<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
Intevac, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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 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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<PAGE> 2
[INTERVAC LOGO]
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Intevac, Inc., a California corporation (the "Company")
which will be held on May 15, 2000, at 9:00 a.m., local time, at the Company's
headquarters, 3560 Bassett Street, Santa Clara, California 95054.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals: (i) to elect five (5) directors of the Company; (ii) to
amend the Company's bylaws to increase the range of authorized number of
directors, (iii) to approve an amendment to the Stock Option/Stock Issuance Plan
to increase the number of shares reserved thereunder; and (iv) to ratify the
appointment of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending December 31, 2000.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting. After careful consideration, the
Company's Board of Directors has unanimously approved the proposals and
recommends that you vote FOR each such proposal.
After reading the Proxy Statement, please mark, date, sign and return the
enclosed proxy card in the accompanying reply envelope to ensure receipt by the
Company's Transfer Agent no later than May 12, 2000. If you decide to attend the
Annual Meeting and would prefer to vote in person, please notify the Secretary
of the Company that you wish to vote in person and your proxy will not be voted.
YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY
OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's 1999 Annual Report has been mailed concurrently
herewith to all shareholders entitled to notice of and to vote at the Annual
Meeting.
We look forward to seeing you at the Annual Meeting. Please notify Kathleen
Sinclair at (408) 496-2877 if you plan to attend.
Sincerely yours,
/s/ NORMAN H. POND
Norman H. Pond
President and Chief Executive Officer
Santa Clara, California
March 15, 2000
IMPORTANT
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT IF YOU ARE
UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
<PAGE> 3
INTEVAC, INC.
3560 BASSETT STREET
SANTA CLARA, CALIFORNIA 95054
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2000
------------------------
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Intevac, Inc., a California corporation (the "Company"), to
be held on May 15, 1999 at 9:00 a.m., local time, at the Company's headquarters,
3560 Bassett Street, Santa Clara, California 95054, for the following purposes:
1. To elect directors to serve for the ensuing year or until their
respective successors are duly elected and qualified. The nominees are
Norman H. Pond, Edward Durbin, Robert D. Hempstead, David N. Lambeth and H.
Joseph Smead.
2. To amend the Company's Bylaws to increase the range of authorized
number of directors to four to seven.
3. To approve an amendment to the Stock Option/Stock Issuance Plan to
increase the number of shares reserved for issuance thereunder by 300,000.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement that accompanies this Notice.
Only shareholders of record at the close of business on March 17, 2000 are
entitled to notice of and to vote at the Annual Meeting and at any continuation
or adjournment thereof.
All shareholders are cordially invited and encouraged to attend the Annual
Meeting. In any event, to ensure your representation at the meeting, please
carefully read the accompanying Proxy Statement which describes the matters to
be voted on at the Annual Meeting and sign, date and return the enclosed proxy
card in the reply envelope provided. Should you receive more than one proxy
because your shares are registered in different names and addresses, each proxy
should be returned to ensure that all your shares will be voted. If you attend
the Annual Meeting and vote by ballot, your proxy will be revoked automatically
and only your vote at the Annual Meeting will be counted. The prompt return of
your proxy card will assist us in preparing for the Annual Meeting.
We look forward to seeing you at the Annual Meeting. Please notify Kathleen
Sinclair at (408) 496-2877 if you plan to attend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CHARLES B. EDDY III
CHARLES B. EDDY III
Vice President, Finance and
Administration,
Chief Financial Officer, Treasurer and
Secretary
Santa Clara, California
March 15, 2000
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. IN ANY EVENT, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU
ARE URGED TO VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE PROVIDED.
<PAGE> 4
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
INTEVAC, INC.
TO BE HELD MAY 15, 2000
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Intevac, Inc., a California corporation (the "Company"
or "Intevac"), of proxies to be voted at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on May 15, 2000, or at any adjournment or
postponement thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders. Shareholders of record on March 17, 2000 will be
entitled to vote at the Annual Meeting. The Annual Meeting will be held at 9:00
a.m., local time, at the Company's headquarters, 3560 Bassett Street, Santa
Clara, California 95054.
It is anticipated that this Proxy Statement and the enclosed proxy card
will be first mailed to shareholders on or about April 3, 2000.
VOTING RIGHTS
The close of business on March 17, 2000 was the record date for
shareholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. At the record date, the Company had approximately
shares of its Common Stock outstanding and entitled to vote at the
Annual Meeting, held by approximately shareholders of record. The
Company believes that approximately beneficial owners hold shares
through brokers, fiduciaries and nominees. Holders of Common Stock are entitled
to one vote for each share of Common Stock so held. A majority of the shares of
Common Stock entitled to vote will constitute a quorum for the transaction of
business at the Annual Meeting.
If any shareholder is unable to attend the Annual Meeting, such shareholder
may vote by proxy. The enclosed proxy is solicited by the Company's Board of
Directors (the "Board of Directors" or the "Board"), and, when the proxy card is
returned properly completed, it will be voted as directed by the shareholder on
the proxy card. Shareholders are urged to specify their choices on the enclosed
proxy card. If a proxy card is signed and returned without choices specified, in
the absence of contrary instructions, the shares of Common Stock represented by
such proxy will be voted FOR Proposals 1, 2, 3 and 4 and will be voted in the
proxy holders' discretion as to other matters that may properly come before the
Annual Meeting.
The five director nominees receiving the highest number of affirmative
votes will be elected. Votes against a nominee, abstentions and brokers
non-votes will have no effect on the election of directors. Approval of Proposal
2 requires the affirmative vote of a majority of the outstanding shares entitled
to vote. Approval of Proposals 3 and 4 require (i) the affirmative vote of a
majority of those shares present and voting, and (ii) the affirmative vote of
the majority of the required quorum. Thus, abstentions and broker non-votes can
have the effect of preventing approval of a proposal where the number of
affirmative votes, though a majority of the votes cast, does not constitute a
majority of all outstanding shares, in the case of Proposal 2, or of the
required quorum in the case of Proposals 3 and 4. All votes will be tabulated by
the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before its
exercise. A proxy may be revoked by filing with the Secretary of the Company an
instrument of revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
<PAGE> 5
SOLICITATION OF PROXIES
The Company will bear the cost of soliciting proxies. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
to forward to such beneficial owners. The Company may reimburse such persons for
their costs of forwarding the solicitation material to such beneficial owners.
The original solicitation of proxies by mail may be supplemented by solicitation
by telephone, telegram, or other means by directors, officers, employees or
agents of the Company. No additional compensation will be paid to these
individuals for any such services. Except as described above, the Company does
not intend to solicit proxies other than by mail.
THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999 HAS BEEN MAILED CONCURRENTLY WITH THE MAILING OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT TO ALL SHAREHOLDERS ENTITLED TO NOTICE OF AND TO
VOTE AT THE ANNUAL MEETING. THE ANNUAL REPORT IS NOT INCORPORATED INTO THIS
PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING MATERIAL.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
At the Annual Meeting, five directors (constituting the entire board) are
to be elected to serve until the next Annual Meeting of Shareholders and until a
successor for each such director is elected and qualified, or until the death,
resignation, or removal of such director. It is intended that the proxies will
be voted for the five nominees named below unless authority to vote for any such
nominee is withheld. All five nominees are currently directors of the Company,
and all were elected to the Board by the shareholders at the last annual
meeting. Each person nominated for election has agreed to serve if elected, and
the Board of Directors has no reason to believe that any nominee will be
unavailable or will decline to serve. In the event, however, that any nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any other person who is designated by the current
Board of Directors to fill the vacancy. Unless otherwise instructed, the
proxyholders will vote the proxies received by them for the nominees named
below. The five candidates receiving the highest number of the affirmative votes
of the shares entitled to vote at the Annual Meeting will be elected directors
of the Company. The proxies solicited by this Proxy Statement may not be voted
for more than five nominees.
NOMINEES
Set forth below is information regarding the nominees to the Board of
Directors.
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY AGE
---- ---------------------------- ---
<S> <C> <C>
Norman H. Pond............................ Chairman of the Board, President and 61
Chief Executive Officer
Edward Durbin(1).......................... Director 72
Robert D. Hempstead....................... Director 56
David N. Lambeth(1)(2).................... Director 52
H. Joseph Smead(2)........................ Director 74
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION AS DIRECTORS
Mr. Pond is a founder of Intevac and has served as Chairman of the Board,
President and Chief Executive Officer since February 1991. Before joining
Intevac, from 1988 to 1990, Mr. Pond served as President and Chief Operating
Officer of Varian Associates, Inc. ("Varian"), a publicly held manufacturer of
semiconductor, communication, defense and medical products where he was
responsible for overall manage-
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ment of Varian's operations. From 1984 to 1988, Mr. Pond was President of
Varian's Electron Device and Systems Group and became a Director of Varian in
1986. Prior to joining Varian, Mr. Pond was employed by Teledyne from 1963 to
1984 where he served in various positions, including as Group Executive. Mr.
Pond holds a B.S. in physics from the University of Missouri at Rolla and a M.S.
in physics from the University of California at Los Angeles.
Mr. Durbin has served as a Director of Intevac since February 1991. Mr.
Durbin is the Vice Chairman of Kaiser Aerospace and Electronics Corporation
("Kaiser"), a privately held manufacturer of electronic and electro-optical
systems, responsible for marketing and business development since joining Kaiser
in 1975. Mr. Durbin currently serves as a director for all of Kaiser's
subsidiaries. Mr. Durbin holds a B.S. in electrical engineering from The Cooper
Union and a M.S. in electrical engineering from the Polytechnic Institute of
Brooklyn.
Dr. Hempstead has served as a Director of Intevac since March 1997 and
served as Chief Operating Officer of Intevac from April 1996 through June 1999.
Before joining Intevac, Dr. Hempstead served as Executive Vice President of
Censtor Corp., a manufacturer of computer disk drive heads and disks, from
November 1994 to February 1996. He was a self-employed consultant from 1989 to
November 1994. Dr. Hempstead is currently Chief Technology Officer at Veeco
Instruments. Dr. Hempstead holds a B.S. and M.S. in electrical engineering from
Massachusetts Institute of Technology and a Ph.D. in physics from the University
of Illinois.
Dr. Lambeth has served as a Director of Intevac since May 1996. Dr. Lambeth
has been Professor of both Electrical and Computer Engineering and Material
Science Engineering at Carnegie Mellon University since 1989. Dr. Lambeth was
Associate Director of the Data Storage Systems at Carnegie Mellon University
from 1989 to 1999. Since 1988, Dr. Lambeth has been the owner of Lambeth
Systems, an engineering consulting firm. From 1973 to 1988, Dr. Lambeth worked
at Eastman Kodak Company's Research Laboratories, most recently as the head of
the Magnetic Material Laboratory. Dr. Lambeth holds a B.S. in electrical
engineering from the University of Missouri and a Ph.D. in physics from the
Massachusetts Institute of Technology.
Dr. Smead has served as a Director of Intevac since February 1991. Dr.
Smead joined Kaiser in 1974 and served as Kaiser's President from 1974 until
October 1, 1997. Dr. Smead served as President and Chairman of the Board of
Directors of K Systems, Inc., Kaiser's parent company, from 1977 until October
1, 1997. Dr. Smead served as Chairman of the Board of Directors of Kaiser and as
a director for all of Kaiser's subsidiaries until December 31, 1999. Dr. Smead
continues to serve as a director of Kaiser. Dr. Smead holds a B.S. in electrical
engineering from the University of Colorado, a M.S. in electrical engineering
from the University of Washington and a Ph.D. in electrical engineering from
Purdue University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five (5) meetings during fiscal 1999. All
members of the Board of Directors during fiscal 1999 attended at least
seventy-five percent (75%) of the aggregate of the total number of meetings of
the Board of Directors held during the fiscal year and the total number of
meetings held by all committees of the Board on which each such director served.
There are no family relationships among executive officers or directors of the
Company. The Board of Directors has an Audit Committee and a Compensation
Committee.
The Audit Committee of the Board of Directors held four (4) meetings during
fiscal 1999. The Audit Committee, which during 1999 was comprised of Mr. Durbin
and Dr. Lambeth, recommends engagement of the Company's independent auditors,
approves services performed by such auditors, and reviews and evaluates the
Company's accounting system and its system of internal controls.
The Compensation Committee of the Board of Directors held one (1) meeting
during fiscal 1999. The Compensation Committee, which during 1999 was comprised
of Dr. Lambeth and Dr. Smead, has overall responsibility for the Company's
compensation policies and determines the compensation payable to the Company's
executive officers, including their participation in certain of the Company's
employee benefit and stock plans.
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DIRECTOR COMPENSATION
Directors of the Company do not receive compensation for services provided
as a director. The Company also does not pay compensation for committee
participation or special assignments of the Board of Directors. However, the
directors are eligible to receive periodic option grants under the Discretionary
Option Grant Programs in effect under the Company's 1995 Stock Option/Stock
Issuance Plan (the "1995 Plan"). Under the Discretionary Option Grant Program,
all directors are eligible to receive option grants, when and as determined by
the Board of Directors. Mr. Durbin, Dr. Lambeth and Dr. Smead each received
option grants of 5,000 shares under the Discretionary Option Grant Program
during the 1999 fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ELECTION OF
ALL OF THE ABOVE NOMINEES FOR ELECTION AS DIRECTORS.
PROPOSAL NO. 2:
AMENDMENT OF BYLAWS TO INCREASE RANGE OF AUTHORIZED NUMBER OF DIRECTORS
The Company's Bylaws currently provide for a Board of Directors consisting
of five members. The Bylaws also permit the Board to change the authorized
number of directors at any time so long as it stays within a range of three to
five members. This range of directors itself may be changed only with the
approval of the Company's shareholders. As a result, any increase in the size of
the Board from its current five members will require the approval of the
shareholders.
The Board currently believes that the Company and its shareholders may
benefit from the inclusion of additional persons on the Company's Board of
Directors. As the Company continues to expand its product lines, especially in
the area of Photonics, the Board believes that additional members could provide
valuable expertise and experience. At the current time, however, the Board is
not ready to propose any specific candidates. Nonetheless, the Board may do so
in the future, and the need to obtain shareholder approval at that time would
substantially delay the Company's ability to take timely action on such a
candidate. Such shareholder approval would most likely necessitate holding a
special meeting of shareholders, which would entail substantial delay and
expense to the Company.
Under California law, when a corporation's bylaws provide for a range in
the authorized number of directors, the upper end of the range may not be more
than one less than two times the lower end of the range. For example, ranges of
three to five, four to seven and five to nine are permissible, while a range of
four to eight is not.
The Board of Directors is proposing that the range of directors specified
in the Bylaws be changed to four to seven. The exact number of directors will
currently remain at five, but can be changed by the Board itself, within the
above range, if and when the Board locates a suitable candidate for addition to
the Board. Any such person added to the Board by action of the Board would stand
for reelection as a director along with all other directors at the Company's
next annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S BYLAWS TO INCREASE THE RANGE OF AUTHORIZED NUMBER OF
DIRECTORS TO FOUR TO SEVEN MEMBERS.
PROPOSAL NO. 3:
APPROVAL OF AMENDMENT TO THE STOCK OPTION/STOCK ISSUANCE PLAN
The Company's 1995 Stock Option/Stock Issuance Plan (the "1995 Plan"), as
amended in May 1999, provides for (i) the granting of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to employees of the Company and (ii) the granting of
non-statutory stock options and stock purchase rights ("SPRs") to employees,
non-employee members of the Board of Directors and consultants of the Company.
The 1995 Plan also provides the Administrator with the authority to grant stock
appreciation rights. The 1995 Plan was approved by the Board of Directors in
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<PAGE> 8
September 1995 and approved by the stockholders in September 1995. Unless
terminated sooner, the 1995 Plan will terminate automatically on September 30,
2005. On December 31, 1999 the price of the Company's common stock was $3.50 per
share.
In 1993, Section 162(m) was added to the Code. Section 162(m) may limit the
Company's ability to deduct for United States federal income tax purposes
compensation in excess of $1,000,000 paid to the Company's Chief Executive
Officer and its four other highest paid executive officers in any one fiscal
year. Grants under the 1995 Plan are not subject to the deduction limitation.
In February 2000, the Board of Directors increased the shares reserved for
issuance under the 1995 Plan by 300,000 shares, bringing the total shares
currently reserved for issuance under the 1995 Plan to 2,383,667. This proposal
seeks shareholder approval of the increase in shares reserved.
The Company believes that stock options play a key role in the Company's
ability to recruit, reward and retain executives and key employees. Companies
like Intevac have historically used stock options as an important part of
recruitment and retention packages. The Company competes directly with these
companies for experienced executives, technical and sales personnel and believes
that it must be able to offer comparable packages to attract the caliber of
individual necessary to the Company's business.
ADMINISTRATION
The 1995 Plan is administered by the Board or a committee appointed by the
Board. The administrators of the 1995 Plan are referred to herein as the
"Administrator."
ELIGIBILITY; LIMITS ON GRANTS
The 1995 Plan provides that options and stock purchase rights may be
granted to employees, including officers, directors and consultants to the
Company, its parent or subsidiaries. Incentive stock options may be granted only
to employees, including employee directors and officers. The Administrator
approves the participants, the time or times at which options and stock purchase
rights are granted and the number of shares subject to each. The 1995 Plan is
administered so as to satisfy certain requirements under the federal securities
laws, including under the Exchange Act, and under the Code.
The 1995 Plan limits the discretion allowed to the Administrator in
granting options. This limitation is intended to preserve the Company's ability
to deduct for federal income tax purposes the compensation expense relating to
options granted to certain executive officers under the 1995 Plan. Without this
limitation in the 1995 Plan, the Company's ability to deduct such compensation
expense might be reduced. The limitation provides that under the 1995 Plan no
employee may be granted in any one fiscal year options to receive more than
200,000 shares of Common Stock (except in connection with the commencement of
employment, in which case options to purchase up to an additional 150,000 shares
may be granted). (See the discussion below under "Tax Information" for a summary
of the more general rules governing the availability to the Company of tax
deductions in connection with stock options granted under the 1995 Plan.)
As of February 26, 2000, there were approximately 189 employees, directors
and consultants eligible to participate in the 1995 Plan, and 130 optionees,
including directors and consultants, held outstanding options under the 1995
Plan.
TERMS OF OPTIONS
The terms of options and stock purchase rights granted under the 1995 Plan
are determined by the Administrator. Each option or stock purchase right is
evidenced by a written agreement between the Company and the optionee to whom
such option or stock purchase right is granted and is generally subject to the
following terms and conditions:
(a) EXERCISE OF THE OPTION: The Administrator determines when options may
be exercisable. Shares subject to an option generally vest and are
exercisable over five years at the rate of 20% of the shares on each
anniversary of the Vesting Commencement Date (as defined in the 1995
Plan). The
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Administrator may accelerate the vesting of any outstanding option. The
purchase price of the shares to be purchased upon exercise of any
option may be paid, at the discretion of the Administrator, in cash or
check or, if specified in the optionee's option agreement, by
promissory note, cashless exercise, by other shares of Common Stock
(with some restrictions) or other legally permitted consideration.
(b) EXERCISE PRICE: The exercise price of options and SPRs under the 1995
Plan is determined by the Administrator, provided that, (i) in the case
of an incentive stock option, the exercise price may not be less than
100% of the fair market value of the Common Stock on the date the
option is granted, (ii) in the case of a non-statutory option or stock
purchase right, the exercise price cannot be less than 85% of such fair
market value, and (iii) in the case of an incentive stock option
granted to an employee who, at the time of such grant, owns stock
representing more than 10% of the voting power of all classes of stock
of the Company, the exercise price may be no less than 110% of the fair
market value of the Common Stock on the date the option is granted.
(c) TERMINATION OF EMPLOYMENT: If the optionee's status as an employee or
consultant terminates for any reason other than misconduct, death or
disability, an option under the 1995 Plan may be exercised not later
than ninety days (or such other period of time, as is determined by the
Administrator and specified in the optionee's option agreement) after
such termination (but in no event later than the date of expiration of
the term of the option) and may be exercised only to the extent such
option was exercisable and vested on the date of termination. If an
optionee's status as an employee or consultant terminates for
misconduct, all outstanding options will terminate immediately and
cease to be outstanding.
(d) DEATH OR DISABILITY OF OPTIONEE: If an optionee should die or become
totally and permanently disabled (as defined in the tax code) while
employed by the Company, an option may be exercised within twelve
months after death or termination of employment due to such disability
(but in no event later than the date of expiration of the term of the
option), but only to the extent such option was exercisable and vested
on the date of death or such termination due to disability.
(e) EXPIRATION OF OPTIONS: Stock options granted under the 1995 Plan expire
as determined by the Administrator, but in no event later than ten
years from the date of grant. However, in the case of an incentive
stock option granted to an employee who, at the time of such grant,
owns stock representing more than 10% of the voting power of all
classes of stock of the Company, the term of the option may not be
greater than five years. Under the form of option agreement currently
used by the Company, options generally expire ten years from the date
of grant.
(f) NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS: Unless
otherwise specified by the Administrator, options and stock purchase
rights are non-transferable by the optionee other than by will or by
the laws of descent or distribution and are exercisable during the
optionee's lifetime only by the optionee.
(g) OTHER PROVISIONS: The option agreement or restricted stock purchase
agreement may contain such other terms, provisions and conditions not
inconsistent with the 1995 Plan as may be determined by the
Administrator.
STOCK PURCHASE RIGHTS
The 1995 Plan permits the Company to grant rights to purchase Common Stock
of the Company either alone, in addition to, or in tandem with other awards
under the 1995 Plan and/or cash awards made outside the Plan. Upon the granting
of such a stock purchase right under the 1995 Plan, the offeree is advised in
writing of the terms, conditions and restrictions related to the grant,
including the number of shares of Common Stock that the offeree is entitled to
purchase, the price to be paid and the time within which the offeree must accept
such offer (which shall in no event exceed six months from the date of grant).
The offer is accepted by execution of a restricted stock purchase agreement
between the Company and the offeree.
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Unless the Administrator determines otherwise, the restricted stock
purchase agreement grants the Company a repurchase option exercisable upon the
voluntary or involuntary termination of the purchaser's employment or consulting
relationship with the Company for any reason (including death or permanent and
total disability) or the failure of the purchaser to attain certain performance
objectives. The repurchase price for shares repurchased pursuant to this
repurchase option is 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 lapses at such rate as the Administrator may determine.
Upon exercise of a stock purchase right, the purchaser has all rights of a
stockholder of the Company.
STOCK APPRECIATION RIGHTS
The Administrator also has discretion to issue under the Discretionary
Option Grant Program tandem stock appreciation rights which provide the holders
with the election to surrender their outstanding options for an appreciation
distribution from the Company equal to the excess of (i) the fair market value
of the vested shares of Common Stock subject to the surrendered option over (ii)
the aggregate exercise price payable for such shares. Such appreciation
distribution may be made in cash or in shares of Common Stock or a combination
of both. The Company can also grant limited stock appreciation rights which
provide each holder with the right, exercisable upon the successful completion
of a hostile tender offer for fifty percent or more of the Company's outstanding
voting securities, to surrender his or her outstanding options to the Company,
to the extent those options are at the time exercisable for vested shares, in
return for a cash distribution per surrendered option equal to the excess of (i)
the greater of the fair market value on the date the option is surrendered or
the highest price per share of Common Stock paid in hostile tender offer over
(ii) the option exercise price payable per share.
STOCK WITHHOLDING
The Administrator may allow participants in the 1995 Plan to satisfy their
withholding obligations by either electing to have withheld by the Company a
certain number of shares of stock which would otherwise be received pursuant to
the exercise of the option or the vesting of such shares, or by delivering to
the Company a number of shares of stock, having a value equal to the amount
required to be withheld.
CHANGES IN CAPITALIZATION
In the event a change, such as a stock split or stock dividend payable in
Common Stock, is made in the Company's capitalization which results in an
exchange of Common Stock for a greater or lesser number of shares without
receipt of consideration by the Company, appropriate adjustment will be made in
the number of shares reserved for issuance under the 1995 Plan and in the number
of shares subject to outstanding options and stock purchase rights under the
1995 Plan, as well as in the price per share of Common Stock covered by such
options and stock purchase rights. Such adjustment will be made by the
Administrator, whose determination is final, binding and conclusive.
MERGER OR ASSET SALE
In connection with any merger, or sale or transfer of all or substantially
all of the assets of the Company, each outstanding option may be assumed or an
equivalent substituted by a successor corporation. If the successor corporation
does not assume the option or substitute a substantially equivalent option, the
option will become fully exercisable for a period of time determined by the
Administrator. All options not exercised before the merger or asset sale will
terminate if not substituted or assumed. Any option assumed or substituted for
will automatically become fully exercisable if an optionee's employment or
consultancy terminates by reason of an involuntary termination (as defined in
the 1995 Plan) within one year after the merger or asset sale. Such option will
expire at the earlier of the end of its term or one year after the involuntary
termination. In addition, any Company repurchase option on unvested Common Stock
will terminate and the stock will fully vest upon a merger or asset sale unless
the repurchase option is assigned to the successor corporation. Any such
repurchase option assigned in the merger or asset sale will end and the shares
subject to the
7
<PAGE> 11
repurchase option will immediately vest in full if the optionee's employment or
consultancy ends within one year of the merger or asset sale.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend the 1995 Plan at any time, or may
terminate the 1995 Plan, without approval of the stockholders; provided,
however, that stockholder approval is required for any amendment to the 1995
Plan for which stockholder approval is required under the Code or other
applicable rules, and no action by the Board of Directors or stockholders may
unilaterally impair any option or stock purchase right previously granted under
the 1995 Plan. In any event, the 1995 Plan will terminate automatically on
September 30, 2005. Any options outstanding under the 1995 Plan at the time of
its termination will remain outstanding until they expire by their terms.
TAX INFORMATION
THE FOLLOWING IS A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION WITH
RESPECT TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE
1995 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE OR FOREIGN COUNTRY IN WHICH A PARTICIPANT MAY RESIDE.
Incentive Stock Options
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. (The rate at which such long-term
capital gain or loss is taxed is further dependent upon the length of time the
shares have been held since exercise.) If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange 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. 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. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
Non-statutory Stock Options
All other options which do not qualify as incentive stock options are
referred to as non-statutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a non-statutory stock option.
However, upon the option's exercise, the optionee will recognize taxable income,
generally measured as the excess of the then fair market value of the shares
purchased over the aggregate exercise price. Any taxable income recognized in
connection with an option exercise by an optionee who is also an employee of the
Company will be subject to tax withholding by the Company. The Company will be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee. Upon resale of such shares by the optionee, any difference
between the sales price and the exercise price, to the extent not recognized as
taxable income as described above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
Stock Purchase Rights
Stock purchase rights will generally be taxed in the same manner as
non-statutory stock options. However, the stock issued upon exercise of a stock
purchase right is usually subject to the Company's right to repurchase such
stock upon termination of the purchaser's employment or consulting relationship
with the Company, which right lapses progressively over time. As a result, at
the time of purchase, this restricted stock
8
<PAGE> 12
is subject to a "substantial risk of forfeiture" within the meaning of Section
83 of the Code, and the purchaser will not recognize ordinary income at the time
of purchase. Instead, the purchaser will recognize ordinary income on the date
or dates when the stock ceases to be subject to substantial risk of forfeiture,
i.e. when it is no longer subject to the Company's right of repurchase or
"vests." At such times, the purchaser will recognize ordinary income 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 a substantial risk of forfeiture.
Ordinary income recognized by a purchaser who is an employee will be treated as
wages and will be subject to tax withholding by the Company. Generally, the
Company will be entitled to a tax deduction in the amount and at the time the
purchaser recognizes ordinary income. Notwithstanding the foregoing, a purchaser
may accelerate the date of his or her recognition of ordinary income, and the
beginning of any capital gain holding period, by timely filing an election
pursuant to Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, would be equal to 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 would commence on the purchase date.
Different rules may apply in the case of purchasers who are subject to
Section 16 of the Securities Exchange Act of 1934, as amended.
Stock Appreciation Rights
A recipient will not recognize any taxable income in connection with the
grant of an SAR. On exercise of an SAR, the recipient will generally recognize
compensation income in the year of exercise in an amount equal to the difference
between the exercise price (if any) of the SAR and the fair market value of the
SAR (computed with references to the Common Stock of the Company) at the time of
exercise. If the recipient is an employee, such amount will be subject to
withholding by the Company. As a general rule, the Company will be entitled to a
tax deduction in an amount and at the time the recipient recognizes ordinary
income with respect to the SAR.
PARTICIPATION IN THE 1995 PLAN
The grant of options and stock purchase rights under the 1995 Plan to
eligible employees and consultants, including the Named Executive Officers, is
subject to the discretion of the Administrator. The following table sets forth
information with respect to options granted under the 1995 Plan during the Last
Fiscal Year to each of the officers named in the Summary Compensation Table, to
all current executive officers as a group, to all non-employee directors, and to
all other employees as a group. The term of options under the 1995 Plan is
generally ten years from the date of grant. No stock purchase rights or stock
appreciation rights were granted to any such persons.
<TABLE>
<CAPTION>
SHARES
SUBJECT DOLLAR
NAME TO OPTION VALUE(1)
---- --------- --------
<S> <C> <C>
Norman H. Pond.............................................. -- $ --
Charles B. Eddy............................................. 7,000 --
Edward Durbin............................................... 5,000 --
Robert D. Hempstead......................................... -- --
David N. Lambeth............................................ 5,000 --
H. Joseph Smead............................................. 5,000 --
All current executive officers as a group................... 7,000 --
All non-employee directors.................................. 15,000 --
All other employees as a group.............................. 377,100 --
</TABLE>
- ---------------
(1) Dollar value is calculated by subtracting the weighted average aggregate
exercise price from the total fair market value of the shares as determined
on December 31, 1999. For all options granted in 1999, the
9
<PAGE> 13
exercise price is higher than the fair market value of the stock on December
31, 1999, resulting in a negative valuation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE STOCK OPTION/ STOCK ISSUANCE PLAN.
PROPOSAL NO. 4:
RATIFICATION OF INDEPENDENT PUBLIC AUDITORS
The Company is asking the shareholders to ratify the selection of Ernst &
Young LLP as the Company's independent public auditors for the fiscal year
ending December 31, 2000. The affirmative vote of the holders of a majority of
the shares represented and voting at the Annual Meeting (provided that such
affirmative vote also constitutes a majority of the required quorum) will be
required to ratify the selection of Ernst & Young LLP.
In the event the shareholders fail to ratify the appointment, the Audit
Committee of the Board of Directors will reconsider its selection of auditors
for the fiscal year. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board determines that such a change would be
in the best interest of the Company and its shareholders.
Ernst & Young LLP has audited the Company's financial statements annually
since 1991. Its representatives are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of February 29, 2000 by (i) all persons known
by the Company to be beneficial owners of five percent (5%) or more of its
outstanding Common Stock based upon a review of 13G filings made with the
Securities and Exchange Commission during 1999, (ii) each director of the
Company and each nominee for director, (iii) the Chief Executive Officer and
each of the two other executive officers of the Company serving as such as of
the end of the last fiscal year whose compensation for such year was in excess
of $100,000, and (iv) all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
-----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OWNED(2)
------------------------------------ ---------------- ----------------
<S> <C> <C>
Foster City LLC............................................. 5,600,000 47.5%
950 Tower Lane, Suite 800
Foster City, CA 94404
Norman H. Pond(3)........................................... 1,011,433 8.5%
3550 Basset Street
Santa Clara, CA 95054
State of Wisconsin Investment Board......................... 843,000 7.2%
P.O. Box 7842
Madison, WI 53707
Charles B. Eddy(4).......................................... 150,807 1.3%
Ed Durbin(5)................................................ 5,624,500 47.7%
Robert D. Hempstead(6)...................................... 127,799 1.1%
David N. Lambeth(7)......................................... 20,000 *
H. Joseph Smead(8).......................................... 5,627,683 47.7%
All directors and executive officers as a group (6
persons)(9)............................................... 6,926,222 57.1%
</TABLE>
- ---------------
* Less than 1%
(1) Except as 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. The
number of shares beneficially owned includes Common Stock of which such
individual has the right to acquire beneficial ownership either currently or
within 60 days after February 29, 2000, including, but not limited to, upon
the exercise of an option.
(2) Percentage of beneficial ownership is based upon 11,779,754 shares of Common
Stock, all of which were outstanding on February 29, 2000. For each
individual, this percentage includes Common Stock of which such individual
has the right to acquire beneficial ownership either currently or within 60
days of February 29, 2000, including, but not limited to, upon the exercise
of an option; however, such Common Stock is not considered outstanding for
the purpose of computing the percentage owned by any other individual as
required by General Rule 13d-3(d)(1)(i) under the Securities Exchange Act of
1934.
(3) Includes 818,100 shares held by the Norman Hugh Pond and Natalie Pond Trust
DTD 12/23/80 and 30,000 shares held by the Pond 1996 Charitable Remainder
Unitrust, both of whose trustees are Norman Hugh Pond and Natalie Pond, and
options exercisable for 163,333 shares of Common Stock outstanding under the
Company's 1995 Plan.
(4) Includes options exercisable for 66,666 shares of Common Stock under the
1995 Plan.
(5) Includes options exercisable for 22,500 shares of Common Stock under the
1995 Plan and 5,600,000 shares held by Foster City LLC ("Foster City"). Mr.
Durbin is a director of the Company and a managing general partner of Foster
City. Mr. Durbin disclaims beneficial ownership in the shares of the Company
held by Foster City except to the extent of his pecuniary interest therein
arising from his general partnership interest in Foster City.
(6) Includes options exercisable for 124,999 shares of Common Stock under the
1995 Plan.
11
<PAGE> 15
(7) Includes options exercisable for 20,000 shares of Common Stock under the
1995 Plan.
(8) Includes options exercisable for 12,500 shares of Common Stock under the
1995 Plan and 5,600,000 shares held by Foster City. Mr. Smead is a director
of the Company and a managing general partner of Foster City. Mr. Smead
disclaims beneficial ownership in the shares of the Company held by Foster
City except to the extent of his pecuniary interest therein arising from his
general partnership interest in Foster City.
(9) Includes options exercisable for 409,998 shares of Common Stock under the
1995 Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership on Form 3 and reports of changes in ownership on Form 4 or Form 5 of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent (10%) shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that during the fiscal year ended December 31, 1999, its
officers, directors and holders of more than 10% of the Company's common stock
complied with all Section 16(a) filing requirements.
12
<PAGE> 16
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned, by (i) the Company's Chief Executive Officer and (ii) each
of the two other executive officers of the Company whose salary and bonus was in
excess of $100,000 for the 1999 fiscal year, for services rendered in all
capacities to the Company and its subsidiaries for each of the last three fiscal
years. Such individuals are referred to as the "Named Executive Officers". No
executive officer who would have otherwise been includible in such table on the
basis of salary and bonus earned for the 1999 fiscal year resigned or terminated
employment during that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEARS SALARY($)(1) BONUS OPTIONS(#) COMPENSATION(2)
--------------------------- ----- ------------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Norman H. Pond.................... 1999 $262,432 -- -- $3,579
President and 1998 291,722 -- -- 4,431
Chief Executive Officer 1997 330,994 -- -- 3,269
Charles B. Eddy III............... 1999 157,498 -- 7,000 1,028
Vice President, Finance and 1998 166,327 -- 7,500(3) 1,146
Administration, Chief Financial 1997 160,298 -- 7,500 1,131
Officer, Treasurer and Secretary
Robert D. Hempstead............... 1999 239,210 -- -- 1,594
Chief Operating Officer 1998 260,579 -- 15,000(3) 2,651
1997 244,672 -- 15,000 1,825
</TABLE>
- ---------------
(1) Includes salary deferral contributions to the Company's 401(k) Plan.
(2) The indicated amount for each Named Executive Officer is comprised of the
contributions made by the Company on behalf of such individual to the
Company's 401(k) Plan, which match part of such officer's salary deferral
contributions to that plan, plus the cost of any life insurance in excess of
$50,000 paid by the Company.
(3) These options were granted under an exchange program approved by the Company
in the third quarter of 1998. Under the exchange program, each employee that
held options granted between August 19, 1996 and July 31, 1998 was given the
opportunity to exchange their options for newly granted stock options. The
new option is for the same number of shares as originally granted, but the
vesting period starts on the day the new option is granted. These options
were granted in exchange for the options granted in 1997.
13
<PAGE> 17
STOCK OPTIONS
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers during the fiscal year ended
December 31, 1999. Except for the limited stock appreciation rights described in
footnote (2) below, no stock appreciation rights were granted to those
individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------ AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(2) 1999 ($/SHARE)(3) DATE 5%($) 10%($)
---- ---------- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman H. Pond.............. -- -- -- -- -- --
Charles B. Eddy III......... 5,000 1.3% $5.375 05/13/09 $16,902 $42,832
2,000 0.5% 3.813 12/02/09 4,796 12,154
Robert D. Hempstead......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) There can be no assurance that the actual stock price appreciation over the
10-year option term will be at the 5% and 10% assumed annual rates of
compounded stock price appreciation or at any other defined level. Unless
the market price of the Common Stock appreciates over the option term, no
value will be realized from the option grants made to the Named Executive
Officer.
(2) Option shares generally vest in a series of five (5) successive equal annual
installments upon the optionee's completion of each year of service over the
five-year period measured from the grant date. In addition, the option
shares vest in full upon an acquisition of the Company by merger or asset
sale, unless such option is assumed by the acquiring entity. Each option has
a maximum term of 10 years measured from the option grant date, subject to
earlier termination following the optionee's cessation of service with the
Company. Each option also includes a limited stock appreciation right which
provides the optionee with a right, exercisable upon the successful
completion of a hostile tender offer for fifty percent or more of the
Company's outstanding voting securities, to surrender the option to the
Company, to the extent the option is at that time exercisable for vested
shares, in return for a cash distribution per surrendered option share equal
to the excess of (i) the highest price per share of Common Stock paid in the
hostile tender offer over (ii) the option exercise price payable per share.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date, or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares, plus any Federal and state income tax liability incurred by the
optionee in connection with such exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning option exercises and
option holdings for the 1999 fiscal year by each of the Named Executive
Officers. Except for the limited stock appreciation rights described in footnote
(2) to the Stock Options table above, no stock appreciation rights were
outstanding at the end of that year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END(#) FISCAL YEAR-END(#)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED(1) UNEXERCISABLE(2) UNEXERCISABLE(3)
---- --------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Norman H. Pond...................... -- -- 163,333/0 $ 0/0
Charles B. Eddy III................. -- -- 66,666/13,000 $15,679/0
Robert D. Hempstead................. -- -- 124,999/0 $ 0/0
</TABLE>
14
<PAGE> 18
- ---------------
(1) Equal to the fair market value of the purchased shares on the option
exercise date less the exercise price paid for those shares.
(2) Certain of such options are immediately exercisable for all option shares,
in which case any shares purchased under those options are subject to
repurchase by the Company, at the original exercise price paid per share,
upon the optionee's cessation of service with the Company prior to vesting
in such shares. All shares subject to such options are included in the
exercisable amount provided above. As of December 31, 1999, the repurchase
right had lapsed as to 124,666 of Mr. Pond's option shares and 48,498 of Mr.
Eddy's option shares.
(3) Based on the market price of $3.500 per share, which was the closing selling
price per share of the Company's Common Stock on the Nasdaq National Market
on the last day of the 1999 fiscal year, less the exercise price payable for
such shares. Options for which the exercise price is greater than $3.500 are
excluded from this calculation.
TEN YEAR OPTION/SAR REPRICINGS
The following table sets forth information concerning repricings of options
and SAR's held by each of the Named Executive Officers during the last ten
completed fiscal years.
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE EXERCISE OPTION TERM
OPTIONS/ OF STOCK AT PRICE AT REMAINING
SAR'S TIME OF TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
---- ------- ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Norman H. Pond............... -- -- -- -- -- --
Charles B. Eddy III.......... 8/24/98 7,500 $7.938 $10.000 $7.938 9 years 93 days
Robert D. Hempstead.......... 9/01/98 15,000 $6.625 $10.000 $6.625 9 years 85 days
</TABLE>
15
<PAGE> 19
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's compensation policies and programs and has primary
responsibility for executive compensation matters, including the establishment
of the base salaries of the Company's executive officers, the approval of
individual bonuses and bonus programs for executive officers and the
administration of certain employee benefit programs. In addition, the Committee
has exclusive responsibility for administering the Company's 1995 Stock
Option/Stock Issuance Plan, under which stock option grants and direct stock
issuances may be made to executive officers and other employees. The Committee
during 1999 was comprised of two non-employee directors. The following is a
summary of policies which the Committee applies in setting the compensation
levels for the Company's executive officers.
GENERAL COMPENSATION POLICY. The overall policy of the Committee is to
offer the Company's executive officers competitive compensation opportunities
based upon their personal performance, the financial performance of the Company
and their contribution to that performance. Each executive officer's
compensation package is generally comprised of base salary, which is determined
on the basis of the individual's position and responsibilities with the Company,
the level of his or her performance, and the financial performance of the
Company, and incentive performance awards payable in cash and stock options.
FACTORS. The primary factors which the Committee considers in establishing
the components of each executive officer's compensation package are summarized
below.
BASE SALARY. In setting the base salary for each executive officer, the
Committee takes into account comparative compensation data for a select group of
companies. Companies are included within the survey group on the basis of a
number of factors, such as their size and organizational structure, the nature
of their businesses, the geographic regions in which they operate, the
composition of their compensation programs (including the extent to which they
rely on other contingent forms of compensation), the extent to which they
compete with the Company for executive talent and the availability of
information concerning their compensation practices. On the basis of the
compiled data, the Committee sets the base salary of each executive officer at a
level which is competitive with the salaries of individuals in similar positions
at the surveyed companies.
In determining base salary levels of each executive officer, the Committee
also takes into account the performance of the Company. In 1998, the Company's
declining revenue and profit levels led the Committee to reduce the base salary
of each executive officer in the second half of the year. Those reductions were
still in place during 1999.
INCENTIVE COMPENSATION. At the end of each fiscal year the Compensation
Committee evaluates each executive officer's base salary, the level of his
performance, and the performance of the Company, and determines for each
individual executive officer the amount of any cash incentive bonus to be paid
to such executive officer. For fiscal year 1999, no year-end cash incentive
bonuses were paid.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Long-term incentives are
provided through stock option grants. The grants are designed to align the
interests of each executive officer with those of the shareholders and provide
each individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant allows
the officer to acquire shares of the Company's Common Stock at a fixed price per
share (the market price on the grant date) over a specified period of time (up
to ten years). Each option generally becomes exercisable in installments over a
five-year period, contingent on the officer's continued employment with the
Company. Accordingly, the option provides a return to the executive officer only
if the market price of the shares appreciates over the option term and the
officer continues in the Company's employ.
The size of the option grant to each executive officer is designed to
create a meaningful opportunity for stock ownership and is based upon the
executive officer's current position with the Company, internal comparability
with option grants made to other Company executives, the executive officer's
current level of performance and the executive officer's potential for future
responsibility and promotion over the option term. The Committee also takes into
account the number of vested and unvested options held by the executive
16
<PAGE> 20
officer in order to maintain an appropriate level of equity incentive for that
individual. However, the Committee does not adhere to any specific guidelines as
to the relative option holdings of the Company's executive officers.
CEO COMPENSATION. The compensation payable to Mr. Pond, the Company's Chief
Executive Officer during fiscal year 1999, was determined by the Committee. His
base salary was set at a level which the Committee felt would be competitive
with the base salary levels in effect for chief executive officers at
similarly-sized companies within the industry. During 1998, Mr. Pond's base
salary was reduced in response to the Company's declining revenue and profit
levels. This reduction was still in place during 1999.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly-held companies for compensation paid to certain executive officers, to
the extent that compensation exceeds $1 million per officer in any year. The
compensation paid to the Company's executive officers for the 1999 fiscal year
did not exceed the $1 million limit per officer, and it is not expected the
compensation to be to the Company's executive officers for the 2000 fiscal year
will exceed that limit. In addition, the Company's 1995 Stock Option/Stock
Issuance Plan is structured so that any compensation deemed paid to an executive
officer in connection with the exercise of his or her outstanding options under
the 1995 Plan will qualify as performance-based compensation which will not be
subject to the $1 million limitation.
Submitted by the Compensation Committee of the Company's Board of
Directors:
David N. Lambeth & H. Joseph Smead, Compensation Committee Members
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
on September 14, 1995 and during 1999 was comprised of David N. Lambeth and H.
Joseph Smead. Neither of these individuals was at any time during fiscal 1999,
or at any other time, an officer or employee of the Company. No executive
officer of the Company serves as a member of the board of directors or
compensation committee of any other entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL AGREEMENTS
None of the Company's executive officers has an employment agreement with
the Company, and each individual's employment may be terminated at any time at
the discretion of the Board of Directors. Pursuant to the express provisions of
the 1995 Stock Option/Stock Issuance Plan (the "1995 Plan"), the outstanding
options under the 1995 Plan held by the Chief Executive Officer and the
Company's other executive officers will immediately accelerate in full, and all
unvested shares of Common Stock at the time held by such individuals under the
1995 Plan will immediately vest, if their employment were to be terminated
(whether involuntarily or through a forced resignation) within twelve (12)
months after any acquisition of the Company by merger or asset sale in which
those options and shares did not otherwise vest. In addition, the Compensation
Committee of the Board of Directors has the authority as Administrator of the
1995 Plan to provide for the accelerated vesting of the outstanding options
under the 1995 Plan held by the Chief Executive Officer and the Company's other
executive officers, and the immediate vesting of all unvested shares of Common
Stock at the time held by such individuals under the 1995 Plan, if their
employment were to be terminated (whether involuntarily or through a forced
resignation) following a hostile take-over of the Company effected through a
successful tender offer for more than fifty percent (50%) of the Company's
outstanding Common Stock or through a change in the majority of the Board as a
result of one or more contested elections for Board membership.
17
<PAGE> 21
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company with that of the NASDAQ Stock Market Total Return
Index, a broad market index published by the Center for Research in Security
Prices ("CRSP"), and the NASDAQ Computer Manufacturers Stock Total Return Index
compiled by CRSP. The comparison for each of the periods assumes that $100 was
invested on November 21, 1995 (the date of the Company's initial public
offering) in the Company's Common Stock, the stocks included in the NASDAQ Stock
Market Total Return Index and the stocks included in the NASDAQ Computer
Manufacturers Stock Total Return Index. These indices, which reflect formulas
for dividend reinvestment and weighing of individual stocks, do not necessarily
reflect returns that could be achieved by individual investors.
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE NOVEMBER 21, 1995
AMONG INTEVAC, NASDAQ STOCK MARKET TOTAL RETURN INDEX AND
NASDAQ COMPUTER MANUFACTURERS TOTAL RETURN INDEX
[CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
INTEVAC, INC. NASDAQ COMPUTER
------------- NASDAQ STOCK MARKET US MANUFACTURER'S TOTAL
TOTAL RETURN INDEX RETURN INDEX
---------------------- --------------------
<S> <C> <C> <C>
Nov 21 1.000 1.000 1.000
1.100 1.035 1.054
Dec 29 1.060 1.030 0.993
1.180 1.035 0.996
1.200 1.074 1.096
Mar 29 1.160 1.078 1.023
2.500 1.167 1.172
3.440 1.221 1.252
Jun 28 2.360 1.166 1.150
2.000 1.062 1.032
1.860 1.122 1.104
Sep 30 2.720 1.207 1.268
2.320 1.194 1.273
2.560 1.268 1.386
Dec 31 2.720 1.267 1.331
2.960 1.357 1.449
2.520 1.282 1.247
Mar 31 2.240 1.198 1.119
2.080 1.236 1.165
2.440 1.375 1.434
Jun 30 1.920 1.418 1.446
2.022 1.567 1.760
2.280 1.565 1.754
Sep 30 2.260 1.658 1.815
2.070 1.571 1.679
1.600 1.580 1.696
Dec 31 1.560 1.552 1.610
1.455 1.601 1.757
1.380 1.752 1.990
Mar 31 1.230 1.817 1.981
1.610 1.847 2.122
1.520 1.745 2.072
Jun 30 1.720 1.867 2.347
1.480 1.845 2.457
1.020 1.480 2.131
Sep 30 1.140 1.686 2.568
1.300 1.758 2.668
1.220 2.830 2.926
Dec 31 1.020 2.187 3.488
1.400 2.506 4.302
1.360 2.281 3.623
Mar 31 0.920 2.447 3.925
0.750 2.516 4.048
0.660 2.458 3.816
Jun 30 0.880 2.677 4.349
0.760 2.638 4.383
0.800 2.743 4.923
Sep 30 0.720 2.738 4.896
0.640 2.937 5.230
0.625 3.251 6.167
Dec 31 0.560 3.952 7.334
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in part,
the preceding Compensation Committee Report on Executive Compensation and the
preceding Performance Graph shall not be incorporated by reference into any such
filings; nor shall such report or graph be incorporated by reference into any
future filings.
18
<PAGE> 22
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders which are intended to be presented at the
Company's annual meeting of shareholders to be held in 2001 must be received by
the Company no later than December 1, 2000 in order to be included in the proxy
statement and proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CHARLES B. EDDY III
CHARLES B. EDDY III
Vice President, Finance and
Administration,
Chief Financial Officer, Treasurer and
Secretary
March 15, 2000
19
<PAGE> 23
1457-PS-2000
<PAGE> 24
INTEVAC, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
AS AMENDED FEBRUARY 2000
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Intevac, Inc., a California corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary), and
B. The provisions of Articles One and Five shall apply to all
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board
<PAGE> 25
may retain the power to administer those programs with respect to all such
persons. The members of the Secondary Committee may be Board members who are
Employees eligible to receive discretionary option grants or direct stock
issuances under the Plan or any other stock option, stock appreciation, stock
bonus or other stock plan of the Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board (other than
those serving as members of the Primary Committee) or the Board of Directors of
any Parent or Subsidiary, and
(iii) consultants and other independent advisors
who provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are
-2-
<PAGE> 26
to be made, the number of shares to be covered by each such grant, the status of
the granted option as either an Incentive Option or a Non-Statutory Option, the
time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive stock
issuances, the time or times when such issuances are to be made, the number of
shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration to be paid for such
shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 2,383,667
shares.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 200,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1995 calendar year; provided, however, that for the calendar
year in which such person first commences Service, the limit shall be increased
to 350,000 shares.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for which
-3-
<PAGE> 27
any one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances per calendar year, and (iii) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option (including any option incorporated from the Predecessor Plan)
in order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
-4-
<PAGE> 28
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in
the form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
-5-
<PAGE> 29
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated
for Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
from the period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the
Optionee would have vested under the option had the Optionee continued
in Service.
-6-
<PAGE> 30
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during Optionee's lifetime in accordance with
the terms of a Qualified Domestic Relations Order. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to such Qualified Domestic Relations Order. The terms applicable
to the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten
-7-
<PAGE> 31
percent (110%) of the Fair Market Value per share of Common Stock on the option
grant date, and the option term shall not exceed five (5) years measured from
the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall NOT so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the
-8-
<PAGE> 32
Corporation's outstanding repurchase rights which do not otherwise terminate at
the time of the Corporate Transaction shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full) in the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within twelve (12) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination.
F. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
H. The grant of options under the Discretionary Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
-9-
<PAGE> 33
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (a) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the later of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over,
each individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
vested shares of Common Stock. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are at the time vested under each surrendered option
(or surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
-10-
<PAGE> 34
(iv) The balance of the option (if any) shall
continue in full force and effect in accordance with the documents
evidencing such option.
-11-
<PAGE> 35
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Five, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation,
or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares
are to vest,
(iii) the interval or intervals (if any) which are
to lapse between installments, and
(iv) the effect which death, Permanent Disability
or other event designated by the Plan Administrator is to have upon the
vesting schedule, shall be determined by the Plan Administrator and
incorporated into the Stock Issuance Agreement.
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2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the outstanding repurchase/cancellation rights under
the Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase/cancellation rights are assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
B. To the extent any repurchase/cancellation rights applicable to
the Participant's outstanding shares under the Stock Issuance Program are
assigned in the Corporate Transaction,
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those rights shall automatically terminate, and the shares subject to those
terminated rights shall immediately vest in full, in the event the Participant's
Service should subsequently terminate by reason of an Involuntary Termination
within twelve (12) months following the effective date of such Corporate
Transaction.
C. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase rights remain outstanding, to (i) provide for the
automatic termination of one or more outstanding repurchase/cancellation rights
and the immediate vesting of the shares of Common Stock subject to those rights
upon the occurrence of a Change in Control or (ii) condition any such
accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price for shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine that
one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of stock options or stock appreciation rights or upon the issuance or
vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs
shall become effective on the Plan Effective Date. Options may be granted under
the Discretionary Option Grant Program at any time on or after the Plan
Effective Date. However, no options granted under the Plan may be exercised, and
no shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date the Plan is adopted by the Board, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Plan Effective Date. All options outstanding under the Predecessor Plan as of
such date shall be incorporated into the Plan at that time and shall be treated
as outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise
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<PAGE> 39
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) September
30, 2005, (ii) the date on which all shares available for issuance under the
Plan shall have been issued pursuant to the exercise of the options or the
issuance of shares (whether vested or unvested) under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all outstanding stock options and
unvested stock issuances shall continue to have force and effect in accordance
with the provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to options, stock appreciation rights or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant consents
to such amendment or modification. In addition, the Board shall not, without the
approval of the Corporation's stockholders, (i) materially increase the maximum
number of shares issuable under the Plan, the number of shares for which options
may be granted under the Automatic Option Grant Program or the maximum number of
shares for which any one person may be granted options, separately exercisable
stock appreciation rights and direct stock issuances per calendar year, except
for permissible adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Plan
participants.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs are held in escrow until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the first such excess grant or issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease to
be outstanding and (ii) the Corporation shall promptly refund to the Optionees
and the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
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Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of Common
Stock (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of
such period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction; or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Intevac, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Intevac, Inc. which shall by appropriate action adopt
the Plan.
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G. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Discretionary Option Grant Program in accordance
with the eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question,
as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of any option grants made on the
Plan Effective Date, the Fair Market Value shall be deemed to be equal
to the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
M. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:
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(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, and
(ii) more than fifty percent (50%) of the
securities so acquired are accepted from persons other than Section 16
Insiders.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe
benefits and participation in corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.
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T. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain; provided, however, that neither Kaiser Aerospace and Electronics
Corporation ("Kaiser"), a New York corporation, nor KSI, a California
corporation, shall be considered a Parent of the Corporation unless either
Kaiser or KSI (as the case may be) owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of the
Corporation at any time after November 30, 1995.
U. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
W. PLAN shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date on which the
Underwriting Agreement is executed and the initial public offering price of the
Common Stock is established.
Z. PREDECESSOR PLAN shall mean the Corporation's existing 1991
Stock Option Plan.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
BB. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
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CC. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. SECTION 12(g) REGISTRATION DATE shall mean the first date on
which the Common Stock is registered under Section 12(g) of the 1934 Act.
FF. SERVICE shall mean the provision of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the Board of Directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
GG. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
HH. STOCK ISSUANCE AGREEMENT shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
II. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
JJ. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
KK. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
LL. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
MM. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
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NN. UNDERWRITING Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INTEVAC, INC.
Norman H. Pond and Charles B. Eddy III, or either of them, are hereby
appointed as the lawful agents and proxies of the undersigned (with all powers
the undersigned would possess if personally present, including full power of
substitution) to represent and to vote all shares of capital stock of Intevac,
Inc. (the "Company") which the undersigned is entitled to vote at the Company's
Annual Meeting of Shareholders on May 15, 2000, and at any adjournments or
postponements thereof as follows on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 48
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS BELOW. THIS
PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED
FOR EACH OF THE PROPOSALS BELOW AND, AT THE DISCRETION OF THE PERSONS NAMED AS
PROXIES, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS
PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
1. The election of all nominees listed below for the Board of Directors, as
described in the Proxy Statement:
NOMINEES: Norman H. Pond, Edward Durbin, Robert D. Hempstead, David N.
Lambeth and H. Joseph Smead
FOR [ ] WITHHELD [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write such name or names in the space provided below.)
2. Proposal to approve an amendment to the Company's Bylaws:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve an amendment to the Company's 1995 Stock Option/Stock
Issuance Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to ratify the appointment of Ernst & Young LLP as independent
public auditors of the Company for the fiscal year ending December 31, 2000:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Transaction of any other business which may properly come before the meeting
and any adjournment or postponement thereof.
DATE: , 2000
-----------------------
- -------------------------------------
(Signature)
- -------------------------------------
(Signature if held jointly)
(Please sign exactly as shown on your stock certificate and on the envelope in
which this proxy was mailed. When signing as partner, corporate officer,
attorney, executor, administrator, trustee, guardian or in any other
representative capacity, give full title as such and sign your own name as well.
If stock is held jointly, each joint owner should sign.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
