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 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 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 transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing party: N/A
(4) Date filed: N/A
<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 Friday, May 28, 1999 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 five 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, 1999.
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 16, 1999
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
April 30, 1999
<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 Friday, May 28,
1999 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 April 30,
1999 to all shareholders entitled to vote at the meeting. A copy of the
Company's 1998 Annual Report to Shareholders accompanies this Proxy Statement.
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 16, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 8,750,580 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 five 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.
-2-
<PAGE>
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.
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 1999
must be received by the Company no later than January 29, 2000 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 five 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 five 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:
Director
Name of Nominee Age Since
- --------------- --- -----
Vincent J. Coates.......................................... 74 1975
Nathaniel Brenner.......................................... 73 1986
Norman V. Coates........................................... 50 1988
John D. Heaton............................................. 39 1995
Kanegi Nagai............................................... 67 1996
-3-
<PAGE>
Vincent J. Coates has been Chairman of the Board since the Company was
founded in 1975. He 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.
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 and redesignated President of the Company. Mr. Heaton served
in various technical positions at National Semiconductor from 1978 to 1990 prior
to joining the Company.
Kanegi Nagai has served as a director of the Company since May 1996.
Mr. Nagai was also a consultant to the Company from August 1995 until June 1998.
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.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth beneficial ownership of Common Stock of
the Company as of April 16, 1999, 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.
-4-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Percent
Common Stock of
Name of Beneficial Owner Beneficially Owned(1) Total
- ------------------------ --------------------- -----
<S> <C> <C>
Vincent J. Coates ................................................. 5,388,774(2) 61.6%
FMR Corp
82 Devonshire St
Boston, MA 02109 ................................................ 858,500(3) 9.8%
Nathaniel Brenner ................................................. 50,999(4) *
Norman V. Coates .................................................. 38,050(5) *
John D. Heaton .................................................... 55,001(6) *
Kanegi Nagai ...................................................... 19,999(7) *
Roger Ingalls ..................................................... 41,666(8) *
William Fate ...................................................... 25,333(9) *
William McGahan ................................................... 34,333(10) *
All officers and directors as a group (9 persons) ................. 5,720,821(11) 63.3%
<FN>
- ---------------------------
* Represents less than 1% of outstanding shares of Common Stock.
(1) Represents sole voting and investment power, except as otherwise noted below.
(2) Includes 5,388,654 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 17, 1999 FMR Corp ("FMR") may be deemed to be the
beneficial owner of 858,500 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 23,333
shares of Common Stock issuable upon exercise of outstanding options
exercisable within 60 days of April 16, 1999.
(5) Includes 19,999 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999. Includes
an aggregate of 8,050 shares held as trustee on the behalf of other family
members.
(6) Includes 55,001 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999.
(7) Includes 19,999 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999.
(8) Includes 41,666 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999.
(9) Includes 25,333 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999
(10) Includes 34,333 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999.
(11) Includes 286,330 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 16, 1999.
</FN>
</TABLE>
Board Meetings and Committees
The Board of Directors held a total of five meetings during fiscal
1998. During fiscal 1998, 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.
-5-
<PAGE>
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 once during fiscal 1998.
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 and Norman V. Coates. Clifford F. Smedley was a member of the
Compensation Committee until April 14, 1999. The Compensation Committee met once
during fiscal 1998.
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 1998,
but acted by written consent 6 times during fiscal 1998.
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, until April
14, 1999, 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 a $1,000 fee) and are eligible to
participate in the Company's 1991 Director Option Plan. In addition, the Company
was a party to a consulting agreement with Kanegi Nagai, a director of the
Company, until June 1998. See "Certain Transactions."
-6-
<PAGE>
Compensation of Executive Officers
<TABLE>
The following table sets forth the compensation paid by the Company to
the Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (collectively, the "Named Officers") during
the past three fiscal years:
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Fiscal Option Grants
Name and Principal Position Year Salary($) Bonus($) (# of shares)
- --------------------------- ---- --------- -------- -------------
<S> <C> <C> <C> <C>
Vincent J. Coates(1)................ 1998 215,231 10,431 --
Chairman of the Board and 1997 238,776 47,405 --
Secretary 1996 180,821 29,336 --
John D. Heaton(1)................... 1998 206,668 21,099 100,000
President and Chief 1997 219,061 45,262 75,000
Executive Officer 1996 178,454 34,712 --
Roger Ingalls....................... 1998 209,178 14,722 19,000
Vice President and Director 1997 222,900 22,641 25,000
of Marketing 1996 138,564 12,954 5,000
William Fate........................ 1998 212,058 13,442 19,000
Vice President and Director 1997 189,053 21,630 4,000
of International Sales 1996 115,112 13,108 --
William McGahan..................... 1998 151,315 15,934 38,000
Vice President and 1997 143,390 26,217 30,000
Director of Research and 1996 119,483 15,559 20,000
Development
<FN>
- ---------------------------
(1) In April 1998 Mr. Coates resigned as Chief Executive Officer of the
Company; Mr. Heaton was then elected Chief Executive Officer and
redesignated President of the Company.
</FN>
</TABLE>
-7-
<PAGE>
Stock Option Grants
<TABLE>
The following table sets forth information regarding individual grants of
options during fiscal 1998 to each of the Named Officers.
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants
--------------------------------------------------------------- Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Option Terms(3)
Options Employees in Exercise Price Expiration ----------------------
Name Granted(#)(1) Fiscal 1998(2) ($/Sh) Date 5%($) 10%($)
---- ------------- -------------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Coates -- -- -- -- -- --
John D. Heaton 100,000 20.7% 5.13 4/20/03 141,732 313,192
Roger Ingalls 4,000 0.8% 5.63 9/17/03 6,222 13,749
15,000 3.1% 7.94 12/11/03 32,905 72,712
William Fate 4,000 0.8% 5.63 9/17/03 6,222 13,749
15,000 3.1% 7.94 12/11/03 32,905 72,712
William McGahan 10,000 2.1% 5.13 4/20/03 14,173 31,319
3,000 0.6% 5.13 6/29/03 4,252 9,396
25,000 5.2% 7.94 12/11/03 54,842 121,186
<FN>
- ---------------------------
(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 as to 33% twelve months after the vesting
commencement date and 33% each full year thereafter and are fully
exercisable after 3 years. Options lapse after 5 years or 90 days after
termination of employment.
(2) Based on 483,500 options granted during fiscal 1998.
(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.
</FN>
</TABLE>
Stock Option Exercises and Fiscal Year-end Values
The following table sets forth, for each Named Officer, each exercise of
stock options during fiscal 1998 and the year-end value of unexercised options.
-8-
<PAGE>
<TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<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 -- -- 55,001/163,334 149,066/442,294
Roger Ingalls 10,000 65,838 41,666/37,334 112,187/58,440
William Fate 40,000 200,375 25,333/21,667 68,083/15,918
William McGahan -- -- 23,333/64,667 62,707/106,605
<FN>
- ---------------------------
(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 1998 year end ($7.813 per share), less the option
exercise price of in-the-money options, multiplied by (ii) the number of
shares underlying such options.
</FN>
</TABLE>
Report on Option Repricings
<TABLE>
The following table summarizes stock options granted to the executive
officers of the Company that have been repriced during the past ten fiscal
years.
TEN-YEAR OPTION REPRICINGS
<CAPTION>
Number of Market
Securities Price of Exercise
Underlying Stock at Price at New Length of Original
Options Time of Time of Exercise Option Term
Repricing Repriced Repricing Repricing Price Remaining at Date of
Name Date (#) ($) ($) ($) Repricing
- ---- ---- --- --- --- --- ---------
<S> <C> <C> <C> <C> <C> <C>
John D. Heaton..................... 9/15/98 16,668 5.125 5.25 5.125 2 years 2 months
President and Chief Executive 9/15/98 75,000 5.125 10.22 5.125 3 years 11 months
Officer 9/15/98 100,000 5.125 8.63 5.125 4 years 7 months
Roger Ingalls...................... 9/15/98 25,000 5.125 6.13 5.125 1 year 11 months
Vice President and Director of 9/15/98 5,000 5.125 5.25 5.125 2 years 2 months
Marketing 9/15/98 25,000 5.125 10.22 5.125 3 years 11 months
William Fate....................... 9/15/98 15,000 5.125 6.13 5.125 1 year 11 months
Vice President and Director of 9/15/98 9,000 5.125 5.25 5.125 2 years 2 months
International Sales 9/15/98 4,000 5.125 10.22 5.125 3 years 11 months
William McGahan.................... 9/15/98 20,000 5.125 5.88 5.125 2 years 4 months
Vice President and Director of 9/15/98 30,000 5.125 10.22 5.125 3 years 11 months
Research and Development 9/15/98 10,000 5.125 8.63 5.125 4 years 7 months
9/15/98 3,000 5.125 8.50 5.125 4 years 9 months
Paul Nolan......................... 9/15/98 5,000 5.125 5.25 5.125 2 years 2 months
Vice President and Chief 9/15/98 40,000 5.125 10.22 5.125 3 years 11 months
Financial Officer
</TABLE>
-9-
<PAGE>
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 1998 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 terms of which were then amended and restated
in August 1996 and again effective April 1998, the Company is obligated, in the
event Mr. Coates is required to resign as Chairman of the Board under certain
circumstances, to continue to pay Mr. Coates his salary and benefits for five
years from the date of such resignation.
The Company was a party to a consulting agreement with Kanegi Nagai, a
director of the Company, until the term of the consulting agreement expired on
June 30, 1998. Under the consulting agreement, the Company paid 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.
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.
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, directors 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 1998, all Section 16(a)
filing requirements applicable to the officers, directors and ten percent
shareholders were complied with.
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, 1998. The information contained in such report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities
-10-
<PAGE>
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 1998, 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.
Fiscal Year 1998 Repricing of Options. In September 1998, the Board of
Directors of the Company determined that the purposes of the 1991 Stock Option
Plan (as amended May 15, 1997), were not being adequately achieved with respect
to those employees holding options that were exercisable above current market
value and that it was essential to the best interest of the Company and its
shareholders that the Company retain and motivate such employees. The Board
further determined that it would be in the best interest of the Company and its
shareholders to provide such optionees the opportunity to reprice their above
market value options to an exercise price at current market value. On September
15, 1998, upon approval of the Board of Directors of the Company, the Company
offered all current employees with outstanding options the opportunity to
reprice such options, on an all or none basis, at an exercise price of $5.125
per share, the fair market value of the Common Stock of the Company at the close
of business on September 15, 1998. In addition, each repriced option was not
exercisable, except upon optionee's death, disability, involuntary termination
without good cause or a change of control of the Company before April 1, 1999.
Compensation of President and Chief Executive Officer. The compensation
of the President and Chief Executive Officer of the Company was based upon the
same criteria described above. Specifically, the Compensation Committee
considered several factors as important in determining such compensation
including progress toward meeting the corporate plan and the objectives set for
the President and Chief Executive Officer during his tenure in the current
fiscal year as well as progress toward attaining longer range goals as a result
of his leadership. In
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<PAGE>
recognition of his new responsibilities and progress toward meeting corporate
goals, the compensation of the Company's newly-elected President and Chief
Executive Officer was increased to an annual salary of $200,000.
STOCK OPTION COMMITTEE COMPENSATION COMMITTEE
Norman V. Coates Nathaniel Brenner
Nathaniel Brenner Norman V. Coates
Clifford F. Smedley, until April 14, 1999
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<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, 1994 and ending on
December 31, 1998. 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.
[GRAPHIC OMITTED]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG NANOMETRICS INCORPORATED,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
12/93 12/94 12/95 12/96 12/97 12/98
Nanometrics Incorporated 100 64 843 543 936 893
Nasdaq Stock Market (U.S.) 100 98 138 170 208 294
Hambrecht & Quist Technology 100 120 180 223 262 407
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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<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, 1999. 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: April 30, 1999
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<PAGE>
Appendix A
NANOMETRICS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1999 ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1999
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, 1999, 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 1999 Annual
Meeting of Shareholders of Nanometrics Incorporated to be held on Friday, May
28, 1999 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 (except as indicated)
( ) WITHHOLD AUTHORITY to vote for all nominees listed below
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
Kanegi Nagai
ITEM 2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE 1999 FISCAL YEAR.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(Continued and to be signed, on reverse side)
<PAGE>
(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: ------------------------------------------------, 1999
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.
