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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box: [X]
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
AMERICAN XTAL TECHNOLOGY, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
AMERICAN XTAL TECHNOLOGY, INC.
4281 TECHNOLOGY DRIVE
FREMONT, CALIFORNIA 94538
April 28, 2000
To our stockholders:
You are cordially invited to attend the annual meeting of stockholders
of American Xtal Technology, Inc. on June 7, 2000 at 11:00 a.m. Pacific Daylight
Time, at 4281 Technology Drive, Fremont, California 94538.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. Also enclosed is a copy of the 1999 American Xtal Technology, Inc.
Annual Report, which includes audited financial statements and certain other
information.
It is important that you use this opportunity to take part in the
affairs of American Xtal Technology, Inc. by voting on the business to come
before this meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. Returning the proxy does not deprive you of your right
to attend the meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
Morris S. Young
President and Chief Executive Officer
<PAGE> 3
AMERICAN XTAL TECHNOLOGY, INC.
4281 TECHNOLOGY DRIVE
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2000
Dear Stockholder:
You are invited to attend the annual meeting of stockholders of American
Xtal Technology, Inc., which will be held on June 7, 2000 at 11:00 a.m., Pacific
Daylight Time, at 4281 Technology Drive, Fremont, California 94538, for the
following purposes:
1. To elect two Class II directors to hold office for a three-year
term and until their successors are elected and qualified.
2. To approve an amendment to American Xtal Technology's
Certificate of Incorporation changing our name from "American
Xtal Technology, Inc." to "AXT, Inc."
3. To approve an increase in the number of shares reserved for
issuance under our 1997 Stock Option Plan from 3,800,000 to
5,800,000 shares of common stock.
4. To approve an increase in the number of shares reserved for
issuance under our 1998 Employee Stock Purchase Plan from
400,000 to 900,000 shares of common stock.
5. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending December 31,
2000.
6. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on April 25, 2000, are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at our principal offices.
By order of the board of directors,
Guy D. Atwood
Secretary Fremont, California
April 28, 2000
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE REVOCABLE, AND
ANY STOCKHOLDER MAY WITHDRAW HIS OR HER PROXY PRIOR TO THE TIME IT IS VOTED, OR
BY ATTENDING THE MEETING AND VOTING IN PERSON.
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AMERICAN XTAL TECHNOLOGY, INC.
4281 TECHNOLOGY DRIVE
FREMONT, CALIFORNIA 94538
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the board of directors of
American Xtal Technology, Inc., a Delaware corporation, for use at the annual
meeting of stockholders to be held June 7, 2000, or any adjournment thereof for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The date of this proxy statement is April 28, 2000, the
approximate date on which this proxy statement and the accompanying form of
proxy were first sent or given to stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the year ended December 31, 1999, is
enclosed with this proxy statement.
Voting Securities. Only stockholders of record as of the close of
business on April 25, 2000, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 18,906,558 shares of our common
stock, par value $.001 per share, issued and outstanding. Stockholders may vote
in person or by proxy. Each stockholder of shares of common stock is entitled to
one vote for each share of stock held on the proposals presented in this proxy
statement. Our bylaws provide that a majority of all of the shares of our
capital stock entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum for the transaction of business at the meeting.
Solicitation of Proxies. American Xtal Technology will bear the cost of
soliciting proxies. We will solicit stockholders by mail through our regular
employees, and will request banks and brokers, and other custodians, nominees
and fiduciaries, to solicit their customers who have our stock registered in the
names of such persons and will reimburse them for their reasonable,
out-of-pocket costs. We may use the services of our officers, directors and
others to solicit proxies, personally or by telephone, without additional
compensation.
Voting of Proxies. All valid proxies received prior to the meeting will
be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke his
or her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of American Xtal Technology at our principal offices at 4281
Technology Drive, Fremont, California 94538, of a written instrument revoking
the proxy or a duly executed proxy with a later date, or by attending the
meeting and voting in person.
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PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
American Xtal Technology has a classified board of directors which
currently consists of five directors, two of whom are Class I directors, two of
whom are Class II directors, and one who is a Class III director. Class II and
Class III directors serve until the annual meeting of stockholders to be held in
2000 and 2001, respectively, and Class I directors serve until the annual
meeting of stockholders to be held in 2002. All directors serve until their
respective successors are duly elected and qualified. Directors in a class are
elected for a term of three years to succeed the directors in that class whose
terms expire at such annual meeting.
Management's nominees for election at the 2000 annual meeting of
stockholders to Class II of the board of directors are Jesse Chen and Donald L.
Tatzin. If elected, the nominees will serve as directors until American Xtal
Technology's annual meeting of stockholders in 2003, and until their successors
are elected and qualified. If the nominees decline to serve or become
unavailable for any reason, or if a vacancy occurs before the election, although
management knows of no reason to anticipate that this will occur, the proxies
may be voted for substitute nominees as the board of directors may designate.
The table below sets forth the names and certain information of our
directors, including the Class II nominees to be elected at this meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION WITH AXT AGE SINCE
- -------------------------------- ------------------------------------- ----- --------
<S> <C> <C> <C>
Class II nominees to be elected at the 2000 annual meeting of stockholders:
Jesse Chen Director 42 1998
Donald L. Tatzin Director 48 1998
Class III directors whose terms expire at the 2001 annual meeting of stockholders:
B.J. Moore Director 64 1998
Class I directors whose terms expire at the 2002 annual meeting of stockholders:
Morris S. Young Chairman of the Board of Directors, 55 1989
President and Chief Executive Officer
Theodore S. Young Director and Senior Vice President, 60 1986
Marketing
</TABLE>
Jesse Chen has served as a director of American Xtal Technology since
February 1998. Since May 1997, Mr. Chen has served as a Managing Director of
Matron Venture, an investment company. Prior to that, Mr. Chen co-founded
BusLogic, Inc., a computer peripherals company, and served as its Chief
Executive Officer from 1990 to 1996. Mr. Chen serves on the board of directors
of several private companies. Mr. Chen has a B.S. degree in Aeronautical
Engineering from Chenkung University, Taiwan and an M.S. in Electrical
Engineering from Loyola Marymount University.
Donald L. Tatzin has served as a director of American Xtal Technology
since February 1998. Since 1993, Mr. Tatzin has served as Executive Vice
President of Showboat, Inc., a gaming company. In addition, Mr. Tatzin served as
a director for Sydney Harbour Casino, an Australian gaming company, from 1995 to
1996 and as its Chief Executive Officer from April to October 1996. Prior to
that, Mr. Tatzin was a director and consultant with Arthur D. Little, Inc. from
1976 to 1993. Mr. Tatzin holds an S.B. in Economics and an S.B. and masters
degrees in City
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Planning from the Massachusetts Institute of Technology and an M.S. in Economics
from Australian National University.
B.J. Moore has served as a director of American Xtal Technology since
February 1998. Since 1991, Mr. Moore has been self-employed as a consultant and
has served as a director to several technology-based companies. Mr. Moore
currently serves on the board of directors for Adaptec, Inc., a computer
peripherals company, and Dionex Corporation, an ion chromatography systems
company, as well as several private companies. Mr. Moore holds a B.S. and an
M.S. in Electrical Engineering from the University of Tennessee.
Morris S. Young, Ph.D. co-founded American Xtal Technology in 1986 and
has served as Chairman of the board of directors since February 1998 and
President, Chief Executive Officer and a director of American Xtal Technology
since 1989. From 1985 to 1989, Dr. Young was a physicist at Lawrence Livermore
National Laboratory. Dr. Young holds a B.S. in Metallurgical Engineering from
Chengkung University, Taiwan, an M.S. in Metallurgy from Syracuse University,
and a Ph.D. in Metallurgy from Polytechnic University.
Theodore S. Young, Ph.D. co-founded American Xtal Technology in 1986 and
has served as Senior Vice President, Marketing since 1989 and as President from
1987 to 1989. He has also acted as a director since American Xtal Technology's
inception, including as the Chairman of the board of directors from January 1987
to January 1998. Dr. Young served as a senior physicist at Lawrence Livermore
National Laboratory from 1984 to 1987. Dr. Young holds a B.S. in Physics from
National Taiwan University, an M.S. in Geophysics from the University of Alaska,
and a Ph.D. in Plasma Physics from the Massachusetts Institute of Technology.
BOARD OF DIRECTOR'S COMMITTEES AND MEETINGS
During 1999, the board of directors held seven meetings. Each incumbent
director attended at least 75% of the aggregate of such meetings of the board
and any committee of the board on which he served. The board of directors has
established an audit committee and a compensation committee.
The audit committee's function is to:
- review with the independent auditors and management of American Xtal
Technology the annual financial statements and independent auditors'
opinion,
- review the scope and results of the examination of our financial
statements by the independent auditors,
- approve all professional services and related fees performed by the
independent auditors,
- recommend the retention of the independent auditors to the board,
subject to ratification by the stockholders, and
- periodically review our accounting policies and internal accounting
and financial controls.
The audit committee also oversees actions taken by our independent
auditors, recommends the engagement of auditors and reviews our internal audits.
The members of the audit committee during 1999 were Jesse Chen, B.J. Moore and
Donald L. Tatzin. The audit committee held two meetings in 1999.
The compensation committee's function is to make decisions concerning
salaries and incentive compensation for executive officers of American Xtal
Technology. The members of the compensation committee during 1999 were Jesse
Chen, B.J. Moore and Donald L. Tatzin. During 1999, the compensation committee
held one meeting. For additional information concerning the compensation
committee, see "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION."
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VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
If a quorum is present and voting at the annual meeting of stockholders,
the nominees for Class II director receiving the highest number of votes will be
elected. Abstentions and broker non-votes will each be counted as present for
purposes of determining the presence of a quorum. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
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PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION
TO CHANGE AMERICAN XTAL TECHNOLOGY'S NAME
Our board of directors has unanimously approved and recommends to the
stockholders that they consider and approve an amendment to American Xtal
Technology's Certificate of Incorporation changing our corporate name from
"American Xtal Technology, Inc." to "AXT, Inc." If the proposed amendment is
approved, Article First of our Certificate of Incorporation would be amended to
read as follows:
"FIRST: The name of the Corporation shall be: "AXT, Inc."
The board of directors believes that this name change will assist
American Xtal Technology in developing new marketing and sales strategies and
will enhance our brand equity and strengthen recognition of American Xtal
Technology by our customers, partners and stockholders. The proposed name change
will not affect the validity or transferability of currently outstanding stock
certificates, and stockholders will not be requested to surrender for exchange
any stock certificates they hold.
Attached to this Proxy Statement as Exhibit A is the proposed amendment
to American Xtal Technology's Certificate of Incorporation with respect to the
name change. Stockholders are urged to review Exhibit A in considering the
amendment.
The affirmative vote of the holders of at least sixty-six and two thirds
(66 2/3%) of our outstanding common stock is required to amend our Certificate
of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
NAME CHANGE.
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PROPOSAL NUMBER THREE
APPROVAL OF AMENDMENT OF
1997 STOCK OPTION PLAN
The board of directors adopted the 1997 Stock Option Plan, also referred
to as the 1997 Plan, on July 26, 1997. Currently, the 1997 Plan provides that
the maximum number of shares issuable under the 1997 Plan is 3,800,000. Because
the use of options is an important factor in attracting and retaining qualified
employees and consultants, the board of directors has amended the 1997 Plan,
subject to stockholder approval, to increase the maximum number of shares
issuable under the 1997 Plan by 2,000,000 shares, to a total of 5,800,000
shares.
The stockholders are now being asked to approve the increase in the
number of shares issuable under the 1997 Plan by 2,000,000 shares, from
3,800,000 shares to 5,800,000 shares. The board of directors believes that
approval of this amendment is in the best interests of American Xtal Technology
and our stockholders because the availability of an adequate reserve of shares
under the 1997 Plan is an important factor in attracting, motivating and
retaining qualified officers and employees essential to our success and in
aligning their long-term interests with those of the stockholders.
SUMMARY OF THE PROVISIONS OF THE 1997 PLAN
The following summary of the 1997 Plan is qualified in its entirety by
the specific language of the 1997 Plan, a copy of which is available to any
stockholder upon request.
General. The 1997 Plan provides for the grant of ISOs and nonstatutory
stock options. As of March 31, 2000, American Xtal Technology had outstanding
options under the 1997 Plan to purchase an aggregate of 2,718,987 shares at a
weighted average exercise price of $14.38 per share. As of March 31, 2000,
options to purchase 210,155 shares of common stock granted pursuant to the 1997
Plan had been exercised, and there were 870,858 shares of common stock available
for future grants under the 1997 Plan, without taking the proposed increase into
account.
Shares subject to the 1997 Plan. Currently, a maximum of 3,800,000
shares of the authorized but unissued or reacquired common stock of American
Xtal Technology may be issued pursuant to the 1997 Plan. The board has amended
the 1997 Plan, subject to stockholder approval, to increase the maximum number
of shares issuable under the 1997 Plan to 5,800,000 shares.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of American Xtal Technology, appropriate adjustments will be
made to the shares subject to the 1997, and to outstanding options. To the
extent any outstanding option under the 1997 Plan expires or terminates prior to
exercise in full or if American Xtal Technology repurchases shares issued upon
exercise of an option, the shares of common stock for which that option is not
exercised or the repurchased shares are returned to the 1997 Plan and will again
be available for issuance under the 1997 Plan.
Administration. The board of directors or a duly appointed committee of
the board may administer the 1997 Plan. With respect to the participation of
individuals whose transactions in American Xtal Technology's equity securities
are subject to Section 16 of the Securities Exchange Act of 1934, the 1997 Plan
must be administered in compliance with the requirements, if any, of Rule 16b-3
under the Exchange Act. Subject to the provisions of the 1997 Plan, the board
determines the persons to whom options are to be granted, the number of shares
to be covered by each option, whether an option is to be an ISO or a
nonstatutory stock option, the terms of vesting and exercisability of each
option, including the effect thereon of an optionee's termination of service,
the type of consideration to be paid to American Xtal Technology upon exercise
of an option, the duration of each option, and all other terms and conditions of
the options. The 1997 Plan also provides, subject to certain limitations, that
American Xtal Technology will indemnify any director, officer or employee
against all reasonable expenses, including attorneys' fees, incurred in
connection with any legal action arising from that person's action or failure to
act in administering the 1997 Plan. The board will interpret the 1997 Plan and
options granted thereunder, and all determinations of the board will be final
and binding on all persons having an interest in the 1997 Plan or any option
under that plan.
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Eligibility. Generally, all employees, directors and consultants of
American Xtal Technology or of any present or future parent or subsidiary
corporations of American Xtal Technology are eligible to participate in the 1997
Plan. In addition, the 1997 Plan also permits the grant of options to
prospective employees, consultants and directors in connection with written
offers of employment or engagement. As of March 31, 2000, American Xtal
Technology had approximately 900 employees, including six executive officers and
five directors. Any person eligible under the 1997 Plan may be granted a
nonstatutory option. However, only employees may be granted ISOs. In order to
preserve American Xtal Technology's ability to deduct compensation related to
options granted under the 1997 Plan, the 1997 Plan provides that no employee may
be granted options for more than 250,000 shares during any fiscal year.
Terms and conditions of options. Each option granted under the 1997 Plan
is evidenced by a written agreement between American Xtal Technology and the
optionee specifying the number of shares subject to the option and the other
terms and conditions of the option, consistent with the requirements of the 1997
Plan. The exercise price per share must equal at least the fair market value of
a share of American Xtal Technology's common stock on the date of grant of an
ISO and at least 85% of the fair market value of a share of the common stock on
the date of grant of a nonstatutory stock option. The exercise price of any ISO
granted to a person who at the time of grant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of American Xtal
Technology or any parent or subsidiary corporation of American Xtal Technology,
referred to as a 10% Stockholder, must be at least 110% of the fair market value
of a share of American Xtal Technology's common stock on the date of grant. The
fair market value of American Xtal Technology's common stock is based on the
trading price of American Xtal Technology's shares on the Nasdaq National
Market.
Generally, the exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of American Xtal Technology's common stock owned
by the optionee having a fair market value not less than the exercise price, by
the assignment of the proceeds of a sale or a loan with respect to some or all
of the shares of common stock being acquired upon the exercise of the option, by
means of a promissory note, by any lawful method approved by the board or by any
combination of these. The board may nevertheless restrict the forms of payment
permitted in connection with any option grant.
The board will specify when options granted under the 1997 Plan will
become exercisable and vested. Shares subject to options generally vest and
become exercisable in installments, subject to the optionee's continued
employment or service. The maximum term of ISOs granted under the 1997 Plan is
ten years, except that an ISO granted to a 10% Stockholder may not have a term
longer than five years. The 1997 Plan authorizes the board to grant nonstatutory
stock options having a term in excess of ten years. Options are nontransferable
by the optionee other than by will or by the laws of descent and distribution
and are exercisable during the optionee's lifetime only by the optionee.
Change in control. The 1997 Plan provides that a "change in control"
occurs in the event of:
- a sale or exchange by the stockholders of more than 50% of
American Xtal Technology's voting stock,
- a merger or consolidation involving American Xtal Technology,
- the sale, exchange or transfer of all or substantially all of
the assets of American Xtal Technology, or
- a liquidation or dissolution of American Xtal Technology,
wherein, upon any such event, the stockholders of American Xtal Technology
immediately before such event do not retain direct or indirect beneficial
ownership of at least 50% of the total combined voting power of the voting stock
of American Xtal Technology, its successor, or the corporation to which the
assets of American Xtal Technology were transferred.
Upon a change in control, the board may arrange for the acquiring or
successor corporation to assume or substitute new options for the options
outstanding under the 1997 Plan. To the extent that the options outstanding
under the 1997 Plan are not assumed, substituted for, or exercised prior to such
event, they will terminate.
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Termination or amendment. Unless sooner terminated, no ISOs may be
granted under the 1997 Plan after July 25, 2007. The board may terminate or
amend the 1997 Plan at any time, but, without stockholder approval, the board
may not adopt an amendment to the 1997 Plan which would increase the total
number of shares of common stock reserved for issuance thereunder, change the
class of persons eligible to receive ISOs, or require stockholder approval under
any applicable law, regulation or rule. No amendment may adversely affect an
outstanding option without the consent of the optionee, unless the amendment is
required to preserve the option's status as an ISO or is necessary to comply
with any applicable law.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 PLAN
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the 1997 Plan and does not attempt to describe all possible federal or other
tax consequences of such participation or tax consequences based on particular
circumstances.
ISOs. An optionee recognizes no taxable income for regular income tax
purposes as the result of the grant or exercise of an ISO qualifying under
Section 422 of the Code. Optionees who do not dispose of their shares for two
years following the date the option was granted or within one year following the
exercise of the option will normally recognize a long-term capital gain or loss
equal to the difference, if any, between the sale price and the purchase price
of the shares. If an optionee satisfies such holding periods upon a sale of the
shares, American Xtal Technology will not be entitled to any deduction for
federal income tax purposes. If an optionee disposes of shares within two years
after the date of grant or within one year from the date of exercise, referred
to as a disqualifying disposition, the difference between the fair market value
of the shares on the exercise date, and the option exercise price, not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized, will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than 12 months. Generally, for federal
income tax purposes, American Xtal Technology should be able to deduct any
ordinary income recognized by the optionee upon the disqualifying disposition of
the shares, except to the extent the deduction is limited by applicable
provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market
value of the shares on the exercise date of an ISO is an adjustment in computing
the optionee's alternative minimum taxable income and may be subject to an
alternative minimum tax which is paid if the tax exceeds the regular tax for the
year. Special rules may apply with respect to certain subsequent sales of the
shares in a disqualifying disposition, certain basis adjustments for purposes of
computing the alternative minimum taxable income on a subsequent sale of the
shares and certain tax credits which may arise with respect to optionees subject
to the alternative minimum tax.
Nonstatutory stock options. Options not designated or qualifying as ISOs
will be nonstatutory stock options. Nonstatutory stock options have no special
tax status. An optionee generally recognizes no taxable income as the result of
the grant of such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in an amount equal to the
difference between the option exercise price and the fair market value of the
shares on the exercise date. If the optionee is an employee, the ordinary income
generally is subject to withholding of income and employment taxes. Upon the
sale of stock acquired by the exercise of a nonstatutory stock option, any gain
or loss, based on the difference between the sale price and the fair market
value on the exercise date, will be taxed as capital gain or loss. A capital
gain or loss will be long-term if the optionee's holding period is more than 12
months. No tax deduction is available to American Xtal Technology with respect
to the grant of a nonstatutory option or the sale of the stock acquired pursuant
to that grant. American Xtal Technology generally should be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee as a
result of the exercise of a nonstatutory option, except to the extent the
deduction is limited by applicable provisions of the Code or the regulations
thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast on the proposal at
the annual meeting of stockholders, at which a quorum representing a majority of
all outstanding shares of American Xtal Technology's common stock
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is present, either in person or by proxy, is required for approval of this
proposal. Votes for and against, abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a quorum.
However, abstentions and broker non-votes will have no effect on the outcome of
this vote.
The board of directors believes that approval of the increase in the
number of shares issuable under the 1997 Plan is in the best interests of
American Xtal Technology and its stockholders. THEREFORE, FOR THE REASONS STATED
ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF AN
INCREASE IN THE NUMBER OF SHARES ISSUABLE UNDER THE 1997 PLAN.
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PROPOSAL NUMBER FOUR
APPROVAL OF AMENDMENT OF
1998 EMPLOYEE STOCK PURCHASE PLAN
American Xtal Technology's 1998 Employee Stock Purchase Plan, also
referred to as the Purchase Plan, became effective on May 20, 1998, the
effective date of American Xtal Technology's initial public offering. Currently,
the Purchase Plan provides that the maximum number of shares issuable under the
Purchase Plan is 400,000. The board of directors has amended the Purchase Plan,
subject to stockholder approval, to increase the maximum number of shares
issuable under the Purchase Plan by 500,000 shares, to a total of 900,000
shares.
The stockholders are now being asked to approve the increase in the
number of shares issuable under the 1997 Plan by 500,000 shares, from 400,000
shares to 900,000 shares. The board of directors believes that approval of this
amendment is in the best interests of American Xtal Technology and our
stockholders because the availability of an adequate reserve of shares under the
Purchase Plan will benefit American Xtal Technology by providing employees with
an opportunity to acquire shares of American Xtal Technology's common stock and
is an important factor in attracting, motivating and retaining qualified
officers and employees essential to our success and in aligning their long-term
interests with those of the stockholders.
SUMMARY OF THE PROVISIONS OF THE PURCHASE PLAN
The following summary of the Purchase Plan is qualified in its entirety
by the specific language of the Purchase Plan, a copy of which is available to
any stockholder upon request.
General. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under section 423 of the Code. Each participant in the Purchase
Plan is granted a right to purchase, through accumulated payroll deductions, up
to a fixed number of shares of American Xtal Technology's common stock which is
determined on the first day of the offering. The purchase right is automatically
exercised on each purchase date of the offering unless the participant has
withdrawn from the Purchase Plan prior to such date.
Shares Subject to Plan. Currently, a maximum of 400,000 of American Xtal
Technology's authorized but unissued or reacquired shares of common stock may be
issued under the Purchase Plan, subject to appropriate adjustment in the event
of a stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in American Xtal Technology's
capital structure or in the event of any merger, sale of assets or other
reorganization of American Xtal Technology. The board has amended the Purchase
Plan, subject to stockholder approval, to increase the maximum number of shares
issuable under the Purchase Plan to 900,000 shares. If any purchase right
expires or terminates, the shares subject to the unexercised portion of such
Purchase Right will again be available for issuance under the Purchase Plan.
Administration. The Purchase Plan is administered by the board of
directors or a duly appointed committee of the board. Subject to the provisions
of the Purchase Plan, the board determines the terms and conditions of purchase
rights granted under the plan. The board will interpret the Purchase Plan and
purchase rights granted thereunder, and all determinations of the board will be
final and binding on all persons having an interest in the Purchase Plan or any
purchase rights. The Purchase Plan provides, subject to certain limitations, for
indemnification by American Xtal Technology of any director, officer or employee
against all reasonable expenses, including attorney's fees, incurred in
connection with any legal action arising from such person's action or failure to
act in administering the Purchase Plan.
Eligibility. Any employee of American Xtal Technology or of any present
or future parent or subsidiary corporation of American Xtal Technology
designated by the board for inclusion in the Purchase Plan is eligible to
participate in an offering under the Purchase Plan so long as the employee has
completed 3 months of service prior to the start of the offering and is
customarily employed for at least 20 hours per week and 5 months per calendar
year. However, no employee who owns or holds options to purchase, or as a result
of participation in the Purchase Plan would own or hold options to purchase,
five percent or more of the total combined voting power or value of all classes
of stock of American Xtal Technology or of any parent or subsidiary corporation
of American Xtal Technology is entitled to participate in the Purchase Plan.
10
<PAGE> 14
Offerings. Generally, each offering under the Purchase Plan is for a
period of six months. Offerings under the Purchase Plan are sequential, with a
new offering beginning every six months. Offerings will generally commence on
the first days of February and August of each year and end on the last days of
the next following July and January, respectively. However, the first offering
commenced on May 21, 1998, the effective date of the Purchase Plan and will end
on July 31, 2000. The initial offering is comprised of four purchase periods,
and the first purchase period commenced on May 21, 1998 and ended on January 31,
1999. Subsequent 6-month purchase periods in the initial offering commenced on
February 1, 1999, August 1, 1999 and February 1, 2000. Shares are purchased on
the last day of each six-month offering and the last day of each purchase period
of the initial offering. The board may establish a different term for one or
more offerings or different commencement or ending dates for an offering.
Participation and Purchase of Shares. Participation in the Purchase Plan
is limited to eligible employees who authorize payroll deductions prior to the
start of an offering. Payroll deductions may not exceed 15%, or such other rate
as the board determines, of an employee's compensation for any pay period during
the offering. Once an employee becomes a participant in the Purchase Plan, that
employee will automatically participate in each successive offering until such
time as that employee withdraws from the Purchase Plan, becomes ineligible to
participate in the Purchase Plan, or terminates employment.
Subject to certain limitations, each participant in a six-month offering
has a purchase right equal to the lesser of that number of whole shares
determined by dividing $12,500 by the fair market value of a share of common
stock on the first day of the offering or 1,250 shares, provided that these
dollar and share amounts will be prorated for any offering that is other than 6
months in duration. No participant may purchase under the Purchase Plan shares
of American Xtal Technology's common stock having a fair market value exceeding
$25,000 in any calendar year, measured by the fair market value of American Xtal
Technology's common stock on the first day of the offering in which the shares
are purchased.
On each purchase date, American Xtal Technology issues to each
participant in the offering the number of shares of American Xtal Technology's
common stock determined by dividing the amount of payroll deductions accumulated
for the participant during that period by the purchase price, limited in any
case by the number of shares subject to the participant's purchase right for
that offering. The price per share at which shares are sold generally equals 85%
of the lesser of the fair market value per share of American Xtal Technology's
common stock on the first day of the offering or the purchase date. The fair
market value of American Xtal Technology's common stock is based on the trading
price of American Xtal Technology's shares on the Nasdaq National Market. Any
payroll deductions under the Purchase Plan not applied to the purchase of shares
will be returned to the participant, unless the amount remaining is less than
the amount necessary to purchase a whole share of Common Stock, in which case
the remaining amount may be applied to the next purchase period or offering.
A participant may withdraw from an offering at any time without
affecting his or her eligibility to participate in future offerings. However,
once a participant withdraws from an offering, that participant may not again
participate in the same offering.
Change in Control. The Purchase Plan provides that in the event of a
change in control of American Xtal Technology, the acquiring or successor
corporation may assume American Xtal Technology's rights and obligations under
the Purchase Plan or substitute substantially equivalent purchase rights for
such corporation's stock. If the acquiring or successor corporation elects not
to assume or substitute for the outstanding purchase rights, the Board may
adjust the last day of the offering to a date on or before the date of the
change in control. Any purchase rights that are not assumed, substituted, or
exercised prior to the change in control will terminate.
Termination or Amendment. The Purchase Plan will continue until
terminated by the board or until all of the shares reserved for issuance under
the plan have been issued. The board may at any time amend or terminate the
Purchase Plan. However, the approval of American Xtal Technology's stockholders
is required within twelve months of the adoption of any amendment that:
- increases the number of shares authorized for issuance under the
Purchase Plan, or
11
<PAGE> 15
- changes the definition of the corporations which may be
designated by the board as corporations whose employees may
participate in the Purchase Plan.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE PLAN
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the Purchase Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
A participant recognizes no taxable income either as a result of
commencing to participate in the Purchase Plan or purchasing shares of common
stock under the terms of the Purchase Plan.
If a participant disposes of shares purchased under the Purchase Plan
within two years from the first day of the applicable offering or within one
year from the purchase date, referred to as disqualifying disposition, the
participant will realize ordinary income in the year of such disposition equal
to the amount by which the fair market value of the shares on the purchase date
exceeds the purchase price. The amount of the ordinary income will be added to
the participant's basis in the shares, and any additional gain or resulting loss
recognized on the disposition of the shares will be a capital gain or loss. A
capital gain or loss will be long-term if the participant's holding period is
more than twelve months.
If the participant disposes of shares purchased under the Purchase Plan
at least two years after the first day of the applicable offering and at least
one year after the purchase date, the participant will realize ordinary income
in the year of disposition equal to the lesser of (1) the excess of the fair
market value of the shares on the date of disposition over the purchase price or
(2) 15% of the fair market value of the shares on the first day of the
applicable offering. The amount of any ordinary income will be added to the
participant's basis in the shares, and any additional gain recognized upon the
disposition after such basis adjustment will be a long-term capital gain. If the
fair market value of the shares on the date of disposition is less than the
purchase price, there will be no ordinary income and any loss recognized will be
a long-term capital loss.
If the participant still owns the shares at the time of death, the
lesser of (1) the excess of the fair market value of the shares on the date of
death over the purchase price or (2) 15% of the fair market value of the shares
on the first day of the offering in which the shares were purchased will
constitute ordinary income in the year of death.
American Xtal Technology should be entitled to a deduction in the year
of a disqualifying disposition equal to the amount of ordinary income recognized
by the participant as a result of the disposition, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. In all other cases, no deduction is allowed to American Xtal
Technology.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast on the proposal at
the annual meeting of stockholders, at which a quorum representing a majority of
all outstanding shares of American Xtal Technology's common stock is present,
either in person or by proxy, is required for approval of this proposal. Votes
for and against, abstentions and broker non-votes will each be counted as
present for purposes of determining the presence of a quorum. However,
abstentions and broker non-votes will have no effect on the outcome of this
vote.
The board of directors believes that approval of the increase in the
number of shares issuable under the Purchase Plan is in the best interests of
American Xtal Technology and its stockholders. THEREFORE, FOR THE REASONS STATED
ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF AN
INCREASE IN THE NUMBER OF SHARES ISSUABLE UNDER THE PURCHASE PLAN.
12
<PAGE> 16
PROPOSAL NUMBER FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has selected PricewaterhouseCoopers LLP as
independent auditors to audit our financial statements for the fiscal year
ending December 31, 2000. PricewaterhouseCoopers LLP has acted in such capacity
since its appointment during the fiscal year ended December 31, 1997. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
annual meeting of stockholders with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast at the annual
meeting of stockholders, at which a quorum representing a majority of all
outstanding shares of American Xtal Technology common stock is present and
voting, either in person or by proxy, is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS AMERICAN XTAL TECHNOLOGY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
13
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31,
2000, with respect to the beneficial ownership of American Xtal Technology
common stock by:
- each person known by American Xtal Technology to be the beneficial
owner of more than 5% of our common stock,
- each director and director nominee of American Xtal Technology,
- the Chief Executive Officer, and the four other highest compensated
executive officers of American Xtal Technology whose salary and bonus
for the year ended December 31, 1999 exceeded $100,000, also referred
to as the "Named Executive Officers," and
- all executive officers and directors of American Xtal Technology as a
group.
Except as otherwise indicated, the address of each beneficial owner is
c/o American Xtal Technology, Inc., 4281 Technology Drive, Fremont, California
94538.
Except as indicated in the footnotes to the table, American Xtal
Technology believes that the persons named in the table have sole voting and
dispositive power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws, where
applicable. A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days upon the exercise of options.
Percentages are based on 18,906,558 shares of common stock outstanding on March
31, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS SHARES OWNED
- ---------------------------------------------------------------------- ---------------------------
NUMBER OF
SHARES PERCENTAGE
--------- ----------
<S> <C> <C>
Morris S. Young (1) .................................................. 1,999,354 10.6%
Lord Abbett & Co. (2)
90 Hudson Street
Jersey City, NJ 07302 ................................................ 1,273,038 6.7%
Theodore S. Young (3) ................................................ 584,465 3.1%
Gary S. Young (4) .................................................... 492,670 2.6%
Davis Zhang (5) ...................................................... 263,100 1.4%
Guy D. Atwood (6) .................................................... 68,750 *
Jesse Chen (7) ....................................................... 16,875 *
B.J. Moore (8) ....................................................... 16,875 *
Donald L. Tatzin (9) ................................................. 17,875 *
All directors and executive officers as a group (8 persons) (10) ..... 3,459,964 18.5%
</TABLE>
- ----------------
* Less than 1%
(1) Includes 735,071 shares held by the Morris & Vicke Young Trust,
1,162,200 shares held by the Morris Young Family Ltd. Partnership, and
20,000 shares held by the minor children of Morris Young, and 62,083
shares subject to options exercisable within 60 days of March 31, 2000.
Also includes 20,000 shares held jointly by George Liu, Morris Young's
father-in-law, and Vicke Young, Morris Young's spouse, of which Morris
Young disclaims beneficial ownership.
(2) According to Schedule 13G filed by the stockholder with the Securities
and Exchange Commission in January 2000, Lord Abbett & Co. beneficially
owns 1,273,038 shares of our common stock.
14
<PAGE> 18
(3) Includes 85,000 shares subject to options exercisable within 60 days of
March 31, 2000.
(4) Includes 3,750 shares directly held by Gary Young, 412,337 shares held
by Gary Young Trust A, 2,000 shares held by Joanna Young, Mr. Young's
daughter, and 74,583 shares subject to options exercisable within 60
days of March 31, 2000.
(5) Includes 133,100 shares directly held by Davis Zhang, 29,000 shares held
by Xian-Ming Zhang, Mr. Zhang's spouse, 16,000 shares held by Mr.
Zhang's minor children and 85,000 shares subject to options exercisable
within 60 days of March 31, 2000.
(6) Includes 18,750 shares subject to options exercisable within 60 days of
March 31, 2000.
(7) Includes 16,875 shares subject to options exercisable within 60 days of
March 31, 2000.
(8) Includes 9,375 shares subject to options exercisable within 60 days of
March 31, 2000.
(9) Includes 16,875 shares subject to options exercisable within 60 days of
March 31, 2000.
(10) Includes 368,541 shares subject to options exercisable within 60 days of
March 31, 2000.
15
<PAGE> 19
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the total
compensation of the Named Executive Officers for the years ended December 31,
1999, 1998 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
NO. OF
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Morris S. Young .................................. 1999 $183,860 $16,000 70,000 $ 648
President and Chief Executive Officer 1998 177,540 18,000 -- 648
1997 152,339 15,000 130,000 648
--
Theodore S. Young ................................ 1999 151,188 11,000 50,000 855
Senior Vice President, Marketing 1998 133,334 13,500 -- 855
1997 133,675 12,000 120,000 855
Davis Zhang ...................................... 1999 165,361 13,000 66,000 285
Senior Vice President, Production 1998 153,052 14,500 -- 285
1997 122,178 12,000 120,000 285
Gary S. Young .................................... 1999 119,700 8,600 36,000
Vice President, Sales 1998 110,574 9,300 -- 860
1997 104,067 8,000 100,000 860
Guy D. Atwood(3) ................................. 1999 130,439 10,500 50,000 3,475
Vice President and Chief Financial 1998 122,128 13,500 -- 2,678
Officer, Treasurer and Secretary 1997 38,912 3,500 100,000 798
</TABLE>
- ----------------
(1) Amounts shown are on a full year basis, but see note 3 below, and
include cash and noncash compensation earned by executive officers.
(2) Represents premiums paid by American Xtal Technology for life insurance
coverage.
(3) The salary amount shown for Guy D. Atwood for 1997 reflects amounts
earned from August 18, 1997, his initial date of employment with
American Xtal Technology, to December 31, 1997, and is based on his 1997
annual salary of $110,000.
16
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information concerning options to
purchase American Xtal Technology's common stock granted during the year ended
December 31, 1999 to the Named Executive Officers:
<TABLE>
<CAPTION>
Potential realizable
% of total value at assumed
options annual rates of stock
granted to price appreciation
employees for option term(4)
Options in fiscal Exercise Expiration ----------------------------
Name granted(1) year(2) price(3) date 5% 10%
- ----------------- ---------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Morris S. Young 35,000 2.26% $ 10.04 Jan. 5, 2004 $ 97,085 $ 214,533
35,000 2.26% $ 24.96 Aug. 19, 2004 $ 241,360 $ 533,342
Theodore S. Young 25,000 1.62% $ 9.12 Jan. 5, 2009 $ 143,388 $ 363,373
25,000 1.62% $ 22.69 Aug. 19, 2009 $ 356,740 $ 904,050
Davis Zhang 33,000 2.13% $ 9.12 Jan. 5, 2009 $ 189,272 $ 479,653
33,000 2.13% $ 22.69 Aug. 19, 2009 $ 470,897 $1,193,347
Gary S. Young 18,000 1.16% $ 9.12 Jan. 5, 2009 $ 103,239 $ 261,629
18,000 1.16% $ 22.69 Aug. 19, 2009 $ 256,853 $ 650,916
Guy D. Atwood 25,000 1.62% $ 9.12 Jan. 5, 2009 $ 143,388 $ 363,373
25,000 1.62% $ 22.69 Aug. 19, 2009 $ 356,740 $ 904,050
</TABLE>
- ----------------
(1) Shares subject to options generally vest and become exercisable in
installments, subject to the optionee's continued employment or service.
American Xtal Technology has a repurchase right for unvested shares.
Under the terms of the 1997 Stock Option Plan, the administrator retains
discretion, subject to the 1997 Stock Option Plan limits, to modify the
terms of outstanding options and to reprice outstanding options. The
options have a term of 10 years, subject to earlier termination in
certain situations related to termination of employment. See "Proposal
Number Three -- Approval of Amendment of 1997 Stock Option Plan" for a
description of the material payment terms of the options.
(2) Based on a total of 1,547,361 options granted to all employees and
consultants during fiscal 1999.
(3) All options were granted at an exercise price equal to the fair market
value of American Xtal Technology's common stock on the date of grant.
(4) Potential realizable values are net of exercise price, but before taxes
associated with exercise. These amounts represent hypothetical gains
that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with rules of the Securities and
Exchange Commission and do not represent American Xtal Technology's
estimate or projection of the future common stock price. Actual gains,
if any, on stock option exercises are dependent on the future
performance of the common stock, overall market conditions and the
option holders' continued employment through the vesting period. This
table does not take into account any appreciation in the price of the
common stock from the date of grant to date.
17
<PAGE> 21
AGGREGATE OPTION EXERCISES FOR FISCAL 1999 AND FISCAL 1999 YEAR-END VALUES
The following table provides certain information concerning exercises of
options to purchase American Xtal Technology common stock during 1999, and
unexercised options held as December 31, 1999, by the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT 12/31/99(1) OPTIONS AT 12/31/99(2)
ON VALUE ------------------------ ------------------------
NAME EXERCISE REALIZED(3) VESTED UNVESTED VESTED UNVESTED
- ----------------- -------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Morris S. Young 30,000 $367,500 48,542 121,458 $579,591 $610,279
Theodore S. Young -- -- 72,500 97,500 $901,900 $667,575
Davis Zhang -- -- 72,500 113,500 $901,900 $692,111
Gary S. Young 3,750 $ 64,594 64,167 75,583 $809,862 $547,619
Guy D. Atwood -- -- 58,333 91,667 $725,663 $595,012
</TABLE>
- ----------------
(1) American Xtal Technology has a right of repurchase as to any unvested shares
upon optionee's termination of employment at their original exercise price.
(2) Calculated on the basis of the fair market value of the underlying
securities as of December 31, 1999 of $17.44 per share, as reported as the
closing price on the National Association of Securities Dealers Automated
Quotations System, minus the aggregate exercise price.
(3) Fair market price on date of exercise, less exercise price.
No compensation intended to serve as incentive for performance to occur
over a period longer than one fiscal year was paid pursuant to a long-term
incentive plan during fiscal 1999 to any Named Executive Officer. American Xtal
Technology does not have any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation or average final
compensation and years of service with any of the Named Executive Officers.
18
<PAGE> 22
COMPENSATION OF DIRECTORS
Directors of American Xtal Technology each receive $1,500 per board or
committee meeting, and are reimbursed for reasonable expenses. The directors are
eligible to receive option grants pursuant to the 1997 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The compensation committee is composed of Jesse Chen, B.J. Moore and
Donald Tatzin. No interlocking relationships exist between any member of our
compensation committee and any member of any other company's board of directors
or compensation committee. The compensation committee makes recommendations
regarding our employee stock plans and makes decisions concerning salaries and
bonus compensation for executive officers of American Xtal Technology.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1999, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which American Xtal
Technology was or is to be a party in which the amount involved exceeds $60,000,
and in which any director, executive officer or holder of more than 5% any class
of voting securities of American Xtal Technology and members of that person's
immediate family had or will have a direct or indirect material interest other
than the transactions described below.
During 1999, Equipment & Materials Inc., a California corporation
engaged in international trading with the People's Republic of China and
quartzware fabrication, supplied American Xtal Technology with various raw
materials from the People's Republic of China and also has manufactured
quartzware for American Xtal Technology. Christina X. Li, the sole shareholder
and President of Equipment & Materials Inc, is the wife of Davis Zhang. The
aggregate revenue received by Equipment & Materials Inc. from American Xtal
Technology for such supply and production up through December 31, 1999 is
approximately $3,559,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires American
Xtal Technology's executive officers, directors and persons who beneficially own
more than 10% of our common stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
These persons are required by SEC regulations to furnish American Xtal
Technology with copies of all Section 16(a) forms that they file.
Based solely on our review of the forms furnished to us and written
representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and persons who
beneficially own more than 10% of our common stock were complied with in fiscal
1999, except that each of the following executive officers and directors filed
one late Form 5, an Annual Statement of Changes in Beneficial Ownership:
Morris S. Young, two transactions;
Theodore S. Young, two transactions;
Davis Zhang, two transactions;
Gary S. Young, two transactions; and
Guy D. Atwood, two transactions.
19
<PAGE> 23
The following table sets forth grants of stock options under the 1997
Plan during 1999 to:
- the Named Executive Officers;
- all current executive officers as a group;
- all current directors who are not executive officers as a group; and
- all employees, who are not executive officers, as a group.
During 1999, American Xtal Technology did not grant any rights under the
Purchase Plan.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1997 PLAN
--------------------------
EXERCISE NO. OF
NAME AND POSITION PRICE SHARES
------------------------------------------------- --------- ---------
<S> <C> <C>
Morris S. Young ................................. $10.04 35,000
President and Chief Executive Officer $24.96 35,000
Theodore S. Young ............................... $ 9.12 25,000
Senior Vice President, Marketing $ 2.69 25,000
Davis Zhang ..................................... $ 9.12 33,000
Senior Vice President, Production $22.69 33,000
Gary S. Young ................................... $ 9.12 18,000
Vice President, Sales $22.69 18,000
Guy D. Atwood ................................... $ 9.12 25,000
Vice President and Chief Financial $22.69 25,000
Officer, Treasurer and Secretary
Executive group (5 persons) ...................... $16.27 272,000
Non-executive director group (3 persons) ......... $21.19 15,000
Non-executive officer employee group ............. -- 1,260,361
</TABLE>
20
<PAGE> 24
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation committee is comprised of Jesse Chen, B.J. Moore and
Donald Tatzin, each an outside director of the board of directors and is
responsible for setting and monitoring policies governing compensation of
executive officers. The compensation committee reviews the performance and
compensation levels for executive officers and sets salary and bonus levels and
option grants under our 1997 Stock Option Plan. The objectives of the committee
are to correlate executive compensation with our business objectives and
performance, and to enable us to attract, retain and reward executive officers
who contribute to our long-term success.
SALARY
The compensation committee annually assesses the performance and sets
the salary of the President and Chief Executive Officer, Morris S. Young. In
turn, Mr. Young annually assesses the performance of all other executive
officers and recommends salary increases which are reviewed and approved by the
compensation committee.
In particular, Mr. Young's compensation as President and Chief Executive
Officer is based on compensation levels of President/Chief Executive Officers of
comparable size companies. In addition, the compensation committee considers
certain incentive objectives based on American Xtal Technology's performance as
it relates to revenue levels and earnings per share levels.
In determining executive officer salaries, the compensation committee
reviews recommendations from Mr. Young which include information from salary
surveys, performance evaluations and the financial condition of American Xtal
Technology. The compensation committee also establishes both financial and
operational based objectives and goals in determining executive officer
salaries. These goals and objectives include sales and spending forecasts for
the upcoming year and published executive compensation literature for comparable
sized companies.
For more information regarding the compensation and employment
arrangements of Mr. Young and other executive officers, see "EXECUTIVE
COMPENSATION AND OTHER MATTERS."
BONUSES
While the compensation committee did not administer a bonus plan for
executives in 1999, the committee may administer such a bonus plan in the future
in order to provide additional incentives to executives who meet established
performance goals. Awards under this bonus plan may be contingent upon American
Xtal Technology's attainment of revenue and operating profit targets, set by the
compensation committee in consultation with the Chief Executive Officer.
Additionally, awards may be weighted so that executives would receive
proportionately higher awards when our performance reaches maximum targets,
proportionately smaller awards when our performance reaches minimum targets, and
no awards when we do not meet minimum performance targets.
STOCK OPTIONS
The compensation committee believes that employee equity ownership
provides significant motivation to executive officers to maximize value for our
stockholders and, therefore, periodically grants stock options under our stock
option plan. Stock options are granted at the current market price and will only
have value if our stock price increases over the exercise price.
21
<PAGE> 25
The compensation committee determines the size and frequency of
option grants for executive officers, after consideration of recommendations
from the Chief Executive Officer. Recommendations for options are based upon the
relative position and responsibilities of each executive officer, previous and
expected contributions of each officer to American Xtal Technology and previous
option grants to such executive officers. Generally, option grants vest 25%
twelve months after commencement of employment or after the date of grant and
continue to vest thereafter in equal monthly installments over three years,
conditioned upon continued employment.
THE COMPENSATION COMMITTEE
22
<PAGE> 26
COMPARISON OF STOCKHOLDER RETURN(1)
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on our common stock with the CRSP Total Return
Index for the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Electronic
Components Index for the period commencing May 20, 1998, and ending December 31,
1999.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
5/20/98 12/31/98 12/31/99
------- -------- --------
<S> <C> <C> <C>
American Xtal Technology, Inc. 100.0 83.4 159.4
Nasdaq Stock Market (US Companies) 100.0 125.0 231.6
Nasdaq Electronic Components 100.0 147.8 289.3
</TABLE>
- ------------------------
(1) Assumes that $100.00 was invested in our common stock and in each index,
and that all dividends were reinvested. Stockholder returns over the
indicated period should not be considered indicative of future
stockholder returns.
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<PAGE> 27
DESCRIPTION OF OTHER EMPLOYEE BENEFIT PLANS
The following is a brief summary of the 1993 Stock Option Plan, also
referred to as the 1993 Plan, as in effect as of the date of this Proxy
Statement. American Xtal Technology has terminated the 1993 Plan and will not
grant any additional options thereunder in the future, although options
outstanding under the 1993 Plan will remain subject to the terms and conditions
of the 1993 Plan.
SUMMARY OF THE PROVISIONS OF THE 1993 PLAN
The following summary of the 1993 Plan is qualified in its entirety by
the specific language of the 1993 Plan, a copy of which is available to any
stockholder upon request.
The 1993 Plan provides for the grant of stock options to employees,
including officers, directors and consultants of American Xtal Technology and
any parent or subsidiary corporation of American Xtal Technology. The 1993 Plan
provides for the grant of ISOs or nonstatutory stock options, although ISOs may
be granted only to employees. As of March 31, 2000, options to purchase an
aggregate 88,350 shares of common stock at a weighted average exercise price of
$6.67 were outstanding under the 1993 Plan. Options granted under the 1993 Plan
will remain outstanding in accordance with their terms, but no further options
will be granted under the 1993 Plan.
The 1993 Plan is administered by the board. The board will interpret the
1993 Plan and options granted thereunder, and all determinations of the board
will be final and binding on all persons having an interest in the 1993 Plan or
any option.
Options granted under the 1993 Plan will become exercisable and vested
at such times as specified by the board. Shares subject to options generally
vest and become exercisable in installments, subject to the optionee's continued
employment or service.
The 1993 Plan provides that in the event of a change in control of
American Xtal Technology, the board may arrange for the acquiring or successor
corporation to assume or substitute new options for the options outstanding
under the 1993 Plan. If the options are not assumed or substituted for in
connection with the change in control, the board may, in certain circumstances,
accelerate the exercisability of such outstanding options. To the extent that
the options outstanding under the 1993 Plan are not assumed, substituted for, or
exercised prior to such event, they will terminate.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 1993 PLAN
The federal income tax consequences of the options granted under the
1993 Plan are the same as the federal income tax consequences described for
stock options granted pursuant to the 1997 Plan set forth above under Proposal
Number Two.
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<PAGE> 28
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must be received by the Company at
its offices at 4281 Technology Drive, Fremont, California 94538, not later than
December 28, 2000, and satisfy the conditions established by the Securities and
Exchange Commission for stockholder proposals to be included in American Xtal
Technology's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this proxy statement, the only business which the board
of directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By order of the board of directors
Guy D. Atwood
Secretary
April 28, 2000
25
<PAGE> 29
AMERICAN XTAL TECHNOLOGY, INC.
1997 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The American Xtal Technology, Inc. 1997 Stock
Option Plan (the "PLAN") was established effective as of July 26, 1997 (the
"EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Participating Company Group and its stockholders by providing an
incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Incentive
Stock Options shall be granted, if at all, within ten (10) years from the
Effective Date.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "BOARD" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.
(d) "COMPANY" means American Xtal Technology, Inc., a
Delaware corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
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<PAGE> 30
(f) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.
(g) "DISABILITY" means the inability of the Optionee, in
the opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company group
because of the sickness or injury of the Optionee.
(h) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(j) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market
for the Stock, the Fair Market Value of a share of Stock shall be the closing
sale price of a share of Stock (or the mean of the closing bid and asked prices
of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Board without regard to any restriction other than a restriction which,
by its terms, will never lapse.
(k) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(l) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(m) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
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<PAGE> 31
(n) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(o) "OPTION AGREEMENT" means a written agreement between
the Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(p) "OPTIONEE" means a person who has been granted one
or more Options.
(q) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(r) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(s) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(t) "RULE 16B-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(u) "SECTION 162(m)" means Section 162(m) of the Code.
(v) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(w) "SERVICE" means an Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
an Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee's Service shall be deemed to have terminated unless
the Optionee's right to return to Service with the Participating Company Group
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the
Optionee's Option Agreement. The Optionee's Service shall be deemed to have
terminated either upon an actual termination of Service or upon the corporation
for which the Optionee performs Service ceasing to be a Participating Company.
Subject to the foregoing, the Company, in its sole discretion, shall determine
whether the Optionee's Service has terminated and the effective date of such
termination.
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<PAGE> 32
(x) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(y) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(z) "TEN PERCENT OWNER OPTIONEE" means an Optionee who,
at the time an Option is granted to the Optionee, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered
by the Board. All questions of interpretation of the Plan or of any Option shall
be determined by the Board, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.3 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
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<PAGE> 33
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel, renew, reprice or
otherwise adjust the exercise price of, or grant a new Option in substitution
for, any Option or to waive any restrictions or conditions applicable to any
Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of Service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
3.4 COMMITTEE COMPLYING WITH SECTION 162(m). If a Participating
Company is a "publicly held corporation" within the meaning of Section 162(m),
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued
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<PAGE> 34
under the Plan shall be Five Million Eight Hundred Thousand (5,800,000) and
shall consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the Section 162(m) Grant Limit described below and to
any outstanding Options and in the exercise price per share of any outstanding
Options. If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"EMPLOYEES," "CONSULTANTS" and "DIRECTORS" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than
one (1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee
on the effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences service with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars
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<PAGE> 35
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
5.4 SECTION 162(m) GRANT LIMIT. Subject to adjustment as
provided in Section 4.2, at any such time as a Participating Company is a
"publicly held corporation" within the meaning of Section 162(m), no Employee
shall be granted one or more Options within any fiscal year of the Company which
in the aggregate are for the purchase of more than two hundred fifty thousand
(250,000) shares of Stock (the "SECTION 162(m) GRANT LIMIT"). An Option which is
canceled in the same fiscal year of the Company in which it was granted shall
continue to be counted against the Section 162(m) Grant Limit for such period.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. No Option or purported Option shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Option
Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
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<PAGE> 36
6.2 EXERCISE PERIOD. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Incentive Stock Option shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option and, (c) no Option granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to
the date on which such person commences Service with a Participating Company.
Subject to the foregoing, unless otherwise specified by the Board in the grant
of an Option, any Option granted hereunder shall have a term of ten (10) years
from the Effective Date of grant of the Option.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an underwriter
for the Company) not less than the exercise price, (iii) by the assignment of
the proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
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<PAGE> 37
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall
be permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for any
such tax withholding obligations of the Participating Company Group arising in
connection with the Option or the shares acquired upon the exercise thereof. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its sole discretion at
the time the Option is granted. The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
6.6 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein, an Option shall be
exercisable after an Optionee's termination of Service as follows:
(i) DISABILITY. If the Optionee's Service with
the Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent
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<PAGE> 38
unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months (or
such longer or shorter period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the date of expiration of the Option's term as set forth
in the Option Agreement evidencing such Option (the "OPTION EXPIRATION DATE").
(ii) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months (or such longer or shorter period of time as determined by the Board, in
its sole discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date. The Optionee's
Service shall be deemed to have terminated on account of death if the Optionee
dies within one (1) month after the Optionee's termination of Service.
(iii) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within one (1) month (or such
longer or shorter period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 11 below, the Option shall remain exercisable until one
(1) month after the date the Optionee is notified by the Company that the Option
is exercisable, but in any event no later than the Option Expiration Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 GENERAL. Unless otherwise provided by the Board at the time
the Option is granted, an Option shall comply with and be subject to the terms
and conditions set forth in the standard form of Option Agreement adopted by the
Board and as amended from time to time.
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<PAGE> 39
7.2 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement shall be in
accordance with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
11
<PAGE> 40
Section 8.2, an Option shall be deemed assumed if, following the Change in
Control, the Option confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Change in Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Change in Control nor exercised as of the date of the Change in Control shall
terminate and cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of the Option Agreement evidencing such Option
except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate unless the Board otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION.
Each Optionee shall be given access to information concerning the
Company equivalent to that information generally made available to the Company's
common stockholders.
10. NONTRANSFERABILITY OF OPTIONS.
During the lifetime of the Optionee, an Option shall be exercisable only
by the Optionee or the Optionee's guardian or legal representative. No Option
shall be assignable or transferable by the Optionee, except by will or by the
laws of descent and distribution.
11. COMPLIANCE WITH SECURITIES LAW.
The grant of Options and the issuance of shares of Stock upon exercise
of Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having
12
<PAGE> 41
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of any Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
12. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as
members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN.
The Board may terminate or amend the Plan at any time. However, subject
to changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
stockholders under any applicable law, regulation or rule. In any event, no
termination or amendment of the Plan may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such termination or amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option or is
necessary to comply with any applicable law, regulation or rule.
13
<PAGE> 42
AMERICAN XTAL TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
a. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
i. ESTABLISHMENT. The American Xtal Technology, Inc. 1998
Employee Stock Purchase Plan (the "PLAN") is hereby established effective as of
the effective date of the initial registration by the Company of its Stock under
Section 12 of the Securities Exchange Act of 1934, as amended (the "EFFECTIVE
DATE").
ii. PURPOSE. The purpose of the Plan is to advance the interests
of Company and its shareholders by providing an incentive to attract, retain and
reward Eligible Employees of the Participating Company Group and by motivating
such persons to contribute to the growth and profitability of the Participating
Company Group. The Plan provides such Eligible Employees with an opportunity to
acquire a proprietary interest in the Company through the purchase of Stock. The
Company intends that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
iii. TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
b. DEFINITIONS AND CONSTRUCTION.
i. DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all
<PAGE> 43
of the powers of the Board granted herein, including, without limitation, the
power to amend or terminate the Plan at any time, subject to the terms of the
Plan and any applicable limitations imposed by law.
(d) "COMPANY" means American Xtal Technology, Inc., a
Delaware corporation, or any successor corporation thereto.
(e) "COMPENSATION" means, with respect to any Offering
Period, base wages or salary, commissions, overtime, bonuses, annual awards,
other incentive payments, shift premiums, and all other compensation paid in
cash during such Offering Period before deduction for any contributions to any
plan maintained by a Participating Company and described in Section 401(k) or
Section 125 of the Code. Compensation shall not include reimbursements of
expenses, allowances, long-term disability, workers' compensation or any amount
deemed received without the actual transfer of cash or any amounts directly or
indirectly paid pursuant to the Plan or any other stock purchase or stock option
plan, or any other compensation not included above.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means a person treated as an employee of
a Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while such individual is on
any military leave, sick leave, or other bona fide leave of absence approved by
the Company of ninety (90) days or less. In the event an individual's leave of
absence exceeds ninety (90) days, the individual shall be deemed to have ceased
to be an Employee on the ninety-first (91st) day of such leave unless the
individual's right to reemployment with the Participating Company Group is
guaranteed either by statute or by contract. The Company shall determine in good
faith and in the exercise of its discretion whether an individual has become or
has ceased to be an Employee and the effective date of such individual's
employment or termination of employment, as the case may be. For purposes of an
individual's participation in or other rights, if any, under the Plan as of the
time of the Company's determination, all such determinations by the Company
shall be final, binding and conclusive, notwithstanding that the Company or any
governmental agency subsequently makes a contrary determination.
(h) "FAIR MARKET VALUE" means, as of any date, if there
is then a public market for the Stock, the closing price of a share of Stock (or
the mean of the closing bid and asked prices if the Stock is so quoted instead)
as quoted on the Nasdaq National Market, the Nasdaq Small-Cap Market or such
other national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street Journal or
<PAGE> 44
such other source as the Company deems reliable. If the relevant date does not
fall on a day on which the Stock has traded on such securities exchange or
market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
sole discretion. If there is then no public market for the Stock, the Fair
Market Value on any relevant date shall be as determined by the Board.
Notwithstanding the foregoing, the Fair Market Value per share of Stock on the
Effective Date shall be deemed to be the public offering price set forth in the
final prospectus filed with the Securities and Exchange Commission in connection
with the initial public offering of the Stock.
(i) "OFFERING" means an offering of Stock as provided in
Section 6.
(j) "OFFERING DATE" means, for any Offering, the first
day of the Offering Period with respect to such Offering.
(k) "OFFERING PERIOD" means a period established in
accordance with Section 6.1.
(l) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has
become a participant in an Offering Period in accordance with Section 7 and
remains a participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation designated by the Board as a
corporation the Employees of which may, if Eligible Employees, participate in
the Plan. The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in
time, the Company and all other corporations collectively which are then
Participating Companies.
(p) "PURCHASE DATE" means, for any Purchase Period, the
last day of such period.
<PAGE> 45
(q) "PURCHASE PERIOD" means a period established in
accordance with Section 6.2.
(r) "PURCHASE PRICE" means the price at which a share of
Stock may be purchased under the Plan, as determined in accordance with Section
9.
(s) "PURCHASE RIGHT" means an option granted to a
Participant pursuant to the Plan to purchase such shares of Stock as provided in
Section 8, which the Participant may or may not exercise during the Offering
Period in which such option is outstanding. Such option arises from the right of
a Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(u) "SUBSCRIPTION AGREEMENT" means a written agreement
in such form as specified by the Company, stating an Employee's election to
participate in the Plan and authorizing payroll deductions under the Plan from
the Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last business day
prior to the Offering Date of an Offering Period or such earlier date as the
Company shall establish.
(w) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
ii. CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
c. ADMINISTRATION.
i. ADMINISTRATION BY THE BOARD. The Plan shall be administered
by the Board. All questions of interpretation of the Plan, of any form of
agreement or other document employed by the Company in the administration of the
Plan, or of any Purchase Right shall be determined by the Board and shall be
final and binding upon all persons having an interest in the Plan or the
Purchase Right. Subject to the provisions of the Plan, the Board shall
<PAGE> 46
determine all of the relevant terms and conditions of Purchase Rights granted
pursuant to the Plan; provided, however, that all Participants granted Purchase
Rights pursuant to the Plan shall have the same rights and privileges within the
meaning of Section 423(b)(5) of the Code. All expenses incurred in connection
with the administration of the Plan shall be paid by the Company.
ii. AUTHORITY OF OFFICERS. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
iii. POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The
Company may, from time to time, consistent with the Plan and the requirements of
Section 423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Company, in its sole discretion, for the proper administration of the Plan,
including, without limitation, (a) a minimum payroll deduction amount required
for participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan.
<PAGE> 47
d. SHARES SUBJECT TO PLAN.
i. MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be Nine Hundred Thousand (900,000) and shall
consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
ii. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan and each Purchase
Right and in the Purchase Price. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Purchase Rights are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Purchase Rights to provide that
such Purchase Rights are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the Purchase Price of, the
outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event may the
Purchase Price be decreased to an amount less than the par value, if any, of the
stock subject to the Purchase Right. The adjustments determined by the Board
pursuant to this Section 4.2 shall be final, binding and conclusive.
e. ELIGIBILITY.
i. EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee, except the following:
(a) Any Employee who is customarily employed by the
Participating Company Group for less than twenty (20) hours per week; or
(b) Any Employee who is customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year.
<PAGE> 48
ii. EXCLUSION OF CERTAIN SHAREHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, such Employee would own
or hold options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.
f. OFFERINGS.
i. OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by sequential Offerings of approximately twenty-four
(24) months duration (an "OFFERING PERIOD"); provided, however, that the first
Offering Period shall commence on the Effective Date and end on July 31, 2000
(the "INITIAL OFFERING PERIOD"). Subsequent Offerings shall commence on the
first day of February and August of each year and end on the last day of the
second January and July, respectively, occurring thereafter. Notwithstanding the
foregoing, the Board may establish a different duration for one or more Offering
Periods or different commencing or ending dates for such Offering Periods;
provided, however, that no Offering Period may have a duration exceeding
twenty-seven (27) months. If the first or last day of an Offering Period is not
a day on which the national securities exchanges or Nasdaq Stock Market are open
for trading, the Company shall specify the trading day that will be deemed the
first or last day, as the case may be, of the Offering Period.
ii. PURCHASE PERIODS. Each Offering Period shall consist of four
(4) consecutive Purchase Periods of approximately six (6) months duration, or
such other number or duration as the Board shall determine. The Purchase Period
commencing on the Offering Date of the Initial Offering Period shall end on
January 31, 1999. A Purchase Period commencing on or about February 1 shall end
on or about the next July 31. A Purchase Period commencing on or about August 1
shall end on or about the next January 31. Notwithstanding the foregoing, the
Board may establish a different duration for one or more Purchase Periods or
different commencing or ending dates for such Purchase Periods. If the first or
last day of a Purchase Period is not a day on which the national securities
exchanges or Nasdaq Stock Market are open for trading, the Company shall specify
the trading day that will be deemed the first or last day, as the case may be,
of the Purchase Period.
g. PARTICIPATION IN THE PLAN.
i. INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the
<PAGE> 49
Subscription Date established by the Company for such Offering Period. An
Eligible Employee who does not deliver a properly completed Subscription
Agreement to the Company's designated office on or before the Subscription Date
for an Offering Period shall not participate in the Plan for that Offering
Period or for any subsequent Offering Period unless such Eligible Employee
subsequently delivers a properly completed Subscription Agreement to the
appropriate office of the Company on or before the Subscription Date for such
subsequent Offering Period. An Employee who becomes an Eligible Employee after
the Offering Date of an Offering Period shall not be eligible to participate in
such Offering Period but may participate in any subsequent Offering Period
provided such Employee is still an Eligible Employee as of the Offering Date of
such subsequent Offering Period.
ii. CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
provided that such Participant remains an Eligible Employee on the Offering Date
of the new Offering Period and has not either (a) withdrawn from the Plan
pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement. Eligible
Employees may not participate simultaneously in more than one Offering.
h. RIGHT TO PURCHASE SHARES.
i. GRANT OF PURCHASE RIGHT. Except as set forth below, on the
Offering Date of each Offering Period, each Participant in such Offering Period
shall be granted automatically a Purchase Right consisting of an option to
purchase the lesser of (a) that number of whole shares of Stock determined by
dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of
Stock on such Offering Date or (b) five thousand (5,000) shares of Stock. No
Purchase Right shall be granted on an Offering Date to any person who is not, on
such Offering Date, an Eligible Employee.
ii. PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
provisions of Section 8.1, if the Board establishes an Offering Period of any
duration other than twenty-four months, then (a) the dollar amount in Section
8.1 shall be determined by multiplying $2,083.33 by the number of months
(rounded to the nearest whole month) in the Offering Period and rounding to the
nearest whole dollar, and (b) the share amount in Section 8.1 shall be
determined by multiplying 208.33 shares by the number of months (rounded to the
nearest whole month) in the Offering Period and rounding to the nearest whole
share.
<PAGE> 50
iii. CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Participant shall be granted a
Purchase Right which permits his or her right to purchase shares of Stock under
the Plan to accrue at a rate which, when aggregated with such Participant's
rights to purchase shares under all other employee stock purchase plans of a
Participating Company intended to meet the requirements of Section 423 of the
Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or
such other limit, if any, as may be imposed by the Code) for each calendar year
in which such Purchase Right is outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section 8.3 shall be applied in
conformance with applicable regulations under Section 423(b)(8) of the Code.
i. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired
in an Offering Period upon the exercise of all or any portion of a Purchase
Right shall be established by the Board; provided, however, that the Purchase
Price shall not be less than eighty-five percent (85%) of the lesser of (a) the
Fair Market Value of a share of Stock on the Offering Date of the Offering
Period or (b) the Fair Market Value of a share of Stock on the Purchase Date.
Unless otherwise provided by the Board prior to the commencement of an Offering
Period, the Purchase Price for that Offering Period shall be eighty-five percent
(85%) of the lesser of (a) the Fair Market Value of a share of Stock on the
Offering Date of the Offering Period, or (b) the Fair Market Value of a share of
Stock on the Purchase Date.
j. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
i. AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided
herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set forth
the percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions made effective following the first payday during an Offering) or more
than fifteen percent (15%). Notwithstanding the foregoing, the Board may change
the limits on payroll deductions effective as of any future Offering Date.
<PAGE> 51
ii. COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
herein.
iii. ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the "Change Notice Date." The "CHANGE NOTICE DATE" shall be a date
prior to the beginning of the first pay period for which such election is to be
effective as established by the Company from time to time and announced to the
Participants. A Participant who elects to decrease the rate of his or her
payroll deductions to zero percent (0%) shall nevertheless remain a Participant
in the current Offering Period unless such Participant withdraws from the Plan
as provided in Section 12.1.
iv. ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company
may, in its sole discretion, suspend a Participant's payroll deductions under
the Plan as the Company deems advisable to avoid accumulating payroll deductions
in excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted during a calendar year under the
limit set forth in Section 8.3. Payroll deductions shall be resumed at the rate
specified in the Participant's then effective Subscription Agreement at the
beginning of the next Purchase Period the Purchase Date of which falls in the
following calendar year.
v. PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall
be maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.
vi. NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
vii. VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may
withdraw all or any portion of the payroll deductions credited to his or her
Plan account and not previously applied toward the purchase of Stock by
delivering to the Company's designated office a written notice on a form
provided by the Company for such purpose. A Participant who withdraws the entire
remaining balance credited to his or her Plan account shall be deemed to have
withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall
be returned to the Participant as soon as practicable after the withdrawal and
may not be applied to the purchase of shares in any Offering under the Plan. The
Company may from time to time establish or change limitations on the frequency
of withdrawals permitted under this Section,
<PAGE> 52
establish a minimum dollar amount that must be retained in the Participant's
Plan account, or terminate the withdrawal right provided by this Section.
k. PURCHASE OF SHARES.
i. EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not terminated before such Purchase Date shall
automatically acquire pursuant to the exercise of the Participant's Purchase
Right the number of whole shares of Stock determined by dividing (a) the total
amount of the Participant's payroll deductions accumulated in the Participant's
Plan account during the Offering Period and not previously applied toward the
purchase of Stock by (b) the Purchase Price. However, in no event shall the
number of shares purchased by the Participant during an Offering Period exceed
the number of shares subject to the Participant's Purchase Right. No shares of
Stock shall be purchased on a Purchase Date on behalf of a Participant whose
participation in the Offering or the Plan has terminated before such Purchase
Date.
ii. PRO RATA ALLOCATION OF SHARES. In the event that the number
of shares of Stock which might be purchased by all Participants in the Plan on a
Purchase Date exceeds the number of shares of Stock available in the Plan as
provided in Section 4.1, the Company shall make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the
Company shall determine to be equitable. Any fractional share resulting from
such pro rata allocation to any Participant shall be disregarded.
iii. DELIVERY OF CERTIFICATES. As soon as practicable after each
Purchase Date, the Company shall arrange the delivery to each Participant, as
appropriate, of a certificate representing the shares acquired by the
Participant on such Purchase Date; provided that the Company may deliver such
shares to a broker that holds such shares in street name for the benefit of the
Participant. Shares to be delivered to a Participant under the Plan shall be
registered in the name of the Participant, or, if requested by the Participant,
in the name of the Participant and his or her spouse, or, if applicable, in the
names of the heirs of the Participant.
iv. RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash to be returned to a Participant pursuant to the preceding sentence is an
amount less than the amount that would have been necessary to purchase an
additional whole share of Stock on such Purchase Date, the Company may retain
such amount in the Participant's Plan account to be applied toward the purchase
of shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.
<PAGE> 53
v. TAX WITHHOLDING. At the time a Participant's Purchase Right
is exercised, in whole or in part, or at the time a Participant disposes of some
or all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
vi. EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which the Purchase Right relates shall expire immediately upon the end of the
Offering Period.
vii. REPORTS TO PARTICIPANTS. Each Participant who has exercised
all or part of his or her Purchase Right shall receive, as soon as practicable
after the Purchase Date, a report of such Participant's Plan account setting
forth the total payroll deductions accumulated prior to such exercise, the
number of shares of Stock purchased, the Purchase Price for such shares, the
date of purchase and the cash balance, if any, remaining immediately after such
purchase that is to be refunded or retained in the Participant's Plan account
pursuant to Section 11.4. The report required by this Section may be delivered
in such form and by such means, including by electronic transmission, as the
Company may determine.
l. WITHDRAWAL FROM OFFERING OR PLAN.
i. VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may
withdraw from the Plan by signing and delivering to the Company's designated
office a written notice of withdrawal on a form provided by the Company for such
purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period; provided, however, that if a Participant withdraws from the
Plan after the Purchase Date of a Purchase Period, the withdrawal shall not
affect shares of Stock acquired by the Participant on such Purchase Date. A
Participant who voluntarily withdraws from the Plan is prohibited from resuming
participation in the Plan in the same Offering from which he or she withdrew,
but may participate in any subsequent Offering by again satisfying the
requirements of Sections 5 and 7.1. The Company may impose, from time to time, a
requirement that the notice of withdrawal from the Plan be on file with the
Company's designated office for a reasonable period prior to the effectiveness
of the Participant's withdrawal.
ii. AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market
Value of a share of Stock on a Purchase Date of an Offering Period (other than
the final Purchase Date of such offering) is less than the Fair Market Value of
a share of Stock on the Offering Date for such Offering Period, then every
Participant shall automatically be (a) withdrawn from such Offering Period after
the acquisition of shares of Stock on the Purchase Date and (b) enrolled in the
new Offering Period effective on its Offering Date. A Participant may elect not
to be
<PAGE> 54
automatically withdrawn from an Offering Period pursuant to this Section 12.2 by
delivering to the Company's designated office not later than the close of
business on Offering Date new Offering Period a written notice indicating such
election.
iii. RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
voluntary withdrawal from the Plan pursuant to Sections 12.1 or automatic
withdrawal from an Offering pursuant to Section 12.2, the Participant's
accumulated payroll deductions which have not been applied toward the purchase
of shares of Stock (except, in the case of an automatic withdrawal pursuant to
Section 12.2, for an amount necessary to purchase an additional whole share as
provided in Section 11.4) shall be refunded to the Participant as soon as
practicable after the withdrawal, without the payment of any interest, and the
Participant's interest in the Plan or the Offering, as applicable, shall
terminate. Such accumulated payroll deductions to be refunded in accordance with
this Section may not be applied to any other Offering under the Plan.
m. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or the failure of a Participant to remain an
Eligible Employee, the Participant's participation in the Plan shall terminate
immediately. In such event, the payroll deductions credited to the Participant's
Plan account since the last Purchase Date shall, as soon as practicable, be
returned to the Participant or, in the case of the Participant's death, to the
Participant's legal representative, and all of the Participant's rights under
the Plan shall terminate. Interest shall not be paid on sums returned pursuant
to this Section 13. A Participant whose participation has been so terminated may
again become eligible to participate in the Plan by again satisfying the
requirements of Sections 5 and 7.1.
n. CHANGE IN CONTROL.
i. DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein
<PAGE> 55
the shareholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Company's voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company
were transferred (the "TRANSFEREE CORPORATION(s)"), as the case may be. For
purposes of the preceding sentence, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting stock of
one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
ii. EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event
of a Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may assume the Company's rights and obligations under the Plan.
If the Acquiring Corporation elects not to assume the Company's rights and
obligations under outstanding Purchase Rights, the Purchase Date of the then
current Purchase Period shall be accelerated to a date before the date of the
Change in Control specified by the Board, but the number of shares of Stock
subject to outstanding Purchase Rights shall not be adjusted. All Purchase
Rights which are neither assumed by the Acquiring Corporation in connection with
the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control.
o. NONTRANSFERABILITY OF PURCHASE RIGHTS.
A Purchase Right may not be transferred in any manner otherwise
than by will or the laws of descent and distribution and shall be exercisable
during the lifetime of the Participant only by the Participant.
p. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to
compliance with all applicable requirements of federal, state and foreign law
with respect to such securities. A Purchase Right may not be exercised if the
issuance of shares upon such exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any securities exchange or market system upon which the
Stock may then be listed. In addition, no Purchase Right may be exercised unless
(a) a registration statement under the Securities Act of 1933, as amended, shall
at the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon
<PAGE> 56
exercise of the Purchase Right may be issued in accordance with the terms of an
applicable exemption from the registration requirements of said Act. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any shares under the Plan shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a
condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company.
q. RIGHTS AS A SHAREHOLDER AND EMPLOYEE.
A Participant shall have no rights as a shareholder by virtue of
the Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
r. LEGENDS.
The Company may at any time place legends or other identifying
symbols referencing any applicable federal, state or foreign securities law
restrictions or any provision convenient in the administration of the Plan on
some or all of the certificates representing shares of Stock issued under the
Plan. The Participant shall, at the request of the Company, promptly present to
the Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include but shall not be limited to the
following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY
NOMINEE)."
s. NOTIFICATION OF SALE OF SHARES.
<PAGE> 57
The Company may require the Participant to give the Company
prompt notice of any disposition of shares acquired by exercise of a Purchase
Right within two years from the date of granting such Purchase Right or one year
from the date of exercise of such Purchase Right. The Company may require that
until such time as a Participant disposes of shares acquired upon exercise of a
Purchase Right, the Participant shall hold all such shares in the Participant's
name (or, if elected by the Participant, in the name of the Participant and his
or her spouse but not in the name of any nominee) until the lapse of the time
periods with respect to such Purchase Right referred to in the preceding
sentence. The Company may direct that the certificates evidencing shares
acquired by exercise of a Purchase Right refer to such requirement to give
prompt notice of disposition.
t. NOTICES.
All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
u. INDEMNIFICATION.
In addition to such other rights of indemnification as they may
have as members of the Board or officers or employees of the Participating
Company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
v. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except
that (a) such termination shall not affect Purchase Rights previously granted
under the Plan, provided that the Board may terminate the Plan (and any
Offerings thereunder) on any Purchase Date if the Board determines that such
termination is in the best interests of the Company and its stockholders except
as permitted under the Plan, and (b) no amendment may adversely affect a
Purchase Right
<PAGE> 58
previously granted under the Plan (except to the extent permitted by the Plan or
as may be necessary to qualify the Plan as an employee stock purchase plan
pursuant to Section 423 of the Code or to obtain qualification or registration
of the shares of Stock under applicable federal, state or foreign securities
laws). In addition, an amendment to the Plan must be approved by the
shareholders of the Company within twelve (12) months of the adoption of such
amendment if such amendment would authorize the sale of more shares than are
authorized for issuance under the Plan or would change the definition of the
corporations that may be designated by the Board as Participating Companies. In
the event that the Board approves an amendment to increase the number of shares
authorized for issuance under the Plan (the "ADDITIONAL SHARES"), the Board, in
its sole discretion, may specify that such Additional Shares may only be issued
pursuant to Purchase Rights granted after the date on which the stockholders of
the Company approve such amendment, and such designation by the Board shall not
be deemed to have adversely affected any Purchase Right granted prior to the
date on which the stockholders approve the amendment.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing American Xtal Technology, Inc. 1998 Employee Stock Purchase
Plan was duly adopted by the Board of Directors of the Company on
________________, 1998.
------------------------------------
Secretary
<PAGE> 59
AMERICAN XTAL TECHNOLOGY, INC.
Proxy for 2000 annual meeting of stockholders
solicited by the board of directors
The undersigned hereby appoints Morris S. Young and Guy D. Atwood, and
each of them, with full power of substitution to represent the undersigned and
to vote all of the shares of stock in American Xtal Technology, Inc. which the
undersigned is entitled to vote at the 2000 annual meeting of stockholders to be
held at 4281 Technology Drive, Fremont, California on June 7, 2000 at 11:00 a.m.
Pacific Daylight Time, and at any adjournment thereof (1) as hereinafter
specified upon the proposals listed below and as more particularly described in
American Xtal Technology's proxy statement, receipt of which is hereby
acknowledged and (2) in their discretion upon such other matters as may properly
come before the meeting.
A vote FOR the following proposals is recommended by the board of
directors:
1. Election of directors listed below.
Nominees: Jesse Chen and Donald L. Tatzin
[ ] FOR [ ] WITHHELD
[ ]
----------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any
nominee, mark the above box and list the name(s) of the
nominee(s) in the space provided.
2. To approve an amendment to American Xtal Technology, Inc.'s
Certificate of Incorporation changing our name from "American
Xtal Technology, Inc." to "AXT, Inc."
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
3. To approve amendments to American Xtal Technology's 1997 Stock
Option Plan to increase by 2,000,000 shares the maximum number of
shares of common stock that may be issued thereunder.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
4. To approve amendments to American Xtal Technology's 1998 Employee
Stock Purchase Plan to increase by 500,000 shares the maximum
number of shares of common stock that may be issued thereunder.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
26
<PAGE> 60
5. To ratify the appointment of PricewaterhouseCoopers LLP as
American Xtal Technology's independent auditors for the fiscal
year ending December 31, 2000.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The shares represented hereby shall be voted as specified. If no
specification is made, such shares shall be voted FOR proposals 1, 2, 3, 4 and
5.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMERICAN
XTAL TECHNOLOGY.
Dated ___________________, 2000
(Be sure to date Proxy)
----------------------------------------
Signatures(s)
----------------------------------------
Print Name(s)
Sign exactly as your name(s) appears on your stock certificate. If
shares of stock stand on record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the above proxy. If shares of stock are held of record
by a corporation, the proxy should be executed by the President or Vice
President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. Executors or administrators or other fiduciaries who
execute the above proxy for a deceased stockholder should give their full title.
PLEASE DATE THE PROXY.
Even if you are planning to attend the meeting in person, you are urged
to sign and mail the proxy in the return envelope so that your stock may be
represented at the meeting.
27
