<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Cerprobe Corporation
- --------------------------------------------------------------------------------
(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 transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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> 2
[CERPROBE LOGO]
CERPROBE CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1999
------------------------
TO THE STOCKHOLDERS:
You are cordially invited to attend the annual meeting (the "Annual
Meeting") of the stockholders of Cerprobe Corporation, a Delaware corporation
(the "Company" or "Cerprobe"), to be held on May 25, 1999, at 10:00 a.m. local
time at the Mesa Hilton, Kachina Room, 1011 West Holmes Avenue, Mesa, Arizona
85210, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualified.
2. To approve an amendment to the Company's 1997 Employee Stock Purchase
Plan (the "Plan") to reduce the employment eligibility requirement from
one year to 90 days.
3. To act upon such other business as may properly come before the meeting
and any adjournment thereof.
Only stockholders of record at the close of business on April 13, 1999,
(the "Record Date") are entitled to notice of and to vote at the meeting.
The enclosed Proxy Statement contains additional information pertaining to
the matters to be considered at the meeting. A copy of the Annual Report to
stockholders for the fiscal year ended December 31, 1998, also accompanies this
Notice.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign, and return the enclosed proxy card as promptly as possible
in the enclosed postage-prepaid envelope. Any stockholder attending the Annual
Meeting may vote in person even if he or she has previously returned a proxy.
By order of the Board of Directors,
RANDAL L. BUNESS
Secretary
Gilbert, Arizona
Dated: April 13, 1999
<PAGE> 3
[CERPROBE LOGO]
CERPROBE CORPORATION
1150 NORTH FIESTA BOULEVARD.
GILBERT, ARIZONA 85233-2237
------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1999
PROXY STATEMENT
------------------------
VOTING AND OTHER MATTERS
GENERAL
This Proxy Statement is submitted in support of a proxy solicitation by the
Board of Directors of Cerprobe Corporation, a Delaware corporation (the
"Company" or "Cerprobe"), in connection with the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on May 25, 1999, at 10:00 a.m. local time at
the Mesa Hilton, Kachina Room, 1011 West Holmes Avenue, Mesa, Arizona 85210.
These proxy solicitation materials were mailed on or about April 26, 1999,
to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 13, 1999, (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting and
at any adjournment or adjournments thereof. On the Record Date, there were
8,144,879 shares issued with 7,658,726 shares outstanding of the Company's
common stock, $.05 par value per share (the "Common Stock").
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to the Secretary of the Company, at the Company's offices at 1150
North Fiesta Boulevard, Gilbert, Arizona 85233-2237, written notification of
revocation or a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person.
VOTING SOLICITATION
The presence, in person or by proxy, of the holders of a majority of the
total number of shares of Common Stock outstanding constitutes a quorum for the
transaction of business at the Annual Meeting. Each share is entitled to one
vote on any matter coming before the Annual Meeting, except in the case of the
election of directors as described below.
For the election of directors, each stockholder is entitled to a number of
votes equal to the number of directors to be elected multiplied by the number of
shares held by such stockholder. Each stockholder may distribute votes among as
many candidates for director in such proportions as he or she sees fit. The five
candidates receiving the highest number of votes shall be elected. Assuming that
a quorum is present, the
<PAGE> 4
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the Annual Meeting and entitled to vote is required
to approve the amendments to the Company's 1997 Employee Stock Purchase Plan.
The enclosed proxy, when properly signed and returned to the Company, will
be voted by the proxy holders at the Annual Meeting as directed therein. If a
stockholder specifies how the proxy is to be voted on any of the business to
come before the Annual Meeting, the proxy will be voted in accordance with such
specification. If no specification is made, the proxy will be voted:
- for the election of the nominees for directors as proposed herein (and
the proxy holders may exercise their discretion in distributing
cumulative votes among the nominees);
- for approval of the amendment to the Company's 1997 Employee Stock
Purchase Plan; and
- in the best judgement of the proxy holders, as to any other matters which
may properly come before the meeting.
The solicitation of proxies is made on behalf of the Company and all
expenses incurred herein will be borne by the Company. Some of the officers,
directors, and employees of the Company may also solicit proxies on behalf of
management by telephone, telegraph, and personal interview, without additional
compensation. Any costs thereof will be borne by the Company. The Company will
reimburse brokerage firms, banks, and other custodians, nominees, and
fiduciaries for their expenses reasonably incurred in forwarding solicitation
material to the beneficial owners of the Common Stock.
ANNUAL REPORT
The 1998 Annual Report to stockholders, which is being mailed to
stockholders with this Proxy Statement, contains financial and other information
about the Company but is not incorporated into this Proxy Statement and is not
to be considered a part of the proxy soliciting materials. The information
contained in the "Compensation Committee Report on Executive Compensation" below
and the "Company Performance Graph" below shall not be deemed "filed" with the
Securities and Exchange Commission (the "SEC") or subject to Regulations 14A or
14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Upon request, the Company will provide, without charge to each stockholder
of record as of the Record Date, a copy of the Company's annual report on Form
10-K for the year ended December 31, 1998, as filed with the SEC. Any exhibits
listed in the Form 10-K report also will be furnished upon request at the actual
expense incurred by the Company in furnishing such exhibit. Any such requests
should be directed to the Company's Secretary at the Company's executive offices
set forth in this Proxy Statement.
2
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Second Restated Certificate of Incorporation provides that
the number of directors shall be fixed from time to time by resolution of the
Board of Directors. Presently, the number of directors is fixed at five. Unless
otherwise instructed, proxies will be voted in favor of ROSS J. MANGANO, C. ZANE
CLOSE, WILLIAM A. FRESH, KENNETH W. MILLER, AND DONALD F. WALTER, all of whom
currently are directors of the Company. In the event that any nominee is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for such substitute nominees as may be selected by the
current Board of Directors. The Board of Directors has no reason to believe that
any of the nominees 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 a
successor has been elected and qualified or until his earlier resignation or
removal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
NAMED HEREIN.
The following table sets forth certain information regarding the nominees
for directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH CERPROBE
---- --- -------------------------
<S> <C> <C>
Ross J. Mangano(1)(2)........... 53 Chairman of the Board of Directors
C. Zane Close................... 49 President, Chief Executive Officer, and Director
William A. Fresh(2)............. 70 Director
Kenneth W. Miller(1)............ 67 Director
Donald F. Walter(1)(2).......... 67 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Ross J. Mangano has served as the Chairman of the Board of Directors of
Cerprobe since February 1993 and as a director of Cerprobe since February 1988.
Mr. Mangano has served as the President of Oliver Estate, Inc., a real estate
and investment management company, since 1996. Prior to that time, Mr. Mangano
served in various management positions with Oliver Estate, Inc., since 1971. Mr.
Mangano also is an investment analyst for Oliver Estate, Inc. From December 1993
to 1996, Mr. Mangano served on the Board of Directors of Cole Taylor Financial
Group, a publicly held bank holding company. Since August 1997, Mr. Mangano has
served on the Board of Directors of Blue Chip Casino, a privately held casino.
Since July 1998, Mr. Mangano has served on the Board of Directors of U.S.
RealTel, Inc., a public company owning access rights on properties around the
world.
C. Zane Close has served as President and Chief Executive Officer and as a
director of Cerprobe since July 1990. From September 1989 to July 1990, Mr.
Close served as Vice President and General Manager of Probe Technology
Corporation ("Probe Technology"), a manufacturer of probing devices for testing
integrated circuits. Mr. Close served as Vice President of Operations of Probe
Technology from February 1985 to September 1989.
William A. Fresh has served as a director of Cerprobe since April 1995. Mr.
Fresh co-founded Fresh Test Technology Corporation ("Fresh Test"), a designer
and manufacturer of probe and interface test technology for the semiconductor
industry, which was acquired by Cerprobe in April 1995. He served as Chairman of
the Board and Chief Executive Officer of Fresh Test from January 1986 through
March 1995. Mr. Fresh also has served as the Chairman of the Board and Chief
Executive Officer of Magellan Technology, a public holding company; and Orem Tek
Development Corp., a real estate development company, since May 1990 and May
1991, respectively. Mr. Fresh served as Chairman of the Board and Chief
Executive Officer of Satellite Images System Corporation, a medical information
processing company, from February 1992 to August 1996, and from August 1996 to
May 1998 served on the Board of Directors of the successor company known as
Satellite Images System, L.L.C. Mr. Fresh served as Chairman of the Board of EFI
Electronics, a publicly
3
<PAGE> 6
held power conditioning company; and Fresh Technology Company, a PC-based
software company, from January 1991 to March 1994. From April 1996 to July 1998,
Mr. Fresh served on the Board of Directors of Sento Technical Innovation
Corporation, a publicly held software company.
Kenneth W. Miller has served as a director of Cerprobe since 1979. Mr.
Miller served as Treasurer of Cerprobe from June 1994 to June 1996 and as
Secretary of Cerprobe from October 1991 to June 1996. Since January 1992, Mr.
Miller has served as a business consultant to various companies involved in the
microelectronic industry. From April 1991 until October 1991, Mr. Miller served
as Marketing Director of Scrantom Engineering, Inc., a manufacturer of hybrid
circuits and ceramic circuit boards. From September 1988 until April 1991, Mr.
Miller served as Marketing Director of Advanced Packaging Systems, a
manufacturer of high-density ceramic and polymer thin film interconnect
products. From 1981 to September 1988, Mr. Miller served as President of
Interamics, a manufacturer of ceramic packages for ICs and hybrid substrates.
Donald F. Walter has served as a director of Cerprobe since May 1991. Since
1982, Mr. Walter has been a financial consultant and is the principal of Walter
& Keenan Financial Consulting Co., a financial consulting firm. Since January
1982, Mr. Walter has served as a director of National Standard Co., a publicly
held manufacturer of specialty wire products. Since October 1988, Mr. Walter has
served as a director of Metro BanCorp, a publicly held bank.
Directors hold office until their successors have been elected and
qualified. All officers are elected by the Board of Directors and hold office
until their successors have been duly elected and qualified, or until
resignation or removal. There currently is no classification of the Board of
Directors. There are no family relationships among any of the directors or
officers of Cerprobe.
The employment agreement between Cerprobe and Mr. Close provides that
Cerprobe will cause Mr. Close to be nominated to the Board of Directors so long
as Mr. Close is employed by Cerprobe. The stockholders of Cerprobe, however,
have no obligation to vote for Mr. Close and may withhold or distribute votes in
their discretion. Cerprobe knows of no other arrangements or understandings
between any director or executive officer and any other person pursuant to which
he has been selected as a director or executive officer.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of seven meetings during
the fiscal year ended December 31, 1998. No director attended fewer than 75% of
the aggregate of:
- the total number of meetings of the Board of Directors, and
- the total number of meetings held by all committees of the Board on which
such director was a member. The Board of Directors had appointed the
following standing committees: an Audit Committee and a Compensation
Committee.
Audit Committee. The Audit Committee reviews the annual financial
statements and significant accounting issues and the scope of the audit with the
Company's independent auditors and is available to discuss with the auditors any
other audit related matters that may arise during the year. The Company's Audit
Committee met separately at one formal meeting during the fiscal year ended
December 31, 1998. During the fiscal year ended December 31, 1998, the Audit
Committee consisted of Messrs. Mangano, Fresh, and Walter, non-employee
directors of the Company.
The Compensation Committee. The Compensation Committee reviews and acts on
matters relating to compensation levels and benefit plans for key executives of
the Company. The Compensation Committee also serves as the Senior Committee for
purposes of the 1995 Stock Option Plan and administers the 1995 Stock Option
Plan. The Compensation Committee held two formal meetings during the fiscal year
ended December 31, 1998. During the fiscal year ended December 31, 1998, the
Compensation Committee consisted of Messrs. Mangano, Miller, and Walter,
non-employee directors of the Company.
4
<PAGE> 7
DIRECTOR COMPENSATION AND OTHER INFORMATION
Each outside director of Cerprobe receives $5,000 each quarter and a fee of
$1,000 for each meeting of the Board of Directors attended. Outside directors
also are eligible to receive stock options pursuant to Cerprobe's stock option
plans and are reimbursed for expenses incurred in attending meetings. Directors
do not receive additional compensation for committee participation or special
assignments. During 1998 each Director received automatic options to acquire
3,000 shares of Common Stock pursuant to the 1995 plan. In addition each
Director was granted options to acquire an additional 20,000 shares of Common
Stock.
PROPOSAL NO. 2
APPROVAL FOR AN AMENDMENT TO THE COMPANY'S
1997 EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1997 Employee Stock Purchase Plan (the "Plan"). The Company desires to
amend the Plan to reduce the employment eligibility requirement from one year to
90 days. Ratification of the proposal requires the affirmative vote of a
majority of the shares of Common Stock voting on the proposal in person or by
proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF AN
AMENDMENT TO THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN.
SUMMARY
The following is a summary of the principal features of the Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the Plan. Any stockholder of the Company who wishes to obtain a
copy of the actual plan document may do so upon written request to the Corporate
Secretary at the Company's offices in Gilbert, Arizona.
GENERAL
The Plan was adopted by the Board of Directors in December 1997 and
approved by the stockholders in May 1998. A total of 150,000 shares of Common
Stock were initially reserved for issuance thereunder. The purpose of the Plan
is to promote superior levels of performance from, and to encourage stock
ownership by, eligible employees of the Company by increasing their interest in
the success of the Company. The Plan is designed to meet this goal by offering
financial incentives for employees to purchase Common Stock, thereby increasing
the interest of employees in pursuing the long-term growth, profitability, and
financial success of the Company. The Company intends to have the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code.
ADMINISTRATION
The Plan is administered by a committee appointed by the Board (the
"Committee"). No member of the Committee may be eligible to purchase Common
Stock under the Plan. All costs and expenses incurred in plan administration are
paid by the Company without charge to participants. All cash proceeds received
by the Company from payroll deductions under the Plan may be used for any
corporate purpose and need not be segregated.
SHARES AND TERMS
The stock issuable under the Plan is the Company's authorized but unissued
or reacquired Common Stock. The maximum number of shares of Common Stock that
may be issued in the aggregate under the Plan is 150,000. If any change in the
Common Stock occurs (through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, or similar transaction), the
Committee may make appropriate and proportionate adjustments in the number and
type of shares that are subject to purchase under outstanding options and to the
option exercise price applicable to such outstanding options.
5
<PAGE> 8
ELIGIBILITY
As originally adopted, any employee who has completed one year of
continuous employment is eligible to participate in the Plan. The proposed
amendment would reduce the employment eligibility requirement from one year to
90 days and would be effective for all offering periods commencing with the
offering period beginning July 1, 1998. The Plan imposes certain limitations
upon a participant's right to acquire Common Stock, including the following:
- no option to participate in the plan shall be granted to any person if,
immediately after the grant, that person would own five percent (5%) or
more of the total combined voting power or value of all classes of Common
Stock; and
- no option to participate in the plan shall be granted to any person which
permits such person's rights to purchase Common Stock under all employee
stock purchase plans of the Company to accrue at a rate which exceeds
$25,000 in fair market value of the Common Stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding.
OFFERING PERIODS AND PURCHASE PRICE
The Plan is implemented by a series of successive six-month offering
periods. Offerings begin on July 1 or January 1, as the case may be. The
purchase price per share at which shares are purchased under the Plan is the
lower of:
- 85% of the closing price of the Common Stock on the date on which the
offering begins, or
- 85% of the closing price of the Common Stock on the date on which the
offering ends.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
Shares are purchased with funds that are accumulated through payroll
deductions during the offering period. The deductions may not exceed 10% of a
participant's base pay. A participant may discontinue participation in the Plan,
but may not alter the amount of the participant's payroll deductions for that
offering. No interest accrues on the payroll deductions. Prior to the last five
days of an offering period, a participant may withdraw payroll deductions
credited to the participant's account under the Plan. A participant must
subsequently enroll in the Plan to be eligible for the next offering.
TERMINATION OF EMPLOYMENT
Upon termination of a participant's employment for any reason, other than
death or permanent disability, the payroll deductions credited to the employee's
account will be returned to the employee. If the participant's employment
terminates due to death or permanent disability, the participant or the
participant's beneficiary will have the right to elect:
- to withdraw all of the payroll deductions credited to the participant's
account under the Plan, or
- to exercise the participant's option on the next offering termination
date and purchase the number of shares of Common Stock that the
accumulated payroll deductions in the participant's account will purchase
at the applicable option price.
Any excess in the participant's account will be returned to the participant
or his or her beneficiary, without interest. In the event that the Company
receives no notice of election from the participant or his or her beneficiary,
the participant or his or her beneficiary will be deemed to have elected to
exercise the participant's option.
6
<PAGE> 9
AMENDMENT AND TERMINATION OF THE PLAN
The Plan shall terminate upon the earlier of:
- January 1, 2008, or
- the date on which all shares available for issuance under the Plan shall
have been sold, unless earlier terminated by the Board of Directors in
its discretion.
CORPORATE TRANSACTIONS
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger, or consolidation of the Company in which the Company is
not the surviving corporation, or a sale of all of the property or stock of the
Company to another corporation, the holders of outstanding options under the
Plan will be entitled to receive, upon exercise of the options, as nearly as
reasonably may be determined, the cash, securities, and/or property which a
holder of one share of Common Stock was entitled to receive at the time of the
transaction.
FEDERAL INCOME TAX CONSEQUENCES
The Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. Under these
provisions, no income will be taxable to a participant at the time of grant of
the option or purchase of shares. A participant will, however, recognize taxable
income when the participant sells or otherwise disposes of the shares. If the
shares are sold or otherwise disposed of more than (a) two years from the first
day of the offering period and (b) more than one year from the date of transfer
of the shares to the participant, then the participant will recognize ordinary
income measured as the lesser of:
- the excess of the fair market value of the shares at the time of such
sale or disposition over the purchase price, or
- an amount equal to 15% of the fair market value of the shares as of the
first day of the 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 purchased over the price at which the participant purchased the
shares under the Plan. 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 will not be entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant except to the extent ordinary
income is recognized by participants as a result of a sale or disposition of
shares prior to the expiration of the holding periods described above. The
foregoing is only a summary of the federal income taxation consequences to the
participants and the Company with respect to the shares purchased under the
Plan, is not intended to be complete, and does not discuss the income tax laws
of any municipality, state, or foreign country. It is advisable that a
participant contact his or her own tax advisor concerning the application of tax
laws.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
the fiscal years ended December 31, 1998, 1997, and 1996 earned by the Company's
Chief Executive Officer and the Company's three most highly compensated
executive officers whose aggregate cash compensation exceeded $100,000 for
7
<PAGE> 10
services rendered in all capacities to the Company and its subsidiaries for the
last fiscal year (the "Named Officers").
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------ -----------------------------------
Awards Payouts
OTHER ---------------------- ----------
ANNUAL RESTRICTED ALL OTHER
NAME AND COMPEN- STOCK OPTIONS LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($)(1) AWARD(S)($) /SARS(#) PAYOUTS($) SATION($)(2)
------------------ ---- --------- -------- ------------ ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. ZANE CLOSE................. 1998 270,000 -- -- -- 140,000(2) -- 1,500(3)
President and Chief
Executive 1997 209,276 185,716 -- -- 60,000 -- --
Officer 1996(4) 157,662 -- -- -- -- -- --
ESWAR SUBRAMANIAN............. 1998 185,000 -- -- -- 40,000(2) -- 1,500(3)
Sr. Vice President and 1997 164,661 120,097 -- -- 50,000 -- 3,162(5)
Chief Operating Officer 1996(4) 132,155 -- -- -- -- -- --
MICHAEL K. BONHAM............. 1998 150,000 -- -- -- 65,000(2) -- 1,500(3)
Sr. Vice President of Sales 1997 134,950 99,547 -- -- 15,000 -- 13,349(5)
and Marketing 1996(4) 122,386 -- -- -- -- -- --
RANDAL L. BUNESS.............. 1998 148,000 -- -- -- 90,000(2) -- 1,500(3)
Sr. Vice President, Chief 1997 119,981 75,000 -- -- -- -- --
Financial Officer, 1996 61,923 -- 50,000 -- --
Secretary and Treasurer(6)
</TABLE>
- ---------------
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of the
total salary and bonus for any of the Named Officers.
(2) Reflects the effect of the reissuance in August 1998 of options to acquire
60,000, 40,000, 25,000, and 40,000 shares granted to Messrs. Close,
Subramanian, Bonham, and Buness, respectively, originally granted in January
1998 and cancelled.
(3) Represents matching contributions to the Company's 401(k) plan.
(4) Includes $14,279, $28,000, and $22,800 in salary and/or bonus earned by
Messrs. Close, Subramanian, and Bonham, respectively, in 1996 payment for
which was deferred to 1997.
(5) Represents the earnings from the Company's deferred compensation plan which
was liquidated in November 1997.
(6) Mr. Buness became an officer of the Company in June 1996.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock options granted to the
Company's Named Officers during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OPTION TERM($)(1)
OPTIONS FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5% 10%
---- ---------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
C. Zane Close.................. 60,000(2) 6% 16.875 01/09/08 636,756 1,613,664
60,000(3) 6% 11.000 8/11/08 415,070 1,051,870
80,000(4) 8% 12.250 12/11/08 616,317 1,561,868
Eswar Subramanian.............. 40,000(2) 4% 16.875 01/09/08 425,504 1,075,776
40,000(3) 4% 11.000 8/11/08 276,714 701,247
Michael K. Bonham.............. 25,000(2) 3% 16.875 01/09/08 265,315 672,360
25,000(3) 3% 11.000 8/11/08 172,946 438,279
40,000(4) 4% 12.250 12/11/08 308,158 780,934
Randal L. Buness............... 40,000(2) 4% 16.875 01/09/08 424,504 1,075,776
40,000(3) 4% 11.000 8/11/08 276,714 701,246
50,000(4) 5% 12.250 12/11/08 385,198 976,167
</TABLE>
8
<PAGE> 11
- ---------------
(1) Calculated from a base price equal to the exercise price of each option,
which was the fair market value of the common stock on the date of grant.
The amounts represent only certain assumed rates of appreciation.
(2) The options granted on January 9, 1998, were cancelled and reissued on
August 11, 1998.
(3) Represents regrant of January 9, 1998, options that were cancelled.
One-fifth of the options vest and become exercisable on the date of grant,
August 11, 1998; and one-fifth on each of August 11, 1999; August 11, 2000;
August 11, 2001; and August 11, 2002. The vesting schedule will accelerate
if the average price per share for the previous 30 calendar days reaches a
specified amount. If the stock reaches an average price of $15.00 per share,
25% of the options will vest; $20.00 per share, another 25% will vest;
$25.00 per share, another 25% will vest; and $30.00 per share, the remainder
of the options will vest.
(4) One-fifth of the options vest and become exercisable on the date of grant,
December 14, 1998; and one-fifth on each of December 14, 1999; December 14,
2000; December 14, 2001; and December 14, 2002.
OPTION HOLDINGS AND YEAR END OPTIONS VALUES
The following table contains certain information representing the options
held by the Named Officers as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END(#) AT FISCAL YEAR-END($)(1)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
C. Zane Close......................... 121,000 139,000 $612,498 $281,382
Eswar Subramanian..................... 70,000 55,000 373,160 152,840
Michael K. Bonham..................... 71,750 58,250 433,052 107,639
Randal L. Buness...................... 50,000 90,000 83,150 151,920
</TABLE>
- ---------------
(1) Calculated based upon the December 31, 1998, Nasdaq National Market closing
price of $13.438 per share, multiplied by the applicable number of shares
in-the-money, less the aggregate exercise price for such shares.
(2) Not vested as of December 31, 1998.
OPTION REPRICINGS
The following table sets forth certain information with respect to the
cancellation of outstanding stock options held by and the grant of replacement
options to any of the Company's Named Officers during fiscal 1998.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE LENGTH OF
UNDERLYING OF STOCK AT EXERCISE ORIGINAL OPTION
OPTIONS TIME OF PRICE AT TIME NEW TERM REMAINING
REPRICED OR REPRICING OR OF REPRICING OR EXERCISE AT DATE OF
NAME AND PRINCIPAL AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
POSITION DATE (#) ($) ($) ($) AMENDMENT
- ------------------ ------- ----------- ------------ --------------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
C. ZANE CLOSE............... 8/11/98 60,000 11.00 16.875 11.00 9 years and 6 months
President and Chief
Executive Officer
ESWAR SUBRAMANIAN........... 8/11/98 40,000 11.00 16.875 11.00 9 years and 6 months
Sr. Vice President and
Chief Operating Officer
MICHAEL K. BONHAM........... 8/11/98 25,000 11.00 16.875 11.00 9 years and 6 months
Sr. Vice President of
Sales and Marketing
RANDAL L. BUNESS............ 8/11/98 40,000 11.00 16.875 11.00 9 years and 6 months
Sr. Vice President, Chief
Financial Officer,
Secretary, and Treasurer
</TABLE>
9
<PAGE> 12
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has entered into Employment Agreements with C. Zane Close,
Michael K. Bonham, and Randal L. Buness that provide a base salary of $280,000
for Mr. Close and $160,000 for Messrs. Bonham and Buness and entitles each to
participate in incentive compensation programs, stock option plans, and other
generally available benefit programs. The terms of the agreements are two years
for Mr. Close and one year for Messrs. Bonham and Buness, and each provides for
automatic successive one-year renewal terms to continue until one party provides
the other with written notice of non-renewal.
Under each of the agreements, if the executive's employment is terminated
by the Company without Cause (as defined) or by the executive for Good Reason
(as defined), the executive will be entitled to "Severance Benefits." Under the
agreements, Severance Benefits are defined as the greater of:
- the sum of (a) the executive's base salary for the unexpired term of the
agreement, and (b) the average of incentive compensation paid to the
executive for the two years prior to the date of termination multiplied
by a fraction, the numerator of which is the number of months remaining
from the date of termination to the end of the term of the agreement and
the denominator of which is 12, and
- the sum of (x) the executive's base salary in effect on the date of
termination and (y) the average of incentive compensation paid to the
executive for the two years prior to the date of termination.
In addition, under the agreements each executive will continue to receive
life, disability, accident and group health insurance benefits substantially
similar to those which he was receiving immediately prior to his termination of
employment until the earlier of the end of the period of 12 months following his
termination of employment or the day on which he becomes eligible to receive any
substantially similar continuing health care benefits under any plan or program
of any other employer.
Each of the agreements provides for the Company to indemnify the executive
for certain liabilities arising from actions taken within the scope of
employment. Each agreement contains restrictive covenants pursuant to which the
executive has agreed not to compete with the Company or to solicit any clients
or employees for a period of one year after the executive's employment ceases.
These restrictions do not apply if the executive is terminated without Cause or
by the executive for Good Reason.
Mr. Subramanian's employment agreement provided for automatic successive
one-year renewal terms and for additional increases in the base salary and
bonuses as determined by Cerprobe's Board of Directors in its sole discretion.
The agreement could be terminated with or without cause by Cerprobe upon 90 days
written notice to Mr. Subramanian, and Mr. Subramanian could terminate his
obligation under the agreement by giving Cerprobe at least 90 days notice of his
intent to terminate. The agreement contained restrictive covenants prohibiting
him from soliciting employees for a period of six months after his employment
ceases. In March 1999 Mr. Subramanian's employment terminated.
Change of Control Agreements
The Company also entered into Change of Control Agreements with Messrs.
Close, Bonham, and Buness. These Change of Control agreements provide that, upon
termination of their employment by the Company without Cause (as defined) within
two years following a Change of Control (as defined), or termination by
executive for Good Reason (as defined) within two years following a Change of
Control each is entitled to lump sum payment equal to the sum of:
- two times base salary on the date of termination of employment,
- two times the average of incentive compensation for the two years prior
to termination of employment, and
- the amount of any lump-sum severance benefit paid under any employment
agreement.
Additionally, each will be entitled to continuation of life, disability and
group health benefits for 24 months after termination of employment.
10
<PAGE> 13
Notwithstanding the above, the benefits under the Change of Control
Agreements will be reduced to the extent that the payments would not be
deductible by the Company (in whole or in part) under Section 280G of the
Internal Revenue Code (which is generally equal to 299% of the executive's
average annual total compensation during the preceding five years).
401(k) PLAN
In 1993, the Company established the Cerprobe Corporation 401(k) Plan.
Employees who have reached 18 years of age and who have completed 90 days of
service for the Company are eligible to participate. Under the 401(k) Plan,
participating employees may defer up to 15% of their pre-tax compensation,
subject to the maximum allowed under the Internal Revenue Code. Any contribution
by the Company is at its discretion and only for those participants who have
completed one year of service with the Company.
THE 1995 STOCK OPTION PLAN
The 1995 Plan, as amended, is divided into two programs: the Discretionary
Grant Program and the Automatic Grant Program. The Discretionary Grant Program
provides for the granting of options to acquire Common Stock ("Options"), the
direct granting of Common Stock ("Stock Awards"), the grant of stock
appreciation rights ("SARs"), or the granting of other cash awards ("Cash
Awards") (Stock Awards, SARs, and Cash Awards are collectively referred to
herein as "Awards"). Options and Awards under the 1995 Plan may be issued to
executive officers, directors, employees, consultants, and other independent
contractors who provide valuable services to Cerprobe and its subsidiaries
(collectively, "Eligible Persons"). The Options issued may be incentive stock
options or non-qualified stock options. Cerprobe believes that the Discretionary
Grant Program represents an important factor in attracting and retaining
executive officers and other key employees and constitutes a significant part of
its compensation program, providing them with an opportunity to acquire a
proprietary interest in Cerprobe and giving them an additional incentive to use
their best efforts for the long-term success of Cerprobe. The Automatic Option
Program provides for the automatic grant of options to acquire shares of Common
Stock ("Automatic Options"). Automatic Options are granted to non-employee
members of the Board of Directors ("Eligible Directors"). Cerprobe believes that
the Automatic Option Program promotes the interests of Cerprobe by providing
such directors the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in Cerprobe and an increased personal
interest in Cerprobe's continued success and progress.
Shares Subject to the 1995 Plan
Currently, a maximum of 1,400,000 shares of Common Stock may be issued
under the 1995 Plan. If any Option or SAR terminates or expires without having
been exercised in full, stock not issued under such Option or SAR will again be
available for the purposes of the 1995 Plan. If any change is made in the stock
subject to the 1995 Plan or subject to any Option or SAR granted under the 1995
Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, change in
corporate structure, or otherwise), the 1995 Plan provides that appropriate
adjustments will be made as to the maximum number of shares subject to the 1995
Plan and the number of shares and exercise price per share of stock subject to
outstanding Options or Awards. As of April 13, 1999, 103,600 shares of Common
Stock have been issued upon exercise of Options granted pursuant to the 1995
Plan, and there were outstanding Options to acquire 992,400 shares of Common
Stock under the 1995 Plan.
Eligibility
Options and Awards may be granted pursuant to the Discretionary Grant
Program only to persons ("Eligible Persons") who at the time of grant are
either:
- key personnel (including officers and directors) of Cerprobe, or
- consultants or independent contractors who provide valuable services to
Cerprobe. Options that are incentive stock options may be granted only to
key personnel of Cerprobe who are also employees of Cerprobe. To the
extent that granted Options are incentive stock options, the terms and
conditions of
11
<PAGE> 14
those Options must be consistent with the qualification requirements set
forth in the Internal Revenue Code.
Exercise of Options
The expiration date, maximum number of shares purchasable, and the other
provisions of the Options are established at the time of grant, provided that no
options may be granted for terms of more than 10 years. Options vest and thereby
become exercisable in whole or in one or more installments at such time as may
be determined by the Plan Administrator upon the grant of the Options. However,
a Plan Administrator has the discretion to provide for the automatic
acceleration of the vesting of any Options or Awards granted under the
Discretionary Grant Program in the event of a "Change in Control." The
definition of "Change in Control" includes the following events:
- the acquisition of beneficial ownership by certain persons, acting alone
or in concert with others, of 40% or more of Common Stock pursuant to a
tender offer which the Board of Directors recommends that Cerprobe's
stockholders not accept, or
- a change in the composition of the Board of Directors occurs such that
those individuals who were elected to the Board of Directors at the last
stockholders' meeting at which there was not a contested election for
Board membership subsequently ceased to comprise a majority of the Board
of Directors by reason of a contested election.
Each Plan Administrator will determine the exercise prices of Options at
the time of grant. However, the exercise price of any Option may not be less
than 100% of the fair market value of the Common Stock at the time of the grant
(110% if the Option is granted to a person who at the time the Option is granted
owns 10% of the total combined voting power of all classes of stock of
Cerprobe). Generally, Options can be exercised by delivery of cash, bank
cashier's check, or shares of Common Stock.
Termination of Employment or Services
Options granted under the 1995 Plan are generally nontransferable other
than by will or by the laws of descent and distribution upon the death of the
optionholder and, during the lifetime of the optionholder, are exercisable only
by such optionholder. If any optionholder ceases to be employed by Cerprobe for
a reason other than death or permanent disability, such optionholder may, within
30 days after the termination of such employment, exercise some or all of the
vested incentive stock options held by such employee. In the event of the death
of the participant, incentive stock options may be exercised within 90 days
thereafter. Termination of employment at any time for cause immediately
terminates all Options held by the terminated employee.
Non-qualified Options will remain exercisable for such period of time after
termination as determined by the Plan Administrator at the time of grant of such
Options. However, if the optionholder is discharged for cause, all Options held
by such optionholder will terminate.
Awards
A Plan Administrator also may grant Awards to Eligible Persons under the
1995 Plan. Awards may be granted in the form of SARs, Stock Awards, or Cash
Awards. Awards granted in the form of SARs entitle the recipient to receive a
cash payment equal to the appreciation in market value of a stated number of
shares of Common Stock from the price on the date the SAR was granted or became
effective to the market value of the Common Stock on the date first exercised or
surrendered. Awards granted in the form of Stock Awards entitle the recipient to
receive shares of Common Stock directly. Awards granted in the form of cash
entitle the recipient to receive direct payments of cash depending on the market
value or the appreciation of the Common Stock or other securities of Cerprobe.
To the extent permitted by applicable law, Cerprobe may issue any other options,
warrants, or awards other than pursuant to the 1995 Plan without stockholder
approval.
12
<PAGE> 15
Terms and Conditions of Automatic Options
The 1995 Plan provides that each year at the meeting of the Board of
Directors held immediately after the annual meeting of stockholders, each
Eligible Director is granted an Automatic Option to acquire 3,000 shares of
Common Stock ("Annual Automatic Option"), which vest at the time of such grant.
The exercise price per share of Common Stock subject to each Automatic
Option is equal to 100% of the fair market value per share on the date of the
grant of the Automatic Option. Each Automatic Option expires on the tenth
anniversary of the date on which an Automatic Option grant was made. Eligible
Directors also may be eligible to receive Options or Awards under the
Discretionary Grant Program or option grants or direct stock issuances under any
other plans of Cerprobe. Cessation of service on the Board terminates any
Automatic Options for shares that were not vested at the time of such cessation.
The 1995 Plan provides that, in the event of Change in Control, all
unvested Automatic Options will automatically accelerate and immediately vest so
that each outstanding Automatic Option will, immediately prior to the effective
date of such Change in Control, become fully exercisable.
Duration and Modification
The 1995 Plan will remain in force until May 9, 2005. The Board of
Directors of Cerprobe may at any time suspend, amend, or terminate the 1995
Plan, except that without approval by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present in person or by proxy
at a meeting of stockholders of Cerprobe, the Board of Directors may not:
- increase, except in the case of certain organic changes to Cerprobe, the
maximum number of shares of Common Stock subject to the 1995 Plan,
- reduce the exercise price at which Options may be granted or the exercise
price for which any outstanding Options may be exercised,
- extend the term of the 1995 Plan,
- change the class of persons eligible to receive Options or Awards under
the 1995 Plan, or
- materially increase the benefits accruing to participants under the 1995
Plan.
Deductibility of Executive Compensation
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises on non-statutory options granted with exercise prices equal to the
fair market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Code Section 162(m).
OTHER STOCK OPTION PLANS
On April 3, 1989, the Board of Directors approved, and on May 6, 1989, the
stockholders ratified, the adoption of an incentive stock option plan (the "ISO
Plan") to provide for the grant of options to key executive, managerial or
supervisory employees or other employees who are deemed by the Board of
Directors to have performed extraordinary services to the Company, which options
will qualify for the tax benefits accorded "incentive stock options" as defined
in Section 422A of the Code. The Board of Directors also approved an amendment
to the prior Non-Qualified Plan to provide that the Company's directors who are
not employees of the Company, and thus not eligible to receive incentive stock
options under the ISO Plan, would be eligible to receive options under the
Non-Qualified Plan.
In connection with the adoption of the ISO Plan, all existing options under
the prior plan were permitted to be exchanged for incentive stock options under
the ISO Plan at the option of the holder. A maximum of
13
<PAGE> 16
500,000 shares of Common Stock was reserved for issuance upon exercise of
options granted under the ISO Plan and a maximum of 685,000 under the
Non-Qualified Plan. The Non-Qualified Plan and the ISO Plan together are
referred to herein as the "Stock Option Plans."
The purpose of the Stock Option Plans is to aid the Company in attracting
and retaining directors and employees and to provide such persons with an
incentive to purchase a proprietary interest in the Company in order to create
an increased personal interest in the Company's continued success and progress,
thereby motivating them to exert their best efforts on behalf of the Company.
The Stock Option Plans are administered by the Board of Directors. The Stock
Option Plans authorize the Board of Directors to delegate its administrative
authority and discretion under the Stock Option Plans to the Compensation
Committee of the Board of Directors.
The exercise price of any options granted under the ISO Plan may not be
less than 100% of the fair market value of shares of the Common Stock at the
time the option is granted (or, for incentive stock options granted to a person
who, at the time of the grant, is the beneficial owner of more than 10% of the
combined voting power of all classes of voting stock then outstanding of the
Company or any parent or subsidiary of the Company (a "10% Beneficial Owner"),
not less than 110% of the fair market value of the Common Stock at the date of
grant). All options granted under the ISO Plan expire ten years from the date of
grant (five years in the case of a 10% Beneficial Owner), unless an earlier
expiration date is provided in the option agreement. The term of each option
granted under the Non-Qualified Plan is fixed by the Board of Directors or the
Compensation Committee at the date of grant. Options granted under the Stock
Option Plans are non-transferable by the optionholder, otherwise than by will or
the laws of descent and distribution, and are exercisable during the
optionholder's lifetime only by the optionholder, or in the event of the death
of the optionholder, by a person who acquires the right to exercise the option
by the laws of descent and distribution.
Only key executive, managerial or supervisory employees of Cerprobe,
including directors who also are full time employees, and other employees who
are deemed by the Board of Directors to have performed extraordinary services to
the Company, are eligible to receive options granted under the ISO Plan.
Although all employees of Cerprobe are eligible to receive options under the
Non-Qualified Plan, the Board of Directors intends to grant options under the
Non-Qualified Plan primarily to the Company's Unaffiliated Directors.
The Stock Option Plans authorize the Board of Directors to amend the Stock
Option Plans without stockholder approval whenever the Board of Directors deems
an amendment proper and in the best interests of the Company. However, the Board
of Directors may not amend the ISO Plan or otherwise take any action with
respect to the ISO Plan which would prevent any option granted under the ISO
Plan from qualifying as an "incentive stock option" within the meaning of
Section 422A of the Code. Moreover, the Board of Directors may not, without
stockholder approval, increase the aggregate number of shares of the Common
Stock which are subject to the ISO Plan, reduce the exercise price at which
options may be granted under the ISO Plan or at which any outstanding option may
be exercised, or extend the term of the ISO Plan. The ISO Plan terminated on
April 3, 1999.
As of April 13, 1999, 920,100 shares of Common Stock have been issued upon
exercise of options granted pursuant to the Stock Option Plans, and there were
outstanding options to acquire 242,566 shares of Common Stock under the Stock
Option Plans.
1997 EMPLOYEE STOCK PURCHASE PLAN
The 1997 Stock Purchase Plan allows eligible employees of the Company to
purchase shares of Common Stock through periodic payroll deductions. See
PROPOSAL NO. 2 APPROVAL FOR AN AMENDMENT TO THE COMPANY'S 1997 EMPLOYEE STOCK
PURCHASE PLAN for a detailed description of the plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and recommending for approval by the Board of
Directors the Company's executive compensation policies and
14
<PAGE> 17
practices and all elements of compensation for the Company's executive officers.
The Committee is comprised exclusively of independent, non-employee directors.
During the fiscal year ended December 31, 1998, the Committee consisted of Ross
J. Mangano, Donald F. Walter, and Kenneth W. Miller.
Philosophy
The Company's compensation philosophy is that total cash compensation
should vary with the performance of the Company, and that any long-term
compensation should be closely aligned with the interests of the stockholders.
The compensation package for each executive officer is comprised of three
elements:
- base salary that is designed primarily to be competitive with salary
levels in the Company's industry and that reflects individual
performance;
- annual cash bonus that is tied to the Company's achievement of financial
performance targets and, in some cases, non-financial objectives; and
- long-term stock-based incentive awards that aid in the retention of the
executive officer and align the officer's interests with those of the
stockholders. As an executive officer's level of responsibility
increases, it is the intent of the Company to have a greater portion of
the executive officer's total compensation be dependent upon Company
performance and stock appreciation rather than base salary.
Base Salary
For comparative compensation purposes for the 1998 fiscal year, the
Committee engaged an independent compensation consultant to review and summarize
the compensation practices of similar sized businesses in the high technology
and electronics industries based upon published 1996-1997 data. The Committee
also considered other available executive compensation surveys generally based
upon 1996-1997 data and compensation recommendations provided by the Chief
Executive Officer for all executive officers except himself. The base salary for
each officer is determined on the basis of the above comparative industry
salaries, the experience and personal performance of the officer, and internal
comparability considerations. The weight given to each of these factors differs
from officer to officer, as the Committee deems appropriate. For each executive
officer, the Committee seeks to establish a base salary that is at or close to
the median salary paid to similarly situated industry executives.
Annual Cash Bonus
Annual discretionary bonuses are designed to provide incentive compensation
to executive officers that contribute substantially to the success of the
Company. The bonuses are intended to maintain a strong link between the
Company's financial performance and enhanced stockholder value by rewarding
results that exceed industry averages. Financial performance targets and
non-financial objectives are established for each fiscal year. Bonuses are
earned on the basis of the Company's earnings compared to the prior fiscal year;
the achievement of strategic objectives primarily related to international
operations, integration of acquired companies, the establishment of strategic
alliances and the personal performance level of the executive officer. The
evaluation of these factors is subjective, with no particular weight being
assigned to any one factor. For 1998, the Committee determined that the
Company's performance did not warrant the payment of discretionary bonuses.
Long-Term Incentive Compensation
Long-term incentives are provided through stock option grants. The grants
are designed to align the interests of each executive officer with those of the
stockholders and provide each executive officer with significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
business. Each grant allows the officer to acquire shares of the Common Stock at
a fixed price per share (the market price on the grant date) over a specified
period of time (up to 10 years). Each option generally
15
<PAGE> 18
becomes exercisable in annual installments over a four-year period, contingent
upon the executive officer's continued employment with the Company. Accordingly,
the option will provide a return to the executive officer only if the market
price of the underlying shares appreciates over the option term. The number of
shares subject to each option grant is set at a level intended to create a
meaningful opportunity for stock ownership based upon the officer's current
position with the Company, the base salary associated with that position, the
size of comparable awards made to executives in similar positions within the
industry, the executive's potential for increased responsibility and promotion
over the option term, and the executive officer's personal performance in recent
periods. The Committee also takes into account the number of unvested options
held by the executive officer in order to maintain an appropriate level of
equity incentive for that executive. However, the Committee does not adhere to
any specific guidelines as to the relative option holdings of the Company's
executive officers.
During 1998, the Board of Directors authorized a reduction of the exercise
price of certain stock options granted to key employees, including executive
officers. The new exercise price for those options was fixed at the market price
of the Company's Common Stock at the time of the repricing. Stock options
granted to employees under the Company's stock option plans are intended to
provide incentives to the employees to work to achieve long-term success for the
Company. The decline in the market price of the Company's Common Stock since the
date the options were granted was contrary to the purpose of the options, and
the Compensation Committee deemed it in the best interest of the Company to
reduce the exercise price to the market price at the time of the repricing. With
respect to the repriced options, the vesting period of those options was revised
at the time of repricing. See the table included under EXECUTIVE COMPENSATION
"Option Grants In Last Fiscal Year" and "Ten-Year Option Repricings" for further
information on the option repricing
Benefits
The Company provides various employee benefit programs to its executive
officers, including medical, dental, vision, and life insurance benefits, an
employee 401(k) retirement savings plan, an employee stock purchase plan, and
short- and long-term disability insurance. These programs are generally
available to all employees of the Company.
Chief Executive Officer Compensation
The Committee considered the same factors outlined above for other
executive officers in setting the fiscal year 1998 base salary and other
compensation of C. Zane Close, the Company's President and Chief Executive
Officer. In setting Mr. Close's compensation, the Committee sought to achieve
two objectives:
- establish a level of base salary competitive with that paid to other
chief executive officers of similar sized companies within the industry
and
- make a significant percentage of the total compensation package
contingent upon Company performance and stock appreciation.
The base salary established for Mr. Close is intended to provide him with a
level of stability and certainty each year, and accordingly, it is not affected
to any significant degree by Company performance factors. Mr. Close's base
salary for fiscal year 1998 was $270,000 and was generally in the fiftieth
(50th) percentile of the base salary levels in effect for other chief executive
officers of similar sized companies within the industry. Stock options for an
additional 60,000 and 80,000 shares of Common Stock were granted to Mr. Close at
option prices of $11.00 and $12.25 respectively, the closing price on the date
of the grant on August 11, 1998 and December 14, 1998, respectively. Such
options are exercisable over four years, in five successive equal installments
measured from the dates of the grants, with the first installment exercisable on
the date of the grant and each successive installment exercisable annually
thereafter until fully vested. The 60,000 share option grant also included an
acceleration feature such that if the share price of the Company's Common Stock
attained target levels of $15, $20, $30, and $35 averaged over a 30-day period,
vesting would occur with respect to 25%, 50%, 75%, and 100%, respectively, of
the 60,000 shares underlying such option.
16
<PAGE> 19
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
each of any publicly held company's chief executive officer and four other most
highly compensated executive officers. The compensation paid to the Company's
executive officers for the 1998 fiscal year did not exceed the $1 million limit
per officer, nor is it expected that the compensation to be paid to the
Company's executive officers for fiscal 1999 will exceed that limit. The
Company's 1995 Plan is structured so that any compensation deemed paid to an
executive officer when he exercises an outstanding option under the 1995 Plan
will qualify as performance-based compensation, which will not be subject to the
$1 million limitation. Because it is very unlikely that the cash compensation
payable to any of the Company's executive officers in the foreseeable future
will approach the $1 million limit, the Compensation Committee has decided at
this time not to take any other action to limit or restructure the elements of
cash compensation payable to the Company's executive officers. The Committee
will reconsider this decision should the individual compensation of any
executive officer ever approach the $1 million level.
Members of the Compensation Committee
Ross J. Mangano
Kenneth W. Miller
Donald F. Walter
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998, the Compensation Committee
consisted of Messers. Mangano, Miller, and Walter, non-employee directors of the
Company. Mr. Miller served as Treasurer of Cerprobe from October 1991 to June
1996 and Secretary of Cerprobe from October 1991 to June 1996.
17
<PAGE> 20
COMPANY PERFORMANCE GRAPH
The following graph compares cumulative stockholder returns (change in
stock price plus reinvestment of dividends) for the five years ended December
31, 1998 for:
- The Company's Common Stock;
- The Hambrecht & Quest Semiconductor Index; and
- The Nasdaq Stock Market (US) Index. The graph assumes an investment of
$100 on December 31, 1993. The performance shown is not necessarily
indicative of future performance.
[COMPANY PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
H & Q SEMICONDUCTOR NASDAQ STOCK MARKET
CERPROBE CORPORATION INDEX (US) INDEX
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Dec-93 100 100 100
Dec-94 73 123 98
Dec-95 232 171 138
Dec-96 192 221 170
Dec-97 228 233 209
Dec-98 179 328 293
</TABLE>
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms filed with the SEC.
Based solely on the Company's review of the copies of such forms received
by it during the fiscal year ended December 31, 1998, and written
representations that no other reports were required, the Company believes that
each person who, at any time during such fiscal year, was a director, officer,
or beneficial owner of more than 10% of the Company's Common Stock complied with
all Section 16(a) filing requirements during such fiscal year, except as noted.
Mr. Walter reported a purchase late on a Form 5.
18
<PAGE> 21
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 13, 1999, by:
- each director and each nominee for director;
- each Named Officer set forth in the Summary Compensation Table under the
section entitled "Executive Compensation";
- all directors and executive officers of the Company as a group; and
- each person known by the Company to be the beneficial owner of more than
5% of the Common Stock. The information as to beneficial ownership is
based upon statements furnished to the Company by such persons.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP(2) CLASS(3)
- ---------------------- -------------------------- ----------
<S> <C> <C>
Directors and Named Officers
Ross J. Mangano........................................... 471,131(4) 6.14%
C. Zane Close............................................. 144,600(5) 1.86%
William A. Fresh.......................................... 227,128(6) 2.96%
Kenneth W. Miller......................................... 162,831(7) 2.12%
Donald F. Walter.......................................... 33,931(8) *
Eswar Subramanian......................................... 150,900(9) 1.95%
Michael K. Bonham......................................... 117,822(10) 1.52%
Randal L. Buness.......................................... 53,000(11) *
All directors and executive officers as a group (eight
persons)............................................... 1,361,343(12) 16.81%
Non-management 5% Stockholders
Warburg, Pincus Asset Management, Inc..................... 474,100(13) 6.19%
</TABLE>
- ---------------
* Less than 1%.
(1) Each director, nominee and officer of the Company may be reached through
the Company at 1150 North Fiesta Boulevard, Gilbert, Arizona 85233-2237.
(2) Unless otherwise indicated, and subject to community property laws where
applicable, all shares are owned of record by the persons named and the
beneficial ownership consists of sole voting power and sole investment
power.
(3) The percentages shown include the shares of Common Stock actually owned as
of April 13, 1999, and the shares of Common Stock that the identified
person or group had the right to acquire within 60 days of April 13, 1999,
pursuant to the exercise of stock options. In calculating the percentage of
ownership, all shares of Common Stock that the identified person or group
had the right to acquire within 60 days of April 13, 1999, upon the
exercise of stock options are deemed to be outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by such person
or group, but are not deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by any other person.
(4) Includes 20,000 shares in the name of Nat & Co voted pursuant to a power of
attorney; 21,300 shares in the name of Oliver & Company voted pursuant to a
power of attorney; 90,000 shares in the name of Millie M. Cunningham voted
pursuant to a power of attorney; 280,200 shares held in the name of Troon &
Co., Ross J. Mangano, et al., Trustees for which Mr. Mangano serves as a
trustee; and 17,331 shares that Mr. Mangano has the right to acquire
pursuant to the exercise of options.
(5) Includes 133,000 shares that Mr. Close has the right to acquire pursuant to
the exercise of options.
19
<PAGE> 22
(6) Includes 135,200 shares held by WAF Investment Company, a company 100%
owned by Mr. Fresh and his wife; 25,977 shares held by The William A. and
Reva Luana Fresh Charitable Remainder Unitrust; and 17,331 shares that Mr.
Fresh has the right to acquire pursuant to the exercise of options.
(7) Includes 65,500 shares held by U.S. Trust Company of California, N.A., as
trustee for the Kenneth W. Miller Charitable Remainder Unitrust. Mr. Miller
disclaims beneficial ownership with respect to these shares. Also includes
37,331 shares that Mr. Miller has the right to acquire pursuant to the
exercise of options.
(8) Includes 32,331 shares that Mr. Walter has the right to acquire pursuant to
the exercise of options.
(9) Includes 80,000 shares that Mr. Subramanian has the right to acquire
pursuant to the exercise of options.
(10) Includes 74,750 shares that Mr. Bonham has the right to acquire pursuant to
the exercise of options.
(11) Includes 50,000 shares that Mr. Buness has the right to acquire pursuant to
the exercise of options.
(12) Includes 442,074 shares that members of the group had the right to acquire
as of April 13, 1999; or within 60 days of April 13, 1999, pursuant to the
exercise of stock options.
(13) Warburg, Pincus Asset Management, Inc. serves as Investment Advisor to
various fiduciary accounts. Of the 474,100 shares, Warburg Pincus Asset
Management, Inc. has sole power to vote 43,600 shares, shared power to vote
412,200 shares, and sole power to dispose 474,100 shares. The address of
Warburg, Pincus Asset Management, Inc. is 466 Lexington Avenue, New York,
New York 10017.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal year ended December 31, 1998, was KPMG LLP, independent
certified public accountants (the "Auditors"). It is presently contemplated that
the Auditors will be retained as the principal accounting firm to be utilized by
the Company during the current fiscal year. A representative of the Auditors
will attend the Annual Meeting for the purpose of responding to appropriate
questions and will be afforded an opportunity to make a statement if the
Auditors so desire.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the rules of the Securities and Exchange Commission (the
"Commission"), any proposal that a stockholder intends to have presented at the
Company's 2000 Annual Meeting must be received by the Company no later than
December 30, 1999 in order to be included in the proxy statement and form of
proxy relating to such meeting. Any proposal that is submitted should be
addressed to the attention of the Secretary of the Company and must be
accompanied by the notice required by the rules of the Commission and must
otherwise comply with such rules.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
intended that the shares represented by proxies will be voted in accordance with
the judgment of the proxy holders.
Dated: April 13, 1999
20
<PAGE> 23
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CERPROBE CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of CERPROBE CORPORATION, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 13, 1999, and hereby appoints C. Zane Close
and Randal L. Buness, and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1999 Annual Meeting of Stockholders of CERPROBE
CORPORATION, to be held on May 25, 1999 at 10:00 a.m., local time, at the Mesa
Hilton, Kachina Room, 1011 West Holmes Avenue, Mesa, Arizona 85210, and at any
adjournment or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth below:
A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the powers of
said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS; FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE SIDE
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
CUMULATIVE
FOR VOTING OPTION WITHHOLD
all nominees (indicate number authority to
listed below of votes for vote for
(except as indicated) each nominee) all nominees
1. Election of / / / / / /
Directors
(mark only one)
If you wish to withhold authority to vote for ___ Ross J. Mangano
any individual nominee, strike a line through ___ C. Zane Close
that nominee's name in the list below: ___ Kenneth W. Miller
Ross J. Mangano; C. Zane Close; Kenneth W. ___ Donald F. Walter
Miller; Donald F. Walter; William A. Fresh; ___ William A. Fresh
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to the Company's / / / / / /
1997 ESPP (the "Plan") to reduce the employment
eligibility requirement from one year to 90 days.
and upon any such matter or matters which may properly come before the meeting
or any adjournment or adjournments thereof.
SIGNATURE(S)___________________________________________ DATED:____________, 1999
(This Proxy should be dated, signed by the stockholder(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 stockholders should sign.)
<PAGE> 24
CERPROBE CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH FEBRUARY 15, 1999)
ARTICLE I
PURPOSE
1.1 Name. This Stock Purchase Plan shall be known as the Cerprobe
Corporation 1997 Employee Stock Purchase Plan (the "Plan").
1.2 Purpose. The Plan is intended to provide a method whereby employees
of Cerprobe Corporation, a Delaware corporation, and each Subsidiary Corporation
that has agreed, with Cerprobe's Corporation's consent, to participate in the
Plan (hereinafter referred to, unless the context otherwise requires, as the
"Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company.
1.3 Qualifications. It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall
be construed in a manner consistent with the requirements of that section of the
Code.
ARTICLE II
DEFINITIONS
2.1 Base Pay. "Base Pay" shall mean regular straight-time earnings
excluding payments for overtime, shift premium bonuses, "skill-based" pay and
other special payments, commissions (unless such commissions represent the
primary source of compensation, as determined by the Committee) and other
marketing incentive payments.
2.2 Committee. "Committee" shall mean the individuals described in
Article XI.
2.3 Employee. "Employee" shall mean any person who is customarily
employed on a full-time or part-time basis by the Company and is regularly
scheduled to work more than 20 hours per week.
2.4 Stock. "Stock" shall mean the Common Stock of the Company, par value
five cents ($.05).
2.5 Subsidiary Corporation. "Subsidiary Corporation" shall mean any
present or future corporation that (i) is a "subsidiary corporation," as that
term is defined in Code section 424(f), of Cerprobe Corporation and (ii) is
designated as a participant in the Plan by the Committee.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Initial Eligibility. Any Employee who has completed 90 days of
continuous employment and is employed by the Company on the date such Employee's
participation in the Plan is to become effective shall be eligible to
participate in Offerings under the Plan which commence on or after such 90 day
employment period has concluded.
3.2 Leave of Absence. For purposes of participation in the Plan, a person
on leave of absence shall be deemed to be an Employee for the first 90 days of
such leave of absence and, except as otherwise provided by the Committee and
unless such Employee shall have returned to regular full-time or part-time
employment (as the case may be) prior to the close of business on such 90th day,
such Employee's employment shall be deemed to have terminated at the close of
business on the 90th day of such leave of absence. Termination by the Company of
any Employee's leave of absence, other than termination of such leave of absence
on return to full-time or part-time employment, shall terminate an Employee's
employment for all purposes of the Plan and shall terminate such Employee's
participation in the Plan and right to exercise any option.
<PAGE> 25
3.3 Restrictions on Participation. Notwithstanding any provision of the
Plan to the contrary, no Employee shall be granted an option to participate in
the Plan:
(a) if, immediately after the grant, such Employee would own Stock
and/or hold outstanding options to purchase Stock that would cause the Employee
to possess five percent or more of the total combined voting power or value of
all classes of Stock of the Company (for purposes of this paragraph, the rules
of section 424(d) of the Code shall apply in determining stock ownership of any
Employee); or
(b) which permits such Employee's rights to purchase Stock under all
Employee stock purchase plans of the Company to accrue at a rate which exceeds
$25,000 in fair market value of the Stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding.
3.4 Commencement of Participation. An eligible Employee may become a
participant by completing the enrollment forms prescribed by the Committee
(including a purchase agreement and a payroll deduction authorization) and
filing such forms with the designated office of the Company prior to the
Offering Commencement Date for the next scheduled Offering (as such terms are
defined below). Payroll deductions for a participant shall commence on the next
scheduled Offering Commencement Date when such Employee's authorization for a
payroll deduction becomes effective and shall continue in effect for the term of
this Plan, except to the extent such payroll deduction is changed in accordance
with this Section 3.4, or terminated in accordance with Article VIII. The
participant may, at any time, increase or decrease the rate of the participant's
payroll deduction by filing the appropriate form with the designated office of
the Company. The new rate of payroll deduction shall become effective as of the
next applicable Offering Commencement Date.
ARTICLE IV
OFFERINGS
4.1 Offerings. The Plan will be implemented by a series of successive
six-month offerings of the Company's Stock (the "Offerings"), the first Offering
beginning on January 1, 1998 and ending June 30, 1998. As used in the Plan,
"Offering Commencement Date" means, in the case of the first Offering, January
1, 1998, and in the case of subsequent Offerings, the July 1 or January 1, as
the case may be, on which the particular Offering begins. The term "Offering
Termination Date" means the June 30 or December 31, as the case may be, on which
the particular Offering terminates.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Amount of Deduction. At the time an Employee files an authorization
for payroll deduction and becomes a participant in the Plan, the Employee shall
elect to have deductions made from the Employee's pay on each payday during the
time the Employee is a participant in an Offering. The deductions shall be at
the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9, or 10 percent of such Employee's Base Pay
in effect during such Offering; provided however, that prior to any Offering
Commencement Date, the Committee shall have the discretion to limit deductions
to less than 10 percent (but no less than 5 percent) for any Offering.
5.2 Calculation of Base Pay. An Employee's Base Pay during the period of
an Offering shall be determined by multiplying such Employee's normal weekly
rate of pay (as in effect on the last day prior to an Offering Commencement
Date) by 26 or the Employee's normal hourly rate of pay by 1,040. In the case of
an Employee designated by the Company as "part-time," such Employee's Base Pay
during the period of an Offering shall be assumed to be 20 hours per week. In
calculating an Employee's normal weekly rate of pay under this Section 5.2,
retroactive adjustments occurring during an Offering which are retroactive to
the last day prior to the Commencement Date of that particular Offering shall be
taken into account. In addition, if a participant's Base Pay includes
commissions, the Committee may set such Employee's Base Pay based upon averages
and standards as determined in the discretion of the Committee.
2
<PAGE> 26
5.3 Participant Accounts. All payroll deductions made for a participant
shall be credited to such Employee's account under the Plan. A participant may
not make any separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.5.
5.4 Changes in Payroll Deductions. A participant may discontinue
participation in the Plan, but no other change can be made during an Offering
and, specifically, a participant may not alter the amount of such participant's
payroll deductions for that Offering. Upon a participant's discontinuance of
contributions, the participant may elect to either withdraw as provided in
Article VIII or retain amounts in the participant's account in the Plan, which
shall be used to purchase Stock at the end of the Offering Period.
5.5 Leave of Absence. If a participant goes on a leave of absence, such
participant shall have the right to elect: (a) to withdraw the balance in such
participant's account pursuant to Section 8.1 hereof; (b) to discontinue
contributions to the Plan but remain a participant in the Plan; or (c) to remain
a participant in the Plan during such leave of absence, to authorize deductions
to be made from payments by the Company to the participant during such leave of
absence and to make cash payments to the Plan at the end of each payroll period
to the extent that amounts payable by the Company to such participant are
insufficient to meet such participant's authorized Plan deductions.
ARTICLE VI
GRANTING OF OPTION
6.1 Number of Option Shares. On each Offering Commencement Date, a
participating Employee shall be deemed to have been granted an option to
purchase the number of shares of the Company's Stock that may be purchased at
the purchase price specified in Section 6.2 with the aggregate amount
contributed by the Employee during the Offering; provided that the number of
shares of the Company's Stock subject to the Employees' option for any Offering
shall not exceed the number derived by dividing $12,500 by 100% of the closing
price of the Stock on the applicable Offering Commencement Date or the nearest
prior business day on which trading occurred on the NASDAQ National Market
System.
6.2 Option Price. The option price of Stock purchased with payroll
deductions made during each Offering to a participant therein shall be the
lesser of (i) 85 percent of the closing price of the Stock on the applicable
Offering Commencement Date or the nearest prior business day on which trading
occurred on the NASDAQ National Market System, or (ii) 85 percent of the closing
price of the Stock on the applicable Offering Termination Date or the nearest
prior business day on which trading occurred on the NASDAQ National Market
System.
ARTICLE VII
EXERCISE OF OPTION
7.1 Automatic Exercise. Unless participant gives written notice to the
Company as hereinafter provided, such participant's option for the purchase of
Stock granted under Section 6.1 hereof will be deemed to have been exercised
automatically on the Offering Termination Date applicable to such Offering for
the purchase of the number of full shares of stock which the accumulated payroll
deductions in such Employee's account at that time will purchase at the
applicable option price (but not in excess of the number of shares for which
options have been granted to the Employee pursuant to Section 6.1 hereof), and
any excess in such Employee's account at that time will be returned to the
participant.
7.2 Fractional Shares. Fractional shares will not be issued under the
Plan and any accumulated payroll deductions which would have been used to
purchase fractional shares will be held in the Employee's account to be used to
purchase Stock in a subsequent Offering.
7.3 Exercisability of Option. During participant's lifetime, options held
by such participant shall be exercisable only by that participant.
7.4 Withdrawals and Transfers of Stock. Shares of Stock may be withdrawn
from a participant's account, in which case one or more certificates for whole
shares may be issued in the name of, and delivered to, the
3
<PAGE> 27
participant, with such participant receiving cash in lieu of fractional shares
based on the fair market value of a share of Stock on the date of withdrawal.
Alternatively, whole shares of Stock may be withdrawn from a participant's
account by means of a transfer to a broker-dealer or financial institution that
maintains an account for the participant, together with the transfer of cash in
lieu of fractional shares based on the fair market value of a share of Stock on
the date of withdrawal. Participants may not designate any other person to
receive shares of Stock withdrawn or transferred under the Plan. A participant
seeking to withdraw or transfer shares of Stock must give instructions to the
custodian in such manner and form as may be prescribed by the custodian, which
instructions will be acted upon as promptly as practicable. Withdrawals and
transfers will be subject to any fees imposed by the custodian.
ARTICLE VIII
WITHDRAWAL
8.1 In General. Prior to the last five days of an Offering period, a
participant may withdraw payroll deductions credited to such participant's
account under the Plan any time by giving written notice to the designated
office of the Company, which withdrawal notice shall be in form and substance as
decided by the Committee. All of the participant's payroll deductions credited
to the participant's account will be paid to the participant promptly after
receipt of such participant's notice of withdrawal, and no further payroll
deductions will be made form the participant's pay during such Offering or
during any subsequent Offering unless an Employee re-enrolls as provided in
Section 8.2 hereof. The Company may, at its option, treat any attempt to borrow
by a participant on the security of such participant's accumulated payroll
deductions as an election to withdraw such deductions.
8.2 Effect on Subsequent Participation. Participant's withdrawal from any
Offering will not have any effect upon such Employee's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company. In order to be eligible for a subsequent
Offering, however, a participant which has withdrawn from a current Offering
must satisfy the requirements of Section 3.4 hereof prior to the Offering
Commencement Date of the next succeeding Offering.
8.3 Termination of Employment. Upon termination of the participant's
employment for any reason, including retirement (but excluding death or
permanent disablement while in the employ of the Company or continuation of a
leave of absence for a period beyond 90 days), the payroll deductions credited
to such Employee's account will be returned to the Employee, or, in the case of
the Employee's death subsequent to the termination of such Employee's
employment, to the person or persons entitled thereto under Section 12.1 hereof.
8.4 Termination of Employment Due to Death or Permanent Disablement. Upon
termination of the participant's employment because of death or permanent
disablement, the participant or participant's beneficiary (as defined in Section
12.1 hereof) shall have the right to elect, by written notice given to the
designated office of the Company prior to the earlier of the Offering
Termination Date or the expiration of a period of 60 days commencing with the
termination of the participant's employment, either:
(a) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
(b) to exercise the participant's option on the next Offering
Termination Date and purchase the number of full shares of Stock which the
accumulated payroll deductions in the participant's account at the date of the
participant's cessation of employment will purchase at the applicable option
price, and any excess in such account will be returned to said beneficiary,
without interest.
In the event that no such written notice of election shall be duly received
by the designated office of the Company, the beneficiary shall automatically be
deemed to have elected, pursuant to paragraph (b), to exercise the participant's
option.
8.5 Leave of Absence. A participant on leave of absence shall, subject to
the election made by such participant pursuant to Section 5.5 hereof, continue
to be a participant in the Plan so long as such participant is on continuous
leave of absence. A participant who has been on leave of absence for more than
90 days and who
4
<PAGE> 28
therefore is not an Employee for the purpose of the Plan shall not be entitled
to participate in any Offering commencing after the 90th day of such leave of
absence. Notwithstanding any other provisions of the Plan, unless a participant
on leave of absence returns to regular full-time or part-time employment with
the Company at the earlier of: (a) the termination of such leave of absence or
(b) three months from the 90th day of such leave of absence, such participant's
participation in the Plan shall terminate on whichever of such dates first
occurs.
ARTICLE IX
INTEREST
9.1 Payment of Interest. No interest will be paid or allowed on any money
paid into the Plan or credited to the account of any participant Employee;
including any interest paid on any and all money which is distributed to an
Employee or such Employee's beneficiary pursuant to the provisions of Sections
8.1, 8.3, 8.4, and 10.1 hereof.
ARTICLE X
STOCK
10.1 Maximum Shares. The maximum number of shares of Stock which shall be
issued under the Plan, subject to adjustment upon changes in capitalization of
the Company as provided in Section 12.4 hereof, shall be 150,000 shares. If the
total number of shares for which options are exercised on any Offering
Termination Date in accordance with Article VI exceeds the maximum number of
shares for the applicable Offering, the Company shall make a pro rata allocation
of the shares available for delivery and distribution in as nearly a uniform
manner as shall be practicable and as it shall determine to be equitable, and
the balance of payroll deductions credited to the account of each participant
under the Plan shall be returned to such participant as promptly as possible.
10.2 Participant's Interest in Option Stock. The participant will have no
interest in Stock covered by such Employee's option until such option has been
exercised.
10.3 Registration of Stock. Stock to be delivered to participant under the
Plan will be registered in the name of the participant, or, if the participant
so directs by written notice to the designated office of the Company prior to
the Offering Termination Date applicable thereto, in the names of the
participant and one such other person as may be designated by the participant,
in the form and manner permitted by applicable law.
10.4 Restrictions on Exercise. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the shares
of Stock reserved for issuance upon the exercise of the option shall have been
duly listed, upon official notice of issuance, upon a stock exchange, and that
either:
(a) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective; or
(b) the participant shall have represented at the time of purchase,
in form and substance satisfactory to the Company, that it is such Employee's
intention to purchase the shares for investment and not for resale or
distribution.
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Committee. The Board of Directors shall appoint a
committee (the "Committee") to administer the Plan, which shall consist of no
fewer than two (2) members of the Board of Directors. No member of the Committee
shall be eligible to purchase Stock under the Plan.
11.2 Authority of Committee. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for
5
<PAGE> 29
administering the Plan. The Committee's determination on the foregoing matters
shall be conclusive. The Committee may delegate its authority as it deems
necessary.
11.3 Rules Governing the Administration of the Committee. The Board of
Directors may from time to time appoint members of the Committee in substitution
for or in addition to members previously appointed and may fill vacancies,
however caused, in the Committee. The Committee may select one of its members as
its Chairman and shall hold its meetings at such times and places as it shall
deem advisable and may hold telephone meetings. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan, in the manner and to the extent it
shall deem desirable. Any decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
ARTICLE XII
MISCELLANEOUS
12.1 Designation of Beneficiary. A participant may file a written
designation of a beneficiary who is to receive any Stock and/or cash. Such
designation of beneficiary may be changed by the participant at any time by
written notice to the designated office of the Company. Upon the death of
participant and upon receipt by the Company of proof of identity and existence
at the participant's death of a beneficiary validly designated by the
participant under the Plan, the Company shall deliver such Stock and/or cash to
such beneficiary. In the event of the death of participant and in the absence of
a beneficiary validly designed under the Plan who is living at the time of such
participant's death, the Company shall deliver such Stock and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Stock and/or cash to the spouse
or to any one or more dependents of the participant as the Company may
designate. No beneficiary shall, prior the death of the participant by whom he
has been designated, acquire any interest in the Stock or cash credited to the
participant under the Plan.
12.2 Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive Stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge, or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Article
VIII.
12.3 Use of Funds. All payroll deductions received or held by the Company
under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
12.4 Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares of
Common Stock of the Company have increased, decreased, changed into, or been
exchanged to a different number or kind of shares or securities of the Company,
through reorganization, merger, recapitalization, reclassification, stock split
(whether or not effected in the form of a Stock dividend), reverse Stock split
or similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding options and on the option exercise price or prices applicable
to such outstanding options. In addition, in any such event, the number and/or
kind of shares which may be offered in the Offerings described in Article IV
hereof shall also be proportionately adjusted.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger, or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or Stock of the Company to
another corporation, the holder of each option then outstanding under the Plan
will thereafter be entitled to receive at the next Offering Termination Date
upon the exercise of such option for each share as to which such option shall be
exercised, as nearly as reasonably may be determined, the cash, securities,
and/or property which a holder of one share of the
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Stock was entitled to receive upon and at the time of such transaction. The
Board of Directors shall take such steps in connection with such transactions as
the Board shall deem necessary to assure that the provisions of this Section
12.4 shall thereafter be applicable, as nearly as reasonably may be determined
in relation to the said cash, securities, and/or property as to which such
holder of such option might thereafter be entitled to receive.
12.5 Amendment and Termination. The Board of Directors shall have complete
power and authority to terminate or amend the Plan; provided, however, that the
Board of Directors shall not, without the approval of the stockholders of the
Corporation (a) increase the maximum number of shares which may be issued under
any Offering (except pursuant to Section 12.4 hereof) or (b) amend the
requirements as to the class of Employees eligible to purchase Stock under the
Plan or permit the members of the Committee to purchase Stock under the Plan. No
termination, modification, or amendment of the Plan may, without the consent of
an Employee then having an option under the Plan to purchase Stock, adversely
affect the rights of such Employee under such option.
12.6 Effective Date and Termination Date. The Plan shall become effective
as of January 1, 1998, subject to the prior approval by the holders of the
majority of the Stock present and represented at the next following annual
meeting of the Company's shareholders. If the Plan is not so approved by that
date, the Plan shall not become effective. The Plan shall terminate upon the
earlier of (a) the tenth anniversary of the effective date of the Plan or (b)
the date on which all shares available for issuance under the Plan shall be sold
pursuant to purchase options exercised under the Plan.
12.7 No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any Employee or class of Employee to
purchase any shares under the Plan, or create in any Employee or class of
Employee any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
12.8 Effect of Plan. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators, or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
12.9 Governing Law. The law of the State of Arizona will govern all
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
CERPROBE CORPORATION, a Delaware corporation
By: /s/C. Zane Close
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Its: President and Chief Executive Officer
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