<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
ADE CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ADE CORPORATION
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
ADE CORPORATION
80 WILSON WAY
WESTWOOD, MASSACHUSETTS 02090
(617) 467-3500
-------------------------
NOTICE OF SPECIAL MEETING
OF STOCKHOLDERS IN LIEU OF THE 1997 ANNUAL MEETING
October 16, 1997
Notice is hereby given that a Special Meeting of Stockholders in lieu of the
1997 Annual Meeting of ADE Corporation, a Massachusetts corporation (the
"Company"), will be held on Thursday, October 16, 1997 at 10:00 a.m. at ADE
Corporate Headquarters located at 80 Wilson Way, Westwood, Massachusetts for
the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualified.
2. To approve the Company's Employee Stock Option Plan.
3. To approve the appointment of Price Waterhouse LLP as the Company's
independent accountants for the 1998 fiscal year.
4. To consider and act upon such other business as may properly come
before the meeting.
Reference is hereby made to the accompanying Proxy Statement for more
complete information concerning the matters to be acted upon at the meeting.
Only stockholders of record of the Company's Common Stock at the close of
business on August 20, 1997 will be entitled to vote at the Special Meeting in
lieu of the Annual Meeting and any adjournments thereof.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Willard G. McGraw, Jr.
Clerk
September [ ], 1997
<PAGE>
ADE CORPORATION
80 WILSON WAY
WESTWOOD, MA 02090
(617) 467-3500
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
IN LIEU OF 1997 ANNUAL MEETING
TO BE HELD OCTOBER 16, 1997
This Proxy Statement and the enclosed proxy card are being furnished to
stockholders of ADE Corporation ("ADE" or the "Company"), a Massachusetts
corporation, in connection with the solicitation by the Company's Board of
Directors (the "Board") of proxies to be voted at a Special Meeting of
Stockholders in lieu of the 1997 Annual Meeting to be held on October 16, 1997
at 10:00 a.m. at ADE Corporate Headquarters, 80 Wilson Way, Westwood,
Massachusetts, and at any adjournments thereof (the "Meeting").
This Proxy Statement and the enclosed proxy card are first being mailed or
otherwise furnished to stockholders of the Company on or about September [ ],
1997. The Annual Report to Stockholders for the fiscal year ended April 30,
1997 is being mailed to the stockholders with this Proxy Statement, but does
not constitute a part hereof.
Proxies may be solicited by directors, officers and employees of the Company
by mail, by telephone, in person or otherwise. No such person will receive
additional compensation for such solicitation. In addition, the Company will
request banks, brokers and other custodians, nominees and fiduciaries to
forward proxy materials to the beneficial owners of Common Stock and obtain
voting instructions from such beneficial owners. The Company will reimburse
those firms for their reasonable expenses in forwarding proxy materials and
obtaining voting instructions.
When the proxy card of a stockholder is duly executed and returned, the
shares represented thereby will be voted in accordance with the voting
instructions given on the proxy by the stockholder. If no such voting
instructions are given on a proxy card with respect to one or more proposals,
the shares represented by that proxy card will be voted, in the election of
directors, for the nominees named herein, and with respect to other proposals,
in accordance with the recommendations of the Board. Stockholders may revoke
their proxies at any time prior to any vote at the Meeting by written notice
to the Clerk of the Company at or before the Meeting, by submission of a duly
executed proxy card bearing a later date, or by voting in person by ballot at
the Meeting.
VOTING SECURITIES
Holders of Common Stock of record on the books of the Company at the close
of business on August 20, 1997 (the "Record Date") are entitled to notice of
and to vote at the Meeting. At the Record Date, there were issued and
outstanding 10,709,435 shares of Common Stock, each of which entitles the
holder to one vote on each matter submitted to a vote at the Meeting.
The proxy card provides space for a stockholder to withhold voting for any
or all nominees for the Board of Directors or to abstain from voting for any
proposal if the stockholder chooses to do so. The holders of a majority of all
shares of Common Stock issued and outstanding and entitled to vote at the
Meeting shall constitute a quorum for the transaction of business. A plurality
of the votes cast in person or by proxy is required for election of directors.
The affirmative vote of a majority of the votes cast in person or by proxy at
the Meeting is required for all other matters. Abstentions and broker non-
votes are not counted in determining the number of votes cast in connection
with any voting matter.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
The By-Laws of the Company provide for a Board consisting of such number of
directors, not less than three nor more than nine, as may be fixed from time
to time by the Board. The Board has fixed the number of directors to
constitute the full Board for the ensuing year at six, all of whom are to be
elected at the Meeting to serve until the next Annual Meeting of Stockholders
and until their respective successors are elected and qualified.
Robert C. Abbe, Harris Clay, Landon T. Clay, H. Kimball Faulkner, Francis B.
Lothrop, Jr., and Kendall Wright, all of whom are currently serving as
directors, have been nominated for election to the Board at the Meeting.
Shares represented by proxies will be voted for the election as directors of
those nominees unless otherwise specified in the proxy. If any of the nominees
for election to the Board should, for any reason not now anticipated, not be
available to serve as such, proxies will be voted for such other candidate as
may be designated by the Board unless the Board reduces the number of
directors. The Board has no reason to believe that any of the nominees will be
unable to serve if elected.
Set forth below is information with respect to each nominee for election to
the Board of Directors at the Meeting.
Robert C. Abbe, age 59, founded the Company in 1967. Since that time, he has
served as President and Chief Executive Officer and as a director of the
Company. Mr. Abbe received an AB in Physics from Harvard College.
Harris Clay, age 70, has been a director of the Company since 1970. He has
been self-employed as a private investor during the past five years. Mr. Clay
received an AB from Harvard College.
Landon T. Clay, age 71, has been a director of the Company since 1970 and
Chairman of the Board since 1979. Since 1971, he has served as Chairman of
Eaton Vance Corp., a mutual fund management and distribution company. Mr. Clay
is also a director of Dakota Mining Corp. Mr. Clay received an AB from Harvard
College. Mr. Clay and Harris Clay are brothers.
H. Kimball Faulkner, age 66, has been a director of the Company since 1970,
and has been a self-employed small business consultant during the past five
years. Mr. Faulkner received an AB from Harvard College and MBA from the
University of Virginia.
Francis B. Lothrop, Jr., age 69, has been a director of the Company since
1972. Since 1985, he has served as Chairman of Tech-Ceram Corporation, a
manufacturer of electronic ceramic packaging. Mr. Lothrop received an AB from
Harvard College and MBA from Northeastern University.
Kendall Wright, age 71, has been a director of the Company since 1983 and
has been a business, marketing and operations management consultant during the
past six years. Mr. Wright received a BS from the Massachusetts Institute of
Technology.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended April 30, 1997, the Board held 7 meetings. Each
of the directors attended all of the Board meetings, except for Mr. Lothrop
and Mr. Wright, who each attended 6 of such meetings.
The Audit Committee, composed of Harris Clay and Messrs. Lothrop and
Faulkner, meets periodically with the Company's independent auditors to review
the scope of the annual audit, to discuss the adequacy of internal
2
<PAGE>
accounting controls and procedures and to perform general oversight with
respect to the accounting principles applied in the financial reporting of the
Company. The Audit Committee held two meetings during fiscal 1997.
The Compensation Committee, composed of Landon T. Clay and Messrs. Lothrop
and Wright, administers the Company's stock option and compensation plans and
recommends to the full Board the amount, character and method of payment of
compensation of all executive officers and certain other key employees and
consultants of the Company. The Compensation Committee held three meetings
during fiscal 1997.
The Nominating Committee, composed of Mr. Abbe, Harris Clay and Landon T.
Clay, recommends the criteria for the composition of the Board and size of the
Board and seeks out and recommends nominees for directors to be submitted to a
vote of stockholders. The Nominating Committee met once in fiscal 1997. The
Nominating Committee will consider nominees recommended in writing by
stockholders if certain information is provided regarding the nominees.
Recommendations by stockholders should be submitted to the Nominating
Committee, in care of the President of the Company.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS. A PLURALITY OF THE VOTES
CAST IN PERSON OR BY PROXY AT THE MEETING IS REQUIRED TO ELECT EACH NOMINEE AS
A DIRECTOR.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock as of August 20, 1997, by (i) each person known to
the Company to be the beneficial owner of more than 5% of the Company's Common
Stock on that date, (ii) each director, (iii) each executive officer listed in
the Summary Compensation Table below and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED(1) OF TOTAL
---- ------------ ----------
<S> <C> <C>
Landon T. Clay(2)...................................... 1,639,318 15.3%
Harris Clay............................................ 887,124 8.3%
Robert C. Abbe(3)...................................... 504,574 4.7%
H. Kimball Faulkner.................................... 99,219 *
Francis B. Lothrop, Jr................................. 60,000 *
Michael J. Ellsworth(4)................................ 45,201 *
Noel S. Poduje(5)...................................... 38,488 *
Mark D. Shooman(6)..................................... 35,200 *
Kendall Wright(7)...................................... 16,981 *
William H. Ohm(8)...................................... 15,800 *
Neil H. Golden(9)...................................... 9,000 *
All directors and officers as a group (11
persons)(10).......................................... 3,297,512 30.6%
</TABLE>
- --------
* Less than one percent.
(1) Beneficial ownership of shares for purposes hereof, as determined in
accordance with applicable Securities and Exchange Commission rules,
includes shares of Common Stock as to which a person has or shares voting
power and/or investment power. All amounts shown in this column include
shares obtainable upon exercise of stock options exercisable within 60
days from the date of this table.
3
<PAGE>
(2) Includes 305,358 shares held in various trusts for the benefit of Mr.
Clay's children, and 5,560 shares held by Mr. Clay's children, as to
which Mr. Clay disclaims beneficial ownership.
(3) Includes 149,900 shares of Common Stock held by Dr. Elizabeth Baker, Mr.
Abbe's wife, as to which Mr. Abbe disclaims beneficial ownership.
(4) Includes 16,484 shares of Common Stock held by Barbara Ellsworth, Mr.
Ellsworth's wife, as to which Mr. Ellsworth disclaims beneficial
ownership and 28,717 shares of Common Stock issuable upon exercise of
stock options. Mr. Ellsworth served as an executive officer until
November 1996.
(5) Includes 12,000 shares of Common Stock issuable upon exercise of stock
options.
(6) Consists solely of shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 30,000 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 15,800 shares of Common Stock issuable upon exercise of stock
options.
(9) Consists solely of shares of Common Stock issuable upon exercise of stock
options.
(10) Includes an aggregate of 85,609 shares of Common Stock issuable upon
exercise of stock options.
The address of all persons listed above is c/o ADE Corporation, 80 Wilson
Way, Westwood, Massachusetts 02090.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers, and persons who are beneficial owners of more than ten
percent of the Company's Common Stock to file with the Securities and Exchange
Commission (the "Commission") reports of their ownership of the Company's
securities and of changes in that ownership. To the Company's knowledge, based
upon a review of copies of reports filed with the Commission with respect to
the fiscal year ended April 30, 1997, all reports required to be filed under
Section 16(a) by the Company's directors and officers and persons who were
beneficial owners of more than ten percent of the Company's Common Stock were
timely filed, except that an initial report of beneficial ownership on Form 3
was not timely filed by each of E. Fred Schiele, William H. Ohm and Barry
Glasgow and reports on Form 4 were not timely filed by each of Mark D. Shooman
and Michael J. Ellsworth, in connection with certain sales by them of shares
of Common Stock. Reports on Form 5 were not timely filed by each of Robert C.
Abbe, Michael J. Ellsworth, E. Fred Schiele, Noel S. Poduje and William H.
Ohm, in connection with certain grants to them of options for the purchase of
shares of Common Stock.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation received for services
rendered to the Company for the fiscal years ended April 30, 1997, 1996 and
1995 by the Company's Chief Executive Officer and each of the four most highly
compensated executive officers other than the Chief Executive Officer whose
annual salary and bonus for the fiscal year ended April 30, 1997 exceeded
$100,000 (collectively, the "Named Executives").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -------------
NUMBER OF
SHARES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION(1)
- --------------------------- ---- ------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert C. Abbe.......... 1997 $200,000 $187,946 50,000 $2,729
President and Chief 1996 $175,000 $175,000 -- $3,089
Executive Officer 1995 $143,850 $ 79,380 -- $2,160
Mark D. Shooman......... 1997 $123,386 $ 30,704 -- $2,250
Vice President and 1996 $111,000 $ 6,853 10,000 $2,325
Chief Financial Officer 1995 $100,833 -- -- $1,844
Neil H. Golden(2)....... 1997 $116,667 $ 90,404 5,000 $1,823
Vice President of Sales 1996 $121,950 $ 32,177 5,000 $1,432
and Support 1995 $ 10,256 $ 2,500 20,000 --
Noel S. Poduje.......... 1997 $108,990 $ 27,582 -- $2,792
Vice President of 1996 $101,000 $ 3,502 -- $2,120
Strategic Technology 1995 $ 95,417 -- 20,000 $1,292
Development
William Ohm............. 1997 $ 87,291 $ 81,282 10,000 $2,687
Vice President and 1996 $ 85,833 $ 66,370 -- $2,050
General Manager of 1995 $ 84,583 -- 20,000 $1,032
ADE Technologies, Inc.
Michael J.
Ellsworth(3)........... 1997 $153,125 $ 42,934 -- $2,591
Vice President and 1996 $165,000 $ 42,934 -- $2,329
Chief Operating Officer 1995 $150,000 $ 5,799 -- $2,171
</TABLE>
- --------
(1) Represents matching contributions made by the Company on behalf of the
Named Executive to the Company's 401(k) Plan.
(2) Mr. Golden joined the Company in March 1995.
(3) Mr. Ellsworth served as Chief Operating Officer until November 1996.
5
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table provides certain information with respect to granted to
each of the Named Executives during the fiscal year ended April 30, 1997
options under the Company's stock option plans.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
----------------------------------------------- ---------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Abbe.......... 50,000 23.64% $ 9.375 09/18/06 $ 295,313 $ 745,313
Neil H. Golden.......... 5,000 2.36% $ 11.25 11/20/06 $ 35,438 $ 89,438
William Ohm............. 10,000 4.73% $17.625 04/23/07 $ 111,038 $ 280,238
Mark D. Shooman......... -- -- -- -- -- --
Noel S. Poduje.......... -- -- -- -- -- --
Michael J. Ellsworth.... -- -- -- -- -- --
</TABLE>
- --------
(1) Options vest in equal annual increments over five years commencing on the
date of grant.
(2) As required by rules of the Securities and Exchange Commission, potential
values stated are on the prescribed assumption that the Company's Common
Stock will appreciate in value from the date of grant to the end of the
option term at annualized rates of 5% and 10%. These hypothesized values
are not intended to forecast possible appreciation in the Company's Common
Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information with respect to option
exercises by the Named Executives during the fiscal year ended April 30, 1997
and the value of unexercised options held by the Named Executives at April 30,
1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Abbe.......... -- -- -- 50,000 -- $ 468,750
Neil H. Golden.......... -- -- 9,000 21,000 $118,600 $ 225,400
William H. Ohm.......... -- -- 13,800 26,000 $199,425 $ 241,650
Mark D. Shooman......... 11,200 $135,840 33,600 31,200 $470,110 $ 370,510
Noel S. Poduje.......... -- -- 8,000 12,000 $114,600 $ 171,900
Michael J. Ellsworth.... 60,000 $594,414 31,916 108,000 $466,771 $1,579,500
</TABLE>
DIRECTOR COMPENSATION
The Company's non-employee directors are reimbursed for expenses and receive
$500 for each Board meeting attended. Directors are given the option to
receive shares of the Company's Common stock in lieu of cash compensation.
6
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing and administering compensation policies for all
executive officers of the Company, including the Chief Executive Officer, and
for making specific recommendations regarding compensation for such executive
officers to the full Board. The Committee is composed of Landon T. Clay,
Francis B. Lothrop, Jr., and Kendall Wright, none of whom are officers or
employees of the Company. ADE's Chief Executive Officer, Robert C. Abbe,
participates in discussions with the Committee regarding the compensation
levels of executive officers other than himself.
The Company provides its executive officers with a compensation package
consisting of a base salary, annual incentive compensation in the form of a
cash bonus and equity-based incentive compensation in the form of stock
options. The overall objectives of the Company's compensation policies are (i)
to establish base salaries which are competitive with those payable by
companies with which ADE competes in the marketplace and for the recruitment
of executives, (ii) to relate a significant part of the executive's
compensation to his or hers and the Company's performance through cash bonuses
based on the achievement of pre-established profitability and other operating
targets and (iii) to align management's interests with those of the Company's
stockholders through the use of stock options at percentage levels appropriate
for executive positions within the Company.
In setting compensation levels for fiscal 1997, the Committee conducted a
review of data from two independent surveys, the 1996 American Electronics
Association Executive Compensation Survey, which covered companies in the
electronics industry, and the 1996 Executive Salary Surveys compiled by the
Survey Group, which covered manufacturing companies from technical and
nontechnical industry sectors (together, the "Independent Survey Data"). The
Committee also reviewed the compensation paid to executive officers at a
selected peer group of semiconductor equipment companies which (i) compete
with ADE in the marketplace, (ii) are comparable to ADE in terms of workforce
size, product offerings or revenues and (iii) compete with ADE for executive
talent (the "Selected Peer Group Data") (the Independent Survey Data and the
Selected Peer Group Data will be referred to together as the "Survey Data").
The companies included in the Survey Data generally are not the same as
those in the peer group index in the Stock Performance Graph included in this
Proxy Statement. The peer group in the Stock Performance Graph comprises of
diversified and specialized companies in the semiconductor industry which do
not necessarily compete with the Company for executive talent. Accordingly,
the Committee did not use those companies for its compensation analysis.
BASE SALARIES
Base salaries for fiscal 1997 for ADE's executive officers were set by the
Committee based on the responsibilities of the position held and the
experience and performance of the individual, and by reference to the
information regarding competitive salaries contained in the Survey Data. The
Committee reviewed the salaries of each of the executive officers of the
Company, compensation practices at similar companies in the industry,
individual and Company performance and individual responsibility levels and
adjusted individual salaries for fiscal 1997 based on these factors.
EXECUTIVE BONUSES
All of the Company's executive officers are eligible to receive annual cash
bonuses. Bonuses awarded in fiscal 1997 were based on both objective and
subjective factors. Bonuses for executive officers who were responsible for
managing one of the Company's business units were based on achievement of the
business unit's growth and profitability targets in the fiscal year. Bonuses
for executive officers who were responsible for sales of the Company's
products were based on the achievement of targeted order rates. All executive
officers, including the Chief Executive Officer, as well as all other full-
time, regular employees of the Company participated in the Company's bonus
pool, the total amount of which is determined by a fixed percentage of pre-tax
profit in excess of a threshold corresponding to a targeted rate of return on
invested capital. Allocations under
7
<PAGE>
the bonus pool were based on the subjective judgment of the Committee of the
relative contributions to the Company's performance of various participating
employee classes. No bonus is payable under the bonus pool unless the return
on capital threshold is achieved.
STOCK OPTIONS
The Committee also is responsible for administration of the Company's stock
option and stock purchase plans and the granting of rights thereunder. Stock
option grants are based on the Committee's subjective evaluation of each
executive officer's performance and contribution to the Company, the executive
officer's position and responsibilities and the executive officer's attitude
and role as a leader. The Committee also considers, but does not weigh as
heavily, each executive officer's potential for greater contribution to ADE in
the future and length of service with the Company. Finally the Committee
considers the executive stock ownership levels reported by executives included
in the Selected Peer Group Data. Generally, stock options are granted with an
exercise price equal to the market price of the Common Stock on the date of
grant and vest over five years. This approach is designed to act as an
incentive for the creation of stockholder value and management stability over
the long term, since the full benefit of the compensation package cannot be
realized unless and until stock price appreciation occurs over a number of
years. The Committee granted stock options to three executive officers during
fiscal 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Abbe's 1997 base salary of $200,000 represented an increase of
approximately 14.3% over his 1996 salary. The Committee based the increase in
the Chief Executive Officer's salary on compensation practices for chief
executive officers in the industry as indicated by the Survey Data, the
leadership demonstrated by Mr. Abbe in developing and implementing the
Company's strategic vision and direction, and the resulting strong financial
performance of the Company. Mr. Abbe also received a cash bonus in fiscal 1997
of $187,946, as his share of the Company's bonus pool.
INTERNAL REVENUE CODE LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid during any year to the company's chief executive officer and four other
most highly compensated executive officers. Qualified performance-based
compensation is not included in the $1 million limit. The Committee believes
that the Company's 1992, 1995 and 1997 Stock Option Plans qualify as
performance based compensation plans.
Submitted by the Compensation
Committee
Landon T. Clay, Chairman
Francis B. Lothrop, Jr.
Kendall Wright
8
<PAGE>
[CHART APPEARS HERE]
TOTAL SHAREHOLDER RETURNS
-------------------------
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE MONTHS ENDING
PERIOD
COMPANY NAME/INDEX 18 OCT 95 APR 96 APR 97
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ADE CORP/MA 100.00 114.29 133.93
S&P SMALLCAP 600 INDEX 100.00 115.19 119.52
EQUIPMENT (SEMICONDUCTOR)-SMALL CAP 100.00 83.41 92.46
NASDAQ STOCK MARKET (U.S.) 100.00 115.00 121.00
HAMBRECHT & QUIST SEMICONDUCTORS 100.00 81.00 118.00
</TABLE>
The Company believes that the S&P SmallCap 600 Index and the Equipment
(Semiconductor)-SmallCap Index more closely reflect the stock performance of
companies with comparable market capitalization and in similar industries,
respectively, of the Company than do the Nasdaq Stock Market Index and the
Hambrecht & Quist Semiconductor Index.
9
<PAGE>
PROPOSAL 2
APPROVAL OF THE 1997 EMPLOYEE STOCK OPTION PLAN
On August 21, 1997, the Board of Directors adopted, subject to approval of
the stockholders, the Company's 1997 Employee Stock Option Plan (the "Plan").
The following is a general summary of the Plan, which is qualified in its
entirety by reference to the Plan, a copy of which is attached as Appendix A.
GENERAL
In August 1997, the Board of Directors adopted, subject to stockholder
approval, the Company's 1997 Employee Stock Option Plan (the "Plan"). Under
the Plan, stock rights may be granted which are either (i) options intended to
qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), (ii)
non-qualified stock options ("NQSOs"), or (iii) awards of shares of Common
Stock or the opportunity to make a direct purchase of shares of Common Stock
("Stock Awards") (ISOs, NQSOs and Stock Awards, together, being hereinafter
referred to as "Stock Rights"). Stock Rights may be granted under the Plan to
employees (including officers and directors who are employees) of the Company
and its subsidiaries (543 persons, as of August 21, 1997).
The number of shares of Common Stock subject to the Plan is 500,000 plus the
number of shares of Common Stock previously reserved for the granting of
options under the Company's 1995 Stock Option Plan which are not granted under
that plan or which are not exercised and cease to be outstanding by reason of
cancellation or otherwise. As of August 21, 1997, 40,400 shares of Common
Stock remained available for the granting of options under the 1995 Stock
Option Plan and 737,516 shares of Common Stock were reserved for issuance
under outstanding, unexercised options under all of the Company's plans. The
number of shares subject to the Plan is subject to adjustment in the case of a
stock split, stock dividend, combination, recapitalization or similar
transaction. The full text of the Plan substantially in the form in which it
will take effect if approved by the stockholders is set forth in Exhibit A. As
of August 21, 1997, there were no Stock Rights outstanding under the Plan.
DESCRIPTION OF PLAN
The Compensation Committee of the Board administers the Plan. Subject to the
provisions of the Plan, the Committee has the authority to determine the
persons to whom Stock Rights will be granted, the number of shares to be
covered by each Stock Right, the exercise price per share and the manner of
exercise, and the terms and conditions upon which Stock Rights are granted, to
accelerate the date of exercise of any installment of any Stock Right, and to
interpret the provisions of the Plan.
ISOs granted under the Plan may not be granted at a price less than the fair
market value of the Common Stock on the date of grant (or less than 110% of
fair market value in the case of employees or officers holding 10% or more of
the voting stock of the Company). NQSOs may be granted at an exercise price
established by the Committee, which may not be less than the par value of the
Common Stock. ISOs granted under the Plan must expire not more than ten years
from the date of grant, and not more than five years from the date of grant in
the case of ISOs granted to an employee or officer holding 10% or more of the
voting stock of the Company. No participant may be granted options in any
calendar year for the purchase of more than 75,000 shares. Stock Awards may be
granted on such terms and conditions as are approved by the Committee,
provided that the purchase price per share cannot be less than the par value
per share of the Common Stock.
ISOs and, except as otherwise provided in the pertinent grant documents,
NQSOs and Stock Awards granted under the Plan are exercisable during the
optionholder's lifetime only by the optionholder and are not transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974.
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In the event of certain consolidations or acquisitions or a sale of
substantially all of the Company's assets, either (i) the Committee or the
entity assuming the Company's obligations under the Plan shall make
appropriate provision for the continuation of all outstanding options under
the Plan by substituting on an equitable basis for the shares then subject to
such options either the consideration payable with respect to the outstanding
shares of Common Stock in connection with such consolidation, acquisition or
sale or securities of any successor or acquiring company, or (ii) the vesting
of all outstanding options under the Plan will be accelerated and such options
will become fully exercisable immediately prior to such consolidation,
acquisition or sale.
The Plan may be amended by the stockholders or by the Board of Directors or
the Committee. Any amendment approved by the Board of Directors or the
Committee which is of a scope that requires stockholder approval in order to
ensure favorable federal income tax treatment for any ISOs or in order to
ensure the compliance of the Plan with Section 162(m) of the Code will be
subject to stockholder approval. No amendment may adversely affect the rights
of any participant to whom Stock Rights have previously been granted without
that participant's consent.
FEDERAL INCOME TAX CONSEQUENCES
The discussion of federal income tax consequences that follows is based on
an analysis of the Internal Revenue Code as currently in effect, existing law,
judicial decisions and administrative regulations and rulings, all of which
are subject to change.
Incentive Stock Options (ISOs). No taxable income is realized by the
optionholder upon the grant or exercise of an ISO under the Plan. If no
disposition of shares issued to an optionholder pursuant to the exercise of an
ISO is made by the optionholder within the later of (i) two years from the
date of grant and (ii) one year after the transfer of such shares to the
optionholder, then (a) upon sale of such shares, any amount realized in excess
of the option price (the amount paid for the shares) will be taxed to the
optionholder as a long-term or mid-term capital gain; and any loss sustained
will be a long-term capital loss; and (b) no deduction will be allowed to the
Company for federal income tax purposes. Shares held more than one year but
not more than eighteen months will be taxed at the mid-term capital gain rate,
currently 28%, and shares held more than eighteen months will be taxed at the
long-term capital gain rate, currently 20%. The exercise of ISOs will give
rise to an item of tax preference that may result in alternative minimum tax
liability for the optionholder.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), generally (a) the
optionholder will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on a sale of such shares) over the
option price thereof, and (b) the Company will be entitled to deduct such
amount subject to applicable withholding requirements and subject to certain
limits on the deductibility of compensation set forth in Section 162(m) of the
Internal Revenue Code. Any further gain realized will be taxed as capital gain
(as set forth in the preceding paragraph) and will not result in any deduction
by the Company. Special rules apply where all or a portion of the exercise
price of the ISO is paid by tendering shares of Common Stock. A disqualifying
disposition will eliminate the item of tax preference associated with the
exercise of the ISO.
Non-Qualified Stock Options. No taxable income is realized by the
optionholder at the time the NQSO is granted. Generally, (a) at exercise,
ordinary income is realized by the optionholder in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise, and the Company receives a tax deduction for the same
amount, subject to applicable withholding requirements and subject to certain
limits on the deductibility of compensation set forth in Section 162(m) of the
Internal Revenue Code, and (b) at disposition, appreciation or depreciation
after the date of exercise is treated as either capital gain or loss, as set
forth above under "Incentive Stock Options".
Stock Awards. The grant of restricted stock should not result in income for
the participant or in a deduction for the Company for federal income tax
purposes if the shares are subject to certain restrictions and conditions
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of forfeitability. A participant will generally realize taxable compensation
income when the restrictions lapse. The amount of such income will be the
value of the Common Stock on that date less any amount paid by the
participant. Dividends paid on the Common Stock and received by the
participant, prior to the lapse of restrictions, will also be taxable
compensation income to the participant. If there are no such restrictions, the
participant will recognize compensation income equal to the fair market value
upon receipt, less the amount of the purchase price paid by the participant.
In all cases, the Company will be entitled to a tax deduction to the extent
that, and at the time that, the participant realizes compensation income.
Payroll tax withholding will be required.
Limitations on Company Deductions. As a result of Section 162(m) of the
Code, the Company's deduction for NQSOs and Stock Awards granted under the
Plan may be limited to the extent that a "covered employee" (i.e., the chief
executive officer or one of the four highest compensated officers who is
employed on the last day of the Company's taxable year and whose compensation
is reported in the summary compensation table in the Company's proxy
statement) receives compensation in excess of $1,000,000 in such taxable year
of the Company. Excluded from this limitation of deductibility is performance-
based compensation that meets specified requirements of Section 162(m) of the
Code.
NEW PLAN BENEFITS
The number of shares or options, if any, that will be granted to executive
officers and other employees under the Plan cannot be determined, since any
such grants are subject to the discretion of the Committee.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997 STOCK
OPTION PLAN AS DESCRIBED ABOVE. A MAJORITY OF THE VOTES CAST IN PERSON OR BY
PROXY AT THE MEETING IS REQUIRED FOR SUCH APPROVAL.
PROPOSAL 3
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP as the Company's
independent accountants for the 1998 fiscal year. Price Waterhouse LLP has
served as the Company's independent accountants since 1973. Representatives of
Price Waterhouse LLP will be present at the Meeting to respond to questions
and will be given the opportunity to make a statement should they desire to do
so.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE CURRENT FISCAL YEAR. A MAJORITY OF THE VOTES CAST IN
PERSON OR BY PROXY AT THE MEETING IS REQUIRED FOR SUCH APPROVAL. IF THE
APPOINTMENT IS NOT SO APPROVED, THE BOARD WILL SELECT OTHER INDEPENDENT
ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
In order to be considered for inclusion in the Proxy Statement for the
Company's 1998 Annual Meeting of Stockholders, stockholder proposals must be
received by the Company no later than May 6, 1998. Proposals should be sent to
the attention of the Clerk at the Company's offices at 80 Wilson Way,
Westwood, MA 02090.
Stockholder nominations for election to the Board at the 1998 Annual Meeting
of Stockholders may be submitted to the Company and must include (i) the name
and address of the stockholder who intends to make
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the nomination and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (iv) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Commission; and (v) the
consent of each nominee to serve as a director of the Company if so elected.
OTHER MATTERS
The Meeting is called for the purposes set forth in the notice. The Board of
Directors does not know of any matter for action by the stockholders at the
Meeting other than the matters described in the notice. However, the enclosed
proxy confers discretionary authority on the persons named therein with
respect to matters which are not known to the directors at the date of
printing hereof and which may properly come before the Meeting. It is the
intention of the persons named in the proxy to vote in accordance with their
best judgment on any such matter.
By order of the Board of Directors
Willard G. McGraw, Jr.
Clerk
September [ ], 1997
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APPENDIX A
ADE CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
The ADE Corporation 1997 Employee Stock Option Plan is intended to encourage
ownership of shares of Common Stock of ADE Corporation (the "Company") by key
employees of the Company in order to attract such persons, to induce them to
work for the benefit of the Company or of an Affiliate, and to provide
additional incentive for them to promote the success of the Company or of an
Affiliate.
2. DEFINITIONS
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in the Plan, have the following meanings:
Affiliate means a corporation which, for purposes of Section 424 of the
Code, is a parent or subsidiary of the Company, direct or indirect.
Board of Directors means the Board of Directors of the Company.
Code means the United States Internal Revenue Code of 1986, as amended.
Committee means the Compensation Committee of the Board of Directors or any
successor thereto appointed by the Board of Directors pursuant to Section 4
hereof to administer this Plan, or in the absence of any such Committee, means
the full Board of Directors.
Common Stock means shares of the Company's common stock, $.0l par value.
Company means ADE Corporation, a Massachusetts corporation.
Disability or Disabled means permanent and total disability as defined in
Section 22(e)(3) of the Code.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Fair Market Value of a Share of Common Stock on a particular date shall be
the mean between the highest and lowest quoted selling prices on such date
(the "valuation date") on the securities market where the Common Stock of the
Company is traded, or if there were no sales on the valuation date, on the
next preceding date within a reasonable period (as determined in the sole
discretion of the Committee) on which there were sales. In the event that
there were no sales in such a market within a reasonable period, or in the
event the Common Stock of the Company is not traded on any securities market,
the Fair Market Value shall be as determined in good faith by the Committee in
its sole discretion.
ISO means an option intended to qualify as an incentive stock option under
Code Section 422.
Key Employee means an employee of the Company or of an Affiliate (including,
without limitation, an employee who is also serving as an officer or director
of the Company or of an Affiliate), designated by the Committee to be eligible
to be granted one or more Stock Rights under the Plan.
NQSO means an option which is not intended to qualify as an ISO.
Option means an ISO or NQSO granted under the Plan.
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Participant means a Key Employee to whom one or more Stock Rights are
granted under the Plan. As used herein, "Participant" shall include
"Participant's Survivors" and a Participant's permitted transferees where the
context requires.
Participant's Survivors means a deceased Participant's legal representatives
and/or any person or persons who acquires the Participant's rights to a Stock
Right by will or by the laws of descent or distribution.
Plan means this ADE Corporation 1997 Employee Stock Option Plan, as amended
from time to time.
Shares means shares of the Common Stock as to which Stock Rights have been
or may be granted under the Plan or any shares of capital stock into which the
Shares are changed or for which they are exchanged within the provisions of
Section 3 of the Plan. The Shares issued upon exercise of Stock Rights granted
under the Plan may be authorized and unissued shares or shares held by the
Company in its treasury, or both.
Stock Agreement means an agreement between the Company and a Participant
executed and delivered pursuant to the Plan, in such form as the Committee
shall approve.
Stock Award means an award of Shares or the opportunity to make a direct
purchase of Shares of the Company granted under the Plan.
Stock Right means a right to Shares of the Company granted pursuant to the
Plan as an ISO, an NQSO, or a Stock Award.
3. SHARES SUBJECT TO THE PLAN
The number of Shares subject to the Plan as to which Stock Rights may be
granted from time to time shall be 500,000, plus the number of shares of
Common Stock previously reserved for the granting of options under the
Company's 1995 Stock Option Plan which are not granted under that plan or
which are not exercised and cease to be outstanding by reason of cancellation
or otherwise, or the equivalent of such number of Shares after the Committee,
in its sole discretion, has interpreted the effect of any stock split, stock
dividend, combination, recapitalization, or similar transaction in accordance
with Section 16 of the Plan.
If an Option granted hereunder ceases to be "outstanding", in whole or in
part, the Shares which were subject to such Option shall also be available for
the granting of other Stock Rights under the Plan. Any Stock Right shall be
treated as "outstanding" until such Stock Right is exercised in full or
terminates or expires under the provisions of the Plan, or by agreement of the
parties to the pertinent Stock Agreement, without having been exercised in
full.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall be
comprised of two or more members of the Board of Directors, all of whom shall
be Non-employee Directors as defined in Rule 16b-3 under the Exchange Act and
"outside directors" as that term is used in Section 162 of the Code and the
regulations promulgated thereunder, or the entire Board of Directors acting as
such a committee. Any provision in this Plan with respect to the Committee
contrary to Rule 16b-3 or Code Section 162 shall be deemed null and void to
the extent permitted by law and deemed appropriate by the Committee.
Subject to the provisions of the Plan, the Committee is authorized to:
(a) Interpret the provisions of the Plan or of any Option, Stock Award,
or Stock Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
(b) Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees shall be granted
Stock Rights;
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(c) Determine the number of Shares and exercise price for which a Stock
Right or Stock Rights shall be granted;
(d) Specify the terms and conditions upon which a Stock Right or Stock
Rights may be granted; and
(e) In its discretion, accelerate the date of exercise of any installment
of any Stock Right; provided that the Committee shall not, without the
consent of the Participant, accelerate the exercise date of any installment
of any Option granted to such Participant as an ISO (and not previously
converted into an NQSO pursuant to Section 18) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the
Code, as described in paragraph (b)(3) of Section 6;
provided, however, that all such interpretations, rules, determinations,
terms, and conditions shall be made and prescribed in the context of
preserving the tax status under Code Section 422 of those Options which are
designated as ISOs and shall be in compliance with any applicable provisions
of Rule 16b-3 under the Exchange Act. Subject to the foregoing, the
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final, unless otherwise
determined by the Board of Directors, if the Committee is other than the Board
of Directors.
The Committee may employ attorneys, consultants, accountants, or other
persons, and the Committee, the Company, and its officers and directors shall
be entitled to rely upon the advice, opinions, or valuations of such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Company, all
Participants, and all other interested persons. No member or agent of the
Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan or grants
hereunder. Each member of the Committee shall be indemnified and held harmless
by the Company against any cost or expense (including counsel fees) reasonably
incurred by him or liability (including any sum paid in settlement of a claim
with the approval of the Company) arising out of any act or omission to act in
connection with the Plan unless arising out of such member's own fraud or bad
faith. Such indemnification shall be in addition to any rights of
indemnification the members of the Committee may have as directors or
otherwise under the by-laws of the Company, or any agreement, vote of
stockholders, or disinterested directors, or otherwise.
5. ELIGIBILITY FOR PARTICIPATION
The Committee shall, in its sole discretion, name the Participants in the
Plan, provided, however, that each Participant must be a Key Employee of the
Company or of an Affiliate at the time a Stock Right is granted.
Notwithstanding the foregoing, the Committee may authorize the grant of a
Stock Right to a person not then an employee of the Company or of an
Affiliate; provided, however, that the actual grant of such Stock Right shall
be conditioned upon such person becoming eligible to become a Participant at
or prior to the time of execution of the Stock Agreement evidencing such Stock
Right. The granting of any Stock Right to any individual shall neither entitle
that individual to, nor disqualify him or her from, participation in other
grants of Stock Rights.
6. TERMS AND CONDITIONS OF OPTIONS
(a) General. Each Option shall be set forth in writing in a Stock Agreement,
duly executed by the Company and, to the extent required by law or requested
by the Company, by the Participant. The Committee may provide that Options be
granted subject to such conditions as the Committee may deem appropriate,
including, without limitation, subsequent approval by the shareholders of the
Company of this Plan or any amendments thereto; provided, however, that the
option price per share of the Shares covered by each Option shall not be less
than the par value per share of the Common Stock. Each Stock Agreement shall
state the number of Shares to which it pertains, the date or dates on which it
first is exercisable, and the date after which it may no longer be exercised.
Option rights may accrue or become exercisable in installments over a period
of time, or upon the achievement of certain conditions or the attainment of
stated goals or events. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement in form satisfactory to
the Committee providing for certain protections for the Company and its other
shareholders, including requirements
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that the Participant's or the Participant's Survivors' right to sell or
transfer the Shares may be restricted, and the Participant or the
Participant's Survivors may be required to execute letters of investment
intent and to acknowledge that the Shares will bear legends noting any
applicable restrictions.
(b) ISOS. In addition to the minimum standards set forth in paragraph (a) of
this Section 6, ISOs shall be subject to the following terms and conditions,
with such additional restrictions or changes as the Committee determines are
appropriate but not in conflict with Code Section 422 and relevant regulations
and rulings of the Internal Revenue Service:
(1) ISO Option Price: The Option price per Share of the Shares subject to
an ISO shall not be less than one hundred percent (100%) of the Fair Market
Value per share of the Common Stock on the date of grant of the ISO;
provided, however that the Option price per share of the Shares subject to
an ISO granted to a Participant who owns, directly or by reason of the
applicable attribution rules in Code Section 424(d), more than ten percent
(10%) of the total combined voting power of all classes of share capital of
the Company or an Affiliate shall not be less than one hundred ten percent
(110%) of the said Fair Market Value on the date of grant.
(2) Term of ISO: Each ISO shall expire not more than ten (10) years from
the date of grant; provided, however, that an ISO granted to a Participant
who owns, directly or by reason of the applicable attribution rules in Code
Section 424(d), more than ten percent (10%) of the total combined voting
power of all classes of share capital of the Company or an Affiliate, shall
expire not more than five (5) years from the date of grant.
(3) Limitation on Yearly ISO Exercisability: The aggregate Fair Market
Value (determined at the time each ISO is granted) of the stock with
respect to which ISOs are exercisable for the first time by a Participant
in any calendar year (under this or any other ISO plan of the Company or an
Affiliate) shall not exceed the maximum amount allowable under Section 422
of the Code.
(4) Limitation on Grant of ISOS: No ISOs shall be granted after August
20, 2007, the date which is ten (10) years from the date of the approval of
the Plan by the Board of Directors.
(c) Limitation on Number of Options Granted. Notwithstanding anything in the
Plan to the contrary, no Participant shall be granted Options in any calendar
year for the purchase of more than 75,000 Shares.
7. TERMS AND CONDITIONS OF STOCK AWARDS
Each Stock Award shall be set forth in a Stock Agreement, duly executed by
the Company and, to the extent required by law or requested by the Company, by
the Participant. The Stock Agreement shall be in the form approved by the
Committee, with such changes and modifications to such form as the Committee,
in its discretion, shall approve with respect to any particular Participant or
Participants. The Stock Agreement shall contain terms and conditions which the
Committee determines to be appropriate and in the best interest of the
Company; provided, however, that the purchase price per share of the Shares
covered by each Stock Award shall not be less than the par value per Share.
Each Stock Agreement shall state the number of Shares to which the Stock Award
pertains, the date prior to which the Stock Award must be exercised by the
Participant, and the terms of any right of the Company to reacquire the Shares
subject to the Stock Award, including the time and events upon which such
rights shall accrue and the purchase price therefor, and any restrictions on
the transferability of such Shares.
8. EXERCISE OF STOCK RIGHTS AND ISSUANCE OF SHARES
A Stock Right (or any part or installment thereof) shall be exercised by
giving written notice to the Company, together with provision for payment of
the full purchase price in accordance with this Section for the Shares as to
which such Stock Right is being exercised, and upon compliance with any other
conditions set forth in the Stock Agreement. Such written notice shall be
signed by the person exercising the Stock Right, shall state the number of
Shares with respect to which the Stock Right is being exercised, and shall
contain any representation required by the Plan or the Stock Agreement.
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Payment of the purchase price for the Shares as to which such Stock Right is
being exercised shall be made (i) in United States dollars in cash or by
check, (ii) through delivery of shares of Common Stock already owned by the
Participant not subject to any restriction under any plan and having a Fair
Market Value equal as of the date of exercise to the cash exercise price of
the Stock Right, (iii) at the discretion of the Committee, by any other means,
including a promissory note of the Participant, which the Committee determines
to be consistent with the purpose of this Plan and applicable law, (iv) at the
discretion of the Committee, in accordance with a cashless exercise program
established with a securities brokerage firm and approved by the Committee, or
(v) at the discretion of the Committee, by any combination of (i), (ii),
(iii), and (iv) above. Notwithstanding the foregoing, the Committee shall
accept only such payment on exercise of an ISO as is permitted by Section 422
of the Code.
The Company shall reasonably promptly deliver the Shares as to which such
Stock Right was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly," it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation which
requires the Company to take any action with respect to the Shares prior to
their issuance. The Shares shall, upon delivery, be fully paid, non-assessable
Shares.
9. RIGHTS AS A SHAREHOLDER
No Participant to whom a Stock Right has been granted shall have rights as a
shareholder with respect to any Shares covered by such Stock Right, except
after due exercise thereof and tender of the full purchase price for the
Shares being purchased pursuant to such exercise and registration of the
Shares in the Company's share register in the name of the Participant.
10. ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS
ISOs and, except as otherwise provided in the pertinent Stock Agreement,
NQSOs and Stock Awards shall not be transferable by the Participant other than
by will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974 or the rules thereunder; provided,
however, that the designation of a beneficiary of a Stock Right by a
Participant shall not be deemed a transfer prohibited by this Section. Except
as provided in the preceding sentence or as otherwise permitted under an NQSO
or Stock Award Stock Agreement, a Stock Right shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged, or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment, or similar process. Any attempted transfer, assignment,
pledge, hypothecation, or other disposition of any Stock Right or of any
rights granted thereunder contrary to the provisions of this Plan, or the levy
of any attachment or similar process upon a Stock Right, shall be null and
void.
11. EFFECT OF TERMINATION OF SERVICE
(a) Except as otherwise provided in the pertinent Stock Agreement or as
otherwise provided in Section 12, 13, or 14, if a Participant ceases to be an
employee of the Company and its Affiliates (a "Termination of Service") for
any reason other than termination "for cause", Disability, or death before the
Participant has exercised all Stock Rights, the Participant may exercise any
Stock Right granted to him or her to the extent that the Stock Right is
exercisable on the date of such Termination of Service, but only within a
period of not more than three (3) months after the date of the Participant's
Termination of Service or, if earlier, within the originally prescribed term
of the Stock Right. Notwithstanding the foregoing, except as provided in
Section 13, in no event may an ISO be exercised later than three (3) months
after the Participant's termination of employment with the Company and its
Affiliates.
(b) The provisions of this Section, and not the provisions of Section 13 or
14, shall apply to a Participant who subsequently becomes disabled or dies
after the Termination of Service; provided, however, that in the case
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of a Participant's death within three (3) months after the Termination of
Service, the Participant's Survivors may exercise the Stock Right within one
(1) year after the date of the Participant's death, but in no event after the
date of expiration of the term of the Stock Right.
(c) Notwithstanding anything herein to the contrary, if subsequent to a
Participant's Termination of Service, but prior to the exercise of a Stock
Right, the Committee determines that, either prior or subsequent to the
Participant's Termination of Service, the Participant engaged in conduct which
would constitute "cause" (as defined in Section 12), then such Participant
shall forthwith cease to have any right to exercise any Stock Right.
(d) Absence from work with the Company or an Affiliate because of temporary
disability (any disability other than a permanent and total Disability as
defined in Section 2 hereof), or a leave of absence for any purpose, shall
not, during the period of any such absence, be deemed, by virtue of such
absence alone, a Termination of Service, except as the Committee may otherwise
expressly provide.
(e) A change of employment or other service within or among the Company and
its Affiliates shall not be deemed a Termination of Service, so long as the
Participant continues to be an employee of the Company or any Affiliate;
provided, however, that if a Participant's employment with the Company or an
Affiliate should cease (other than to become an employee of another Affiliate
or of the Company), then paragraph (a) of this Section 11 shall apply as to
any ISOs granted to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR "CAUSE"
Except as otherwise provided in the pertinent Stock Agreement, in the event
of a Termination of Service of a Participant "for cause," all outstanding and
unexercised Stock Rights as of the date the Participant is notified his or her
service is terminated "for cause" will immediately be forfeited. For purposes
of this Section 12, "cause" shall include (and is not limited to) dishonesty
with respect to the Company and its Affiliates, insubordination, substantial
malfeasance or nonfeasance of duty, unauthorized disclosure of confidential
information, conduct substantially prejudicial to the business of the Company
or any Affiliate, and termination by the Participant in violation of an
agreement by the Participant to remain in the employ of the Company of an
Affiliate. The determination of the Committee as to the existence of cause
will be conclusive on the Participant and the Company. "Cause" is not limited
to events which have occurred prior to a Participant's Termination of Service,
nor is it necessary that the Committee's finding of "cause" occur prior to
termination. If the Committee determines, subsequent to a Participant's
Termination of Service but prior to the exercise of a Stock Right, that either
prior or subsequent to the Participant's termination the Participant engaged
in conduct which would constitute "cause," then the right to exercise any
Stock Right shall be forfeited. Any definition in an agreement between a
Participant and the Company or an Affiliate which contains a conflicting
definition of "cause" for termination and which is in effect at the time of
such termination shall supersede the definition in this Plan with respect to
that Participant.
13. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY
Except as otherwise provided in the pertinent Stock Agreement, in the event
of a Termination of Service by reason of Disability, the Disabled Participant
may exercise any Stock Right granted to him or her to the extent exercisable
but not exercised on the date of Disability. A Disabled Participant may
exercise such rights only within a period of not more than one (1) year after
the date that the Participant became Disabled or, if earlier, within the
originally prescribed term of the Stock Right.
The Committee shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Committee, the cost of which examination shall be
paid for by the Company.
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14. EFFECT OF DEATH WHILE AN EMPLOYEE
Except as otherwise provided in the pertinent Stock Agreement, in the event
of death of a Participant while the Participant is an employee of the Company
or of an Affiliate, any Stock Rights granted to such Participant may be
exercised by the Participant's Survivors to the extent exercisable but not
exercised on the date of death. Any such Stock Right must be exercised within
one (1) year after the date of death of the Participant.
15. PURCHASE FOR INVESTMENT
Unless the offering and sale of the Shares to be issued upon the particular
exercise of a Stock Right shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the "Securities
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
(a) The person who exercises such Stock Right shall warrant to the
Company, at the time of such exercise or receipt, as the case may be, that
such person is acquiring such Shares for his own account for investment and
not with a view to, or for sale in connection with, the distribution of any
such Shares, in which event the person acquiring such Shares shall be bound
by the provisions of the following legend which shall be endorsed upon the
certificate evidencing the Shares issued pursuant to such exercise or such
grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the
Securities Act of 1933, as amended, or (b) the Company shall have
received an opinion of counsel satisfactory to it that an exemption
from registration under such Act is then available, and (2) there shall
have been compliance with all applicable state securities laws."
(b) The Company shall have received an opinion of its counsel that the
Shares may be issued upon such particular exercise in compliance with the
Securities Act without registration thereunder.
The Company may delay issuance of the Shares until completion of any action
or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
16. ADJUSTMENTS
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Stock Right granted to him or her hereunder which have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the written agreement between the
Participant and the Company relating to such Stock Right or in any employment
agreement between a Participant and the Company or an Affiliate:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of such Stock Right shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination, or stock
dividend.
(b) Mergers or Consolidations. If the Company is to be consolidated with or
acquired by another entity in a merger, or in the event of a sale of all or
substantially all of the Company's assets (an "Acquisition"), the Company may
take such action with respect to outstanding Stock Rights as the Committee or
the Board of Directors may deem to be equitable and in the best interests of
the Company and its stockholders under the circumstances, including, without
limitation, (i) giving the Participant reasonable advance notice of the
pendency
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of the Acquisition and accelerating the vesting of the Stock Rights so that
they become exercisable in full immediately prior to the Acquisition, (ii)
making appropriate provision for the continuation of the Stock Rights by
substituting on an equitable basis for the shares then subject to the Options
either the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition or securities of any successor
or acquiring entity, or (iii) giving the Participant reasonable advance notice
of the pendency of the Acquisition and canceling the Stock Rights effective
upon the Acquisition if they are not exercised prior to the Acquisition.
(c) Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
paragraph (b) of this Section 16) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising a Stock Right shall be entitled to
receive for the purchase price paid upon such exercise the securities he or
she would have received if he or she had exercised such Stock Right prior to
such recapitalization or reorganization.
(d) Modification of ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to paragraph (a), (b), or (c) of this Section 16 with respect to
ISOs shall be made only after the Committee determines whether such
adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that
such adjustments made with respect to ISOs would constitute a modification of
such ISOS, it may refrain from making such adjustments, unless the holder of
an ISO specifically requests in writing that such adjustment be made and such
writing indicates that the holder has full knowledge of the consequences of
such "modification" on his or her income tax treatment with respect to the
ISO.
17. FRACTIONAL SHARES
No fractional share shall be issued under the Plan, and the person
exercising any Stock Right shall receive from the Company cash in lieu of any
such fractional share equal to the Fair Market Value thereof determined in
good faith by the Board of Directors of the Company.
18. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS
Any Options granted under this Plan which do not meet the requirements of
the Code for ISOs shall automatically be deemed to be NQSOs without further
action on the part of the Committee. The Committee, at the written request of
any Participant, may in its discretion take such actions as may be necessary
to convert such Participant's ISOs (or any portion thereof) that have not been
exercised on the date of conversion into NQSOs at any time prior to the
expiration of such ISOS, regardless of whether the Participant is an employee
of the Company or an Affiliate at the time of such conversion. Such actions
may include, but not be limited to, extending the exercise period or reducing
the exercise price of the appropriate installments of such Options. At the
time of such conversion, the Committee (with the consent of the Participant)
may impose such conditions on the exercise of the resulting NQSOs as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
NQSOs, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the Participant, may
also terminate any portion of any ISO that has not been exercised at the time
of such termination.
19. WITHHOLDING
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("FICA") withholdings, or other
amounts are required by applicable law or governmental regulation to be
withheld from the Participant's salary, wages, or other remuneration in
connection with the exercise of a Stock Right or a Disqualifying Disposition
(as defined in Section 20), the Participant shall advance in cash to the
Company, or to any Affiliate of the Company which employs or employed the
Participant, the
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amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock, is authorized by
the Committee (and permitted by law); provided, however, that with respect to
persons subject to Section 16 of the Exchange Act, any such withholding
arrangement shall be in compliance with any applicable provisions of Rule 16b-
3 promulgated under Section 16 of the Exchange Act. For purposes hereof, the
Fair Market Value of any shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Section 2 hereof, as of the most
recent practicable date prior to the date of exercise. If the Fair Market
Value of the shares withheld is less than the amount of payroll withholdings
required, the Participant may be required to advance the difference in cash to
the Company or the Affiliate employer. The Committee in its discretion may
condition the exercise of an Option for less than the then Fair Market Value
on the Participant's payment of such additional withholding.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition
of any Shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such Shares are sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
21. EFFECTIVE DATE; TERMINATION OF THE PLAN
The Plan shall be effective on August 21, 1997, the date it is approved by
the Board of Directors. Stock Rights may be granted under the Plan on and
after its effective date; provided, however, that any such Stock Rights shall
be null and void if the Plan is not approved by the stockholders of the
Company within twelve (12) months after the effective date. The Plan will
terminate on August 20, 2007, the date which is ten (10) years from the date
of its approval by the Board of Directors. The Plan may be terminated at an
earlier date by vote of the stockholders of the Company; provided, however,
that any such earlier termination will not affect any Stock Rights granted or
Stock Agreements executed prior to the effective date of such termination.
22. AMENDMENT OF THE PLAN
The Plan may be amended by the stockholders of the Company. The Plan may
also be amended by the Board of Directors or the Committee, including, without
limitation, to the extent necessary to qualify any or all outstanding Stock
Rights granted under the Plan or Stock Rights to be granted under the Plan for
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code, to the extent necessary to ensure the qualification of the Plan under
Rule 16b-3 under the Exchange Act, and to the extent necessary to qualify the
shares issuable upon exercise of any outstanding Stock Rights granted, or
Stock Rights to be granted, under the Plan for listing on any national
securities exchange or quotation in any national automated quotation system of
securities dealers. Any amendment approved by the Board of Directors or the
Committee which is of a scope that requires stockholder approval in order to
ensure favorable federal income tax treatment for any ISOs or requires
stockholder approval in order to ensure the compliance of the Plan with Rule
16b-3 or Section 162(m) of the Code shall be subject to obtaining such
stockholder approval. No modification or amendment of the Plan shall adversely
affect any rights under a Stock Right previously granted to a Participant
without such Participant's consent.
In its discretion, the Committee may amend any term or condition of any
outstanding Stock Right, provided (i) such term or condition as amended is
permitted by the Plan, (ii) if the amendment is adverse to the Participant,
such amendment shall be made only with the consent of the Participant, (iii)
any such amendment of any ISO shall be made only after the Committee
determines whether such amendment would constitute a "modification" of any
Stock Right which is an ISO (as that term is defined in Section 424(h) of the
Code) or would cause any adverse tax consequences for the holder of such ISO,
and (iv) with respect to any Stock Right held by any
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Participant who is subject to the provisions of Section 16(a) of the 1934 Act,
any such amendment shall be made only after the Committee determines whether
such amendment would constitute the grant of a new Stock Right.
23. EMPLOYMENT OR OTHER RELATIONSHIP
Nothing in the Plan or any Stock Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment status of a
Participant, nor to prevent a Participant from terminating his or her own
employment, or to give any Participant a right to be retained in employment or
other service by the Company or any Affiliate for any period of time.
24. GOVERNING LAW
This Plan shall be construed and enforced in accordance with the law of the
Commonwealth of Massachusetts.
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