<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 Section240.14a-11(c) or
Section240.14a-12
GENUS, 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), 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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GENUS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1997
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus, Inc
(the"Company") will be held on Tuesday, May 20, 1997 at 2:00 p.m., local time,
at The Network Meeting Center located at 5201 Great America Parkway, Suite 122
in 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 650,000 additional
shares.
3. To approve an amendment to the 1989 Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder by
150,000 additional shares.
4. To approve an amendment to the Articles of Incorporation increasing the
number of authorized shares of Common Stock to 50,000,000.
5. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company for the fiscal year ending December 31, 1997.
6. 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 31, 1997 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
Sunnyvale, California
April 21, 1997
<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, May 20, 1997, 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 Network
Meeting Center at 5201 Great America Parkway, Suite 122 in 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 21, 1997,
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 six 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 affirmative vote of a majority of the Votes Cast will be required under
California law to approve the proposals in this Proxy Statement. For this
purpose, the "Votes Cast" are defined under California law to be the shares of
the Company's Common Stock represented and "voting" at the Annual Meeting. In
addition, the affirmative votes must constitute at least a majority of the
required quorum, which quorum is majority of the shares outstanding on the
Record Date. Votes that are cast against the proposal will be counted for
purposes of determining (i) the presence or absence of a quorum and (ii) the
total number of Votes Cast with respect to the proposal.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions in the counting of votes with respect
to a proposal, the Company believes that abstentions should be counted for
purposes of determining both (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes Cast with respect to
the proposal. In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal. Broker non-votes will
be counted for purposes of determining the presence or absence of a quorum for
the transaction of business, but will not be counted for purposes of determining
the number of Votes Cast with respect to the proposal.
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:
Mary F. Bobel, Executive Vice President, Chief Financial Officer) a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
<PAGE>
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 $6,000 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.
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 1998 Annual Meeting of Shareholders must
be received by the Company no later than December 22, 1997, 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 31, 1997, are
entitled to notice of and to vote at the meeting. At the record date,
shares of the Company's Common Stock, no par value, were issued and outstanding.
2
<PAGE>
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 10,
1997, 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 CLASS
NAME OF BENEFICIAL OWNER SHARES(1) OWNED
- --------------------------------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
William W.R. Elder**(2)................................................................ 258,719 1.5%
James T. Healy***...................................................................... 0 *
James M. Burns****..................................................................... 2,267 *
Kevin C. Conlon****.................................................................... 0 *
Thomas E. Seidel***(3)................................................................. 24,998 *
John E. Aldeborgh***(4)................................................................ 24,173 *
Todd S. Myhre******(5)................................................................. 41,670 *
Stephen F. Fisher*****(6)(7)........................................................... 6,250 *
G. Frederick Forsyth*****(8)........................................................... 6,250 *
Mario M. Rosati*****(9)................................................................ 24,250 *
Bachow Investment Partners III, L.P.(10)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................. 977,876 5.8%
Paul S. Bachow Co-Investment Fund, L.P.(11)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................. 138,671 *
Paul S. Bachow(12)
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004................................................................. 63,392 *
The Parnassus Fund
244 California Street, Ste. 400
San Francisco, CA 94111............................................................... 1,150,000 6.8%
All directors and executive officers as a group (13 persons)(13)....................... 429,537 2.5%
</TABLE>
- ------------------------
* Less than 1%.
** Employee director.
*** Executive officer.
**** Former executive officer.
***** Non-employee director.
****** Part-time 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 69,995 shares of Common Stock exercisable
within 60 days of March 10, 1997.
3
<PAGE>
(3) Includes options to purchase 24,998 shares of Common Stock exercisable
within 60 days of March 10, 1997.
(4) Includes options to purchase 19,167 shares of Common Stock exercisable
within 60 days of March 10, 1997.
(5) Includes options to purchase 41,670 shares of Common Stock exercisable
within 60 days of March 10, 1997.
(6) Includes options to purchase 6,250 shares of Common Stock exercisable
within 60 days of March 10, 1997.
(7) 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.
(8) Includes options to purchase 6,250 shares of Common Stock exercisable
within 60 days of March 31, 1997.
(9) Consists of 2,000 shares held by Mr. Rosati, 4,500 shares held by WS
Investments 92A and options to purchase 21,250 shares of Common Stock
exercisable within 60 days of March 10, 1997. Mr. Rosati is a general
partner of WS Investments 92A 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 Paul S. Bachow Co-Investment Fund,
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 224,245 shares of Common Stock exercisable
within 60 days of March 10, 1997.
4
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide for a variable board of four to seven
directors, with the number currently fixed at six. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the Company's six
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.
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.................................... 58 Chairman of the Board of the Company 1981
James T. Healy........................................ 56 President and Chief Executive Officer of 1996
the Company
Todd S. Myhre......................................... 52 Business Consultant 1994
Stephen F. Fisher..................................... 44 Managing Director of Bachow & Associates, 1995
Inc.
G. Frederick Forsyth.................................. 52 Business Consultant 1996
Mario M. Rosati....................................... 50 Member of Wilson Sonsini Goodrich & 1981
Rosati, Professional Corporation
</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, is the Chairman of the Board. From
April 1990 to September 1996, he was Chairman of the Board, President and Chief
Executive Officer of the Company. From November 1981 to April 1990, he was
President and a director of the Company.
Mr. Healy joined the Company in September 1996 as President and Chief
Executive Officer of the Company. From December 1990 to September 1996, Mr.
Healy was associated with Credence Systems Corporation, a manufacturer of
semiconductor test equipment, in various senior executive management positions,
most recently as President and a director of the Company.
Mr. Myhre is a part-time employee of and consultant to the Company. From
February 1996 to October 1996, Mr. Myhre was an international business
consultant. From September 1995 to January 1996, he served as President and
Chief Executive Officer of GameTech International, an electronic gaming
manufacturer. From January 1993 to August 1993, from August 1993 to December
1993 and from January 1994 to August 1995, Mr. Myhre served as Vice President
and Chief Financial Officer of the Company, as Executive Vice President and
Chief Operating Officer of the Company and as President and a director of the
Company, respectively.
5
<PAGE>
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.
Mr. Forsyth has been a director of the Company since February 12, 1996. From
June 1989 to February 1997, Mr. Forsyth was associated with Apple Computer,
Inc., a personal computer manufacturer, in various senior management positions,
most recently as Senior Vice President and General Manager, Macintosh Production
Group.
Mr. Rosati has been Secretary of the Company since May 1996 and a director
of the Company since the Company's inception in November 1981. From July 1995 to
April 1996, Mr. Rosati was the Assistant Secretary of the Company. He is also a
director of CATS 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 both networks and personal computers; Ross Systems, Inc., a
supplier of enterprise-wide business systems and related services to companies
installing open systems/client server software products; and Sanmina
Corporation, an electronics manufacturer of multilayered printed circuit boards,
backplane assemblies, subassemblies, and printed circuit board assemblies. He is
a member of Wilson Sonsini Goodrich & Rosati, general counsel to the Company.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF
THE NOMINEES.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during
the year ended December 31, 1996. 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, 1996 and as of March 31, 1997, the Audit
Committee of the Board of Directors consisted of directors Fisher, Forsyth and
Rosati and held one meeting. 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, 1996 and as of March 31, 1997, the
Compensation Committee of the Board of Directors consisted of directors Fisher,
Forsyth and Rosati and held three meetings. 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, 1996, 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.
6
<PAGE>
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 1996, 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 Secretary of the Company, is a member of the firm of
Wilson Sonsini Goodrich & Rosati.
TRANSACTIONS WITH MANAGEMENT
On April 30, 1996, the Company entered into a Management Transition
Agreement with William W. R. Elder (the "Elder Agreement"). The Elder Agreement
provides for the cessation of Mr. Elder's services to the Company in his
capacity as Chief Executive Officer, the continuation of his role as Chairman of
the Board and the commencement of his role as an employee of the Company until
December 31, 1997 and as a consultant to the Company until December 31, 1999.
The terms of the Elder Agreement provide for Mr. Elder to continue to receive
his salary as in effect on April 30, 1996 until December 31, 1997 and $100,000
per year for the period of January 1, 1998 to December 31, 1999, provided Mr.
Elder does not cease to be an employee of or consultant to the Company prior to
such dates. In addition, the Elder Agreement provides that Mr. Elder will
receive all of the employee benefits that he received as of April 30, 1996 while
an employee of the Company, and will receive only health benefits and an
automobile allowance while a consultant to the Company. Mr. Elder's options to
purchase Common Stock of the Company will be governed by the provisions of the
applicable option agreements between Mr. Elder and the Company, and the vesting,
post-termination exercisability, and other provisions of such options shall not
be affected by the Elder Agreement.
On August 25, 1995 the Company entered into a Transition Agreement with Todd
S. Myhre (the "Myhre Agreement"). The Myhre Agreement provides 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 Myhre Agreement provide 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 Myhre Agreement provides 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 Myhre 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.
See also "Compensation Committee Interlocks and Insider Participation"
above.
7
<PAGE>
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 1996, its executive officers, directors and ten percent
shareholders field all required Section 16(a) reports on a timely basis without
exception.
8
<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, 1996:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS(2)
ANNUAL COMPENSATION ------------------------------------
--------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS(#) COMPENSATION($)(3)
- ---------------------------------------- --------- --------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
William W.R. Elder ..................... 1996 304,167 -- 50,000 2,947
Chairman of the Board 1995 282,917 42,750 100,000 18,422
1994 260,000 53,950 -- 7,980
James T. Healy ......................... 1996(4) 87,500 -- 250,000 --
President and Chief Executive Officer
James M. Burns ......................... 1996 213,996 5,000 50,000 393
Former Executive Vice President and 1995(5) 178,225 56,631 100,000 150,729(6)
General Manager Thin Film Division
Kevin C. Conlon ........................ 1996 207,341 15,613(7) 100,000 926
Former Executive Vice President, 1995 162,567 36,029 50,000 11,359
Marketing and Sales 1994 129,900 36,255 15,000 3,412
Thomas E. Seidel ....................... 1996(4) 183,333 -- 125,000 948
Executive Vice President and Chief
Technical Officer
John E. Aldeborgh ...................... 1996 182,390 -- 50,000 --
Executive Vice President, Sales and 1995 152,096 30,000 62,500 9,816
General Manager Ion Technology 1994 138,490 27,140 20,000 3,324
Division
</TABLE>
- ------------------------
(1) Except as otherwise noted, all bonuses were earned by and paid to the named
officer in fiscal year indicated pursuant to the Company's Management
Incentive Plan.
(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 on behalf of the
officer by the Company. Premiums in the amount of $2,947 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 1996.
(4) Mr. Healy and Mr. Seidel were not employed by the Company prior to fiscal
1996.
(5) Mr. Burns was not employed by the Company prior to fiscal 1995.
(6) Includes $139,720 paid as reimbursed relocation expenses to Mr. Burns.
(7) Amount represents sales commissions earned by Mr. Conlon in fiscal 1996.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
1996 to the named executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------------- ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR
OPTIONS/SARS EXERCISE OR OPTION TERM(3)
OPTIONS/SARS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1) IN FISCAL YEAR(2) PER SHARE DATE 5% 10%
- --------------------------- ------------- ----------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder......... 50,000 4.9% $ 6.125 7/23/01 $ 82,891 $ 182,737
James T. Healy............. 250,000 24.6% 5.934 9/16/01 410,105 906,226
James M. Burns............. 50,000 4.9% 6.125 7/23/01 82,891 182,737
Kevin C. Conlon............ 100,000 9.8% 6.125 7/23/01 165,782 365,474
Thomas E. Seidel........... 75,000 7.4% 8.375 1/31/01 173,539 383,477
50,000 4.9% 6.125 7/23/01 82,891 182,737
John E. Aldeborgh.......... 50,000 4.9% 6.125 7/23/01 82,891 182,737
</TABLE>
- ------------------------
(1) The indicated options were granted at various dates in 1996, vest at the
rate of 1/3 per year and become fully exercisable at various dates in 1999.
(2) The Company granted options to purchase 1,027,300 shares to employees in
fiscal 1996.
(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.
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
1996 by the named executive officers and the value of such officers unexercised
options/SARs at December 31, 1996. Options were exercised by named executive
officers during fiscal 1996.
<TABLE>
<CAPTION>
NAME
- ------------------------ SHARES VALUE REALIZED NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON -------------- OPTIONS/SARS AT 12/31/96 IN-THE-MONEY OPTIONS/SARS
EXERCISE ----------------------------- AT 12/31/96(1):
------------ (UNEXERCISABLE) (UNEXERCISABLE) ----------------------------
(EXERCISABLE) (EXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder...... -- -- 53,330 116,670 $ 52,500 --
James T. Healy.......... -- -- -- 250,000 -- --
James M. Burns.......... -- -- 33,331 116,669 -- --
Kevin C. Conlon......... $ 43,332 $ 224,676 8,333 138,335 -- $ 7,502
Thomas E. Seidel........ -- -- -- 125,000 -- --
John E. Aldeborgh....... 11,133 50,568 8,333 81,668 -- 10,002
</TABLE>
- ------------------------
(1) Market value of underlying securities based on the closing price of
Company's Common Stock on December 31, 1996, on NASDAQ of $5.50, 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.
10
<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. 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 the Chief Executive Officer and the specific
11
<PAGE>
individual. The Compensation Committee also, with the Chief Executive
Officer, jointly establishes and agrees on their respective performance
objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer, the Compensation Committee and full Board, as
appropriate.
4. At the end of the performance cycle, the Chief Executive Officer
evaluates 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 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
G. Frederick Forsyth
Mario M. Rosati
12
<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 1992 Fiscal Year (December 31, 1991)
through 1996 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, 1991. 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 HAMBRECHT & QUIST TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GENUS, INC. NASDAQ STOCK MARKET -US HAMBRECHT & QUIST TECHNOLOGY
<S> <C> <C> <C>
Dec-91 100 100 100
Dec-92 74 116 115
Dec-93 83 134 126
Dec-94 221 131 146
Dec-95 207 185 219
Dec-96 152 227 262
</TABLE>
* 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.
13
<PAGE>
PROPOSAL TWO
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 1997, a total of 2,853,006
shares of Common Stock were reserved for issuance thereunder. In January 1997,
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 650,000
to 3,653,006 shares. The Board of Directors 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 10,
1997, 309 full-time employees (including officers and directors), 2 part-time
employees and 3 consultants were eligible for grants under the 1991 Option Plan,
while three 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 10, 1997, options to purchase 754,244 shares had been exercised,
options to purchase 1,823,253 shares were outstanding and 2,098,762 shares were
available for future grant. The closing price of the Company's Common Stock
reported on the NASDAQ National Market System on March 10, 1997, was $4.94 per
share. The essential features of the 1991 Option Plan are outlined below.
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. 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 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.
14
<PAGE>
PERFORMANCE-BASED COMPENSATION LIMITATIONS
No employee shall be granted in any fiscal year of the Company options to
acquire in the aggregate 400,000 shares of Common Stock. The foregoing
limitation, which shall adjust proportionately in connection with any change in
the Company's capitalization, is intended to satisfy the requirements applicable
to options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code. In the event that the
Committee determines that such limitation is not required to qualify options as
performance-based compensation, the Committee may modify or eliminate such
limitation.
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. 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:
(a) EXERCISE OF THE OPTION: The Board of Directors 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 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. The option
price of incentive stock options may not be less than 100% of the fair market
value of the Company's Common Stock on the date the option is granted and the
exercise price of nonstatutory stock options may not be less than 85% of the
fair market value of the 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 of any option 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.
15
<PAGE>
(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 three months (or, in the case of
a nonstatutory stock option, such other period of time not exceeding six 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, options
may be exercised at any time within twelve months after the date of death but
only to the extent that the options were exercisable on the date of death.
(e) TERM OF OPTIONS: Options granted under the 1991 Option Plan (other than
Outside Director Options) expire 10 years from the date of grant, unless a
shorter term is provided in the option agreement. However, incentive stock
options granted to an optionee who, immediately before the grant of such option,
owns 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 terms 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 sale of assets of
the Company, options shall be assumed or substituted for by the successor
corporation or the optionee's right to exercise outstanding options shall be
accelerated in full.
(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 that 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
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. To the
extent required by applicable law, shareholder approval shall be obtained of any
Plan amendment. 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 by its
terms 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.
16
<PAGE>
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.
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 a nonstatutory option is granted. 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE 1991 INCENTIVE STOCK OPTION PLAN.
17
<PAGE>
PROPOSAL THREE
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 1997, 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 150,000 shares, from 1,600,000 to 1,750,000 shares.
As of March 10, 1997, 1,350,083 shares had been issued under the Purchase Plan,
and 249,917 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 10, 1997, approximately employees were eligible
to participate in the Purchase Plan.
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 may change 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.
18
<PAGE>
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.
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 that 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. The Purchase Plan will by
its terms terminate in 2009.
19
<PAGE>
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 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.
VOTE REQUIRED
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
20
<PAGE>
PROPOSAL FOUR
AMENDMENT TO THE ARTICLES OF INCORPORATION
GENERAL
The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend the Company's Articles of
Incorporation and to increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 50,000,000. Accordingly, the Board of Directors
has unanimously approved the proposed Amended and Restated Articles of
Incorporation, in substantially the form attached hereto as EXHIBIT A (the
"Articles"), and hereby solicits the approval by the Company's shareholders of
the Articles.
If the shareholders approve the Articles, the Board of Directors currently
intends to file the Articles with the Secretary of State of the State of
California as soon as practicable following such shareholder approval.
PURPOSE
The objectives of the increase in the authorized number of shares of Common
Stock from 20,000,000 to 50,000,000 shares are to ensure that there is a
sufficient number of authorized shares to issue shares under the 1991 Incentive
Stock Option Plan and 1989 Employee Stock Purchase Plan and to have sufficient
shares available for future issuances. For these reasons, the Board of Directors
believes that the increase in the authorized number of shares of Common Stock
are in the best interests of the Company and its shareholders.
The Board of Directors believes that it is prudent to increase the
authorized number of shares of Common Stock to the proposed level in order to
provide a reserve of shares available for issuance to meet business needs as
they arise. Such future activities may include, without limitation, financings,
establishing strategic relationships with corporate partners, providing equity
incentives to employees, officers or directors, or effecting stock splits or
dividends. The additional shares of Common Stock authorized may also be used to
acquire or invest in complementary businesses or products or to obtain the right
to use complementary technologies.
The additional Common Stock would have rights identical to the currently
outstanding Common Stock of the Company. Adoption of the proposed Articles would
not affect the rights of the holders of currently outstanding Common Stock of
the Company, except for effects incidental to increasing the number of shares of
the Company's Common Stock outstanding.
POSSIBLE EFFECTS OF THE AMENDMENT
If the shareholders approve the proposed Articles, the Board of Directors
may cause the issuance of additional shares of Common Stock without further vote
of the shareholders of the Company, except as provided under California
corporate law or under the rules of any national securities exchange on which
shares of Common Stock of the Company are then listed. Current holders of Common
Stock have no preemptive or like rights, which means that current shareholders
do not have a prior right to purchase any new issue of capital stock of the
Company in order to maintain their appropriate ownership thereof. The issuance
of additional shares of Common Stock would decrease the proportionate equity
interest of the Company's current shareholders and, depending upon the price
paid for such additional shares, could result in dilution to the Company's
current shareholders.
In addition, the Board of Directors could use authorized but unissued shares
to create impediments to a takeover or a transfer of control of the Company.
Accordingly, the increase in the number of authorized shares of Common Stock may
deter a future takeover attempt that holders of Common Stock may deem to be in
their best interest or in which holders of Common Stock may be offered a premium
for their shares
21
<PAGE>
over the market price. The Board of Directors is not currently aware of any
attempt to take over or acquire the Company. While it may be deemed to have
potential anti-takeover effects, the proposed amendment to increase the
authorized Common Stock is not prompted by any specific effort or takeover
threat currently perceived by management.
VOTE REQUIRED
Approval of the amendment to the Articles requires the affirmative vote of a
majority of the Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION.
22
<PAGE>
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P., independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1997, 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 L.L.P. has audited the Company's financial statements since the year
ended December 31, 1982. Representatives of Coopers & Lybrand L.L.P. 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: April 21, 1997
23
<PAGE>
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GENUS, INC.
James T. Healy and Mario M. Rosati certify that:
1. They are the duly elected President and Secretary of Genus, Inc., a
California corporation.
2. The Articles of Incorporation of this corporation, as amended to the
date of the filing of these Restated Articles of Incorporation, and with the
omissions required by Section 910 of the Corporations Code, are hereby amended
and restated to read as follows:
I.
The name of this corporation is: GENUS, INC.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This Corporation is authorized to issue two classes of shares, designated
"Common Stock" and "Preferred Stock." The total number of shares which this
corporation is authorized to issue is 52,000,000. The number of shares of
Preferred Stock which this corporation is authorized to issue is 2,000,000. The
number of shares of Common Stock which this corporation is authorized to issue
is 50,000,000.
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of this corporation is authorized to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series, to determine the designation and par value of any series
and to fix the number of shares of any series.
IV.
The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
Any repeal or modification of the foregoing provisions of this Article IV by
the shareholders of this corporation shall not adversely affect any right or
protection of a director of this corporation existing at the time of such repeal
or modification.
3. The foregoing Restated Articles of Incorporation have been duly approved
by the Board of Directors of said corporation.
<PAGE>
4. The foregoing Restated Articles of Incorporation were approved by the
required vote of the shareholders of said corporation in accordance with
Sections 902 and 903 of the California General Corporations Code at the Annual
Meeting of Shareholders, the record date for which was March 31, 1997. The total
number of outstanding shares of the corporation entitled to vote as of the
record date for said meeting was shares of Common Stock. The number of
shares of Stock voting in favor of the foregoing Restated Articles of
Incorporation equaled or exceeded the vote required. The vote required was a
majority of the outstanding shares of Common Stock entitled to vote as of the
record date for said meeting. We further declare under penalty of perjury under
the laws of the State of California that the matters set forth in the foregoing
Restated Articles of Incorporation are true and correct of our own knowledge.
Executed at Sunnyvale, California, on May 20, 1997.
______________________________________
James T. Healy, President
______________________________________
Mario M. Rosati, Secretary
2
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of GENUS, INC., a California corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated April 21, 1997, and hereby
appoints James T. Healy and Mary F. Bobel proxies and attorneys-in-fact, with
full power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1997 Annual Meeting of Shareholders of
GENUS, INC. to be held on Tuesday, May 20, 1997, at 2:00 p.m., local time, at
The Network Meeting Center located at 5201 Great America Parkway, Suite 122,
in Santa Clara, California, 95054, and any continuation(s) or adjournment(s)
thereof, and to vote all shares of Common Stock which the undersigned would
be entitled to vote if then and there personally present, on the matters set
forth below.
SEE REVERSE
SIDE
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<PAGE>
Please mark your choice like this /X/
1. Election of directors: / / FOR all nominees / / WITHHOLD authority to
listed below vote for all nominees
(except as indicated) 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, James T. Healy, Todd S. Myhre, Stephen F. Fisher, G.
Frederick Forsyth and Mario M. Rosati
FOR AGAINST ABSTAIN
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 650,000
additional shares:
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 150,000
additional shares:
4. Proposal to approve the amendment of the / / / / / /
Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock
to 50,000,000:
5. Proposal to ratify the appointment of Coopers / / / / / /
& Lybrand L.L.P. as the independent public
accountants of the Company for the fiscal
year ending December 31, 1997:
6. 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
AMENDMENT OF THE ARTICLES OF INCORPORATION, FOR THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
Such attorney or substitute shall have and may
exercise all of the powers of said attorney-in-fact
hereunder.
Signature(s) Date , 1997
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(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.)
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