<PAGE>
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GENUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
GENUS, INC.
- --------------------------------------------------------------------------------
(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), 14a-6(i)(1), 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>
GENUS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1996
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on Tuesday, April 30, 1996 at 2:00 p.m., local
time, at the Santa Clara Westin Hotel located at 5101 Great America Parkway,
Santa Clara, California 95054, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the 1991 Stock Option Plan increasing the
number of shares reserved for issuance thereunder by 800,000 additional
shares.
3. To approve an amendment to the 1989 Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder by
300,000 additional shares.
4. To ratify the appointment of Coopers & Lybrand LLP as independent
auditors of the Company for the fiscal year ending December 31, 1996.
5. 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.
Only shareholders of record at the close of business on March 22, 1996 are
entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
self-addressed stamped envelope enclosed for that purpose. Any shareholder
attending the meeting may vote in person even if he or she returned a proxy.
FOR THE BOARD OF DIRECTORS
William W. R. Elder
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Sunnyvale, California
March 28, 1996
<PAGE>
GENUS, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of Genus, Inc., a California
corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held Tuesday, April 30, 1996, at 2:00 p.m., local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the Santa
Clara Westin Hotel, 5101 Great America Parkway, Santa Clara, California 95054.
The principal executive offices of the Company are located at 1139 Karlstad
Drive, Sunnyvale, California 94089. The Company's telephone number at that
location is (408) 747-7120.
These proxy solicitation materials were mailed on or about April 5, 1996, to
all shareholders entitled to vote at the meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote. In addition, every shareholder, or his or her proxy, who is entitled to
vote upon the election of directors may cumulate such shareholder's votes and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of shares held by such shareholder, or
distribute the shareholder's votes on the same principle among as many
candidates as the shareholder may select, provided that votes cannot be cast for
more than five candidates. No shareholder or proxy, however, shall be entitled
to cumulate votes for a candidate unless such candidate's name has been placed
in nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the meeting, prior to the voting, of the shareholder's
intention to cumulate votes. If any shareholder gives such notice, all
shareholders may cumulate their votes for candidates in nomination.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are votes "For" or "Against" are treated as shares
"represented and voting" at the Annual Meeting (the "Votes Cast") with respect
to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions or broker non-votes, the Company
believes that both abstentions and broker non-votes should be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. The Company further believes that neither abstentions nor broker
non-votes should be counted as shares "represented and voting" with respect to a
particular matter for purposes of determining the total number of Votes Cast
with respect to such matters. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions and broker non-votes in this
manner. Accordingly, they will not affect the determination as to whether the
requisite majority of Votes Cast has been obtained for a particular matter.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Kent L. Robertson, Executive Vice President, Chief Financial Officer and
Secretary) a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
SOLICITATION
The cost of soliciting proxies will be borne by the Company. The Company is
retaining the services of Corporate Investor Communications, Inc. to solicit
proxies for a cost of approximately $5,000 plus out-of-pocket expenses. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram or facsimile.
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1997 Annual Meeting of Shareholders must
be received by the Company no later than December 26, 1996, in order that they
may be included in the proxy statement and form of proxy relating to that
meeting.
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on March 22, 1996, are
entitled to notice of and to vote at the meeting. At the record date, 16,249,323
shares of the Company's Common Stock, no par value, were issued and outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of March 22,
1996, by (i) each of the Company's directors, (ii) each executive officer named
in the Summary Compensation Table appearing herein, (iii) all directors and
executive officers of the Company as a group and (iv) each person known by the
Company to beneficially own more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(1) CLASS OWNED
- -------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
William W. R. Elder**(2).............................................................. 247,264 1.5%
James M. Burns**(3)................................................................... 24,998 *
William D. Cole**(4).................................................................. 34,452 *
Kevin C. Conlon**(5).................................................................. 8,333 *
Todd S. Myhre***(6)................................................................... 79,960 *
Stephen F. Fisher***(7)(8)............................................................ 1,250 *
Mario M. Rosati***(9)................................................................. 27,250 *
Bachow Investment Partners III, L.P.(10)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................ 977,876 6.0%
Paul S. Bachow Co-Investment Fund, L.P.(11)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................ 138,671 .9%
Paul S. Bachow (12)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................ 63,392 .4%
The Parnassus Fund
244 California Street, Ste. 400
San Francisco, CA 94111.............................................................. 1,150,000 7.1%
All directors and executive officers as a group (12 persons)(13)...................... 462,805 2.8%
</TABLE>
- ------------------------
* Less than 1%
** Executive officer.
*** Non-employee director.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.
(2) Includes options to purchase 36,665 shares of Common Stock exercisable
within 60 days of March 22, 1996.
(3) Includes options to purchase 24,998 shares of Common Stock exercisable
within 60 days of March 22, 1996.
2
<PAGE>
(4) Includes options to purchase 23,666 shares of Common Stock exercisable
within 60 days of March 22, 1996.
(5) Includes options to purchase 8,333 shares of Common Stock exercisable within
60 days of March 22, 1996.
(6) Includes options to purchase 79,960 shares of Common Stock exercisable
within 60 days of March 22, 1996.
(7) Includes options to purchase 1,250 shares of Common Stock exercisable within
60 days of March 22, 1996.
(8) On April 3, 1995, pursuant to the terms of a Stock Purchase Agreement dated
February 10, 1995 (the "Stock Purchase Agreement") by and among the Company
and Bachow Investment Partners III, L.P., Paul S. Bachow Co-Investment Fund,
L.P. and Paul S. Bachow, (collectively the "Bachow Group"), Mr. Fisher was
elected as a representative of the Bachow Group to fill an existing vacancy
on the Company's Board of Directors. This figure does not include the
1,179,939 shares held by the Bachow Group, as to which shares Mr. Fisher has
neither voting nor investment power.
(9) Consists of 1,500 shares held by Mr. Rosati, 4,500 shares held by WS
Investments 91A and options to purchase 21,250 shares of Common Stock
exercisable within 60 days of March 22, 1996. Mr. Rosati is a general
partner of WS Investments 91A and disclaims beneficial ownership of the
shares held by such entity except to the extent of his proportionate
partnership interest therein.
(10)Does not include 138,671 shares held by Bachow Investment Partners III, L.P.
and 63,392 shares held by Paul S. Bachow, as to which Bachow Investment
Partners III, L.P. disclaims beneficial ownership.
(11)Does not include 977,876 shares held by Bachow Investment Partners III, L.P.
and 63,392 shares held by Paul S. Bachow, as to which Paul S. Bachow
Co-Investment Fund, L.P. disclaims beneficial ownership.
(12)Does not include 977,876 shares held by Bachow Investment Partners III, L.P.
and 138,671 shares held by Paul S. Bachow Co-Investment Fund, L.P., as to
which Paul S. Bachow disclaims beneficial ownership.
(13)Includes options to purchase 217,789 shares of Common Stock exercisable
within 60 days of March 22, 1996.
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide for a variable board of four to seven
directors, with the number currently fixed at four. It is planned that a board
of five directors will be elected at the meeting and thereafter, the number of
fixed directors will be increased to five. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the Company's five
nominees named below, all of whom are presently directors of the Company. In the
event that any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will assure the election of as
many of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. It is not
expected that any nominee listed below will be unable or will decline to serve
as a director. The term of office of each person elected as a director will
continue until the next Annual Meeting of Shareholders or until his successor
has been elected and qualified.
3
<PAGE>
The names of the nominees, and certain information about them, are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ------------------------- --- ----------------------------------------------------------------------- -----------
<S> <C> <C> <C>
William W. R. Elder...... 57 Chairman and Chief Executive Officer of the Company 1981
Todd S. Myhre............ 51 Former Chief Operating Officer and International Consultant 1994
Stephen F. Fisher........ 43 Managing Director of Bachow & Associates, Inc. 1995
G. Frederick Forsyth..... 51 Senior Vice President of Worldwide Operations of Apple Computer Co. 1996
Mario M. Rosati.......... 49 Member of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation 1981
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There are no
family relationships among any directors or executive officers of the Company.
Mr. Elder, a founder of the Company, served as President and as a director
of the Company from its organization in November 1981 through April 1990. In
April 1990, he was named Chairman of the Board, President and Chief Executive
Officer. Mr. Elder currently serves as Chairman of the Board and Chief Executive
Officer of the Company.
Mr. Myhre joined the Company in January 1993 as Vice President and Chief
Financial Officer. From August 1993 to December 1993, Mr. Myhre served as
Executive Vice President and Chief Operating Officer of the Company. In January
1994, Mr. Myhre was named President and elected as a director of the Company. In
August 1995, Mr. Myhre resigned from his position as President and Chief
Operating Officer, to become the President and Chief Executive Officer for
GameTech International, an electronic gaming manufacturer, from September 1995
to January 1996. In February 1996, Mr. Myhre left GameTech and is currently an
International Business Consultant. From April 1989 to December 1992, Mr. Myhre
was President and Chief Financial Officer of Optimal Associates, Inc., a real
estate development company. From December 1988 to April 1989, he was associated
with Apple Computer, Inc., a computer manufacturer, as Worldwide Manufacturing
Financial Director. From November 1977 to November 1988, he served in various
management positions at Hewlett-Packard Company, a computer and instrumentation
manufacturer, most recently as Group Operations Controller.
Mr. Fisher has served as a director since April, 1995, when he was elected
pursuant to the terms of the Stock Purchase Agreement to serve as a
representative of Bachow Group. He has been the Managing Director of Bachow &
Associates, Inc., an investment firm, since June 1993. For more than five years
prior to joining Bachow & Associates, Inc., he served in numerous executive
capacities with Westinghouse Broadcasting Company, Inc., a media and
communications company, most recently as Executive Vice President. He is also a
director of Vista Information Solutions, Inc.
Mr. Forsyth has been a director of the Company since February 12, 1996. From
June 1989 to the present, Mr. Forsyth has been associated with Apple Computer,
Inc., a personal computer manufacturer, in various senior management positions,
most recently as Senior Vice President, Worldwide Operations. From November 1979
to June 1989, Mr. Forsyth served in various management positions at Digital
Equipment Corporation, a manufacturer of networked computers systems and
associated peripheral equipment, most recently as Group Manager, Low End Systems
Manufacturing.
Mr. Rosati has been Secretary and a director of the Company since the
Company's inception in November 1981 to June 1995. From July 1995 to the
present, Mr. Rosati has been the Assistant Secretary of the Company. He is also
a director of C-ATS Software Inc., a supplier of client/server software products
for financial risk management; Meridian Data, Inc., a developer of compact disc-
read only memory (CD-ROM) and compact disc-recordable (CD-R) systems and related
software for
4
<PAGE>
both networks and personal computers; and Ross Systems, Inc., a supplier of
enterprise-wide business systems and related services to companies installing
open systems/client server software products. He is a member of Wilson, Sonsini,
Goodrich & Rosati, general counsel to the Company.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum, but have no legal effect under California law. While
there is no definitive statutory or case law authority in California as to the
proper treatment of abstentions and broker non-votes in the election of
directors, the Company believes that both abstentions and broker non-votes
should be counted for purposes of determining whether a quorum is present at the
Annual Meeting. In the absence of precedent to the contrary, the Company intends
to treat abstentions and broker non-votes with respect to the election of
directors in this manner.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the year ended December 31, 1995. The Board of Directors has an Audit Committee
and a Compensation Committee. It does not have a nominating committee or a
committee performing the functions of a nominating committee.
During the year ended December 31, 1995, the Audit Committee of the Board of
Directors consisted of directors Fisher and Rosati and held one meeting. As of
March 22, 1996 the Audit Committee consisted of directors Fisher and Rosati. The
Audit Committee recommends engagement of the Company's independent accountants
and is primarily responsible for approving the services performed by the
Company's independent accountants and for reviewing and evaluating the Company's
accounting principles and its system of internal accounting controls.
During the year ended December 31, 1995, the Compensation Committee of the
Board of Directors consisted of directors Fisher and Rosati and held four
meetings. As of March 22, 1996, the Compensation Committee consisted of
directors Fisher and Rosati. The Compensation Committee makes recommendations to
the Board of Directors regarding the Company's executive compensation policy.
See "Compensation Committee Report on Executive Compensation."
No director serving in the year ended December 31, 1995, attended fewer than
75% of the aggregate number of meetings of the Board of Directors and meetings
of the committees of the Board on which he or she serves.
DIRECTOR COMPENSATION
The Company currently pays to its directors who are not employees a fee of
$1,000 per meeting and $500 per telephonic meeting. In addition, the Company
pays non-employee members of the board an annual fee of $10,000. The Company
also reimburses directors for reasonable expenses incurred in attending
meetings. Under the Company's 1991 Option Plan, each of the non-employee
directors receives an automatic grant of an option to purchase 5,000 shares of
Common Stock on the date of his or her appointment or election to the Board and,
for so long as he or she continues to serve as a director, an automatic grant of
an option to purchase 5,000 shares of Common Stock on February 7 of each year.
See "Amendment of 1991 Incentive Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1995, the Company paid legal fees and expenses to Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, general counsel to the Company.
Mario M. Rosati, a director and Assistant Secretary of the Company, is a member
of the firm of Wilson, Sonsini, Goodrich & Rosati.
TRANSACTIONS WITH MANAGEMENT
In February 1992, the Company loaned William W. R. Elder, Chairman of the
Board and Chief Executive Officer of the Company, $100,000 under a three-year
note bearing interest at 7% annually in connection with the exercise by him of
options to purchase 80,000 shares of Common Stock.
5
<PAGE>
Mr. Elder's obligation to repay this loan is secured by the Common Stock
received by him upon the exercise of these options. This loan was extended to
May 31, 1995 under the same terms. In May 1995, Mr. Elder repaid the loan
outstanding plus annual interest at 7%.
On August 25, 1995 the Company entered into a Transition Agreement with Todd
S. Myhre (the "Transition Agreement"). The Transition Agreement provided for the
cessation of Mr. Myhre's services to the Company in his capacity as President
and Chief Operating Officer and the commencement of his role as a part-time
employee of the Company. The terms of the Transition Agreement provided for Mr.
Myhre to continue to receive his salary as in effect on August 25, 1995 until
August 31, 1995, $5,000 per month for the period of September 1 through December
31, 1995 and $1,250 per month for the period of January 1, 1996 until the
earlier of January 31, 1998 or when Mr. Myhre ceases to be an employee of the
Company. In addition, the Transition Agreement provided for Mr. Myhre's full
participation in the Company's fringe and benefit plans and participation in the
Company's profit sharing and management incentive plans in an amount equal to
75% of the amount otherwise payable to Mr. Myhre under such plans if he had
remained a full-time employee during the entire 1995 fiscal year. Beginning
January 1, 1996, Mr. Myhre's participation in the Company's fringe and benefit
plans was reduced pursuant to the terms of the Transition Agreement to the level
of coverage, if any, afforded other part-time employees of the Company. Mr.
Myhre's options to purchase Common Stock of the Company will continue to vest
while Mr. Myhre remains an employee of the Company.
The Board of Directors has considered, and may consider in the future, an
arrangement under which the Company would make payments to executive officers
and other employees in the event of termination of their employment related to
any change in control of the Company.
See also "Compensation Committee Interlocks and Insider Participation"
above.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's Securities with the Securities and
Exchange Commission (the "SEC"). Such officers, directors and 10% shareholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during fiscal 1995 all Section 16(a) filing requirements applicable to its
officers, directors and 10% shareholders were complied with without exception.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly compensated executive
officers of the Company for the three fiscal years ended December 31, 1995:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ AWARDS(2) ALL OTHER
SALARY ---------------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($)(1) OPTIONS/SARS (#) ($)(3)
- ------------------------------------------ ------------ --------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
William W. R. Elder,...................... 1995 282,917 42,950 100,000 18,422
Chairman of the Board 1994 260,000 53,950 -- 7,980
and CEO 1993 216,667 -- -- 3,119
James M. Burns............................ 1995(4) 178,225 56,631 100,000 150,729(6)
Executive Vice President and
General Manager Thin Film
Division
William D. Cole........................... 1995 150,542 107,341(5) 40,000 9,419
Vice President, Sales 1994 135,938 100,232(5) 20,000 3,365
1993 122,750 48,344(5) 35,000 --
Kevin C. Conlon........................... 1995 162,567 36,029 50,000 11,359
Vice President 1994 129,900 36,255 15,000 3,412
Marketing 1993 113,792 -- -- --
Todd S. Myhre............................. 1995 167,917 25,312 50,000 10,526
Former President, Chief 1994 200,000 41,500 75,000 5,600
Operating Officer 1993 149,426 -- 125,000 --
</TABLE>
- ------------------------
* Under the SEC's transitional rules, amounts are not required to be required
to be reported for these columns in these years.
(1) Except as otherwise noted, all bonuses were earned by the named officer in
fiscal 1995 pursuant to the Company's Management Incentive Plan, but were
not paid until fiscal 1996.
(2) The Company did not make any awards of restricted stock or make any payments
under long-term incentive plans during the periods covered in the table.
(3) Represents amounts contributed to the Company's 401(k) plan and/or profit
sharing plan on behalf of the officer by the Company in the following
amounts: $16,074 to the profit sharing plan for benefit of Mr. Elder; $410
and $10,599 to the 401(k) plan and profit sharing plan, respectively, for
benefit of Mr. Burns; $395 and $9,024 to the 401(k) plan and profit sharing
plan, respectively, for benefit of Mr. Cole; $643 and $10,716 to the 401(k)
plan and profit sharing plan, respectively, for benefit of Mr. Conlon; and
$1,008 and $9,518 to the 401(k) plan and profit sharing plan, respectively,
for benefit of Mr. Myhre. Premiums in the amount of $2,348 were also paid by
the Company on behalf of Mr. Elder for a term life insurance policy (the
proceeds of which are payable to his named beneficiaries) in fiscal 1994.
(4) Mr. Burns was not employed by the Company prior to fiscal 1995.
(5) Includes sales commissions earned by Mr. Cole in the amount of $101,341 in
fiscal 1995, $94,089 in fiscal 1994 and $48,344 in fiscal 1993.
(6) Includes $139,720 paid as reimbursed relocation expenses to Mr. Burns.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
1995 to the named executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK
OPTIONS/ SARS EXERCISE PRICE APPRECIATION
OPTIONS/SARS GRANTED TO OR FOR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (#) FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
- ------------------------------------ ------------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William W. R. Elder................. 50,000 5.3% 7.75 1/27/00 107,059 236,573
50,000 5.3% 12.125 7/25/00 167,496 370,121
James M. Burns...................... 10,000 1.1% 7.75 1/27/00 21,412 47,314
65,000 6.9% 8.25 2/08/00 147,242 325,134
25,000 2.7% 12.125 7/20/00 83,747 185,061
William D. Cole..................... 15,000 1.6% 7.75 1/27/00 32,118 70,972
25,000 1.7% 12.125 7/20/00 83,748 185,561
Kevin C. Conlon..................... 25,000 2.6% 7.75 1/27/00 53,530 118,286
25,000 2.7% 12.125 7/20/00 83,748 185,061
Todd S. Myhre....................... 50,000 5.3% 7.75 1/20/00 107,059 236,575
</TABLE>
- ------------------------
(1) The indicated options were granted at various dates in 1995, vest at the
rate of 1/3 per year and become fully exercisable at various dates in 1998.
(2) The Company granted options to purchase 937,900 shares to employees in
fiscal 1995.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (5 years) at the annual rate
specified (5% and 10%). Annual compounding results in total appreciation of
28% (at 5% per year) and 61% (at 10% per year). The assumed annual rates of
appreciation are specified in SEC rules and do not represent the Company's
estimate or projection of future stock price. The Company does not
necessarily agree that this method can properly determine the value of an
option.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on option/SAR exercises in fiscal
1995 by the named executive officers and the value of such officers unexercised
options/SARs at December 31, 1995. Options were exercised by named executive
officers during fiscal 1995.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES 12/31/95 (#) AT 12/31/95 ($)(2):
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE($) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W. R. Elder........... 170,000 1,583,040 29,000 100,000 92,500 --
James M. Burns................ -- -- -- 100,000 -- --
William D. Cole............... 3,000 163,875 6,997 65,003 24,779 97,721
Kevin C. Conlon............... 35,000 424,375 30,000 60,000 161,250 35,000
Todd S. Myhre................. 66,665 536,471 41,663 141,672 172,901 383,878
</TABLE>
- ------------------------
(1) Market value of underlying securities based on the closing price of the
Company's Common Stock on the NASDAQ on the date of exercise, minus the
exercise price.
(2) Market value of underlying securities based on the closing price of
Company's Common Stock on December 31, 1995, on NASDAQ of $7.50, less the
exercise price.
The Company has not established any long-term incentive plans, defined
benefit or actuarial plans, or arrangements relating to a change-in-control
covering any of the named executive officers.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The objectives of the overall executive compensation program are to attract,
retain, motivate and reward Company executives while aligning their relative
compensation with the achievements of key business objectives, maximization of
shareholder value and optimal satisfaction of customers.
The Compensation Committee is responsible for:
1. Determining the specific executive compensation vehicles to be used by
the Company and the participants in each of those specific programs;
2. Determining the evaluation criteria and timeliness to be used in those
programs;
3. Determining the processes that will be followed in the ongoing
administration of the programs; and
4. Determining their role in the administration of the programs.
All of the actions take the form of recommendations to the full Board of
Directors where final approval, rejection or redirection will occur. The
Compensation Committee is responsible for administering the compensation
programs for all Company officers. The Compensation Committee has delegated the
responsibility of administering the compensation programs for all other Company
employees to the Company's officers.
Currently, the Company uses the following executive compensation vehicles:
-- Cash-based programs: base salary, Annual Incentive Bonus Plan, Annual
Profit Sharing Plan, and a Sales Incentive Commission Plan; and
-- Equity-based programs: 1991 Incentive Stock Option Plan and the 1989
Employee Stock Purchase Plan.
These programs apply to the Chief Executive Officer and all executive level
positions, except for the Sales Incentive Commission Plan, which only includes
executives directly responsible for sales activities. Periodically, but at least
once near the close of each fiscal year, the Compensation Committee reviews the
existing plans and recommends those that should be used for the subsequent year.
The criteria for determining the appropriate salary level, bonus and stock
option grants for the Chief Executive Officer and each of the executive officers
include (a) Company performance as a whole, (b) business unit performance (where
appropriate) and (c) individual performance objectives. Company performance and
business unit performance are measured against both strategic and financial
goals. Examples of these goals are to obtain: operating profit, revenue growth,
timely new product introduction, and shareholder value (usually measured by the
Company stock price). Individual performance is measured to specific objectives
relevant to the individual's position and a specific time frame.
These criteria are usually related to a fiscal year time period, but may, in
some cases, be measured over a shorter or longer time frame.
The processes used by the Compensation Committee include the following
steps:
1. The Compensation Committee periodically receives information comparing
the Company's pay levels to other companies in similar industries, other
leading companies (regardless of industry) and competitors. Primarily
national and regional compensation surveys are used.
2. At or near the start of each evaluation cycle, the Compensation Committee
meets with the Chief Executive Officer to review, revise as needed, and
agree on the performance objectives set for the other executives
reporting to the Chief Executive Officer and the Chief Financial Officer.
The Chief Executive Officer, and Compensation Committee jointly set the
Company objectives to be used. The business unit and individual
objectives are formulated jointly by
9
<PAGE>
the Chief Executive Officer or Chief Financial Officer and the specific
individual. The Compensation Committee also, with the Chief Executive
Officer or Chief Financial Officer, as appropriate, jointly establishes
and agrees on their respective performance objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer and Chief Financial Officer, the Compensation
Committee and full Board, as appropriate.
4. At the end of the performance cycle, the Chief Executive Officer and
Chief Financial Officer evaluate each executive's relative success in
meeting the performance goals. The Chief Executive Officer makes
recommendations on salary, bonus and stock options, utilizing the
comparative results as a factor. Also included in the decision criteria
are subjective factors such as teamwork, leadership contributions and
ongoing changes in the business climate. The Chief Executive Officer
reviews the recommendations and obtains Compensation Committee approval.
The Compensation Committee also determines the level of salary and bonus
and the terms of stock option grants for the Chief Executive Officer.
5. The final evaluations and compensation decisions are discussed with each
executive by the Chief Executive Officer, Chief Financial Officer or
Compensation Committee, as appropriate.
The Compensation Committee feels that the compensation vehicles used by the
Company, generally administered through the process as outlined above, provide a
fair and balanced executive compensation program related to the proper business
issues. In addition, it should be noted that compensation vehicles will be
reviewed and, as appropriate, revised in order to attract and retain new
executives in addition to rewarding performance on the job.
Respectfully submitted by:
Stephen F. Fisher
Mario M. Rosati
10
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return, calculated on a dividend reinvested basis, from the last trading day
before the beginning of the Company's 1989 Fiscal Year (December 31, 1988)
through 1995 Fiscal Year End for the Company, the NASDAQ Stock Market-US Index
and the H & Q Technology Index. The graph assumes that $100 was invested in the
Company's Common Stock at the initial public offering price, in the NASDAQ Stock
Market-US Index and the H & Q Technology Index on December 31, 1988. Note that
historic stock price performance is not necessarily indicative of future stock
price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GENUS, INC., THE NASDAQ STOCK MARKET-US INDEX AND THE H&Q TECHNOLOGY INDEX
[GRAPH]
* The total return on each of these investments assumes the reinvestment of
dividends, although dividends have never been paid on the Company's Common
Stock. The Company's fiscal year ends on December 31.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GENUS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[GRAPH]
* $100 INVESTED ON 12/31/90 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
Group produced by Research Data Group
Research Data Group Total Return -- Data Summary
GGNS
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Genus, Inc............................ GGNS 100 290 215 240 640 600
NASDAQ Stock Market-US................ INAS 100 161 187 215 210 296
H&Q Technology........................ IHQT 100 148 170 186 215 323
</TABLE>
Research Data Group Company Total Return Worksheet
Begin: 12/31/90
FYE: 12/31/95
End: 12/31/95
Genus, Inc. GGNS
<TABLE>
<CAPTION>
CUM.
BEGIN NO. DIV. $ DIV. DIV. ENDING TOTAL
TYPE OF CLOSE OF SHARES PER $.$$ SHARES NO. OF SHRHLDR.
DATE* LINE PRICE** *** SHARE** PAID REINVD. SHARES RETURN
- --------------------------------- --------- ----------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 Begin 1.250 80.000 80.000 100
12/31/91 YE 3.625 80.000 80.000 290
12/31/92 YE 2.688 80.000 80.000 215
12/31/93 YE 3.000 80.000 80.000 240
12/31/94 YE 8.000 80.000 80.000 640
12/31/95 YE 7.50 80.000 80.000 600
</TABLE>
* Fiscal year end and ex-dividend dates.
** All Closing Prices and Dividends are adjusted for stock splits.
*** "Begin No. of Shares" based on $100 investment.
11
<PAGE>
AMENDMENT OF 1991 INCENTIVE STOCK OPTION PLAN
GENERAL
The 1991 Incentive Stock Option Plan ("1991 Option Plan") was adopted by the
Board of Directors in February 1991. Prior to January 1996, a total of 2,053,000
shares of Common Stock were reserved for issuance thereunder. In January 1996,
the Board of Directors approved an amendment to the 1991 Option Plan to increase
the number of shares of Common Stock reserved for issuance thereunder by 800,000
to 2,853,006 shares and to limit the number of shares which may be granted to
any one employee in any one fiscal year under the plan. Management recommends
that the shareholders vote to approve this amendment of the 1991 Option Plan.
All employees, including officers and directors, and consultants of the
Company or any of its designated subsidiaries are eligible to be granted options
under the 1991 Option Plan. In addition, non-employee directors are eligible for
option grants under the Automatic Grant Plan described below. As of March 22,
1996, 358 full-time employees (including officers and directors), 28 part-time
employees and 4 consultants were eligible for grants under the 1991 Option Plan,
while two non-employee directors were eligible for grants under the Automatic
Grant Plan.
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or "nonstatutory options." As
of March 22, 1996, options to purchase 539,357 shares had been exercised,
options to purchase 1,617,188 shares were outstanding and (103,539) shares were
available for future grant. The closing price of the Company's Common Stock
reported on the NASDAQ National Market System on March 22, 1996, was $7.44 per
share. On December 14, 1995, the Board of Directors of the Company approved a
repricing of all incentive stock options outstanding on that date so that all
such options then priced at above $8.625 were repriced at $8.625. The essential
features of the 1991 Option Plan are outlined below.
PARTICIPATION OF OFFICERS AND DIRECTORS IN THE OPTION PLAN
The grant of options under the Option Plan to executive officers, including
the officers named in the Summary Compensation Table (the "Named Officers"), is
subject to the discretion of the Board. As of the date of this proxy statement,
there has been no determination by the Board with respect to future awards under
the Option Plan. Accordingly, future awards are not determinable. The table of
option grants under "COMPENSATION OF EXECUTIVE OFFICERS--Option/SAR Grants in
Last Fiscal Year" provides information with respect to the grant of options to
the Named Officers during the Last Fiscal Year. Information regarding options
granted to Outside Directors during the Last Fiscal Year pursuant to the
Automatic Grant Program is set forth under the heading "ELECTION OF
DIRECTORS--Director Compensation." The following table sets forth additional
information with respect to options granted during the Last Fiscal Year to
certain other groups:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
IDENTITY OF GROUP GRANTED (#) PER SHARE
- ---------------------------------------------------------------------------------- ----------- ----------------
<S> <C> <C>
All current executive officers and directors as a group........................... 482,500 $ 10.06
All employees as a group.......................................................... 455,400 $ 9.45
</TABLE>
PURPOSE
The 1991 Option Plan replaced the 1981 Option Plan which terminated in
December 1991. The purposes of the 1991 Option Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive and to promote the success of the Company's
business.
ADMINISTRATION
The 1991 Option Plan provides for administration by the Board of Directors
of the Company or by a committee of the Board. The 1991 Option Plan is currently
being administered by the Board of Directors. No member of the Board who is
eligible to participate in the plan may vote on any option to be granted to
himself or take part in any consideration of the 1991 Option Plan as it applies
to himself.
12
<PAGE>
The interpretation and construction of any provision of the 1991 Option Plan by
the Board shall be final and conclusive. Members of the Board receive no
compensation for their services in connection with the administration of the
1991 Option Plan.
ELIGIBILITY
The 1991 Option Plan provides that options may be granted to employees,
including officers and directors, and consultants of the Company or any of its
designated subsidiaries. Except with respect to non-employee directors ("Outside
Directors"), the Board of Directors or a committee of the Board selects the
optionees and determines the number of shares to be subject to each option and
the time or times at which shares become exercisable under the option. In making
such determination, the duties and responsibilities of the employee or
consultant, the value of his or her services, his or her present and potential
contribution to the success of the Company, the anticipated number of years of
future service and other relevant factors are taken into account. There is a
$100,000 limit on the aggregate market value of shares subject to all incentive
stock options which are exercisable for the first time in any one calendar year.
The 1991 Option Plan, as amended by the Board of Directors in February 1994,
limits the discretion of the Board of Directors in granting stock options to
certain individuals. This limitation provides that no officer or employee may be
granted in any one fiscal year stock options under the 1991 Option Plan with
respect to more than 400,000 shares of Common Stock. This limitation is intended
to preserve the Company's ability to deduct for federal income tax purposes the
compensation expense relating to stock options and purchase rights granted to
certain executive officers under the 1991 Option Plan. Without this limitation,
the federal tax legislation enacted in August 1993 might not allow the Company
to deduct such compensation expense.
The August 1993 federal tax legislation imposed limits on the Company's
ability to deduct compensation paid to certain of the Company's current and
future executive officers. However, these limitations on deductibility do not
apply to compensation attributable to stock options or purchase rights if, among
other things, the plan under which the options or purchase rights were granted
includes a limit on the discretion to make grants. The limitation on discretion
contained in the 1991 Option Plan is intended to meet this requirement. Since
the limitation has been included solely to preserve the Company's ability to
deduct such compensation, the Board of Directors may modify or eliminate this
limitation if it is not required to preserve the deductibility of such
compensation.
OUTSIDE DIRECTORS' OPTIONS
The 1991 Option Plan provides that, with respect to Outside Directors,
nonstatutory options shall be automatically granted to Outside Directors on a
yearly basis from their initial appointment or election in order to provide an
incentive to Outside Directors of the Company ("Automatic Grant Program"). The
exercise price of options granted under the Automatic Grant Program is the fair
market value of the Company's Common Stock on the date of the automatic grant.
Outside Directors may not be granted options under the 1991 Option Plan except
under the Automatic Grant Program.
Each Outside Director receives an automatic grant on the date of his or her
appointment or election to the Board of an initial option to purchase 5,000
shares of Common Stock and, for as long as he or she continues to serve as an
Outside Director, receives an automatic grant on February 7 of each year of an
option to purchase an additional 5,000 shares of Common Stock. These options
become exercisable cumulatively with respect to 1/12th of the underlying shares
on the last day of each month following the date of grant and have a term of
five years from the date of grant.
TERMS OF OPTIONS
The terms of the options granted under the 1991 Option Plan (other than
options granted to Outside Directors pursuant to the Automatic Grant Program
("Outside Director Options")) are determined by the Board of Directors or its
committee. Each option granted under the 1991 Option Plan is evidenced by a
stock option agreement between the Company and the employee to whom such option
is granted and is subject to the following additional terms and conditions:
13
<PAGE>
(a) EXERCISE OF THE OPTION: The Board of Directors or its committee
determines when options granted under the 1991 Option Plan (other than Outside
Director Options) may be exercised. An option is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering payment to the Company of the
purchase price. Payment for shares issued upon exercise of an option may consist
of cash, promissory note, exchange of shares of the Company's Common Stock or
such other consideration as determined by the Board of Directors or its
committee and as permitted by the California Corporations Code.
(b) OPTION PRICE: The option price under the 1991 Option Plan (other than
Outside Director Options) is determined by the Board of Directors or its
committee. The option price may not be less than 100% of the fair market value
of the Company's Common Stock on the date the option is granted. However, in the
case of options granted to an optionee who owns more than 10% of the voting
power or value of all classes of stock of the Company, the per share exercise
price must not be less than 110% of the fair market value on the date of grant.
The Board of Directors of the Company or its committee determines such fair
market value based upon the closing price of the Common Stock in the NASDAQ
National Market System on the date the option is granted.
(c) TERMINATION OF EMPLOYMENT: The 1991 Option Plan provides that if the
optionee's employment by the Company is terminated for any reason other than
death, options may be exercised not later than thirty days (or such other period
of time not exceeding three months as is determined by the Board and specified
in the option agreement) after such termination and may be exercised only to the
extent the options were exercisable on the date of termination.
(d) DEATH: If an optionee should die while employed by the Company or
during the thirty-day period following termination of the optionee's employment,
options may be exercised at any time within six months after the date of death
but only to the extent that the options were exercisable on the date of death or
termination of employment, whichever is earlier.
(e) TERMINATION OF OPTIONS: Options granted under the 1991 Option Plan
(other than Outside Director Options) expire 10 years from the date of grant,
unless otherwise provided in the option agreement. However, incentive stock
options granted to an optionee who, immediately before the grant of such option,
owned more than 10% of the total combined voting power of all classes of stock
of the Company or a parent or subsidiary corporation, may not have a term of
more than five years.
(f) NONTRANSFERABILITY OF OPTIONS: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
(g) ACCELERATION OF OPTIONS: In the event of a merger or consolidation in
which the Company is not the surviving entity, the Board is obligated to either
accomplish a substitution of options or give 30 days' notice of the acceleration
of the optionee's right to exercise his outstanding options in full at any time
within 30 days of such notice.
(h) OTHER PROVISIONS: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1991 Option Plan as may be
determined by the Board of Directors or its committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization which results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the option price and in the
number of shares subject to each option. In the event of the proposed
14
<PAGE>
dissolution or liquidation of the Company, all outstanding options automatically
terminate immediately prior to the consummation of such action unless otherwise
provided by the Board. The Board of Directors may in its discretion make
provision for accelerating the exercisability of shares subject to options under
the 1991 Option Plan in such event.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1991 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders, provided,
however, that shareholder approval is required for any amendment which increases
the number of shares which may be issued under the plan, materially changes the
standards of eligibility or materially increases the benefits which may accrue
to participants under the plan. However, no action by the Board of Directors or
shareholders may alter or impair any option previously granted under the 1991
Option Plan without the consent of the effected optionee. The 1991 Option Plan
will terminate in 2001.
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the Optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
VOTE REQUIRED
Affirmative votes constituting a majority of the votes cast will be required
to approve and ratify the amendment of the 1991 Option Plan. MANAGEMENT
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE
1991 OPTION PLAN.
15
<PAGE>
AMENDMENT OF 1989 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The 1989 Employee Stock Purchase Plan ("Purchase Plan") was adopted by the
Board of Directors in March 1989 and approved by the shareholders in May 1990.
In January 1996, the Board of Directors amended the Purchase Plan, subject to
shareholder approval, to increase the number of shares of Common Stock reserved
for issuance thereunder by 300,000 shares, from 1,300,000 to 1,600,000 shares.
As of March 22, 1996, 1,102,667 shares had been issued under the Purchase Plan,
and 197,733 shares remained available for future issuances under the Purchase
Plan.
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company (and
any of its subsidiaries which are designated by the Board of Directors) who
participate in the plan with an opportunity to purchase Common Stock of the
Company through payroll deductions.
ADMINISTRATION
The Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board. All questions of interpretation or application
of the plan are determined at the sole discretion of the Board of Directors or
its committee. The Purchase Plan is currently being administered by the Board of
Directors. Members of the Board of Directors who are eligible employees are
permitted to participate in the Purchase Plan but may not vote on any matter
affecting the administration of the plan or the grant of any option pursuant to
the plan, or be a member of any committee appointed to administer the plan. No
charges for administrative or other costs may be made against the payroll
deductions of a participant in the plan. Members of the Board of Directors
receive no additional compensation for their services in connection with the
administration of the Purchase Plan.
ELIGIBILITY
Any person who is employed by the Company (or by any of its subsidiaries
which are designated from time to time by the Board) for at least twenty hours
per week and more than five months in a calendar year on the date his or her
participation in the plan is effective is eligible to participate in the
Purchase Plan. As of March 22, 1996, approximately 310 employees were eligible
to participate in the Purchase Plan.
16
<PAGE>
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering to
the Company a subscription agreement authorizing payroll deductions prior to the
applicable offering date. An employee who becomes eligible to participate in the
plan after the commencement of an offering may not participate in the plan until
the commencement of the next offering period.
Outside Directors are not eligible to participate in the Purchase Plan. The
participation of the Named Officers in the Purchase Plan is entirely at the
election of each individual officer. Accordingly, future benefits are not
determinable. The following table sets forth information with respect to the
participation under the Purchase Plan of the Named Officers and certain other
groups during fiscal 1995:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE AGGREGATE
SHARES PURCHASE MARKET
IDENTITY OF PERSON OR GROUP PURCHASED PRICE VALUE (1) NET VALUE(2)
- ---------------------------------------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
William W. R. Elder................................. -- -- -- --
James M. Burns...................................... 1,588 6.38 11,910 1,787
William D. Cole..................................... 5,668 2.66 58,896 43,841
Kevin C. Conlon..................................... 5,465 2.98 55,524 39,266
Todd S. Myhre....................................... -- -- -- --
All current executive officers as a group........... 21,352 3.14 216,559 149,446
All employees as a group............................ 267,431 3.63 2,736,428 1,796,447
</TABLE>
- ------------------------
(1) Market Value based on the closing price of the Company's Common Stock on the
NASDAQ on the date of purchase.
(2) Market Value, less the purchase price.
OFFERING DATE
The Purchase Plan is implemented by overlapping 24-month offering periods
containing four six-month purchase periods. New offering periods commence every
six months. The purchase periods generally commence on July 1 and January 1 of
each year. The Board of Directors has the power to alter the duration of the
offering periods without shareholder approval.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is the lower of 85% of fair market value of the Common Stock on the date of
commencement of the 24-month offering period or 85% of the fair market value of
the Common Stock on the last day of the six-month purchase period. Eligible
employees are automatically re-enrolled in the offering period with the lower of
85% of fair market value of the Common Stock on the date of commencement of such
24-month offering period. The fair market value of the Common Stock on a given
date shall be determined by the Board of Directors based upon the reported
closing price in the NASDAQ National Market System on such date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the offering period. The deductions may not exceed 10% of a participant's
eligible compensation. A participant may discontinue his or her participation in
the plan or may decrease, but not increase, the rate of payroll deductions at
any time during the offering period.
All payroll deductions are credited to the participant's account under the
plan and are deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
17
<PAGE>
PURCHASE OF STOCK; EXERCISE OF OPTION
At the beginning of each offering period, by executing a subscription
agreement to participate in the Purchase Plan, each employee is in effect
granted an option to purchase shares of Common Stock. The maximum number of
shares placed under option to a participant in an offering is determined by
dividing the compensation which such participant has elected to have withheld
during the offering period by 85% of the fair market value of the Common Stock
at the beginning of the offering period or ending of a purchase period,
whichever is lower.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest in a given offering may be terminated in whole, but not in part, by
signing and delivering to the Company a notice of withdrawal from the plan. Such
withdrawal may be elected at any time prior to the end of the applicable
24-month offering period. A participant's withdrawal from an offering does not
have any effect upon such participant's eligibility to participate in subsequent
offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to such participant or, in the case of death, to the
person or persons entitled thereto as specified by the employee in the
subscription agreement.
CHANGES
In the event of any change, such as stock splits or stock dividends, made in
the capitalization of the Company which results in an increase or decrease in
the number of shares of Common Stock outstanding without receipt of
consideration by the Company, appropriate adjustments will be made by the
Company in the number of shares subject to purchase and in the purchase price
per share, subject to any required action by the shareholders of the Company.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Purchase Plan,
except that such termination shall not affect options previously granted nor may
any amendment make any change in an option granted prior thereto which adversely
affects the rights of any participant. No amendment may be made to the Purchase
Plan without approval of the shareholders of the Company if such amendment would
increase the number of shares reserved under the plan, permit payroll deductions
at a rate in excess of ten percent (10%) of participant's compensation,
materially modify the eligibility requirements or materially increase the
benefits which may accrue to participants under the plan. In any event the
Purchase Plan will terminate in 2009.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two years from the first
day of the offering period and one year from the date the shares are purchased,
the participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The
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Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income recognized
by participants upon a sale or disposition of shares prior to the expiration of
the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
REQUIRED VOTE
The approval of the amendment to the Purchase Plan requires the affirmative
vote of the holders of a majority of the shares of the Company's Common Stock
entitled to vote and present or represented at the meeting. MANAGEMENT
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE
PURCHASE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand, independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1996, and recommends that the shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. Coopers &
Lybrand has audited the Company's financial statements since the year ended
December 31, 1982. Representatives of Coopers & Lybrand are expected to be
present at the meeting with the opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: March 28, 1996
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COMMON
/X/ Please mark
your choice
like this
1. Election of directors:
__ FOR all nominees listed below (except as indicated)
__ WITHHOLD authority to vote for all nominees listed below.
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
William W. R. Elder, Todd S. Myhre, Stephen F. Fisher, G. Frederick Forsyth
and Mario M. Rosati
2. Proposal to approve the amendment of the Company's 1991 Incentive Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 800,000 additional shares:
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to approve the amendment of the Company's 1989 Employee Stock
Purchase Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 300,000 additional shares:
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal to ratify the appointment of Coopers & Lybrand LLP as the
independent public accountants of the Company for the fiscal year ending
December 31, 1996:
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion upon such other matter or matters which may properly
come before the meeting and any continuation(s) or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE
1991 INCENTIVE STOCK OPTION PLAN, FOR THE AMENDMENT OF THE 1989 EMPLOYEE STOCK
PURCHASE PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING.
Such attorney or substitute shall have and may exercise all of the powers of
said attorney-in-fact hereunder.
Signature(s) _____________________________ Date ____________________________
(This Proxy should be dated, signed by the shareholder(s) exactly as his or
her name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
