<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
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
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NANOMETRICS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NANOMETRICS INCORPORATED
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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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: N/A
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(2) Form, Schedule or Registration Statement No.: N/A
-------------------------
(3) Filing Party: N/A
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(4) Date Filed: N/A
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<PAGE>
NANOMETRICS INCORPORATED
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Nanometrics Incorporated, a California corporation (the "Company"), will be
held on Thursday, June 18, 1998 at 1:30 p.m., local time, at the principal
offices of the Company located at 310 DeGuigne Drive, Sunnyvale, California
94086, for the following purposes:
1. To elect six directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 20, 1998 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy.
Sincerely,
Vincent J. Coates
Secretary
Sunnyvale, California
May 28, 1998
<PAGE>
NANOMETRICS INCORPORATED
----------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Nanometrics Incorporated (the "Company") for use at the Annual Meeting (the
"Annual Meeting") of Shareholders of the Company to be held on Thursday, June
18, 1998 at 1:30 p.m., local time, or at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal offices of the
Company located at 310 DeGuigne Drive, Sunnyvale, California 94086. The
Company's telephone number at that address is (408) 746-1600.
These proxy solicitation materials were mailed on or about May 28, 1998 to
all shareholders entitled to vote at the meeting. A copy of the Company's 1997
Annual Report to Shareholders accompanies this Proxy Statement.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on April 20, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 8,624,805 shares of the Company's Common Stock, no par value,
were issued and outstanding. For information concerning security ownership of
management and beneficial owners of more than 5% of the Company's Common
Stock, see "Security Ownership of Management and Certain Beneficial Owners"
below.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute the shareholder's votes
on the same principle among as many candidates as the shareholder may select,
provided that votes cannot be cast for more than six candidates. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name
has been placed in nomination prior to the voting and the shareholder, or any
other shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each
share of Common Stock outstanding has one vote.
The cost of this solicitation will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone.
QUORUM; ABSTENTIONS: BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
("Votes Cast") with respect to such matter.
<PAGE>
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal. In the absence of
controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against a proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to a
proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's Annual Meeting for fiscal 1998 must be
received by the Company no later than December 2, 1998 in order that they may
be included in the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's six nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner and in
accordance with cumulative voting as will ensure the election of as many of
the nominees listed below as possible and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company
is not aware of any nominee who will be unable or will decline to serve as a
director. The term of office of each person elected as a director will
continue until the next Annual Meeting of Shareholders or until such
director's successor has been elected and qualified.
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE
--------------- --- --------
<S> <C> <C>
Vincent J. Coates............................................ 73 1975
Nathaniel Brenner............................................ 72 1986
Norman V. Coates............................................. 49 1988
John D. Heaton............................................... 38 1995
Clifford F. Smedley.......................................... 63 1996
Kanegi Nagai................................................. 66 1996
</TABLE>
Vincent J. Coates has been Chairman of the Board since the Company was
founded in 1975. He has also served as Chief Executive Officer through April
1998 and President from the founding through May 1996, except for the period
January 1986 through February 1987 when he served exclusively as Chief
Executive Officer. He was elected Secretary in February 1989. Prior to his
employment at Nanometrics, Mr. Coates co-founded Coates and Welter Instrument
Corporation, a designer of electron microscopes, which company was
subsequently acquired by Nanometrics. Mr. Coates also spent over twenty years
working in engineering, sales and international operations for the Perkin-
Elmer Corporation. In 1995 he received an award which recognized his
contribution to the industry from Semiconductor and Equipment and Materials
International, an industry trade organization.
2
<PAGE>
Nathaniel Brenner has served as a director of the Company since June 1986.
He joined Beckman Instruments, Inc. in 1976 where he held the positions of
Program Manager, Marketing Manager (Instruments) and General Manager
(Spectroscopy). In 1992, Mr. Brenner retired from Beckman Instruments, Inc.
Mr. Brenner is also a director of PMC, Inc., a manufacturer of optical and
electron microscopy equipment.
Norman V. Coates has served as a director of the Company since May 1988. He
has operated Gem of the River Produce, a farming and produce packing operation
in Orleans, California, as a sole proprietor since 1978. He has also been
manager of the Boise Creek Farm operation since 1985.
John D. Heaton joined the Company in September 1990 and in April 1994 he was
elected Vice President of Engineering and General Manager. In July 1995, he
was appointed to the Board of Directors. In May 1996, he was elected President
and Chief Operating Officer. In April 1998, he was elected Chief Executive
Officer. Mr. Heaton served in various technical positions at National
Semiconductor from 1978 to 1990 prior to joining the Company.
Clifford F. Smedley has served as a director of the Company since January
1996. From July 1993 through July 1995, Mr. Smedley was the Chief Operating
Officer of System Chemistry, Inc. From January 1988 through March 1993, Mr.
Smedley served in several management capacities with Genus, Inc., most
recently as Vice President, New Product Development.
Kanegi Nagai has served as a director of the Company since May 1996. Mr.
Nagai is also a consultant to the Company and has acted as such since August
1995. From January 1990 to April 1995, Mr. Nagai was the President and Chief
Executive Officer of Cybeq Systems, a semiconductor equipment supplier. From
1983 to 1989, Mr. Nagai held a number of management positions with the
Mitsubishi Corporation.
Vincent J. Coates is the father of Norman V. Coates. There is no other
family relationship between any of the foregoing nominees or between any such
nominees and any of the executive officers of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE NOMINEES LISTED ABOVE.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth beneficial ownership of Common Stock of the
Company as of April 1, 1998, by each director or nominee, by each of the Named
Officers (as defined below), by all directors and officers as a group, and by
all persons known to the Company to be the beneficial owners of more than 5%
of the Company's Common Stock. Unless otherwise indicated the address of each
beneficial owner of 5% of the Company's Common Stock is 310 DeGuigne Avenue,
Sunnyvale, California 94086.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) PERCENT OF TOTAL
- ------------------------ ---------------------- ----------------
<S> <C> <C>
Vincent J. Coates...................... 5,401,774(2) 62.9%
FMR Corp............................... 548,200(3) 6.4
82 Devonshire St.
Boston, MA 02109
Nathaniel Brenner...................... 40,999(4) *
Norman V. Coates....................... 25,000(5) *
John D. Heaton......................... 8,334(6) *
Clifford F. Smedley.................... 6,666(7) *
Kanegi Nagai........................... 9,999(8) *
Roger Ingalls.......................... 31,666(9) *
William Fate........................... 6,000(10) *
William McGahan........................ 13,333(11) *
All officers and directors as a group
(9 persons)........................... 6,091,971(12) 70.1%
</TABLE>
- --------
* Represents less than 1% of outstanding shares of Common Stock.
(1) Represents sole voting and investment power, except as otherwise noted
below.
(2) Includes 5,401,654 shares of Common Stock held of record by the Vincent
J. Coates Trust dated August 7, 1981, for which Mr. Coates acts as
trustee and is the beneficial owner.
(3) According to a Schedule 13G filed with the Securities Exchange Commission
on or about February 10, 1998, FMR Corp ("FMR") may be deemed to be the
beneficial owner of 548,200 shares of Common Stock. FMR is identified as
a Parent Holding Company on its Schedule 13G.
(4) Includes 27,666 shares of Common Stock held of record by the N&J Brenner
Living Trust, for which Mr. Brenner and his spouse act as trustees, for
the benefit of members of Mr. Brenner's immediate family, and 13,333
shares of Common Stock issuable upon exercise of outstanding options
exercisable within 60 days of April 1, 1998.
(5) Includes 9,999 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998. Includes
an aggregate of 5,000 shares held on the behalf of Mr. Coates' children.
(6) Includes 8,334 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(7) Includes 6,666 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(8) Includes 9,999 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(9) Includes 31,666 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(10) Includes 6,000 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(11) Includes 13,333 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
(12) Includes 99,330 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 1998.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five meetings during fiscal 1997.
During fiscal 1997, no incumbent directors attended less than 75% of the
meetings of the Board of Directors and all incumbent directors attended all
meetings of committees, if any, upon which such directors served, except that
Mr. Nagai did not attend one meeting of the Board of Directors.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors reviews and
monitors the corporate financial reporting and the internal and external
audits of the Company, including among other things, the Company's internal
audit and control functions, the results and scope of the annual audit and
other services provided by the Company's independent auditors, and the
Company's compliance with legal matters with a significant impact on the
Company's financial reports. In addition, the Audit Committee has the
responsibility to consider and recommend the employment of, and to review fee
arrangements with, the Company's independent auditors. The Audit Committee
also monitors transactions between the Company and its officers, directors and
employees for any potential conflicts of interest. The current members of the
Audit Committee are Vincent J. Coates, Nathaniel Brenner and Kanegi Nagai. The
Audit Committee met 1 time during fiscal 1997.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of Directors
reviews and makes recommendations to the Board regarding the Company's
compensation policy and all forms of compensation to be provided to executive
officers and directors of the Company, including among other things, annual
salaries and bonuses. The current members of the Compensation Committee are
Nathaniel Brenner, Norman V. Coates and Clifford F. Smedley. The Compensation
Committee met 1 time during fiscal 1997.
STOCK OPTION COMMITTEE. The Stock Option Committee of the Board of Directors
is responsible for approving the grant of stock options to the Company's
employees under the Company's 1991 Stock Option Plan. The current members of
the Stock Option Committee are Norman V. Coates and Nathaniel Brenner. The
Stock Option Committee did not meet separately during fiscal 1997, but acted
by written consent 5 times during fiscal 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of Nanometrics
Incorporated consisted of Nathaniel Brenner, Norman V. Coates and Clifford F.
Smedley. No member of the Compensation Committee of the Company's Board serves
as a member of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
BOARD COMPENSATION
Directors who are not also employees of the Company receive an annual
retainer fee of $1,500 plus $1,000 for each Board of Directors and committee
meeting attended (unless the Board and committee meeting take place on the
same day, in which case such directors receive on $1,000 fee) and are eligible
to participate in the Company's 1991 Director Option Plan. In addition, the
Company is a party to a consulting agreement with Kanegi Nagai, a director of
the Company. See "Certain Transactions."
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Company to the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (collectively, the "Named Officers") during
the past three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------ -------------
FISCAL OPTION GRANTS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (# OF SHARES)
- --------------------------- ------ --------- -------- -------------
<S> <C> <C> <C> <C>
Vincent J. Coates (1)................... 1997 238,776 47,405 --
Chief Executive Officer, 1996 180,821 29,336 --
Chairman of the Board and 1995 170,519 19,036 --
Secretary
John D. Heaton(1)....................... 1997 219,061 45,262 75,000
President, and Chief 1996 178,454 34,712 --
Operating Officer 1995 129,178 15,199 --
Roger Ingalls........................... 1997 222,900 22,641 25,000
Vice President and Director 1996 138,564 12,954 5,000
of U.S. Sales 1995 72,648 6,916 40,000
William Fate............................ 1997 189,053 21,630 4,000
Vice President and Director 1996 115,112 13,108 --
of International Sales 1995 83,937 7,261 54,000
William McGahan......................... 1997 143,390 26,217 30,000
Vice President and 1996 119,483 15,559 20,000
Director of Engineering 1995 26,346 2,231 --
</TABLE>
- --------
(1) In April 1998 Mr. Coates resigned as Chief Executive Officer of the
Company, and Mr. Heaton was elected as Chief Executive Officer of the
Company.
6
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding individual grants of
options during fiscal 1997 to each of the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERMS(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL 1997(2) ($/SH) DATE 5%($) 10%($)
- ---- ------------- -------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Coates....... -- -- -- -- -- --
John D. Heaton.......... 75,000 15.4% $10.22 8/11/2002 $ 211,770 $ 467,956
Roger Ingalls........... 25,000 5.1% $10.22 8/11/2002 70,590 155,985
William Fate............ 4,000 0.8% $10.22 8/11/2002 11,294 24,958
William McGahan......... 30,000 6.1% $10.22 8/11/2002 84,708 187,182
</TABLE>
- --------
(1) Represent stock options granted under the Company's 1991 Stock Option
Plan. Stock options are granted with an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. Options
generally become exercisable 33% after the first year and 33% each full
year thereafter and are fully exercisable after 3 years. Options lapse
after 5 years or, if earlier, 90 days after termination of employment.
(2) Based on 488,500 options granted during fiscal 1997.
(3) Potential realizable values are net of exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only, based on rules of the Securities and Exchange
Commission. Actual realizable values, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall
market conditions and the option holder's continued employment through the
vesting period.
7
<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth, for each Named Officer, each exercise of
stock options during fiscal 1997 and the year-end value of unexercised
options.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY
SHARES VALUE AT YEAR END: OPTIONS AT YEAR-END:
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(1) UNEXERCISABLE (#) UNEXERCISABLE ($)(2)
- ---- ------------ --------- -------------------- --------------------
<S> <C> <C> <C> <C>
Vincent J. Coates....... -- -- -- --
John D. Heaton.......... 121,665 1,043,406 8,334/110,001 30,211/136,879
Roger Ingalls........... -- -- 28,331/41,669 110,007/65,019
William Fate............ -- -- 46,000/22,000 187,375/52,125
William McGahan......... -- -- 6,666/43,334 19,998/40,002
</TABLE>
- --------
(1) Value realized upon exercise is (i) the fair market value of the Company's
Common Stock on the date of exercise, less the option exercise price per
share, multiplied by (ii) the number of shares underlying the options
exercised.
(2) Value of unexercised options is (i) the fair market value of the Company's
Common Stock at fiscal 1997 year end ($8.88 per share), less the option
exercise price of in-the-money options, multiplied by (ii) the number of
shares underlying such options.
CERTAIN TRANSACTIONS
The Company is the beneficiary of an insurance policy on the life of Vincent
J. Coates in a face amount of $8,000,000. Annual premiums, which are paid by
the Company, totaled $200,000 for fiscal 1997 and in subsequent years are
fixed at $200,000. Mr. Coates and the Company have entered into an agreement
providing that in the event of Mr. Coates' death, his estate has the option to
cause the Company to use the proceeds of the policy to purchase shares of the
Company's Common Stock owned by the estate at their then fair market value.
The estate is not obligated under the terms of the agreement to exercise the
option. If the option is not exercised, the Company would retain the proceeds
of the insurance. The purpose of this agreement is to provide Mr. Coates'
estate, at its option, the opportunity to obtain cash to pay estate taxes
without having to raise all of such money from sales in the open market.
Pursuant to the terms of an agreement dated May 1, 1985 between the Company
and Vincent J. Coates, the Company is obligated, in the event Mr. Coates is
required to resign as Chief Executive Officer of the Company under certain
circumstances, to continue to pay Mr. Coates his salary for five years from
the date of such resignation. The agreement was amended and restated in 1996.
In April 1998, Mr. Coates resigned as Chief Executive Officer and continued to
serve as Chairman of the Board, and the Company has continued to pay
Mr. Coates his salary in connection with his services as Chairman of the
Board.
The Company is a party to a consulting agreement with Kanegi Nagai, a
director of the Company. Under the consulting agreement, the Company pays to
Mr. Nagai a fee at a rate of $400 per day, plus reasonable expenses, for
consulting services with respect to matters involving the Company's business
and operations in Japan. The term of the consulting agreement expires on June
30, 1998, unless sooner terminated by the parties thereto.
In April 1998, the Company entered into an agreement with Mr. Heaton in
which the Company agrees to pay Mr. Heaton his usual annual salary (excluding
bonuses) for a period of one year from the date that he is required or
requested for any reason not involving good cause to involuntarily relinquish
his positions with the Company as Chief Executive Officer and President and as
a director. If Mr. Heaton leaves the Company voluntarily or if he is asked to
leave under certain circumstances, no such severance pay shall be awarded.
8
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership on Form 3 and changes in ownership on Form 4 and Form 5
with the SEC. Such officers, and ten percent shareholders are also required by
the SEC rules to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on its review of the copies of such forms received by
it, the Company believes that, during fiscal 1997, all Section 16(a) filing
requirements applicable to the officers, directors and ten percent
shareholders were complied with, with the exception of a late Form 4 for
transactions occurring on October 2,1997 and October 6, 1997 filed by
Nathaniel Brenner. A Form 5 was filed by Mr. Brenner in order to report the
transaction on February 12, 1998.
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE OF THE BOARD
OF DIRECTORS
The following is the report of the Compensation Committee and the Stock
Option Committee of the Board of Directors describing compensation policies
and rationales applicable to the Company's executive officers with respect to
the compensation paid to such executive officers for the fiscal year ended
December 31, 1997. The information contained in such report shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act or Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
General. The Compensation Committee is responsible for making
recommendations to the Board of Directors with respect to cash compensation
levels for the Company's executive officers. During 1997, the Stock Option
Committee was responsible for determining levels of equity-based compensation
for the Company's executive officers and other key personnel of the Company.
Compensation Philosophy. The Compensation Committee makes recommendations as
to the salaries of the executive officers by considering (i) the salaries of
executive officers in similar positions at comparably-sized peer companies,
(ii) the Company's financial performance over the past year based upon
revenues and operating results and (iii) the achievement of individual
performance goals related to each executive officer's duties and areas of
responsibility. The Compensation Committee makes recommendations as to the
levels of cash bonuses awarded to the Company's executive officers and views
such bonuses as being an integral part of its performance based compensation
program. Such bonuses are based on Company profits and are determined as a
percentage of the executive salaries.
Equity-Based Compensation. The Stock Option Committee views stock options as
an important part of its long-term, performance-based compensation program.
The Stock Option Committee bases grants of stock options to the executive
officers of the Company under the Company's 1991 Stock Option Plan upon such
Committee's estimation of each executive's contribution to the long-term
growth and profitability of the Company. The 1991 Stock Option Plan is
intended to provide additional incentives to the executive officers to
maximize stockholder value. Options are granted under the 1991 Stock Option
Plan at the then-current market price and are generally subject to three-year
vesting periods to encourage key employees to remain with the Company.
Compensation of the Chief Executive Officer. The compensation of the
Company's Chief Executive Officer for fiscal 1997 was based upon the same
criteria described above. Specifically, the Compensation Committee considered
several factors as important in determining the Chief Executive Officer's
compensation for fiscal 1997. These factors included the attainment of
corporate revenue and operating results goals for the fiscal year. After
considering these factors, including but not limited to, the Company's record
revenue levels and sustained quarterly revenue growth over prior quarters, the
Company awarded the Chief Executive Officer a bonus that was higher than
recent historic levels.
<TABLE>
<S> <C>
STOCK OPTION COMMITTEE COMPENSATION COMMITTEE
Norman V. Coates Nathaniel Brenner
Nathaniel Brenner Norman V. Coates
Clifford F. Smedley
</TABLE>
9
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the shareholders of the Company's Common Stock with
the cumulative return of the Nasdaq U.S. Index and the Hambrecht & Quist
Technology Index for the period commencing on January 1, 1993 and ending on
December 31, 1997. The information contained in the performance graph shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by
reference into any future filing under the Securities Act or Exchange Act,
except to the extent that the Company specifically incorporates it by
reference into such filing.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG NANOMETRICS INCORPORATED, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION> NASDAQ HAMBRECHT
Measurement Period NANOMETRICS STOCK MARKET & QUIST
(Fiscal Year Covered) INCORPORATED (U.S.) TECHNOLOGY
- ------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Measurement Pt-12/92 $100 $100 $100
FYE 12/93 $100 $115 $117
FYE 12/94 $ 64 $112 $141
FYE 12/95 $843 $159 $211
FYE 12/96 $543 $195 $262
FYE 12/97 $936 $240 $307
</TABLE>
* $100 invested on 12/31/92 in Stock or Index--including reinvestment of
dividends. Fiscal year ending December 31.
10
<PAGE>
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Deloitte & Touche LLP, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending December 31, 1998. Deloitte & Touche LLP has audited the Company's
financial statements since fiscal 1991.
Representatives of Deloitte & Touche LLP are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR"
APPROVAL AND RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: May 28, 1998
11
<PAGE>
PROXY
NANOMETRICS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1998 ANNUAL MEETING OF SHAREHOLDERS
JUNE 18, 1998
The undersigned shareholder(s) of Nanometrics Incorporated, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 30, 1998, and hereby
appoints Vincent J. Coates and Paul B. Nolan, and each of them, Proxies and
Attorneys-in-Fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1998 Annual
Meeting of Shareholders of Nanometrics Incorporated to be held on Thursday,
June 18, 1998 at 1:30 p.m., local time, at the principal offices of the Company
located at 310 DeGuigne Drive, Sunnyvale, California, 94086 and at any
adjournments thereof, and to vote all shares of Common Stock which the
undersigned is entitled to vote on the matters set forth below:
ITEM 1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as indicated) to vote for all nominees
listed below
(INSTRUCTIONS: If you wish to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list below).
Vincent J. Coates Nathaniel Brenner Norman V. Coates John D. Heaton
Clifford F. Smedley Kanegi Nagai
ITEM 2. Proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the 1998 fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed, on reverse side)
(Continued from other side)
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR RATIFICATION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
Typed or Printed Name(s)
-------------------------------
Signature
-------------------------------
Signature
-------------------------------
Title, if applicable
-------------------------------
Type and Number of shares owned
Dated: __________________, 1998
This proxy should be marked,
dated, signed by the
shareholder(s) exactly as his
or her name appears hereon and
returned promptly in the
enclosed envelope. Persons
signing in a fiduciary
capacity should so indicate.
If shares are held by joint
tenants or as community
property, both should sign.
