<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)(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> 2
LOGO
ETEC SYSTEMS, INC.
26460 CORPORATE AVENUE
HAYWARD, CA 94545
(510) 783-9210
OCTOBER 29, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Etec Systems, Inc., which will be held on Tuesday, December 14, 1999, at 2:00
p.m., Pacific Standard Time (PST), at our offices located at 26460 Corporate
Avenue, Hayward, California 94545.
The formal Notice of the Annual Meeting and the Proxy Statement are
included with 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 CARD
BY MAIL, PROVIDE A PROXY OVER THE INTERNET OR BY TELEPHONE, OR ATTEND THE ANNUAL
MEETING AND VOTE IN PERSON.
A copy of our Annual Report on Form 10-K is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
LOGO
Stephen E. Cooper
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
LOGO
ETEC SYSTEMS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 1999
------------------------
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 14, 1999, at 2:00
p.m. Pacific Standard Time (PST), at the Company's principal executive offices
located at 26460 Corporate Avenue, Hayward, California, 94545, for the following
purposes:
1. To elect eight directors;
2. To approve an amendment to the 1995 Omnibus Incentive Plan to
increase the number of available shares by 800,000;
3. To approve an amendment to the 1995 Directors' Stock Option Plan to
increase the number of available shares by 50,000;
4. To approve an amendment to the 1995 Employee Stock Purchase Plan to
increase the number of available shares by 200,000;
5. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants; and
6. 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 18, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
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 CARD BY MAIL OR PROVIDE A PROXY OVER THE INTERNET
OR BY TELEPHONE. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND THE MEETING OR TO
VOTE IN PERSON AT THE MEETING.
By Order of the Board of Directors
LOGO
W. Russell Wayman
Secretary
Hayward, California
October 29, 1999
<PAGE> 4
LOGO
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 the Company's principal executive offices located
at 26460 Corporate Avenue, Hayward, California, 94545, on Tuesday, December 14,
1999, at 2:00 p.m., Pacific Standard Time (PST), 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
also be provided electronically or telephonically by following the instructions
printed on the proxy card. 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. The Company's transfer agent, which is tabulating votes with respect to
the Annual Meeting, will count the last vote received from a stockholder,
whether by telephone, proxy card, electronically through the Internet, or by
ballot at the meeting in person. On the matters coming before the Annual Meeting
for which a choice has been specified by a stockholder by means of a 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, FOR approval of Proposals 2, 3, 4 and 5 described in the Notice of
Annual Meeting and in this Proxy Statement, and in the discretion of the
proxyholders as to any other matter that is properly brought before the Annual
Meeting.
Stockholders of record at the close of business on October 18, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, the Company had 21,540,478 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. The closing price of the Company's Common Stock on the
Nasdaq Stock Market for the Record Date was $35.94 per share.
Directors are elected by a plurality vote. There is no cumulative voting in
the election of directors. Under Nevada law, the other matters submitted for
stockholder approval at this Annual Meeting require that the number of votes
cast in favor of the matter exceed the number of votes cast against the matter.
Abstentions with respect to any matter are counted for quorum purposes but do
not affect the outcome of the vote. 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 will not affect the outcome of the vote.
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 $7,500.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders, together with the 1999 Annual Report to Stockholders, on or about
October 29, 1999.
<PAGE> 5
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
as to shares of the Company's Common Stock beneficially owned by: (i) each of
the Company's executive officers named in the Summary Compensation Table
(collectively the "Named Officers"), (ii) each of the Company's directors, (iii)
all current 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>
Capital Guardian Trust Company(3)........................... 2,545,700 11.82%
11100 Santa Monica Blvd., Los Angeles, CA 90025
Pioneering Investment Management(4)......................... 1,951,000 9.1%
60 State St., Boston, MA 02109
Franklin Resources, Inc.(5)................................. 1,241,960 5.77%
777 Mariners Island, San Mateo, CA 94403
Capital Research and Management Company(6).................. 1,226,600 5.69%
333 S. Hope St., Los Angeles, CA 90071
SMALLCAP World Fund(7)...................................... 1,210,000 5.62%
333 S. Hope St., Los Angeles, CA 90071
Stephen E. Cooper(8)........................................ 172,481 .8%
William D. Cole(8).......................................... 44,417 *
Edward Gelbach(8)........................................... 30,000 *
John McBennett(8)........................................... 14,000 *
William J. Ryan(8).......................................... 11,668 *
William T. Siegle(8)........................................ 11,000 *
William D. Snyder(8)........................................ 44,750 *
Takeshi (John) Suzuki(8).................................... 41,833 *
Thomas M. Trent(8).......................................... 17,000 *
Paul A. Warkentin(8)........................................ 92,373 *
Robert L. Wehrli(8)......................................... 9,000 *
All current directors and executive officers as a group (11
persons)(2)............................................... 488,522 2.27%
</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 that 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) As reported in Schedule 13G dated February 8, 1999, filed by Capital
Guardian Trust Company ("CGTC") as to 2,204,600 shares, Capital
International, Inc. ("CII") as to 283,900 shares, Capital International S.A.
("CISA") as to 31,200 shares, and Capital International Limited ("CIL") as
to
2
<PAGE> 6
26,000 shares. CGTC, CII, CISA and CIL are affiliated entities; however,
they disclaim membership in a group for all purposes other than making the
joint filing.
(4) As reported in Schedule 13G dated January 8, 1999 filed by Pioneer
Investment Management, Inc.
(5) As reported on Schedule 13G dated January 22, 1999 filed by Franklin
Resources, Inc., Franklin Advisory Services, Charles B. Johnson and Rupert
H. Johnson, Jr. The shares are beneficially owned by one or more investment
companies or other managed accounts which are advised by direct and indirect
investment advisory subsidiaries (the "Adviser Subsidiaries") of Franklin
Resources, Inc. ("FRI"). Charles B. Johnson and Rupert H. Johnson, Jr. (the
"Principal Shareholders") each owns in excess of 10% of the outstanding
Common Stock of FRI and are the principal shareholders of FRI. FRI, the
Principal Shareholders, and each of the Adviser Subsidiaries disclaim any
beneficial ownership in any of the shares.
(6) As reported in Schedule 13G dated February 8, 1999, filed by Capital
Research and Management Company.
(7) As reported in Schedule 13G dated February 8, 1999, filed by SMALLCAP World
Fund, Inc., which is advised by Capital Research and Management Company.
(8) Includes shares issuable upon exercise of options within 60 days of the
Record Date. For the Named Officers and Directors, the amounts of such
shares are as follows: Mr. Cooper, 105,143; Mr. Cole, 33,500; Mr. Gelbach,
20,000; Mr. McBennett, 14,000; Mr. Ryan, 11,668; Mr. Siegle, 11,000; Mr.
Snyder, 44,000; Mr. Suzuki, 28,500; Mr. Trent, 9,000; Mr. Warkentin, 63,000;
Mr. Wehrli, 9,000; and all executive officers and directors as a group (11
persons), 348,811.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
A total of eight directors are to be elected at the Annual Meeting, each to
serve 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. Each of
the Company's nominees is currently serving as a director of the Company.
3
<PAGE> 7
The names of the nominees, their ages as of the Record Date and certain
information about them are set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NOMINEES AGE DURING THE LAST FIVE YEARS SINCE
-------- --- -------------------------- --------
<S> <C> <C> <C>
Mr. Stephen E. Cooper.................. 53 Chairman of the Board since April 1995, 1993
President since January 1993 and Chief
Executive Officer of the Company since
July 1993. Mr. Cooper served as Chief
Operating Officer from January 1993
until July 1993. Mr. Cooper is also a
director of Vivid Semiconductor.
Mr. Takeshi (John) Suzuki.............. 61 President and Director of Etec Japan, a 1994
subsidiary of the Company, since May
1990.
Mr. Edward L. Gelbach(2)............... 68 Private investor for more than the past 1995
five years. Mr. Gelbach is also a
director of Bell Microproducts and was
a director of Richey Electronics, Inc.
until January 1999.
Mr. John McBennett(1).................. 61 Vice President, Internal Audit of PE 1994
Corporation, A LIFE SCIENCES COMPANY,
since 1977.
Mr. William J. Ryan.................... 60 Vice President and General Manager, IPG 1997
Division of the Company since February
1999. From 1994 until February 1999,
Executive Vice President, Operations
and Director of Angstrom Technologies,
Inc., a manufacturer of electro-optical
scanners.
Mr. William T. Siegle(1)............... 60 Senior Vice President for Technology 1997
Development and Chief Scientist of
Advanced Micro Devices, Inc., a
semiconductor manufacturer, since 1990.
Mr. Thomas M. Trent (2)................ 54 Currently retired. Mr. Trent is also a 1994
director for Stellar One Corporation.
From 1986 through 1996, he was a vice
president of Micron Technology, Inc., a
semiconductor manufacturer.
Mr. Robert L. Wehrli (2)............... 77 Owner and Chief Executive Officer of 1995
Chronometry, a consulting firm, since
1977. Mr. Wehrli is also a director of
PECO Controls Co., a packing control
company. From 1985 to 1998 he was a
director of Siliconix, Inc., a
semiconductor manufacturer, and was
Chairman during the last four years of
that period.
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
There are no family relationships among any directors or executive officers
of the Company.
Under the Company's Bylaws, nominations for the election of Directors may
be made by any stockholder entitled to vote in the election of Directors, but
only if written notice of such stockholder's intent to make such nominations has
been received by the Company at its principal executive office not less than 60
days prior to the first anniversary of the day on which notice of the date of
the prior year's annual meeting was mailed to stockholders. Such stockholder's
notice must set forth: (a) with respect to each proposed nominee, the name, age,
business and residence address, principal occupation or employment, class and
number of shares of stock of the Company owned, written consent to be named as a
nominee and to serve as a director if elected, and any other information that
would be required to be disclosed in solicitations of proxies for election of
directors; and (b) with respect to the stockholder giving the notice, the name,
address and class and number of shares of the
4
<PAGE> 8
Company that are beneficially owned by such stockholder, and a description of
any arrangements or understandings between the stockholder, the nominee and any
other person relating to the nomination. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure. The Company has not received notice from any
stockholder of the intent to nominate a person from the floor at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE DIRECTOR NOMINEES AS SET FORTH ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five meetings during the fiscal year ended July
31, 1999. The average attendance at the aggregate number of meetings of the
Board and committees of the Board was 88%. Mr. Siegle attended fewer than 75% of
the aggregate number of meetings of the Board and the committees on which he
serves.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee. The Compensation Committee and Audit Committee are comprised entirely
of non-employee directors, who are identified in the list of directors under
"Nominees" above. The Company does not have a nominating committee or a
committee performing the functions of a nominating committee.
The Compensation Committee held four meetings during fiscal 1999. The
Compensation Committee's functions are to review and approve salaries and
incentive compensation of the executive officers of the Company, and to
establish basic guidelines and generally review the Company's incentive
compensation and benefit plans for all employees. See "Report of the
Compensation Committee of the Board of Directors on Executive Compensation"
below.
The Audit Committee held four meetings during fiscal 1999. The Audit
Committee's functions are to review the annual financial statements of the
Company, 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 (Messrs. Cooper, Ryan and Suzuki) receive no additional
compensation for service on the Board of Directors. Non-employee directors of
the Company receive an annual retainer of $10,000. In addition, they receive
$1,500 for each regularly scheduled Board meeting attended in person, $500 for
each Board committee meeting attended in person and $500 for each regularly
scheduled Board or committee meeting held by telephone. Directors are also
reimbursed for their expenses for each meeting attended in person and are
eligible to participate in the Company's 1995 Directors' Stock Option Plan (the
"Directors' Plan").
Under the terms of the Directors' Plan, upon appointment to the Board, each
non-employee director receives a non-statutory option to purchase 8,000 shares
of Common Stock (an "Initial Option"). These one-time grants vest in two
installments, with half of the shares vesting on the first anniversary of the
grant date and the other half vesting on the second anniversary of the grant
date. In addition, during his or her tenure, each non-employee director receives
an annual grant of an option to purchase 3,000 shares on each anniversary (an
"Annual Option"). Annual Options vest in full on the first anniversary of the
grant date. Under the 1995 Directors' Plan, each option's exercise price is 100%
of the fair market value of the underlying shares on the grant date and its term
is ten years. For a more detailed description of the Directors' Plan, see
"Proposal 3 -- Approval of Increase in Shares Under the 1995 Directors' Plan."
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered to the
Company in all capacities for the three fiscal years ended July 31, 1997, 1998
and 1999 by (i) the Company's Chief Executive Officer, and (ii) the Company's
four other most highly compensated executive officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
AWARDS/SECURITIES
ANNUAL COMPENSATION -----------------
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen E. Cooper....................... 1999 424,710 0 80,000 3,000(1)
Chairman of the Board, President and 1998 418,655 147,000 80,000 2,000(1)
Chief Executive Officer 1997 348,950 234,500 100,000 2,000(1)
Paul A. Warkentin....................... 1999 282,009 0 0 1,402(1)
Senior Vice President, 1998 218,847 66,000 90,000 1,498(1)
Advanced Reticle Solutions 1997 159,432 64,320 40,000 1,470(1)
Takeshi (John) Suzuki................... 1999 249,666 0 24,000 56,067(2)
President, Etec Japan 1998 175,027 56,960 -- 42,327(2)
1997 206,992 55,551 15,000 60,618(2)
William D. Snyder(3).................... 1999 231,202 0 32,000 2,321(1)
Vice President and Chief Financial 1998 212,021 56,250 96,000 1,299(1)
Officer 1997 -- -- -- --
William D. Cole......................... 1999 200,294 0 16,000 2,231(1)
Vice President, Sales and 1998 200,001 50,000 10,000 1,712(1)
Customer Support 1997 202,187 80,400 16,000 1,442(1)
</TABLE>
- ---------------
(1) Represents contributions by the Company under its 401(k) plan.
(2) Represents housing allowance payments.
(3) Mr. Snyder's employment with the Company commenced on August 18, 1997.
STOCK OPTIONS
The following table summarizes options granted to the Named Officers during
fiscal year 1999.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME GRANTED(#)(1) IN FISCAL YEAR SHARE($/SH) DATE 5%($) 10%($)
---- ------------- -------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen E. Cooper........... 80,000 6.81% $29.32 06/14/09 $1,475,135 $3,738,282
Takeshi (John) Suzuki....... 16,000 1.36% $32.75 08/05/08 $ 329,541 $ 835,121
8,000 .68% $29.32 06/14/09 $ 147,514 $ 373,828
Paul A. Warkentin........... -- -- -- -- -- --
William D. Snyder........... 12,000 1.02% $43.50 03/03/09 $ 328,283 $ 831,934
20,000 1.70% $29.32 06/14/09 $ 368,784 $ 934,571
William D. Cole............. 16,000 1.36% $29.32 06/14/09 $ 295,027 $ 747,646
</TABLE>
- ---------------
(1) Standard options are granted under the 1995 Omnibus Incentive Plan. The
exercise price is the fair market value on the date of grant. Options vest
25% each year beginning one year from the date of grant and expire 10 years
from the date of grant. Options are exercisable for 60 days after
termination of employment to the extent vested at that time. All options
outstanding will vest in the event of termination of employment after a
merger or consolidation of the Company with, or the sale of substantially
all the
6
<PAGE> 10
Company's assets to, any other person or corporation (except for a merger or
consolidation in which at least 80% of the total voting power after such
merger or consolidation was held by the same persons holding such voting
power immediately prior to such merger or consolidation). Options are not
transferable, except upon death by testamentary will or pursuant to the laws
of descent and distribution, or pursuant to a Qualified Domestic Relations
Order as defined by the U.S. Internal Revenue Code.
(2) Potential realizable value is calculated based on assumptions set forth in
SEC rules and does not in any way represent the Company's estimate of future
stock price. 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 exercise price, no value will be realized from the option grant made
to the Named Officer.
The following table summarizes exercises of options during fiscal 1999 by
the Named Officers and the value of options held by each such person at the end
of fiscal 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
JULY 31, 1999(#) AT JULY 31, 1999($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen E. Cooper........ 17,000 $624,750 105,143 201,000 $846,371 $1,109,480
Takeshi (John) Suzuki.... 0 $ 0 24,500 34,500 $400,460 $ 193,700
Paul A. Warkentin........ 0 $ 0 53,000 91,250 $253,240 $ 185,175
William D. Snyder........ 0 $ 0 24,000 104,000 $ 14,000 $ 213,200
William D. Cole.......... 12,000 $165,803 33,500 49,000 $362,490 $ 432,360
</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 30, 1999 ($37.88 per share) minus the exercise price.
EMPLOYMENT AGREEMENTS AND TERMINATION AGREEMENTS
None of the Named Officers has an employment agreement with the Company,
except Mr. Cooper, who is entitled to 26 weeks of salary continuance if the
Company terminates his employment other than for cause.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension plan or long-term incentive plan for its
executives. However, the Company makes an annual contribution to Mr. Suzuki's
retirement plan pursuant to an agreement between the Company and Mr. Suzuki.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Edward L. Gelbach,
Thomas M. Trent and Robert L. Wehrli. None of these individuals was at any time
during fiscal year 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 other entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
7
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Until March 2, 1999, the Compensation Committee of the Company's Board of
Directors was comprised of three non-employee directors: Messrs. William T.
Siegle, Thomas M. Trent and Robert L. Wehrli. Effective March 2, 1999, Mr.
Siegle left the Compensation Committee and was replaced by Mr. Edward L.
Gelbach. The Compensation Committee meets regularly, prior to scheduled meetings
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 Compensation 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 determining 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 primary components of the Company's executive compensation package are
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 ("Comparable Companies"). Approximately one third of the Comparable
Companies are included in the Hambrecht & Quist Semiconductor Index and all of
the Comparable Companies are included in the Nasdaq Stock Market Index. Both
indexes are used in the Stock Price Performance Graph. In fiscal year 1999, none
of the Named Officers received increases to their base salaries.
Annual Cash Incentives. The Company's Senior Management Incentive Plan
("SMIP") provides for annual cash bonuses that are earned according to a formula
designed to reward key executive officers for meeting or exceeding certain
established targets set by the Compensation Committee. For fiscal 1999, the key
targets were earnings per share, market share and customer satisfaction. The
maximum payout under the SMIP is capped at twice each participant's targeted
percentage of salary. The targeted percentage of salary ranges between 20% and
70%. Based on the Company's results during fiscal year 1999, the SMIP paid no
cash incentive compensation to executive officers.
The Compensation Committee approves the SMIP target financial, operational
and performance objectives so that they are properly aligned with the
performance of the Company. In addition, the Compensation Committee approves
participation in the SMIP and determines to what extent the objectives have been
met.
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. Such options are granted at an exercise price equal to
the market price of the Company's outstanding shares on the date of the grant.
The objective of these grants is to ensure that the interests and objectives of
the executive officers are more closely aligned with the long-term interests and
returns that will be realized by stockholders. The number of shares to
8
<PAGE> 12
be subject to an option is determined by the Compensation Committee after a
review of grant levels of Comparable Companies. In awarding option grants, the
Compensation Committee also considers the vesting schedule of an executive
officer's current options. However, the Compensation 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 1999, was determined by
the Compensation Committee in consideration of comparable base salary levels in
effect for chief executive officers of Comparable Companies. 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 Comparable 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. There was no cash bonus
paid to Mr. Cooper for the 1999 fiscal year.
Mr. Cooper's fiscal 1998 base salary of $420,000 remained the same in
fiscal year 1999. A stock option for an additional 80,000 shares of Common Stock
was granted to Mr. Cooper on June 14, 1999 to bring his unvested option holdings
to a level maintaining significant incentive for him to continue in the
employment of the Company and to increase the Company's stock price.
DEDUCTIBILITY OF COMPENSATION UNDER INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally disallows a tax deduction to a publicly-held company for certain
compensation ("162(m) compensation") in excess of $1 million paid or accrued to
certain executive officers in any year. The 162(m) compensation paid to the
Company's executive officers for the 1999 fiscal year did not exceed $1 million
for any executive officer, and it is not expected that the 162(m) compensation
paid in fiscal year 2000 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:
Edward L. Gelbach (since March 2, 1999)
William T. Siegle (until March 2, 1999)
Thomas M. Trent
Robert L. Wehrli
9
<PAGE> 13
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 closing price of
such stock on the date of such initial public offering, and assumes that
dividends, if any, 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 45 MONTH CUMULATIVE TOTAL RETURN*
AMONG ETEC SYSTEMS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST SEMICONDUCTORS INDEX
<TABLE>
<CAPTION>
NASDAQ STOCK HAMBRECHT & QUIST
ETEC SYSTEMS, INC. MARKET (U.S.) SEMICONDUCTORS
------------------ ------------- -----------------
<S> <C> <C> <C>
10/24/95 100 100 100
7/96 235 105 63
7/97 543 155 156
7/98 338 182 108
7/99 389 259 231
</TABLE>
*$100 INVESTED ON 10/24/95 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JULY 31.
PROPOSAL 2 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 OMNIBUS INCENTIVE
PLAN
Since 1995, the Company has provided stock options as an incentive to its
employees to promote increased stockholder value. Management believes that stock
options are one of the prime ways to attract and retain key personnel
responsible for the continued development and growth of the Company's business,
and to motivate all employees to increase stockholder value. In addition, stock
options are considered a competitive necessity in semiconductor equipment and
other high technology industries.
The Company currently grants options to all employees worldwide upon
initial hire, and periodically to key employees or in recognition of achievement
of certain performance criteria. In the recent fiscal year,
10
<PAGE> 14
critical hires were made in finance, administration, engineering, service,
manufacturing, operations, sales and marketing, The number of employees during
fiscal 1999 grew from 1,085 to 1,109 at fiscal year end and normal turnover also
led to the hiring of a number of replacement employees. In total, there were 193
new hires during the fiscal year who were granted a total of 403,410 shares from
the 1995 Omnibus Incentive Plan (the "Option Plan"). In addition, a total of
681,000 shares were issued as retention grants from the Option Plan to other
employees of the Company.
The Company believes that the proposed increase in the number of shares
available under the Option 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
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the Option Plan to increase the number of
shares reserved for issuance under the Option Plan by 800,000 shares from
3,975,000 shares to 4,775,000 shares. At the Annual Meeting, stockholders are
being asked to approve the increase in shares reserved under the Option Plan.
The proposed amendment 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, Stock
Units, and Options shall be 4,775,000 Shares, provided that no more than
10% of the preceding amount may be awarded as Restricted Shares. Any Shares
that have been reserved but not awarded as Restricted Shares, Stock Units
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 10."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the Option Plan at
a duly held meeting at which a quorum is present must exceed the votes cast
against such proposal in order to approve the amendment of the Option Plan.
Unless marked to the contrary, proxies received will be voted "FOR" approval of
the amendment to the Option Plan to increase the shares reserved thereunder by
800,000.
GENERAL
The Option Plan provides an incentive to employees and consultants whose
present and potential contributions are important to the continued success of
the Company, affords them an opportunity to acquire a proprietary interest in
the Company, and enables the Company to enlist and retain the best available
talent for the conduct of its business. The Option Plan permits the granting of
incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"),
restricted stock (up to 10% of the total authorized shares under the Option
Plan) and stock units. The Company does not currently have any specific plans to
grant any awards under the Option Plan other than stock options.
ELIGIBILITY
Awards may be granted under the Option Plan to employees (including
officers and directors) and consultants of the Company and its subsidiaries. The
Option Plan provides that NSOs may be granted to employees and consultants of
the Company or any majority-owned subsidiary or other entity of the Company.
ISOs may be granted only to employees of the Company or any parent or subsidiary
of the Company.
As of the Record Date, all employees of the Company worldwide, a total of
1,080 persons, are eligible for stock option awards under the Option Plan. In
addition, approximately 51 consultants are currently eligible for awards under
the Option Plan.
11
<PAGE> 15
ADMINISTRATION
The Option Plan may be administered by the Board of Directors or by a
committee of the Board (the "Administrator"), and is currently administered by
the Compensation Committee, which is composed solely of non-employee directors,
for grants of options to officers, and by the Stock Option Committee for grants
of options to non-officer, non-director employees and consultants. The
Administrator has full power to select, among the employees and consultants
eligible for awards, the individuals to whom awards will be granted, to make any
combination of awards to any participant and to determine the specific terms of
each grant, subject to the provisions of the Option Plan and to guidelines
approved by the full Board of Directors. The interpretation and construction of
any provision of the Option Plan by the Administrator shall be final and
conclusive.
TERMS OF AWARDS
Restricted shares or stock units shall become vested, in full or in
installments, upon satisfaction of the conditions specified in the Stock Award
Agreement. A restricted share shall not vest less than one year from the grant
date if the vesting is based on meeting performance targets established by the
Committee, or, in all other cases, not less than three years from the grant
date. In both cases, the vesting limitation is subject to the following
exceptions: A Stock Award Agreement may provide for accelerated vesting 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, as defined
in the Option Plan.
Vesting of stock options is specified in individual agreements. Stock
options become immediately exercisable in the event of death or total and
permanent disability. See also "Change-in-Control Provisions" below.
The exercise price of Options granted under the Option Plan cannot be less
than 100% of the fair market value of the Common Stock on the date of grant.
Options granted to a holder of more than 10% of the voting power of the Company
must have an exercise price of not less than 110% of such fair market value. The
maximum term of an option is ten years, or five years if the option is granted
to a holder of more than 10% of the voting power of the Company.
SHARES UNDER THE PLAN
At the Record Date, options to purchase 3,136,962 shares were outstanding
and options to purchase 438,384 shares had been exercised under the Option Plan.
No restricted shares or stock units have been granted under the Option Plan.
Excluding the 800,000 shares that have been approved by the Board but are
subject to stockholder approval, there are currently 399,654 shares available
for future grant under the Option Plan. If any restricted shares or options
granted under the Option Plan are forfeited, then they will again become
available for awards under the Option Plan.
TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP
Under the Option Plan, ISOs may be exercised following an optionee's
termination for a period up to one year from the date of termination, if the
termination was caused by death or disability, and up to 60 days from the date
of termination if the termination was for any other reason. Subject to this
limitation, the period of time during which an option may be exercised following
an optionee's termination of employment or consulting relationship for any
reason is as determined by the Administrator, but not longer than the term of
the option.
WRITTEN AGREEMENTS
All awards granted under the Option Plan are evidenced by a written
agreement between the Company and the employee or consultant to whom such award
is granted.
12
<PAGE> 16
RIGHTS NONTRANSFERABLE
Options granted pursuant to the Option Plan are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
USE OF STOCK FOR TAX WITHHOLDING
The Option Plan permits participants to satisfy tax withholding obligations
arising from the grant, vesting or exercise of options by surrendering shares of
Common Stock already owned, or by directing the Company to withhold from the
shares of Common Stock issued or issuable pursuant to the award in question that
number of shares having a fair market value equal to the tax withholding
liability as of the applicable tax date. All elections to utilize stock for tax
withholding are subject to the approval of the Administrator.
CHANGE-IN-CONTROL PROVISIONS
The Administrator may determine, at the time of granting an option or
thereafter, that such option shall become fully exercisable as to all shares
subject to such option in the event of a Change in Control of the Company. A
Change in Control is defined as approval by the shareholders of a merger or
consolidation of the Company with, or the sale of substantially all of the
Company's assets to, any other person or corporation, except for a merger or
consolidation that would result in the Company's voting securities outstanding
immediately prior to such merger or consolidation continuing to represent at
least 80% of the voting securities immediately after such merger or
consolidation.
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend or discontinue the Option Plan at any
time, but any such amendment, alteration, suspension or discontinuation shall
not adversely affect any outstanding option under the Option Plan without the
consent of the holder thereof. The Company may not amend the Option Plan without
stockholder approval if the amendment would materially increase the benefits
available under the Option Plan. Because the Option Plan permits the granting of
ISOs, tax regulations require stockholder approval of any increase in shares
under the Option Plan or any change in the class of persons eligible to receive
awards under the Option Plan. The Option Plan will terminate by its terms on
July 18, 2005, and no ISOs may be granted under the Option Plan after May 31,
2005.
Subject to applicable laws and the specific terms of the Option Plan, the
Administrator may accelerate any option or waive any condition or restriction
pertaining to such option at any time.
FEDERAL TAX INFORMATION FOR STOCK OPTIONS
An optionee will recognize no taxable income upon grant or exercise of an
ISO under the Option Plan, unless the alternative minimum tax rules apply. The
Company will not be allowed a deduction for federal income tax purposes in
connection with the grant or exercise of an ISO. Upon an optionee's sale or
other disposition of the underlying shares (assuming that the sale occurs no
sooner than two years after grant of the option and one year after exercise of
the option (the "statutory holding periods")), any gain or loss will be taxed to
the optionee as long-term capital gain or loss. If the statutory holding periods
are not satisfied (i.e., the optionee makes a "disqualifying disposition"), the
optionee will recognize compensation income equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock at the
date of the option exercise or (ii) the sale price of the stock, and the Company
will be entitled to a deduction in the same amount. Any additional gain or loss
recognized on a disqualifying disposition of the shares will be characterized as
short-term or long-term capital gain or loss, as the case may be.
An optionee will not recognize any taxable income at the time he or she is
granted an NSO under the Option Plan. However, upon exercise of the NSO, the
optionee will generally recognize compensation income for federal tax purposes
measured by the excess, if any, of the then fair market value of the shares over
the
13
<PAGE> 17
exercise price. The Company will be entitled to a tax deduction in the same
amount, subject to Section 162(m) of the Code. Upon an optionee's disposition of
such shares, any difference between the amount realized and the fair market
value of such shares on the date of exercise will be treated as capital gain or
loss and will qualify for long-term capital gain or loss treatment if the shares
have been held for more than one year.
The compensation income recognized upon exercise of an NSO by an optionee
who is also an employee will be treated as wages for tax purposes and will be
subject to tax withholding by the Company out of the current compensation paid
to such person, if any. If such current compensation is insufficient to satisfy
the tax-withholding obligation, such person will be required to make direct
payment to the Company for the tax liability. Any required withholding in
connection with the exercise of any NSO may, with the consent of the
Administrator, be satisfied by an optionee, in whole or in part, by surrendering
to the Company shares of Common Stock previously owned by such person or shares
issued upon exercise of the option. For such purpose, the surrendered shares are
valued at their fair market value at the time of surrender.
In order for compensation in excess of $1 million realized by any of the
Named Officers with respect to options granted under the Option Plan to be
deductible by the Company, IRS regulations require, among other things, that the
Option Plan limit the number of shares that can be granted to any one
individual. Under the terms of the Option Plan, no employee may be granted
options to purchase more than 100,000 shares in any fiscal year. While the
Company does not expect to grant this number of options to an individual on a
regular basis, the Company does expect that this would be the maximum number of
options that would be necessary to recruit or retain any outstanding top
executive.
PARTICIPATION IN THE OPTION PLAN
The grant of options, stock units and restricted stock awards under the
Option Plan to employees, including Named Officers, is subject to the discretion
of the Board and the Administrator. As of the date of this proxy statement,
there has been no determination by the Board or Administrator with respect to
future awards under the Option Plan. Accordingly, future awards are not
determinable. Non-employee directors are not eligible to participate in the
Option Plan.
The following table sets forth information with respect to the grant of
options to the Named Officers, to all current executive officers as a group, and
to all other employees as a group during the last fiscal year.
AMENDED PLAN BENEFITS
1995 OMNIBUS INCENTIVE PLAN
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NAME OF INDIVIDUAL OR OPTIONS EXERCISE PRICE
IDENTITY OF GROUP AND POSITION GRANTED(#) PER SHARE($/SH)
------------------------------ ---------- ----------------
<S> <C> <C>
Stephen E. Cooper........................................... 80,000 $29.32
Chairman of the Board, President and Chief Executive
Officer
Takeshi (John) Suzuki....................................... 24,000 $31.61
President, Etec Japan
Paul A. Warkentin........................................... 0 0
Senior Vice President, Advanced Reticle Solutions
William D. Snyder........................................... 32,000 $34.64
Chief Financial Officer
William D. Cole............................................. 16,000 $29.32
Vice President, Sales and Customer Support
All current Named Officers as a group....................... 152,000 $30.80
All other employees as a group.............................. 870,060 $31.70
</TABLE>
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL 2 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 OMNIBUS INCENTIVE PLAN.
14
<PAGE> 18
PROPOSAL 3 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 DIRECTORS' PLAN
In 1995, the Company established the 1995 Directors' Stock Option Plan (the
"Directors' Plan") to promote the long-term success of the Company by
encouraging non-employee directors to focus on critical long-range objectives,
encourage the attraction and retention of non-employee directors with
exceptional qualifications, and link non-employee directors directly to
stockholder interests through increased stock ownership. The Directors' Plan
seeks to achieve this purpose by providing for the grant of non-statutory
options to purchase Shares of Common Stock to non-employee directors.
The Company believes that the proposed increase in the number of shares
available under the Directors' Plan will be sufficient to meet the Company's
option granting requirements for at least the next two years.
PROPOSED AMENDMENT
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the Directors' Plan to increase the number of
shares reserved for issuance under the Directors' Plan by 50,000, from 150,000
shares to 200,000 shares. At the Annual Meeting, stockholders are being asked to
approve this increase in shares reserved under the Directors' Plan.
The proposed amendment amends and restates Article 4(a) of the 1995
Directors' Stock Option Plan to read as follows:
"ARTICLE 4(a). Stock Subject to Plan
4(a) Basic Limitation. Shares offered under the Directors' Plan shall
be treasury Shares or authorized but unissued Shares. Subject to adjustment
pursuant to Section 7, a total of 200,000 Shares are subject to Options and
are available for issuance under the Directors' Plan. The Company, during
the term of the Directors' Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the purposes of the Directors'
Plan."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the Directors' Plan
at a duly held meeting at which a quorum is present must exceed the votes cast
against such proposal in order to approve the amendment of the Directors' Plan.
Unless marked to the contrary, proxies received will be voted "FOR" approval of
the amendment to the Directors' Plan to increase the shares reserved thereunder
by 50,000.
GENERAL
The Directors' Plan provides an incentive to non-employee Directors whose
present and potential contributions are important to the continued success of
the Company. The Directors' Plan permits the granting of non-statutory stock
options ("NSOs").
ELIGIBILITY
The Directors' Plan provides that NSOs may be granted only to non-employee
Directors of the Company and its subsidiaries. Non-employee Directors ("Outside
Directors") shall mean a member of the Board of Directors who is not and has
never been an employee (within the meaning of section 3401(c) of the Code and
the regulations thereunder) of the Company, of a Subsidiary of the Company or of
an affiliate of the Company (within the meaning of the Securities Act of 1933)
and who is not prohibited under the terms of his or her employment from
accepting the Options granted under the Directors' Plan.
As of the Record Date, a total of five Outside Directors are eligible for
stock option awards under the Directors' Plan. Six Directors have received
options under the Directors' Plan, but Mr. Ryan is no longer eligible for
additional grants.
15
<PAGE> 19
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors (the
"Administrator"). The Administrator has full authority and discretion to
interpret the Directors' Plan and to apply its provisions, to adopt, amend or
rescind rules, procedures and forms relating to the Directors' Plan, to
authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Directors' Plan, and to take any other
actions deemed necessary or advisable for the administration of the Directors'
Plan.
TERMS OF OPTIONS
Under the terms of the Directors' Plan, upon appointment to the Board, each
Outside Director automatically receives a non-statutory stock option to purchase
8,000 shares of Common Stock (an "Initial Option"). These one-time grants vest
in two installments, with half of the shares vesting on the first anniversary of
the grant date and the other half vesting on the second anniversary of the grant
date. In addition, during his or her tenure, each Outside Director receives an
annual grant of an option to purchase 3,000 shares on each anniversary (an
"Annual Option"). Annual Options vest in full on the first anniversary of the
grant date. Under the Directors' Plan, each option's exercise price is 100% of
the fair market value of the underlying shares on the grant date and its term is
ten years.
SHARES UNDER THE DIRECTORS' PLAN
At the Record Date, options to purchase 69,000 shares were outstanding and
options to purchase 41,000 shares had been exercised under the Directors' Plan.
Excluding the 50,000 shares that have been approved by the Board but are subject
to stockholder approval, there are currently 40,000 shares available for future
grants under the Directors' Plan. If any options granted under the Directors'
Plan are forfeited, then they will again become available for awards under the
Directors' Plan.
TERMINATION OF SERVICE AS A DIRECTOR
Under the Directors' Plan, if an Outside Director's service as a director
terminates for any reason, then any options held by him or her that were granted
under the Directors' Plan shall expire one year from the date of termination.
The Outside Director may exercise all or part of his or her option at any time
before its expiration, but only to the extent that such option is exercisable in
accordance with the vesting schedule. The unexercisable balance of such option
shall lapse immediately upon the Outside Director's termination except for
termination due to the death of the Outside Director. In the event that the
Outside Director's service terminates because of death or the Outside Director
dies after the termination of his or her service but before the expiration of
his or her option, all or part of such option may be exercised (prior to
expiration) by the executors or administrators of the Outside Director's estate
or by any person who has acquired such option directly from him or her by
bequest, inheritance or beneficiary designation, but only to the extent that
such option is exercisable in accordance with the vesting schedule.
WRITTEN AGREEMENTS
All awards granted under the Directors' Plan are evidenced by a written
agreement between the Company and the Outside Director to whom such award is
granted.
RIGHTS NONTRANSFERABLE
Options granted pursuant to the Directors' Plan are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
16
<PAGE> 20
USE OF STOCK FOR TAX WITHHOLDING
The Directors' Plan permits participants to satisfy tax withholding
obligations arising from the grant, vesting or exercise of options by
surrendering shares of Common Stock already owned, or by directing the Company
to withhold from the shares of Common Stock issued or issuable pursuant to the
award in question that number of shares having a fair market value equal to the
tax withholding liability as of the applicable tax date. All elections to
utilize stock for tax withholding are subject to the approval of the
Administrator.
REORGANIZATIONS
In the event that the Company is a party to a merger or consolidation,
outstanding options shall become subject to the agreement of merger or
consolidation. Such agreement may provide, without limitation, for the
assumption of outstanding options by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one share under such agreement and the exercise price,
or for the acceleration of their exercisability followed by the cancellation of
options not exercised, in all cases without the optionees' consent. Any
cancellation shall not occur earlier than 30 days after such acceleration is
effective and optionees have been notified of such acceleration.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Directors' Plan at any time, but not
more than every six months unless such amendment is required to comply with the
Internal Revenue Code of 1986, as amended, or the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. Rights and
obligations under any option granted before amendment of the Directors' Plan
shall not be materially altered or impaired by such amendment, except with
consent of the optionee. An amendment of the Directors' Plan shall be subject to
the approval of the Company's stockholders only to the extent required by the
applicable laws, regulations or rules. The Directors' Plan will terminate by its
terms on July 18, 2005.
FEDERAL TAX INFORMATION FOR STOCK OPTIONS
An optionee will not recognize any taxable income at the time he or she is
granted an NSO under the Directors' Plan. However, upon exercise of the NSO, the
optionee will generally recognize income (subject to tax withholding) for
federal tax purposes measured by the excess, if any, of the then fair market
value of the shares over the exercise price. The Company will be entitled to a
tax deduction in the same amount. Upon an optionee's disposition of such shares,
any difference between the amount realized and the fair market value of such
shares on the date of exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the shares have been
held for more than one year.
Any required withholding in connection with the exercise of any NSO may,
with the consent of the Administrator, be satisfied by an optionee, in whole or
in part, by surrendering to the Company shares of Common Stock previously owned
by such person or shares issued upon exercise of the option. For such purpose,
the surrendered shares are valued at their fair market value at the time of
surrender.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL 3 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 DIRECTORS' PLAN.
PROPOSAL 4 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 EMPLOYEE STOCK
PURCHASE PLAN
Since 1995, the Company has provided eligible employees with an opportunity
to purchase Common Stock from the Company on favorable terms and to pay for such
purchases through payroll deductions. The 1995 Employee Stock Purchase Plan
("ESPP") is intended to qualify under section 423 of the Internal Revenue Code
(the "Code"), as amended.
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<PAGE> 21
The Company believes that the proposed increase in the number of shares
available under the ESPP will enable the Company to provide appropriate
incentives to its current and future employees, and will be sufficient to meet
the Company's issuance requirements for the next two years.
PROPOSED AMENDMENT
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the ESPP to increase the number of shares
reserved for issuance under the ESPP by 200,000, from 500,000 shares to 700,000
shares. At the Annual Meeting, stockholders are being asked to approve the
increase in shares reserved under the ESPP.
The proposed amendment amends and restates Article 13.1 of the 1995
Employee Stock Purchase Plan of Etec Systems, Inc. to read as follows:
"ARTICLE 13. Common Stock Offered Under the ESPP
13.1 Authorized Shares. The aggregate number of shares of Common
Stock available for purchase under the ESPP shall be 700,000, subject to
adjustment pursuant to this Article 13."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the ESPP at a duly
held meeting at which a quorum is present must exceed the votes cast against
such proposal in order to approve the amendment of the ESPP. Unless marked to
the contrary, proxies received will be voted "FOR" approval of the amendment to
the ESPP to increase the shares reserved thereunder by 200,000.
GENERAL
The ESPP provides eligible employees of the Company with an opportunity to
purchase the Company's Common Stock at a discounted price through payroll
deductions.
ELIGIBILITY
Eligible employee means any employee of the Company and any subsidiary
company electing to participate whose customary employment is for more than five
months per calendar year and for more than 20 hours per week. As of the Record
Date, a total of 1,080 employees were eligible to participate in the ESPP.
ADMINISTRATION
The ESPP may be administered by the Board of Directors or by a committee of
the Board (the "Administrator"), and is currently administered by the
Compensation Committee, which is composed solely of non-employee directors. The
interpretation and construction by the Compensation Committee of any provision
of the ESPP or of any right to purchase Common Stock granted under the ESPP
shall be conclusive and binding on all persons. The Compensation Committee may
adopt such rules and forms under the ESPP as it considers appropriate.
TERMS OF THE ESPP
Accumulation Periods: While the ESPP is in effect, two six-month
Accumulation Periods shall commence in each calendar year on January 1 and July
1.
Duration of Participation: Once enrolled, a participant may continue to
participate in the ESPP for each succeeding Accumulation Period until he or she
ceases to be an eligible employee, withdraws from the ESPP or reaches the end of
the Accumulation Period in which he or she discontinued contributions.
Employee Contributions: Payroll deductions commence with the first payday
in the Accumulation Period and continue on each subsequent payday during
participation in the ESPP. Eligible employees designate a
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<PAGE> 22
percentage of their gross base salary to be withheld for the purchase of Common
Stock, at a rate not less than 1% or more than 15%.
Offering Period: An Offering Period is an 18-month period commencing
January 1 or July 1.
Purchase Price: The purchase price for each share of Common Stock shall be
the lower of 85% of the fair market value of such share as of the day the
Offering Period commences, or 85% of the fair market value of such share as of
the last day in the Accumulation Period.
Purchase of Shares: A participant's enrollment in the ESPP commences on the
first day of the next Offering Period. During each Offering Period, as of the
last day of each Accumulation Period, each participant shall be deemed to have
elected to purchase the number of shares of Common Stock determined by dividing
the amount then in the participant's plan account by the purchase price of such
shares. Notwithstanding the foregoing, no purchase shall be made at the end of
an Accumulation Period if the participant has previously elected to withdraw
from the ESPP, no participant shall purchase more than a maximum of 250 shares
of Common Stock with respect to any Accumulation Period, and no participant
shall purchase shares of Common Stock in excess of the authorized shares. The
Compensation Committee may determine that any fractional share may be rounded
down to the next lower whole share.
SHARES UNDER THE ESPP
At the Record Date, 336,920 shares had been issued under the ESPP.
Excluding the 200,000 shares that have been approved by the Board but are
subject to stockholder approval, there are currently 163,080 shares available
for future issuance under the ESPP.
TERMINATION OF EMPLOYMENT OR DEATH
Under the ESPP, termination of employment for any reason, including death,
shall be treated as an automatic withdrawal from the ESPP.
WRITTEN AGREEMENTS
All participation in the ESPP is evidenced by a written agreement between
the Company and the employee.
RIGHTS NON-TRANSFERABLE
Options granted pursuant to the ESPP are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
REORGANIZATION
In the event of a dissolution or liquidation of the Company, or a merger or
consolidation to which the Company is a constituent corporation, the ESPP shall
terminate unless the plan of merger, consolidation or reorganization provides
otherwise, and all amounts that have been withheld but not yet applied to
purchase Common Stock shall be refunded, without interest. The ESPP shall in no
event be construed to restrict in any way the Company's right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.
AMENDMENT OR DISCONTINUANCE
The Board shall have the right to amend, suspend or terminate the ESPP at
any time and without notice. Any increase in the aggregate number of shares of
Common Stock to be issued under the ESPP shall be subject to approval by a vote
of the stockholders of the Company. In addition, any other amendment of the ESPP
shall be subject to approval by a vote of the stockholders of the Company to the
extent required by an applicable law or regulation. The ESPP will terminate by
its terms on July 18, 2005.
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FEDERAL TAX INFORMATION FOR ESPP
The ESPP is intended to qualify as an "employee stock purchase plan" under
section 423 of the Code. No income is recognized by a participant at the time
the right to purchase shares is granted. Likewise, no taxable income is
recognized at the time of the purchase, even though the purchase price reflects
a discount from the market value of the shares at that time.
A participant must recognize taxable income upon a disposition of shares
acquired under the ESPP. The tax treatment may be more favorable if the
disposition occurs after the holding-period requirements of section 423 have
been satisfied (a "Qualifying Disposition").
To satisfy the holding-period requirements of section 423, shares acquired
under the ESPP cannot be disposed of within two years after the first day of the
Offering Period during which the Shares were purchased nor within one year of
the date of purchase.
The federal income tax consequences of a Qualifying Disposition are as
follows:
- The participant recognizes ordinary income equal to the lower of (i) the
excess of the fair market value of the shares on the date of the
disposition over the actual purchase price or (ii) 15% of the fair market
value of the shares immediately before the applicable Offering Period.
The Company will not be entitled to any deduction under these
circumstances.
- The excess, if any, of the fair market value of the shares on the date of
the disposition over the sum of the purchase price plus the amount of
ordinary income recognized (as described above) will be taxed as a
long-term capital gain. If a taxable disposition produces a loss (i.e.,
the fair market value of the Shares on the date of the disposition is
less than the purchase price) and the disposition involves certain
unrelated parties, then the loss will be a long-term capital loss.
A participant who disposes of shares acquired under the ESPP within two
years after the beginning of the applicable Offering Period or within one year
of the date of purchase makes a non-qualifying disposition of such shares (a
"Non-qualifying Disposition").
The federal income tax consequences of a Non-qualifying Disposition of
shares acquired under the ESPP are as follows:
- The entire difference between the purchase price and the market value of
the shares on the date of purchase will be taxed to the participant as
ordinary income in the year of disposition. The Company will be entitled
to a deduction for the same amount.
- The excess, if any, of the amount realized on the date of disposition
over the market value on the date of purchase will be taxed as a capital
gain (long-term or short-term, depending on how long the shares have been
held). If the value of the shares on the date of disposition is less than
their value on the date of purchase, then the difference will result in a
capital loss (long-term or short-term, depending upon the holding
period), provided the disposition involves certain unrelated parties. Any
such loss will not affect the ordinary income recognized upon the
disposition.
Certain transfers of shares acquired under the ESPP are not considered
"dispositions" for purposes of the foregoing rules, including: (i) A transfer of
shares to a descendant's estate or to an heir by bequest or inheritance; (ii)
certain transfers of shares pursuant to certain tax-free exchanges; and (iii)
pledge of shares unless the shares are actually disposed of pursuant to the
pledge.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR
PROPOSAL 4 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 STOCK PURCHASE
PLAN.
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<PAGE> 24
PROPOSAL 5 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of PricewaterhouseCoopers LLP as the Company's independent
accountants for the fiscal year ended July 31, 2000. Representatives of
PricewaterhouseCoopers 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.
PricewaterhouseCoopers LLP (or its predecessor) has audited the Company's
financial statements since April 1995.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR
PROPOSAL 5 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting and that the
stockholder desires to have included in the Company's proxy statement must be
received by the Secretary of the Company no later than August 31, 2000 in order
that they may be considered for possible inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
With respect to stockholder proposals that are not sought to be included in
the Company's proxy statement and form of proxy relating to the 2000 Annual
Meeting, the Company's Bylaws require that advance notice of such proposals be
given to the Company no later than August 31, 2000. See "Other Matters" for a
description of such Bylaw provision. Proposals received after that date will not
be eligible to be raised or voted upon at the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that 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, 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 regulations 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 1999.
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. Under the Company's Bylaws, in
order to be deemed properly presented, notice must be delivered to, or mailed
and received by, the Company not less than 60 days prior to the first
anniversary of the day on which notice of the prior year's annual meeting was
mailed to stockholders. The stockholder's notice must set forth, as to each
proposed matter: (a) a brief description of the business and reason for
conducting such business at the meeting; (b) the name and address of the
stockholder proposing such business; (c) a lawful representation that the
stockholder is entitled to vote at the meeting and intends to appear in person
or by proxy at the meeting to present the matter; (d) any material interest of
the stockholder in such business; and (e) such other information with respect to
such matter as would be required in a proxy statement soliciting proxies
regarding such matter. The presiding officer of the meeting may refuse to
acknowledge any matter not made in compliance with the foregoing procedure.
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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.
LOGO
W. Russell Wayman
Secretary
Hayward, California
October 29, 1999
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.
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E T E C
1995 EMPLOYEE STOCK PURCHASE PLAN
OF ETEC SYSTEMS, INC.
(As Amended and Restated Effective September 1999)
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. PURPOSE OF THE PLAN..............................................1
ARTICLE 2. DEFINITIONS......................................................1
ARTICLE 3. ADMINISTRATION OF THE PLAN.......................................2
3.1 The Committee...............................................2
3.2 Rules and Forms.............................................2
ARTICLE 4. ENROLLMENT AND PARTICIPATION.....................................2
4.1 Enrollment..................................................2
4.2 Accumulation Periods........................................2
4.3 Duration of Participation...................................2
ARTICLE 5. EMPLOYEE CONTRIBUTIONS...........................................3
5.1 Frequency of Payroll Deductions.............................3
5.2 Amount of Payroll Deductions................................3
5.3 Changing Withholding Rate...................................3
5.4 Discontinuing Payroll Deductions............................3
ARTICLE 6. PLAN ACCOUNTS AND PURCHASE OF SHARES.............................3
6.1 Plan Accounts...............................................3
6.2 Offering Period.............................................3
6.3 Options Grant and Shares Purchased..........................3
6.4 Purchase Price..............................................3
6.5 Available Shares Insufficient...............................4
6.6 Issuance of Common Stock and Restriction on Transfer........4
6.7 Unused Cash Balances........................................4
ARTICLE 7. WITHDRAWAL FROM THE PLAN.........................................4
7.1 Withdrawal..................................................4
7.2 Re-Enrollment After Withdrawal..............................4
ARTICLE 8. TERMINATION OF EMPLOYMENT OR DEATH...............................4
8.1 Termination of Employment...................................4
8.2 Death.......................................................4
ARTICLE 9. LIMITATIONS ON COMMON STOCK OWNERSHIP............................4
9.1 Ownership Limitation........................................4
9.2 Attribution Rule............................................5
ARTICLE 10. RIGHTS NOT TRANSFERABLE..........................................5
ARTICLE 11. NO RIGHTS AS AN EMPLOYEE.........................................5
ARTICLE 12. NO RIGHTS AS A STOCKHOLDER.......................................5
ARTICLE 13. COMMON STOCK OFFERED UNDER THE PLAN..............................5
13.1 Authorized Shares...........................................5
13.2 Anti-Dilution Adjustments...................................5
13.3 Reorganizations.............................................5
ARTICLE 14. AMENDMENT OR DISCONTINUANCE......................................6
ARTICLE 15. EXECUTION........................................................6
</TABLE>
<PAGE> 28
1995 EMPLOYEE STOCK PURCHASE PLAN
OF ETEC SYSTEMS, INC.
ARTICLE 1. PURPOSE OF THE PLAN
The Plan was adopted by the Board of Directors on July 18, 1995, and
approved by the Company's stockholders on September 12, 1995. The Plan was
effective as of October 24, 1995, the date on which the Company registered under
Section 12 of the Securities Exchange Act of 1934.
The purpose of the Plan is to provide Eligible Employees with an
opportunity to purchase Common Stock from the Company on favorable terms and to
pay for such purchases through payroll deductions. The Plan is intended to
qualify under Section 423 of the Internal Revenue Code of 1986, as amended.
ARTICLE 2. DEFINITIONS
2.1 "Accumulation Period" means a period during which contributions may
be made toward the purchase of Common Stock under the Plan, as determined
pursuant to Section 4.2.
2.2 "Board of Directors" means the Board of Directors of the Company, as
constituted from time to time.
2.3 "Committee" means a committee of the Board of Directors, consisting
of one or more directors appointed by the Board of Directors.
2.4 "Common Stock" means the Common Stock of the Company.
2.5 "Company" means Etec Systems, Inc., a Nevada corporation.
2.6 "Compensation" means the regular, base compensation paid in cash to
a Participant by a Participating Company. Regular, base compensation excludes
(i) bonuses, overtime pay and commissions, (ii) special allowances such as
moving or relocation allowances and car allowances, (iii) imputed income
attributable to non-cash compensation, (iv) expense reimbursements, and (v)
similar items, all as determined by the Committee.
2.7 "Eligible Employee" means any employee of a Participating Company:
(a) Whose customary employment is for more than five months per
calendar year and for more than 20 hours per week; and
(b) With respect to the first Accumulation Period that commences
on October 24, 1995, Eligible Employee shall be determined
without regard to Subsection (b).
2.8 "Fair Market Value" shall mean (a) the closing price of a share of
Common Stock on the principal exchange on which the shares are trading, on the
trading day on which the Fair Market Value is determined, or (b) if the shares
of Common Stock are not traded on an exchange but are quoted on NASDAQ or a
successor quotation system, the closing price on the trading day on which the
Fair Market Value is determined, or (c) if the shares are not traded on an
exchange or quoted on the NASDAQ or a successor quotation system, the fair
market value of a Share, as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Western Edition of The
Wall Street Journal.
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<PAGE> 29
2.9 "Offering Period" means a period during which shares of Common Stock
are offered for sale under the Plan, as determined pursuant to Section 6.2.
2.10 "Participant" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 4.1.
2.11 "Participating Company" means the Company and each present or
future Subsidiary, except subsidiaries excluded by the Committee.
2.12 "Plan" means this 1995 Employee Stock Purchase Plan of Etec
Systems, Inc., as amended from time to time.
2.13 "Plan Account" means the account established for each Participant
pursuant to Section 6.1.
2.14 "Purchase Price" means the price at which Participants may purchase
Common Stock under the Plan, as determined pursuant to Section 6.4.
2.15 "Subsidiary" means a corporation, 50% or more of the total combined
voting power of all classes of stock of which is owned by the Company or by
another Subsidiary.
ARTICLE 3. ADMINISTRATION OF THE PLAN
3.1 The Committee. The Plan shall be administered by the Committee. The
interpretation and construction by the Committee of any provision of the Plan or
of any right to purchase Common Stock granted under the Plan shall be conclusive
and binding on all persons.
3.2 Rules and Forms. The Committee may adopt such rules and forms under
the Plan as it considers appropriate.
ARTICLE 4. ENROLLMENT AND PARTICIPATION
4.1 Enrollment. Any individual who, on the day preceding the first day
of an Accumulation Period, qualifies as an Eligible Employee may elect to become
a Participant in the Plan for such Accumulation Period by executing the
Enrollment/Change form and Subscription Agreement provided by the Committee. The
Enrollment/Change form and Subscription Agreement shall be filed with the
Company no later than the date specified by the Committee that is prior to the
commencement of the Accumulation Period.
4.2 Accumulation Periods. While the Plan is in effect, two Accumulation
Periods shall commence in each calendar year, except that there shall be only
one Accumulation Period in the year 1995. The Accumulation Periods shall consist
of the six-month periods commencing on each January 1 and July 1, except that
the first Accumulation Period shall commence on October 24, 1995, and end on
December 31, 1995.
4.3 Duration of Participation. Once enrolled, a Participant shall
continue to participate in the Plan for each succeeding Accumulation Period
until he or she ceases to be an Eligible Employee, withdraws from the Plan or
reaches the end of the Accumulation Period in which he or she discontinued
contributions. A Participant who discontinued contributions under Section 5.4 or
withdrew from the Plan under Section 7.1 may again become a Participant, if he
or she then is an Eligible Employee, by following the procedure described in
Section 4.1.
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<PAGE> 30
ARTICLE 5. EMPLOYEE CONTRIBUTIONS
5.1 Frequency of Payroll Deductions. A Participant may purchase shares
of Common Stock under the Plan solely by means of payroll deductions. Once a
Participant enrolls in the Plan, payroll deductions shall commence with the
first payday in the Accumulation Period and shall continue on each subsequent
payday during participation in the Plan.
5.2 Amount of Payroll Deductions. An Eligible Employee shall designate
on the Enrollment/Change form the amount of his or her Compensation that he or
she elects to have withheld for the purchase of Common Stock. Such portion shall
be a whole percentage of the Eligible Employee's Compensation, but not less than
1% nor more than 15%.
5.3 Changing Withholding Rate. A Participant may discontinue payroll
deductions during an Offering Period in accordance with Section 5.4. A
Participant also may change the level of payroll deductions from one
Accumulation Period to the next. If a Participant wishes to change the rate of
payroll withholding, he or she may do so by filing an amended Enrollment/Change
form with the Company not later than one week prior to the commencement of the
Accumulation Period for which such change is to be effective.
5.4 Discontinuing Payroll Deductions. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing an
amended Enrollment/Change form at any time. Payroll withholding shall cease as
soon as reasonably practicable after such form has been received by the Company.
ARTICLE 6. PLAN ACCOUNTS AND PURCHASE OF SHARES
6.1 Plan Accounts. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. No interest shall be credited to Plan Accounts.
6.2 Offering Period. An Offering Period is an 18-month period commencing
January 1 or July 1 and throughout which the terms on which shares of Common
Stock may be purchased are fixed. Notwithstanding the foregoing, the first
Offering Period starts on October 24, 1995 and ends on December 31, 1996.
6.3 Options Grant and Shares Purchased. A Participant's enrollment date
commences his or her initial Offering Period. During each Offering Period, as of
the last day of each Accumulation Period, each Participant shall be deemed to
have elected to purchase the number of shares of Common Stock determined by
dividing the amount then in the Participant's Plan account by the Purchase Price
of such shares. Notwithstanding the foregoing, (a) no purchase shall be made at
the end of an Accumulation Period if the Participant has previously elected to
withdraw from the Plan in accordance with Section 7.1, (b) no Participant shall
purchase more than a maximum of 250 shares of Common Stock with respect to any
Accumulation Period, and (c) no Participant shall purchase shares of Common
Stock in excess of the amounts set forth in Article 9 and Section 13.1. The
Committee may determine that any fractional share, as calculated under this
Section 6.3, shall be rounded down to the next lower whole share.
6.4 Purchase Price. The Purchase Price for each share of Common Stock
shall be the lower of:
(a) 85% of the Fair Market Value of such share as of the day the
Offering Period commences; or
(b) 85% of the Fair Market Value of such share as of the last
day in the Accumulation Period (i.e., the date of purchase).
With respect to the first Offering Period of the Plan, commencing October 24,
1995, the amount determined under (a)
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<PAGE> 31
above shall be 85% of the price at which such stock is first offered to the
public.
6.5 Available Shares Insufficient. In the event that the aggregate
number of shares that all Participants elect to purchase during an Offering
Period exceeds the maximum number of shares remaining available for issuance
under Section 13.1, then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
6.6 Issuance of Common Stock and Restriction on Transfer. Certificates
representing the shares of Common Stock purchased by a Participant under the
Plan shall be issued to him or her as soon as reasonably practicable after the
close of the applicable Accumulation Period. Shares may be registered in the
name of the Participant or jointly in the name of the Participant and his or her
spouse as joint tenants with right of survivorship or as community property. The
Committee may determine that the shares of Common Stock issued to the
Participant shall be held for the Participant's benefit by a broker designated
by the Committee.
6.7 Unused Cash Balances. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of Section
6.3 or Section 13.1 shall be refunded to the Participant in cash, without
interest.
ARTICLE 7. WITHDRAWAL FROM THE PLAN
7.1 Withdrawal. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at any time before the last day of
an Accumulation Period. As soon as reasonably practicable thereafter, payroll
deductions shall cease and the entire amount credited to the Participant's Plan
Account for the Accumulation Period shall be refunded to him or her in cash,
without interest. No partial withdrawals shall be permitted.
7.2 Re-Enrollment After Withdrawal. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls
for a subsequent Accumulation Period under Section 4.2 and a subsequent Offering
Period under Section 6.2.
ARTICLE 8. TERMINATION OF EMPLOYMENT OR DEATH
8.1 Termination of Employment. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 7.1. (A transfer from one Participating
Company to another shall not be treated as a termination of employment.)
8.2 Death. In the event of the Participant's death, the amount credited
to his or her Plan Account shall be paid to a beneficiary designated by him or
her for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company before
the Participant's death.
ARTICLE 9. LIMITATIONS ON COMMON STOCK OWNERSHIP
9.1 Ownership Limitation. Any other provision of the Plan
notwithstanding, no Participant shall be granted a right to purchase Common
Stock under the Plan if:
(a) Such Participant, immediately after his or her election to
purchase such Common Stock,
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<PAGE> 32
would own stock possessing more than 5% of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company; or
(b) Under the terms of the Plan, such Participant's rights to
purchase stock under this and all other qualified employee stock
purchase plans of the Company or any parent or Subsidiary of the Company
would accrue at a rate that exceeds $25,000 of the fair market value of
such stock (determined at the time when such right is granted) for each
calendar year for which such right or option is outstanding at any time.
9.2 Attribution Rule. For purposes of this Article 9, ownership of stock
shall be determined after applying the attribution rules of section 424(d) of
the Internal Revenue Code of 1986, as amended. For purposes of this Article 9,
each Participant shall be considered to own any stock that he or she has a right
or option to purchase under this or any other plan, and each Participant shall
be considered to have the right to purchase 250 shares of Common Stock under
this Plan with respect to each Accumulation Period.
ARTICLE 10. RIGHTS NOT TRANSFERABLE
The rights of any Participant under the Plan, or any Participant's
interest in any Common Stock or moneys to which he or she may be entitled under
the Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. If a Participant in any manner attempts
to transfer, assign or otherwise encumber his or her rights or interest under
the Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 7.1.
ARTICLE 11. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of a Participating Company. Each Participating Company
reserves the right to terminate the employment of any person at any time, with
or without cause.
ARTICLE 12. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares that he or she has purchased, or may have a right to purchase, under the
Plan until the date of issuance of a stock certificate for such shares.
ARTICLE 13. COMMON STOCK OFFERED UNDER THE PLAN
13.1 Authorized Shares. The aggregate number of shares of Common Stock
available for purchase under the Plan shall be 700,000, subject to adjustment
pursuant to this Article 13.
13.2 Anti-Dilution Adjustments. The aggregate number of shares of Common
Stock offered under the Plan, the 250-share limitation described in Section 6.3
and the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares, the payment of a stock dividend, any other increase or
decrease in such shares effected without receipt or payment of consideration by
the Company or the distribution of the shares of a Subsidiary to the Company's
stockholders.
13.3 Reorganization. In the event of a dissolution or liquidation of the
Company, or a merger or consolidation to which the Company is a constituent
corporation, the Plan shall terminate unless the plan of merger, consolidation
or reorganization provides otherwise, and all amounts that have been withheld
but not yet applied to purchase Common
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Stock hereunder shall be refunded, without interest. The Plan shall in no event
be construed to restrict in any way the Company's right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.
ARTICLE 14. AMENDMENT OR DISCONTINUANCE
The Board of Directors shall have the right to amend, suspend or
terminate the Plan at any time and without notice. Except as provided in Article
13, any increase in the aggregate number of shares of Common Stock to be issued
under the Plan shall be subject to approval by a vote of the stockholders of the
Company. In addition, any other amendment of the Plan shall be subject to
approval by a vote of the stockholders of the Company to the extent required by
an applicable law or regulation.
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1995 OMNIBUS INCENTIVE PLAN
OF ETEC SYSTEMS, INC.
(As Amended and Restated Effective August 31, 1999)
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. INTRODUCTION.................................................... 1
ARTICLE 2. DEFINITIONS..................................................... 1
ARTICLE 3. ADMINISTRATION.................................................. 3
3.1 Committee Composition......................................... 3
3.2 Committee Responsibilities.................................... 4
ARTICLE 4. SHARES AVAILABLE FOR GRANTS..................................... 4
4.1 Basic Limitation.............................................. 4
4.2 Additional Shares............................................. 4
4.3 Dividend Equivalents.......................................... 4
ARTICLE 5. ELIGIBILITY..................................................... 4
5.1 General Rules................................................. 4
5.2 Outside Directors............................................. 4
5.3 Incentive Stock Options....................................... 5
ARTICLE 6. OPTIONS......................................................... 5
6.1 Stock Option Agreement........................................ 5
6.2 Number of Shares.............................................. 5
6.3 Exercise Price................................................ 5
6.4 Exercisability and Term....................................... 5
6.5 Modification of Exercise Price................................ 5
ARTICLE 7. PAYMENT FOR OPTION SHARES....................................... 6
7.1 General Rule.................................................. 6
7.2 Surrender of Stock............................................ 6
7.3 Exercise/Sale................................................. 6
7.4 Exercise/Pledge............................................... 6
7.5 Other Forms of Payment........................................ 6
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS............................... 6
8.1 Time, Amount and Form of Awards............................... 6
8.2 Payment for Awards............................................ 6
8.3 Vesting Conditions............................................ 6
8.4 Form and Time of Settlement of Stock Units.................... 7
8.5 Creditors' Rights............................................. 7
ARTICLE 9. VOTING AND DIVIDEND RIGHTS...................................... 7
9.1 Restricted Shares............................................. 7
9.2 Stock Units................................................... 7
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 10. PROTECTION AGAINST DILUTION.................................... 8
10.1 Adjustments.................................................. 8
10.2 Reorganizations.............................................. 8
ARTICLE 11. LIMITATION ON RIGHTS........................................... 8
11.1 Retention Rights............................................. 8
11.2 Shareholders' Rights......................................... 8
11.3 Regulatory Requirements...................................... 8
ARTICLE 12. LIMITATION ON PAYMENTS......................................... 9
12.1 Basic Rule................................................... 9
12.2 Reduction of Payments........................................ 9
12.3 Overpayments and Underpayments............................... 9
12.4 Related Corporations......................................... 10
ARTICLE 13. WITHHOLDING TAXES.............................................. 10
13.1 General...................................................... 10
13.2 Share Withholding............................................ 10
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARDS............................... 10
14.1 General...................................................... 10
14.2 Trusts....................................................... 11
ARTICLE 15. FUTURE OF THE PLAN............................................. 11
15.1 Term of the Plan............................................. 11
15.2 Amendment or Termination..................................... 11
ARTICLE 16. EXECUTION...................................................... 12
</TABLE>
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1995 OMNIBUS INCENTIVE PLAN
OF ETEC SYSTEMS, INC.
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board of Directors on July 18, 1995,
effective June 1, 1995. The Company's stockholders subsequently approved the
Plan at the annual meeting of stockholders on September 12, 1995, subject to the
Company becoming a registered company under section 12 of the Exchange Act. The
Company became a company registered under section 12 of the Exchange Act on
October 27, 1995.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by (a) encouraging Key Employees
to focus on critical long-range objectives, (b) encouraging the attraction and
retention of Key Employees and (c) linking the interests of Key Employees
directly to those of shareholders through increased stock ownership. The Plan
provides for Awards in the form of Restricted Shares, Stock Units, or Options
(which may constitute incentive stock options or non-statutory stock options).
The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act and shall be construed accordingly.
ARTICLE 2. DEFINITIONS
2.1 "Affiliate" means any entity other than a subsidiary, if the Company
and/or one or more Subsidiaries own not less than 50% of such entity.
2.2 "Award" means any award of an Option, a Restricted Share or a Stock
Unit under the Plan. Awards may be made in any combination of NSO, Restricted
Shares or Stock Units.
2.3 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
2.4 "Change in Control" means the shareholders of the Company approve a
merger or consolidation of the Company with, or the sale of substantially all
the Company's assets to, any other person or corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation.
Any other provision of this Section 2.4 notwithstanding, the term
"Change in Control" shall not include either of the following events, if
undertaken at the election of the Company:
(i) A transaction, the sole purpose of which is to change the
state of
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the Company's incorporation; or
(ii) A transaction, the result of which is to sell all or
substantially all of the assets of the Company to another corporation
(the "surviving corporation"); provided that the surviving corporation
is owned directly or indirectly by the shareholders of the Company
immediately following such transaction in substantially the same
proportions as their ownership of the Company's common stock immediately
preceding such transaction; and provided, further, that the surviving
corporation expressly assumes this Plan and all outstanding Awards.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means a committee of the Board of Directors, as
described in Article 3.
2.7 "Company" means ETEC Systems, Inc., a Nevada corporation.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.9 "Exercise Price" means the amount for which one Share may be
purchased upon exercise of an Option, as specified in the applicable Stock
Option Agreement.
2.10 "Fair Market Value" means (a) the closing price of a Share on the
principal exchange on which the Shares are trading, on the date on which the
Fair Market Value is determined, or (b) if the Shares are not traded on an
exchange but are quoted on NASDAQ or a successor quotation system, the closing
price on the date on which the Fair Market Value is determined, or (c) if the
Shares are not traded on an exchange or quoted on the NASDAQ or a successor
quotation system, the fair market value of a Share, as determined by the
Committee in good faith. Such determination shall be conclusive and binding on
all persons.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Western Edition of The
Wall Street Journal. Determinations of Fair Market Value shall be conclusive and
binding on all persons.
2.11 "ISO" means an incentive stock option described in section 422(b)
of the Code.
2.12 "Key Employee" means (a) a common-law employee of the Company, a
Parent, a Subsidiary or an Affiliate or (b) a consultant or adviser who provides
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as an independent contractor shall be considered
employment for all purposes of the Plan, except as provided in Section 5.3.
2.13 "NSO" means an employee stock option not described in sections 422
or 423 of the Code.
2.14 "Option" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Share.
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<PAGE> 39
2.15 "Optionee" means an individual or estate who holds an Option.
2.16 "Outside Director" shall mean a member of the Board of Directors
who is not a common-law employee of the Company, a Parent, a Subsidiary or an
Affiliate.
2.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
2.18 "Participant" means an individual or estate who holds an Award.
2.19 "Plan" means this 1995 Omnibus Incentive Plan of ETEC Systems,
Inc., as it may be amended from time to time.
2.20 "Restricted Share" means a Share awarded under the Plan.
2.21 "Share" means one share of the common stock of the Company.
2.22 "Stock Award Agreement" means the agreement between the Company and
the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions and restrictions pertaining to such Restricted Share or Stock Unit.
2.23 "Stock Option Agreement" means the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.
2.24 "Stock Unit" means a bookkeeping entry representing the equivalent
of one Share, as awarded under the Plan.
2.25 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 3. ADMINISTRATION
3.1 Committee Composition. The Plan shall be administered by the
Committee.
(a) Except as provided in Subsection (b), the Board of Directors
shall appoint a Committee to administer the Plan consisting of two or
more Outside Directors of the Company and meeting such other
requirements as may be established from time to time by the Securities
and Exchange Commission for plans intended to qualify for exemption
under Rule 16b3 (or its successor) under the Exchange Act.
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<PAGE> 40
(b) The Board of Directors may also appoint one or more separate
committees of the Board of Directors, each composed of one or more
directors of the company who need not be Outside Directors, who may
administer the Plan with respect to Kay Employees who are not officers
or directors of the Company, may grant Awards under the Plan to such Key
Employees and may determine all terms of such Awards.
3.2 Committee Responsibilities. The Committee shall (a) select the Key
Employees who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines, as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
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, Stock Units,
and Options shall be 4,775,000 Shares, provided that no more than 10% of the
preceding amount may be awarded as Restricted Shares. Any Shares that have been
reserved but not awarded as Restricted Shares, Stock Units, and Options during
any calendar year shall remain available for award in any subsequent calendar
year. The limitations of this Section 4.1 shall be subject to adjustment
pursuant to Article 10.
4.2 Additional Shares. If Stock Units or Options are forfeited or if
Options terminate for any other reason before being exercised, then such Stock
Units or Options shall again become available for Awards under the Plan. If
Restricted Shares are forfeited before any dividends have been paid with respect
to such Restricted Shares, then such Restricted Shares shall again become
available for Awards under the Plan. In addition, any Shares previously issued
under the Plan and repurchased by the Company shall again become available for
Awards under the Plan.
4.3 Dividend. Any dividend equivalents distributed under the Plan shall
not be applied against the number of Restricted Shares, Stock Units, or Options
available for Awards, whether or not such dividend equivalents are converted
into Stock Units.
ARTICLE 5. ELIGIBILITY
5.1 General Rules. Only Key Employees shall be eligible for designation
as Participants by the Committee.
5.2 Outside Directors. Outside Directors are not eligible for Awards
under this Plan.
5.3 Incentive Stock Options. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. Independent contractors and consultants are not eligible for the
grant of ISOs. In addition, a Key Employee
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<PAGE> 41
who owns more than 10% of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries shall not
be eligible for the grant of an ISO unless the requirements set forth in section
422(c)(5) of the Code are satisfied.
ARTICLE 6. OPTIONS
6.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan, as
determined by the Committee. The Stock Option Agreement shall specify whether or
to what extent the Option is an ISO or an NSO. The provisions of the various
Stock Option Agreements entered into under the Plan need not be identical.
6.2 Number of Shares. Each Stock Option Agreement shall specify the
number of Shares subject to the Option subject to the adjustment of such number
in accordance with Article 10. Options granted to an Optionee in a single
calendar year shall in no event pertain to more than 100,000 Shares, subject to
adjustment in accordance with Article 10.
6.3 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price, which shall in no event be less than 100% of the Fair Market
Value of a Share on the date of grant (or, for a Key Employee who owns more than
10% of the total combined voting power of all classes of outstanding stock of
the Company or any of its Parents or Subsidiaries, 110% of the Fair Market Value
of a Share on the date of grant).
6.4 Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an option shall in no event exceed 10 years from the date of grant
(or, for a Key Employee who owns more than 10% of the total combined voting
power of all classes of outstanding stock of the Company or any of its Parents
or Subsidiaries, five years from the date of grant). Options may not be
exercised more than one year from the date of termination if the termination was
caused by death or disability and more than 60 days from the date of termination
if the termination was for any other reason. The vesting of any Option shall be
determined by the Committee in its sole discretion, provided, however, that no
Option is exercisable less than six months after the grant date, subject to the
following exceptions: the Option shall be immediately exercisable in the event
of the Optionee terminates employment as a result of his or her death or a
disability that the Committee finds is a total and permanent disability.
Otherwise, the Stock Option Agreement may provide for (1) accelerated
exercisability in the event of the Optionee's retirement or (2) that such Option
shall become fully exercisable as to all Shares subject to such Option in the
event of a Change in Control.
6.5 Modification of Exercise Price. Neither the Board of Directors nor
the Committee may, without stockholder approval, make any adjustment or
amendment to the Exercise Price of any Option previously awarded under the Plan,
whether through amendment, cancellation or replacement grants, or any other
means.
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<PAGE> 42
ARTICLE 7. PAYMENT FOR OPTION
7.1 General Rule. The entire Exercise Price of Shares issued upon
exercise of Options shall be payable in cash at the time when such Shares are
purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Article 7.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in Section 7.2, 7.3, or 7.4.
7.2 Surrender of Stock. To the extent that this Section 7.2 is
applicable, payment for all or any part of the Exercise Price may be made with
Shares which have already been owned by the Optionee for more than six months.
Such Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
7.3 Exercise/Sale. To the extent that this Section 7.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
7.4 Exercise/Pledge. To the extent that this Section 7.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved
by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.
7.5 Other Forms of Payment. Payment may be made in any other form that
is approved by the Committee and is consistent with applicable laws, regulations
and rules.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS
8.1 Time, Amount and Form of Awards. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. The amount of the Restricted Shares granted is limited to
10% of the Shares available for awards under Section 4.1.
8.2 Payment for Awards. Awards of Restricted Shares may be made for no
consideration.
8.3 Vesting Conditions. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Restricted Share shall not
vest less than one year from the grant date if the vesting is based on meeting
performance targets established by the Committee, or in
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all other cases, less than three years from the grant date subject, in both
cases, to the following exceptions: A Stock Award Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of making
an Award or thereafter, that such Award shall become fully vested in the event
that a Change in Control occurs with respect to the Company.
8.4 Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Shares or (c) any
combination of both. The actual number of Stock Units eligible for settlement
may be smaller than the number included in the original Award, based on
predetermined performance factors. Methods of converting Stock Units into cash
may include (without limitation) a method based on the average Fair Market Value
of Shares over a series of trading days. Vested Stock Units may be settled in a
lump sum or in installments. The distribution may occur or commence when all
vesting conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend equivalents.
Until an Award of Stock Units is settled, the number of such Stock Units shall
be subject to adjustment pursuant to Article 10. Any Stock Units Award that
becomes payable after the recipient's death shall be distributed to the
recipient's designated beneficiary or beneficiaries or his or her estate in
accordance with Section 14.1.
8.5 Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS
9.1 Restricted Shares. The holders of Restricted Shares awarded under
the Plan shall have the same voting, dividend and other rights as the Company's
other shareholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Shares available under Article 4.
9.2 Stock Units. The holders of Stock Units shall have no voting rights.
Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at
the Committee's discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or in a
combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions as the Stock
Units to which they attach.
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ARTICLE 10. PROTECTION AGAINST DILUTION
10.1 Adjustments. In the event of a subdivision of the outstanding
Shares, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the price of Shares, a combination or consolidation of the outstanding
Shares (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of (a) the number of Options, Restricted Shares and Stock Units available for
future Awards under Article 4, (b) the number of Stock Units included in any
prior Award which has not yet been settled, (c) the number of Shares covered by
each outstanding Option or (d) the Exercise Price under each outstanding Option.
Except as provided in this Article 10, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
10.2 Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, Restricted Shares and Stock
Units shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for the assumption of outstanding
Awards by the surviving corporation or its parent, for their continuation by the
Company (if the Company is a surviving corporation), for accelerated vesting and
accelerated expiration, or for settlement in cash.
ARTICLE 11. LIMITATION ON RIGHTS
11.1 Retention Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an employee,
consultant or director of the Company, a Parent, a Subsidiary or an Affiliate.
The Company and its Parents and Subsidiaries reserve the right to terminate the
service of any employee, consultant or director at any time, and for any reason,
subject to applicable laws, the Company's certificate of incorporation and
bylaws and a written employment agreement (if any).
11.2 Shareholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a shareholder with respect to any Shares
covered by his or her Award prior to the issuance of a stock certificate for
such Shares. No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date when such certificate is issued,
except as expressly provided in Articles 8, 9 and 10.
11.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the Plan
shall be subject to all applicable laws, rules and regulations and such approval
by any regulatory body as may be required. The Company reserves the right to
restrict, in whole or in part, the delivery of Shares pursuant to any Award
prior to the satisfaction of all legal requirements relating to the issuance of
such Shares, to their registration, qualification or listing or to an exemption
from registration, qualification or listing.
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<PAGE> 45
ARTICLE 12. LIMITATION ON PAYMENTS
12.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board of Directors (the "Auditors") determine that any payment
or transfer by the Company to or for the benefit of a Participant, whether paid
or payable (or transferred or transferable) pursuant to the terms of this Plan
or otherwise (a "Payment"), would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount; provided
that the Committee, at the time of making an Award under this Plan or at any
time thereafter, may specify in writing that such Award shall not be so reduced
and shall not be subject to this Article 12. For purposes of this Article 12,
the "Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of section 280G of the Code.
12.2 Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 12, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 12 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
12.3 Overpayments and Underpayments. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the
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<PAGE> 46
Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
12.4 Related. For purposes of this Article 12, the term "Company" shall
include affiliated corporations to the extent determined by the Auditors in
accordance with section 280G(d)(5) of the Code.
ARTICLE 13. WITHHOLDING TAXES
13.1 General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
13.2 Share Withholding. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash. Any payment of
taxes by assigning Shares to the Company may be subject to restrictions,
including any restrictions required by rules of the Securities and Exchange
Commission.
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARDS
14.1 General. Except as provided in Article 14, Subsections (a) and (b),
below, and Section 14.2, an Award granted under the Plan shall not be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law. An Option may be exercised during the lifetime of the Optionee
only by him or her or by his or her guardian or legal representative. Any act in
violation of this Article 14 shall be void.
(a) Each Participant shall designate a beneficiary or
beneficiaries to receive or exercise any outstanding Awards at the time
of the Participant's death. The designation shall be made on the form
prescribed for the purpose by the Company. In the event no beneficiary
is designated by the Participant or no designated beneficiary survives
the Participant, any outstanding Awards at the time of the Participant's
death shall be transferred by will or by the laws of descent and
distribution.
(b) Rights under Awards may be assigned to an Alternate Payee
pursuant to a QDRO. The assignment of an Award to an Alternate Payee
pursuant to a QDRO shall not be treated as a new grant. The transfer of
an ISO to an Alternate Payee may, however, cause it to fail to qualify
as an ISO. If an Award is assigned to an Alternate Payee pursuant to a
QDRO, the Alternate
-10-
<PAGE> 47
Payee generally has the same rights as the grantee under the terms of
the Plan, except that (1) the Award shall be subject to the same vesting
terms and exercise period as if the Award were held by the grantee, (2)
an Alternate Payee may not transfer an Award and (3) and Alternate Payee
is ineligible for re-load Options. For purposes of the Subsection (b),
the word "QDRO" means a court order (1) that recognizes the right of the
spouse, former spouse or child (an "Alternate Payee") of an individual
who is granted an Award to an interest in such Award relating to marital
property rights or support obligations and (2) that the Committee
determines to be a "qualified domestic relations order," as that term is
defined in section 414(p) of the Code, but for the fact that the Plan is
not a plan described in section 3(3) of the Employee Retirement Income
Security Act of 1974.
14.2 Trusts. Neither this Article 14 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares or
Stock Units to (a) the trustee of a trust that is revocable by such Participant
alone, both at the time of the transfer or assignment and at all times
thereafter prior to such Participant's death, or (b) the trustee of any other
trust to the extent approved in advance by the Committee in writing. A transfer
or assignment of Restricted Shares or Stock Units from such trustee to any
person other than such Participant shall be permitted only to the extent
approved in advance by the Committee in writing, and Restricted Shares or Stock
Units held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable Stock Award Agreement,
as if such trustee were a party to such Agreement.
ARTICLE 15. FUTURE OF THE PLAN
15.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors; provided,
however, it is approved by the Company's shareholders within 12 months before or
after the date of adoption. In the event the Company's shareholders fail to
approve the Plan within 12 months after its adoption by the Board of Directors,
any Options granted under the Plan shall be null and void, shares received upon
the exercise of such Options shall not be counted in determining whether
shareholder approval has been obtained, and no additional Option grants shall be
made. The Plan shall terminate automatically ten (10) years after its adoption
by the Board of Directors and may be terminated on any earlier date pursuant to
Section 15.2. No ISOs shall be granted after May 31, 2005.
15.2 Amendment or Termination. The Board of Directors may, at any time
and for any reason, amend or terminate the Plan. An amendment of the Plan shall
be subject to the approval of the Company's shareholders only to the extent that
the amendment materially increases the benefits available under the plan, or as
required by applicable laws, regulations or rules. No Awards shall be granted
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Award previously granted under the
Plan.
-11-
<PAGE> 48
1995 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AUGUST 31, 1999)
<PAGE> 49
1995 DIRECTORS' STOCK OPTION PLAN
OF ETEC SYSTEMS, INC.
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board on March 7, 1995, subject to approval
by the Company's stockholders at the Annual Meeting of Stockholders on September
12, 1995. The purpose of the Plan is to promote the long-term success of the
Company by (a) encouraging Non-employee Directors to focus on critical
long-range objectives, (b) encouraging the attraction and retention or
Non-employee Directors with exceptional qualifications and (c) linking
Non-employee Directors directly to stockholder interests through increased stock
ownership. The Plan seeks to achieve this purpose by providing for the grant of
Non-statutory options to purchase shares of Common Stock.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" shall mean the internal Revenue Code of 1986, as amended.
(c) "Company" shall mean Etec Systems, Inc., a Nevada Corporation, or
any successor.
(d) "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
(e) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified in Section 5(c) and in the
applicable Stock Option Agreement.
(f) "Fair Market Value" shall mean (a) the closing price of a share of
Common Stock on the principal exchange on which the shares are trading, on the
day on which the Fair Market Value is determined, or (b) if the shares of Common
Stock are not traded on an exchange but are quoted on NASDAQ or a successor
quotation system, the closing price on the day on which the Fair Market Value is
determined, or (c) if the shares are not traded on an exchange or quoted on the
NASDAQ or a successor quotation system, the Fair Market Value of a share, as
determined by the Committee in good faith.
(g) "Non-employee Director" shall mean a member of the Board of
Directors (i) who is not and has never been an employee (within the meaning or
section 3401(c) of the Code and the regulations thereunder) (A) of the Company,
(B) of a Subsidiary of the Company or (C) of an affiliate of the Company (within
the meaning of the Securities Act of 1933) and (ii) who is not prohibited under
the terms of his or her employment from accepting the Options granted under this
Plan.
<PAGE> 50
(h) "Non-statutory Option" shall mean a stock option not described in
section 422(b) or 423(b) of the Code.
(i) "Option" shall mean a Non-statutory Option granted under the Plan
and entitling the holder to purchase Shares.
(j) "Optionee" shall mean an individual who holds an Option.
(k) "Plan" shall mean this 1995 Directors' Stock Option Plan of Etec
Systems, Inc., as amended pursuant to Section 8(b).
(l) "Service" shall mean service as a Non-Employee Director.
(m) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 7 (if applicable).
(n) "Stock" shall mean the Common Stock of the Company.
(o) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which, subject to this Plan, contains the terms,
conditions and restrictions pertaining to his or her Option.
(p) "Subsidiary" shall mean any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes or outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall he considered a Subsidiary commencing as of such date.
SECTION 3. ADMINISTRATION.
(a) Plan Administrator. The Plan shall he administered by the Board of
Directors.
(b) Board Responsibilities. Subject to the provisions of the Plan and,
as of any date that the Company becomes registered under Section 12 of the
Exchange Act, the Rule 16b-3 requirements for "formula plans," the Board of
Directors shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
and
(iv) To take any other actions deemed necessary or advisable for
the administration of the Plan.
<PAGE> 51
All decisions, interpretations and other actions of the Board of
Directors shall be final and binding on all Optionees and all other persons
deriving their rights from an Optionee. No member of the Board of Directors
shall be liable for any action that he or she has taken or has failed to take in
good faith with respect to the Plan or any option.
SECTION 4. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be treasury
Shares or authorized but unissued Shares. Subject to adjustment pursuant to
Section 7, a total of 200,000 Shares are subject to Options and are available
for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the purposes
of the Plan.
(b) Additional Shares. In the event that any outstanding option for any
reason expires or is canceled or otherwise terminated, the Shares allocable to
the unexercised portion of such Option shall again be available for the purposes
of this Plan.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option shall he evidenced
by a Stock Option Agreement between the Optionee and the Company. Such Option
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions that are not inconsistent with the
Plan and that the Board of Directors deems appropriate for inclusion in a Stock
Option Agreement.
(b) Eligibility and Time of Grant. Each Non-employee Director who was a
member of the Board on March 7, 1995 shall receive an Option covering 8,000
Shares on such date. Thereafter, each such Non-employee Director shall receive
an option covering 3,000 Shares on the date of each succeeding Annual Meeting of
Stockholders, on which he or she serves as a member of the Board of Directors.
Each Non-employee Director who first joins the Board of Directors after March 7,
1995, shall receive an Option covering 8,000 Shares as of the first business day
of his or her election to the Board of Directors. Thereafter, such Non-employee
Director shall receive an Option covering 3,000 shares, on the date of each
succeeding Annual Meeting of Stockholders provided he or she serves as a member
of the Board of Directors on such date. (The number of Shares included in an
Option shall be subject to adjustment under Section 7).
(c) Exercise Price. The Exercise Price under each option shall be 100
percent of the Fair Market value of the Shares subject to such Option on the
date when such Option is granted. The entire Exercise Price of Shares issued
under the Plan shall be payable in cash or by check when the Option is
exercised, except as follows:
(i) Payment may be made with Shares that have already been owned
by the Optionee for more than six months and that are surrendered to the
Company (in good form for transfer) in payment of all or part of the
Exercise Price and any withholding
<PAGE> 52
taxes. Such Shares shall be valued at their Fair Market Value on the
date when the new Shares are purchased under the Plan.
(ii) As of any date that the Company becomes registered under
Section 12 of the Exchange Act, payment may be made by the delivery (on
a form prescribed by the Company) of an irrevocable direction to a
securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company in payment of all or
part of the Exercise Price and any withholding taxes.
(iii) As of any date that the Company becomes registered under
Section 12 of the Exchange Act, payment may be made by the delivery (on
a form prescribed by the Company) of an irrevocable direction to pledge
Shares to a securities broker or lender approved by the Company as
security for a loan and to deliver all or part of the loan proceeds to
the Company in payment of all or part of the Exercise Price and any
withholding taxes.
(d) Vesting. Subject to the stockholder approval requirement of
Sub-section (h) below, each Option shall become exercisable as follows:
(i) With respect to the Options covering 8,000 Shares, 4,000
Shares shall become exercisable one year from the date of grant and the
remaining 4,000 Shares shall become exercisable on the second
anniversary of the date of grant, if the Optionee remains in Service on
such anniversary date.
(ii) With respect to the Options covering 3,000 Shares, each
such option shall become exercisable the day prior to the Annual Meeting
of Stockholders next following the date of grant, or, if earlier, the
365th day after the last Annual Meeting of Stockholders.
(iii) Notwithstanding 5(d)(i) and (ii) above, all outstanding
options shall immediately vest on the death or total disability of the
Optionee.
Notwithstanding the Service conditions in Subparagraph (i)(a) or (i)(b),
if an Optionee is not in Service on the anniversary date because of removal from
the Board of Directors, any Shares scheduled to become exercisable on the
vesting date next following his or her removal shall nonetheless become
exercisable.
(e) Term of Options. Each Option shall expire on the 10th anniversary of
the date when such Option was granted.
(f) Termination of Service. If an Optionee's Service terminates for any
reason, then his or her Option shall expire one year from the date of
termination. The Optionee may exercise all or part of his or her option at any
time before its expiration under the preceding sentence, but only to the extent
that such Option is exercisable in accordance with Section 5(d). The
unexercisable balance of such Option shall lapse. In the event that the
Optionee's service terminates because of his or her death or the Optionee dies
after the termination of his or her service, but before the expiration of his or
her Option, all or part of such option may be exercised
<PAGE> 53
(prior to expiration) by the executors or administrators of the Optionee's
estate or by any person who has acquired such option directly from him or her by
bequest, inheritance or beneficiary designation, but only to the extent that
such Option is exercisable in accordance with Section 5(d).
(g) Non-transferability. During an Optionee's lifetime, his or her
Option shall be exercisable only by him or her and shall be non-transferable. In
the event of an Optionee's death, his or her Option shall not be transferable
other than by bequest, inheritance or beneficiary designation.
(h) Stockholder Approval. Subsection (d) above notwithstanding, no
Option shall be exercisable under any circumstances unless and until the
Company's stockholders have approved the Plan.
SECTION 6. MISCELLANEOUS PROVISIONS.
(a) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her option until such Optionee or transferee is entitled,
pursuant to the terms of the Plan, to receive such Shares. No adjustment shall
be made except as provided in Section 7.
(b) Restrictions on Issuance of Shares. Shares shall not be issued under
the Plan unless the issuance and delivery of such Shares complies with (or is
exempt from) all applicable requirements of law, including (without limitation)
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and the regulations of any
stock exchange on which the Company's securities may then be listed. The Company
may impose restrictions upon the sale, pledge or other transfer of such Common
Shares (including the placement of appropriate legends on stock certificates)
if, in the judgment of the Company and its counsel, such restrictions are
necessary or desirable in order to achieve compliance with the provisions of the
Securities Act of 1933, as amended, the securities laws of any state or any
other law.
(c) No Retention Rights. No provision of the Plan, nor any Option
granted under the Plan, shall be construed as giving any person the right to
become or to be treated as a Non-employee Director or to remain a Non-employee
Director.
SECTION 7. ADJUSTMENT OF SHARES.
(a) General. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Board of Directors shall make
appropriate adjustments in one or more of (i) the number of options available
for future grants under Section 4, (ii) the number of Shares to be covered by
each new Option under Section 5(d), (iii) the number of Shares covered by each
outstanding Option or (iv) the Exercise Price under each outstanding Option.
<PAGE> 54
(b) Reorganizations. In the event that the Company is a party to a
merger or consolidation, outstanding Options shall be subject to the agreement
of merger or consolidation. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one Share under such agreement and the Exercise Price,
or for the acceleration of their exercisability followed by the cancellation of
Options not exercised, in all cases without the Optionees' consent. Any
cancellation shall not occur earlier than 30 days after such acceleration is
effective and Optionees have been notified of such acceleration.
(c) Reservation of Rights. Except as provided in this Section 7, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Shares subject to
an Option. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 8. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on March 7, 1995 subject to approval of the Company's stockholders.
The Plan shall remain effective until it is terminated pursuant to Subsection
(b) below.
(b) Right to Amend or Terminate this Plan. The Board of Directors may
amend the Plan at any time and from time to time, provided that, as of any date
on which the Company becomes registered under Section 12 of the Exchange Act,
the Board of Directors may amend the Plan no more than once every six months
unless such amendment is required to comply with the Code, or the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
Rights and obligations under any option granted before amendment of the Plan
shall not be materially altered, or impaired by such amendment, except with
consent of the person to whom the Option was granted. An amendment of the Plan
shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Option previously granted under the Plan.
<PAGE> 55
PROXY
ETEC SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Stephen E. Cooper, W. Russell Wayman, and Saul
E. Arnold as Proxies, with full power in each to act without the other and with
the power of substitution in each, to represent and to vote all the shares of
the stock that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Etec Systems, Inc. to be held on December 14, 1999, or at any
postponement or adjournment thereof, with respect to the matters set forth on
the reverse side.
The proxy will be voted in accordance with specifications made on the reverse
side.
IF YOU DO NOT INDICATE HOW YOU WISH THIS PROXY TO BE VOTED, THE PROXYHOLDERS
WILL VOTE "FOR" ALL OF MANAGEMENT'S NOMINEES FOR DIRECTOR, "FOR" PROPOSALS 2,3,4
AND 5, AND IN THEIR DISCRETION ON SUCH OTHER MATTERS AS ARE PROPERLY BROUGHT
BEFORE THE MEETING.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 56
<TABLE>
<CAPTION>
<S> <C>
VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient, and immediate! It's fast, convenient, and immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683)
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompany Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). For http://www.eproxyvote.com/etec
shareholders residing outside the United
States call collect on a touch-tone phone 3. Enter your 14 digit Voter Control Number
1-201-536-8073 located on your Proxy Card above your name.
3. Enter your 14 digit Voter Control Number 4. Follow the instructions provided.
located on your Proxy Card above your name.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/etec anytime!
</TABLE>
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
1. Election of eight Board of Directors.
Nominees: (01) Stephen E. Cooper, (02) Takeshi (John) Suzuki,
(03) Edward L. Gelbach, (04) John McBennett,
(05) William J. Ryan, (06) William T. Siegle,
(07) Thomas M. Trent, (08) Robert L. Wehrij
FOR ALL NOMINEES / / / / WITHHELD FROM ALL NOMINEES
/ / For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
2. To approve an amendment to the 1995 Omnibus Incentive Plan to increase the
number of available shares by 800,000.
For / / Against / / Abstain / /
3. To approve an amendment to the 1995 Directors' Stock Option Plan to increase
the number of available shares by 50,000.
For / / Against / / Abstain / /
4. To approve an amendment to the 1995 Employee Stock Purchase Plan to increase
the number of available shares by 200,000.
For / / Against / / Abstain / /
5. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants.
For / / Against / / Abstain / /
6. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
This proxy should be signed by the shareholder(s) exactly as his or her name(s)
appear(s) hereon, dated and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both persons should sign.
