<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
DUPONT PHOTOMASKS, 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:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
DUPONT PHOTOMASKS, INC.
131 OLD SETTLERS BOULEVARD
ROUND ROCK, TEXAS 78664
512-310-6500
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 26, 1998
------------------------
To the Stockholders of
DUPONT PHOTOMASKS, INC.
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
DuPont Photomasks, Inc. (the "Company") will be held in the San Jacinto East
Room of the Four Seasons Hotel, 98 San Jacinto Blvd., Austin, Texas 78701, on
Monday, October 26, 1998 at 10:00 a.m. Austin time, and any adjournment thereof,
for the following purposes:
(1) To elect eight directors to the Board of Directors;
(2) To approve the adoption of the 1998 Employee Stock Purchase Plan;
(3) To approve the adoption of the Second Amended and Restated Non-employee
Directors Stock Option Plan;
(4) To ratify the selection of independent accountants; and
(5) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors recommends election of the nominees for directors,
the approval of the adoption of the 1998 Employee Stock Purchase Plan, the
approval of the adoption of the Second Amended and Restated Non-employee
Directors Stock Option Plan and the ratification of the selection of independent
accountants named in the accompanying Proxy Statement.
E.I. du Pont de Nemours and Company, through its wholly-owned subsidiary,
DuPont Chemical and Energy Operations, Inc., beneficially owned 10,500,000
shares of Common Stock (approximately 69% of the outstanding shares of Common
Stock) on the record date and thus will be able to elect all of the nominees for
directors, approve the adoption of the 1998 Employee Stock Purchase Plan,
approve the adoption of the Second Amended and Restated Non-employee Directors
Stock Option Plan and ratify the selection of independent accountants.
Stockholders of record at the close of business on September 8, 1998 are
entitled to notice of and to vote at the meeting. All stockholders are cordially
invited and urged to attend the meeting. Regardless of whether you expect to
attend the meeting, you are requested to sign, date and return the accompanying
proxy card in the enclosed self-addressed postage-paid envelope. You may still
attend and vote in person at the meeting if you wish, even though you may have
submitted your proxy prior to the meeting. The Bylaws of the Company require
that the holders of a majority of the outstanding shares of Common Stock of the
Company entitled to vote be represented in person or by proxy at the meeting in
order to constitute a quorum for the transaction of business. It is important
that your shares be represented at the meeting in person or by proxy.
Your support for the Company is greatly appreciated.
By order of the Board of Directors
/S/ J. MICHAEL HARDINGER
--------------------------------------
J. Michael Hardinger
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
September 18, 1998
<PAGE>
DUPONT PHOTOMASKS, INC.
131 OLD SETTLERS BOULEVARD
ROUND ROCK, TEXAS 78664
------------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
OF DUPONT PHOTOMASKS, INC.
SOLICITATION, EXERCISE AND REVOCATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors (the
"Board") of DuPont Photomasks, Inc. (the "Company"), to be voted at the 1998
Annual Meeting of Stockholders of the Company (the "Annual Meeting"). The Annual
Meeting will be held at the time and place and for the purposes set forth in the
accompanying Notice. In addition to the original solicitation by mail, certain
regular employees of the Company may solicit proxies by telephone or telecopy or
in person. No specially engaged employees or solicitors will be retained for
proxy solicitation purposes. All expenses of this solicitation, including the
costs of preparing and mailing this Proxy Statement and the reimbursement of
brokerage firms and other nominees for their reasonable expenses in forwarding
proxy materials to beneficial owners of shares, will be borne by the Company.
You may vote in person at the Annual Meeting, if you wish, even though you have
previously mailed in your proxy. This Proxy Statement and the accompanying proxy
are being mailed to stockholders beginning on or about September 28, 1998.
All duly executed proxies will be voted in accordance with the instructions
thereon. Stockholders who execute proxies, however, retain the right to revoke
them at any time before they are voted. The revocation of a proxy will not be
effective until written notice thereof has been given to the Secretary of the
Company, unless the stockholder granting such proxy votes in person at the
Annual Meeting.
VOTING OF SECURITIES
The record date for the determination of stockholders entitled to vote at
the Annual Meeting is September 8, 1998. As of such date, the Company had
outstanding 15,293,097 shares of Common Stock, $.01 par value per share (the
"Common Stock"). The Common Stock is the only class of stock of the Company
outstanding and entitled to vote at the Annual Meeting. Each stockholder is
entitled to one vote for each share of Common Stock held. All votes on the
proposals set forth below will be taken by ballot. For purposes of the votes on
all proposals set forth below, the holders of a majority of the shares entitled
to vote, represented in person or by proxy, will constitute a quorum at the
Annual Meeting. The stockholders present at the Annual Meeting may continue to
transact business until adjournment, notwithstanding the subsequent withdrawal
of enough stockholders to leave less than a quorum or the refusal of any
stockholder present in person or by proxy to vote or participate in the Annual
Meeting. Abstentions and broker non-votes will be counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions will be counted towards the number of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes, whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership, as of the close of business on September 8, 1998, of shares of Common
Stock by each person who is known to the Company to be a beneficial owner of 5%
or more of the Common Stock, each current director (each of whom is a nominee),
each executive officer named in the Summary Compensation Table hereinafter set
forth, and all current directors and executive officers of the Company as a
group. AS OF SEPTEMBER 8, 1998, E.I. DU PONT DE NEMOURS AND COMPANY ("DUPONT"),
THROUGH ITS WHOLLY-OWNED SUBSIDIARY DUPONT CHEMICAL AND ENERGY OPERATIONS, INC.
("DCEO"), OWNED 10,500,000 SHARES (APPROXIMATELY 69%) OF THE COMMON
<PAGE>
STOCK. AS A RESULT, DUPONT HAS SUFFICIENT VOTING POWER TO CONTROL THE DIRECTION
AND POLICIES OF THE COMPANY, INCLUDING ANY MERGER, CONSOLIDATION OR SALE OF ALL
OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, TO ELECT THE MEMBERS OF THE
BOARD, AND TO PREVENT OR CAUSE A CHANGE IN CONTROL OF THE COMPANY. The Common
Stock is the only class of voting securities outstanding. Unless otherwise
indicated, each person or entity set forth in the table has sole investment and
voting power with respect to all shares shown as beneficially owned. Shares are
owned beneficially and of record, unless otherwise specified.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
<S> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER(2) PERCENT
- ---------------------------------------------------------------------------------------- ------------ -----------
E.I. du Pont de Nemours and Company..................................................... 10,500,000(3) 68.7%
1007 Market Street
Wilmington, Delaware 19898
J. Michael Hardinger.................................................................... 103,657 *
John L. Doyle........................................................................... 10,250 *
John W. Himes........................................................................... 10,500,000(4) 68.7%
John C. Hodgson......................................................................... 10,500,500(4) 68.7%
Gary W. Pankonien....................................................................... 12,250 *
John C. Sargent......................................................................... 10,500,300(4) 68.7%
Marshall C. Turner...................................................................... 7,550 *
Susan A. Vladuchick..................................................................... 10,502,000(4) 68.7%
Preston M. Adcox........................................................................ 40,847 *
Gerard Cognie........................................................................... 38,934(5) *
Arthur W. Launder....................................................................... 28,116 *
Kenneth A. Rygler....................................................................... 19,400 *
All executive officers and directors as a group (15 persons)............................ 10,805,672(4) 70.7%
</TABLE>
- ------------------------
* Less than 1%.
(1) The address for all officers and directors is 131 Old Settlers Boulevard,
Round Rock, Texas 78664.
(2) Does not include shares purchasable more than 60 days after September 8,
1998 pursuant to options granted as of year end to directors and named
executive officers under the Company's stock plans, as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER OR DIRECTOR OPTION SHARES
- ------------------------------------------------------------------------------- -------------
<S> <C>
J. Michael Hardinger........................................................... 107,420
John L. Doyle.................................................................. 8,750
Gary W. Pankonien.............................................................. 8,750
Marshall C. Turner............................................................. 8,750
Preston M. Adcox............................................................... 71,806
Gerard Cognie.................................................................. 31,407
Arthur W. Launder.............................................................. 31,372
Kenneth A. Rygler.............................................................. 25,873
</TABLE>
(3) All 10,500,000 shares are held by DuPont's wholly-owned subsidiary, DCEO.
(4) Includes the 10,500,000 shares beneficially owned by DuPont, which Messrs.
Himes, Hodgson and Sargent and Ms. Vladuchick share the right to vote.
(5) Includes 14,800 shares held by Mr. Cognie's spouse, as to which Mr. Cognie
has disclaimed beneficial ownership.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
GENERAL INFORMATION
Eight directors are proposed to be elected at the Annual Meeting, all of
whom currently are directors of the Company. The Bylaws of the Company provide
for a Board of not less than one nor more than fifteen directors, with the
current number set at eight. Each director will serve until the next annual
meeting of stockholders or until his successor is elected and has qualified.
Vacancies on the Board may be filled by the majority vote of directors then in
office or by the sole remaining director.
The persons named in the accompanying proxy may act with discretionary
authority to vote for a new management nominee should any nominee named in this
Proxy Statement become unavailable for election, although management is unaware
of any circumstances likely to render any nominee unavailable for election.
Unless the stockholder has specified otherwise, the persons named in the
accompanying proxy will vote such stockholder's shares of Common Stock in favor
of the nominees listed below.
The Certificate of Incorporation of the Company does not permit cumulative
voting. A plurality of the votes of the holders of the outstanding shares of
Common Stock of the Company represented at the Annual Meeting at which a quorum
is present will elect all eight directors.
BOARD RECOMMENDATION
The Board believes that the election of the persons listed below as
directors of the Company is in the best interest of the Company and its
stockholders. The Board therefore recommends that you vote FOR the nominees and
it is intended that the proxies not marked to the contrary will be so voted.
NOMINEES FOR DIRECTOR
The following table sets forth the name, age (as of September 8, 1998) and
current position with the Company of each person who is a nominee for election
as a director of the Company.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH THE COMPANY
- ------------------------------------------ --- -------------------------------------------
<S> <C> <C>
J. Michael Hardinger...................... 51 Chairman of the Board and Chief Executive
Officer
John L. Doyle............................. 67 Director
John W. Himes............................. 53 Director
John C. Hodgson........................... 54 Director
Gary W. Pankonien......................... 48 Director
John C. Sargent........................... 60 Director
Marshall C. Turner........................ 56 Director
Susan A. Vladuchick....................... 50 Director
</TABLE>
J. MICHAEL HARDINGER. Mr. Hardinger is Chairman of the Board and Chief
Executive Officer of the Company, positions he assumed as a part of the global
realignment of the photomask business. He joined DuPont in 1970 and has served
in a number of management positions with DuPont, including Vice President and
General Manager of DuPont's Acrylics and Consumer Products Business from 1990
until 1993. He was Vice President--DuPont Corporate Sourcing prior to assuming
his position with the Company. Mr. Hardinger is a member of the Chase Bank of
Texas Austin Advisory Board of Directors and a member of the Board of Directors
of the Capital of Texas Public Telecommunications Council.
3
<PAGE>
JOHN L. DOYLE. Mr. Doyle is a private consultant, having retired from the
Hewlett-Packard Company in 1991. At the time of his retirement, he was Executive
Vice President, Business Development with responsibility for Hewlett-Packard's
integrated circuit facilities as well as acquisitions, mergers, planning,
corporate purchasing, manufacturing and engineering. He was also a member of the
Executive Committee. Mr. Doyle was Co-Chief Executive Officer of Hexcel Corp., a
manufacturer of advanced composite materials, from July 1993 to December 1993.
Hexcel Corp. filed for bankruptcy under Chapter 11 of the United States
Bankruptcy Code in December 1993. He is currently a director of Xilinx, Inc.,
and Analog Devices, Inc. He became a director of the Company in April 1996.
JOHN W. HIMES. Mr. Himes is Vice President of Investor Relations for
DuPont. He joined DuPont in 1966 and has served in a variety of business
management positions, including leadership of Dacron-Registered Trademark-
polyester, Advanced Composites and Industrial Polymers. Mr. Himes was
responsible for Human Resources and later Business Development in Asia for
DuPont. He became a director of the Company in January 1998.
JOHN C. HODGSON. Mr. Hodgson is the Vice President/General Manager of the
Photopolymer and Electronic Materials Strategic Business Unit of DuPont, a
position he assumed in 1996. He has been with DuPont for 32 years and has served
in a variety of management positions in the X-Ray, Electronics and Diagnostic
businesses in the United States and in Geneva, Switzerland. From 1994 until
assuming his current position, Mr. Hodgson served as Managing Director/General
Manager of the Electronic Materials Strategic Business Unit. He became a
director of the Company in April 1996.
GARY W. PANKONIEN. Mr. Pankonien is the Chairman and Chief Executive
Officer of 1st TECH Molding and a private investor. He serves as a director of
Tanisys Technology, a manufacturer of memory modules, 1st TECH Molding and
MagRabbit. Mr. Pankonien spent seven years at Compaq Computer Corporation where
he served as the Notebook Computer Design and Operations Manager for three
years. He co-developed and currently holds the patent for the first notebook
computer as well as several other patents. Mr. Pankonien has over 20 years of
management experience in the electronics industry and has extensive experience
in off-shore operations. He became a director of the Company in April 1996.
JOHN C. SARGENT. Mr. Sargent is a private consultant, having retired from
DuPont in 1998. He joined the Treasury Department of Conoco in 1964 and worked
in a number of financial management positions with Conoco both in the United
States and Europe. He became Vice President and Treasurer of Conoco in 1981 and
also in 1981 became Assistant Treasurer and Director of the Treasury Division of
DuPont after Conoco was acquired by DuPont. He assumed the position of Vice
President and Treasurer of DuPont in 1992. He became a director of the Company
in December 1995.
MARSHALL C. TURNER. Mr. Turner is an independent consultant and technology
venture investor. He has also been a general partner of Taylor & Turner
Associates, Ltd., the general partner of venture capital partnerships, since its
inception in 1981. He has been a venture capital principal or operating
executive in technology industries for 25 years, and is a former director of ten
venture-backed technology companies. Mr. Turner is Vice-Chairman of the Board of
the Public Broadcasting Service, and serves as a director of the Alliance
Technology Fund, two privately-held companies, the George Lucas Educational
Foundation, and the Smithsonian National Museum of Natural History. He became a
director in April, 1996.
SUSAN A. VLADUCHICK. Ms. Vladuchick is the Director of Operations--U.S.
Region and Vice Chair of the Operations Network for DuPont. She joined DuPont in
1969 and has held a variety of management positions in research and development,
human resources, and manufacturing during the course of her career, including
Director of Operations for DuPont Medical Products from 1993 to 1995 and
Director of Human Development and Personnel Relations from 1995 to 1997. Ms.
Vladuchick currently serves on the College of Engineering & Science Advisory
Board for Clemson University and is a past Alumni Trustee for Grove City
College. She became a director of the Company in January 1996.
4
<PAGE>
BOARD COMMITTEES
The Board has appointed from among its members two standing committees of
the Board.
The Audit Committee is composed of John L. Doyle, who serves as chairperson
of the committee, John C. Sargent, and Marshall C. Turner. No member of the
Audit Committee may be an employee or officer of the Company or any of its
subsidiaries. The functions of the Audit Committee include meeting with the
independent public accountants to discuss the scope and results of their
examination of the books and records of the Company and to review the internal
audit department's activities, if and when established, and to discuss the
adequacy of the Company's accounting and control systems, reviewing the audit
schedule, and considering any issues raised by its members, the independent
public accountants, the internal audit staff, the legal staff or management.
Each year the Audit Committee will recommend to the full Board the name of an
accounting firm to audit the financial statements of the Company.
The Compensation Committee is composed of Gary W. Pankonien, Marshall C.
Turner, and Susan A. Vladuchick, who serves as chairperson of the committee. No
member of the Compensation Committee may be an employee or officer of the
Company or any of its subsidiaries. The principal function of the Compensation
Committee is to review and approve the corporate organization structure, review
performance of corporate officers, establish overall employee compensation
policies and recommend to the Board major compensation programs. The
Compensation Committee also reviews and approves compensation of directors and
corporate officers, including salary, bonus awards and stock option and
restricted stock grants and administers the Company's stock plans and bonus
plan.
During 1998, the Board held eight meetings in person or by telephone.
Members of the Board are provided with information between meetings regarding
the operations of the Company and are consulted on an informal basis with
respect to pending business. Such consultation from time to time leads to
director action between meetings by unanimous written consent of the directors,
which occurred two times during 1998. During 1998, the Compensation Committee
held four meetings and the Audit Committee held four meetings. Each of the
incumbent directors who was a director during the 1998 year attended no fewer
than 75% of the total number of meetings of the Board and the total number of
meetings held by all committees of the Board on which such director served
during the year.
TRANSACTIONS AND RELATIONSHIP BETWEEN THE COMPANY AND DUPONT
The Company and DuPont have entered into a number of agreements for the
purpose of defining certain past, present and prospective arrangements and
transactions between them. These agreements were negotiated in the context of a
parent-subsidiary relationship and therefore are not the result of negotiations
between independent parties. It is the intention of the Company and DuPont that
such agreements and the transactions provided for therein, taken as a whole,
should accommodate the parties' interests in a manner that is fair to both
parties, while continuing certain mutually beneficial joint arrangements.
However, because of the complexity of the various relationships between the
Company and DuPont (including their subsidiaries), there can be no assurance
that each of such agreements, or the transactions provided for therein, were
effected on terms at least as favorable to the Company as could have been
obtained from unaffiliated third parties. The Company is only entitled to the
ongoing assistance of DuPont for a limited time.
Additional or modified arrangements and transactions may be entered into by
the Company, DuPont and their respective subsidiaries in the future. Any such
future arrangements and transactions will be determined through negotiation
between the Company and DuPont or their respective subsidiaries, as the case may
be. The Company has adopted a policy that all future agreements between the
Company and DuPont and their subsidiaries will be on terms that the Company
believes are no less favorable to the Company than the terms the Company
believes would be available from unaffiliated parties. In that regard, the
Company intends to follow the procedures provided by the Delaware General
Corporation
5
<PAGE>
Law, which includes a vote to affirm any such future agreements by a majority of
the Company's directors who are not employees of DuPont (even though such
directors may be less than a quorum).
The following is a summary of certain past, present and prospective
arrangements and transactions between the Company and DuPont.
HISTORICAL TRANSACTIONS AND REALIGNMENT OF PHOTOMASK BUSINESS
Prior to the Realignment (as defined below), DuPont's U.S. photomask
operations were conducted by DuPont Photomasks, Inc., a Texas corporation.
European photomask operations were conducted by separate, wholly owned
subsidiaries of DuPont in their respective countries. Photomask operations in
Korea were conducted by DuPont Korea, Ltd., which was 31% owned by DuPont
Photomasks, Inc. and 69% owned by DuPont and which also conducted DuPont's other
non-photomask business. In connection with the consummation of the initial
public offering of the Company's Common Stock, DuPont realigned its global
photomask business, pursuant to which certain transactions were undertaken so
that DuPont's foreign photomask operations would reside in wholly owned
subsidiaries of the Company (the "Realignment").
DuPont provided significant management functions and services, including
cash management, tax administration, accounting, legal, data processing, benefit
administration and other support services. The Company was charged and/or
allocated expenses for 1995 and 1996 of approximately $13.1 million and $7.3
million. The costs of these services have been directly charged and/or allocated
using methods that DuPont management believed were reasonable. Such charges and
allocations are not necessarily indicative of the costs the Company would have
incurred to obtain these services had it been a separate entity. The Company has
not made a study or any attempt to obtain estimates from third parties to
determine what the cost of obtaining such services from such parties may have
been.
The Company participated in DuPont's centralized cash management system
prior to the Realignment. In general, the cash funding requirements of the
Company were met by, and all cash generated by the Company was transferred to,
DuPont. In the U.S. and France, this was accomplished under the terms of
interest-bearing loan arrangements between the Company and DuPont (collectively,
the "Master Notes"). The Company borrowed funds for acquisitions, capital
expenditures and working capital from DuPont pursuant to the Master Notes. The
interest rate charged was equal to the rate DuPont paid for its commercial paper
borrowings.
ADMINISTRATIVE SERVICE AGREEMENTS
The Company and its subsidiaries, on the one hand, and DuPont and certain
DuPont subsidiaries, on the other hand, have entered into several transitional
administrative service agreements (collectively, the "Administrative Service
Agreements"), pursuant to which DuPont will continue to provide various services
to the Company, including tax administration, computer and information systems,
telecommunications and employee benefits administration.
Each service under the Administrative Service Agreements is provided for a
specified time period. However, the Company and its subsidiaries may terminate
any or all services that it receives under an Administrative Service Agreement
at any time upon 45 days' prior written notice. Each Administrative Service
Agreement shall terminate upon the later of (i) January 1, 1999 or (ii) the date
upon which DuPont owns less than 50% of the outstanding Common Stock of the
Company. The Company and its subsidiaries are obligated to take all steps
necessary to obtain their own administrative and support services prior to the
termination of the Administrative Service Agreements.
The Company and its subsidiaries will be obligated to pay fees established
in the Administrative Service Agreements based upon the type and amount of
services rendered. In addition, the Company and its subsidiaries will reimburse
DuPont for any out-of-pocket expenses it incurs in connection with providing
6
<PAGE>
the services. The Company paid DuPont $3.9 million and $3.1 million for services
provided under the Administrative Service Agreements in 1997 and 1998. With the
exception of the Administrative Service Agreement entered into by the respective
subsidiaries of DuPont and the Company in Korea, in the absence of gross
negligence or willful or reckless misconduct, DuPont's liability for damages to
the Company for any breach of DuPont's obligations under the Administrative
Service Agreements is limited to payments made to DuPont thereunder. With
respect to the Administrative Service Agreement covering the operations in
Korea, DuPont's subsidiary is not required to provide any guarantee or warranty
of any nature and cannot be held liable for any claims, damages or liabilities
of any kind resulting from the furnishing of the services thereunder.
RESEARCH, DEVELOPMENT AND CONSULTING AGREEMENT
The Company and DuPont have entered into a research, development and
consulting agreement (the "Research, Development and Consulting Agreement")
whereby DuPont will provide to the Company supplemental technical assistance and
consulting with respect to: (i) analytical support and consulting on an as
needed basis ("Analytical Support"), and (ii) research projects addressing
specific Company needs ("Research Project Support"). In exchange for the
Analytical Support, the Company will pay DuPont $100,000 per calendar year. In
the event the costs of these services are estimated to exceed $100,000, the
Company can either agree to pay additional projected costs or elect not to have
DuPont provide these additional services. Compensation for Research Project
Support will be determined at the time each specific project relating thereto is
undertaken. The initial term of the Research, Development and Consulting
Agreement expires on January 1, 2001 and automatically renews for successive
one-year terms until terminated by either DuPont or the Company pursuant to
certain procedures set forth in the Research, Development and Consulting
Agreement.
TAX INDEMNIFICATION AGREEMENT
The Company and DuPont have entered into a tax indemnification agreement
(the "Tax Indemnification Agreement") pursuant to which the Company will pay
DuPont, or DuPont will pay the Company, as appropriate, amounts in respect of
taxes shown as due attributable to the operations of the Company for the period
ending on the date on which the Company ceases to be a member of the DuPont
consolidated group. DuPont will indemnify the Company and its subsidiaries from
liability for certain matters (net of corresponding tax benefits), including (i)
any federal, state or local taxes attributable to any affiliated or combined
group of which the Company was a member at any time prior to June 13, 1996 and
(ii) any federal, state or local income or other tax for any period up to and
including June 13, 1996. The Company will indemnify DuPont and its subsidiaries
from liability for certain matters, including any federal, state or local income
or other taxes attributable to the operations of the Company following June 13,
1996. In connection with the Company's sale of its 31% equity interest in DuPont
Korea, Ltd. to DuPont, to the extent there is a loss, any tax benefit
attributable to such loss will be for DuPont's benefit at such time as DuPont's
beneficial ownership of the Company falls below 50%.
The Tax Indemnification Agreement will require payments of claims to be made
within 30 days of the date a written demand for the claim is delivered. Interest
accrues on payments that are not made within 10 days of the final due date at
the rate applicable to the underpayments of the applicable tax. Any disputes
concerning the calculation or basis of determination of any payment provided
under the Tax Indemnification Agreement will be resolved by a law firm or a "big
five" accounting firm selected jointly by the parties.
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
The Company and DuPont have entered into an environmental indemnification
agreement (the "Environmental Indemnification Agreement") pursuant to which
DuPont will generally indemnify the Company against substantially all
liabilities relating to any environmental contamination present on the
7
<PAGE>
manufacturing sites of the Company and its subsidiaries as of June 13, 1996 or
present on any other site as a result of the manufacturing operations of the
Company and its subsidiaries prior to June 13, 1996.
In the event that the parties cannot determine with reasonable certainty,
following good faith negotiations, whether the contamination was caused by
activities occurring before or after June 13, 1996, the Environmental
Indemnification Agreement provides for a mechanism whereby the liability
associated with any such claim is allocated according to the following: DuPont
bears 100% of the liability associated with claims filed by the Company with
regard to such contamination prior to June 13, 1997; DuPont's liability for
claims filed following June 13, 1997 declines at the rate of 20% per year; and
DuPont has no liability for such claims filed following June 13, 2001.
The Environmental Indemnification Agreement includes procedures for notice
and payment of indemnification claims and generally provides that the party
bearing the majority of the liability will assume the defense of such claim and
will control any negotiation or remediation activities.
CREDIT AGREEMENT
The Company and DuPont have entered into a credit agreement (the "Credit
Agreement"), pursuant to which DuPont has agreed to provide a credit facility to
the Company in an aggregate amount of $100 million. The Credit Agreement expires
in 2001 and any loans thereunder will bear interest at LIBOR plus 25 basis
points. At the Company's option, advances under the Credit Agreement are
convertible into term loans with maturities up to seven years. The amounts
loaned under the Credit Agreement are unsecured and the Credit Agreement
contains various representations, covenants and events of default typical for
financings of a similar size and nature. For example, the Credit Agreement
provides that, without DuPont's prior written consent, the Company will not
incur, create, assume or permit to exist any indebtedness, including guarantees
on indebtedness (in addition to the indebtedness under the Credit Facility), in
excess of $50 million in the aggregate. To date, the Company has borrowed a
maximum of $35 million under the Credit Agreement and at June 30, 1998
borrowings of $9 million were outstanding.
CORPORATE TRADENAME AGREEMENT
The Company and DuPont have entered into a corporate tradename and trademark
agreement (the "Corporate Tradename Agreement") whereby DuPont licenses to
Company (i) use of the tradename "DuPont" as part of the Company's corporate
name, (ii) use of the tradename "DuPont" as part of the name of an affiliated
company of the Company and (iii) use of the trademark DuPont in Oval as part of
the Company's corporate logo. DuPont may terminate the Corporate Tradename
Agreement upon two years prior written notice in the event that DuPont and/or
its affiliates cease to hold 20% of the total outstanding Common Stock of the
Company and upon 90 days written notice in the event that (i) DuPont ceases to
be the largest holder of Common Stock of the Company, (ii) the Company purports
to assign or otherwise transfer the Corporate Tradename Agreement without
DuPont's written consent, or (iii) the Company uses the tradename "DuPont" other
than under the terms of the Corporate Tradename Agreement. In addition, DuPont
may terminate the Corporate Tradename Agreement upon 90 days written notice for
any reason after January 1, 2008. In the Corporate Tradename Agreement, the
Company grants DuPont the right to inspect and test products manufactured by or
for the Company and intended to be sold bearing the DuPont in Oval logo to
determine uniform quality and compliance with quality standards of DuPont and
agrees to hold DuPont harmless from any and all liabilities arising from the
manufacture, sale, transportation, storage or use of products manufactured by or
for the Company bearing the DuPont in Oval logo. Upon termination of the
Corporate Tradename Agreement, the Company will be obligated to: (i) change its
name so that the tradename "DuPont" is omitted therefrom; (ii) cease to use the
tradename "DuPont" or any similar tradename as part of its corporate name or in
any other manner whatsoever; and (iii) cease to use the DuPont in Oval logo.
8
<PAGE>
DISTRIBUTOR AGREEMENTS
The Company has entered into separate distributor agreements (the
"Distributor Agreements") with DuPont K.K., a Japanese subsidiary of DuPont, and
DuPont Taiwan Limited, a Taiwanese subsidiary of DuPont (collectively, the
"Distributors"). Pursuant to the Distributor Agreements, the Company has
appointed the Distributors to sell the Company's products in their respective
countries. The products will be sold to the Distributors at a discount, which
shall permit the Distributors to earn a pre-tax profit between 2% and 4%.
REGISTRATION RIGHTS AGREEMENT
Under a Registration Rights Agreement (the "Registration Rights Agreement")
between DuPont and the Company, DuPont and its assignees ("Holders") are
entitled to certain rights with respect to the registration of shares they hold
under the Securities Act. Subject to certain limitations (including a minimum
registration of over 1,000,000 shares), each Holder has the right to require the
Company to register the sale of all or part of the shares it holds under the
Securities Act (a "demand registration"). The Holders will be entitled to
request up to an aggregate of five demand registrations. Each Holder is also
entitled to include the shares of Common Stock it holds in a registered offering
of securities by the Company for its own account, subject to certain conditions
and restrictions. The Company will pay all expenses associated with a
registration of shares of Common Stock by a Holder pursuant to the Registration
Rights Agreement, other than underwriting discounts and commissions, Holders'
out-of-pocket expenses or underwriters' counsel fees and disbursements, if any,
relating to such shares. In addition, the Registration Rights Agreement contains
certain indemnification provisions (i) by the Company for the benefit of Holders
as well as any potential underwriter and (ii) by Holders for the benefit of the
Company and related persons, DuPont and its assignees may transfer its
registration rights under the Registration rights Agreement without the prior
approval of the Company. The Registration Rights Agreement also provides that
while DuPont owns 50% or more of the Company's Common Stock, the Company may not
grant registration rights to any other person without DuPont's prior consent.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under Section 16(a) of the Securities Exchange Act of 1934, directors,
certain officers, and beneficial owners of 10% or more of the Company's Common
Stock are required from time to time to file with the Securities and Exchange
Commission reports on Forms 3, 4 or 5, relating principally to transactions in
Company securities by such persons. Based solely upon a review of Forms 3 and 4
and amendments thereto furnished to the Company during 1998 and thereafter,
Forms 5 and amendments thereto furnished to the Company with respect to 1998,
and any written representations received by the Company from a director, officer
or beneficial owner of more than 10% of the Common Stock ("reporting persons")
that no Form 5 is required, the Company believes that all reporting persons
filed on a timely basis the reports required by Section 16(a) of the Securities
Exchange Act of 1934 during 1998 except that John W. Himes' initial Form 3 was
filed late and Messrs. Doyle, Pankonien and Turner each failed to timely file
stock option grants in June 1996 and November 1996 under the Company's
Non-Employee Director Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Gary W. Pankonien, Marshall C.
Turner, and Susan A. Vladuchick, who serves as chairperson of the Committee. No
member of the Compensation Committee is an employee or officer of the Company or
any of its subsidiaries. However, Ms. Vladuchick is the Director of
Operations--U.S. Region and Vice Chair of the Operations Network for DuPont.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for reviewing and approving the
corporate organization structure, reviewing performance of corporate officers,
establishing overall employee compensation policies and recommending to the
Board major compensation programs. The Compensation Committee also reviews and
approves compensation of directors and corporate officers, including salary,
bonus awards and stock option and restricted stock grants, and administers the
Company's stock plans and bonus plan. Prior to the Company's initial public
offering, the functions of the Compensation Committee were performed by DuPont.
The Company has designed an executive compensation program intended to
attract and motivate officers and key employees of the Company. The Company
believes that executive compensation should be tied to the Company's long term
performance and benefit to its stockholders. As such, a significant portion of
executive management's compensation is tied to the performance of the Company's
long term total stockholder return. The Company periodically reviews its
compensation programs in comparison with similarly situated companies and
amended the plans accordingly to assure that the Company's compensation programs
are competitive within the industry and carry out the objectives of the Company.
BASE SALARY
At May 1, 1998, the base salaries for Messrs. Hardinger, Adcox, Cognie,
Launder, and Rygler were $315,000, $260,000, 1,086,130 FrF (approximately
$181,000), $201,100, and $177,000, respectively.
BONUS PLAN
The Company maintains an annual incentive plan (the "Bonus Plan") for
officers and employees of the Company and its subsidiaries. Employees are
selected by the Compensation Committee to participate in the Bonus Plan based
upon the recommendation of the Chairman of the Board. The Bonus Plan provides
for target bonus grants to be established based on the position of the employee
and to be computed as a percentage of the employee's salary. The Bonus Plan
provides that a performance goal based primarily on the Company's earnings will
be set by the Board, and the amount of bonus will be calculated based on the
employee's target bonus grant, the performance of the Company compared with the
performance goal and individual contributions by the employee.
The Compensation Committee authorized, at the recommendation of the Chairman
of the Board, that bonuses not be awarded for 1998 because the Company missed
the Bonus Plan performance goal for 1998.
1997 STOCK OPTION PLAN
The Company maintains the 1997 Stock Option and Restricted Stock Plan (the
"1997 Stock Option Plan") to provide incentive to those officers and employees
of the Company and its subsidiaries primarily responsible for the success of the
Company and to closely identify their interests with those of the stockholders.
Under the 1997 Stock Option Plan, grants of stock options, incentive stock
options, restricted stock or combinations of the above may be awarded to
employees (including officers), consultants, directors and other individuals.
The aggregate number of shares of stock of the Company which may be made subject
to option or restriction under the 1997 Stock Option Plan may not exceed
3,000,000 shares.
The 1997 Stock Option Plan is administered by the Compensation Committee,
which determines the timing and size of grants, the individuals, if any, who
receive grants and the terms and conditions of such grants. The Compensation
Committee expects to review stock option grants and restricted stock grants as
part of its periodic review of the Company's compensation program. Effective as
of July 31, 1998, the Compensation Committee authorized the Company to grant up
to 624,000 stock options and incentive
10
<PAGE>
stock options, at an exercise price of $33.37 per share, to approximately 460
employees of the Company and others including Messrs. Hardinger, Adcox, Cognie,
Launder and Rygler.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
As discussed below under "Employment Contracts", DuPont entered into an
agreement with Mr. Hardinger, whereby he agreed to serve as the Chairman of the
Board and Chief Executive Officer of the Company in exchange for a specific
compensation package. The compensation paid to Mr. Hardinger for 1998 was in
accordance with the terms of this agreement. Any future increases in salary or
discretionary bonuses will be determined in accordance with the Company's
compensation program and will be based upon Mr. Hardinger's performance and
comparisons with compensation at appropriate companies.
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 exceeding
$1 million paid to certain of the Company's executive officers. The limitation
applies only to compensation which is not considered to be performance-based
compensation. Compensation which qualifies as performance-based compensation
will not have to be taken into account for purposes of this limitation. The 1997
Stock Option Plan contains certain provisions which are intended to assure that
any compensation deemed paid in connection with the exercise of stock options
granted under that plan with an exercise price equal to the market price of the
option shares on the grant date will qualify as performance-based compensation.
The non-performance based compensation to be paid to the Company's executive
officers for 1998 did not exceed the $1 million limit per officer, nor is it
expected that the non-performance based compensation to be paid to the Company's
executive officers for 1999 will exceed that limit. Because it is very unlikely
that the compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided not to take any other action to limit or restructure the
elements of cash compensation payable to the Company's executive officers. The
Compensation Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the $1 million level.
COMPENSATION COMMITTEE
Gary W. Pankonien
Marshall C. Turner
Susan A. Vladuchick, Chairperson
11
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended June 30, the
compensation paid to the Company's chief executive officer and the four other
most highly compensated executive officers (the "Named Officers") for the year
ended June 30, 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS($)(2) OPTIONS(#) COMPENSATION(3)
- --------------------------------------- --------- ---------- ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Hardinger................... 1998 $ 316,034 46,000 $ 9,071
Chairman and CEO 1997 294,170 $ 441,000 17,528
1996 218,350 218,500 $ 242,000 145,841 6,573
Preston M. Adcox ...................... 1998 261,038 36,750 7,296
President and COO 1997 230,834 316,000 13,700
1996 170,350 143,550 150,000 88,488 5,115
Gerard Cognie(4) ...................... 1998 176,629 22,100
EVP--European Operations 1997 161,049 164,200
1996 161,091 65,733 60,800 29,644
Arthur W. Launder(5) .................. 1998 196,472 13,000 3,646
EVP--North American Photomask 1997 137,384 119,440 60,014 43,244 5,472
Operations
Kenneth A. Rygler ..................... 1998 173,034 10,800 4,700
EVP--Worldwide Marketing and 1997 168,500 109,350 9,555
Strategic Planning 1996 134,500 73,900 56,000 35,547 3,945
</TABLE>
- ------------------------
(1) Of the bonuses paid in 1996, approximately 10% were paid in the form of
unrestricted shares of DuPont common stock.
(2) Represents the market value of the restricted stock at date of grant. All
restricted stock grants vested two years from the date of grant.
(3) For 1996, represents matching contributions made by DuPont pursuant to
DuPont's savings and thrift plan. Subsequent to 1996, represents matching
contributions made by the Company pursuant to its savings and thrift plan
and contributions made by the Company pursuant to its defined contribution
plan.
(4) Mr. Cognie is paid in French Francs. The figures shown were calculated using
an exchange rate for 1998 of 6.0 Francs to the dollar, for 1997 of 5.8
Francs to the dollar, and for 1996 of 5.2 Francs to the dollar.
(5) Mr. Launder joined the Company in 1997.
12
<PAGE>
INFORMATION REGARDING DUPONT STOCK OPTIONS
YEAR-END OPTION VALUES
The following table sets forth information regarding the exercisable options
to acquire DuPont common stock granted to the Named Officers.
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF UNEXERCISED UNEXERCISED EXERCISABLE
EXERCISABLE OPTIONS OPTIONS AT
NAME AT YEAR-END(#) YEAR-END($)(1)
- ----------------------------------------------------------------- --------------------- ------------------------
<S> <C> <C>
J. Michael Hardinger............................................. 16,400 $ 770,325
Preston M. Adcox................................................. 10,900 518,513
Gerard Cognie.................................................... 2,000 75,000
Arthur W. Launder................................................
Kenneth A. Rygler................................................ 7,280 350,125
</TABLE>
- ------------------------
(1) The closing price per share of DuPont common stock on June 30, 1998 was
$74.63.
INFORMATION REGARDING COMPANY STOCK OPTIONS
OPTION GRANTS IN LAST YEAR
The following table sets forth information regarding options to purchase
shares of Common Stock granted to the Named Officers in 1998. The Company has
not granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF PRICE APPRECIATION
TOTAL OPTIONS EXERCISE FOR OPTION TERM
OPTIONS GRANTED TO PRICE EXPIRATION --------------------------
NAME GRANTED(#)(1) COMPANY EMPLOYEES ($/SHARE) DATE 5% 10%
- ------------------------------- ------------- ----------------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Hardinger........... 46,000 9.1% $ 52.75 7/28/2007 $ 1,525,820 $ 3,867,220
Preston M. Adcox............... 36,750 7.2% 52.75 7/28/2007 1,128,998 3,089,573
Gerard Cognie.................. 22,100 4.4% 52.75 7/28/2007 733,057 1,857,947
Arthur W. Launder.............. 13,000 2.6% 52.75 7/28/2007 431,210 1,092,910
Kenneth A. Rygler.............. 10,800 2.1% 52.75 7/28/2007 358,236 907,956
</TABLE>
- ------------------------
(1) Options become exercisable over a four year period at the rate of 25% per
year. Of the options granted to Messrs. Hardinger, Adcox, Launder and
Rygler, 7,580 were incentive stock options and the remainder were
non-qualified stock options.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
The following table sets forth information regarding the exercisable and
unexercisable options to acquire Common Stock granted to the Named Officers.
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF UNEXERCISED UNEXERCISED OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END(1)
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ------------------------------- ----------- ------------ ------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Hardinger........... 72,921 118,920 $ 1,276,118 $ 1,276,118
Preston M. Adcox............... 22,059 $ 1,011,926 22,185 80,994 388,238 774,270
Gerard Cognie.................. 14,832 36,932 259,560 259,560
Arthur W. Launder.............. 10,811 45,433 172,976 518,928
Kenneth A. Rygler.............. 4,000 160,000 13,774 28,573 241,045 311,045
</TABLE>
- ------------------------
(1) The closing price per share of the Common Stock on June 30, 1998 was $34.50.
13
<PAGE>
LONG-TERM INCENTIVE PROGRAM
The Company has no long-term incentive program.
PENSION PLAN
The Company has no defined benefit or actuarial pension plan. However, each
of the Named Officers, except Mr. Launder, have been credited with years of
service under the DuPont Pension Plan. Their participation ended on the Offering
Date. Upon termination, they received either a reduced pension immediately or a
full pension at a deferred date.
DIRECTOR COMPENSATION
Directors who are officers of the Company receive no additional compensation
for serving on the Board. All other directors who are not affiliated with DuPont
receive an annual fee of $20,000. Mr. John L. Doyle is party to an arrangement
with the Company whereby he will provide consulting services in the area of
human resource management and principles at a fee of $3,500 per day, not to
exceed five days per year. Payments in 1998 were $3,500.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purpose of the Non-Employee Directors' Stock Option Plan, as amended and
restated by the Company's Board of Directors on July 27, 1998 to increase the
initial and recurring option grant quantities, (the "Directors' Plan"), is to
allow the Company to recruit and retain qualified outside directors to serve on
the Board. Under the Directors' Plan, each director who was not an employee of
the Company or any of its subsidiaries (and who is not precluded by his or her
employer from receiving such grant) receives a one-time grant of options to
purchase 12,000 shares of Common Stock upon first joining the Board. Thereafter,
each non-employee director will receive, during his or her tenure as a director,
an annual grant of options covering 5,000 shares as of the first day of the
month following the annual meeting of stockholders of the Company. Directors who
are first elected to the Board within the 60 day period immediately preceding an
annual meeting of stockholders and who at the time of their election received
the one-time grant of options to purchase 12,000 shares described above, will
not, under the terms of the Directors' Plan, receive an additional grant of
5,000 shares as of the first of the month following such annual meeting. Upon
exercise of an option, payments of the purchase price for the stock subject to
the exercise will be made in cash. Under the terms of the Directors' Plan, no
more than 25% of the total number of shares of stock granted under option may
become exercisable in any given year following the grant. Currently, 250,000
shares have been reserved for issuance under the Directors' Plan. Under the
Director's Plan, prior to its amendment, Messrs. Doyle, Pankonien, and Turner
were granted options to purchase 10,000 shares of Common Stock, at $17.00 per
share, effective upon the Company's initial public offering. Further, Messrs.
Doyle, Pankonien, and Turner were granted options to purchase 3,000 shares of
Common Stock, at $35.56 per share, on November 1, 1996 and 3,000 shares of
Common Stock, at $44.81 per share, on November 1, 1997.
EMPLOYMENT CONTRACTS
DuPont has entered into an agreement with Mr. Hardinger whereby he has
agreed to serve as the Chairman of the Board and Chief Executive Officer of the
Company. The agreement provides Mr. Hardinger with a minimum annual base salary
of at least $290,000. In the event of termination without cause, Mr. Hardinger
would receive from DuPont a payment equal to one and one half years' base salary
to the extent not paid by the Company. The Company has no change-in-control
arrangements with any of its executive officers.
14
<PAGE>
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total return as of the end
of the Company's most recent year on $100 invested in the Common Stock of the
Company, the Nasdaq Composite Index and an industry peer group on June 14, 1996,
the first trading date, assuming the reinvestment of all dividends. The industry
peer group used includes the following issuers: AlignRite International, Inc.
(Nasdaq-- MASK); Electroglas, Inc. (Nasdaq--EGLS); Etec (Nasdaq--ETEC);
KLA-Tencor Corporation (Nasdaq-- KLAC); Novellus Systems, Inc. (Nasdaq--NVLS);
Photronics, Inc. (Nasdaq--PLAB) and Ultratech Stepper, Inc. (Nasdaq--UTEK). The
stock performance set forth below is not necessarily indicative of future price
performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ COMPOSITE INDUSTRY
<S> <C> <C> <C>
DPI Index Peer Group
6/14/96 $100 $100 $100
6/30/96 $121 $97 $85
6/30/97 $318 $118 $173
6/30/98 $203 $155 $120
</TABLE>
15
<PAGE>
APPROVAL OF THE ADOPTION OF THE 1998 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL 2)
GENERAL INFORMATION
On July 27, 1998, the Compensation Committee recommended, and the Board
adopted, the 1998 Employee Stock Purchase Plan (the "1998 Plan") to provide a
means by which employees of the Company and its subsidiaries may be given the
opportunity to purchase Common Stock of the Company. Under the 1998 Plan, rights
to purchase Common Stock may be granted to eligible employees (including
officers) from time to time. The aggregate number of shares of Common Stock of
the Company for which rights may be granted under the 1998 Plan may not exceed
5% (not to exceed 1,500,000 shares) of the issued shares. The 1998 Plan is
administered by the Compensation Committee which determines the timing and size
of grants and the terms and conditions of such grants. No purchase rights have
been granted and no shares have been purchased under the 1998 Plan.
SUMMARY PLAN DESCRIPTION
THE FOLLOWING DESCRIPTION OF THE 1998 PLAN IS QUALIFIED BY REFERENCE TO THE
COPY OF THE 1998 PLAN ATTACHED TO THIS PROXY STATEMENT AS AN EXHIBIT.
GENERAL. The purpose of the 1998 Plan is to provide a means by which
employees of the Company may be given an opportunity to purchase Common Stock of
the Company through payroll deductions, to assist the Company in retaining the
services of its employees, to secure and retain the services of new employees
and to provide incentives for such persons to exert maximum efforts for the
success of the Company. Grants must meet the requirements of Section 423(b) of
the Internal Revenue Code of 1986, as amended (the "Code"). The 1998 Plan is not
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
ADMINISTRATION. The 1998 Plan is administered by the Compensation
Committee. In accordance with the provisions of the 1998 Plan, the Compensation
Committee has authority to determine the grants, to interpret the 1998 Plan, to
prescribe, amend and rescind any rules and regulations necessary or appropriate
for the administration of the 1998 Plan, to determine and interpret the details
and provisions of each grant agreement, to modify or amend any grant agreement,
to waive any conditions or restrictions applicable to any grant and to make all
other determinations necessary or advisable for the administration of the 1998
Plan.
ELIGIBILITY. Under the 1998 Plan, only employees (including officers) of
the Company and its subsidiaries (whether now existing or hereafter organized)
are eligible to receive grants. The 1998 Plan is implemented by grants of rights
to all eligible participants from time to time. Eligible participants become
participants in the 1998 Plan by delivering to the Company, prior to the date
selected by the Compensation Committee as the offering date for the offering, an
agreement authorizing payroll deductions during the purchase period. The
purchase price of the shares is accumulated by payroll deductions over the
offering period. All payroll deductions made for a participant are credited to
his or her account under the 1998 Plan and deposited with the general funds of
the Company.
While each participant in the 1998 Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering a notice
of withdrawal from the 1998 Plan to the Company. Such withdrawal maybe elected
at any time prior to the end of the applicable offering except as provided by
the Compensation Committee. Upon any withdrawal from an offering by the
employee, the Company will distribute to the employee his or her accumulated
payroll deductions without interest, and such employee's interest in the
offering will be automatically terminated. The employee is not entitled to again
participate in such offering. An employee's withdrawal from an offering will not
have any effect upon such employee's eligibility to participate in subsequent
offerings under the 1998 Plan.
16
<PAGE>
Rights granted pursuant to any offering under the 1998 Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest. Rights granted under the Purchase Plan are not
transferable and may be exercised only by the person to whom such rights are
granted. As of July 27, 1998, approximately 1,000 employees (including six
executive officers) were eligible to participate in the 1998 Plan.
SHARES AVAILABLE. The aggregate number of shares of Common Stock of the
Company for which rights may be granted under the 1998 Plan may not exceed 5%
(not to exceed 1,500,000 shares) of the issued shares. Under the terms of the
1998 Plan, the number of shares of Common Stock reserved is subject to
adjustment by the Company if the number of outstanding shares of Common Stock is
changed. In the event of a stock split, reverse stock split or other event that
is functionally equivalent to a stock split or reverse stock split, the 1998
Plan provides for automatic proportionate adjustments to the number of shares
granted and to the number of shares of Common Stock authorized for future grant.
If rights granted under the 1998 Plan expire, lapse or otherwise terminate
without being exercised, the Common Stock not purchased under such rights again
becomes available for issuance under such plan.
GRANT TERMS. In connection with each grant made, the Compensation
Committee. shall specify a maximum number of shares which may be purchased by
any employee, but in no event an amount in excess of 15% of said employees
earnings during the period, as well as a maximum aggregate number of shares
which may be purchased by each employee and by all employees. If the aggregate
purchase of shares upon exercise of rights granted would exceed any such maximum
aggregate number, the Compensation Committee shall make a pro rata allocation of
the shares available. The purchase price of stock acquired pursuant to rights
granted under the 1998 Plan shall be determined by the Compensation Committee,
but in no event be less than the lesser of (i) an amount equal to 85% of the
market value of the stock on the offering date or (ii) an amount equal to 85% of
the market value of the stock on the purchase date. Unless the employee's
participation is discontinued, his or her right to purchase shares is exercised
automatically at each exercise date designated by the Compensation Committee at
the applicable price. The market value of the Common Stock on any relevant date
under the 1998 Plan will be the closing selling price per share on that date on
the Nasdaq National Market.
MISCELLANEOUS. A participant in the 1998 Plan shall have no rights as a
stockholder with respect to shares covered by such participant's grant until the
date of the issuance of the shares to the participant. No adjustments shall be
made for dividends or other distributions or rights for which the record date is
prior to the date of such issuance.
The Compensation Committee may at any time alter, amend, suspend,
discontinue or terminate the 1998 Plan and any grants thereunder; provided,
however, that no such action by the Compensation Committee may, without the
approval of the stockholders of the Company, alter the provisions of the 1998
Plan so as to (i) increase the maximum number of shares of Common Stock that may
be subject to grants or (ii) change the eligibility or other provisions of the
1998 Plan if such modifications require stockholder approval in order for the
1998 Plan to comply with Section 423 of the Code.
Under current accounting rules, the issuance of Common Stock under the 1998
Plan will not result in a compensation expense chargeable against the Company's
reported earnings. However, the Company must disclose the impact the purchase
rights granted under the 1998 Plan would have upon the Company's reported
earnings were the value of those purchase rights treated as compensation
expense.
17
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the U.S. federal income tax
consequences of grants which may be awarded under the 1998 Plan.
Rights granted under the 1998 Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares as if
such amounts were actually received. Generally, other than this, no income will
be taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the first day of the
offering period and at least one year after the purchase date of the stock, then
the lesser of (i) the excess of the fair market value of the stock at the time
of such disposition over the purchase price of the stock or (ii) 15% of the fair
market value of the stock on the first day of the offering period, will be
treated as ordinary income. Any further gain, or any loss, will be taxed as a
capital gain or loss. If the stock is disposed of before the expiration of
either of the holding periods described above, then the excess of the fair
market value of the stock on the exercise date over the exercise price will be
treated as ordinary income at the time of such disposition. The balance of any
gain or loss will be treated as capital gain or loss. There are no federal
income tax consequences to the Company by reason of the grant or exercise of
rights under the 1998 Plan. The Company is entitled to a deduction to the extent
amounts are taxable as ordinary income to a participant by reason of a
disposition before the expiration of the holding periods described above
(subject to the requirement of reasonableness and the provisions of Section
162(m) of the Code).
The foregoing is intended as a summary of the effect of certain U.S. federal
income tax consequences associated with the 1998 Plan and does not purport to be
complete. This summary is based on current law, which is subject to change in
the future, and current interpretations of the law, which may also change. It is
recommended that participants consult their own tax advisors for counseling. The
tax treatment under non-U.S., state or local law is not covered in this summary.
BOARD RECOMMENDATION
The Board believes that approval of the adoption of the 1998 Plan is in the
best interest of the Company and its stockholders. The Board therefore
recommends that you vote FOR such approval and it is intended that the proxies
not marked to the contrary will be so voted. The affirmative vote of a majority
of the shares represented and entitled to vote at the Annual Meeting is required
for the approval of the adoption of the 1998 Plan. Should such stockholder
approval not be obtained, then the 1998 Plan will not be implemented, no
purchase rights will be granted and no stock issuances will be made under the
1998 Plan.
APPROVAL OF THE ADOPTION OF THE SECOND AMENDED AND RESTATED
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(PROPOSAL 3)
GENERAL INFORMATION
On July 27, 1998, the Compensation Committee recommended, and the Board
adopted, the Second Amended and Restated Non-employee Directors Stock Option
Plan (the "Directors' Plan"), subject to stockholder approval of the amendments
at the Annual Meeting. The amendment had the effect of increasing from 10,000
and 3,000 to 12,000 and 5,000 the number shares subject to initial and annual
options granted to a director under the plan. The purpose of the plan is to
secure for the Company and its stockholders the benefits of the incentive
inherent in increased ownership of Common Stock by members of the Board who are
not employees of the Company or its subsidiaries. Under the Directors' Plan,
options to purchase Common Stock may be granted to eligible Board members. The
aggregate number of shares of
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Common Stock of the Company which may be granted under the Directors' Plan may
not exceed 250,000 shares.
SUMMARY PLAN DESCRIPTION
THE FOLLOWING DESCRIPTION OF THE DIRECTORS' PLAN IS QUALIFIED BY REFERENCE
TO THE COPY OF THE DIRECTORS' PLAN ATTACHED TO THIS PROXY STATEMENT AS AN
EXHIBIT.
GENERAL. The Directors' Plan provides that each director who was not an
employee of the Company or any of its subsidiaries (and who is not precluded by
his or her employer from receiving such grant) receives a one-time grant of
options to purchase 12,000 shares of Common Stock upon first joining the Board.
Thereafter, each non-employee director will receive, during his or her tenure as
a director, an annual grant of options covering 5,000 shares as of the first day
of the month following the annual meeting of stockholders of the Company.
Directors who are first elected to the Board within the 60 day period
immediately preceding an annual meeting of stockholders and who at the time of
their election received the one-time grant of options to purchase 12,000 shares
described above, will not, under the terms of the Directors' Plan, receive an
additional grant of 5,000 shares as of the first of the month following such
annual meeting. Upon exercise of an option, payments of the purchase price for
the stock subject to the exercise will be made in cash.
SHARES AVAILABLE. The Directors' Plan has 250,000 shares of Common Stock
reserved for issuance. Under the terms of the plan, the number of shares of
Common Stock reserved is subject to adjustment by the Company if the number of
outstanding shares of Common Stock is changed as a result of reclassification or
recapitalization. In the event of a stock split, reverse stock split or other
event that is functionally equivalent to a stock split or reverse stock split,
the Directors' Plan provides for automatic proportionate adjustments to the
number of shares granted and to the number of shares of Common Stock authorized
for future grant.
OPTION GRANT TERMS. Option grants shall vest at the rate of 25% per year.
Each grant shall be evidenced by an agreement executed by an authorized officer
of the Company and each agreement shall be in a form approved by the Board, and
shall comply with the terms and conditions of the plan. The options will
accelerate in full upon the participant's death or retirement provided the
option has been outstanding for at least six months. Upon a participant's
termination of Board service for any reason other than death or retirement,
outstanding options will terminate. The exercise price for each option shall be
the average of the high and low price on the Nasdaq National Market on the date
of grant.
MISCELLANEOUS. A participant in the plan shall have no rights as a
stockholder with respect to shares covered by such participant's option grant
until the date of the issuance of the shares to the participant. No adjustments
shall be made for dividends or other distributions or rights for which the
record date is prior to the date of such issuance.
Option grants at 100% of fair market value will not result in any charge to
the Company's earnings. However, the Company must disclose the impact those
options would have upon the Company's reported earnings were the value of those
options at the time of grant treated as a compensation expense. Whether or not
granted at a discount, the number of outstanding options may be a factor in
determining the Company's earnings per share on a fully-diluted basis.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the U.S. federal income tax
consequences of a grant which may be awarded under the Directors' Plan.
For options granted pursuant to the plan,, no taxable income will be
realized by the participant upon the grant of such option. A participant
generally will recognize ordinary taxable income upon exercise of
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such option in an amount equal to the excess of the fair market value of the
Common Stock on the date of exercise over the exercise price paid.
For purposes of determining gain or loss upon a subsequent disposition of
Common Stock acquired upon the exercise of options, the participant's basis in
such shares will generally be equal to the purchase price paid to the Company
for the Common Stock, increased by the amount, if any, includable in the
participant's taxable income with respect to the Common Stock. The participant's
holding period for determining the rate of capital gains tax on such subsequent
disposition generally begins on the date of exercise of the option. However,
solely for purposes of determining whether the stock has a holding period
beginning after December 31, 2000, so that gain on a subsequent sale of the
stock could be eligible for the special reduced capital gains rate applicable to
capital assets held for more than five years, the participant's holding period
is deemed to begin at the grant of the option.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the participant with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
participant.
The foregoing is intended as a summary of the effect of certain U.S. federal
income tax consequences associated with the plan and does not purport to be
complete. This summary is based on current law, which is subject to change in
the future, and current interpretations of the law, which may also change. It is
recommended that participants consult their own tax advisors for counseling. The
tax treatment under non-U.S., state or local law is not covered in this summary.
BOARD RECOMMENDATION
The Board believes that approval of the adoption of the Directors' Plan is
in the best interest of the Company and its stockholders. The Board therefore
recommends that you vote FOR such approval and it is intended that the proxies
not marked to the contrary will be so voted. The affirmative vote of a majority
of the shares represented and entitled to vote at the Annual Meeting is required
for the approval of the adoption of the Directors' Plan. Should such stockholder
approval not be obtained, then the Directors' Plan will not be implemented as
amended. The Directors Plan will, however, continue to remain in effect, and
option grants may continue to be made pursuant to the provisions of the
Directors Plan prior to its amendment until the available reserve of Common
Stock under such plan is issued.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 4)
The Bylaws of the Company provide that it shall be the duty of the Audit
Committee to employ, subject to stockholder ratification at each annual meeting,
independent accountants to audit the books of account, accounting procedures and
financial statements of the Company for the year and to perform such other
duties as prescribed from time to time by the Audit Committee.
During 1998, PricewaterhouseCoopers LLP audited the Company's annual
consolidated financial statements, reviewed financial information in filings
with the Securities and Exchange Commission, and provided various other
services.
Subject to ratification by the holders of the Common Stock, the Audit
Committee has retained PricewaterhouseCoopers independent accountants to perform
the examination of the Company's financial statements for 1999 and to render
other services required of them.
Representatives of PricewaterhouseCooopers expected to be present at the
Annual Meeting on October 26, 1998, with the opportunity to make a statement if
they desire to do so. Such representatives are also expected to be available to
respond to appropriate questions.
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BOARD RECOMMENDATION
The Board believes that the ratification of PricewaterhouseCooopers
independent accountants of the Company is in the best interest of the Company
and its stockholders. The Board therefore recommends that you vote FOR such
ratification and it is intended that the proxies not marked to the contrary will
be so voted. The affirmative vote of a majority of the shares represented and
entitled to vote at the Annual Meeting is required for the ratification of the
selection of PricewaterhouseCoopers as independent accountants of the Company.
OTHER BUSINESS
Management knows of no business to be brought before the meeting other than
the proposals outlined above. If any other proposals come before the meeting, it
is intended that the shares represented by proxies shall be voted in accordance
with the judgment of the person or persons exercising the authority conferred by
the proxies.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company on or before May 21,
1999, to be included in the Proxy Statement and proxy for that meeting. The
mailing address of the Company for submission of any such proposal is given on
the first page of this Proxy Statement.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE REQUESTED TO SIGN, DATE AND RETURN THE PROXY CARD AS SOON AS POSSIBLE,
WHETHER OR NOT THEY EXPECT TO ATTEND THE 1998 ANNUAL MEETING IN PERSON.
By Order of the Board of Directors
/s/ JOHN M. LYNN
--------------------------------------
John M. Lynn,
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
September 18, 1998
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DUPONT PHOTOMASKS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS JULY 27, 1998
1. PURPOSE.
(a) The purpose of the DuPont Photomasks, Inc. 1998 Employee Stock Purchase
Plan (the "Plan") is to provide a means by which employees of DuPont Photomasks,
Inc., a Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph l(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors. The Compensation Committee shall be elected
pursuant to the Bylaws of the Company, and the members of therefor shall be
ineligible to participate in the Plan while serving on said Committee. The
Compensation Committee shall have the final power to determine all questions of
policy and expediency that may arise in the administration of the Plan.
(b) The Compensation Committee shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its administration.
The Compensation Committee, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Compensation Committee deems necessary or expedient to promote the best
interests of the Company.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the number of shares of stock for which rights may be granted
under the Plan shall not exceed in the aggregate of five (5%) percent (not to
exceed 1,500,000 shares) of the issued shares of common stock of the Company as
of the Effective Date; provided that, if the number of issued shares of stock is
increased after the Effective date, the maximum number of shares of stock for
which rights may be granted under the Plan
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shall be increased proportionately. If any right granted under the Plan shall
for any reason terminate without having been exercised, the Common Stock not
purchased under such right shall again become available for issuance under the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Compensation Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Compensation Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Compensation Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Compensation Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Compensation Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Compensation
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Compensation Committee may provide that, each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering Date"
of such right for all purposes, including determination of the exercise
price of such right;
(ii) the Purchase Period (as defined below) for such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Compensation Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Purchase Period (as defined below) for such offering, he or she
will not receive any right under that offering.
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(c) No employee shall be eligible for the grant of any rights under the Plan
if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company shall be eligible to participate in Offerings
under the Plan, provided, however, that the Compensation Committee may provide
in an Offering that certain employees who are highly compensated employees
within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.
(f) For purposes of this Plan, an eligible employee shall not include any
individual who performs services for the Company or an Affiliate solely as an
independent contractor, consultant or employee of a third party employment or
leasing agency or is classified as such by the Company or Affiliate for who such
services are performed (whether or not such classification is upheld upon
governmental or judicial review).
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable within a percentage designated
by the Compensation Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in Section 7(a)) during the period which begins
on the Offering Date (or such later date as the Compensation Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each offering made
under this Plan, the Compensation Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such offering. In addition, in connection with each Offering which contains more
than one Exercise Date (as defined in the Offering), the Compensation Committee
may specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Exercise Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Compensation Committee shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted 2lthe
Plan fmbe determined by the Compensation Committee, but in no event be less than
the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Exercise Date.
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(c) For purposes of this Plan, "fair market value" means, as of any date,
the value of the common stock of the Company determined as follows:
(i) if the common stock is listed on any established stock exchange or a
national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the fair market value of a share of common
stock shall be the average of the highest and lowest price at which the
common stock was sold on such exchange or national market system on the date
as of which the determination is to be made (or, if such date is not a
trading day on such exchange system, on the date that is the next market
trading day following the date as of which the determination is to be made);
(ii) if the common stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value
of a share of common stock shall be the mean between the high bid and high
asked prices for the common stock on the date as of which the determination
is to be made (or, if such date is not a trading day on such exchange
system, on the date that is the next market trading day following the date
as of which the determination is to be made), as reported in the Wall Street
Journal or such other sources as the Board deems reliable;
(iii) in the absence of an established market for the common stock, the
fair market value shall be determined in good faith by the Compensation
Committee.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage specified by the
Compensation Committee of such employee's Earnings during the Purchase Period.
"Earnings" is defined as the total compensation paid to an employee, including
all salary, wages (including amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or, deferred arrangement
established by the Company), overtime pay, commissions, and other remuneration
paid directly to the employee, but excluding bonuses, profit sharing, the cost
of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero) such payroll
deductions after the beginning of any Purchase Period only as provided for in
the Offering.
(b) At any time during a Purchase Period a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period except as provided by the Compensation Committee in the
Offering. Upon such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company or an Affiliate, for any reason,
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and the Company shall distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such deductions
have been used to acquire stock for the terminated employee), under the
Offering, without interest.
(d) Rights granted under the Plan shall not be transferable, and shall be
exerciseable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (the
"Exercise Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole and fractional
shares of stock of the Company, up to the maximum number of shares permitted
pursuant to the terms of the Plan and the applicable Offering, at the purchase
price specified in the Offering. At the direction of the Compensation Committee,
the amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares shall either (i) be held in
each such participant's account for the purchase of shares under the next
Offering under the Plan, unless such participant withdraws from such next
Offering, as provided in subparagraph 7(b), or is no longer eligible to be
granted rights under the Plan, as provided in paragraph 5, in which case such
amount shall be distributed to the participant after said final Exercise Date,
without interest or (ii) distributed to the participant after the final Exercise
Date, without interest
(b) No rights granted under the Plan may be exercised to any extent unless
the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"); If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and the Exercise Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Exercise Date shall not be delayed more than two (2) months and the Exercise
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Exercise Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any offering shall be exercised and all payroll deductions
accumulated during the purchase period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy
such rights.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
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11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder-with respect to, any shares subject to rights granted under
the Plan unless and until certificates representing such shares shall have been
issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, ' exchange
of shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board and/or the Compensation Committee at any time, and from time
to time, may amend the Plan. However, except as provided in paragraph 12
relating to adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12) months
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section
423 of the Code or to comply with the requirements of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board and/or the Compensation Committee
may amend the Plan in any respect which the Board and/or the Compensation
Committee deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulation.
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<PAGE>
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom such rights were granted or
except as necessary to comply with any laws or governmental regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company.
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<PAGE>
SECOND AMENDED AND RESTATED
DUPONT PHOTOMASKS, INC.
NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
I. PURPOSE.
The Purpose of the DuPont Photomasks, Inc. Non-Employee Directors' Stock
Option Plan (the "Plan") is to secure for DuPont Photomasks, Inc. (the
"Company") and its shareholders the benefits of the incentive inherent in
increased ownership of common stock, par value $.01 per share (the "Common
Stock"), of the Company by the members of the Board of Directors (the "Board")
of the Company who are not employees of the Company or any of its subsidiaries
("Non-Employee Directors"). It is expected that the Plan will encourage
qualified persons to become directors of the Company and that ownership of
Company stock will provide such Non-Employee Directors with a more direct stake
in the future welfare of the Company and encourage them to remain directors of
the Company.
II. ADMINISTRATION.
The Plan shall be administered by the Board. The Board shall have all the
powers vested in it by the terms of the Plan, such powers to include authority
(within the limitations described herein) to prescribe the form of the agreement
embodying awards of stock options made under the Plan (the "Options") and the
power to determine the restrictions, if any, on the ability of participants to
dispose of any stock issued in the Plan. The Board shall, subject to the
provisions of the Plan, have the power to construe the Plan, to determine all
questions arising thereunder and to adopt and amend such rules and regulations
for the administration of the Plan as it may deem desirable. Any decisions of
the Board in the administration of the Plan, as described herein, shall be final
and conclusive. The Board may authorize any one or more of their number or the
Secretary or any other officer of the Company to execute and deliver documents
on behalf of the Board. The Board hereby authorizes the Secretary to execute and
deliver all documents to be delivered by the Board pursuant to the Plan. No
member of the Board shall be liable for anything done or omitted to be done by
such member or by any other member of the Board in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.
III. AMOUNT OF STOCK.
The stock which may be issued and sold under the Plan will be the Common
Stock (par value $.01 per share) of the Company. The total amount of stock for
which Options may be granted under the Plan shall not exceed 250,000 Common
Stock shares, subject to adjustment as provided in Article VI below. The stock
to be issued may be either authorized and unissued shares or issued shares
acquired by the Company or its subsidiaries.
IV. ELIGIBILITY.
Each member of the Board of the Company who is not an employee of the
Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible
to receive an Option in accordance with Article V below (provided such
Non-Employee Director is not precluded by his or her employer from receiving an
option grant). The adoption of this Plan shall be not deemed to give any
director any right to be granted an Option, except to the extent and upon such
terms and conditions, in accordance with terms of the Plan, as may be determined
by the Board.
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<PAGE>
V. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under the Plan shall be evidenced by an agreement in
such form as the Board shall prescribe from time to time in accordance with the
Plan, and shall comply with the following terms and conditions:
1. The Option exercise price shall be the fair market value of the
Common Stock shares subject to such option on the date the Option is
granted, as determined in accordance with Article V9.
2. Each Non-Employee Director shall receive an Option for 12,000 shares
of Common Stock the later of: (a) upon his or her first election of the
Board, or (b) the initial public offering of the Company's stock.
3. Except as provided below, each year, as of the first day of the
month following the Annual Meeting of Stockholders of the Company, each
Non-Employee Director who has been reelected as a member of the Board as of
the adjournment of the Annual Meeting shall receive an Option for 5,000
shares of Common Stock; provided, however, that a Non-Employee Director who
has been first elected to the Board within the 60 day period immediately
preceding the Annual Meeting and has therefore received an Option under
Article V2, above, shall not receive an Option for an additional 5,000
shares at such Annual Meeting.
4. Except as set forth in Article VII, the Option shall not be
transferable by the optionee otherwise than by will or the laws of descent
and distribution, and shall be exercisable during the lifetime of the
optionee only by the optionee.
5. No Option or any part of an Option shall be exercisable:
A. After the expiration of ten years from the date the Option was
granted;
B. Unless written notice of the exercise is delivered to the Company
specifying the number of shares to be purchased and payment in full is
made for the shares of Common Stock being acquired. Payment shall be made
in cash (U.S. Dollars); and
C. Unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option and
ending on the date of such exercise, a Director of the Company or his
permitted transferees (pursuant to Article VII), except that if such
person shall cease to be such a Director by reason of Retirement or death
while holding an Option that has vested under the terms of Article V6
hereof but not expired and has not been fully exercised, such person or
his permitted transferees (pursuant to Article VII), or in the case of
death, the executors, administrators, legatees, or distributees, as the
case may be, may at any time for a period of six months after the date
such person ceased to be such a director (but in no event after the
Option has expired under the provisions of Article V5A above), exercise
the Option with respect to any shares of Common Stock as to which such
person has not exercised the Option on the date the person ceased to be
such a Director. In the event any Option is exercised by the executors,
administrators, legatees or distributees of the estate of a deceased
optionee, the Company shall be under no obligation to issue stock
thereunder unless and until the Company is satisfied that the person or
persons exercising the Option are the duly appointment legal
representatives of the deceased optionee's estate or the proper legatees
or distributees thereof.
6. One-quarter (25%) of the total number of shares of Common Stock
covered by the Option shall become exercisable beginning with the first
anniversary date of the grant of the Option; thereafter an additional
one-quarter (25% ) of the total number of shares of Common Stock covered by
the Option shall become exercisable on each subsequent anniversary date of
the grant of the Option until on the fourth anniversary date of the grant of
the option the total number of shares of Common Stock covered by the Option
shall become exercisable. In the event the Non-Employee Director ceases to
be a Director by reason of Retirement or death, the total number of shares
of
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<PAGE>
Common Stock covered by the Option shall thereupon become exercisable
provided such Option shall have been granted at least 6 months prior to such
Retirement or death.
7. Options granted to a person shall automatically be forfeited by such
person if such person shall cease to be a Director for reasons other than
Retirement or death.
8. As used in this Article V, the term "Retirement" means the
termination of a Director's service on the Board, including resignation from
the Board upon reaching age 70 or otherwise resigning or not standing for
reelection with the approval of the Board, but shall not include any
termination of service resulting from an act of (I) fraud or intentional
misrepresentation or (ii) embezzlement, misappropriation or conversion of
assets or opportunities of the Company or any direct or indirect
majority-owned subsidiary of the Company, by such Non-Employee Director. The
determination of whether termination results from any such act shall be made
by the Board, whose determination shall be conclusive.
9. As used herein, fair market value shall be, at the time of the
initial public offering of the stock, the initial offering price and
thereafter shall be the average of the high and low prices of the Common
Stock on the date of determination as reported on the NASDAQ Composite Index
or if no sales of such stock were reported on the date of determination, the
average of the high and low prices of such stock or the next preceding day
on which sales were reported on such Index.
10. Only non-qualified stock options may be granted under this plan.
VI. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK.
1. In the event of any stock dividend, split-up, reclassification or other
analogous change in capitalization, the Compensation Committee shall make such
adjustments, in the light of the change, as it deems to be equitable, both to
the optionees and to the Company, in
A. The number of shares and prices per share applicable to outstanding
stock options.
B. The aggregate limitation set forth in Article III with respect to
the number of shares which may be made subject to options.
Furthermore, in the event of a distribution to common stockholders other
than interim or year-end dividends declared as such by the Board of Directors,
the Compensation Committee shall make such adjustments, in the light of the
distribution, as it deems to be equitable, both to the optionees and to the
Company, in respect of the items described in A above.
2. Any fractional shares resulting from adjustments made pursuant to this
Article shall be eliminated.
VII. MISCELLANEOUS PROVISIONS.
1. Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Company.
2. All or a portion of the Option granted to a Non-Employee Director may be
on terms that permit transfer without consideration by such Non-Employee
Director to:
(i) the spouse, children or grandchildren of the Non-Employee Director
("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members (including a custodian under a Uniform Gifts to Minors Act
for the benefit of a child or grandchild), or
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<PAGE>
(iii) a partnership or other entity in which such Immediate Family
Members are the only partners, PROVIDED that (A) the stock option agreement
pursuant to which such Options are granted must expressly provide for
transferability in a manner consistent with this Section, and (B) subsequent
transfers of transferred Options shall be prohibited except by will or the
laws of descent and distribution. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of each agreement,
the term "Non-Employee Director" shall be deemed to refer to the transferee
(however, the events of termination of service as a director of Section V
hereof shall continue to be applied with respect to the Non-Employee
Director). Except as set forth above, an optionee's rights and interest
under the Plan may not be assigned or transferred in whole or in part either
directly or by operation of law or otherwise (except in the event of an
optionee's death, by will or by laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy, or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation
or liability of such participant.
3. No Common Stock shares shall be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable Federal, state and other securities laws and regulations.
4. It shall be a condition to the obligation of the Company to issue Common
Stock shares upon exercise of an Option, that the optionee (or any beneficiary
or person entitled to act under Article V5C above) pay to the Company, upon its
demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold Federal, state, local, or foreign income or
other taxes. If the amount requested is not paid (which payment may be made in
any manner prescribed in Article V5B), the Company may refuse to issue Common
Stock shares.
5. The expenses of the Plan shall be borne by the Company.
6. The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares upon exercise of any Option under the
Plan, and the issuance of shares upon exercise of Options shall be subordinate
to the claims of the Company's general creditors.
7. By accepting any Option or other benefit under the Plan, each optionee
and each person claiming under or through such person shall be conclusively
deemed to have indicated his or her acceptance and ratification of, and consent
to, any action taken under the Plan by the Company or the Board.
VIII. AMENDMENT OR DISCLOSURE.
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable; provided, however, that no amendment shall
become effective without stockholder approval if such stockholder approval is
required by law, rule or regulation, and provided further, to the extent
required by Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), in effect from time to time, Plan provisions
relating to the amount, price, and timing of Options shall not be amended more
than once every six months, except that the foregoing shall not preclude any
amendment to comport with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974, or the rules thereunder in
effect from time to time. No amendment of the Plan shall materially and
adversely affect any right of any participant with respect to any Option
theretofore granted without such participant's written consent.
IX. EFFECTIVE DATE OF PLAN.
The Plan shall become effective when the Plan is approved and adopted by the
Company's stockholders.
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<PAGE>
X. TERM.
The Plan shall continue in effect without limit unless and until the Board
otherwise determines.
XI. COMPLIANCE WITH SEC REGULATIONS.
It is the Company's intent that the Plan comply in all respects with Rule
16b-3 under the Exchange Act, and any related regulations. If any provision of
this Plan is later found not to be in compliance with such Rule and regulations,
the provision shall be deemed null and void. All grants and exercises of options
under this Plan shall be executed in accordance with the requirements of Section
16 of the Exchange Act and regulations promulgated thereunder.
XII. GOVERNING LAW.
The validity and construction of the Plan and any agreements entered into
thereunder shall be governed by the laws of the State of Delaware.
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<PAGE>
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DUPONT PHOTOMASKS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS OCTOBER 26, 1998
PROXY
The undersigned hereby appoints David S. Gino and John M. Lynn, or any
one or more of them, with full power of substitution, the attorneys and
proxies for the undersigned to vote the shares of common stock of DuPont
Photomasks, Inc., a Delaware corporation (the "Company"), held of record by
the undersigned at the close of business on September 8, 1998, at the annual
meeting of stockholders of the Company to be held in the San Jacinto East
Room of the Four Seasons Hotel, 98 San Jacinto Blvd., Austin, Texas 78701, on
Monday, October 26, 1998 at 10:00 a.m. Austin time, and at any adjournment
thereof, as follows:
- -------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS CHANGE ON REVERSE SIDE.
(Continued and to be signed on other side)
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE BE ADVISED THAT EFFECTIVE SEPTEMBER 3, 1998, OUR NEW
TRANSFER AGENTS IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. BOX 2500
JERSEY CITY, N.J. 07303-2506
1-800-446-2617
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<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE PERSONS SET FORTH ABOVE AS DIRECTORS AND THE OTHER PROPOSALS.
<TABLE>
<S> <C> <C>
FOR all nominees listed to WITHHOLD VOTE NOMINEES: J. Michael Hardinger, John L. Doyle,
the right (except as marked to vote for all nominees John W. Himes, John C. Hodgson,
to the contrary) listed to the right Gary W. Pankonien, John C. Sargent,
Marshall C. Turner, and Susan A. Vladuchick
1. Election of / / / /
Directors
</TABLE>
(Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line.)
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the adoption of the 1998
Employee Stock Purchase Plan / / / / / /
3. Approval of the adoption of the
Second Amended and Restated Non- / / / / / /
Employee Directors Stock Option Plan
4. Ratification of PricewaterhouseCoopers LLP / / / / / /
as independent accountants
5. As such proxies may in their discretion determine upon such other matters
as may properly come before the meeting.
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN, AND IN
THE ABSENCE OF SUCH INSTRUCTIONS, THE PROXIES SHALL VOTE FOR THE ELECTION OF
THE NOMINEES NAMED ABOVE, ALL OF THE PROPOSALS SET FORTH ABOVE AND SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
-----------------------------------------------------------
-----------------------------------------------------------
SIGNATURE(S) DATE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE NOTE
THIS PROXY IS TO BE VOTED AS DIRECTED. IN THE ABSENCE OF SPECIFIC
DIRECTION, IT IS INTENDED TO VOTE THE SHARES REPRESENTED BY THIS PROXY FOR
THE ELECTION OF J. MICHAEL HARDINGER, JOHN L. DOYLE, JOHN W. HIMES, JOHN C.
HODGSON, GARY W. PANKONIEN, JOHN C. SARGENT, MARSHALL C. TURNER, AND SUSAN A.
VLADUCHICK, AS DIRECTORS AND FOR THE OTHER PROPOSALS.
You are urged to sign and return your proxy without delay in the return
envelope provided for that purpose, which requires no postage if mailed in
the United States or Canada.
When signing this proxy, please date it and take care to have the
signature conform to the stockholder's name as it appears on this side of the
proxy. If shares are registered in the names of two or more persons, each
person should sign. Executors, administrators, trustees and guardians should
so indicate when signing.
PLEASE SEND IN YOUR PROXY
In order that there may be proper representation
at the Annual Meeting, each stockholder, whether
he or she owns one or more shares, is requested
to sign this proxy and return it promptly in the
enclosed envelope.
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