<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MAXWELL TECHNOLOGIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MAXWELL
TECHNOLOGIES
LOGO
MAXWELL TECHNOLOGIES, INC.
9275 SKY PARK COURT
SAN DIEGO, CA 92123
---------------
NOTICE OF THE 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 28, 2000
---------------
To the Shareholders of
Maxwell Technologies, Inc.
The 1999 Annual Meeting of Shareholders of Maxwell Technologies, Inc., a
Delaware corporation (the "Company"), will be held on January 28, 2000 at 10:00
A.M., local time, at the La Jolla Marriott, La Jolla Village Drive, San Diego,
California, for the following purposes, all as more fully set forth in the
accompanying Proxy Statement:
1. To elect Kenneth F. Potashner as director of the Company of Class I, to
serve until the fiscal year 2002 annual meeting of shareholders and
until his successor shall have been duly elected and qualified.
2. To consider and approve an amendment to the Company's 1995 Stock Option
Plan to increase the maximum number of shares reserved for options
thereunder by 400,000 shares.
3. To consider and approve the Company's 1999 Director Stock Option Plan
and authorize 75,000 shares for options thereunder.
4. To consider and approve the Company's 1999 Management Equity Ownership
Program.
5. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 3, 1999,
as the record date for determining shareholders entitled to notice of and to
vote at the meeting and any adjournment or adjournments thereof.
By Order of the Board of Directors,
Donald M. Roberts
Secretary
Dated: December 10, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
<PAGE>
MAXWELL TECHNOLOGIES, INC.
9275 SKY PARK COURT
SAN DIEGO, CALIFORNIA 92123
---------------
PROXY STATEMENT FOR THE 1999 ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON JANUARY 28, 2000
---------------
GENERAL INFORMATION
This Proxy Statement is being mailed on or about December 15, 1999 to the
shareholders of Maxwell Technologies, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company to be used at the 1999 Annual Meeting of the
Shareholders of the Company to be held on January 28, 2000 (the "Meeting") and
any adjournment or adjournments thereof. Any proxy given may be revoked at any
time prior to the exercise of the powers conferred by it by filing with the
Secretary of the Company a written notice signed by the shareholder revoking
such proxy or a duly executed proxy bearing a later date. In addition, the
powers conferred by such proxy may be suspended if the person executing the
proxy is present at the meeting and elects to vote in person. All shares
represented by each properly executed and unrevoked proxy received in time for
the Meeting will be voted (unless otherwise indicated thereon) in the manner
specified therein at the Meeting and any adjournment or adjournments thereof.
The Company will pay the expenses of soliciting proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of shares. In addition to the use of the mails,
some of the Company's directors, officers and regular employees, without extra
compensation, may solicit proxies by telephone, personal interview, or other
means.
The Company's annual report on Form 10-K for the fiscal year ended July 31,
1999 ("fiscal 1999"), as filed with the U.S. Securities and Exchange Commission
is being mailed to shareholders concurrently with the mailing of this Notice of
Annual Meeting and Proxy Statement. The Form 10-K contains, among other things,
financial information regarding the Company and a discussion of developments in
the Company's business during fiscal 1999.
VOTING RIGHTS
The close of business on December 3, 1999 (the "Record Date") has been
fixed by the Board of Directors as the record date for determining shareholders
entitled to notice of and to vote at the Meeting and any adjournment or
adjournments thereof. On the Record Date, there were outstanding 9,563,984
shares of the Company's Common Stock, $.10 par value ("Common Stock"), all of
one class and all of which are entitled to be voted at the Meeting. Holders of
such issued and outstanding shares of Common Stock are entitled to one vote for
each share held by them.
The holders of record of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting, present in person or represented by
proxy, will constitute a quorum for the transaction of business. As to all
matters, each shareholder is entitled to one vote for each share of Common Stock
held. Under Delaware law, abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Under the rules of the New York Stock Exchange ("NYSE"), brokers
who hold shares in street name for customers have the authority to vote on
certain items when they have not received instructions from beneficial owners.
Brokers that do not receive instructions are entitled to vote on the election of
directors and the other matters specified in the foregoing notice for the
Meeting.
With regard to the election of directors, the nominee who receives the
greatest number of votes will be elected to the Board. Shareholders are not
entitled to cumulate votes. Votes against a candidate, votes withheld and
abstentions have no legal effect in the election of directors. In matters other
than the election of directors, the matter must be approved by a majority of the
votes cast on the matter. Under Delaware law and the Company's bylaws,
abstentions are counted as votes cast, and therefore have the same effect as
votes against a matter. Broker non-votes, on the other hand, are not considered
to be votes cast and have no effect on the outcome of a matter.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) each director and
nominee for director of the Company, (ii) the two individuals who served as
Chief Executive Officer during fiscal 1999 and each of the other four most
highly compensated executive officers of the Company, and (iii) all directors
and executive officers of the Company as a group. The Company knows of no person
(or group of affiliated persons) who beneficially owns more than five percent of
the outstanding shares of Common Stock. Information for the officers and
directors is as of September 30, 1999. The address for each individual is 9275
Sky Park Court, San Diego, CA 92123.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED (1)(2)(3)
NAME AND ADDRESS OF ------------------------
BENEFICIAL OWNER NUMBER PERCENT
------------------------------- -------- --------
<S> <C> <C>
Kenneth F. Potashner........................... 234,796 2.4%
Thomas L. Horgan ............................... 80,046 *
Gregg L. McKee................................ 18,600 *
John D. Werderman............................... 28,572 *
Walter P. Robertson............................ 38,786 *
Ted Toch........................................ 24,000 *
Carlton J. Eibl................................... 2,000 *
Mark Rossi...................................... 6,000 *
Karl M. Samuelian............................... 23,774 *
Jean Lavigne ................................... -0- *
All directors and executive officers as
a group (13 persons)............................ 503,149 5.1%
</TABLE>
- ----------
*Less than one percent.
(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each person included in the table or included in
filings with the Securities and Exchange Commission. The Company understands
that each individual has sole voting and investment power for shares
beneficially owned by him, subject to community property laws where
applicable.
(2) Shares of Common Stock subject to options which are currently exercisable or
exercisable within 60 days of September 30, 1999, are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person.
Percentage of ownership is based on 9,560,171 shares of Common Stock
outstanding on September 30, 1999.
(3) Shares of Common Stock beneficially owned include options exercisable within
60 days of September 30, 1999 to purchase 77,492 shares granted to Mr.
Potashner, 75,233 shares granted to Mr. Horgan, 15,324 shares granted to Mr.
McKee, 23,000 shares granted to Mr. Werderman, 24,186 shares granted to Mr.
Robertson, 24,000 shares granted to Mr. Toch, 23,334 shares granted to Mr.
Samuelian, and 6,000 shares granted to Mr. Rossi and options to purchase
305,969 shares granted to all directors and officers as a group.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, with
the terms of office of each class ending in successive years. The term of the
director currently serving in Class I expires with this Annual Meeting of
Shareholders. The directors in Class II and Class III will continue in office
until their terms expire at the 2000 and 2001 Annual Meeting of Shareholders,
respectively. The director elected in Class I at the Meeting will hold office
for a term expiring at the 2002 Annual Meeting of Shareholders and until his
successor is duly elected and qualified.
Holders of Common Stock are entitled to cast one vote for each share held
for one nominee for director in Class I. The nominee receiving the greatest
number of votes will be elected director of the Company in Class I. It is
intended that the shares represented by the enclosed proxy will be voted, unless
otherwise instructed, for the election of the nominee named below. While the
Company has no reason to believe that the nominee will be unable to stand for
election as a director, it is intended that if such an event should occur, such
shares will be voted for such substitute nominee as may be selected by the Board
of Directors.
Set forth below is certain information regarding the nominee for director
and the other directors of the Company who will continue in office for terms
extending beyond the Meeting.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
PERIOD SERVED AS A DIRECTOR,
POSITIONS AND OTHER RELATIONSHIPS
WITH THE COMPANY, AND BUSINESS
NAME AND AGE EXPERIENCE
------------ ----------
<S> <C>
Kenneth F. Potashner, 42 Mr. Potashner has served as a director since
(Class I) April, 1996 and as Chairman since April,
1997. From the time he joined the Company in
April, 1996 until November, 1998, he served
Maxwell as President, Chief Executive
Officer and chief operating officer. In
November, 1998, Mr. Potashner was named
chief executive officer of S3 Incorporated,
a manufacturer of embedded graphics
accelerator chips. From 1991 through 1994,
he was Vice President, Product Engineering,
for Quantum Corporation. From 1994 to April
of 1996, he served as Executive Vice
President, Operations, of Conner
Peripherals.
</TABLE>
4
<PAGE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
PERIOD SERVED AS A DIRECTOR,
POSITIONS AND OTHER RELATIONSHIPS
WITH THE COMPANY, AND BUSINESS
NAME AND AGE EXPERIENCE
------------ ----------
<S> <C>
Mark Rossi, 43 Mr. Rossi was appointed a director of the
(Class II) Company in November, 1997 and elected to a
full term at the Company's Annual
Shareholder Meeting in January, 1998. Mr.
Rossi is a Senior Managing Director of
Cornerstone Equity Investors, L.L.C., a New
York-based private equity firm with assets
under management in excess of $1 billion.
Prior to the formation of Cornerstone Equity
Investors in 1996, Mr. Rossi was President
of Prudential Equity Investors, Inc. Mr.
Rossi's industry focus is on
technology-related and telecommunications
companies. He is a member of the Board of
Directors of True Temper, Inc. and MCMS,
Inc. as well as several privately-held
companies.
Jean Lavigne, 61 Mr. Lavigne was appointed a director of the
(Class II) Company in August, 1999. Mr. Lavigne is Vice
President and Country President in France
for Motorola, Inc., and he is President and
Chief Executive Officer of Motorola, S.A.
Prior to joining Motorola, Mr. Lavigne was
with Digital Equipment Corporation ("DEC")
in Europe where he was responsible for
Interconnect Technology and served as a
member of DEC's European Government Affairs
Team.
Karl M. Samuelian, 67 Mr. Samuelian has been a director of the
(Class III) Company since 1967 and served as Secretary
from that time until June, 1996. From 1978
to June, 1980, he also held the office of
Chairman of the Board of the Company. For
more than five years, Mr. Samuelian has been
a shareholder in the law firm of Parker,
Milliken, Clark, O'Hara & Samuelian, A
Professional Corporation, and a partner in
the predecessor law partnership.
Carlton J. Eibl, 39 Mr. Eibl was appointed a director in July,
(Class III) 1998 and named Chief Executive Officer and
President of the Company in November, 1999.
From February 1999 until he formally joined
the Company on December 1, 1999, Mr. Eibl
served as President and Chief Operating
Officer of Stratagene Corporation, a
privately-held biotechnology company. Prior
thereto, Mr. Eibl held various executive
positions with Mycogen Corporation, a
diversified, publicly-held agribusiness and
biotechnology company. Mr. Eibl joined
Mycogen in 1993 as Executive Vice President
and General Counsel. In 1995, he was
appointed President and Chief Operating
Officer and in 1997 he became Chief
Executive Officer. The Dow Chemical Company
acquired Mycogen at the end of 1998.
</TABLE>
5
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven regular and
special meetings during fiscal 1999. All directors continuing in office attended
more than 75% of the aggregate of (a) the total number of meetings of the Board
of Directors and (b) the total number of meetings of all committees of the Board
on which he served.
The Board of Directors has an Audit Committee, the function of which is to
assist the full Board in fulfilling its responsibilities with respect to
corporate accounting, auditing and reporting practices. In performing such
function, the Audit Committee maintains a direct line of communication with the
Company's independent auditors. This committee held two meetings during fiscal
1999, and its current members who are continuing, or nominated to continue, in
office are Messrs. Rossi, Eibl and Samuelian.
The Board also has a Compensation Committee that authorizes and reviews
officers' compensation. This committee held two meetings during fiscal 1999, and
its current members who are continuing in office are Messrs. Rossi and
Samuelian.
The Board also has an Executive Committee empowered to act on behalf of the
Board in appropriate circumstances. The current members of the Executive
Committee who are continuing in office are Messrs. Potashner and Rossi. The
Board has no separately designated Nominating Committee.
COMPENSATION OF DIRECTORS
Each director of the Company (other than Mr. Potashner and Mr. Eibl who
receive no compensation other than that received as officers of the Company)
receives compensation of $6,250 per quarter and $1,000 per Board and Committee
meeting attended ($500 per Board or Committee telephonic meeting in which such
director participates).
The Board has adopted, and is submitting for shareholder approval at the
Meeting, the Maxwell Technologies, Inc. 1999 Director Stock Option Plan (the
"Director Option Plan") which authorizes the granting of ten-year options to
purchase an aggregate of 75,000 shares of the Company's Common Stock to
non-employee directors of the Company during the term of the Director Option
Plan which expires in 2009 (see "PROPOSAL TO ADOPT THE 1999 DIRECTOR STOCK
OPTION PLAN" below). This plan succeeds a similar director stock option plan
that expired in 1999. Under the Director Option Plan, each eligible director
automatically receives options to purchase 10,000 shares of Company Common Stock
on the first business day following such director's initial Annual Shareholders'
Meeting of the Company, and options to purchase 3,000 shares following
subsequent Annual Shareholders' Meetings. The Director Option Plan also gives
the Board the discretion to approve special options to eligible directors. The
option price per share is the fair market value based on the public trading
price of such shares on the date of grant. Options granted to directors vest in
full on the first anniversary of the date of grant.
The Company maintains the Maxwell Technologies, Inc. 1994 Director Stock
Purchase Plan (the "Director Purchase Plan"), under which directors, other than
those who are full-time employees of the Company, have the opportunity to
purchase directly from the Company shares of Common Stock at 100% of the public
trading price of the shares. An aggregate of 100,000 shares have been authorized
for purchase by directors under the plan. The Director Purchase Plan authorizes
purchases by eligible directors from and after January 1, 1995, the effective
date of the plan, until the earlier of ten years thereafter or the issuance of
all shares authorized for purchase. As of July 31, 1999, 47,826 shares remain
available for purchase under the Director Purchase Plan.
6
<PAGE>
PROPOSAL TO AMEND TO THE COMPANY'S
1995 STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Maxwell Technologies, Inc. 1995 Stock Option Plan (the "1995
Plan") which provides for an increase of 400,000 shares in the number of shares
of the Company's Common Stock authorized for grant of options to purchase such
shares to key employees of the Company and its subsidiaries, including officers
and directors who are also employees.
On November 22, 1999, the date on which the Board of Directors adopted the
proposed amendment, 183,885 shares remained available for grant under the 1995
Plan. On that date the Board amended the Plan, subject to shareholder approval,
to add 400,000 shares authorized for the grant of options. After this amendment,
the number of shares available under the 1995 Plan for grant of options is
583,885 shares. A total of 1,485,166 shares are currently subject to outstanding
employee stock options (including options for 29,920 granted under a prior plan
that has terminated).
The Board of Directors of the Company believes that the Company's ability
to grant employee stock options plays a critical role in the ability of the
Company to attract and retain key employees by affording them an opportunity to
acquire a proprietary interest in the Company. The Company has undergone
significant growth in its business operations in the last two years, with a
resultant expansion of the employee base from under 500 to approximately 1,000
employees. A critical part of this growth has been the Company's ability to
recruit key managers, technical and sales and marketing staff and others needed
to sustain the growth environment in a successful fashion. The Board believes
that the Company's ability to offer equity incentives is crucial to its ability
to attract and retain such key individuals.
TERMS AND CONDITIONS OF THE PLAN
The 1995 Plan authorizes the granting to key employees during the ten-year
period ending on October 23, 2005, of stock options to purchase shares of the
Company's Common Stock. Prior to the proposed amendment, the maximum number of
shares available for options granted under the 1995 Plan was 1,990,000 shares.
After the proposed amendment, the maximum number of authorized shares will be
2,390,000, of which 350,869 shares have already been issued upon the exercise of
options, 1,455,246 shares are currently subject to outstanding options, and
583,885 shares are available for future grants of options. The 1995 Plan
provides the flexibility for the grant of options intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and options which do not so qualify, referred to
as "non-qualified stock options."
The 1995 Plan is administered by the Board of Directors of the Company or,
at the discretion of the Board, by a Stock Option Committee appointed by the
Board (the "Committee"). The Board of Directors of the Company has delegated the
authority to administer the 1995 Plan to such a Committee. Subject to the
provisions of the 1995 Plan, the Committee has the authority to determine the
employees to whom and the times at which options are granted, the price and
terms of and the number of shares covered by each option, and whether it is
intended to be an incentive stock option or a non-qualified stock option.
The number of shares subject to incentive stock options that may become
exercisable by any one individual for any calendar year is limited to a dollar
value of $100,000 (measured by the fair market value of the shares on the date
of grant). Any options becoming exercisable in excess of such limit in any
calendar year will be non-qualified stock options.
The purchase price of shares with respect to which an option is granted
under the 1995 Plan and the terms covering payment of such purchase price are
determined by the Committee in its sole discretion, but such price may not be
less than 100% of the fair market value of the shares on the date the option is
granted. Fair market value is defined as the closing selling price for the
Common Stock in the public trading market on the date of grant. In the event,
however, that an incentive stock option is granted to an employee who, at the
time the option is granted, owns stock representing more than ten percent of the
total combined voting power of all classes of stock of the Company or any
subsidiary, the purchase price of shares with respect to which such option is
granted must be at least 110% of the fair market value of the shares on the date
of grant.
7
<PAGE>
Options granted under the 1995 Plan are exercisable in such increments and
at such times as the Committee shall specify, provided that in the event of a
"change in control" of the Company, as defined in the Plan, options will become
fully exercisable. In addition, no incentive stock option may be exercised after
the expiration of ten years from the date of grant, or five years from the date
of grant with respect to options granted to an employee who owns more than 10%
of the outstanding shares of the Company's stock. No non-qualified stock option
may be exercised more than eleven years after the date of grant. Shares covered
by the unexercised portion of any terminated or expired option may again be the
subject of further options under the 1995 Plan.
Upon any exercise of an option granted under the 1995 Plan, the purchase
price of the shares purchased upon such exercise shall be paid in full (i) in
cash, (ii) by delivery to the Company of shares of its Common Stock having a
fair market value equal to the purchase price or (iii) by a combination of cash
and stock. The fair market value of shares of the Company's Common Stock
delivered in full or partial payment of the exercise price of an option will be
determined by the Committee as of the date of exercise in the same manner by
which the fair market value of shares of the Company's Common Stock is
determined on the date of grant of an option.
The Company will receive no consideration upon the grant of any option
under the 1995 Plan. Cash proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of options granted under the 1995 Plan
constitute general funds of the Company which may be used for general corporate
purposes.
Under the 1995 Plan, if an optionee's employment with the Company is
terminated for any reason, the number of shares purchasable under any option
granted thereunder held by such optionee is limited to the number of shares
which are purchasable by him at the date of such termination. If termination of
employment occurs for any reason other than such optionee's death, the option
will expire unless exercised by him within sixty days after the date of such
termination. If termination of employment occurs by reason of death, the option
will expire unless exercised by the optionee's successor within one year after
the date of death.
Options granted under the 1995 Plan are exercisable only by the optionee
during such optionee's lifetime and are not transferable except by will or the
laws of descent and distribution.
In the event of any change in the Common Stock by reason of
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or like capital adjustment, the 1995 Plan provides that the Board of
Directors shall make appropriate adjustments in the aggregate number, class and
kind of shares available for option grants under the 1995 Plan or subject to
outstanding options thereunder and also make appropriate adjustments in the per
share exercise price of outstanding options.
In the event of the merger, consolidation or other reorganization of the
Company, or in the event of any dissolution or liquidation of the Company, the
1995 Plan provides that the Board of Directors shall elect either to (i)
appropriately adjust the number, class, kind and exercise price of shares
subject to all outstanding options thereunder and shares which may become
subject to options granted thereafter, or (ii) terminate the 1995 Plan and any
options theretofore granted thereunder, subject to the right of optionees under
the 1995 Plan to exercise, in whole or in part (including the portions of
options which may not otherwise have been exercisable due to any insufficient
passage of time), their options during a period of not less than thirty days
following notification by the Company of the event causing such termination.
The 1995 Plan may be amended, suspended or terminated by the Board of
Directors of the Company at any time, except that no amendment, suspension or
termination may affect, without his consent, any right or obligation of an
optionee under an option theretofore granted to him, and except that no
amendment made without shareholder approval shall (i) increase the maximum
number of shares for which options may be granted (except pursuant to
adjustments of the types described above), (ii) change the provisions
relating to the expiration dates of options, (iii) change the provisions
relating to the establishment of the option price (except pursuant to
adjustments of the types described above), or (iv) change the expiration date
of the 1995 Plan. No options may be granted under the 1995 Plan after its
termination on October 24, 2005.
8
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. No federal income tax consequences result from
the grant of an incentive stock option, and generally the exercise of an
incentive stock option will not result in the recognition of income by an
optionee. If an optionee satisfies certain holding period requirements for
shares acquired upon the exercise of an incentive stock option, the full
amount of his gain upon the sale of such shares (measured by the difference
between the amount of his proceeds of sale less the exercise price) will
normally be treated as long-term capital gain. The Company will not be
entitled to any deduction under such circumstances.
NON-QUALIFIED OPTIONS. No federal income tax consequences result from
the grant of a non-qualified stock option. Generally, an optionee will
recognize ordinary income upon exercise of a non-qualified stock option in an
amount equal to the difference between the fair market value of the shares
acquired on the date the option is exercised and the aggregate exercise price
for such shares. The Company will be entitled to an income tax deduction
equal to the amount of ordinary income recognized by an optionee as a result
of the exercise of a non-qualified stock option.
The preceding discussion under the heading "Federal Income Tax
Consequences" is based on federal tax laws and regulations as in effect on
the date of this Proxy Statement and does not purport to be a complete
description of the federal income tax aspects of the 1995 Plan.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendment to the 1995 Plan by the shareholders
of the Company will require the affirmative vote of a majority of the shares
of Common Stock present and voting on the proposal at the Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION
PLAN.
PROPOSAL TO ADOPT THE
1999 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Maxwell Technologies, Inc. 1999 Director Stock Option Plan (the "Director
Option Plan"). The Director Option Plan replaces a similar plan that expired
during fiscal 1999 and provides for options for 10,000 shares to be granted
to each non-employee director following the Annual Shareholder Meeting at
which such individual is first elected to the Board. Continuing directors
will be granted options for 3,000 shares on the day following each Annual
Shareholder Meeting. A total of 75,000 shares of Common Stock have been
authorized for the grant of options under the Director Option Plan.
The Board of Directors believes that the Director Option Plan provides
an important incentive to attract qualified individuals to serve as members
of the Board. During the last few years, the Board has undergone significant
change in its membership to align the skills and experience of the directors
with the orientation of the Company towards large commercial markets for its
products and services. The ability to grant options to directors will assist
the Company in attracting and retaining Board members with the background and
experience necessary to assist the Company in achieving its strategic goals.
TERMS AND CONDITIONS OF THE PLAN
The Director Option Plan authorizes the granting during the period
commencing on August 31, 1999, the date of its adoption by the Board of
Directors of the Company, and concluding on the tenth anniversary thereof, of
stock options to purchase an aggregate of 75,000 shares of the Company's
Common Stock. Persons who are incumbent directors of the Company who are not
at the time employees of the Company or any subsidiary of the Company are the
only persons eligible to participate in the Director Option Plan. As of the
date of this Proxy Statement options to purchase a total of 75,696 shares are
outstanding under the option plan for directors which expired in August, 1999.
9
<PAGE>
The Director Option Plan is administered by the Board of Directors of
the Company which has the authority, subject to the terms of the Director
Option Plan, to prescribe, amend and rescind rules and regulations pertaining
to the Plan and the administration thereof. The Director Option Plan provides
that each non-employee director will automatically receive annual grants of
options to purchase 3,000 shares of the Company's Common Stock on the first
business day following the scheduled organizational meeting of the Board of
Directors of the Company (which is the first meeting of the Board following
the Company's Annual Meeting of Shareholders), provided that any eligible
director on the date of any such annual grant who was not a member of the
Board of Directors on the date of the preceding grant of options under the
Director Option Plan and who was not an employee of the Company at any time
after the date of such preceding grant will receive an initial grant of
options to purchase 10,000 shares of the Company's Common Stock. In addition,
the Director Option Plan provides that the Board can approve special grants
of options to eligible directors.
The purchase price of shares covered by an option granted under the
Director Option Plan is the fair market value (as defined in the Plan) of the
Company's Common Stock on the date of grant of the option. Generally, fair
market value is defined as the closing selling price for such stock in the
public trading market on the date of grant.
Each option granted under the Director Option Plan becomes exercisable
in full on the first anniversary of the date on which it was granted ("Vested
Options"), provided that no such option may be exercised after the expiration
of ten years from the date of grant. Shares covered by the unexercised
portion of any terminated or expired option may again be the subject of
further options under the Director Option Plan.
Upon any exercise of an option granted under the Director Option Plan,
the purchase price of the shares purchased upon such exercise shall be paid
in full (i) in cash, (ii) by delivery to the Company of shares of its Common
Stock having a fair market value equal of the purchase price or (iii) by a
combination of cash and stock. The fair market value of shares of the
Company's Common Stock delivered in full or partial payment of the exercise
price of an option will be determined by the Board of Directors as of the
date of exercise in the same manner by which the fair market value of shares
of the Company's Common Stock is determined on the date of grant of an option.
The Company receives no consideration upon the grant of any option under
the Director Option Plan. Cash proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of options granted under the
Director Option Plan constitute general funds of the Company which may be
used for general corporate purposes.
Under the Director Option Plan, if an optionee's service as a director
of the Company is terminated for any reason, the number of shares that may be
purchased is limited to the shares subject to Vested Options. If termination
of service as a director occurs by reason of death, the vested options will
expire unless exercised by the optionee's successor within one year after the
date of death.
Options granted under the Director Option Plan are exercisable only by
the optionee during such optionee's lifetime and are not transferable except
by will or the laws of descent and distribution.
In the event of any change in the Common Stock by reason of
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or like capital adjustment, the Director Option Plan provides that
the Board of Directors shall make appropriate adjustments in the aggregate
number, class and kind of shares available for option grants under the
Director Option Plan or subject to outstanding options thereunder and also
make appropriate adjustments in the per share exercise price of outstanding
options.
In the event of the merger, consolidation or other reorganization of the
Company, or in the event of any dissolution or liquidation of the Company,
the Director Option Plan provides that, in the event that outstanding options
are not adjusted in the number, class, kind and exercise price of shares nor
are substitute options in a successor entity made available, the Director
Option Plan will terminate and any options theretofore granted thereunder
will terminate, subject to the right of optionees under the Director Option
Plan to exercise, in whole or in part (including the portion of options which
may not otherwise have been exercisable due to any insufficient passage of
time), their options during a period of not less than thirty days following
notification by the Company of the event causing such termination.
10
<PAGE>
The Director Option Plan may be amended, suspended or terminated by the
Board of Directors of the Company at any time. The Board of Directors of the
Company also has the right to modify, extend or renew outstanding options
granted under the Director Option Plan or to authorize the grant of new
options in substitution therefor, provided that no such action may affect,
without his consent, any right or obligation of an optionee under an option
previously granted to him and except that no such power shall be exercised in
a manner which would adversely affect the qualification of the Director
Option Plan or any other stock related plan of the Company under Rule 16b-3
under the Securities Exchange Act of 1934. No options may be granted under
the Director Option Plan after its termination on August 31, 2009.
FEDERAL TAX CONSEQUENCES
Options granted under the Director Option Plan will not constitute
"incentive stock options" as defined in the Internal Revenue Code of 1986, as
amended, but rather will constitute "non-qualified" options. No federal
income tax consequences result from the grant of a non-qualified stock
option. Generally, an optionee will recognize ordinary income upon exercise
of a non-qualified stock option in an amount equal to the difference between
the fair market value of the shares acquired on the date the option is
exercised and the aggregate exercise price for such shares. The Company will
be entitled to an income tax deduction equal to the amount of ordinary income
recognized by an optionee as a result of the exercise of a non-qualified
stock option. The preceding discussion is based on federal tax laws and
regulations as in effect on the date of this Proxy Statement and does not
purport to be a complete description of the federal income tax aspects of the
Director Option Plan.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendment to the Director Option Plan by the
shareholders of the Company will require the affirmative vote of a majority
of the shares of Common Stock present and voting on the proposal at the
Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S DIRECTOR STOCK
OPTION PLAN.
PROPOSAL TO ADOPT THE 1999 MANAGEMENT
EQUITY OWNERSHIP PROGRAM
The Board of Directors has adopted, subject to shareholder approval, the
1999 Management Equity Ownership Program (the "Program") which provides for
loans from the Company to key executives to assist in the purchase of Company
Common Stock. The Board believes that the Company and the shareholders will
benefit from a greater ownership interest on the part of the senior
management. The purpose of the Program is to encourage and facilitate a
significant increase in the investment by management in Company Common Stock,
thereby aligning the interests of management with the shareholders. Purchases
of stock will be financed by full-recourse, interest-bearing loans from the
Company, resulting in an element of investment risk that generally is not
found in other executive incentive plans. Executives participating in the
Program will be fully at risk, both on the upside and on the downside, on the
value of the stock purchased and will be required to repay loans from the
Company in full.
The Program provides for loans from the Company in a total amount
outstanding at any point in time not to exceed $900,000 to assist eligible
executives in the purchase of stock in the public trading market. Eligibility
will be limited to the Company's chief executive officer and other executive
officers and management personnel selected by the Board. The amount of loans
available will vary from $300,000 for the chief executive officer to $100,000
each for executive officers and $50,000 each for other management personnel.
The principal amount of loans under the Program that are repaid will again be
available for additional loans during the term of the Program.
Under the Program, an eligible executive must acquire shares in the
public trading market in order to receive a loan in an amount up to the
purchase price of the shares, not to exceed the applicable maximum under the
Program. The loans are full recourse loans secured by the shares or other
acceptable collateral. Full recourse loans require the borrower to be
personally liable for the full amount of the loan, regardless of the value of
the shares purchased with the proceeds of the loan. Principal and accrued
interest under the loans are payable in annual installments over a four-year
period and bear interest at the "applicable federal rate" within the meaning
of Section 1274(d) of the Internal Revenue Code of 1986, as amended. The
applicable federal rate is currently 6.2% per annum. If all or a portion of
the shares purchased with the proceeds of a loan under the Program are sold,
a proportionate amount of
11
<PAGE>
the loan will be accelerated and become due and payable. In addition, if a
loan recipient voluntarily terminates employment with the Company or is
terminated from employment by the Company with cause, any loan to that
individual under the Program will be accelerated and become due and payable
in full.
The Program is administered by the Board of Directors. The Board has the
authority to amend or terminate the Program, but no such amendment or
termination will impact outstanding loans without agreement of the loan
recipient. Unless terminated earlier by the Board, the Program will terminate
ten years after its adoption.
VOTE REQUIRED FOR APPROVAL
Approval of the Program by the shareholders of the Company will require
the affirmative vote of a majority of the shares of Common Stock present and
voting on the proposal at the Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL OF THE MANAGEMENT EQUITY OWNERSHIP PROGRAM.
12
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation earned by the two individuals who served as the Company's Chief
Executive Officer during fiscal 1999 and its four other most highly compensated
executive officers (the "Named Executive Officers") whose total salary and bonus
for fiscal 1999 exceeded $100,000, for services rendered to the Company and its
subsidiaries in all capacities during that fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------
ANNUALCOMPENSATION (1) STOCK OPTION
---------------------------------- RESTRICTED GRANTS (4) ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OTHER(2) STOCK AWARDS(3) (NO. OF SHARES) COMPENSATION (5)
- ----------------- ---- ------ ----- -------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth F. Potashner (6) 1999 $ 339,062 $ 181,875 $ 5,142 $ -0- -0- $ 50,000
Chief Executive Officer, 1998 469,877 495,009 4,038 -0- 200,000 170,000
Chairman of the Board, 1997 400,004 400,000 2,850 190,000 50,000 361,031
Director
Thomas L. Horgan (6) 1999 260,841 156,416 6,600 -0- 227,890 -0-
Chief Executive Officer, 1998 192,123 86,051 3,000 -0- 2,000 50,000
President, Director 1997 180,083 81,630 -0- -0- 9,000 19,254
Gregg L. McKee. 1999 207,795 85,664 4,486 -0- 24,000 -0-
Vice President 1998 197,242 108,724 8,286 -0- 2,000 35,439
1997 167,990 82,617 -0- -0- 10,000 49,863
John D. Werderman 1999 185,782 94,610 4,625 -0- 24,000 50,000
Vice President 1998 170,160 68,065 5,495 -0- 12,000 17,598
1997 121,162 38,166 -0- -0- 59,000 37,475
Walter P. Robertson 1999 177,085 94,475 3,217 -0- 24,000 -0-
Vice President 1998 175,349 83,400 7,153 -0- 2,000 -0-
1997 165,713 69,228 -0- -0- 69,000 -0-
Ted Toch (7) 1999 182,211 101,628 430 -0- 24,000 10,286
Vice President 1998 10,096 8,413 -0- -0- 80,000 -0-
</TABLE>
- --------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers under the Company's Savings Plan and Deferred Compensation Plan.
(2) Amounts in this column consist of matching contributions made by the Company
under its Savings Plan. They do not include the dollar value of certain
perquisites and other personal benefits, securities or property the
recipient received as personal benefits. Although such amounts cannot be
determined precisely, the Company has concluded that the aggregate amount
thereof does not exceed as to any of the named individuals the lesser of
$50,000 and 10% of the total salary and bonus paid to such individual for
fiscal 1999.
(3) Mr. Potashner was awarded 10,000 shares of restricted stock in fiscal 1997,
which restricted shares vest 25% one year after grant and each month
thereafter an additional 1/48 of the total number of shares granted become
vested. Mr. Potashner has full voting power and dividend rights with
respect to all of the restricted stock. At July 31, 1999, Mr. Potashner
held a total of 98,437 shares of such restricted stock having a value based
on the closing price of the Company's Common Stock on that date of
$2,559,362.
13
<PAGE>
(4) Options shown in this column are options to purchase shares of Common Stock
of Maxwell Technologies, Inc. granted under the Company's 1995 Stock Option
Plan. Several individuals in the table also received options in fiscal 1997
to purchase common stock in the Company's operating subsidiaries as
follows: Mr. Potashner - 100,000 shares in each of Maxwell Energy Products,
Inc. ("Energy Products"), I-Bus, Inc. ("I-Bus"), Maxwell Technologies
Systems Division, Inc. ("Systems") and Maxwell Information Systems, Inc.
("Information Systems"); Mr. Horgan - 33,750 shares in Pure Pulse
Technologies, Inc. ("PurePulse") and 37,500 shares in each of Energy
Products, I-Bus, Systems and Information Systems; Mr. McKee - 125,000
shares in Energy Products, 22,500 shares in PurePulse and 25,000 shares in
each of I-Bus, Systems and Information Systems; Mr. Werderman - 25,000
shares in Energy Products, 100,000 shares in I-Bus, 25,000 shares in
Information Systems, 22,500 shares in PurePulse and 50,000 shares in
Systems; Mr. Robertson - 100,000 shares in Systems, 22,500 shares in
PurePulse and 25,000 shares in each of Energy Products, I-Bus and
Information Systems. In fiscal 1998 Mr. Toch was granted options to
purchase 100,000 shares of common stock in PurePulse. Mr. Potashner
received options in fiscal 1996 to purchase 150,000 shares of PurePulse
common stock.
(5) For Mr. Potashner, represents amounts paid or accrued in fiscal 1997 for
relocation expenses including certain carrying and sale-related costs for
his former residence, and related tax offset payments; and in fiscal 1998
and fiscal 1999 for certain non-qualified retirement benefits. For Mr.
Horgan, the fiscal 1998 amount is a loan from the Company made at point of
hire, which was forgivable two years after Mr. Horgan's fiscal 1996 hire
date. For Mr. Werderman, the fiscal 1999 amount is a loan from the Company
made at point of hire, which was forgivable two years after Mr. Werderman's
fiscal 1997 hire date. For Mr. Horgan for fiscal 1996, Mr. McKee for fiscal
years 1998 and 1999, Mr. Werderman for fiscal years 1998 and 1997 and Mr.
Toch for fiscal year 1999, the amounts are reimbursements of relocation
expenses (including reimbursement of brokerage commissions on the sale of a
residence). During fiscal 1999 Mr. Werderman received a loan of $50,000
from the company which is forgivable if Mr. Werderman remains employed with
the Company through August 31, 2000.
(6) In November, 1998, Mr. Potashner stepped down from his positions of Chief
Executive Officer, President and Chief Operating Officer and continues as
Chairman, with an on-going executive role with the Company. In April, 1999,
Mr. Horgan was appointed Chief Executive Officer, President and Chief
Operating Officer. Mr. Horgan resigned from these positions in November,
1999.
(7) Mr. Toch was hired as an executive officer in fiscal year 1998.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information on grants of options to purchase
stock of the Company pursuant to the 1995 Stock Option Plan to those Named
Executive Officers who received options during fiscal 1999. Pursuant to
Securities and Exchange Commission rules, the table also shows the value of the
options at the end of the ten year option terms if the stock price were to
appreciate annually by 5% and 10%, respectively. These assumed values may not
reflect actual value at the times indicated.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM
NAME GRANTED (1) FY 1999 (2) (PER SHARE) DATE 5% 10%
- --------------------- ----------- ----------- ----------- ----------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Horgan 227,890 34.16% 25.00 05/21/2009 $2,654,948 $7,602,229
Gregg L. McKee 24,000 3.60% 22.50 05/21/2009 339,603 860,621
John D. Werderman 24,000 3.60% 22.50 05/21/2009 339,603 860,621
Walter P. Robertson 24,000 3.60% 22.50 05/21/2009 339,603 860,621
Ted Toch 24,000 3.60% 22.50 05/21/2009 339,603 860,621
</TABLE>
- ----------
(1) These options are either incentive stock options or non-qualified stock
options and were granted at a purchase price no less than the fair market
value of the underlying Company Common Stock based on the closing trading
price of such stock on the date of grant. The options have a term of ten
years. The increments in which the options are exercisable are determined
by the committee that administers the plan.
(2) Total options include options covering 24,000 shares of Company Common
Stock granted in fiscal 1999 to directors of the Company under the Director
Stock Option Plan.
15
<PAGE>
FISCAL YEAR END OPTION VALUES
Shown below is information on each Named Executive Officer with respect to
(i) the value of stock options exercised by such person in fiscal 1999, measured
in terms of the closing price of the Company's Common Stock on the date of
exercise, and (ii) the value of unexercised options to purchase the Company's
Common Stock held by such person on July 31, 1999, measured in terms of the
closing price of the Company's Common Stock on that date.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
ACQUIRED JULY 31, 1999 (1) JULY 31, 1999 (1)
ON EXERCISE VALUE --------------------------------- -----------------------------
NAME (NO. OF SHARES) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- -------------- -------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth F. Potashner 97,923 $2,342,790 58,495 194,662 $ 580,942 $ 932,951
Thomas L. Horgan -0- -0- 56,243 230,647 805,418 489,222
Gregg L. McKee 21,276 386,195 15,324 41,400 202,650 335,175
John D. Werderman 14,000 396,500 10,000 56,000 62,925 437,325
Walter P. Robertson 14,400 306,628 13,572 49,028 164,043 506,419
Ted Toch -0- -0- 24,000 80,000 70,488 248,472
</TABLE>
- ----------
(1) Does not include options held by the Named Executive Officers to purchase
shares of common stock in five of the Company's operating subsidiaries
under the stock option plans of such subsidiaries. All options held by
these individuals under such subsidiary stock option plans were granted in
fiscal 1997, except for options to purchase 150,000 shares of common stock
of the Company's PurePulse Technologies, Inc. subsidiary granted to Mr.
Potashner in fiscal 1996, and 100,000 shares of common of the Company's
PurePulse Technologies, Inc. subsidiary granted to Mr. Toch in fiscal 1998,
and are described in footnote (4) to the Summary Compensation Table. With
the exception of Mr. Potashner's and Mr. Toch's PurePulse options, of which
90,000 and 25,000 shares, respectively, were exercisable, 50% of such
subsidiary options described in said footnote (4) were exercisable within
60 days of July 31, 1999. No public market exists for the common stock of
any of the Company's subsidiaries. For purposes of the above table, no
value has been attributed to the subsidiary stock options.
16
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the five year cumulative total
return to shareholders on the Company's Common Stock with the five year
cumulative total return on the NASDAQ and a peer group of comparable companies
identified therein.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG MAXWELL TECHNOLOGIES, INC., NASDAQ, AND INDUSTRY PEER GROUP
YEARS ENDING JULY 31, 1994-1999
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 07/1994 07/1995 07/1996 07/1997 07/1998 07/1999
- ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maxwell Technologies, Inc. 100.0 93.9 157.6 563.6 609.1 630.3
Nasdaq Stock Market (US & Foreign) 100.0 138.8 150.4 221.8 258.8 364.9
Self-Determined Peer Group 100.0 166.9 120.9 165.6 127.8 174.3
</TABLE>
Companies in the Self-Determined Peer Group
ADAPTIVE BROADBAND CORP COHERENT INC
CUBIC CORP 1 L C TECHNOLOGY INC
KAMAN CORP TITAN CORP
WATKINS JOHNSON CO
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding day is used.
D. The index level for all series was set to $100.0 on 07/29/1994.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON EXECUTIVE
COMPENSATION
As described in more detail below, the Company's executive compensation
consists of three principal components--base salary and annual incentive
compensation as determined by the Compensation Committee of the Board of
Directors and stock option awards as determined by the Stock Option Committee of
the Board of Directors. During fiscal 1999, the Compensation Committee also
acted as the Stock Option Committee.
The compensation policies of the Company are designed to set its executive
compensation, including salary and short-term and long-term incentive programs,
at a level consistent with amounts paid to executive officers of companies of
similar size and business orientation and consistent with marketplace
requirements to attract and retain management personnel with the experience and
background to drive the commercialization of the Company's technologies. In this
regard, the compensation policies of the Company are particularly designed to
link executive officer bonus compensation to the Company's performance in the
short-term and to emphasize compensation from equity, primarily employee stock
options, for long-term incentives.
The Company's policy is to qualify executive compensation to be deductible
under applicable provisions of the Internal Revenue Code of 1986. However,
occasionally, in hiring a key individual such as the chief executive officer,
one or another component of the compensation package may not fully qualify for
deductibility under such provisions. Under those circumstances, the Board may
conclude that inclusion of this element of compensation is an important factor
in the Company's ability to secure the services of the particular individual and
is therefore in the Company's best interest, notwithstanding the potential
inability to deduct the particular component of compensation.
The three principal components of the Company's executive compensation are
as follows:
(1) BASE SALARY. Base salary is intended to be set at a level consistent with
amounts paid to executive officers of companies of comparable size and
business areas and generally reflective of the performance of the Company
and the individual. Salaries for executive officers are reviewed on an
annual basis. Base salary (and annual incentive bonus compensation) during
fiscal 1999 for Mr. Potashner and Mr. Horgan, each of whom was Chief
Executive Officer for part of the year, were set forth in their respective
employment agreements discussed below. Mr. Eibl's base salary and annual
bonus incentive for the balance of the current fiscal year after he
formally joins the Company as President and Chief Executive Officer on
December 1, 1999 is set forth in his employment agreement described below.
(2) ANNUAL INCENTIVE COMPENSATION. The Company fell slightly short of the
revenue and earnings per share target in fiscal 1999 for target bonus
payout to executive officers, and other than for the CEO, bonuses of just
under 50% of base compensation were paid. The determination of the exact
percentage was at the discretion of the CEO. Pursuant to their respective
employment contracts described below and based on the percentage of the
revenue and earnings targets achieved, for fiscal 1999, Mr. Potashner
received a bonus of $181,875, or just under 100% of his base compensation,
prorated for the time he served in the Chief Executive Officer capacity,
and Mr. Horgan received $156,416, or just under 100% of his base
compensation, prorated for the time he served in the Chief Executive
Officer capacity. For fiscal 1999, the Compensation Committee adopted a
bonus plan for executive officers similar to that in fiscal 1998, with a
range of new revenue and earnings per share performance targets
established.
18
<PAGE>
(3) LONG TERM INCENTIVE COMPENSATION/STOCK OPTIONS. The Company's long-term
incentive program consists of a stock option program pursuant to which the
Chief Executive Officer and other executive officers (as well as other key
employees) are periodically granted stock options at the then fair market
value of the Company's Common Stock. In addition, the Company adopted a
program in early fiscal 1997 for the one-time award to executives of stock
options in the Company's operating subsidiaries. These option programs are
designed to reward and retain executive officers over the long-term and to
link the value of the incentive to increases in the value of the
subsidiaries and in the Company's stock price over time, benefiting
shareholders as a whole.
Dated: November 29, 1999
COMPENSATION AND STOCK OPTION COMMITTEE
Carlton J. Eibl
Karl M. Samuelian
Mark Rossi
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, the Compensation Committee consisted of Messrs.
Samuelian, Rossi and Eibl, and the current members of such committee are Messrs.
Samuelian and Rossi. None of the members of the Compensation Committee served as
an officer or employee of the Company or its subsidiaries during the past fiscal
year, and there were no compensation committee interlocks with other companies
within the meaning of the Securities and Exchange Commission's rules during the
past fiscal year.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
MR. EIBL. In November 1999, the Company entered into an Employment
Agreement ("Agreement") with Carlton J. Eibl pursuant to which Mr. Eibl is to
become the President and Chief Executive Officer of the Company effective
December 1, 1999. The Agreement requires Mr. Eibl to perform duties associated
with the office of chief executive of the Company plus other duties or positions
as the Board of Directors may require. The Agreement provides for a base salary
of $425,000 per year, reviewed annually, with an annual bonus opportunity
targeted at 100% of base salary, to be determined by the Board of Directors.
Such bonus will be based on financial and non-financial performance targets set
by the Board of Directors. The Agreement provides for the grant of special,
non-qualified options to purchase 294,030 shares of the Company's common stock
at an exercise price of $8.75 per share, with four year vesting at the rate of
1/48 of the total number of shares per month commencing with December, 1999, as
long as Mr. Eibl is with the Company.
Under the Agreement, Mr. Eibl will become immediately vested in all the
options, and receive payments equal to twice his annual salary then in effect,
in the event a "change of control" occurs and either his compensation or
responsibilities are reduced or the Company's principal place of business is
moved outside of San Diego County. A "change of control" is defined as the
acquisition by a person or group of a majority of the Company's stock by direct
purchase or through merger, the liquidation or sale of substantially all of the
assets of the Company or a change in the majority of the members of the Board of
Directors other than through membership changes determined by the Board itself.
If Mr. Eibl is terminated without cause prior to the second anniversary date of
the Agreement, he will be paid two times his annual base salary in effect on the
date of termination and his stock options will continue to vest until the second
anniversary date of his Agreement. If the termination occurs after the second
anniversary date of the Agreement, he will receive the average of the total
annual compensation (annual base salary plus bonuses earned) for the preceding
two years. If Mr. Eibl voluntarily resigns or is terminated for cause, he will
be paid only such salary and accrued vacation pay as is then due him.
19
<PAGE>
MR. HORGAN. The Company entered into an Employment Agreement with Mr.
Horgan upon his appointment as President and Chief Executive Officer in April,
1999. Mr. Horgan resigned from his positions with the Company in November, 1999,
and under the Employment Agreement, he will receive a total of $700,000,
representing an amount equal to twice his annual salary then in effect. In
addition, Mr. Horgan will continue to vest in a portion of the stock options
covering 227,890 shares granted to him pursuant to the Employment Agreement.
Such options vest at the rate of 1/48 of the total shares each month commencing
with April, 1999, and will continue to vest at that rate through April, 2001,
after which the vested options must be exercised within 60 days or they will
expire.
MR. POTASHNER. In March, 1996, the Company entered into an Employment
Contract ("Contract") with Kenneth F. Potashner pursuant to which Mr. Potashner
became the President and Chief Executive Officer of the Company effective April
26, 1996. In November, 1998, Mr. Potashner stepped down from his position as
Chief Executive Officer and agreed with the Board to continue as Chairman, as
well as, for a period of time, in an active, although less than full time,
executive role with the Company. Mr. Potashner has received an annual base
salary of $250,000 for the period in which he has continued in such executive
role. Mr. Potashner currently holds a total of 98,437 shares of restricted stock
granted under the Contract and options under the Company's 1995 Stock Option
Plan for a total of 351,594 shares. Both the restricted shares and the options
are subject to four-year vesting schedules. Vesting will continue during the
period in which Mr. Potashner is active with the Company in an executive,
consulting or other role. In addition, Mr. Potashner is entitled to
non-qualified retirement benefits payable in installments following the
termination of his employment equal, in the aggregate, to 10% of the total of
his annual salary and target bonus each year under the Contract. A total of
$240,000 has been earned under this provision through the end of fiscal 1999.
Under the Contract, Mr. Potashner will be immediately fully vested in the
restricted shares and stock options in the event that a "change of control"
occurs and certain other conditions are met. A "change of control" is defined as
the acquisition by a person or group of a majority of the Company's stock by
direct purchase or through a merger, the liquidation or sale of substantially
all of the assets of the Company or a change in a majority of the members of the
Board of Directors other than through membership changes determined by the Board
itself.
OTHER PROGRAMS
In September, 1998, the Board adopted a policy involving the purchase by
the Company of shares of Company common stock from officers and directors. Under
the policy, such individuals may tender shares on selected days during the
Company's open trading windows, and if the Compensation Committee of the Board
determines that purchases of such shares are then in the best interest of the
Company, the Company will buy such shares at a price $.25 below the closing
trading price on that day. No individual may sell shares to the Company under
the policy in excess of 50% of his total share ownership at the time the policy
was adopted.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP, independent auditors ("E&Y"), were the Company's
auditors in fiscal 1999.
The Company has engaged E&Y as its auditors for the current fiscal year;
provided, however, that if E&Y shall decline to act or otherwise become
incapable of acting, or if its engagement is otherwise terminated by the Board
of Directors (none of which events are currently anticipated), the Board of
Directors will appoint other auditors for the fiscal year.
Representatives of E&Y will be present at the meeting with an opportunity
to make a statement if they desire to do so and such representatives will be
available to respond to appropriate questions from shareholders in attendance.
SHAREHOLDER PROPOSALS
Shareholders may present proposals for inclusion in the proxy statement and
form of proxy to be used in connection with the 2000 Annual Meeting of
Shareholders of the Company, provided such proposals are received by the Company
no later than August 23, 2000 and are otherwise in compliance with applicable
laws and regulations. If a shareholder notifies the Company in writing prior to
November 1, 2000, that he or she intends to present a proposal at the Company's
2000 Annual Meeting of Shareholders, the proxyholders designated by the Board of
Directors may exercise their discretionary voting authority with regard to the
shareholder's proposal only if the Company's proxy statement discloses the
nature of the shareholder's proposal and the proxyholder's intentions with
respect to the proposal. If the shareholder does not notify the Company by such
date, the proxyholders may exercise their discretionary voting authority with
respect to the proposal without such discussion in the proxy statement.
OTHER BUSINESS
The Board of Directors does not intend to present any other business at the
meeting and knows of no other matters which will be presented at the meeting.
By Order of the Board of Directors
Donald M. Roberts
Secretary
Dated: December 10, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT EXPECT TO ATTEND
THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
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AMENDMENT NUMBER FOUR TO
MAXWELL TECHNOLOGIES, INC.
1995 STOCK OPTION PLAN
The Maxwell Technologies, Inc. 1995 Stock Option Plan (the "Plan") is
hereby amended in the following respects:
1. COMMON STOCK SUBJECT TO OPTIONS.
The maximum number of shares authorized under the Plan for grant of
options as set forth in paragraph 4 of the Plan entitled "Common Stock
Subject to Options", consisting of 1,990,000 shares of the Company's
Common Stock as previously amended, is hereby adjusted to a maximum of
2,390,000 shares of the Company's Common Stock.
2. EFFECT OF AMENDMENTS.
This amendment to the Plan shall be effective as of November 22, 1999,
subject to the approval of the shareholders of Maxwell Technologies,
Inc., at the Annual Shareholder's Meeting on January 28, 2000. Except
to the extent specifically modified herein, the Plan shall remain in
full force and effect.
MAXWELL TECHNOLOGIES, INC.
By: /s/ Donald M. Roberts
Donald M. Roberts, Secretary
Date: November 22, 1999
<PAGE>
MAXWELL TECHNOLOGIES, INC.
1999 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this Director Stock Option Plan (the "Plan") of Maxwell
Technologies, Inc. (the "Company"), is to encourage ownership in the Company by
its outside directors whose services are considered essential to the Company's
continued progress and thus to provide them with a further incentive to continue
to serve as directors of the Company. The Plan is also intended to assist the
Company through utilization of the incentives provided by the Plan to attract
and retain experienced and qualified candidates to fill vacancies in the Board
which may occur in the future. The Plan is intended to be a "formula plan"for
purposes of ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934
(the "1934 Act") and the interpretations thereof by the Staff or the Securities
and Exchange Commission.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors (the "Board")
of the Company.
Subject to the express provisions of the Plan, the Board will have
authority to amend, suspend or terminate the Plan; to interpret the Plan; to
prescribe, amend, and rescind rules and regulations relating to it; to determine
the terms and provisions of the respective option agreements (which need not be
identical); and to make all other determinations necessary or advisable for the
administration of the plan. The interpretation and construction of the Plan, and
any determination made by the Board in administering and interpreting the
provisions of the Plan, and of any option granted hereunder, shall be conclusive
and binding.
3. PARTICIPATION IN THE PLAN
Persons who are now or shall become incumbent directors of the Company
who are not at the time employees of the Company or any subsidiary of the
Company shall be eligible to participate in the Plan (hereinafter "eligible
directors"). A director of the Company shall not be deemed to be an employee of
the Company solely by reason of the existence of a consulting contract between
such director and the Company or any subsidiary thereof pursuant to which the
director agrees to provide consulting services as an independent consultant to
the Company or its subsidiaries on a regular or occasional basis for a stated
consideration. The term "director" as used in this Plan shall include a
"director emeritus".
4. STOCK SUBJECT TO THE PLAN
The stock subject to the Plan shall consist of 75,000 shares of the
$.10 par value Common Stock of the Company ("Common Stock"). Such shares may, as
the Board shall from time to time
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determine, be either authorized and unissued shares of Common Stock or issued
shares of Common Stock which have been reacquired by the Company.
5. STOCK OPTIONS
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreement shall comply with and be subject to the following terms and
conditions:
A. AUTOMATIC GRANT DATES. Options shall be granted to each
eligible director automatically on the first business day after the
organizational meeting of the Board in each year, which is the first meeting of
the Board following the Company's Annual Meeting of Shareholders (hereinafter a
"Grant Date").
B. NUMBER OF SHARES. The initial grant of options under this
Plan for each eligible director on the first Grant Date on which such individual
is an eligible director shall constitute a grant of options to purchase 10,000
shares of Common Stock. Thereafter each annual grant to each such eligible
director on succeeding Grant Dates shall constitute a grant of options to
purchase 3,000 shares of Common Stock.
C. DISCRETIONARY GRANTS. In addition to automatic grants under
Section 5(A) above, the Board may, from time to time, grant options to one or
more eligible directors to purchase such number of shares as the Board shall
determine, subject to all of the terms and conditions of the Plan (other than
Section 5(A) and Section 5(B) above). The Grant Date for such discretionary
options shall be the date on which the Board approves the grant.
D. OPTION PRICE PER SHARE. All options granted hereunder shall
be exercisable at a price per share equal to the Fair Market Value of the Common
Stock on the date of the grant of the option. "Fair Market Value" for purposes
of this Plan shall be defined as the mean between the closing bid and asked
quotations for such stock (or the closing selling price for such stock, if
applicable) on the Grant Date (as reported by a newspaper of general circulation
or a recognized stock quotation service) or, in the event that there shall be no
bid or asked quotations (or reported closing selling price) on the Grant Date,
then upon the basis of the mean between the closing bid and asked quotations (or
the closing selling price, as the case may be,) on the date nearest preceding
the Grant Date. In the event that the Company's Common Stock shall become listed
and traded upon a recognized securities exchange, then the Fair Market Value
shall be determined upon the basis of the closing selling price at which shares
of the Common Stock were traded on such recognized securities exchange on the
date of grant or, if the Common Stock was not traded on said date, upon the
basis of the closing selling price on the date nearest preceding the date of
grant.
E. TRANSFERABILITY. Except as provided below, each option
granted under the Plan by its terms shall be exercisable during the lifetime of
the optionee only by him and shall not be
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transferable by the optionee in whole or in part, by sale, assignment, pledge or
otherwise, except by will, or by the laws of descent and distribution, nor be
made subject to execution, attachment, or similar process. Notwithstanding the
foregoing, the Board may, in its discretion, limit or eliminate these
restrictions on transferability to the extent such restrictions are not at the
time required for the Plan to continue to meet the requirements of Rule 16b-3 or
otherwise result in adverse consequences to the Company.
F. PERIOD OF OPTION. Each option granted under this Plan shall
become exercisable on the first anniversary of the date upon which it was
granted. Except for earlier termination as provided below, no option shall be
exercisable after the expiration of ten years from the date upon which such
option was granted. In the event of the death of an optionee, the option
privileges of said optionee shall be limited to the shares which were
immediately purchasable by such optionee at the date of death and such option
shall terminate unless exercised by said optionee's successor within one (1)
year after the date of death. In the event that an optionee ceases to serve as a
director of the Company other than by reason of death, the option privileges of
such optionee shall be limited to the shares which were immediately purchasable
by him at the date of such termination. If any option granted under the Plan is
canceled by mutual consent or terminates or expires for any reason without
having been exercised in full, the number of shares subject thereto shall again
be available for purposes of the Plan.
G. EXERCISE OF OPTIONS. Options may be exercised only by
written notice delivered to the Company at its corporate office and the exercise
price of each option being exercised shall be paid in full upon exercise,
including any federal, state, and/or local income tax withholding amount due and
shall be payable in cash in United States dollars (including check, bank draft
or money order); provided, however, that in lieu of such cash the person
exercising the option may pay the option price in whole or in part by delivering
to the Company shares of the Common Stock. For this purpose, the Common Stock
shall be treated as having a Fair Market Value on the date of exercise of the
stock option, determined as provided in Section 5(D), except that no shares of
the Common Stock which have been held for less than six months may be delivered
in payment of the option price of an option, if that would result in adverse
accounting or tax consequences to the Company as determined by the Board, in its
sole discretion. Delivery of shares may also be accomplished through the
effective transfer to the Company of shares held by a broker or other agent. The
Company will also cooperate with any person exercising an option who
participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the option are sold
through the broker or other agent or under which the broker or other agent makes
a loan to such person. Notwithstanding the foregoing, the exercise of the option
shall not be deemed to occur and no shares of the Common Stock will be issued by
the Company upon exercise of the option until the Company has received payment
of the option price in full. The number of shares of the Common Stock deemed
issued upon an exercise paid for with shares shall be the number of shares
issued upon exercise less the number of shares delivered in satisfaction of the
exercise price. No options may be exercised as a fraction of a share.
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<PAGE>
H. NONSTATUTORY OPTIONS. No option granted hereunder shall
constitute an incentive stock option" as that term is defined in the Internal
Revenue Code of 1986, as amended.
6. MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS
The Board shall have the power to modify, extend, or renew outstanding
options and authorize the grant of new options in substitution therefor,
provided that such power may not be exercised in a manner which would (i) alter
or impair any rights or obligations of any option previously granted without the
written consent of the optionee or (ii) adversely affect the qualification of
the Plan or any other stock-related plan of the Company under Rule 16b-3 or any
successor provision.
7. LIMITATION OF RIGHTS
A. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the existence of
the Plan nor the granting of an option nor any other action taken pursuant to
the Plan, shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a director for any period of
time, or at any particular rate of compensation.
B. NO STOCKHOLDERS' RIGHTS FOR OPTIONEES. Neither an optionee
nor his representative shall have rights as a stockholder with respect to the
shares covered by his options until the date of the issuance to him or his
representative of a stock certificate therefor, and except as provided in
Paragraph 8 below, no adjustment will be made for dividends or other rights for
which the record date is prior to the date such certificate is issued.
8. ADJUSTMENTS
(i) In the event that the outstanding shares of Common Stock are
hereafter increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company or of another
corporation, by reason of a recapitalization, reclassification, stock split-up,
combination of shares, dividend or other distribution payable in capital stock,
an appropriate adjustment shall be made by the Board in the number, kind and
exercise price of shares for the purchase of which options have theretofore been
or may thereafter be granted under the Plan.
(ii) In the event that the Company shall determine to merge,
consolidate or enter into any other reorganization with or into any other
corporation, or in the event of any dissolution or liquidation of the Company,
and in the further event that neither (i) appropriate adjustment is made in the
number, kind and exercise price of shares for the purchase of which options have
theretofore been granted under the Plan, nor (ii) does the surviving entity
(which may be the Company) tender to any holder of options, substitute options
to purchase shares or equity interests of the surviving entity which substituted
options shall contain terms substantially preserving the rights and benefits
(including economic value) of the options outstanding hereunder, plus any
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<PAGE>
reasonable changes to reflect the circumstances of the surviving entity, then
the Plan and any options theretofore granted under the Plan shall terminate as
of the date of such merger, consolidation, reorganization, dissolution or
liquidation, provided that written notice of such event shall have been given to
each optionee not less than five (5) days prior to the date of such event. If
the Plan will be terminated as contemplated in the preceding sentence, each
optionee shall have the right during the period commencing on the date the
notice referred to above is given and concluding on the date of such merger,
consolidation, reorganization, dissolution or liquidation, as the case may be,
to exercise such optionee's outstanding and unexercised options, including for
any shares as to which such options would not otherwise have been exercisable on
such date.
(iii) All adjustments and determinations under this Paragraph 8
shall be made by the Board, whose decisions as to what adjustments or
determinations shall be made, and the extent thereof, shall be final, binding
and conclusive.
9. EFFECTIVE DATE AND DURATION OF THE PLAN
The effective date of the Plan shall be the date of its adoption by the
Board of Directors of the Company; provided, however, that in the event that
shareholder approval of the Plan is not secured on or before the first
anniversary of such adoption, the Plan shall thereupon terminate. Any options
granted prior to the aforesaid shareholder approval being secured shall be
subject to such approval being secured. The Plan shall terminate ten (10) years
after the effective date of the Plan (the "Automatic Termination Date") unless
earlier terminated due to a lack of shareholder approval or discontinuance by
the Board. No option may be granted during any suspension or termination of the
Plan. The rights of the holders of any options outstanding on the date of
termination of the Plan shall not be affected thereby.
10. USE OF PROCEEDS
The proceeds received by the Company from the sale of the Common Stock
pursuant to the exercise of options granted under the Plan shall be added to the
Company's general funds and used for general corporate purposes.
11. COMPLIANCE WITH LAW, ETC.
Notwithstanding any other provision of this Plan or agreements made
pursuant hereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under this Plan prior to
fulfillment of the following conditions:
(i) The satisfaction of withholding tax or other withholding
liabilities;
(ii) Any registration or other qualification of such shares of
the Company under any state or federal law or regulation, or the maintaining in
effect of any such registration or other
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<PAGE>
qualification which the Board shall, in its absolute discretion upon the advice
of counsel, deem necessary or advisable; and
(iii) The satisfaction of any conditions imposed by any stock
exchange on which the Common Stock is listed or any quotation system which
quotes the price of the Common Stock;
(iv) The obtaining of any other consent, approval, or permit
from any state or federal governmental agency which the Board shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.
12. NOTICE
Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
13. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of Delaware and construed accordingly.
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MAXWELL TECHNOLOGIES, INC.
1999 MANAGEMENT EQUITY OWNERSHIP PROGRAM
1. PURPOSE
The Maxwell Technologies, Inc. 1999 Management Equity Ownership Program
(the "Program") is intended to promote the long-term growth and financial
success of Maxwell Technologies, Inc. (the "Company") and to strengthen the link
between the interests of management and the Company and its stockholders by:
- providing senior management of the Company and its
Subsidiaries with an opportunity to increase their ownership
of the Company's Common Stock; and
- providing this opportunity in a manner that is designed to
align senior management's investment risk with the Company's
financial performance.
2. DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
"Board" means Board of Directors of the Company or, for purposes of
administering the Program after delegation by the Board, the Compensation
Committee of the Board.
"Cause" means termination for any of the following reasons:
(i) commission of an act of theft, fraud or material
dishonesty or misconduct involving the property or affairs of the
Company or the carrying out of Participant's duties; or
(ii) conviction of a felony; or
(iii) refusal or failure to implement any reasonable
directive issued by the Board and failure to remedy the refusal or
failure within 15 days of receipt of written notice thereof; or
(iv) obtaining of any personal profit by Participant or his
family arising out of or in connection with a transaction to which the
Company or any of its Subsidiaries is a party or with which it is
associated without making disclosure to and obtaining prior written
consent of the Company.
"Common Stock" means the Common Stock, $0.10 par value per share, of
the Company.
<PAGE>
"Disability" means the inability of the Participant to perform his or
her normal duties of employment as a result of incapacity as determined by the
Board.
"Effective Date" means the date the Program is approved by the
stockholders of the Company.
"Interest Rate" means the "applicable federal rate" in effect on the
date of a Purchase Loan for loans with a maturity of four years with interest
compounded annually, as determined by Section 1274(d) of the Internal Revenue
Code of 1986, as amended.
"Market Price" with respect to a given security shall mean, for any
given date (or in the event such date is not a Trading Day, the last Trading Day
prior to such date), the closing sale price of such security on such date, as
reported in The Wall Street Journal, as reported on the principal national
securities exchange or national automated stock quotation system on which such
security is traded or quoted.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Participant" means each eligible employee of the Company or any of its
Subsidiaries who is designated by the Board to receive a Purchase Loan.
"Purchase Loan" means an extension of credit to the Participant by the
Company evidenced by the Purchase Note and secured by a pledge of the Common
Stock purchased by the Participant in accordance with the Program's terms and
conditions. Purchase Loans need not be identical and shall be in the form
approved by the Board.
"Purchase Note" means a full recourse promissory note including the
terms set forth in Section 6(a).
"Retirement" shall be as defined by the Board.
"Service" means employment with the Company or its Subsidiaries.
"Subsidiary" means a corporation (or partnership, joint venture, or
other enterprise) of which the Company owns or controls, directly or indirectly,
50% or more of the outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting power).
"Tax Rate" means, at the time of determination, the maximum marginal
effective combined federal and state tax rates on ordinary income or capital
gains, as the case may be, to which such individual is subject.
<PAGE>
"Termination of Service" means a Participant's termination of Service
such that he or she is no longer an employee of either the Company or any of its
Subsidiaries for any reason whatsoever.
3. THE PROGRAM
The aggregate principal amount of Purchase Loans outstanding at any
time under the program shall not exceed $900,000. All repayments of principal
(of any type and for whatever reason) of outstanding Purchase Loans extended
under the Program shall again become available for further Purchase Loans.
4. TERM OF THE PROGRAM
The Program shall become effective upon the approval by the
stockholders of the Company. The Program shall terminate on the tenth
anniversary of such approval date; provided that Purchase Loans outstanding as
of such date shall not be affected or impaired by the termination of the
Program.
5. ELIGIBLE EMPLOYEES
The chief executive officer of the Company and other executive officers
and senior management personnel of the Company and its Subsidiaries who, in the
opinion of the Board, can materially influence the long-term performance of the
Company and/or its Subsidiaries are eligible to receive a Purchase Loan. The
Board shall have the power and complete discretion to select those eligible
employees who are to receive Purchase Loans.
6. LOAN TERMS
(a) GENERAL. The Company shall extend a Purchase Loan, subject to the
terms and conditions set forth in this Section 6, to Participants who purchase
Common Stock in the public trading market. The original principal amount of the
Purchase Loan shall be equal to the purchase price paid by the Participant to
acquire such Common Stock. The Purchase Loan will be made no later than the
first Trading Day following the purchase date. Each Purchase Loan shall be
evidenced by a Purchase Note with full recourse against the maker. The
obligations of each Participant under a Purchase Note shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by any change in the existence,
structure or ownership of the Company, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Company or its assets
or the market value of the Common Stock or any resulting release or discharge of
any obligation of the Company or the existence of any claim, set-off or other
rights which any Participant may have at any time against the Company or any
other person, whether in connection with the Program or with any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or counterclaim.
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<PAGE>
Notwithstanding anything to the contrary in this Section 6, the Company
shall not be required to make any Purchase Loan to a Participant if the making
of such Purchase Loan would (i) cause the Company to violate any covenant or
similar provision in any indenture, loan agreement or other agreement, or (ii)
violate any applicable federal, state or local law or regulation.
(b) AMOUNTS. Purchase Loans shall be limited in principal amounts
outstanding at any point in time to $300,000 for the chief executive officer,
$100,000 each for other corporate executive officers and $50,000 each for other
management personnel.
(c) SECURITY. Payment of each Purchase Note shall be secured by a
pledge of all of the Common Stock acquired by the Participant to which the
Purchase Loan relates or by some other form of collateral approved by the Board.
If the Purchase Loan is secured by a pledge of Common Stock, the Participant
shall effect such pledge by delivering to the Company (i) the certificate or
certificates for the applicable shares of Common Stock, accompanied by a duly
executed stock power in blank, (ii) a properly executed stock pledge agreement,
and (iii) such other documents as may be required by the Board. If the Purchase
Loan is secured by some other form of collateral than Common Stock, then the
Company's security interest in such collateral shall be effected as determined
by the Board.
A Participant shall always have the right to sell the Common Stock
securing a Purchase Loan provided that (i) such sales are in accordance with the
Company's trading policies and applicable securities laws, (ii) the Company
shall have a security interest in the proceeds of such sale to the extent of any
outstanding Purchase Loan, and (iii) the proceeds of any such sale are utilized
in the manner provided in Section 6(f)(ii). Prior to payment in full of the
outstanding balance on the Purchase Note (including accrued and unpaid
interest), no Common Stock or other collateral pledged to the Company under the
stock pledge agreement shall be released except pursuant to Section 6(f)(ii).
(d) INTEREST. Interest on the principal balance of each Purchase Loan
will accrue annually, in arrears, at the Interest Rate. Except as provided in
subsections (f) and (g) of this Section 6, accrued interest shall be payable
with each installment of principal and at maturity.
(e) TERM. The term of each Purchase Loan shall begin on the date
specified in subsection (a) of this Section 6 and, subject to prepayment as
provided in subsections (f), (g) and (h) of this Section 6, mature on the fourth
anniversary of such date. The principal balance of the Purchase Loan shall be
payable in installments as provided in the Purchase Note, with interest on the
unpaid balance payable as provided in Section 6(d). The Board shall have the
discretion to grant Purchase Loans with payments of principal and accrued but
unpaid interest due in a lump sum at the end of the loan term.
(f) PREPAYMENT OBLIGATIONS OTHER THAN TERMINATION OF SERVICE.
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<PAGE>
(i) DIVIDENDS AND DISTRIBUTIONS. To the extent the Participant
receives cash dividends or other distributions (other than liquidating
distributions) paid in cash on the Common Stock securing a Purchase Loan, the
Participant shall be entitled to retain such dividend or distribution with no
prepayment of the related Purchase Loan.
(ii) SALE OF COMMON STOCK. In the event a Participant sells
some or all of the Common Stock securing a Purchase Loan, the full pre-tax
amount of the proceeds of such sale shall be applied to prepay the Purchase Loan
to the extent of the outstanding balance of principal and accrued interest
thereon. In the event that the Participant sells all the Common Stock securing a
Purchase Loan and the proceeds of any such sale are inadequate to fully pay the
principal and accrued interest thereon, such loan will become due and payable in
full 30 days after such sale unless the Participant provides substitute
collateral satisfactory to the Board. A transfer of a Participant's Common Stock
to a revocable trust as to which the Participant retains voting and investment
power (which powers of revocation, voting and investment may be shared with the
Participant's spouse) or a transfer to joint ownership with such Participant's
spouse shall not be deemed a sale for purposes of this Section 6(f)(ii),
although such Common Stock shall remain pledged to secure the Purchase Loan.
(iii) OPTIONAL PREPAYMENTS. The Participant may prepay all or
any portion of a Purchase Loan at any time.
(iv) APPLICATION OF PREPAYMENTS. All prepayments made to the
Company pursuant to this Section 6(f) shall first be applied to pay accrued
interest on the Purchase Loan and then to reduce the principal balance due on
the Purchase Loan. Any prepayment of a remaining balance shall be applied to the
principal payments due thereon in chronological order of maturity.
(g) PREPAYMENT OBLIGATIONS ON TERMINATION OF SERVICE. In the event of
Participant's Termination of Service for any reason except (1) Retirement, (2)
Disability, or (3) termination by the Company without Cause, any outstanding
balance (including accrued and unpaid interest) of the Purchase Loan to such
Participant shall be due and payable on the later of (i) the 30th day following
the date of Termination or (ii) the day following the first date on which the
Participant may sell the Common Stock securing the Purchase Loan without
incurring liability under the federal securities laws, including Section 16 of
the 1934 Act, (limited, in the case of Section 16, to liability relating to
purchases or sales of Common Stock or any derivative security occurring prior to
the Termination of Service). There shall be no prepayment obligation incurred
solely as a result of a Participant's Termination of Service for any of the
reasons mentioned in the first sentence of this Section 6(g) prior to maturity
of a Purchase Loan. All prepayments under this Section 6(g) shall be applied as
provided in Section 6(f)(iv).
7. PROGRAM ADMINISTRATION.
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<PAGE>
The Program shall be administered by the Board. Subject to the
provisions of the Program, the Board shall interpret the Program and make such
rules as it deems necessary for the proper administration of the Program, shall
make all other determinations necessary or advisable for the administration of
the Program and shall correct any defect or supply any omission or reconcile any
inconsistency in the Program in the manner and to the extent that the Board
deems desirable to carry the Program into effect. Among other things, the Board
shall have the authority, subject to the terms of the Program, to determine (i)
the individuals to whom the Purchase Loans are offered, (ii) the basis for any
Termination of Service, and (iii) the forms, terms and provisions of any
documents utilized under the Program. Any action taken or determination made by
the Board pursuant to this paragraph and the other paragraphs of the Program in
which the Board is given discretion shall be final and conclusive on all
parties. The Board may consult with counsel, who may be counsel to the Company,
and such other advisors as the Board may deem necessary and/or desirable, and
the members of the Board shall not incur any liability for any action taken in
good faith in reliance upon the advice of counsel or any other advisor.
8. AMENDMENT AND DISCONTINUANCE OF THE PROGRAM.
The Board may amend, suspend or terminate the Program at any time,
subject to the provisions of this Section 8. No amendment, suspension or
termination of the Program may, without the consent of the Participant,
adversely affect such Participant's rights under any outstanding Purchase Loans
in any material respect.
9. MISCELLANEOUS PROVISIONS.
(a) EMPLOYMENT NOT GUARANTEED. Nothing contained in the Program nor any
related agreement nor any action taken in the administration of the Program
shall be construed as a contract of employment or as giving a Participant any
right to be retained in the Service of the Company.
(b) NONASSIGNABILITY. No person shall have any right to commute, sell,
assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
hypothecate or convey any interest in the Program.
(c) SEPARABILITY, VALIDITY. In the event that any provision of the
Program or any related document is held to be invalid, void or unenforceable,
the same shall not affect, in any respect whatsoever, the validity of any other
provision of the Program or any related document.
(d) APPLICABLE LAW. The Program, any Purchase Loans extended pursuant
thereto and any related documents shall be governed in accordance with the laws
of the State of Delaware without regard to the application of the conflicts of
law provisions thereof. The obligation of the Company with respect to the grant
of Purchase Loans shall be subject to all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required, including,
6
<PAGE>
without the rules and regulations of any securities exchange on which the Common
Stock may be listed.
(e) INUREMENT OF RIGHTS AND OBLIGATIONS. The rights and obligations
under the Program, any Purchase Loans extended pursuant thereto and any related
documents shall inure to the benefit of, and shall be binding upon, the Company,
its successors and assigns, and the Participants and their beneficiaries.
(f) NOTICES. All notices and other communications required or permitted
to be given under this Program shall be in writing and shall be deemed to have
been duly given if delivered personally or mailed first class, postage prepaid,
as follows: (A) if to the Company--at its principal business address to the
attention of the General Counsel; (B) if to any Participant--at the last address
of the Participant known to the sender at the time the notice or other
communication is sent.
7
<PAGE>
MAXWELL TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of MAXWELL TECHNOLOGIES, INC. hereby appoints
Carlton J. Eibl and Donald M. Roberts and each of them with full power of
substitution to each, proxies of the undersigned to represent the undersigned
at the 1999 Annual Meeting of Shareholders of MAXWELL TECHNOLOGIES, INC. to
be held on January 28, 2000, at 10:00 A.M., local time, at the La Jolla
Marriott, 4240 La Jolla Village Drive, La Jolla, California and at any
adjournment(s) thereof, with all power, including voting rights, which the
undersigned would possess if personally present at said meeting on the
matters set forth on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED. UNLESS A CONTRARY DIRECTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEE FOR DIRECTOR LISTED ON
THE REVERSE SIDE AND FOR PROPOSALS (2), (3) AND (4).
The proxies (or, if only one, then that one proxy) or their substitutes
acting at the meeting may exercise all powers hereby conferred.
The undersigned hereby revokes any prior proxy and ratifies and confirms all
that the above-named proxies or their substitutes, and each of them, shall
lawfully do or cause to be done by virture hereof.
The undersigned hereby acknowledges receipt of the Notice of the 1999 Annual
Meeting of Shareholders and accompanying Proxy Statement dated December 10,
1999.
(Continued and to be signed on the reverse side)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S><C>
Please mark ------
your votes as X
indicated in ------
this example
FOR NOMINEE LISTED WITHHOLD AUTHORITY FOR AGAINST ABSTAIN
BELOW to vote for nominee
listed below
(1) Election of one Director / / / / (2) Approval of the Amendment / / / / / /
of the Company in Class I to to the Company's 1995 Stock
serve until the fiscal year Option Plan increasing the
2002 Annual Meeting of shares thereunder by 400,000
Shareholders of Maxwell shares.
Technologies, Inc. and until
his successor is duly elected (3) Approval of the Company's / / / / / /
and qualified. 1999 Director Stock Option Plan
and authorizing 75,000 shares
Kenneth F. Potasher for options thereunder.
(4) Approval of the Company's / / / / / /
1999 Management Equity
Ownership Program.
(5) In their discretion, upon / / / / / /
all matters as may properly
come before the meeting or any
adjournment or adjournments
thereof.
--------------------------------------------
Please mark, sign, date and return the proxy
card promptly using the enclosed envelope.
--------------------------------------------
Signature(s) Dated
-------------------------------------------------------------------- ------------------------------
IMPORTANT: In signing this Proxy, please sign your name or names in the same way as shown above. When signing as a fiduciary,
please give your full title. If shares are registered in the names of two or more persons, each shoud sign.
</TABLE>
