<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FSI INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
FSI INTERNATIONAL, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
- --------------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
FSI INTERNATIONAL, INC.
322 LAKE HAZELTINE DRIVE
CHASKA, MINNESOTA 55318
612/448-5440
December 9, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held at the Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota, commencing at 3:30 p.m., Minneapolis time, on Wednesday,
January 22, 1997.
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 one other proposal.
Proposal 2 relates to your Board of Directors' recommendation to approve
the recently adopted FSI 1997 Omnibus Stock Plan which is intended to replace
the 1994 Omnibus Stock and Directors' Nonstatutory Option Plans. The FSI
International, Inc. 1997 Omnibus Stock Plan is a stock-based incentive plan
intended to motivate key employees, consultants, and directors and to promote
the long-term value of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL THREE
PROPOSALS.
Only Shareholders Of Record At The Close Of Business On November 26, 1996
Are Entitled To Notice Of And To Vote At The Annual Meeting And Any Adjournment
Thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
Joel A. Elftmann sig
Joel A. Elftmann
Chairman, President and
Chief Executive Officer
------------------------------
YOUR VOTE IS IMPORTANT
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. ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON NOVEMBER
26, 1996, ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING AND ANY
ADJOURNMENT THEREOF.
------------------------------
<PAGE> 3
FSI INTERNATIONAL, INC.
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 22, 1997
------------------------------
To the Shareholders of FSI International, Inc.:
The Annual Meeting of Shareholders of FSI International, Inc. (the
"Company") will be held at the Lutheran Brotherhood Building, 625 Fourth Avenue
South, Minneapolis, Minnesota on Wednesday, January 22, 1997, at 3:30 p.m.,
Minneapolis time, for the following purposes:
1. To elect two Class I directors for a three-year term.
2. To act upon a proposal to approve the FSI International, Inc. 1997
Omnibus Stock Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending August 30, 1997.
4. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed November 26, 1996 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
Benno G. Sand Sig
Benno G. Sand
Secretary
December 9, 1996
<PAGE> 4
FSI INTERNATIONAL, INC.
-------------------------------
PROXY STATEMENT
-------------------------------
GENERAL INFORMATION
GENERAL
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 22, 1997 and any and all adjournments thereof for the
purposes described below and in the accompanying Notice. The Meeting will be
held at the Lutheran Brotherhood Building, 625 Fourth Avenue South, Minneapolis,
Minnesota.
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 10, 1996.
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies. 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. The Company also 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. The Company intends to use
the services of Morrow & Co., Inc., a proxy solicitation firm, in connection
with the solicitation of proxies. Although the exact cost of those services is
not known at this time, it is anticipated that the cost will be approximately
$4,500.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
Only shareholders of record at the close of business on November 26, 1996
are entitled to vote at the Meeting. On that day there were issued and
outstanding 22,374,056 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.
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, and 3 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.
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.
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REVOCABILITY OF PROXIES
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. A shareholder attending the Meeting may
also revoke a proxy at the Meeting.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be considered at the Annual Meeting of
Shareholders for the fiscal year ended August 30, 1997 must be received by the
Company no later than August 12, 1997. Such proposals may be included in next
year's proxy statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission ("SEC").
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table lists, as of October 17, 1996, 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 AGE OWNED BENEFICIALLY OWNED
- ------------------------------------------------- --- ---------------- ------------------
<S> <C> <C> <C>
Joel A. Elftmann 56 1,015,039(1) 4.54%
James A. Bernards 50 21,999(2) *
Neil R. Bonke 54 11,333(3) *
Robert E. Cavins 61 33,329(4) *
Dale A. Courtney 59 115,926(5) *
Terrence W. Glarner 53 5,655(6) *
Joanna T. Lau 38 10,000(7) *
Robert E. Lorenzini 60 23,999(2) *
William M. Marcy 54 2,666(8) *
Benno G. Sand 43 74,704(9) *
Benjamin J. Sloan 56 121,862(10) *
Charles R. Wofford 63 15,349(11) *
All Nominees, Directors, Named Executives and
other executive officers as a group (15
persons) 1,695,542(12) 7.38%
</TABLE>
- ---------------------------
* Less than 1%
(1) Includes 39,333 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(2) Includes 13,999 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(3) Includes 11,333 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(4) Includes 30,964 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(5) Includes 110,632 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(6) Includes 3,999 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(7) Includes 10,000 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(8) Includes 2,666 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(9) Includes 61,966 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(10) Includes 120,964 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(11) Includes 15,349 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996.
(12) Includes 624,767 shares issuable pursuant to currently exercisable options
and options exercisable within 60 days of October 17, 1996 granted to seven
executive officers and five directors of the Company.
2
<PAGE> 6
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. James A. Bernards, Joanna T. Lau, and William M. Marcy are
Directors in the class whose term expires at the Meeting. Neil R. Bonke, Joel A.
Elftmann and Robert E. Lorenzini are Class II Directors with terms expiring in
1998. Terrence W. Glarner and Charles R. Wofford are Class III Directors with
terms expiring in 1999.
The Board has nominated and recommended that Mr. Bernards and Ms. Lau be
elected as Class I Directors, each to hold office until the 2000 Annual Meeting
of Shareholders and until his or her respective successor is duly elected and
qualified. Mr. Marcy has indicated that he does not intend to stand for
reelection. The Board of Directors' current size has been set at eight members.
Therefore, the Company will be evaluating potential candidates in an effort to
select the eighth member of the Board during the current fiscal year.
Each of the nominees is currently a member of the Company's Board of
Directors and has indicated a 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 1997 Meeting as Class I Directors
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, Reality Interactive, Inc. and
several private companies.
JOANNA T. LAU Ms. Lau has served as a director of the Company since May
30, 1996. Ms. Lau is a founder of Lau Technologies, an
electronics manufacturer in Acton, Massachusetts and has
served as its President since March 1990. She previously
held management positions with General Electric and Digital
Equipment Corporation. In 1995, she was recognized by Inc.
Magazine as the National Turn-Around Entrepreneur of the
Year. She also serves as a director of INSO Corporation.
3
<PAGE> 7
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. Since April 1993, Mr. Bonke has been Chairman of
the Board of Electroglas Inc., a manufacturer of automatic
wafer probing equipment for semiconductor device
manufacturers. He also was Chief Executive Officer of
Electroglas from April 1993 to April 1996. 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 Electroglas, SANMINA Corporation, and Speedfam
International, Inc.
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 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.
Class III Directors Whose Terms Continue Until the 1999 Meeting
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. He joined the Company as Vice Chairman in
February 1996. 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 Texas Instrument's semiconductor
operations in the United States, Europe, Asia, and Latin
America, including Senior Vice President, Semiconductor
Group.
None of the above nominees or directors are related to one another or to
any executive officer of the Company.
4
<PAGE> 8
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board met seven times and adopted resolutions by written action three
times in fiscal 1996. The Board has an Audit, a Compensation, an Omnibus Stock
Plan, and a Nomination Committee.
The Audit Committee, consisting of Messrs. Bernards, Elftmann and Glarner,
met three times in fiscal 1996. 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 the Company's
management the Company's financial reporting, loss exposures and internal
controls.
The Company has a Compensation Committee consisting of Messrs. Bernards,
Glarner and Lorenzini. The Compensation Committee met once and adopted
resolutions by written action four times in fiscal 1996. 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
incentive awards) 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 1994 Omnibus
Stock Plan. The Omnibus Stock Plan Committee adopted resolutions by written
action five times in fiscal 1996.
The Company's Nomination Committee was formed in the latter part of fiscal
1996 and consists of Messrs. Elftmann, Bonke and Wofford. It met once in fiscal
1996. Its functions include: evaluating and recommending qualified individuals
to the Board; reviewing the qualifications of individuals for election or
reelection as members of the Board; and reviewing the charters and membership of
the Board's Committees and Board membership guidelines. The Committee will
consider persons whom shareholders recommend as candidates for election as
Company directors. Any shareholder wishing to make such a recommendation should
submit it to the Secretary of the Company.
During fiscal 1996, each of the directors attended at least 75% of the
aggregate number of meetings of the Board and of the Committees on which he or
she 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. (As
part of cost control measures recently implemented, the Outside Directors have
agreed to a ten percent reduction in such compensation.)
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
5
<PAGE> 9
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 Annual Meeting and was amended at the Company's 1995 Annual Meeting. If the
1997 Omnibus Stock Plan (Proposal Two) is approved by the Shareholders at the
Meeting, the Directors' Plan will terminate and be replaced by that Plan.
William M. Marcy, a director of the Company and Associate Dean of
Engineering for Research and Administration 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 1996. 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 $116,861 during fiscal
1996.
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. The contract was
terminated upon his becoming an employee on February 5, 1996. Pursuant to the
consulting contract, Mr. Wofford was paid $87,150 for such services in fiscal
1996.
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 1996 fiscal year under the three leases totaled
$927,400.
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. The
Company and the partnership, 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 the 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 37.5% 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. 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, Executive Vice
President; President, Surface Conditioning Division, of the Company, are all
directors of m-FSI Ltd.
6
<PAGE> 10
During the 1996 fiscal year, the Company sold approximately $62,325,000 of
its products to Metron and approximately $14,112,000 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 1996 the
Company paid Metron commissions of $2,963,000 for direct sales by the Company to
customers in Asia.
In addition to the leasing policy discussed above, 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 SEC. Such
officers, directors and ten percent shareholders are also required by the SEC'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 SEC and
the Company is required to disclose in this Proxy Statement any failure to file
reports by such dates during fiscal 1996. Based solely on its review of the
copies of such reports received by it or written representations from certain
reporting persons, the Company believes that during the fiscal year ended August
31, 1996, all Section 16(a) filing requirements applicable to its officers,
directors and ten percent shareholders were complied with except that the
initial ownership report for Ms. Lau was not filed on a timely basis.
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
(collectively 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 microelectronic 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.
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<PAGE> 11
The Committee periodically conducts a review of its executive compensation
program. The purpose of the review is to ensure that the Company's executive
compensation program is 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 awards 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 microelectronic companies. 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.
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, 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.
The base salaries of the Company's officers, including those listed in the
Summary Compensation Table, increased in fiscal 1996. This increase is due to an
adjustment in executive salaries reflecting merit increases as part of the
annual review process.
INCENTIVE COMPENSATION
Executive officers and certain key employees are each eligible to receive
an incentive award 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 calculated
based upon a specified percentage of base salary determined primarily upon the
individual's job level within the organization. An individual's potential
incentive award at threshold, goal and maximum is determined near the beginning
of the
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<PAGE> 12
fiscal year by the Compensation Committee based upon recommendations made by the
Chief Executive Officer, the Executive Vice President, Quality and Human
Resources and the Chief Financial Officer.
For fiscal 1996, the awards were paid at the maximum profit target level
for the Chemical Management and Microlithography Divisions, and for the Company
at the threshold profit target level. The Surface Conditioning Division did not
reach its threshold target. Following the fiscal year-end, cash incentive awards
were paid to all participants eligible at fiscal year end and approximately 300
individuals received such an award.
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 generally 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.
On September 25, 1996, the Compensation Committee determined to grant
replacement options to all affected employees including executive officers.
Options to purchase a total of 145,000 shares at an exercise price of $11.625
per share, the fair market value of the underlying stock on the date of grant,
were granted to such executive officers, provided that the officers agree to
terminate the related options. The options held by executive officers that may
be exchanged for a like number of replacement options have exercise prices
ranging from $15.88 to $20.50 per share. However, if exchanged, the unvested
portion of all replacement options will be delayed one year pursuant to the
terms of the replacement option agreements. The Compensation Committee approved
the option repricing to executive officers and other employees of the Company
because it believes that equity interests are a significant factor in the
Company's ability to retain key employees who are critical to the Company's
long-range success and in response to various cost control measures impacting
such individuals including mandatory furlough days and salary reductions in
executive officers' pay. As required by the rules of the SEC, a complete
discussion of the option repricing will be contained in the proxy statement for
the 1998 Annual Meeting of Shareholders.
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.
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<PAGE> 13
Effective January 1, 1996, the Compensation Committee approved a salary
increase of approximately 16.5% 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 incentive award at the threshold, goal
and maximum profit targets is established by the Compensation Committee in
relation to the Company's financial goals and reflects its determination of what
is an appropriate incentive by putting a substantial portion of his compensation
at risk. For fiscal 1996, Mr. Elftmann received an incentive award of $54,987
based upon the payout of awards at the threshold financial performance target
for the Company. In addition, in the first quarter of fiscal 1996, Mr. Elftmann,
together with all other eligible employees, received a discretionary bonus equal
to approximately two week's pay ($10,904). In connection with certain cost
control measures instituted in early fiscal 1997, Mr. Elftmann and the other
executive directors have agreed to a 10% reduction in their base salary.
As with other members of management, Mr. Elftmann is periodically awarded
stock options. Mr. Elftmann did not receive a stock option award in fiscal 1996.
JAMES A. BERNARDS TERRENCE W. GLARNER ROBERT E. LORENZINI
Members of the Compensation and Omnibus Stock Plan Committees
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
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<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Chief
Executive Officer and the four other most highly compensated executive officers
as of the fiscal year ended August 31, 1996 for services in all capacities as
well as compensation earned by such person for the previous two fiscal years (if
the person was an executive officer during any part of such fiscal year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- -----------------------------------
AWARDS
------------------------- PAYOUTS
RESTRICTED -------
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(S) UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) OPTIONS/SARS ($) ($)(2)
- --------------------------------- ------ ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel A. Elftmann, 1996 305,480 65,891 -- -0- -0- -0- 47,906
Chairman, President and 1995 257,027 128,514 -- -0- 20,000 -0- 47,384
Chief Executive Officer 1994 222,065 92,129 -- -0- -0- -0- 52,149
Robert E. Cavins, 1996 169,711 67,154 -- -0- 7,500 -0- 19,136
Executive Vice President; 1995 140,359 28,072 -- -0- 30,000 -0- 19,208
President, Chemical 1994 119,769 16,998 -- -0- 20,000 -0- 13,766
Management Division
Dale A. Courtney, 1996 182,313 19,531 -- -0- 7,500 -0- 23,423
Executive Vice President; 1995 142,384 71,192 -- -0- 30,000 -0- 22,746
President, Surface 1994 119,769 32,680 -- -0- 20,000 -0- 21,304
Conditioning Division
Benno G. Sand, 1996 199,073 42,237 -- -0- 7,500 -0- 22,676
Executive Vice President, 1995 152,352 76,181 -- -0- 30,000 -0- 22,332
Chief Financial Officer and 1994 168,960 32,966 -- -0- 20,000 -0- 23,182
Secretary
Dr. Benjamin J. Sloan, 1996 194,080 76,446 -- -0- 7,500 -0- 23,423
Executive Vice 1995 167,681 68,749 -- -0- 30,000 -0- 22,746
President; President, 1994 159,577 42,778 -- -0- 20,000 -0- 24,075
Microlithography Division
</TABLE>
- ---------------------------
(1) Disclosure is not required by applicable SEC 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 (c) the
Company's profit sharing contribution to the 401(k) Plan made in fiscal 1994
for the 1993 Plan (calendar) year, in fiscal 1995 for the 1994 Plan
(calendar) year and in fiscal 1996 for the 1995 plan (calendar) year. The
dollar value of each benefit for the fiscal year ended August 31, 1996 is:
J. Elftmann, (a) $6,000, (b) $39,483, (c) $2,423; R. Cavins, (a) $6,000, (b)
$10,713, (c) $2,423; D. Courtney, (a) $6,000, (b) $15,000, (c) $2,423; B.
Sand, (a) $6,000, (b) $14,253, (c) $2,423; and B. Sloan, (a) $6,000, (b)
$15,000, (c) $2,423.
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<PAGE> 15
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made to
the Named Executives during the fiscal year ended August 31, 1996.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF APPRECIATION
SECURITIES PERCENT OF TOTAL FOR OPTION
UNDERLYING OPTIONS TERM($)(3)
OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE ------------------
NAME GRANTED(1) IN FISCAL YEAR OR BASE PRICE ($) EXPIRATION DATE 5% 10%
- ------------------------ --------- -------------------- ----------------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Joel A. Elftmann 0 0% N/A N/A 0 0
Robert E. Cavins 7,500(2) 1.93 20.50 11/9/05 96,691 245,037
Dale A. Courtney 7,500(2) 1.93 20.50 11/9/05 96,691 245,037
Benno G. Sand 7,500(2) 1.93 20.50 11/9/05 96,691 245,037
Dr. Benjamin J. Sloan 7,500(2) 1.93 20.50 11/9/05 96,691 245,037
</TABLE>
- ---------------------------
(1) All of these options were granted pursuant to the Company'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.
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. On
September 25, 1996 the above-named executives were granted an option to
purchase a comparable number of shares at an exercise price of $11.625.
These options may be exchanged for the options listed above subject to a one
year delay in the vesting of such options. See "Report of the Compensation
and Omnibus Stock Plan Committee of the Board on Executive Compensation --
Stock Options".
(3) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted by
the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the SEC. They assume the
value of Company stock appreciates 5% or 10% each year, compounded annually,
for the term of each option. They are not intended to forecast possible
future appreciation, if any, of such stock price or to establish a present
value of options. Also, if appreciation does occur at the 5% or 10% per year
rate, the amounts shown would not be realized by the recipients until the
end of the option term.
(THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.)
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<PAGE> 16
The following table shows, as to the Named Executives, information
concerning stock options exercised and the value of options held by such persons
at the end of fiscal 1996 including those listed in the table above.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS
SHARES ACQUIRED VALUE REALIZED YEAR-END(2) AT FISCAL YEAR-END ($)(3)
NAME ON EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- --------------- -------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel A. Elftmann 0 0 32,666 13,334 200,850 0
Robert E. Cavins 0 0 20,799 36,701 49,992 27,508
Dale A. Courtney 0 0 100,468 36,698 753,909 27,501
Benno G. Sand 10,000 102,500 51,802 36,698 306,249 27,501
Benjamin J. Sloan 0 0 110,799 36,701 813,742 27,508
</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 ($10.75
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, 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, 1996, the
approximate amounts payable to the Named Executives would be as follows: Mr.
Elftmann $550,000; Dr. Cavins $200,000; Mr. Courtney $210,000; Mr. Sand
$305,000; and Dr. Sloan $315,000.
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<PAGE> 17
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, 1991 to August 31, 1996.
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, 1991 and the reinvestment of
all dividends:
<TABLE>
<S> <C> <C> <C>
FSI International, Inc. Nasdaq-U.S. Peer Index
AUGUST 31, 1991 $ 100 $100 $100
AUGUST 31, 1992 183 98 108
AUGUST 31, 1993 354 143 306
AUGUST 31, 1994 613 149 423
AUGUST 31, 1995 2,350 201 844
AUGUST 31, 1996 717 226 387
</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 each of which manufacture equipment used in the microelectronics
industry: 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.
14
<PAGE> 18
PROPOSAL TO APPROVE THE FSI 1997 OMNIBUS STOCK PLAN
(ITEM 2 ON THE PROXY CARD)
INTRODUCTION
Effective December 2, 1996 the Company's Board of Directors authorized the
adoption of the FSI International, Inc. 1997 Omnibus Stock Plan (the "1997
Omnibus Plan"), which is attached as Appendix A to this Proxy Statement. At that
time, the Board directed that the Company submit the Plan to the shareholders of
the Company for approval at the next annual meeting of shareholders. If the
shareholders approve the 1997 Omnibus Plan, that approval will have the effect
of terminating both the Company's 1994 Omnibus Stock Plan and the Directors'
Plan.
The Compensation Committee of the Board of Directors and the Board of
Directors continue to believe that stock-based compensation programs are a key
element in achieving the Company's continued financial and operational success.
The Company's compensation programs have been designed to motivate
representatives of the Company to work as a team to achieve the corporate goal
of maximizing shareholder return.
The SEC recently modified the regulations regarding the short swing profit
rules and the requirements regarding the administration of stock-based incentive
plans. In view of the new regulations, the Company believes it is valuable and
desirous to centralize the stock-based plans covering employees and those
covering directors into one plan and to terminate the existing plans.
The Company's 1994 Omnibus Stock Plan (the "1994 Omnibus Plan") was
approved by the Company's Board effective November 22, 1993 and by the
shareholders of the Company on January 27, 1994. There are 1,500,000 shares
authorized under the Plan. To date, approximately 221,129 shares have been
issued, 1,071,500 shares are subject to outstanding options, and 207,371 shares
remain available for issuance.
Effective May 16, 1990, the Company's Board of Directors authorized the
adoption of the FSI International, Inc. Directors' Nonstatutory Stock Option
Plan (the "Directors' Plan") and the Directors' Plan was approved by the
Company's shareholders at the 1991 Annual Meeting of Shareholders. Amendments to
the Directors' Plan were approved by the shareholders at the 1995 Annual Meeting
of Shareholders. To date, 41,333 shares have been issued, 106,667 shares are
subject to outstanding options and 52,000 shares remain available for issuance.
At the 1990 Annual Meeting, shareholders approved the FSI International
1989 Stock Option Plan ("1989 Plan"). This Plan was terminated effective upon
the adoption of the 1994 Omnibus Stock Plan. There are currently 517,521 shares
subject to outstanding options issued under the 1989 Plan.
PURPOSE
The purpose of the 1997 Omnibus 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. In addition, the Plan promotes the interests of
the Company and its shareholders by providing directors of the Company who are
not employees of the Company (the "Outside Directors") with an opportunity to
acquire a proprietary interest in the Company, to compensate Outside Directors
for their contributions to the Company and to aid in attracting and retaining
Outside Directors. Options granted under the 1997 Omnibus Plan to Outside
Directors are nonstatutory stock options that do not meet the requirements of
Section 422A of the Internal Revenue Code.
ADMINISTRATION
The 1997 Omnibus Plan is administered by the Omnibus Stock Plan Committee
(the "Committee"). The Board has the authority to adopt, revise and waive rules
relating to the 1997 Omnibus 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 1997 Omnibus Plan to
members of management of the Company or to others with respect to the selection
and grants of awards to employees of
15
<PAGE> 19
the Company who are not deemed to be officers, directors or 10% shareholders of
the Company under applicable Federal securities laws The descriptions set forth
below are in all respects qualified by the terms of the 1997 Omnibus Plan, a
copy of which is attached to this Proxy Statement as Appendix A. Certain grants
of options and the amount and nature of the awards to be granted to Outside
Directors are automatic. Because the Plan has two basic components, Outside
Director options and discretionary options for employees and consultants, the
terms of which are substantially different, these two separate components of the
Plan are described separately below.
A. AWARDS TO EMPLOYEES AND CONSULTANTS
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates are eligible to receive
awards under the 1997 Omnibus Plan at the discretion of the Committee.
Nonstatutory stock options under the 1997 Omnibus 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,
directors, and consultants. The Company and its affiliates presently have
approximately 1,300 employees.
The total number of shares of Company Common Stock available for
distribution under the 1997 Omnibus 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 1997
Omnibus 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 1997 Omnibus 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 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 1997 Omnibus
Plan which are not used because the terms and conditions of the awards are not
met may be reallocated under the 1997 Omnibus 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 1997 Omnibus Plan include
restricted and unrestricted stock, incentive and nonstatutory 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. Except as noted below, during the
lifetime of a person to whom an award is granted, only that person (or that
person's legal representative) may exercise an option or stock appreciation
right, or receive payment with respect to performance units or any other award.
No award may be sold, assigned, transferred, exchanged or otherwise encumbered
other than pursuant to a qualified domestic relations order. However, the
Committee may provide (i) that an award shall be transferable to a successor in
the event of a recipient's death, or (ii) that an award (other than incentive
stock options) may be transferable to members of the recipient's immediate
family or to one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners, if the
recipient does not receive any consideration for the transfer.
16
<PAGE> 20
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 to an employee (and in some cases, a consultant, director, or
other advisor) under the 1997 Omnibus 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
persons 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 1997 Omnibus Plan provides that no more than 100,0000
shares in the form of restricted stock and 25,000 shares in the form of
unrestricted stock can be issued under the 1997 Omnibus Plan.
INCENTIVE AND NONSTATUTORY STOCK OPTIONS
Both incentive stock options and nonstatutory 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 1997 Omnibus 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 1997 Omnibus
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 1997 Omnibus 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 optionees 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 1997 Omnibus 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.
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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 1997 Omnibus 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 1997
Omnibus Plan also gives the Board the right to terminate, suspend or modify the
1997 Omnibus Plan, except that amendments to the 1997 Omnibus Plan are subject
to shareholder approval if needed to comply with the incentive stock option
provisions of Federal tax laws. Under the 1997 Omnibus 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.
B. OUTSIDE DIRECTOR OPTIONS
AGREEMENTS
The 1997 Omnibus Plan provides that all options granted under the Plan be
subject to agreements governing the terms and conditions of the awards. Such
agreements will be entered into by the Outside Directors and the Company on or
after the time the options are granted. Any shares of Common Stock subject to an
option under the 1997 Omnibus Plan that are not used because the terms and
conditions of the option are not met may be reallocated under the Plan as though
they had not previously been awarded.
TYPES OF AWARDS
There are two types of automatic option grants under the terms of the 1997
Omnibus Plan: Initial Outside Director Options, and Annual Outside Director
Options.
Initial Outside Director Options
Each Outside Director first elected or appointed to the Board on or after
January 22, 1997 is entitled to receive a single grant of an option, on the date
such director first becomes a director, to purchase 10,000 shares of Common
Stock.
Subject to the prior expiration of an Initial Outside Director Option as
described below, these options vest and become exercisable six months after the
date of grant. In the event of a change in control of the Company (as defined in
the 1997 Omnibus Plan), the death or permanent disability of an Outside
Director, any Initial
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<PAGE> 22
Outside Director Option held by such individual or his or her legal
representative that was not previously exercisable shall become immediately
exercisable in full.
Annual Outside Directors Options
For the 1997 Annual Meeting of Shareholders and for each Annual Meeting of
Shareholders thereafter during the term of the 1997 Omnibus Plan, each Outside
Director serving as an Outside Director of the Company immediately following
such Annual Meeting shall be granted, by virtue of serving as an Outside
Director of the Company, a nonstatutory stock option to purchase 4,000 shares of
Common Stock (each, an "Annual Outside Director Option"). Such Annual Outside
Directors Options shall be deemed to be granted to each Outside Director
immediately after such Annual Meeting and shall be granted regardless of whether
or not such Outside Director previously received, or simultaneously receives, an
Initial Outside Director Option. Initial Outside Director Options and Annual
Outside Director Options together are hereinafter sometimes referred to as
"Outside Director Options."
Annual Outside Director Options shall vest and become exercisable
cumulatively on an annual basis, as follows: one-third of the total number of
shares of Common Stock subject to each such option shall become exercisable on
each of the first and second anniversaries of the date of grant and the
remaining Common Stock subject to such option shall become exercisable on the
third anniversary of the date of grant. Each such option, to the extent
exercisable, shall be exercisable in whole or in part.
In the event of a change in control of the Company, the death or permanent
disability of an Outside Director, any Annual Outside Director Options held by
such individual or his or her legal representative that was not previously
exercisable shall become immediately exercisable in full.
Termination of Outside Director Options
Each Outside Director Option granted pursuant to the 1997 Omnibus Plan and
all rights to purchase Common Stock thereunder shall terminate on the earliest
of:
(i) ten years after the date such option is granted;
(ii) the expiration of the period specified in the agreement after
the death or permanent disability of an Outside Director;
(iii) February 28, 1997, if the shareholders of the Company shall not
have approved the 1997 Omnibus Plan; or
(iv) the date, if any, fixed for cancellation pursuant to the 1997
Omnibus Plan (e.g., in the event of a dissolution, liquidation
or merger, etc.); or ninety days after the date the Outside
Director ceases to be a director of the Company; provided,
however, that the option shall be exercisable during this
90-day period only to the extent that option was exercisable
as of the date the person ceases to be an Outside Director
unless the cessation results from the director's death or
permanent disability. Notwithstanding the preceding sentence,
if an Outside Director who resigns or whose term expires then
becomes a consultant or employee of the Company within ninety
days of such resignation or term expiration, the Outside
Director Options of such person shall continue in full force
and effect.
In no event shall such option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
Purchase Price and Exercise of Outside Director Options
All Outside Director Options granted pursuant to the Plan are nonstatutory
stock options and the price per share of Common Stock subject to an Outside
Director Option is 100% of the fair market value of the Company's Common Stock
on the date of grant as defined in the 1997 Omnibus Plan.
An Outside Director Option may be exercised in whole or in part by delivery
of a written notice of exercise accompanied by payment in full of the exercise
price in cash, in shares of previously acquired
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<PAGE> 23
Common Stock having a fair market value at the time of exercise equal to the
exercise price or a combination thereof.
During the lifetime of an Outside Director only the Outside Director or his
or her guardian or legal representative may exercise the option. An option may
be assignable or transferable by the Outside Director to the extent authorized
by the Committee. An option may be exercised after the death or permanent
disability of the Outside Director by such individual's legal representatives,
heirs, or legatees, but only within the period specified in the agreement
relating to such Outside Director Options.
Other Awards
The Committee, in its discretion, may grant options or other Awards to an
Outside Director, but only in substitution for Outside Director Options held by
that director.
ADJUSTMENTS, MODIFICATIONS, TERMINATION
The Committee may provide for the accelerated exercisability of Outside
Director Options in the event of a change or control of the Company, other
fundamental changes of the corporate structure of the Company, the death of the
Outside Director or such other events as the Committee may determine. The
Committee may also provide that certain awards may be exercised in certain
events after the termination of services of the Outside Director or the death of
the recipient.
In addition, the termination of an Outside Director's award may be waived
in the event that the Outside Director enters into a consulting or other
advisory role with the Company which may, in some cases, involve entering into a
non-compete agreement with the Company.
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the 1997
Omnibus 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 1997 Omnibus Plan. If certain statutory employment and holding
period conditions are satisfied before the recipient disposes of shares acquired
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<PAGE> 24
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.
NONSTATUTORY STOCK OPTIONS
A recipient will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time any nonstatutory stock option is
granted under the 1997 Omnibus Plan. At the time shares are transferred to the
recipient pursuant to the exercise of a nonstatutory 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 1997 Omnibus Plan permits the Company to withhold from cash awards, and
to require a recipient receiving Common Stock under the 1997 Omnibus 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.
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
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approval of the 1997 Omnibus Plan and the shares authorized under the 1997
Omnibus Plan. Proxies solicited by the Board will be voted for approval of the
proposal, unless shareholders specify otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of the 1997 Omnibus Plan is considered to be present and
entitled to vote on the approval of the 1997 Omnibus 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 1997 Omnibus Plan shall not be considered present and entitled
to vote on the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE 1997 OMNIBUS PLAN
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 3 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 30, 1997 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 Audit
Committee and the Board will reconsider such 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.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE APPOINTMENT OF KPMG
PEAT MARWICK.
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.
ANNUAL REPORTS
THE ANNUAL REPORT OF THE COMPANY FOR FISCAL 1996 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 31, 1996, 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 Of Directors
Benno Sand Sig
Benno G. Sand
Secretary
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APPENDIX A
FSI INTERNATIONAL, INC.
1997 OMNIBUS STOCK PLAN
1. Purpose. The purpose of the FSI International, Inc. 1997 Omnibus Stock
Plan (the "Plan") is to motivate key personnel to produce a superior return to
the shareholders of the Company 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.
Additionally, the Plan is intended to provide Outside Directors with an
opportunity to acquire a proprietary interest in the Company, to compensate
Outside Directors for their contribution to the Company and to aid in attracting
and retaining Outside Directors.
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 (i) a written contract consistent with the
terms of the Plan entered into between the Company or an Affiliate and a
Participant, (ii) 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 two or more Non-Employee Directors
designated by the Board to administer the Plan under Plan Section 3.1
and constituted so as to permit grants thereby 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) "Effective Date" means the date specified in Plan Section 12.1.
(i) "Employee" means an employee (including an officer or director
who is also an employee) of the Company or an Affiliate.
(j) "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
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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 that 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
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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 of an Award 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 of an Award.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.
(l) "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.
(m) "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 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 this 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 those regulations. The determination of Fair Market Value shall be subject
to adjustment as provided in Plan Section 16.
(n) "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.
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(o) "Incentive Stock Option" means any Option designated as such
and granted in accordance with the requirements of Code Section 422 or
any successor provision.
(p) "Insider" as of a particular date means any person who, as of
that date is an officer of the Company as defined under Exchange Act
Rule 16a-1(f) or its successor provision.
(q) "Non-Employee Director" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act
Rule 16b-3(b)(3) or its 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) "Outside Director" means a director who is not an Employee.
(u) "Participant" means a person or entity to whom an Award is or
has been made in accordance with the Plan.
(v) "Performance Cycle" means the period of time as specified in an
Agreement over which Performance Units are to be earned.
(w) "Performance Units" means an Award made pursuant to Plan
Section 11.
(x) "Plan" means this FSI International, Inc. 1997 Omnibus Stock
Plan, as may be amended and in effect from time to time.
(y) "Restricted Stock" means Stock granted under Plan Section 7 so
long as such Stock remains subject to one or more restrictions.
(z) "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.
(aa) "Share" means a share of Stock.
(bb) "Stock" means the common stock, no designated par value, of
the Company.
(cc) "Stock Appreciation Right" means a right, the value of which
is determined in relation to the appreciation in value of Shares
pursuant to an Award granted under Plan Section 10.
(dd) "Subsidiary" means a "subsidiary corporation", as that term is
defined in Code Section 424(f), or any successor provision.
(ee) "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.
(ff) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions or terms and conditions placed on Restricted Stock or any
other Award are in effect.
(gg) "Transferee" means any member of the Participant's immediate
family (i.e., his or her children, step-children, grandchildren and
spouse) or to one or more trusts for the benefit of such family members
or partnerships in which such family members are the only partners.
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.
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3. Administration and Indemnification.
3.1 Administration.
(a) The Committee shall administer the Plan. The Committee shall
have exclusive power to (i) make Awards, (ii) determine when and to whom
Awards will be granted, the form of each Award, the amount of each Award
(except as to the amount of the Initial Outside Director Option and the
Annual Outside Director Option, as provided in Plan Section 9.3), and
any other terms or conditions of each Award consistent with the Plan,
and (iii) 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 which has been authorized by
the Committee.
(b) Solely for purposes of determining and administering Awards to
Participants 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 Non-Employee Directors.
(c) To the extent within its discretion and subject to Plan
Sections 15 and 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, except in such
instances as the Committee, in its discretion, may so provide. 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 the conflict.
To the extent of any remaining irreconcilable conflict with this 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).
(b) Any Shares subject to the terms and conditions of an Award
under this Plan that are not used because the terms and conditions of
the Award are not met may again be used for an Award
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under the Plan. But 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) 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) 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) 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; and
(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 single Award.
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. Participation in the Plan shall be limited to Employees and
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, advisor or director. The granting of Awards is solely at the
discretion of the Committee, except that Incentive Stock Options may only be
granted to Employees and Awards to Outside Directors are subject to the limits
of Section 9.3.
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 the
Agreement, or the number of Shares to which the Option subject to the
Agreement applies or with respect to which payment upon the exercise of the
Stock Appreciation Right subject to the 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.
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6.3 Transferability. Except as provided in this Section, during the
lifetime of a Participant to whom an Award is granted, only that
Participant (or that Participant's legal representative) may exercise an
Option or Stock Appreciation Right, or receive payment with respect to
Performance Units or any other Award. No Award of Restricted Stock (prior
to the expiration of the restrictions), Options, Stock Appreciation Rights
or Performance Units or other Award may be sold, assigned, transferred,
exchanged or otherwise encumbered other than pursuant to a qualified
domestic relations order as defined in the Code or Title 1 of the Employee
Retirement Income Security Act ("ERISA") or the rules thereunder; any
attempted transfer in violation of this Section 6.3 shall be of no effect.
Notwithstanding the immediately preceding sentence, the Committee, in an
Agreement or otherwise at its discretion, may provide (i) that the Award
subject to the Agreement shall be transferable to a Successor in the event
of a Participant's death, or (ii) that the Award (other than Incentive
Stock Options) may be transferable to a Transferee. Any Award held by a
Transferee shall continue to be subject to the same terms and conditions
that were applicable to that Award immediately prior to the transfer
thereof to the Transferee.
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 or other relationship 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, a Transferee or the Successor of a Participant
following the death of the 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 if and until the date the Participant
becomes the holder of record of the Stock, if any, to which the Award
relates.
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 the 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 or Transferee.
(d) A Participant or a Transferee with a Restricted Stock Award shall
have all the other rights of a shareholder including, but not limited to,
the right to receive dividends and the right to vote the Shares of
Restricted Stock.
(e) No more than 100,000 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,
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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 that are consistent with the terms and
conditions of the Award to which the Shares relate.
No more than 25,000 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 (except as provided in Plan Section 19).
(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 the sale as payment of the purchase price of
the 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 this 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 this limit the 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 this 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 that the Committee determines
necessary to qualify this Option as an Incentive Stock Option; and
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(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 percent of the
total combined voting power of all classes of stock of the Corporation
or its subsidiaries, unless (i) the option price for that Incentive
Stock Option is at least 110 percent of the Fair Market Value of the
Shares subject to that Incentive Stock Option on the date of grant and
(ii) that Option is not exercisable after the date five years from the
date that Incentive Stock Option is granted.
9.3 Terms and Conditions of Outside Directors' Options.
(a) Initial Outside Directors' Options. Subject to the terms and
conditions of this Plan, any Outside Director first elected or appointed
to the Board on or after January 22, 1997 (the "Approval Date") shall
receive, by virtue of serving as a director of the Company, a single
grant of a Non-Statutory Stock Option to purchase 10,000 Shares (an
"Initial Outside Director Option").
(b) Vesting of Initial Outside Directors' Options. Subject to the
provisions of Plan Section 9.3(e), Initial Outside Directors' Options
granted pursuant to this Plan shall vest and become exercisable six
months after the date of grant. Each Initial Outside Directors' Option,
to the extent exercisable, shall be exercisable in whole or in part.
(c) Annual Outside Director Option Grants. For the Annual Meeting
of Shareholders for fiscal year 1997 (to be held on January 22, 1997)
and for each Annual Meeting of Shareholders thereafter during the term
of this Plan, each Outside Director serving as an Outside Director of
the Company immediately following the Annual Meeting shall be granted,
by virtue of serving as an Outside Director of the Company, a
Non-Statutory Stock Option to purchase 4,000 Shares (an "Annual Outside
Director Option"). Each Annual Outside Director Option shall be deemed
to be granted to each Outside Director immediately after an Annual
Meeting and shall be granted regardless of whether or not an Outside
Director previously received, or simultaneously receives, an Initial
Outside Director Option. Initial Outside Director Options and Annual
Outside Director Options together are sometimes referred to as "Outside
Director Options."
(d) Vesting of Annual Director Options. Subject to the provisions
of Plan Section 9.3(e), Annual Outside Director Options shall vest and
become exercisable cumulatively on an annual basis, as follows:
one-third of the total number of Shares subject to each Option shall
become exercisable on each of the first and second anniversaries of the
date of grant and the remaining Shares subject to the Option shall
become exercisable on the third anniversary of the date of grant. Each
Option, to the extent exercisable, shall be exercisable in whole or in
part.
(e) Termination of Initial and Annual Outside Directors'
Options. Each Outside Director Option granted pursuant to this Plan and
all rights to purchase Shares thereunder shall terminate on the earliest
of:
(i) ten years after the date that the Outside Director Option
was granted;
(ii) the expiration of the period specified in the Agreement
after the death or permanent disability of an Outside Director;
(iii) February 28, 1997, if the shareholders of the Company
shall not have approved this Plan as of or prior to that date at a
duly held shareholders' meeting; or
(iv) ninety days after the date the Outside Director ceases to
be a director of the Company, provided, however, that the option
shall be exercisable during this 90-day period only to the extent the
option was exercisable as of the date the person ceases to be an
Outside Director unless the cessation results from the director's
death or permanent disability. Notwithstanding the preceding
sentence, if an Outside Director who resigns or whose term expires
then becomes a consultant or Employee of the Company within ninety
days of such
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resignation or term expiration, the Outside Director Options of such
person shall continue in full force and effect.
In no event shall an Option be exercisable at any time after its
original expiration date. When an Option is no longer exercisable, it
shall be deemed to have lapsed or terminated and will no longer be
outstanding.
(f) Allocation of Common Shares. If as of a date on which an Option
or Options are to be awarded pursuant to the provisions of this Section
9.3, the number of Shares available for issuance under the Plan as of
this date are less than the number of options to purchase Shares that
otherwise would be awarded, then the following formula shall determine
how the remaining number of Shares are to be allocated:
(i) if only one Outside Director is to receive an Option on the
date, then that Outside Director shall receive an Option to purchase
Shares equal to the number of Shares remaining;
(ii) if two or more Outside Directors are to receive Options on
the date:
(1) all Initial Outside Director Options shall first be
awarded; if, however, the number of Shares available is less than
the number of options to purchase Shares that would otherwise be
awarded as Initial Outside Director Options then each Outside
Director eligible to receive an Initial Outside Director Option
shall receive the number of Options that results from the
following equation: the whole number of Shares available divided
by the number of Outside Directors eligible to receive such an
Option, provided, however, that no fractional shares shall be
awarded; and if such allocation occurs, any remaining Shares
shall not be awarded and shall be deemed not subject to
distribution for purposes of Plan Section 4; and
(2) If on that date all Initial Outside Director Options to
be awarded are awarded in the full amount or if no Initial
Outside Director Options are to be awarded, then each Outside
Director eligible for an Annual Outside Director Option shall
receive an Annual Outside Director Option to purchase Shares in
the amount that results from the following equation: the whole
number of Shares available divided by the number of Outside
Directors eligible for an Annual Outside Director Option,
provided, however, that no fractional shares shall be awarded;
and any remaining Shares shall not be awarded and shall be deemed
not subject to distribution for purposes of Plan Section 4.
(g) Non-exclusivity of Section 9.3. The provisions of this Section
9.3 are intended to be exclusive; however, the Committee, in its
discretion, may grant Options or other Awards to an Outside Director,
but only in substitution for Outside Director Options held by that
director.
10. Stock Appreciation Rights. An Award of a Stock Appreciation Right shall
entitle the Participant (or a Successor or Transferee), 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 that 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 a pro rata portion of the Option
with which it is connected and vice versa. 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 or
Transferee 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 or Transferee shall be made at such time or times as
shall be
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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 or Transferee 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. These performance targets may, but
need not, include without limitation targets relating to one or more of
the Company's or a group's, unit's, Affiliate's or an individual's
performance. The Agreement may establish that a portion of the total
potential of a Participant's Award will be paid for performance that
exceeds the minimum target but falls below the maximum target applicable
to the Award. The Agreement shall also provide for the timing of the
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 the 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 22,
1997, 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 22, 1997 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 23, 2007 (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 this 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 (or such other time as the Committee may
designate) shall be considered the date and time at which the 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 that 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 that the Company or any Affiliate may have
to change such
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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 (including a
Successor or a Transferee) 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
those Shares. In lieu of all or any part of a cash payment from a person
receiving Shares under the Plan, the Committee may permit the individual 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 taxes 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.
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 the Plan conform to the requirements of Code Section 422.
(b) No termination, suspension, or modification of the Plan will
materially and adversely affect any right acquired by any Participant or
Successor or Transferee 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 these 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 -- (i) in the aggregate number
and type of Shares available for Awards under the Plan, (ii) 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, (iii) in the
number and type of Shares and amount of cash subject to Awards then outstanding,
(iv) in the Option price as to any outstanding Options and, (v) 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
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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 of the Company
or Affiliate or any other occurrence specified in the Agreement within the
period or periods of time specified in the Agreement.
19. Corporate Mergers, Acquisitions, Etc. The Committee may also grant
Options, Stock Appreciation Rights, Restricted Stock or other Awards under the
Plan having terms, conditions and provisions that vary from those specified in
this Plan provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options, stock appreciation rights,
restricted stock or other award granted, awarded or issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
20. 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 or Transferee. To the extent any person acquires a right to receive an
Award under the Plan, this right shall be no greater than the right of an
unsecured general creditor of the Company.
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<PAGE> 39
21. 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.
22. Compliance with Applicable Legal Requirements. No certificate for
Shares distributable pursuant to this Plan shall be issued and delivered unless
the issuance of the 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.
23. 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.
24. 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 laws 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.
25. 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.
26. 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 that 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 26(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 that 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;
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<PAGE> 40
(c) Any Award not paid as a result of this Plan Section 26 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.
27. 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
principles 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.
28. Termination of Other Plan. Effective upon the approval of the Plan by
the Company's shareholders, the Company's 1994 Omnibus Stock Plan and the
Company's Directors' Nonstatutory Stock Option Plan ("Prior Plans") shall
terminate. Thereafter, all grants and awards made under the Prior Plans prior to
the approval by the shareholders shall continue in accordance with the terms of
the Prior Plans.
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<PAGE> 41
PROXY PROXY
FSI INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joel A. Elftmann, Luke R. Komarek 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 November 26, 1996, at the Annual Meeting
of Shareholders to be held on January 22, 1997, 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 AND 3. 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.)
<PAGE> 42
<TABLE>
<S><C>
FSI INTERNATIONAL, INC.
PLEASE MARK VOTE IN OVAL USING DARK INK ONLY. / /
1. ELECTION OF TWO CLASS I DIRECTORS. 2. APPROVAL OF THE FSI INTERNATIONAL, INC. 1997 For Withhold Against
Nominees to serve as Class I Directors OMNIBUS STOCK PLAN, as attached in the / / / / / /
for a three year term and until their accompanying Proxy Statement.
respective successor shall be elected
and qualified are:
James A. Bernards and Joanna T. Lau For All 3. RATIFICATION OF THE APPOINTMENT OF KPMG PEAT For Withhold Against
For Withhold Except MARWICK LLP as independent auditors of the / / / / / /
(To withhold authority to vote for / / / / / / Company for the 1997 fiscal year.
any individual nominee write that
nominee's name on the line provided
below.)
__________________________________________
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 part-
nership name by an authorized
person.
___________________________________
(Signature)
___________________________________
(Signature, if held jointly)
</TABLE>
