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
----------------------------------------------------------
(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)(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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<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 Wednesday, May 31, 2000 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 until the next annual meeting of
shareholders or until their successors are elected.
2. To approve the adoption of the Company's 2000 Employee Stock Option Plan
and the reservation of 1,250,000 shares of Common Stock for issuance
thereunder.
3. To approve the adoption of the Company's 2000 Director Stock Option Plan
and the reservation of 250,000 shares of Common Stock for issuance
thereunder.
4. To approve an amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares common stock reserved for future issuance
by 150,000.
5. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000.
6. 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 28, 2000 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 3, 2000
<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 Wednesday, May
31, 2000 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 3, 2000 to
all shareholders entitled to vote at the meeting. A copy of the Company's 1999
Annual Report to Shareholders accompanies this Proxy Statement.
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 28, 2000 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 11,284,754 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.
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
The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the 2000 annual meeting. Proposals of
shareholders of the Company which are intended to be presented by such
shareholders at the Company's 2001 Annual Meeting must be received by the
Company no later than December 30, 2000 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
If a shareholder intends to submit a proposal at the 2001 annual meeting
that is not eligible for inclusion in the proxy statement and proxy, the
shareholder must do so no later than March 14, 2001. If such a shareholder
fails to comply with the foregoing notice provision, the proxy holders will be
allowed to use their discretionary authority when the proposal is raised at the
2001 annual 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 .............. 75 1975
Nathaniel Brenner .............. 74 1986
Norman V. Coates .............. 51 1988
John D. Heaton ................. 40 1995
Edmond R. Ward ................. 60 1999
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,
2
<PAGE>
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 and a manager of
Coates Vineyard since 1997.
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.
Edmond R. Ward has served as one of the directors since June 1999. Since
August 1999, Mr. Ward has been a General Partner of Virtual Founders. From
April 1992 to June 1997, Mr. Ward was the Vice President of Technology at
Silicon Valley Group, Inc.
Kanegi Nagai, a director since May 1996, will not be standing for
re-election this year. Mr. Nagai has served the Company very well during his
tenure and contributed to the Company's success and growth. The Company
appreciates the enormous service that he has given and will miss his presence
and contributions.
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 SET FORTH HEREIN.
3
<PAGE>
<TABLE>
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth beneficial ownership of Common Stock of the
Company as of December 31, 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.
<CAPTION>
Number of Shares of Percent
Common Stock of
Name of Beneficial Owner Beneficially Owned(1) Total
- ------------------------ --------------------- -----
<S> <C> <C>
Vincent J. Coates(2) ....................................... 5,388,774 58.8%
Putnam Investments, Inc.(3) ................................. 833,840 9.1%
One Post Office Square
Boston, MA 02109
FMR Corp.(4) ................................................ 700,000 7.6%
82 Devonshire St
Boston, MA 02109
Nathaniel Brenner(5) ....................................... 55,999 *
Norman V. Coates(6) ....................................... 38,049 *
John D. Heaton(7) .......................................... 126,668 1.4%
Paul B. Nolan(8) .......................................... 61,666 *
Kanegi Nagai(9) ............................................. 13,999 *
Roger Ingalls, Jr.(10) .................................... 32,999 *
William A. McGahan(11) .................................... 29,332 *
Edmond R. Ward ............................................. 0 *
All officers and directors as a group (9 persons)(12) ...... 5,747,486 60.6%
<FN>
- ------------
* Represents less than 1% of outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
The number of shares beneficially owned by a person includes shares of
common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of December 31, 1999. Such shares
issuable pursuant to such options are deemed outstanding for computing the
percentage ownership of the person holding such options but are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person.
(2) Includes 4,388,654 shares of common stock held of record by the Vincent J.
Coates Separate Property Trust, U/D/T dated August 7, 1981, for which Mr.
Coates acts as trustee, and 1,000,000 shares of common stock held of record
by the Vincent J. Coates 1999 Charitable Trust UTA dated December 17, 1999
for which Mr. Coates acts as trustee.
(3) According to a Schedule 13G filed with the Securities Exchange Commission
on or about February 17, 2000, Putnam Investments, Inc. ("PI") may be
deemed to be the beneficial owner of 833,840 shares of common stock. PI is
identified as a Parent Holding Company on its Schedule 13G.
(4) According to a Schedule 13G filed with the Securities Exchange Commission
on or about February 11, 2000 FMR Corp ("FMR") may be deemed to be the
beneficial owner of 700,000 shares of Common Stock. FMR is identified as a
Parent Holding Company on its Schedule 13G.
(5) Includes 26,000 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 29,999 shares of
common stock issuable upon exercise of outstanding options exercisable
within 60 days of December 31, 1999.
4
<PAGE>
(6) Includes an aggregate of 8,050 shares held as trustee on the behalf of
other family members and 29,999 shares of common stock issuable upon
exercise of outstanding options exercisable within 60 days of December 31,
1999.
(7) Includes 126,668 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
(8) Includes 61,666 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
(9) Includes 13,999 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
(10) Includes 32,999 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
(11) Includes 29,332 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
(12) Includes 324,662 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of December 31, 1999.
</FN>
</TABLE>
Board Meetings and Committees
The Board of Directors held a total of four meetings during fiscal 1999.
During fiscal 1999, 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.
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 Edmond R. Ward. Kanegi Nagai was a member of
the Audit Committee until April 18, 2000. The Audit Committee met twice during
fiscal 1999.
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
one time during fiscal 1999.
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 1999,
but acted by written consent nine times during fiscal 1999.
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.
5
<PAGE>
Board Compensation
Directors who are not also employees of the Company receive an annual
retainer fee of $5,000 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.
<TABLE>
Compensation of Executive Officers
The following table sets forth the compensation paid by the Company to the
Chief Executive Officer and each of the other most highly compensated executive
officers of the Company (collectively, the "Named Officers") during the past
three fiscal years:
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Awards
--------------
Annual Compensation Securities
Fiscal ----------------------- Underlying
Year Salary Bonus Options (#)
-------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
John D. Heaton ............... 1999 $241,445 $ 5,338 50,000
President and 1998 $206,668 $ 21,098 100,000
Chief Executive Officer 1997 $219,061 $ 45,261 75,000
Vincent J. Coates ............ 1999 $204,800 $ -- --
Chairman of the Board and 1998 $215,231 $ 10,431 --
Secretary 1997 $238,776 $ 47,405 --
Roger Ingalls Jr ............ 1999 $178,529 $ 3,203 --
Vice President and 1998 $209,178 $ 14,723 19,000
Director of Marketing 1997 $222,900 $ 22,642 25,000
William Fate .................. 1999 $177,767 $ 2,925 --
Former Vice President and 1998 $212,058 $ 13,442 19,000
Director of International Sales 1997 $189,053 $ 21,630 4,000
William A. McGahan ............ 1999 $174,896 $ 3,681 --
Vice President and 1998 $151,315 $ 15,934 38,000
Chief Scientist 1997 $143,390 $ 26,218 30,000
Paul B. Nolan ............... 1999 $120,870 $ 2,643 --
Vice President and 1998 $123,232 $ 13,809 --
Chief Financial Officer 1997 $135,551 $ 29,378 40,000
</TABLE>
6
<PAGE>
Stock Options Granted in the Fiscal Year Ended December 31, 1999
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1999 to each of the Named
Officers. All options were granted under the Company's 1991 Stock Option Plan.
The potential realizable value amounts in the last two columns of the
following chart represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed 5%
and 10% annual rates of stock price appreciation from the date of grant to the
end of the option term are provided in accordance with rules of the SEC and do
not represent the Company's estimate or projection of the future common stock
price. Actual gains, 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.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants
-------------------------------------------------------
Potential Realized
Value Rates
Number of % of Total at Assumed Annual
Securities Options of Stock Price
Underlying Granted to Appreciation for
Options Employees Exercise Option Term
Granted in Fiscal Price Expiration --------------------
Name (#) (1) Year (2) ($/Sh) Date 5% ($) 10% ($)
- --------------------------- ------------ ------------ ---------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
John D. Heaton ......... 50,000 11.0% 6.94 5/28/04 95,835 211,771
Vincent J. Coates ...... -- -- -- -- -- --
Roger Ingalls Jr. ...... -- -- -- -- -- --
William Fate ............ -- -- -- -- -- --
William A. McGahan ...... -- -- -- -- -- --
Paul B. Nolan ............ -- -- -- -- -- --
<FN>
- ------------
(1) All options granted to the Named Officers in 1999 were granted at exercise
prices equal to the fair market value of the Company's common stock on the
dates of grant. Historically, options granted become exercisable at the
rate of 33% on the first anniversary date of the option grant and 33% of
the option shares become exercisable each full year thereafter, such that
full vesting occurs three years after the date of grant. Options lapse
after 5 years or 90 days after termination of employment.
(2) Based on 455,000 options granted during the fiscal year ended December 31,
1999.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of shares acquired upon the
exercise of stock options during 1999 and the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named Officers
at December 31, 1999.
<CAPTION>
Number of Securities
Underlying Unexercisable Value of Unexercised
Options At Fiscal In-the-Money Options At
Shares Value Year-End (#) Fiscal Year-End ($)(2)
Acquired on Realized ----------------------------- -----------------------------
Exercise (#) ($)(1) Exercisable Unexercised Exercisable Unexercised
-------------- ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Heaton ......... -- -- 126,668 141,667 1,906,687 2,034,380
Vincent J. Coates ...... -- -- -- -- -- --
Roger Ingalls Jr. ...... 25,000 416,375 32,999 21,001 481,507 285,557
William Fate ............ 27,999 150,981 -- -- -- --
William A. McGahan ...... 25,000 193,505 29,332 33,668 416,453 458,144
Paul B. Nolan ............ 25,000 264,725 61,666 13,334 960,640 200,010
<FN>
- ------------
(1) The 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) The value of unexercised options is (i) the fair market value of the
Company's common stock on December 31, 1999 ($20.13 per share), less the
option exercise price of in-the-money options, multiplied by (ii) the
number of shares underlying such options.
</FN>
</TABLE>
<TABLE>
Report on Repricing of Options
The following table summarizes stock options granted to the executive
officers of the Company that have been repriced during the past ten years.
Ten-Year Option Repricings
<CAPTION>
Number of Market Exercise
Securities Price of Price at Length of Original
Underlying Stock at Time of New Option Term
Repricing Options Time of Repricing Exercise Remaining at Date
Name Date Repriced (#) Repricing ($) ($) Price ($) of 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 9/15/98 75,000 5.125 10.22 5.125 3 years 11 months
Executive Officer 9/15/98 100,000 5.125 8.63 5.125 4 years 7 months
Roger Ingalls Jr. ......... 9/15/98 25,000 5.125 6.13 5.125 1 year 11 months
Vice President and Director 9/15/98 5,000 5.125 5.25 5.125 2 years 2 months
of 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
Former Vice President and 9/15/98 9,000 5.125 5.25 5.125 2 years 2 months
Director of 9/15/98 4,000 5.125 10.22 5.125 3 years 11 months
International Sales
William A. McGahan ...... 9/15/98 20,000 5.125 5.88 5.125 2 years 4 months
Vice President and 9/15/98 30,000 5.125 10.22 5.125 3 years 11 months
Chief Scientist 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 B. 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>
8
<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 1999 are fixed at $200,000 per
year upon continuation of the policy. In the event of termination of the
policy, any cash surrender value would belong to Mr. Coates. 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.
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 executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the Nasdaq National Market. Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulations 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 or
written representations from certain reporting persons, the Company believes
that during fiscal 1999 all filing requirements applicable to the executive
officers, directors and greater than ten percent shareholders were complied
with, except that the Vincent J. Coates Separate Property Trust, U/D/T/ dated
August 7, 1981 and the Vincent J. Coates 1999 Charitable Trust UTA dated
December 17, 1999, both greater than ten percent shareholders, each filed one
report on Form 3 late.
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, 1999. 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 1999, 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
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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 shareholder
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 President and Chief Executive Officer. The
compensation of the Company's President and Chief Executive Officer 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 recognition of his progress toward
meeting corporate goals and to remain competitive, based on a survey of other
CEO salaries, the compensation of the Company's President and Chief Executive
Officer was increased to an annual salary of $250,000.
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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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, 1995 and ending on
December 31, 1999. 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 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]
12/94 12/95 12/96 12/97 12/98 12/99
---------------------------------------------
Nanometrics Incorporated 100 1,311 844 1,456 1,389 3,578
Hambrecht & Quist Technology 100 150 186 218 339 757
NASDAQ Stock Market (U.S.) 100 141 174 213 300 557
* $100 invested on 12/31/94 in stock or index.
Including reinvestment of dividends.
Fiscal Year Ending December 31.
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PROPOSAL NO. 2
ADOPTION OF THE COMPANY'S 2000 EMPLOYEE STOCK OPTION PLAN
AND THE RESERVATION OF 1,250,000 SHARES OF THE COMPANY'S
COMMON STOCK FOR ISSUANCE THEREUNDER
On April 25, 2000, the Board of Directors of the Company (the "Board")
adopted the 2000 Employee Stock Option Plan (the "Plan"), subject to the
approval of the Company's shareholders. The Plan is intended to replace the
Company's 1991 Employee Stock Plan (the "1991 Plan"). Shareholders are being
asked to approve the adoption of the Plan and the reservation of 1,250,000
shares thereunder. The fair market value of the Common Stock as of December 31,
1999 was $20.13 per share.
The Board believes that the Plan has been important to the Company's
efforts to encourage employee equity participation and increase worker retention
by aligning employee interests with those of the shareholders. The Board is
pleased with the success of the 1991 Plan in increasing the level of employee
interest in the Company's stock price, and believes that the offer of equity
incentives to all employees has been a key factor in the Company's overall
financial performance. As of December 31, 1999, options to purchase 2,557,496
shares of Common Stock were issued under the 1991 Plan, of which options to
purchase 1,340,664 shares of Common Stock were outstanding.
The following is a summary description of the Plan under which no options
or stock purchase rights have yet been granted.
SUMMARY OF THE PLAN
Purpose. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants (collectively, the
"Service Providers"), and to promote the success of the Company's business.
Shares Subject to the Plan. The Board has reserved a maximum of 1,250,000
shares of Common Stock for issuance under the Plan. The shares may be authorized
but unissued, or reacquired Common Stock.
Administration. The Plan may be administered by different Committees with
respect to different groups of Service Providers (as applicable, the
"Administrator"). The Administrator may make any determinations deemed necessary
or advisable for the Plan.
Eligibility. Nonstatutory stock options and stock purchase rights may be
granted to Service Providers. Incentive stock options may be granted only to
employees. The Administrator, in its discretion, selects the Service Providers
to whom options and stock purchase rights may be granted, and the exercise price
and number of shares subject to each such grant. Currently, approximately 160
employees of the Company are eligible to participate in the Plan.
Limitations. Section 162(m) of the Internal Revenue Code, as amended (the
"Code") places limits on the deductibility for federal income tax purposes of
compensation paid to certain executive officers of the Company. In order to
preserve the Company's ability to deduct the compensation income associated with
the options granted to such persons, the Plan provides that no employee may be
granted, in any fiscal year of the Company, options to purchase more than
1,000,000 shares of Common Stock. Notwithstanding this limit, however, in
connection with an individual's initial employment with the Company, he or she
may be granted options to purchase up to an additional 1,000,000 shares of
Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of the Common Stock on the date such option is granted; provided, however,
that the exercise price of an incentive stock option granted to a 10%
shareholder may not be less than 110% of the fair market value on the date
such option is granted. The fair market value of the
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Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported)
on the same trading day as the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable. An option shall be exercisable
in whole or in part by giving written or electronic notice to the Company,
stating the number of shares with respect to which the options being
exercised, accompanied by payment in full for such shares. The means of
payment for shares issued upon exercise of an option is specified in each
option agreement. The Plan permits payment to be made by cash, check,
promissory note, other shares of Common Stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.
(c) Term of Option. The Administrator determines the term of each
option. However, the term of an incentive stock option may be no more than
ten (10) years from the date of grant; provided, however, that in the case
of an incentive stock option granted to a 10% shareholder, the term of the
option may be no more than five (5) years from the date of grant. No option
may be exercised after the expiration of its term.
(d) Termination as a Service Provider. If an optionee's employment,
director or consulting relationship terminates for any reason (excluding
death or disability), then the optionee generally may exercise the option
within 3 months of such termination to the extent that the option is vested
on the date of termination, (but in no event later than the expiration of
the term of such option as set forth in the option agreement). If an
optionee's employment, director or consulting relationship terminates due
to the optionee's disability or death, the optionee (or the optionee's
estate or the person who acquires the right to exercise the option by
bequest or inheritance) generally may exercise the option, to the extent
the option was vested on the date of termination, within 12 months from the
date of such termination.
(e) Nontransferability of Options. Unless otherwise determined by the
Administrator, options granted under the Plan are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionee's lifetime only by the optionee.
(f) Other Provisions. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Stock Purchase Rights. Stock purchase rights may be issued either alone, in
addition, or in tandem with other awards granted under the Plan. The
Administrator determines who will be offered Common Stock and the conditions and
restrictions related to the offer, including the number of shares to be offered,
the price to be paid and the time which the offer must be accepted. Unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment to the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
Adjustments Upon Changes in Capitalization. In the event that the Common
Stock of the Company changes by reason of any stock split, reverse stock split,
stock dividend, combination, reclassification or other similar change in the
capital structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option and stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its sole
discretion, provide that each optionee shall have the right to exercise all or
any part of the option, including shares as to which the option would not
otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to shares purchased upon exercise of an
option or stock purchase right will lapse as to all shares, provided the
proposed dissolution or liquidation takes place as contemplated.
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Subject to the occurrence of a change of control (discussed below), in
connection with any merger of the Company with or into another corporation or
the sale of all or substantially all of the assets of the Company, each
outstanding option and stock purchase right shall be assumed or an equivalent
option or stock purchase right substituted by the successor corporation. If the
successor corporation refuses to assume the options or stock purchase rights or
to substitute substantially equivalent options or stock purchase rights, the
optionee shall have the right to exercise the option as to all the optioned
stock, including shares not otherwise vested or exercisable. In such event, the
Administrator shall notify the optionee that the option is fully exercisable for
fifteen (15) days from the date of such notice and that the option terminates
upon expiration of such period.
Change of Control. In the event of a "change of control," any options
outstanding on the date of such change in control will vest and become fully
exercisable and any Company repurchase right with respect to restricted stock
will lapse if (i) a successor corporation fails to assume all obligations with
respect to such options and restricted stock, (ii) the optionees or holders of
restricted stock do not or will not receive the same consideration as received
by other shareholders in such change of control, (iii) an optionee or holder of
restricted stock is terminated in an "involuntary termination" following the
change of control or (iv) the optionee is designated an executive officer by the
Company's board of directors as of the date of such change of control and such
optionee does not voluntarily resign from the Company during the twelve (12)
month period following such change of control. A "change of control" is defined
as (i) any "person" (as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) becoming the "beneficial owner" (as defined under Rule
13d-3 of the Securities Exchange Act of 1934) of 50% or more of the total voting
power of the Company, (ii) certain changes in the composition of the board of
directors, (iii) a merger or consolidation where the Company's shareholders do
not own at least 50% of the voting power after the transaction or (iv) the sale
or disposition of substantially all of the Company's assets. An "involuntary
termination" is defined as (i) a termination of an optionee for other the
"Cause," (ii) certain reductions of an optionee's base salary, (iii) certain
reductions of an optionee's employee benefits, (iv) certain relocations of an
optionee, and (v) with respect to certain officers, a reduction of duties,
authority or responsibilities following a change of control. "Cause" is defined
as (i) certain acts of dishonesty, fraud or misrepresentation in connection with
such optionee's employment responsibilities, (ii) an optionee's arrest for a
felony, fraud or an act or moral turpitude, or (ii) an optionee's failure to
perform his or her employment obligations or follow the Company's employee
policies.
Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain shareholder approval for any amendment to the
Plan to the extent necessary and desirable to comply with applicable law. No
such action by the Board or shareholders may alter or impair any rights of an
optionee without the written consent of the optionee. Unless terminated earlier,
the Plan shall terminate ten years from the date the Plan was adopted by the
Board.
Federal Income Tax Consequences. The following discussion summarizes
certain U.S. federal income tax considerations for persons receiving options and
stock purchase rights under the Plan and certain tax effects to the Company,
based upon the provisions of the Code as in effect on the date of this Proxy
Statement, current regulations and existing administrative rulings of the IRS.
However, the summary is not intended to be a complete discussion of all the
federal income tax consequences of this Plan:
(a) Incentive Stock Options. An optionee who is granted an incentive
stock option does not recognize taxable income at the time the option is
granted or upon its exercise, although the exercise is an adjustment item
for alternative minimum tax purposes and may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two
years after grant of the option and one year after exercise of the option,
any gain or loss is treated as long-term capital gain or loss. Net capital
gains on shares held more than 12 months may be taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains and
up to $3,000 against other income. If these holding periods are not
satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. Any
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<PAGE>
gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A
different rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is also an officer, director, or 10%
shareholder of the Company. Unless limited by Section 162(m) of the Code,
the Company is entitled to a deduction in the same amount as the ordinary
income recognized by the optionee.
(b) Nonstatutory Stock Options. An optionee does not recognize any
taxable income at the time he or she is granted a nonstatutory stock
option. Upon exercise, the optionee recognizes taxable income generally
measured by the excess of the then fair market value of the shares over the
exercise price. Any taxable income recognized in connection with an option
exercise by an employee of the Company is subject to tax withholding by the
Company. Unless limited by Section 162(m) of the Code, the Company is
entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Net capital gains on shares held more than 12 months may be
taxed at a maximum federal rate of 20%. Capital losses are allowed in full
against capital gains and up to $3,000 against other income.
(c) Stock Purchase Rights. Stock purchase rights will generally be
taxed in the same manner as nonstatutory stock options. However, restricted
stock is generally purchased upon the exercise of a stock purchase right.
At the time of purchase, restricted stock is subject to a "substantial risk
of forfeiture" within the meaning of Section 83 of the Code, because the
Company may repurchase the stock when the purchaser ceases to provide
services to the Company. As a result of this substantial risk of
forfeiture, the purchaser will not recognize ordinary income at the time of
purchase. Instead, the purchaser will recognize ordinary income on the
dates when the stock is no longer subject to a substantial risk of
forfeiture (i.e., when the Company's right of repurchase lapses). The
purchaser's ordinary income is measured as the difference between the
purchase price and the fair market value of the stock on the date the stock
is no longer subject to right of repurchase.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and begin his or her capital gains holding period by
timely filing, (i.e., within thirty days of the purchase), an election pursuant
to Section 83(b) of the Code. In such event, the ordinary income recognized, if
any, is measured as the difference between the purchase price and the fair
market value of the stock on the date of purchase, and the capital gain holding
period commences on such date. The ordinary income recognized by a purchaser who
is an employee will be subject to tax withholding by the Company. Different
rules may apply if the purchaser is also an officer, director, or 10%
shareholder of the Company.
Option Information As of December 31, 1999. The Company, including its
subsidiaries, had approximately 160 employees with outstanding option grants
under the 1991 Plan.
While it believes that establishment of the Plan can result in dilution to
existing shareholders, the Board believes that the positive effect on the
Company's performance that the 1991 Plan had and that the Plan will have, more
than offset the dilution to existing shareholders.
With the demand for highly skilled employees at an all time high,
especially in the technology industries, the Board believes it is critical to
the Company's success to maintain competitive employee compensation programs,
including the Plan.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to vote
will be required to approve the adoption of the Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ADOPTION OF THE 2000 EMPLOYEE STOCK OPTION PLAN AND THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER.
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PROPOSAL NO. 3
ADOPTION OF THE COMPANY'S 2000 DIRECTOR STOCK OPTION PLAN
AND THE RESERVATION OF 250,000 SHARES OF THE COMPANY'S
COMMON STOCK FOR ISSUANCE THEREUNDER
On April 25, 2000, the Board of Directors of the Company (the "Board")
adopted the 2000 Director Stock Option Plan (the "2000 Director Plan"), subject
to the approval of the Company's shareholders. The 2000 Director Plan is
intended to replace the Company's 1991 Director Stock Option Plan (the "1991
Director Plan"). The Board of Directors has reserved a maximum of 250,000 shares
of Common Stock for issuance under the 2000 Director Plan. The fair market value
of the Common Stock as of December 31, 1999 was $20.13 per share.
The Board believes that the 1991 Director Plan has been important to the
Company's efforts to encourage director equity participation and increase
retention. Although non-employee directors have an interest in acquiring
approval for the 2000 Director Plan since they will be the beneficiaries of the
approval, the Board is pleased with the success of the 1991 Plan in increasing
the level of director interest in the Company's stock price, and believes that
the offer of equity incentives to all directors has been a key factor in the
Company's overall financial performance. As of December 31, 1999, options to
purchase 263,332 shares of Common Stock were issued under the 1991 Director Plan
of which options to purchase 154,000 shares of Common Stock were outstanding.
The following is a summary description of the 2000 Director Plan under
which no options have yet been granted.
SUMMARY OF THE 2000 DIRECTOR PLAN
Purpose. The purposes of the 2000 Director Plan are to attract and retain
the best available personnel for service as a Director who is not an Employee
(an "Outside Director") of the Company, to provide additional incentive to
Outside Directors of the Company to serve as directors, and to encourage their
continued service on the Board.
Shares Subject to the 2000 Director Plan. The Board has reserved a maximum
of 250,000 shares of Common Stock for issuance under the 2000 Director Plan. The
Shares may be authorized, but unissued, or reacquired Common Stock.
Administration. The 2000 Director Plan provides for grants of options to be
made in two ways:
(a) Each Outside Director is automatically granted an option to
purchase 10,000 shares (the "First Option") upon the date such individual
first becomes a director, whether through election by the shareholders of
the Company or by appointment by the Board in order to fill a vacancy; and
(b) Each non-employee director is automatically granted an option to
purchase 10,000 shares (the "Subsequent Option") on January 1 of each year,
if on such date he or she shall have served on the Board for at least the
preceding six (6) months.
The Board has the authority, in its discretion, to: (i) determine the fair
market value of the Common Stock; (ii) interpret the Director Plan; (iii)
prescribe, amend and rescind rules and regulations relating to the Director
Plan; (iv) authorize any person to execute, on behalf of the Company, any
instrument required to effectuate the grant of an option previously granted
under the 2000 Director Plan; and (v) make all other determinations deemed
necessary or advisable for the administration of the Director Plan. All
decisions, determinations and interpretations of the Board are final.
Eligibility; Limitations. Only non-employee directors of the Board are
eligible to receive nonstatutory stock options under the 2000 Director Plan.
Terms and Conditions of Options. Each option is evidenced by a director
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The exercise price of options granted under the
Director Plan is 100% of the fair market value per share of the Common
Stock on the date of grant, generally determined with reference to the
closing sale price for the Common Stock (or the closing bid if no sales
were reported) on the date of grant.
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(b) Exercise of Option. Both the First Option and the Subsequent Option
shall vest as to 1/3 of the optioned stock on each anniversary of the date
of grant. An option shall be exercisable in whole or in part by giving
written notice to the Company, stating the number of shares with respect to
which the option is being exercised, accompanied by payment in full for
such shares.
(c) Forms of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The 2000
Director Plan permits payment to be made by cash, check, promissory note,
other shares of Common Stock of the Company (with some restrictions),
cashless exercises, any payment permitted by under applicable law, or any
combination thereof.
(d) Term of Option. The term of any option shall be five (5) years from
the date of grant. No option may be exercised after the expiration of its
term.
(e) Termination of Directorship. If an optionee's status as a director
terminates for any reason, then all options held by the optionee under the
2000 Director Plan expire three months following the termination. If the
optionee's status as a director terminates due to death or disability, then
all options held by the optionee under the 2000 Director Plan expire twelve
months following the termination. In no case may an option be exercised
after the expiration date of the option.
(f) Nontransferability of Options: Options granted under the 2000
Director Plan are not transferable other than by will or the laws of
descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee.
(g) Other Provisions: The director option agreement may contain other
terms, provisions and conditions not inconsistent with the 2000 Director
Plan as may be determined by the Board.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split,
recapitalization or other similar change in the capital structure of the
Company, or converted into or exchanged for other securities as a result of any
merger, consolidation or reorganization, or in the event the outstanding number
of shares of stock of the Company is increased through payment of a stock
dividend, appropriate adjustments shall be made in the number and class of
shares of stock subject to the 2000 Director Plan, the number and class of
shares of stock subject to any option outstanding under the Director Plan, and
the exercise price of any such outstanding option.
Unless otherwise determined by the Board, in the event of a proposed
liquidation or dissolution, any unexercised options will terminate prior to such
action. The Board may give the optionee the right to exercise any unexercised
options, including shares as to which the option would not otherwise be
exercisable, prior to their termination.
Subject to the occurrence of a change of control (discussed below), in the
event of a merger of the Company or the sale of substantially all of the assets
of the Company, each option may be assumed or an equivalent option substituted
for by the successor corporation. If an option is assumed or substituted for by
the successor corporation, it shall continue to vest as provided in the 2000
Director Plan. If the successor corporation does not agree to assume or
substitute for the option, each option shall become fully vested and exercisable
for a period of fifteen (15) days from the date the Board notifies the optionee
of the option's full exercisability, after which period the option will
terminate.
Change of Control. In the event of a "change of control," any options
outstanding on the date of such change in control will vest and become fully
exercisable if (i) a successor corporation fails to assume all obligations with
respect to such options, (ii) the optionees do not or will not receive the same
consideration as received by other shareholders in such change of control, (iii)
an optionee's status as a director of the Company or the successor corporation
is terminated other than by voluntary resignation following such change of
control. A "change of control" is defined as (i) any "person" (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becoming the
"beneficial owner" (as defined under Rule 13d-3 of the Securities Exchange Act
of 1934) of 50% or more of the total voting power of the Company, (ii) certain
changes in the composition of the board of directors, (iii) a merger or
17
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consolidation where the Company's shareholders do not own at least 50% of the
voting power after the transaction or (iv) the sale or disposition of
substantially all of the Company's assets.
Amendment and Termination of the 2000 Director Plan. The Board may amend,
alter, suspend or terminate the 2000 Director Plan, or any part thereof, at any
time and for any reason. However, the Company shall obtain shareholder approval
for any amendment to the 2000 Director Plan to the extent necessary to comply
with applicable laws or regulations. No such action by the Board or shareholders
may alter or impair any option previously granted under the 2000 Director Plan
without the consent of the optionee. Unless terminated earlier, the 2000
Director Plan shall terminate ten years from the date of its approval by the
shareholders or the Board, whichever is earlier.
Federal Income Tax Consequences. The following discussion summarizes
certain U.S. federal income tax considerations for directors receiving options
under the 2000 Director Plan and certain tax effects to the Company, based upon
the provisions of the Code as in effect on the date of this Proxy Statement,
current regulations and existing administrative rulings of the Internal Revenue
Service. However, the summary is not intended to be a complete discussion of all
the federal income tax consequences of this Plan:
(a) Nonstatutory Stock Options. Options granted under the 2000 Director
Plan do not qualify as incentive stock options under Section 422 of the
Code. An optionee does not recognize any taxable income at the time he or
she is granted a nonstatutory stock option. Upon exercise, the optionee
recognizes taxable income generally measured by the excess of the then fair
market value of the shares over the exercise price. The Company is entitled
to a deduction in the same amount as the ordinary income recognized by the
optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net
capital gains on shares held more than 12 months may be taxed at a maximum
federal rate of 20%. Capital losses are allowed in full against capital
gains and up to $3,000 against other income.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to vote
will be required to approve the adoption of the 2000 Director Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ADOPTION OF THE 2000 DIRECTOR OPTION PLAN AND THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
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PROPOSAL NO. 4
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE THEREUNDER BY 150,000 SHARES
The Company's Board of Directors (the "Board") and shareholders have
previously adopted and approved the Company's Employee Stock Purchase Plan
("Purchase Plan") (described below). On April 25, 2000, the Board approved an
amendment to the Purchase Plan, subject to shareholder approval, to increase the
shares reserved for issuance thereunder by 150,000 shares, bringing the total
number of shares issuable under the Purchase Plan to 400,000. As of December 31,
1999, 25,894 shares were available for future issuance under the Purchase Plan.
At the annual meeting, the shareholders are being asked to approve the
increase in the number of shares issuable under the Purchase Plan.
SUMMARY OF THE PURCHASE PLAN
General. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll deductions.
Administration. The Purchase Plan may be administered by the Board of
Directors (the "Board") or a committee appointed by the Board. All questions of
interpretation or application of the Purchase Plan are determined by the Board
or its appointed committee, and its decisions are final, conclusive and binding
upon all participants.
Eligibility. Each employee of the Company (including officers), whose
customary employment with the Company is at least twenty (20) hours per week and
more than five (5) months in any calendar year, is eligible to participate in
the Purchase Plan; provided, however, that no employee shall be granted an
option under the Purchase Plan (i) to the extent that, immediately after the
grant, such employee would own 5% of either the voting power or value of the
stock of the Company, or (ii) to the extent that his or her rights to purchase
stock under all employee stock purchase plans of the Company accrues at a rate
which exceeds $25,000 worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year.
Offering Period. The Purchase Plan is implemented by offering periods
lasting approximately six months in duration with a new offering period
commencing approximately on October 1 and April 1 of each year. To participate
in the Purchase Plan, each eligible employee must authorize payroll deductions
pursuant to the Purchase Plan. Such payroll deductions may not exceed 10% of a
participant's compensation. Compensation is defined as regular straight time
gross earnings, but exclusive of commissions, overtime, shift premium, incentive
compensation, bonuses and other compensation. Once an employee becomes a
participant in the Purchase Plan, Common Stock will automatically be purchased
under the Purchase Plan at the end of each offering period, unless the
participant withdraws or terminates employment earlier, and the employee will
automatically participate in each successive offering period until such time as
the employee withdraws from the Purchase Plan or the employee's employment with
the Company terminates.
Purchase Price. The purchase price per share at which shares will be sold
in an offering under the Purchase Plan is the lower of (i) 85% of the fair
market value of a share of Common Stock on the first day of an offering period
or (ii) 85% of the fair market value of a share of Common Stock on the last day
of each offering period. The fair market value of the Common Stock on a given
date is generally the closing sale price of the Common Stock as reported on the
Nasdaq National Market for such date.
Payment of Purchase Price; Payroll Deductions. Payment for of the shares is
accumulated by payroll deductions throughout the offering period. The number of
shares of Common Stock a participant may purchase in each offering period is
determined by dividing the total amount of payroll deductions withheld from the
participant's compensation during that offering period by the purchase price;
provided, however, that a participant may not purchase during an offering period
more than 5,000 shares during any
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offering period. During the offering period, a participant may discontinue his
or her participation in the Purchase Plan, and may decrease or increase the
rate of payroll deductions in an offering period within limits set by the
Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan, are withheld in whole percentages
only and are included with the general funds of the Company. Funds received by
the Company pursuant to exercises under the Purchase Plan are also used for
general corporate purposes. A participant may not make any additional payments
into his or her account.
Withdrawal. A participant may terminate his or her participation in the
Purchase Plan at any time by giving the Company a written notice of withdrawal.
In such event, the payroll deductions credited to the participant's account will
be returned, without interest, to such participant. Payroll deductions will not
resume unless a new subscription agreement is delivered in connection with a
subsequent offering period.
Termination of Employment. Termination of a participant's employment for
any reason, including death, cancels his or her participation in the Purchase
Plan immediately. In such event the payroll deductions credited to the
participant's account will be returned without interest to such participant, his
or her designated beneficiaries or the executors or administrators of his or her
estate.
Adjustments Upon Changes in Capitalization. In the event of any changes in
the capitalization of the Company effected without receipt of consideration by
the Company, such as a stock split, stock dividend, combination or
reclassification of the Common Stock, resulting in an increase or decrease in
the number of shares of Common Stock, proportionate adjustments will be made by
the Board in the shares subject to purchase and in the price per share under the
Purchase Plan. In the event of liquidation or dissolution of the Company, the
offering periods then in progress will terminate immediately prior to the
consummation of such event unless otherwise provided by the Board. In the event
of a sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, the successor
corporation will assume or substitute for each outstanding option. In the event
the successor corporation refuses to assume or substitute for the options, the
offering period then in progress will be shortened and a new exercise date will
be set. In such event, the Board shall notify each participant at least ten (10)
business days prior to the new exercise date.
Amendment and Termination. The Board may at any time and for any reason
amend or terminate the Purchase Plan, except that no such termination shall
affect options previously granted and no amendment shall make any change in an
option granted prior thereto which adversely affects the rights of any
participant. Shareholder approval for amendments to the Purchase Plan shall be
obtained in such a manner and to such a degree as required to comply with all
applicable laws or regulations. The Purchase Plan will terminate in 2006 unless
terminated earlier by the Board in accordance with the Purchase Plan.
Certain Federal Income Tax Information. The following brief summary of the
effect of federal income taxation upon the participant and the Company with
respect to the shares purchased under the Purchase Plan and does not purport to
be complete, and does not discuss the tax consequences of a participant's death
or the income tax laws of any state or foreign country in which the participant
may reside.
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax in an amount that depends upon the holding period.
If the shares are sold or otherwise disposed of more than two years from the
first day of the applicable offering period and one year from the applicable
date of purchase, the participant will recognize ordinary income measured as the
lesser of (a) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (b) an amount equal to 15%
of the fair market value of the shares as of the first day of the applicable
offering period. Any additional gain will be treated as long-term capital gain.
If the shares are sold or otherwise disposed of before the expiration of these
holding periods, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are
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purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding periods described above.
VOTE REQUIRED
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE THERE-UNDER BY 150,000 SHARES.
PROPOSAL NO. 5
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, 2000. 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 RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
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 3, 2000
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PROXY NANOMETRICS INCORPORATED
This Proxy is Solicited on Behalf of the Board of Directors
2000 Annual Meeting of Shareholders
May 31, 2000
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 May 3, 2000, 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 2000 Annual Meeting
of Shareholders of Nanometrics Incorporated to be held on Wednesday, May 31,
2000 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
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
Edmond R. Ward
ITEM 2. Proposal to approve the adoption of the Company's 2000 Employee Stock
Option Plan and the reservation of 1,250,000 shares of the Company's
Common Stock for issuance thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 3. Proposal to approve the adoption of the Company's 2000 Director Stock
Option Plan and the reservation of 250,000 shares of the Company's
Common Stock for issuance thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 4. Proposal to approve an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares of the Company's Common
Stock reserved for future issuance by 150,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 5. Proposal to ratify the appointment of Deloitte & Touche LLP as
Independent Auditors of the Company for the 2000 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 NAMED HEREIN, "FOR"
EACH PROPOSAL LISTED, 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: ______________________, 2000
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.