<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ILC Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
<PAGE>
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(1).
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
- --------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
2
<PAGE>
ILC TECHNOLOGY, INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 14, 1996
------------------------
The 1995 Annual Meeting of the Shareholders of ILC Technology, Inc., a
California corporation (the "Company"), will be held on Wednesday, February 14,
1996, at 2:00 p.m. local time at the principal office of the Company at 399 Java
Drive, Sunnyvale, California, for the following purposes:
1. To elect a Board of five Directors.
2. To approve an amendment to the 1992 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder and to
set the maximum number of shares subject to options granted to any
participant in any fiscal year.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for fiscal 1996.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only shareholders of record at the close of business on December 18, 1995
are entitled to notice of and to vote at the meeting.
A majority of the Company's outstanding shares must be represented at the
meeting (in person or by proxy) to transact business. To assure proper
representation at the meeting, please mark, sign, and date the enclosed proxy
and mail it promptly in the enclosed self-addressed envelope. Your proxy will
not be used if you revoke it either before or at the meeting.
Ronald E. Fredianelli
SECRETARY
Dated: January 2, 1996
IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOUR VOTE IS IMPORTANT.
<PAGE>
ILC TECHNOLOGY, INC.
------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited on behalf of the Board of Directors of ILC
Technology, Inc. (the "Company") for use at the Annual Meeting of Shareholders
(the "Meeting") to be held Wednesday, February 14, 1996 at 2:00 p.m. local time,
or at any adjournment or postponement thereof. The Meeting will be held at the
principal offices of the Company, which are located at 399 Java Drive,
Sunnyvale, California 94089. The Company's telephone number is (408) 745-7900.
These proxy solicitation materials were mailed to shareholders on or about
January 2, 1996.
Shareholders of record at the close of business on December 18, 1995 are
entitled to notice of, and to vote at, the Meeting. On December 18, 1995,
4,691,416 shares of the Company's Common Stock were issued and outstanding. A
majority of the shares issued and outstanding as of December 18, 1995 must be
present in person or represented by proxy at the Meeting for the transaction of
business. Nominees for election of directors are elected by plurality vote of
all votes cast at the Meeting. Approval of the amendment to the 1992 Stock
Option Plan and ratification of Arthur Andersen LLP as the independent public
accountants require the affirmative vote of a majority of the shares present at
the Meeting in person or by proxy and entitled to vote. Abstentions have the
effect of a negative vote, but broker non-votes do not affect the calculation.
For the election of directors, shareholders may exercise cumulative voting
rights which enable them to cast as many votes as there are directors to be
elected, multiplied by the number of shares held by each shareholder. All such
votes may be cast for one candidate or may be distributed as desired among two
or more candidates. However, no shareholder shall be entitled to cumulate votes
unless the candidate's name has been placed in nomination before the voting and
the shareholder has given notice at the Meeting before the voting of the
shareholder's intention to cumulate votes. If one shareholder gives such notice,
all shareholders may cumulate their votes and the proxy holders may vote all
proxies on a cumulative voting basis. On all other matters, each share has one
vote.
Any person may revoke a proxy at any time before its use by delivering to
the Company a written revocation or a duly executed proxy bearing a later date
or by attending the Meeting and voting in person.
The cost of this solicitation will be borne by the Company. These costs
represent amounts normally expended for a solicitation for an election of
directors. The Company may reimburse brokerage firms and
1
<PAGE>
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, by telephone or otherwise.
DEADLINE FOR RECEIPT OF SHAREHOLDER
PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 1996 meeting of shareholders must be received by
the Company no later than September 4, 1996.
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the Meeting. There will be one
vacancy on the Board. Unless marked to the contrary, all properly signed and
returned proxies will be voted for the election of management's five nominees
named below, all of whom are directors of the Company. If any nominee is unable
or declines to serve as a director at the time of the Meeting, the proxies will
be voted for any nominee designated by the present Board of Directors to fill
the vacancy. The Company is not aware of any nominee who will be unable or will
decline to serve as a director. The proxy holders reserve the right to cumulate
votes for the election of directors in such a manner as will assure 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
term of office of each person elected as a director will continue until the next
meeting of shareholders or until a successor has been elected and qualified.
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED AS OF
DECEMBER 18, 1995
(1)
DIRECTOR ------------------
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE NUMBER PERCENT
- --------------------------------------------------------------------------- --- -------- ------- -------
<S> <C> <C> <C> <C>
Henry C. Baumgartner 63 1967 209,988(2) 4.4%
President and Chief Executive Officer of the Company since April 1990;
Chief Financial Officer and Chairman of the Board of the Company from
November 1986 to April 1990; Secretary of the Company from December 1986
to June 1987; Chief Executive Officer of the Company from November 1986
to February 1987; Retired from June 1985 to November 1986; Vice
President of the Company from 1974 to June 1985; Chief Financial Officer
and Secretary of the Company from 1967 to June 1985.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED AS OF
DECEMBER 18, 1995
(1)
DIRECTOR ------------------
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE SINCE NUMBER PERCENT
- --------------------------------------------------------------------------- --- -------- ------- -------
Arthur L. Schawlow 74 1984 18,250(3) *
<S> <C> <C> <C> <C>
Retired in 1991; Professor of Physics at Stanford University from 1961 to
1991; Director of the Company from 1969 to 1971 and since 1984; Nobel
Prize in 1981 for contributions to the development of laser
spectroscopy.
Wirt D. Walker, III 49 1988 178,750(4) 3.8%
Chairman of the Board of the Company since April 1990 and Director since
1988; Managing Director of KuwAm Corporation since 1982; Chairman of
Commander Aircraft Company; Chairman of Advanced Laser Graphics, Inc.;
Chairman of Securacom, Incorporated.
Harrison H. Augur 54 1989 38,250(5) *
General Partner of Capital Asset Management since June 1987; Executive
Vice President and Director of Worms & Co., Inc. from April 1981 to
August 1991.
Richard D. Capra 63 1995 -- --
President and Chief Executive Officer of AeroM since December 1994;
President and Chief Operating Officer of Crescent Electric Supply
Company from January 1993 to December 1994; Management Consultant from
1991 to 1993; President and Chief Executive Officer of Philip Lighting
Company, U.S. from 1987 to 1991; Director of Venture Lighting Intl.
EXECUTIVE OFFICERS
Ronald E. Fredianelli 46 63,341(6) 1.3%
Chief Financial Officer and Secretary
Felix J. Schuda 47 88,957(7) 1.9%
Vice President
Lynn J. Reiter (8) 46 31,174 *
Vice President
All Officers and Directors as a Group (7 persons)(9) 628,710 12.7%
</TABLE>
- ------------------------
* Less than 1%
3
<PAGE>
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them, subject to
applicable community property laws and the information contained in the
footnotes to the table.
(2) Includes 111,250 shares subject to outstanding options that are exercisable
on or before February 16, 1996.
(3) Includes 11,250 shares subject to outstanding options that are exercisable
on or before February 16, 1996.
(4) Includes 6,250 shares subject to outstanding options that are exercisable on
or before February 16, 1996. Includes 100,000 shares owned by Special
Situation Investment Holdings, a limited partnership in which Mr. Walker
holds an interest and 50,000 shares owned by KuwAm Corporation, of which Mr.
Walker is the Managing Director. Mr. Walker disclaims beneficial ownership
of all such shares. Also includes 7,500 shares owned by persons whose
accounts are managed by Mr. Walker, as to which Mr. Walker disclaims
beneficial ownership.
(5) Includes 26,250 shares subject to outstanding options that are exercisable
on or before February 16, 1996.
(6) Includes 47,500 shares subject to outstanding options that are exercisable
on or before February 16, 1996.
(7) Includes 38,500 shares subject to outstanding options that are exercisable
on or before February 16, 1996.
(8) Mr. Reiter resigned his position with the Company effective September 30,
1995.
(9) Includes 241,000 shares subject to outstanding options held by the executive
officers and four directors that are exercisable on or before February 16,
1996.
DIRECTOR COMPENSATION
Members of the Board who are not also officers or employees of the Company
("Outside Directors") are paid an annual fee of $10,000 for services as
director. Such fees are paid quarterly and prorated when a director does not
serve for a full year. Directors receive no additional compensation for
committee participation or attendance at committee meetings.
During fiscal 1995, each Outside Director was granted automatic options to
purchase a total of 5,000 shares of the Company's Common Stock at an exercise
price of $9.50 per share. No Outside Directors exercised options during fiscal
1995. As of September 30, 1995, options to purchase 75,000 shares were
outstanding to four Outside Directors, at the weighted average exercise price
per share indicated: Mr. Augur -- 35,000 shares at $6.32 per share; Mr. Capra --
5,000 shares at $9.50 per share; Dr. Schawlow -- 20,000 shares at $8.19 per
share; and Mr. Walker -- 15,000 shares at $9.75 per share.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of four meetings during the fiscal year
ended September 30, 1995. The Board has two committees: the Audit Committee and
the Compensation and Stock Option Committee.
The Audit Committee, comprised of Directors Augur, Walker, Schawlow and
Capra, recommends engagement of the Company's independent public accountants and
is primarily responsible for approving the services performed by the Company's
independent public accountants and for reviewing and evaluating the Company's
accounting practices and its systems of internal accounting controls. The Audit
Committee held two meetings during fiscal 1995. Each quarter the Chairman of the
Audit Committee meets with the Company's independent public accountants.
The Compensation and Stock Option Committee, comprised of Directors Augur,
Walker, Schawlow and Capra, recommends the amount and nature of compensation to
be paid to the Company's Chief Executive Officer and reviews and approves the
compensation plan for other corporate officers. It also reviews the performance
of the Company's key employees who are eligible for the Company's Stock Option
Plan and determines the number of shares, if any, to be granted each employee
under such plan and the terms of such grants. The Compensation and Stock Option
Committee held two meetings during fiscal 1995.
No director attended fewer than 75% of all meetings of the Board of
Directors held during fiscal 1995 or of all meetings of any committee upon which
such director served during fiscal 1995.
OTHER OFFICERS
Felix J. Schuda, age 47, was elected a Vice President of the Company in
1981. He has been employed by the Company in various engineering and engineering
management positions since June 1976.
Ronald E. Fredianelli, age 46, was elected Chief Financial Officer of the
Company in April 1990 and Secretary in 1987. Except for the period from November
1985 to August 1986 and until he was elected Chief Financial Officer in 1990,
Mr. Fredianelli was the Controller of the Company since August 1979. From
November 1985 to August 1986, he was Controller of Synergy Computer Graphics.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows certain information concerning the compensation of
each of the Company's executive officers for services rendered in all capacities
to the Company for the fiscal years ended 1995, 1994 and 1993. There were no
options grants to executive officers and no restricted stock awards or LTIP
payouts during any of the years covered.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY (1) BONUS (2) COMPENSATION (3)
- --------------------------------------------- ------------- ----------- --------- -----------------
<S> <C> <C> <C> <C>
Henry C. Baumgartner 1995 $ 175,000 $ 26,392 $ 3,021
Chief Executive Officer 1994 144,462 26,417 2,889
1993 112,615 37,734 2,252
Ronald E. Fredianelli 1995 113,423 19,074 2,262
Chief Financial Officer and Secretary 1994 101,192 20,913 2,024
1993 89,154 29,913 1,783
Felix J. Schuda 1995 105,000 15,893 2,100
Vice President 1994 97,292 20,253 1,946
1993 86,339 28,945 1,727
Lynn J. Reiter 1995 105,000 15,890 2,100
Vice President 1994 96,761 20,033 1,935
1993 85,400 28,623 1,708
</TABLE>
- ------------------------
(1) No compensation is paid to officers of the Company for services rendered as
directors.
(2) Includes cash bonuses paid during the year and cash bonuses accrued for
services rendered during the year.
(3) Company matching contributions under the Company's Thrift Incentive Savings
Plan.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table shows the number of shares of Common Stock acquired by
the executive officers upon the exercise of stock options during fiscal 1995,
the net value realized at exercise, the number of shares of Common Stock
represented by outstanding stock options held by each executive officer as of
September 30, 1995 and the value of such options based on the closing price of
the Company's Common Stock on September 30, 1995, which was $11.25.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY - END (#)(1) FY - END ($)(2)
---------------- -------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(3) UNEXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Henry C. Baumgartner -- -- 111,250/3,750 $ 859,625/$9,375
Ronald E. Fredianelli -- -- 47,500/2,500 $ 345,000/$6,250
Felix J. Schuda 3,000 $ 22,895 38,500/2,500 $ 259,875/$6,250
Lynn J. Reiter (4) 41,500 $ 261,688 -- --
</TABLE>
- ------------------------
(1) Represents the total number of shares subject to stock options held by each
executive officer. These options were granted on various dates during fiscal
years 1986 through 1992 and are exercisable on various dates beginning in
1987 and expiring in 2002.
(2) Represents the difference between the exercise price and $11.25, which is
the September 30, 1995 closing price. Stock option exercise prices range
from $2.13 to $8.75.
(3) Aggregate market value of the shares covered by the option at the date of
exercise, less the aggregate exercise price.
(4) Mr. Reiter resigned his position with the Company effective September 30,
1995
BOARD COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is composed of Harrison H. Augur, Chairman, Arthur L. Schawlow,
Wirt D. Walker and Richard D. Capra. All are independent outside directors. The
Committee is charged with the responsibility for reviewing the performance and
approving the compensation of key executives and for establishing general
compensation policies and standards for reviewing management performance. The
Committee also reviews both corporate and key executive performance in light of
established criteria and goals and approves individual key executive
compensation.
7
<PAGE>
COMPENSATION PHILOSOPHY
The executive compensation philosophy of the Company is to provide
competitive levels of compensation that advance the Company's annual and
long-term performance objectives, reward corporate performance, and assist the
Company in attracting, retaining and motivating highly qualified executives. The
framework for the Committee's executive compensation programs is to establish
base salaries which are competitive and to incentivize excellent performance by
providing executives with the opportunity to earn additional remuneration linked
to the Company's profitability. The incentive plan goals are designed to improve
the effectiveness and enhance the efficiency of Company operations, to provide
savings for customers and to create value for shareholders. It is also the
Company's policy to encourage share ownership by executive officers and Outside
Directors through the grant of stock options.
COMPONENTS OF COMPENSATION
The compensation package of the Company's executive officers consists of
base annual salary, bonus opportunities and stock option grants.
At executive levels, base salaries are reviewed but not necessarily
increased annually. Base salaries are fixed at levels slightly below competitive
amounts paid to individuals with comparable qualifications, experience and
responsibilities engaged in similar businesses as the Company. The Company
develops its executive compensation data from a nationally recognized survey for
high technology companies of similar size, industry and location. Mr.
Fredianelli's base salary of $110,000 was increased to $120,000 in May 1995. No
other executive officer of the Company received a salary increase in fiscal
1995.
Incentive compensation is closely tied to the Company's success in achieving
financial performance goals. Each year the Committee approves a management bonus
program based upon performance objectives for executive officers and other key
employees. Under the program, a participant may receive in any year a portion of
a management bonus pool, which pool is based on a percentage of yearly pre-tax
profits with no ceiling. The participant's share is based on his or her base
wage as a percent of the total salaries of all participants during the
management bonus period. The participant's distribution is then calculated in
accordance with a bonus point scaling system tied to financial performance
goals. In addition, all employees share in another bonus program based solely on
a percentage of pre-tax profits, again with no ceiling, and distributed based on
a percentage of base salary.
The Company uses stock options both to reward past performance and to
motivate future performance, especially long-term performance. The Committee
believes that through the use of stock options, executive interests are directly
tied to enhancing shareholder value. Stock options are granted at fair market
value as of the date of grant, and have a term of ten years. The options vest
25% per year, beginning on the first anniversary date of the grant. The stock
options provide value to the recipients only when the market price of the
Company's Common Stock increases above the option grant price and only as the
shares vest and become exercisable.
8
<PAGE>
The Committee did not approve any stock option grants for any of the
executive officers during fiscal year 1995.
MR. BAUMGARTNER'S 1995 COMPENSATION
The Committee makes decisions regarding the compensation of the Chief
Executive Officer using the same philosophy set forth above. The Committee's
approach in setting Mr. Baumgartner's base compensation, as with that of the
Company's other executives, is to be competitive with other companies within the
industry, taking into consideration company size, operating conditions and
compensation philosophy and performance. Mr. Baumgartner's base salary in fiscal
1995 was the same as his base salary in fiscal 1994. Mr. Baumgartner's fiscal
1995 incentive compensation was earned under the same bonus plans and
performance criteria that were described previously in this report. He received
no stock option grants during fiscal 1995.
COMPENSATION AND STOCK OPTION
COMMITTEE
Harrison H. Augur, Chairman
Arthur L. Schawlow
Wirt D. Walker, III
Richard D. Capra
9
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this Proxy Statement a line-graph presentation comparing cumulative, five-year
shareholder returns on an indexed basis with (i) a broad equity market index and
(ii) either an industry index or peer group. The following graph compares the
percentage change in the cumulative total shareholder return on the Company's
Common Stock against the cumulative total return of the Standard & Poors 500
Index and the NASDAQ SIC Group 364 (Electric Lighting and Wiring Equipment) for
a period of five years. "Total return," for the purpose of this graph, assumes
reinvestment of all dividends, if any. The stock price performance shown on the
graph is not necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ILC TECHNOLOGY, INC., THE S & P 500 INDEX
AND NASDAQ SIC GROUP 364
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ILC TECHNOLOGY,
INC. NASDAQ SIC GROUP 364 S & P 500
<S> <C> <C> <C>
9-90 100 100 100
9-91 303 154 131
9-92 254 178 146
9-93 254 214 165
9-94 195 248 171
9-95 243 306 221
</TABLE>
* $100 invested on 09/30/90 in stock or index, including reinvestment of
dividends. Fiscal year ending September 30.
10
<PAGE>
AMENDMENT OF THE 1992 STOCK OPTION PLAN
In November 1995, the Board of Directors adopted a resolution, subject to
shareholder approval, approving an amendment to the Company's 1992 Stock Option
Plan (the "Plan") to increase the number of shares of Common Stock issuable
thereunder by 200,000 shares to 400,000 shares and to set the maximum number of
shares subject to options granted to any participant under the Plan in any
fiscal year at 100,000 shares of Common Stock. Before giving effect to the
proposed amendment to increase the number of shares reserved for issuance under
the Plan, 874 shares of Common Stock were available for issuance under the Plan.
The purpose of the amendment to limit the maximum number of shares subject to
options granted to any one individual in any fiscal year is to conform the Plan
to requirements of recent tax legislation to ensure the deductibility of the
compensation element of options granted under the Plan.
Approval of the amendment to the Plan requires the affirmative vote of a
majority of the shares present at the Meeting in person or by proxy and entitled
to vote. The Board of Directors recommends that shareholders vote for the
amendment to the Plan. The essential features of the Plan are summarized below.
The purpose of the Plan is to advance the interests of the Company by giving
the Company's employees and Outside Directors incentive through ownership of the
Company's Common Stock to continue in the service of the Company and thereby to
help the Company compete effectively with other enterprises for the services of
qualified individuals. Options granted under the Plan may be either "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonstatutory stock options.
ADMINISTRATION
The Plan is administered by the Compensation and Stock Option Committee of
the Board of Directors (the "Committee"). In addition to having general
supervisory and interpretive authority over the Plan, the Committee determines,
upon the recommendation of management and subject to the terms and limits of the
Plan, the employees, if any, to whom options will be granted, the time at which
options are granted, the number of shares subject to each option and the terms
and conditions of exercise of options.
ELIGIBILITY
All employees (including officers and directors who are also employees) of
the Company and its subsidiaries are eligible to receive incentive stock options
under the Plan. Nonstatutory stock options may be granted under the Plan to
employees and directors of the Company. Participants are selected by the
Committee upon the recommendation of management. Nonstatutory stock options are
also granted under the Plan to all Outside Directors pursuant to the automatic
grant program. As of September 30, 1995, 588 persons were eligible to receive
options under the Plan, of which three were executive officers of the Company,
581 were non-executive officer employees and four were Outside Directors.
11
<PAGE>
Under the terms of the Plan, the aggregate fair market value (determined at
the date of the option grant) of the stock with respect to which incentive stock
options are exercisable for the first time by any employee during any calendar
year may not exceed $100,000. Under the terms of the Plan, as amended, no
participant will be able to receive options to purchase more than a total of
100,000 shares of Common Stock under the Plan in any fiscal year.
The Plan provides for an automatic grant program for Outside Directors,
whereby each year, each Outside Director is automatically granted a new ten-year
nonstatutory stock option to purchase 5,000 shares of Common Stock, which is
exercisable in cumulative annual increments of 25% beginning on the first
anniversary of the date of grant. See "Plan Benefits."
TERMS OF OPTIONS
Each option granted under the Plan must be evidenced by an option agreement
between the Company and the optionee and has a term of up to 10 years, unless
sooner terminated in accordance with the Plan or the option agreement. Options
granted pursuant to the Plan need not be identical, but each option is subject
to the following terms and conditions:
(a) EXERCISE OF OPTION. Options are exercisable by the optionee in
such periodic increments and/or at such milestones as the Committee, in its
sole discretion, shall determine on an individual basis with respect to each
optionee. Options are generally exercisable in cumulative increments of 25%
per year beginning on the first anniversary of the date of grant. In no
event shall an officer or director of the Company exercise any option during
the six-month period immediately following the grant of such option. An
option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased, and
tendering payment of the purchase price and any applicable taxes to the
Company. Payment for shares issued upon exercise of an option may consist of
cash, check or delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
(b) EXERCISE PRICE. The exercise price is determined by the Committee,
provided that in no instance shall such price be less than the fair market
value of the Common Stock on the date the option is granted. The Plan
defines "fair market value" as the closing sales price of the Common Stock
of the Company as reported by the Nasdaq National Market on the last market
trading day before the date of grant. The closing sales price of the
Company's Common Stock on the Nasdaq National Market on December 18, 1995
was $9.375 per share.
Incentive stock options granted to shareholders owning more than 10% of
the combined voting power of all the stock of the Company are subject to the
additional restrictions that the exercise price be no less than 110% of the
fair market value on the date of grant and that options expire no later than
5 years from the date of grant.
12
<PAGE>
(c) TERMINATION OF EMPLOYMENT. Incentive stock options granted under
the Plan terminate 30 days after the optionee ceases to be employed by the
Company unless (i) the termination of employment is due to permanent and
total disability, in which case the option may be exercised at any time
within 12 months after termination to the extent the option was exercisable
on the date of termination; (ii) the optionee dies while employed by the
Company, in which case the option may be exercised at any time within 12
months after death to the extent the option was exercisable on the date of
death; or (iii) the option by its terms specifically provides otherwise.
Subject to special rules for incentive stock options, the Committee may, in
its discretion, extend the period of exercisability of an option after an
optionee's termination of employment, but in no event shall any option be
exercisable after the expiration date set forth in the option agreement.
(d) EXPIRATION OF OPTIONS. No option is exercisable by any person
after the expiration of 10 years from the date the option was granted.
(e) NONTRANSFERABILITY OF OPTION. Options granted under the Plan are
transferable only by will or the laws of descent and distribution and are
exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.
(f) OTHER PROVISIONS. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the Plan as the
Committee may deem necessary or appropriate.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The Plan provides for adjustments to be made in the shares subject to option
to give effect to changes in the capital structure of the Company resulting from
recapitalizations, stock splits, stock dividends, combinations of shares,
mergers or reorganizations. Depending upon the circumstances, the particular
adjustments may require a change in the number, kind and class of securities
covered by the option and a change in the exercise price or prices thereof to
give effect to the purpose and intent of the Plan. The Plan and all options
terminate in the event of the dissolution or liquidation of the Company.
CORPORATE TRANSACTIONS. A Corporate Transaction is defined in the Plan
generally as a merger or asset sale in which the Company does not survive, or
any reorganization that results in the transfer of beneficial ownership of 50%
or more of the Company's voting stock outstanding. Immediately before the
effective date of a Corporate Transaction, each option outstanding under the
Plan will automatically become exercisable in full unless the option is either
to be assumed by the successor corporation or a parent thereof or replaced by a
reasonably comparable option to purchase shares of the successor corporation or
parent thereof, in connection with the Corporate Transaction. Upon the
consummation of any Corporate Transaction, all outstanding options will
terminate, to the extent not previously exercised by the optionees or assumed by
the successor corporation or its parent company.
CHANGE IN CONTROL. Change in control is defined in the Plan generally as a
tender or exchange offer that is not recommended by the Company's Board of
Directors for 25% or more of the Company's voting
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stock by a person or related group of persons other than the Company or an
affiliate of the Company, or a contested election for the Board of Directors
that results in a change in a majority of the Board. Effective 15 days following
the effective date of a Change in Control, each option outstanding under the
Plan will automatically become exercisable in full and will remain fully
exercisable until the expiration or sooner termination of the option term
specified in the option agreement.
Acceleration of the exercisability of options in the event of a Corporate
Transaction or a Change in Control may have the effect of depressing the market
price of the Company's Common Stock and denying shareholders a control premium
that might otherwise be paid for their shares in such a transaction and may have
the effect of discouraging a proposal for merger, a takeover attempt or other
efforts to gain control of the Company.
ADJUSTMENT TO OPTION RIGHTS
Subject to the general limitations of the Plan, the Committee may adjust the
exercise price, term or any other provision of an option (other than automatic
options granted to Outside Directors) by cancelling and regranting the option or
by amending or substituting the option. Options that have been so adjusted may
have higher or lower exercise prices, have longer or shorter terms, or be
subject to different rights and restrictions than prior options. The Committee
may also adjust the number of options granted to an optionee by cancelling
outstanding options or granting additional options. Except for adjustments
necessary to ensure compliance with any applicable state or federal law, no such
adjustment may impair an optionee's rights under any option agreement without
the consent of the optionee.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend the Plan from time to time or may suspend or terminate
the Plan. In addition, to the extent necessary to comply with applicable laws or
regulations, the Company shall obtain shareholder approval of any amendment to
the Plan in such a manner as required. However, no such action by the Board or
shareholders may alter or impair any option previously granted under the Plan
without the consent of the optionee.
The Plan terminates by its terms when all shares available for issuance
under the Plan have been issued or in November 2002, whichever is earlier,
subject to earlier termination by the Board of Directors. Notwithstanding such
termination, options granted under the Plan will remain outstanding in
accordance with their terms.
PLAN BENEFITS
Automatic options are granted to the Outside Directors at the meeting of the
Committee held during the Company's third fiscal quarter. Under the Plan, each
Outside Director, currently Messrs. Auger, Capra, Schawlow and Walker, will
receive an automatic grant of options to purchase 5,000 share of Common Stock
each calendar year.
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FEDERAL INCOME TAX INFORMATION
The following summary is intended only as a general guide as to the federal
income tax consequences under current law with respect to participation in the
Plan and does not describe all possible federal and other tax consequences of
such participation. Furthermore, the tax consequences of options are complex and
subject to change, and a taxpayer's situation may be such that some variation of
the described rules applies. The summary does not address other taxes that may
affect an optionee such as state and local income taxes, federal and state
estate, inheritance and gift taxes and foreign taxes. Optionees should consult
with their own tax advisors before the exercise of any option and before the
disposition of any shares acquired upon the exercise of an option.
INCENTIVE STOCK OPTIONS. If an option is treated as an incentive stock
option ("ISO"), the optionee does not recognize taxable income upon its grant or
incur tax on its exercise (unless the optionee is subject to the alternative
minimum tax described below). If the optionee holds the stock acquired upon
exercise of an ISO ("ISO Shares") for more than one year after the date the
option was exercised and for more than two years after the date the option was
granted, the optionee generally will realize long-term capital gain or loss
(rather than ordinary income or loss) upon disposition of the ISO Shares. This
gain or loss will be equal to the difference between the amount realized upon
such disposition and the amount paid for the ISO Shares. If the optionee
disposes of ISO Shares before the expiration of either required holding period
(a "disqualifying disposition"), then gain realized upon such disqualifying
disposition, up to the difference between the fair market value of the ISO
Shares on the date of exercise (or, if less, the amount realized on a sale of
such ISO Shares) and the option exercise price, will be treated as ordinary
income. Any additional gain will be long-term or short-term capital gain,
depending upon the length of time the optionee held the ISO Shares. The Company
will be entitled to a deduction in connection with the disposition of ISO Shares
only to the extent that the optionee recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
ALTERNATIVE MINIMUM TAX. The difference between the exercise price and fair
market value of the ISO Shares on the date of exercise of an ISO is an
adjustment to income for purposes of the alternative minimum tax ("AMT"). The
AMT (imposed to the extent it exceeds the taxpayer's regular tax) is 26% of an
individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this
amount by the applicable exemption amount ($45,000 in the case of a joint
return, subject to reduction in certain circumstances). If a disqualifying
disposition of the ISO Shares occurs in the same calendar year as exercise of
the ISO, there is no AMT adjustment with respect to those ISO Shares. Also, upon
a sale of ISO Shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the fair
market value of the ISO Shares at exercise over the amount paid for the ISO
Shares.
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NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time a nonstatutory stock option ("NSO") is granted. However, upon
exercise of an NSO, the optionee must include in income as compensation an
amount equal to the difference between the fair market value of the shares on
the date of exercise and the amount paid for that stock upon exercise of the
NSO. The included amount must be treated as ordinary income by the optionee and
will be subject to income tax withholding by the Company. Upon resale of the
shares by the optionee, any subsequent appreciation or depreciation in the value
of the shares will be treated as capital gain or loss. The Company will be
entitled to a deduction in connection with the exercise of an NSO by a domestic
optionee to the extent that the optionee recognizes ordinary income and the
Company withholds tax. In addition, for taxable years beginning after 1993,
deductions taken by the Company for compensation paid to certain employees
generally will be limited to $1 million per employee. This limitation is subject
to a number of exceptions, and will not apply to the compensation element of
stock options to the extent that such amounts are deemed to be paid in
connection with the attainment by the employee of performance goals, if certain
other requirements are met.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent public
accountants, to serve as the auditors for the Company for fiscal 1996. At the
Meeting, the shareholders will be asked to ratify such appointment.
Representatives of Arthur Andersen LLP are expected to attend the Meeting and
will be given the opportunity to make a statement and to answer appropriate
questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting.
However, if any other matters properly come before the Meeting or any
adjournment or postponement thereof, it is the intention of the proxy holders to
vote the shares they represent as the Board of Directors may recommend.
By Order of the Board of Directors
Ronald E. Fredianelli,
SECRETARY
Dated: January 2, 1996
Sunnyvale, California
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ILC TECHNOLOGY, INC.
1992 STOCK OPTION PLAN
AS AMENDED NOVEMBER 6, 1995
ARTICLE 1
DEFINITIONS
As used herein, the following definitions shall apply:
1.1 "ADMINISTRATOR" means the Board or its Committee appointed pursuant to
Article 10 of the Plan.
1.2 "AFFILIATE" means a parent or subsidiary corporation of the Company,
whether now or hereafter existing, as defined in Sections 424(e) and (f) of the
Code, respectively.
1.3 "BOARD" means the Board of Directors of the Company.
1.4 A "CHANGE IN CONTROL" shall be deemed to occur (a) should a person or
related group of persons, other than the Company or a person that directly or
indirectly controls, is controlled by or is under common control with the
Company, becomes the beneficial owner (within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act) of 25% or more of the
Company's outstanding voting stock pursuant to a tender or exchange offer that
the Board does not recommend that the shareholders of the Company accept; or (b)
on the first date within any period of 24 consecutive months or less on which
there is effected a change in the composition of the Board by reason of a
contested election such that a majority of the Board members (rounded up to the
next whole number) cease to be comprised of individuals who either (i) have been
members of the Board continuously since the beginning of such period or (ii)
have been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (i) who were
still in office at the time such election or nomination was approved by the
Board.
1.5 "CODE" means the Internal Revenue Code of 1986, as amended.
1.6 "COMMITTEE" means the Committee appointed by the Board under Article
10 of the Plan.
1.7 "COMMON STOCK" means the Common Stock, no par value, of the Company.
1.8 "COMPANY" means ILC Technology, Inc., a California corporation.
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1.9 "CORPORATE TRANSACTION" means (a) a merger or acquisition in which the
Company is not the surviving entity (except for a transaction the principal
purpose of which is to change the State in which the Company is incorporated),
(b) the sale, transfer or other disposition of all or substantially all of the
assets of the Company or (c) any other corporate reorganization or business
combination in which the beneficial ownership of 50% or more of the Company's
outstanding voting stock is transferred.
1.10 "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Affiliate. The term "Employee" shall also
include directors of the Company; however, payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
1.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
1.12 "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(a) If the Common Stock is listed on a stock exchange or national
market system including without limitation the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq")
System, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported), as quoted on such system or
exchange for the last market trading day prior to the time of determination as
reported in the Wall Street Journal or such other source as the Administrator
deems reliable;
(b) If the Common Stock is quoted on the Nasdaq System (but not on
its National Market System) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the Common Stock or;
(c) In the absence of an established market for the Common Stock, its
Fair Market Value shall be determined in good faith by the Administrator.
1.13 "INCENTIVE OPTION" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
1.14 "NONSTATUTORY OPTION" means an Option not intended to qualify as an
Incentive Option.
1.15 "OPTION" means a stock option granted pursuant to the Plan.
1.16 "OPTION AGREEMENT" means a written agreement, signed by the Optionee
and a duly authorized representative of the Company, evidencing the grant of an
Option.
1.17 "OPTIONEE" means an Employee or Outside Director who receives an
Option.
1.18 "OUTSIDE DIRECTOR" means each member of the Board who is not an
Employee or an officer of the Company or any Affiliate.
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1.19 "PLAN" means this 1992 Stock Option Plan.
1.20 "RULE 16b-3" means Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended.
1.21 "SHARE" means a share of the Common Stock, as adjusted in accordance
with Article 9 of the Plan.
1.22 "TERMINATION OF EMPLOYMENT" means the interruption or termination of
the employment relationship by the Company or any Affiliate for any reason
including resignation, discharge, death or retirement, but excluding
terminations where there is a simultaneous reemployment by the Company or an
Affiliate. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment.
Employment shall not be considered interrupted in the case of: (a) sick leave;
(b) military leave; (c) any other leave of absence approved by the Board,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute; or (d) transfers between locations of the Company or between the
Company, its Affiliates or its successor. For Outside Directors, Termination of
Employment means ceasing to be a member of the Board.
ARTICLE 2
PURPOSE
The purpose of the Plan is to advance the interests of the Company by
giving the Company's Employees and Outside Directors incentive through ownership
of the Company's stock to continue in the service of the Company and thereby to
help the Company compete effectively the other enterprises for the services of
qualified individuals. Options granted under the Plan may be Incentive Options
or Nonstatutory Options, as determined by the Administrator at the time of grant
of an option and subject to the applicable provisions of Section 422 of the
Code, the regulations promulgated thereunder and other relevant provisions of
the Code and regulations.
ARTICLE 3
STOCK SUBJECT TO THE PLAN
Subject to the adjustment as provided in Article 9 of the Plan, the Company
is authorized to issue Options to purchase up to 400,000 Shares. Any
unpurchased Shares that are subject to an Option that terminates for any reason
other than exercise shall, unless the Plan has been terminated, become available
for future grant under the Plan. The Company shall at all times reserve for
issuance pursuant to the Plan a number of its authorized but unissued Shares
equal to the number of Shares issuable pursuant to the Plan. Exercise of an
Option shall decrease the
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number of Shares available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
ARTICLE 4
TERM OF PLAN
The Plan shall become effective upon its adoption by the Board. Within 12
months after the date of such adoption, the Plan shall be approved by the
shareholders of the Company in the degree and manner required under applicable
state and federal law. No Option shall become exercisable unless and until such
shareholder approval has been obtained. Unless sooner terminated under Article
9 and 10, the Plan shall terminate upon the earlier of (i) the tenth anniversary
of its adoption by the Board or (ii) the date on which all shares available for
issuance under the Plan have been issued. Any Option outstanding under the Plan
at the time of its termination shall remain in effect in accordance with its
terms and conditions and those of the Plan.
ARTICLE 5
ELIGIBILITY
Nonstatutory Options may be granted to Employees and Outside Directors,
except that Outside Directors who serve as Administrator under Section 10.1 of
the Plan are eligible to receive Option grants only in accordance with Article
8. Incentive Options may be granted only to Employees. An Optionee who is
otherwise eligible may be granted an additional Option or Options.
ARTICLE 6
TERMS OF OPTIONS
6.1 WRITTEN AGREEMENTS. Grants of Options shall be evidenced by an Option
Agreement, which shall contain the provisions that the Plan requires and may
contain additional provisions that do not conflict with the Plan as the
Administrator deems appropriate. Option Agreements need not have identical
terms, but each Option Agreement shall be subject to the Plan.
6.2 TERM OF OPTION. The term of each Option shall be no more than 10
years from the date of grant. However, in the case of an Incentive Option
granted to an Optionee who, at the time the Option is granted, owns, as that
term is defined in Section 424(d) of the Code, stock representing more than 10%
of the voting power of all classes of stock of the Company or any Affiliate, the
term of the Option shall be no more than 5 years from the date of grant.
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6.3 EXERCISE PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, but in no event shall the per Share exercise price of an Option
be less than the Fair Market Value per Share on the date of grant. In the case
of an Incentive Option granted to an Employee who, at the time of the grant of
such Incentive Option, owns, as that term is defined in Section 424(d) of the
Code, stock representing more than 10% of the voting power of all classes of
stock of the Company or any Affiliate, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
6.4 TERMINATION OF EMPLOYMENT. Unless determined otherwise by the
Administrator pursuant to Section 6.5, to the extent not already expired or
exercised, every Option shall terminate at the earlier of (i) the expiration
date as set forth in the Option Agreement or (ii) 30 days after Termination of
Employment for reasons other than death or disability. If Termination of
Employment is due to the Optionee's death or disability (as defined in Section
22(e) (3) of the Code), unless determined otherwise by the Administrator
pursuant to Section 6.5, the Option, to the extent not already expired or
exercised, shall terminate at the earlier of (i) the expiration date as set
forth in the Option Agreement or (ii) 12 months after the date of the Optionee's
disability or death. In the event of the death of the Optionee, the Option
shall be exercisable by the Optionee's estate or any person who acquired the
right to exercise the Option by bequest or inheritance. Except as provided in
an Option Agreement, an Option shall be exercisable after Termination of
Employment only to the extent exercisable on the date of Termination of
Employment. For purposes of this Section, the limited period of exercisability
of Incentive Options following Termination of Employment shall be measured from
the date the Optionee ceases to be an Employee. Upon the expiration of the
period of exercisability after Termination of Employment or (if earlier) upon
the expiration of the Option term, the Option shall terminate.
6.5 EXTENSION OF EXERCISE PERIOD. The Administrator shall have full power
and authority to extend the expiration date of an Option following the
Optionee's Termination of Employment from the periods specified in Section 6.4
to such greater period of time as the Administrator shall deem appropriate;
provided, however, that in no event shall any Option be exercisable after the
expiration date set forth in the Option Agreement. In the case of an Incentive
Option, however, such determination shall be made at the time of grant of the
Option and such period of time shall not exceed 12 months after Termination of
Employment by reason of death or disability of the Optionee or 3 months after
Termination of Employment for other reasons.
6.6 NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
6.7 TYPE OF OPTION. Each Option Agreement shall clearly state whether or
not the Option is intended to qualify as an Incentive Option. If only a portion
of an Option is intended to so qualify, (i) the Option Agreement shall so state,
and (ii) the Option Agreement shall not require that the number of Incentive
Options exercised reduces the size of the Nonstatutory Option portion, or vice-
versa.
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6.8 LIMITATION ON INCENTIVE OPTIONS. The aggregate Fair Market Value of
the Shares for which one or more Incentive Options granted to an Optionee under
the Plan (or any other incentive stock option plan of the Company or any
Affiliate) may for the first time become exercisable as Incentive Options under
the Code during any one calendar year shall not exceed $100,000 or such other
amount as may be permitted under subsequent amendments to Section 422 of the
Code. To the extent that any two or more Incentive Options (including any
Incentive Options accelerated in connection with any Corporate Transaction or
Change in Control under Section 9.3 or 9.4 of the Plan), violate this
limitation, such excess Options shall be treated as Nonstatutory Options. For
purposes of this Section 6.8, Incentive Options shall be taken into account in
the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares was
granted.
6.9 TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
6.10 NO EMPLOYMENT AGREEMENT. No Option Agreement, nor anything contained
in the Plan, shall confer upon any Optionee any right with respect to
continuation of employment with the Company or interfere in any way with the
right of the Optionee or the Company to terminate such employment at any time,
with or without cause.
6.11 NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE OPTIONS. Optionees
shall give the Company written notice of any disposition of any Share acquired
pursuant to exercise of an Incentive Option if such disposition occurs before
the second anniversary of the date the Option was granted or the first
anniversary of the date of purchase of the Share disposed of, whichever occurs
later. A disposition includes any sale, exchange, gift, or other transfer or
attempted transfer of legal title. The notice shall include the Optionee's
name, the number of Shares disposed of and the dates and prices the Shares were
acquired and disposed of.
6.12 ADJUSTMENTS TO OPTION RIGHTS. Subject to the general limitations of
the Plan, the Administrator may adjust the exercise price, term or any other
provision of an Option (other than Options granted pursuant to Article 8 of the
Plan) by cancelling and regranting the Option or by amending or substituting the
Option. Options that have been so adjusted may have higher or lower exercise
prices, have longer or shorter terms or be subject to different rights and
restrictions than prior Options. The Administrator may also adjust the number
of Options granted to an Optionee by cancelling outstanding Options or granting
additional Options. Except for adjustments necessary to ensure compliance with
any applicable state or federal law, no such adjustment shall impair an
Optionee's rights under any Option Agreement without the consent of the
Optionee.
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ARTICLE 7
EXERCISE OF OPTIONS
7.1 WHEN OPTIONS BECOME EXERCISABLE. Options shall be exercisable at such
times and under such conditions as determined by the Administrator, which may
include performance criteria with respect to the Company and/or the Optionee.
Options granted to officers and directors of the Company shall not be
exercisable in whole or in part until the expiration of six months after the
date of grant. No Option shall be exercisable until the Company and the
Optionee sign an Option Agreement acceptable to the Company.
7.2 NO FRACTIONAL SHARES. An Option may not be exercised for a fraction
of a Share.
7.3 EXERCISE PROCEDURE. An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 7.4
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing Shares acquired upon exercise of an Option, no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to such Shares, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option.
7.4 PAYMENT FOR SHARES. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Option, shall
be determined at the time of grant) and may consist of (i) cash, (ii) check,
(iii) delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds required to pay the exercise price or (iv) any combination of
the foregoing.
7.5 WITHHOLDING TAX OBLIGATIONS. At the time of exercise of an Option,
the Optionee shall remit to the Company by bank cashier's check or other form of
payment acceptable to the Company, all applicable (as determined by the Company
in its sole discretion) federal and state withholding and employment taxes.
ARTICLE 8
AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
8.1 OPTION GRANT. Each calendar year, each Outside Director in office at
the date of grant (including any Outside Director who may have already received
one or more automatic
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option grants) shall automatically be granted a Nonstatutory Option to purchase
5,000 Shares upon the terms and conditions specified below. The initial
automatic grant shall occur on November 13, 1993. Beginning in 1994, such
automatic grants shall occur each year on the date of the meeting of the
Administrator held in the Company's third fiscal quarter.
8.2 TERMS OF OPTIONS. The terms and conditions that apply to each such
automatic grant shall be as follows: (i) the per Share exercise price shall be
equal to the Fair Market Value per Share on the date of grant; (ii) the term of
the Option shall be 10 years; (iii) the Options shall be exercisable in
cumulative increments of 25% per year commencing on the first anniversary of the
date of grant; and (iv) all other terms and conditions of the Option shall be as
set forth in the Company's then current form of Option Agreement.
8.3 NO OTHER GRANTS. Except for the automatic grants under this Article
8, those members of the Board who serve as Administrator under Section 10.1 of
the Plan shall not be eligible to receive any additional Options under the Plan
or any other stock plan of the Company or any Affiliate, except as permitted by
Rule 16b-3.
ARTICLE 9
ADJUSTMENTS OF AND CHANGES IN STOCK
9.1 ADJUSTMENTS. Subject to any required action by the shareholders of
the Company, in the event of any change to the Common Stock issuable under the
Plan by reason of any (i) Corporate Transaction or (ii) stock split, reverse
stock split, stock dividend, recapitalization, combination or reclassification
of Shares or other change affecting the outstanding Common Stock as a class
without receipt of consideration, then unless such change results in the
termination of all outstanding Options as a result of the Corporate Transaction,
the number of Shares covered by each outstanding Option and the number of Shares
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the per Share exercise price, shall be proportionately
adjusted. Such adjustments shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an outstanding Option.
9.2 DISSOLUTION. In the event of the proposed dissolution or liquidation
of the Company, the Board shall notify the Optionee at least fifteen (15) days
prior to such proposed action. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.
9.3 CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the
exercisability of each Option shall be automatically accelerated so that each
Option shall, immediately before the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of Shares
and may be exercised for all or any portion
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of such Shares. However, an Option shall not be so accelerated if and to the
extent that such Option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or parent thereof or be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof. The determination of comparability shall be made
by the Administrator, and its determination shall be final, binding and
conclusive. Upon the consummation of a Corporate Transaction, all outstanding
Options shall, to the extent not previously exercised or assumed by the
successor corporation or its parent, terminate and cease to be exercisable.
9.4 CHANGE IN CONTROL. In the event of a Change in Control, the
exercisability of each Option shall be automatically accelerated effective 15
days following the effective date of the Change in Control, so that each Option
shall become fully exercisable with respect to the total number of Shares and
may be exercised for all or any portion of such Shares. Upon a Change in
Control, all outstanding Options accelerated shall remain fully exercisable
until the expiration or sooner termination of the Option term specified in the
option agreement.
9.5 OTHER CHANGES. Upon any other relevant change in the capitalization
of the Company, the Administrator may, as it deems appropriate, provide for an
equitable adjustment in the number of Shares then subject to the Plan and to any
outstanding Options, as well as the exercise price of outstanding Options.
9.6 NO FRACTIONAL SHARES. No right to purchase fractional Shares shall
result from any adjustment to outstanding Options pursuant to this Article.
Upon any such adjustment, the number of Shares subject to outstanding Options of
each Optionee shall be rounded down to the nearest whole Share. The Company
shall give notice of any adjustment to each holder of Options that have been so
adjusted. Such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
ARTICLE 10
ADMINISTRATION OF PLAN
10.1 ADMINISTRATOR. The Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3, or (B) a Committee
of the Board, which shall be constituted in such a manner as to permit the Plan
to comply with Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of such Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Rule 16b-3.
10.2 POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
9
<PAGE>
(a) to determine the Fair Market Value of the Common Stock, in
accordance with Section 1.12 of the Plan;
(b) to select the Employees and Outside Directors to whom Options may
from time to time be granted hereunder;
(c) to determine whether and to what extent Options are granted
hereunder;
(d) to determine the number of Shares to be covered by each such
Option granted hereunder;
(e) to approve forms of Option Agreement;
(f) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted hereunder (including, but not limited
to, the Share price and any restriction or limitation on any Option and/or the
Shares relating thereto, based in each case on such factors as the Administrator
shall determine, in its sole discretion);
(g) to adopt rules and regulations for implementing the Plan;
(h) to interpret the Plan; and
(i) to take such other action as is appropriate to the administration
of the Plan.
10.3 RULE 16b-3. Unless the Board determines otherwise in a specific case,
Options granted to persons subject to Section 16(b) of the Exchange Act must
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions. In no
event shall the Board take any action that would violate Section 10.1 of the
Plan.
10.4 EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other persons having an interest in any Options.
ARTICLE 11
AMENDMENT AND TERMINATION OF THE PLAN
11.1 AMENDMENT AND TERMINATION. The Board may at any time amend, suspend
or terminate the Plan. In addition, to the extent necessary and desirable to
comply with Rule 16b-3 or with Section 422 of the Code (or any other applicable
law or regulation, including the requirements of the NASD or an established
stock exchange), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
10
<PAGE>
11.2 EFFECT OF AMENDMENT OR TERMINATION. Except as provided in the Plan or
in an Option Agreement, no amendment, suspension or termination of the Plan
shall alter or impair the rights of any Optionee under any Option outstanding at
the time, without the written consent of the Optionee.
11.3 AMENDMENTS REQUIRED BY CODE. Notwithstanding the provisions of
Section 11.2, the Board hereby reserves the right to amend or modify the Plan
and any Options outstanding to the extent necessary to qualify any or all
Options for such favorable federal income tax treatment as may be afforded
employee stock options under Section 422 of the Code and regulations
subsequently promulgated thereunder.
ARTICLE 12
CONDITIONS UPON ISSUANCE OF SHARES
Implementation of the Plan, the grant of Options and the issuance of Shares
hereunder shall be subject to the Company obtaining all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
Options or the Shares, including, without limitation, any stock exchange or
market upon which the Shares may then be listed or traded. The inability of the
Company to obtain any such approvals or permits shall relieve the Company of any
liability in respect of the failure to grant such Options or issue or sell such
Shares as to which such approval or permit shall not have been obtained. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by applicable law.
ARTICLE 13
INFORMATION TO OPTIONEES
The Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding, copies of all annual reports
and other information which are provided to all shareholders of the Company.
This Article 13 shall not be construed to require the Company to provide such
information to key employees whose duties in connection with the Company assure
their access to equivalent information.
ARTICLE 14
TAX STATUS
The Company does not hereby, nor by way of any plan, document, Option
Agreement or otherwise, represent or warrant to any person, including the
Optionees, that the grant or exercise
11
<PAGE>
of an Option or the subsequent disposition of Shares obtained by the exercise of
an Option pursuant to the Plan, or any other aspect of the Plan, will have any
particular tax effect.
ARTICLE 15
PLAN GOVERNS
If there is any inconsistency between the Plan and any documents related to
the Plan, including any Option Agreement, the Plan shall govern. Nothing
contained in the Plan shall be construed to constitute, or be evidence of, any
right in favor of any person to receive Options hereunder or any obligation on
the part of the Company to issue Options with respect to its Common Stock.
ARTICLE 16
APPLICABLE LAW; SEVERABILITY
The Plan shall be governed and construed in all respects in accordance with
the laws of the State of California excluding its conflict of laws rules to the
extent such rules would apply the law of another jurisdiction. Incentive
Options granted under the Plan shall be interpreted and administered in
accordance with Section 422 of the Code. If any provision is susceptible of
more than one interpretation, it shall be interpreted in a manner consistent
with the Plan being an incentive stock option plan. If any provision of the
Plan is found by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions shall continue to be fully effective.
<PAGE>
ILC TECHNOLOGY, INC.
399 JAVA DRIVE
SUNNYVALE, CA 94089
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ILC TECHNOLOGY,
INC.
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS ON WEDNESDAY, FEBRUARY 14, 1996
The undersigned hereby appoints HENRY C. BAUMGARTNER, RONALD E. FREDIANELLI,
and each of them, as Proxies, with the powers the undersigned would have if
personally present and with power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
ILC Technology, Inc. held of record by the undersigned on December 18, 1995, at
the Annual Meeting of Shareholders to be held on Wednesday, February 14, 1996,
at 2:00 p.m. local time at 399 Java Drive, Sunnyvale, California, or any
adjournment or postponement thereof, upon all subjects which may come before the
meeting including the matters described in the Proxy Statement furnished
herewith. The shares represented by this proxy shall be voted in the following
manner.
<TABLE>
<S> <C> <C>
1. Election of Directors:
NOMINEES
Henry C. Baumgartner Arthur L. Schawlow Harrison H. Augur Wirt D. Walker, III Richard D. Capra
/ / FOR the election as Directors of all nominees / / WITHHOLD AUTHORITY to vote for all nominees
listed above. listed above.
/ / FOR the election as Directors of all nominees listed above, except the following named nominees:
</TABLE>
________________________________________
<TABLE>
<S> <C> <C>
2. Proposal to approve an amendment to the 1992 Stock Option Plan to increase the number of shares
reserved for issuance and to set the maximum number of shares subject to options granted to any
participant in any fiscal year:
</TABLE>
/ / FOR / / AGAINST / / WITHHOLD
<TABLE>
<S> <C> <C>
3. Proposal to ratify the appointment of Arthur Andersen LLP, as the Independent Public Accountants of
the Company for fiscal 1996:
</TABLE>
/ / FOR / / AGAINST / / WITHHOLD
(CONTINUED ON REVERSE SIDE)
<PAGE>
WHEN PROPERLY EXECUTED AND RETURNED TO THE COMPANY, THIS PROXY WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES
FOR DIRECTOR, FOR PROPOSALS 2 AND 3 AND AT THE DISCRETION OF THE PROXY HOLDERS
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IF ANY
SHAREHOLDER GIVES NOTICE OF INTENTION TO CUMULATE VOTES FOR THE ELECTION OF
DIRECTORS, THIS PROXY MAY BE VOTED ON A CUMULATIVE VOTING BASIS. IN THE EVENT
THAT ANY NOMINEE FOR DIRECTOR IS UNABLE OR DECLINES TO SERVE AS A DIRECTOR, THIS
PROXY WILL BE VOTED FOR ANY NOMINEE WHO SHALL BE DESIGNATED BY THE PRESENT BOARD
OF DIRECTORS.
Please sign exactly as name
appears below.
DATED: _____________________, 1996
__________________________________
(Signature)
__________________________________
(Signature If Held Jointly)
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, give full title as such.
If a corporation, sign in full
corporate name by President or
other authorized officer. If a
partnership, sign in partnership
name by authorized person.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
