SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FSI INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
LUKE R. KOMAREK
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
FSI INTERNATIONAL, INC.
322 LAKE HAZELTINE DRIVE
CHASKA, MINNESOTA 55318
612/448-5440
December 18, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Minneapolis Marriott City Center Hotel, 30 South Seventh Street,
Minneapolis, Minnesota, commencing at 3:30 p.m., Minneapolis time, on
Wednesday, January 24, 1996.
The Secretary's Notice of Annual Meeting and the Proxy Statement which follow
describe the matters on which action will be taken. During the meeting we
will also review the activities of the past year and items of general
interest about the Company.
In addition to electing two members of the Board of Directors and approving
the independent auditors, you are being asked to vote on two other proposals.
Proposal 2 relates to your Board of Directors' recommendation to adopt
amendments to the FSI International, Inc. Employees Stock Purchase Plan
including increasing the number of shares authorized under the Plan. The
Employees Stock Purchase Plan provides all eligible employees the opportunity
to purchase FSI common stock and thereby develop a stronger incentive to work
for the continued success of the Company.
Proposal 3 relates to increasing the number of shares authorized under the
FSI International Inc. 1994 Omnibus Stock Plan, a stock based incentive plan
intended to motivate key employees and promote the long-term value of the
Company.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL FOUR
PROPOSALS.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you there.
Sincerely
/s/ Joel A. Elftmann
Joel A. Elftmann
Chairman
EVEN IF YOU OWN ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE
PRESENT AT THE MEETING, PLEASE SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED
PROXY IN THE POSTAGE-PAID REPLY ENVELOPE PROVIDED. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED. If you later determine that you will be present at the
meeting or for any other reason desire to revoke your proxy, you may do so at
any time before it is voted.
FSI INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 24, 1996
To the Shareholders of FSI International, Inc.:
The Annual Meeting of Shareholders of FSI International, Inc. (the "Company")
will be held at the Minneapolis Marriott City Center Hotel, 30 South Seventh
Street, Minneapolis, Minnesota on Wednesday, January 24, 1996, at 3:30 p.m.,
Minneapolis time, for the following purposes:
1. To elect two Class III directors for a three-year term.
2. To act upon a proposal to approve amendments to the FSI International, Inc.
Employees Stock Purchase Plan to (i) increase the number of shares
available under the Plan by an additional 200,000 shares and (ii) modify
the definition of "affiliate" as used in the Plan to allow the Board of
Directors' discretion in determining which affiliates of the Company (and,
therefore, their employees) will be eligible to participate in the Plan.
3. To act upon a proposal to increase the number of shares that may be issued
pursuant to the Company's 1994 Omnibus Stock Plan from 1,000,000 to
1,500,000.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending August 31, 1996.
5. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed December 6, 1995 as the record date for the
meeting, and only shareholders of record at the close of business on that
date are entitled to receive notice of and vote at the meeting.
By Order of the Board of Directors
/s/ Benno G. Sand
Benno G. Sand
Secretary
December 18, 1995
FSI INTERNATIONAL, INC.
PROXY STATEMENT
GENERAL INFORMATION
SOLICITATION OF PROXIES
This Proxy Statement and the enclosed proxy are being furnished in connection
with the solicitation by the Board of Directors (the "Board") of FSI
International, Inc., a Minnesota corporation (the "Company"), of proxies for
use in connection with the Annual Meeting of Shareholders ("Meeting") to be
held on Wednesday, January 24, 1996 and any and all adjournments thereof.
Proxies in the accompanying form which are properly signed and duly returned
to an officer of the Company will, unless otherwise specified on the proxy,
be voted for Items 1, 2, 3 and 4 as set forth on the proxy and be voted in
the discretion of the proxy holders as to any other matter that may properly
come before the Meeting. A shareholder executing a proxy retains the right to
revoke it at any time before it is exercised by providing notice in writing
to an officer of the Company of termination of the proxy's authority or a
properly signed and duly returned proxy bearing a later date.
So far as the Board and the management of the Company are aware, no matters
other than those described in this Proxy Statement will be acted upon at the
Meeting. If, however, any other matters properly come before the Meeting, it
is the intention of the persons named in the enclosed proxy to vote the same
in accordance with their judgment on such matters.
The address of the principal executive office of the Company is 322 Lake
Hazeltine Drive, Chaska, Minnesota 55318 and the Company's telephone number
is (612) 448-5440. The mailing of this Proxy Statement and accompanying form
of proxy to shareholders will commence on or about December 18, 1995.
The Company will pay the cost of soliciting proxies in the accompanying form.
In addition to solicitation by the use of the mails, certain directors,
officers and employees of the Company may solicit proxies by telephone,
personal contact, or special letter, and may request brokerage firms and
custodians, nominees and other record holders to forward soliciting materials
to the beneficial owners of stock of the Company and will reimburse them for
their reasonable out-of-pocket expenses in forwarding such materials.
OUTSTANDING VOTING SECURITIES
Only shareholders of record at the close of business on December 6, 1995 are
entitled to vote at the Meeting. On that day there were issued and
outstanding 20,321,268 shares of common stock ("Common Stock"), the only
authorized and issued voting security of the Company. Each shareholder is
entitled to one vote for each share held and is not entitled to cumulate
votes for the election of directors.
VOTING REQUIREMENT
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present and entitled to vote on a matter to be acted upon at
the Meeting is required for the approval of that matter. A shareholder voting
through a proxy who abstains with respect to any matter is considered to be
present and entitled to vote on that matter at the Meeting, and is in effect
a negative vote, but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on any matter
shall not be considered present and entitled to vote on that matter.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
THE NOMINEES AND DIRECTORS
The Company's Articles of Incorporation, as amended, provide that the Board
be divided into three classes of directors of as nearly equal size as
possible. The members of each class are elected to serve a three-year term,
and the terms are staggered. Terrence W. Glarner and Charles R. Wofford are
directors in the class whose term expires at the Meeting. James A. Bernards
and William M. Marcy are Class I Directors with terms expiring in 1997. Neil
R. Bonke, Joel A. Elftmann and Robert E. Lorenzini are Class II Directors
with terms expiring in 1998.
The Board has nominated and recommended that Messrs. Glarner and Wofford be
elected as Class III Directors, each to hold office until the 1999 Annual
Meeting of Shareholders and until his respective successor is duly elected
and qualified.
Each of the nominees is currently a member of the Board of the Company and
has indicated his willingness to serve as a director if elected. In case any
nominee is not a candidate for any reason, the proxies named in the enclosed
form of proxy may vote for a substitute nominee in their discretion, unless
an instruction to the contrary is indicated on the proxy. The Company has no
reason to believe that any nominee will be unable to serve as a director if
elected.
The accompanying proxy will be voted in favor of the election of the nominees
of directors, unless the shareholder giving the proxy indicates to the
contrary on the proxy. The affirmative vote of the holders of a majority of
the voting power of the outstanding shares of Common Stock entitled to vote
on the election of directors and present, in person or by proxy, at the
Meeting is required for election to the Board of each of the two nominees
named below. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE
DIRECTOR-NOMINEES.
Certain information concerning the nominees and other directors follows:
Nominees for Election at the 1996 Meeting
<TABLE>
<CAPTION>
<S> <C>
TERRENCE W. GLARNER Mr. Glarner has served as a Director of the Company since October 1988. Since February
1993, Mr. Glarner has been President of West Concord Ventures, Inc., a venture capital
company. From 1982 to February 1993, Mr. Glarner was President of North Star Ventures,
Inc. and North Star Ventures II, Inc., venture capital funds. Mr. Glarner is also a
director of Aetrium Incorporated, Cima Labs, Inc. and Datakey, Inc.
CHARLES R. WOFFORD Mr. Wofford has served as a Director of the Company since November 1992. Since April
1994, Mr. Wofford has been a business and management consultant. From April 1992 to
April 1994, he was Chairman of the Board, Chief Executive Officer, and President of the
FARR Company, a manufacturer of clean room filtration systems and equipment. Mr. Wofford
was President and Chief Executive Officer of the FARR Company from September 1991 to
March 1992, and from July 1991 to August 1991 he was President and Chief Operating
Officer. From 1958 to 1991, Mr. Wofford held a variety of positions with respect to TI's
semiconductor operations in the United States, Europe, Asia and Latin America, including
Senior Vice President, Semiconductor Group.
Class I Directors Whose Terms Continue Until the 1997 Meeting
JAMES A. BERNARDS Mr. Bernards has served as a Director of the Company since July 1981. Since June 1993,
Mr. Bernards has been President of Facilitation, Inc., which provides business and financial
consulting services. Mr. Bernards was President of the accounting firm of Stirtz, Bernards
& Company from May 1981 to June 1993. Since 1986, Mr. Bernards has been President of
Brightstone Capital, Ltd., a venture capital fund manager. He is also a director of
Health Fitness Physical Therapy Corporation.
WILLIAM M. MARCY Dr. Marcy has served as a Director of the Company since August 1984, and since August
1986 has served as a consultant to the Company in the area of software engineering.
Dr. Marcy has served as Associate Dean of Engineering for Research and Administration
at Texas Tech University since March 1995. From September 1987 to March 1995, Dr. Marcy
served as Professor of Computer Science and the Director of Computer Science Programs
at Texas Tech University. From June 1983 to August 1987, Dr. Marcy was Professor of
Industrial Engineering and the Director of the Center for Automation and Robotics at
Texas Tech University. Prior to June 1983, Dr. Marcy was Chief Operating Officer of
Information Planning Corporation, a software development and sales company.
Class II Directors Whose Terms Continue Until the 1998 Meeting
NEIL R. BONKE Mr. Bonke has served as a Director of the Company since June 1994. Mr. Bonke has been
Chairman of the Board and Chief Executive Officer of Electroglas Inc., a manufacturer
of automatic wafer probing equipment for semiconductor device manufacturers, since April
1993. He was a Group Vice President of General Signal and President of General Signal's
Semiconductor Equipment Operations from September 1991 to July 1993. From 1990 to 1991,
he was Chief Operating Officer of Cognex Corporation, a manufacturer of machine vision
systems for the semiconductor and electronics industries, and from 1987 to 1990 was
President of General Signal's Xynetics division, a group of semiconductor equipment
manufacturing companies which included Electroglas. Mr. Bonke currently serves on the
Board of SEMI/SEMATECH, the equipment arm of the semiconductor industry consortium and
is a director of SANMINA Corporation.
JOEL A. ELFTMANN Mr. Elftmann is a co-founder of the Company and has served as a Director of the Company
since 1973 and as Chairman of the Board since August 1983. From August 1983 to August
1989, and from May 1991 until the present, Mr. Elftmann also has served as Chief Executive
Officer of the Company. From 1977 to August 1983, and from May 1991 until the present,
Mr. Elftmann has served as President of the Company. Prior to 1977, Mr. Elftmann was
Vice President and General Manager of the Company. Mr. Elftmann is also Chairman of
the Supervisory Board of Metron Technology B.V. and is a director of m * FSI Ltd. He
also has been a director of Veeco Instruments, Inc. since May 1994.
ROBERT E. LORENZINI Mr. Lorenzini has served as a Director of the Company since November 1986. Since January
1993, Mr. Lorenzini has been Chairman of SunPower Corporation, a manufacturer of
opto-electronic devices. Since February 1995, he also has served as a Chairman and Chief
Executive Officer of Virtual Golf, Inc., a manufacturer of sports simulation systems.
From October 1988 to January 1993 he served as President and Chief Executive Officer
of SunPower Corporation. From December 1986 to October 1989, Mr. Lorenzini was active
in a number of venture capital investments focused on high technology companies. Mr.
Lorenzini is a founder of Siltec Corporation ("Siltec"), a multi-division manufacturer
of silicon wafers and processing equipment for the semiconductor industry. Mr. Lorenzini
was Chairman of the Board and President of Siltec from 1969 to December 1986. Mr. Lorenzini
is also a director of KLA Instruments Corporation.
</TABLE>
None of the above nominees or directors are related to one another or to any
executive officer of the Company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board met five times and adopted resolutions by written action four times in
fiscal 1995. The Board has an Audit, a Compensation and an Omnibus Stock Plan
Committee but does not have a standing nominating committee or a committee
performing similar functions.
The Audit Committee, consisting of Messrs. Bernards, Elftmann and Glarner,
met two times in fiscal 1995. Its functions include: recommending to the
Board the independent auditors for the Company; establishing and reviewing
the activities of the independent auditors; reviewing recommendations of the
independent auditors and the responses of management to such recommendations;
and reviewing and discussing with the independent auditors and Company's
management the Company's financial reporting, loss exposures and asset
controls.
The Company has a Compensation Committee consisting of Messrs. Bernards,
Glarner and Lorenzini. The Compensation Committee met two times and adopted
resolutions by written action one time in fiscal 1995. Its functions include:
reviewing and reporting to the Board on the programs for developing senior
management personnel; approving and reporting to the Board concerning
administration of executive compensation plans and the compensation
(including bonuses) of certain executives; and review and approval of the
Company's incentive plans.
The Company also has an Omnibus Stock Plan Committee consisting of Messrs.
Bernards, Glarner and Lorenzini. The Omnibus Stock Plan Committee grants or
makes recommendations to the Board concerning employee stock options, and
administers the FSI International, Inc. 1989 Stock Option Plan and the FSI
1994 Omnibus Stock Plan. The Omnibus Stock Plan Committee met three times and
adopted resolutions by written action four times in fiscal 1995.
During fiscal 1995, each of the directors attended at least 75% of the
aggregate number of meetings of the Board and of the committees on which he
serves.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company (an "Outside Director") receives a
quarterly fee of $1,500 for service on the Board and a fee of $1,000 for
attending meetings of the Board. In addition, each Outside Director receives
a fee of $500 for attendance at a meeting of a Committee on which the
Director serves if held other than the day of, the day preceding or the day
following a meeting of the Board or an Annual Meeting of the Company's
Shareholders.
Upon joining the Board, each Outside Director receives a single grant of an
option to purchase 10,000 shares of Common Stock under the FSI Directors'
Nonstatutory Stock Option Plan ("Directors' Plan"). The purchase price of
each share subject to an option is the fair market value of a share of Common
Stock of the Company at the time the option is granted. The options vest and
become exercisable six months after the date of grant, except that vesting is
accelerated upon death or a change in control of the Company. Generally, the
options expire ten years from the date of grant, but expiration may occur
sooner in the event of an optionee's death. Each Outside Director serving as
an Outside Director of the Company immediately following an annual meeting of
the Company's shareholders is granted a nonstatutory stock option under the
Directors' Plan to purchase 4,000 shares of Common Stock at the fair market
value at the time of grant (each an "Annual Outside Director Option"). An
Annual Outside Director Option vests and becomes exercisable cumulatively on
an annual basis as follows: one-third of the total number of shares subject
to each such option shall become exercisable on each of the first and second
anniversaries of the date of grant and the remainder become exercisable on
the third anniversary of the date of grant, except that vesting is
accelerated upon a change in control or upon the Outside Director's death.
Generally, Annual Outside Director Options expire five years after the date
of grant. The Directors' Plan was approved by shareholders at the Company's
1991 Meeting of Shareholders and was amended at the Company's 1995 Meeting of
Shareholders.
William M. Marcy, a Director of the Company and Professor of Computer Science
and Director of Computer Science Programs at Texas Tech University, acts as a
consultant to the Company in the area of software engineering for which he
currently receives $3,000 per month from the Company, and for which he
received $36,000 in fiscal 1995. In addition, Texas Tech University performs
software and computer development for the Company under contracts
administered by Dr. Marcy pursuant to which the Company paid Texas Tech
University $148,874 during the 1995 fiscal year and is scheduled to pay Texas
Tech University approximately $79,600 during the 1996 fiscal year.
Charles R. Wofford, a Director of the Company and a business and management
consultant, entered into a consulting contract with the Company effective
July 1, 1995 in the area of organizational planning and structure. Pursuant
to the consulting contract, Mr. Wofford is to be compensated on an hourly
basis for his services. Mr. Wofford was not paid any compensation for such
services in fiscal 1995.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table lists, as of October 17, 1995, certain information
regarding the beneficial ownership of Common Stock of the Company by (i) each
Director, including the nominees for director, (ii) each executive officer
named in the Summary Compensation Table in this Proxy Statement ("Named
Executives"), (iii) all of such Directors, Named Executives and other
executive officers as a group, and (iv) each person or entity known by the
Company to own beneficially more than 5% of the outstanding Common Stock of
the Company. Except as otherwise noted below, the listed beneficial owner has
sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF SHARES
NAME OF BENEFICIAL OWNER AGE OWNED BENEFICIALLY OWNED
<S> <C> <C> <C>
Directors, Director-Nominees and Named
Executives
Joel A. Elftmann 55 987,373(1) 4.86%
James A. Bernards 49 19,333(2) *
Neil R. Bonke 53 10,000(3) *
Dale A. Courtney 58 98,551(4) *
Terrence W. Glarner 52 2,989(5) *
Robert E. Lorenzini 59 21,333(2) *
William M. Marcy 53 0 0
Peter A. Pope 45 119,855(6) *
Benno G. Sand 41 57,029(7) *
Benjamin J. Sloan 55 104,134(8) *
Charles R. Wofford 62 11,333(2) *
All Nominees, Directors, Named Executives and 1,523,251(9) 7.33%
other executive officers as a group (14 persons)
5% Shareholders
Pilgrim Baxter & Associates 1,667,100(10) 8.12%
Suite 300
4 Glenhardie Corporate Center
1255 Drummers Lane
Wayne, PA 19087
</TABLE>
* Less than 1%
(1) Includes 6,667 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(2) Includes 11,333 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(3) Includes 10,000 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(4) Includes 93,801 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(5) Includes 1,333 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(6) Includes 93,467 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(7) Includes 55,135 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(8) Includes 104,134 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995.
(9) Includes 479,607 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1995 granted to eight
executive officers and five directors of the Company.
(10) The number of shares noted above is based upon information provided to the
Company by Pilgrim Baxter & Associates ("Pilgrim") and reflects the
beneficial ownership of Pilgrim as of October 17, 1995.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company's corporate headquarters and certain manufacturing facilities,
aggregating approximately 161,500 square feet, are leased from three
Minnesota partnerships comprised of two or more of the following individuals:
Joel A. Elftmann, Chairman of the Board, President, and Chief Executive
Officer of the Company; Robert S. Blackwood, a former director and executive
officer of the Company; and Joseph H. Wyers, a former director and executive
officer of the Company. Annual rent for the 1995 fiscal year under the three
leases totaled $1,320,300.
The 140,000 square foot main facility is leased from a partnership in which
all three such persons are partners under a lease expiring in October, 2000,
subject to five three-year renewal options at the election of the Company
pursuant to lease amendments recently entered into by the Company and the
partnership. Based upon independent appraisals of the value of the property
and comparable market rentals, the Company, effective November 1, 1995,
entered into a new five-year lease at an annual rental rate of $700,000 per
year which rate commenced December 1, 1995. The Company also pays all real
estate taxes, insurance and maintenance expenses. If the Company exercises a
renewal option then the rent is adjusted to its fair rental value based upon
an independent real estate appraisal. Commencing October 31, 1999 and
annually thereafter during the term of the lease, the Company has an option
to purchase the property for the greater of $4.0 million or 90% of the fair
market value of the property. Pursuant to the policy described below, the
lease amendments were approved by a majority of the Board and a majority of
the disinterested Directors.
The Company has adopted a policy prohibiting the lease of any additional
facilities from entities in which its officers or directors have a material
interest. However, this policy would not prohibit the Company from leasing
any further additions to the above facilities or any extensions of the
existing operating leases on the related facilities, if approved by a
majority of the members of its Board who have no interest in the ownership of
such facility and the terms of such rentals are based upon independent
appraisals of the value of such property and market rentals for comparable
property.
The Company owns 38.2% of the outstanding common stock of Metron Technology
B.V. ("Metron" formerly known as Metron Semiconductors Europa B.V.), a
distributor of the Company's products. Joel A. Elftmann, Chairman of the
Board, President and Chief Executive Officer of the Company, is also Chairman
of the Supervisory Board of Metron. During fiscal 1995 the Company sold to
Metron all of its 50% ownership interest in each of three corporations that
distribute the Company's products in Asia: Metron Semiconductors (Hong Kong)
Ltd.; Metron Semiconductors Far East Ltd. and Metron Semiconductors Asia Ltd.
(collectively, the "Metron Asia Group"). The Company owns 49% of the
outstanding capital stock of m * FSI Ltd., which distributes and acts as a
licensee for certain of the Company's products in Japan. Messrs. Elftmann,
Peter A. Pope, Executive Vice President, Marketing and Account Management and
Dale A. Courtney, Senior Vice President, Surface Conditioning Division, of
the Company, are all directors of m * FSI Ltd.
During the 1995 fiscal year, the Company sold approximately $37,750,000 of
its products to Metron (and its subsidiaries including approximately
$15,069,000 of sales to the Metron Asia Group) and approximately $4,875,000
of its products to m * FSI Ltd. Sales to Metron (and its subsidiaries) and m
* FSI Ltd. are made by the Company on commercially reasonable terms. In
addition, in fiscal 1995 the Company paid the Metron Asia Group a commission
of $1,112,000 for direct sales by FSI to customers in Asia.
The Board has adopted a policy regarding transactions, other than sales in
the normal course of business, between the Company and any affiliate,
including loans from the Company, requiring that all such transactions be
approved by a majority of the Board and a majority of the disinterested
outside directors and that all such transactions be for a bona fide business
purpose and be entered into on terms at least as favorable to the Company as
could be obtained from unaffiliated independent third parties.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Forms 4 or 5 with the
Securities and Exchange Commission (the "Commission"). Such officers,
directors and ten percent shareholders are also required by the Commission's
rules to furnish the Company with copies of all Section 16(a) reports they
file.
Specific due dates for such reports have been established by the Commission
and the Company is required to disclose in this Proxy Statement any failure
to file reports by such dates during fiscal 1995. Based solely on its review
of the copies of such reports received by it, or written representations from
certain reporting persons that no Forms 5 were required for such persons, the
Company believes that during the fiscal year ended August 26, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
ten percent shareholders were complied with.
REPORT OF THE COMPENSATION AND OMNIBUS STOCK PLAN COMMITTEES
OF THE BOARD ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation and Omnibus Stock Plan Committees of the Board (the
"Compensation Committee") are composed entirely of outside Directors. The
members of the Compensation Committee are Messrs. Bernards, Glarner and
Lorenzini. The Compensation Committee is responsible for reviewing and/or
administering the Company's compensation and stock option plans and
determining the compensation to be paid to the Chief Executive Officer and
the other executive officers of the Company including the executive officers
listed in the Summary Compensation Table.
The objectives of the Company's executive compensation program are:
* to attract and retain superior talent and reward individual
performance;
* to support the achievement of the Company's financial and strategic
goals; and
* through stock-based compensation, align the executive officers'
interests with the success of the Company.
The Company's executive compensation program strives to be competitive with
the compensation provided by comparable semiconductor equipment manufacturing
companies. In that respect, the Company compares itself to a self-selected
peer group (which is broader than the peer group used in the Performance
Graph which appears elsewhere in this Proxy Statement). The self-selected
peer group is subject to occasional change as members of the peer group alter
their focus, merge or are acquired, or as new competitors emerge. In
comparing itself to members of this peer group, the Company relies upon
salary survey data developed and published by several external sources.
The Committee periodically conducts a review of its executive compensation
programs. The purpose of the review is to ensure that the Company's executive
compensation programs are meeting the objectives listed above. In its review,
the Committee considers data submitted by management and external data
including compensation surveys.
Executive compensation at the Company has three components: base salary,
annual incentive bonuses and stock options. The Compensation Committee uses
its discretion to set executive compensation at levels which, in its
judgment, are warranted by external, internal and individual circumstances.
The Company does not currently have a policy with respect to the limit under
Internal Revenue Code Section 162(m) on the deductibility of the qualifying
compensation paid to its executives as it is likely that all such
compensation will be deductible by the Company.
BASE SALARY
The base salary of each of the executive officers, including the Chief
Executive Officer, is targeted to be at or near the competitive median for
comparable semiconductor equipment manufacturers. In determining an
individual's base salary, the Compensation Committee considers the
compensation levels of similar positions within the peer group, the
responsibilities and performance of the individual executive officer and the
Company's recent financial performance. In general, the current salary levels
for each of the executives in the Summary Compensation Table is less than the
median salary for the comparable position within the peer group.
Generally, salary decisions are made by the Compensation Committee near the
beginning of each calendar year based upon evaluations and recommendations
made by the Chief Executive Officer. The Chief Executive Officer completes
and submits to the Compensation Committee a performance appraisal for each
executive officer. The appraisal assesses such individual's performance in
the following areas: accountabilities of the position, individual goals and
objectives, special projects and assignments, and management skills and the
achievement of an annual training/development plan. A salary recommendation
is made based upon the individual's overall performance assessment and where
the individual's salary falls within the range of salaries for similar
positions in the peer group.
In general, the base salaries of the Company's officers, including those
listed in the Summary Compensation Table, increased in fiscal 1995. This
increase is due to an adjustment in executive salaries reflecting merit
increases implemented in mid-fiscal 1995. The increase in salaries in fiscal
1994 was the result of adjustments following an analysis of the Company's
executive salaries in comparison to other peer companies and merit increases.
In addition, in the case of one individual the amount listed for fiscal 1994
includes the payment of salary supplements.
INCENTIVE COMPENSATION
Executive officers and certain key employees are each eligible to receive a
cash bonus at the end of the fiscal year based upon the Company's financial
performance. The purpose of this annual cash incentive program is to provide
a direct financial incentive to executives and other key employees to meet or
exceed the Company's annual corporate and divisional financial performance
objectives.
Each year a threshold, goal and maximum profit target are established for the
Company and each of its three divisions. A division's profit is measured by
divisional sales less divisional expenses and the Company's profit is
measured by total revenues less total expenses. Generally, for each of the
divisions and for the Company, threshold represents 85% of the goal profit
target and maximum represents 120% of the goal profit target.
All eligible participants are entitled to an award if the Company's
threshold, goal or maximum profit target is achieved. The potential award for
individuals with primarily corporate level responsibilities is based solely
upon whether the Company's threshold, goal or maximum profit targets have
been reached. However, individuals with primarily divisional responsibilities
are eligible for an award based upon the achievement of that division's
threshold, goal or maximum profit target even if the Company fails to reach
its threshold profit target. A significant portion of such individual's total
bonus potential is related to the division's profit performance.
Cash awards at threshold, goal and maximum profit targets are determined
based upon a specified percentage of base salary based primarily upon the
individual's job level within the organization. An individual's potential
bonus award at threshold, goal and maximum is determined at the beginning of
the fiscal year by the Compensation Committee based upon recommendations made
by the Chief Executive Officer, the Vice President, Quality and Human
Resources and the Chief Financial Officer.
For fiscal 1995, the maximum profit targets for the Surface Conditioning
Division and for the Company were met or exceeded, and the Chemical
Management Division did not meet its threshold profit target. The
Microlithography Division reached its threshold target and narrowly missed
its goal target for fiscal 1995 in part due to strategic decisions made by
that division during the course of the fiscal year. The Compensation
Committee therefore authorized an additional incentive bonus to eligible
participants in that division of the amount they would have received had the
division met its goal target. Therefore, following the fiscal year-end,
bonuses were paid to all participants eligible at fiscal year end and
approximately 200 individuals received an annual incentive bonus.
STOCK OPTIONS
Stock options are the principal vehicle used by the Company for the payment
of long-term compensation and to provide a stock-based incentive to improve
the Company's financial performance. The objectives of stock option grants
are to assist in the recruitment, motivation, and retention of key
professional and managerial personnel as well as to reward eligible employees
for outstanding performance.
Generally, stock options are granted to eligible employees from time to time
based primarily upon the individual's actual and/or potential contributions
and the Company's financial performance. To date, all stock options have been
granted at or above fair market value. Generally, such options vest over a
period of several years; however, for certain option grants, vesting is
accelerated if certain financial performance objectives are met. Accordingly,
an executive receiving an option is rewarded only if the market price of
FSI's Common Stock appreciates. Stock options are authorized by the
Compensation Committee. Since long-term options generally vest over time, the
Company periodically grants new options to provide continuing incentives for
future performance. The size of previous grants and the number of options
held are considered by the Compensation Committee, but are not entirely
determinative of future grants.
Stock options are designed to align the interest of the Company's executives
with those of shareholders by encouraging executives to enhance the value of
the Company and, hence, the price of the Common Stock and the shareholders'
return. In addition, through deferred vesting, this component of the
compensation system is designed to create an incentive for the individual
executive to remain with the Company.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Compensation Committee determines Mr. Elftmann's compensation package in
accordance with the methodology described above. In evaluating and setting
the CEO's target annual compensation the Committee reviews the Company's
business and financial performance. That review is based upon a number of
factors including sales, earnings, divisional growth, backlog, market share,
return on equity and total shareholder return. The Committee does not assign
relative weights or rankings to these factors, but instead makes a subjective
determination based upon a consideration of all of these factors as well as
the progress made with respect to the Company's long term goals and
strategies.
Effective January 1, 1995, the Compensation Committee approved a salary
increase of approximately 20% based upon its evaluation of Mr. Elftmann's
performance toward the achievement of the Company's financial strategies and
other goals, his length of service and comparative chief executive officer
pay information.
Each year, Mr. Elftmann's potential bonus at the target, goal and maximum
profit targets is established by the Compensation Committee and reflects its
determination of what is an appropriate incentive and also puts a substantial
portion of his compensation at risk by linking bonuses to achievement of the
Company's financial goals. For fiscal 1995, Mr. Elftmann received a bonus of
$128,514 and such award reflects the Compensation Committee's assessment that
he has done an excellent job in managing the Company. In addition, Mr.
Elftmann, together with all other eligible employees, received a
discretionary bonus ($4,051) equal to approximately one week's pay in the
first quarter of fiscal 1995.
As with other members of management, Mr. Elftmann is periodically awarded
stock options. Mr. Elftmann received a stock option award of 20,000 shares at
the price of $11.55 per share in October of 1994 (which amounts reflect the
effect of the stock split in June 1995). Consistent with past practice, the
options vest over three years.
JAMES A. BERNARDS TERRENCE W. GLARNER ROBERT E. LORENZINI
Members of the Compensation and Omnibus Stock Plan Committees.
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Chief
Executive Officer and the four other most highly compensated executive
officers as of the fiscal year ended August 26, 1995 for services in all
capacities as well as compensation earned by such person for the previous two
fiscal years (if the person was an executive officer during any part of such
fiscal year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS
RESTRICTED
OTHER ANNUAL STOCK
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(S)
PRINCIPAL POSITION YEAR ($) ($) (1) ($)
<S> <C> <C> <C> <C> <C>
Joel A. Elftmann, 1995 257,027 132,565 -- -0-
Chairman, President and 1994 222,065 88,077 -- -0-
Chief Executive Officer 1993 207,674 17,928 -- -0-
Dale A. Courtney, 1995 142,384 73,497 -- -0-
Senior Vice President, 1994 119,769 30,375 -- -0-
Surface Conditioning Division 1993 110,707 15,698 -- -0-
Peter A. Pope, 1995 143,077 73,879 -- -0-
Executive Vice President, 1994 126,923 32,250 -- -0-
Marketing and Account Management 1993 123,027 6,372 -- -0-
Benno G. Sand, 1995 152,352 78,522 -- -0-
Executive Vice President, 1994 168,960 30,625 -- -0-
Chief Financial Officer and Secretary 1993 113,291 5,868 -- -0-
Dr. Benjamin J. Sloan, 1995 167,681 71,666 -- -0-
Executive Vice President, 1994 159,577 39,861 -- -0-
Microlithography Division 1993 154,941 21,970 -- -0-
</TABLE>
TABLE CONTINUED
LONG TERM COMPENSATION
AWARDS PAYOUTS
SECURITIES ALL OTHER
NAME AND UNDERLYING LTIP PAYOUTS COMPENSATION
PRINCIPAL POSITION OPTIONS/SARS ($) ($)(2)
Joel A. Elftmann, 20,000 -0- 47,384
Chairman, President and -0- -0- 52,149
Chief Executive Officer -0- -0- 47,765
Dale A. Courtney, 30,000 -0- 22,746
Senior Vice President, 20,000 -0- 21,304
Surface Conditioning Division -0- -0- 11,749
Peter A. Pope, 30,000 -0- 22,492
Executive Vice President, 20,000 -0- 21,562
Marketing and Account Management -0- -0- 19,484
Benno G. Sand, 30,000 -0- 22,332
Executive Vice President, 20,000 -0- 23,182
Chief Financial Officer and Secretary -0- -0- 18,996
Dr. Benjamin J. Sloan, 30,000 -0- 22,746
Executive Vice President, 20,000 -0- 24,075
Microlithography Division -0- -0- 33,117
(1) Disclosure is not required by applicable Securities and Exchange Commission
rules, as the aggregate amount of perquisites and other personal benefits
did not exceed the lesser of $50,000 or 10% of the total salary and bonus
for any of the executive officers named above.
(2) Compensation reported represents (a) the estimated dollar value of Company
contributions to the Company's defined contribution pension plan based upon
such individual's earnings for the year being reported; (b) the dollar
value of premiums paid by the Company on split-dollar life insurance and,
in the case of Mr. Courtney, the amount of term life insurance premiums
paid by the Company in fiscal 1993, and (c) in the case of fiscal 1994 and
1995 compensation, the Company's profit sharing contribution to the 401(k)
Plan made in fiscal 1994 for the 1993 Plan (calendar) year and in fiscal
1995 for the 1994 Plan (calendar) year. The dollar value of each benefit
for the fiscal year ended August 26, 1995 is: J. Elftmann, (a) $6,000, (b)
$39,638, (c) $1,746; D. Courtney, (a) $6,000, (b) $15,000, (c) $1,746; P.
Pope, (a) $6,000, (b) $14,746, (c) $1,746; B. Sand, (a) $6,000, (b)
$14,586, (c) $1,746; and B. Sloan, (a) $6,000, (b) $15,000, (c) $1,746.
STOCK OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made to the
Named Executives during the fiscal year ended August 26, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE PRICE EXPIRATION FOR OPTION TERM($)(4)
NAME GRANTED(1) IN FISCAL YEAR ($) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Joel A. Elftmann 20,000(2) 5.13% 11.55 10/17/99 63,821 141,028
Dale A. Courtney 20,000(2) 5.13 10.50 10/17/04 132,068 334,686
10,000(3) 2.57 15.969 2/15/05 100,428 254,505
Peter A. Pope 20,000(2) 5.13 10.50 10/17/04 132,068 334,686
10,000(3) 2.57 15.969 2/15/05 100,428 254,505
Benno G. Sand 20,000(2) 5.13 10.50 10/17/04 132,068 334,686
10,000(3) 2.57 15.969 2/15/05 100,428 254,505
Dr. Benjamin J. Sloan 20,000(2) 5.13 10.50 10/17/04 132,068 334,686
10,000(3) 2.57 15.969 2/15/05 100,428 254,505
</TABLE>
(1) All of these options were granted pursuant to FSI's 1994 Omnibus Stock
Plan.
(2) Approximately one-third of the options granted will vest on each of the
first three anniversaries of the date of grant. All options were granted at
fair market value on the date of grant and have a term of ten years except
that Mr. Elftmann's options were granted at 110% of fair market value and
have a term of five years. Generally all of the options will become fully
exercisable upon approval by the Company's shareholders of a merger, plan
of exchange, sale of substantially all of the Company's assets or plan of
liquidation.
(3) A portion of the options vest each year over a six year period and the
amount which vests each year increases during that period. In addition, the
options vest entirely if certain financial targets are achieved in fiscal
1996, 1997 or 1998. All options were granted at fair market value and have
a term of ten years. Generally all of the options will become fully
exercisable upon approval by the Company's shareholders of a merger, plan
of exchange, sale of substantially all of the Company's assets or plan of
liquidation.
(4) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted
by the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Securities and
Exchange Commission. They assume the value of Company stock appreciates 5%
or 10% each year, compounded annually, for the term of each option. They
are not intended to forecast possible future appreciation, if any, of such
stock price or to establish a present value of options. Also, if
appreciation does occur at the 5% or 10% per year rate, the amounts shown
would not be realized by the recipients until the end of the option term.
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
The following table shows, as to the Named Executives, information concerning
stock options exercised and the value of options held by such persons at the
end of fiscal 1995 including those listed in the table above.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
FISCAL OPTIONS/SARS
SHARES ACQUIRED VALUE REALIZED YEAR-END(2) AT FISCAL YEAR-END ($)(3)
NAME ON EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Joel A. Elftmann 44,000 922,900 0 46,000 0 1,269,600
Dale A. Courtney 0 0 86,332 43,334 2,742,502 1,003,245
Peter A. Pope 8,086 82,032 100,666 43,334 3,216,941 1,003,245
Benno G. Sand 50,000 1,122,313 47,666 43,334 1,470,191 1,003,245
Benjamin J. Sloan 0 0 96,666 43,334 3,023,316 1,003,245
</TABLE>
(1) Represents market value of underlying securities on date of exercise less
the exercise price.
(2) Includes options exercisable within 60 days of fiscal year end.
(3) Represents market value of underlying securities at fiscal year end
($33.875 per share) less the exercise price.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into Management Agreements (the "Agreements") with
each of the Named Executives. The Agreements are operative only upon the
occurrence of certain changes in control of the Company. Absent a change in
control, the Agreements do not require the Company to retain the executive
officers or to pay them any specified level of compensation or benefits.
Each Agreement provides that if, for two years after a change in control, the
executive officer's employment is terminated by the Company other than (i)
for cause, (ii) on account of the death, disability or retirement of the
executive, or (iii) except for the Agreements entered into with Joel A.
Elftmann, Benjamin J. Sloan and Benno G. Sand, voluntarily by the executive
(other than voluntary terminations following events that constitute a
"Constructive Involuntary Termination" (as defined in the Agreements, and
including compensation reductions, demotions, relocations and excessive
travel)), the executive is entitled to receive a lump sum severance payment.
The amount of the lump sum severance payment is equal to one times (or, in
the case of Messrs. Elftmann, Pope, Sand and Sloan, one and one-half times)
the individual's highest rate of compensation during the 12 months
immediately preceding the change in control, and payment of a bonus at the
"Plan" level for that Plan Year or a specified percentage of the lump sum
payment if no plan is then in effect. The Agreements also allow the Named
Executive to continue his participation in certain insurance and other
benefit plans of the Company for two years following a change in control. If
a change in control of the Company occurred and resulted in the termination
of a Named Executive, giving rise to payments under these management
agreements as of December 1, 1995, the approximate amounts payable to the
Named Executives would be as follows: Mr. Elftmann $494,100; Mr. Courtney
$199,500; Mr. Pope $274,500; Mr. Sand $292,800; and Dr. Sloan $311,100.
PERFORMANCE GRAPH
The graph below compares the five-year cumulative shareholder return on the
Company's Common Stock with the cumulative five-year return on the Nasdaq
Stock Market-U.S. Companies ("Nasdaq-U.S.") and the Company-Determined Peer
Group Index (the "Peer Index") over the period of August 31, 1990 to August
31, 1995. The graph and table assume the investment of $100 in each of the
common stock, the Nasdaq-U.S. and the Peer Index on August 31, 1990 and the
reinvestment of all dividends:
[GRAPH]
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
FSI International, Inc. $100 $120 $220 $425 $735 $2,820
Nasdaq-U.S. 100 142 154 203 211 284
Peer Index 100 141 138 431 595 1,188
</TABLE>
The Company feels that there is no published industry or line of business
index available for comparison purposes. The Peer Index includes the
following six companies which each manufacture equipment used in the
fabrication of semiconductors: Applied Materials, Inc.; KLA Instruments
Corporation; LTX Corporation; Lam Research Corporation; Novellus Systems,
Incorporated; and Silicon Valley Group, Inc. The returns for each of the
members of the Peer Index have been weighted according to such member's stock
market capitalization.
PROPOSAL TO AMEND THE FSI EMPLOYEES
STOCK PURCHASE PLAN
(ITEM 2 ON THE PROXY CARD)
AMENDMENTS TO FSI INTERNATIONAL, INC. EMPLOYEES STOCK PURCHASE PLAN
At the Meeting, the shareholders are being asked to approve two amendments to
the Company's Employees Stock Purchase Plan, as amended (the "Employees
Plan"). The first amendment amends Section 3.1 of the Employees Plan to
increase the number of shares of Common Stock available for distribution
under the Employees Plan from 1,000,000 to 1,200,000 shares. The second
amendment modifies the definition of "Affiliate" provided in Section 2.1(a)
of the Employees Plan to allow the Board discretion in determining which
affiliates of the Company (and, therefore, their employees) will be eligible
to participate in the Employees Plan.
The Employees Plan was approved by the Board effective January 1, 1990 and by
the shareholders of the Company on January 10, 1990. At the 1991 Meeting of
Shareholders, the number of shares of Common Stock available for distribution
under the Employees Plan was increased from 200,000 to 400,000 shares. At the
1992 Meeting of Shareholders the number of shares available for distribution
was increased to 600,000, and at the 1993 Meeting of Shareholders the number
of shares available for distribution was increased to 1,000,000.
To date, approximately 677,722 shares have been purchased under the Plan, and
only 322,278 shares remain available for issuance, including those shares to
be purchased based upon participants' contributions for the 1995 calendar
year. To accommodate the increase in the number of employees participating in
the Employees Plan and to enable the Company to continue to offer employees
the opportunity to purchase shares of the Company's Common Stock under the
Employees Plan, the Board has approved an amendment to the Employees Plan to
increase the number of shares reserved for issuance by an additional 200,000
shares, subject to shareholder approval. The shareholders are being asked to
approve such amendment at the Meeting.
The Employees Plan currently provides that all employees of the Company and
its Affiliates automatically are eligible to participate in the Plan. As
currently defined in section 2.1(a) of the Employees Plan, "Affiliate" means
"any corporation, a majority of the voting stock of which is directly or
indirectly owned by FSI." However, there may be situations where, because of
costs associated with administering the Employees Plan, regulatory concerns
applicable to entities operating in foreign jurisdictions or for other
reasons, it is inadvisable to automatically extend the Employees Plan to the
employees of certain Affiliates of the Company. Therefore, the Board has
approved an amendment to the Employees Plan to provide the Board with the
discretion to decide on a case-by-case basis which Affiliates will be
included as eligible Affiliates under the Employees Plan. The proposed
amendment would change the definition of "Affiliate" to read as follows:
"'Affiliate means any corporation, a majority of the voting stock of which is
directly or indirectly owned by FSI and whose participation in the Plan has
been approved by FSI's Board." Such amendment is to be effective January 1,
1996, subject to shareholder approval. The effect of the proposed amendment
would be to prevent the employees of any corporation, a majority of the
voting stock of which is directly or indirectly owned by the Company, from
automatically becoming eligible to participate in the Employees Plan. The
approval of the Company's Board would be required before such employees would
be eligible to participate.
PURPOSE
The purpose of the Employees Plan is to permit eligible employees to purchase
Common Stock of the Company, through cash payments or payroll deductions, and
at a specified percentage of the Common Stock's fair market value. The
Employees Plan is an employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
ADMINISTRATION
The Employees Plan is administered by a committee appointed by the Board (the
"Employees Plan Committee"), consisting of not less than three members.
Current members are James A. Bernards, Terrence W. Glarner and Charles R.
Wofford. No person may participate in the Employees Plan while a member of
the Employees Plan Committee, and no person shall become a member of the
Employees Plan Committee if, within one year prior to becoming a member, that
person shall have been eligible (i) to be a participant in the Employees
Plan, or (ii) for selection as a person to whom stock might be allocated or
to whom stock options or stock appreciation rights might be granted pursuant
to any other plan of the Company or any of its affiliates entitling the
participants therein to acquire stock, stock options or stock appreciation
rights of FSI or any of its affiliates. Subject to the express provisions of
the Employees Plan, the Employees Plan Committee, by majority action, is
authorized to interpret and prescribe, amend and rescind rules relating to
the Employees Plan, and to make all other determinations necessary or
advisable for administration of the Employees Plan.
ELIGIBILITY AND NUMBER OF SHARES
Up to 1,000,000 shares of Common Stock are available for distribution under
the Employees Plan (of which approximately 678,000 have already been
distributed), subject to appropriate adjustments by the Employees Plan
Committee in the event of certain changes in the outstanding shares of Common
Stock by reason of a stock dividend, stock split, combination,
recapitalization or reclassification. If the amendment to the Employees Plan
is approved by the shareholders, up to 1,200,000 shares of Common Stock will
be available for distribution under the Employees Plan (subject to
adjustments as described above). Shares delivered pursuant to the Employees
Plan shall be newly issued Common Stock of the Company.
Any employee of the Company or its subsidiaries (including officers and any
directors who are also employees) is eligible to participate in the Employees
Plan during any calendar year so long as such employee was eligible to
participate on the December 15th immediately preceding such calendar year.
No eligible employee may be granted the right to purchase Common Stock under,
or otherwise participate in, the Employees Plan if after the purchase such
employee would own (or have the right to purchase) stock of the Company
possessing five percent or more of the total combined voting power or value
of all classes of stock of the Company.
As of December 1, 1995, approximately 500 employees were participating in the
Employees Plan.
PARTICIPATION
An eligible employee who elects to participate in the Employees Plan may
contribute funds for the purchase of Common Stock under the Employees Plan by
electing either to make a cash payment of between 1 to 6 percent of that
employee's "Base Earnings" (as defined in the Employees Plan) for that
calendar year or to direct his or her employer to withhold from 1 to 6
percent of such Base Earnings, provided that the aggregate contributions made
by such employee do not exceed 6 percent of such Base Earnings.
A participant may elect to reduce (but not increase) the amount of cash
payment or rate of withholding or to make no further deductions all as set
forth in greater detail in the Employees Plan. Amounts withheld or otherwise
contributed are held by the participant's employer until the end of the
calendar year and are automatically applied to purchase Common Stock of the
Company unless refunded to the participant by written election or direction
of such participant pursuant to rules adopted by the Employees Plan
Committee. Any such refund includes interest, if any, payable to the
participant as determined by the Employees Plan Committee and as set forth in
the Employees Plan.
PURCHASE OF STOCK
Amounts withheld or otherwise contributed by (and not refunded to) a
participant in the Employees Plan are used to purchase Common Stock of the
Company as of the last business day of the calendar year at a price equal to
85 percent of the lesser of the fair market value (as defined in the
Employees Plan) of a share of Common Stock on either the first or last
business day of the calendar year. All amounts so withheld are used to
purchase the largest number of full shares of Common Stock purchasable with
such amount, unless the participant has properly notified the Employees Plan
Committee in advance that he or she elects to have less than the entire
amount contributed by such participant used to purchase shares in the
Employees Plan or to receive the entire amount in cash. Any amount not
capable of being used to purchase full shares of Common Stock will be carried
over to the next calendar year for the account of the participant.
As soon as practicable after the close of the calendar year, the Company is
required to issue and to deliver to participants certificates representing
the respective shares of Common Stock purchased under the Employees Plan, at
which time participants shall have privileges as shareholders with respect to
such shares.
No participant in the Employees Plan may purchase Common Stock under the
Employees Plan and all other employee stock purchase plans of the Company and
any subsidiaries at a rate in excess of $25,000 of the fair market value of
such stock (determined at the time the option to purchase stock is granted)
for the calendar year in which any such option to purchase stock granted to
such participant is outstanding at any time. If a participant is not entitled
to purchase Common Stock under any such plan and during a plan year, the
total number of shares purchased under the Employees Plan for the participant
with respect to that calendar year may not exceed (i) $25,000 divided by (ii)
the fair market value of a share of Common Stock on the earliest day in such
calendar year the individual is a participant.
DEATH, DISABILITY, RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT
No shares of Common Stock may be purchased by a participant with respect to a
calendar year if the participant's employment terminates prior to October 1
of such calendar year. Any amount withheld from or otherwise contributed by
such a participant during such calendar year is repaid to the participant
with interest due, if any. If a participant dies at any time during a
calendar year, any amount withheld from or otherwise contributed by such a
participant is repaid to the participant's personal representative with
interest due, if any.
RIGHTS NOT TRANSFERABLE
The rights of a participant in the Employees Plan are exercisable only by the
participant during his or her lifetime. No right or interest of any
participant in the Employees Plan is assumable, transferable or subject to
any lien, directly or indirectly, by operation of law or otherwise.
AMENDMENT OR MODIFICATION
The Board of the Company may at any time terminate, amend or modify the
Employees Plan, provided that approval by the shareholders of the Company is
required to (i) increase the total amount of Common Stock awarded under the
Employees Plan (except for adjustments in the outstanding shares of Common
Stock by reason of a stock dividend or split, combination, recapitalization,
or reclassification), (ii) change the class of employees eligible to
participate in the Employees Plan, (iii) withdraw the administration of the
Employees Plan from the Employees Plan Committee, (iv) permit any member of
the Employees Plan Committee to be eligible to participate in the Employees
Plan or (v) extend the duration of the Employees Plan.
FEDERAL TAX CONSIDERATIONS
No income will be recognized by participants due to their purchase of shares
under the Employees Plan until the disposal of those shares or the death of
the participant. Participants who hold their shares for more than one year or
die while holding their shares will have ordinary income in the year of
disposition or death equal to the lesser of (i) the excess of the fair market
value of the shares on the date of disposition or death over the purchase
price paid by the participant or (ii) the excess of the fair market value of
the shares on the first day of the year in which they were purchased by the
participant over the purchase price paid by the participant. If the holding
period has been satisfied when the participant sells the shares or the
participant dies while holding the shares, the Company will not be entitled
to any deduction in connection with the shares.
Participants who dispose of their shares within the one-year period after the
shares are transferred to them will be considered to have realized ordinary
income in the year of disposition in an amount equal to the difference
between the fair market value of the shares on the date they were purchased
by the participant and the price paid by the participant. If such
dispositions occur, the Company generally will be entitled to a deduction at
the same time and in the same amount as the participants who make those
dispositions are deemed to have realized ordinary income.
Participants will have a basis in their shares equal to the purchase price of
their shares plus any amount that must be treated as ordinary income at the
time of their disposition of the shares. Any gain realized on the disposition
of shares acquired under the Employees Plan in excess of the basis will be
capital gain.
VOTING REQUIREMENTS; RECOMMENDATION
The affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Common Stock of the Company entitled to vote on this
item and present, in person or by proxy, at the Meeting is required for
approval of the amendments to the Employees Plan. Proxies solicited by the
Board will be voted for approval of the amendments, unless shareholders
specify otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of the amendment to the Employees Plan is considered to
be present and entitled to vote on the amendment to the Employees Plan at the
Meeting, and is in effect a negative vote, but a shareholder (including a
broker) who does not give authority to a proxy to vote, or withholds
authority to vote, on the approval of the amendment to the Employees Plan
shall not be considered present and entitled to vote on the proposal. THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO THE
EMPLOYEES PLAN.
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
PROPOSAL TO AMEND THE FSI 1994 OMNIBUS STOCK PLAN
(ITEM 3 ON THE PROXY CARD)
AMENDMENT TO FSI 1994 OMNIBUS STOCK PLAN
The Company's 1994 Omnibus Stock Plan (the "Omnibus Stock Plan") was approved
by the Company's Board effective November 22, 1993 and by the shareholders of
the Company on January 27, 1994. To date, approximately 79,796 shares have
been issued, 820,318 shares are subject to outstanding options, and only
99,886 shares remain available for issuance. To accommodate the increase in
the number of employees participating in the Omnibus Stock Plan and to enable
the Company to continue to offer such persons the opportunity to realize
stock appreciation and facilitate stock ownership in the Company, the Board
has approved an amendment to the Omnibus Stock Plan to increase the number of
shares reserved for issuance by an additional 500,000 shares, subject to
shareholder approval. The shareholders are being asked to approve such
amendment at the Meeting. Subject to shareholder approval of the increase in
shares authorized, options to purchase approximately 160,925 shares have been
granted to 105 employees. If the amendment is approved, such options shall
vest over three years and be subject to a term of 10 years, with accelerated
vesting in the event of the Company's shareholders approval of a merger, plan
of exchange or plan of liquidation involving the Company or a sale of
substantially all of the Company's assets.
PURPOSE
The purpose of the Omnibus Stock Plan is to motivate key employees to produce
a superior return to the shareholders of the Company by offering such
eligible personnel an opportunity to realize stock appreciation, by
facilitating their stock ownership and by rewarding them for achieving a high
level of corporate financial performance.
ADMINISTRATION
The Omnibus Stock Plan is administered by the Omnibus Stock Plan Committee
(the "Committee"). Committee members are not eligible to receive awards under
the Omnibus Stock Plan. The Committee has the authority, subject to the terms
of the Omnibus Stock Plan, to adopt, revise and waive rules relating to the
Omnibus Stock Plan and to determine the timing and identity of recipients,
the amount of any awards, and other terms and conditions of awards. The
Committee may delegate its responsibilities under the Omnibus Stock Plan to
members of management of the Company or to others with respect to the
selection and grants of awards to employees of the Company who are not deemed
to be officers, directors or 10% shareholders of the Company under applicable
Federal securities laws.
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates are eligible to receive
awards under the Omnibus Stock Plan at the discretion of the Committee.
Non-statutory stock options under the Omnibus Stock Plan also may be awarded
by the Committee to individuals or entities that are not employees but who
provide services to the Company or its affiliates in capacities such as
advisers and consultants. However, directors who are not employees shall not
be eligible for awards under the Omnibus Stock Plan. The Company and its
affiliates presently have approximately 900 employees.
The total number of shares of Company Common Stock available for distribution
under the Omnibus Stock Plan is 1,000,000 (subject to adjustment for future
stock splits, stock dividends and similar changes in the capitalization of
the Company). No more than 100,000 shares pursuant to a stock option or a
stock appreciation right may be granted to any one individual under the
Omnibus Stock Plan in any calendar year. Subject to this limitation, there is
no limit on the number of shares in respect of which awards may be granted by
the Committee to any person.
The Omnibus Stock Plan provides that all awards are subject to agreements
containing the terms and conditions of the awards. Such agreements will be
entered into by the recipients of the awards and the Company on or after the
time the awards are granted and are subject to amendment, including
unilateral amendment by the Company (upon authorization of the Committee)
unless such amendments are determined by the Committee to be materially
adverse to the recipient and are not required as a matter of law. Any shares
of Company Common Stock subject to awards under the Omnibus Stock Plan which
are not used because the terms and conditions of the awards are not met may
be reallocated under the Omnibus Stock Plan as though they had not previously
been awarded, unless such shares were used to calculate the value of stock
appreciation rights which have been exercised.
TYPES OF AWARDS
The types of awards that may be granted under the Omnibus Stock Plan include
restricted and unrestricted stock, incentive and non-statutory stock options,
stock appreciation rights, performance units, and other stock-based awards.
Subject to the restrictions described in this Proxy Statement with respect to
incentive stock options, such awards will be exercisable by the recipients at
such times as are determined by the Committee. No award will be assignable or
transferable by a recipient except that the Committee, in its discretion, may
permit transfers of awards in the event of death.
In addition to the general characteristics of all of the awards described in
this Proxy Statement, the basic characteristics of each type of award that
may be granted under the Omnibus Stock Plan are as follows:
Restricted and Unrestricted Stock, and Other Stock-based Awards. The
Committee is authorized to grant, either alone or in conjunction with other
awards, stock and stock-based awards. The Committee shall determine the
employees to whom such awards are made, the timing and amount of such awards,
and all other terms and conditions.
Company Common Stock granted to recipients may be unrestricted or may contain
such restrictions, including provisions requiring forfeiture and imposing
restrictions upon stock transfer, as the Committee may determine. Unless
forfeited, the recipient of restricted Common Stock will have all other rights
of a shareholder, including without limitation, voting and dividend rights. The
Omnibus Stock Plan provides that no more than 150,0000 shares in the form of
restricted stock and 50,000 shares in the form of unrestricted stock can be
issued under the Omnibus Stock Plan.
Incentive and Non-statutory Stock Options. Both incentive stock options and
non-statutory stock options may be granted to recipients at such exercise
prices as the Committee may determine but not less than 100% of the fair
market value (as defined in the Omnibus Stock Plan) of the underlying stock
as of the date the option is granted. Stock options may be granted and
exercised at such times as the Committee may determine, except that unless
applicable Federal tax laws are modified, (i) no incentive stock options may
be granted more than 10 years after the effective date of the Omnibus Stock
Plan, (ii) an incentive stock option shall not be exercisable more than 10
years after the date of grant and (iii) the aggregate fair market value of
the shares of Company Common Stock with respect to which incentive stock
options held by an employee under the Omnibus Stock Plan and any other plan
of the Company or any affiliate may first become exercisable in any calendar
year may not exceed $100,000. Additional restrictions apply to an incentive
stock option granted to an individual who beneficially owns 10% or more of
the outstanding shares of the Company.
The purchase price for stock purchased upon the exercise of the options may be
payable in cash, in stock having a fair market value on the date the option is
exercised equal to the option price of the stock being purchased or in a
combination of cash and stock, as determined by the Committee. The Committee may
permit employees to simultaneously exercise options and sell the stock purchased
upon such exercise pursuant to brokerage or similar relationships and use the
sale proceeds to pay the purchase price. The Committee may provide, at or after
the grant of a stock option, that a Plan participant who surrenders shares of
stock in payment of an option shall be granted a new incentive or non-qualified
stock option covering a number of shares equal to the number of shares so
surrendered.
In addition, options may be granted under the Omnibus Stock Plan to employees of
entities acquired by the Company in substitution of options previously granted
to them by the acquired entity.
Stock Appreciation Rights and Performance Units. The value of a stock
appreciation right granted to a recipient is determined by the appreciation
in Company Common Stock, subject to any limitations upon the amount or
percentage of total appreciation that the Committee may determine at the time
the right is granted. The recipient receives all or a portion of the amount
by which the fair market value of a specified number of shares, as of the
date the stock appreciation right is exercised, exceeds a price specified by
the Committee at the time the right is granted. The price specified by the
Committee must be at least 100% of the fair market value of the specified
number of shares of Company Common Stock to which the right relates
determined as of the date the stock appreciation right is granted. No stock
appreciation right may be exercised less than six months from the date it is
granted unless the recipient dies or becomes disabled.
Performance units entitle the recipient to payment in amounts determined by the
Committee based upon the achievement of specified performance targets during a
specified term.
Payments with respect to stock appreciation rights and performance units may be
paid in cash, shares of Company Common Stock or a combination of cash and shares
as determined by the Committee.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS, FORFEITURE
The Committee may provide for the lapse of restrictions on restricted stock
or other awards, accelerated exercisability of options, stock appreciation
rights and other awards or acceleration of the term with respect to which the
achievement of performance targets for performance units is determined in the
event of a change in control of the Company, other fundamental changes in the
corporate structure of the Company, the death of the recipient or such other
events as the Committee may determine. The Committee may provide that certain
awards may be exercised in certain events after the termination of employment
or death of the recipient.
The Committee may condition a grant upon the recipient's agreement that in
the event of certain occurrences, which may include a recipient's competition
with, unauthorized disclosure of confidential information of, or violation of
the applicable business ethics policy or business policy of the Company or
any of its affiliates, the awards paid to the recipient within six months
prior to the termination of employment of the recipient (or their economic
value) may be subject to forfeiture at the Committee's option.
ADJUSTMENTS, MODIFICATIONS, TERMINATION
The Omnibus Stock Plan gives the Committee discretion to adjust the kind and
number of shares available for awards or subject to outstanding awards, the
option price of outstanding options, and performance targets for, and
payments under, outstanding awards of performance units in the event of
mergers, recapitalizations, stock dividends, stock splits or other relevant
changes. Adjustments in performance targets and payments on performance units
are also permitted upon the occurrence of such other events as may be
specified by the Committee, which may include changes in accounting practices
of the Company or changes in the recipient's title or employment
responsibilities. The Omnibus Stock Plan also gives the Board the right to
terminate, suspend or modify the Omnibus Stock Plan, except that amendments
to the Omnibus Stock Plan are subject to shareholder approval if needed to
comply with Rule 16b-3 of the Securities Exchange Act of 1934 (or its
successor provisions) or the incentive stock option provisions of Federal tax
laws. Under the Omnibus Stock Plan, the Committee may cancel outstanding
options and stock appreciation rights generally in exchange for cash payments
to the recipients in the event of certain dissolutions, liquidations,
mergers, statutory share exchanges or other similar events involving the
Company.
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the
Omnibus Stock Plan generally will result in the following tax events for
United States citizens under current United States Federal income tax laws:
Restricted and Unrestricted Stock. Unless the recipient files an election to
be taxed under Section 83(b) of the Code, (a) the recipient will not realize
income upon the grant of restricted stock, (b) the recipient will realize
ordinary income, and the Company will be entitled to a corresponding
deduction, when the restrictions have been removed or expire, and (c) the
amount of such ordinary income and deduction will be the fair market value of
the restricted stock on the date the restrictions are removed or expire. If
the recipient files an election to be taxed under Section 83(b) of the Code,
the tax consequences to the recipient and the Company will be determined as
of the date of the grant of the restricted stock rather than as of the date
of the removal or expiration of the restrictions.
With respect to awards of unrestricted stock, (a) the recipient will realize
ordinary income and the Company will be entitled to a corresponding deduction
upon the grant of the unrestricted stock, and (b) the amount of such ordinary
income and deduction will be the fair market value of such unrestricted stock on
the date of the grant.
When the recipient disposes of restricted or unrestricted stock, the difference
between the amount received upon such disposition and the fair market value of
such shares on the date the recipient realizes ordinary income will be treated
as a capital gain or loss.
Incentive Stock Options. No taxable income to a recipient will be realized,
and the Company will not be entitled to any related deduction, at the time
any incentive stock option is granted under the Omnibus Stock Plan. If
certain statutory employment and holding period conditions are satisfied
before the recipient disposes of shares acquired pursuant to the exercise of
such an option, then no taxable income will result upon the exercise of such
option and the Company will not be entitled to any deduction in connection
with such exercise. Upon disposition of the shares after expiration of the
statutory holding periods, any gain or loss realized by a recipient will be a
capital gain or loss. The Company will not be entitled to a deduction with
respect to a disposition of the shares by a recipient after the expiration of
the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an incentive stock option are disposed of by such recipient before
the expiration of the statutory holding periods (a "disqualifying disposition"),
such recipient will be considered to have realized as compensation, taxable as
ordinary income in the year of disposition, an amount, not exceeding the gain
realized on such disposition, equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise of the option.
The Company will be entitled to a deduction at the same time and in the same
amount as the recipient is deemed to have realized ordinary income. Any gain
realized on the disposition in excess of the amount treated as compensation or
any loss realized on the disposition will constitute capital gain or loss,
respectively. If the recipient pays the option price with shares that were
originally acquired pursuant to the exercise of an incentive stock option and
the statutory holding periods for such shares have not been met, the recipient
will be treated as having made a disqualifying disposition of such shares, and
the tax consequences of such disqualifying disposition will be as described
above.
The foregoing discussion applies only for regular tax purposes. For alternative
minimum tax purposes an incentive stock option will be treated as if it were a
non-statutory stock option, the tax consequences of which are discussed below.
Non-Statutory Stock Options. A recipient will realize no taxable income, and
the Company will not be entitled to any related deduction, at the time any
non-statutory stock option is granted under the Omnibus Stock Plan. At the
time shares are transferred to the recipient pursuant to the exercise of a
non-statutory stock option, the recipient will realize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the stock on the date of exercise over the option price. Upon
disposition of the shares, any additional gain or loss realized by the
recipient will be taxed as a capital gain or loss.
Stock Appreciation Rights and Performance Units. Generally (a) the recipient
will not realize income upon the grant of a stock appreciation right or
performance unit award, (b) the recipient will realize ordinary income, and
the Company will be entitled to a corresponding deduction, in the year cash,
shares of Common Stock or a combination of cash and shares are delivered to
the recipient upon exercise of a stock appreciation right or in payment of
the performance unit award and (c) the amount of such ordinary income and
deduction will be the amount of cash received plus the fair market value of
the shares of common stock received on the date they are received. The
Federal income tax consequences of a disposition of unrestricted shares
received by the recipient upon exercise of a stock appreciation right or in
payment of a performance unit award are the same as described above with
respect to a disposition of unrestricted shares.
WITHHOLDING
The Omnibus Stock Plan permits the Company to withhold from cash awards, and
to require a recipient receiving Common Stock under the Omnibus Stock Plan to
pay the Company in cash, an amount sufficient to cover any required
withholding taxes. In lieu of cash, the Committee may permit a recipient to
cover withholding obligations through a reduction in the number of shares
delivered to such recipient or a surrender to the Company of shares then
owned by the recipient. The use of stock to satisfy withholding obligations
is subject to certain restrictions if the recipient is an officer or director
of the Company or a holder of at least 10% of stock of the Company under
applicable securities laws.
VOTING REQUIREMENTS; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of common stock of the Company entitled to vote on this item and present in
person or by proxy at the Meeting is required for approval of this amendment
to the Omnibus Stock Plan. Proxies solicited by the Board will be voted for
approval of the amendment, unless shareholders specify otherwise in their
proxies.
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of the amendment to the Omnibus Stock Plan is considered
to be present and entitled to vote on the approval of the amendment to the
Omnibus Stock Plan at the Meeting, and is in effect a negative vote, but a
shareholder (including a broker) who does not give authority to a proxy to
vote, or withholds authority to vote, on the approval of the amendment to the
Omnibus Stock Plan shall not be considered present and entitled to vote on
the proposal. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE OMNIBUS STOCK PLAN.
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 4 ON THE PROXY CARD)
The firm of KPMG Peat Marwick LLP, independent public accountants, has
audited the financial statements of the Company since 1984. The Board has
again selected KPMG Peat Marwick LLP to serve as the Company's independent
auditors for the fiscal year ending August 31, 1996 subject to ratification
by the shareholders. While it is not required to do so, the Board is
submitting the selection of KPMG Peat Marwick LLP for ratification in order
to ascertain the view of the Company's shareholders. If this selection is not
ratified, the Board will reconsider its selection. PROXIES SOLICITED BY THE
BOARD WILL BE VOTED FOR THE APPOINTMENT OF KPMG PEAT MARWICK LLP, UNLESS
SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
A representative of KPMG Peat Marwick LLP will be present at the Meeting and
will be afforded an opportunity to make a statement if such representative so
desires and will be available to respond to appropriate questions during the
Meeting.
OTHER MATTERS
As of the date of the Proxy Statement, management knows of no matters that
will be presented for determination at the Meeting other than those referred
to in this Proxy Statement. If any other matters properly come before the
meeting, calling for a vote of shareholders, the proxy holders have
discretionary authority, unless it is expressly revoked, to vote all proxies
in accordance with their best judgment.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1997 Meeting of
Shareholders must be received by the Company at its principal executive
office no later than August 20, 1996. To be considered, any such proposals
also must comply with all applicable statutes and regulations.
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
ANNUAL REPORTS
THE ANNUAL REPORT OF THE COMPANY FOR FISCAL 1995 INCLUDING FINANCIAL
STATEMENTS IS BEING MAILED WITH THIS PROXY STATEMENT. IT IS NOT TO BE DEEMED
A PART OF THE PROXY SOLICITATION MATERIAL AND IS NOT INCORPORATED HEREIN BY
REFERENCE. SHAREHOLDERS WHO WISH TO OBTAIN A COPY OF THE COMPANY'S FORM 10-K
ANNUAL REPORT, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE
FISCAL YEAR ENDED AUGUST 26, 1995, MAY DO SO WITHOUT CHARGE BY WRITING TO
BENNO G. SAND, CHIEF FINANCIAL OFFICER AT THE COMPANY'S OFFICES, 322 LAKE
HAZELTINE DRIVE, CHASKA, MINNESOTA 55318.
By Order of the Board
/s/ Benno G. Sand
Benno G. Sand
Secretary
December 18, 1995
PROXY PROXY
FSI INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joel A. Elftmann, Peter A. Pope and Benno G.
Sand, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes such Proxies to represent and to vote, as
designated below, all the shares of common stock of FSI International, Inc. held
of record by the undersigned on December 6, 1995, at the Annual Meeting of
Shareholders to be held on January 24, 1996, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4. THE PROXIES ARE AUTHORIZED TO VOTE THIS PROXY
IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued, and to be completed and signed on the reverse side.)
FSI INTERNATIONAL, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. ELECTION OF TWO CLASS III DIRECTORS. Nominees to serve as Class III
Directors for a three year term and until their respective successor shall
be elected and qualified are:
TERRENCE W. GLARNER AND CHARLES R. WOFFORD
(To withhold authority to vote for any individual nominee write that
nominee's name on the line provided below.)
For _________________________________________________
Withhold ____________________________________________
For All Except ______________________________________
2. APPROVAL OF THE AMENDMENTS TO THE FSI INTERNATIONAL, INC. EMPLOYEES STOCK
PURCHASE PLAN, as described in the accompanying Proxy Statement.
For _________________________________________________
Withhold ____________________________________________
For All Except ______________________________________
3. APPROVAL OF THE AMENDMENT TO THE FSI INTERNATIONAL, INC. 1994 OMNIBUS STOCK
PLAN, as described in the accompanying Proxy Statement.
For _________________________________________________
Withhold ____________________________________________
For All Except ______________________________________
4. RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP as independent
auditors of the Company for the 1996 fiscal year.
For _________________________________________________
Withhold ____________________________________________
Abstain _____________________________________________
For Withhold Abstain For Withhold Abstain For Withhold Abstain Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
____________________________
(Signature)
____________________________
(Signature, if held jointly)
FSI INTERNATIONAL, INC.
EMPLOYEES STOCK PURCHASE PLAN
Section 1. Establishment and Purpose
1.1 Establishment. FSI International, Inc., a Minnesota
corporation, (hereinafter called "FSI" or the "Company"), hereby establishes a
stock purchase plan for employees as described herein, which shall be known as
the FSI INTERNATIONAL, INC. EMPLOYEES STOCK PURCHASE PLAN (hereinafter called
the "Plan").
1.2 Purpose. The purpose of this Plan is to permit employees
to purchase Stock from FSI at the price specified in Section 5. The Plan is an
employee stock purchase plan under Section 423 of the Internal Revenue Code.
Section 2. Definitions
2.1 Definitions. Whenever used hereinafter, the
following terms shall have the meanings set forth below:
(a) "Affiliate" means any corporation, a majority of the
voting stock of which is directly or indirectly owned by
FSI.
(b) "Base Earnings" means a Participant's regular rate of pay and
does not include overtime pay, bonuses, or amounts payable
under employee benefit plans.
(c) "Board" means the Board of Directors of FSI.
(d) "Committee" means a committee of at least three members
appointed by the Board empowered to take actions as
stated in this Plan. No person, while a member of the
Committee, shall be eligible to be a Participant in this
Plan, and no person shall become a member of the
Committee if, within one year prior to becoming a member,
that person shall have been eligible (i) to be a
Participant in this Plan, or (ii) for selection as a
person to whom stock might be allocated or to whom stock
options or stock appreciation rights might be granted
pursuant to any other plan of FSI or any of its
Affiliates entitling the participants therein to acquire
stock, stock options or stock appreciation rights of FSI
or any of its Affiliates. Each member of the Committee
will remain a member for the duration of the Plan, unless
such member resigns or is removed earlier by majority
vote of the Board.
(e) "Employee" means an employee (including officers and
directors who are also employees) of FSI or its
Affiliates.
(f) "Fair Market Value" of a share of Stock as of any date is
the mean between the bid and asked prices of a share of
Stock on said date as published in the Wall Street
Journal, or, if no such prices are published for said
date, on the last preceding day for which such prices are
published, or, if the Company's Stock is listed on a
national securities exchange or traded in the national
market system, the mean between the high and low sale
prices for such Stock on such exchange or market on said
date, or, if no sale has been made on such exchange or
market on said date, on the last preceding day on which
any such sale shall have been made.
(g) "Interest" means interest determined under Section 5.2.
(h) "Participant" means an Eligible Employee who has elected
to participate in the Plan pursuant to Section 4.1.
(i) "Plan Year" means the twelve-month period beginning each
January 1.
(j) "Stock" means the common stock, no par value, of FSI.
Section 3. Stock Subject to the Plan
3.1 Number. The total number of shares of Stock available for
distribution under this Plan shall not exceed 1,000,000. These shares may
consist, in whole or in part, of authorized but unissued Stock or treasury Stock
not reserved for any other purpose.
3.2 Adjustment in Capitalization. In the event of any change
in the outstanding shares of Stock by reason of a Stock dividend or split,
combination, recapitalization, or reclassification, the shares of Stock issuable
and the price payable therefor under this Plan shall be appropriately adjusted
by the Committee, whose determination shall be conclusive, provided, however,
that fractional shares shall be rounded to the nearest whole share. Except as
provided above, no adjustment shall be made in connection with the issuance by
FSI of any Stock or any warrants, rights, or options to acquire shares of Stock
or of securities convertible into Stock.
Section 4. Participation
4.1 Participation. An Eligible Employee may elect to
become a Participant on January 1, 1990. Any Eligible Employee who
does not become a Participant on January 1, 1990 may elect to become a
Participant on the first day of any subsequent Plan Year, provided such
Participant was an Eligible Employee on the December 15 immediately preceding
said day. Any election to participate shall be made in accordance with rules
adopted by the Committee. However, in no event shall an Eligible Employee be
granted the right to purchase Stock under the Plan if after the purchase such
Eligible Employee would own stock of FSI possessing 5% or more of the total
combined voting power or value of all classes of stock of FSI. Also, an Eligible
Employee may not become or remain a Participant at any time when such Eligible
Employee owns stock possessing 5% or more of the total combined voting power or
value of all classes of stock of FSI. For purposes of this subsection, the rules
of Section 425(d) of the Internal Revenue Code shall apply in determining the
stock ownership of an individual, and stock which an employee may purchase under
outstanding options shall be treated as stock owned by the employee.
Section 5. Purchase of Stock
5.1 Contributions for Purchase of Stock. At the time an
Eligible Employee elects to become a Participant in the Plan, such Eligible
Employee shall also elect the form and manner of contributing funds for the
purchase of Stock. A Participant may elect to contribute funds for the purchase
of Stock by (1) electing to make a cash payment to his or her employer equal to
1%, 2%, 3%, 4%, 5% or 6% of his or her aggregate Base Earnings in the Plan Year,
and/or (2) directing his or her employer to withhold 1%, 2%, 3%, 4%, 5% or 6% of
his or her Base Earnings for the purpose of purchasing Stock from FSI. In no
event shall the aggregate contributions for the purchase of Stock exceed 6% of a
Participant's Base Earnings.
(a) A Participant may modify the amount of the cash payment to
such Participant's employer only in accordance with the
following:
(1) A Participant may at any time elect to reduce the
amount of cash payment to be made to the employer to
an amount lower than that previously elected.
However, only one such reduction may be made in any
one Plan Year.
(2) A Participant may at any time elect not to make any
cash payment for the purchase of Stock. If a
Participant elects not to make any cash payment for
the purchase of Stock, such Participant may re-elect
to make a cash payment only as of the first day of
any subsequent Plan Year.
(3) Except as provided in subsection (a)(1) or (a)(2)
above, a Participant may elect a modification of the
amount of cash payment only as of the first day of
the Plan Year. The modified rate may be 1%, 2%, 3%,
4%, 5% or 6% of the Participant's aggregate Base
Earnings. Unless otherwise elected by the
Participant, the amount of cash payment elected will
remain in effect for subsequent years.
(b) A Participant may modify the rate of withholding from such
Participant's Base Earnings only in accordance with the
following:
(1) A Participant may at any time direct reduction of the
rate of withholding to a rate lower than that
previously in effect. However, only one such
direction to continue withholding at a rate lower
than that previously in effect may be made in any one
Plan Year.
(2) A Participant may at any time direct discontinuance
of withholding. If a Participant directs
discontinuance of withholding, such Participant may
direct resumption of withholding only as of the first
day of any subsequent Plan Year.
(3) Except as provided in subsection (b)(1) or (b)(2)
above, a Participant may direct modification of the
rate of withholding only as of the first day of any
Plan Year. The modified rate may be 1%, 2%, 3%, 4%,
5% or 6% of the Participant's Base Earnings. Unless
otherwise elected by the Participant, the rate of
withholding such Participant has elected will remain
in effect for subsequent years.
Any cash payment elected to be made by a Participant shall be
made by a deadline specified by the Committee which shall not be later than the
close of the Plan Year.
Any election or direction under this section shall be made in
writing pursuant to rules adopted by the Committee, and shall become effective
at a time specified by the Committee.
5.2 Disposition of Contributions. Amounts withheld or
otherwise contributed pursuant to Section 5.1 shall be held by the employer
until the end of the Plan Year in which withheld or contributed, subject to the
following:
(a) A Participant who elects pursuant to Section 5.1(a)(2) not to
make any cash payment and who directs pursuant to Section
5.1(b)(2) to discontinue withholding may at any time withdraw
all or any part of the amounts previously withheld or
otherwise contributed. Any such withdrawal shall be paid to
the Participant by his or her employer in cash, with Interest.
(b) In December of each Plan Year, each Participant shall be
permitted to elect to have all or any part of the amounts
withheld or contributed in cash paid to such Participant in
cash with Interest.
(c) Any withdrawal under (a) or (b) above shall be deemed to
be on a first-in-first-out basis. Interest shall be
applied to the average amount in the Participant's
account at the end of each full calendar month during the
completed portion of the Plan Year. The rate of Interest
with respect to any Plan Year shall be determined by the
Committee prior to the first day of said Plan Year. The
Committee shall give such publicity to said Interest rate
as it deems appropriate.
(d) Any portion of the amounts withheld or otherwise contributed
which is not paid to the Participant in cash shall be
automatically applied to purchase Stock under Section 5.3.
(e) Any election or direction under this section shall be made in
writing pursuant to rules adopted by the Committee.
5.3 Purchases of Stock. Amounts withheld from or contributed
in cash by a Participant during the Plan Year (except any amounts refunded to
such Participant in cash under Section 5.2) shall be used as of the last
business day of said Plan Year to purchase Stock from FSI for a price equal to
the lesser of (a) or (b).
(a) 85% of the Fair Market Value of a share of Stock on the
first business day of the Plan Year.
(b) 85% of the Fair Market Value of a share of Stock on the
last business day of the Plan Year.
However, only whole shares shall be purchased under the foregoing provisions,
and any amount remaining that is not sufficient to purchase a whole share shall
be carried over to the next Plan Year for the account of the Participant.
5.4 Issuance of Stock Certificates. As soon as practicable
after the close of the Plan Year, FSI shall, without Stock issue or transfer
taxes to the Participant, deliver to the Participant a certificate or
certificates for the requisite number of shares of Stock.
5.5 Privileges of a Stockholder. A Participant shall not have
stockholder privileges with respect to any Stock until the date of issuance of a
certificate to such Participant for such Stock.
5.6 Limitation On Stock Purchases. As required by Section 423
of the Internal Revenue Code, no Participant may purchase Stock under this Plan
and all other employee stock purchase plans of the Company and its Affiliates at
a rate in excess of $25,000 in Fair Market Value of such Stock (determined at
the time the option to purchase Stock is granted) for each calendar year in
which any such option to purchase Stock granted to such Participant is
outstanding at any time. If a Participant is not entitled to purchase Stock
under any other such plan during a Plan Year, the total number of shares
purchased under this Plan for the Participant with respect to that Plan Year may
not exceed (a) divided by (b):
(a) $25,000
(b) The Fair Market Value of a share of Stock on the earliest day
in such Plan Year that the individual is a Participant.
Section 6. Termination of Employment
6.1 Termination of Employment. No shares of Stock may be
purchased by a Participant pursuant to this Plan with respect to a Plan Year if
his or her termination of employment occurs during said Plan Year and prior to
October 1 thereof. Any amount withheld from such a Participant or otherwise
contributed by him or her during the Plan Year in which his termination of
employment occurs shall be paid to such Participant in cash with Interest
calculated under Section 5.2(c) promptly after such Participant's termination of
employment. Any Participant whose termination of employment occurs on or after
October 1 of a Plan Year may direct Stock purchases or withdrawals with respect
to that Plan Year pursuant to Sections 5.2 and 5.3. However, if a Participant's
death occurred at any time during the Plan Year, any amount withheld from or
otherwise contributed by the Participant shall be paid to the Participant's
personal representative in cash with Interest determined under Section 5.2(c),
and no portion thereof shall be applied to purchase Stock.
Section 7. Rights of Employees; Participants
7.1 Employment. Nothing in this Plan shall interfere with or
limit in any way the right of FSI or any of its Affiliates to terminate any
Employee's, Eligible Employee's, or Participant's employment at any time, nor
confer upon any such person any right to continue in the employ of FSI or any of
its Affiliates.
7.2 Nontransferability. No right or interest of any
Participant in this Plan shall be assignable or transferable, or subject to any
lien, directly or indirectly, by operation of law, or otherwise, including
execution, levy, garnishment, attachment, pledge, or bankruptcy. Any attempted
assignment, transfer, pledge or other disposition of any rights under the Plan
shall be null and void, and shall automatically terminate all rights of a
Participant under the Plan.
Section 8. Administration
8.1 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of FSI, and to make all
other determinations necessary or advisable for the administration of the Plan,
but only to the extent not contrary to the express provisions of the Plan. The
determination of the Committee, interpretation or other action made or taken
pursuant to the provisions of the Plan shall be final, and shall be binding and
conclusive for all purposes and upon all persons.
Section 9. Amendment, Modification, and
Termination of Plan
9.1 Amendment, Modification, and Termination of the Plan. The
Board, upon recommendation of the Committee, at any time may terminate, and at
any time and from time to time and in any respect, may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders of FSI, may:
(a) Increase the total amount of Stock which may be awarded under
the Plan, except as provided in Section 3.2 of the Plan.
(b) Change the class of Employees eligible to participate in
the Plan.
(c) Withdraw the administration of the Plan from the
Committee.
(d) Permit any person, while a member of the Committee, to be
eligible to participate in the Plan.
(e) Extend the duration of the Plan.
Section 10. Requirements of Law
10.1 Requirements of Law. The issuance of Stock and the
payment of cash pursuant to this Plan shall be subject to all applicable laws,
rules, and regulations, and shares of Stock shall not be issued nor cash
payments made except upon approval of proper government agencies or stock
exchanges as may be required.
10.2 Governing Law. The Plan, and all agreements
hereunder, shall be construed in accordance with and governed by
the laws of the State of Minnesota.
Section 11. Effective Date of the Plan
11.1 Effective Date. The Plan is effective as of
January 1, 1990.
11.2 Duration of the Plan. Unless the Board terminates the
Plan earlier, the Plan shall remain in effect until all Stock subject to it
shall be distributed pursuant to the Plan.
FSI INTERNATIONAL, INC.
1994 OMNIBUS STOCK PLAN
1. Purpose. The purpose of the FSI International, Inc. 1994 Omnibus
Stock Plan (the "Plan") is to motivate key personnel to produce a superior
return to the shareholders of FSI International, Inc. by offering such personnel
an opportunity to realize Stock appreciation, by facilitating Stock ownership
and by rewarding them for achieving a high level of corporate financial
performance. The Plan is also intended to facilitate recruiting and retaining
key personnel of outstanding ability by providing an attractive capital
accumulation opportunity.
2. Definitions.
2.1 The terms defined in this section are used (and
capitalized) elsewhere in the Plan.
(a) "Affiliate" means any corporation that is a
"parent corporation" or "subsidiary corporation" of the
Company, as those terms are defined in Code Section 424(e) and
(f), or any successor provisions.
(b) "Agreement" means a written contract entered into
between the Company or an Affiliate and a Participant
containing the terms and conditions of an Award in such form
and not inconsistent with this Plan as the Committee shall
approve from time to time, together with all amendments
thereto, which amendments may be unilaterally made by the
Company (with the approval of the Committee) unless such
amendments are deemed by the Committee to be materially
adverse to the Participant and not required as a matter of
law.
(c) "Award" or "Awards" means a grant made under this
Plan in the form of Restricted Stock, Options, Stock
Appreciation Rights, Performance Units, Stock or any other
stock based award.
(d) "Board" means the Board of Directors of the
Company.
(e) "Code" means the Internal Revenue Code of
1986, as amended and in effect from time to time or any
successor statute.
(f) "Committee" means the Disinterested Persons
designated by the Board to administer the Plan under
Plan Section 3.1 and constituted so as to permit the Plan to
comply with Exchange Act Rule 16b-3.
(g) "Company" means FSI International, Inc., a
Minnesota corporation, or the successor to all or
substantially all of its businesses by merger, consolidation,
purchase of assets or otherwise.
(h) "Disinterested Person" means a member of the
Board who is considered a disinterested person within the
meaning of Exchange Act Rule 16b-3.
(i) "Effective Date" means the date specified in
Plan Section 12.1.
(j) "Employee" means an employee (including an
officer or director who is also an employee) of the
Company or an Affiliate.
(k) "Event" means any of the following:
(1) The acquisition by any individual,
entity or group (within the meaning of Exchange Act
Sections 13(d)(3) or 14(d)(2)) of beneficial
ownership (within the meaning of Exchange Act Rule
13d-3) of 30% or more of either (i) the then
outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally
in the election of the Board (the "Outstanding
Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute an
Event:
(A) any acquisition of common stock
or voting securities of the Company directly
from the Company,
(B) any acquisition of common stock
or voting securities of the Company by the
Company or any of its wholly-owned
Subsidiaries,
(C) any acquisition of common stock
or voting securities of the Company by any
employee benefit plan (or related trust)
sponsored or maintained by the Company or
any of its Subsidiaries, or
(D) any acquisition by any
corporation with respect to which,
immediately following such acquisition, more
than 70% of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors is then
beneficially owned, directly or indirectly,
by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such acquisition in
substantially the same proportions as was
their ownership, immediately prior to such
acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be;
(2) Individuals who, as of the Effective
Date, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however, that any
individual becoming a director of the Board
subsequent to the Effective Date whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board shall be considered a member of the
Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office
occurs as a result of an actual or threatened
election contest which was (or, if threatened, would
have been) subject to Exchange Act Rule 14a-11 or its
successor provision;
(3) Approval by the shareholders of the
Company of a reorganization, merger, consolidation or
statutory exchange of Outstanding Company Voting
Securities, unless immediately following such
reorganization, merger, consolidation or exchange,
all or substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately
prior to such reorganization, merger, consolidation
or exchange beneficially own, directly or indirectly,
more than 70% of, respectively, the then outstanding
shares of common stock and the combined voting power
of the then outstanding voting securities entitled to
vote generally in the election of directors, as the
case may be, of the corporation resulting from such
reorganization, merger, consolidation or exchange in
substantially the same proportions as was their
ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(4) Approval by the shareholders of the
Company of (i) a complete liquidation or dissolution
of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the
Company, other than to a corporation with respect to
which, immediately following such sale or other
disposition, more than 70% of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other
disposition in substantially the same proportion as
was their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be.
Notwithstanding the above, an Event shall not be deemed to
occur with respect to a recipient of an Award if the
acquisition of the 30% or greater interest referred to in
paragraph (1) is by a group, acting in concert, that includes
that recipient or if at least 30% of the then outstanding
common stock or combined voting power of the then outstanding
voting securities (or voting equity interests) of the
surviving corporation or of any corporation (or other entity)
acquiring all or substantially all of the assets of the
Company shall be beneficially owned, directly or indirectly,
immediately after a reorganization, merger, consolidation,
statutory share exchange or disposition of assets referred to
in paragraphs (3) or (4) by a group, acting in concert, that
includes that recipient.
(l) "Exchange Act" means the Securities Exchange
Act of 1934, as amended and in effect from time to
time, or any successor statute.
(m) "Exchange Act Rule 16b-3" means Rule 16b-3
promulgated by the Securities and Exchange Commission under
the Exchange Act as now in force and in effect from time to
time or any successor regulation.
(n) "Fair Market Value" as of any date means,
unless otherwise expressly provided in the Plan:
(i) the closing price of a Share on the date
immediately preceding that date or, if no sale of
Shares shall have occurred on that date, on the next
preceding day on which a sale of Shares occurred
(A) on the composite tape for New
York Stock Exchange listed shares, or
(B) if the Shares are not quoted on
the composite tape for New York Stock
Exchange listed shares, on the principal
United States Securities Exchange registered
under the Exchange Act on which the Shares
are listed, or
(C) if the Shares are not listed on
any such exchange, on the National
Association of Securities Dealers, Inc.
Automated Quotations National Market System,
or
(ii) if clause (i) is inapplicable, the mean
between the closing "bid" and the closing "asked"
quotation of a Share on the date immediately
preceding that date, or, if no closing bid or asked
quotation is made on that date, on the next preceding
day on which a closing bid and asked quotation is
made, on the National Association of Securities
Dealers, Inc. Automated Quotations System or any
system then in use, or
(iii) if clauses (i) and (ii) are
inapplicable, what the Committee determines in good
faith to be 100% of the fair market value of a Share
on that date, using such criteria as it shall
determine, in its sole discretion, to be appropriate
for such valuation.
However, if the applicable securities exchange or system has
closed for the day at the time the event occurs that triggers
a determination of Fair Market Value, whether the grant of an
Award, the exercise of an Option or Stock Appreciation Right
or otherwise, all references in this paragraph to the "date
immediately preceding that date" shall be deemed to be
references to "that date". In the case of an Incentive Stock
Option, if such determination of Fair Market Value is not
consistent with the then current regulations of the Secretary
of the Treasury, Fair Market Value shall be determined in
accordance with said regulations. The determination of Fair
Market Value shall be subject to adjustment as provided in
Plan Section 16.
(o) "Fundamental Change" shall mean a dissolution or
liquidation of the Company, a sale of substantially all of the
assets of the Company, a merger or consolidation of the
Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or a
statutory share exchange involving capital stock of the
Company.
(p) "Incentive Stock Option" means any Option
designated as such and granted in accordance with the
requirements of Code Section 422 or any successor provision.
(q) "Insider" as of a particular date means any
person who, as of such date is an officer of the Company as
defined under Exchange Act Rule 16a-1(f) or it successor
provision.
(r) "Non-Statutory Stock Option" means an Option
other than an Incentive Stock Option.
(s) "Option" means a right to purchase Stock,
including both Non-Statutory Stock Options and
Incentive Stock Options.
(t) "Participant" means an Employee to whom an Award
is or has been made or a person or entity not an Employee to
whom an Award of Non-Statutory Stock Options has been made as
provided in Plan Section 5.
(u) "Performance Cycle" means the period of time
as specified in an Agreement over which Performance
Units are to be earned.
(v) "Performance Units" means an Award made
pursuant to Plan Section 11.
(w) "Plan" means this FSI International, Inc.
1994 Omnibus Stock Plan, as amended and in effect from
time to time.
(x) "Restricted Stock" means Stock granted under Plan
Section 7 so long as such Stock remains subject to one or more
restrictions.
(y) "Section 16" or "Section 16(b)" means Section 16
or Section 16(b), respectively, of the Exchange Act or any
successor statute and the rules and regulations promulgated
thereunder as in effect and as amended from time to time.
(z) "Share" means a share of Stock.
(aa) "Stock" means the common stock, no
designated par value, of the Company.
(ab) "Stock Appreciation Right" means a right, the
value of which is determined relative to appreciation in value
of Shares pursuant to an Award granted under Plan Section 10.
(ac) "Subsidiary" means a "subsidiary corporation",
as that term is defined in Code Section 424(f), or any
successor provision.
(ad) "Successor" with respect to a Participant means
the legal representative of an incompetent Participant, and if
the Participant is deceased the estate of the Participant or
the person or persons who may, by bequest or inheritance, or
pursuant to the terms of an Award, acquire the right to
exercise an Option or Stock Appreciation Right or to receive
cash and/or Shares issuable in satisfaction of an Award in the
event of the Participant's death.
(ae) "Term" means the period during which an Option
or Stock Appreciation Right may be exercised or the period
during which the restrictions placed on Restricted Stock or
any other Award are in effect.
2.2 Gender and Number. Except when otherwise indicated by the
context, reference to the masculine gender shall include, when used,
the feminine gender and any term used in the singular shall also
include the plural.
3. Administration and Indemnification.
3.1 Administration.
(a) The Committee shall administer the Plan. The
Committee shall have exclusive power to make Awards, to
determine when and to whom Awards will be granted, the
form of each Award, the amount of each Award, and any
other terms or conditions of each Award consistent with
the Plan. The Committee may determine whether, to what
extent and under what circumstances, Awards may be
settled, paid or exercised in cash, Shares or other
Awards, or other property or canceled, forfeited or
suspended. Each Award shall be subject to an Agreement
authorized by the Committee.
(b) Solely for purposes of determining and
administering Awards to Employees who are not Insiders, the
Committee may delegate all or any portion of their authority
under the Plan to one or more persons who are not
Disinterested Persons.
(c) To the extent within its discretion and subject
to Plan Sections 15-16, other than price, the Committee may
amend the terms and conditions of any outstanding Award.
(d) It is the intent that the Plan and all Awards
granted pursuant to it shall be administered by the Committee
so as to permit the Plan and Awards to comply with Exchange
Act Rule 16b-3. If any provision of the Plan or of any Award
would otherwise frustrate or conflict with the intent
expressed in this Section 3.1(d), that provision to the extent
possible shall be interpreted and deemed amended in the manner
determined by the Committee so as to avoid such conflict. To
the extent of any remaining irreconcilable conflict with such
intent, the provision shall be deemed void as applicable to
Insiders to the extent permitted by law and in the manner
deemed advisable by the Committee.
(e) The Committee's interpretation of the Plan and of
any Award or Agreement made under the Plan and all related
decisions or resolutions of the Board or Committee shall be
final and binding on all parties with an interest therein.
Consistent with its terms, the Committee shall have the power
to establish, amend or waive regulations to administer the
Plan. In carrying out any of its responsibilities, the
Committee shall have discretionary authority to construe the
terms of the Plan and any Award or Agreement made under the
Plan.
3.2 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, and any other person to whom
the Committee delegates authority under the Plan, shall be indemnified
and held harmless by the Company, to the extent permitted by law,
against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit or proceeding to which such
person may be a party or in which such person may be involved by reason
of any action taken or failure to act, made in good faith, under the
Plan and against and from any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person
in satisfaction of any judgment in any such action, suit or proceeding
against such person, provided such person shall give the Company an
opportunity, at the Company's expense, to handle and defend the same
before such person undertakes to handle and defend it on such person's
own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such person
or persons may be entitled under the Company's Articles of
Incorporation or By-laws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them
harmless.
4. Shares Available Under the Plan.
(a) The number of Shares available for distribution
under this Plan shall not exceed 1,000,000 (subject to
adjustment pursuant to Plan Section 16 hereof).
(b) Any Shares subject to the terms and conditions of
an Award under this Plan which are not used because the terms
and conditions of the Award are not met may again be used for
an Award under the Plan. However, Shares with respect to which
a Stock Appreciation Right has been exercised whether paid in
cash and/or in Shares may not again be awarded under this
Plan.
(c) Any unexercised or undistributed portion of any
terminated, expired, exchanged, or forfeited Award, or any
Award settled in cash in lieu of Shares (except as provided in
Plan Section 4(b)) shall be available for further Awards.
(d) For the purposes of computing the total number of
Shares granted under the Plan, the following rules shall apply
to Awards payable in Shares where appropriate:
(i) except as provided in (v) below, each
Option shall be deemed to be the equivalent of the
maximum number of Shares that may be issued upon
exercise of the particular Option;
(ii) except as provided in (v) below, an
Award (other than an Option) payable in some other
security shall be deemed to be equal to the number of
Shares to which it relates;
(iii) except as provided in (v) below, where
the number of Shares available under the Award is
variable on the date it is granted, the number of
Shares shall be deemed to be the maximum number of
Shares that could be received under that
particular Award;
(iv) where two or more types of Awards (all
of which are payable in Shares) are granted to a
Participant in tandem with each other, such that the
exercise of one type of Award with respect to a
number of Shares cancels at least an equal number of
Shares of the other, each such joint Award shall be
deemed to be the equivalent of the maximum number of
Shares available under the largest Award; and
(v) each Share awarded or deemed to be
awarded under the preceding paragraphs (i)-(iv) shall
be treated as a Share, even if the Award is for a
security other than Stock.
Additional rules for determining the number of Shares granted
under the Plan may be made by the Committee, as it deems
necessary or desirable.
(e) No fractional Shares may be issued under the
Plan; however, cash shall be paid in lieu of any fractional
Share in settlement of an Award.
(f) The maximum number of Shares that may be awarded
to a Participant in any calendar year in the form of Options
is 100,000 and the maximum number of Shares that may be
awarded to a Participant in any calendar year in the form of
Stock Appreciation Rights is 100,000.
5. Eligibility. Except as provided below in this Plan Section 5,
participation in the Plan shall be limited to Employees granted an Award by the
Committee. An Award of Non- Statutory Stock Options may be granted to
individuals or entities who are not Employees but who provide services to the
Company or an Affiliate including services provided in the capacity of a
consultant or an advisor, except that a director of the Board who is not also an
Employee shall not be eligible to receive such an Award. The granting of Awards
is solely at the discretion of the Committee.
6. General Terms of Awards.
6.1 Amount of Award. Each Agreement shall set forth the number
of Shares of Restricted Stock, Stock or Performance Units subject to
such Agreement, or the number of Shares to which the Option subject to
such Agreement applies or with respect to which payment upon the
exercise of the Stock Appreciation Right subject to such Agreement is
to be determined, as the case may be, together with such
other terms and conditions applicable to the Award as determined by the
Committee acting in its sole discretion.
6.2 Term. Each Agreement, other than those relating solely to
Awards of Shares without restrictions, shall set forth the Term of the
Option, Stock Appreciation Right, Restricted Stock or other Award or
the Performance Cycle for the Performance Units, as the case may be.
Acceleration of the expiration of the applicable Term is permitted,
upon such terms and conditions as shall be set forth in the Agreement,
which may, but need not, include without limitation, acceleration
resulting from the occurrence of an Event or in the event of the
Participant's death or retirement. Acceleration of the Performance
Cycle of Performance Units shall be subject to Plan Section 11.2.
6.3 Transferability. During the lifetime of a Participant,
only such Participant (or such Participant's legal representative) may
exercise an Option or Stock Appreciation Right, or receive payment with
respect to an Award of Performance Units or other Award. No Award of
Restricted Stock (prior to the expiration of the restrictions),
Options, Stock Appreciation Rights, Performance Units or other Award
(other than an Award of Shares without restrictions) may be sold,
assigned, transferred, exchanged or otherwise encumbered and any
attempt to do so shall be of no effect. Notwithstanding the immediately
preceding sentence, an Agreement may provide that the Award subject to
the Agreement shall be transferable to a Successor in the event of a
Participant's death.
6.4 Termination of Employment. No Option or Stock Appreciation
Right may be exercised by a Participant, all Restricted Stock held by a
Participant or any other Award then subject to restrictions shall be
forfeited, and no payment with respect to Performance Units for which
the applicable Performance Cycle has not been completed shall be made,
if the Participant's employment with the Company and its Affiliates
shall be voluntarily terminated or involuntarily terminated with or
without cause prior to the expiration of the Term of the Option, Stock
Appreciation Right, Restricted Stock or other Award, or the completion
of the Performance Cycle, as the case may be, except as, and to the
extent, provided in the Agreement applicable to that Award. An Award
may be exercised by, or paid to, the Successor of a Participant
following the death of such Participant to the extent, and during the
period of time, if any, provided in the applicable Agreement.
6.5 Rights as Shareholder. Each Agreement shall provide that a
Participant shall have no rights as a shareholder with respect to any
securities covered by an Award until the date the Participant becomes
the holder of record.
7. Restricted Stock Awards.
(a) An Award of Restricted Stock under the Plan shall
consist of Shares subject to restrictions on transfer and
conditions of forfeiture, which restrictions and conditions
shall be included in the applicable Agreement. The Committee
may provide for the lapse or waiver of any such restriction or
condition based on such factors or criteria as the Committee,
in its sole discretion, may determine.
(b) Except as otherwise provided in the applicable
Agreement, each Stock certificate issued with respect to an
Award of Restricted Stock shall either be deposited with the
Company or its designee, together with an assignment separate
from such certificate, in blank, signed by the Participant, or
bear such legends with respect to the restricted nature of the
Restricted Stock evidenced thereby as shall be provided for in
the applicable Agreement.
(c) The Agreement shall describe the terms and
conditions by which the restrictions and conditions of
forfeiture upon awarded Restricted Stock shall lapse. Upon the
lapse of the restrictions and conditions, Shares free of
restrictive legends, if any, relating to such restrictions
shall be issued to the Participant or a Successor.
(d) A Participant with a Restricted Stock Award shall
have all the other rights of a stockholder including, but not
limited to, the right to receive dividends and the right to
vote the Shares of Restricted Stock.
(e) No more than 150,000 of the total number of
Shares available for Awards under the Plan shall be issued
during the term of the Plan as Restricted Stock. This
limitation shall be calculated pursuant to the applicable
provisions of Plan Sections 4 and 16.
8. Other Awards. The Committee may from time to time grant Stock and
other Awards under the Plan including without limitations those Awards
pursuant to which Shares are or may in the future be acquired, Awards
denominated in Stock units, securities convertible into Stock and
phantom securities. The Committee, in its sole discretion, shall
determine the terms and conditions of such Awards provided that such
Awards shall not be inconsistent with the terms and purposes of this
Plan. The Committee may, at its sole discretion, direct the Company to
issue Shares subject to restrictive legends and/or stop transfer
instructions which are consistent with the terms and conditions of the
Award to which such Shares relate.
No more than 50,000 of the total number of Shares available for Awards
under the Plan shall be issued during the term of the Plan in the form
of Stock without restrictions.
9. Stock Options.
9.1 Terms of All Options.
(a) An Option shall be granted pursuant to an
Agreement as either an Incentive Stock Option or a
Non-Statutory Stock Option. The purchase price of each Share
subject to an Option shall be determined by the Committee and
set forth in the Agreement, but shall not be less than 100% of
the Fair Market Value of a Share as of the date the Option is
granted.
(b) The purchase price of the Shares with respect to
which an Option is exercised shall be payable in full at the
time of exercise, provided that to the extent permitted by
law, the Agreement may permit some or all Participants to
simultaneously exercise Options and sell the Shares thereby
acquired pursuant to a brokerage or similar relationship and
use the proceeds from such sale as payment of the purchase
price of such Shares. The purchase price may be payable in
cash, in Shares having a Fair Market Value as of the date the
Option is exercised equal to the purchase price of the Shares
being purchased pursuant to the Option, or a combination
thereof, as determined by the Committee and provided in the
Agreement but no fractional Shares will be issued or accepted.
(c) The Committee may provide, in an Agreement or
otherwise, that a Participant who exercises an Option and pays
the Option price in whole or in part with Shares then owned by
the Participant will be entitled to receive another Option
covering the same number of shares tendered and with a price
of no less than Fair Market Value on the date of grant of such
additional Option ("Reload Option"). Unless otherwise provided
in the Agreement, a Participant, in order to be entitled to a
Reload Option, must pay with Shares that have been owned by
the Participant for at least the preceding 180 days.
(d) Each Option shall be exercisable in whole or
in part on the terms provided in the Agreement. In no
event shall any Option be exercisable at any time after
the expiration of its Term. When an Option is no
longer exercisable, it shall be deemed to have lapsed
or terminated.
9.2 Incentive Stock Options. In addition to the other
terms and conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of
the date the Option is granted) of the Shares with respect to
which Incentive Stock Options held by an individual first
become exercisable in any calendar year (under this Plan and
all other incentive stock option plans of the Company and its
Affiliates) shall not exceed $100,000 (or such other limit as
may be required by the Code) if such limitation is necessary
to qualify the Option as an Incentive Stock Option and to the
extent an Option or Options granted to a Participant exceed
such limit such Option or Options shall be treated as a
Non-Statutory Stock Option;
(ii) an Incentive Stock Option shall not be
exercisable more than 10 years after the date of grant (or
such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive
Stock Option;
(iii) the Agreement covering an Incentive Stock
Option shall contain such other terms and provisions which the
Committee determines necessary to qualify such Option as an
Incentive Stock Option; and
(iv) notwithstanding any other provision of this Plan
to the contrary, no Participant may receive an Incentive Stock
Option under the Plan if, at the time the Award is granted,
the Participant owns (after application of the rules contained
in Code Section 424(d), or its successor provision), Shares
possessing more than ten (10) percent of the total combined
voting power of all classes of stock of the Corporation or its
subsidiaries, unless (i) the option price for such Incentive
Stock Option is at least 110 percent of the Fair Market Value
of the Shares subject to such Incentive Stock Option on the
date of grant and (ii) such Option is not exercisable after
the date five (5) years from the date such Incentive Stock
Option is granted.
10. Stock Appreciation Rights. An Award of a Stock
Appreciation Right shall entitle the Participant, subject to
terms and conditions determined by the Committee, to receive upon
exercise of the Stock Appreciation Right all or a portion of the
excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right
over (ii) a specified price which shall not be less than 100% of the Fair Market
Value of such Shares as of the date of grant of the Stock Appreciation Right. A
Stock Appreciation Right may be granted in connection with part or all of, in
addition to, or completely independent of an Option or any other Award under
this Plan. If issued in connection with a previously or contemporaneously
granted Option, the Committee may impose a condition that exercise of a Stock
Appreciation Right cancels the Option with which it is connected and exercise of
the connected Option cancels the Stock Appreciation Right. Each Stock
Appreciation Right may be exercisable in whole or in part on the terms provided
in the Agreement. Notwithstanding anything to the contrary stated in the Plan,
no Stock Appreciation Right shall be exercisable by a Participant or Successor
prior to six months from the date of grant except in the event of the death or
disability of the Participant. No Stock Appreciation Right shall be exercisable
at any time after the expiration of its Term. When a Stock Appreciation Right is
no longer exercisable, it shall be deemed to have lapsed or terminated. Upon
exercise of a Stock Appreciation Right, payment to the Participant or a
Successor shall be made at such time or times as shall be provided in the
Agreement in the form of cash, Shares or a combination of cash and Shares as
determined by the Committee and provided in the Agreement. The Agreement may
provide for a limitation upon the amount or percentage of the total appreciation
on which payment (whether in cash and/or Shares) may be made in the event of the
exercise of a Stock Appreciation Right.
11. Performance Units.
11.1 Initial Award.
(a) An Award of Performance Units under the Plan
shall entitle the Participant or a Successor to future
payments of cash, Shares or a combination of cash and Shares,
as determined by the Committee and provided in the Agreement,
based upon the achievement of pre-established performance
targets. Such performance targets may, but need not, include
without limitation targets relating to one or more of
corporate, group, unit, Affiliate or individual performance.
The Agreement may establish that a portion of the total
potential of a Participant's Award will be paid for
performance which exceeds the minimum target but falls below
the maximum target applicable to such Award. The Agreement
shall also provide for the timing of such payment.
(b) Following the conclusion or acceleration of each
Performance Cycle, the Committee shall determine the extent to
which (i) performance targets have been attained, (ii) any
other terms and conditions with respect to an Award relating
to such Performance Cycle have been satisfied and (iii)
payment is due with respect to an Award of Performance Units.
11.2 Acceleration and Adjustment. The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance
targets and payments with respect to some or all of the Performance
Units awarded to a Participant, upon such terms and conditions as shall
be set forth in the Agreement, upon the occurrence of certain events,
which may, but need not include without limitation an Event, a
Fundamental Change, a recapitalization, a change in the accounting
practices of the Company, a change in the Participant's title or
employment responsibilities, the Participant's death or retirement or,
with respect to payments in Shares with respect to Performance Units, a
reclassification, stock dividend, stock split or stock combination as
provided in Plan Section 16. The Agreement also may provide for a
limitation on the value of an Award of Performance Units that a
Participant may receive.
12. Effective Date and Duration of the Plan.
12.1 Effective Date. The Plan shall become effective as of
January 27, 1994, provided that the Plan is approved by the affirmative
vote of the holders of a majority of the outstanding Shares present or
represented and entitled to vote in person or by proxy at a meeting of
the shareholders of the Company to be held on January 27, 1994 and any
and all adjournments thereof.
12.2 Duration of the Plan. The Plan shall remain in effect
until all Stock subject to it shall be distributed or until all Awards
have expired or lapsed, or the Plan is terminated pursuant to Plan
Section 15 or until January 28, 2004 (the "Termination Date") provided,
however, Awards made prior to the Termination Date may be exercised,
vested or otherwise effectuated beyond the Termination Date unless
limited in the Agreement or otherwise. No Award of an Incentive Stock
Option shall be made more than 10 years after the Effective Date (or
such other limit as may be required by the Code) if such limitation is
necessary to qualify the Option as an Incentive Stock Option. The date
and time of approval by the Committee of the granting of an Award shall
be considered the date and time at which such Award is made or granted.
13. Plan Does Not Affect Employment Status.
(a) Status as an eligible Employee shall not be
construed as a commitment that any Award will be made under
the Plan to such eligible Employee or to eligible Employees
generally.
(b) Nothing in the Plan or in any Agreement or
related documents shall confer upon any Employee or
Participant any right to continue in the employment of the
Company or any Affiliate or constitute any contract of
employment or affect any right which the Company or any
Affiliate may have to change such person's compensation, other
benefits, job responsibilities, or title, or to terminate the
employment of such person with or without cause.
14. Tax Withholding. The Company shall have the right to withhold from
any cash payment under the Plan to a Participant or other person an amount
sufficient to cover any required withholding taxes. The Company shall have the
right to require a Participant or other person receiving Shares under the Plan
to pay the Company a cash amount sufficient to cover any required withholding
taxes before actual receipt of such Shares. In lieu of all or any part of such a
cash payment from a person receiving Shares under the Plan, the Committee may
permit the individual to elect to cover all or any part of the required
withholdings, and to cover any additional withholdings up to the amount needed
to cover the individual's full FICA and federal, state and local income tax with
respect to income arising from payment of the Award, through a reduction of the
number of Shares delivered or a subsequent return to the Company of Shares held
by the Participant or other person, in each case valued in the same manner as
used in computing the withholding taxes under the applicable laws. Unless
otherwise permitted by the Committee, such elections are subject to the
following limitations if, and to the extent, such limitations are necessary to
comply with Exchange Act Rule 16b-3 or any successor provision:
(a) Time of Election. Except as set forth in Plan Section
14(a)(3) below, any such election by an Insider may be made only if the
conditions set forth in clauses (1) and (2) below are satisfied:
(1) (A) The election may be made during the period
beginning on the third business day following the date of
public release of the Company's quarterly or annual financial
statements and ending on the twelfth business day following
such date of public release, or
(B) The election may be made at least six
months prior to the date the Award is paid to the Participant.
(2) An election by a Participant may not be made
within six months of the date of grant of the Award to which
the payment relates; provided, however, that such restriction
does not apply in the event death or disability of the
Participant occurs prior to such election and during that
six-month period.
(3) Notwithstanding the foregoing, a Participant who
tenders previously owned Shares to the Company in payment of
the purchase price of Shares in connection with exercise of an
Option may also tender previously owned Shares to the Company
in satisfaction of any tax withholding obligations in
connection with such Option exercise without regard to the
time periods set forth in clauses (1) and (2) above.
The foregoing restrictions do not apply to any
Participant who is not an Insider at the time of the election.
(b) Committee Approval. Any such election by a Participant who
is an Insider at the time is irrevocable and is subject to approval by
the Committee. The Committee's approval may be granted in advance but
is subject to revocation by the Committee at any time.
15. Amendment, Modification and Termination of the Plan.
(a) The Board may at any time and from time to time terminate,
suspend or modify the Plan. Except as limited in (b) below, the
Committee may at any time alter or amend any or all Agreements under
the Plan to the extent permitted by law. However, no such action may,
without further approval of the shareholders of the Company, be
effective if such approval is required in order that transactions in
Company securities under the Plan be exempt from the operation of
Exchange Act Section 16(b) or to conform to the requirements of Code
Section 422 or their successor provisions and may not amend the Plan so
as to
(i) increase the number of Shares which may be
issued under the Plan, except as provided for in Plan
Section 16;
(ii) materially modify the requirements as to
eligibility for participation;
(iii) materially increase the benefits accruing
to Participants under the Plan; or
(iv) extend the duration of the Plan beyond the
date approved by the shareholders.
(b) No termination, suspension, or modification of the Plan
will materially and adversely affect any right acquired by any
Participant or Successor under an Award granted before the date of
termination, suspension, or modification, unless otherwise agreed to by
the Participant in the Agreement or otherwise or required as a matter
of law; but it will be conclusively presumed that any adjustment for
changes in capitalization provided for in Plan Sections 11.2 or 16 does
not adversely affect such rights.
16. Adjustment for Changes in Capitalization. Subject to any required
action by the Company's shareholders, appropriate adjustments, so as to prevent
enlargement of rights or inappropriate dilution, in the aggregate number and
type of Shares available for Awards under the Plan, in the limitations on the
number of Shares that may be issued to an individual Participant as an Option or
a Stock Appreciation Right in any calendar year or that may be issued in the
form of Restricted Stock or Shares without restrictions, in the number and type
of Shares and amount of cash subject to Awards then outstanding, in the Option
price as to any outstanding Options and, subject to Plan Section 11.2, in
outstanding Performance Units and payments with respect to outstanding
Performance Units may be made by the Committee in its sole discretion to give
effect to adjustments made in the number or type of Shares through a Fundamental
Change (subject to Plan Section 17), recapitalization, reclassification, stock
dividend, stock split, stock combination or other relevant change, provided that
fractional Shares shall be rounded to the nearest whole Share.
17. Fundamental Change. In the event of a proposed Fundamental Change,
the Committee may, but shall not be obligated to:
(a) if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the protection
of the outstanding Options and Stock Appreciation Rights by the
substitution of options, stock appreciation rights and appropriate
voting common stock of the corporation surviving any merger or
consolidation or, if appropriate, the parent corporation of the Company
or such surviving corporation to be issuable upon the exercise of
Options or used to calculate payments upon the exercise of Stock
Appreciation Rights, in lieu of options, stock appreciation rights and
capital stock of the Company; or
(b) at least 30 days prior to the occurrence of the
Fundamental Change, declare, and provide written notice to each holder
of an Option or Stock Appreciation Right of the declaration, that each
outstanding Option and Stock Appreciation Right, whether or not then
exercisable, shall be canceled at the time of, or immediately prior to
the occurrence of the Fundamental Change in exchange for payment to
each holder of an Option or Stock Appreciation Right, within ten days
after the Fundamental Change, of cash equal to (i) for each Share
covered by the canceled Option, the amount, if any, by which the Fair
Market Value (as hereinafter defined in this Section) per Share exceeds
the exercise price per Share covered by such Option or (ii) for each
Stock Appreciation Right, the price determined pursuant to Section 10,
except that Fair Market Value of the Shares as of the date of exercise
of the Stock Appreciation Right, as used in clause (i) of Plan Section
10, shall be deemed to mean Fair Market Value for each Share with
respect to which the Stock Appreciation Right is calculated determined
in the manner hereinafter referred to in this Section. At the time of
the declaration provided for in the immediately preceding sentence,
each Stock Appreciation Right that has been outstanding for at least
six months and each Option shall immediately become exercisable in full
and each person holding an Option or a Stock Appreciation Right shall
have the right, during the period preceding the time of cancellation of
the Option or Stock Appreciation Right, to exercise the Option as to
all or any part of the Shares covered thereby or the Stock Appreciation
Right in whole or in part, as the case may be. In the event of a
declaration pursuant to this Plan Section 17(b), each outstanding
Option and Stock Appreciation Right granted pursuant to the Plan that
shall not have been exercised prior to the Fundamental Change shall be
canceled at the time of, or immediately prior to, the Fundamental
Change, as provided in the declaration. Notwithstanding the foregoing,
no person holding an Option or a Stock Appreciation Right shall be
entitled to the payment provided for in this Section 17(b) if such
Option or Stock Appreciation Right shall have expired pursuant to the
Agreement. For purposes of this Section only, "Fair Market Value" per
Share shall mean the cash plus the fair market value, as determined in
good faith by the Committee, of the non-cash consideration to be
received per Share by the shareholders of the Company upon the
occurrence of the Fundamental Change, notwithstanding anything to the
contrary provided in the Plan.
18. Forfeitures. An Agreement may provide that in the event a
Participant has received or been entitled to payment of cash, delivery of
Shares, or a combination thereof pursuant to an Award within six months prior to
the Participant's termination of employment with the Company and its Affiliates,
the Committee, in its sole discretion, may require the Participant to return or
forfeit the cash and/or Shares received with respect to the Award (or its
economic value as of (i) the date of the exercise of Options or Stock
Appreciation Rights, (ii) the date of, and immediately following, the lapse of
restrictions on Restricted Stock or the receipt of Shares without restrictions,
or (iii) the date on which the right of the Participant to payment with respect
to Performance Units vests, as the case may be) in the event of certain
occurrences specified in the Agreement. The Committee's right to require
forfeiture must be exercised within 90 days after discovery of such an
occurrence but in no event later than 15 months after the Participant's
termination of employment with the Company and its Affiliates. The occurrences
may, but need not, include competition with the Company or any Affiliate,
unauthorized disclosure of material proprietary information of the Company or
any Affiliate, a violation of applicable business ethics policies or a material
violation of the applicable business policies of the Company or any Affiliate or
any other occurrence specified in the Agreement within the period or periods of
time specified in the Agreement.
19. Unfunded Plan. The Plan shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under the Plan. Neither the Company, its Affiliates, the Committee, nor
the Board of Directors shall be deemed to be a trustee of any amounts to be paid
under the Plan nor shall anything contained in the Plan or any action taken
pursuant to its provisions create or be construed to create a fiduciary
relationship between the Company and/or its Affiliates, and a Participant or
Successor. To the extent any person acquires a right to receive an Award under
the Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company.
20. Limits of Liability.
(a) Any liability of the Company to any Participant with
respect to an Award shall be based solely upon contractual obligations
created by the Plan and the Award Agreement.
(b) Except as may be required by law, neither the Company nor
any member of the Board of Directors or of the Committee, nor any other
person participating in any determination of any question under the
Plan, or in the interpretation, administration or application of the
Plan, shall have any liability to any party for any action taken, or
not taken, in good faith under the Plan.
21. Compliance with Applicable Legal Requirements. No certificate for
Shares distributable pursuant to this Plan shall be issued and delivered unless
the issuance of such certificate complies with all applicable legal requirements
including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended and in effect from
time to time or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Company's Shares may, at the time, be listed.
22. Deferrals and Settlements. The Committee may require or permit
Participants to elect to defer the issuance of Shares or the settlement of
Awards in cash under such rules and procedures as it may establish under the
Plan. It may also provide that deferred settlements include the payment or
crediting of interest on the deferral amounts.
23. Other Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of the termination, indemnity or severance pay law of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate unless expressly so provided by such
other plan, contract or arrangement, or unless the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive cash compensation.
24. Beneficiary Upon Participant's Death. To the extent that the
transfer of a Participant's Award at his or her death is permitted under an
Agreement, a Participant's Award shall be transferable at death to the estate or
to the person who acquires the right to succeed to the Award by bequest or
inheritance.
25. Change in Control Payments.
(a) Notwithstanding the provisions of Plan Section 17 above,
if any Award, either alone or together with other payments in the
nature of compensation to a Participant which are contingent on a
change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company or
otherwise, would result in any portion thereof being subject to an
excise tax imposed under Code Section 4999, or any successor provision,
or would not be deductible in whole or in part by the Company, an
affiliate of the Company (as defined in Code Section 1504, or any
successor provision), or other person making such payments as a result
of Code Section 280G, or any successor provision, such Award and/or
such other benefits and payments shall be reduced (but not below zero)
to the largest aggregate amount as will result in no portion thereof
being subject to such an excise tax or being not so deductible.
(b) For purposes of Plan Section 25(a), (i) no portion of
payments the receipt or enjoyment of which a Participant shall have
effectively waived in writing prior to the date of distribution of an
Award shall be taken into account; (ii) no portion of such Award,
benefits and other payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to the Participant does not constitute a "parachute
payment" within the meaning of Code Section 280G(b)(2), or any
successor provision; and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in such payment shall be
determined by the Company's independent auditors in accordance with the
principles of Code Sections 280G(d)(3) and (4) or any successor
provisions;
(c) Any Award not paid as a result of this Plan Section 25 or
reduced to zero as a result of the limitations imposed hereby, shall
remain outstanding in full force and effect in accordance with the
other terms and provisions of this Plan.
26. Requirements of Law.
(a) To the extent that Federal laws do not otherwise control,
the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of Minnesota without regard to its
conflicts of law principals and construed accordingly.
(b) In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not effect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
27. Termination of Other Plan. Effective upon the approval of the Plan
by the Company's shareholders, no further grants of options shall be made under
the Company's 1989 Stock Option Plan ("Prior Plan"). Thereafter, all grants and
awards made under the Prior Plan prior to such approval by the shareholders
shall continue in accordance with the terms of the Prior Plan.
The following amendments to the FSI International, Inc. ("FSI") Employees Stock
Purchase Plan and FSI 1994 Omnibus Stock Purchase Plan were approved at the
FSI Board of Directors' Meeting held on August 26 and 27, 1995.
AMENDMENTS TO FSI INTERNATIONAL, INC. EMPLOYEES STOCK PURCHASE PLAN ("EMPLOYEES
PLAN") TO INCREASE THE AGGREGATE NUMBER OF SHARES THAT MAY BE PURCHASED UNDER
THE EMPLOYEES PLAN AND TO CLARIFY UNDER WHAT CIRCUMSTANCES THE EMPLOYEES OF
"AFFILIATES" MAY PARTICIPATE IN THE EMPLOYEES PLAN.
RESOLVED, that subject to approval of the shareholders of the Company
at the 1996 Annual Meeting, the Employees Plan shall be amended as of the date
of the 1996 Annual Meeting to increase the number of Shares available for
purchase thereunder by 200,000, such number of Shares to be subject to
adjustment from time to time in accordance with the Employees Plan; and
RESOLVED FURTHER, that subject to the approval of the shareholders at
the 1996 Annual Meeting, the definition of "Affiliate" in the Employees Plan is
amended in its entirety to be defined as follows: " `Affiliate' means any
corporation, a majority of the voting stock of which is directly or indirectly
owned by FSI and whose participation in the Plan has been approved by FSI's
Board of Directors" such amendment to be effective January 1, 1996; and
RESOLVED FURTHER, that pursuant to the provisions of the preceding
resolution and the applicable terms of the Employees Plan, the participation in
the Employees Plan of the eligible employees of the Company's subsidiary,
Applied Chemical Solutions, effective January 1, 1996 is hereby approved; and
RESOLVED FURTHER, that the officers of the Company are authorized and
directed to seek approval of the foregoing amendments to the Employees Plan by
the shareholders of the Company at the 1996 Annual Meeting and the Board of
Directors hereby recommends to the shareholders that they approve such
amendments; and
RESOLVED FURTHER, that, subject to the approval of the shareholders of
the Company, there are reserved an additional 200,000 authorized but unissued
Shares for issuance pursuant to the Employees Plan, such number of reserved
Shares to be subject to adjustment from time to time in accordance with the
Employees Plan and such Shares upon issuance shall be considered to be duly and
validly issued, fully paid and non-assessable; and
RESOLVED FURTHER, that the officers of the Company, and each of them
are authorized and directed to take such actions and execute and deliver such
documents as they deem necessary or appropriate in their discretion to implement
the foregoing resolutions, or each of them including, but not limited to,
registration of such additional Shares with the Securities and Exchange
Commission a listing of such shares on the NASDAQ and qualifying or registering
for sale all or part of such additional Shares under the Employees Plan in such
states as such officer or officers may deem desirable.
AMENDMENT TO THE FSI INTERNATIONAL, INC. 1994 OMNIBUS STOCK PLAN ("OMNIBUS
PLAN") TO INCREASE THE AGGREGATE NUMBER OF SHARES THAT MAY BE PURCHASED UNDER
THE OMNIBUS PLAN.
RESOLVED, that subject to the approval of the shareholders of the
Company at the 1996 Annual Meeting the Omnibus Plan shall be amended as of the
date of the 1996 Annual Meeting to increase the number of shares of the
Company's Common Stock ("Shares") available for purchase thereunder by 500,000,
such number of Shares to be subject to adjustment from time to time in
accordance with the Omnibus Plan;
RESOLVED FURTHER, that the officers of the Company are authorized and
directed to seek approval of the foregoing amendment to the Omnibus Plan by the
shareholders of the Company at the 1996 Annual Meeting and the Board of
Directors hereby recommends to the shareholders that they approve such
amendment; and
RESOLVED FURTHER, that, subject to the approval of the shareholders of
the Company, there are reserved an additional 500,000 authorized but unissued
Shares for issuance pursuant to the Omnibus Plan, such number of reserved Shares
to be subject to adjustment from time to time in accordance with the Omnibus
Plan and such Shares upon issuance shall be considered to be duly and validly
issued, fully paid and non-assessable; and
RESOLVED FURTHER, that the officers of the Company, and each of them
are authorized and directed to take such actions and execute and deliver such
documents as they or each of them deem necessary or appropriate in their
discretion to implement the foregoing resolutions, including, but not limited,
to registration of such additional Shares with the Securities and Exchange
Commission, listing of such shares on the NASDAQ and qualifying or registering
for sale all or part of such additional Shares under the Omnibus Plan in such
states as such officer or officers may deem desirable.
