SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GENUS, INC.
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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.
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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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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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GENUS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 2003
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on Thursday, June 12, 2003 at 10:00 a.m.,
local time, at the Company's principal executive offices located at 1139
Karlstad Drive, Sunnyvale, California 94089, 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.
3. To approve an amendment to the 2000 Stock Plan.
4. To approve an amendment to each of the 1989 Employee Stock Purchase
Plan and the 2000 Stock Plan to provide for an annual increase in the
number of shares of Common Stock reserved thereunder.
5. To approve the amendment to the Company's Amended and Restated
Articles of Incorporation to increase the number of authorized shares
of Company Common Stock available for issuance from 50,000,000 shares
to 100,000,000 shares.
6. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company's financial statements for the fiscal year
ending December 31, 2003.
7. 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 15, 2003 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 24, 2003
TABLE OF CONTENTS
-----------------
Information Concerning Solicitation and Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposal One: Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Audit Committee Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Executive Officer Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proposal Two: Amendment to the 1989 Employee Stock Purchase Plan. . . . . . . . . . . . . . . . . . 15
Proposal Three: Amendment to the 2000 Stock Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Proposal Four: Amendments to each of the 1989 Employee Stock Purchase Plan and the 2000 Stock Plan 22
Proposal Five: Amendment to the Amended and Restated Articles of Incorporation. . . . . . . . . . . 24
Proposal Six: Ratify Appointment of Independent Accountants. . . . . . . . . . . . . . . . . . . . 26
GENUS, INC.
PROXY STATEMENT FOR THE 2003 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, June 12,
2003 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 Company's principal
executive offices located at 1139 Karlstad Drive in 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 28, 2003
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 15, 2003 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 28,945,409 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 five 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 (other than proposal 5, which requires
the affirmative vote of a majority of the outstanding shares) 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.
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:
Shum Mukherjee, 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
This Proxy Statement is furnished in connection with the solicitation of
proxies by Genus, Inc. on behalf of the Board of Directors for the 2003 Annual
Meeting of Shareholders. 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. The
Company has engaged Georgeson Shareholder Co. to assist with the solicitation of
proxies for the 2003 Annual Meeting of Shareholders. The Company expects the
engagement of Georgeson Shareholder Co. to cost approximately $20,000.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders who intend to present a proposal for inclusion in the
Company's proxy materials for the 2004 Annual Meeting of Shareholders must
submit the proposal to the Company no later than December 31, 2003.
Additionally, shareholders who intend to present a proposal at the 2004 Annual
Meeting of Shareholders without inclusion of such proposal in the Company's
proxy materials for the 2004 Annual Meeting must provide notice of such proposal
to the Company no later than December 31, 2003. The Company reserves the right
to reject, rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable requirements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's common stock as of March 31,
2003 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:
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER** SHARES(1) CLASS(2)
- ------------------------------------------------------------ -------------- -----------
William W.R. Elder . . . . . . . . . . . . . . . . . . . . . 803,296 (3) 2.7%
Thomas E. Seidel . . . . . . . . . . . . . . . . . . . . . . 248,546 (4) *
Mario M. Rosati. . . . . . . . . . . . . . . . . . . . . . . 26,360 (5) *
G. Frederick Forsyth . . . . . . . . . . . . . . . . . . . . 25,625 (6) *
Todd S. Myhre. . . . . . . . . . . . . . . . . . . . . . . . 98,160 (7) *
George D. Wells. . . . . . . . . . . . . . . . . . . . . . . 30,744(8) *
Robert J. Richardson . . . . . . . . . . . . . . . . . . . . 20,625(9) *
Edward C. Lee. . . . . . . . . . . . . . . . . . . . . . . . 80,445 (10) *
RS Investment Management Co. LLC and G. Randall Hecht . 1,839,750 (11) 6.0%
Shum Mukherjee . . . . . . . . . . . . . . . . . . . . . . . 95,894 (12) *
Werner Rust. . . . . . . . . . . . . . . . . . . . . . . . . 61,055 (13) *
All directors and executive officers as a group (10 persons) 1,490,750 (14) 4.9%
<FN>
* Less than 1%.
** Except as indicated otherwise, the address is: c/o Genus, Inc., 1139 Karlstad
Drive, Sunnyvale, CA 94089.
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 28,943,409 shares of common
stock outstanding as of February 28, 2003 together with applicable options
for such shareholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, based on factors
including voting and investment power with respect to shares. Shares of
common stock subject to the options currently exercisable, or exercisable
within 60 days of March 31, 2003, 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 339,350 shares held by William W.R. Elder and Gloria S. Elder,
and of options to purchase 463,946 shares of common stock exercisable
within 60 days of March 31, 2003.
(4) Consists of 29,888 shares of common stock held by Mr. Seidel and of options
to purchase 218,658 shares of common stock exercisable within 60 days of
March 31, 2003.
(5) Consists of 3,500 shares of common stock held by Mr. Rosati, of 1,500
shares of common stock held by Mario Rosati Trust, of options to purchase
20,625 shares of common stock exercisable within 60 days of March 31, 2003,
and of 735 shares held by Mr. Rosati through his proportionate partnership
interest in WS Investment Company holdings.
(6) Consists of Mr. Forsyth's options to purchase 25,625 shares of common stock
exercisable within 60 days of March 31, 2003.
(7) Consists of 22,535 shares of common stock held by Mr. Myhre and of options
to purchase 75,625 shares of common stock exercisable within 60 days of
March 31, 2003.
(8) Consists of 10,119 shares of common stock held by Mr. Wells and options to
purchase 20,625 shares of common stock exercisable within 60 days of March
31, 2003.
(9) Consists of Mr. Richardson's options to purchase 20,625 shares of common
stock exercisable within 60 days of March 31, 2003.
(10) Consists of 3,000 shares of common stock held by Mr. Lee and options to
purchase 77,445 shares of common stock exercisable within 60 days of March
31, 2003.
(11) Based on the Form 13G filing of February 14, 2003, 1,839,750 shares of
common stock are beneficially owned by RS Investment Management Co. LLC
which is the parent company of registered investment advisers whose clients
have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the shares. G. Randall Hecht is a
control person of RS Investment Management Co. LLC and shares beneficial
ownership of these shares.
(12) Consists of 11,005 shares of common stock held by Mr. Mukherjee and options
to purchase 84,889 shares of common stock exercisable within 60 days of
March 31, 2003.
(13) Consists of 10,000 shares of common stock held by Mr. Rust and options to
purchase 51,055 shares of common stock exercisable within 60 days of March
31, 2003.
(14) Consists of shares held and of options to purchase common stock exercisable
within 60 days of March 31, 2003.
3
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide for a variable board of four to seven
directors, with the number (as of April 11, 2003) fixed at five. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's five 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.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------- --- ------------------------------------------- --------
William W.R. Elder 64 Executive Officer of the Company 1981
Chairman of the Board, President and Chief
Todd S. Myhre 58 President and CEO of Ybrain.com 1994
G. Frederick Forsyth 58 President and CEO of NewRoads, Inc. 1996
Mario M. Rosati 56 Member of Wilson Sonsini Goodrich & Rosati, 1981
Professional Corporation
Robert J. Richardson 57 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 a director since our inception in November
1981. He has been a member of the law firm Wilson Sonsini Goodrich & Rosati,
Professional Corporation, general counsel to the Company, since 1971. Mr.
Rosati is also a director of Aehr Test Systems, a manufacturer of computer
hardware testing systems, Sanmina-SCI 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, interWAVE Communications
International Ltd., a provider of compact mobile wireless network systems
solutions in the Global System for Mobile Communications (GSM) markets, and
Vivus, a specialty pharmaceutical company, all publicly-held companies. He is
also a director of a number of privately held companies.
Todd S. Myhre has served as a director since August 1993. Since September
1999, he served as Chief Executive Officer and a Board member for Ybrain.com, an
eCommerce company focused on the college student market. From February 1998 to
4
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 January 1996 to January 1998, Mr Myhre was
an international business consultant. From January 1993 to December 1994, from
August 1993 to December 1993, and from July 1994 to August 1995, Mr. Myhre
served as Chief Financial Officer of the Company, Vice President and Chief
Operating Officer of the Company, and President and Chief Operating Officer of
the Company, respectively.
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.
Robert J. Richardson has served as a director since March 2000. Mr.
Richardson has served as a semiconductor industry consultant from January 2000
to now. 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 five 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 6 meetings during the
year ended December 31, 2002. The Board of Directors has an Audit Committee, a
Compensation Committee, and a Nominating Committee.
During the year ended December 31, 2002, and as of April 14, 2003, the
Compensation Committee of the Board of Directors, consisting of directors George
Wells, Todd Myhre and Mario Rosati, held 3 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."
During the year ended December 31, 2002, and as of April 14, 2003, the
Audit Committee of the Board of Directors, consisting of Todd Myhre, G.
Frederick Forsyth, and Robert Richardson, held 6 meetings. The Audit Committee
oversees the Company's accounting and financial reporting process. See the
"Audit Committee Report" and the Audit Committee Charter attached hereto as
Appendix A.
The Nominating Committee of the Board of Directors, consisting of G. Frederick
Forsyth and Robert Richardson, was initiated on August 7, 2002. The Nominating
Committee held its first meeting on April 11, 2003.
No director serving in the year ended December 31, 2002 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.
5
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. Options issued to directors are fully vested upon
the date of grant.
AUDIT COMMITTEE REPORT(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 4 meetings in fiscal year
2002. 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 aspects
of the Company's financial affairs.
Genus management has primary responsibility for preparing Genus' financial
statements and for Genus' financial reporting process. Genus' independent
auditors, PricewaterhouseCoopers LLP ("PwC"), 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,
2002. PwC issued their unqualified report dated February 7, 2003 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 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 hereto 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, 2002 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.
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 2002:
DESCRIPTION OF SERVICES
-----------------------
Audit fees (1) . . . . . . . . . . . . . $ 312,450
Financial information system design
and implementation fees . . . . . . . . 0
All other fees (2) . . . . . . . . . . . $ 79,150
Total . . . . . . . . . . . . . . . $ 391,600
=========
(1) Represents the aggregate fees billed or to be billed for professional
services rendered for the audit of our 2002 annual financial statements and
for the review of the financial statements included in our quarterly
reports during such period.
(2) Other fees comprise of $50,750 for audit related work done in connection
with the private placements of stock, secondary offerings and proposed
transactions, as well as $28,400 for income tax compliance work.
The Company's Audit Committee has considered the provision of the services
described in footnote (2) above and deems such services are compatible with the
maintenance of the independent status of PricewaterhouseCoopers LLP.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2002 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.
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 $151,500. This note bears interest at the rate of 8%
compounded annually and is due in full on January 24, 2004, unless pre-paid on
an earlier date. The funds were used by Dr. Elder to exercise options for
50,000 shares of common stock of the Company. This transaction was reported on
a Form 4 to the Securities and Exchange Commission in 2001.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires our directors and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of our common
stock and our other equity securities. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish us with copies of
all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with during the fiscal
year ended December 31, 2002.
7
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the other most highly compensated executive officers of
the Company (the "Named Executive Officers") for the three fiscal years ended
December 31, 2002, 2001 and 2000:
LONG TERM COMPENSATION
AWARDS
-------------------------------
ANNUAL COMPENSATION SECURITIES
---------------------------------------- UNDERLYING
FISCAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) (# OF SHARES) COMPENSATION ($)
- --------------------------------- ------ ---------- ---------- ---------------- ------------- ----------------
William W.R. Elder . . . . . . . . 2002 288,000 0 0 186,000 25,437(2)
Chairman of the Board, 2001 330,000 0 0 50,000 18,460 (3)
President and Chief Executive 2000 330,000 31,000 (1) 0 50,000 13,650 (4)
Officer
Thomas E. Seidel, Ph.D.. . . . . . 2002 180,800 0 0 115,000 22,373(5)
Executive Vice President and 2001 218,532 0 0 0 24,421(6)
Chief Technical Officer 2000 240,000 0 0 30,000 11,671 (7)
Edward Lee . . . . . . . . . . . . 2002 161,500 0 0 84,000 13,184(8)
Executive Vice President, Advance 2001 175,632 0 0 25,000 13,239(9)
Technology 2000 71,453 10,000 0 0 0
Shum Mukherjee . . . . . . . . . . 2002 192,000 75,000 0 108,000 17,089(10)
Chief Financial Officer 2001 48,000 25,000 0 100,000 3,237 (11)
2000 N/A N/A N/A N/A N/A
Werner Rust. . . . . . . . . . . . 2002 153,000 0 50,000(12) 84,000 18,696(13)
Executive Vice President, 2001 15,692 0 0 50,000 1,747 (14)
Worldwide Sales & 2000 N/A N/A N/A N/A N/A
Marketing
<FN>
(1) Bonus paid to Dr. Elder for meeting 2000 objectives.
(2) Consists of insurance premium of $4,245 for a life insurance policy, car
allowance of $15,747, and matched 401(k) contribution of $5,445.
(3) Consists of insurance premiums of $4,910 for a group term life insurance
policy, the proceeds of which were payable to Mr. Elder's named
beneficiaries, CPA services allowance of $3,150, life insurance premium of
$5,625, and matched 401(k) contribution of $4,775.
(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.
8
(5) Consists of insurance premium of $4,949 for a life insurance policy, car
allowance of $12,000, and matched 401(k) contribution of $5,424.
(6) Consists of insurance premiums of $6,096 for a group term life insurance
policy, the proceeds of which were payable to Dr. Seidel's named
beneficiaries, CPA services allowance of $1,075, car allowance of $12,000,
and matched 401(k) contribution of $5,250.
(7) 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.
(8) Consists of insurance premium of $781 for a life insurance policy, car
allowance of $12,000, and matched 401(k) contribution of $403.
(9) Consists of insurance premiums of $839 for a group term life insurance
policy, the proceeds of which were payable to Mr. Lee's named
beneficiaries, and car allowance of $12,400.
(10) Consists of insurance premium of $949 for a life insurance policy, car
allowance of $12,000, and matched 401(k) contribution of $4,140.
(11) Consists of insurance premiums of $237 for a group term life insurance
policy, the proceeds of which were payable to Mr. Mukherjee's named
beneficiaries, and car allowance of $3,000.
(12) Commission paid to Mr. Rust for meeting 2002 sales objectives.
(13) Consists of insurance premium of $2,106 for a life insurance policy, car
allowance of $12,000, and matched 401(k) contribution of $4,590.
(14) Consists of insurance premiums of $114 for a group term life insurance
policy, the proceeds of which were payable to Mr. Rust's named
beneficiaries, car allowance of $1,250, and matched 401(k) contribution of
$383.
9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
2002 to Named Executive Officers. No Stock Appreciation Rights ("SARs") were
granted.
INDIVIDUAL GRANTS
--------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE APPRECIATION FOR OPTION
OPTIONS IN FISCAL PRICE PER EXPIRATION TERM (3)
NAME GRANTED YEAR (1) SHARE ($)(2) DATE 5% ($) 10% ($)
- -------------------- ---------- ----------- ------------- ---------- -------------- -----------
William W.R. Elder . . 100,000 11.42% $ 2.56 06/19/07 $ 71,000 $ 156,000
86,000 $ 1.29 10/25/07 $ 30,960 $ 67,940
Thomas E. Seidel . . . 50,000 7.06% $ 2.56 06/19/07 $ 35,500 $ 78,000
65,000 $ 1.29 10/25/07 $ 23,400 $ 51,350
Shum Mukherjee . . . . 50,000 6.63% $ 2.63 01/31/07 $ 36,500 $ 80,500
58,000 $ 1.29 10/25/07 $ 20,880 $ 45,820
Werner Rust. . . . . . 50,000 5.16% $ 2.63 01/31/07 $ 36,500 $ 80,500
34,000 $ 1.29 10/25/07 $ 12,240 $ 26,860
Edward Lee . . . . . . 50,000 5.16% $ 2.63 01/31/07 $ 6,500 $ 80,500
34,000 $ 1.29 10/25/07 $ 12,240 $ 26,860
<FN>
(1) Based on an aggregate of 1,628,721 options granted to all employees
(including employees at Korea and Japan subsidiaries) during fiscal year
2002. Options granted in fiscal year 2002 expire in 2007 and typically vest
monthly over three years commencing one month after 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.
10
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 2002
by the Named Executive Officers and the number and value of such officers'
unexercised options at December 31, 2002. No SARs have been granted.
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE- DECEMBER
SHARES VALUE OPTIONS DECEMBER 31, MONEY 31, 2002
ACQUIRED ON REALIZED 2002 OPTIONS AT ($)(2)
-----------------------
UNEXERCIS- UNEXERCIS-
NAME EXERCISE (#) ($) (1) EXERCISABLE ABLE EXERCISABLE ABLE
- ------------------ ------------ ---------- ----------- ---------- ------------ ------------
William W.R. Elder 0 $ 0 521,446 214,554 $ 300,000 $ 81,222
Thomas E. Seidel . 0 $ 0 331,018 113,055 $ 144,351 $ 61,389
Shum Mukherjee . . 0 $ 0 57,389 150,611 $ 3,222 $ 54,778
Werner Rust. . . . 0 $ 0 33,834 100,166 $ 1,889 $ 32,111
Edward Lee . . . . 0 $ 0 58,835 100,165 $ 1,889 $ 32,111
<FN>
(1) Market value of underlying securities (based on the fair market value of
the Company's common stock on the Nasdaq National Market) at the time of
exercise, minus the exercise price.
(2) Market value of securities underlying in-the-money options at the end of
fiscal year 2002 (based on $2.29 per share, the closing price of Company's
common stock on the Nasdaq National Market on December 31, 2002), less the
exercise price.
The Company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
11
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 and maximization
of shareholder value.
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
12
executives reporting to the Chief Executive Officer. The Chief
Executive Officer and Compensation Committee jointly set the Company
objectives to be used. The business unit and individual objectives are
formulated jointly by the Chief Executive Officer and the specific
individual. The Compensation Committee also, with the Chief Executive
Officer, jointly establishes and agrees on their respective
performance objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer, the Compensation Committee and full Board, as
appropriate.
4. At the end of the performance cycle, the Chief Executive Officer
evaluates each executive's relative success in meeting the performance
goals. The Chief Executive Officer makes recommendations on salary,
bonus and stock options, utilizing the comparative results as a
factor. Also included in the decision criteria are subjective factors
such as teamwork, leadership contributions and ongoing changes in the
business climate. The Chief Executive Officer reviews the
recommendations and obtains Compensation Committee approval. The
Compensation Committee also determines the level of salary and bonus
and the terms of stock option grants for the Chief Executive Officer.
6. The final evaluations and compensation decisions are discussed with
each executive by the Chief Executive Officer or Compensation
Committee, as appropriate.
William W.R. Elder has served as Chairman, President and Chief Executive
Officer since April 1998. In determining Mr. Elder's base salary and long-term
incentive compensation for 2002, the Compensation Committee considered both the
Company's performance and Mr. Elder's individual performance by the same
measures described above for determining executive compensation. No cash
bonuses were paid to Mr. Elder in fiscal year 2002.
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 retain and attract new
executives in addition to rewarding performance on the job.
Respectfully submitted by:
Mario M. Rosati
Todd S. Myhre
George D. Wells
13
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return among the Company, the NASDAQ Stock Market-US Index, the H & Q Technology
Index, and the RDG Technology Index for the period from December 31, 1997 (the
last trading day before the beginning of the Company's 1998 Fiscal Year) through
2002 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, the H&Q
Technology Index, and the RDG Technology Index on December 31, 1997 and all
dividends were reinvested. Historic stock price performance is not necessarily
indicative of future stock price performance.
Cumulative Total Return
---------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
GENUS, INC. 100.00 30.84 134.58 47.67 72.67 68.49
NASDAQ STOCK MARKET (U.S.) 100.00 140.99 261.48 157.40 124.87 86.38
JP MORGAN H & Q TECHNOLOGY 100.00 155.54 347.38 224.57 155.23 *
RDG TECHNOLOGY COMPOSITE 100.00 176.28 348.72 215.64 157.63 93.01
* JP Morgan H&Q Technology Index terminated as of February 28, 2002; the Company
has selected the RDG Technology Composite Index as an alternative reference to
the JP Morgan H&Q Technology Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG GENUS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE JP MORGAN H & Q TECHNOLOGY INDEX
AND THE RDG TECHNOLOGY INDEX
Begin: 12/31/1997
Period End: 12/31/2002
GENUS INC End: 12/31/2002
Beginning
Transaction Closing No. Of Dividend Dividend Shares Ending Cum. Tot.
Date* Type Price** Shares*** per Share Paid Reinvested Shares Return
- --------- ----------- ------- --------- --------- -------- ---------- ------ ---------
31-Dec-97 Begin 3.344 29.91 29.907 100.00
31-Dec-98 Year End 1.031 29.91 29.907 30.84
31-Dec-99 Year End 4.500 29.91 29.907 134.58
31-Dec-00 Year End 1.594 29.91 29.907 47.67
31-Dec-01 Year End 2.430 29.91 29.907 72.67
31-Dec-02 End 2.290 29.91 29.907 68.49
<FN>
* Specified ending dates or ex-dividends dates.
** All Closing Prices and Dividends are adjusted for stock splits and stock dividends.
***'Begin Shares' based on $100 investment.
JP Morgan indices ceased to exist in 2/2003 and therefore no data is required
for 12/2002. However, we need to disclose the history.
* $100 invested on 12/31/97 in stock or index including reinvestment of
dividends. Fiscal year ending December 31.
14
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.
On April 11, 2003, 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 3,250,000 to 3,550,000 shares.
The Board believes that increasing the number of shares available under the
Purchase Plan will enable the Company to continue its policy of encouraging
employee equity participation in the Company by enabling employees to purchase
the Company's common stock at a discount from the market price through voluntary
payroll deductions. The Board also believes the continued opportunity for
employees equity participation will promote the attraction, retention and
motivation of employees.
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 December 31, 2002 approximately 82 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. 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.
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
15
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.
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.
16
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two years from the first
day of the offering period and one year from the date the shares are purchased,
the participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
VOTE REQUIRED
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
17
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 shareholders approved the 2000 Plan in May 2000.
On April 11, 2003, the Board adopted, subject to shareholder approval, an
amendment to the 2000 Plan to increase the aggregate number of shares reserved
for issuance thereunder by 1,000,000, from 6,503,006 to 7,503,006. 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.
(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.
18
(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.
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.
19
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.
20
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 1,000,000 shares.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 2000 STOCK PLAN.
21
PROPOSAL FOUR
AMENDMENT TO EACH OF
THE 1989 EMPLOYEE STOCK PURCHASE PLAN
AND THE 2000 STOCK PLAN
1989 EMPLOYEE STOCK PURCHASE PLAN
On April 11, 2003, the Board of Directors amended the 1989 Employee Stock
Purchase Plan (the "Purchase Plan"), subject to shareholder approval, to provide
for an annual increase in the number of shares of Common Stock reserved
thereunder by the least of (i) 300,000 shares or (ii) 1% of the outstanding
shares of Common Stock of the Company on the last day of the immediately
preceding fiscal year or (iii) an amount to be reasonably determined by the
Board of Directors.
Under accounting rules, the Company is subject to negative accounting
treatment in the case of a shortfall of shares reserved for issuance under the
Purchase Plan. If a shortfall occurs during a purchase period, the Company will
be unable to seek shareholder approval for an increase without incurring
significant compensation charges. To avoid such circumstances, the Board of
Directors has approved an amendment to the Purchase Plan which would
automatically increase the shares reserved for issuance under the Purchase Plan
and proposes that it be approved by the shareholders at the Annual Meeting.
In addition, the Board believes that an annual increase to the number of
shares available under the Purchase Plan will enable the Company to continue its
policy of encouraging employee equity participation in the Company by enabling
employees to purchase the Company's common stock at a discount from the market
price through voluntary payroll deductions. The Board also believes the
continued opportunity for employees equity participation will promote the
attraction, retention and motivation of employees.
2000 STOCK PLAN
On April 11, 2003, the Board adopted, subject to shareholder approval, an
amendment to the 2000 Plan to provide for an annual increase in the number of
shares of Common Stock reserved thereunder by the least of (i) 1,000,000 shares
or (ii) 4% of the outstanding shares of Common Stock of the Company on the last
day of the immediately preceding fiscal year or (iii) an amount to be reasonably
determined by the Board of Directors. 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. The Board also believes the automatic annual increase will simplify
the administration of the 2000 Plan, save costs, and 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 intends that the
additional shares to be reserved for issuance resulting from the annual increase
as described in this proposal shall not be subject to future repricing.
VOTE REQUIRED
Affirmative votes constituting a majority of the Votes Cast will be
required to amend the 1989 Employee Stock Purchase Plan and the 2000 Stock Plan
as described in this proposal.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN AND THE 2000
STOCK PLAN.
22
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2002 about our
Common Stock that may be issued upon the exercise of options, warrants and
rights under all of our existing equity compensation plans, including the Genus,
Inc. the 2000 Stock Plan and the 1989 Employee Stock Purchase Plan, each as
amended.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED
WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN THE FIRST COLUMN)
PLAN CATEGORY (#) (a) ($) (b) (#) (c)
- ---------------------------- --------------------------- ---------------------- --------------------------------
Equity compensation plans
approved by security
holders (1) . . . . . . . 4,142,254 $3.05 478,338
Equity compensation plans
not approved by security
holders . . . . . . . . . None N/A N/A
Total. . . . . . . . . . . . 4,142,254 $3.05 478,338
<FN>
(1) These plans consist of : (i) the 2000 Stock Plan and (ii) the 1989 Employee
Stock Purchase Plan.
23
PROPOSAL FIVE
APPROVAL OF AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
GENERAL
The Board of Directors has determined that it is in the best interests of
the Company and its shareholders to amend the Company's Articles of
Incorporation and to increase the number of authorized shares of the Company's
Common Stock from 50,000,000 to 100,000,000. Accordingly, the Board of Directors
has unanimously approved the proposed Amended and Restated Articles of
Incorporation, in substantially the form attached hereto as Appendix B (the
"Articles"), and hereby solicits the approval by the Company's shareholders of
the Articles.
If the shareholders approve the Articles, the Board of Directors currently
intends to file the Articles with the Secretary of State of the State of
California as soon as practicable following such shareholder approval.
PURPOSE
The objectives of the increase in the authorized number of shares of Common
Stock from 50,000,000 to 100,000,000 shares are to ensure that there is a
sufficient number of authorized shares available for future issuances relating
to, but not limited to, financings, establishing strategic relationships with
corporate partners, effecting stock splits or dividends, and/or for general
corporate purposes. The additional shares of Common Stock authorized may also be
used to acquire or invest in complementary businesses or products or to obtain
the right to use complementary technologies. Although the Company has no present
obligation to issue additional shares of Common Stock, the Board of Directors
believes that the increase in the authorized number of shares of Common Stock
are in the best interests of the Company and its shareholders.
Genus' authorized common stock currently consists of 50,000,000 shares of
common stock. As of December 31, 2002, Genus had issued 28,623,570 shares of
common stock. Also as of December 31, 2002, Genus had 4,142,254 shares reserved
for issuance under its 2000 stock plan and 1989 employee stock purchase plan (or
5,442,254 if proposal nos. 2 and 3 are approved). In addition, Genus has
reserved for issuance 3,723,222 shares of common stock for issuance upon
exercise of warrants issued to investors, 5,031,797 shares of common stock for
issuance upon conversion of convertible notes issued to investors, and 2,000,000
shares of common stock reserved for issuance to holders of convertible
promissory notes in lieu of cash payment for interest. As a consequence, Genus
may issue only 6,479,157 additional shares of common stock (or 5,179,157 if
proposal nos. 2 and 3 are approved).
While Genus does not have any current intention to seek outside financing,
it does believe that such financing may become necessary in the future. The
semiconductor industry is experiencing its greatest downturn ever. This has
resulted in reduced revenues, delays in receiving expected bookings and also
delays in shipments. While Genus has received very positive feedback on its
products, there is no assurance that Genus will generate sales sufficient to
achieve and maintain positive cashflows from its operations.
If Genus were required to raise additional capital to fund operations, it
is likely that Genus would be required to issue equity securities or securities
convertible into equity securities to investors. If the proposal to increase the
authorized capital stock of the Company from 50,000,000 to 100,000,000 is not
approved by Genus' shareholders, it may be difficult or impossible for Genus to
raise necessary capital to continue its operations. Even if the proposal is
passed, there can be no assurance that Genus would be able to raise any required
capital on commercially reasonable terms or at all.
The additional Common Stock would have rights identical to the currently
outstanding Common Stock of the Company. Adoption of the proposed Articles would
not affect the rights of the holders of currently outstanding Common Stock of
the Company, except for effects incidental to increasing the number of shares of
the Company's Common Stock outstanding.
24
POSSIBLE EFFECTS OF AMENDMENT
If the shareholders approve the proposed Articles, the Board of Directors
may cause the issuance of additional shares of Common Stock without further vote
of the shareholders of the Company, except as provided under California
corporate law or under the rules of any national securities exchange on which
shares of Common Stock of the Company are then listed. Current holders of Common
Stock have no preemptive or like rights, which means that current shareholders
do not have a prior right to purchase any new issue of capital stock of the
Company in order to maintain their appropriate ownership thereof. The issuance
of additional shares of Common Stock would decrease the proportionate equity
interest of the Company's current shareholders and, depending upon the price
paid for such additional shares, could result in dilution to the Company's
current shareholders.
In addition, the Board of Directors could use authorized but unissued shares
to create impediments to a takeover or a transfer of control of the Company.
Accordingly, the increase in the number of authorized shares of Common Stock may
deter a future takeover attempt that holders of Common Stock may deem to be in
their best interest or in which holders of Common Stock may be offered a premium
for their shares over the market price. The Board of Directors is not currently
aware of any attempt to take over or acquire the Company. While it may be deemed
to have potential anti takeover effects, the proposed amendment to increase the
authorized Common Stock is not prompted by any specific effort or takeover
threat currently perceived by management.
VOTE REQUIRED
Approval of the amendment to the Articles requires the affirmative vote of a
majority of the outstanding shares.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION.
25
PROPOSAL SIX
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, 2003, 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 24, 2003
26
APPENDIX A
Audit Committee Charter
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
GENUS, INC.
(as amended and restated 02/07/03)
PURPOSE:
The purpose of the Audit Committee of the Board of Directors of Genus, Inc. (the
"COMPANY") shall be to:
- - Oversee the accounting and financial reporting processes of the Company and
audits of the financial statements of the Company;
- - Assist the Board in oversight and monitoring of (i) the integrity of the
Company's financial statements, (ii) the Company's compliance with legal
and regulatory requirements, (iii) the independent auditor's
qualifications, independence and performance, and (iv) the Company's
internal accounting and financial controls;
- - Prepare the report that the rules of the Securities and Exchange Commission
(the "SEC") require be included in the Company's annual proxy statement;
- - Provide the Company's Board with the results of its monitoring and
recommendations derived therefrom; and
- - Provide to the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters
that require the attention of the Board.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors. The Audit Committee will consist of at
least three members of the Board of Directors. Members of the Audit Committee
must meet the following criteria (as well as any criteria required by the SEC):
- Each member will be an independent director, as defined in (i) NASDAQ
Rule 4200 and (ii) the rules of the SEC;
- Each member will be able to read and understand fundamental financial
statements, in accordance with the NASDAQ National Market Audit
Committee requirements; and
- At least one member will have past employment experience in finance or
accounting, requisite professional certification in accounting, or
other comparable experience or background, including a current or past
position as a principal financial officer or other senior officer with
financial oversight responsibilities.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
27
- Reviewing on a continuing basis the adequacy of the Company's system
of internal controls, including meeting periodically with the
Company's management and the independent auditors to review the
adequacy of such controls and to review before release the disclosure
regarding such system of internal controls required under SEC rules to
be contained in the Company's periodic filings and the attestations or
reports by the independent auditors relating to such disclosure;
- Appointing, compensating, and overseeing the work of the independent
auditors (including resolving disagreements between management and the
independent auditors regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work;
- Pre-approving audit and non-audit services provided to the Company by
the independent auditors (or subsequently approving non-audit services
in those circumstances where a subsequent approval is necessary and
permissible); in this regard, the Audit Committee shall have the sole
authority to approve (i) the hiring and firing of the independent
auditors; (ii) all audit engagement fees and terms; and (iii) all
non-audit engagements, as may be permissible, with the independent
auditors;
- Reviewing and providing guidance with respect to the external audit
and the Company's relationship with its independent auditors by (i)
reviewing the independent auditors' proposed audit scope, approach and
independence; (ii) obtaining on a periodic basis a statement from the
independent auditors regarding relationships and services with the
Company which may impact independence and presenting this statement to
the Board of Directors, and to the extent there are relationships,
monitoring and investigating them; (iii) reviewing the independent
auditors' peer review conducted every three years; (iv) discussing
with the Company's independent auditors the financial statements and
audit findings, including any significant adjustments, management
judgments and accounting estimates, significant new accounting
policies and disagreements with management and any other matters
described in SAS No. 61, as may be modified or supplemented; and (v)
reviewing reports submitted to the audit committee by the independent
auditors in accordance with the applicable SEC requirements;
- Reviewing and discussing with management and the independent auditors
the annual audited financial statements and quarterly unaudited
financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," prior to filing the Company's Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q, respectively, with the
SEC;
- Directing the Company's independent auditors to review before filing
with the SEC the Company's interim financial statements included in
Quarterly Reports on Form 10-Q, using professional standards and
procedures for conducting such reviews;
- Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements
provided to management by the independent auditors;
- Reviewing before release the unaudited quarterly operating results in
the Company's quarterly earnings release;
- Overseeing compliance with the requirements of the SEC for disclosure
of auditor's services and audit committee members, member
qualifications and activities;
- Reviewing, approving and monitoring the Company's code of ethics for
its senior financial officers;
- Reviewing management's monitoring of compliance with the Company's
standards of business conduct and with the Foreign Corrupt Practices
Act;
- Reviewing, in conjunction with counsel, any legal matters that could
have a significant impact on the Company's financial statements;
28
- Providing oversight and review at least annually of the Company's risk
management policies, including its investment policies;
- Reviewing the Company's compliance with employee benefit plans;
- Overseeing and reviewing the Company's policies regarding information
technology and management information systems;
- If necessary, instituting special investigations with full access to
all books, records, facilities and personnel of the Company;
- As appropriate, obtaining advice and assistance from outside legal,
accounting or other advisors; in this regard, the Audit Committee
shall have the sole authority to approve the hiring and firing of
outside advisors, including counsel, to assist the audit committee
members in carrying out the duties of the Audit Committee;
- Reviewing and approving in advance any proposed related party
transactions;
- Reviewing its own charter, structure, processes and membership
requirements;
- Providing a report in the Company's proxy statement in accordance with
the rules and regulations of the SEC; and
- Establishing procedures for receiving, retaining and treating
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and procedures for the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
MEETINGS:
The Audit Committee will meet at least five times each year. The Audit Committee
may establish its own schedule, which it will provide to the Board of Directors
in advance.
The Audit Committee will meet separately with the Chief Executive Officer and
separately with the Chief Financial Officer of the Company at such times as are
appropriate to review the financial affairs of the Company. The Audit Committee
will meet separately with the independent auditors of the Company, at such times
as it deems appropriate, but not less than quarterly, to fulfill the
responsibilities of the Audit Committee under this charter.
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board of Directors.
REPORTS:
In addition to preparing the report in the Company's proxy statement in
accordance with the rules and regulations of the SEC, the Audit Committee will
summarize its examinations and recommendations to the Board of Directors as may
be appropriate, consistent with the Committee's charter.
COMPENSATION:
Members of the Audit Committee shall receive such fees, if any, for their
service as Audit Committee members, as may be determined by the Board of
Directors in its sole discretion. Such fees may include retainers or per
meeting fees. Fees may be paid in such form of consideration as is determined
by the Board of Directors.
29
Members of the Audit Committee may not receive any compensation from the Company
except the fees that they receive for service as a member of the Board of
Directors or any committee thereof.
FUNDING:
The Company shall provide the Audit Committee the appropriate funding, as
reasonably determined by the Audit Committee, in its capacity as a committee of
the Board of Directors, for payments of compensation to any independent auditors
of the Company and any advisors engaged by the Audit Committee.
DELEGATION OF AUTHORITY:
The Audit Committee may delegate to one or more designated members of the Audit
Committee the authority to pre-approve audit and permissible non-audit services,
provided such pre-approval decision is presented to the full Audit Committee at
its scheduled meetings.
30
APPENDIX B
Amendment to Articles of Incorporation
The first paragraph to Article III of the Company's Amended and Restated
Articles of Incorporation shall be deleted in its entirety and replaced with the
following:
"This Corporation is authorized to issue two classes of shares, designated
"Common Stock" and "Preferred Stock." The total number of shares which this
corporation is authorized to issue is 102,000,000. The number of shares of
Preferred Stock which this corporation is authorized to issue is 2,000,000. The
number of shares of Common Stock which this corporation is authorized to issue
is 100,000,000."
31
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
2003 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 24, 2003, and hereby appoints
William W.R. Elder and Shum Mukherjee 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 2003 Annual Meeting of Shareholders of Genus,
Inc. to be held on Thursday, June 12, 2003 at 10:00 a.m., local time, at the
Company's principal executive offices at 1139 Karlstad Drive in Sunnyvale,
California 94089, 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,
and Robert J. Richardson
2. Proposal to approve an amendment to the 1989 Employee Stock Purchase
Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve an amendment to the 2000 Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to approve an amendment to each of the 1989 Employee Stock
Purchase Plan and the 2000 Stock Plan to provide for an annual increase in
the number of shares of Common Stock reserved thereunder.
32
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Proposal to approve the amendment to the Company's Amended and Restated
Articles of Incorporation to increase the number of authorized shares of
Company Common Stock from 50,000,000 to 100,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. 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, 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. 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
AMENDMENT OF THE ARTICLES OF INCORPORATION, 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 , 2003
--------------------------------- ----------
(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 -
33