<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
YieldUp International Corporation
- --------------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
YIELDUP INTERNATIONAL CORPORATION
117 EASY STREET
MOUNTAIN VIEW, CA 94043
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
-------------------
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of YieldUP
International Corporation (the "Company"), which will be held on May 29, 1997 at
10:00 a.m. Pacific Daylight Time at the Company's headquarters, 117 Easy Street,
Mountain View, California 94043 for the following purposes:
1) To elect one Class II director to hold office for a term of three
years and until his successor is elected and qualified;
2) To consider and vote upon a proposal to increase the number of shares
reserved for issuance under the Company's 1995 Employee Stock Option
Plan by 500,000;
3) To consider and vote upon a proposal to ratify the selection of
KPMG Peat Marwick L.L.P. as the Company's independent accountants for the
year ended December 31, 1997; and
4) To consider and take action upon such other matters as may properly come
before the meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on March 31, 1997 are entitled
to notice of, and to vote at, this meeting and any adjournments thereof. For ten
days prior to the meeting, a complete list of stockholders entitled to vote at
the meeting will be available for examination by any stockholder for any purpose
relating to the meeting during ordinary business hours at the receptionist desk
at the Company headquarters, 117 Easy Street, Mountain View, California 94043.
By order of the Board of Directors,
Raj Mohindra
Secretary
Mountain View, California
May 9, 1997
<PAGE> 3
YIELDUP INTERNATIONAL CORPORATION
117 EASY STREET
MOUNTAIN VIEW, CA 94043
----------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
-------------------
The accompanying proxy is solicited by the Board of Directors of YieldUP
International Corporation, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held May 29, 1997, or any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting. The approximate date on which this Proxy Statement and the accompanying
form of proxy were first sent or given to stockholders is May 9, 1997.
GENERAL INFORMATION
ANNUAL REPORT. A copy of the Company's prospectus describing the Company's
business and containing financial information for the fiscal years ended
December 31, 1996 and 1995, is enclosed with this Proxy Statement. THE COMPANY
WILL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER OF THE COMPANY AS OF MARCH 31,
1997, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31 1996. REQUESTS FOR SUCH
REPORTS SHOULD BE DIRECTED TO YIELDUP INTERNATIONAL CORPORATION, 117 EASY
STREET, MOUNTAIN VIEW, CA 94043, ATTN: CHIEF FINANCIAL OFFICER.
VOTING SECURITIES. Only stockholders of record as of the close of business on
March 31, 1997, will be entitled to vote at the meeting and any adjournment
thereof. As of that date, there were a total of 3,431,508 shares of Common Stock
and Class A Common Stock of the Company, issued and outstanding. Stockholders
may vote in person or by proxy. Each holder of shares of Common Stock is
entitled to one vote for each such share of stock held on the proposals
presented at the Annual Meeting. Each holder of shares of Class A Common Stock
is entitled to five votes for each such share of stock held on the proposals
presented at the Annual Meeting. The Company's Bylaws provide that
representation in person or by proxy of a majority of the outstanding shares
shall constitute a quorum for the transaction of business at the meeting.
SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by the
Company. The Company may solicit stockholders by mail or through its regular
employees, and may request banks and brokers, and other custodians, nominees,
and fiduciaries, to solicit their customers who have stock of the Company
registered in the names of such persons and will reimburse them for their
reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally, by facsimile, or
by telephone, without additional compensation.
1
<PAGE> 4
VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted in favor of
election of the nominee for director named in these materials and in favor of
the other proposals. A stockholder giving a proxy has the power to revoke his or
her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company of a written instrument revoking the proxy or a duly
executed proxy with a later date, or by attending the meeting and voting in
person.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table
sets forth certain information, as of March 31, 1997, with respect to the
beneficial ownership of the Company's Common Stock and Class A Common Stock by,
(i) all persons known by the Company to be the beneficial owners of more than 5%
of the outstanding Common Stock and Class A Common Stock of the Company, (ii)
each director and director-nominee of the Company, (iii) each executive officer
of the Company named in the Summary Compensation Table, and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF ALL
NAME AND ADDRESS OF BENEFICIAL NUMBER OF PERCENTAGE OF COMMON STOCK
OWNER (1) SHARES VOTING POWER(2) OUTSTANDING(3)
- ------------------------------ --------- --------------- -----------------
<S> <C> <C> <C> <C>
Raj Mohindra (4) 1,102,123 36.1% 19.2%
Abhay K. Bhushan (5) 312,605 10.2% 5.5%
Suraj Puri (6) 220,804 7.0% 3.9%
Bernard Slade(7) 124,587 3.9 2.2
Ram Paul Gupta (8) 49,171 1.1 (*)
William W.R. Elder(9) 20,000 (*) (*)
All officers and directors as a
group (eight (8) persons) (10) 1,888,020 57.2% 32.1%
</TABLE>
- ----------
(*) Represents less than one percent.
(1) The address of each beneficial owner is c/o the Company, 117 Easy Street,
Mountain View, California 94043.
(2) Class A Common Stock has five votes per share compared to one vote per
share for Common Stock. Assumes exercise of all 2,215,000 outstanding Class A
Warrants.
(3) Based on 1,918,402 shares of Class A Common Stock outstanding and 1,513,106
shares of Common Stock outstanding. Assumes exercise of all 2,215,000
outstanding Class A Warrants.
(4) Includes 121,866 shares of Common Stock issuable upon exercise of Class A
Warrants held by Mr. Mohindra and his family members. Includes 125,971 shares
issuable upon exercise of outstanding options. Also includes 44,161 shares held
by family members of Mr. Mohindra, but Mr. Mohindra disclaims beneficial
ownership of all such shares except to the extent of any pecuniary interest
therein which he may have. Does not include an aggregate of 320,004 shares of
Common Stock issuable upon exercise of Class B Warrants held by Mr. Mohindra and
his family members.
(5) Includes 50,895 shares of Common Stock issuable upon exercise of Class A
Warrants held by Mr. Bhushan and his family members. Includes 14,479 shares
issuable upon exercise of options. Also includes 43,434 shares held by family
members of Mr. Bhushan, but Mr. Bhushan disclaims beneficial ownership of all
such shares except to the extent of any pecuniary interest therein which he may
have. Does not include an aggregate of 103,866 shares of Common Stock issuable
upon exercise of Class B Warrants held by Mr. Bhushan and his family members.
2
<PAGE> 5
(6) Includes 43,260 shares of Common Stock issuable upon exercise of Class A
Warrants held by Mr. Puri and his family members. Includes 3,619 shares issuable
upon exercise of outstanding options. Also includes 7,239 shares held by a
family member of Mr. Puri, but Mr. Puri disclaims beneficial ownership of all
such shares except to the extent of any pecuniary interest therein which he may
have. Does not include an aggregate of 80,611 shares of Common Stock issuable
upon exercise of Class B Warrants held by Mr. Puri and his family members.
(7) Includes 27,586 shares of Common Stock issuable upon exercise of Class
A Warrants. Does not include an aggregate of 47,195 shares of Common Stock
issuable upon exercise of Class B Warrants held by Mr. Slade. Mr. Slade resigned
as a director effective May 1, 1997.
(8) Includes 4,316 shares of Common Stock issuable upon exercise of Class A
Warrants. Includes 38,822 shares issuable upon exercise of options. Does not
include an aggregate of 13,144 shares of Common Stock issuable upon exercise of
Class B Warrants held by Mr.
Gupta.
(9) Includes 20,000 shares issuable upon exercise of outstanding options.
Mr. Elder resigned as a director effective May 2, 1997.
(10) Includes 252,215 shares of Common Stock issuable upon exercise of Class A
Warrants held by executive officers and their family members. Includes 263,120
shares issuable upon exercise of options, of which 196,780 shares are vested.
Does not include an aggregate of 584,677 shares of Common Stock issuable upon
exercise of Class B Warrants held by officers and directors and their family
members.
3
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Company has a classified Board of Directors currently consisting of two
Class I directors (Ram Paul Gupta and Suraj Puri), one Class II director (Abhay
K. Bhushan), and one Class III director (Raj Mohindra), who will serve until the
Annual Meetings of Stockholders to be held in 1999, 1997, and 1998 respectively,
and until their respective successors are duly elected and qualified. Directors
in a class are elected for a term of three years to succeed the directors in
such class whose terms expire at such annual meeting.
Management's nominee for election as Class II of the Board of Directors is Abhay
K. Bhushan. If elected, the nominee will serve as director until the Company's
Annual Meeting of Stockholders in 2000, and until his successor is elected and
qualified. If the nominee declines to serve or becomes unavailable for any
reason, or if a vacancy occurs before the election (although the Company knows
of no reason to anticipate that this will occur), the proxies may be voted for
such substitute nominee as the Board of Directors may designate.
Vote Required and Board of Directors Recommendation
The affirmative vote of a plurality of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
this proposal. Abstentions and broker non-votes will each be counted as present
for purposes of determining the presence of a quorum. Abstentions will have the
same effect as a negative vote on this proposal. Broker non-votes will have no
effect on the outcome of this vote.
The nominee receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as director. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE NAMED NOMINEE.
4
<PAGE> 7
The table below sets forth for the Company's directors, including the Class II
nominee proposed to be elected at this meeting, certain information with respect
to age and background.
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE DIRECTOR SINCE
- ---- ------------------------- --- ---------------
<S> <C> <C>
CLASS I DIRECTORS WHOSE TERM EXPIRES AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Ram Paul Gupta Director 58 1995
Suraj Puri Vice President, Chief Technical 52 1993
Officer, and Director
CLASS II DIRECTOR TO BE ELECTED AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS
Abhay K. Bhushan Director 51 1993
CLASS III DIRECTOR WHOSE TERM EXPIRES AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS
Raj Mohindra President, Chief Executive Officer, 51 1993
and Director
</TABLE>
Ram Paul Gupta has served as a director of the Company since July 1995. From
1992 to the present, Mr. Gupta has served as President, Chief Operating Officer
and Vice President of Operations of Quality Semiconductor, Inc., a semiconductor
manufacturer. From 1988 to 1992, Mr. Gupta served as President of Blackship
Computers, Inc., a systems integration company. From 1983 to 1988, Mr. Gupta
held various management positions, including President, at General Electric's
Intensil Semiconductor operation. Mr. Gupta serves as a director of Quality
Semiconductor.
Suraj Puri co-founded the Company in 1993 and has served as Vice President,
Chief Technical Officer and a director of the Company since its inception. Prior
to joining the Company, from 1986 to 1993, Mr. Puri served as an independent
consultant in the semiconductor industry. From 1978 to 1986, he managed process
engineering, technology transfer and yield improvement at Advanced Micro
Devices, a manufacturer of semiconductor devices.
Abhay K. Bhushan co-founded the Company in 1993 and has served as a director of
the Company since its inception. He also served as Chief Financial Officer of
the Company from August 1993 until July 1995. Mr. Bhushan is currently Chairman
and Chief Financial Officer of Portola Communications, a software company, where
he has been employed since 1996. From 1974 through 1995, Mr. Bhushan was
employed by Xerox Corporation, where he has served in various capacities,
including Manager of Xerox Environmental Leadership Programs, Manager of Systems
Engineering and Standards and Manager of Business Strategy.
Raj Mohindra co-founded the Company in 1993 and has served as President, Chief
Executive Officer and a director of the Company since its inception. Mr.
Mohindra is currently serving as the Company's Chief Financial Officer. Prior to
joining the Company, from 1968 to 1993, he worked for IBM where he held a number
of operational, management and technical positions, including head of the IBM
Productivity Competence Center, Manager of Systems Engineering and Senior
Technical Staff Member.
BOARD MEETINGS. During the fiscal year ended December 31, 1996, the Board held
five meetings. Each director serving on the Board during his respective term in
fiscal year 1995 attended at least 75% of the meetings of the Board and the
Committees on which he served during such period, except for Suraj Puri.
5
<PAGE> 8
COMMITTEES OF THE BOARD. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors does not have a Nominating
Committee. The members of the Audit Committee during fiscal 1996 were Ram Paul
Gupta and William W.R. Elder. The responsibilities of the Audit Committee
include the selection of the independent public accountants, the review of the
annual audit, the approval of non-audit professional services performed by such
accountants and the review of the scope and adequacy of the Company's internal
accounting controls. The Audit Committee met once during the 1996 fiscal year.
The members of the Compensation Committee during fiscal 1996 were Ram Paul Gupta
and William W.R. Elder. The Compensation Committee met once during the 1996
fiscal year. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all executive officers of the
Company, and administers the Company's 1995 Stock Option Plan.
DIRECTOR COMPENSATION. Directors of the Company do not receive compensation for
their services as directors other than pursuant to the 1995 Outside Directors
Stock Option Plan (the "Directors Plan"). Under the Directors Plan, each new
director elected who is not an employee of the Company is automatically granted
an option to purchase 20,000 shares of Common Stock upon his election.
Additionally, each outside director, except for outside directors who have
received an initial grant of an option to purchase 20,000 shares within six
months of the annual meeting of stockholders, is automatically granted an option
to purchase 5,000 shares of Common Stock on the date of each annual meeting of
stockholders. The exercise price of the options in all cases shall be equal to
the fair market value of the Common Stock on the date of grant. Options granted
under the Directors Plan are immediately exerciseable but vest over four years
and generally must be exercised within ten years. As of December 31, 1996,
options had been granted under the Directors Plan to Messrs. Gupta and Elder for
20,000 shares each. In January 1997, Bernard Slade was elected to the Board of
Directors and granted an option for 20,000 shares under the Directors Plan.
Effective as of May 29, 1997, the date of the 1997 Annual Meeting of
Stockholders, Mr. Gupta will be automatically granted an additional option to
purchase 5,000 shares of Common Stock.
6
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation
of the Chief Executive Officer of the Company and the only other officer with
total compensation greater than $100,000 as of December 31, 1996 for services in
all capacities to the Company during the fiscal years ended December 31, 1996
and 1995. In 1995 no executive officer of the Company received in excess of
$100,000 compensation for services rendered to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS COMPENSATION
- --------------------------------------------- --------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Raj Mohindra, President and Chief Executive 1995 $ 84,000 125,971 --
Officer 1996 $138,459 -- $5,400(1)
Robert Ciano, Vice President, Sales and 1995 -- -- --
Marketing (2) 1996 $131,461 45,000 --
</TABLE>
- -------------
(1) Represents automobile allowance payments.
(2) Mr. Ciano resigned from the Company in November 1996.
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended December 31, 1996 to the persons named in the Summary Compensation Table:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS IN FISCAL 1996)
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE OR BASE
UNDERLYING EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE
- ---- ---------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Raj Mohindra -- -- -- --
Robert Ciano 45,000 12.4% $5.75 2/15/06(1)
</TABLE>
- -------------
(1) The option expired without exercise 30 days after Mr. Ciano's resignation.
7
<PAGE> 10
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the fiscal year
ended December 31, 1996, and unexercised options held as of December 31, 1996 by
the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
ACQUIRED ON VALUE ----------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raj Mohindra -- -- 125,971 -- $660,008 --
Robert Ciano -- -- -- -- -- --
</TABLE>
- ---------------
(1) The value of "in-the money" stock options represents the positive spread
between the exercise price of stock options, $0.76 per share, and the fair
market value for the Company's Common Stock of $6.00 per share as of December
31, 1996, which was the closing price of the Company's Common Stock on December
31, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors, and more than 10% stockholders were complied with during the 1996
fiscal year, except for Mr. Slade, who inadvertently failed to file one Form 4
in a timely manner.
CERTAIN TRANSACTIONS.
During the last two fiscal years, the Company sold Class A Common Stock and
Preferred Stock to certain of its officers, directors, and holders of 5% of the
outstanding shares of the Company, as described below.
In September 1995, the Company issued a promissory note in the principal amount
of $50,000 and 25,000 warrants which subsequently converted into Class A
Warrants to each of Raj Mohindra, Abhay Bhushan, Suraj Puri, and Bernard Slade,
directors of the Company.
These notes were repaid by the Company in December 1995.
In October 1995, the Company distributed a dividend of 220,000 Class A Warrants
and 450,000 Class B Warrants pro rata among all holders of capital stock and
options to acquire capital stock of the Company, including all officers of the
Company.
The Company believes that all transactions with affiliates described above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties.
8
<PAGE> 11
PROPOSAL 2
AMENDMENT TO 1995 STOCK OPTION PLAN
General.
The YieldUP International 1995 Stock Option Plan (the "Option Plan") was adopted
by the Board of Directors in July 1995 and approved by the stockholders of the
Company in August 1995. At meetings in December 1996 and February 1997, subject
to stockholder approval at the annual meeting, the Board of Directors adopted an
amendment to the Option Plan to increase the number of shares of Common Stock
reserved for issuance under the Option Plan by an aggregate of 500,000 shares to
a total of 750,000 shares. The Option Plan was created in order to assist the
Company in recruitment, retention and motivation of employees. The Option Plan
is intended to offer these individuals an incentive by enabling them to acquire
options to purchase Common Stock, generally at a price equal to its market value
on the date the option is granted. The Company's employment growth and need for
highly qualified employees, combined with the increased competition for the
limited supply of qualified personnel, make the Option Plan essential to the
Company's ability to recruit and retain its key employees. The Company believes
that an adequate reserve of shares available for issuance under the Option Plan
is necessary to enable it to compete successfully with other companies to secure
and retain valuable employees. The increase is necessary at this time because
the Company has exhausted its current reserve.
Description of the Option Plan.
The following summary of the Option Plan is qualified in its entirety by the
specific language of the Option Plan, a copy of which is available to any
stockholder upon request.
General. The Option Plan provides for the grant of incentive stock
options within the meaning of section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and nonstatutory stock options.
Shares Subject to Plan. A maximum of 250,000 shares of the authorized
but unissued Common Stock of the Company may be issued upon the exercise of
options granted pursuant to the Option. If the amendment to the Plan is approved
by the stockholders at the 1997 Stockholder Meeting, an additional 500,000
shares may be issued upon exercise of options granted pursuant to the Option
Plan. In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments will be made to the
shares subject to the Option Plan and to outstanding options. To the extent any
outstanding option under the Option Plan expires or terminates prior to exercise
in full or if shares issued upon exercise of an option are repurchased by the
Company, the shares of Common Stock for which such option is not exercised or
the repurchased shares are returned to the Option Plan and become available for
future grant.
Administration. The Option Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). The Option Plan provides that with respect to the participation of
individuals whose transactions in the Company's equity securities are subject to
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Option Plan must be administered in compliance with the requirements of Rule
16b-3 under the Exchange Act. Subject to the provisions of the Option Plan, the
Board determines the persons to whom options are to be granted, the number of
shares to be covered by each option, whether an option is to be an incentive
stock option or a nonstatutory stock option, the timing and
9
<PAGE> 12
terms of exercisability of each option or the vesting of shares acquired
upon the exercise of an option, including the effect thereon of an optionee's
termination of service, the exercise price of and the type of consideration to
be paid to the Company upon the exercise of each option, the duration of each
option, and all other terms and conditions of the options. The Option Plan
authorizes the Board to amend, modify, extend, renew, or grant a new option in
substitution for, any option, to waive any restrictions or conditions applicable
to any option or any shares acquired upon the exercise thereof, and to
accelerate, continue, extend or defer the exercisability of any option or the
vesting of any shares acquired upon the exercise of an option, including with
respect to the period following an optionee's termination of service with the
Company. The Option Plan also provides, subject to certain limitations, for
indemnification by the Company of any director, officer or employee against all
reasonable expenses, including attorneys' fees, incurred in connection with any
legal action arising from such person's action or failure to act in
administering the Option Plan. The Board will interpret the Option Plan and
options granted thereunder, and all determinations of the Board will be final
and binding on all persons having an interest in the Option Plan or any option.
Eligibility. All employees, directors and consultants of the Company or
of any present or future parent or subsidiary corporations of the Company are
eligible to participate in the Option Plan. The Option Plan provides that no
director serving on a committee intended to administer the plan in compliance
with Rule 16b-3 under the Exchange Act may be granted an option. In addition,
the Option Plan permits options to be granted to prospective employees and
consultants in connection with written offers of employment or engagement.
However, any such options may not become exercisable prior to such individual's
commencement of service. Any person eligible under the Option Plan may be
granted a nonstatutory option. However, only employees may be granted incentive
stock options.
Terms and Conditions of Options. Each option granted under the Option
Plan is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the Option Plan.
The exercise price per share must equal at least the fair market value of a
share of the Company's Common Stock on the date of grant of an incentive stock
option and at least 85% of the fair market value of a share of the Common Stock
on the date of grant of a nonstatutory stock option. The Option Plan provides
that the exercise price of any incentive stock option granted to a person who at
the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (a "Ten Percent Stockholder") must be at least 110%
of the fair market value of a share of the Company's Common Stock on the date of
grant. The Board determines the fair market value of the Company's Common Stock
in its sole discretion.
Under the Option Plan, the option exercise price may be paid in cash, by check,
or in cash equivalent, by tender of shares of the Company's Common Stock owned
by the optionee having a fair market value not less than the exercise price, by
the assignment of the proceeds of a sale or loan with respect to some or all of
the shares of Common Stock being acquired upon the exercise of the option, by
means of a recourse promissory note, or by any combination of these or any other
lawful consideration approved by the Board. The Board may nevertheless restrict
the forms of payment permitted in connection with any option grant.
Options granted under the Option Plan become exercisable and vested at such
times and subject to such conditions as specified by the Board. Generally,
options granted under the Option Plan are exercisable on and after the date of
grant, subject to the right of the Company to reacquire at the optionee's
exercise price any unvested shares held by the optionee upon termination of
employment
10
<PAGE> 13
or service with the Company or if the optionee attempts to transfer any
unvested shares. Shares subject to options generally vest in installments
subject to the optionee's continued employment or service. The Option Plan
provides that the maximum term of an incentive stock option is ten years unless
granted to a Ten Percent Stockholder, in which case the maximum term is five
years. The Option Plan does not limit the term of a nonstatutory stock option.
Options are nontransferable by the optionee other than by will or by the laws of
descent and distribution, and are exercisable during the optionee's lifetime
only by the optionee.
Transfer of Control. The Option Plan provides that, in the event of (i)
a sale or exchange by the stockholders of more than 50% of the Company's voting
stock, (ii) a merger or consolidation in which the Company is a party, (iii) the
sale, exchange or transfer of all or substantially all of the assets of the
Company, or (iv) a liquidation or dissolution of the Company wherein, upon any
such event, the stockholders of the Company immediately before such event do not
retain direct or indirect beneficial ownership of at least 50% of the total
combined voting power of the voting stock of the Company, its successor, or the
corporation to which the assets of the Company were transferred (a "Transfer of
Control"), the acquiring or successor corporation may assume the Company's
rights and obligations under outstanding options or substitute substantially
equivalent options for such corporation's stock. To the extent that the options
outstanding under the Option Plan are not assumed, substituted for, or exercised
prior to the Transfer of Control, they will terminate.
Termination or Amendment. The Option Plan will continue in effect until
the earlier of its termination by the Board or the date on which all shares
available for issuance under the Option Plan have been issued and all
restrictions on such shares under the terms of the Plan and the option
agreements have lapsed, provided that all incentive stock options must be
granted within ten years of July 26, 1995, the date on which the Board approved
the Option Plan. The Option Plan further provides that the period for granting
incentive stock options will be extended to a period of ten years following any
subsequent approval of an increase in the maximum number of shares issuable
under the Option Plan. The Board may terminate or amend the Option Plan at any
time, but, without stockholder approval, the Board may not amend the Option Plan
to increase the total number of shares of Common Stock issuable thereunder,
change the class of persons eligible to receive incentive stock options, or
expand the class of persons eligible to receive nonstatutory stock options. No
amendment may adversely affect an outstanding option without the consent of the
optionee, unless the amendment is required to preserve the option's status as an
incentive stock option or is necessary to comply with any applicable law.
Summary of United States Federal Income Tax Consequences of the Option Plan.
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction for federal income tax purposes. If an optionee
11
<PAGE> 14
disposes of shares within two years after the date of grant or within one year
from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the determination date (see
discussion under "Nonstatutory Stock Options" below) and the option exercise
price (not to exceed the gain realized on the sale if the disposition is a
transaction with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any gain in excess
of that amount will be a capital gain. If a loss is recognized, there will be no
ordinary income, and such loss will be a capital loss. A capital gain or loss
will be long-term if the optionee's holding period is more than 12 months. Any
ordinary income recognized by the optionee upon the disqualifying disposition of
the shares generally should be deductible by the Company for federal income tax
purposes, except to the extent such deduction is limited by applicable
provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market value of
the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is the date
on which the option is exercised unless the shares are subject to a substantial
risk of forfeiture and are not transferable, in which case the determination
date is the earlier of (i) the date on which the shares are transferable or (ii)
the date on which the shares are not subject to a substantial risk of
forfeiture. If the determination date is after the exercise date, the optionee
may elect, pursuant to Section 83(b) of the Code, to have the exercise date be
the determination date by filing an election with the Internal Revenue Service
not later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. A capital gain or
loss will be long-term if the optionee's holding period is more than 12 months.
No tax deduction is available to the Company with respect to the grant of a
nonstatutory option or the sale of the stock acquired pursuant to such grant.
The Company generally should be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee as a result of the exercise of a
nonstatutory option, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations thereunder.
12
<PAGE> 15
New Plan Benefits Table
Future grants under the Option Plan will be made at the discretion of the Board,
and accordingly, are not yet determinable. In addition, benefits under the
Option Plan will depend on a number of factors, including the fair market value
of the Company's Common Stock on future dates and, in the case of stock options,
the exercise decisions made by the optionees. Consequently it is not possible to
determine the benefits that might be received by participants in the Option
Plan. The following table sets forth the grants of stock options under the
Option Plan during the fiscal year ended December 31, 1996, to (1) the Company's
Chief Executive Officer and the Named Executive Officer, (2) all current
executive officers as a group, (3) all current directors who are not executive
officers as a group, and (4) all employees, including all current officers who
are not executive officers as a group.
<TABLE>
<CAPTION>
NAME EXERCISE PRICE NUMBER OF
PRINCIPAL POSITION PER SHARE SHARES
------------------ --------------- ---------
<S> <C> <C>
Raj Mohindra
President and Chief Executive
Officer -- --
Robert Ciano
Vice President, Sales and
Marketing $5.75 45,000
All Executive Officers as a Group
(4 Persons) $4.50-5.75 56,000
All Outside Directors as a Group
(2 Persons) -- --
All Non-Executive Officer
Employees as a Group $4.50-7.50 273,500
</TABLE>
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
this proposal. Abstentions and broker non-votes will each be counted as present
for purposes of determining the presence of a quorum. Abstentions will have the
same effect as a negative vote on this proposal. Broker non-votes will have no
effect on the outcome of this vote.
The Board of Directors believes that the proposed Amendment to the
Option Plan to increase by 500,000 shares the Common Stock of the Company
reserved for issuance thereunder is in the best interests of the Company and the
stockholders for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE OPTION PLAN.
13
<PAGE> 16
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company recommends a vote for the ratification of the appointment of KPMG
Peat Marwick L.L.P. as the Company's independent accountants. KPMG Peat Marwick
L.L.P. has been the Company's independent accountants since mid-1995, prior to
the Company's initial public offering. A representative of KPMG Peat Marwick
L.L.P. is expected to be present at the Annual Meeting of Stockholders with the
opportunity to make a statement if he or she desires to do so, and shall be
available to respond to appropriate questions.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
these proposals. Abstentions and broker non-votes will each be counted as
present for purposes of determining the presence of a quorum. Abstentions will
have the same effect as a negative vote on this proposal. Broker non-votes will
have no effect on the outcome of this vote.
The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote. In the event
that the stockholders do not approve the selection of KPMG Peat Marwick L.L.P.,
the appointment of the independent accountants will be reconsidered by the Board
of Directors. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK L.L.P. AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS.
STOCKHOLDER PROPOSALS
The Annual Meeting of Stockholders for the fiscal year ending December 31, 1997
is expected to be held in May 1998. All proposals of stockholders intended to be
presented at the Company's next Annual Meeting of Stockholders for the fiscal
year ending December 31, 1997 must be received at the Company's executive office
no later than December 31, 1997, for inclusion in the Proxy Statement and form
of proxy related to that meeting.
By order of the Board of Directors,
Raj Mohindra
Secretary
Dated: May 9, 1997
14
<PAGE> 17
YIELDUP INTERNATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Raj Mohindra, Secretary, as proxy with
the power of substitution to vote and act on and consent in respect to any and
all shares of the stock of Yieldup International Corporation, held or owned by
or standing in the name of the undersigned on the Company's books on March 31,
1997, at the Annual Meeting of Stockholders of the Company to be held at the
Company headquarters, 117 Easy Street, Mountain View, California 94043 at
10:00 am Pacific Daylight Time on May 29, 1997, and any continuation of
adjournment thereof, with all power the undersigned would possess if personally
present at the meeting.
The undersigned hereby directs and authorizes said proxies, and each of
them, or their substitutes, to vote as specified herein with respect to the
proposals listed in paragraphs 1, 2 and 3 or if no specification is made, to
vote in favor thereof.
The undersigned hereby further confers upon said proxies and each of
them, or their substitutes, discretionary authority to vote in respect to all
other matters, which may properly come before the meeting or any continuation or
adjournment thereof.
(TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 18
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
Please mark your
A. |X| votes as in this
example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
WITHHOLD AUTHORITY
FOR the nominee to vote for the nominee
listed at right listed at right
--------------- -----------------------
1. Election of
the following: [ ] [ ] NOMINEES:
Abhay Bhushan
(INSTRUCTIONS: To withhold authority to vote for the nominees,
strike a line through his name at right.)
FOR AGAINST ABSTAIN
2. To increase the number of shares reserved
for issuance under the Company's 1995 [ ] [ ] [ ]
Employee Stock Option Plan by 500,000.
3. To ratify the appointment of KPMG Peat Marwick,
LLP as independent accountants of the Company [ ] [ ] [ ]
for the fiscal year ended December 31, 1997.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
- ------------------------- --------- ------------------------------ ---------
SIGNATURE DATE: SIGNATURE DATE:
Note: Sign exactly as your name(s) appear on your stock certificate. If shares
of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or
all such persons should sign the Proxy. If shares of stock are held of
record by a corporation, the Proxy should be executed by the President or
Vice President and the Secretary or Assistant Secretary, and the
corporate seal should be affixed thereto. Executors or administrators or
other fiduciaries who execute the Proxy for a deceased shareholder should
give their full title. Please date the Proxy.
