<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INTEGRATED PROCESS EQUIPMENT CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(N/A)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(l), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and O-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 O-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
O-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:
Notes:
<PAGE> 2
INTEGRATED PROCESS EQUIPMENT CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 19, 1998
To the Stockholders:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
Integrated Process Equipment Corp. (the "Company"), a Delaware corporation, will
be held on Thursday, November 19, 1998 at 10:00 a.m., local time, at the Phoenix
Airport Hilton, 2435 South 47th Street, Phoenix, Arizona 85034, for the
following purposes:
1. To elect Directors of the Company to serve until the next
Annual Meeting or the election of their successors.
2. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the 1999 fiscal year.
3. To approve an amendment to the 1992 Stock Option Plan to
increase the number of shares reserved for issuance thereunder
by 350,000 to a new total of 5,250,000.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on October 9, 1998
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
All Stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Roger D. McDaniel
President and Chief Executive Officer
San Jose, California
October 23, 1998
YOUR VOTE IS IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF
YOU RETURNED A PROXY.
<PAGE> 3
INTEGRATED PROCESS EQUIPMENT CORP.
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Integrated Process Equipment Corp. (the "Company") for use at the Annual Meeting
of Stockholders to be held on Thursday, November 19, 1998 at 10:00 a.m., local
time, or at any adjournments thereof. The Annual Meeting will be held at the
Phoenix Airport Hilton, 2435 South 47th Street, Phoenix, Arizona 85034. The
principal executive offices of the Company are located at 911 Bern Court, San
Jose, California 95112. The Company's telephone number at that location is (408)
436-2170.
These proxy solicitation materials are being mailed on or about October
23, 1998 to stockholders entitled to vote at the meeting, accompanied by a copy
of the Company's 1998 Annual Report to Stockholders.
RECORD DATE AND SHARE OWNERSHIP
Only holders of record of Common Stock and Class A Common Stock at the
close of business on October 9, 1998 (the "Record Date") are entitled to notice
of and vote at the meeting. At the Record Date, 17,840,625 shares of the
Company's Common Stock, $0.01 par value, and 7,186 shares of the Company's Class
A Common Stock, $0.01 par value, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by (i) delivering to the Company's
Secretary, at the principal executive office listed above, a written notice of
revocation or a duly executed proxy bearing a later date or (ii) attending the
Annual Meeting and voting in person. Attending the Annual Meeting in and of
itself may not constitute a revocation of a proxy.
VOTING AND SOLICITATION
Each share of Common Stock outstanding on the Record Date is entitled
to one vote. Each share of Class A Common Stock outstanding on the Record Date
is entitled to four votes.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections (the "Inspector") with the assistance of
the Company's transfer agent. The Inspector will also determine whether a quorum
is present. The affirmative vote of the majority of the Votes Cast will be
required under Delaware law to approve each Proposal except the election of
Directors. Directors shall be elected by a plurality of the Votes Cast. The
"Votes Cast" are defined under Delaware law to be the shares of the Company's
Common Stock and Class A Common Stock present in person or represented by proxy
at the Annual Meeting and "entitled to vote on the subject matter" multiplied by
the number of votes to which
<PAGE> 4
each such share is entitled. Votes that are cast against a Proposal will be
counted for purposes of determining (i) the presence or absence of a quorum for
the transaction of business and (ii) the total number of Votes Cast with respect
to the Proposal. Abstentions will be counted for purposes of determining both
(i) the presence or absence of a quorum for the transaction of business and (ii)
the total number of Votes Cast with respect to the Proposal. Accordingly,
abstentions will have the same effect as a vote against the Proposal. Broker
non-votes will not be counted as Votes Cast.
The cost of soliciting proxies will be borne by the Company. The
Company has retained the services of Georgeson & Company Inc. to solicit
proxies, for which the Company estimates that it will pay a fee not to exceed
$10,000, plus out-of-pocket expenses. The Company may reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited by certain of the Company's Directors, Officers and regular employees,
without additional compensation, in person or by telephone or facsimile.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF
STOCKHOLDERS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1999 Annual Meeting of
Stockholders must be received by the Company no later than July 2, 1999 to be
included in the proxy statement and form of proxy relating to that meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of capital stock of the Company as of September
30, 1998, by (i) all persons known to the Company to be the beneficial owners of
more than 5% of the Company's capital stock, (ii) the Company's Chief Executive
Officer and the other most highly paid Executive Officers other than the Chief
Executive Officer whose annual compensation in fiscal 1998 exceeded $100,000,
(iii) each of the Company's Directors and (iv) all Directors and Executive
Officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK SHARES BENEFICIALLY OWNED (1)
----------------------------------------------
NUMBER OF PERCENT OF NUMBER OF
NAME (2) SHARES SHARES VOTES (3)
- -------------------------------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
State of Wisconsin Investment Board(4)(5)..................... 1,834,000 10.3% 1,834,000
Capital Guardian Trust Co.(4)(6).............................. 1,529,700 8.6% 1,529,700
The Fletcher Asset Management, Inc.(4)(7)..................... 1,389,961 7.8% 1,389,961
Harold C. Baldauf(8).......................................... 390,307 2.2% 390,307
Sanjeev R. Chitre(9).......................................... 752,500 4.2% 752,500
William J. Freschi(10)........................................ 98,982 * 98,982
John S. Hodgson(11)........................................... 75,000 * 75,000
Kenneth Levy(12).............................................. 45,000 * 45,000
Roger D. McDaniel(13)......................................... 280,000 1.6% 280,000
Thomas C. McKee (14).......................................... 30,643 * 30,643
All Executive Officers and Directors as a group
(7 persons)(15)............................................... 1,672,432 8.6% 1,672,432
- ---------------------------
</TABLE>
* Less than one percent.
(1) Percentage ownership is calculated based on 17,839,793 shares of Common
Stock and 7,186 shares of Class A Common Stock outstanding on September
30, 1998 for a total of 17,846,979 shares. For purposes of the table,
shares of Common Stock and Class A Common Stock are referred to
collectively as "Common" and shares of Series B-1, B-2 and B-3
Preferred Stock are referred to collectively as "Preferred." Each share
of the Series B-1, B-2 and B-3 Preferred Stock is
-2-
<PAGE> 5
convertible into 12.54, 11.41 and 15 shares of Common Stock,
respectively. The Preferred Stock is listed on an as converted basis.
(2) The address of each person or entity set forth herein is the address of
the Company appearing elsewhere in this Proxy Statement except as
appears in the footnotes below.
(3) The Class A Common Stock is entitled to four votes per share. The
Common Stock is entitled to one vote per share. The Preferred Stock is
not entitled to vote. However, for purposes of number of votes and
percent of voting power, the Preferred Stock is included on an as
converted basis (see footnote 1 above). Options and warrants
outstanding at September 30, 1998 and exercisable within 60 days after
September 30, 1998 have been included as voting shares for purposes of
calculating the number of votes and the percentage of votes.
(4) Based on statements filed with the Securities and Exchange Commission
pursuant to Sections 13(d) or 13(g) of the Securities Exchange Act of
1934. The Company has not independently verified more current holdings.
(5) The address of the State of Wisconsin Investment Board is 121 East
Wilson Street, Madison, Wisconsin 53707.
(6) The Capital Group Companies, Inc. is the parent company of a group of
investment management companies that hold investment power, and in some
cases, voting power over the Company's Common Stock. Capital Guardian
Trust Co., a wholly owned subsidiary of The Capital Group Companies,
Inc., is the beneficial owner of 1,529,700 shares of the Company's
Common Stock. The remaining shares are beneficially owned by other
subsidiaries of The Capital Group Companies, Inc., none of which by
itself owns 5% or more of the outstanding securities. The address of
Capital Guardian Trust Co. is 333 South Hope Street, Los Angeles,
California 90071.
(7) Includes 456,000 shares of Common Stock issuable upon the exercise of
warrants exercisable within 60 days. The address of Fletcher Asset
Management, Inc. is 767 Fifth Avenue, 48th Floor, New York, New York
10153.
(8) Includes 350,307 shares of Common Stock issuable upon conversion of
7,204, 9,772 and 9,898 shares of Series B-1, B-2 and B-3 Preferred
Stock, respectively, at the conversion rates described in footnote 1
above. Includes 40,000 shares of Common Stock subject to options
exercisable within 60 days. Mr. Baldauf's address is c/o Saginaw
Control & Engineering, 95 Midland Road, Saginaw, Michigan 48603.
(9) Includes 752,500 shares of Common Stock subject to options exercisable
within 60 days. Does not include 150,373 shares of Common Stock
currently held by the Avantika Sanjeev Chitre Irrevocable Trust dated
July 1, 1991 (the "Trust"). Neither Mr. Chitre nor his wife has a
beneficial interest in the shares held in the name of the Trust. Bruce
W. McRoy, the trustee, holds sole voting and investment power with
respect to such shares. The beneficiary of the Trust is Mr. Chitre's
daughter, Avantika Sanjeev Chitre.
(10) Includes 90,000 shares of Common Stock subject to options exercisable
within 60 days. Mr. Freschi's address is c/o TransData International,
Inc., 5757 W. Century Blvd., Suite 2000, Los Angeles, California 90045.
(11) Includes 75,000 shares of Common Stock subject to options exercisable
within 60 days.
(12) Includes 45,000 shares of Common Stock subject to options exercisable
within 60 days. Mr. Levy's address is c/o KLA-Tencor Corporation, 160
Rio Robles, San Jose, California 95161-9055.
(13) 50,000 shares held by Mr. McDaniel are subject to a repurchase option
and vest monthly from September 1997 through February 2000. Each month,
Mr. McDaniel receives the number of shares vested minus a certain
number of shares withheld for tax purposes. Includes 230,000 shares of
Common Stock subject to options exercisable within 60 days.
(14) Includes 30,000 shares of Common Stock subject to options exercisable
within 60 days. Mr. McKee resigned from the Company as of January 1,
1998.
(15) Includes 350,307 shares of Common Stock issuable upon conversion of
7,204, 9,772 and 9,898 shares of Series B-1, B-2 and B-3 Preferred
Stock, respectively, at the conversion rates described in footnote 1
above. Includes 1,262,500 shares of Common Stock subject to options
exercisable within 60 days.
-3-
<PAGE> 6
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
A board of five Directors is to be elected at the Annual Meeting. The
Company's Bylaws provide for the Board of Directors to determine the number of
Directors (but not below one Director). The Company's Board of Directors is
currently set at five. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for the five nominees of the Board of Directors
named below, all of whom are presently Directors of the Company. If any nominee
is unable or declines to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a Director. If stockholders nominate persons
other than the Company's nominees for election as Directors, the proxy holders
will vote all proxies received by them to assure the election of as many of the
Company's nominees as possible, with the proxy holder making any required
selection of specific nominees to be voted for. The term of office of each
person elected as a Director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected and qualified.
The following table sets forth information concerning the nominees at
September 30, 1998 that is based on data furnished by them.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------------- ----- ----------------------------------------------------- --------
<S> <C> <C> <C>
Sanjeev R. Chitre(1)(5)............... 43 Chairman of the Board of Directors of the Company 1989
Roger D. McDaniel(1)(5)............... 59 President and Chief Executive Officer of the Company 1996
Harold C. Baldauf(2).................. 66 Chairman of the Board of Directors of Saginaw Control 1993
and Engineering and of Southwest Automation Systems,
Inc.
William J. Freschi(2)(3)(4)........... 57 Chairman of the Board of TransData International, Inc. 1992
and Managing Partner of J&B Ventures
Kenneth Levy(3)(4)(5)(6).............. 55 Chief Executive Officer of KLA-Tencor Corporation 1995
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Stock Option Committee
(5) Member of the Nominating Committee
(6) Lead Director
SANJEEV R. CHITRE founded the Company and has been the Chairman of the
Board since its organization in October 1989. He was the Company's Chief
Executive Officer from October 1989 to August 1997. Mr. Chitre was Vice
President of marketing and sales of Superwave Technology, Inc., a manufacturer
of automated in line systems for the semiconductor industry, from 1984 through
1989.
ROGER D. MCDANIEL has been President and Chief Executive Officer of the
Company effective September 1997 and has been a Director of the Company since
August 1996. From April 1989 until August 1996, Mr. McDaniel was the Chief
Executive Officer of MEMC, a silicon wafer producer, and he served as a Director
of MEMC from April 1989 to March 1997. Mr. McDaniel is a Director of Veeco
Instruments, Inc. He is a Director and past Chairman of the Semiconductor
Equipment and Materials Institute ("SEMI"), an international industry
association of material and equipment manufacturers which serves the
semiconductor industry.
-4-
<PAGE> 7
HAROLD C. BALDAUF has been a Director of the Company since September
1993. Mr. Baldauf was a principal stockholder, Director and Vice President of
the Company's subsidiary Westech Systems, Inc., now known as IPEC Planar, Inc.
("Planar"), acquired in 1993. Mr. Baldauf is Chairman of the Board of Directors
of Saginaw Control and Engineering ("Saginaw Control") and the Chairman of the
Board of Directors of Southwest Automation Systems, Inc. ("Southwest
Automation"). Mr. Baldauf is a consultant to Southwest Automation. In connection
with the Company's acquisition of Planar, the Company entered into a
Stockholders' Rights Agreement with Mr. and Mrs. Baldauf giving Mr. Baldauf the
right (so long as the Baldauf family owns 50,000 or more shares of the Company's
Common Stock) to designate two Directors to the Company's Board of Directors.
Mr. Baldauf was elected and is nominated to the Company's Board of Directors as
one of his designees.
WILLIAM J. FRESCHI has been a Director of the Company since September
1992. Mr. Freschi is Chairman of the Board of TransData International, Inc. and
Managing Partner of J&B Ventures. Previously, he was a principal of the
investment banking firm of BT Alex. Brown Incorporated. Mr. Freschi was founder
and Chief Executive Officer of TCMS, a data processing services company sold to
Chase Manhattan Bank, and a certified public accountant with the consulting
division of KPMG Peat Marwick.
KENNETH LEVY has been a Director of the Company since May 1995. Since
July 1998, he has been Chief Executive Officer of KLA-Tencor Corporation, a
semiconductor manufacturing instrumentation company formed by the merger of KLA
Instruments Corporation and Tencor Corporation. From April 1997 to July 1998,
Mr. Levy served as Chairman of the Board of Directors of KLA-Tencor Corporation.
From 1974 to April 1997, Mr. Levy served as the Chief Executive Officer of KLA
Instruments Corporation. Mr. Levy is a Director of Ultratech Stepper, Inc. and
KLA-Tencor Corporation. Mr. Levy also serves as a Director emeritus of SEMI.
VOTE REQUIRED
The five nominees for Director receiving the highest number of
affirmative votes of the Votes Cast shall be elected as Directors. Votes
withheld from any Director are counted for purposes of determining the presence
or absence of a quorum and the total number of Votes Cast with respect to the
election of Directors. Broker non-votes will not be counted for purposes of
determining the number of Votes Cast.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven meetings during the
1998 fiscal year. All Directors, with the exception of Harold Baldauf, attended
75% or more of the meetings of the Board of Directors. All Directors attend all
meetings of the committees of the Board on which the Director served. The Board
of Directors acted by written consent on four occasions during the 1998 fiscal
year. The Board of Directors has an Executive Committee, Audit Committee,
Compensation Committee, Stock Option Committee and a Nominating Committee.
The Executive Committee currently consists of Mr. Chitre and Mr.
McDaniel. Until September 1, 1997, the Executive Committee during fiscal 1998
consisted of Mr. Chitre. John S. Hodgson, the Company's Vice President and Chief
Financial Officer, has served as Secretary of the Executive Committee since
September 1, 1997. The Executive Committee did not act during fiscal 1998. The
Executive Committee has authority to exercise all the powers and authority of
the Board of Directors in the management and affairs of the Company between
meetings of the Board of Directors, to the extent permitted by law.
-5-
<PAGE> 8
The Audit Committee currently consists of Mr. Freschi and Mr. Baldauf.
Until September 1, 1997, the Audit Committee during fiscal 1998 consisted of Mr.
Freschi and Mr. McDaniel. The Audit Committee held three meetings during fiscal
1998. The Audit Committee recommends engagement of the Company's independent
auditors, approves the services performed by the Company's independent auditors
and reviews the Company's accounting principles and its system of internal
accounting controls.
The Compensation Committee currently consists of Mr. Levy and Mr.
Freschi. Until September 1, 1997, the Compensation Committee during fiscal 1998
consisted of Mr. Levy and Mr. McDaniel. The Compensation Committee held four
meetings during fiscal 1998. The Compensation Committee reviews and makes
recommendations to the Board concerning the Company's executive compensation
policy, bonus plans and equity incentive plans. During fiscal 1998, Mr. Levy was
confirmed as the sole member of a committee with authority to adopt resolutions
necessary regarding employment arrangements with Sanjeev Chitre and Roger
McDaniel.
The Stock Option Committee currently consists of Mr. Levy and Mr.
Freschi. Until September 1, 1997, the Stock Option Committee during fiscal 1998
consisted of Mr. Levy and Mr. McDaniel. The Stock Option Committee held three
meetings during fiscal 1998. The Stock Option Committee determines the grant of
stock options to purchase shares of Common Stock of the Company pursuant to the
1992 Stock Option Plan.
On April 23, 1998, the Board established a Nominating Committee and Mr.
Chitre, Mr. McDaniel and Mr. Levy were appointed as members. The Nominating
Committee seeks and recommends to the Board of Directors qualified candidates
for election to the Board at the Company's Annual Meeting of Stockholders and
seeks qualified candidates to fill vacancies on the Board of Directors subject
to appointment by the Board of Directors. The Nominating Committee held no
meetings during fiscal 1998.
DIRECTOR COMPENSATION
Non-employee, non-consultant Directors of the Company are entitled to
receive up to $1,000 per day for attendance at each Board of Directors or
committee meeting. All Directors are reimbursed for reasonable expenses incurred
by them in acting as a Director or as a member of any committee of the Board of
Directors.
The Company has agreed to indemnify each Director against certain
claims and expenses for which the Director might be held liable in connection
with past or future service on the Board. In addition, the Company maintains an
insurance policy insuring its Officers and Directors against such liabilities.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and to the other most highly paid Executive Officers
other than the Chief Executive Officer whose annual compensation exceeded
$100,000 (the "Named Executive Officers") for the fiscal years ended June 30,
1998, 1997 and 1996:
-6-
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ---------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
COMPENSATION STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS($) SARS(#)
- ---------------------------------- ---- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sanjeev R. Chitre................ 1998 383,088 71,667 -- -- --
Chairman of the Board and Chief 1997 385,592 67,000 -- -- --
Executive Officer(1) 1996 325,000 150,000 -- -- 87,500
Roger D. McDaniel................ 1998 304,699 71,667 261,633(2) 1,343,750(3) 650,000
President and Chief Executive 1997 __ __ -- -- 30,000
Officer(1) 1996 -- -- -- -- --
John S. Hodgson(4)............... 1998 170,595 13,000 -- -- --
Vice President, Chief Financial 1997 163,509 75,660 -- -- --
Officer, Secretary and Treasurer 1996 133,262 102,310 -- -- --
Thomas C. McKee.................. 1998 173,569 64,014 -- -- --
President and Chief Operating 1997 245,435 102,590 -- -- --
Officer(1) 1996 245,245 70,000 -- -- 40,625
</TABLE>
- ---------------------------
(1) Mr. Chitre resigned as Chief Executive Officer in September 1997. Mr.
McDaniel was appointed President and Chief Executive Officer in
September 1997. Mr. McKee resigned as President in September 1997 and
as Chief Operating Officer in January 1998.
(2) Represents amount paid for relocation expenses.
(3) In August 1997, Mr. McDaniel was granted 50,000 shares of Common Stock
with a fair market value of $26.875 per share that are subject to a
repurchase option by the Company and vest monthly from September 1997
through February 2000. Each month, Mr. McDaniel receives the number of
shares vested minus a certain number of shares withheld for tax
purposes. As of June 30, 1998, the 50,000 shares had a fair market
value of $562,500, or $11.25 per share.
(4) Mr. Hodgson will resign from the Company effective November 19, 1998.
STOCK PLANS
The Company's 1992 Stock Option Plan (the "1992 Plan") permits the
grant of "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonstatutory stock
options and stock purchase rights. Only employees (including employees of any
company in which the Company owns directly or indirectly at least 50 percent of
the voting shares) may receive incentive stock options, while employees, paid
consultants and outside Directors may receive nonstatutory options. As of June
30, 1998, options to purchase 1,178,000 shares of Common Stock had been
exercised, options to purchase 3,068,000 shares were outstanding at a weighted
average exercise price of $14.68 per share, and 804,000 shares remained
available for future grant under the 1992 Plan. In connection with Mr.
McDaniel's appointment as President and Chief Executive Officer of the Company,
the Company granted Mr. McDaniel 50,000 shares of Common Stock that vest monthly
from September 1997 through February 2000. The Company also granted Mr. McDaniel
options to purchase 450,000 shares of Common Stock at an exercise price of
$26.875 per share. 50,000 shares were fully vested on issuance and 50,000 shares
vest yearly beginning September 1, 1998. All of these shares were granted under
the 1992 Plan.
The Company also granted Mr. McDaniel options to purchase 200,000
shares of Common Stock at an exercise price of $26.875 per share outside the
1992 Plan. 50,000 shares vest yearly beginning September 1, 1998.
In fiscal 1994, the Company adopted the 1994 Employee Stock Purchase
Plan (the "1994 Purchase Plan") and reserved 1,000,000 shares for issuance
thereunder. As of June 30, 1998, 265,000 shares had been issued under the 1994
Purchase Plan. The 1994 Purchase Plan is administered by the Board of Directors
of the Company or by a committee appointed by the Board. Employees of the
Company or any majority owned
-7-
<PAGE> 10
subsidiary, including Officers, are eligible to participate if they are
customarily employed by the Company for at least 20 hours per week. The 1994
Purchase Plan currently permits eligible employees to purchase Common Stock
through payroll deductions (which may not exceed the lower of ten percent of an
employee's base compensation or $25,000 per calendar year) at a purchase price
that is no less than 85% of the fair market value of the Common Stock on the
date of purchase. During fiscal 1998 Executive Officers purchased no shares
under the 1994 Purchase Plan.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
The following table sets forth each grant of stock options made during
the fiscal year ended June 30, 1998 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS EXERCISE ASSUMED ANNUAL RATES OF
GRANTED TO OR BASE STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM (1)
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------ ---------- ------------ -------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sanjeev R. Chitre............. -- -- -- -- -- --
Roger D. McDaniel............. 650,000(2) 80.95 26.875 August 13, 2007 2,892,542 9,947,992
John S. Hodgson............... -- --- -- -- -- --
Thomas C. McKee............... -- -- -- -- -- --
</TABLE>
- ---------------------------
(1) The "Potential Realizable Value" shown represents the potential gains
based on annual compound stock price appreciation of 5% and 10% from
the date of grant through the full 10-year option term, net of exercise
price, but before taxes associated with exercise. The amounts represent
certain assumed rates of appreciation only, based on the Securities and
Exchange Commission rules. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock,
overall market conditions and the optionholders' continued employment
through the vesting period. The amounts reflected in this table may not
be achieved and do not reflect the Company's estimate of future stock
price growth.
(2) Excludes restricted stock award of 50,000 shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
VALUES
The following table sets forth, for each of the Named Executive Officers,
stock options exercised during the fiscal year ended June 30, 1998 and the
fiscal year-end value of unexercised options:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
SHARES ---------------------------- ------------------------------
ACQUIRED ON VALUE UNEXERCISABLE
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE($) ($)
- ------------------------------ ------------ ----------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanjeev R. Chitre............. 105,000 1,473,750 592,500 320,000 56,250 --
Roger D. McDaniel............. -- -- 230,000(2) 450,000(2) -- --
John S. Hodgson............... -- -- 75,000 25,000 112,500 --
Thomas C. McKee............... -- -- 30,000 30,000 -- --
</TABLE>
- ---------------------------
(1) Market value of underlying securities at June 30, 1998 less the
exercise price.
(2) Excludes restricted stock award of 50,000 shares.
-8-
<PAGE> 11
EMPLOYEE STOCK PURCHASE PLAN SUMMARY
The following table sets forth as of June 30, 1998, as to the Named
Executive Officers, all Executive Officers as a group and all employees
(excluding Executive Officers) as a group who participated in the 1994 Purchase
Plan: (i) the number of shares of the Company's Common Stock purchased under the
1994 Purchase Plan during the last fiscal year; (ii) the dollar value of the
benefit based on market value on date of purchase less the purchase price, and
(iii) the amount of payroll deductions for future purchases accumulated through
June 30, 1998 for the current purchase period under the 1994 Purchase Plan,
which commenced May 1, 1998:
<TABLE>
<CAPTION>
CURRENT PERIOD
NAME OF INDIVIDUAL OR NO. OF SHARES DOLLAR PAYROLL
IDENTITY OF GROUP PURCHASED VALUE($) DEDUCTIONS ($)
- ------------------------------------------------------------------ ------------- --------- --------------
<S> <C> <C> <C>
Sanjeev R. Chitre................................................. -- -- --
Roger D. McDaniel ................................................ -- -- --
John S. Hodgson................................................... -- -- --
Thomas C. McKee................................................... -- -- --
All current Executive Officers as a group (4 persons)............. -- -- --
All current employees, excluding Executive Officers, as a group... 85,339 1,402,023 155,598
</TABLE>
- ---------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's acquisition of Planar in September
1993, the Company entered into (i) a Consulting Agreement with Mr. Baldauf
providing for payments of $150,000 annually for 10 years to Mr. Baldauf and his
two sons, and (ii) a Stockholders' Agreement with Mr. and Mrs. Baldauf, giving
Mr. Baldauf the right (so long as the Baldauf family owns 50,000 or more shares
of the Company's Common Stock) to designate two Directors to the Company's Board
of Directors (which Board shall not exceed seven Directors). Mr. Baldauf was
elected and is nominated to the Company's Board of Directors as one of Mr.
Baldauf's designees. The Company paid $650,000 to Mr. Baldauf to buy out the
Consulting Agreement in 1998. The non-compete covenant in the Consulting
Agreement will remain in effect until August 2003.
During the fiscal year ended June 30, 1998, the Company purchased
approximately $1.1 million of goods and services from Saginaw Control,
approximately $995,000 of goods and services from Southwest Automation, and
approximately $4.7 million of goods and services from Motion Systems. Mr.
Baldauf is Chairman of Saginaw Control and Southwest Automation, and he and
members of his family own all of the outstanding capital stock of Saginaw
Control and 50% of the outstanding capital stock of Southwest Automation.
Southwest Automation owns 60% of the equity of Motion Systems.
In December 1995 the Company loaned Mr. Chitre $900,000, secured by Mr.
Chitre's Common Stock shares of the Company and by his options to purchase
Common Stock shares of the Company. The interest rate of the loan was the prime
rate charged by the Company's primary commercial bank to its corporate
customers. The loan was paid in full in July 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of
Directors or the Compensation Committee and the board of directors or
compensation committee of any other company.
-9-
<PAGE> 12
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORT
The following report is provided to stockholders by the members of the
Compensation Committee and the Stock Option Committee of the Board of Directors.
Until September 1, 1997, the members of the Compensation Committee and the Stock
Option Committee during fiscal 1998 were Kenneth Levy and Roger D. McDaniel.
Since September 1, 1997, the members of the Compensation Committee and the Stock
Option Committee have been Kenneth Levy and William J. Freschi.
Compensation Philosophy. The goals of the Company's executive
compensation program are to attract and retain Executive Officers who will
strive for excellence and to motivate those individuals to achieve superior
performance by providing them with rewards for assisting the Company in meeting
revenue and profitability targets. Compensation for the Company's Executive
Officers consists of base salary and potential cash bonus, as well as potential
incentive compensation through stock options. The Compensation Committee
considers the total current and potential long-term compensation of each
Executive Officer in establishing each element of compensation.
Cash-Based Compensation. Each fiscal year, the Compensation Committee
reviews and approves, with appropriate modifications, an annual base salary plan
for the Company's Executive Officers. Base salary is targeted at the competitive
median of industry and peer group surveys, with adjustments made by the
Compensation Committee based on its perception of an individual Executive
Officer's performance as to past and expected future contributions. Factors
considered by the Compensation Committee include quantitative factors such as
the profitability of the Company and the market value of its stock, but in years
with unusually strong or weak financial results the Committee complements its
quantitative analysis with a subjective analysis that takes into account efforts
expended and non-quantifiable results achieved by the Executive Officers. During
fiscal 1998, the base salaries of the Company's Executive Officers, on average,
were 13% below estimated median competitive levels. The base salaries ranged
from approximately 76% to 121% of their respective competitive medians. In April
1998, the Company's Executive Officers took a voluntary 10% to 20% reduction in
pay in recognition of the business downturn. The Compensation Committee
determined that pay reductions should not be extended beyond a fixed period of
time, and pay levels for most Executive Officers were restored on September 27,
1998. The opportunity to receive a lump sum adjustment of the pay withheld is
available at such time as revenue levels return to $55 million in a quarter in
the future.
Certain Executive Officers, including the Chief Executive Officer,
received cash bonuses for their service, which were also targeted at the
competitive median of industry and peer group surveys. In determining the bonus
paid to each Executive Officer, the Compensation Committee first establishes a
base bonus figure for each Executive Officer, determined through review of
competitive compensation data for executives at similar levels. The base amount
will be incrementally reduced if the Company does not meet targeted performance
goals or increased if the Company exceeds such goals, which are determined by
the Compensation Committee and include sales, gross margin and operating profit
(excluding non-recurring charges). In fiscal 1998, the Company did not achieve
its performance goals for sales, gross margin and operating profit. As a result,
bonuses were 25% to 50% of their targets and ranged in amount from approximately
7% to 27% of total cash-based compensation.
The industry and peer group used by the Compensation Committee for
purposes of determining Executive Officer compensation is not the same peer
group used in connection with cumulative total stockholder return because the
Compensation Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies included in that peer
group. To construct the industry and peer group for Executive Officer
compensation, the Company chose companies in the
-10-
<PAGE> 13
semiconductor industry and that (i) have revenues comparable to the Company's
revenues or (ii) compete with the Company for executive talent irrespective of
revenue. Companies are included in the latter group if their executives have
skills and expertise similar to the skills and expertise the Company requires of
its Executive Officers.
Stock Options. During each fiscal year, the Stock Option Committee
considers the desirability of granting to Executive Officers awards under the
Company's 1992 Stock Option Plan (the "1992 Plan"), which allows for the grant
of long-term incentives in the form of stock options. The Stock Option Committee
believes stock option grants encourage the achievement of superior results over
time and align employee and stockholder interests. In fixing the grants of stock
options to Executive Officers in the last fiscal year, the Committee reviewed
the recommended individual awards, taking into account the Executive Officer's
scope of responsibility and specific assignments, strategic and operational
goals, anticipated performance requirements and contributions of the Executive
Officer, the number of options previously granted to the Executive Officer and
the number of shares subject to options that had vested and that would vest in
the future and the relative mix of fixed, annual incentive and long-term
compensation in fiscal 1997 versus competitive median data. In light of the
foregoing, in particular, the heavy emphasis in the past on compensation in the
form of long-term incentives when compared to the industry peer group, no stock
options were granted to Executive Officers in the last fiscal year, except in
connection with Mr. McDaniel's appointment as the President and Chief Executive
Officer of the Company (as described below).
In connection with Mr. McDaniel's appointment as President and Chief
Executive Officer of the Company effective September 1, 1997, the Company
granted Mr. McDaniel 50,000 shares of Common Stock that vest monthly from
September 1997 through February 2000. The Company also granted Mr. McDaniel
options to purchase 450,000 shares of Common Stock at an exercise price of
$26.875 per share. 50,000 shares were fully vested on issuance and 50,000 shares
vest yearly beginning September 1, 1998. All of these shares were granted under
the 1992 Plan.
The Company also granted Mr. McDaniel options to purchase 200,000
shares of Common Stock at an exercise price of $26.875 per share outside the
1992 Plan. 50,000 shares vest yearly beginning September 1, 1998. Mr. McDaniel's
cash bonus will decreased to reflect the value of the options vesting during a
particular year if all performance goals for that year are not achieved.
Chief Executive Officer Compensation. The Compensation Committee
reviews and fixes the total cash compensation of the Chief Executive Officer
based on similar competitive compensation data as for all Executive Officers and
the Compensation Committee's assessment of the Chief Executive Officer's past
performance and its expectation as to his future contributions in leading the
Company and positioning the Company for future growth. For fiscal 1998, the base
salary of the Chief Executive Officer was 121% of the relevant competitive
median. For fiscal 1998 the cash bonus was 24% of his total cash-based
compensation and 50% of his target, based on the sales, gross margin, operation
profit and earnings per share of the Company, along with the fulfillment of
customer expectation goals. As has been previously indicated, beginning April
1998, the Chief Executive Officer was among those who took a cut in pay in
recognition of the declining market position and profits of the Company. The
Chief Executive Officer's stock options during fiscal 1998 are described above.
Respectfully submitted,
William J. Freschi
Kenneth Levy
-11-
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE
The following Index shows a comparison of cumulative total stockholder
return (stock appreciation plus dividends, if any) for the Company's Common
Stock for the calendar quarters ended September 30, 1993 through September 30,
1998, with the cumulative total stockholder return for the Nasdaq Stock Market -
U.S. Index and the Hambrecht & Quist ("H&Q") Semiconductor Sector Index. The
cumulative total stockholder return for the Company's Common Stock in the
following index is compared also with the H&Q Technology Index. The graph
assumes the investment of $100 on September 30, 1993, and the reinvestment of
all dividends, if any. The performance shown is not necessarily indicative of
future performance.
COMPARISON OF 50-MONTH CUMULATIVE TOTAL RETURN*
AMONG INTEGRATED PROCESS EQUIPMENT CORP.,THE NASDAQ STOCK MARKET - U.S. INDEX,
THE H&Q SEMICONDUCTOR SECTOR INDEX AND THE H&Q TECHNOLOGY INDEX
* The total return on each of these investments assumes the reinvestment of
dividends, although dividends have never been paid on the Company's Common
Stock.
-12-
<PAGE> 15
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
1998 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
ACTUAL PRICES
<TABLE>
<CAPTION>
Integrated Process Nasdaq Stock H&Q Semiconductor
DATES Equipment Corp. Market -U.S. Sector
- ----- ------------------ --------------- -----------------
<S> <C> <C> <C>
Jun-93 8.00 225.994 257.28
Jul-93 8.25 226.260 259.36
Aug-93 9.00 237.952 308.01
Sep-93 11.00 245.041 323.51
Oct-93 11.75 250.548 283.01
Nov-93 10.25 243.082 282.18
Dec-93 9.00 249.859 286.50
Jan-94 9.50 257.443 310.53
Feb-94 10.25 255.038 329.87
Mar-94 8.75 239.359 324.56
Apr-94 8.06 236.250 309.65
May-94 9.63 236.829 316.22
Jun-94 10.75 228.167 304.91
Jul-94 12.75 232.850 320.08
Aug-94 10.88 247.698 344.51
Sep-94 14.50 247.064 333.22
Oct-94 17.56 251.918 360.23
Nov-94 18.13 243.561 351.78
Dec-94 16.63 244.243 351.82
Jan-95 14.50 245.636 357.60
Feb-95 18.50 258.627 401.79
Mar-95 21.50 266.297 424.85
Apr-95 24.75 274.686 484.97
May-95 26.75 281.771 525.02
Jun-95 35.31 304.606 596.26
Jul-95 45.00 326.999 680.19
Aug-95 36.13 333.627 667.49
Sep-95 39.81 341.296 673.86
Oct-95 37.13 339.326 633.20
Nov-95 30.75 347.294 560.33
Dec-95 23.50 345.445 489.62
Jan-96 22.00 347.144 482.97
Feb-96 18.25 360.356 485.44
Mar-96 17.50 361.543 462.41
</TABLE>
Desk of Michael G. DeWitt
Hambrecht & Quist Research
Page 1
<PAGE> 16
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
1998 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
ACTUAL PRICES
<TABLE>
<CAPTION>
Integrated Process Nasdaq Stock H&Q Semiconductor
DATES Equipment Corp. Market -U.S. Sector
- ----- ------------------ --------------- -----------------
<S> <C> <C> <C>
Apr-96 26.13 391.531 529.79
May-96 29.25 409.509 513.38
Jun-96 20.75 391.049 443.18
Jul-96 12.88 356.176 393.42
Aug-96 15.25 376.132 430.61
Sep-96 15.88 404.901 503.10
Oct-96 10.88 400.427 507.74
Nov-96 17.00 425.181 639.85
Dec-96 18.00 424.798 634.11
Jan-97 26.75 454.989 764.50
Feb-97 25.25 429.823 727.81
Mar-97 16.75 401.756 712.67
Apr-97 13.63 414.316 773.81
May-97 18.38 461.270 835.57
Jun-97 25.31 475.397 803.71
Jul-97 26.13 525.575 983.03
Aug-97 33.00 524.773 1001.66
Sep-97 36.88 555.788 1004.67
Oct-97 22.19 527.000 786.49
Nov-97 21.50 529.642 758.76
Dec-97 15.75 521.181 668.75
Jan-98 14.63 537.527 747.01
Feb-98 18.50 587.995 820.61
Mar-98 20.13 609.678 766.76
Apr-98 18.19 620.007 834.05
May-98 13.88 585.981 685.42
Jun-98 11.25 627.266 658.77
</TABLE>
Desk of Michael G. Denitt
Hambrecht & Quist Research
Page 2
<PAGE> 17
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
1998 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
SCALED PRICES: Stock and index prices scaled to 100 at 6/30/93
<TABLE>
<CAPTION>
H&Q
Integrated Process Nasdaq Stock Semiconductor
DATES Equipment Corp. Market -U.S. Sector
- ----- ------------------ --------------- -------------
<S> <C> <C> <C>
Jun-93 100.00 100.00 100.00
Jul-93 103.13 100.12 100.81
Aug-93 112.50 105.29 119.72
Sep-93 137.50 108.43 125.74
Oct-93 146.88 110.86 110.00
Nov-93 128.13 107.56 109.68
Dec-93 112.50 110.56 111.36
Jan-94 118.75 113.92 120.70
Feb-94 128.13 112.85 128.21
Mar-94 109.38 105.91 126.15
Apr-94 100.78 104.54 120.36
May-94 120.31 104.79 122.91
Jun-94 134.38 100.96 118.51
Jul-94 159.38 103.03 124.41
Aug-94 135.94 109.60 133.90
Sep-94 181.25 109.32 129.52
Oct-94 219.53 111.47 140.01
Nov-94 226.56 107.77 136.73
Dec-94 207.81 108.07 136.75
Jan-95 181.25 108.69 138.99
Feb-95 231.25 114.44 156.17
Mar-95 268.75 117.83 165.13
Apr-95 309.38 121.55 188.50
May-95 334.38 124.68 204.07
Jun-95 441.40 134.78 231.76
Jul-95 562.50 144.69 264.38
Aug-95 451.56 147.63 259.44
Sep-95 497.65 151.02 261.92
Oct-95 464.06 150.15 246.11
Nov-95 384.38 153.67 217.79
Dec-95 293.75 152.86 190.31
Jan-96 275.00 153.61 187.72
Feb-96 228.13 159.45 188.68
Mar-96 218.75 159.98 179.73
</TABLE>
Desk of Michael G. DeWitt
Hambrecht & Quist Research
Page 3
<PAGE> 18
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
1998 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
SCALED PRICES: Stock and index prices scaled to 100 at 6/30/93
<TABLE>
<CAPTION>
H&Q
Integrated Process Nasdaq Stock Semiconductor
DATES Equipment Corp. Market -U.S. Sector
- ----- ------------------ --------------- -------------
<S> <C> <C> <C>
Apr-96 326.56 173.25 205.92
May-96 365.63 181.20 199.54
Jun-96 259.38 173.04 172.26
Jul-96 160.94 157.60 152.92
Aug-96 190.63 166.43 167.37
Sep-96 198.44 179.16 195.55
Oct-96 135.94 177.18 197.35
Nov-96 212.50 188.14 248.70
Dec-96 225.00 187.97 246.47
Jan-97 334.38 201.33 297.15
Feb-97 315.63 190.19 282.89
Mar-97 209.38 177.77 277.00
Apr-97 170.31 183.33 300.77
May-97 229.69 204.11 324.77
Jun-97 316.40 210.36 312.39
Jul-97 326.56 232.56 382.09
Aug-97 412.50 232.21 389.33
Sep-97 460.94 245.93 390.50
Oct-97 277.34 233.19 305.69
Nov-97 268.75 234.36 294.92
Dec-97 196.88 230.62 259.93
Jan-98 182.81 237.85 290.35
Feb-98 231.25 260.18 318.96
Mar-98 251.56 269.78 298.03
Apr-98 227.34 274.35 324.18
May-98 173.44 259.29 266.41
Jun-98 140.63 277.56 256.05
</TABLE>
Desk of Michael G. DeWitt
Hambrecht & Quist Research
Page 4
<PAGE> 19
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
auditors, to audit the financial statements of the Company for the 1999 fiscal
year, and recommends that the stockholders confirm such selection. In the event
of a negative vote, the Board of Directors will reconsider its selection.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS.
-13-
<PAGE> 20
PROPOSAL NO. 3
AMENDMENT OF THE COMPANY'S 1992 STOCK OPTION PLAN
The 1992 Stock Option Plan (the "1992 Plan") provides for the grant of
stock options and stock appreciation rights to employees, consultants and
Directors of the Company or any parent or subsidiary of the Company. Since the
last stockholder approval of the 1992 Plan, the Board of Directors of the
Company has amended the 1992 Plan, subject to stockholder approval, to increase
the number of shares reserved for issuance under the 1992 Plan by an aggregate
of 350,000 shares to a new total of 5,250,000 shares. The Board of Directors
approved this change because it believes the change will be useful in attracting
new employees and Directors to the Company and in creating an incentive for
existing employees and Directors to remain with the Company and to contribute to
its success. The affirmative vote of holders of majority of the Votes Cast
represented at the Annual Meeting is necessary to approve this amendment to the
1992 Plan. The Board of Directors recommends that stockholders vote for approval
of this amendment to the 1992 Plan.
GENERAL
The 1992 Plan was adopted by the Board of Directors in 1992, approved
by the stockholders in 1992 and subsequently amended. Assuming shareholder
approval of this Proposal No. 3, a total of 5,250,000 shares of Common Stock are
currently reserved for issuance under the 1992 Plan. Options granted under the
1992 Plan may be either "incentive stock options," as defined in Section 422 of
the Code, which are granted at no less than fair market value, or nonstatutory
options. See "Certain United States Federal Income Tax Information" below for
information concerning the tax treatment of both incentive and nonstatutory
stock options. The 1992 Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
PURPOSE
The purposes of the 1992 Plan are to attract and retain the best
available personnel for positions of substantial responsibility and to provide
additional incentive to the employees, consultants and Directors of the Company.
ADMINISTRATION
The 1992 Plan may be administered by the Board of Directors of the
Company or by a committee (the "Administrator"), and is currently being
administered by the Stock Option Committee of the Board of Directors. Grants of
options under the 1992 Plan are made by the Administrator. The interpretation
and construction of any provision of the 1992 Plan is within the sole discretion
of the Administrator, whose determination is final and conclusive. Members of
the Administrator receive no additional compensation for their services in
connection with the administration of the 1992 Plan.
LIMITS ON GRANTS
The 1992 Plan limits the discretion allowed to the Administrator in
granting options. This limitation is intended to preserve the Company's ability
to deduct for federal income tax purposes the compensation expense relating to
stock options and stock purchase rights granted to certain Executive Officers
under the 1992 Plan. Without this provision in the 1992 Plan, the federal tax
legislation enacted in August 1993 might limit the Company's ability to deduct
such compensation expense. The limitation provides that under the 1992 Plan no
employee, Officer or Director may be granted in any one fiscal year options and
stock purchase
-14-
<PAGE> 21
rights to receive more than 1,000,000 shares of Common Stock, except that in
connection with his or her initial employment, an employee, Officer or Director
may be granted options or stock purchase rights to purchase up to an additional
1,000,000 shares, which shall not count against the annual 1,000,000 share
limitation. In addition, notwithstanding the designation of an option as an
incentive stock option, to the extent that the aggregate fair market value of
shares with respect to which options designated as incentive stock options are
exercisable by an employee for the first time during any single calendar year
(under all of the Company's option plans) exceeds $100,000, such options in
excess of $100,000 are treated as nonstatutory options. See "Certain United
States Federal Income Tax Information" below.
ELIGIBILITY
The 1992 Plan provides that options and stock purchase rights may be
granted to employees (including Officers and Directors who are employees) and
paid consultants and Directors of the Company or any parent or subsidiary of the
Company. The Administrator or its committee selects the optionees and determines
the number of shares for which each option and stock purchase right may be
exercised. In making such determination, there is taken into account the duties
and responsibilities of the employee, the value of the employee's services, his
or her present and potential contribution to the success of the Company, the
anticipated number of years of future service of the employee and other relevant
factors.
TERMS OF OPTIONS
The terms of options granted under the 1992 Plan are determined by the
Administrator. Each option is evidenced by a written stock option agreement
between the Company and the optionee and is subject to the following additional
terms and conditions:
(a) Exercise of the Option. The Administrator determines on the date of
grant when options may be exercisable. The current standard form of option
agreement (which is subject to varying schedules) provides that options may be
exercised cumulatively as to one-third of the shares at the end of the first
full year following the date of grant of the option and an additional one-third
of the shares at the end of each full year thereafter. The Administrator in some
circumstances may accelerate exercisability of an outstanding stock option on
certain events.
An option is exercised by giving written notice of exercise to the
Company, specifying the number of full shares of Common Stock to be purchased
and tendering payment of the purchase price. Payment for shares issued upon
exercise of an option shall be by cash or cash equivalent, promissory note, an
exchange of shares of the Company's Common Stock, or by such other consideration
as determined by the Administrator or its committee. The Company's current form
of option agreement provides for payment by cash or cash equivalent. A cash
equivalent includes a same day sale procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased shares and to
remit to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
(b) Exercise Price. The exercise price of incentive stock options and
nonstatutory options granted under the 1992 Plan is 100% of the fair market
value of the Company's Common Stock. In the case of incentive stock options
granted to an optionee who owns more than 10% of the voting power or value of
all classes of stock of the Company, the exercise price must not be less than
110% of the fair market value of the Common Stock on the date of grant. For so
long as the Company's Common Stock is traded in the Nasdaq National Market, the
fair market value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) reported by Nasdaq the day prior to the
date of determination.
-15-
<PAGE> 22
(c) Termination of Employment. The 1992 Plan provides that if the
optionee's continuous status as an employee or consultant is terminated for any
reason, other than death or total and permanent disability, the option may be
exercised within such period of time as is determined by the Administrator or
its committee (not exceeding three months in the case of an incentive stock
option, which determination in the case of incentive options must be made at the
date of grant) after such termination as to all or part of the shares as to
which the optionee was entitled at the time of termination.
(d) Disability. In the event of the termination of an optionee's
continuous status as an employee, consultant or non-employee Director as a
result of his or her total and permanent disability, the option may be exercised
within twelve months after such termination as to all of the shares subject to
the grant.
(e) Death. If an optionee should die while employed with the Company,
the option may be exercised at any time within twelve months after death as to
all of the shares subject to the grant.
(f) Termination of Options. All stock options, incentive and
nonstatutory, granted under the 1992 Plan expire ten years from the date of
grant, unless a shorter period is provided in the option agreement. No option
may be exercised by any person after the expiration of its term. An incentive
stock option granted to an optionee who, immediately before the grant of such
option, owns more than 10% of the voting power or value of all classes of stock
of the Company, may not have a term of more than five years.
(g) Nontransferability of Options. An option is nontransferable by the
optionee, other than by will or the laws of descent or distribution, and is
exercisable only by the optionee during his or her lifetime or by a person who
acquires the rights to exercise by bequest or inheritance by reason of the death
of the optionee.
(h) Rights Upon Exercise. Until an option has been properly exercised,
no rights to vote or to receive dividends or any other rights as a stockholder
exist with respect to the option stock.
(i) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1992 Plan as may be
determined by the Board of Directors.
STOCK PURCHASE RIGHTS
The 1992 Plan permits the Company to grant rights to purchase Common
Stock of the Company ("Stock Purchase Rights") either alone, in addition to or
in tandem with other awards under the 1992 Plan and/or cash awards made outside
the 1992 Plan. Upon the granting of a Stock Purchase Right under the 1992 Plan,
the offeree shall be advised in writing of the terms, conditions and
restrictions related to the offer, including the number of shares of Common
Stock that the offeree shall be entitled to purchase, the price to be paid and
the time within which the offeree must accept such offer (which shall in no
event exceed six months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right). The offer shall be accepted by
execution of a restricted stock purchase agreement between the Company and the
offeree.
Unless the Administrator determines otherwise, the restricted stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment or
consulting relationship with the Company for any reason (including death or
permanent and total disability). The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any
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<PAGE> 23
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine.
Upon exercise of a Stock Purchase Right, the purchaser shall have all
rights of a shareholder of the Company.
CAPITAL CHANGES
In the event any change, such as a stock split or payment of a stock
dividend, is made in the Company's capitalization which results in an exchange
of Common Stock for a greater or lesser number of shares without receipt of
consideration by the Company, appropriate adjustments shall be made in the
exercise price and in the number of shares subject to options and Stock Purchase
Rights outstanding under the 1992 Plan, as well as the number of shares reserved
for issuance under the 1992 Plan.
In the event of the liquidation or dissolution of the Company, each
outstanding option and Stock Purchase Right shall terminate automatically unless
otherwise provided by the Board. In the event of the merger of the Company with
another corporation or the sale of substantially all of the assets of the
Company, each outstanding option and Stock Purchase Right shall be assumed or an
equivalent option or stock option right shall be substituted by the successor
corporation. If the successor corporation does not agree to assume the option or
Stock Purchase Right or to substitute an equivalent option, the Board shall
provide for the optionee to have the right to exercise the option or Stock
Purchase Right as to all the optioned shares, including the shares as to which
the option or Stock Purchase Right would not otherwise be exercisable.
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter, suspend or terminate the 1992
Plan at any time or from time to time without approval of the stockholders;
provided, however, the Company shall obtain stockholder approval of any
amendment to the extent necessary to comply with Rule 16b-3 under the Securities
Exchange Act of 1934 or with Section 422 of the Code (or any other applicable
law or regulation). Such stockholder approval shall be obtained in such a manner
and to such a degree as required by the applicable law, rule or regulation.
However, no action by the Board of Directors or stockholders may alter or impair
any option previously granted under the 1992 Plan. In any event, the 1992 Plan
shall terminate in May 2002. Any options outstanding under the 1992 Plan at the
time of its termination shall remain outstanding until they expire by their
terms.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
(a) Stock Options. Options granted under the 1992 Plan may be either
"incentive stock options," as defined in Section 422 of the Code, or
nonstatutory options.
If an option granted under the 1992 Plan is an incentive stock option,
the optionee will recognize no income upon grant of the incentive stock option
and incur no tax liability due to the exercise, unless the optionee is subject
to the alternative minimum tax. Upon the sale or exchange of the shares at least
two years after grant of the option and one year after exercise of the option,
any gain will be treated as long-term capital gain. If the statutory holding
periods are not satisfied, the optionee will recognize ordinary income equal to
the difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the stock.
Any additional gain (or loss) will be taxed as capital gain (or loss). A
different rule for measuring ordinary income upon such premature disposition may
apply if the optionee is also an Officer, Director or 10% stockholder of the
Company. The Company generally will
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<PAGE> 24
be entitled to a deduction in the same amount as the ordinary income recognized
by the optionee. The Company's ability to recognize these deductions may be
limited in certain circumstances, such as under Section 162(m) of the Code or
Section 280G ("golden parachute rules") of the Code. Any gain recognized on such
a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as capital gain.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. However, upon
exercise of the option, the optionee will generally recognize ordinary income
for tax purposes measured by the excess of the then fair market value of the
shares over the exercise price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the optionee
is an Officer, Director or 10% stockholder of the Company, the date of taxation
may be deferred unless the optionee files an election with the Internal Revenue
Service under Section 83(b) of the Code. The income recognized by an optionee
who is also an employee of the Company will be subject to tax withholding by the
Company by payment in cash or out of the current earnings paid to the optionee.
Upon resale of such shares by the optionee, any difference between the sale
price and the exercise price, to the extent not recognized as ordinary income as
provided above, will be treated as capital gain or loss. The Company generally
will be entitled to a tax deduction in the same amount as the ordinary income
recognized by the optionee with respect to shares acquired upon exercise of a
nonstatutory option. The Company's ability to recognize these deductions may be
limited in certain circumstances, such as under Section 162(m) of the Code or
Section 280G ("golden parachute rules") of the Code.
(b) Stock Purchase Rights. Stock Purchase Rights will generally be
taxed in the same manner as nonstatutory stock options.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF UNITED STATES FEDERAL
INCOME TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE 1992 PLAN AND DOES NOT PURPORT TO BE COMPLETE.
REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION,
THIS SUMMARY DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE. THE OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR CONCERNING APPLICATION OF THESE LAWS AND HIS OR HER TAX
CIRCUMSTANCES.
RESTRICTIONS ON RESALE
Certain Officers and Directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act of
1933 (the "Securities Act"). Common Stock acquired under the 1992 Plan by an
affiliate may only be reoffered or resold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or another exemption
from the registration requirements of the Securities Act. Directors and
Officers who are subject to Section 16 of the Securities Exchange Act of 1934
(the "Exchange Act") cannot sell shares of stock during the six months before or
six months after the individual is granted a stock option or Stock Purchase
Right under the 1992 Plan. For this purpose, options and Stock Purchase Rights
granted subject to stockholder approval are considered received when stockholder
approval is obtained.
PARTICIPATION IN THE OPTION PLAN
The grant of options under the 1992 Plan to all Executive Officers,
including the Named Executive Officers, is subject to the discretion of the
Board or the Stock Option Committee. In connection with Mr. McDaniel's
appointment as President and Chief Executive Officer of the Company, the Company
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<PAGE> 25
granted Mr. McDaniel 50,000 shares of Common Stock that vest monthly from
September 1997 through February 2000. The Company also granted Mr. McDaniel
options to purchase 450,000 shares of Common Stock at an exercise price of
$26.875 per share. 50,000 shares were fully vested on issuance and 50,000 shares
vest yearly beginning September 1, 1998. All of these shares were granted under
the 1992 Plan. There has been no determination by the Board or the Compensation
Committee with respect to any future awards under the 1992 Plan.
The following table sets forth information regarding grants made under
the 1992 Plan as of June 30, 1998 to (i) each Named Executive Officer, (ii) all
current Executive Officers as a group, (iii) all non-Executive Officer Directors
as a group and (iv) all employees as a group.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS GRANTED EXERCISE PRICE PER
IDENTITY OF PERSON OR GROUP (#) SHARE
- ----------------------------------------------------------------------- --------------- ------------------
<S> <C> <C>
Sanjeev R. Chitre...................................................... 1,092,500 $12.98
Roger D. McDaniel...................................................... 680,000(1) $26.30
John S. Hodgson........................................................ 110,000 $11.22
Thomas C. McKee........................................................ 160,625 $12.05
All current Executive Officers as a group.............................. 2,043,125 $17.25
All non-Executive Officer Directors as a group......................... 255,000 $13.02
All employees as a group............................................... 4,923,903 $15.58
</TABLE>
- ---------------------------
(1) Excludes restricted stock award of 50,000 shares.
In August 1997, the Board of Directors approved stock option grants to
Mr. McDaniel (as described above), and in August 1998, the Board of Directors
approved stock option grants to Executive Officers and Directors, as described
in the following table.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS GRANTED EXERCISE PRICE PER
PERSON (#) SHARE
- ----------------------------------------------------------------------- --------------- ------------------
<S> <C> <C>
Roger D. McDaniel(1)................................................... 450,000(2) $26.88
60,000(3) $ 9.63
Sanjeev R. Chitre...................................................... 60,000(3) $ 9.63
Kenneth Levy........................................................... 12,500(3) $ 9.63
John S. Hodgson........................................................ 9,000(3) $ 9.63
William J. Freschi..................................................... 6,250(3) $ 9.63
Harold C. Baldauf...................................................... 6,250(3) $ 9.63
</TABLE>
- ---------------------------
(1) Mr. McDaniel was also granted options to purchase 200,000 shares of the
Company's Common Stock in August 1997 outside of the 1992 Plan.
(2) Granted in August 1997.
(3) Granted in August 1998.
The August 1997 options to Mr. McDaniel were granted as part of a plan
to provide long-term retention incentives for executives, particularly the Chief
Executive Officer. See "Compensation Committee and Stock Option Committee
Report" above for additional information on the Company's compensation
philosophy and determination of cash and equity compensation provided to
Executive Officers.
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<PAGE> 26
VOTE REQUIRED
Approval of the foregoing amendment of the 1992 Plan will require the
affirmative vote of a majority of the Votes Cast.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE AMENDMENT OF THE 1992 STOCK OPTION PLAN.
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<PAGE> 27
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Executive
Officers and Directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such Executive Officers, Directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that during fiscal 1998 all the reporting persons complied with Section 16(a)
filing requirements except as follows: Mr. Chitre expects to file a Form 4 in
October 1998 to report the conversion of Class A Common Stock to Common Stock
and sale of Common Stock by a trust for the benefit of his daughter; however,
Mr. Chitre disclaims ownership of these shares for purposes of Section 16 or for
any other purpose.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, the persons named in the
accompanying form of proxy will vote the shares represented by proxy as the
Board of Directors may recommend or as the proxy holders, acting in their sole
discretion, may determine.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30,
1998, INCLUDING, IF SO REQUESTED, THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST
OF EXHIBITS. REQUESTS SHOULD BE SENT TO: INVESTOR RELATIONS, INTEGRATED PROCESS
EQUIPMENT CORP., 911 BERN COURT, SAN JOSE, CALIFORNIA 95112.
THE BOARD OF DIRECTORS
Dated: October 23, 1998
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<PAGE> 28
APPENDIX I
INTEGRATED PROCESS EQUIPMENT CORPORATION
1992 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and state
securities laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company, $.01
par value per Share.
(g) "Company" means Integrated Process Equipment Corporation,
a Delaware corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
<PAGE> 29
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National Market thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
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<PAGE> 30
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the
Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(v) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1992 Stock Option Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
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<PAGE> 31
(cc) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 5,250,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of
Optionees.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
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<PAGE> 32
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the
Plan, which agreements need not be identical;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
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<PAGE> 33
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions
applicable to Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. If otherwise eligible, an Employee or Consultant who
has been granted an Option or Stock Purchase Right may be granted additional
Options or Stock Purchase Rights.
6. Limitations
(a) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.
(c) The following limitations shall apply to grants of Options
and Stock Purchase Rights to Employees:
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<PAGE> 34
(i) No Employee shall be granted, in any fiscal year
of the Company, Options and Stock Purchase Rights to purchase more than
1,000,000 Shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options and Stock Purchase Rights to
purchase up to an additional 1,000,000 Shares which shall not count against the
limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option or Stock Purchase Right is
cancelled in the same fiscal year of the Company in which it was granted (other
than in connection with a transaction described in Section 13), the cancelled
Option or Stock Purchase Right will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise price of an
Option or Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the stockholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Notice of Grant; provided, however, that in the case of an Incentive Stock
Option, the term shall be ten (10) years from the date of grant or such shorter
term as may be provided in the Notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Notice of
Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
-7-
<PAGE> 35
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
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(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 13 of the
Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three (3) months following the Optionee's termination. In the
case of an Incentive Stock Option, such period of time for exercise shall not
exceed three (3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise the Optionee's entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, an Optionee's
Continuous Status as an Employee or Consultant shall not automatically terminate
solely as a result of such change in status. However, in such event, an
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and
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shall be treated for tax purposes as a Nonstatutory Stock Option three months
and one day following such change of status.
(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination (but in no event
later than the expiration of the term of such Option as set forth in the Notice
of Grant), as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If, after termination, the Optionee
does not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, as to all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer, which shall in no event
exceed six (6) months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Admin-
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istrator in its sole discretion. In addition, the provisions of Restricted Stock
Purchase Agreements need not be the same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 13 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.
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<PAGE> 39
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to exercise the Option
or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
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(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, Applicable Laws, and the requirements of any
stock exchange or quotation system upon which the Shares may then be listed or
quoted, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
17. Liability of Company.
(a) Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Stock Purchase Right exceeds, as of the date of grant,
the number of Shares which may be issued under the Plan without additional
stockholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless stockholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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19. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
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APPENDIX II
INTEGRATED PROCESS EQUIPMENT CORP.
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NOVEMBER 19, 1998
The undersigned stockholder of INTEGRATED PROCESS EQUIPMENT CORP., a
Delaware corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated October 23 1998, and the
1998 Annual Report to Stockholders and hereby appoints Sanjeev R. Chitre and
John S. Hodgson, and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1998 Annual Meeting of Stockholders of
INTEGRATED PROCESS EQUIPMENT CORP. to be held on November 19, 1998 at 10:00
a.m., local time, at the Phoenix Airport Hilton located at 2435 South 47th
Street, Phoenix, Arizona 85034, and at any adjournments thereof, and to vote all
shares of Common Stock and of Class A Common Stock of INTEGRATED PROCESS
EQUIPMENT CORP. which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES OF THE BOARD OF DIRECTORS, FOR
THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS, FOR THE APPROVAL OF AMENDMENT TO THE 1992 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
1. ELECTION OF DIRECTORS:
/ / FOR all nominees listed below / / WITHHOLD
(except as indicated)
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), STRIKE A LINE THROUGH THAT NOMINEE'S
NAME IN THE LIST AT RIGHT:
Sanjeev R. Chitre; Harold C. Baldauf; William J. Freschi;
Kenneth Levy; Roger D. McDaniel
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
THE INDEPENDENT AUDITORS OF THE COMPANY FOR FISCAL 1999:
/ / FOR / / AGAINST / / ABSTAIN
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3. PROPOSAL TO APPROVE AMENDMENT TO THE 1992 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER:
/ / FOR / / AGAINST / / ABSTAIN
4. TO TRANSACT SUCH OTHER BUSINESS, IN THEIR DISCRETION, AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
EITHER OF SUCH ATTORNEYS-IN-FACT OR SUBSTITUTES SHALL HAVE AND MAY EXERCISE ALL
OF THE POWERS OF SAID ATTORNEYS-IN-FACT HEREUNDER.
-------------------------------
Signature
-------------------------------
Signature
Dated: _______________________, 1998
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his, her or its name appears hereon, and returned promptly in the enclosed
envelope. If shares are held in the names of two or more persons, including
husband and wife, as joint tenants or otherwise, all persons must sign. Persons
signing in a fiduciary capacity should so indicate, and should give their full
title. If shares are held by joint tenants or as community property, both should
sign.)
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