<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IN FOCUS SYSTEMS, INC.
(Exact Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
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):
Proposed maximum aggregate value of transaction:
Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
IN FOCUS SYSTEMS, INC.
27700B S.W. Parkway Avenue
Wilsonville, Oregon 97070
March 9, 1998
Dear Shareholders:
Our Annual Meeting of Shareholders will be held on Wednesday, April 22, 1998,
at 1:00 p.m., Pacific Daylight Savings Time, at the Oregon Museum of Science
and Industry, 1945 S.E. Water Avenue, Portland, Oregon 97214. You are
invited to attend this meeting to give us an opportunity to meet you
personally, to allow us to introduce to you the key management of your
Company and its directors, and to answer any questions you may have.
The formal Notice of Meeting, the Proxy Statement, the proxy card and a copy
of the Annual Report to Shareholders describing the Company's operations for
the year ended December 31, 1997 are enclosed.
I hope that you will be able to attend the meeting in person. Whether or not
you plan to attend the meeting, please sign and return the enclosed proxy
card promptly. A prepaid return envelope is provided for this purpose. Your
shares will be voted at the meeting in accordance with your proxy.
If you have shares in more than one name, or if your stock is registered in
more than one way, you may receive multiple copies of the proxy materials.
If so, please sign and return each proxy card you receive so that all of your
shares may be voted. I look forward to meeting you at the Annual Meeting.
Very truly yours,
IN FOCUS SYSTEMS, INC.
JOHN V. HARKER
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
IN FOCUS SYSTEMS, INC.
27700B S.W. PARKWAY AVENUE
WILSONVILLE, OREGON 97070
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1998
To the Shareholders of In Focus Systems, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of IN FOCUS
SYSTEMS, INC. (the Company), an Oregon corporation, will be held at the
Oregon Museum of Science and Industry, 1945 S.E. Water Avenue, Portland,
Oregon 97214, on Wednesday, April 22, 1998, at 1:00 p.m., Pacific Daylight
Savings Time. The purposes of the Annual Meeting will be:
1. To elect the Board of Directors to serve until the next
Annual Meeting of Shareholders (Proposal No. 1);
2. To ratify the appointment of Arthur Andersen LLP as the
Company's independent accountants for the year ending
December 31, 1998 (Proposal No. 2);
3. To approve the In Focus Systems, Inc. 1998 Stock Incentive
Plan (Proposal No. 3);
4. To approve an amendment to Article III of the Company's 1990
Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 30 million to 50 million
shares (Proposal No. 4); and
5. To consider and act upon any other matter which may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 27, 1998,
as the record date for determining shareholders entitled to notice of and to
vote at the meeting or any adjournment thereof. Only holders of record of
Common Stock of the Company at the close of business on the record date will
be entitled to notice of and to vote at the meeting and any adjournment
thereof. Further information regarding voting rights and the matters to be
voted upon is presented in the accompanying proxy statement.
All shareholders are cordially invited to attend the Annual Meeting. A
review of the Company's operations for the year ended December 31, 1997 will
be presented. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY TIME
PRIOR TO ITS USE. A prepaid, self-addressed envelope is enclosed for your
convenience. Your shares will be voted at the meeting in accordance with
your proxy. If you attend the meeting, you may revoke your proxy and vote in
person.
By Order of the Board of Directors,
MICHAEL D. YONKER
VICE PRESIDENT, INFORMATION SERVICES,
CHIEF FINANCIAL OFFICER AND SECRETARY
Wilsonville, Oregon
March 9, 1998
<PAGE>
IN FOCUS SYSTEMS, INC.
27700B S.W. PARKWAY AVENUE
WILSONVILLE, OREGON 97070
_______________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1998
______________________
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Annual Report to Shareholders, the
Notice of Annual Meeting and the proxy card are being furnished to the
shareholders of In Focus Systems, Inc., an Oregon corporation (the
"Company"), in connection with the solicitation of proxies by the Company's
Board of Directors for use at the Company's 1998 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Oregon Museum of
Science and Industry, 1945 S.E. Water Avenue, Portland, Oregon 97214, on
Wednesday, April 22, 1998, at 1:00 p.m. Pacific Daylight Savings Time and any
adjournment thereof. The solicitation of proxies by mail may be followed by
personal solicitation of certain shareholders, by officers or regular
employees of the Company. All expenses of the Company associated with this
solicitation will be borne by the Company.
The two persons named as proxies on the enclosed proxy card, John V. Harker
and Michael D. Yonker, were designated by the Board of Directors. All
properly executed proxies will be voted (except to the extent that authority
to vote has been withheld) and where a choice has been specified by the
shareholder as provided in the proxy card, it will be voted in accordance
with the specification so made. Proxies submitted without specification will
be voted FOR Proposal No. 1 to elect the nominees for directors proposed by
the Board of Directors, FOR Proposal No. 2 to ratify the appointment of
Arthur Andersen LLP as independent accountants for the Company, FOR Proposal
No. 3 to approve the In Focus Systems, Inc. 1998 Stock Incentive Plan and FOR
Proposal No. 4 to approve an amendment to the Company's 1990 Restated
Articles of Incorporation to increase the number of authorized shares of
Common Stock from 30 million to 50 million shares.
A proxy may be revoked by a shareholder prior to its exercise by written
notice to the Secretary of the Company, by submission of another proxy
bearing a later date or by voting in person at the Annual Meeting. Such
notice or later proxy will not affect a vote on any matter taken prior to the
receipt thereof by the Company.
These proxy materials and the Company's 1997 Annual Report to Shareholders
are being mailed on or about March 9, 1998 to shareholders of record on
February 27, 1998 of the Company's Common Stock. The principal executive
office and mailing address of the Company is 27700B S.W. Parkway Avenue,
Wilsonville, Oregon 97070.
1
<PAGE>
VOTING AT THE MEETING
The shares of Common Stock constitute the only class of securities entitled
to notice of and to vote at the meeting. In accordance with the Company's
Bylaws, the stock transfer records were compiled on February 27, 1998, the
record date set by the Board of Directors, for determining the shareholders
entitled to notice of, and to vote at, this meeting and any adjournment
thereof. On that date, there were 20,xxx,xxx shares of Common Stock
outstanding and entitled to vote and the closing price of the Company's
Common Stock as reported by the Nasdaq National Market System was $xx.xxx.
Each share of Common Stock outstanding on the record date is entitled to one
vote per share at the Annual Meeting. If a quorum is present at the Annual
Meeting: (i) the four nominees for election as directors who receive the
greatest number of votes cast for the election of directors by the shares of
Common Stock present in person or represented by proxy at the meeting and
entitled to vote shall be elected directors, (ii) Proposal No. 2 to ratify
the appointment of Arthur Andersen LLP as independent accountants for the
Company will be approved if the number of votes cast in favor of the proposal
exceeds the number of votes cast against it, (iii) Proposal No. 3 to approve
the In Focus Systems, Inc. 1998 Stock Incentive Plan will be approved if it
receives the affirmative vote of the holders of at least a majority of the
shares of Common Stock present in person or represented by proxy at the
Annual Meeting and (iv) Proposal No. 4 to approve an amendment to Article III
of the Company's 1990 Restated Articles of Incorporation to increase the
number of authorized shares of Common Stock from 30 million to 50 million
shares will be approved if the number of votes cast in favor of the proposal
exceeds the number of votes cast against it.
With respect to the election of directors, directors are elected by a
plurality of the votes cast and only votes cast in favor of a nominee will
have an effect on the outcome. Therefore, abstention from voting or
nonvoting by brokers will have no effect thereon. With respect to voting on
Proposal No. 2, abstention from voting or nonvoting by brokers will have no
effect thereon. With respect to voting on Proposal No. 3, abstention from
voting will have the same effect as voting against the proposal and nonvoting
by brokers will have no effect thereon. With respect to Proposal No. 4,
abstention from voting or nonvoting by brokers will have no effect thereon
2
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
In accordance with the Company's Bylaws, the Board of Directors shall consist
of no less than three and no more than seven directors, the specific number
to be determined by resolution adopted by the Board of Directors. By
resolution adopted on February 13, 1998, the Board of Directors set the
number of Directors at four, and four Directors are to be elected at the 1998
Annual Meeting of Shareholders.
NOMINEES FOR DIRECTOR
The names and certain information concerning the persons to be nominated by
the Board of Directors at the Annual Meeting are set forth below. THE BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES NAMED BELOW. Shares represented by proxies will be voted for
the election to the Board of Directors of the persons named below unless
authority to vote for a particular director or directors has been withheld in
the proxy. All nominees have consented to serve as directors for the ensuing
year. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve as a director. In the event of the death or
unavailability of any nominee or nominees, the proxy holders will have
discretionary authority under the proxy to vote for a suitable substitute
nominee as the Board of Directors may recommend. Proxies may not be voted
for more than four (4) nominees. The Board of Directors has nominated the
persons named in the following table to be elected as directors:
<TABLE>
<CAPTION>
NAME AGE HAS BEEN A DIRECTOR SINCE
- ---- --- -------------------------
<S> <C> <C>
Peter D. Behrendt 59 1995
Michael R. Hallman 52 1992
John V. Harker 63 1992
Nobuo Mii 66 1997
</TABLE>
Peter D. Behrendt is a director of the Company. He is the former Chairman
and Chief Executive Officer of Exabyte Corp., a publicly traded company that
is the world's largest independent manufacturer focused exclusively on tape
storage products, tape libraries and recording media. Prior to working at
Exabyte Corp., Mr. Behrendt spent 26 years in numerous executive positions at
International Business Machines, Inc. ("IBM"), including worldwide
responsibility for business and product planning for IBM's tape and disk
drives and general management of IBM's worldwide electronic typewriter
business. Mr. Behrendt is on the Board of Directors of Western Digital Corp.
and Exabyte Corp.
3
<PAGE>
Michael R. Hallman is a director of the Company and is currently serving as
President of The Hallman Group, a management consulting company focusing on
marketing, sales, business development and strategic planning for the
information systems industry. Mr. Hallman served as President and Chief
Operating Officer of Microsoft Corporation from February 1990 until March
1992. From 1987 to 1990, he was Vice President of the Boeing Company and
President of Boeing Computer Services. From 1967 to 1987, Mr. Hallman worked
for IBM in various sales and marketing executive positions, with his final
position being Vice President of Field Operations, responsible for one-half
of IBM's domestic sales revenue. Mr. Hallman holds a B.B.A. and a M.B.A.
from the University of Michigan. Mr. Hallman is a member of the Board of
Directors of Keytronics, Inc., Intuit, Inc., Timeline, Inc. and Network
Appliance, Inc.
John V. Harker is a director of the Company, and has served as President and
Chief Executive Officer of the Company since April 1992. Mr. Harker was
elected as Chairman of the Board in October 1994. Mr. Harker served as
Executive Vice President of Genicom Corporation, a manufacturer of printers,
from 1984 to January 1992, and as a member of the Board of Directors of
Genicom Corporation, from 1986 to January 1992. Mr. Harker served as Senior
Vice President of Marketing and Corporate Development of Data Products, Inc.
from 1982 to 1984, as Vice President and partner of Booz, Allen & Hamilton,
Inc. from 1979 to 1982, and in various managerial and executive positions at
IBM Corporation from 1963 to 1979. He holds a B.S. degree in Marketing from
the University of Colorado.
Nobuo Mii is a director of the Company. Mr. Mii has been the Chairman and
CEO of SegaSoft, Inc. since December 1995. Mr. Mii is also a partner at
ACCEL Partners, a venture capital firm specializing in technology
investments. Mr. Mii also spent 26 years at IBM, with his final position
being Corporate Vice President, General Manager of the Power Personal Systems
Division. Mr. Mii holds a B.S. degree in Communication Engineering from
Kyushu University in Fukuoka, Japan.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six regular meetings and took action pursuant to
one unanimous written consent during the year ended December 31, 1997. No
director attended fewer than 75 percent of the meetings of the Board of
Directors and committees thereof, if any, during the period that he was a
member of the Board of Directors during 1997.
Until April 1997, the Audit Committee was composed of Mr. Hallman and Mr.
Behrendt, outside directors who are not, and have not been at any time in the
past, officers of the Company. In April 1997, Mr. Harker was added to the
Audit Committee. The Audit Committee reviews, with the Company's independent
public accountants and
4
<PAGE>
representatives of management, the scope and results of audits, the
appropriateness of accounting principles used in financial reporting, and the
adequacy of financial and operating controls. The Audit Committee held two
meetings in 1997.
The Compensation Committee and the Administrative Committee of the 1988
Combination Stock Option Plan were composed of Messrs. Hallman, Behrendt and
Kuehler during 1997. The Compensation Committee approves all of the policies
under which compensation is paid or awarded to the Company's executive
officers. The Compensation Committee is responsible for establishing
compensation of executive officers who also serve on the Board of Directors.
The entire Board of Directors is responsible for reviewing and providing
feedback on non-director executive officer compensation with goals and dollar
amounts established by the Chief Executive Officer in accordance with
policies approved by the Board. During 1997, the Administrative Committee of
the 1988 Combination Stock Option Plan was responsible for approving option
grants under such plan. The Compensation Committee held two regular meetings
during 1997. The Administrative Committee of the 1988 Combination Stock
Option Plan held four regular meetings during the year ended December 31,
1997.
The Board of Directors does not have a Nominating Committee.
5
<PAGE>
SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors has appointed Arthur Andersen LLP, independent
accountants, as auditors of the Company for the year ending December 31,
1998, subject to ratification by the shareholders. In the absence of
contrary specifications, the shares represented by the proxies will be voted
FOR the appointment of Arthur Andersen LLP as the Company's independent
accountants for the year ending December 31, 1998.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting. The representative will be given the opportunity to make a
statement on behalf of his firm if such representative so desires, and will
be available to respond to appropriate shareholder questions. Arthur
Andersen LLP was the Company's independent accountant for the year ended
December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS OF THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 1998.
6
<PAGE>
APPROVAL OF THE IN FOCUS SYSTEMS, INC. 1998 STOCK INCENTIVE PLAN
(PROPOSAL NO. 3)
In order for the Company to continue to attract and retain key personnel, the
Board of Directors has approved the In Focus Systems, Inc. 1998 Stock
Incentive Plan (the "Plan") and the reservation of 1,500,000 shares for
issuance thereunder. The Plan allows for the granting of incentive stock
options, non-qualified stock options and restricted stock. For a description
of the Plan see "1998 Stock Incentive Plan Summary" on page 16. The Plan is
the successor to the Company's 1988 Stock Option Plan which expires on December
21, 1998. In the absence of contrary specifications, the shares represented by
proxies will be voted FOR the approval of the In Focus Systems, Inc. 1998 Stock
Incentive Plan.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting
is required to approve the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL OF THE PLAN.
7
<PAGE>
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1990 RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
(PROPOSAL NO. 4)
The Company's Board of Directors has unanimously approved a resolution to
increase the number of authorized shares of the Company's Common Stock from
30 million to 50 million shares as indicated in the following amendment to
Article III of the Company's 1990 Restated Articles of Incorporation:
ARTICLE III
The aggregate number of shares which the Corporation shall have authority to
issue is 50,000,000 shares of Common Stock.
The Company currently has 30 million shares of Common Stock authorized, of
which, at February 27, 1998, xx,xxx,xxx shares were outstanding and xxx,xxx
shares were reserved for issuance under the Company's stock option plans
(assuming approval of Proposal No. 3 above). Assuming issuance of all shares
reserved under the Company's stock incentive plans, the Company would have
xx,xxx,xxx shares of Common Stock outstanding and 2,101,555 shares of
authorized but unissued shares of Common Stock available for future issuance.
Accordingly, the Board of Directors has proposed to increase the Company's
authorized shares of its Common Stock to 50 million shares.
The terms of the additional shares of Common Stock will be identical to the
terms of the shares of Common Stock currently authorized and outstanding, and
approval of the proposed amendment will not affect the terms or the rights of
the holders of currently authorized and outstanding shares of Common Stock.
Holders of the Company's Common Stock do not have preemptive rights to
subscribe for or purchase any additional shares of Common Stock issued.
The purpose of the increase in the number of authorized shares of Common
Stock is to have additional shares available for issuance for such corporate
purposes as the Board of Directors may determine in its discretion,
including, without limitation, future acquisitions, investment opportunities,
future financings and other corporate purposes. Except for the shares
reserved under the Company's stock incentive plans and shareholder rights
plan, the Company has no agreements or understandings regarding the issuance
of additional stock.
If adopted by the shareholders, this proposed amendment to the Company's
Articles will become effective upon the filing of the amendment with the
Oregon Secretary of State. Such filing is expected to occur shortly after
this annual meeting, upon adoption of the proposal by the shareholders.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 27, 1998, certain information
furnished to the Company with respect to ownership of the Company's Common
Stock of (i) each Director, (ii) the Chief Executive Officer, (iii) the
"named executive officers" (as defined under "Executive Compensation") other
than the Chief Executive Officer, (iv) all persons known by the Company to be
beneficial owners of more than 5 percent of its Common Stock, and (v) all
executive officers and Directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK (A)
------------------------------------
NUMBER OF PERCENT OF SHARES
SHAREHOLDER SHARES OUTSTANDING
- ------------------------------------- --------- -----------------
<S> <C> <C>
John V. Harker (B) (C) 334,996 1.51
Michael D. Yonker (B) (D) 159,550 *
David L. Stallard (B) (E) 100,000 *
Susan L. Thompson (B) (F) 89,926 *
Michael R. Hallman (B) (G) 64,666 *
Stuart F. Cohen (B) (H) 50,160 *
Jack D. Kuehler (B) (I) 39,634 *
Peter D. Behrendt (B) (J) 35,634 *
Nobuo Mii (B) (K) 20,000 *
All executive officers and directors
as a group (10 persons) (L) 833,976 3.68
</TABLE>
- -------------------
*Less than one percent
9
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(A) Applicable percentage of ownership is based on 22,xxx,xxx shares of
Common Stock outstanding as of February 27, 1998 together with
applicable options for such shareholders. Beneficial ownership is
determined in accordance with the rules of the Securities and
Exchange Commission, and includes voting and investment power with
respect to shares. Shares of Common Stock subject to options or
warrants currently exercisable or exercisable within 60 days after
February 27, 1998 are deemed outstanding for computing the
percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the
percentage of any other person.
(B) The address for such person is 27700B SW Parkway Avenue,
Wilsonville, Oregon 97070.
(C) Includes 270,996 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and
exercisable as of April 28, 1998.
(D) Includes 147,950 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and
exercisable as of April 28, 1998.
(E) Includes 99,400 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and
exercisable as of April 28, 1998.
(F) Includes 84,926 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and
exercisable as of April 28, 1998.
(G) Includes 60,666 shares subject to options granted pursuant to the
Company's Directors' Stock Option Plan, as amended, and exercisable
as of April 28, 1998.
(H) Includes 50,160 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and
exercisable as of April 28, 1998.
(I) Includes 35,634 shares subject to options granted pursuant to the
Company's Directors' Stock Option Plan, as amended, and exercisable
as of April 28, 1998.
(J) Includes 35,634 shares subject to options granted pursuant to the
Company's Directors' Stock Option Plan, as amended, and exercisable
as of April 28, 1998.
(K) Includes 20,000 shares subject to options granted pursuant to the
Company's Directors' Stock Option Plan, as amended, and exercisable
as of April 28, 1998.
(L) Includes 744,396 shares subject to options granted pursuant to the
Company's 1988 Combination Stock Option Plan, as amended, and the
Company's Directors' Stock Option Plan, as amended and exercisable
as of April 1, 1997.
10
<PAGE>
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the Company,
the positions they hold and the year in which they began serving in their
respective capacities. Officers of the Company are elected by the Board of
Directors at the Annual Meeting to hold office until their successors are
elected and qualified.
<TABLE>
<CAPTION>
POSITION
NAME AGE CURRENT POSITION(S) WITH COMPANY HELD SINCE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
John V. Harker 63 Chairman of the Board, President and 1994
Chief Executive Officer
Stuart F. Cohen 38 Vice President, Worldwide Marketing 1997
Gary R. Pehrson 52 Senior Vice President, Operations 1998
Susan L. Thompson 40 Vice President, Human Resources 1994
William D. Yavorsky 41 Vice President, Worldwide Sales 1997
Michael D. Yonker 40 Vice President, Information Services, 1996
Chief Financial Officer, Treasurer and
Secretary
</TABLE>
For information on the business background of Mr. Harker see "Nominees For
Director" above.
Stuart F. Cohen joined the Company in April 1997 as Vice President, Worldwide
Marketing. Prior to joining the Company, Mr. Cohen held various positions at
IBM from 1981 through April 1996, with his final position being Director,
Worldwide Marketing. Mr. Cohen holds a B.S. degree in Business
Administration, with a major in Quantitative Business Analysis from Arizona
State University.
Gary R. Pehrson joined the Company in January 1998 as Senior Vice President,
Operations. From 1995 until joining the Company, Mr. Pehrson was Executive
Vice President and General Manager for Teletronics Pacing Systems, a medical
device manufacturer with annual sales over $300 million at the time. In 1997
Teletronics Pacing Systems was sold to St. Jude Medical and the name of the
corporation was changed to Pacesetter, Inc. - A St. Jude Company. From 1990
to 1995, Mr. Pehrson was Senior Vice President at Verbatim Tape Corporation,
a $500 million company at the time. Mr. Pehrson holds a B.S. degree in
Business Administration with an emphasis in Marketing from the University of
Nebraska, Lincoln.
11
<PAGE>
Susan L. Thompson joined the Company in May 1990 as Manager, Human Resources
and in January 1994, was promoted to Vice President, Human Resources. From
May 1989 to May 1990, Ms. Thompson was a training consultant with Richard
Chang Associates, a large human resources consulting firm. From October 1987
to May 1989 Ms. Thompson held senior management positions in human resources
at Emerald Systems, a computer peripherals manufacturer with annual revenues
at the time of approximately $50 million. Prior to this time, she held
various positions within human resources at Archive Corporation and Fluor
Engineers and Constructors. Ms. Thompson studied human resource management
at the University of California at Irvine.
William D. Yavorsky was promoted to Vice President, Worldwide Sales in April
1997. Mr. Yavorsky joined the Company in August 1993 as Manager, Strategic
Relationships. In January 1995, Mr. Yavorsky was promoted to Director,
Strategic Relationships, International Sales and in July 1996 he was promoted
to Director, Worldwide Sales. In October 1996, Mr. Yavorsky was promoted to
Vice President, Sales. From February 1992 until joining the Company, Mr.
Yavorsky was a Channel Sales Manager for Tektronix Corporation. Mr. Yavorsky
holds a B.S. degree in Business Administration from Bowling Green State
University.
Michael D. Yonker, C.P.A., joined the Company in July 1993 as Vice President,
Information Services, Chief Financial Officer, Treasurer and Assistant
Secretary. During 1996, Mr. Yonker was named Secretary of the Company.
Prior to joining the Company, Mr. Yonker was the Partner in Charge of
Northwest Manufacturing Industry at Arthur Andersen LLP specializing in
process improvement, total quality and performance measurement systems for
the manufacturing industry. Mr. Yonker was the audit partner for the Company
in 1992 and was with Arthur Andersen from February 1980 until July 1993. He
graduated from Linfield College in 1980 with a B.S. degree in Accounting and
Finance.
12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company determined as of the end of the last fiscal year and any
ex-officers for whom disclosure would have been provided except for the fact
that the individual was not serving as an executive officer at the end of the
fiscal year (hereafter referred to as the "named executive officers") for the
fiscal years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
---------------------------------------------- ------------
Securities All Other
Name and Principal Other Annual Underlying Compensation
Position Year Salary($)(A) Bonus($)(A) Compensation($)(B) Options (#) ($)(C)
- ------------------------------------- ---- ------------ ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John V. Harker 1997 345,971 230,888 1,450 -- 3,978
Chairman of the Board, 1996 307,493 12,964 625 200,000 1,047
President and Chief 1995 298,750 154,384 1,440 70,000 5,325
Executive Officer
Stuart F. Cohen (D) 1997 130,078 172,717 146,262 200,640 344
Vice President, 1996 -- -- -- -- --
Worldwide Marketing 1995 -- -- -- -- --
Michael D. Yonker 1997 188,165 63,548 250 -- 440
Vice President, Infor- 1996 169,255 8,735 250 54,200 209
mation Services, Chief 1995 158,635 53,317 1,160 17,000 526
Financial Officer,
Treasurer and
Secretary
David L. Stallard (E) 1997 187,551 59,344 250 -- 1,983
Former Vice President, 1996 180,077 9,098 -- 40,000 1,419
Engineering 1995 68,308 18,779 -- 150,000 741
Susan L. Thompson 1997 155,962 53,789 -- -- 165
Vice President, 1996 121,154 7,262 300 50,200 145
Human Resources 1995 108,850 37,485 1,260 31,200 322
</TABLE>
(A) Amounts shown include cash compensation earned in each respective
year. Unless otherwise indicated, amounts under the Bonus column
include an annual bonus in 1995 and 1997 and 401(k) matching payments
and quarterly profit sharing in all years. See "Annual Bonus Awards
for 1997" below.
(B) Unless otherwise indicated, Other Annual Compensation includes the
cost of income tax advice provided by a third party.
(C) Unless otherwise indicated, amounts included in this column represent
life insurance premiums paid by the Company for the benefit of the
named executive.
(D) Salary for Mr. Cohen includes amounts earned from the time Mr. Cohen
joined the Company in April 1997. The Bonus amount for Mr. Cohen
includes a $130,189 signing bonus and Other Annual Compensation
includes $146,262 for relocation assistance.
(E) 1995 Salary includes amounts paid to Mr. Stallard from the date he
joined the Company in August 1995 through the fiscal year ended
December 31, 1995. As of January 1998, Mr. Stallard is no longer an
executive officer of the Company.
13
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1988 Combination Stock Option Plan, as amended
(the "Plan") to the named executive officers in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants (A) Option Term (B)
- ---------------------------------------------------------------------- -----------------------
Number of % of Total
Securities Options to
Underlying Granted
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price ($/Sh.) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
John V. Harker -- -- -- -- -- --
Stuart F. Cohen 200,640 1.66 9.47 04/16/07 1,194,938 3,028,208
Michael D. Yonker -- -- -- -- -- --
David L. Stallard -- -- -- -- -- --
Susan L. Thompson -- -- -- -- -- --
</TABLE>
(A) Options granted in 1997 vest as to 25 percent of the options granted
on each of the first through fourth anniversaries of the grant date,
with full vesting occurring on the fourth anniversary date. Under
the terms of the Plan, the Administrative Committee of the Board of
Directors retains discretion, subject to plan limits, to modify the
terms of outstanding options.
(B) These calculations are based on certain assumed annual rates of
appreciation as required by rules adopted by the Securities and
Exchange Commission requiring additional disclosure regarding
executive compensation. Under these rules, an assumption is made
that the shares underlying the stock options shown in this table
could appreciate at rates of 5% and 10% per annum on a compounded
basis over the ten-year term of the stock options. Actual gains, if
any, on stock option exercises are dependent on the future
performance of the Company's Common Stock and overall stock market
conditions. There can be no assurance that amounts reflected in
this table will be achieved.
(C) Options held by all executive officers of the Company shall become
immediately exercisable, without regard to any contingent vesting
provision to which such option may otherwise be subject, in the
event of the occurrence of a Change of Control.
14
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning the exercise of options
during 1997 and unexercised options held as of the end of the fiscal year,
with respect to the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised Value of Unexercised
Shares Options In-The-Money Options
Acquired Value At FY-End (#) At FY-End($)(B)
On Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(A) Unexercisable Unexercisable
- ------------------- ----------- -------- ----------------- ---------------------
<S> <C> <C> <C> <C>
John V. Harker -- -- 256,018 / 146,956 1,456,037 / 580,231
Stuart F. Cohen -- -- -- / 200,640 -- / 1,147,661
Michael D. Yonker 4,000 39,500 149,812 / 44,788 1,136,438 / 224,163
David L. Stallard 10,600 94,150 86,900 / 92,500 125,136 / 298,200
Susan L. Thompson 32,000 223,530 79,166 / 48,394 396,574 / 235,474
</TABLE>
(A) Market value of the underlying securities at exercise date, minus
exercise price of the options.
(B) Market value of the underlying securities at December 31, 1997,
$15.1875 per share, minus exercise price of the unexercised options.
DIRECTOR COMPENSATION
During 1997, non-employee directors of the Company received quarterly stock
option grants as well as an annual grant pursuant to the In Focus Systems,
Inc. Directors' Stock Option Plan (the "Directors' Plan"). The non-employee
directors were also reimbursed for their expenses in attending meetings of
the Company's Board of Directors. The Directors' Plan, as amended, provides
that each "Eligible Director" shall be granted an option to purchase 20,000
shares of the Company's Common Stock upon becoming an Eligible Director. The
Directors' Plan further provides that each Eligible Director shall, so long
as he or she remains an Eligible Director, be granted an option to purchase
10,000 shares of the Company's Common Stock on each anniversary of becoming
an Eligible Director. The quarterly grants under the Directors' Plan are
based on a formula defined in the Plan. Messrs. Behrendt and Kuehler each
received options covering a total of 18,086 shares of the Company's Common
Stock during 1997, Mr. Hallman received options covering 17,494 shares of the
Company's Common Stock during 1997 and Mr. Mii received options covering
24,354 shares of the Company's Common Stock during 1997. The options
granted were at exercise prices between $7.33 per share and $15.69 per share.
The Company pays no additional remuneration to employees of the Company who
serve as directors.
15
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
In connection with Mr. Harker's employment in April 1992 as President and
Chief Executive Officer, the Company entered into an agreement with Mr.
Harker, which provided for certain relocation benefits. In addition, in the
event the Company terminates Mr. Harker's employment other than "for cause",
as defined in the agreement, Mr. Harker will be entitled to receive salary
and insurance benefits for an additional twelve-month period. Additionally,
as specified in the agreement, in the event the Company is acquired, Mr.
Harker's unvested options will become fully vested.
In April 1997, the Board of Directors approved amendments to the stock option
agreements of all executive officers of the Company to provide that all
options held by executive officers of the Company shall become immediately
exercisable, without regard to any contingent vesting provision to which such
option may otherwise be subject, in the event of the occurrence of a Change
of Control.
IN FOCUS SYSTEMS, INC. 1998 STOCK INCENTIVE PLAN SUMMARY
BACKGROUND
In December 1997, the Company's Board of Directors adopted the In Focus
Systems, Inc. 1998 Stock Incentive Plan (the "1998 Plan"), which provides for
the grant of incentive stock options ("ISOs") to officers and other employees
of the Company and non qualified stock options ("NQSOs") and restricted stock
awards to employees, officers, directors and consultants of the Company
covering up to 1,500,000 shares of the Company's Common Stock. The 1998 Plan
is the successor to the Company's 1988 Combination Stock Option Plan (the
"1988 Plan") which terminates on December 21, 1998.
ELIGIBILITY
As of January 31, 1998 the persons eligible to participate in the 1998 Plan
included six officers, four non-employee directors and approximately 520
employees of the Company. Under the 1988 Plan, options to purchase 1,212,330
shares of Common Stock were granted at an average exercise price of $12.21
per share during the year ended December 31, 1997. As a result of employee
terminations, options to purchase 550,140 shares of the Company's Common
Stock were canceled during 1997 at an average price of $9.97. As of December
31, 1997, options to purchase 3,139,100 shares of Common Stock were
outstanding at an average exercise price of $10.51 per share, 5,350,956
shares of Common Stock had been issued upon exercise of options, and 489,944
shares of Common Stock were available for future grants under the 1988 Plan.
As of the date of this Proxy Statement, there has been no activity under the
1998 Plan.
ADMINISTRATION
The 1998 Plan shall be administered by the Board of Directors of the Company
(the "Board") or a committee appointed by, and consisting of two or more
members of, the Board, hereinafter referred to as the Plan Administrator.
The Plan Administrator has full authority to administer the 1998 Plan in
accordance with its terms and to determine all
16
<PAGE>
questions arising in connection with the interpretation and application of
the 1998 Plan. In selecting the Plan Administrator, the Board shall
consider, with respect to any persons subject to Section 16 of the Exchange
Act, the provisions regarding "outside directors" as contemplated by Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
"nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act.
SHARES SUBJECT TO THE PLAN
The 1998 Plan covers a total of 1,500,000 shares of the Company's Common
Stock. Not more than 400,000 shares of Common Stock may be made subject to
awards under the Plan to any one individual in the aggregate in one fiscal
year of the Company, except the Company may make additional one-time grants
of up to 1,000,000 shares to a newly hired individual, such limitation to be
applied in a manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the Code.
MINIMUM OPTION PRICE
The exercise prices of ISOs and NQSOs under the 1998 Plan must equal or
exceed the fair market value of the Common Stock on the date of grant (110%
of the fair market value in the case of employees who hold 10% or more of the
voting power of the Common Stock). As defined in the 1998 Plan, "fair market
value" shall mean the last reported sales price of the Common Stock on the
Nasdaq National Market System on the date of grant.
DURATION OF OPTIONS
Subject to earlier termination as a result of termination of employment,
death or disability, each option granted under the 1998 Plan shall expire on
the date specified by the Plan Administrator, but in no event more than (i)
ten years from the date of grant in the case of ISOs generally, and (ii) five
years from the date of grant in the case of ISOs granted to an employee who
holds 10% or more of the voting power of all Common Stock.
MEANS OF EXERCISING OPTIONS
An option is exercised by giving written notice to the Company, which notice
must be accompanied by full payment of the purchase price therefor, either in
cash or by certified check, or at the discretion of the Plan Administrator,
through delivery of shares of Common Stock (either actual or by attestation)
having a fair market value equal to the cash exercise price of the option, by
delivery of instructions to a broker for a "cashless exercise" whereby shares
acquired upon exercise are sold to pay the option exercise price, by delivery
of the optionee's personal recourse promissory note in the amount of the cash
exercise price of the option, such other consideration that the Plan
Administrator may permit, or by any combination of the above as permitted by
the Plan Administrator.
GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make awards of Common Stock on such
terms and conditions and subject to such restrictions, if any (which may be
based on continuous service with the company or the achievement of
performance goals related to operating profit as a percentage of revenues,
revenue and profit growth, profit-related return ratios, such as return on
equity, or cash flow, where such goals may be stated in absolute terms or
relative to comparison companies), as the Plan Administrator shall determine,
in its sole
17
<PAGE>
discretion, which terms, conditions and restrictions shall be set forth in
the instrument evidencing the award ("Stock Award"). The terms, conditions
and restrictions that the Plan Administrator shall have the power to
determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture or restricted stock
shall occur by reason of termination of the holder's services.
TERM AND AMENDMENT OF THE PLAN
The 1998 Plan has no fixed expiration date, but ISOs may not be granted after
December 17, 2007. The Board of Directors may terminate or amend the 1998
Plan at any time, provided, however, to the extent required for compliance
with Section 422 of the Code or any applicable law or regulation, the
following actions will not become effective without approval of the
shareholders obtained within 12 months before or after the Board adopts a
resolution authorizing such action:
(a) increasing the total number of shares that may be issued under the
1998 Plan (except by adjustment under the Plan);
(b) modifying the class of persons eligible to receive grants; or
(c) modifying terms that otherwise require shareholder approval under
any applicable law or regulation.
TRANSFERABILITY
Except as indicated in the following, no option shall be transferable or
exercisable by any person other than the optionee to whom such option was
originally granted. Any option exercisable at the time of the optionee's
death may be exercised to the extent of the number of shares purchasable at
the date of death, by any person to whom such rights have passed under
applicable laws of descent and distribution at any time, or from time to
time, within one year after the date of death, but in no event later than the
remaining term of the option. The Plan Administrator may, in its discretion,
authorize all or a portion of the NQSOs granted to an optionee to be on terms
that permit transfer by such optionee to (i) the spouse, children or
grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (iii) a
partnership in which such Immediate Family Members are the only partners,
provided that (a) there may be no consideration for any such transfer, (b)
the stock option agreement pursuant to which such options are granted must be
approved by the Plan Administrator and must expressly provide for
transferability and (c) subsequent transfers of transferred options are
prohibited.
FEDERAL TAX EFFECTS OF ISOS
The Company intends that ISOs granted under the 1998 Plan will qualify as
ISOs under Section 422 of the Code. An optionee acquiring stock pursuant to
an ISO receives favorable tax treatment in that the optionee does not
recognize any taxable income at the time of the grant of the ISO or upon
exercise. The tax treatment of the disposition of ISO stock depends upon
whether the stock is disposed of within the holding period, which is the
later of two years from the date the ISO is granted or one year from the date
the ISO is exercised. If the optionee disposes of ISO stock after completion
of the holding period, the optionee will recognize as capital gains income
the difference between the amount received in such disposition and the basis
in the ISO stock, i.e. the option's exercise price. If the
18
<PAGE>
optionee disposes of ISO stock before the holding period expires, it is
considered a disqualifying disposition and the optionee must recognize the
gain on the disposition as ordinary income in the year of the disqualifying
disposition. Generally, the gain is equal to the difference between the
option's exercise price and the stock's fair market value at the time the
related stock is sold. While the exercise of an ISO does not result in
taxable income, there are implications with regard to the alternative minimum
tax ("AMT"). When calculating income for AMT purposes, the favorable tax
treatment granted ISOs is disregarded and the difference between the option
exercise price and the fair market value of the related common stock on the
date of exercise (the "bargain purchase element") will be considered as part
of AMT income. Just as the optionee does not recognize any taxable income on
the grant or exercise of an ISO, the Company is not entitled to a deduction
on the grant or exercise of an ISO. Upon a disqualifying disposition of ISO
stock, the Company may deduct from taxable income in the year of the
disqualifying disposition an amount generally equal to the amount that the
optionee recognizes as ordinary income due to the disqualifying disposition.
In general capital gains will be taxed at a rate of 28 percent, but if the
shares are held for at least 18 months, the rate of taxation is 20 percent.
FEDERAL TAX EFFECTS OF NQSOS
If an option does not meet the statutory requirements of Section 422 of the
Code and therefore does not qualify as an ISO, the difference, if any,
between the option's exercise price and the fair market value of the stock on
the date the option is exercised is considered compensation and is taxable as
ordinary income to the optionee in the year the option is exercised, and is
deductible by the Company for federal income tax purposes in such year.
The foregoing summary of federal income tax consequences of stock options
does not purport to be complete, nor does it discuss the provisions of the
income tax laws of any state or foreign country in which the optionee
resides.
DIRECTOR AND EXECUTIVE STOCK OWNERSHIP GUIDELINES
In January 1998, the Board of Directors approved ownership objectives for the
Company's executive officers and Outside Directors. One of the purposes of
the 1998 Plan is to provide a means for the executive officers and Outside
Directors of the Company to achieve the following objectives:
<TABLE>
<CAPTION>
Position Ownership Guideline Date to be Accomplished By
- ----------------------- ---------------------- -----------------------------------
<S> <C> <C>
Chief Executive Officer 5 times annual salary 1/1/01 or 5 years from hire date,
in stock value whichever is later
Senior Vice President 3 times annual salary 1/1/01 or 5 years from hire date,
in stock value whichever is later
Vice President 2 times annual salary 1/1/01 or 5 years from hire date,
in stock value whichever is later
Outside Directors 4 times annual 1/1/03 or 5 years from appointment
retainer in stock value date, whichever is later
</TABLE>
The Board has under consideration specific proposals with regard to the
granting of restricted stock to executive officers and Outside Directors, and
expects to approve such proposals during 1998.
19
<PAGE>
NEW PLAN BENEFITS
1998 STOCK INCENTIVE PLAN
There have been no options granted under the 1998 Plan. However, the
following options have been granted under the Company's existing 1988 Plan
from January 1, 1998 through February 27, 1998:
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) Number of Units (A)
----------------- ---------------- -------------------
<S> <C> <C>
John V. Harker, Chairman of the Board, President and
Chief Executive Officer -- 157,690
Stuart Cohen, Vice President, Worldwide Sales -- 19,720
Michael D. Yonker, Vice President, Information Services --
Chief Financial Officer, Treasurer and Assistant Secretary 59,140
David L. Stallard, Former Vice President, Engineering -- --
Susan L. Thompson, Vice President, Human Resources -- 19,720
Peter D. Behrendt, Director -- --
Michael R. Hallman, Director -- --
Jack D. Kuehler, Director -- --
Nobuo Mii, Director -- --
All Current Executive Officers as a Group (6 people) -- 308,830
All Non-Executive Officer Directors -- --
as a Group (4 people)
All Non-Executive Officer Employees as a Group (xxx people) --
</TABLE>
(A) Options to purchase shares of the Company's Common Stock, totaling
xxxxx shares, have been granted to each of the Named Executive
Officers and described groups through February 27, 1998. Such
options were granted at an exercise price per share that is equal to
the fair market value of the Company's Common Stock on the date of
grant. The average per share exercise price of all option grants
included in the above table is $xxxx. The options shall become
exercisable over a four-year period and expire ten years from the
date of grant. Option grants under the 1988 Combination Stock Option
Plan and the 1998 Stock Incentive Plan are discretionary and
therefore grants for the remainder of 1998 or thereafter cannot be
determined. The fair market value of the Company's Common Stock, as
reported by the Nasdaq National Market System, on February 27, 1998
was $xxxx.
20
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the Compensation Committee was composed of Messrs. Hallman,
Behrendt and Kuehler, all outside directors who are not, and have not been at
any time in the past, officers of the Company. Although Mr. Harker, Chairman
of the Board, President and Chief Executive Officer, served on the Company's
Board of Directors in 1997 and participated in compensation discussions, he
did not participate in any deliberations or decisions regarding his own
compensation.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was composed of Messrs.
Hallman, Behrendt and Kuehler during 1997. All members of the Compensation
Committee are non-employee, outside directors. The Compensation Committee is
responsible for establishing compensation of officers who also serve on the
Board of Directors. The entire Board is responsible for reviewing and
providing feedback on non-director executive officer compensation with goals
and dollar amounts established by the Chief Executive Officer in accordance
with policies approved by the Board.
Awards to executive officers under the Company's 1988 Combination Stock
Option Plan, as amended, are made solely by the Administrative Committee,
which is composed of the same non-employee, outside Directors as the
Compensation Committee.
COMPENSATION PHILOSOPHY AND POLICIES
The Company's philosophy is to structure executive officer compensation so
that it will attract, motivate and retain senior management by providing an
opportunity for competitive compensation based on performance. Executive
officer compensation includes competitive base salaries, annual bonus plans
based on Company financial and personal performance goals, and long-term
stock-based incentive opportunities in the form of options exercisable to
purchase the Company's Common Stock. It is also the policy of both the
Compensation Committee and the Administrative Committee that, to the extent
possible, compensation will be structured so that it meets the
"performance-based" criteria as defined by Section 162(m) of the Internal
Revenue Code of 1986, as amended and therefore is not subject to federal
income tax deduction limitations. Both the Compensation Committee and the
Administrative Committee have the right to waive pre-established performance
criteria in granting awards.
BASE SALARIES
In setting base salaries that are competitive with other high technology
companies, the Company participates in executive salary surveys including
those conducted by Radford Associates, the American Electronics Association
(AEA) and the Western Management Group (WMG). When selecting comparables,
the Company attempts to select companies that are similar in many respects,
including industry, annual revenue and profitability. Executives' salaries
paid in 1997 were targeted within the 50th to 75th percentile compared to the
range of salaries paid by companies in the salary surveys mentioned above.
Many of the companies included in the above mentioned surveys are also
included in the indices used in the Performance Graph.
21
<PAGE>
ANNUAL BONUS AWARDS FOR 1997
The 1997 Officer Bonus Plan (the "Plan") provided for annual bonuses in two
components. First, the Plan provided for the payment of quarterly profit
sharing bonuses equal to a percentage of each officer's quarterly salary.
This percentage was determined by dividing the quarterly non-officer profit
sharing bonus pool (2 percent of pre-tax income) paid quarterly to
non-officer employees by total non-officer compensation for the quarter.
These percentages were approximately 3.50%, 3.78%, 2.81% and 4.63% based on
the first, second, third and fourth quarter of 1997 results, respectively.
The fourth quarter profit sharing was paid in the first quarter of 1998.
Second, the Plan provided for the payment of executive officer bonuses (other
than the Chief Executive Officer) based 75 percent on the Company meeting its
1997 profit before income tax objectives and 25 percent on meeting individual
goals and objectives which are both quantitative and qualitative in nature,
including such factors as market development, product introduction and
resource management. The targeted bonus was 30 percent of annual salary and
would be achieved by an officer receiving 100 percent ratings on both the
Company and individual goals. The maximum bonus component for Company profit
before income tax performance is 200 percent and for individual performance
is 130 percent. The Company goals must be met at the 50 percent level or
greater and the individual goals must be met at the 75 percent level or
greater for an officer to receive a bonus. Bonuses paid for 1997 to the
named executive officers (other than the Chief Executive Officer) ranged from
24.8 percent to 27.1 percent of total salary based on Company performance
being met at the 77 percent level and the individual goals being met between
the 90 percent and the 130 percent levels.
STOCK OPTION AWARDS FOR 1997
The Company's 1988 Combination Stock Option Plan, as amended, provides for
the issuance of incentive and non-qualified stock options to officers and
employees of the Company to purchase shares of the Company's Common Stock at
an exercise price equal to the fair market value on the date of grant. See
"Option Grants in Last Fiscal Year" table for a summary of options granted to
the named executive officers during 1997.
22
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Harker's 1997 base salary of $350,000 was determined in the same manner
as the other executives as described in "Base Salaries" above. The profit
sharing component of Mr. Harker's annual bonus was determined in the same
manner as discussed above under "Annual Bonus Awards for 1997" and totaled
$15,588. The second component of Mr. Harker's bonus was based on the Company
meeting its profit before income tax objectives. Mr. Harker's targeted bonus
under this component of the annual bonus plan was 60 percent of his 1997
annual salary, based on the Company meeting its profit before income tax
objectives at the 100 percent level. The maximum bonus component for Company
profit before income tax performance is 200 percent with a 75 percent minimum
level for Mr. Harker to receive a bonus under this component of the bonus
plan. Mr. Harker's bonus totaled $161,700, or 46.2 percent of his 1997
annual salary, based on the Company meeting 77 percent of its profit before
income tax objective. The Compensation Committee also approved an additional
bonus for 1997 performance of $50,000 for Mr. Harker. The Compensation
Committee's objective in setting Mr. Harker's 1997 compensation was to be
competitive with other companies in the Company's industry and to allow for
potential compensation based on long-term performance criteria as defined in
"Annual Bonus Awards for 1997" and "Stock Option Awards for 1997" above.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Peter D. Behrendt
Michael R. Hallman
Jack D. Kuehler
23
<PAGE>
STOCK PERFORMANCE GRAPH
The SEC requires that registrants include in their proxy statement a
line-graph presentation comparing cumulative five-year shareholder returns on
an indexed basis, assuming a $100 initial investment and reinvestment of
dividends, of (a) the registrant, (b) a broad-based equity market index and
(c) an industry-specific index. The broad-based market index used is the
Nasdaq Stock Market Total Return Index - U.S. and the industry-specific index
used is the Computer Hardware Sector Sub-Index of the Hambrecht & Quist
Technology Index.
<TABLE>
<CAPTION>
Indexed Returns
Base Year Ending
Period --------------------------------------------------------------------
Company/Index 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ------------------------------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
In Focus Systems, Inc. 100.00 122.45 212.75 294.90 176.53 247.96
Nasdaq U.S. Index 100.00 114.80 112.21 158.70 195.19 239.53
Computer Sector Sub-
Index of the Hambrecht &
Quist Technology Index 100.00 104.84 130.23 187.47 248.54 338.35
</TABLE>
24
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and executive
officers and persons who own more than ten percent of the outstanding shares
of the Company's Common Stock ("ten percent shareholders"), to file with the
SEC initial reports of beneficial ownership and reports of changes in
beneficial ownership of shares of Common Stock and other equity securities of
the Company. To the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company or otherwise in its files and on
written representations from its directors, executive officers and ten
percent shareholders that no other reports were required, during the fiscal
year ended December 31, 1997, the Company's officers, directors and ten
percent shareholders complied with all applicable Section 16(a) filing
requirements.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the Company's 1999
Annual Meeting must be received by the Company at its principal executive
office no later than November 9, 1998 in order to be included in the
Company's 1999 Proxy Statement and proxy card.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters that may come before this meeting. It is the intention
of the persons named in the enclosed proxy to vote the proxy in accordance
with their best judgment if any other matters do properly come before the
meeting.
Please return your proxy as soon as possible. Unless a quorum consisting of
a majority of the outstanding shares entitled to vote is represented at the
meeting, no business can be transacted. Therefore, please be sure to date
and sign your proxy exactly as your name appears on your stock certificate
and return it in the enclosed postage prepaid return envelope. Please act
promptly to insure that you will be represented at this important meeting.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED TO VOTE AT
THE ANNUAL MEETING OF SHAREHOLDERS, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE
COMPANY'S FISCAL YEAR ENDED DECEMBER 31, 1997. WRITTEN REQUESTS SHOULD BE
MAILED TO THE SECRETARY, IN FOCUS SYSTEMS, INC., 27700B SW PARKWAY AVENUE,
WILSONVILLE, OREGON 97070.
By Order of the Board of Directors:
MICHAEL D. YONKER
VICE PRESIDENT, INFORMATION SERVICES,
CHIEF FINANCIAL OFFICER AND SECRETARY
Dated: March 9, 1998
25
