EXHIBIT 1
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COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their services as directors of the Company. However,
nonemployee members of the Board of Directors receive an annual cash retainer of
$12,000 and an annual committee membership stipend of $1,500 for each committee
of the Board of Directors on which such director serves.
In addition, nonemployee directors participate in the Company's 1994
Outside Director Stock Option Plan (the "Director Plan"). The Director Plan was
adopted by the Board of Directors in January 1994 and was approved by the
stockholders in May 1994. The Director Plan provides for an automatic grant of a
nonstatutory stock option to purchase 20,000 shares of Common Stock to a
nonemployee director on the date of the first meeting on which such individual
participates as a director (an "Initial Option"). An Initial Option has a term
of ten years and vests monthly over four years. Beginning four years after the
grant of an Initial Option to a director, such director is granted an automatic
annual option to purchase 3,500 shares of Common Stock, which option has a term
of ten years and vests monthly over one year. The exercise price of each option
granted equals 100% of the fair market value of the Common Stock, based on the
closing sales price of the Common Stock as reported on the Nasdaq National
Market on the date of grant. Options granted under the Director Plan must be
exercised within three months following the end of the optionee's tenure as a
director of the Company or within twelve months after the termination of a
director's tenure due to death or disability. The Director Plan is designed to
work automatically, without administration; however, to the extent
administration is necessary, the Director Plan has been structured so that
options granted to nonemployee directors who administer the Company's other
employee benefit plans qualify as transactions exempt from Section 16(b) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), pursuant
to Rule 16b-3 promulgated thereunder.
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock as
of February 25, 1998 for the following: (i) each person or entity who is known
by the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) each of the Company's current directors, (iii) each of the
officers named in the Summary Compensation Table and (iv) all directors and
executive officers of the Company as a group.
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED
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PRINCIPAL STOCKHOLDERS
Kopp Investment Advisors, Inc.(2)................................................ 2,597,975 14.6%
7701 France Avenue South, Suite 500
Edina, MN 55435
State of Wisconsin Investment Board(2)........................................... 1,149,500 6.5%
121 East Wilson Street
Madison, WI 53707
DIRECTORS
Glen M. Antle(3)................................................................. 323,282 1.8%
Keith R. Lobo(4)................................................................. 473,750 2.6%
Richard C. Alberding(5).......................................................... 15,000 *
Michael R. D'Amour(6)............................................................ 44,471 *
Dr. Yen-Son (Paul) Huang(7)...................................................... 351,425 2.0%
Dr. David K. Lam(5).............................................................. 7,917 *
NAMED OFFICERS
Jeffrey K. Jordan(5)............................................................. 16,271 *
Raymond K. Ostby(8).............................................................. 111,142 *
Dugald H. Stewart(9)............................................................. 30,166 *
Tung-sun Tung(10)................................................................ 69,673 *
All directors and executive officers as a group (20 persons)(11)................. 2,710,805 14.4%
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* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission ("SEC"), 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 the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within sixty days of February 25, 1998 through the exercise of any stock
option or other right. Unless otherwise indicated in the footnotes, each
person has sole voting and investment power (or shares such powers with his
or her spouse) with respect to the shares shown as beneficially owned.
(2) This information was obtained from filings made with the SEC pursuant to
Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended.
(3) Includes 207,270 shares held by The Antle Family Trust, as to which Mr.
Antle shares voting and dispositive power, and 116,012 shares of Common
Stock exercisable within sixty days of February 25, 1998.
(4) Includes options to purchase 468,750 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(5) All such shares are subject to options exercisable within sixty days of
February 25, 1998.
(6) Includes 37,388 shares held by The D'Amour Family Trust, as to which Mr.
D'Amour shares voting and dispositive power, and 7,083 shares of Common
Stock subject to options exercisable within sixty days of February 25,
1998.
(7) Includes 37,548 shares held by The Huang Living Trust, as to which Mr.
Huang shares voting and dispositive power, and 28,125 shares of Common
Stock subject to options exercisable within sixty days of February 25,
1998.
(8) Includes options to purchase 103,042 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(9) Includes options to purchase 29,896 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(10) Includes options to purchase 56,760 shares of Common Stock exercisable
within sixty days of February 25, 1998.
(11) Includes options to purchase 1,117,064 shares of Common Stock exercisable
within sixty days of February 25, 1998.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning total
compensation received by the person serving as Chief Executive Officer and each
of the four most highly compensated executive officers during the last fiscal
year (the "Named Officers"), for services rendered to the Company in all
capacities during the last three fiscal years.
LONG-TERM
COMPENSATION
AWARDS
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ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (2)
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Keith R. Lobo................................. 1997 $250,000 $144,000 0 $11,168
PRESIDENT AND CHIEF EXECUTIVE OFFICER 1996 $250,000 $200,000 100,000 $ 6,768
1995 $227,369 $150,000 20,000 $ 3,978
Jeffrey K. Jordan............................. 1997 $227,351(3) $ 17,000 0 $16,400
VICE PRESIDENT, NORTH AMERICAN SALES 1996 $382,499 $ 30,000 25,000 $34,000
1995 $544,567 $ 30,000 10,000 $10,800
Raymond K. Ostby.............................. 1997 $205,000 $ 59,000 0 $ 6,968
VICE PRESIDENT, FINANCE AND ADMINISTRATION, 1996 $190,000 $ 70,000 40,000 $ 6,768
CHIEF FINANCIAL OFFICER AND SECRETARY 1995 $156,667 $ 66,000 0 $ 5,863
Dugald H. Stewart............................. 1997 $205,223 $ 57,000 0 $ 9,073
VICE PRESIDENT, MANUFACTURING 1996 $184,333 $102,000 40,000 $ 8,873
1995 $151,667 $ 56,000 10,000 $ 6,000
Tung-sun Tung................................. 1997 $188,666 $ 40,000 0 $ 9,073
VICE PRESIDENT, RESEARCH & DEVELOPMENT 1996 $174,584 $ 64,000 60,000 $ 8,873
1995 $140,000 $ 36,000 0 $ 6,000
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(1) Includes bonuses earned or accrued with respect to services rendered in the
fiscal year indicated, whether or not such bonus was actually paid during
such fiscal year.
(2) Includes health care premiums and 401(k) contributions.
(3) Includes $126,370 from commissions.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") is responsible for establishing
policies and programs which determine the compensation of the Company's
executive officers, as well as supervising and making recommendations to the
Board on compensation matters generally. The Committee also has exclusive
authority to grant stock options to executive officers of the Company under the
1988 Stock Option Plan (the "1988 Plan"), the 1996 Supplemental Stock Plan (the
"1996 Plan") and the 1997 Stock Option Plan (the "1997 Plan").
COMPENSATION PHILOSOPHY AND POLICIES
The Committee's compensation philosophy is to provide cash and equity
incentives to the Company's officers and other employees through programs
designed to attract and retain personnel of the highest caliber in order to
maintain the Company's competitive position in its market. The Company seeks to
motivate its key employees by rewarding superior performance and by joining the
interests of employees to those of the stockholders through equity incentives.
The Committee seeks to foster teamwork and to motivate high performance
through a bonus program which depends upon achievement of corporate performance
objectives and, increasingly, individual performance objectives.
The Committee's policy is to establish a total compensation program at the
beginning of each year which is designed to enhance the Company's ability to
meet its financial, technical and other strategic goals for the year, while
creating an environment which will attract, retain and motivate highly skilled
officers and key employees to promote the success of the Company's business.
ELEMENTS OF COMPENSATION
Compensation for officers and key employees includes both cash and equity
elements.
Cash compensation consists of base salary, which is determined on the basis
of the level of responsibility, expertise and experience of the employee, taking
into account competitive conditions in the industry. In addition, cash
performance awards are paid to officers and other key employees up to an
established percentage of base salary, subject to meeting all or a portion of
targeted objectives. Performance awards are based on achievement of corporate
financial goals and discretionary individual performance reviews. Compensation
of sales personnel includes two additional components, sales commissions and
sales bonuses tied to quarterly and annual targets.
Ownership of Common Stock is a key element of executive compensation.
Officers and other employees of the Company are eligible to participate in the
1988 Plan, the 1996 Plan, the 1997 Plan and the 1993 Employee Qualified Stock
Purchase Plan (the "Purchase Plan"). The 1988 Plan, the 1996 Plan and the 1997
Plan permit the Board of Directors or any committee delegated by the Board to
grant stock options to employees on such terms as the Board or its committee may
determine. The Committee has sole authority to grant stock options to executive
officers of the Company and is currently administering stock option grants to
all employees. In determining the size of a stock option grant to a new officer
or other key employee, the Committee takes into account equity participation by
comparable employees within the Company, external competitive circumstances and
other relevant factors. Additional options may be granted to current employees
to reward exceptional performance or to provide additional unvested equity
incentives. These options typically vest over a four-year period and thus
require the employee's continuing efforts on behalf of the Company. The Purchase
Plan permits employees to acquire Common Stock through payroll deductions and
promotes broad-based equity participation throughout the Company. The Committee
believes that it is in the stockholders' interests to link employees'
compensation as closely as possible to equity appreciation and thus to share
with the employees the benefits of their efforts on behalf of the Company's
success.
The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees. The Company may
also make discretionary contributions towards the 401(k) Plan. The Company made
contributions of $497,000 to the 401(k) Plan for fiscal 1997.
1997 EXECUTIVE COMPENSATION
Executive compensation for fiscal 1997 included base salary and cash
performance awards, plus, in the case of sales executives, sales commissions and
sales bonuses. Executive officers, like other employees, were eligible for
option grants under the 1988 Plan, the 1996 Plan and the 1997 Plan, and to
participate in the Purchase Plan. Performance awards for the 1997 fiscal year
were based upon achievement by the Company of corporate revenue and profit goals
which had been established at the beginning of the year (as to which no payments
were made in fiscal 1997) and individual performance goals. Performance awards
were paid after the 1997 fiscal year end.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1997
Keith R. Lobo joined the Company in November 1992. His annual base
compensation is set by the Committee in January of each year, after review of
salaries paid to chief executives of comparable companies and in light of Mr.
Lobo's performance during the prior year. Like all officers, he is eligible to
receive options under the 1988 Plan, the 1996 Plan and the 1997 Plan, and to
participate in the Purchase Plan. Mr. Lobo received a performance award for
fiscal 1997 in the amount of $144,000. Mr. Lobo declined an increase in base
compensation for fiscal 1997 over fiscal 1996.
SUMMARY
The Committee sets policy and administers the Company's cash and equity
incentive programs to attract and retain highly skilled executives who will
promote the Company's business goals and to incentivize them to achieve goals
which will build long-term stockholder value.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Richard C. Alberding
Glen M. Antle