<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
COHERENT, 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)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 17, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of COHERENT,
INC. (the "Company"), a Delaware corporation, will be held on March 17, 1999 at
5:30 p.m., local time, at the Company's principal offices located at 5100
Patrick Henry Drive, Santa Clara, California 95054, for the following purposes:
1. To elect six directors to serve for the ensuing year and until their
successors are duly elected (Proposal One);
2. To approve the amendment of the Company's Employee Stock Purchase Plan
to increase the number of shares reserved for issuance thereunder by
1,750,000 to an aggregate of 6,325,000 (Proposal Two);
3. To approve the amendment of the Company's 1995 Stock Plan to increase
the number of shares reserved for issuance thereunder by 3,000,000 to an
aggregate of 5,500,000 (Proposal Three);
4. To approve the adoption of the Company's 1998 Director Option Plan
(Proposal Four);
5. To ratify the appointment of Deloitte & Touche LLP as independent public
accountants to the Company for the fiscal year ending October 2, 1999
(Proposal Five); and
6. To transact such other business as may properly be brought before the
meeting and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on February 1, 1999 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she has returned a proxy.
Sincerely,
Larry W. Sonsini
SECRETARY
Santa Clara, California
February 12, 1999
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
COHERENT, INC.
5100 PATRICK HENRY DRIVE
SANTA CLARA, CALIFORNIA 95054
------------------------
PROXY STATEMENT
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
COHERENT, INC. (the "Company") for use at the Annual Meeting of Stockholders to
be held at the Company's principal offices located at 5100 Patrick Henry Drive,
Santa Clara, California 95054, on March 17, 1999 at 5:30 p.m., local time, and
at any adjournment(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Company's telephone
number at the address above is (408) 764-4000. These proxy solicitation
materials were mailed on or about February 15, 1999 to all stockholders entitled
to vote at the meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on February 1, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting and at any
adjournment(s) thereof. At the Record Date, 23,894,313 shares of the Company's
Common Stock, $0.01 par value, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use (i) by delivering to the Company at its
principal offices (Attention: Scott H. Miller, Senior Vice President and General
Counsel) a written notice of revocation or a duly executed proxy bearing a later
date or (ii) by attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters, other than the election of directors, each share has one
vote. See "Election of Directors--Vote Required."
The cost of this solicitation will be borne by the Company. The Company has
retained the services of D.F. King & Co., Inc. (the "Solicitor") to aid in the
solicitation of proxies from brokers, bank nominees and other institutional
owners. The Company estimates that it will pay the Solicitor a fee not to exceed
$3,500 for its services and will reimburse the Solicitor for certain
out-of-pocket expenses estimated to be $5,000. In addition, the Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally or
by telephone or telegram.
1
<PAGE>
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's Bylaws provide that stockholders holding a majority of the
shares of Common Stock issued and outstanding and entitled to vote on the Record
Date shall constitute a quorum at meetings of stockholders. Shares that are
voted "FOR," "AGAINST" or "WITHHELD" on a matter are treated as being present at
the meeting for purposes of establishing a quorum and are also treated as
"entitled to vote on the subject matter" (the "Votes Cast") at the Annual
Meeting and with respect to such matter.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter (other than the election of directors).
Accordingly, with the exception of the proposal for the election of directors,
abstentions will have the same effect as a vote against the proposal. Because
directors are elected by a plurality vote, abstentions in the election of
directors have no impact once a quorum exists.
In a 1988 Delaware case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme
Court held that, although broker non-votes may be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore not be considered "Votes Cast" and,
accordingly, will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company currently intends to hold its 2000 Annual Meeting of
Stockholders in March 2000 and to mail proxy statements relating to such meeting
in February 2000. Proposals of stockholders of the Company that are intended to
be presented by such stockholders at the 2000 Annual Meeting must be received by
the Company no later than October 5, 1999 and must otherwise be in compliance
with applicable laws and regulations in order to be considered for inclusion in
the proxy statement and form of proxy relating to that meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the National Association of Securities Dealers. Such officers,
directors and ten-percent stockholders are also required by SEC rules to furnish
the Company with copies of all forms that they file pursuant to Section 16(a).
Based solely on its review of the copies of such forms received by the Company,
or on written representations from certain reporting persons that no other
reports were required for such persons, the Company believes that, during fiscal
1998, its directors, officers and ten-percent stockholders complied with all
applicable Section 16(a) filing requirements.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
any person (including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) known by the Company to be the
beneficial owner of more than 5% of the Company's voting securities, (ii) each
director and each nominee for director to the Company, (iii) each of the
executive officers named in the Summary Compensation Table appearing herein and
(iv) all executive officers and directors of the Company as a group. The Company
does not know of any arrangements, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change of control of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
NAME AND ADDRESS (1) OF TOTAL
- ------------------------------------------------------------------ --------- -----------
<S> <C> <C>
ICM Asset Management (2).......................................... 2,567,175 10.74%
601 W. Main Ave.
Spokane, WA 99201
Franklin Advisers, Inc. (3)....................................... 2,390,260 10.00%
777 Mariners Blvd.
San Mateo, CA 94404
PRIMECAP Management (4)........................................... 2,010,000 8.41%
225 S. Lake Ave, #400
Pasadena, CA 91101
Eagle Asset Management (5)........................................ 1,773,555 7.42%
880 Carillon Pkwy., 3rd Floor
St. Petersburg, FL 33733
Henry E. Gauthier (6)............................................. 100,330 *
Bernard J. Couillaud (7).......................................... 80,626 *
Robert J. Quillinan (8)........................................... 62,048 *
Robert M. Gelber (9).............................................. 37,333 *
Jerry E. Robertson (10)........................................... 35,000 *
Frank Carrubba (11)............................................... 25,000 *
Thomas Sloan Nelsen (12).......................................... 17,000 *
Charles W. Cantoni (13)........................................... 15,000 *
Vittorio Fossati-Bellani (14)..................................... 14,746 *
John Ambroseo (15)................................................ 13,866 *
All directors and executive officers as a group (12 persons)
(16)............................................................ 472,789 1.98%
</TABLE>
- ------------------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange commission (the "SEC") and generally includes voting
or investment power with respect to the securities. In computing the number
of shares beneficially owned by a person and the percentage ownership of
that person, each share of Coherent Common Stock subject to options held by
that person that will be exercisable on or before April 2, 1999, are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
3
<PAGE>
(2) Represents shares reported by Carson Group on January 14, 1999 as being held
by ICM Asset Management as of September 30, 1998.
(3) Represents shares reported by Carson Group on January 14, 1999 as being held
by Franklin Advisers, Inc. as of September 30, 1998.
(4) Represents shares reported by Carson Group on January 14, 1999 as being held
by PRIMECAP Management as of September 30, 1998.
(5) Represents shares reported by Carson Group on January 14, 1999 as being held
by Eagle Asset Management as of September 30, 1998.
(6) Includes 27,000 shares issuable upon exercise of options held by Mr.
Gauthier which are currently exercisable or will become exercisable within
60 days of the Record Date.
(7) Includes 48,000 shares issuable upon exercise of options held by Mr.
Couillaud which are currently exercisable or will become exercisable within
60 days of the Record Date.
(8) Includes 12,000 shares issuable upon exercise of options held by Mr.
Quillinan which are currently exercisable or will become exercisable within
60 days of the Record Date.
(9) Includes 22,130 shares issuable upon exercise of options held by Mr. Gelber
which are currently exercisable or will become exercisable within 60 days of
the Record Date.
(10) Includes 10,000 shares issuable upon exercise of options held by Mr.
Robertson which are currently exercisable or will become exercisable within
60 days of the Record Date.
(11) Includes 15,000 shares issuable upon exercise of options held by Mr.
Carrubba which are currently exercisable or will become exercisable within
60 days of the Record Date.
(12) Includes 10,000 shares issuable upon exercise of options held by Dr. Nelsen
which are currently exercisable or will become exercisable within 60 days of
the Record Date.
(13) Includes 10,000 shares issuable upon exercise of options held by Mr.
Cantoni which are currently exercisable or will become exercisable within 60
days of the Record Date.
(14) Includes 13,000 shares issuable upon exercise of options held by Mr.
Fossati-Bellani which are currently exercisable or will become exercisable
within 60 days of the Record Date.
(15) Includes 10,000 shares issuable upon exercise of options held by Mr.
Ambroseo which are currently exercisable or will become exercisable within
60 days of the Record Date.
(16) Includes an aggregate of 213,630 options which are currently exercisable or
will become exercisable within 60 days of the Record Date.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of six (6) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's nominees named below. Each nominee
has consented to be named a nominee in the proxy statement and to continue to
serve as a director if elected. If any nominee becomes unable or declines to
serve as a director, if additional persons are nominated at the meeting or if
stockholders are entitled to cumulate votes, the proxy holders intend to vote
all proxies received by them in such a manner (in accordance with cumulative
voting) as will assure the election of as many of the nominees listed below as
possible (or, if new nominees have been designated by the Board of Directors, in
such a manner as to elect such nominees), and the specific nominees to be voted
for will be determined by the proxy holders.
The Company is not aware of any reason that any nominee will be unable or
will decline to serve as a director. The term of office of each person elected
as a director will continue until the next Annual Meeting of Stockholders or
until a successor has been elected and qualified. There are no arrangements or
understandings between any director or executive officer and any other person
pursuant to which he is or was to be selected as a director or officer of the
Company.
The names of the nominees, all of whom are currently directors of the
Company, and certain information about them as of the Record Date, are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE PRINCIPAL OCCUPATION
- -------------------------------------- --- ----------- --------------------------------------
<S> <C> <C> <C>
Bernard J. Couillaud (3).............. 54 1996 President and Chief Executive Officer
of the Company
Henry E. Gauthier (1)(2)(3)........... 58 1983 Chairman of the Board of Directors of
the Company
Charles W. Cantoni (1)(2)(3).......... 63 1983 Owner, Cantoni Consulting
Frank P. Carrubba (1)(2)(3)........... 61 1989 Retired Chief Technical Officer,
Phillips Electronics N.V.
Thomas Sloan Nelsen (1)(2)............ 72 1983 Retired Professor of Surgery, Stanford
University School of Medicine
Jerry E. Robertson (1)(2)............. 66 1994 Retired Executive Vice President, 3M
Life Sciences Sector and Corporate
Services
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There is no
family relationship between any director or executive officer of the Company.
5
<PAGE>
Mr. Cantoni is the owner of Cantoni Consulting and provides management and
medical marketing consulting services. From October 1994 until founding Cantoni
Consulting in June 1998, Mr. Cantoni was Vice President, Quinton Instruments,
Inc., a manufacturer of medical instrumentation products. From August 1988 until
September 1994, he was President of ImageComm Systems, Inc., a value added
reseller of medical image processing systems.
Mr. Robertson retired from 3M in 1994. He is a member of the board of
directors of Manor Care, Inc., Cardinal Health, Inc., Haemonetics Corporation,
Steris Corporation, Life Technologies, Inc., Allianz Life Insurance Company of
North America, Choice Hotels International, Medwave, Inc. and Project HOPE.
Mr. Couillaud is President and Chief Executive Officer as well as a member
of the Board of Directors since July 1996. He served as Vice President and
General Manager of Coherent Laser Group from March 1992 to July 1996. From 1990
to March 30, 1992, he served as Manager of the Advanced Systems Business Unit,
and from 1987 to 1990 served as Director of R&D for the Coherent Laser Group.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the fiscal year ended September 26, 1998. No director serving during such fiscal
year attended fewer than 75% of the aggregate of all meetings of the Board of
Directors and the committees of the Board upon which such director served. The
Board of Directors has three committees: the Audit Committee, the Compensation
Committee and the Nominating Committee.
The Audit Committee of the Board of Directors, which consists of directors
Gauthier, Carrubba, Cantoni, Nelsen and Robertson, held one meeting during the
last fiscal year. The Audit Committee recommends engagement of the Company's
independent public accountants. In addition, the Audit Committee is primarily
responsible for approving the services performed by the Company's independent
public accountants and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee of the Board of Directors consists of directors
Gauthier, Carrubba, Cantoni, Nelsen and Robertson, and held one meeting during
the last fiscal year. The Compensation Committee reviews and approves the
Company's executive compensation policy and grants stock options to employees of
the Company, including officers pursuant to the Company's stock option plans.
The Nominating Committee was established in January 1998 and consists of
directors Couillaud, Gauthier, Cantoni and Carrubba. The Nominating Committee
held one meeting during the last fiscal year. The Nominating Committee reviews
candidates for officers and directors and makes recommendations with respect to
such candidates. The Nominating Committee will consider nominees recommended by
stockholders. Although there are no formal procedures for stockholders to
nominate persons to serve as directors, stockholders wishing to submit
nominations should notify the Company at its principal offices (Attention: Scott
H. Miller, Senior Vice President and General Counsel) of their intent to do so.
To be considered by the Nominating Committee, nominations must be received on or
before the deadline for receipt of stockholder proposals. See "Information
Concerning Solicitation and Voting--Deadline for Receipt of Stockholder
Proposals."
6
<PAGE>
DIRECTOR COMPENSATION
In fiscal year 1998, members of the Board of Directors who were not
employees of the Company each received $16,000 plus $1,500 per meeting attended
and were reimbursed for their expenses incurred in attending such meetings.
The Company's 1990 Directors' Stock Option Plan (the "1990 Directors' Option
Plan") was adopted by the Board of Directors on December 8, 1989 and was
approved by the stockholders on March 29, 1990. The 1990 Directors' Option Plan
was amended by the Board of Directors on January 25, 1996, and the amendment was
approved by the stockholders on March 20, 1996. The 1990 Directors' Option Plan
provides for the automatic and nondiscretionary grant of a non-statutory stock
option to purchase 20,000 shares of the Company's Common Stock to each
non-employee director on the later of the effective date of the 1990 Directors'
Option Plan or the date on which such person becomes a director. Thereafter,
each non-employee director will be automatically granted a nonstatutory stock
option to purchase 5,000 shares of Common Stock on the date of and immediately
following each Annual Meeting of Stockholders at which such non-employee
director is re-elected to serve on the Board of Directors, if, on such date, he
or she has served on the Board for at least three months. Such plan provides
that the exercise price shall be equal to the fair market value of the Common
Stock on the date of grant of the options. The 1990 Directors' Option Plan will
terminate after the 1999 Annual Meeting. Accordingly, no more options will be
granted under the 1990 Directors' Option Plan after each non-employee director
receives his automatic grant of an option at the 1999 Annual Meeting.
Three non-employee directors have each been granted options to purchase
60,000 shares of the Company's Common Stock under such plan at a weighted
average exercise price of $11.34. One non-employee director has been granted
options to purchase 40,000 shares of the Company's Common Stock under such plan
at a weighted average exercise price of $13.58 per share. One non-employee
director has been granted options to purchase 25,000 shares of the Company's
Common Stock under such plan at a weighted average exercise price of $22.61 per
share. As of the Record Date, 115,000 shares had been issued on exercise of such
options. The following table shows, as to each non-employee director,
information concerning options exercised under the 1990 Directors' Option Plan
during the last fiscal year:
OPTION EXERCISES IN LAST FISCAL YEAR BY DIRECTORS
<TABLE>
<CAPTION>
SHARES ACQUIRED ON VALUE
NAME EXERCISE REALIZED(1)
- -------------------------------------- ------------------------- -------------
<S> <C> <C>
Frank Carrubba........................ 5,000 $ 84,688
Jerry E. Robertson.................... 5,000 $ 62,656
</TABLE>
- ------------------------
(1) The value realized is calculated based on market value less exercise price.
The market value of underlying securities is based on the closing price of
the Company's Common Stock as reported by the Nasdaq National Market on the
date of exercise.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Directors Gauthier, Carrubba,
Cantoni, Nelsen and Robertson. During the last fiscal year, the Company paid Dr.
Thomas Nelsen $63,000 in consulting fees. Dr. Nelsen has more than 40 years of
experience as a physician and, before his retirement, was a Professor of Surgery
at Stanford University School of Medicine. Utilizing this experience, Dr. Nelsen
has worked
7
<PAGE>
closely with the Company in developing and refining new laser products for the
medical field. Management believes that this arrangement is at least as
favorable to the Company as could be negotiated with an outside consultant.
Mr. Gauthier and the Company have entered into a Management Transition
Agreement pursuant to which Mr. Gauthier has agreed to provide employment and
consulting services to the Company through June 30, 1999. In consideration for
these services, the Company agreed (i) to pay Mr. Gauthier his base salary
through June 30, 1997, (ii) to pay him an hourly consulting fee equal to $175.00
for services rendered through June 30, 1999, and (iii) to provide him with
benefits under the Company's medical, dental and life insurance plans.
VOTE REQUIRED
Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which the
stockholder's shares are entitled. Alternatively, a stockholder may distribute
his or her votes on the same principle among as many candidates as the
stockholder thinks fit, provided that votes cannot be cast for more than six
candidates. However, no stockholder shall be entitled to cumulate votes for a
candidate unless (i) such candidate's name has been placed in nomination prior
to the voting and (ii) the stockholder, or any other stockholder, has given
notice at the meeting prior to the voting of the intention to cumulate the
stockholder's votes.
If a quorum is present and voting, the six nominees receiving the highest
number of votes will be elected to the Board of Directors. See "Information
Concerning Solicitation and Voting--Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES LISTED ABOVE
------------------------
8
<PAGE>
PROPOSAL TWO
AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the
Board of Directors and approved by the stockholders in 1980 and a total of
100,000 shares of Common Stock were initially reserved for issuance thereunder.
The Purchase Plan was amended in 1983, 1989 and 1993 to increase the number of
shares of Common Stock reserved for issuance thereunder.
On November 24, 1998, the Board of Directors approved an amendment to the
Purchase Plan to increase the number of shares reserved for issuance thereunder
by an additional 1,750,000 shares to an aggregate of 6,325,000. At the Annual
Meeting, the stockholders are being requested to approve this amendment. As of
September 26, 1998, a total of 3,921,976 shares had been issued under the
Purchase Plan, and only 653,024 shares remained available for future issuance.
Management believes that it is in the best interests of the Company and its
stockholders to provide employees with an opportunity to purchase shares of
Common Stock.
The material features of the Plan are outlined below:
SUMMARY OF THE PURCHASE PLAN
PURPOSE. The purpose of the Purchase Plan is to provide employees of the
Company and its subsidiaries with an opportunity to purchase Common Stock of the
Company through payroll deductions.
ADMINISTRATION. The Purchase Plan is administered by management of the
Company under the direction of the Board of Directors. The administration,
interpretation or application of the Purchase Plan by the Board or management
shall be final, conclusive and binding upon all participants. Members of the
Board of Directors and management are permitted to participate in the Purchase
Plan provided such persons are eligible Employees.
ELIGIBILITY. Any person, including an officer, who is customarily employed
by the Company or by any of its subsidiaries (i) for more than five months in a
calendar year on the date his or her participation in the plan is effective and
(ii) for at least twenty hours per week, is eligible to participate in the
Purchase Plan. As of September 26, 1998, approximately 2,261 employees were
eligible to participate in the Purchase Plan and 1,346 of such eligible
employees were participating.
OFFERING DATES. The Purchase Plan is implemented by two twelve-month
offering periods during each fiscal year. The offering periods commence
approximately May 1 and November 1 of each year.
PARTICIPATION. Eligible employees become participants in the Purchase Plan
by delivering to the Company a signed subscription agreement authorizing payroll
deductions prior to the applicable offering date. An employee who becomes
eligible to participate in the plan after the commencement of an offering period
may not participate in the plan until the commencement of the next offering
period.
PURCHASE PRICE. The purchase price per share at which shares are sold under
the Purchase Plan is the lower of 85% of the fair market value of the Common
Stock on the date of commencement of the offering period or 85% of the fair
market value of the Common Stock on the last day of the offering. The fair
market value of the Common Stock on a given date shall be determined by the
Board of Directors in the
9
<PAGE>
exercise of their discretion in good faith and is based on the closing sales
price of the Company's Common Stock on such date, as reported by the Nasdaq
National Market System.
PAYMENT OF PURCHASE PRICE/PAYROLL DEDUCTIONS. The purchase price of the
shares is accumulated by payroll deductions during the offering period. The
aggregate deductions to be made in connection with the then current offering
periods on each payday may not be greater than 10% of the participant's base pay
on such payday nor less than $10.00 per pay period. The aggregate payroll
deductions during any offering period may not exceed 10% of a participant's base
pay during such offering period. Base pay includes all regular straight-time
earnings and commissions but excludes any payments for over-time, shift
premiums, incentive compensation, bonuses, and other special payments. A
participant may discontinue his or her participation in the plan, and may
decrease, but not increase, the rate of payroll deductions at any time during
the offering period. Any change in the rate of payroll deductions is effective
within fifteen days following the Company's receipt of the authorization to
change payroll deductions.
All payroll deductions are credited to a participant's account under the
plan and are deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
PURCHASE OF STOCK; EXERCISE OF OPTION. At the beginning of each offering
period, by executing a subscription agreement to participate in the Purchase
Plan, each participant is granted an option to purchase shares of Common Stock.
The maximum number of shares placed under option to a participant in an offering
period is determined by dividing the compensation that such participant has
elected to have withheld during the offering period (not to exceed an aggregate
amount under both current offering periods equal to 10% of the participant's
base pay for the offering period as of the commencement of such offering period)
by 85% of the fair market value of the Common Stock at the beginning of the
offering period. Notwithstanding the foregoing, no participant may be granted an
option under the Purchase Plan which permits his or her rights to purchase
shares under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate in excess of $25,000 (determined using the fair
market value of the shares at the time the option is granted) for each calendar
year in which such option is outstanding.
WITHDRAWAL. A participant's interest in a given offering may be terminated
in whole, but not in part, by signing and delivering to the Company a notice of
withdrawal from the plan. Such withdrawal may be elected at any time prior to
the end of the applicable offering period. A participant's withdrawal from an
offering does not have any effect upon such participant's eligibility to
participate in subsequent offerings under the Purchase Plan. All of a
participant's payroll deductions credited to his or her account for the offering
period(s) from which he or she had withdrawn will be paid to him or her, without
interest, promptly after receipt of the notice of withdrawal.
TERMINATION OF EMPLOYMENT. Termination of a participant's employment for
any reason, including retirement or death, cancels his or her participation in
the Purchase Plan immediately. In such event, the payroll deductions credited to
the participant's account will be returned, without interest, to such
participant or, in the case of death, to the person(s) entitled thereto as
specified by the participant in the subscription agreement.
CAPITAL CHANGES. In the event any change is made in the capitalization of
the Company which results in an increase or decrease in the number of shares of
Common Stock outstanding without receipt of consideration by the Company, such
as a stock split or stock dividend, appropriate adjustments will be
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made by the Company in the number of shares subject to purchase and in the
purchase price per share, subject to any required action by the stockholders of
the Company.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any
time amend or terminate the Purchase Plan, except that such termination shall
not affect options previously granted nor may any amendment make any change in
an option granted prior thereto which adversely affects the rights of any
participant. No amendment may be made to the Purchase Plan without prior
approval of the stockholders of the Company if such amendment would increase the
number of shares reserved for issuance thereunder, permit payroll deductions at
a rate in excess of 10% of the participants' base pay, modify the eligibility
requirements or materially increase the benefits which may accrue to
participants under the plan.
CERTAIN FEDERAL INCOME TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the sale or other disposition of the shares purchased under the Purchase
Plan. Upon such sale or disposition, the participant will generally be subject
to tax in an amount that depends upon the holding period. If the shares are sold
or disposed of more than two years from the first day of the offering period and
one year from the date of purchase, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price or (b) an
amount equal to 15% of the fair market value of the shares as of the first day
of the offering period. Any additional gain will be treated as long-term capital
gain. If the shares are sold or otherwise disposed of before the expiration of
this holding period, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are purchased over the purchase price. Any additional gain or loss on
such sale or disposition will be long-term or short-term capital gain or loss,
depending on the holding period. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized upon a sale or disposition of shares prior
to the expiration of the holding periods described above.
THE FOREGOING SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES OF PURCHASE
PLAN TRANSACTIONS IS BASED UPON FEDERAL INCOME TAX LAWS IN EFFECT ON THE DATE OF
THIS PROXY STATEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPREHENSIVE, AND
DOES NOT DESCRIBE FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES.
AMENDED AND NEW PLAN BENEFITS
The Company cannot now determine the number of shares to be issued in the
future under the Purchase Plan to the Named Executive Officers, all current
officers as a group or all employees (including current officers who are not
executive officers) as a group. In fiscal 1998, 208,270 shares of Common Stock
were issued under the Purchase Plan to all employees (including current officers
who are not executive officers) and 3,220 shares of Common Stock were issued
under the Purchase Plan to all current executive officers as a group.
VOTE REQUIRED
The amendment of the Purchase Plan requires the affirmative vote of a
majority of the shares of the Company's Common Stock present or represented and
entitled to vote on this proposal at the meeting. An abstention is not an
affirmative vote and will therefore have the same effect as a vote against the
proposal. See "Information Concerning Solicitation and Voting--Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN.
------------------------
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PROPOSAL THREE
AMENDMENT OF THE 1995 STOCK PLAN
The Company's 1995 Stock Plan (the "Stock Plan") was adopted by the Board of
Directors in 1995 and approved by the stockholders in 1996. On November 24,
1998, the Company's Board of Directors authorized an amendment of the Stock
Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the plan by 3,000,000 shares (from 2,500,000 to
5,500,000). The stockholders are being requested to approve this amendment at
the Annual Meeting. As of September 26, 1998, 786,100 shares remained available
to be optioned and sold under the Stock Plan.
Management believes that the proposed increase to the Stock Plan is
necessary to allow the Company to continue to attract, motivate and retain
talented, top-quality people. The Board believes that stock options are an
essential method of rewarding employees and consultants for their performance
and the Company's business success.
The material features of the Stock Plan are outlined below:
SUMMARY OF THE 1995 STOCK PLAN
GENERAL. The Stock Plan provides for the grant of options and rights to
purchase shares of the Company's Common Stock to employees (including officers)
and consultants. Options granted under the Stock Plan may either be "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options, as determined by the
Board of Directors or a committee designated by the Board.
PURPOSE. The general purposes of the Stock Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to the employees and consultants of the Company and
to promote the success of the Company's business.
ADMINISTRATION. The Stock Plan is administered by the Board of Directors
("Board") or a committee designated by the Board ("Committee"), as may be
necessary to comply with the rules governing plans intended to qualify as
discretionary grant plans under Rule 16b-3.
ELIGIBILITY. The Stock Plan provides that nonstatutory stock options and
stock purchase rights may be granted to employees (including officers) and
consultants of the Company and its majority-owned subsidiaries. Incentive stock
options may be granted only to employees. The Board or the Committee shall
determine which eligible persons shall be granted options.
GRANT LIMITATION. The Stock Plan provides that no employee shall be
granted, in any fiscal year of the Company, options and stock purchase rights to
purchase more than 500,000 shares of Common Stock. An employee may also be
granted options and stock purchase rights in connection with his or her initial
employment to purchase up to 500,000 shares, an amount that is not to be counted
against the annual limit of the preceding sentence.
EXERCISE PRICE. The exercise price of options and stock purchase rights
granted under the Stock Plan is determined by the Board or the Committee and
must not be less than 100% of the fair market value of the Company's Common
Stock at the time of grant. Incentive stock options granted to stockholders
owning more than 10% of the voting stock of the Company, if any, are subject to
the additional restriction
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that the exercise price per share of each option must be at least 110% of the
fair market value at the time of grant.
EXERCISE OF OPTIONS AND RIGHTS. Options become exercisable at such times as
are determined by the Board or the Committee and are set forth in the individual
option agreements. Generally, options granted to newly hired employees vest as
to 25% per year over a four (4) year period. Subsequent options, which are
granted to existing employees, generally vest as to 100% of the shares on the
third or fourth anniversary date of the date of grant, such that the vesting of
any previously granted option has been completed. An option is exercised by
giving written notice to the Company specifying the number of full shares of
Common Stock to be purchased and tendering payment of the purchase price. The
method of payment of the exercise price for the shares purchased upon exercise
of an option shall be determined by the Board or the Committee.
TERMINATION. The Stock Plan gives the Board or the Committee the authority
to vary the terms of the individual option agreements. However, generally, if
the optionee ceases to be an employee or consultant for any reason other than
death or disability, then the optionee shall have the right to exercise an
existing unexercised option within thirty (30) days after the date of
termination, but only to the extent that the optionee was entitled to exercise
such option at the date of such termination. If such termination is due to death
or disability within the meaning of Section 422(c) of the Code, the optionee (or
the optionee's legal representative) shall have the right to exercise an
existing unexercised option at any time within twelve (12) months of the
termination date, but only to the extent that the optionee was entitled to
exercise such option at the date of such termination. In no event shall an
option be exercisable beyond the option term.
TERMINATION OF OPTIONS. Options granted under the Stock Plan expire as
determined by the Board or Committee, but in no event later than ten (10) years
from date of grant. No option may be exercised by any person after its
expiration.
NONTRANSFERABILITY OF OPTIONS. An option is non-transferable by the
optionee other than by will or laws of descent and distribution, and is
exercisable during an optionee's lifetime only by the optionee.
STOCK PURCHASE RIGHTS. The Stock Plan permits the Company to grant rights
to purchase Common Stock either alone or in tandem with other awards granted
under the Stock Plan and/or cash awards made outside the Stock Plan. The Board
or the Committee determines who may be granted a stock purchase right, the
number of shares to be offered, the price to be paid and the time within which
the offeree must accept such offer which may not exceed six (6) months. The
offer of a stock purchase right is accepted by the execution of a restricted
stock purchase agreement between the Company and the offeree and the payment of
the purchase price of the shares. Unless the Board or Committee determines
otherwise, the restricted stock purchase agreement will give the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or consulting relationship with the Company for any
reason (including death and disability). The purchase price for any shares
repurchased by the Company shall be the original price paid by the purchaser and
may be paid be cancellation of indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate fixed by the Board or Committee. A stock
purchase right is nontransferable by the offeree, other than by will or the laws
of descent and distribution.
ADJUSTMENTS UPON CHANGE IN CAPITALIZATION. The number of shares covered by
each outstanding option or stock purchase right, and the exercise price thereof,
shall be proportionately adjusted for any
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<PAGE>
increase or decrease in the number of issued shares resulting from a change in
the Company's capitalization, such as a stock split, reverse stock split, stock
dividend, recapitalization or other change in the capital structure of the
Company.
TRANSFER OF CONTROL. In the event that the Company is a participant in any
merger, consolidation, acquisition of assets or like occurrence involving the
Company, each outstanding option or stock purchase right shall be assumed or an
equivalent option or right substituted by a successor corporation. If such
options and stock purchase rights are not assumed, they become fully exercisable
prior to the closing of such merger or consolidation. Any option or stock
purchase right which is neither assumed nor exercised as of the date of such
merger or consolidation will terminate upon the effectiveness thereof.
AMENDMENT OR TERMINATION OF THE STOCK PLAN. The Board may amend, alter,
suspend or terminate the Stock Plan or any part thereof from time to time, with
respect to any shares at such time not subject to options or stock purchase
rights; provided, however, that without the approval of a majority of the
Company's stockholders, no amendment may (a) increase the number of shares
reserved for issuance under the Stock Plan, (b) change the designation of the
class of persons eligible to receive options and stock purchase rights or (c)
amend the provisions to defeat the stated purpose. In any event, the Plan shall
terminate ten (10) years from its approval by the stockholders of the Company.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not generally recognize taxable income at the time the option is
granted or upon its exercise, although the exercise may subject the optionee to
the alternative minimum tax. Upon a disposition of the shares more than two
years after grant of the option and one year after exercise of the option, any
gain or loss is treated as long-term capital gain or loss. If these holding
periods are not satisfied, the optionee recognizes ordinary income at the time
of disposition equal to the difference between the exercise price and the lower
of (i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is an officer, director, or 10%
stockholder of the Company. The Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally by the excess of the
then fair market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee of the Company
is subject to tax withholding by the Company. The Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Upon a disposition of such shares by the optionee, any difference between the
sale price and the optionee's exercise price, to the extent not recognized as
taxable income as provided above, is treated as long-term or short-term capital
gain or loss, depending on the holding period.
STOCK RIGHTS. Restricted stock is generally acquired pursuant to Stock
Rights. At the time of acquisition, restricted stock is subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code.
As a result, the recipient will not generally recognize ordinary income at the
time of acquisition. Instead, the recipient will recognize ordinary income on
the dates when the stock ceases to be subject to a substantial risk of
forfeiture. The stock will generally cease to be subject to a substantial risk
of
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<PAGE>
forfeiture when it is no longer subject to the Company's right to reacquire the
stock upon the recipient's termination of employment with the Company. At such
times, the recipient will recognize ordinary income measured as the difference
between the purchase price (if any) and the fair market value of the stock on
the date the stock is no longer subject to a substantial risk of forfeiture. The
purchaser may accelerate to the date of acquisition his or her recognition of
ordinary income, if any, and the beginning of any capital gain holding period,
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% stockholder of the Company.
RESTRICTED STOCK. A purchaser of restricted stock recognizes ordinary income
equal to the difference between the purchase price, if any, and the fair market
value of the shares (the "spread") as any right of the Company to repurchase the
shares at the original purchase price lapses (that is, as the stock "vests").
Under current federal tax law, the purchaser may elect to include the spread in
ordinary income at the time of grant. Any subsequent gain or loss upon resale of
the shares by the purchaser is treated as long or short-term capital gain or
loss, depending on how long the shares are held. The Company is entitled to a
federal tax deduction in the same amount and at the same time as the purchaser
realizes ordinary income.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE EMPLOYEE OR CONSULTANT AND THE COMPANY WITH RESPECT TO AWARDS UNDER THE
STOCK PLAN AND DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO
THE APPLICABLE PROVISIONS OF THE INTERNAL REVENUE CODE. IN ADDITION, THIS
SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF AN OPTIONEE'S OR PURCHASER'S
DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.
AMENDED AND NEW PLAN BENEFITS
The Company cannot now determine the number of options to be received in the
future by the Named Executive Officers, all current officers as a group or all
employees (including current officers who are not executive officers) as a
group. In fiscal 1998, options to purchase 644,200 shares of Common Stock were
granted to all employees (including current officers who are not executive
officers) and options to purchase 301,000 shares of Common Stock were granted to
all current executive officers as a group. See "Executive Compensation--Stock
Option Grants and Exercises" for the number of stock options granted to each of
the Named Executive Officers.
REQUIRED VOTE
The amendment of the 1995 Stock Plan requires the affirmative vote of a
majority of the shares of the Company's Common Stock present or represented and
entitled to vote on this proposal at the meeting. An abstention is not an
affirmative vote and will therefore have the same effect as a vote against the
proposal. See "Information Concerning Solicitation and Voting--Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE AMENDMENT OF THE COMPANY'S 1995 STOCK PLAN
------------------------
15
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PROPOSAL FOUR
ADOPTION OF 1998 DIRECTOR OPTION PLAN
The existing 1990 Directors' Option Plan will terminate by its terms on
December 8, 1999. In order to replace this plan, the Board of Directors adopted
the Company's 1998 Director Option Plan (the "Director Option Plan") on November
24, 1998 and reserved 100,000 shares of the Company's Common Stock for issuance
thereunder, plus an annual increase to be added on each anniversary date of the
adoption of the Director Option Plan equal to (i) the number of shares needed to
restore the maximum aggregate number of shares that may be optioned and sold
under the Director Option Plan to 100,000 or (ii) a lesser amount determined by
the Board of Directors. At the Annual Meeting, the stockholders are being asked
to ratify the adoption of the Director Option Plan and the shares of the
Company's Common Stock reserved for issuance thereunder.
The Board of Directors believes that the Director Option Plan is necessary
to allow the Company to continue to attract and retain the best available people
for service as directors and to compensate them for their many hours of service.
The material features of the Director Option Plan are outlined below:
SUMMARY OF 1998 DIRECTOR OPTION PLAN
PURPOSE. The purposes of the Director Option Plan are to attract and retain
the best available personnel for service as non-employee directors of the
Company, to provide additional incentive to the non-employee directors and to
encourage their continued service on the Board.
ADMINISTRATION. The Director Option Plan is designed as an automatic grant
plan which generally does not require administration. However, if necessary, it
will be administered by the Board of Directors.
PROCEDURE FOR GRANTS. The Director Option Plan provides for the grant of
nonstatutory options to non-employee directors of the Company. Each such
director is granted an option to purchase 20,000 shares of Common Stock on the
date on which such person first becomes a director, whether through election by
the stockholders of the Company or appointment by the Board of Directors to fill
a vacancy. Thereafter, immediately following each Annual Meeting of Stockholders
at which such non-employee director is re-elected, each non-employee director
shall be granted an option to purchase 5,000 shares of Common Stock if, on such
date, he shall have served on the Company's Board of Directors for the preceding
three (3) months. The Director Option Plan provides for the number of shares
that are included in any grant and the method of making a grant but does not
provide for a maximum number of option shares that may be granted to any one
non-employee director.
STOCK SUBJECT TO DIRECTOR OPTION PLAN. The maximum aggregate number of
shares of Common Stock that may be optioned and sold under the Director Option
Plan is 100,000 shares, plus an annual increase to be added on each anniversary
date of the adoption of the Director Option Plan equal to (i) the number of
shares needed to restore the maximum aggregate number of shares that may be
optioned and sold under the Director Option Plan to 100,000 or (ii) a lesser
amount determined by the Board of Directors.
TERMS OF OPTIONS. Options granted under the Director Option Plan have a
term of six (6) years. Each option is evidenced by a stock option agreement
between the Company and the director to whom such option is granted.
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EXERCISE OF OPTION. The initial option grant becomes exercisable
cumulatively to the extent of twenty-five percent (25%) of the shares subject to
the option on each of the first four anniversaries of the date of grant.
Subsequent option grants are exercisable in full on the fourth anniversary of
the date of grant. An option is exercised by giving written notice of exercise
to the Company, specifying the number of full shares of Common Stock to be
purchased and tendering payment to the Company of the purchase price. Payment
for shares issued upon exercise of an option may consist of cash, check,
exchange of securities held by the optionee for at least six (6) months or a
combination thereof.
OPTION PRICE. The option price is 100% of the fair market value of the
Company's Common Stock on the date of grant. The Board of Directors of the
Company determines such fair market value based upon the closing price of the
Common Stock in the Nasdaq National Market on the date the option is granted.
TERMINATION OF STATUS AS A DIRECTOR. If an optionee ceases to be a director
of the Company for any reason other than death or disability, vesting of the
option shall cease as of the date of termination. Thereafter, the option may be
exercised within two hundred and ten (210) days as to all or part of the shares
that the optionee was entitled to exercise at the date of termination. If such
termination is due to death or disability, within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended, the optionee (or the
optionee's legal representative) shall have the right to exercise an existing
unexercised option at any time within twelve (12) months of the termination
date, but only to the extent that the option would have been exercisable had the
optionee continued living or not been disabled and remained a director of the
Company for six (6) months after death or disability. In no event may an option
be exercised after its six (6) year term has expired.
SUSPENSION OR TERMINATION OF OPTIONS. No option is exercisable by any
person after the expiration of six (6) years from the date the option was
granted. If the Chief Executive Officer or his designee reasonably believes that
an optionee has committed an act of misconduct, the Chief Executive Officer may
suspend the optionee's right to exercise any option pending a determination by
the Board of Directors (excluding the director accused of such misconduct). If
the Board of Directors (excluding the director accused of such misconduct)
determines an optionee has committed an act of embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, breach of fiduciary duty or
deliberate disregard of the Company rules resulting in loss, damage or injury to
the Company, or if an optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any Company customer to breach a contract with the
Company, or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the optionee nor his estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the director accused of such misconduct) shall act
fairly and shall give the optionee an opportunity to appear and present evidence
on the optionee's behalf at a hearing before a committee of the Board.
NONTRANSFERABILITY OF OPTIONS. An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares covered by
each outstanding option, and the exercise price thereof, shall be
proportionately adjusted in the event of any change, such as a stock split, in
the Company's capitalization. In the event of a stock dividend, each optionee
shall be
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<PAGE>
entitled to receive, upon exercise of the option, the equivalent of any stock
dividend which the optionee would have received had he or she been, on the
record date for such dividend, the holder of record of the shares purchasable
upon such exercise.
CHANGE IN CONTROL. The Director Option Plan provides that, in the event of
(i) a proposed merger of the Company with or into another corporation where
following such merger the stockholders of the Company prior to such merger own
less than 50% of the voting securities of the surviving corporation or (ii) the
sale of all or substantially all of the assets of the Company, each outstanding
option shall be assumed or an equivalent option shall be substituted by such
successor corporation. If an option is assumed or substituted for, the option or
equivalent option shall continue to be exercisable for its original term and for
so long as the optionee serves as a director of the Company or a director of the
successor corporation. Following such assumption or substitution, if the
optionee's status as a director is terminated, other than upon a voluntary
resignation by the optionee, the option shall become fully exercisable. If the
successor corporation refuses to assume the option or to substitute an
equivalent option, the Board shall, in lieu of such assumption or substitution,
provide for the optionee to have the right to exercise the option as to all of
the optioned stock. If an option becomes fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify the optionee that the option shall be fully exercisable for a period of
twenty (20) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
AMENDMENT AND TERMINATION. The Board of Directors may terminate the
Director Option Plan at any time and may amend the Director Option Plan at any
time or from time to time; provided, however, that amendments to the Director
Option Plan must be approved by the stockholders to the extent required by
applicable law. However, no action by the Board of Directors or stockholders may
alter or impair any option previously granted under the Director Option Plan
without the consent of the optionee. The Director Option Plan will terminate by
its terms on November 24, 2008.
TAX INFORMATION
An optionee does not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. Upon exercise, the optionee recognizes
taxable income generally measured by the excess of the then fair market value of
the shares over the exercise price. The Company is entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Upon a
disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE DIRECTOR PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE DIRECTOR'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
DIRECTOR MAY RESIDE.
REQUIRED VOTE
The ratification of the adoption of the Director Option Plan requires the
affirmative vote of the holders of the shares of the Company's Common Stock
present or represented and entitled to vote on this proposal at the meeting. An
abstention is not an affirmative vote, and therefore will have the same effect
as a vote against the proposal. A broker non-vote will not be treated as
entitled to vote on this subject matter at the meeting. See "Information
Concerning Solicitation and Voting--Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE COMPANY'S 1998 DIRECTOR OPTION PLAN
------------------------
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PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP, independent
public accountants, to audit the financial statements of the Company for the
fiscal year ending October 2, 1999, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote or
ratification, the Board of Directors will reconsider its selection. Deloitte &
Touche LLP has audited the Company's financial statements since the fiscal year
ended September 25, 1976. Representatives of Deloitte & Touche LLP are expected
to be present at the meeting and will be afforded the opportunity to make a
statement if they desire to do so. The representatives of Deloitte & Touche LLP
are also expected to be available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS INDEPENDENT ACCOUNTANTS.
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EXECUTIVE COMPENSATION
OFFICERS
The names, ages and office of all of the executive officers of the Company
are set forth below.
<TABLE>
<CAPTION>
NAME OF OFFICER AGE OFFICE HELD
- ---------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Bernard J. Couillaud.............. 54 President and Chief Executive Officer
Robert J. Quillinan............... 51 Executive Vice President and Chief Financial
Officer
John R. Ambroseo.................. 37 Executive Vice President and President, Coherent
Laser Group
Vittorio Fossati-Bellani.......... 51 Executive Vice President and President, Coherent
Semiconductor Group
Robert M. Gelber.................. 53 Executive Vice President and President, Coherent
Auburn Group
Scott H. Miller................... 44 Senior Vice President and General Counsel
Larry W. Sonsini.................. 57 Secretary
</TABLE>
There are no family relationships between any of the executive officers and
directors.
Mr. Couillaud has served as President and Chief Executive Officer as well as
a member of the Board of Directors since July 1996. He served as Vice President
and General Manager of Coherent Laser Group from March 1992 to July 1996. From
1990 to March 30, 1992, he served as Manager of the Advanced Systems Business
Unit, and from 1987 to 1990, he served as Director of R&D for the Coherent Laser
Group.
Mr. Quillinan has served as Executive Vice President and Chief Financial
Officer since July 1984. He served as Vice President and Treasurer from March
1982 to July 1984 and as Corporate Controller from April 1980 to March 1982.
Mr. Ambroseo became Executive Vice President and President, Coherent Laser
Group in July 1997. He joined Coherent in 1988 as a Sales Engineer and has
served as Product Marketing Manager, U. S. Sales Manager, Director of European
Operations and most recently as Scientific Business Unit Manager.
Mr. Fossati-Bellani became Executive Vice President and President, Coherent
Semiconductor Group in July 1997. He joined the Italian office of Coherent in
1979 as a Scientific Sales Engineer and has served in the capacity of Product
Manager, Director of Marketing, Director of Business Development, Scientific
Business Unit Manager and Diode Laser Business Unit Manager for the Coherent
Laser Group.
Mr. Gelber has served as Executive Vice President and President, Coherent
Auburn Group since August 1986.
Mr. Miller has served as General Counsel to the Company since October 1988
and as Senior Vice President since March 1994.
For over seven years, Mr. Sonsini has served as the Company's Secretary. He
is a member of the law firm of Wilson, Sonsini, Goodrich & Rosati, P.C.
20
<PAGE>
SUMMARY COMPENSATION
The following table shows, as to the Chief Executive Officer and each of the
other four most highly compensated executive officers who were serving as
executive officers at the end of the last fiscal year and whose salary plus
bonus exceeded $100,000, information concerning compensation awarded to, earned
by or paid for services to the Company in all capacities during the last three
fiscal years (to the extent that such person was the Chief Executive Officer
and/or executive officer, as the case may be, during any part of such fiscal
year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
AWARDS ALL OTHER
NAME YEAR SALARY ($) BONUS ($) OPTIONS(#) COMPENSATION
- ---------------------------------------- --------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bernard J. Couillaud.................... 1998 $ 337,492 $ 147,578 138,000 $ 23,393(1)
President and Chief Executive Officer... 1997 273,229 341,797 24,000 14,834
1996 185,353 258,595 30,000 12,937
Robert J. Quillinan..................... 1998 $ 220,201 $ 65,138 34,000 $ 14,723(2)
Executive Vice President and............ 1997 194,964 192,491 14,000 15,267
Chief Financial Officer................. 1996 182,361 268,251 12,000 9,527
John Ambroseo........................... 1998 $ 206,898(3) $ 108,668 36,000 $ 8,672(4)
Executive Vice President and............ 1997 304,897(5) 80,605 21,000 9,266
President, Coherent Laser Group......... 1996 119,900 98,408 5,000 6,803
Vittorio Fossati-Bellani (6)............ 1998 $ 178,288 $ 46,669 24,000 $ 11,207(7)
Executive Vice President and............ 1997 127,515 77,693 19,500 9,537
President, Coherent Semiconductor
Group................................. 1996 120,872 117,632 4,000 7,908
Robert M. Gelber........................ 1998 $ 190,575 $ 37,423 18,000 $ 9,188(8)
Executive Vice President and............ 1997 174,777 97,155 12,000 16,210
President, Coherent Auburn Group........ 1996 160,135 158,532 12,000 16,033
</TABLE>
- ------------------------
(1) Includes $18,427 contributed by the Company under defined contribution plans
and $4,966 in life insurance benefits.
(2) Includes $12,439 contributed by the Company under defined contribution plans
and $2,284 in life insurance benefits.
(3) Includes $19,282 compensation related to European assignment.
(4) Includes $8,260 contributed by the Company under defined contribution plans
and $412 in life insurance benefits.
(5) Includes $186,162 compensation related to European assignment.
(6) Mr. Fossati-Bellani became Executive Vice President and President, Coherent
Semiconductor Group on July 25, 1997.
(7) Includes $9,486 contributed by the Company under defined contribution plans
and $1,721 in life insurance benefits.
(8) Includes $6,882 contributed by the Company under defined contribution plans
and $2,306 in life insurance benefits.
21
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options granted during
the fiscal year ended September 26, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM (4)
GRANTED (#) IN FISCAL PRICE EXPIRATION --------------------
NAME (1)(2) YEAR (3) ($/SH) DATE 5% ($) 10% ($)
- -------------------------- --------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Couillaud...... 11,188 1.18 $ 8.94 8/31/04 $ 34,007 $ 77,151
126,812 13.42 $ 8.94 8/31/04 $ 385,458 $ 874,474
Robert J. Quillinan....... 11,188 1.18 $ 8.94 8/31/04 $ 34,007 $ 77,151
22,812 2.41 $ 8.94 8/31/04 $ 69,339 $ 157,308
John Ambroseo............. 11,188 1.18 $ 8.94 8/31/04 $ 34,007 $ 77,151
24,812 2.63 $ 8.94 8/31/04 $ 75,419 $ 171,099
Vittorio
Fossati-Bellani......... 11,188 1.18 $ 8.94 8/31/04 $ 34,007 $ 77,151
12,812 1.36 $ 8.94 8/31/04 $ 38,943 $ 88,349
Robert M. Gelber.......... 11,188 1.18 $ 8.94 8/31/04 $ 34,007 $ 77,151
6,812 0.72 $ 8.94 8/31/04 $ 20,706 $ 46,974
</TABLE>
- ------------------------
(1) The Company's 1987 Stock Option Plan and 1995 Stock Plan (collectively the
"Option Plans") provide for the grant of options and stock purchase rights
to officers, employees and consultants of the Company. Options granted under
the Option Plans may be either "nonstatutory options" or "incentive stock
options." The exercise price is determined by the Board of Directors or its
Compensation Committee and, in the case of incentive stock options, may not
be less than 100% of the fair market value of the Common Stock on the date
of grant (110% in the case of grants to 10% shareholders). The options
expire not more than ten years from the date of grant and may be exercised
only while the optionee is employed by the Company or within such period of
time after termination of employment as is determined by the Board or its
Committee at the time of grant. The Board of Directors may determine when
options granted may be exercisable.
(2) The first entry for each individual sets forth the number of options awarded
that are intended to qualify as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986. The second entry for
each individual sets forth the number of options that are nonstatutory stock
options.
(3) The Company granted options to purchase an aggregate of 644,200 to all
employees other than executive officers and granted options to purchase an
aggregate of 301,000 shares to all executive officers as a group (7
persons), during fiscal 1998.
(4) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. Each
gain is based on an arbitrarily assumed annualized rate of compound
appreciation of the market price at the date of grant of 5% and 10% from the
date the option was granted to the
22
<PAGE>
end of the option term. The 5% and 10% rates of appreciation are specified
by the rules of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of future Common Stock prices. The
Company does not necessarily agree that this method properly values an
option. Actual gains, if any, on option exercises are dependent on the
future performance of the Company's Common Stock and overall market
conditions.
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options exercised during
the fiscal year ended September 26, 1998 and the value of unexercised options at
such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 26, 1998 SEPTEMBER 26, 1998
ACQUIRED ON VALUE (#)(2) ($)(3)
EXERCISE REALIZED ------------------------ ------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Couillaud...... 0 $ 0 48,000 180,000 $ 67,500 $ 77,625
Robert J. Quillinan....... 36,000 $ 320,250 12,000 60,000 $ 0 $ 19,125
John Ambroseo............. 2,000 $ 18,750 7,000 54,000 $ 0 $ 20,250
Vittorio
Fossati-Bellani......... 0 $ 0 9,000 42,000 $ 0 $ 13,500
Robert M. Gelber.......... 1,870 $ 21,271 22,130 42,000 $ 31,656 $ 10,125
</TABLE>
- ------------------------
(1) The value realized is calculated based on the closing price of the Company's
Common Stock as reported by the Nasdaq National Market on the date of
exercise minus the exercise price of the option, and does not necessarily
indicate that the optionee sold such stock.
(2) The Company has not granted any stock appreciation rights and its stock
plans do not provide for the granting of such rights.
(3) The market value of underlying securities is based on the difference between
the closing price of the Company's Common Stock on September 25, 1998 of
$9.50 (as reported by Nasdaq National Market) and the exercise price.
OTHER EMPLOYEE BENEFIT PLANS
EMPLOYEE RETIREMENT AND INVESTMENT PLAN AND SUPPLEMENTARY RETIREMENT PLAN
Effective January 1, 1979, the Company adopted the Coherent Employee
Retirement and Investment Plan. Employees become eligible to participate after
completing one year of service. Under this plan, the Company will match employee
contributions to the plan up to a maximum of 6% of the employee's individual
earnings. An employee is not entitled to any part of the Company's contribution
until the completion of his or her third year of employment. After the end of
the third year of employment, 20% of the Company's contribution vests.
Thereafter, an additional 20% of the Company's contribution vests at the end of
each year of completed service until the end of the seventh year of employment
when such contributions become 100% vested. Effective as of 1985, the plan was
amended and restated to conform the plan to new regulations and to qualify under
Section 401(k) of the Internal Revenue Code of 1986, as amended to permit
employees to make contributions to the plan from their pre-tax earnings.
Effective
23
<PAGE>
January 1, 1990, the Company adopted the Supplementary Retirement Plan which
provides that certain senior management may contribute income to a trust fund.
The Company will match such contributions up to 6% of the participant's income.
Such contributions are subject to the same vesting requirements as contributions
made under the Employment Retirement and Investment Plan.
MANAGEMENT BONUS PLAN
The Company's Management Bonus Plan provides for the payment of quarterly
cash bonuses to members of management designated by the Board of Directors
determined by a formula based on improvements of pre-tax profits, cash flow and
asset management over preset threshold levels for each operating group or
business unit. Those employees who participate in the Bonus Plan who are not
assigned to an operating group or business unit receive an average of such
amounts.
PRODUCTIVITY INCENTIVE PLAN
Under the Company's Productivity Incentive Plan (the "Incentive Plan"),
450,000 shares of Common Stock were initially reserved, and as of the fiscal
year ended September 26, 1998, 50,647 shares of Common Stock were available for
issuance to employees of the Company and its designated subsidiaries who are
customarily employed for at least twenty hours per week. The purpose of the
Incentive Plan is to enhance an employee's proprietary interest in the Company
and to create an incentive for the Company's success.
The Incentive Plan provides for the quarterly distribution of cash or Common
Stock, at the election of each participant, based upon the quarterly
profitability of the Company. The amount of cash or number of shares of Common
Stock distributed to each participant is determined by dividing a participant's
"incentive compensation" by the fair market value of the Company's Common Stock
at the end of each three-month period.
24
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS
PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND THE PERFORMANCE
GRAPH INCLUDED HEREIN SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
INTRODUCTION
The Compensation Committee of the Board of Directors establishes the general
compensation policies of the Company, and establishes the compensation plans and
specific compensation levels for executive officers. The Committee strives to
ensure that the Company's executive compensation programs will enable the
Company to attract and retain key people and motivate them to achieve or exceed
certain key objectives of the Company by making individual compensation directly
dependent on the Company's achievement of certain financial goals, such as
profitability and asset management and by providing rewards for exceeding those
goals.
COMPENSATION PROGRAMS
BASE SALARY. The Committee establishes base salaries for executive
officers, normally within ten percent of the average paid for comparable
positions at other similarly sized companies as set forth in national and local
compensation surveys. Base pay increases vary according to individual
contributions to the Company's success and comparisons to similar positions
within the Company and at other comparable companies.
BONUS PLANS. Each executive officer participates in the Management Bonus
Plan which provides for the payment of a quarterly bonus determined by a formula
based on improvements of pre-tax profits and asset management over preset
threshold levels for each operating group or business unit.
STOCK OPTIONS. The Committee believes that stock options provide additional
incentive to officers to work towards maximizing stockholder value. The
Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. Options granted by the Company to its executive
officers and other employees have exercise prices equal to the fair market value
at the time of grant. Options vest and become exercisable at such time as
determined by the Board. The initial option grant is designed to be competitive
with those of comparable companies for the level of the job that the executive
holds and is designed to motivate the officer to make the kind of decisions and
implement strategies and programs that will contribute to an increase in the
Company's stock price over time. Periodic additional stock options within the
comparable range for the job are granted to reflect the executives ongoing
contributions to the Company, to create an incentive to remain at the Company
and to provide a long-term incentive to achieve or exceed the Company's
financial goals.
OTHER. In addition to the foregoing, officers participate in compensation
plans available to all employees, such as a quarterly profit sharing plan and
participation in both the Company's 401(k) retirement plan and employee stock
purchase plan. See "Executive Compensation--Other Employee Benefit Plans."
25
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The factors considered by the Compensation Committee in determining the
compensation of the Chief Executive Officer, in addition to survey data, include
the Company's operating and financial performance, as well as his leadership and
establishment and implementation of strategic direction for the Company.
The Compensation Committee considers stock options to be an important
component of the Chief Executive Officer's compensation as a way to reward
performance and motivate leadership for long term growth and profitability. In
1998, Mr. Couillaud was granted options to purchase 138,000 shares with an
exercise price equal to the fair market value at date of grant ($8.94 per
share). This option becomes exercisable at the end of three years.
COMPENSATION LIMITATIONS
Under Section 162(m) of the Internal Revenue Code, adopted in August 1993,
and regulations adopted thereunder by the Internal Revenue Service,
publicly-held companies may be precluded from deducting certain compensation
paid to an executive officer in excess of $1.0 million in a year. The
regulations exclude from this limit performance-based compensation and stock
options provided certain requirements, such as stockholder approval, are
satisfied. The Company plans to take actions, as necessary, to insure that its
stock option plans and executive annual cash bonus plans qualify for exclusion.
COMPENSATION COMMITTEE
Henry E. Gauthier
Frank P. Carrubba
Charles W. Cantoni
Thomas Sloan Nelsen
Jerry E. Robertson
Dated: January 22, 1999
26
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder return, calculated on a dividend reinvestment basis and based on a
$100 investment, from September 24, 1993 through September 26, 1998 comparing
the return on the Company's Common Stock with the Standard & Poors 500 Stock
Index and the High Technology Composite Index. No dividends have been declared
or paid on the Company's Common Stock during such period. The stock price
performance shown on the graph following is not necessarily indicative of future
price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COHERENT INC. S&P 500 INDEX TECHNOLOGY-500
<S> <C> <C> <C>
9/24/93 100.00 100.00 100.00
9/30/94 93.33 100.19 113.61
9/29/95 243.33 126.55 177.56
9/27/96 230.00 148.59 217.98
9/26/97 356.67 204.68 350.40
9/25/98 126.67 226.23 412.80
</TABLE>
27
<PAGE>
CERTAIN TRANSACTIONS
The following table sets forth information with respect to all executive
officers of the Company who had indebtedness outstanding during the past fiscal
year. This indebtedness arose as a result of the delivery of promissory notes in
connection with the exercise of stock options.
<TABLE>
<CAPTION>
LARGEST BALANCE AT
AMOUNT SEPTEMBER
NEW LOANS INTEREST MATURITY OUTSTANDING 26,
NAME DURING 1998 RATES DATE(S) DURING 1998 1998
- --------------------------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Scott Miller............... $ 0.00 7.10% 10/4/99 $ 111,680 $ 111,680
Robert J. Quillinan........ $ 325,779 5.68-5.69% 2/27/03-7/31/03 $ 325,779 $ 325,779
</TABLE>
All promissory notes are full recourse and are secured by the shares of
Common Stock of the Company issued upon exercise of the options. Interest is
paid annually.
See "Election of Directors--Compensation Committee Interlocks and Insider
Participation" for a description of Dr. Nelsen's consulting arrangement with the
Company.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: February 12, 1999
28
<PAGE>
APPENDIX A
COHERENT, INC.
1998 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the common stock of the Company.
(d) "COMPANY" means Coherent, Inc.
(e) "DIRECTOR" means a member of the Board.
(f) "DISABILITY" means total and permanent disability as defined in
section 22(e)(3) of the Code.
(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination
as reported in THE WALL STREET JOURNAL or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading day
prior to the time of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "INSIDE DIRECTOR" means a Director who is an Employee.
A-1
<PAGE>
(k) "OPTION" means a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means a Director who holds an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1998 Director Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 100,000 Shares (the "Pool") (the Shares may be authorized, but
unissued, or reacquired Common Stock), plus an annual increase to be added on
each anniversary date of the adoption of the Plan equal to (i) the number of
Shares needed to restore the maximum aggregate number of Shares that may be
optioned and sold under the Plan to 100,000 or (ii) a lesser amount determined
by the Board of Directors.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) PROCEDURE FOR GRANTS. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an Option
to purchase 20,000 Shares (the "FIRST OPTION") on the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an
Inside Director but who remains a Director shall not receive a First
Option.
(iii) Each Outside Director shall be automatically granted an Option
to purchase 5,000 Shares (a "SUBSEQUENT OPTION") immediately following
each annual meeting of stockholders at which such Outside Director is
re-elected (beginning with the 2000 annual meeting of stockholders)
provided he or she is then an Outside Director and if as of such date, he
or she shall have served on the Board for at least the preceding three
(3) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has obtained
stockholder approval of the Plan in accordance
A-2
<PAGE>
with Section 16 hereof shall be conditioned upon obtaining such
stockholder approval of the Plan in accordance with Section 16 hereof.
(v) The terms of an Option granted hereunder shall be as follows:
(A) the term of the Option shall be six (6) years.
(B) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall become
exercisable cumulatively to the extent of twenty-five percent (25%)
of the Shares subject to such option on each of the first four
anniversaries of the date of grant, provided that the Optionee
continues to serve as a Director on such dates.
(E) subject to Section 10 hereof, each Subsequent Option shall
become exercisable with respect to 100% of the Shares subject to such
option on the fourth anniversary of the date of grant, provided that
the Optionee continues to serve as a Director on such date.
(vi) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the
stockholders to increase the number of Shares that may be issued under
the Plan or through cancellation or expiration of Options previously
granted hereunder.
(b) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
Officer or his designee reasonably believes that an Optionee has committed
an act of misconduct, the Chief Executive Officer may suspend the Optionee's
right to exercise any option pending a determination by the Board of
Directors (excluding the Outside Director accused of such misconduct). If
the Board of Directors (excluding the Outside Director accused of such
misconduct) determines an Optionee has committed an act of embezzlement,
fraud, dishonesty, nonpayment of an obligation owed to the Company, breach
of fiduciary duty or deliberate disregard of the Company rules resulting in
loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential
information, engages in any conduct constituting unfair competition, induces
any Company customer to breach a contract with the Company or induces any
principal for whom the Company acts as agent to terminate such agency
relationship, neither the Optionee nor his estate shall be entitled to
exercise any option whatsoever. In making such determination, the Board of
Directors (excluding the Outside Director accused of such misconduct) shall
act fairly and shall give the Optionee an opportunity to appear and present
evidence on Optionee's behalf at a hearing before the Board or a committee
of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
A-3
<PAGE>
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program (if any) implemented by the
Company in connection with the Plan, or (v) any combination of the foregoing
methods of payment.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; PROVIDED, HOWEVER, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a divi-dend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the number
of Shares which thereafter may be available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to Section
10 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or Disability), the Optionee may exercise his
or her Option, but only within 210 days following the date of such
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its six (6) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of such termination, and to
the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
A-4
<PAGE>
(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termina-tion, and only to the extent that the Optionee would have been
entitled to exer-cise the Option had the Optionee not been disabled and
remained an Outside Director for six (6) months after such termination (but
in no event later than the expiration of its six (6) year term). To the
extent that the Optionee would not have been entitled to exercise an Option
had the Optionee not been disabled and remained an Outside Director for six
(6) months after such termination, or if he or she does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee would have been entitled to exercise the Option had the Optionee
continued living and remained an Outside Director for six (6) months after
the date of death (but in no event later than the expiration of its six (6)
year term). To the extent that the Optionee would not have been entitled to
exercise an Option had the Optionee continued living and remained an Outside
Director for six (6) months after the date of death, and to the extent that
the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
PROVIDED, HOWEVER, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject
to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a proposed merger of the
Company with or into another corporation where following such merger the
stockholders of the Company prior to such merger own less than 50% of the
voting securities of the surviving corporation (a "change of
A-5
<PAGE>
control"), or the sale of all or substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary
of such successor corporation. If an Option is assumed or substituted for,
the Option or equivalent option shall continue to be exercisable as provided
in Section 4 hereof for so long as the Optionee serves as a Director or a
director of the successor corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
successor corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become
fully exercisable, including as to Shares for which it would not otherwise
be exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Section 8 above. In the event that such successor
corporation refuses to assume the Option or to substitute an equivalent
option, the Board shall, in lieu of such assumption or substitution, provide
for the Optionee to have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. If an Option becomes fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify the Optionee that the Option shall be fully exercisable for a period
of twenty (20) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
there-under, state securities laws, and
A-6
<PAGE>
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's 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.
14. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
A-7
<PAGE>
APPENDIX B
COHERENT, INC.
DIRECTOR OPTION AGREEMENT
Coherent, Inc., a Delaware corporation (the "COMPANY") has granted to
(the "OPTIONEE"), an option to purchase a total of 5,000 shares of
the Company's Common Stock (the "OPTIONED STOCK"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1998 Director Option Plan (the "PLAN") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. EXERCISE PRICE. The exercise price is $ for each share of Common
Stock.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option shall become exercisable as to 100% of the Optioned
Stock on the fourth anniversary of the date of grant; PROVIDED, HOWEVER,
that in no event shall any Option be exercisable prior to the date the
stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other termination of
service as a Director, the exercisability of the Option is governed by
Section 8 of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number
of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as EXHIBIT A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment
of the exercise price.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
(iii) surrender of other shares which (x) in the case of Shares acquired
upon exercise of an Option, have been owned by the Optionee for more than
six (6) months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
B-1
<PAGE>
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. TERM OF OPTION. This Option may not be exercised more than six (6)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
9. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the laws of the State of California
without giving effect to the conflicts of laws principles thereof.
<TABLE>
<S> <C>
DATE OF GRANT: COHERENT, INC.
By:
</TABLE>
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<PAGE>
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
<TABLE>
<S> <C>
Dated: Optionee
</TABLE>
B-3
<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Coherent, Inc.
5100 Patrick Henry Drive
Santa Clara, CA 95056-0980
Attention: General Counsel
1. EXERCISE OF OPTION. The undersigned ("OPTIONEE") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"SHARES") of Coherent, Inc. (the "COMPANY") under and pursuant to the Company's
1998 Director Option Plan and the Director Option Agreement dated
_______________ (the "AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the Shares
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended, or unless an exemption from such registration is available,
and that the certificate(s) representing the Shares may bear a legend to that
effect. Optionee understands that the Company is under no obligation to register
the Shares and that an exemption may not be available or may not permit Optionee
to transfer Shares in the amounts or at the times proposed by Optionee.
4. TAX CONSEQUENCES. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. ENTIRE AGREEMENT. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by California law except for that
body of law pertaining to conflict of laws.
<TABLE>
<CAPTION>
<S> <C>
Submitted by: Accepted by:
OPTIONEE: COHERENT, INC.
Name: By:
Its:
Signature
Address: ---------------------------------- Address: 5100 Patrick Henry Drive
Santa Clara , CA 95056-0980
Dated: ------------------------------------ Dated: ------------------------------------
</TABLE>
<PAGE>
DETACH HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COHERENT, INC.
ANNUAL MEETING OF STOCKHOLDERS
MARCH 17, 1999
The undersigned stockholder of COHERENT, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated February 12, 1999, and hereby appoints
Bernard J. Couillaud and Robert J. Quillinan, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual
Meeting of Stockholders of COHERENT, INC. to be held on March 17, 1999 at
5:30 p.m., local time, at the Company's principal offices located at 5100
Patrick Henry Drive, Santa Clara, California 95054 and at any adjournment(s)
thereof and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, or all the matters set
forth on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO
THE EMPLOYEE STOCK PURCHASE PLAN, FOR THE AMENDMENT TO THE 1995 STOCK PLAN,
FOR THE ADOPTION OF THE 1998 DIRECTOR OPTION PLAN, FOR THE RATIFICATION OF
THE APPOINTMENT OF THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING
AND ANY ADJOURNMENTS THEREOF.
- --------------- ---------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- --------------- ---------------
<PAGE>
COHERENT, INC. THIS IS YOUR PROXY.
c/o EquiServe YOUR VOTE IS IMPORTANT.
P.O. Box 9040
Boston, MA 02266-9040
All stockholders are cordially invited to attend the meeting. However,
to assure your representation at the meeting, you are urged to mark, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
In order to assure your representation at the meeting, you are requested to
complete, sign and date this enclosed proxy card as promptly as possible and
return it in the enclosed envelope.
DETACH HERE
PLEASE MARK VOTES AS IN THIS EXAMPLE.
To elect the directors to serve for the ensuing year and until their
successors are duly elected:
Nominees: Bernard J. Couillaud; Henry E. Gauthier; Charles W. Cantoni; Frank
P. Carrubba; Thomas Sloan Nelsen; Jerry E. Robertson
FOR / / WITHHELD / /
/ / _______________________________________
For all nominees except as noted above
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
2. To approve the amendment of the Company's Employee Stock Purchase Plan to
increase the number of shares reserved for issuance thereunder by 1,750,000
to an aggregate of 6,325,000;
FOR / / AGAINST / / ABSTAIN / /
3. To approve the amendment of the Company's 1995 Stock Plan to increase the
number of shares reserved for issuance thereunder by 3,000,000 to an
aggregate of 6,500,000;
FOR / / AGAINST / / ABSTAIN / /
4. To approve the adoption of the Company's 1998 Director Option Plan;
FOR / / AGAINST / / ABSTAIN / /
5. To ratify the appointment of Deloitte & Touche LLP as independent public
accountants to the Company for the fiscal year ending October 2, 1999, and
FOR / / AGAINST / / ABSTAIN / /
6. To transact such other business as may properly be brought before the
meeting and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on February 1, 1999 are
entitled to notice of and to vote at the meeting.
