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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GENUS, INC.
- ------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
GENUS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on Wednesday, May 19, 1999 at 10:00 a.m.,
local time, at The Network Meeting Center located at 5201 Great America Parkway,
Suite 122 in Santa Clara, California, 95054, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the 1991 Incentive Stock Option Plan
increasing the number of shares reserved for issuance thereunder by 500,000
additional shares.
3. To approve an amendment to the 1989 Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder by 300,000
additional shares.
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company's financial statements for the fiscal year ending
December 31, 1999.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 22, 1999 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.
THE BOARD OF DIRECTORS
WILLIAM W.R. ELDER
Chairman of the Board, President and
Chief Executive Officer
Sunnyvale, California
April 19, 1999
GENUS, INC.
PROXY STATEMENT FOR 1999 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 (the "Annual Meeting") to be held Wednesday, May 19,
1999 at 10:00 a.m., local time, or at any adjournment thereof, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at The Network Meeting Center at
5201 Great America Parkway, Suite 122 in Santa Clara, California, 95054. The
principal executive offices of the Company are located at 1139 Karlstad Drive,
Sunnyvale, California 94089. The Company's telephone number at that location is
(408) 747-7120.
These proxy solicitation materials were mailed on or about April 19, 1999
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 March 22, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 18,113,791 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 four candidates. No shareholder or
proxy, however, shall be entitled to cumulate votes for a candidate unless such
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting, prior to
the voting, of the shareholder's intention to cumulate votes. If any shareholder
gives such notice, all shareholders may cumulate their votes for candidates in
nomination.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The affirmative vote of a majority of the Votes Cast will be required under
California law to approve the proposals in this Proxy Statement. For this
purpose, the "Votes Cast" are defined under California law to be the shares of
the Company's common stock represented and "voting" at the Annual Meeting. In
addition, the affirmative votes must constitute at least a majority of the
required quorum, which quorum is a majority of the shares outstanding on the
Record Date. Votes that are cast against the proposal will be counted for
purposes of determining (i) the presence or absence of a quorum and (ii) the
total number of Votes Cast with respect to the proposal.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions in the counting of votes with respect
to a proposal, the Company believes that abstentions should be counted for
purposes of determining both (i) the presence or absence of a quorum 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, 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:
Kenneth Schwanda, Vice President of Finance, 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 $6,000 plus out-of-pocket expenses. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram or facsimile.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders who intend to present a proposal for inclusion in the
Company's proxy materials for the 2000 Annual Meeting of Shareholders must
submit the proposal to the Company no later than December 21, 1999.
Additionally, shareholders who intend to present a proposal at the 2000 Annual
Meeting of Shareholders without inclusion of such proposal in the Company's
proxy materials for the 2000 Annual Meeting must provide notice of such proposal
to the Company no later than December 21, 1999. The Company reserves the right
to reject, rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable requirements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's common stock as of March 22,
1999 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>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS(2)
- ---------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Bachow Investment Partners III, L.P. 977,876 5.40%
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
William W.R. Elder (3) 438,929 2.42%
Kenneth Schwanda (4) 64,968 *
Jeff Farrell (5) 72,882 *
Mario M. Rosati (6) 59,250 *
James T. Healy 5,000 *
Thomas E. Seidel (7) 132,264 *
John E. Aldeborgh 2,593 *
G. Frederick Forsyth (8) 16,250 *
Todd S. Myhre (9) 102,923 *
All directors and executive officers as a group (8 persons) (10) 889,960 4.91%
<FN>
* Less than 1%.
</TABLE>
(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 18,113,791 shares of common
stock outstanding as of March 22, 1999 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 subject to the
options currently exercisable, or exercisable within 60 days of March 22, 1999,
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) Consists of 305,599 shares held by William W.R. Elder and Gloria S.
Elder Family Trust, and options to purchase 133,330 shares of common stock
exercisable within 60 days of March 22, 1999.
(4) Consists of 31,634 shares of common stock and options to purchase 33,334
shares of common stock exercisable within 60 days of March 22, 1999.
(5) Consists of 18,048 shares of common stock and options to purchase 54,834
shares of common stock exercisable within 60 days of March 22, 1999.
(6) Consists of 22,500 shares held by Mr. Rosati, 9,000 shares held by WS
Investment Company 92A and options to purchase 27,750 shares of common stock
exercisable within 60 days of March 22, 1999. Mr. Rosati is a general partner
of WS Investment Company 92A and disclaims beneficial ownership of the shares
held by such entity except to the extent of his proportionate partnership
interest therein.
(7) Consists of 17,266 shares of common stock and options to purchase
114,998 shares of common stock exercisable within 60 days of March 22, 1999.
(8) Consists of options to purchase 16,250 shares of common stock
exercisable within 60 days of March 22, 1999.
(9) Consists of options to purchase 102,923 shares of common stock
exercisable within 60 days of March 22, 1999.
(10) Includes options to purchase 509,754 shares of common stock exercisable
within 60 days of March 22, 1999.
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 who 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>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------------------- --- --------------------------------------------------------------------------- --------------
<S> <C> <C> <C>
William W.R. Elder 60 Chairman of the Board, President and Chief Executive Officer of the Company 1981
Todd S. Myhre 53 Business Consultant 1994
G. Frederick Forsyth 55 Business Consultant 1996
Mario M. Rosati 52 Member of Wilson Sonsini Goodrich & Rosati, Professional Corporation 1981
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There are no
family relationships among any directors or executive officers of the Company.
Mr. Elder, a founder of the Company, 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
March 1999, Mr. Forsyth has served as President, Systems Engineering and
Services of Solectron Corp. From August 1997 to March 1999, he 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.
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;
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; Sanmina Corporation, an electronics
manufacturer of multilayered printed circuit boards, backplane assemblies,
subassemblies, and printed circuit board assemblies; and Vivus, Inc., a
pharmaceutical company developing products for erectile disfuntion. 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.
RECOMMENDATION
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 13 meetings during
the year ended December 31, 1998. 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, 1998, and as of March 22, 1999, the
Audit Committee of the Board of Directors, consisting of directors Forsyth,
Myhre and Rosati, held 1 meeting. The Audit Committee recommends engagement of
the Company's independent accountants and is primarily responsible for approving
the services performed by the Company's independent accountants and for
reviewing and evaluating the Company's accounting principles and its system of
internal accounting controls.
During the year ended December 31, 1998, and as of March 22, 1999, the
Compensation Committee of the Board of Directors, consisting of directors
Forsyth, Myhre and Rosati, held 1 meeting. 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, 1998, 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 Incentive Stock 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998 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.
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 1998 its executive officers, directors and 10% shareholders filed
all required Section 16(a) reports on a timely basis, with the following
exceptions: James T. Healy, Mary F. Bobel, John E. Aldeborgh, Frederick E.
Heslet, Ed.D. and James McEleney.
EXECUTIVE OFFICER COMPENSATION
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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDERLYING
FISCAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) (# OF SHARES) COMPENSATION($)
- ---------------------------- ----- --------- ----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder 1998 285,576 -- -- 300,000 4,489 (3)
Chairman of the Board, 1997 305,000 -- -- -- 3,540 (4)
President and Chief Executive 1996 304,167 -- -- 50,000 2,947 (5)
Officer (2)
James T. Healy 1998 122,493 -- 22,367 (7) 250,000 228,625 (8)
Former President and Chief 1997 300,000 90,000 -- -- 6,940 (9)
Executive Officer (6) 1996 87,500 -- -- 250,000 --
Kenneth Schwanda 1998 106,118 -- -- 53,000 1,080 (10)
Vice President of Finance and 1997 95,948 -- -- 10,000 744 (11)
Chief Financial Officer 1996 82,500 4,230 -- -- 568 (12)
John E. Aldeborgh 1998 150,491 -- 41,874 (14) 50,000 167,215 (15)
Former Executive Vice 1997 206,845 20,976 -- 30,000 8,716
President, Chief Customer 1996 182,390 -- -- 50,000 --
Satisfaction Officer (13)
Thomas E. Seidel, Ph.D. 1998 210,000 -- -- 200,000 5,895 (16)
Executive Vice President and 1997 209,200 21,000 -- 125,000 948
Chief Technical Officer 1996 183,333 -- -- 5,000 8,692
Jeff Farrell 1998 144,922 -- -- 107,000 2,272 (17)
Vice President of Engineering 1997 141,284 -- -- 10,000 1,612 (18)
1996 96,254 -- -- 12,500 1,204 (19)
</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) Mr. Elder was re-appointed President and Chief Executive Officer in
April 1998.
(3) Consists of insurance premiums of $4,489 for a term life insurance
policy, the proceeds of which are payable to Mr. Elder's named beneficiaries.
(4) Consists of insurance premiums of $3,540 for a term life insurance
policy, the proceeds of which are payable to Mr. Elder's named beneficiaries.
(5) Consists of insurance premiums of $2,994 for a term life insurance
policy, the proceeds of which are payable to Mr. Elder's named beneficiaries.
(6) Mr. Healy served as President and Chief Executive Officer of the Company
until April 1998.
(7) Includes car allowance of $18,135.
(8) Consists of insurance premiums of $2,996 for a group term life insurance
policy, the proceeds of which were payable to Mr. Healy's named beneficiaries,
matched 401(k) contributions of $629 and severance payment of $225,000.
(9) Consists of insurance premiums of $5,040 for a group term life insurance
policy, the proceeds of which were payable to Mr. Healy's named beneficiaries,
and matched 401(k) contributions of $1,900.
(10) Consists of insurance premiums of $231 for a group term life insurance
policy, the proceeds of which were payable to Mr. Schwanda's named
beneficiaries, and matched 401(k) contribution of $849.
(11) Consists of insurance premiums of $149 for a group term life insurance
policy, the proceeds of which are payable to Mr. Schwanda's named beneficiaries,
and matched 401(k) contribution of $595.
(12) Consists of insurance premiums of $149 for a group term life insurance
policy, the proceeds of which are payable to Mr. Schwanda's named beneficiaries,
and matched 401(k) contribution of $419.
(13) Mr. Aldeborgh served as Executive Vice President, Chief Customer
Satisfaction Officer of the Company until June 1998.
(14) Includes sales commissions of $33,738.
(15) Consists of matched 401(k) contribution of $715 and severance payment
of $166,500.
(16) Consists of insurance premiums of $5,335 for a group term life
insurance policy, the proceeds of which are payable to Dr. Seidel's named
beneficiaries, and matched 401(k) contribution of $560.
(17) Consists of insurance premiums of $1,452 group term life insurance
policy, the proceeds of which are payable to Mr. Farrell's named beneficiaries,
and matched 401(k) contribution of $820.
(18) Consists of insurance premiums of $848 for a group term life insurance
policy, the proceeds of which are payable to Mr. Farrell's named beneficiaries,
and matched 401(k) contribution of $764.
(19) Consists of insurance premiums of $601 for a group term life insurance
policy, the proceeds of which are payable to Mr. Farrell's named beneficiaries,
and matched 401(k) contribution of $603.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
1998 to the Named Executive Officers. No SARs were granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
---------------------------------- REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------
NAME GRANTED YEAR (1) SHARE ($)(2) DATE 5% ($) 10% ($)
- ------------------ ------- ---------- ------------ ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder 300,000 7.96% 0.875 09/21/03 72,524 160,259
50,000 * 1.33% 3.031 01/27/01 ** 23,888 50,163
50,000 * 1.33% 3.031 12/14/01 ** 23,888 50,163
50,000 * 1.33% 3.031 07/23/02 ** 32,660 70,334
James T. Healy 250,000 6.64% 2.438 01/28/03 168,394 372,106
250,000 * 6.64% 3.031 09/16/02 ** 163,300 351,672
Kenneth Schwanda 3,000 0.08% 2.031 03/20/03 1,683 3,720
50,000 1.33% 1.625 05/14/03 22,448 49,604
4,000 * 0.10% 3.031 12/14/01 ** 1,911 4,013
7,500 * 0.20% 3.031 07/23/02 ** 4,899 10,550
John E. Aldeborgh 50,000 1.33% 2.438 01/28/03 33,679 74,421
6,668 * 0.18% 3.031 05/23/00 ** 2,072 4,244
8,333 * 0.22% 3.031 01/27/01 ** 3,981 8,360
25,000 * 0.66% 3.031 12/14/01 ** 11,944 25,082
50,000 * 1.33% 3.031 07/03/02 ** 32,660 70,334
30,000 * 0.80% 3.031 02/10/03 ** 25,122 55,514
Thomas E. Seidel 10,000 0.27% 2.438 01/28/03 6,736 14,884
200,000 5.31% 0.875 09/21/03 48,349 106,839
75,000 * 2.00% 3.031 01/30/02 ** 48,990 105,502
50,000 * 1.33% 3.031 07/23/02 ** 32,660 70,334
5,000 * 0.13% 3.031 02/10/03 ** 4,187 9,252
Jeff Farrell 7,000 0.19% 2.438 01/28/03 4,715 10,419
100,000 2.66% 1.625 05/14/03 44,896 99,208
12,500 * 0.33% 3.031 04/30/03 ** 10,468 23,131
10,000 * 0.30% 3.031 05/20/04 ** 10,308 23,386
</TABLE>
* Represents options that were repriced by the Company on February 9, 1998.
The share amounts and vesting schedules remained the same as the original
option; however, the term of the option was extended one year to compensate for
a one-year blackout period following the repricing.
** Includes one-year extended term pursuant to the option repricing (see
above).
(1) Based on an aggregate of 3,764,407 options granted to all employees
during fiscal year 1998, including 1,562,241 options that were repriced. Options
granted in fiscal year 1998 expire in 2003 and typically vest in three equal
annual installments commencing on the first anniversary of the date of grant.
(2) All options were granted at an exercise price equal to the fair market
value based on the closing market value of common stock on the Nasdaq National
Market on the date of grant with the exception of those options that were
repriced as disclosed.
(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 1998
by the Named Executive Officers and the number and value of such officers'
unexercised options at December 31, 1998. No SARs have been granted.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1998 DECEMBER 31, 1998 ($)(2)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder -0- -- 133,330 316,670 -- 46,800
James T. Healy -0- -- -0- -0- -- --
Kenneth Schwanda -0- -- 12,334 62,166 -- --
John E. Aldeborgh -0- -- -0- -0- -- --
Thomas E. Seidel -0- -- 84,992 255,008 -- 31,200
Jeff Farrell -0- -- 11,667 117,833 -- --
</TABLE>
(1) Market value of underlying securities (based on the fair market value of
the Company's common stock on the Nasdaq National Market) at the time of
exercise, minus the exercise price.
(2) Market value of securities underlying in-the-money options at the end of
fiscal year 1998 (based on $1.031 per share, the closing price of Company's
common stock on the Nasdaq National Market on December 31, 1998), less the
exercise price.
The Company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
10-YEAR STOCK OPTION REPRICING
The following table sets forth certain information regarding the
participation of any executive officer in the Company's repricing of stock
options for the previous 10 fiscal years.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION TERM
SECURITIES MARKET PRICE REMAINING
UNDERLYING OF STOCK EXERCISE PRICE AT DATE OF
OPTIONS/SARS AT TIME OF AT TIME OF NEW REPRICING OR
REPRICED OR REPRICING OR REPRICING OR EXERCISE AMENDMENT
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) (IN YEARS)
- --------------------------------- -------- ----------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder 02/09/98 50,000 3.0310 7.7500 3.0310 1.9
Chairman of the Board, President 02/09/98 50,000 3.0310 8.6250 3.0310 1.8
and Chief Executive Officer 02/09/98 50,000 3.0310 6.1250 3.0310 3.4
12/14/95 50,000 8.6250 12.1250 8.6250 4.6
01/15/91 20,000 1.2500 2.5000 1.2500 1.1
01/15/91 60,000 1.2500 2.5000 1.2500 1.1
01/15/91 120,000 1.2500 3.1250 1.2500 4.4
06/08/90 120,000 3.1250 5.1250 3.1250 3.5
James T. Healy 02/09/98 250,000 3.0310 5.9375 3.0310 3.6
Former President and Chief
Executive Officer
Kenneth Schwanda 02/09/98 4,000 3.0310 8.6250 3.0310 2.8
Vice President of Finance and 02/09/98 7,500 3.0310 6.1250 3.0310 3.4
Chief Financial Officer
John E. Aldeborgh 02/09/98 6,668 3.0310 4.0000 3.0310 1.3
Former Executive Vice President, 02/09/98 8,333 3.0310 7.7500 3.0310 1.9
Chief Customer Satisfaction 02/09/98 25,000 3.0310 8.6250 3.0310 2.8
Officer; former Vice President and 02/09/98 50,000 3.0310 6.1250 3.0310 3.4
General Manager, Ion Technology 02/09/98 30,000 3.0310 5.2500 3.0310 4.0
Division 07/20/95 25,000 12.1250 12.1250 8.6250 5.0
01/15/91 4,000 1.2500 3.1250 1.2500 4.4
06/08/90 4,000 3.1250 10.2500 3.1250 4.0
Thomas E. Seidel 02/09/98 75,000 3.0310 8.3700 3.0310 2.9
Executive Vice President and 02/09/98 50,000 3.0310 6.1250 3.0310 3.4
Chief Technical Officer 02/09/98 5,000 3.0310 5.2500 3.0310 4.0
Jeff Farrell 02/09/98 12,500 3.0310 8.0000 3.0310 4.2
Vice President of Engineering 02/09/98 10,000 3.0310 4.1900 3.0310 5.3
Frederick E. Heslet, Ed.D. 02/09/98 25,000 3.0310 6.3750 3.0310 5.9
Former Vice President,
Chief Quality Officer
James McEleney. 02/09/98 5,000 3.0310 8.0000 3.0310 3.2
Former Vice President, 02/09/98 10,000 3.0310 6.1250 3.0310 3.4
General Manager, 02/09/98 3,00 3.0310 5.2500 3.0310 4.0
Ion Technology Products 02/09/98 20,000 3.0310 3.8750 3.0310 4.1
Michael Mitchell 02/09/98 1,000 3.0310 8.6250 3.0310 0.8
Director of Operations 02/09/98 2,000 3.0310 5.2550 3.0310 2.0
02/09/98 5,000 3.0310 4.1900 3.0310 2.3
12/14/95 1,000 8.6250 15.6250 8.6250 4.8
James Burns 12/14/95 25,000 8.6250 12.1250 8.6250 4.6
Former Executive Vice President
and General Manager, Thin Film
Division
W. Wayne Carlson 01/15/91 20,000 1.2500 3.1250 1.2500 4.4
Former Vice President and 06/08/90 20,000 3.1250 8.3800 3.1250 3.9
General Manager, Ion Technology
Division
William Cole 12/14/95 25,000 8.6250 12.1250 8.6250 4.6
Former Vice President, Sales
Kevin Conlon 12/14/95 25,000 8.6250 12.1250 8.6250 4.6
Former Vice President, Marketing
Frank Deak 06/08/90 10,000 3.1250 5.1250 3.1250 3.5
Former Vice President,
Information Services
Richard Hannigan 01/15/91 20,000 1.2500 2.5000 1.2500 1.1
Former Executive Vice President 01/15/91 20,000 1.2500 2.5000 1.2500 1.1
and Chief Financial Officer 01/15/91 20,000 1.2500 3.1250 1.2500 4.4
06/08/90 20,000 3.1250 5.1250 3.1250 3.5
William Harshberger 01/15/91 14,000 1.2500 3.1250 1.2500 4.4
Former Vice President, 01/15/91 4,000 1.2500 3.0000 1.2500 4.5
Japan Operations and Chief 06/08/90 14,000 3.1250 5.1250 3.1250 3.5
Technologist
Michael Hernandez 01/15/91 11,000 1.2500 2.5000 1.2500 2.0
Former Vice President, 01/15/91 3,000 1.2500 3.1250 1.2500 4.4
Human Resources 01/15/91 4,000 1.2500 3.0000 1.2500 4.5
06/08/90 3,000 3.1250 8.3800 3.1250 4.2
Michael McCann 01/15/91 6,000 1.2500 2.5000 1.2500 1.1
Former Vice President, Sales 01/15/91 800 1.2500 2.5000 1.2500 1.1
01/15/91 2,000 1.2500 2.5000 1.2500 1.1
01/15/91 6,000 1.2500 2.5000 1.2500 2.1
01/15/91 10,000 1.2500 5.1250 1.2500 2.9
01/15/91 4,000 1.2500 3.0000 1.2500 4.5
Eric Newton 01/15/91 8,000 1.2500 3.1250 1.2500 4.4
Former General Manager, 01/15/91 4,000 1.2500 3.0000 1.2500 4.5
Thin Film Products 06/08/90 8,000 3.1250 5.1250 3.1250 3.2
Ken Norcross 01/15/91 10,000 1.2500 3.1250 1.2500 4.4
Former Vice President, 01/15/91 7,000 1.2500 3.0000 1.2500 4.5
Customer Service 06/08/90 10,000 3.1250 8.3800 3.1250 4.1
Ernerst Qinones 12/14/95 10,000 8.6250 15.6250 8.6250 4.8
Former Vice President of Finance 01/15/91 4,000 1.2500 3.1250 1.2500 4.4
01/15/91 2,000 1.2500 3.0000 1.2500 4.5
06/08/90 4,000 3.1250 10.2500 3.1250 4.0
Kent Robertson 12/14/95 75,000 8.6250 12.3750 8.6250 4.5
Former Chief Financial Officer
Kenneth L. Schroeder 05/15/91 100,000 1.2500 3.1250 1.2500 4.4
Former President and Chief 06/08/90 100,000 3.1250 4.5000 3.1250 4.9
Operating Officer
Clifford Smedley 01/15/91 24,000 1.2500 2.5000 1.2500 2.0
Former Vice President, 01/15/91 10,000 1.2500 3.1250 1.2500 4.4
New Business Development 01/15/91 10,000 1.2500 3.1250 1.2500 4.4
01/15/91 4,000 1.2500 3.0000 1.2500 4.5
06/08/90 10,000 3.1250 5.1250 3.1250 3.5
06/08/90 10,000 3.1250 8.3800 3.1250 4.2
</TABLE>
COMPENSATION COMMITTEE REPORT
OPTION REPRICING
On January 28, 1998 the Board of Directors authorized the repricing of
certain stock options at the fair market value of the Company's common stock as
of February 9, 1998. The Company and the Board of Directors took this action in
order to address concerns regarding the retention of the Company's key employees
in a climate of intense competition for experienced personnel. Pursuant to the
option repricing, all individuals who held stock options granted under the
Company's 1991 Incentive Stock Option Plan were offered the opportunity to
exchange all of their stock options with an exercise price of greater than $3.03
for a like number of options at an exercise price of $3.03 per share, the fair
market value of the Company's common stock on February 9, 1998. Participants in
the February 1998 repricing were required to agree not to exercise their new
options for a period of one year (the "blackout period"). The original
expiration dates of the stock options cancelled and reissued pursuant to the
repricing were extended for one year to compensate for the blackout period. On
February 9, 1998 options to purchase 1,652,241 shares of common stock at
exercise prices ranging from $4.00 to $8.625 -per share were repriced at an
exercise price of $3.03 per share.
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 timelines 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 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:
Frederick Forsyth
Todd S. Myhre
Mario M. Rosati
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return among the Company, the NASDAQ Stock Market-US Index and the H & Q
Technology Index for the period from December 31, 1993 (the last trading day
before the beginning of the Company's 1994 Fiscal Year) through 1998 Fiscal Year
End for the Company. 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, 1993 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>
12/93 $ 100 $ 100 $ 100
12/94 267 98 120
12/95 250 138 180
12/96 183 170 223
12/97 111 209 262
12/98 34 293 407
</TABLE>
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.
TERMINATION OF EMPLOYMENT AGREEMENTS
In January 1998, the Company entered into a Settlement Agreement and Mutual
Release with John E. Aldeborgh (the "Aldeborgh Agreement") in connection with
Mr. Aldeborgh's resignation from the Company effective as of June 30, 1998.
Pursuant to the Aldeborgh Agreement, the Company continued to pay Mr. Aldeborgh
$18,500 per month, less applicable withholding, for nine months from the date of
his resignation.
In April 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 Company effective as of April 30, 1998. Pursuant to
the Healy Agreement, the Company continued to pay Mr. Healy $25,000 per month,
less applicable withholding, for nine months from the date of his resignation.
In May 1998, the Company entered into a Settlement Agreement and Mutual
Release with Mary F. Bobel (the "Bobel Agreement") in connection with Ms.
Bobel's resignation from the Company effective as of August 7, 1998. Pursuant
to the Bobel Agreement, the Company continued to pay Ms. Bobel $13,750 per
month, less applicable withholding, for nine months from the date of her
resignation.
In May 1998, the Company entered into a Settlement Agreement and Mutual
Release with Frederick E. Heslet, Ed.D. (the "Heslet Agreement") in connection
with Dr. Heslet's resignation from the Company effective as of May 30, 1998.
Pursuant to the Heslet Agreement, the Company continued to pay Dr. Heslet
$11,600 per month, less applicable withholding, for six months from the date of
his resignation.
See also "Compensation Committee Interlocks and Insider Participation"
above.
PROPOSAL TWO
AMENDMENT OF 1991 INCENTIVE STOCK OPTION PLAN
GENERAL
The 1991 Incentive Stock Option Plan ("1991" Option Plan") was adopted by
the Board of Directors in February 1991. Prior to January 1998, a total of
3,653,006 shares of common stock were reserved for issuance thereunder. In
February 1999, the Board of Directors approved an amendment to the 1991 Option
Plan to increase the number of shares of common stock reserved for issuance
thereunder by 500,000 to a total of 4,153,006 shares. The Board of Directors
recommends that the shareholders vote to approve this amendment of the 1991
Option Plan.
All employees, including officers and directors, and consultants of the
Company or any of its designated subsidiaries are eligible to be granted options
under the 1991 Option Plan. In addition, non-employee directors are eligible for
option grants under the Automatic Grant Plan described below. As of March 22,
1999, 81 full-time employees (including officers and directors), 0 part-time
employees and 7 consultants were eligible for grants under the 1991 Option Plan,
while 3 non-employee directors were eligible for grants under the Automatic
Grant Plan.
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or "nonstatutory options." As
of March 22,1999, options to purchase 872,610 shares had been exercised, options
to purchase 2,193,390 shares were outstanding and 1,087,006 shares were
available for future grant. The closing price of the Company's common stock
reported on the NASDAQ National Market system on March 22, 1999, was $2.00 per
share. The essential features of the 1991 Option Plan are outlined below.
PURPOSE
The 1991 Option Plan replaced the 1981 Option Plan, which terminated in
December 1991. The purposes of the 1991 Option Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive and to promote the success of the Company's
business.
ADMINISTRATION
The 1991 Option Plan provides for administration by the Board of Directors
of the Company or by a committee of the Board. The 1991 Option Plan is currently
being administered by the Board of Directors. No member of the Board who is
eligible to participate in the plan may vote on any option to be granted to
himself or take part in any consideration of the 1991 Option Plan as it applies
to himself. The interpretation and construction of any provision of the 1991
Option Plan by the Board shall be final and conclusive. Members of the Board
receive no compensation for their services in connection with the administration
of the 1991 Option Plan.
ELIGIBILITY
The 1991 Option Plan provides that options may be granted to employees,
including officers and directors, and consultants of the Company or any of its
designated subsidiaries. Except with respect to non-employee directors ("Outside
Directors"), the Board of Directors selects the optionees and determines the
number of shares to be subject to each option and the time or times at which
shares become exercisable under the option. In making such determination, the
duties and responsibilities of the employee or consultant, the value of his or
her services, his or her present and potential contribution to the success of
the Company, the anticipated number of years of future service and other
relevant factors are taken into account. There is a $100,000 limit on the
aggregate market value of shares subject to all incentive stock options that are
exercisable for the first time in any one calendar year.
PERFORMANCE-BASED COMPENSATION LIMITATIONS
No employee shall be granted in any fiscal year of the Company options to
acquire in the aggregate 400,000 shares of common stock. The foregoing
limitation, which shall adjust proportionately in connection with any change in
the Company's capitalization, is intended to satisfy the requirements applicable
to options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code. In the event that the
Committee determines that such limitation is not required to qualify options as
performance-based compensation, the Committee may modify or eliminate such
limitation.
OUTSIDE DIRECTORS' OPTIONS
The 1991 Option Plan provides that, with respect to Outside Directors,
nonstatutory options shall be automatically granted to Outside Directors on a
yearly basis from their initial appointment or election in order to provide an
incentive to Outside Directors of the Company ("Automatic Grant Program"). The
exercise price of options granted under the Automatic Grant Program is the fair
market value of the Company's common stock on the date of the automatic grant.
Outside Directors may not be granted options under the 1991 Option Plan except
under the Automatic Grant Program.
Each Outside Director receives an automatic grant on the date of his or her
appointment or election to the Board of an initial option to purchase 5,000
shares of common stock and, for as long as he or she continues to serve as an
Outside Director, receives an automatic grant on February 7 of each year of an
option to purchase an additional 5,000 shares of common stock. These options
become exercisable cumulatively with respect to 1/12th of the underlying shares
on the last day of each month following the date of grant and have a term of
five years from the date of grant.
TERMS OF OPTIONS
The terms of the options granted under the 1991 Option Plan (other than
options granted to Outside Directors pursuant to the Automatic Grant Program
("Outside Director Options")) are determined by the Board of Directors. Each
option granted under the 1991 Option Plan is evidenced by a stock option
agreement between the Company and the employee to whom such option is granted
and is subject to the following additional terms and conditions:
Exercise of the Option. The Board of Directors determines when options
granted under the 1991 Option Plan (other than Outside Director Options) may be
exercised. An option is exercised by giving written notice of exercise to the
Company, specifying the number of full shares of common stock to be purchased
and tendering payment to the Company of the purchase price. Payment for shares
issued upon exercise of an option may consist of cash, promissory note, exchange
of shares of the Company's common stock or such other consideration as
determined by the Board of Directors and as permitted by the California
Corporations Code.
Option Price. The option price under the 1991 Option Plan (other than
Outside Director Options) is determined by the board of Directors. The option
price of incentive stock options may not be less than 100% of the fair market
value of the Company's common stock on the date the option is granted and the
exercise price of nonstatutory stock options may not be less than 85% of the
fair market value of the common stock on the date the option is granted.
However, in the case of options granted to an optionee who owns more than 10% of
the voting power or value of all classes of stock of the Company, the per share
exercise price of any option must not be less than 110% of the fair market value
on the date of grant. The Board of Directors of the Company or its committee
determines such fair market value based upon the closing price of the common
stock in the NASDAQ National Market System on the date the option is granted.
Termination of Employment. The 1991 Option Plan provides that if the
optionee's employment by the Company is terminated for any reason other than
death, options may be exercised not later than three months (or, in the case of
a nonstatutory stock option, such other period of time not exceeding six months
as is determined by the Board and specified in the option agreement) after such
termination and may be exercised only to the extent the options were exercisable
on the date of termination.
Death. If an optionee should die while employed by the Company, options may
be exercised at any time within twelve months after the date of death but only
to the extent that the options were exercisable on the date of death.
Term of Options. Options granted under the 1991 Option Plan (other than
Outside Director Options) expire 10 years from the date of grant, unless a
shorter term is provided in the option agreement. However, incentive stock
options granted to an optionee who, immediately before the grant of such option,
owns more than 10% of the total combined voting power of all classes of stock of
the Company or a parent or subsidiary corporation may not have terms of more
than five years.
Nontransferability of Options. An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
Acceleration of Options. In the event of a merger or sale of assets of the
Company, options shall be assumed or substituted for by the successor
corporation or the optionee's right to exercise outstanding options shall be
accelerated in full.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1991 Option Plan as may be
determined by the Board of Directors or its committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of common stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the option price and in the
number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, all outstanding options automatically
terminate immediately prior to the consummation of such action unless otherwise
provided by the Board. The Board of Directors may in its discretion make
provision for accelerating the exercisability of shares subject to options under
the 1991 Option Plan in such event.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1991 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders. To the
extent required by applicable law, shareholder approval shall be obtained of any
Plan amendment. No action by the Board of Directors or shareholders may alter or
impair any option previously granted under the 1991 Option Plan without the
consent of the effected optionee. The 1991 Option Plan will terminate by its
terms in 2001.
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
Options which do not qualify as incentive stock options are referred to as
nonstatutory options. An optionee will not recognize any taxable income at the
time a nonstatutory option is granted. However, upon its exercise, the optionee
will recognize taxable income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the Optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
VOTE REQUIRED
Affirmative votes constituting a majority of the Votes Cast will be
required to approve and ratify the amendment of the 1991 Option Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 1991 INCENTIVE STOCK OPTION PLAN.
PROPOSAL THREE
AMENDMENT OF 1989 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The 1989 Employee Stock Purchase Plan ("Purchase Plan") was adopted by the
board of Directors in March 1989 and approved by the shareholders in May 1990.
In February 1999, 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 2,050,000 to 2,350,000 shares.
As of March 22, 1999, 1,862,608 shares had been issued under the Purchase Plan,
and 487,392 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 20 hours per
week and more than five months in a calendar year on the date his or her
participation in the plan is effective is eligible to participate in the
Purchase Plan. As of March 22, 1999 approximately 65 employees were eligible to
participate in the Purchase Plan.
OFFERING DATE
The Purchase Plan is implemented by overlapping 24-month offering periods
containing four six-month purchase periods. New offering periods commence every
six months. The purchase periods generally commence on July 1 and January 1 of
each year. The Board of Directors may change the duration of the offering
periods without shareholder approval.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is the lower of 85% of fair market value of the common stock on the date of
commencement of the 24-month offering period or 85% of the fair market value of
the common stock on the last day of the six-month purchase period. Eligible
employees are automatically re-enrolled in the offering period with the lower of
85% of fair market value of the common stock on the date of commencement of such
24-month offering period. The fair market value of the common stock on a given
date shall be determined by the Board of Directors based upon the reported
closing price in the NASDAQ National Market System on such date.
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.
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.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1999, 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.
PricewaterhouseCoopers LLP has audited the Company's financial statements since
the year ended December 31, 1982. Representatives of PricewaterhouseCoopers LLP
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 19, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of GENUS, INC., a California corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 19, 1999, and hereby appoints
William W.R. Elder and Kenneth Schwanda 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 1999 Annual Meeting of Shareholders of Genus,
Inc. to be held on Wednesday, May 19, 1999 at 10:00 a.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.
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Please mark your
choice like this [X]
--------------
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. Proposal to approve the amendment of the Company's 1991 Incentive Stock
Option Plan to increase the number of shares of common stock reserved for
issuance thereunder by 500,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the amendment of the Company's 1989 Employee Stock
Purchase Plan to increase the number of shares of common stock reserved for
issuance thereunder by 300,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
independent public accountants of the Company's financial statements for the
fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. 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 AMENDMENT OF THE 1991
INCENTIVE STOCK OPTION PLAN, FOR THE AMENDMENT OF THE 1989 EMPLOYEE STOCK
PURCHASE PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS
LLP 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 __________, 1999
(This Proxy should be dated, signed by the shareholder(s) exactly as his or her
name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
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