<PAGE>
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ETEC SYSTEMS, 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)(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:
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<PAGE>
PRELIMINARY
LOGO
ETEC SYSTEMS, INC.
26460 CORPORATE AVENUE
HAYWARD, CA 94545
(510) 783-9210
OCTOBER 24, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Etec Systems, Inc., which will be held on Tuesday, December 2, 1997, at 10:00
a.m., at 26460 Corporate Avenue, Building 2, Hayward, California.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at an
early date, the enclosed proxy in the prepaid envelope addressed to Morrow &
Co., Inc., our agent, to ensure that your shares will be represented. YOUR
SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR
ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's 1997 Annual Report to Stockholders is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
/s/ Stephen E. Cooper
-----------------------
Stephen E. Cooper
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
PRELIMINARY
ETEC SYSTEMS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 2, 1997
----------------
To the Stockholders of Etec Systems, Inc.:
The Annual Meeting of Stockholders of Etec Systems, Inc., a Nevada
corporation (the "Company"), will be held on Tuesday, December 2, 1997, at
10:00 a.m. Pacific Standard Time, at 26460 Corporate Avenue, Building 2,
Hayward, California, for the following purposes:
1. To elect eight directors;
2. To approve an amendment to the Articles of Incorporation to increase
the number of authorized shares of Common Stock;
3. To approve an amendment to the 1995 Omnibus Incentive Plan to increase
the number of available shares;
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournment of the Annual Meeting.
Stockholders of record as of the close of business on October 15, 1997 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote will be available
for examination by any stockholder, for any purpose germane to the meeting, at
the Assistant Secretary's office, 26460 Corporate Avenue, Hayward, California,
during ordinary business hours, ten days before the meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND
OR VOTE AT THE MEETING.
By Order of the Board of Directors
/s/ Richard S. Grey
----------------------
Richard S. Grey
Secretary
Hayward, California
October 24, 1997
<PAGE>
PRELIMINARY
ETEC SYSTEMS, INC.
----------------
PROXY STATEMENT
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Etec Systems, Inc., a Nevada corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual
Meeting of Stockholders to be held at 26460 Corporate Avenue, Building 2,
Hayward, California, on Tuesday, December 2, 1997 and any adjournment thereof
(the "Annual Meeting"). The shares represented by the proxies received in
response to this solicitation and not revoked will be voted at the Annual
Meeting. A proxy may be revoked at any time before it is exercised by filing
with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the Annual Meeting. On
the matters coming before the Annual Meeting for which a choice has been
specified by a stockholder by means of the ballot on the proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be voted
FOR the election of the nominees for directors listed in this Proxy Statement
and FOR approval of Proposals 2, 3 and 4 described in the Notice of Annual
Meeting and in this Proxy Statement.
Stockholders of record at the close of business on October 15, 1997 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had shares of Common Stock outstanding
and entitled to vote. The presence in person or by proxy of the holders of a
majority of the Company's outstanding shares entitled to vote constitutes a
quorum for the transaction of business at the Annual Meeting. Each holder of
Common Stock is entitled to one vote for each share held as of the record
date.
Directors are elected by a plurality vote. The other matters submitted for
stockholder approval at this Annual Meeting will be decided by the affirmative
vote of a majority of shares present in person or represented by proxy and
entitled to vote on each such matter. Abstentions with respect to any matter
are treated as shares present or represented and entitled to vote on that
matter and thus have the same effect as negative votes. If a broker who is the
record holder of certain shares indicates on a proxy that he or she does not
have discretionary authority to vote on a particular matter as to such shares,
or if shares are not voted in other circumstances in which proxy authority is
defective or has been withheld with respect to any matter, these non-voted
shares will be counted for quorum purposes but are not deemed to be present or
represented for purposes of determining whether stockholder approval of a
particular matter has been obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may
be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation materials to beneficial owners of the Company's Common Stock. The
Company has retained Morrow & Co., Inc. to assist in the solicitation of
proxies at a cost of approximately $5,000.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about October 24, 1997.
IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT, WHETHER
YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, YOUR SHARES CAN BE
VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
NOMINEES
The Board of Directors proposes the election of eight directors of the
Company for a term of one year. Directors are elected to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. If any nominee is unable or declines to serve as director at the
time of the Annual Meeting, an event not now anticipated, proxies will be
voted for any nominee designated by the Board of Directors to fill the
vacancy.
Names of the nominees and certain biographical information about them are
set forth below:
MR. STEPHEN E. COOPER, age 51, joined the Company as President and Chief
Operating Officer in January 1993 and was named Chief Executive Officer in
July 1993. He was initially appointed to the Board of Directors in March
1993 and became the Chairman of the Board in April 1995. Before joining the
Company, Mr. Cooper served as President and Chief Executive Officer of
Bipolar Integrated Technology, a manufacturer of bipolar emitter coupled
logic semiconductors, from 1987 to 1990. From 1980 to 1987, Mr. Cooper held
various positions, including President and Chief Operating Officer, with
Silicon Systems, Inc., a manufacturer of analog/digital semiconductors.
From 1973 to 1980, Mr. Cooper held various engineering and management
positions at Intel Corporation, including Engineering Manager and Wafer
Fabrication Manager. He is also a director of Vivid Semiconductor.
MR. TAKESHI (JOHN) SUZUKI, age 59, has been a director of the Company
since May 1994. Mr. Suzuki has been President and a director of Etec Japan
since May 1990. He founded Etec Japan in 1977. Mr. Suzuki has worked in the
electronics industry since 1962 and has extensive international trade
experience.
MR. EDWARD L. GELBACH, age 66, has been a director of the Company since
June 1995. He has been a private investor for more than the past five years
and also serves as a director of Richey Electronics Inc. and Bell
Microproducts. Mr. Gelbach held various positions at Intel Corporation,
including Senior Vice President Corporate Marketing, from 1971 to 1989. He
held various positions at Texas Instruments, including National Sales
Manager, from 1965 through 1971.
MR. JOHN MCBENNETT, age 59, has been a director of the Company since
December 1994. Mr. McBennett has been the Corporate Controller of Perkin-
Elmer, which manufactures analytical instrumentation, since 1977. He has
been a corporate officer of Perkin-Elmer since 1993.
MR. WILLIAM J. RYAN, age , is proposed as a director for the Company.
Mr. Ryan has been Executive Vice President, Operations and a director of
Angstrom Technologies, Inc., which manufactures electro optical scanners,
since 1994. He co-founded Angstrom Technologies in 1993. Previously, Mr.
Ryan was Vice President, Operations of SVG Lithography Systems, Inc. from
1992 to 1994. From 1965 to 1992, he held various management positions at
IBM Corporation, including Senior Manager Advanced Semiconductor Equipment
Engineering. Mr. Ryan holds eight patents.
MR. WILLIAM T. SIEGLE, age 58, is proposed as a new director of the
Company. Dr. Siegle is a group Vice President for Technology Development
and Chief Scientist at Advanced Micro Devices, Inc., a semiconductor
manufacturer where he has been employed since 1990. Previously, he was
employed in a variety of positions in product and technology development
and manufacturing with the IBM Corporation from 1964 to 1990.
MR. THOMAS M. TRENT, age 52, has been a director of the Company since
December 1994. From 1986 through 1996, Mr. Trent was a Vice President of
Micron Technology, Inc., a semiconductor manufacturer. He joined Micron as
an integrated circuit design engineer in 1980. Previously, Mr. Trent worked
in Motorola Inc.'s semiconductor research and development department.
MR. ROBERT L. WEHRLI, age 75, joined the Company's Board of Directors in
April 1995. Since 1977, Mr. Wehrli has been owner and Chief Executive
Officer of Chronometry, Inc., a consulting firm. Mr. Wehrli has been
Chairman of the Board of Siliconix, Inc., a manufacturer of power
semiconductors, since 1990, and a director of Siliconix since 1981. He is
also a director of PECO Controls Co.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION FOR DIRECTOR OF THE
NOMINEES SET FORTH ABOVE.
2
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended July
31, 1997. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of the committees on which such
directors serve.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee. The Compensation Committee and Audit Committee are comprised
entirely of independent directors.
The members of the Compensation Committee during fiscal 1997 were Jack H.
King, Thomas M. Trent and Robert L. Wehrli. Mr. King will no longer serve as a
director of the Company following the 1997 Annual Meeting of Stockholders. The
Compensation Committee held five meetings during fiscal 1997. The Compensation
Committee's functions are to review and approve salaries and incentive
compensation of the executive officers of the Company, and to administer the
Company's incentive compensation and benefit plans.
The members of the Audit Committee during fiscal 1997 were Catherine P. Lego
and John McBennett. Ms. Lego will no longer serve as a director of the Company
following the 1997 Annual Meeting of Stockholders. The Audit Committee held
six meetings during fiscal 1997. The Audit Committee's functions are to review
the results and the scope of the annual audit and the other services provided
by the Company's independent accountants, and monitor the effectiveness of the
Company's internal financial and accounting organization and controls and
financial reporting.
DIRECTORS' COMPENSATION
Employee directors (including Messrs. Cooper and Suzuki) receive no
additional compensation for service on the Board of Directors. Non-employee
directors of the Company receive $1,500 for each Board meeting and $500 for
each Board committee meeting attended in person. Directors are also reimbursed
for their expenses for each meeting attended in person and are eligible to
participate in the Company's 1995 Directors' Stock Option Plan (the "1995
Directors' Plan").
Under the terms of the 1995 Directors' Plan, upon appointment to the Board,
each non-employee director receives an option to purchase 8,000 shares of
Common Stock. These one-time grants vest in two installments, with half of the
shares vesting six months after the grant date and the other half vesting on
the first anniversary of the grant date. In addition, during his or her
tenure, each non-employee director receives an annual grant (upon the
anniversary of such director's initial grant of options) of options to
purchase 3,000 shares. Annual grants of options vest on the first anniversary
of the grant date. Under the 1995 Directors' Plan, each option's exercise
price is 100% of the fair market value of the underlying shares on the grant
date.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 15, 1997,
as to shares of the Company's Common Stock beneficially owned by: (i) each of
the Company's executive officers, including those named in the Summary
Compensation Table, (ii) each of the Company's directors, (iii) all directors
and executive officers of the Company as a group, and (iv) each person who is
known by the Company to own beneficially more than 5% of the Company's Common
Stock.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)(2)
------------ ------------
<S> <C> <C>
Frank E. Abboud(3).................................. *%
William D. Cole(3).................................. *
Stephen E. Cooper(3)................................ *
Trisha A. Dohren(3)................................. *
Edward L. Gelbach(3)................................ *
Mark A. Gesley(3)................................... *
Jack H. King(3)(4).................................. *
Catherine P. Lego(3)................................ *
John McBennett(3)................................... *
William D. Snyder(3)................................ *
Takeshi (John) Suzuki(3)............................ *
Thomas M. Trent(3).................................. *
Paul A. Warkentin(3)................................ *
Robert L. Wehrli(3)................................. *
All directors and executive officers as a group (14
persons)(3)........................................
</TABLE>
- --------
* Amount represents less than 1% of the Company's Common Stock.
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, shares which
such person or group has the right to acquire within 60 days after such
date are deemed to be outstanding, but are not deemed to be outstanding
for the purposes of computing the percentage ownership of any other
person.
(3) Includes shares issuable upon exercise of options within 60 days of
October 15, 1997 as follows: Mr. Abboud, , Mr. Cole, , Mr. Cooper, ,
Ms. Dohren, , Mr. Gelbach, , Mr. Gesley, , Mr. King, , Ms. Lego,
, Mr. McBennett, , Mr. Snyder, , Mr. Suzuki, , Mr. Trent, , Mr.
Warkentin, , Mr. Wehrli, , and all executive officers and directors as
a group (14 persons), .
(4) Excludes shares held by Zitel Corporation, of which Mr. King is
President, Chief Executive Officer and a director and may be deemed to
share voting or dispositive power over such shares.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in all
capacities to the Company for the three fiscal years ended July 31, 1997 of
(i) the Company's Chief Executive Officer, (ii) the Company's five other most
highly compensated executive officers whose total annual salary and bonus for
fiscal year 1997 exceeded $100,000 (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ALL OTHER
- --------------------------- ---- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Stephen E. Cooper........... 1997 348,950 132,088 100,000 2,000(1)
Chairman, President and 1996 242,281 123,750 44,000 2,387(1)
Chief Executive Officer 1995 200,655 93,698 44,000 2,006(1)
Takeshi (John) Suzuki....... 1997 206,992 67,516 15,000 60,618(2)
President, Etec Japan 1996 226,120 85,397 12,000 55,787(2)
1995 277,610 63,058 16,000 62,710(2)
William D. Cole(3).......... 1997 202,187 80,400 16,000 1,442(1)
Vice President, Sales and 1996 -- -- 70,000 --
Customer Support 1995 -- -- -- --
Roy A. Earle(4)............. 1997 189,965 176,440 20,000 1,142(1)
Vice President, European 1996 139,116 100,000 90,000 572(1)
Operations 1995 -- -- -- --
Philip J. Koen, Jr.(5)...... 1997 233,381 76,440 0 1,059(1)
Vice President and Chief 1996 178,181 90,000 16,000 1,592(1)
Financial Officer 1995 150,001 68,144 22,000 1,500(1)
Paul A. Warkentin........... 1997 159,432 54,600 40,000 1,470(1)
Senior Vice President and 1996 141,575 49,500 15,000 1,158(1)
Chief Operating Officer 1995 110,001 35,776 12,000 1,100(1)
</TABLE>
- --------
(1) Represents contributions by the Company under its 401(k) plan.
(2) Represents contributions by the Company to a plan which provides for
payments to Mr. Suzuki during his retirement, pursuant to an agreement the
Company and Mr. Suzuki entered into in fiscal 1994, and for a housing
allowance.
(3) Mr. Cole commenced employment with the Company on July 29, 1996.
(4) Mr. Earle commenced employment with the Company on October 9, 1995. Mr.
Earle's bonus includes a hiring bonus of $100,000 which was paid in fiscal
year 1996 and an additional bonus of $100,000 paid during fiscal year 1997
upon achievement of his performance plan metrics.
(5) Mr. Koen's employment with the Company terminated on July 8, 1997.
5
<PAGE>
STOCK OPTIONS
The following table summarizes options granted to the Company's Chief
Executive Officer and the Named Executive Officers during fiscal year 1997.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
--------------------------------------------------- -------------------
NUMBER OF % TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR PER SHARE(1) DATE 5%($) 10%($)
---- ---------- -------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen E. Cooper....... 100,000 11.85% $36.75 3/4/07 2,311,188 5,857,004
Takeshi (John) Suzuki... 15,000 1.78% $42.50 6/3/07 400,920 1,016,011
William D. Cole......... 16,000 1.90% $42.50 6/3/07 427,648 1,083,745
Roy A. Earle............ 20,000 2.37% $42.50 6/3/07 534,560 1,354,681
Philip J. Koen, Jr.(3).. 0 0% $ 0 -- 0 0
Paul A. Warkentin....... 40,000 4.74% $42.50 6/3/07 1,069,121 2,709,362
</TABLE>
- --------
(1) All options were granted with an exercise price at or above fair market
value. During fiscal year 1997, no stock appreciation rights were awarded
to any executive officer.
(2) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the 5% and 10%
assumed annual rates of compounded stock price appreciation or at any
other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grant made to the Named Officer.
(3) Mr. Koen's employment with the Company terminated on July 8, 1997.
The following table summarizes exercises of options during fiscal 1997 by
the Company's Chief Executive Officer and the Named Officers and the value of
options held by each such person at the end of fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JULY 31, 1997(#) JULY 31, 1997($)(2)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen E. Cooper....... 23,500 893,767 22,000 167,500 891,022 4,542,750
Takeshi (John) Suzuki... 13,334 558,257 11,000 32,000 494,250 855,000
William D. Cole......... 0 0 17,500 68,500 555,625 1,854,875
Roy A. Earle............ 20,000 683,904 2,500 87,500 76,875 3,261,625
Philip J. Koen, Jr.(3).. 81,667 2,743,306 0 0 0 0
Paul A. Warkentin....... 24,574 954,332 22,075 68,136 1,079,898 1,703,104
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) Calculated on the basis of the fair market value of the underlying
securities at July 31, 1997 ($54.25 per share) minus the exercise price.
(3) Mr. Koen's employment with the Company terminated on July 8, 1997.
6
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION AGREEMENTS
None of the executive officers named in the Summary Compensation Table has
an employment agreement with the Company, except that Mr. Cooper and Ms.
Trisha Dohren, Vice President of Corporate Services are each entitled to 26
weeks of salary continuance if the Company terminates his or her employment
other than for cause.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans for its executives,
except that the Company makes an annual contribution to Mr. Suzuki's
retirement plan pursuant to an agreement between the Company and Mr. Suzuki.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
During fiscal 1997, the Compensation Committee of the Company's Board of
Directors (the "Committee") was comprised of three non-employee directors,
Messrs. Jack H. King, Thomas M. Trent and Robert L. Wehrli. Mr. King will no
longer serve as a director of the Company following the 1997 Annual Meeting of
Stockholders. The Committee meets regularly, prior to a scheduled meeting of
the Board of Directors, and holds special meetings as required.
The charter of the Compensation Committee is to provide guidance and
leadership to the Chief Executive Officer and the Vice President of Corporate
Services to enable them to design and implement executive compensation
packages to enable the Company to attract and retain executive management. The
primary role of the Committee is to review and approve the salary, bonus,
stock options and other benefits, direct or indirect, of the Company's senior
management.
EXECUTIVE COMPENSATION OBJECTIVES
The Company's major objectives in defining executive officer compensation
are to:
. Attract and retain key executive management and leadership to ensure the
success of the Company;
. Align executive compensation targets with the annual as well as long-term
financial, operational and strategic objectives of the Company; and
. Reward key executives for their contribution to the long-term success of
the Company by providing opportunities for them to acquire an ownership
interest in the Company.
COMPONENTS OF EXECUTIVE COMPENSATION
The Committee approved the fiscal year 1997 executive compensation package
upon consideration of base salary, annual cash incentives and long-term stock-
based incentives.
Base Salary. The base salary for executive officers of the Company takes
into account individual performance, the scope of the executive officer's
responsibilities and comparative compensation data for companies of a similar
size and organizational structure that are located in the Northern California
area. In fiscal year 1997 certain executive officers received increases to
their base salaries as a result of changes or increases in management
responsibilities and to reflect adjustments to comparative market data.
Annual Cash Incentives. Annual cash bonuses are earned according to a
formula that was designed to reward key executive officers for the overall
performance of the Company. The Senior Management Incentive Program ("SMIP")
awards key executives according to a targeted return on the Company's net
capital employed. The maximum payout under the SMIP is capped at 200% of the
fiscal year's 1997 targeted incentive. The target SMIP provided cash incentive
compensation to executives in amounts ranging from 27% to 67% of the
executive's base salary for fiscal 1997.
7
<PAGE>
The Compensation Committee approves the SMIP to ensure that the target
financial, operational and performance objectives of the program are properly
aligned with the performance of the Company. In addition, the Committee
approves any changes to participation in the SMIP.
Long-Term Stock-Based Incentives. Long-term stock-based incentives are
provided through periodic stock option grants pursuant to the Company's 1995
Omnibus Incentive Plan. The option grants are made based on an exercise price
which is equal to the market price of the Company's outstanding shares at the
time of the grant. The objective of these grants is to ensure that the
interests and objectives of the executive are more closely aligned with the
long-term interests and returns that will be realized by the stockholder. In
awarding option grants, the Committee also considers the vesting schedule of
an executive officer's current options as well as comparable data indicating
long-term awards provided to executive officers of similar industries and
possessing similar responsibilities in the Northern California region.
However, the Committee does not intend to adhere to any specific guidelines
and may elect to vary the size of an option grant to any executive officer in
consideration of his or her overall option and compensation package.
CHIEF EXECUTIVE OFFICER (CEO) COMPENSATION
Chief executive officer compensation is comprised of the same components as
the other executive officers' compensation: base salary, annual cash
incentives and long-term stock-based incentives. The compensation payable to
Mr. Stephen E. Cooper, the Chief Executive Officer during fiscal year 1997 was
determined by the Board of Directors in consideration of comparable base
salary levels in effect for chief executive officers of similar sized
companies in similar industries and in the Northern California region. Mr.
Cooper's compensation package was designed to achieve two primary objectives:
(1) to provide a base compensation level that is competitive with that paid to
other chief executive officers of peer group companies according to the
criteria described above, and (2) to base a significant portion of his
compensation on the annual and long-term performance of the Company. The cash
bonus paid to Mr. Cooper for the 1997 fiscal year was based on the Company's
achievement of return on net capital employed. No dollar guarantee is provided
going forward.
Mr. Cooper received an increase in base salary from $226,800 in fiscal year
1996 to $350,000 in fiscal year 1997. The increase was to ensure a competitive
base salary level. No adjustment in base salary was made in fiscal year 1996.
A stock option for an additional 100,000 shares of Common Stock was granted to
Mr. Cooper on March 4, 1997 to bring his level of unvested option holdings to
a level deemed appropriate to maintain a meaningful incentive in which to
contribute and share in the financial success of the Company through stock
price appreciation.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to a publicly-held company for compensation in
excess of $1 million paid or accrued to certain executive officers in any
year. The compensation paid to the Company's executive officers for the 1997
fiscal year did not exceed $1 million for any executive officer. It is not
expected that the compensation paid in fiscal year 1998 will exceed the $1
million limit for any executive officer of the Company.
Submitted by the Compensation Committee of the Company's Board of Directors:
Jack H. King
Thomas M. Trent
Robert L. Wehrli
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Jack H. King, Thomas M.
Trent, and Robert L. Wehrli. None of these individuals were at any time during
fiscal year 1997, 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 other entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
8
<PAGE>
CERTAIN TRANSACTIONS
In fiscal 1997 the Company made loans to certain executive officers pursuant
to the Company's Executive Loan Program, as follows: (i) $100,000 to Frank
Abboud, Vice President of Product Development. Mr. Abboud's loan has a five-
year term and is secured by a Deed of Trust on his principal residence; (ii)
$100,000 to Trisha Dohren, Vice President of Corporate Services, which has
been paid in full; and (iii) $100,000 to Paul Warkentin, Senior Vice President
and Chief Operating Officer, which has been paid in full.
It is the Company's current policy that it will enter into transactions with
officers, directors, five percent stockholders and their affiliates only if
such transactions are approved by a majority of the disinterested independent
directors, are on terms no less favorable to the Company than could be
obtained from unaffiliated parties and are reasonably expected to benefit the
Company.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company's Common Stock with The Nasdaq Stock Market Index (U.S.) and Hambrecht
& Quist Semiconductor Index. The comparison assumes the investment of $100 on
October 24, 1995 (the date the Company's Common Stock became registered under
Section 12 of the Securities Exchange Act of 1934) based on the initial public
offering price of such stock on that date and the assumption that dividends
were reinvested when paid. The comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ETEC SYSTEMS, INC., THE NASDAQ
STOCK MARKET
INDEX (U.S.) AND THE HAMBRECHT & QUIST SEMICONDUCTOR INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------
10/24/95 - 7/96 7/97
<S> <C> <C> <C>
ETEC SYSTEMS, INC. 100 235 543
NASDAQ STOCK MARKET(U.S) 100 105 155
HAMBRECHT & QUIST SEMICONDUCTORDS 100 63 156
</TABLE>
9
<PAGE>
PROPOSAL 2--TO APPROVE AN AMENDMENT TO THE ARTICLES OF
INCORPORATION OF ETEC SYSTEMS, INC.
PROPOSAL 2
The stockholders are being asked to approve an amendment to the Company's
Articles of Incorporation to increase the authorized number of shares of
Common Stock from 40,000,000 to 60,000,000 shares. The Board of Directors
approved the amendment on September 22, 1997, subject to stockholder approval.
The Articles of Incorporation presently provide that the Company is
authorized to issue two classes of stock, consisting of Common Stock and
Preferred Stock. On October 15, 1997, shares of Common Stock were issued
and outstanding, and shares of Common Stock were reserved for issuance
upon the exercise of outstanding options. The remaining number of authorized
but unissued shares of Common Stock are not reserved for any specific use and
are available for future issuance.
The proposed amendment will authorize additional shares of Common Stock to
provide the Company with the flexibility to issue Common Stock as may be
necessary to complete strategic acquisitions or other corporate transactions,
or to declare a share dividend or stock split. The proposed amendment would
enable the Company to accomplish its business and strategic objectives in an
expeditious manner.
The additional shares of Common Stock authorized by the proposed amendment
could be used to dilute the stock ownership of persons seeking to obtain
control of the Company. The proposed amendment, together with the right of the
Board of Directors to issue Preferred Stock without further shareholder
approval, may have the effect of delaying or deterring a change in control or
management of the Company.
PROPOSAL 2 AMENDMENT
The amendment, which is subject to stockholder approval, amends and restates
the first paragraph of Article Fourth of the Eighth Amended and Restated
Articles of Incorporation to read as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is seventy million (70,000,000) shares. Of said
shares, sixty million (60,000,000) shares shall be common stock ("Common
Stock") with a par value of $0.01 per share and ten million (10,000,000)
shares shall be preferred stock ("Preferred Stock") with a par value of
$0.01 per share."
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of shares of Common Stock
represented and voting at a duly held meeting at which a quorum is present is
required to approve the amendment to the Articles of Incorporation. Unless
marked to the contrary, proxies received will be voted "FOR" approval of the
Proposal 2 amendment to the Company's Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3--TO APPROVE AN AMENDMENT TO THE 1995 OMNIBUS INCENTIVE PLAN OF ETEC
SYSTEMS, INC.
SUMMARY OF THE 1995 OMNIBUS INCENTIVE PLAN
The 1995 Omnibus Incentive Plan of the Company (the "1995 Plan"), which was
adopted by the Board of Directors in July 1995 and approved by the
stockholders in September 1995, became effective upon the consummation of the
Company's initial public offering in October, 1995.
The 1995 Plan originally provides for awards in the form of restricted
shares, options, and stock appreciation rights ("SARs"). Options issued under
the 1995 Plan may take the form of incentive stock options
10
<PAGE>
("ISOs") intended to qualify for preferential tax treatment under section 422
of the Internal Revenue Code (the "Code"), and nonstatutory stock options
("NSOs") that do not qualify for such treatment. A total of 1,975,000 shares
of Common Stock have been reserved for issuance under the 1995 Plan.
The Board of Directors recently amended the 1995 Plan to limit the number of
restricted shares that may be awarded to 10% of the shares allocated to the
1995 Plan and to eliminate awards in the form of SARs.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors, which is comprised of directors of the Company who are
disinterested within the meaning of Rule 16b-3 of the Exchange Act. The Board
of Directors may appoint another committee, which may consist of any two or
more members of the Board of Directors, to administer the 1995 Plan with
respect to employees who are not officers or directors. Subject to the
limitations set forth in the 1995 Plan, the applicable committee has the
authority to determine to whom options will be granted or shares will be sold
or awarded and to determine the terms and conditions of each grant, sale or
award. Options and rights to purchase shares under the 1995 Plan are
nontransferable, except in the case of a Qualified Domestic Relations Order.
All employees and select consultants of the Company worldwide are eligible
for awards under the 1995 Plan, except that only employees are eligible for
the grant of ISOs. No participant may be granted options covering more than
100,000 shares under the 1995 Plan in any calendar year.
Vesting of restricted shares or stock options will be specified in
individual agreements. Stock options become immediately exercisable in the
event of death or total and permanent disability, and vesting of stock options
may be accelerated in the event of a merger, consolidation or sale of
substantially all of the assets of the Company that constitutes a change in
the control of the Company, or in the event of the employee's retirement or
any other event determined by the administering committee.
The committee may grant options that are exercisable prior to becoming
vested, subject to the Company's right to repurchase unvested shares.
The Board of directors has the discretion to grant NSOs under the 1995 Plan
at an exercise price below the fair market value of the Common Stock on the
date of grant. No NSOs with exercise prices below fair market value have been
granted to date. The exercise price of an ISO cannot be less than 100% of the
fair market value of the Common Stock on the date of grant and, if the ISO is
granted to a holder of more than 10% of the voting power of the Company, not
less than 110% of such fair market value. The maximum term of an ISO is ten
years and, if the ISO is granted to a holder of more than 10% of the voting
power of the Company, five years.
All existing employees of the Company worldwide are eligible for awards
under the 1995 Plan. At October 15, 1997, options to purchase shares had
been granted under the 1995 Plan. No restricted shares have been granted under
the 1995 Plan to date. There are currently shares available for future
grants under the 1995 Plan. If any restricted shares or options granted under
the 1995 Plan are forfeited, then they will again become available for awards
under the 1995 Plan. The 1995 Plan automatically terminates ten years from the
date of stockholder approval.
PROPOSAL 3
The stockholders are being asked to approve an amendment to the Company's
1995 Plan that will increase the number of shares of Common Stock available
for issuance under the 1995 Plan by an additional 1,000,000 shares. The Board
of Directors approved the amendment to the 1995 Plan on September 4, 1997,
subject to stockholder approval.
The Company believes that approval of the amendment is in the best interests
of the Company and its stockholders because the availability of shares
reserved for issuance under the 1995 Plan and the ability to grant stock
options is a critical factor in its ability to attract, retain and motivate
employees. The Company currently grants options to all employees worldwide
upon hire, and periodically, to key employees or in recognition of achievement
of certain performance criteria. In the recent year, the Company has
experienced revenue growth
11
<PAGE>
from $145.6 million in 1996 to $240.9 million in 1997. Additionally, in the
third quarter of fiscal 1997, the Company acquired all of the shares of
Munich, Germany based Ebetech Electron Beam Technology GmbH ("Ebetech"), and
formed a new subsidiary to employ the Ebetech personnel. Critical hires were
also made in finance, administration, engineering, manufacturing, operations,
sales and marketing. Consequently, the number of employees during fiscal 1997
grew from 688 to 886. As a result of the increase in number of employees
during fiscal year 1997, options to purchase 869,260 shares were granted. The
availability of a sufficient amount of shares available for future option
grants will be important if the Company enters into acquisitions that involve
the retention of key employees of the acquisition candidate.
The Company believes that the increase in the number of shares available
under the 1995 Plan will enable the Company to provide appropriate incentives
to its current and future employees, and will be sufficient to meet the
Company's option granting requirements for the next year.
PROPOSED AMENDMENT
The amendment, which is subject to stockholder approval, amends and restates
Article 4.1 of the 1995 Omnibus Incentive Plan to read as follows:
"ARTICLE 4. SHARES AVAILABLE FOR GRANTS
4.1 Basic Limitation. Shares issued pursuant to the Plan shall be
authorized but unissued Shares and Shares acquired in the open market.
The aggregate number of Shares reserved for award as Restricted Shares
and Options shall be 2,975,000 Shares. Any shares that have been
reserved but not awarded as Restricted Shares or Options during any
calendar year shall remain available for award in any subsequent
calendar year. The limitation of this Section 4.1 shall be subject to
adjustment pursuant to Article 11."
FEDERAL INCOME TAX CONSEQUENCES
The proposed amendment will have no effect upon the tax consequences to
recipients of stock awards or option exercises under the 1995 Plan. Nor will
the proposed amendment have any effect upon the tax consequences to the
Company of stock awards, option exercises or stock sales under the 1995 Plan.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of shares of Common Stock
represented and voting at a duly held meeting at which a quorum is present is
required to approve the amendment of the 1995 Omnibus Incentive Plan. Unless
marked to the contrary, proxies received will be voted "FOR" approval of the
amendment to the Company's 1995 Omnibus Incentive Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 4--TO RATIFY THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Price Waterhouse LLP as the Company's independent
accountants for the fiscal year ended July 31, 1998, subject to ratification
by the stockholders. Representatives of Price Waterhouse LLP are expected to
be present at the Company's Annual Meeting. They will have an opportunity to
make a statement, if they desire to do so, and will be available to respond to
appropriate questions. Price Waterhouse LLP has audited the Company's
financial statements since April 10, 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
12
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received by
the Secretary of the Company no later than June 26, 1998 in order that they
may be included in the Company's proxy statement and form of proxy relating to
that meeting.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them
with respect to transactions during fiscal year 1997 except that (i) Trisha
Dohren, Vice President, filed a Form 4 report which inadvertently failed to
report an option exercise and sale which was subsequently reported on an
amended Form 4, (ii) due to an oversight by the Company, Takeshi (John)
Suzuki, Director, filed his initial Form 3 report late and Mr. Suzuki filed a
late Form 4 report for a stock option grant and an option exercise and sale,
(iii) due to an oversight by the Company, Thomas Trent, Director, filed his
initial Form 3 report late, and (iv) Paul Warkentin, Senior Vice President,
filed an initial Form 3 report which inadvertently failed to report a warrant
grant which was subsequently reported on an amended Form 3.
OTHER MATTERS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
it is intended that proxies in the enclosed form will be voted in accordance
with the judgment of the persons voting the proxies.
Whether or not you intend to be present at the Annual Meeting, we urge you
to return your signed proxy promptly.
By Order of the Board of Directors.
/s/ Richard S. Grey
----------------------
Richard S. Grey
Secretary
Hayward, California
October 24, 1997
UPON WRITTEN REQUEST OF ANY STOCKHOLDER ENTITLED TO RECEIVE THIS PROXY
STATEMENT, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY
SUCH REQUEST SHOULD BE ADDRESSED TO THE COMPANY AT 26460 CORPORATE AVENUE,
HAYWARD, CALIFORNIA 94545, ATTENTION: INVESTOR RELATIONS. THE REQUEST MUST
INCLUDE A REPRESENTATION BY THE STOCKHOLDER THAT AS OF OCTOBER 15, 1997, THE
STOCKHOLDER WAS ENTITLED TO VOTE AT THE ANNUAL MEETING.
13
<PAGE>
4380-PS-97
<PAGE>
ETEC SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R The undersigned hereby authorizes Stephen E. Cooper, William Snyder
O and Melanie Mock, as Proxies with full power in each to act without the
X other and with the power of substitution in each, to represent and to
Y vote all the shares of stock the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Etec Systems, Inc. to be held on December
2, 1997 or at any postponement or adjournment thereof on the following
matters set forth on the reverse side.
-------------
SEE REVERSE
(Continued and to be signed on reverse side) SIDE
-------------
Please mark
[X] votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1, 2, 3 and 4.
- ---
1. Proposal to elect eight Directors of the Company as set forth in the proxy.
Nominees: Stephen E. Cooper, Takeshi Suzuki, Edward Gelbach, John McBennett,
William Ryan, William Siegel, Thomas Trent, Robert Wehril
FOR WITHHELD
[ ] [ ]
[ ]___________________________________
For all nominees except as noted above
2. Proposal to amend the Company's seventh Amended and Restated Articles of
Incorporation to increase the authorized number of shares of Common Stock
from 40,000,000 to 60,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to amend the Company's 1995 Omnibus Incentive Plan to increase the
number of shares of Common Stock available for issuance under the Plan form
1,875,000 to 2,975,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the appointment of Price Waterhouse LLP as the Company's
Independent accountants for the fiscal year ended July 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, the proxies are authorized to vote upon such other
business as many properly come before the meeting.
PLEASE MARK EACH DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign where indicated 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 an authorized officer. If a partnership, please sign in
partnership name by an authorized person.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE BELOW
MARK HERE
IF YOU
PLAN TO
ATTEND [ ]
THE ANNUAL
STOCKHOLDERS
MEETING
Signature _____________ Date: __________ Signature ___________ Date: _________
