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
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
CFM TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CFM TECHNOLOGIES, INC.
150 Oaklands Blvd.
Exton, PA 19341
__________________
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 9, 2000
__________________
TO OUR SHAREHOLDERS:
You are invited to be present either in person or by proxy at the Annual
Meeting of Shareholders of CFM Technologies, Inc. to be held at the Sheraton
Great Valley Hotel, 707 East Lancaster Avenue, Frazer, Pennsylvania 19355, on
Thursday, March 9, 2000 beginning at 10:00 A.M., for the following purposes:
1. To elect six (6) directors; and
2. To act upon such other matters as may properly come before the
meeting.
The Board of Directors has fixed the close of business on January 25, 2000
as the record date for determining shareholders entitled to notice of and to
vote at the meeting and any adjournments or postponements thereof. A list of
shareholders entitled to vote at the meeting will be available for examination
by any shareholder for any purpose germane to the meeting for a period beginning
ten days prior to the meeting during normal business hours at the Company's
offices at 150 Oaklands Blvd., Exton, PA 19341. Such list of shareholders will
also be available for inspection at the meeting.
The Directors hope that you will find it convenient to attend the meeting in
person, but whether or not you plan to attend, please sign, date and return the
enclosed proxy promptly to ensure your shares are represented at the meeting.
Shareholders who execute proxies retain the right to revoke them (in writing) at
any time prior to the voting thereof. A return envelope, which requires no
postage if mailed in the United States, is enclosed for your convenience.
By Order of the Board of Directors
Lorin J. Randall
Secretary
Exton, Pennsylvania
February 4, 2000
<PAGE>
CFM Technologies, Inc.
150 Oaklands Blvd.
Exton, PA 19341
__________________
PROXY STATEMENT
FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
To be held March 9, 2000
__________________
This Proxy is furnished to the shareholders of CFM Technologies, Inc., a
Pennsylvania corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the 2000 Annual Meeting of
Shareholders of the Company to be held on March 9, 2000 at 10:00 A.M. and any
adjournment or postponement thereof (the "Meeting"). The Meeting will be held at
the Sheraton Great Valley Hotel, 707 East Lancaster Avenue, Frazer, Pennsylvania
19355. A copy of the notice of the Meeting accompanies this Proxy Statement. It
is anticipated that the mailing of this Proxy Statement will commence on or
about February 4, 2000.
If the enclosed proxy is executed and returned, it may nevertheless be
revoked at any time before it is exercised by giving written notice to the
Secretary of the Company, but mere attendance at the Meeting, without such
notice, will not revoke the proxy. Shares represented by a valid proxy which is
received pursuant to this solicitation and not revoked before it is exercised
will be voted as provided on the proxy at the Meeting.
VOTING AT THE MEETING
Only holders of shares of common stock of the Company (the "Common Stock")
of record at the close of business on January 25, 2000 will be entitled to vote
at the Meeting. On such date, there were 7,833,839 shares of Common Stock, net
of treasury stock, outstanding. Each such share of Common Stock is entitled to
one vote on all matters.
The holders of a majority of the shares entitled to vote, present in person
or represented by proxy, constitute a quorum. Except for the election of
directors, for which a plurality is required, the affirmative vote of a majority
of the shares present in person or represented by proxy at the Meeting and
entitled to vote is required to take action with respect to any other matter as
may properly be brought before the Meeting. Shares cannot be voted at the
Meeting unless the holder of record is present in person or by proxy. The shares
of Common Stock represented by each properly executed proxy will be voted at the
Meeting in accordance with each shareholder's directions. Shareholders are urged
to specify their choices by marking the appropriate boxes on the enclosed proxy;
if no choice has been specified, the shares will be voted as recommended by the
Board of Directors. If any other matters are properly presented to the Meeting
for action, the proxy holders will vote the proxies (which confer discretionary
authority to vote on such matters) in accordance with their best judgment.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum.
Abstentions will be considered present and entitled to vote at the Meeting,
but will not be counted as votes cast in the affirmative. Brokers who hold
shares in street name for customers have the authority to vote on certain items
when they have not received instructions from beneficial owners. Brokers that do
not receive instructions are entitled to vote those shares with respect to the
election of directors. Broker non-votes (shares held by a broker or nominee as
to which the broker or nominee does not have the authority to vote on a
particular matter) are not considered shares present for purposes of determining
the presence of a quorum and will not be voted.
<PAGE>
The Company will bear the cost of the Meeting and the cost of soliciting
proxies, including the cost of mailing the proxy materials. In addition to
solicitation by mail, directors, officers and regular employees of the Company
(who will not be specifically compensated for such services) may solicit proxies
in person and by telephone or facsimile. Arrangements have been made for the
Company's transfer agent, American Stock Transfer & Trust Company (and may also
be made with brokerage houses and other custodians, nominees and fiduciaries),
for forwarding proxy materials to the beneficial owners of shares of Common
Stock held of record by such persons, and the Company will reimburse the
transfer agent (and such other entities) for reasonable out-of-pocket expenses
incurred in forwarding such materials.
Your proxy vote is important. Accordingly, the Company asks you to complete,
sign and return the accompanying proxy whether or not you plan to attend the
Meeting. If you plan to attend the Meeting to vote in person and your shares are
registered with the Company's transfer agent in the name of a broker, bank or
other custodian, nominee or fiduciary, you must secure a proxy from such person
assigning you the right to vote your shares.
SECURITY OWNERSHIP
The following table sets forth certain information as of January 25, 2000,
as supplied to the Company, regarding the beneficial ownership of the Common
Stock by all persons known to the Company who own more than 5% of the
outstanding shares of the Company's Common Stock, each director of the Company,
each executive officer named in the Summary Compensation Table under the caption
"Executive Compensation" included elsewhere herein and all executive officers
and directors as a group. Unless otherwise indicated, based upon information
provided to the Company by the directors, executive officers and principal
shareholders, the persons named in the table below have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
Shares Beneficially Owned
---------------------------
Name* Number (1) Percent (2)
----- ----------- -----------
Christopher F. McConnell (3) 1,231,094 15.66%
Wellington Management Company, LLP (4) 736,400 9.40
Roger A. Carolin (5) 259,091 3.22
Lorin J. Randall (6) 71,486 **
Joseph E. Berger (7) 53,746 **
Milton S. Stearns, Jr. (8) 53,243 **
James J. Kim (9) 34,980 **
Brad S. Mattson (10) 19,400 **
Rudra N. Kar (11) 13,673 **
John F. Osborne (12) 9,000 **
All directors and executive officers as a
group (9 persons) (13) 2,482,113 30.07%
- ----------
* The business address of each shareholder named in this table, with the
exception of Wellington Management Company, is CFM Technologies, Inc., 150
Oaklands Blvd., Exton, PA 19341. Wellington Management Company's business
address is 75 State Street, Boston, MA 02109.
** Less than 1%.
(1) For purposes of this table, a person or group is deemed to have "beneficial
ownership" of any shares which such person has the right to acquire within
60 days.
(2) Percentage ownership is based on 7,833,839 shares of common stock
outstanding on January 25, 2000. For purposes of computing the percentage
of outstanding shares held by each such person or group of persons named
above, any security which such person or groups of persons has the right to
acquire within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage of ownership of any
other person.
2
<PAGE>
(3) Includes 38,919 shares owned by Mr. McConnell's wife, 200,000 shares owned
jointly with Mr. McConnell's wife and 41,372 shares held in trust for Mr.
McConnell's children. Mr. McConnell has exercisable options to purchase
30,000 shares.
(4) Wellington Management Company, LLP has advised the Company that it serves
as adviser to various clients and has shared voting power with respect to
410,000 of these shares and shared dispositive power with respect to all
736,400 of these shares.
(5) Includes 41,864 shares owned by Mr. Carolin's wife and exercisable options
to purchase 213,678 shares.
(6) Includes exercisable options to purchase 68,041 shares.
(7) Includes exercisable options to purchase 52,916 shares.
(8) Includes 4,000 shares held in a trust of which Mr. Stearns is a trustee and
exercisable options to purchase 18,043 shares.
(9) Includes exercisable options to purchase 6,000 shares.
(10) Consists of exercisable options to purchase 19,400 shares.
(11) Includes exercisable options to purchase 12,500 shares.
(12) Includes exercisable options to purchase 1,000 shares.
(13) Includes exercisable options to purchase 421,578 shares.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors will consist of
not fewer than three members, as determined from time to time by resolution of
the Board of Directors. At the meeting, six directors are to be elected by the
holders of Common Stock, with each share of Common Stock being entitled to one
vote.
It is the intention of the persons named in the enclosed proxy, unless
otherwise directed, to vote all proxies in favor of the election to the Board of
Directors of the nominees identified below. Each nominee has consented to being
named in this Proxy Statement and to serve if elected. If any nominee should
become unavailable for any reason, which management does not anticipate, the
proxy will be voted for any substitute nominee selected by management prior to
or at the Meeting, or the Board of Directors may reduce the membership of the
Board of Directors to the number of nominees available.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.
Nominees
Set forth in the table below and the following paragraphs are the names and
ages of the nominees, their positions with the Company, their principal
occupations during the past five years and certain other directorships they
hold. All nominees are current members of the Board of Directors.
Name Age Position
- ---- --- --------
Christopher F. McConnell 46 Chairman of the Board of Directors
Roger A. Carolin 44 President, Chief Executive
Officer and Director
James J. Kim 64 Director (1)
Brad S. Mattson 45 Director (2)
John F. Osborne 55 Director (1)(2)
Milton S. Stearns, Jr. 76 Director (2)
- ----------
(1) Member of Executive Compensation and Stock Option Committee.
(2) Member of Audit Committee.
3
<PAGE>
Christopher F. McConnell founded the Company in May 1984 and served as
President and Chief Executive Officer until October 1990 when he was named
Chairman of the Board of Directors. Prior to forming the Company, Mr. McConnell
held various technical and marketing positions with Dow Chemical. Mr. McConnell
received his BS and MS degrees in Chemical Engineering from Dartmouth College
and Purdue University, respectively, and his MBA from Harvard Business School.
Mr. McConnell is a named inventor on several of the Company's patents. Mr.
McConnell is Chairman of the Board of Directors of Batteries Batteries, Inc.,
(Nasdaq: BATS), an assembler and distributor of specialty batteries and cellular
products.
Roger A. Carolin has served the Company as a director since its inception
in 1984 and as President and Chief Executive Officer since April 1991. From
October 1990 to April 1991, he served as a marketing and sales consultant to the
Company. From June 1984 to October 1990, Mr. Carolin was Senior Vice President
of The Mills Group, Inc., a real estate development firm. Previously, Mr.
Carolin worked for The General Electric Company and Honeywell, Inc. in a variety
of technical positions. Mr. Carolin received his BS in Electrical Engineering
from Duke University and his MBA from Harvard Business School.
James J. Kim has been a director of the Company since December 1991. Mr.
Kim is the founder, Chairman and Chief Executive Officer of Amkor Technology,
Inc. Amkor, headquartered in West Chester, Pennsylvania, is a leader in
semiconductor assembly, test, packaging and technology, utilizing the facilities
of Anam Industrial Co., Ltd., of Seoul, and Amkor/Anam Pilipinas, Inc., in
Manila. Mr. Kim received his BS and MA in Economics from the University of
Pennsylvania. See "Certain Relationships and Related Transactions."
Brad S. Mattson has been a director of the Company since December 1995. Mr.
Mattson founded Mattson Technology, Inc., a manufacturer of semiconductor
fabrication equipment, and has served as its Chief Executive Officer, President
and a director since its inception in November 1988. Mr. Mattson was the founder
of Novellus, a semiconductor equipment company, and formerly served as its
President, Chief Executive Officer and Chairman. He has also held executive
positions at Applied Materials and LFE Corporation, both semiconductor equipment
companies.
John F. Osborne has been a director of the Company since July 1999. Mr.
Osborne has 30 years experience in the semiconductor industry with 15 years of
service in senior management positions. Mr. Osborne is currently a consultant to
the semiconductor industry. From 1988 to 1997 Mr. Osborne held various positions
at Lam Research, Inc. including Vice President of Strategic Development, Vice
President of Quality and Vice President of Customer Support. Mr. Osborne
received his BS in Physical Metallurgy from the Colorado School of Mines.
Milton S. Stearns, Jr. has been a director of the Company since December
1994. Since 1972, Mr. Stearns has been President of Charter Financial Company, a
corporate financial consulting company. Mr. Stearns has been a director of five
public and a number of private companies. In addition, from 1976 to 1987, he was
Chairman and Chief Executive Officer of Judson Infrared Inc., a manufacturer of
infrared detectors for the military and for telecommunications companies. Mr.
Stearns received his BS from Harvard University and his MBA from Harvard
Business School.
All directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers are appointed
by the Board of Directors and serve at the discretion of the Board.
During the fiscal year ended October 31, 1999, the Board of Directors held
a total of four regular meetings and four special meetings, the Executive
Compensation and Stock Option Committee held one meeting and the Audit Committee
held three meetings. Each director of the Company attended more than 75% of the
meetings of the Board of Directors and of the committees of the Board of
Directors on which such director served.
4
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PK Ltd. ("PKL"), a company partly owned by Mr. James J. Kim, a director and
shareholder of the Company, acts as the Company's sales agent in Korea. The
Company recorded commission expense in fiscal 1999, 1998 and 1997 of $597,000,
$391,000 and $3,948,000, respectively, which related to commissions payable to
PKL. Commissions payable to PKL, included in accrued expenses as of October 31,
1999 and 1998, were $377,000 and $1,437,000, respectively. The terms of the
commissions to PKL were no less favorable than would have been obtained from
unrelated third parties. The Company also recorded net sales of $4,891,000 and
$6,760,000 in fiscal 1998 and 1997, respectively, to Anam Semiconductor ("Anam")
for which Mr. Kim served as Chairman of the Board of Directors. The Company
believes that the terms of the sales to Anam were no more favorable than would
have been granted to unrelated third parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than ten
percent of its Common Stock to file with the Securities and Exchange Commission
and The Nasdaq Stock Market initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to it and written representations with respect to the fiscal
year ended October 31, 1999, the Company's officers, directors and greater than
ten percent shareholders were in compliance with all applicable Section 16(a)
filing requirements with the following exceptions: Messrs. McConnell, Carolin,
Randall, Berger and Kar each inadvertently failed to file a Form 4 to report an
option grant to each such person in 1998 and Mr. Kar inadvertently failed to
file a Form 4 to report the purchase of shares through an Employee Stock
Purchase Plan in 1999 and an open market purchase in September 1999.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") for
services in all capacities to the Company or its subsidiaries for the fiscal
year ended October 31, 1999 and the total compensation earned by such
individuals for the Company's prior two fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Annual Compensation Securities All Other
Name and Fiscal ----------------------- Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($)(1)
- ------------------ ---- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
Roger A. Carolin 1999 $196,875 $78,750 20,000 $5,234
President and Chief 1998 196,000 -- 25,000 5,302
Executive Officer 1997 175,000 34,500 63,300 5,476
Lorin J. Randall 1999 144,375 37,500 13,000 5,632
Vice President 1998 146,000 -- 12,000 5,220
Finance, Chief Financial Officer, 1997 145,000 33,500 45,800 5,662
Secretary and Treasurer
Rudra N. Kar 1999 111,771 34,500 50,000 4,488
Vice President
Engineering (2)
Joseph E. Berger 1999 113,750 18,800 7,000 4,009
Vice President 1998 116,000 -- 7,000 4,168
Worldwide Sales and Marketing 1997 120,000 25,000 21,000 5,040
Christopher F. McConnell 1999 83,333 42,000 20,000 3,092
Chairman of the Board of 1998 106,000 -- 10,000 4,186
Directors 1997 150,000 40,250 40,000 6,786
</TABLE>
- ----------
(1) Compensation reported represents (a) the Company's matching contribution to
the Company's 401(k) Plan paid in fiscal 1998 for the 1997 fiscal year,
paid in fiscal 1999 for the 1998 fiscal year and paid in fiscal 2000 for
the 1999 fiscal year and (b) the dollar value (per IRS rates) on life
insurance policies in excess of $50,000 regularly furnished to all
employees. The amounts reported above for fiscal year 1999 are comprised
of:
401(k) Company Life
Match Insurance
-------------- ---------
Roger A. Carolin $5,000 $234
Lorin J. Randall 4,950 682
Rudra N. Kar 4,350 138
Joseph E. Berger 3,900 109
Christopher F. McConnell 3,000 92
(2) Mr. Kar joined the Company in January 1999 as Vice President Engineering.
6
<PAGE>
Compensation Committee Interlocks
The Executive Compensation and Stock Option Committee of the Company's
Board of Directors was formed in November 1991. From the beginning of fiscal
year 1999 until July 1999, the members of this Committee were Mr. Mattson and
Mr. Kim. From July 1999 and until the Meeting, the members were and are expected
to remain Mr. Osborne and Mr. Kim. None of these individuals was at any time
during the fiscal year ended October 31, 1999, or at any other time, an officer
or employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of the Company's Board of
Directors or Executive Compensation and Stock Option Committee.
Option Grants in the Last Fiscal Year
The following table sets forth each grant of stock options made during the
fiscal year ended October 31, 1999 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------- Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term (3)
Options Employees in Price Expiration --------------------------
Name Granted Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ----------- ----------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Carolin (1) 20,000 8.9% $7.125 12/15/08 $ 89,617 $227,108
Lorin J. Randall (2) 13,000 5.8 7.125 12/15/08 58,251 147,620
Rudra N. Kar (3) 50,000 22.2 7.125 12/15/08 224,044 567,771
Joseph E. Berger (4) 7,000 3.1 7.125 12/15/08 31,366 79,488
Christopher F. McConnell (1) 20,000 8.9 7.8375 12/15/08 98,579 249,819
</TABLE>
- ----------
(1) These options vest with regard to 5,000 shares on December 31, 2001, March
31, 2002, June 30, 2002 and September 30, 2002, respectively.
(2) These options vest with regard to 3,250 shares on December 31, 2001, March
31, 2002, June 30, 2002 and September 30, 2002, respectively.
(3) These options vest with regard to 12,500 shares on December 15, 1999 and
3,125 shares on the last day of each quarter commencing on March 31, 2000
and concluding in December 31, 2002.
(4) These options vest with regard to 1,750 shares on December 31, 2001, March
31, 2002, June 30, 2002 and September 30, 2002, respectively.
(5) The potential realizable value is based on the term of the option at the
time of the grant (ten years). Potential gains are net of the exercise price
but before taxes associated with the exercise. Amounts represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the relevant option term. The assumed 5% and 10%
rates of stock appreciation are based on appreciation from the exercise
price per share established at the relevant grant date. These rates are
provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on stock options exercised
are dependent on, among other things, the future financial performance of
the Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into account
any appreciation in the price of Common Stock from the date of grant to the
date of this Proxy Statement, other than the columns reflecting assumed
rates of appreciation of 5% and 10%.
7
<PAGE>
Fiscal Year-End Stock Option Values
The following table sets forth information with respect to the number of
shares covered by exercisable and unexercisable options held by the Named
Executive Officers on October 31, 1999 and the value of such unexercised options
on October 31, 1999. No stock options were exercised by any of the Named
Executive Officers during the 1999 fiscal year.
Fiscal Year-End Stock Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at Fiscal Year End (#) at Fiscal Year End ($) (1)
------------------------------ -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Roger A. Carolin 213,678 59,550 $1,252,780 $ 57,500
Lorin J. Randall 68,041 37,675 86,731 37,375
Rudra N. Kar -- 50,000 -- 143,750
Joseph E. Berger 52,916 18,500 276,580 20,125
Christopher F. McConnell 30,000 40,000 -- --
</TABLE>
- ----------
(1) Options are in-the-money if the market value of the shares covered thereby
is greater than the options' exercise price. Calculated based on the fair
market value at fiscal year end of $10.00 per share, less the exercise
price.
Compensation of Directors
The Company reimburses directors for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees. Each
non-employee director will receive an option grant to purchase a number of
shares of Common Stock of the Company with a fair value, as reasonably
determined utilizing a valuation method in accordance with generally accepted
accounting principles, of $20,000 for each year or partial year of service (on a
prorated basis) on the date of the Company's Annual Meeting of Shareholders
following such year of service. Newly elected non-employee directors will
receive an additional option grant to purchase a number of shares of Common
Stock of the Company with a fair value, as reasonably determined utilizing a
valuation method in accordance with generally accepted accounting principles, of
$20,000 on the date of the Company's Annual Meeting of Shareholders following
such election. In addition, each non-employee director receives fees of $1,000
for attendance at regularly scheduled meetings of the Board of Directors, $500
for attendance at committee meetings and $250 for attendance at telephonic
meetings.
In the future, the Company may compensate directors for their service
through cash compensation, stock options or stock grants, or a combination
thereof.
Employment Contracts
The Company has entered into written employment agreements with Lorin J.
Randall, its Vice President-Finance and Chief Financial Officer, and Rudra N.
Kar, its Vice President-Engineering. The principle terms of their agreements are
as follows:
The agreement with Mr. Randall is for five years beginning October 1999,
subject to extension, and provides for an annual base salary of $165,000 plus a
bonus with an annual payment target of not less than 30% of his base salary and
all employee fringe benefits that are made available to other employees of the
Company. The agreement may be terminated by Mr. Randall or the Company under
certain circumstances. If Mr. Randall's employment is terminated after or in
connection with a change of control of the Company, he will be entitled to his
then current annual base salary plus annual target bonus for a period of 18
months following termination. The Company will also be obligated in that case to
grant Mr. Randall fully vested stock options equal to the number of unvested
options held by him and cancelled at the time of such termination. A "change of
control" includes, among other things, a specified change in the composition of
the Company's Board of Directors, approval by the shareholders of the Company of
certain mergers, consolidations or reorganizations involving the Company and a
sale of all or substantially all of the assets of the Company.
8
<PAGE>
Mr. Kar's employment agreement provides for an annual base salary of
$145,000 per year plus all employee fringe benefits that are made available to
other employees of the Company. Under this agreement, Mr. Kar was granted
options to purchase 50,000 shares of Common Stock which vest over four years.
The agreement will remain in effect until terminated by either Mr. Kar or the
Company. In the event Mr. Kar is terminated without just cause, the Company will
continue to pay his then current base salary for a period of twelve months from
the date of termination, or if termination occurs after two years from his
starting date of employment, until he commences full-time employment elsewhere
(whichever is earlier).
Except as set forth above, the Company does not have employment agreements
with any of its executive officers.
Audit Committee
The Audit Committee for fiscal 1999 was comprised of Mr. Milton S. Stearns,
Jr., Chairman, Mr. Brad S. Mattson and Mr. John F. Osborne, who joined the Board
and the Audit Committee in July 1999. These three members are independent
outside directors of the Company. The Audit Committee historically meets three
times each year and is responsible for meeting with the Company's auditors to
review audit procedures and results, considering any matters arising from audits
of the Company with respect to the Company's accounting and its internal
controls, and considering such matters as may from time to time be set forth in
a charter adapted by the Board and the Audit Committee.
Report of Executive Compensation and Stock Option Committee on Annual
Compensation
The Executive Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee") is comprised entirely of the
undersigned independent, outside directors. The Compensation Committee meets at
least once each year to act on specific recommendations by management for the
grant of stock options and to review the overall compensation philosophy,
policies and practices of the Company with regard to all employees. The
Compensation Committee also reviews policies upon which compensation decisions
are based and, where required, recommends to the Board of Directors for approval
the philosophy and policies established by the Compensation Committee.
The Company's overall philosophy on compensation, as adopted by the
Committee, is to provide competitive compensation designed to attracting
talented employees. Other than eligibility for certain levels of stock options
and incentive awards, there are no perquisites, pay or benefit programs offered
to executive officers which are not offered to all employees. An incentive
awards plan is generally proposed annually by management for senior executives
and reviewed and recommended, in aggregate, by the Compensation Committee. These
awards are based upon a combination of individual and Company performance
against predetermined objectives, each of which is tested against the goal of
the creation of shareholder value.
The components of overall compensation for each position are set by, among
other things, comparison with the pay practices of comparable companies. The
Company, on a discretionary basis, matches contributions to the Company's 401(k)
plan at the rate of 50 percent of eligible employee contributions.
A portion of the Compensation Committee's meetings each year takes place
without the Chief Executive Officer's presence to discuss the performance and
compensation of the Chief Executive Officer. A series of strategic and tactical
objectives were established for the Company related to improving the market
position and returning value to the shareholders. The Committee reviewed the
performance with respect to both quantitative and qualitative goals to establish
the compensation of the Chief Executive Officer. Cash compensation and stock
option awards made to the Chief Executive Officer during the fiscal year ended
October 31, 1999 were made in accordance with these principles.
John F. Osborne, Compensation Committee Chairman
James J. Kim, Compensation Committee Member
9
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock with the cumulative total stockholder return of (i) The Nasdaq
Stock Market (U.S.) Index (the "Nasdaq Index"), and (ii) a peer group consisting
of the Hambrecht & Quist Semiconductor Index which represents companies in the
semiconductor industry (the "Peer Group"), assuming an investment of $100 on
June 18, 1996 in each of the Common Stock of the Company, the Nasdaq Index
stocks and the Peer Group stocks. The graph assumes dividend reinvestment and,
with respect to companies in the Peer Group, the returns of each company have
been weighted at each measurement point to reflect relative stock market
capitalization. The graph commences as of June 18, 1996, the date the Common
Stock became publicly traded.
<TABLE>
<CAPTION>
Cumulative Total Return ($)
----------------------------------------------------------------------------
June 18, October 31, October 31, October 31, October 31,
1996 1996 1997 1998 1999
-------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
CFM TECHNOLOGIES, INC. $ 100 $ 84 $ 183 $ 90 $ 85
NASDAQ STOCK MARKET - (US) 100 103 135 152 253
H & Q SEMICONDUCTOR 100 113 176 154 395
</TABLE>
10
<PAGE>
APPOINTMENT OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP as
independent public accountants for the fiscal year ending October 31, 2000. A
representative of Arthur Andersen LLP is expected to be present at the Meeting
to respond to appropriate questions and will have the opportunity to make a
statement if he or she so desires.
SHAREHOLDER PROPOSALS
For the next annual meeting of shareholders, shareholder proposals must be
received by the Secretary of the Company not later than October 7, 2000 to be
considered for inclusion in the Company's proxy materials for the Annual Meeting
of Shareholders to be held in 2001. If any proposal is submitted after December
21, 2000, the Board will be allowed to use its discretionary voting authority
when the proposal is raised at the 2001 Annual Meeting, without any discussion
of the matter in the proxy statement for that meeting. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy materials
relating to such Annual Meeting of Shareholders any shareholder proposal which
does not meet all of the requirements for inclusion established by the
Securities and Exchange Commission and the Company's By-laws then in effect.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented for
action at the Meeting. However, if any other matter properly comes before the
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
By Order of the Board of Directors
Lorin J. Randall
Secretary
February 4, 2000
<PAGE>
PROXY
CFM TECHNOLOGIES, INC.
PROXY
The undersigned shareholder of CFM Technologies, Inc. (the "Company")
hereby appoints Lorin J. Randall and Joseph E. Berger, and each of them,
attorneys and proxies, with power of substitution in each of them, to vote and
act for and on behalf of the undersigned at the Annual Meeting of Shareholders
to be held on March 9, 2000 and at all postponements and adjournments thereof,
according to the number of shares which the undersigned would be entitled to
vote if then personally present upon the matters described on the reverse,
hereby revoking any proxy heretofore executed by the undersigned (i) as
specified by the undersigned on the reverse and (ii) in the discretion of any
proxy upon such other business as may properly come before the meeting, all as
set forth in the notice of the meeting and in the proxy statement furnished
herewith, copies of which have been received by the undersigned, and hereby
ratifies and confirms all that said attorneys and proxies may do or cause to be
done by virtue hereof.
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
<PAGE>
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
CFM TECHNOLOGIES, INC.
March 9, 2000
Please mark your votes as in this example. [X]
The Proxies are directed to vote as follows:
1. Election of Directors
FOR all Nominees:
nominees listed at right Christopher F. McConnell
(except as marked to VOTE Chairman of the Board of Directors
the contrary) WITHHELD Roger A. Carolin
President, Chief Executive
Officer and Director
To withhold a vote for any of the James J. Kim, Director
nominees at right, strike a line Brad S. Mattson, Director
through that nominee's name Milton S. Stearns, Jr., Director
John F. Osborne, Director
2. In their discretion, the Proxies are authorized to vote such other business
as may properly come before the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHICH
RECOMMENDS A VOTE "FOR" THE ABOVE MATTERS.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ABOVE MATTERS.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY.
Signature__________________ Signature__________________ Dated___________, 2000
IMPORTANT: Please date this proxy and sign exactly as your name or names appear
on the certificate(s) representing your shares of Common Stock of the
Company. If shares are registered in more than one name, all owners
should sign. When signing as an executor, administrator, trustee,
guardian or in another representative capacity, please give your full
title(s). If this proxy is submitted by a corporation or partnership,
it should be executed in the full corporate or partnership name by a
duly authorized person.
