<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):
/ / No fee required.
/X/ 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:
-----------------------------------------------------------------------
(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: $25,000,000
-----------------------------------------------------------------------
(5) Total fee paid: $5,000
-----------------------------------------------------------------------
/ / 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:
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(4) Date Filed:
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<PAGE>
GENUS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on , , 1998 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 the sale of the Company's ion implantation systems business,
including the assets, properties and intellectual property related
thereto, pursuant to the terms and conditions of the Asset Purchase
Agreement, dated as of April 15, 1998, between Varian Associates, Inc.
("Varian") and the Company and the transactions contemplated thereby
(collectively, the "Proposed Transactions").
3. To approve the conversion of securities exceeding 20% of the outstanding
Common Stock.
4. To approve an amendment to the 1989 Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder by
300,000 shares.
5. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company's financial statements for the fiscal year ending
December 31, 1998.
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 , 1998
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
, 1998
<PAGE>
GENUS, INC.
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
---------------------
The enclosed Proxy is solicited on behalf of the Board of Directors of
Genus, Inc., a California corporation (the "Company") for use at the Annual
Meeting of Shareholders to be held , , 1998, 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 ,
1998, to all shareholders entitled to vote at the meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on , 1998, are
entitled to vote at the meeting. At the record date, shares of the
Company's Common Stock, no par value, were issued and outstanding.
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote. In addition, each shareholder on the record date, or his or her proxy, 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 first, third, fourth and fifth proposals in this
Proxy Statement. The affirmative vote of a majority of the outstanding shares of
Common Stock on the record date will be required under California law to approve
the second proposal 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
1
<PAGE>
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.
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 $10,000 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.
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 31,
1998, 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(2)
- ---------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
The Parnassus Fund ................................................... 1,150,000 6.71%
244 California Street, Ste. 400
San Francisco, CA 94111
Anthony T. Winn ...................................................... 1,000,000 5.84%
c/o Herbert H. Davis III, Esq.
1200 17th Street Suite 3000
Denver, CO 80202
Bachow Investment Partners III, L.P.(3) .............................. 997,876 5.83%
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Dimensional Fund Advisors ............................................ 868,400 5.07%
1299 Ocean Ave
11th Floor
Santa Monica, CA
William W.R. Elder(4)................................................. 230,599 1.35%
James T. Healy........................................................ 5,000 *
Paul S. Bachow Co-Investment Fund, L.P.(5) ........................... 138,671 *
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Paul S. Bachow(6) .................................................... 63,392 *
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Mary F. Bobel(7)...................................................... 27,032 *
Mario M. Rosati(8).................................................... 11,500 *
Thomas E. Seidel...................................................... 3,841 *
John E. Aldeborgh..................................................... 2,593 *
Stephen F. Fisher(9).................................................. 0 *
G. Frederick Forsyth.................................................. 0 *
Todd S. Myhre......................................................... 0 *
All directors and executive officers as a group (11 persons)(10)...... 1,485,076 8.67%
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, 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.
(2) Applicable percentage ownership is based on 17,129,260 shares of Common
Stock outstanding as of March 31, 1998 together with applicable options for
such shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, based on factors including
voting and investment power with respect to shares. Shares of Common Stock
3
<PAGE>
subject to the options currently exercisable, or exercisable within 60 days
after March 31, 1998, are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) 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.
(4) Consists of 230,599 shares held in William R. Elder and Gloria S. Elder
Family Trust.
(5) 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.
(6) 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.
(7) Consists of 2,032 shares of Common Stock and options to purchase 25,000
shares of Common Stock exercisable within 60 days of March 31, 1998.
(8) Consists of 2,500 shares held by Mr. Rosati, 9,000 shares held by WS
Investments 92A and options to purchase 5,000 shares of Common Stock
exercisable within 60 days of March 31, 1998. 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.
(9) 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.
(10) Includes options to purchase 25,000 shares of Common Stock exercisable
within 60 days of March 31, 1998.
4
<PAGE>
PROPOSAL ONE
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. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the Company's four
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. It is not expected that any nominee listed below will be unable or will
decline to serve as a director. 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. 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............... 59 President, Chief Executive Officer and Chairman of the Board 1981
of the Company
Todd S. Myhre.................... 52 President and Chief Executive Officer of GameTech 1994
International
G. Frederick Forsyth............. 54 President, Professional Products Division of Iomega, Inc. 1996
Mario M. Rosati.................. 50 Member of Wilson Sonsini Goodrich & Rosati, P.C. 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, is the Chairman of the Board, President
and Chief Executive Officer of the Company. From October 1996 to April 1998, he
served only as 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. Myhre has served as a director of the Company since January 1994. Since
April 1998, and from September 1995 to January 1996, Mr. Myhre has served as
President and Chief Executive Officer of GameTech International, an electronic
gaming manufacturer. From September 1995 to March 1998, Mr. Myhre was an
international business consultant. 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.
Mr. Forsyth has been a director of the Company since February 1996. Since
August 1997, Mr. Forsyth has served as President, Professional Products Division
of Iomega, Inc. 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 Product Group.
5
<PAGE>
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. He is also a
director of Aehr Test Systems, a manufacturer of semiconductor test equipment;
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, P.C., general counsel to the Company.
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
Votes Cast will be elected as directors of the Company for the ensuing year.
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 7 meetings during the
year ended December 31, 1997. 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, 1997, the Audit Committee of the Board of
Directors consisted of directors Fisher, Forsyth and Rosati and held one
meeting. As of March 31, 1998 the Audit Committee consisted of directors
Forsyth, Myhre 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, 1997, the Compensation Committee of the
Board of Directors consisted of directors Fisher, Forsyth and Rosati and held
three meetings. As of March 31, 1998 the Compensation Committee consisted of
directors Forsyth, Myhre 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, 1997, 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.
6
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1997, the Company paid legal fees and expenses to Wilson Sonsini Goodrich
& Rosati, Professional Corporation, general counsel to the Company. The amounts
paid by the Company to Wilson Sonsini Goodrich & Rosati were less than 5% of the
law firm's total gross revenues for its last completed fiscal year. Mario M.
Rosati, a director and Secretary of the Company, is a member of the law firm of
Wilson Sonsini Goodrich & Rosati.
EXECUTIVE OFFICERS
The executive officers of the Company, who are elected by and serve at the
discretion of the Board of Directors, and their ages at March 31, 1998, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
William W.R. Elder................................... 59 President, Chief Executive Officer and Chairman of
the Board
John E. Aldeborgh.................................... 41 Executive Vice President, Chief Customer Satisfaction
Officer
Thomas E. Seidel, Ph.D............................... 62 Executive Vice President, Chief Technical Officer
Mary F. Bobel........................................ 48 Executive Vice President, Chief Financial Officer
Frederick E. Heslet, Ed.D............................ 58 Vice President, Chief Quality Officer
James McEleney....................................... 40 Vice President, General Manager, Ion Technology
Products
</TABLE>
Except as set forth below, all of the executive officers have been
associated with the Company in their present or other capacities for more than
the past five years. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
executive officers of the Company.
Mr. Elder's background is summarized under "Election of Directors" above.
Mr. Aldeborgh joined the Company in June 1989 and serves as the Executive
Vice President and Chief Customer Satisfaction Officer. From January 1997 to
September 1997, Mr. Aldeborgh served as Executive Vice President and Chief
Operating Officer. From January 1993 to January 1997, he was Vice President and
General Manager, Ion Technology Division of the Company. From June 1989 to
January 1993, he was the Director of Operations of Ion Technology Products. From
May 1983 to May 1989, Mr. Aldeborgh was with LTX Corporation, a manufacturer of
semiconductor test equipment, in various management positions, most recently as
Director of Manufacturing for the Linear Manufacturing Division.
Dr. Seidel joined the Company in January 1996 and is the Executive Vice
President and Chief Technical Officer of the Company. From July 1988 to January
1996, Dr. Seidel was associated with SEMATECH, a semiconductor-industry
consortium, in various senior management positions, most recently as Chief
Technologist and Director of Strategic Technology.
Ms. Bobel joined the Company in March 1997 as Executive Vice President and
Chief Financial Officer. From October 1994 to September 1996, Ms. Bobel served
as Vice President and Chief Financial Officer at Educational Publishing
Corporation, a publisher of supplementary educational materials. From March 1990
to September 1994, she was employed at Adobe Systems, a publicly held software
company, most recently as Vice President and Corporate Controller.
7
<PAGE>
Dr. Heslet joined the Company in November 1996 as Chief Quality Officer and
Executive Vice President, Human Resources. In addition, he also is employed by
California State University, Hayward, where he has been a professor of
educational psychology since 1968. From November 1990 to December 1996, he
served as Vice President of Quality and Development at Credence Systems
Corporation, a manufacturer of semiconductor test equipment.
Mr. McEleney joined the Company in April 1996 as Vice President, Marketing,
Ion Technology Products and was promoted to Vice President and General Manager
of Ion Technology Products in March 1998. From January 1995 to April 1996, Mr.
McEleney was the Director, Sales & Marketing for Thermadics Detection, Inc., a
manufacturer of precision analytical instruments. From December 1984 to January
1995, Mr. McEleney held various sales and marketing positions for Teradyne,
Inc., a manufacturer of automatic test equipment.
TRANSACTIONS WITH MANAGEMENT
CHANGE OF CONTROL SEVERANCE AGREEMENTS
Certain executive officers and key employees have severance agreements with
the Company that provide severance benefits in the event that the officer's or
employee's employment with the Company is "Involuntarily Terminated" or
otherwise terminated without "Cause" within a specified period of time (either
six months or one year) following a "Change of Control." The severance benefits
include a cash payment of a specified percentage (either 600% or 1200%) of the
executive's or employee's monthly base pay. The severance agreements define
"Cause" to include an act of dishonesty intended to result in substantial gain
or personal enrichment; conviction of an illegal act with respect to his or her
employment by the Company; and willful violations of the executive's or key
employee's obligations to the Company. The severance agreements define
"Involuntary Termination" to include a reduction in base compensation; a
relocation of the executive or key employee to a location more than 50 miles
from the executive or key employee's present location; a material reduction in
benefits or a material increase in the executive's or employee's cost of
benefits; significant reduction of the executive's or key employee's duties or
responsibilities; or the failure or refusal of a successor company to assume the
Company's obligations under the severance agreements. The severance agreements
define "Change of Control" to mean the occurrence of any of the following
events: (i) any person becomes the beneficial owner of securities of the Company
representing 50% or more of the total voting power represented by the Company's
then outstanding voting securities; or (ii) a change in the composition of the
Board of Directors occurring within a two-year period, as a result of which
fewer than a majority of the directors are incumbent directors; or (iii) the
shareholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent at least 50% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets. The applicability of the change of control severance
benefits to any specific executive officer or key employee is dependent on
whether the Proposed Transaction as described in Proposal Two is deemed to be a
sale of substantially all the assets of the Company and whether the shareholders
approve the Proposed Transaction.
TERMINATION OF EMPLOYMENT AGREEMENT
On April 20, 1998, the Company entered into a Settlement Agreement and
Mutual Release with James T. Healy (the "Healy Agreement") in connection with
Mr. Healy's resignation from the positions of President and Chief Executive
Officer of the Company effective as of April 30, 1998. Pursuant to the Healy
Agreement, the Company will continue to pay Mr. Healy $25,000 per month, less
applicable withholding, for nine months from the date of his resignation. Mr.
Healy will not be entitled to the accrual or
8
<PAGE>
continuation of any employee benefits, including but not limited to, vacation
benefits and bonuses. The exercise of any stock options will continue to be
subject to the terms and conditions of the Company's Stock Option Plan and the
applicable Stock Option Agreement between Mr. Healy and the Company.
TRANSITION AGREEMENT
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.
Following the resignation of Mr. Healy, Mr. Elder resumed the position of
President and Chief Executive Officer and will continue as Chairman of the
Board. Accordingly, beginning in May 1998, Mr. Elder began receiving his
previous salary of $300,000 per year.
See also "Compensation Committee Interlocks and Insider Participation"
above.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such officers, directors and 10% shareholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) reports that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during 1997, its executive officers, directors and 10% shareholders filed
all required Section 16(a) reports on a timely basis with the following
exceptions: John Aldeborgh filed a Form 5 disclosing one transaction that should
have been reported earlier on a Form 4; and Thomas Seidel filed a Form 5
disclosing two transactions that should have been reported earlier on Form 4.
9
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company (the "Named Executive Officers") for the three fiscal years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS(2)
ANNUAL COMPENSATION -------------------------------
---------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(3)
- -------------------------------------------------- -------- -------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
William W.R. Elder................................ 1997 305,000 -- -- 43,890
Chairman of the Board 1996 304,167 -- 50,000 2,947
1995 282,917 42,750 100,000 18,422
James T. Healy.................................... 1997 300,000 90,000 -- 11,500
President and Chief Executive 1996(4) 87,500 -- 250,000 --
Officer
Mary F. Bobel..................................... 1997(5) 137,500 16,500 75,000 6,539
Executive Vice President and
Chief Financial Officer
John E. Aldeborgh................................. 1997 206,845 20,976 30,000 8,716
Executive Vice President, Chief 1996 182,390 -- 50,000 --
Customer Satisfaction Officer 1995 152,096 30,000 62,500 9,816
Thomas E. Seidel.................................. 1997 209,200 21,000 5,000 8,692
Executive Vice President and 1996(4) 183,333 -- 125,000 948
Chief Technical Officer
</TABLE>
- ------------------------
(1) Except as otherwise noted, all bonuses were earned by the named officer in
fiscal year indicated and paid to the named officer early in the subsequent
year 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 and automobile allowances. Premiums in the amount of
$2,947 and $3,540 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 and fiscal 1997, respectively.
(4) Mr. Healy and Mr. Seidel were not employed by the Company prior to fiscal
1996. Mr. Healy joined the Company in September 1996 and resigned in April
1998. Mr. Seidel joined the Company in January 1996.
(5) Ms. Bobel was not employed by the Company prior to fiscal 1997. Ms. Bobel
joined the Company in March 1997.
10
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
1997 to the Named Executive Officers. No SARs were granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION
GRANTED TO EXERCISE FOR
EMPLOYEES OR BASE OPTION TERM(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) YEAR(2) SHARE DATE 5% 10%
- ------------------------------------------- ----------- --------------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder......................... -- -- -- -- -- --
James T. Healy............................. -- -- -- -- -- --
Mary F. Bobel.............................. 75,000 14 3.87 2002 $ 80,191 $ 177,201
John E. Aldeborgh.......................... 30,000 6 5.25 2002 43,514 96,155
Thomas E. Seidel........................... 5,000 1 5.25 2002 7,252 16,026
</TABLE>
- ------------------------
(1) The indicated options were granted at various dates in 1997, vest at the
rate of 1/3 per year and become fully exercisable at various dates in 2000.
(2) The Company granted options to purchase 537,000 shares to employees in
fiscal 1997.
(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%). This assumption is based on SEC rules and does not
necessarily represent the expected rate of appreciation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the number and value of such officers'
unexercised options at December 31, 1997. No SARs have been granted.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE- MONEY
NUMBER OF UNEXERCISED OPTIONS
SHARES AT 12/31/97 OPTIONS AT 12/31/97(2):
ACQUIRED ON VALUE ----------------------------- ----------------------------------
NAME EXERCISE REALIZED(1) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
- -------------------------------------- ----------- ----------- ------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder.................... 20,000 61,260 99,999 50,001 -- --
James T. Healy........................ 83,325 166,675 -- --
Mary F. Bobel......................... 25,000 50,000 -- --
John E. Aldeborgh..................... 58,311 61,670 -- --
Thomas E. Seidel...................... 68,327 61,673 -- --
</TABLE>
- ------------------------
(1) Fair market value of the Company's Common Stock 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, 1997, on NASDAQ of $3.334, less the
exercise price.
The Company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
11
<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 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 methods 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
12
<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:
Todd S. Myhre
G. Frederick Forsyth
Mario M. Rosati
13
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return from the last trading day before the beginning of the Company's 1993
Fiscal Year (December 31, 1992) through 1997 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, in the NASDAQ
Stock Market-US Index and the H & Q Technology Index on December 31, 1992 and
all dividends were reinvested. Historic stock price performance is not
necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GENUS, INC. NASDAQ STOCK MARKET (U.S.) H & Q TECHNOLOGY
<S> <C> <C> <C>
12/92 $100 $100 $100
12/93 112 115 117
12/94 298 112 141
12/95 279 159 211
12/96 205 195 262
12/97 124 240 307
</TABLE>
14
<PAGE>
PROPOSAL TWO
APPROVAL OF THE PROPOSED TRANSACTION
GENERAL
Pursuant to the terms of the Asset Purchase Agreement, dated April 15, 1998,
by and between Varian and the Company (the "Agreement"), the Company will sell
to Varian most of its physical assets and assign its rights and obligations to
Varian under its existing contracts related to its ion implantation systems
business (the "Business"). Additionally, as a condition to consummation of the
sale of selected assets and transfer of selected liabilities of the Business
contemplated by the Agreement, the Company and Varian will enter into a
Cross-License Agreement (the "License Agreement"), pursuant to which the Company
will grant a royalty free, nonexclusive, irrevocable, worldwide, perpetual
license to Varian covering the Company's intellectual property related to the
Business (the "Intellectual Property"), other than any such intellectual
property primarily used in the conduct of the Company's chemical vapor and thin
film deposition systems business (the "CVD Business"). The Company will retain
ownership of certain intellectual property rights primarily used in the
development, manufacture, testing and sale of the products of the Company's CVD
Business (the "Licensed Intellectual Property") and will grant Varian a license
under these intellectual property rights pursuant to the License Agreement.
The detailed terms of, and conditions to, the Proposed Transaction are
contained in the Asset Purchase Agreement. The statements made in this Proxy
Statement with respect to the terms of the Proposed Transaction and related
transactions are qualified in their entirety by reference to the more complete
information set forth in the Asset Purchase Agreement, a copy of which is
attached to this Proxy Statement as Appendix A and which is incorporated herein
by reference.
BACKGROUND OF THE TRANSACTION
The Company, which was formed in 198 and completed its initial public
offering in 1988, has two primary lines of business: its chemical vapor thin
film deposition systems business and its high energy ion implantation systems
business. Both of these businesses involve the design, development, manufacture
and marketing of capital equipment for the semiconductor industry.
Beginning in mid-1996, the semiconductor capital equipment industry entered
a cyclical downturn. As a result of this downturn, Company management began to
explore opportunities for consolidation, either as a buyer or seller. In March
1996, Smith Barney Inc. (now associated with Salomon Brothers Inc and
collectively doing business with Salomon Brothers Inc as, and referred to herein
as, Salomon Smith Barney) was retained as the Company's financial advisor to
assist in these efforts.
During the period from May through July 1996, several companies, other than
four direct competitors of the Company, were contacted as to their possible
interest in a transaction with the Company. Three of the companies contacted
expressed preliminary interest. In August 1996, one of the Company's direct
competitors was also contacted. This company expressed no interest in pursuing a
transaction.
During August and September 1996, Company management held several meetings
with the three companies that had expressed a preliminary level of interest.
Following these meetings, Company management determined that no viable merger
opportunity existed and elected to temporarily discontinue discussions regarding
a possible merger transaction.
During the fourth quarter of 1996, the Company observed continuing weakness
in its business, which was largely attributable to the cyclical downturn in the
semiconductor equipment industry. As a result, in February 1997, the Company
reported a net loss for the fourth quarter of 1996 and the Company's management
elected to resume efforts to seek a strategic transaction.
Accordingly, during the period from February through June 1997, several
companies that were not approached in 1996, including Varian and two other
competitors of the Company, were contacted. During
15
<PAGE>
the period from June 1997 through September 1997, Company management held a
series of meetings with four companies which had expressed interest in a
possible transaction with the Company, including Varian and one other competitor
of the Company ("Company A"). Two of the companies were not interested in
pursuing a transaction with the Company. Company A expressed interest at a small
premium to the Company's then current market price and Varian submitted a
proposal at a valuation below the Company's market price. In September 1997, the
Company determined that these proposals were inadequate and ceased discussions
with these companies.
During the fourth quarter of 1997, the Company experienced a significant
further downturn in its business. This downturn was due in large part to
economic conditions in Asia which caused several of the Company's customers in
this region to cancel orders or reschedule delivery dates for products they had
ordered. As a result, sales for the fourth quarter of 1997 fell below sales for
the fourth quarter of 1996, and the Company reported a loss of $1.20 per share
in the fourth quarter of 1997 as compared to a loss of $0.14 per share in the
fourth quarter of 1996.
Accordingly, in the first quarter of 1998, the Company sought both to obtain
additional financing and to seek a strategic transaction. In February 1998, the
Company completed a financing in which $5,000,000 of convertible preferred stock
was issued. However, notwithstanding this additional financing, the Company's
working capital needs continued to increase, due in large part to the effects of
cancellation and rescheduling of orders by the Company's Asian customers.
In March 1998, discussions with Varian and Company A regarding a strategic
transaction were reinitiated. In addition, other prospective acquirors were
contacted, none of which expressed any interest. During March 1998, Company A
submitted a proposal to acquire the Company in a stock-for-stock merger
transaction valued at the then current market price of the Company's Common
Stock. As a result of this offer, the Company entered into discussions with
Company A. During these discussions, Company A advised the Company that its
initial proposal contained an error in the exchange ratio calculation and that
Company A would be willing to proceed only at a price less than the Company's
then current market value. At meetings held on March 2, 1998, March 18, 1998 and
March 21, 1998, the Board was updated as to the status of negotiations with
Company A and the negotiations that were underway with Varian. The Varian
proposal involved an acquisition of the assets of the Business for cash. The
Board met on March 27, 1998 to review the status of negotiations with both
Company A and Varian. The Board considered both companies' proposals, including
the consideration being offered. Although Company A's proposal presented the
possibility of a tax-free reorganization as well as an acquisition of the entire
Company, the Board noted that Company A would face several significant strategic
issues in upcoming quarters which could affect the value of its stock. The Board
also took into consideration that the proposal by Varian reflected a higher
overall valuation and would provide the Company with funds with which to
continue the development of several new CVD products currently being developed.
In April 1998, negotiations continued with both companies. Company A was
again approached and responded with the same below-market offer. Negotiations
and disclosures of operating information with Varian continued during the first
two weeks of April. On April 10, 1998, the Board approved the Agreement with
Varian, which was executed on April 15, 1998 and the transaction was publicly
announced on April 15, 1998.
RECOMMENDATION OF THE BOARD AND REASONS FOR THE TRANSACTION
The Board unanimously approved the Proposed Transaction with Varian and
recommends that shareholders approve the Proposed Transaction. In addition, the
Company's Board of Directors unanimously determined that the terms of the
Proposed Transaction are fair and in the best interest of the Company and its
Shareholders and recommends a vote in favor of the Proposed Transaction. In the
course
16
<PAGE>
of reaching its decision to approve the Proposed Transaction, the Board
consulted with its legal and financial advisors as well as the Company's
management and considered the following factors:
(1) The effect on the Company on the deteriorating economic environment
in Asia, which was causing the Company to incur increased operating losses.
This situation, as well as the Company's cash position, made completion of a
transaction that would provide liquidity in a short time frame imperative.
(2) The deterioration in the Company's financial condition and the
qualification by the Company's auditors of the certification of the
Company's financial statements by noting "substantial doubt about its
ability to continue as a going concern," thereby decreasing the Company's
other financing alternatives.
(3) The absence of any serious offers from any other third parties
regarding a possible acquisition of the Company's assets or a possible
merger with the Company, other than the proposals made by Company A, which
the Board rejected in favor of the Proposed Transaction because of the
uncertainties associated with the proposed consideration in Company A's
transaction as well as the higher overall valuation reflected by the Varian
proposal.
(4) The anticipated positive effects upon the Company's balance sheet
and results of operations from the use of the net proceeds of the Proposed
Transaction to retire indebtedness and expand the Company's ability to
develop its new CVD products.
(5) The opinion dated April 15, 1998 of Salomon Smith Barney rendered to
the Board of Directors of the Company, to the effect that, as of such date
and based upon and subject to certain matters set forth in such opinion, the
Consideration (as defined below under the caption "--Purchase Price") to be
received by the Company in the Proposed Transaction was fair, from a
financial point of view, to the Company, and the financial analyses
performed by Salomon Smith Barney in connection with such opinion (see
"--Opinion of the Company's Financial Advisor").
(6) The Board's belief that Genus is well positioned to contribute and
engage in the several growing thin film segments of the semiconductor
equipment business. Genus' strategy for its continuing thin film business
includes seeking to achieve growth of its WSix CVD business, further
development of the company's enabling WN films technology for multiple
applications and development of new ultra-thin film capabilities to meet the
industry's future needs.
(7) The willingness of Varian to continue to employ the substantial
majority of the workforce involved in the Business.
Considering all of the above factors, the Board of Directors concluded that
the Company should become focused on developing its new CVD products with a
significantly downsized workforce. The Board did not independently establish a
value for the Proposed Transaction, but based on all the above factors
determined that the Proposed Transaction was fair and reasonable to the Company
and its Shareholders. The Board did not assign a weight for the individual
factors considered in evaluating the Proposed Transaction.
PURCHASE PRICE
The terms of the Proposed Transaction require Varian to pay an aggregate
purchase price of $25.0 million cash, subject to adjustment if, prior to the
closing of the Proposed Transaction (the "Closing"), the Company exercises its
option to sell Varian certain machinery, plus an additional contingent cash
amount equal to one-third of the amount, if any, by which (x) gross revenues
generated from the sale by Varian or the Company of (i) high energy MeV ion
implantation systems during the calendar year 1998 and (ii) service and spare
parts for such systems, in each case during the calendar year 1998 and
17
<PAGE>
actually collected from the customer (the "Booked Revenue") shall exceed (y)
$30.0 million (collectively, the "Consideration").
ASSETS TO BE SOLD AND RETAINED BY THE COMPANY
The assets of the Company to be sold to Varian consist of all raw materials
and inventories; all machinery, equipment, computers, tapes, data bases,
furniture, automobiles, trucks, vehicles, tools, supplies and parts and other
tangible personal property, whether owned, leased or subleased, which are used
primarily in the conduct of the Business; all written contracts entered into in
the ordinary course of business and necessary for the conduct of the Business,
and that are for the sale and non-warranty service after the Closing of products
of the Business, all rights, indemnification, warrants, claims and causes of
action against third persons; all security, utility or similar deposits and
prepaid expenses related primarily to the Business; all letters of credit issued
in favor of the Company that related to any contract; to the extent permitted by
law, all governmental licenses, permits approvals, license applications, license
amendment applications and product registrations with respect to the conduct of
the Business; real property leased by the Company, together with all
improvements thereon and fixtures thereto; all Intellectual Property, other than
the Licensed Intellectual Property; all books and records related to the assets
to be sold to Varian; all rights to causes of action, claims, lawsuits,
arbitrations, orders, judgements, decrees, awards and injunctions available to
or being pursued by the Company; and the goodwill of the Business. Assets
retained by the Company include the Company's cash or cash equivalents and any
business, operation, subsidiary or division of the Company other than the
Business, which consists primarily of the CVD Business.
INTELLECTUAL PROPERTY TO BE RETAINED FOR LICENSING BY THE COMPANY
Pursuant to the Agreement, the Company will retain ownership of the Licensed
Intellectual Property, and will grant Varian a license under these intellectual
property rights pursuant to the terms of the License Agreement. In addition,
Varian will grant to the Company a license relating to the Business or used or
held for use by the Company in the conduct of the Business or that otherwise
constitutes a part of the Other Intellectual Property. The License Agreement
does not transfer any ownership rights to Varian in the Licensed Intellectual
Property and does not transfer any ownership rights to the Company in the Owned
Intellectual Property.
UNAUDITED PRO-FORMA FINANCIAL DATA
The following unaudited pro forma condensed balance sheet of March 31, 1998,
and unaudited pro forma condensed statement of operations for the year ended
December 31, 1997 and the three months ended March 31, 1998 give pro forma
effect to the estimated financial effects of the Asset Purchase Agreement (the
"Agreement") with Varian. The pro forma condensed balance sheet as of March 31,
1998 gives pro forma effect to the Agreement as if such transaction was
consummated on that date. The pro forma condensed statements of operations for
the year ended December 31, 1997 and the three months ended March 31, 1998,
present the results of operations of the Company as if the transaction
contemplated by the Agreement occurred on January 1, 1997 and January 1, 1998,
respectively. The pro forma information is based on the historical financial
statements of the Company giving effect to the assumptions and adjustments set
forth in the accompanying notes.
18
<PAGE>
GENUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------------------
PRO FORMA
AFTER SALE
PRO FORMA PRO FORMA OF
GENUS, INC. ADJUSTMENTS NOTE BUSINESS
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents.................................. $ 3,683 $ 21,200 (1) $ 24,883
Accounts receivable, net................................... 11,858 11,858
Inventories................................................ 9,709 9,709
Net Assets held for sale................................... 30,500 (25,000) (2) 5,500
Other current assets....................................... 1,001 1,001
----------- ----------- -----------
Total current assets..................................... 56,751 (3,800) 52,951
Property and equipment, net................................ 6,406 6,406
Other assets, net.......................................... 2,025 2,025
----------- ----------- -----------
Total assets............................................. $ 65,182 $ (3,800) $ 61,382
----------- ----------- -----------
----------- ----------- -----------
Liabilities and shareholders' equity
Total current liabilities.................................. $ 19,073 $ (2,800) (1) $ 16,273
Long-term debt............................................. 74 74
Shareholders' equity....................................... 46,035 (1,000) (1) 45,035
-----------
Total liabilities and shareholders' equity............... $ 65,182 $ (3,800) $ 61,382
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
19
<PAGE>
GENUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------
PRO FORMA
AFTER SALE
OF
GENUS, INC. BUSINESS BUSINESS
----------- --------- -----------
<S> <C> <C> <C>
Net sales.................................................................... $ 7,238 $ (5,823) $ 1,415
Cost and expenses:
Cost of goods sold......................................................... 6,941 (4,986) 1,955
Research and Development................................................... 3,332 (1,744) 1,588
Selling, general and administrative........................................ 4,223 (2,750) 1,473
----------- -----------
Income (loss) from operations............................................ (7,258) (3,657) (3,601)
Other, net................................................................... (156) (80) (76)
----------- -----------
Loss before income taxes................................................... (7,414) (3,737) (3,677)
Provision for (benefit from) income taxes
Net loss................................................................... (7,414) (3,737) $ (3,677)
Deemed dividend on preferred stock......................................... $ 1,829 -- $ 1,829
Net loss available to common shareholders.................................. $ (9,243) (3,737) $ (5,506)
----------- --------- -----------
----------- --------- -----------
Pro forma net loss per share--basic and diluted.............................. $ (0.32)
-----------
-----------
Shares used in per share calculations........................................ 17,125
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------
PRO FORMA
AFTER SALE
OF
GENUS, INC. BUSINESS BUSINESS
----------- ---------- -----------
<S> <C> <C> <C>
Net sales................................................................... $ 84,286 $ (57,102) $ 27,184
Cost and expenses:
Cost of goods sold........................................................ 54,762 (38,022) $ 16,740
Research and Development.................................................. 12,327 (6,599) $ 5,728
Selling, general and administrative....................................... 20,326 (12,808) $ 7,518
----------- ---------- -----------
Income (loss) from operations........................................... (3,129) (327) (2,802)
Other, net.................................................................. (1,363) (829) (534)
----------- ---------- -----------
Income (loss) before income taxes......................................... (4,492) (1,156) (3,336)
Provision for (benefit from) income taxes................................... 14,844 -- 14,844
----------- ---------- -----------
Net income (loss)......................................................... $ (19,336) $ (1,156) $ (18,180)
----------- ---------- -----------
----------- ---------- -----------
Pro forma net income (loss) per share--basic and diluted.................... $ (1.08)
Shares used in per share calculations....................................... 16,860
</TABLE>
PRO FORMA NOTES:
(1) Reflects proceeds of $25 million from Varian, the repayment of $2.8
million of short-term bank borrowings, and the payment of transaction expenses
estimated to be $1 million. Since transaction expenses represent non-recurring
charges resulting directly from the Proposed Transaction that will be included
in the operating results of the Company within the 12 months succeeding the
Proposed Transaction, these transaction expenses were not considered in the pro
forma condensed statements of operations for the year ended December 31, 1997
and the three months ended March 31, 1998.
20
<PAGE>
(2) Transfer of $25 million of net assets held for sale to Varian. After
giving effect to the sale of the Business, pro forma net assets held for sale of
$5.5 million represent planned sales of inventory and scheduled repayments of
capital lease obligations of the Business prior to the Closing.
The unaudited pro forma condensed financial data have been prepared by
Company management and are not necessarily indicative of how the Company's
balance sheet and results of operations would have been presented had the
transaction with Varian actually been consummated at the assumed dates, nor are
they necessarily indicative of the presentation of the Company's balance sheet
and results of operations for any future period. The unaudited pro forma
condensed financial data should be read in conjunction with the financial
statements and related notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations incorporated herein by reference.
TRADING RANGE OF COMMON SOCK
On April 14, 1998, the date preceding public announcement of the Proposed
Transaction, the high and low sales prices for the Common Stock on the Nasdaq
National Market were $2.50 and $2.375, respectively. The high and low sales
prices for the Common Stock on , 1998, the last trading day before the
printing of this Proxy Statement were $ and $ , respectively.
DISPUTE RESOLUTION
The Agreement dictates that any dispute, controversy or claim relating to,
arising out of or in connection with the Agreement or the License Agreement (or
any subsequent agreements or amendments thereto) shall be settled in binding
arbitration under the Commercial Rules of the American Arbitration Association
(the "Rules"). Any arbitration would be held in Santa Clara, California before a
panel of three arbitrators, who shall be selected under the normal procedures
prescribed in the Rules, except that one such arbitrator shall be a certified
public accountant and one arbitrator (who shall chair the arbitration panel)
shall be a member of the American College of Trial Lawyers.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares of the Company's Common
Stock outstanding at the Record Date is required to approve the Proposed
Transaction.
CERTAIN INFORMATION CONCERNING VARIAN
Varian, a publicly-held company, is a high-technology enterprise engaged in
the research, development, manufacture and marketing of products and services
for health care, industrial, scientific and industrial research and
environmental monitoring. Varian's principal business segments are health care
systems, instruments and semiconductor +production equipment. With headquarters
in Palo Alto, California and subsidiaries throughout the world, Varian employs
more than 6,500 people worldwide. For fiscal 1997 (ended September 26, 1997),
Varian reported sales of $1.4 billion, during the most recent fiscal quarter
(ended April 3, 1998), Varian reported sales of $373.0 million and net earnings
of $23.0 million. Additionally, Varian had $142 million in cash and cash
equivalents at year end. Varian's Common Stock is traded on the New York Stock
Exchange. Prior to the proposed transaction, Varian and the Company had no
affiliation.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
Salomon Smith Barney was retained by the Company to act as its financial
advisor in connection with the Proposed Transaction. On April 15, 1998, at a
meeting of the Board of Directors of the Company held to evaluate the proposed
Transaction, Salomon Smith Barney delivered an oral opinion (which opinion was
subsequently confirmed by delivery of a written opinion dated April 15, 1998) to
the Board of Directors of
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the Company to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the Consideration was fair, from
a financial point of view, to the Company.
In arriving at its opinion, Salomon Smith Barney reviewed the Proposed
Transaction and held discussions with certain senior officers, directors and
other representatives and advisors of the Company and certain senior officers
and other representatives and advisors of Varian concerning the operations and
prospects of the Business. Salomon Smith Barney examined certain available
business and financial information relating to the Business as well as certain
financial forecasts and other information and data for the Business which were
provided to or otherwise discussed with Salomon Smith Barney by the management
of the Company. Salomon Smith Barney reviewed the financial terms of the
Proposed Transaction as set forth in the Agreement in relation to, among other
things, the historical and projected earnings and other operating data of the
Business and the financial condition of the Business, including the near-term
liquidity needs of, and capital resources available with respect to, the
Business. Salomon Smith Barney considered, to the extent publicly available, the
financial terms of certain other transactions recently effected which Salomon
Smith Barney considered relevant in evaluating the Proposed Transaction and
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon Smith
Barney considered relevant in evaluating those of the Business. In connection
with its engagement, Salomon Smith Barney was requested to approach, and held
discussions with, third parties to solicit indications of interest in the
acquisition of the Company. In addition to the foregoing, Salomon Smith Barney
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as Salomon Smith Barney deemed
appropriate in arriving at its opinion. Salomon Smith Barney noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed, to Salomon
Smith Barney as of the date of its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with Salomon Smith Barney, the management of the Company advised
Salomon Smith Barney that such forecasts and other information and data were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of the Company as to the future financial
performance of the Business. Salomon Smith Barney did not make and was not
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Business nor did Salomon Smith
Barney make any physical inspection of the properties or assets of the Business.
Salomon Smith Barney was not requested to evaluate, and did not evaluate, the
potential financial impact of the Proposed Transaction on the Company or the
redeployment of all or any part of the Consideration received by the Company in
connection with the Proposed Transaction. Salomon Smith Barney did not express
any opinion as to the price at which the Company Common Stock will trade upon
announcement or consummation of the Proposed Transaction, nor did Salomon Smith
Barney express any opinion as to the relative merits of the Proposed Transaction
as compared to any alternative business strategies that might exist for the
Company or the effect of any other transaction in which the Company might
engage. No other limitations were imposed by the Company on Salomon Smith Barney
with respect to the investigations made or procedures followed by Salomon Smith
Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY DATED APRIL 15,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. THE OPINION OF SALOMON SMITH BARNEY IS DIRECTED TO
THE BOARD OF DIRECTORS OF THE COMPANY AND RELATES ONLY TO THE FAIRNESS OF THE
CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO THE COMPANY, DOES NOT ADDRESS
ANY OTHER ASPECT OF THE PROPOSED TRANSACTION OR RELATED TRANSACTIONS AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE AT THE ANNUAL MEETING. THE SUMMARY OF THE OPINION OF SALOMON SMITH
BARNEY SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
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In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The summary
of such analyses does not purport to be a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness opinion
is a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Salomon Smith
Barney believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Salomon Smith Barney made
numerous assumptions with respect to the Business, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company. The estimates contained in such
analyses and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Salomon Smith
Barney's opinion and analyses were only one of many factors considered by the
Board of Directors of the Company in its evaluation of the Proposed Transaction
and should not be viewed as determinative of the views of the Board of Directors
or management of the Company with respect to the Consideration or the Proposed
Transaction.
LIQUIDATION ANALYSIS. Given the financially distressed condition of the
Company, Salomon Smith Barney analyzed the estimated liquidation value of the
Business based on internal estimates of, and discussions with, Company
management. For purposes of such analysis, Salomon Smith Barney reviewed with
Company management the estimated book value at March 31, 1998 of each of the
assets, and related liabilities, of the Business in order to ascertain the net
realizable value which Company management believed could be obtained upon the
sale or other disposition of such assets to a third party. This analysis
indicated a net realizable value for the Business of approximately $11.9 million
to $17.5 million, as compared to the Consideration of $25.0 million, subject to
the adjustment that may be made if the Booked Revenue shall exceed $30,000,000.
SELECTED COMPANY ANALYSIS. Using publicly available information, Salomon
Smith Barney analyzed, among other things, the market values and trading
multiples of the following selected publicly traded companies in the
semiconductor capital equipment industry: Aehr Test Systems, AG Associates,
Inc., Aseco Corporation, BTU International, Inc., Submicron Systems Corporation,
Trikon Technologies, Inc. and Tegal Corporation (the "Selected Companies").
Salomon Smith Barney compared market values as a multiple of, among other
things, latest 12 months net income, and adjusted market values (market value,
plus total debt, less cash) as multiples of latest 12 months and estimated
calendar 1998 revenues, latest 12 months earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT"). All multiples were based on closing stock prices as of April 13, 1998.
Net income estimates for the Selected Companies were based on estimates of
selected investment banking firms and net income estimates for the Business were
based on internal estimates of Company management. The implied enterprise
reference range of the Business based on the latest 12 months net income, EBITDA
and EBIT of the Selected Companies was not meaningful given the lack of
profitability in the operations of the Business during the past two calendar
years. Applying a range of multiples for the Selected Companies of latest 12
months and estimated calendar 1998 revenue of 0.3x to 0.9x and 0.3x to 0.4x,
respectively, to corresponding financial data for the Business resulted in an
enterprise reference range for the Business of approximately $13.7 million to
$29.9 million, as compared to the Consideration of $25.0 million, subject to the
adjustment that may be made if the Booked Revenue shall exceed $30,000,000.
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No company or business used in the "Selected Company Analysis" as a
comparison is identical to the Company or the Proposed Transaction. Accordingly,
an analysis of the results of the foregoing is not entirely mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics and other factors that could affect
the public trading or other values of the Selected Companies or the business
segment, company or transaction to which they are being compared.
SELECTED MERGER AND ACQUISITION TRANSACTIONS ANALYSIS. Using publicly
available information, Salomon Smith Barney analyzed the implied purchase prices
and transaction value multiples in approximately
17 selected merger and acquisition transactions in the semiconductor capital
equipment industry. Salomon Smith Barney compared purchase prices as multiples
of latest 12 months net income and latest reported tangible book value, and
transaction values as multiples of latest 12 months revenues, EBITDA, EBIT and
current assets. All multiples were based on publicly available information at
the time of announcement of such transaction. Due to the lack of profitability
of the Business and, accordingly, the inherent differences between the
businesses, operations and prospects of the Business and the acquired businesses
analyzed, Salomon Smith Barney did not consider the quantitative results of such
analysis particularly meaningful and therefore did not derive an enterprise
reference range for the Business based on such analysis.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney did not consider a
discounted cash flow analysis, which is performed for purposes of analyzing the
unlevered, after-tax free cash flows of an entity or business on a stand-alone
basis, a relevant valuation methodology for purposes of evaluating the Business
given, among other things, the current negative and future projected cash flows
of the Business, the volatility of the semiconductor capital equipment industry
and the unpredictability of positive cash flows generated by companies in such
industry.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion, Salomon
Smith Barney considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of (i) indications
of interests received from third parties other than Varian; (ii) historical and
projected financial results of the Business, including the financially
distressed condition of the Company; (iii) the history of trading prices and
volume for Company Common Stock and the relationship between movements in
Company Common Stock, movements in the common stock of selected companies in the
semiconductor capital equipment industry and movements in the Semiconductor
Equipment Index, the Semiconductor Index and the S&P Industrial 500 Index; and
(iv) consolidation trends in the semiconductor capital equipment industry.
Pursuant to the terms of Salomon Smith Barney's engagement, the Company has
agreed to pay Salomon Smith Barney for its services in connection with the
Proposed Transaction an aggregate financial advisory fee based on a percentage
of the total consideration (including liabilities assumed) payable in the
Proposed Transaction. The fee payable to Salomon Smith Barney is currently
estimated to be approximately $800,000. The Company also has agreed to reimburse
Salomon Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Salomon Smith Barney in performing its services, including the
reasonable fees and expenses of its legal counsel, and to indemnify Salomon
Smith Barney and related persons against certain liabilities, including
liabilities under the federal securities laws, arising out of Salomon Smith
Barney's engagement.
Salomon Smith Barney has advised the Company that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold the
securities of the Company and Varian for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities. Salomon Smith Barney has in the past provided investment
banking services to the Company unrelated to the Proposed Transaction, for which
services Salomon Smith Barney has received compensation. In addition, Salomon
Smith Barney and its affiliates (including Travelers Group Inc. and its
affiliates) may maintain relationships with the Company, Varian and their
respective affiliates.
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Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by the Company based on its experience, expertise and
familiarity with the Company and its business. Salomon Smith Barney regularly
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
INTEREST OF MANAGEMENT IN THE TRANSACTION
Certain members of management, along with 120 other Company employees, are
proposed to be hired by Varian. It is not contemplated that any other of the
Company's management will become employees of Varian as a result of this
transaction. Certain members of management and key employees have severance
agreements with the Company that provide severance benefits in the event that
their employment is Involuntarily Terminated or otherwise terminated without
Cause within a specified period of time following a Change of Control. In the
event that such individuals are hired by Varian and Involuntarily Terminated or
terminated without Cause within the specified period, such individuals will
receive the cash payments specified in their respective severance agreements.
EFFECT ON EMPLOYEES.
The Company anticipates that Varian will hire approximately 120 of the 190
employees of the Company (the "Designated Employees") currently engaged in the
operation of the Business. The employment of the remaining employees of the
Company engaged in the operation of the Business will be terminated prior to or
contemporaneously with the Closing. In connection with the sale of the Business,
the Company will restructure the operations of the CVD Business and will also
significantly reduce its workforce. Accordingly, the Company anticipates that an
additional reduction in headcount will occur contemporaneously with the sale.
APPLICATION OF SALE PROCEEDS
Of the net proceeds from the Proposed Transaction, the Company expects to
use approximately $2.8 million to pay down short-term borrowings. The remainder
of the proceeds will be used for general working capital purposes with respect
to its remaining business operations. The Company has no present intent to pay a
dividend to Shareholders or to otherwise distribute to its Shareholders any
proceeds received from the Proposed Transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
All transfer and other similar taxes imposed in connection with the transfer
of the Assets whether such taxes are assessed initially against Varian or the
Company shall be borne and paid 50% by the Buyer and 50% by the Seller.
For tax purposes, the Company may recognize income or gain as a result of
the Proposed Transaction. Notwithstanding, the Company determined that any
income tax related to the Proposed Transaction will not be significant because
such income or gain will be offset by current year net operating loss or prior
year net operating loss carry forwards. The Company determined that the Proposed
Transaction will not have any federal income tax consequences to the
Shareholders.
The above tax discussion was developed by the Company after consultation
with its tax and legal advisors.
REPRESENTATIONS AND WARRANTIES
The Company has made certain customary representations and warranties in the
Agreement relating to the Company, the authorization, validity and the
enforceability of the Agreement and similar corporate matters. The Company has
also made certain representations and warranties regarding execution, delivery
and performance of the Agreement; execution and delivery of the Agreement not
violating or conflicting with any provision of the charter or bylaws of the
Company or any provisions of law, rules, regulations or
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government orders; financial statements; title of the assets beings sold; the
payment of taxes; pending and threatened claims and litigation; identity of
suppliers; compliance with laws and regulations; environmental matters;
condition of the assets being sold; contracts to be assumed by Varian; pending
or threatened proceedings related to employees; and completeness and accuracy of
representations and warranties.
COVENANTS AND CONDITIONS TO THE PROPOSED TRANSACTION
The Company has agreed, until Closing, among other things, to conduct its
business in the ordinary course consistent with past practices; to preserve and
maintain the assets being sold to Varian; to perform obligations required to be
performed by the Company under the contracts to be assumed by Varian; to give
prompt notice to Varian of any failure likely to cause any representation or
warranty to be inaccurate; not to sell, transfer, lease or otherwise dispose any
of the assets being sold to Varian except in the ordinary course of business and
consistent with past practice; to provide Varian with access to the Company's
facilities, properties and books and records; not to pursue another agreement
for the sale of the assets subject to the Agreement; not to compete, directly or
indirectly, with the Business for a period of five years; and to pay, on a
monthly basis, to the Company an amount equal to one-third of the amount, if
any, by which (a) gross revenues generated from the sale by Varian or the
Company of (i) high energy MeV ion implantation systems manufactured by the
Company prior to Closing (or substantially similar high energy MeV ion
implantation systems derived therefrom and manufactured by Varian after the
Closing) and (ii) service and spare parts for such systems in each case during
the calendar year 1998 and actually collected from the customer shall exceed (b)
$30,000,000.
Consummation of the Proposed Transaction is subject to approval by the
Shareholders and to a number of other conditions, including: (a) all
representations and warranties made by the other party in the Agreement being
true and correct, and all agreements, covenants and conditions required having
been performed under the Agreement, as of the Closing, (b) each party's receipt
at the Closing of certain closing certificates and legal opinions, (c) the
absence of any temporary or permanent order, writ, rule or judgement by any
governmental authority prohibiting or making unlawful the Proposed Transaction
and (d) the acceptance by at least 18 of the 24 employees, that Varian and the
Company have determined to be key employees of the Business, of Varian's offer
of employment.
INDEMNIFICATION
The Company has agreed to indemnify and hold harmless Varian, its
subsidiaries and affiliates, and each officer, director, employee, agent and
representative of the foregoing (the "Indemnified Parties") from and against,
and pay or reimburse the Indemnified Parties for, any and all losses, actions,
liabilities, damages, claims, costs and expenses, interests, awards, judgements,
penalties and encumbrances suffered or incurred by any of the Indemnified
Parties arising in whole or in part from (a) any breach of any representation or
warranty of the Company or its affiliates in the Agreement, (b) any breach of
any covenant, obligation or agreement of the Company or its affiliates in the
Agreement, (c) any liability remaining the sole responsibility of the Company
and (d) any liability relating to (i) any employee related at any time during
the 12-month period immediately preceding April 15, 1998 to the Business (a
"Business Employee") who is not a Designated Employee but whose employment or
employment-related rights transfer to Varian as a result of the Proposed
Transaction and (ii) any compensation rights, employment benefits or other terms
of employment of Business Employees that Varian will become obligated to pay or
assume by operation of law or contract as a result of the Proposed Transaction.
TERMINATION OF THE PROPOSED TRANSACTION
At any time prior to Closing, the Agreement may be terminated under certain
circumstances, including the following: (a) by mutual written consent of Varian
and the Company, (b) by either party if the Closing shall not have occurred by
September 30, 1998, (c) by Varian, if there has been a material breach on the
part of the Company in its representation and warranties, subject to a right to
cure, (d) by Varian, if any action seeking a decree or order for relief in
respect of the Company under any bankruptcy, insolvency or other similar law is
instituted, (e) by the Company, if there has been a material breach on the part
of
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Varian in its representation and warranties, subject to a right to cure, (f) by
either party if Shareholder approval is not obtained or (g) by the Company, if
the Board of Directors reasonably determines that a proposal or offer by a third
party for an acquisition of the Business is more favorable to the Company than
the Proposed Transaction.
EXPENSES
Total costs to the Company associated with the Proposed Transaction are
estimated at $1,000,000. Such amount represents primarily legal and advisory
fees and will be paid by the Company. Costs incurred by Varian will be paid by
Varian.
VOTE REQUIRED
Affirmative vote of a majority of the shares of the Company's outstanding
Common Stock will be required to approve and ratify the terms of the Proposed
Transaction.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE PROPOSED TRANSACTION.
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PROPOSAL THREE
APPROVAL OF THE CONVERSION OF SECURITIES
EXCEEDING 20% OF THE OUTSTANDING COMMON STOCK
BACKGROUND
THE 20% RULE. The By-laws of the National Association of Securities
Dealers, Inc. (the "NASD") require the Company to obtain shareholder approval in
connection with a transaction other than a public offering involving the sale or
issuance by the Company of Common Stock (or securities convertible into or
exercisable for Common Stock) equal to 20% or more of the Common Stock
outstanding before the issuance for less than the greater of book value or
market value of the Common Stock.
THE SERIES A FINANCING. On February 2, 1998, the Company entered into a
Stock Purchase Agreement (the "Agreement") with certain investors (the
"Investors"), pursuant to which the Company issued, on February 12, 1998, to the
Investors an aggregate of 100,000 shares of its 6% Series A Convertible
Preferred Stock (the "Series A Stock") and warrants to purchase an aggregate of
up to 300,000 shares of its Common Stock at an exercise price of $3.67 per share
(collectively, the "Warrants"), all for an aggregate purchase price of $5
million in cash. The shares of Common Stock issuable upon conversion of the
Series A Stock and upon exercise of the Warrants constituted approximately
14.34% of the outstanding Common Stock at the time of the issuance of the Series
A Stock and the Warrants.
THE SERIES B FINANCING. Under the terms of the Agreement, upon fulfillment
of certain conditions, the Investors have committed to providing an additional
$5 million in equity financing through the purchase of 6% Series B Convertible
Preferred Stock (the "Series B Stock") and warrants to purchase an aggregate of
up to 300,000 shares of its Common Stock on terms substantially the same as
those of the Series A Stock. Among the conditions that must be satisfied before
the Company may require the purchase of the Series B Stock are the following:
(a) the closing bid price per share of the Common Stock of the Company shall be
no less than $4.00 for the 30 trading days prior to the Company's notice to the
Investors of its intention to require their purchase of the Series B Stock; (b)
such notice by the Company may not be given sooner than 90 days after the
effectiveness date for the shares registered pursuant to a Registration
Statement on Form S-3 (the "Series A Registration") and no suspension or stop
order may have been entered against such Series A Registration; (c) the closing
bid price for the Common Stock of the Company shall not, in the 30 trading days
prior to the completion of the sale of the Series B Stock, have decreased by
greater than 35% from the highest closing bid price during such period, (d) the
maintenance of a waiver in connection with existing bank line of credit and (e)
no change of control of the Company shall have occurred. "Change of control" is
defined as, (i) the acquisition of more than 50% of the voting securities of the
Company, (ii) the replacement of more than one-half the members of the Board of
Directors, (iii) the merger of the Company with or into another entity, (iv) the
sale of all or substantially all of the assets of the Company, or (v) the
execution of any agreement providing for any of (i), (ii), (iii), or (iv)
above). Accordingly, if the Proposed Transaction set forth in Proposal Two
above, is deemed to be a sale of substantially all of the assets of the Company,
the Company can not require the Investors to purchase the Series B Stock nor can
the Investors require the Company to sell the Series B Stock.
TERMS OF THE PREFERRED STOCK
PURCHASE PRICE; CONVERSION RIGHTS. Each share of the Series A Stock was
sold at a purchase price of $50 and a stated value of $50 (the "Stated Value").
Each holder of shares of Series A Stock has the right at any time, and from time
to time, to convert some or all such shares into fully paid and nonassessable
shares of Common Stock.
Any conversion shall occur according to the following conversion formula:
The number of shares of Common Stock issuable upon conversion of each share of
Series A Stock will equal (i) the sum of (A) the Stated Value per share and (B)
accrued and unpaid dividends on such share, divided by (ii) the Conversion
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Price. The Conversion Price shall be equal to the lesser of: (a) 110% of the
Closing Bid Price for the trading day immediately preceding the original issue
date of the Series A Stock, provided that such price shall not be less than
$3.47; or (b) 82% of the average of 15 Closing Bid Prices during the 45 trading
days prior to the date of the conversion notice, which 15 closing bid prices
shall be chosen by the holder converting such shares of Series A Stock. The
Closing Bid Price shall mean the closing bid price of the Common Stock as
reported on the Nasdaq National Market or other market or exchange on which the
Common Stock is then listed or traded.
On or after the second anniversary of the original issue date of the Series
A Stock, the Company may require the conversion of all of the then outstanding
and unconverted shares of Series A Stock, provided that certain conditions have
been satisfied, including that the Closing Bid Price of the Common Stock for at
least 20 of the 30 trading days preceding the date of such Company Conversion
Date shall have been at least $3.48 and such conversion shall be effectuated at
the Conversion Price then in effect. On and after such conversion, all dividends
on the Series A Stock shall cease to accrue and the shares represented thereby
shall no longer be deemed outstanding and all rights of the holders thereof as
shareholders of the Company shall cease and terminate, except the right to
receive the shares of Common Stock upon conversion.
PREFERENTIAL CUMULATIVE DIVIDENDS. The holders of Series A Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available therefor, and the Company shall pay, cumulative dividends at
the rate per share equal to 6% per annum of the Stated Value per share (6% of
$50 = $3 per share) payable in cash or shares of Common Stock at the option of
the Company, before any dividend or other distribution will be paid or declared
and set apart for payment on any shares of any Common Stock or other class of
stock junior to the Series A Stock (the Common Stock and such junior stock being
hereafter collectively the "Junior Stock"). The dividends on the Series A Stock
shall be due and payable on each yearly anniversary of the original issue date
("Dividend Payment Date"), and any dividends not paid on any Dividend Payment
Date shall accrue and shall be due and payable upon conversion of the Series A
Stock. No dividends shall be due and payable for any partial year period for
which the Dividend Payment Date has not yet occurred. A party that holds shares
of Series A Stock on a Dividend Payment Date will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such Dividend Payment Date, without regard to any sale or disposition of such
Series A Stock subsequent to the applicable record date. If dividends are paid
in shares of Common Stock, the number of shares of Common Stock payable as such
dividend to each holder shall be equal to the cash amount of such dividend
payable to such holder on such Dividend Payment Date divided by the Closing Bid
Price of the Common Stock on the trading day prior to such Dividend Payment Date
("Dividend Conversion Price"), provided that the Dividend Conversion Price shall
not be less than $3.47.
LIQUIDATION RIGHTS. In the event of the dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, the holders of the
Series A Stock will be entitled to receive before any payment or distribution
will be made on the Junior Stock, out of the assets of the Company available for
distribution to shareholders, the Stated Value per share of Series A Stock and
all accrued and unpaid dividends to and including the date of payment thereof.
Upon the payment in full of all amounts due to holders of the Series A Stock,
then the holders of the Junior Stock of the Company will receive, ratably, all
remaining assets of the Company legally available for distribution. If the
assets of the Company available for distribution to the holders of the Series A
Stock are insufficient to permit payment in full of the amounts payable as
aforesaid to the holders of Series A Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Company will be distributed to the exclusion of the holders of shares of Junior
Stock ratably among the holders of Series A Stock.
A sale, conveyance or disposition of all or substantially all of the assets
of the Company or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting power of the Company
is disposed of, or a consolidation or merger of the Company with or into
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any other company or companies shall not be deemed to be a liquidation,
dissolution or winding-up of the Company for the purposes of the liquidation
rights that would be available to the holders of Series A Stock.
REDEMPTION PROVISIONS. On or after the fifth anniversary of the original
issue date of the Series A Stock, the Company may elect to redeem all or part of
the Stated Value of the Series A Stock upon payment of an amount of dollars
equal to the number of shares of Common Stock that could be obtained by
converting into the Company's Common Stock that amount of Stated Value plus
accrued but unpaid dividends and any other sums payable in respect to that
Stated Value at the conversion price in effect on the fifth anniversary of the
original issue date of the Series A Stock (the "Redemption Date") multiplied by
the average of the Closing Bid Price of the Common Stock for the five trading
days immediately preceding (a) such Redemption Date or (b) the date of payment
in full by the Company of the redemption price, whichever is greater. The
Company may not redeem any amount that a holder of Series A Stock has elected to
convert, including a notice of conversion given after the Redemption Date but
prior to receipt by the holder of Series A Stock of the payment under the
redemption provisions.
In addition, upon the occurrence of certain triggering events, the holders
of Series A Stock shall have the right, at each such holder's option, to require
the Company to redeem all or a portion of the Stated Value of such holder's
Series A Stock upon payment of an amount of dollars equal to the number of
shares of Common Stock that could be obtained by converting into the Company's
Common Stock that amount of Stated Value of such holder's Series A Stock plus
accrued but unpaid dividends and any other sums payable in respect to that
Stated Value at the conversion price in effect on the date of the triggering
event multiplied by the average of the Closing Bid Prices of the Common Stock
for the five trading days immediately preceding (a) the date of such triggering
event or (b) the date of payment in full by the Company of such redemption
price, whichever is greater. A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events: (i) the failure of the
Registration Statement to be declared effective by the Commission on or prior to
the date that is 180 days after the original issue date; (ii) while the
Registration Statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to the holder of the Series A Stock
for sale of the Registrable Securities (as defined in the Registration Rights
Agreement) other than in accordance with the terms of the Registration Rights
Agreement, provided that the cause of such lapse or unavailability is not due to
factors solely within the control of such holder seeking to be redeemed; (iii)
the failure of the Common Stock to be listed on the Nasdaq Stock Market, The New
York Stock Exchange, Inc. or The American Stock Exchange, Inc. for a period of
seven consecutive days; or (iv)the Company's notice to any holder of Series A
Stock, including by way of public announcement, at any time, of its intention
not to comply with proper requests for conversion of any Series A Stock into
shares of Common Stock.
VOTING RIGHTS. The shares of Common Stock into which the Series A Stock is
converted will have full voting rights. Except as otherwise required by law, the
Series A Stock has no voting rights.
REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. The Company has
prepared and filed with the Securities and Exchange Commission, a registration
statement registering the resale of the shares of Common Stock into which the
Series A Stock is convertible, which registration statement has not yet been
declared effective. The Company will use its best efforts to have it declared
effective and to maintain the effectiveness of the registration statement until
the earlier of (i) the date on which all such shares have been sold or may be
sold without volume restrictions pursuant to Rule 144 of the Securities Act
("Rule 144") or (ii) the second anniversary of the effectiveness date of such
registration statement.
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CONSIDERATIONS WITH RESPECT TO THE APPROVAL OF THE CONVERSION OF THE SERIES A
STOCK IN EXCESS OF THE 20% RULE
Before voting, each shareholder should consider the following factors with
respect to the conversion of the Series A Stock in excess of the 20% Rule. If
the Company fails to obtain shareholder approval, the Conversion Price will be
decreased by 2% each month for two months following the date of such failure to
obtain shareholder approval. Commencing on the second month anniversary of such
failure to obtain shareholder approval , the Company shall also pay to the
Series A Shareholders $50,000 in cash on the first day of each month until the
Company cures the failure to obtain shareholder approval. Any decrease in the
Conversion Price shall continue notwithstanding the fact that the event causing
such decrease has been subsequently cured. Sales by the holders of the Series A
Stock may depress the per share price of the Common Stock of the Company.
Conversion of the shares of Series A Stock to Common Stock (especially in light
of the conversion formula that may result in large numbers of shares being
issued upon conversion) and sale of those converted shares, may depress the per
share price of the Common Stock of the Company.
SHAREHOLDER APPROVAL
Based on the recent prices of the Company's Common Stock, it is anticipated
that the number of shares of Common Stock issuable upon conversion of the Series
A Stock may be equal to or greater than 20% of the Common Stock outstanding
immediately prior to the Series A Financing. The terms of the Series A Stock
will allow the holders of the Series A Stock to obtain shares of Common Stock at
a price below the current market value, and the Investors can impose certain
penalties and are entitled to adjustments to the Conversion Price if the Company
does not obtain shareholder approval. See "Terms of Preferred Stock" below.
Therefore, the Board of Directors has determined that it is advisable to obtain
the approval of the Company's shareholders at this time.
Shareholders are requested in this Proposal Two to approve the conversion of
securities exceeding 20% of the outstanding shares of Common Stock of the
Company.
VOTE REQUIRED
Affirmative votes constituting a majority of the Votes Cast will be required
to approve and ratify the terms of the Financings.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE CONVERSION OF SECURITIES
EXCEEDING 20% OF THE OUTSTANDING COMMON STOCK.
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PROPOSAL FOUR
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 1998, 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 1,750,000 to 2,050,000 shares.
As of March 31, 1998, 1,625,086 shares had been issued under the Purchase Plan,
and 124,914 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 31, 1998, approximately 250 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 rice in the NASDAQ National Market System on such date.
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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.
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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.
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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, 1998, 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.
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 1999 Annual Meeting of Shareholders must
be received by the Company no later than , 1998, in order that they
may be included in the proxy statement and form of proxy relating to that
meeting.
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: , 1997
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
1998 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 ________, 1998, and hereby
appoints William W. R. Elder 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 1998 Annual Meeting of
Shareholders of Genus, Inc. to be held on __________, __________, 1998, 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.
- FOLD AND DETACH HERE -
<PAGE>
Please mark
your choice / X /
like this
----------
COMMON
FOR all nominees listed WITHHOLD authority to vote
below (except as indicated) for all nominees listed below.
1. Election of directors: / / / /
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, G. Frederick Forsyth, and Mario M. Rosati
2. To approve the sale of the Company's ion implantation systems business,
including the assets, properties and intellectual property related thereto,
pursuant to the terms and conditions of the Asset Purchase Agreement, dated
as of April 15, 1998, between Varian Associates, Inc. and the Company and
the transactions contemplated thereby.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to approve the conversion of securities exceeding 20% of the
outstanding shares of Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
4. 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 shares.
FOR AGAINST ABSTAIN
/ / / / / /
5. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
independent public accountants of the Company's financial statements for the
fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
6. In the discretion of the proxy holders, upon such other matter or matters
which may properly come before the meeting and any continuation(s) or
adjournment(s) thereof.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
THE ELECTION OF DIRECTORS, FOR THE SALE OF THE
COMPANY'S ION IMPLANTATION SYSTEMS BUSINESS FOR THE
AMENDMENT OF THE 1989 EMPLOYEE STOCK PURCHASE PLAN,
FOR THE CONVERSION OF SECURITIES EXCEEDING 20% OF
THE OUTSTANDING COMMON STOCK, FOR THE RATIFICATION
OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT PUBLIC ACCOUNTANTS, AND IN THE
DISCRETION OF THE PROXY HOLDERS, UPON SUCH OTHER
MATTER OR MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING AND ANY CONTINUATION(S) OR ADJOURNMENT(S)
THEREOF.
Signature(s) Date , 1998
--------------------------------------------- ----------
(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.)
- FOLD AND DETACH HERE -
