SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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
Netrix Corporation
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(Name of Registrant as Specified In Its Charter)
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(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:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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Notes:
[NEXTRIX LOGO APPEARS HERE]
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 22071
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON TUESDAY, JULY 10, 1997
The Annual Meeting of Stockholders of Netrix Corporation (the "Company")
will be held on July 10, 1997 at 13595 Dulles Technology Drive, Herndon,
Virginia, at 2:00 p.m., local time, to consider and act upon the following
matters:
1. To elect one Class II Director to serve for the ensuing three years.
2. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Company's independent accountants for the current fiscal year.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on May 20, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open following the record
date.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ David Sylvester
David Sylvester, Secretary
Herndon, Virginia
June 12, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 20171
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Netrix Corporation (the "Company") for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
July 10, 1997 and at any adjournments of that meeting. All proxies will be
voted in accordance with the stockholders' instructions, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in
person at the Annual Meeting.
The Company's Annual Report for 1996 was mailed to stockholders, along with
these proxy materials, on or about June 12, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS AMENDED, FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY
STOCKHOLDER UPON WRITTEN REQUEST TO INVESTOR RELATIONS, NETRIX CORPORATION,
13595 DULLES TECHNOLOGY DRIVE, HERNDON, VIRGINIA 20171. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTES REQUIRED AND TABULATION OF VOTES
At the close of business on May 20, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there
were outstanding and entitled to vote an aggregate of 9,525,805 shares of
common stock, $.05 par value per share, of the Company (the "Common Stock").
Stockholders are entitled to one vote per share.
Under the Company's Amended and Restated By-laws, the holders of a majority
of the votes represented by the shares of Common Stock issued, outstanding and
entitled to vote on any matter shall constitute a quorum with respect to that
matter at the Annual Meeting. Shares of Common Stock present in person or
represented by proxy (including shares which abstain or do not vote with
respect to one or more of the matters presented for stockholder approval) will
be counted for purposes of determining whether a quorum is present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the
election of Directors. The affirmative vote of the holders of a majority of
the shares of Common Stock voting on the matter is required for the approval
of each of the other matters to be voted upon.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
will also not be counted as votes cast or shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on a matter that requires the affirmative vote of a certain percentage
of the votes cast or shares voting on a matter.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of May 20, 1997, with
respect to the beneficial ownership of Common Stock by (i) each person known
by the Company to beneficially own more than 5% of the outstanding shares of
Common Stock, (ii) each Director of the Company and nominee for Director,
(iii) each executive officer of the Company named in the Summary Compensation
Table set forth under the caption "Executive Compensation" below and (iv) all
Directors and executive officers of the Company as a group:
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
---------------- ---------------- --------------
Kopp Investment Advisors(3)................... 958,150 9.7
6600 France Avenue South
Suite 672
Edina, MN 55435
New Enterprise Associates IV,(4).............. 582,009 5.9
Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202
Dimensional Fund Advisors, Inc.(5)............ 509,400 5.1
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Lynn C. Chapman(6)............................ 53,536 *
J. Gerard Cregan(7)........................... 93,876 *
John Mullaney(8).............................. 62,167 *
Charles W. Stein(9)........................... 328,795 3.3
Richard G. Tennant............................ 42,046 *
Robert W. Carroll(10)......................... 27,140 *
G. Brent Wilson(11)........................... 25,206 *
Stephen E. Coit(12)........................... 16,060 *
Arthur J. Marks(13)........................... 794,069 8.0
V. Orville Wright(14)......................... 32,726 *
William T. Rooker, Jr.(15).................... 6,030 *
John F. Burton(16)............................ 3,060 *
All Directors and executive officers as a
group (12 persons)(17)....................... 1,481,967 14.9
- --------
* Less than 1%
(1) The number of shares of Common Stock beneficially owned by each person is
determined under the rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any
shares as to which
2
the individual has sole or shared voting power or investment power and
also any shares of Common Stock which the individual has the right to
acquire within 60 days after May 20, 1997 through the exercise of any
stock option or other right. The inclusion herein of any shares of Common
Stock deemed beneficially owned does not constitute an admission of
beneficial ownership of those shares. Unless otherwise indicated, 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) Number of shares deemed outstanding includes 9,525,805 shares outstanding
as of May 20, 1997 plus any shares subject to options held by the person
or entity in question that are currently exercisable or exercisable
within 60 days after May 20, 1997.
(3) This information is based on a Schedule 13G dated January 8, 1996.
(4) This information is based on a Schedule 13G dated February 11, 1993.
(5) This information is based on a Schedule 13G dated February 5, 1997.
(6) Includes 53,536 shares issuable upon exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(7) Includes 56,841 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(8) Includes 62,167 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(9) Includes 216,670 shares held by Mr. Stein jointly with his wife. Also
includes 112,125 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(10) Includes 20,979 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(11) Includes 25,206 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(12) Includes 12,060 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(13) Includes 582,009 shares held by New Enterprise Associates IV, Limited
Partnership and 200,000 shares held by New Enterprise Associates V,
Limited Partnership. Mr. Marks is a general partner of the general
partner of New Enterprise Associates IV, Limited Partnership and of the
general partner of New Enterprise Associates V, Limited Partnership. Mr.
Marks disclaims beneficial ownership of such shares. Also includes 12,060
shares issuable upon the exercise of outstanding stock options
exercisable within 60 days after May 20, 1997.
(14) Includes 1,000 shares held by Mr. Wright's wife, as to which Mr. Wright
disclaims beneficial ownership. Also includes 12,060 shares issuable upon
the exercise of outstanding stock options exercisable within 60 days
after May 20, 1997.
(15) Includes 6,030 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(16) Includes 3,060 shares issuable upon the exercise of outstanding stock
options exercisable within 60 days after May 20, 1997.
(17) Includes and excludes shares as indicated in footnotes (6) through (16)
above. Also includes shares issuable upon the exercise of outstanding
stock options exercisable within 60 days after May 20, 1997 held by other
executive officers.
3
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation, as amended,
provides that the Board of Directors is classified into three classes
(designated Class I Directors, Class II Directors and Class III Directors),
with members of each class holding office for staggered three-year terms.
There are currently two Class I Directors authorized, two Class II Directors
authorized and three Class III Directors authorized. There is currently one
Class I Director, whose term expires at the 1999 Annual Meeting of
Stockholders, two Class II Directors, whose terms expire at the 1997 Annual
Meeting of Stockholders, and three Class III Directors, whose terms expire at
the 1998 Annual Meeting of Stockholders (in all cases subject to the election
and qualification of their successors and to their earlier death, resignation
or removal). One of the current Class II Directors whose terms expire in 1997
will not stand for reelection as a Director of the Company. It is currently
expected that the Board, in conjunction with its Nominating Committee, will
identify suitable candidates and fill the one Class I and one Class II
vacancies at some time after the Annual Meeting.
Mr. Wright, one of the current Class II Directors whose terms expire in
1997, will stand for reelection as a Director of the Company. The persons
named in the enclosed proxy will vote to elect Mr. Wright as a Class II
Director, unless authority to vote for the election of any such nominee is
withheld by marking the proxy to that effect. If a stockholder returns a proxy
without contrary instructions, the persons named as proxies will vote to elect
as director the Class II director nominee named below. The nominee is
currently a member of the Board of Directors of the Company. The Class II
Director will be elected to hold office until the 2000 Annual Meeting of
Stockholders and until his successor is duly elected and qualified. The
enclosed proxy may not be voted for more than one Director. The nominee has
indicated his willingness to serve, if elected, but if any nominee should be
unable or unwilling to serve, proxies may be voted for a substitute nominee
designated by the Board of Directors.
DIRECTORS AND NOMINEES
The following table sets forth, for each Director of the Company (including
the nominee for Class II Director), his name and age, his positions with the
Company, his principal occupation and business experience during the past five
years, the names of the other publicly held corporations of which he serves as
a director and the year during which he first became a Director of the
Company. Information with respect to the number of shares of Common Stock
beneficially owned by each director, directly or indirectly, as of May 20,
1997 appears under the heading "Beneficial Ownership of Common Stock."
NOMINEE FOR CLASS II DIRECTOR (TERM TO EXPIRE IN 2000)
NAME, OFFICES AND POSITIONS WITH
THE COMPANY, PRINCIPAL OCCUPATION, FIRST BECAME A
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE DIRECTOR
------------------------------------- --- --------------
V. Orville Wright............................................ 76 1991
Mr. Wright has been a Director of the Company since 1991.
From 1975 to 1985, he served as President and Chief Operat-
ing Officer of MCI Communications Corporation ("MCI") and
from 1987 to 1991 as Vice Chairman and Co-Chief Executive
Officer of MCI. From 1985 to 1987, Mr. Wright served as Vice
Chairman of MCI. Mr. Wright has also held senior executive
positions at IBM, RCA Corporation, Amdahl Corporation and
Xerox Corporation. Mr. Wright serves as director of Calpine
Corp., an independent power producing company.
4
CLASS I DIRECTOR (TERM TO EXPIRE IN 1999)
NAME, OFFICES AND POSITIONS WITH
THE COMPANY, PRINCIPAL OCCUPATION, FIRST BECAME A
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE DIRECTOR
------------------------------------- --- --------------
William T. Rooker, Jr........................................ 63 1994
Mr. Rooker has been a Director of the Company since July
1994. Mr. Rooker retired from IBM Corporation ("IBM") at the
end of 1992 after 37 years of service and has since served
as a private consultant. During his tenure at IBM he held a
variety of marketing and executive management positions.
From 1974 to 1990 he was Vice President and General Manager
of Federal Marketing Programs at IBM and from 1990 to 1992
he was Corporate Director of Government Relations at IBM.
CLASS III DIRECTORS (TERMS TO EXPIRE IN 1998)
NAME, OFFICES AND POSITIONS WITH
THE COMPANY, PRINCIPAL OCCUPATION, FIRST BECAME A
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE DIRECTOR
------------------------------------- --- --------------
Arthur J. Marks.............................................. 52 1987
Mr. Marks has been a Director of the Company since 1987. He
has been a General Partner of New Enterprise Associates, a
venture capital firm, since 1984. Mr. Marks serves as direc-
tor of Progress Software Corporation, an application devel-
opment software company, Platinum Software Corporation, a
marketing and development company for LAN-based and client
server software, and AMISYS, a managed care software compa-
ny.
John F. Burton............................................... 45 1995
Since March 1997, Mr. Burton has been managing director of
Updata Group, an investment banking firm. From October 1996
to March 1997, Mr. Burton was managing director of Burton
Technology Partners, a technology investment and consulting
company. From September 1995 to September 1996, Mr. Burton
was the President and Chief Executive Officer of NatSystems
Inc., a client server software company. From February to Au-
gust 1995, Mr. Burton was an independent consultant. Mr.
Burton was employed by Legent Corporation, a systems manage-
ment software company, from 1989 through 1995, as President
and Director, and from 1992 through 1995 as Chief Executive
Officer. Mr. Burton was a cofounder of Business Software
Technology in 1984, which was acquired by Legent Corporation
in 1989. He is currently a director of Banyan Systems Corpo-
ration, a networking software company, Mapinfo Corporation,
a desktop mapping software company, and Axent Technologies
Inc., a network security
company.
Lynn C. Chapman.............................................. 43 1997
Since February 1997, Mr. Chapman has been the President and
Chief Executive Officer and a Director of the Company. From
November 1992 to January 1997, he served as Vice President
of Network Products. Mr. Chapman served as Director of Mar-
keting for Data General Corporation, a managment systems
company, from 1989 to 1992.
5
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
accountants and the Board. The Audit Committee met two times during 1996 to
review the effectiveness of the accountants during the annual audit, to
discuss the Company's internal accounting control policies and procedures and
to consider and recommend the selection of the Company's independent
accountants. The current members of the Audit Committee are Messrs. Marks,
Burton and Wright.
The Company also has a standing Compensation Committee of the Board of
Directors, which makes recommendations to the Board regarding the executive
and employee compensation programs of the Company and administers the
Company's stock option and other employee stock plans. The Compensation
Committee met three times during 1996. The current members of the Compensation
Committee are Messrs. Coit and Rooker. See "Report of the Compensation
Committee" below.
The Company has a standing Nominating Committee of the Board of Directors,
which makes recommendations to the Board regarding qualified candidates for
nomination to the Board. The Nominating Committee will consider nominees
recommended by stockholders who submit such recommendations in writing prior
to the time stockholder proposals are due to be submitted for inclusion in
proxy materials. The current members of the Nominating Committee are Messrs.
Marks and Wright. The Nominating Committee did not meet during 1996.
The Board of Directors met twelve times during 1996. Each Director attended
at least 75% of the aggregate of the number of Board meetings and the number
of meetings held by all committees on which he then served.
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not employees of the Company are
paid a retainer of $12,000 per year plus $250 for each day that they attend a
meeting of the full Board or any committee thereof. In addition, the Company
reimburses all of its Directors for all reasonable expenses incurred by them
in connection with their attendance at Board or committee meetings.
Pursuant to the Company's 1992 Director Stock Option Plan, each of Messrs.
Coit, Marks and Wright were granted an initial option to purchase 9,000 shares
of Common Stock with an exercise price of $12.75 per share on October 1, 1992.
On July 20, 1994, Mr. Rooker was granted an initial option to purchase 9,000
shares of Common Stock with an exercise price of $4.00 per share and on May
31, 1995, Mr. Burton was granted an initial option to purchase 9,000 shares of
Common Stock with an exercise price of $7.13 per share. Each option vests in
three equal installments beginning on the first anniversary of the date of
grant. Under the 1992 Director Stock Option Plan, additional options to
purchase 9,000 shares of Common Stock are automatically granted at fair market
value on the date three years after grant of the initial option. On October 1,
1995, each of Messrs. Coit, Marks and Wright received an option to purchase
9,000 shares of Common Stock with an exercise price of $4.69 per share. No
options were granted pursuant to the 1992 Director Stock Option Plan in 1996.
6
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation. The following table sets forth information concerning
the compensation for the last three fiscal years of the Company's Chief
Executive Officer and the Company's other most highly compensated executive
officers (together, the "Named Executive Officers") for the year ended
December 31, 1996:
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- AWARDS
NAME/POSITION YEAR SALARY($) BONUS($) OTHER(1) OPTIONS(#)
------------- ---- ---------- ---------- -------- ------------
Charles W. Stein(2)........... 1994 193,632 37,500 -- 15,000
President and Chief 1995 203,542 22,710 -- 60,000
Executive Officer 1996 204,789 -- 1,125 150,000
John Mullaney................. 1994 -- -- -- --
Vice President, 1995 156,525 49,340(3) -- 55,000
Sales and Marketing 1996 158,219 40,626(4) 656 100,000
J. Gerard Cregan.............. 1994 135,107 32,500 -- 9,000
Vice President, Operations 1995 147,744 11,355 -- 25,000
1996 143,948 -- -- 50,000
Richard G. Tennant(5)......... 1994 135,177 22,500 -- 9,000
Vice President, Finance 1995 145,176 11,355 -- 25,000
and Administration, and 1996 179,611 -- 1,125 50,000
Chief Financial Officer
Lynn C. Chapman(6)............ 1994 134,448 27,500 -- 10,000
Vice President, 1995 141,928 11,355 -- 25,000
Network Products 1996 140,578 -- 1,125 75,000
G. Brent Wilson............... 1994 90,023 -- -- 3,000
Vice President 1995 96,796 -- -- 20,000
1996 109,701 -- -- 25,000
- --------
(1) Represents matching 401(k) plan contributions by the Company.
(2) Mr. Stein resigned as President and Chief Executive Officer of the Company
and was elected to serve as Chairman of the Board of Directors of the
Company in January 1997. He resigned as Chairman of the Board of Directors
of the Company in March 1997.
(3) Includes sales commissions of $32,722.
(4) Includes sales commissions of $40,626.
(5) Mr. Tennant resigned as an officer of the Company in June 1996.
(6) Mr. Chapman was made President and Chief Executive Officer of the Company
in February 1997.
7
Option Grants. The following table summarizes option grants during 1996 to
the Named Executive Officers:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
PERCENT VALUE AT
OF TOTAL ASSUMED ANNUAL
OPTIONS RATES OF
GRANTED STOCK PRICE
TO MARKET APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE PRICE OPTION TERM (D)
GRANTED IN FISCAL PRICE ($/SHARE) EXPIRATION --------------------------
NAME (#)(A) YEAR ($/SHARE) (C) DATE 0% ($) 5%($) 10%($)
---- --------- --------- --------- --------- ---------- ------ -------- ----------
Charles W. Stein........ 150,000(B) 18.29% $4.75 $4.75 3/20/06 -- $448,087 $1,135,542
John Mullaney........... 100,000(B) 12.19 4.75 4.75 3/20/06 -- 298,725 757,028
J. Gerard Cregan........ 50,000(B) 6.10 4.75 4.75 3/20/06 -- 149,362 378,514
Richard G. Tennant...... 50,000(B) 6.10 4.75 4.75 3/20/06 -- 149,362 378,514
Lynn C. Chapman......... 75,000(B) 9.14 4.75 4.75 3/20/06 -- 224,044 567,771
G. Brent Wilson......... 25,000(B) 3.05 4.75 4.75 3/20/06 -- 74,681 189,257
- --------
(A) Under the terms of the Company's incentive stock option plan, the Board of
Directors retains discretion, subject to plan limits, to modify the terms
of the outstanding options and to reprice the options. The options were
granted for a term of 10 years, subject to earlier termination in the
event of termination of employment. The options were granted with tandem
tax withholding rights.
(B) Identified options were granted March 20, 1996, and become exercisable in
equal monthly installments on the 20th day of each calendar month
following the date of grant, with full vesting occurring on the fourth
anniversary date.
(C) Equals fair market value of Common Stock on the date of grant.
(D) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 0%, 5% and 10%
compounded annually from the date of grant to their expiration date.
Actual gains, if any, on stock option exercises will depend upon the
future performance of the Common Stock and the date on which the options
are exercised.
Option Exercises and Year-End Values. The following table summarizes option
exercises during 1996 by the Named Executive Officers and the value of the
options held by such persons at the end of 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
Charles W. Stein........ -- -- 85,875 151,125 65,700 --
John Mullaney........... -- -- 48,417 106,583 32,850 --
J. Gerard Cregan........ -- -- 45,775 53,308 39,245 --
Richard G. Tennant...... -- -- 52,025 53,308 58,432 --
Lynn C. Chapman......... 18,000 $52,875 71,709 83,291 32,850 --
G. Brent Wilson......... -- -- 17,007 39,019 5,115 --
- --------
(1) Value is based on the closing sales price of the Company's Common Stock on
December 31, 1996 ($4.75), the last trading day of 1996, less the
applicable option exercise price.
8
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"), which is
composed of two non-employee Directors. The Committee is responsible for
establishing and administering the policies which govern both annual
compensation and equity ownership programs. All decisions by the Committee
relating to the compensation of the Company's executive officers are reviewed
by the full Board of Directors. This report is submitted by the Committee and
addresses the Company's policies for 1996 as they apply to the President and
Chief Executive Officer of the Company and the other Named Executive Officers.
OVERVIEW AND PHILOSOPHY
The Company's executive compensation program is designed to promote the
following objectives:
. To provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term success
of the Company.
. To align management's interests with the success of the Company by placing a
portion of the executive's compensation at risk in relation to the Company's
performance.
. To align management's interests with stockholders by including long-term
equity incentives.
The Committee believes that the Company's executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size and complexity. To ensure that
compensation is competitive, the Company regularly compares its compensation
practices with those of other similar companies and sets its compensation
guidelines based on this review. The Committee also seeks to achieve an
appropriate balance of the compensation paid to a particular individual and the
compensation paid to other executives both inside the Company and at comparable
companies and attempts to maintain an appropriate mix of salary and incentive
compensation. While compensation data are useful guides for comparative
purposes, the Company believes that a successful compensation program also
requires the application of judgment and subjective determinations of
individual performance.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program typically consists of base
salary, annual incentive compensation and long-term equity incentives in the
form of stock options. Executive officers also are eligible to participate in
certain benefit programs that are generally available to all employees of the
Company, such as life insurance benefits, the Company's Employee Stock Purchase
Plan and medical and 401(k) savings plans.
Base Salary
At the beginning of each fiscal year, the Committee establishes an annual
salary plan for the Corporation's senior executive officers based on
recommendations made by the Company's Chief Executive Officer. The Committee
attempts to set base salary compensation within the range of salaries of
executive officers with comparable qualifications, experience and
responsibilities at other companies in the same or similar businesses and of
comparable size and success. In setting the annual cash compensation for
Company executives, the Committee reviews compensation for comparable positions
by reviewing compensation data published by the
9
American Electronics Association for similar companies with comparable
revenues. All of the companies in the Peer Group (as defined below) are
included, along with other companies, in the compensation data reviewed. In
addition to external market data, salary determinations depend both upon the
Company's financial performance and upon the individual's performance as
measured by certain subjective non-financial objectives. These non-financial
objectives include the individual's contribution to the Company as a whole,
including his or her ability to motivate others, develop the skills necessary
to grow as the Company matures, recognize and pursue new business opportunities
and initiate programs to enhance the Company's growth and success.
Annual and Long-Term Incentive Compensation
The Company's bonus program is designed to provide its key employees with
cash incentives to achieve the Company's financial goals. At the beginning of
each year, the Committee typically establishes target annual bonuses for each
executive officer, which the executive will receive if the Company achieves its
target net income for the year. Cash bonuses are then paid quarterly based upon
the Company's net income for the quarter and its relationship to target annual
net income. In addition, the Company's sales personnel receive a monthly
commission based on sales bookings for the month and their relationship to
targeted annual bookings. Given the Company's financial condition and
performance, however, the Committee did not establish cash bonus targets for
1996. At the beginning of 1996, the Committee instead decided to wait until the
end of 1996 to determine whether any key employee's performance warranted
payment of a bonus, on a subjective basis. After reviewing the performances of
1996, the Committee did not recommend and the Company did not make any bonus
payments for 1996.
The Company's stock option plan is designed to promote the identity of long-
term interests between the Company's employees and its stockholders and to
assist in the retention of executives. The size of option grants is generally
intended by the Committee to reflect the executive's position with the Company
and his or her contributions to the Company. Stock options generally vest over
a four-year period in order to encourage key employees to continue in the
employ of the Company.
Benefits
The Company's executive officers are entitled to receive medical and life
insurance benefits and to participate in the Company's 401(k) Retirement
Savings Plan on the same basis as other full-time employees of the Company. The
Company's 1992 Employee Stock Purchase Plan, which is available to virtually
all employees including executive officers, allows participants to purchase
shares at a discount of approximately 15% from the fair market value at the
beginning or end of the applicable purchase period.
The amount of perquisites, as determined in accordance with the rules of the
Securities and Exchange Commission relating to executive compensation, did not
exceed 10% of salary and bonus for 1996 for any of the Named Executive
Officers.
Summary of Compensation of Chief Executive Officer
In 1996, Mr. Stein, the Company's then President and Chief Executive Officer,
received salary compensation of $204,789 and no bonus compensation. In 1996,
Mr. Stein received stock options to purchase 150,000 shares of Common Stock at
$4.75 per share, the fair market value of the Company's Common Stock on the
date of grant.
10
Compliance with Internal Revenue Code Section 162(m)
The Company does not believe Section 162(m) of the Internal Revenue Code,
which disallows a tax deduction for certain compensation in excess of $1
million, will generally have an effect on the Company. The Compensation
Committee intends to review the potential effect of Section 162(m) periodically
and in the future may decide to structure the performance-based portion of its
executive officer compensation to comply with Section 162(m).
COMPENSATION COMMITTEE
Stephen E. Coit
William T. Rooker, Jr.
11
CHANGE IN CONTROL ARRANGEMENTS
The Board of Directors has adopted an Employee Retention Policy which
provides that, in the event of a change in control of the Company, (i) each of
the Named Executive Officers shall receive severance pay equal to the last
twelve months compensation if, within one year after such a change in control,
such executive is terminated other than for cause, his or her compensation is
substantially reduced, or he or she is forced to relocate to a new area; and
(ii) acceleration of one-half of the unvested stock options under the 1996
Stock Option Plan for the options granted to Messrs. Chapman, Cregan and
Wilson in September 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Stephen E. Coit and William T.
Rooker, Jr. No member of the Compensation Committee was at any time during
1996, or formerly, an officer or employee of the Company or any subsidiary of
the Company, nor has any member of the Compensation Committee had any
relationship with the Company requiring disclosure under Item 404 of
Regulation S-K under the Exchange Act.
No executive officer of the Company has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of
or member of the Compensation Committee of the Company.
COMPARATIVE STOCK PERFORMANCE
The graph below compares cumulative total stockholder return on the
Company's Common Stock during the period from September 21, 1992 (the date on
which the Company's Common Stock was first registered under the Exchange Act)
through December 31, 1996 with the cumulative total return over the same
period of (i) the Russell 2000 Index and (ii) a peer group of publicly-traded
companies* selected by the Company for purposes of this comparison (the "Peer
Group"). This graph assumes the investment of $100 at the close of trading on
September 21, 1992 in the Company's Common Stock, the Russell 2000 Index and
the Peer Group and assumes reinvestment of dividends. Measurement points are
at September 21, 1992, December 31, 1992, December 31, 1993, December 31,
1994, December 31, 1995 and December 31, 1996.
12
COMPARATIVE TOTAL RETURNS**
NETRIX CORPORATION, RUSSELL 2000 INDEX AND PEER GROUP*
(PERFORMANCE RESULTS FROM 9/21/92 THROUGH 12/31/96)
[LINE GRAPH APPEARS HERE]
9/12/92 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------
NETRIX $100.00 $150.94 $38.68 $69.81 $34.91 $35.85
Russell 2000 $100.00 $114.70 $136.39 $133.90 $171.98 $200.35
Peer Group $100.00 $137.62 $164.49 $182.78 $312.82 $438.00
- -------------------------------------------------------------------------------------------------
Assumes $100 invested at the close of trading on September 21, 1992, in Netrix
common stock, Russell 2000 Index, and Peer Group.
** Cumulative total return assumes reinvestment of dividends.
Source: Frank Russell Company
- --------
* The Peer Group includes the following companies: Cisco Systems, Inc. (CSCO),
CrossComm Corporation (XCOM), Network Equipment Technologies, Inc. (NWK),
Newbridge Networks Corporation (NNCXF), Northern Telecom, Inc. (NT), Proteon,
Inc. (PTON), StrataCom, Inc. (STRM), Telematics International, Inc. (TMAX),
Bay Networks, Inc. (BNET) and 3Com Corporation (COMS). The stockholder returns
of each such company have been weighted to reflect relative stock market
capitalization.
13
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Arthur Andersen LLP as the Company's independent
accountants for the current fiscal year. Arthur Andersen LLP has served as the
Company's independent accountants since 1987. Although stockholder approval of
the Board of Directors' selection of Arthur Andersen LLP is not required by
law, the Board of Directors believes that it is advisable to give stockholders
an opportunity to ratify this selection. If this proposal is not approved at
the Annual Meeting, the Board of Directors will reconsider its selection of
Arthur Andersen LLP.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to be held in 1998 must be received by the Company at its
principal office in Herndon, Virginia, not later than December 19, 1997, for
inclusion in the proxy statement for that meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews, and the Company reserves the
right to retain outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of stock held in their names, and, as
required by law, the Company will reimburse them for their out-of-pocket
expenses in this regard.
By Order of the Board of Directors,
/s/ David Sylvester
David Sylvester, Secretary
June 12, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES.
14
1154-PS-97
[NETRIX LOGO APPEARS HERE]
DETACH HERE
- --------------------------------------------------------------------------------
NETRIX CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held July 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
P
THE BOARD OF DIRECTORS OF THE COMPANY
R
The undersigned, having received notice of the meeting and the
O management's proxy statement therefor, and revoking all prior proxies, hereby
appoint(s) Lynn C. Chapman and Robert W. Carroll, and each of them, with
X full power of substitution, as proxies to represent and vote as designated
herein all shares of stock of Netrix Corporation (the "Company") which the
Y undersigned would be entitled to vote if personally present at the 1997
Annual Meeting of Stockholders of the Company to be held at the principal
executive offices of the Company at 13595 Dulles Technology Drive, Herndon,
Virginia, at 2:00 p.m., local time, on July 10, 1997 and at any adjournment
thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. The Shares represented by this Proxy
will be voted as directed by the undersigned. If no direction is given with
respect to any election to office or proposal, this proxy will be voted for
such election to office or proposal. Attendance of the undersigned at the
meeting or at any adjournment thereof will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
[NETRIX LOGO APPEARS HERE]
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
DETACH HERE
- --------------------------------------------------------------------------------
[X] Please mark votes as in this example.
1. To elect one Class II Director to serve for the ensuing three years.
Nominee: V. Orville Wright
[_] FOR [_] WITHHELD
2. To ratify the selection by the Board of Directors of Arthur Andersen LLP as
the Company's independent accountants for the current fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
[_] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: Date:
------------------------------------ -----------
Signature: Date:
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