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 24, 2001
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on Thursday, May 24, 2001 at 10:00 a.m., local
time, at Embassy Suites located at 2885 Lakeside Drive 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 1989 Employee Stock Purchase Plan increasing
the number of shares reserved for issuance thereunder by 300,000 additional
shares.
3. To approve an amendment to the 2000 Stock Option Plan increasing the number
of shares reserved for issuance thereunder by 700,000 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, 2001.
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 April 18, 2001 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 30, 2001
GENUS, INC.
PROXY STATEMENT FOR 2001 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 on Thursday, May 24,
2001 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 Embassy Suites located at
2885 Lakeside Drive 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 30, 2001
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 April 18, 2001 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 19,429,990 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.
PAGE 1
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
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 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 2002 Annual Meeting of Shareholders must
submit the proposal to the Company no later than December 31, 2001.
Additionally, shareholders who intend to present a proposal at the 2002 Annual
Meeting of Shareholders without inclusion of such proposal in the Company's
proxy materials for the 2002 Annual Meeting must provide notice of such proposal
to the Company no later than December 31, 2001. 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 April 11,
2001 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:
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS(2)
- ------------------------------------------------------------------------------------------------------
Bachow Investment Partners III, L.P.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004 . . . . . . . . . . . . . . . . . . . 1,195,882 (3) 5.8%
William W.R. Elder . . . . . . . . . . . . . . . . . . . . . 766,711 (4) 3.8%
Thomas E. Seidel . . . . . . . . . . . . . . . . . . . . . . 327,900 (5) 1.6%
Kenneth Schwanda . . . . . . . . . . . . . . . . . . . . . . 177,037 (6) *
Mario M. Rosati. . . . . . . . . . . . . . . . . . . . . . . 34,999 (7) *
Robert A. Wilson . . . . . . . . . . . . . . . . . . . . . . 127,806 (8) *
G. Frederick Forsyth . . . . . . . . . . . . . . . . . . . . 22,153 (9) *
Todd S. Myhre. . . . . . . . . . . . . . . . . . . . . . . . 84,132 (10) *
George D. Wells. . . . . . . . . . . . . . . . . . . . . . . 13,244 (11) *
Robert J. Richardson . . . . . . . . . . . . . . . . . . . . 4,125 (12) *
Edward C. Lee. . . . . . . . . . . . . . . . . . . . . . . . 13,889 (13) *
Bruce E. Roberts . . . . . . . . . . . . . . . . . . . . . . 16,851 (14) *
Jeff Farrell . . . . . . . . . . . . . . . . . . . . . . . . 65,499 (15) *
All directors and executive officers as a group (11 persons) 1,588,847 (16) 7.8%
* Less than 1%.
PAGE 2
(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 19,426,656 shares of common
stock outstanding as of April 11, 2001 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 April 11, 2001, 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 991,092 shares held by Bachow Investment Partners III L.P., of
140,543 shares held by Paul S. Bachow Co-Investment Fund L.P., and of
64,247 shares held by Paul S. Bachow.
(4) Consists of 355,599 shares held by William W.R. Elder and Gloria S. Elder
Family Trust, and of options to purchase 411,112 shares of common stock
exercisable within 60 days of April 11, 2001.
(5) Consists of 28,122 shares of common stock held by Mr. Seidel and of options
to purchase 299,778 shares of common stock exercisable within 60 days of
April 11, 2001.
(6) Consists of 52,816 shares of common stock held by Mr. Schwanda directly, of
16,500 shares held by minor sons of Mr. Schwanda, and of options to
purchase 107,721 shares of common stock exercisable within 60 days of April
11, 2001.
(7) Consists of 26,000 shares of common stock held by Mr. Rosati, of options to
purchase 8,264 shares of common stock exercisable within 60 days of April
11, 2001, and of 735 shares held by Mr. Rosati through his proportionate
partnership interest in WS Investment Company holdings.
(8) Consists of 33,334 shares held by Mr. Wilson and of options to purchase
94,472 shares of common stock exercisable within 60 days of April 11, 2001.
(9) Consists of Mr. Forsyth's options to purchase 22,153 shares of common stock
exercisable within 60 days of April 11, 2001.
(10) Consists of 22,535 shares held by Mr. Myhre and of options to purchase
61,597 shares of common stock exercisable within 60 days of April 11, 2001.
(11) Consists of 10,119 shares held by Mr. Wells and of options to purchase
3,125 shares of common stock exercisable within 60 days of April 11, 2001.
(12) Consists of 1,000 shares held by Mr. Richardson and of options to purchase
3,125 shares of common stock exercisable within 60 days of April 11, 2001.
(13) Consists of Mr. Lee's options to purchase 13,889 shares of common stock
exercisable within 60 days of April 11, 2001.
(14) Consists of 2,962 shares held by Mr. Roberts and of options to purchase
13,889 shares of common stock exercisable within 60 days of April 11, 2001.
(15) Consists of shares held by Mr. Farrell as of April 11, 2001.
(16) Consists of shares held and of options to purchase common stock exercisable
within 60 days of April 11, 2001.
PAGE 3
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 six. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the Company's six
nominees named below, all of whom are presently directors of the Company. In the
event that any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. 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.
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
William W.R. Elder . 62 Chairman of the Board, President and Chief Executive Officer of the Company 1981
Todd S. Myhre. . . . 55 President of Ybrain.com 1994
G. Frederick Forsyth 57 President and CEO of NewRoads, Inc. 1996
Mario M. Rosati. . . 54 Member of Wilson Sonsini Goodrich & Rosati, Professional Corporation 1981
George D. Wells. . . 66 Business Consultant 2000
Robert J. Richardson 55 Business Consultant 2000
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.
William W.R. Elder was a founder of Genus and is our Chairman of the Board,
President and our Chief Executive Officer. From October 1996 to April 1998, Dr.
Elder served only as Chairman of the Board. From April 1990 to September 1996,
Dr. Elder was Chairman of the Board, President and Chief Executive Officer of
the Company. From November 1981 to April 1990, Dr. Elder was President and a
director of the Company.
Mario M. Rosati has served as our Secretary since May 1996 and as a
director since our inception in November 1981. He has been a member, since 1971,
of the law firm Wilson Sonsini Goodrich & Rosati, Professional Corporation,
general counsel to the Company. Mr. Rosati is also a director of Aehr Test
Systems, a manufacturer of computer hardware testing systems, MyPoints.com,
Inc., a web and email-based direct marketing company, Sanmina Corporation, an
electronics contract manufacturer, Symyx Technologies, Inc., a combinatorial
materials science company, The Management Network Group, Inc., a management
consulting firm focused on the telecommunications industry, and Vivus, a
specialty pharmaceutical company, all publicly-held companies. He is also a
director of a number of privately held companies.
PAGE 4
Todd S. Myhre has served as a director since January 1994. Since September
1999, he served as Interim Chief Executive Officer and a Board member for
Ybrain.com, an eCommerce company focused on the college student market. From
February 1998 to August 1999 and from September 1995 to January 1996, he served
as President, Chief Executive Officer, and a Board member of GameTech
International, an electronic gaming manufacturer. From February 1996 to January
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 and as
President and a Director of the Company.
G. Frederick Forsyth has served as a director since February 1996. Since
May 2000, Mr. Forsyth has served as the President and CEO of NewRoads, Inc.
From March 1999 to May 2000, Mr. Forsyth served as President, Systems
Engineering and Services of Solectron Corp. From August 1997 to March 1999, Mr.
Forsyth 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.
George D. Wells has served as a director since March 2000. From July 1992
to October 1996, Mr. Wells served as President and Chief Executive Officer of
Exar Corporation. From April 1985 to July 1992, he served as President and Chief
Operating Officer of L.S.I. Logic Corporation and became Vice Chairman in March
1992. From May 1983 to April 1985, Mr. Wells was President and Chief Executive
Officer of Intersil, Inc., a subsidiary of General Electric Company.
Robert J. Richardson has served as a director since March 2000. Since
January 2000, Mr. Richardson has been a semiconductor industry consultant. From
November 1997 to January 2000, Mr. Richardson served as Chairman, Chief
Executive Officer and President of Unitrode Corporation. From June 1992 to
November 1997, he served in various positions at Silicon Valley Group, Inc.
including President Lithography Systems, President Track Systems Division, and
Corporate Vice-President New Business Development and Marketing. From October
1988 to June 1992, Mr. Richardson was President and General Manager, Santa Cruz
Division at Plantronics, Inc.
VOTE REQUIRED
The six 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 six meetings during
the year ended December 31, 2000. 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, 2000, and as of April 1, 2001, the
Compensation Committee of the Board of Directors, consisting of directors
Forsyth, Myhre and Rosati, held two meetings. The Compensation Committee makes
recommendations to the Board of Directors regarding the Company's executive
compensation policy. See "Compensation Committee Report on Executive
Compensation."
No director serving in the year ended December 31, 2000, 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.
PAGE 5
REPORT OF THE AUDIT COMMITTEE. (1)
The Audit Committee of the board of directors of Genus, Inc. serves as
representatives of the board for general oversight of Genus' financial
accounting and reporting system of internal control, audit process and process
for monitoring compliance with laws and regulations. The Audit Committee,
consisting of Myhre, Forsyth and Richardson, held two meetings in fiscal year
2000. Each member is an independent director in accordance with the NASDAQ
National Market Audit Committee requirements. The Audit Committee evaluates the
scope of the annual audit, reviews audit results, consults with management and
the Company's independent auditors prior to the presentation of financial
statements to stockholders and, as appropriate, initiates inquiries into aspect
of the Company's financial affairs.
Genus management has primary responsibility for preparing Genus' financial
statements and for Genus' financial reporting process. Genus' independent
accounts, PricewaterhouseCoopers LLP, are responsible for expressing an opinion
on the conformality of Genus' audited financial statements to generally accepted
accounting principles. The Audit Committee has reviewed and discussed with
management the audited financial statements for the year ended December 31,
2000. PricewaterhouseCoopers LLP ("PwC") the Company's independent auditors for
fiscal year 2000, issued their unqualified report dated February 12, 2001 on the
Company's financial statements.
The Audit Committee has also discussed with PwC the matters required to be
discussed by AICPA Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The Audit committee has also received the written
disclosures and the letter from PwC required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and has
conducted a discussion with PwC relative to its independence. The Audit
Committee has considered whether PwC's provision of non-audit services is
compatible with its independence. The Audit Committee has an Audit Committee
Charter. A copy of the charter is attached as Appendix A.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors of Genus, Inc. that the Company's audited
financial statements for the fiscal year ended December 31, 2000 be included in
the Annual Report on Form 10-K.
Respectfully submitted by:
Todd S. Myhre, Chairman, Audit Committee
G. Frederick Forsyth, Member, Audit Committee
Robert J. Richardson, Member, Audit Committee
(1) The information regarding the Audit Committee is not "soliciting" material
and is not deemed "filed" with the SEC, and is not incorporated by reference
into any filings of the Company under the Securities Act or the Exchange Act,
whether made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
PAGE 6
AUDIT FEES
The following table sets forth the aggregate fees billed or to be billed by
PricewaterhouseCoopers LLP for the following services during fiscal 2000:
DESCRIPTION OF SERVICES
-------------------------
Audit fees (1) $ 270,000
Financial information system design
and implementation fees (2) 0
All other fees (3) 116,000
-------
TOTAL $ 386,000
==========
(1) Represents the aggregate fees billed or to be billed for professional
services rendered for the audit of our 2000 annual financial statements and
for the review of the financial statements included in our quarterly
reports during such period.
(2) Represents the aggregate fees billed for operating or supervising the
operation of our information system or managing our local area network
and/or designing or implementing a hardware or software system that
aggregates data or generates information that is significant to the
generation of our financial statements.
(3) Represents the aggregate fees billed in 2000 for services other than audit
and other than financial information system design and implementation
including fees for tax services and registration statements.
DIRECTOR COMPENSATION
The Company currently pays to its directors who are not employees a fee of
$2,000 per meeting and $1,000 per telephonic meeting. In addition, the Company
pays non-employee members of the board an annual fee of $15,000. The Company
also reimburses directors for reasonable expenses incurred in attending
meetings. Annual option grants to the directors are discretionary under the
Company's 2000 Stock Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2000 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 (the "1934 Act")
requires our directors and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of our common
stock and our other equity securities. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish us with copies of
all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with during the fiscal
year ended December 31, 2000, except that initial reports of ownership were
inadvertently filed late on behalf of Mr. Wells and Mr. Richardson.
PAGE 7
IDENTIFICATION OF EXECUTIVE OFFICERS
Certain information required by this section is omitted from this Proxy
Statement in that the Company filed an annual report on Form 10-K on April 2,
2001, and certain information included therein is incorporated herein by
reference.
NAME OF PRINCIPAL
EXECUTIVE OFFICER AGE OCCUPATION EXECUTIVE OFFICER SINCE
- --------------------------------------------------------------------------------
Edward C. Lee 49 Executive Vice President, February 2001
Advanced Technology,
Engineering and Strategic
Marketing
Bruce E. Roberts 45 Executive Vice President, February 2001
Business Units and
Operations
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.
Edward C. Lee has served as our Executive Vice President, Advanced
Technology, Engineering and Strategic Marketing since February 2001. Mr. Lee
joined the Company in August 2000, as Vice President of New Technology Business
Development. Prior to joining the Company, Mr. Lee was Vice President of
Technology at Silicon Valley Group. Working in the thin film industry since
1974, Mr. Lee has held managerial positions at Honeywell, Advanced Micro Devices
and Varian. He is currently on the technical advisory boards of two other
privately held companies in a non-competing field with Genus.
Bruce E. Roberts has served as our Executive Vice President, Business Units
and Operations since February 2001. Mr. Roberts joined the Company in June 2000
as Vice President and General Manager of the Tungsten Products Business Unit.
From 1997 to 2000 and prior to joining the Company, Mr. Roberts was Senior
Manager at Dominion Semiconductor, Inc., a joint venture between IBM Corporation
and Toshiba Corporation. Prior to that, Mr. Roberts held various key technical
and managerial positions at Novellus Systems, Inc. From 1991 to 1993, Mr.
Roberts held support and applications managerial positions at Genus, Inc.
Earlier in his career, Mr. Roberts was a Program Manager at SEMATECH and
involved with Harris Semiconductor Corporation.
PAGE 8
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, 2000, 1999 and 1998:
LONG TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS COMPEN-
POSITION FISCAL YEAR SALARY ($) BONUS($)(1) COMPENSATION($) (# OF SHARES) SATION ($)
- -----------------------------------------------------------------------------------------------------------------------------
William W.R. Elder 2000 330,000 31,000 (3) -- 50,000 13,650 (4)
Chairman of the Board, President and Chief 1999 300,000 95,000 -- 50,000 12,296 (5)
Executive Officer (2) 1998 285,576 -- -- 300,000 3,540 (6)
Kenneth Schwanda. . . . . . . . . . . . . . 2000 160,000 -- -- 0 4,771 (7)
Vice President of Finance. . . . . . . . . 1999 133,343 32,400 -- 80,000 1,695 (8)
and Chief Financial Officer 1998 106,118 -- -- 53,000 1,080 (9)
Thomas E. Seidel, Ph.D. . . . . . . . . . . 2000 240,000 -- -- 30,000 11,671 (10)
Executive Vice President . . . . . . . . . 1999 210,000 58,800 -- 30,000 4,829 (11)
and Chief Technical Officer . . . . . . . . 1998 210,000 -- -- 200,000 5,895 (12)
Jeff Farrell. . . . . . . . . . . . . . . . 2000 110,025 -- -- 0 63,401 (13)
Vice President of . . . . . . . . . . . . . 1999 152,630 37,200 -- 30,000 2,011 (14)
Engineering. . . . . . . . . . . . . . . . 1998 144,922 -- -- 107,000 2,272 (15)
Robert A. Wilson. . . . . . . . . . . . . . 2000 166,249 -- 90,709 (16) 10,000 3,403 (17)
Vice President of . . . . . . . . . . . . . 1999 122,917 -- 110,762 (18) 55,000 1,057 (19)
Worldwide Sales . . . . . . . . . . . . . . 1998 99,350 -- 69,506 (20) 50,000 933 (21)
(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) Dr. Elder was re-appointed Chief Executive Officer in April 1998.
(3) Bonus paid to Dr. Elder for meeting 2000 objectives (year-to-date).
(4) Consists of insurance premiums of $10,950 for a group term life insurance
policy, the proceeds of which were payable to Dr. Elder's named
beneficiaries, and matched 401(k) contribution of $2,700.
(5) Consists of insurance premiums of $11,496 for a group term life insurance
policy, the proceeds of which were payable to Dr. Elder's named
beneficiaries, and matched 401(k) contribution of $800
(6) Consists of insurance premiums of $3,540 for a term life insurance policy,
the proceeds of which were payable to Dr. Elder's named beneficiaries.
(7) Consists of insurance premiums of $136 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 $4,635
PAGE 9
(8) Consists of insurance premiums of $628 for a group term life insurance
policy, the proceeds of which were payable to named Mr. Schwanda's
beneficiaries, and matched 401(k) contribution of $1,067.
(9) 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.
(10) Consists of insurance premiums of $6,571 for a group term life insurance
policy, the proceeds of which were payable to Dr. Seidel's named
beneficiaries, and matched 401(k) contribution of $5,100
(11) Consists of insurance premiums of $4,269 for a group term life insurance
policy, the proceeds of which were payable to Dr. Seidel's named
beneficiaries, and matched 401(k) contribution of $560.
(12) Consists of insurance premiums of $5,335 for a group term life insurance
policy, the proceeds of which were payable to Dr. Seidel's named
beneficiaries, and matched 401(k) contribution of $560.
(13) Mr. Farrell left the Company on July 31, 2000. Consists of insurance
premiums of $499 for a group term life insurance policy, the proceeds of
which were payable to Mr. Farrell's named beneficiaries, and matched 401(k)
contribution of $2,902, and severance pay of $60,000.
(14) Consists of insurance premiums of $1,184 for a group term life insurance
policy, the proceeds of which were payable to Mr. Farrell's named
beneficiaries, and matched 401(k) contribution of $827.
(15) Consists of insurance premiums of $1,452 group term life insurance policy,
the proceeds of which were payable to Mr. Farrell's named beneficiaries,
and matched 401(k) contribution of $820.
(16) Consists of sales commissions of $90,709.
(17) Consists of insurance premiums of $312 for a group term life insurance
policy, the proceeds of which were payable to Mr. Wilson's named
beneficiaries, and matched 401(k) contribution of $3091.
(18) Consists of sales commissions of $110,762.
(19) Consists of insurance premiums of $240 for a group term life insurance
policy, the proceeds of which were payable to Mr. Wilson's named
beneficiaries, and matched 401(k) contribution of $817.
(20) Consists of sales commissions of $69,506.
(21) Consists of insurance premiums of $191 for a group term life insurance
policy, the proceeds of which were payable to Mr. Wilson 's named
beneficiaries, and matched 401(k) contribution of $742.
PAGE 10
INDEBTEDNESS OF MANAGEMENT
On January 24, 2001, Dr. William W. R. Elder, the President and Chief
Executive Officer of Genus, received a promissory note from the Company for the
principal sum of $151,500. This note bears interest at the rate of 8%
compounded annually and is due in full on January 24, 2004, unless pre-paid on
an earlier date. The funds were used by Dr. Elder to exercise options for
50,000 shares of common stock of the Company. This transaction was reported on
a Form 4 to the Securities and Exchange Commission in 2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
2000 to Named Executive Officers. No Stock Appreciation Rights ("SARs") were
granted.
INDIVIDUAL GRANTS
-----------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE APPRECIATION FOR OPTION
OPTIONS IN FISCAL PRICE PER EXPIRATION TERM (3)
NAME GRANTED YEAR (1) SHARE($)(2) DATE 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------
William W.R. Elder 50,000 4.7% 5.34 8/10/05 73,750 163,000
Thomas E. Seidel 30,000 2.8% 5.34 8/10/05 44,250 97,800
Robert A. Wilson 10,000 1.0% 5.34 8/10/05 14,750 32,600
Kenneth Schwanda 0 -- -- -- -- --
Jeff Farrell (4) 0 -- -- -- -- --
(1) Based on an aggregate of 1,052,750 options granted to all employees during
fiscal year 2000. Options granted in fiscal year 2000 expire in 2005. A new
vesting rate was recently implemented. Effective April 2001, the options
will vest at the rate of 1/36 per month over three years commencing from
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 (five 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.
(4) Mr. Farrell left the Company on July 31, 2000.
PAGE 11
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 2000
by the Named Executive Officers and the number and value of such officers'
unexercised options at December 31, 2000. No SARs have been granted.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS DECEMBER 31, 2000 IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED (2) DECEMBER 31, 2000 ($)(3)
-------------------------
UNEXERCIS- UNEXERCIS-
NAME EXERCISE (#) ($)(1) EXERCISABLE ABLE EXERCISABLE ABLE
- -----------------------------------------------------------------------------------------------------------------------------
William W.R. Elder. 0 0 366,667 183,333 143,000 71,500
Kenneth Schwanda. . 20,667 263,051 73,834 59,999 -- --
Thomas E. Seidel. . 44,667 526,982 249,444 105,889 79,444 39,960
Robert A. Wilson. . 33,334 191,671 44,333 88,333 -- --
Jeff Farrell (4). . 0 -- -- -- -- --
(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) On April 2, 2001, the board of directors of Genus approved a revised
vesting schedule which affects the shares listed in this table. Effective
April 2001, the options will vest at the rate of 1/36 per month over three
years commencing from the date of grant.
(3) Market value of securities underlying in-the-money options at the end of
fiscal year 2000 (based on $1.59 per share, the closing price of Company's
common stock on the Nasdaq National Market on December 29, 2000), less the
exercise price.
(4) Mr. Farrell left the Company on July 31, 2000.
The Company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
PAGE 12
COMPENSATION COMMITTEE REPORT
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: 2000 Stock 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
PAGE 13
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:
Mario M. Rosati
Todd S. Myhre
George D. Wells
PAGE 14
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, 1995 (the last trading day
before the beginning of the Company's 1996 Fiscal Year) through 2000 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, 1995 and all dividends were reinvested. Historic stock price
performance is not necessarily indicative of future stock price performance.
GENUS, INC. NASDAQ JP MORGAN
STOCK MRKT H&Q
(U.S.) TECHNOLOGY
12/95 100 100 100
12/96 73 123 124
12/97 45 150 146
12/98 14 213 227
12/99 60 395 506
12/00 21 237 327
[GRAPHIC OMITED]
PAGE 15
PROPOSAL TWO
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 March 2001, 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 2,650,000 to 2,950,000 shares.
As of April 2, 2001, 2,456,765 shares had been issued under the Purchase Plan,
and 193,235 shares remained available for future issuances under the Purchase
Plan. Also in March 2001, the Board of Directors amended the Purchase Plan to
shorten the offering period, as defined in the Purchase Plan, from twenty-four
months to six months (see "Offering Date" below for further explanation).
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 April 2, 2001 approximately 116 employees were eligible to
participate in the Purchase Plan.
OFFERING DATE
The Purchase Plan is implemented by consecutive six-month offering periods
and purchase periods. The offering and 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. Prior to the
March 2001 amendment by the Board of Directors, the offering periods were each
twenty-four months.
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 six-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
six-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.
PAGE 16
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
six-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
PAGE 17
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.
PAGE 18
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO THE 2000 STOCK PLAN
BACKGROUND
The Board adopted the 2000 Stock Plan (the "2000 Plan") in April 2000 and
the Company's stockholders approved the 2000 Plan in May 2000.
INCREASE IN NUMBER OF SHARES AUTHORIZED FOR ISSUANCE. In March 2001, the
Board adopted, subject to stockholder approval, an amendment to the 2000 Plan
increasing the aggregate number of shares reserved for issuance thereunder by
700,000, from 4,803,006 to 5,503,006, in order to ensure that there will be a
sufficient reserve of shares to permit the grant of further options to existing
and new employees and consultants of the Company. The Board believes that
increasing the number of shares reserved for issuance under the 2000 Plan is
necessary to permit the Company to remain competitive in the industry and to
continue to attract and retain qualified employees by providing them with
appropriate equity incentives.
DESCRIPTION OF THE GENUS, INC. 2000 STOCK PLAN
General. The purpose of the Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consul-tants of
the Company and its subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be either "incentive stock options"
or nonstatutory stock options. Stock purchase rights may also be granted under
the Plan.
Administration. The Plan may generally be administered by the Board or a
Committee appointed by the Board (as applicable, the "Administrator"). The
Administrator may make any determinations deemed necessary or advisable for the
Plan.
Eligibility. Nonstatutory stock options and stock purchase rights may be
granted under the Plan to employees, directors and consultants of the Company
and any parent or subsidiary of the Company. Incentive stock options may be
granted only to employees. The Administrator, in its discretion, selects the
employees, directors and consultants to whom options and stock purchase rights
may be granted, the time or times at which such options and stock purchase
rights shall be granted, and the exercise price and number of shares subject to
each such grant.
Limitations. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to preserve the Company's ability to deduct
the compensation income associated with options granted to such persons, the
Plan provides that no employee may be granted, in any fiscal year of the
Company, options or stock purchase rights to purchase more than 750,000 shares
of common stock. Notwithstanding this limit, however, in connection with such
individual's initial employment with the Company, he or she may be granted
options or stock purchase rights to purchase up to an additional 750,000 shares
of common stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the common
stock on the date such option is granted; provided, however, that the exercise
price of an incentive stock option granted to a 10% shareholder may not be less
than 110% of the fair market value on the date such option is granted. The fair
market value of the common stock is generally determined with reference to the
closing sale price for the common stock (or the closing bid if no sales were
reported) on the last market trading day prior to the date the option is
granted.
PAGE 19
(b) Exercise of Option; Form of Consideration. The Administrator determines
when options become exercisable and may, in its discretion, accelerate the
vesting of any outstanding option. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The Plan permits
payment to be made by cash, check, promissory note, other shares of common stock
of the Company (with some restrictions), cashless exercises, any other form of
consideration permitted by applicable law, or any combination thereof.
(c) Term of Option. The term of an incentive stock option may be no more
than ten (10) years from the date of grant; provided, however, that in the case
of an incentive stock option granted to a 10% shareholder, the term of the
option may be no more than five (5) years from the date of grant. No option may
be exercised after the expiration of its term.
(d) Termination of Service. If an optionee's service relationship
terminates for any reason (excluding death or disability), then the optionee
generally may exercise the option within 30 days of such termination to the
extent that the option is vested on the date of termination, (but in no event
later than the expiration of the term of such option as set forth in the option
agreement). If an optionee's service relationship terminates due to the
optionee's disability, the optionee generally may exercise the option, to the
extent the option was vested on the date of termination, within six months from
the date of such termination. If an optionee's service relationship terminates
due to the optionee's death, the optionee's estate or the person who acquires
the right to exercise the option by bequest or inheritance generally may
exercise the option, as to all of the shares subject to the option (including
unvested shares), within six months from the date of such termination.
(e) Nontransferability of Options. Unless otherwise determined by the
Administrator, options granted under the Plan are not transferable other than by
will or the laws of descent and distribution, and may be exercised during the
optionee's lifetime only by the optionee.
(f) Other Provisions. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.
Stock Purchase Rights. In the case of stock purchase rights, unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
Adjustments upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassifi-cation or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its sole
discretion, provide that each optionee shall have the right to exercise all or
any part of the option or stock purchase right, including shares as to which the
option or stock purchase right would not otherwise be exercisable.
In connection with any merger of the Company with or into another
corporation or the sale of all or substantially all of the assets of the
Company, each outstanding option and stock purchase right shall be assumed or an
equivalent option or right substituted by the successor corporation. If the
successor corporation refuses to assume the options or rights or to substitute
substantially equivalent options or rights, the optionee shall have the right to
exercise the option or stock purchase right as to all the optioned stock,
including shares not otherwise vested or exercisable. In such event, the
Administrator shall notify the optionee that the option or stock purchase right
is fully exercisable for fifteen (15) days from the date of such notice and that
the option terminates upon expiration of such period.
PAGE 20
Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary and desirable to comply with applicable law. No
such action by the Board or stockholders may alter or impair any option
previously granted under the Plan without the written consent of the optionee.
Unless terminated earlier, the Plan shall terminate ten years from the date the
Plan or any amendment to add shares to the Plan was last adopted by the Board.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income. If these
holding periods are not satisfied, the optionee recognizes ordinary income at
the time of disposition 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. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. 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. Unless limited by Section 162(m) of
the Code, the Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income.
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is subject
to a "substantial risk of forfeiture" within the meaning of Section 83 of the
Code, because the Company may repurchase the stock when the purchaser ceases to
provide services to the Company. As a result of this substantial risk of
forfeiture, the purchaser will not recognize ordinary income at the time of
purchase. Instead, the purchaser will recognize ordinary income on the dates
when the stock is no longer subject to a substantial risk of forfeiture (i.e.,
when the Company's right of repurchase lapses). The purchaser's ordinary income
is measured as the difference between the purchase price and the fair market
value of the stock on the date the stock is no longer subject to right of
repurchase.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and begin his or her capital gains holding period by
timely filing (i.e., within 30 days of purchase), an election pursuant to
Section 83(b) of the Code. In such event, the ordinary income recognized, if
any, is measured as the difference between the purchase price and the fair
market value of the stock on the date of purchase, and the capital gain holding
period commences on such date. The ordinary income recognized by a purchaser who
is an employee will be subject to tax withholding by the Company. Different
rules may apply if the purchaser is also an officer, director, or 10%
shareholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.
PAGE 21
VOTE REQUIRED
Affirmative votes constituting a majority of the Votes Cast will be
required to increase the number of shares available for issuance under the 2000
Stock Plan by 700,000 shares.
PAGE 22
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, 2001, 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 30, 2001
PAGE 23
APPENDIX A
APPROVED MAY 31, 2000
GENUS AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The audit committee of the board of directors assists the board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of the corporation and such other duties as
directed by the board.
STRUCTURE AND ORGANIZATION
1. The membership of the committee shall consist of at least three independent
members of the board of directors who are generally knowledgeable in
financial and auditing matters, including at least one member with
accounting or related financial management expertise. The committee and
its' chairperson shall be designated by and serve at the pleasure of the
board of directors.
2. Each member shall be free of any relationship that, in the opinion of the
board, would interfere with their individual exercise of independent
judgement.
3. The committee shall meet at least four times per year or more frequently as
circumstances require. The committee may ask members of management or
others to attend the meeting and provide pertinent information as
necessary. Meetings may be by telephone.
4. The committee is expected to maintain free and open communication with the
independent accountants, the internal auditors (if employed), management of
the corporation and any external experts that the Company engages to audit
or review the policies and procedures of the Company.
CHAIRPERSON'S RESPONSIBILITIES
The board of directors shall appoint one member of the audit committee as
chairperson. He or she shall be responsible for leadership of the committee,
including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the board of directors. The chairperson will also
maintain regular liaison with the CEO, CFO, the lead independent audit partner
and the director of internal audit.
GENERAL RESPONSIBILITIES
The audit committee's general responsibilities include:
1. Meet periodically with the independent auditors, the internal auditors (if
employed) and management in separate sessions to discuss any matters that
the committee or these groups believe should be discussed privately with
the committee. Provide sufficient opportunity for the independent auditors
and the internal auditors (if employed) to meet without members of
management present. The independent auditor is accountable to the board and
the audit committee.
2. The committee is empowered to investigate any matter brought to its
attention, with full power to retain outside counsel or other experts for
this purpose if, in its judgment, that is appropriate.
3. Submit the minutes of all audit committee meetings to, or discuss the
deliberations there at, currently with the board of directors.
PAGE 24
4. Review and reassess this Charter annually.
5. The committee will do whatever else the law, the Company's charter or
bylaws of the board of directors require.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT AUDITORS AND APPOINTING THE CHIEF
INTERNAL AUDITOR
1. The audit committee recommends for approval by the board of directors and
ratification by the shareholders the selection and retention of the
independent accountant who audits the financial statements of the
corporation. In so doing, the committee will discuss and consider the
auditors written affirmation that the auditor is in fact independent, will
discuss the nature and rigor of the audit process, receive and review all
reports and will provide to the independent accountant full access to the
committee (and the board) to report on any and all matters appropriate. In
considering the independence of the independent auditors the committee will
review the nature and related fees for all services provided to the company
and such other inquires as may be appropriate.
2. Arrange for the independent auditors to be available to the full board of
directors at least annually to help provide a basis for the board's
approval of the independent auditors' appointment.
3. Provision of guidance and oversight to the internal audit function of the
corporation including review of the organization, plans and results of such
activity and the coordination of such with the independent auditor. The
audit committee shall assure the objectivity of the internal auditors and
review and concur in the appointment, reassignment or dismissal of the
company's chief internal auditor.
Responsibilities for oversight to the quality and integrity of the accounting,
auditing and reporting practices of the corporation.
1. Consider, in consultation with independent auditor and management, the
audit scope and plan of the independent auditor.
2. Review of financial statements (including timely review of quarterly
earnings releases) with management and the independent auditor. It is
anticipated that these discussions will include items subject to estimate,
review of reserves and accruals, consideration of the suitability of
accounting principles, review of highly judgmental areas, audit adjustments
whether or not recorded, the clarity, consistency and completeness of the
company's financial disclosures and the quality, not just acceptability of
the resultant financial statements and such other inquiries as may be
appropriate. Quarterly reviews may be performed by the committee or its'
chairperson.
3. Discussion with management and the auditors the contents of any management
letters issued by the auditors and of the quality and adequacy of the
company's internal controls, including computerized information system
controls and security.
4. It is expected that management, the independent accountant and the internal
auditor will voluntarily bring to the committees attention any and all
matters appropriate including (but not limited to) such items as:
- Any significant changes in audit plans from those previously approved.
- Any proposed change in accounting principles.
- Any serious difficulties or disputes encountered with management
during the course of the audit.
- Other matters related to the conduct of the audit, which are to be
communicated to the committee under generally accepted auditing
standards.
PAGE 25
5. Discussion with management of the status of pending litigation, taxation
matters, monitoring compliance with laws and regulations, the code of
business conduct and other areas of oversight to the legal compliance area
as may be appropriate.
6. Issuance annually of a summary reports (including appropriate oversight
conclusions) suitable for submission to the shareholders.
7. Review policies and procedures with respect to executive officers' expense
accounts and perquisites, including their use of corporate assets, and
consider the results of any review of these areas by the independent or
internal auditors.
8. Review the results of review of monitoring compliance with the company's
code of conduct by the independent or internal auditors.
PAGE 26
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
2001 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 30, 2001, 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 2001 Annual Meeting of Shareholders of Genus,
Inc. to be held on Thursday, May 24, 2001 at 10:00 a.m., local time, at the
Embassy Suites located at 2885 Lakeside Drive in Santa Clara, California 95054,
and any continuation(s) or adjournment(s) thereof, and to vote all shares of
common stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
- FOLD AND DETACH HERE -
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, Mario M. Rosati,
George D. Wells, and Robert J. Richardson
2. Proposal to approve the amendment of the Company's 2000 Stock Plan to
increase the number of shares of common stock reserved for issuance
thereunder by 700,000 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, 2001.
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 2000 STOCK
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 __________, 2001
(This Proxy should be dated, signed by the shareholder(s) exactly as his or her
name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
- FOLD AND DETACH HERE -