KULICKE & SOFFA INDUSTRIES INC, PRE 14A, 1997-12-16

KULICKE & SOFFA INDUSTRIES INC
PRE 14A, 1997-12-16
SPECIAL INDUSTRY MACHINERY, NEC

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<PAGE>

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement [_] Confidential, For Use of the

[_] Definitive Proxy Statement Commission Only (as permitted

[_] Definitive Additional Materials by Rule 14a-6(e)(2))

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

KULICKE AND SOFFA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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/1/ Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>

[LOGO OF KULICKE AND SOFFA INDUSTRIES, INC. APPEARS HERE]

2101 Blair Mill Road, Willow Grove, PA 19090

January 2, 1997

To Our Shareholders:

Kulicke & Soffa's Annual Meeting of Shareholders will be held on February 10,
1998 at 4:30 P.M. at the Company's offices in Willow Grove, Pennsylvania. We
look forward to your attending either in person or by proxy.

This year, in addition to electing two directors and ratifying the selection of
Price Waterhouse LLP as independent accountants, we are asking you to approve an
increase in the number of authorized Common Shares and approve the 1997 Non-
Qualified Stock Option Plan for Non-Employee Directors. The proposed increase
in authorized Common Shares will enable the Company to pursue corporate matters
involving the issuance of stock, such as raising equity capital, making
acquisitions through the issuance of stock, effecting a stock split and issuing
shares under stock option plans. The proposed Stock Option Plan for Non-
Employee Directors will truly help the Company attract and retain capable
outside directors.

The accompanying Proxy Statement, which I urge you to read carefully, describes
these proposals and the reasons why the Board of Directors unanimously approved
each one. Your Board of Directors recommends a vote FOR each proposal.

Whether or not you plan to attend, you can ensure that your shares are
represented and voted at the Annual Meeting by promptly completing, signing,
dating and returning the enclosed proxy card in the envelope provided.

On behalf of the Directors and our employees, let me thank you for your support.

Sincerely yours,

C. Scott Kulicke
Chairman of the Board
Chief Executive Officer
<PAGE>

Preliminary Copies

[LOGO OF KULICKE AND SOFFA INDUSTRIES, INC. APPEARS HERE]

2101 Blair Mill Road, Willow Grove, PA 19090

---------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 10, 1998

---------------------------

THE ANNUAL MEETING OF SHAREHOLDERS OF KULICKE AND SOFFA INDUSTRIES, INC.
(the "Company") will be held on Tuesday, February 10, 1998, at 4:30 p.m. at the
offices of the Company, 2101 Blair Mill Road, Willow Grove, Pennsylvania, for
the following purposes:

1. Election of directors;

2. Approval of an amendment to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock from
50,000,000 to 100,000,000 shares;

3. Approval of the 1997 Non-Qualified Stock Option Plan for Non-Employee
Directors;

4. Ratification of the appointment of Price Waterhouse LLP as the
Company's independent accountants for the year ending September 30,
1998; and

5. Transaction of such other business as may properly come before the
meeting.

The Board of Directors has fixed the close of business on December 15,
1997, as the record date for the determination of holders of Common Shares
entitled to notice of and to vote at the meeting.

All shareholders are cordially invited to attend the meeting, but whether
or not you expect to attend the meeting in person, please sign and date the
enclosed proxy and return it promptly in order that your stock may be voted. If
you attend the meeting, you may revoke your proxy and vote in person.

By Order of the Board of Directors
SUSAN WATERS
Secretary
January 2, 1998
<PAGE>

[LOGO OF KULICKE AND SOFFA INDUSTRIES, INC. APPEARS HERE]

2101 Blair Mill Road, Willow Grove, PA 19090

---------------
PROXY STATEMENT
---------------

January 2, 1998

The enclosed proxy is solicited by the Board of Directors of the Company.
This proxy statement and the enclosed proxy are being mailed on or about January
6, 1998. A copy of the Company's 1997 Annual Report to Shareholders (which
includes the Company's Annual Report on Form 10-K) is also enclosed but is not
to be considered as proxy solicitation material.

Voting and Revocability of Proxies

The Board of Directors has fixed the close of business on December 15,
1997, as the record date for determination of the shareholders entitled to vote
at the Annual Meeting. As of the record date, there were 23,266,996 Common
Shares outstanding ("Common Shares" or "Common Stock"). Each such share is
entitled to one vote on all matters to be presented to the meeting, except that
cumulative voting is permitted in the election of directors. See "Item 1 --
ELECTION OF DIRECTORS."

When proxies are properly dated, executed and returned, the shares they
represent will be voted at the Annual Meeting in accordance with the
instructions of the shareholder. If no specific instructions are given, the
shares will be voted FOR the following Items: (1) the election of the nominees
for directors set forth herein; (2) approval of the amendment of the Articles of
Incorporation increasing the number of authorized shares of Common Stock; (3)
approval of the 1997 Non-Qualified Stock Option Plan for Non-Employee Directors
(the "1997 Director Plan"); and (4) ratification of the appointment of
independent accountants. A proxy is revocable at any time prior to its use by
delivering a subsequently executed proxy or written notice of revocation to the
Secretary of the Company.

A majority of the shares entitled to vote, represented in person or by
proxy, constitutes a quorum. If a quorum is present, (i) the two nominees for
directors receiving the highest number of votes cast at the Annual Meeting will
be elected and (ii) the affirmative vote of a majority of the total votes cast
on the Item by all shareholders entitled to vote at the Meeting will be required
to approve Items 2, 3, and 4. Abstentions, the withholding of authority to vote
or the specific direction not to cast a vote, such as a broker non-vote, will
not constitute the casting of a vote on any matter.
<PAGE>

Security Ownership of Certain Beneficial Owners

To the best knowledge of the Company, the only persons or groups of persons
that owned beneficially more than 5% of the outstanding Common Shares of the
Company as of December 1, 1997, were as follows:

Number of Percent of
Name and Address Shares Class
- ---------------- ---------- -----
<S> <C> <C>

J. & W. Seligman & Co. Incorporated............. 3,128,000 13.44%
100 Park Avenue
New York, NY 10017

The Capital Group Companies, Inc................ 1,460,200 6.28%
333 South Hope Street
Los Angeles, CA 90071

</TABLE>

ITEM 1 - - ELECTION OF DIRECTORS

The Board of Directors currently consists of eight directors, divided into
four classes of two directors each. The Board intends to cause Messrs. John A.
O'Steen and MacDonell Roehm, Jr., the members of the class whose terms expire at
the 1998 Annual Meeting, to be nominated for re-election at the 1998 Annual
Meeting to serve until the 2002 Annual Meeting and until their successors have
been duly elected and qualified. Each shareholder who so chooses may cumulate
votes in the election of directors (i.e. may multiply the number of votes the
shareholder is entitled to cast by the total number of directors to be elected
(i.e., two) and cast the whole number of votes for one candidate or distribute
them among some or all candidates). The proxy agents reserve the right to vote
the proxies cumulatively, if necessary, in order that one or both of Messrs.
O'Steen and Roehm will be re-elected to the Board of Directors. If either of
the nominees should be unavailable at the time of the election, the persons
named in the proxy may vote the proxies for such other persons as they may
choose, unless the Board of Directors reduces the number of the directors to be
elected.

The following table provides certain information concerning: (i) Messrs.
O'Steen and Roehm, (ii) the persons whose terms as directors will continue after
the Annual Meeting, and (iii) the executive officers named in the Summary
Compensation Table herein, including their ages, principal occupations and, as
of December 1, 1997, beneficial shareholdings. To the best knowledge of the
Company, each of the persons listed below has sole voting and investment power
with respect to the beneficial shareholdings set forth, unless otherwise
indicated.

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<TABLE>
<CAPTION>
Present Common Shares
Director Term Beneficially Owned
Name, Age and Occupation Since Expires On December 1, 1997
- -------------------------- -------- ------- ------------------
Number Percent
------ -------
<S> <C> <C> <C> <C>
James W. Bagley (58), 1993 1999 16,000/(1)/ /(2)/
Chief Executive Officer
and a director of Lam
Research Corporation, a
leading manufacturer of
semiconductor processing
equipment since August
1997. From June 1996 to
August 1997, Chairman of
the Board and Chief
Executive Officer of
OnTrak Systems, Inc., a
developer and marketer of
semiconductor wafer
processing equipment, and
prior to June 1996, Vice
Chairman of the Board of
Directors of Applied
Materials, Inc., the
largest supplier of wafer
fabrication systems to the
semiconductor industry.
Currently, a director of
KLA/Tencor Corporation,
Micron Technology, Inc.,
and Teradyne, Inc.

C. Scott Kulicke (48), 1975 1999 625,332/(1)(3)/ 2.7%
Chairman of the Board
and Chief Executive Officer
of the Company.

Frederick W. Kulicke, Jr. 1956 2000 5,000/(1)/ /(2)/
(80),
Retired co-founder of
the Company; Co-Chairman
of the Board of Directors
and senior executive officer
from 1951 until his
retirement in 1979. Father
of C. Scott Kulicke.

John A. O'Steen (53), 1988 1998 11,000/(1)(4)/ /(2)/
Chairman and Chief
Executive Officer of
Cinmar, Inc., a mail
order catalog company
since 1991 and a director
of International
Cornerstone Group, Inc.
and Bill's Dollar Stores,
Inc. Formerly, President,
Chief Executive Officer
and a director of
Cincinnati Microwave,
Inc., a manufacturer
of electronic products.

Allison F. Page (74), 1962 2001 5,520/(1)/ /(2)/
Retired partner in the
Philadelphia law firm
of Pepper, Hamilton &
Scheetz.
</TABLE>

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<PAGE>

<S> <C> <C> <C> <C>
MacDonell Roehm, Jr. (58), 1984 1998 17,000/(1)/ /(2)/
Chairman, President and Chief
Executive Officer of Bill's Dollar
Stores, Inc., a chain of retail
convenience stores, since 1994.
Formerly, Managing Director of
AEA Investors, Inc., a private
investment firm.

Larry D. Striplin, Jr. (68), 1995 2000 1,000/(1)/ /(2)/
Chairman of the Board and Chief
Executive Officer of Nelson-
Brantley Glass Contractors, Inc., a
glass contractor, and Clearview
Properties, Inc., a real estate
rental company. Chairman of Circle
"S" Industries, Inc. and American
Fine Wire Corp. prior to their
acquisition by the Company in 1995.
Director of Capstone Capital
Corporation and MedPartners, Inc.

C. William Zadel (54), 1989 2001 0
President, Chief Executive
Officer and a director of Millipore
Corporation, a global manufacturer
of filtration and purification
products and former President and
Chief Executive Officer of Ciba-
Corning Diagnostics Corp., a
manufacturer and distributor of
medical diagnostic products.
Director of Matritech, Inc. and Zoll
Medical Corp.

Moshe O. Jacobi (55), -- -- 13,141/(1)/ /(2)/
Senior Vice President of the
Company; President Packaging
Materials Group.

Morton K. Perchick (60), -- -- 32,908/(1)/ /(2)/
Executive Vice President of the
Company.

Asuri Raghavan (44), -- -- 14,943/(1)/ /(2)/
Senior Vice President of
the Company; President
Equipment Group.
</TABLE>

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<PAGE>

All directors and
executive officers -- -- 776,045/(6)/ 3.3%
as a group (13 persons).
</TABLE>

- ---------------------
(1) Includes or consists of shares subject to outstanding options that are
currently exercisable or exercisable within 60 days after December 1, 1997
in the following amounts: Mr. Bagley (6,000), Mr. Scott Kulicke (112,920),
Mr. Fred Kulicke (5,000), Mr. O'Steen (1,000), Mr. Page (5,000), Mr. Roehm
(15,000), Mr. Striplin (1,000), Mr. Jacobi (12,480), Mr. Perchick (30,060),
Mr. Raghavan (14,240), Mr. Sprague (13,880).
(2) Less than 1.0%.
(3) Includes 416,914 shares jointly held with Mr. Kulicke's wife.
(4) Includes 1,000 shares jointly held with Mr. O'Steen's wife.
(5) Includes 3,200 shares jointly held with Mr. Sprague's wife.
(6) Includes 230,580 shares subject to options that are currently exercisable
or exercisable within 60 days after December 1, 1997. See also footnote (1)
above.

For further information concerning Directors and Executive Officers see
"Additional Information" below.

ITEM 2 - - AMENDMENT OF THE ARTICLES OF INCORPORATION

In December 1997, the Company's Board of Directors unanimously adopted,
subject to shareholder approval, an amendment to Article 5 of the Company's
Articles of Incorporation increasing the Company's authorized capital stock from
55,000,000 shares, consisting of 50,000,000 shares of Common Stock, without par
value, and 5,000,000 shares of Preferred Stock, without par value, to
105,000,000 shares consisting of 100,000,000 shares of Common Stock, without par
value, and 5,000,000 shares of Preferred Stock, without par value. The
amendment, which shareholders will be asked to approve at the Annual Meeting,
makes no change in the authorized number of shares of Preferred Stock. No shares
of Preferred Stock are outstanding.

As of December 15, 1997, 23,266,996 Common Shares were outstanding,
2,269,428 Common Shares were reserved for issuance under the Company's
existing employee stock option plans, and an additional 227,000 Common Shares
were reserved for issuance under the existing 1988 Non-Qualified Stock Option
Plan For Non-Officer Directors (the "1988 Director Plan"). Thus, out of
50,000,000 Common Shares currently authorized, a total of 25,763,424 Shares
are issued or reserved for issuance.

The Board of Directors believes that the proposed additional 50,000,000
shares of authorized Common Stock will provide the Company with needed
flexibility to issue Common Stock for proper corporate purposes which may be
identified in the future, such as to effect a split or stock dividend of Common
Stock, to raise equity capital, to adopt additional employee benefit plans or
reserve additional shares for issuance under such plans, and to make
acquisitions through the issuance of Common Stock. Although the Company
continually evaluates alternatives for raising capital and acquisition
opportunities and conducts

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<PAGE>

preliminary discussions, the Company has no present agreements, arrangements or
commitments with respect to any such financing or acquisition. The
authorization of the additional shares will enable the Company to continue to
consider such alternatives and opportunities and to act promptly if appropriate
circumstances arise which require the issuance of such shares.

The authorization of additional shares of Common Stock of the Company will
not, by itself, have any effect on the rights of holders of existing Common
Stock. Depending on the circumstances, any issuance of additional shares of
Common Stock could affect the existing holders of shares of Common Stock by
diluting the per share earnings of the Common Stock and the voting power of the
outstanding shares. Under the Company's Articles of Incorporation, the
Company's shareholders do not have preemptive rights to acquire capital stock
which may be issued by the Company.

Although the Board of Directors is not proposing the authorization of the
additional Common Shares as an "anti-takeover" device, it is possible that such
additional shares could be used to discourage or impede a tender offer or other
attempt to gain control of the Company. For example, in the event of a hostile
attempt to take over control of the Company, it may be possible for the Company
to impede the attempt by issuing shares of the Common Stock, thereby diluting
the voting power of the other outstanding shares and increasing the potential
cost to acquire control of the Company. Such issuance of additional Common
Stock could be used along with certain provisions of the Company's Articles of
Incorporation and By-laws and Pennsylvania Business Corporation Law to
discourage certain transactions involving a change in control of the Company.
For example, the Company's Articles of Incorporation and By-laws contain
provisions which (i) classify the Board of Directors into four classes, with one
class being elected each year, (ii) permit the Board to issue "blank check"
preferred stock without shareholder approval and (iii) prohibit the Company from
engaging in certain business combinations with a holder of 20% or more of the
Company's voting securities without supra-majority board or shareholder
approval. Further, under the Pennsylvania Business Corporation Law, because the
Company's By-laws provide for a classified Board of Directors, shareholders may
only remove directors for cause. The Company is not aware of any take-over
attempt and has no present plans to issue any of the Preferred Stock.

If the 50,000,000 additional Common Shares are authorized, no further
action or authorization by the Company's shareholders will be necessary prior to
the issuance of such Common Shares, except as might be required for a particular
transaction by applicable law or by agreements with or policies of any exchange
or market on which the Company's securities are listed or traded. The Board of
Directors has no present plans with respect to the issuance of any of the
additional Common Shares proposed to be authorized.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
---
ARTICLES OF INCORPORATION.

ITEM 3 - - 1997 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

In December 1997, the Company's Board of Directors unanimously adopted the
Director Plan, subject to shareholder approval. The Director Plan provides for
the grant through February 2008 of non-qualified options ("Director Options")
for up to 400,000 shares of Common Stock to Directors of the Company who are not
officers or employees of the Company. The purpose of the Director Plan is to
assist the Company in attracting and retaining capable outside directors, and to
motivate them to promote the best interests of the Company and its shareholders.

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<PAGE>

The Company's only stock option plan for non-employee directors, the 1988
Director Plan approved by the shareholders at the 1989 Annual Meeting, will
expire following the option grants in late February 1998. Option grants under
the proposed Director Plan would begin in February 1999.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
---
APPROVAL OF THE DIRECTOR PLAN.

Summary of the 1997 Director Plan

The text of the 1997 Director Plan is attached as Appendix A to this Proxy
Statement. The following description of the Director Plan is a summary of its
principal features beyond those described above and is qualified in its
entirety by reference to the Director Plan.

Under the 1997 Director Plan, options to purchase 5,000 shares of Common
Stock are granted automatically each year commencing in 1999 to each eligible
director on the last day of February on which the Company's shares are publicly
traded. The Compensation Committee, which administers the plan, has no
discretion with respect to the eligibility or selection of non-employee
Directors of the Board to receive options under the plan, the number of shares
of stock subject to any such options, or the purchase price of the option
shares.

The Director Options: (i) are exercisable in 20% annual increments
commencing on the first anniversary of the date they are granted subject to
acceleration in certain circumstances; (ii) may be exercised only by the
optionee or, following death, by his or her executor(s) or administrator(s);
(iii) will terminate ten years and one month from the date of grant; and (iv)
will be exercisable by the optionee's executor(s) or administrator(s), whether
or not exercisable at the time of death, for one year following the optionee's
death unless the option earlier expires by its terms.

The exercise price of Director Options must be not less than the fair
market value of the Common Shares on the date of grant and must be paid in full
at the time of exercise either in cash or by delivery to the Company of shares
of the Company's Common Stock having a fair market value as of the close of
business on the day preceding such delivery equal to the aggregate exercise
price of the shares being purchased, or by a combination of such cash and
shares. On December 15, 1997, the last reported sale price of the Company's
Common Shares on the NASDAQ National Market was $17.438.

The number of shares as to which Director Options may be granted under the
1997 Director Plan and the number of shares subject to outstanding Director
Options and the option prices thereof will be adjusted proportionately for any
increase or decrease in the outstanding shares of the Company's Common Stock
resulting from stock splits or reverse stock splits, but will not be so adjusted
for stock dividends. Any stock dividend resulting in an increase of 20% or more
in the outstanding Common Stock will be deemed to be a stock split. If the
Company is a party to any merger in which it is not the surviving entity, or any
consolidation or dissolution, all outstanding options will terminate and the
optionee will receive, in cash, from the Company an amount equal to the fair
market value of the shares subject to his or her outstanding options less the
amount which would be required to exercise such options.

Insofar as is consistent with the treatment of the 1997 Director Plan as a
"formula plan" under Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any successor thereto (the
"Exchange Act"), the Board may, from time to time, suspend or discontinue the
Director Plan or revise or amend it in any respect whatsoever without the
approval of the shareholders.

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<PAGE>

Tax Treatment

Based on the advice of counsel, the Company believes that, under Federal
tax laws and regulations in effect on December 1, 1997, the principal federal
income tax consequences to the Company and to the optionees receiving Director
Options pursuant to the 1997 Director Plan will be as follows:

An optionee will not recognize any U.S. federal taxable income at the time
the optionee is granted a Director Option. However, upon exercise of the
option, the optionee will recognize ordinary income for federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of the Common Shares over the exercise price, and the Company will be
entitled to a deduction in the same amount at the time of exercise. Upon an
optionee's sale of such shares, any difference between the sale price and fair
market value of such shares on the date of exercise will be treated as capital
gain or loss and will qualify for mid-term or long-term capital gain or loss
treatment if the Common Shares have been held for more than 12 months or 18
months, respectively.

Different rules of measuring ordinary income may apply if the optionee is
subject to Section 16 of the Exchange Act at the time of exercise of a Director
Option.

The foregoing does not purport to be a complete summary of the effect of
federal income taxation upon holders of Director Options or upon the Company.
It also does not reflect provisions of the income tax laws of any municipality,
state or foreign country in which an optionee may reside.

ITEM 4 - - APPOINTMENT OF INDEPENDENT ACCOUNTANTS

At the recommendation of the Audit Committee, the Board of Directors has
appointed Price Waterhouse LLP as the Company's independent accountants for the
fiscal year ending September 30, 1998. Price Waterhouse has served as the
Company's independent accountants for a number of years. The election of
independent accountants by the shareholders is not required by law or by the
Company's By-laws. Traditionally, the Company has submitted this matter to the
shareholders for ratification and believes that it is good practice to continue
to do so. If a majority of the votes cast on this matter are not cast in favor
of the reappointment of Price Waterhouse LLP, the Company will appoint other
independent accountants as soon as is practical and before the close of the 1998
fiscal year.

A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting to make a statement if desired and will be available to respond
to any appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
---
APPOINTMENT OF PRICE WATERHOUSE.

ADDITIONAL INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, the "reporting persons") to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies of these reports.

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<PAGE>

Based solely on the Company's review of the copies of these reports
received by it, and written representations received from reporting persons with
respect to the filing of reports on Forms 3, 4 and 5, the Company believes that
all filings required to be made by the reporting persons for Fiscal 1997 were
made on a timely basis.

Summary Compensation Table

The following table sets forth information with respect to the compensation
received by the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (together with the Chief Executive
Officer, the "named executive officers") for the fiscal year ended September 30,
1997 ("Fiscal 1997"), as well as the compensation received by each such
individual for the Company's previous two fiscal years ("Fiscal 1996" and
"Fiscal 1995," respectively).

Annual Long Term
Compensation Compensation
---------------------------------------------- ------------
Awards
------ All
Other Securities Other
Annual Underlying Compen-
Name and Fiscal Salary Bonus Compen- Options sation
Principal Position Year ($)/(1)/ ($)/(1)(2)/ sation($)/(3)/ (#) ($)/(4)/
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. Scott Kulicke 1997 $ 320,765 $ 580,800 $ 4,915 63,000 $ 16,472
Chairman of the Board and 1996 300,000 -0- 4,922 31,700 16,472
Chief Executive Officer 1995 260,000 268,268 4,926 55,400 3,608

Moshe O. Jacobi 1997 $ 223,935 $ 92,400 $26,356 21,000 $ 65,135
Sr. Vice President, President 1996 184,275 33,900 41,469 11,000 56,589
Packaging Materials Group 1995 131,151 65,916 7,728 12,400 28,393

Morton K. Perchick 1997 $ 217,115 $ 168,287 $ 6,127 29,100 $ 17,079
Executive Vice President 1996 210,623 63,205 5,883 15,000 16,644
1995 189,750 119,808 4,371 30,600 1,386

Asuri Raghavan 1997 $ 175,461 $ 246,235 $ 4,943 21,400 $ 9,263
Senior Vice President, 1996 154,000 17,325 4,949 11,200 7,843
President Equipment Group 1995 140,000 68,992 3,276 14,000 1,299

Clifford G. Sprague 1997 $ 186,785 $ 149,978 $ 4,943 21,400 $ 9,709
Senior Vice President and 1996 179,550 22,445 4,816 11,200 9,214
Chief Financial Officer 1995 157,500 99,445 4,058 24,600 1,386
</TABLE>

- ----------------------
(1) Includes amounts earned but deferred at the election of executive officers
under the Company's Officers' Deferred Compensation Plan.
(2) These amounts represent incentive payments to the named executive officers
as participants in the Company's Executive Incentive Compensation Plan
(with respect to the fiscal year indicated). See "Compensation Committee
Report on Executive Compensation" herein.
(3) These amounts for Messrs. Kulicke, Perchick, Raghavan and Sprague
represent reimbursement to them by the Company for taxes paid by them on
Company-provided automobiles. The amount set forth for Mr. Jacobi for
Fiscal 1995 represents reimbursement for taxes paid by Mr. Jacobi on
Company-provided automobiles. The amount set forth for Mr. Jacobi for
Fiscal 1996 includes amounts for reimbursement of taxes paid by Mr. Jacobi
on Company-provided automobiles, $11,977 for travel expenses for
accompanying family members and $27,412 for relocation benefits paid to Mr.
Jacobi in connection with his move from Israel to the United States. The
amount set forth for Mr. Jacobi in Fiscal 1997 includes reimbursement of
taxes paid by Mr. Jacobi on Company-provided automobiles, $5,523 for travel
expenses for accompanying family members and $15,572 for relocation
benefits in connection with his move from Israel to the United States.

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<PAGE>

(4) Amounts indicated for Mr. Kulicke for Fiscal 1995, 1996 and 1997 include
the Company's matching contribution to the 401(k) Incentive Savings Plan,
and $2,222 of forgiveness of interest and principal on a loan made by the
Company pursuant to a 1978 loan program which was established to permit
certain officers of the Company to purchase Common Shares. This column
also includes, for Fiscal 1995, 1996 and 1997, the Company's matching
contribution to the 401(k) Incentive Savings Plan with respect to Messrs.
Perchick, Raghavan and Sprague. With respect to Mr. Jacobi, this column
contains, for Fiscal 1995, the Company's matching contribution to an
Israeli voluntary matched savings plan and its contribution to an Israeli
pension and severance insurance plan in which Mr. Jacobi participates (see
"Pension Plan" below), and, for Fiscal 1996, the Company's matching
contributions of $16,223 for the Israeli voluntary matched savings plan and
$6,554 for the Company's 401(k) Incentive Savings Plan and its contribution
of $33,812 to the Israeli pension and severance insurance plan, and for
Fiscal 1997, the Company's matching contributions of $35,736 for the
Israeli voluntary matched savings plan and $12,455 for the Company's 401(k)
Incentive Savings Plan and its contribution of $16,944 to the Israeli
pension and severance insurance plan. Effective January 1, 1996, the
Company enhanced the 401(k) Incentive Savings Plan, including an increase
in the Company's matching contribution, to offset the freezing of benefits
under the pension plan. See "Pension Plan" below.

Stock Option Tables

The following tables set forth information with respect to stock option
grants by the Company to the named executive officers in Fiscal 1997, and the
number of unexercised options and the value of unexercised in-the-money options
at the Fiscal 1997 year-end, respectively.

Option Grants in Fiscal 1997
<TABLE>
<CAPTION>

Individual Grants
------------------------------------------------------------- Potential Realizable Value
at Assumed Annual Rates of
Number of Stock Price Appreciation for
Shares % of Total Option Term/ (3)/
Underlying Options Granted Exercise ----------------------------
Options to Employees in Price Expiration
Name Granted/(1)/ Fiscal Year/(2)/ Per Share Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. Scott Kulicke 63,000 11.41% $12.00 10-08-06 $475,441 $1,204,867
Moshe O. Jacobi 21,000 3.80% 12.00 10-08-06 158,480 401,622
Morton K. Perchick 29,100 5.27% 12.00 10-08-06 219,608 556,534
Asuri Raghavan 21,400 3.88% 12.00 10-08-06 161,499 409,272
Clifford G. Sprague 21,400 3.88% 12.00 10-08-06 161,499 409,272
</TABLE>

- ------------------
(1) All options granted to named executive officers in Fiscal 1997 were granted
under the 1994 Employee Stock Option Plan and generally become exercisable
one year from the date of grant in installments of 20% per year.
(2) The Company granted options to employees to purchase a total of 552,000
shares during Fiscal 1997.
(3) These amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date.

-10-
<PAGE>

Aggregated Option Exercises in Fiscal 1997 and 1997 Fiscal
Year-End Option Values

Number of Shares
Underlying
Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End at Fiscal Year-End/(1)/
Shares -------------------------- -------------------------
Acquired on Exercis- Unexercis- Exercis- Unexercis-
Name Exercise Value Realized able able able able
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

C. Scott Kulicke..... 54,040 $1,230,413 79,060 127,440 $3,049,644 $3,989,645
Moshe O. Jacobi...... 19,740 625,495 2,200 39,360 29,287 1,201,868
Morton K. Perchick... 12,440 267,603 12,240 63,900 388,026 2,026,269
Asuri Raghavan....... 10,480 213,225 3,120 41,440 67,439 1,275,988
Clifford G. Sprague.. 23,694 563,988 -- 48,880 -- 1,558,526
</TABLE>
______________________
(1) In-the-money options are those where the fair market value of the
underlying securities exceeds the exercise price of the option. The
closing price of the Company's Common Shares on September 30, 1997, the end
of its 1997 fiscal year, was $46.313 per share.

Pension Plan

The Company has maintained a tax-qualified defined benefit pension plan,
which covered U.S. employees who had reached age 21 and completed one year of
service. Effective December 31, 1995, benefit accruals under the Company's
pension plan were frozen. Retirement benefits under this pension plan are
determined under a formula based on length of service and average compensation
in the three consecutive calendar years during the ten year period ended
December 31, 1995, producing the highest average (subject to certain Internal
Revenue Code limits). Assuming normal retirement at age 65 and election of
payment in the form of an annuity, the named executive officers would receive
the following annual amounts under this pension plan: C. Scott Kulicke, $57,996;
Morton K. Perchick, $29,951; Asuri Raghavan, $25,326; and Clifford G. Sprague,
$15,793.

Prior to 1996, Moshe Jacobi, a named executive officer of the Company, was
an officer of Micro-Swiss Ltd., one of the Company's Israeli subsidiaries.
Under Israeli law, Micro-Swiss is required to make severance payments to
dismissed employees. In order to fund this severance obligation, provide
pension benefits required by a general industry collective agreement regarding
comprehensive pensions, and provide death and disability benefits to its
employees, Micro-Swiss has obtained, over time, certain insurance plans offered
by Israeli insurance companies. Each of the plans provides severance, pension
and disability benefits for covered employees in consideration of the payment of
premiums based upon the employee's monthly salary. For pension benefits, Micro-
Swiss makes a matching payment of approximately 5% of the employee's monthly
salary; for severance benefits, Micro-Swiss makes a payment of approximately
8.3% of the employee's monthly salary; and for disability benefits, Micro-Swiss
makes a payment of approximately 2.5% of the employee's monthly salary. The
Company continued making these severance, pension and disability premium
payments on behalf of Mr. Jacobi during 1997. Upon retirement, participating
employees like Mr. Jacobi are entitled to the amount in their pension plan
account which they may elect to receive in a lump-sum payment or in the form of
an annuity.

-11-
<PAGE>

Termination of Employment and Change in Control Arrangements

The Company has Termination of Employment Agreements with its executive
officers which provide that in the event of certain changes in control, as
defined in the Agreements, the officer who is a party to such agreement and
whose employment terminates, other than voluntarily or for cause, within 18
months after such change in control, will be entitled to termination pay equal
to the lesser of a specified number of months' target total cash compensation
(base salary plus incentives) for the year in which the change in control occurs
or $10 less than the amount which would subject the officer to excise tax with
respect to such payment under Section 4999 of the Internal Revenue Code or would
make payment thereof non-deductible by the Company under Section 280G of the
Code. Such agreements were renewed by the Board of Directors in December 1997
and are all currently scheduled to expire on December 31, 2000 unless extended.
The named executive officers' Termination of Employment Agreements provide for
payment of the following number of months' target total cash compensation: Mr.
C. Scott Kulicke, 30 months; Mr. Jacobi, 18 months; Mr. Perchick, 18 months; Mr.
Raghavan, 18 months; and Mr. Sprague, 18 months.

In addition to the payments described above, Mr. Jacobi is entitled to
receive certain severance payments under the private insurance company plan
described under the heading "Pension Plan" above.

Under the Company's 1994 Employee Stock Option Plan, in the event of a
change in control of the Company (as defined in that plan), all outstanding
options become fully vested and exercisable. Under the Company's 1988 Employee
Stock Option Plan and 1988 Director Plan, if the Company is a party to any
merger in which it is not the surviving entity, or any consolidation or
dissolution, all outstanding options will terminate and the optionee will
receive, in cash, from the Company an amount equal to the fair market value of
the shares subject to then exercisable options less the amount which would be
required to exercise such options. Under the Company's Officers' Deferred
Compensation Plan, on a change in control (as defined in that plan) participants
receive a lump sum payment of the value of their accounts.

Board Matters

In Fiscal 1997, the Board of Directors met four times. All of such
meetings were regular meetings. Directors who are not officers of the Company
receive a quarterly retainer of $3,000, plus $2,000 for each regular meeting of
the Board attended and $1,000 for each special meeting of the Board attended.
Committee Chairmen also are paid an annual retainer of $2,000, and committee
members are paid $1,000 for each committee meeting not held on the date of a
Board meeting. All of the incumbent directors attended at least 75% of the
Board and applicable committee meetings in Fiscal 1997.

Each member of the Board who is not also an officer or employee of the
Company is eligible to participate in the 1988 Director Plan. Pursuant to this
plan, options to purchase 5,000 Common Shares are automatically granted to each
eligible director on the last day of each February on which the Company's shares
are publicly traded in each of the years 1990 through 1998 at an exercise price
equal to 100% of the fair market value of the Company's Common Shares on the
date of grant. Options granted under this plan become exercisable in 20% annual
increments commencing on the first anniversary of the date they are granted.

See also "Certain Relationships and Related Transactions" below.

The Company has standing Audit and Compensation Committees. There is no
standing nominating committee.

-12-
<PAGE>

The Audit Committee, comprised of Messrs. MacDonell Roehm, Jr., Chairman,
Frederick W. Kulicke, Jr. and Allison F. Page, met twice during Fiscal 1997.
The principal duties of the Audit Committee are to recommend independent public
accountants for appointment by the Company; review with the independent
accountants the planned scope and results of the annual audit and their reports
and recommendations; and review with the independent accountants matters
relating to the Company's system of internal controls.

The Compensation Committee, comprised of Messrs. John A. O'Steen, Chairman,
James W. Bagley and C. William Zadel, met four times during Fiscal 1997. The
principal duties of the Compensation Committee are to approve compensation
arrangements for the executive officers and senior managers of the Company and
to administer the Company's stock option plans.

Certain Relationships and Related Transactions

On October 2, 1995, the Company acquired American Fine Wire Corporation
("AFW") through the merger of a subsidiary of the Company into Circle "S"
Industries, Inc., the parent corporation of AFW ("Circle S"). Larry D. Striplin,
Jr., a director of the Company and former director of Circle S, and various
members of his family and related trusts owned slightly more than a majority of
the outstanding common stock of Circle S. In connection with the AFW
acquisition, the Company's Board agreed to elect, and on December 12, 1995 did
elect, Larry D. Striplin, Jr. as a director of the Company. Mr. Striplin
subsequently was reelected a director of the Company at its 1996 Annual Meeting
of Shareholders for a four-year term. Pursuant to the AFW acquisition, the
Company also assumed a 1990 employment and non-competition agreement between
Circle S and Mr. Striplin providing for payments to him or his estate of
$200,000 per year for five years following the date of the AFW acquisition. Mr.
Striplin's employment by Circle S and AFW terminated at the time of such
acquisition.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Company's Board of Directors, comprised
entirely of outside directors, is responsible for approving compensation
arrangements for the officers and senior managers of the Company.

The Compensation Committee seeks to achieve the following goals with the
Company's executive compensation programs: to attract and retain key
executives; to motivate and reward executives for the attainment of corporate
and individual performance objectives; and to provide executives with an
opportunity to acquire an equity interest in the Company. The Compensation
Committee seeks to foster a performance-oriented environment by tying a
significant portion of each executive's cash compensation to the achievement of
objectives that are important to the Company.

The Company's Executive Incentive Compensation Plan is currently comprised
of three components: base salary; cash incentive; and equity incentive in the
form of stock options granted under the Company's stock option plans.

Target Total Cash Compensation

Target total cash compensation for each executive is established based on
marketplace data. For this purpose, in Fiscal 1997 the Company utilized
principally the median data for companies with sales between $200 million and
$499 million as reported by nationwide participants in the Alexander & Alexander
Consulting Group/Radford Associates' 1996 Management Compensation Report.
Participants in that

-13-
<PAGE>

nationwide survey are not limited to the companies included in the peer group
established to compare shareholder returns in the performance graph included
below because the Compensation Committee believes that the Company's competitors
for executive talent are not limited to that peer group.

Base Salary and Cash Incentive

Once target total cash compensation has been established for each
executive, the total compensation is divided into a base salary portion and a
cash incentive portion. Generally, the higher the level of responsibility of
the executive within the Company, the greater the portion of that executive's
target total cash compensation that consists of the cash incentive component.
At budgeted performance levels, targeted cash incentive ranges from
approximately 37.5% to 56% of targeted total cash compensation (60% to 125% of
base salary) for the named executive officers.

In Fiscal 1997, the cash incentive portion of the compensation of
participants in the Executive Incentive Compensation Plan was based upon
achievement of specified operating profit margins, return on assets and
performance goals. Based on the Company's performance in Fiscal 1997, an
aggregate of $1,379,765 was awarded to the Company's six executive officers
under the Plan.

Equity Incentive

The Company grants stock options annually to all participants in the
Executive Incentive Compensation Plan. The purpose of these grants is to give
participants a stake in the success of the Company as measured by the stock
market's assessment of the Company's performance. The number of options granted
to each participant is generally determined on the basis of a percentage of
target total cash compensation that varies depending on the participant's level
of responsibility. The extent of existing options or stock ownership is not
generally considered in granting options, except that the Company sometimes
grants an initial round of options to newly recruited executives to provide them
with some stake in the Company's success from the commencement of their
employment.

In Fiscal 1997, option grants to executive officers amounted to
approximately .89% of the Company's Common Shares outstanding on or about the
date of the grants.

Chief Executive Officer Compensation

The Compensation Committee uses the same factors in determining the
compensation of the Chief Executive Officer as it does for the other
participants in the Executive Incentive Compensation Plan. Following an
analysis of marketplace data and a subjective assessment of the Chief Executive
Officer's performance, the Compensation Committee approved an increase in the
annual base salary of the Chief Executive Officer from $300,000 to $330,000 for
Fiscal 1997. As in the case of the other participants in the 1996 Executive
Incentive Compensation Plan, the Chief Executive Officer received a cash
incentive payment for Fiscal 1997, which amounted to $580,800 based on the
considerations described in "Base Salary and Cash Incentive" above.

THE COMPENSATION COMMITTEE

JOHN A. O'STEEN, CHAIRMAN
JAMES W. BAGLEY
C. WILLIAM ZADEL

-14-
<PAGE>

Performance Graph

The graph set forth below compares, for Fiscal 1993 through Fiscal 1997,
the yearly change in the cumulative total returns to holders of Common Shares of
the Company with the cumulative total return of a peer group selected by the
Company and of the NASDAQ Stock Market-US Index. The peer companies are all
among the top 25 semiconductor capital equipment suppliers in the world and were
selected by the Company based principally on nature of business, revenues,
employee base, technology base, market share, customer and customer
relationships. The peer group is composed of Advanced Semiconductor Materials
International N.V., Applied Materials, Inc., BTU International, Inc., Electro
Scientific Industries, Inc., FSI International, Inc., Genus, Inc., KLA - Tencor
Corp., Lam Research Corp., LTX Corp., Novellus Systems, Inc., Silicon Valley
Group, Inc., Teradyne Inc. and Varian Associates, Inc. The graph assumes that
the value of the investment in the relevant stock or index was $100 at September
30, 1992 and that all dividends were reinvested. Total returns are calculated
based on a fiscal year ending September 30. For purposes of the peer group
index, the peer group companies have been weighted based upon their relative
market capitalization. The closing market price of the Company's Common Shares
as of September 30, 1997 was $46.313. The closing market price of such shares
on December 15, 1997 was $17.438.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG KULICKE & SOFFA INDUSTRIES, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP

[LINE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kulicke & Soffa Industries, Inc 100 575 325 1,460 455 1,853

Peer Group 100 227 296 604 330 921

NASDAQ Stock Market (U.S.) 100 131 132 182 216 297
</TABLE>

-15-
<PAGE>

SHAREHOLDER PROPOSALS

Proposals which shareholders desire to have included in the Company's Proxy
Statement for the Annual Meeting in 1999 pursuant to Securities Exchange Act
Regulation 14a-8 must be addressed to the Secretary of the Company and received
by the Company on or before September 2, 1998.

OTHER MATTERS

The cost of soliciting proxies will be borne by the Company. The Company
has retained D.F. King & Co., Inc., to solicit proxies for a fee of $7,500 plus
reimbursement of reasonable expenses. Proxies may also be solicited by certain
officers and regular employees of the Company personally or by written
communication, telephone, telegraph or other means, for which they will receive
no compensation in addition to their normal compensation. Arrangements may also
be made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of stock held
of record by such persons, and the Company may reimburse them for their
reasonable out-of-pocket and clerical expenses.

Although the Company knows of no business which will be presented at the
Annual Meeting other than those described herein, proxies in the accompanying
form will confer discretionary authority with respect to any other matters which
may come before the meeting.

The Company, upon request, will furnish to record and beneficial holders of
its Common Stock, free of charge, a copy of its Annual Report on Form 10-K
(including financial statements and schedules but without exhibits) for fiscal
1997. Copies of exhibits to the Form 10-K also will be furnished upon request
and the payment of a fee of $.50 per page. All requests should be directed to
the Investor Relations Department of the Company at the offices of the Company
set forth on page 1 of this proxy statement.

By Order of the Board of Directors
SUSAN WATERS
Secretary

-16-
<PAGE>

APPENDIX A

KULICKE AND SOFFA INDUSTRIES, INC.
1997 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
-------------------------------------------

1. Purpose
-------

The purpose of the 1997 Non-Qualified Stock Option Plan for Non-
Employee Directors (the "Plan") of Kulicke and Soffa Industries, Inc. (the
"Company") is to encourage stock ownership by non-employee members of the
Company's Board of Directors (the "Board") by issuing options to purchase shares
of the Company's stock ("Options," and individually an "Option"), thereby
enabling such Board members to acquire or increase their proprietary interests
in the Company and thereby encouraging them to remain as Board members. The
Options issued pursuant to the Plan are intended to constitute non-qualified
stock options ("Non-Qualified Stock Options").

2. Administration
--------------

The Plan will be administered by the Company's Compensation Committee
(the "Committee"), which shall consist of two or more non-employee directors (as
defined in Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"), or any successor thereto) who will be
appointed by, and will serve at the pleasure of, the Board. If a Committee of
two or more non-employee directors has not been appointed, the Plan will be
administrated by the full Board. The Committee will hold meetings when a quorum
is present at such times and places as it may determine. A quorum shall consist
of a majority of the Committee. A majority of the Committee present and voting
at a meeting at which a quorum is present, or acts reduced to, and approved in,
writing by a majority of the members of the Committee at any other time, will be
valid acts of the Committee. The Committee shall have no discretion with
respect to the eligibility or selection of non-officer members of the Board to
receive Options under the Plan, the number of shares of stock subject to any
such Options, or the purchase price thereunder.

The interpretation and construction by the Committee of any provision
of the Plan or of any Option granted under it will be final. Anything herein to
the contrary notwithstanding, no member of the Board or the Committee will be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted under it.

3. Eligibility
-----------

The only persons eligible to receive Options under the Plan shall be
each member of the Board who is not also an employee of the Company. An
eligible director who is granted an Option ("Optionee," which term shall also
include his executor(s) or administrator(s) under Section 5(f) hereof) may be
granted more than one Option.
<PAGE>

4. Stock
-----

The stock subject to the Options will be shares of the Company's
authorized but unissued or reacquired Common Stock, without par value (the
"Shares"). Options shall not be issued with respect to more than 400,000
Shares, subject, however, to adjustment as provided in Section 5(g) hereof.

5. Terms and Conditions of Options
-------------------------------

Each Option granted pursuant to the Plan will be evidenced by an
Option Notice in such form as is acceptable to the Committee. Each Option
Notice will include the information required by Subsections (a) and (b) of this
Section 5 and will be in conformity with and incorporate by reference all other
terms and conditions of the Plan, including the following terms and conditions:

(a) Option Grant Dates. Options to purchase 5,000 Shares (as
------------------
adjusted pursuant to Section 5(g)) shall be granted automatically to each
eligible director on the last day of February on which the Company's shares are
publicly traded in each of the years 1999 through 2008.

(b) Option Price. The purchase price per Share payable upon
------------
exercise of the Options shall be 100% of the fair market value per Share on the
date the Options are granted, which shall be the representative closing price on
such date of the Shares as reported by Nasdaq.

(c) Payment. The price payable on the exercise of the Option in
-------
whole or in part will be equal to the Option price multiplied by the number of
Shares as to which the Option is exercised, and shall be paid in full upon
exercise of any Option, either in cash or by delivering to the Company shares of
the Company's Common Stock having a fair market value, as of the close of
business on the day preceding such delivery, equal to the aggregate exercise
price of the Shares being purchased on exercise of the Options, or by a
combination of such cash and shares.

(d) Option Term. Notwithstanding any other provisions of this
-----------
Plan, Options shall expire after the termination of ten years and one month from
the date of the grant, unless sooner terminated as provided in this Plan, and
shall be void and unexercisable thereafter.

(e) Exercisability of Options. Options granted hereunder shall
-------------------------
become exercisable in 20% annual increments commencing on the first anniversary
of the date they are granted.

Options that have become exercisable may be exercised in whole or
in part, except that no Option may be exercised unless the total number of
Shares issuable upon exercise of such Option and all other Options being
exercised simultaneously is at least 25 or

-2-
<PAGE>

unless the number of Shares purchased is the total number remaining unpurchased
under the Option.

Options may be exercised only by the Optionee and may not be
exercised by any other person except as provided in Section 5(f) hereof.

(f) Termination of Options. Subject to Section 5(d) above and to
----------------------
Section 5(g) below, upon the death of an Optionee, all Options held by such
Optionee, whether or not then exercisable, shall immediately become exercisable
and remain exercisable by his executor(s) or administrator(s) for a period of
one year from the date of such Optionee's death.

Options may be terminated by agreement between the Company and the
Optionee.

(g) Recapitalization. Subject to any required action by the
----------------
stockholders of the Company, the number of Shares as to which Options may be
granted under this Plan and the number of Shares subject to outstanding Options
and the Option price thereof will be proportionately adjusted for any increase
or decrease in the number of outstanding Shares of Common Stock of the Company
resulting from stock splits or reverse stock splits but not for stock dividends.
The number of Shares will be adjusted to the nearest whole share. Any stock
dividend resulting in an increase of 20% or more in the outstanding Common Stock
shall be deemed a stock split.

If the Company is involved in any merger or consolidation (as
described below) or dissolution, all Options outstanding hereunder shall become
fully vested and shall terminate, in the case of mergers or consolidation, on
the date that such merger or consolidation becomes effective, and in case of
dissolution, on the date that the Articles of Dissolution are filed with the
Secretary of the Commonwealth of Pennsylvania. A merger or consolidation shall
be deemed to be covered by this Section 5(g) only if it results in the
shareholders of the Company immediately before such merger or consolidation not
owning, directly or indirectly, immediately following such merger or
consolidation more than 50% of the combined voting power of the outstanding
voting securities ("Voting Securities") of the corporation resulting from such
merger or consolidation, in substantially the same proportion as their ownership
of the Voting Securities outstanding immediately before such merger or
consolidation.

If Options become fully vested and are terminated pursuant to the
provisions of the foregoing paragraph, Optionees shall receive in cash from the
Company an amount equal to the fair market value of the Shares which are subject
to the outstanding Options on the date such Options become fully vested (and
subsequently terminate), less the Purchase Price under such Options of such
Shares. Fair market value shall be determined as of the close of business on the
day preceding the event terminating all outstanding Options under this Plan.

Except as expressly provided above in this Section 5(g), the
Optionee will have no rights by reason of any subdivision or consolidation of
shares of stock of any

-3-
<PAGE>

class of the Company or the payment of any stock dividend by the Company or any
other increase or decrease in the number of shares of stock of any class of the
Company or by reason of any dissolution, liquidation, merger, or consolidation
or spinoff of assets or stock of another corporation.

The grant or existence of any Option shall not affect in any way
the right or power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or part of its
stock or assets.

(h) Rights as a Stockholder. The Optionee will have no rights as
-----------------------
a stockholder of the Company with respect to any Shares subject to the Option
until the Option has been exercised and a certificate with respect to the Shares
purchased upon exercise has been issued to him. No adjustment will be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date the Shares so purchased have been issued.

(i) Modification of Options. Insofar as is consistent with the
-----------------------
treatment of the Plan as a "formula plan" under Rule 16b-3 promulgated under
(S)16(b) of the 1934 Act, or any successor thereto, and subject to the terms and
conditions of the Plan, the Committee may modify the Options or accept the
surrender of Options (to the extent not theretofore exercised); provided,
however, that the Committee may not modify the terms upon which, the times at
which or the periods within which Options may be exercised. Notwithstanding the
foregoing sentence, no modification of any Option which adversely affects the
Optionee shall be made without the consent of the Optionee.

(j) Purchase for Investment. The issuance of Shares on exercise
-----------------------
of the Option will be conditioned on obtaining appropriate representations and
warranties of the Optionee that the purchase of Shares thereunder will be for
investment, and not with a view to the public resale or distribution thereof,
unless the Shares subject to the Option are registered under the Securities Act
of 1933, as amended (the "1933 Act"), and comply with any other law, regulation
or rule applicable thereto. Unless the Shares are registered under the 1933 Act,
the Optionee shall acknowledge that the Shares purchased on exercise of the
Option are not registered under the 1933 Act and may not be sold or otherwise
transferred unless the Shares have been registered under the 1933 Act in
connection with the sale or other transfer or counsel satisfactory to the
Company is of the opinion that the sale or other transfer is exempt from
registration under the 1933 Act, and unless said sale or transfer is in
compliance with any other applicable law, including all applicable state
securities law.

(k) No Rights to Board Membership. An individual granted an
-----------------------------
Option under this Plan shall not have any right to continue as a member of the
Board of the Company solely by virtue of the existence of such Option.

(l) Other Provisions. The Option Notice may contain such other
----------------
provisions, including, without limitation, restrictions upon the exercise of the
Option, as the Committee in its discretion deems advisable and as are not
inconsistent with (i) the

-4-
<PAGE>

provisions of this Plan or (ii) the treatment of this Plan as a "formula plan"
under Rule 16b-3 promulgated under (S)16(b) of the 1934 Act, or any successor
thereto.

6. Term of Plan.
------------

The Plan shall terminate on March 1, 2008. No Option shall be granted
under this Plan after February 29, 2008. However, the termination of this Plan
shall not affect any option which is outstanding on March 1, 2008.

7. Amendment of the Plan.
---------------------

Insofar as is consistent with the treatment of the Plan as a "formula
plan" under Rule 16b-3 promulgated under (S)16(b) of the 1934 Act, or any
successor thereto, the Board may, from time to time, with respect to any Shares
at the time not subject to an Option, suspend or discontinue the Plan or revise
or amend it in any respect whatsoever.

8. Application of Funds.
--------------------

The proceeds received by the Company from the sale of Shares pursuant
to the exercise of Options will be used for general purposes.

9. No Obligation to Exercise Option.
--------------------------------

The granting of an Option will impose no obligation upon the Optionee
to exercise such Option.

10. Approval of Stockholders.
------------------------

The Plan shall be effective December 9, 1997, the date it was adopted
by the Board; provided, however, that it shall become null and void if it is not
"Approved" (as hereinafter defined) by the holders of the Company's Common Stock
at the February, 1998 meeting of the shareholders of the Company. The Plan shall
be "Approved" by the holders of the shares of the Common Stock if a quorum is
present (i.e. a majority of the holders of the shares of the Common Stock
entitled to vote is represented in person or by proxy) and the Plan receives the
affirmative vote of a majority of the total votes cast on the Plan by all
shareholders entitled to vote at the meeting.

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<PAGE>

Appendix
--------

KULICKE AND SOFFA INDUSTRIES, INC.

This Proxy Is Solicited On Behalf Of The Board Of Directors

The undersigned, revoking all prior proxies, hereby appoints C. Scott
Kulicke and Clifford G. Sprague, or either of them, with full power of
substitution, as the undersigned's proxies to vote at the Annual Meeting of
Shareholders of Kulicke and Soffa Industries, Inc. (the "Company") called for
February 10, 1998 and any adjournment thereof.

[x] Please mark your votes as in this example.

1. ELECTION OF For All Withhold Nominees: John A. O'Steen
DIRECTORS Nominees Authority MacDonell Roehm, Jr.
Listed To Vote For
All Nominees
Listed

(INSTRUCTION: To [_] [_]
withhold authority to
vote for any individual
nominee, write that
nominee's name in the
space provided below)

- -----------------------------------
By signing this Proxy, authority
is given to cumulate votes in the
than all nominees listed.

2. Amendment to the For Against Abstain
Articles of [_] [_] [_]
Incorporation
increasing the
number of Common
Shares

3. Approval of the For Against Abstain
1997 Non-Qualified [_] [_] [_]
Stock Option Plan
for Non-Employee
Directors

4. Appointment of For Against Abstain
Price Waterhouse [_] [_] [_]
LLP as independent
public accountants
for the Company
for the year
ending September
30, 1998.

<PAGE>

5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

You are urged to sign and return this proxy so that you may be sure that your
Shares will be voted.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.

YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.

- -----------------------------
Signature of Shareholder

Date 1998
--------------------

Note: Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in the partnership name by authorized
person.

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