SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
APPLIED SCIENCE AND TECHNOLOGY, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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APPLIED SCIENCE AND TECHNOLOGY, INC.
35 CABOT ROAD
WOBURN, MASSACHUSETTS 01801
October __, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of APPLIED SCIENCE AND TECHNOLOGY, INC. (the "Corporation") to be held on
Thursday, November 20, 1997, at 2:00 p.m. at the St. Francis/Westin Hotel, 325
Powell Street, San Francisco, California.
At the Annual Meeting, you will be asked (i) to elect two (2) members
of the Board of Directors of the Corporation; (ii) to approve an amendment to
the Corporation's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 10,000,000 to 30,000,000, and to adopt a
three-for-two stock split; (iii) to approve an amendment to the Corporation's
1993 Stock Option Plan to increase the number of shares of Common Stock
available for issuance pursuant to the plan to 1,500,000; and (iv) to ratify and
approve the selection of the Corporation's independent auditors, KPMG Peat
Marwick LLP. Details of the matters to be considered at the Annual Meeting are
contained in the Proxy Statement, which we urge you to review carefully.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign and return your Proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States. If you attend the Annual
Meeting, you may vote in person if you wish, even if you have previously
returned your Proxy.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Corporation.
Sincerely,
Richard S. Post, Ph.D.
President
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 CABOT ROAD
WOBURN, MASSACHUSETTS 01801
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
APPLIED SCIENCE AND TECHNOLOGY, INC. (the "Corporation"), a Delaware
corporation, will be held on Thursday, November 20, 1997 at 2:00 p.m. at the St.
Francis/Westin Hotel, 325 Powell Street, San Francisco, California, for the
following purposes:
1. To elect two (2) members of the Board of Directors for a term
of three (3) years;
2. To approve an amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock from
10,000,000 to 30,000,000, and to adopt a three-for-two stock
split;
3. To approve an amendment to the Corporation's 1993 Stock Option
Plan to increase the number of shares of Common Stock
available for issuance pursuant to the plan to 1,500,000;
4. To ratify and approve the selection of KPMG Peat Marwick LLP
as independent auditors for the Corporation for the fiscal
year ending June 27, 1998; and
5. To consider and act upon any matters incidental to the
foregoing and any other matters that may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on September 24,
1997, as the record date for the determination of stockholders entitled to
notice of and vote at the Annual Meeting and any adjournment or adjournments
thereof.
By Order of the Board of Directors
John M. Tarrh
Secretary
Woburn, Massachusetts
October __, 1997
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IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, WE URGE YOU TO SIGN, DATE, AND
RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. THIS WILL ENSURE THE
PRESENCE OF A QUORUM AT THE ANNUAL MEETING. PROMPTLY SIGNING, DATING, AND
RETURNING THE PROXY WILL SAVE THE CORPORATION THE EXPENSES AND EXTRA WORK OF
ADDITIONAL SOLICITATION. AN ADDRESSED ENVELOPE FOR WHICH NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE. SENDING IN YOUR
PROXY WILL NOT PREVENT YOU FROM VOTING YOUR STOCK AT THE ANNUAL MEETING IF YOU
DESIRE TO DO SO, AS YOUR PROXY IS REVOCABLE AT YOUR OPTION.
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APPLIED SCIENCE AND TECHNOLOGY, INC.
35 CABOT ROAD
WOBURN, MASSACHUSETTS 01801
PROXY STATEMENT
OCTOBER __, 1997
The enclosed proxy is solicited by the Board of Directors of APPLIED
SCIENCE AND TECHNOLOGY, INC. (the "Corporation") for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on Thursday, November 20,
1997, at 2:00 p.m. at the St. Francis/Westin Hotel, 325 Powell Street, San
Francisco, California, and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on September 24, 1997,
will be entitled to vote at the Annual Meeting or any adjournment thereof. On
that date, 4,556,899 shares of the Corporation's common stock, $.01 par value
per share (the "Common Stock"), were issued and outstanding. Each share of
Common Stock entitles the holder to one vote with respect to all matters
submitted to stockholders at the Annual Meeting. The Corporation has no other
voting securities.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote at the Annual Meeting, either in person
or represented by a properly executed proxy, is necessary to constitute a quorum
for the transaction of business at the Annual Meeting.
The election of directors will be determined by a plurality of the
shares voted affirmatively or negatively at the Annual Meeting. The other
proposals to be voted upon by the stockholders of the Corporation, except
Proposal No. 2, requires the vote of a majority of shares of Common Stock
present at the Annual Meeting for passage. Proposal No. 2 requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock for passage. Abstentions and broker non-votes (the latter of which
result when a broker holding shares for a beneficial holder in "street name" has
not received timely voting instructions on certain matters from such beneficial
holder and the broker does not have discretionary voting power on such matters)
are counted for purposes of determining the presence or absence of a quorum at
the Annual Meeting. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
2
THE DIRECTORS, NOMINATED DIRECTORS AND OFFICERS OF THE CORPORATION AS A
GROUP OWN OR MAY BE DEEMED TO CONTROL 1,078,786 SHARES OF COMMON STOCK,
CONSTITUTING APPROXIMATELY 23.7% OF THE OUTSTANDING SHARES OF COMMON STOCK OF
THE CORPORATION. EACH OF THE DIRECTORS, NOMINATED DIRECTORS AND OFFICERS HAS
INDICATED HIS INTENT TO VOTE ALL SHARES OF COMMON STOCK OWNED OR CONTROLLED BY
HIM IN FAVOR OF EACH ITEM SET FORTH HEREIN.
Where the Stockholder specifies a choice on the proxy as to how his or
her shares are to be voted on a particular matter, the shares will be voted
accordingly. If no choice is specified, the shares will be voted FOR the
election of the two nominees for director named herein, FOR the proposal to
amend the Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 to 30,000,000, and to adopt a
three-for-two stock split, FOR the proposal to increase the aggregate number of
shares available for issuance under the Corporation's 1993 Stock Option Plan to
1,500,000 and FOR the ratification of the appointment of KPMG Peat Marwick LLP
as the Corporation's independent auditors for the fiscal year ending June 27,
1998. Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person. The proxy may be revoked at any
time before it is exercised by written notice to the Secretary prior to the
Annual Meeting, or by giving to the Secretary a duly executed proxy bearing a
later date than the proxy being revoked at any time before such proxy is voted,
or by appearing at the Annual Meeting and voting in person. The shares
represented by all properly executed proxies received in time for the Annual
Meeting will be voted as specified therein.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote may be taken, such shares represented by all proxies received
by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as attorneys in the proxies. The Board of
Directors knows of no matter to be acted upon at the Annual Meeting that would
give rise to appraisal rights for dissenting stockholders.
An annual report on Form 10-K, containing the Corporation's audited
financial statements for its fiscal years ended June 28, 1997 ("Fiscal Year
1997"), June 29, 1996 ("Fiscal Year 1996") and July 1, 1995 ("Fiscal Year 1995")
is being mailed together with this Proxy Statement to all stockholders entitled
to vote. This Proxy Statement and the accompanying proxy were first mailed to
stockholders on or about October __, 1997.
PROPOSAL NO. 1
--------------
ELECTION OF DIRECTORS
The bylaws of the Corporation provide for a Board of Directors which is
divided into three classes. Directors constituting approximately one-third of
the Board of Directors are elected each year for a period of three years at the
Corporation's Annual Meeting of Stockholders and serve until their successors
are duly elected by the stockholders of the Corporation. The
3
members of Class I, Dr. Post and Mr. Anderson, are currently proposed for
reelection to the Board of Directors. The terms of the members of Class II,
Messrs. Tarrh and Kahl, expire in 1998, and the terms of the members of Class
III, Dr. Smith and Messrs. de Beaumont and Bertucci, expire in 2000. Vacancies
and newly created directorships resulting from any increase in the number of
authorized directors may be filled by a majority vote of the directors then
remaining in office. Officers are elected by and serve at the discretion of the
Board of Directors.
Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for an individual director,
or for all directors, will be voted (unless one or more nominees are unable or
unwilling to serve) for the election of the nominees named below. The Board of
Directors expects that each of the nominees will be available for election, but
if any of them is not a candidate at the time the election occurs, it is
intended that such proxy will be voted for the election of another nominee to be
designated by the Board of Directors to fill any such vacancy.
A plurality of the shares voted affirmatively or negatively at the
Annual Meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF DR. RICHARD S. POST
AND MR. ROBERT R. ANDERSON AS DIRECTORS, EACH TO SERVE A THREE YEAR TERM, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
4
The following table sets forth the year each director was elected a
director and the age, positions and offices presently held by each director with
the Corporation:
<TABLE>
<CAPTION>
CLASS TO YEAR
WHICH FIRST
DIRECTOR BECAME A
NAME AGE BELONGS DIRECTOR POSITION
- ---- --- ------- -------- --------
<S> <C> <C> <C> <C>
Richard S. Post, Ph.D.*.. 54 I 1987 Chief Executive Officer,
President and Chairman of
the Board of Directors
John M. Tarrh ........... 50 II 1987 Senior Vice President,
Finance, Secretary,
Treasurer and Director
Donald K. Smith, Ph.D.... 44 III 1987 Senior Vice President,
Advanced Technology,
and Director
Robert R. Anderson*...... 59 I 1995 Director
Michel de Beaumont....... 55 III 1993 Director
John R. Bertucci......... 56 III 1994 Director
Hans-Jochen Kahl......... 56 II 1995 Director
</TABLE>
- -------------------------
*Nominees for election at this Annual Meeting.
Mr. Jordan L. Golding has served as an advisor to the Board of
Directors since 1989.
The Board of Directors has appointed an Executive Committee presently
comprised of Drs. Post and Smith and Mr. Tarrh. The Executive Committee is
authorized to take any action that the Board of Directors is authorized to act
upon with the exception of the issuance of stock, the sale of all or
substantially all of the Corporation's assets, or any other significant
corporate transaction.
All of the directors of the Corporation who were directors during
Fiscal Year 1997 attended at least 75% of the meetings of the Board of Directors
and the committees on which they served during Fiscal Year 1997. The Board of
Directors met seven (7) times formally, while the Executive Committee met
informally on a number of occasions during Fiscal Year 1997.
5
The Board of Directors also has appointed a Compensation Committee,
presently comprised of Mr. Kahl with Mr. Golding as an advisor, and an Audit
Committee comprised of Messrs. Bertucci and Anderson, with Mr. Golding as an
advisor. The Compensation Committee is responsible for negotiating and approving
compensation arrangements for officers, employees, consultants, and directors,
including the granting of options to purchase the Corporation's Common Stock
pursuant to any of the Corporation's stock option plans. The Audit Committee was
established for the purposes of (i) reviewing the Corporation's financial
results and recommending the selection of the Corporation's independent
auditors; (ii) reviewing the effectiveness of the Corporation's accounting
policies and practices, financial reporting and internal controls; and (iii)
reviewing the scope of independent audit coverages and fees, and any
transactions that may involve a potential conflict of interest and internal
control systems. In July 1995, the Board of Directors established a Stock Option
Committee to administer the Corporation's 1987 and 1993 Stock Option Plans.
Members of the Stock Option Committee are Messrs. de Beaumont and Bertucci, two
of the outside directors of the Corporation. The Compensation and Audit
Committees met two (2) and four (4) times, respectively, during Fiscal Year
1997.
None of the directors or executive officers of the Corporation are
related by blood, marriage, or adoption to any of the Corporation's directors or
executive officers.
BACKGROUND
The following is a brief summary of the background of each director of
the Corporation, as well as Mr. Golding, an advisor to the Board of Directors:
RICHARD S. POST, PH.D. has served as the Corporation's President, Chief
Executive Officer and Chairman of the Board since its inception in 1987. Prior
to founding the Corporation, Dr. Post served at the Massachusetts Institute of
Technology ("MIT") from 1981 to 1987. At MIT, Dr. Post served as a Senior
Research Scientist, in the position of Head of the Mirror Confinement Division
of the Plasma Fusion Center, where he was responsible for project management,
plasma physics and materials interactions research. Dr. Post earned his Ph.D. in
Plasma Physics from Columbia University and his Bachelor of Science degree from
the University of California at Berkeley.
MR. JOHN M. TARRH has served as the Corporation's Senior Vice
President, Finance, Treasurer and Secretary, and as a director since its
inception in 1987. Mr. Tarrh became the Manager of the Mirror Confinement
Division of MIT's Plasma Fusion Center in 1986 where he was responsible for
financial management, project management and administration. Prior to joining
the research staff of MIT in 1978, he was the Executive Vice President -
Operations of Magnetic Engineering Associates, a privately held, high-technology
company in Cambridge, Massachusetts which was owned by Sala Magnetics. Mr. Tarrh
presently serves as a director for QC Optics, Inc., a publicly held designer of
laser based defect detection systems. Mr. Tarrh
6
received his Master of Science degree in Electrical Engineering from MIT, and he
earned his Bachelor of Science degree in Electrical Engineering from Virginia
Polytechnic Institute and State University.
DONALD K. SMITH, PH.D. has served as the Corporation's Senior Vice
President, Advanced Technology, and as a director since its inception in 1987.
He joined MIT as a Research Scientist in 1981 and was a Group Leader as well as
a member of the management team on several projects. Dr. Smith specializes in
radio frequency and plasma engineering. Dr. Smith earned his Master of Science
degree and Ph.D. in Electrical Engineering from the University of Wisconsin,
Madison, and his Bachelor of Science degree from Davidson College.
MR. ROBERT R. ANDERSON has served as a director of the Corporation
since October 1995. Previously, Mr. Anderson co-founded in 1975 and served as
Chairman of the Board of Directors, Chief Financial Officer and Chief Operating
Officer of KLA Instruments Corporation, the leading manufacturer of yield
monitoring and process control systems for the semiconductor manufacturing
industry, from which he retired in 1994. From 1970 to 1975, Mr. Anderson was
Chief Financial Officer of Computervision Corporation, which develops and
markets software for design automation and product data management. Mr. Anderson
is presently the Chief Executive Officer and is Chairman of the Board of
Directors of Silicon Valley Research, a manufacturer of EDA software for
integrated circuit design and manufacture. Mr. Anderson attended Bentley
College.
MR. MICHEL DE BEAUMONT has served as a director of the Corporation
since January 1993. Since 1981, Mr. de Beaumont has served as a co-founder and
director of American Equities Overseas (U.K.) Ltd. of London, England, a wholly
owned subsidiary of American Equities Overseas Inc. ("American Equities"), a
private securities brokerage and corporate finance firm. From 1978 to 1981, Mr.
de Beaumont served as a Vice President in the London, England Office of American
Securities Corp., which subsequently was the clearing house for American
Equities until 1993. Mr. de Beaumont has also previously served as a Vice
President at Smith Barney Harris Upham and Oppenheimer & Co. Mr. de Beaumont
holds degrees in Advanced Mathematics, Physics and Chemistry from the
Universities of Poitiers and Paris, and a degree in Business Administration from
the University of Paris.
MR. JOHN R. BERTUCCI has served as a director of the Corporation since
September 1994. Mr. Bertucci has been President, Chief Executive Officer and a
director of MKS Instruments, Inc. ("MKS"), a privately held manufacturer and
seller of pressure control instruments for vacuum processes, since 1974. Mr.
Bertucci received a Master of Science degree in Industrial Administration and a
Bachelor of Science degree in Metallurgical Engineering from Carnegie-Mellon
University.
MR. HANS-JOCHEN KAHL has served as a director of the Corporation since
October 1995. From June 1994 through September 1996, Mr. Kahl served as a
consultant to Ebara, a Japanese manufacturer of industrial water pumps and
vacuum process equipment for the semiconductor industry. Mr. Kahl was employed
by Leybold AG, formerly Leybold-Heraeus GmbH
7
("Leybold"), a leading international manufacturer of vacuum pumps and other
vacuum process equipment for the semiconductor industry, from July 1983 to March
1992, Mr. Kahl served as a managing director of Leybold, where he was primarily
responsible for sales, marketing and strategic planning. Mr. Kahl was appointed
to the Board of Directors of Leybold in 1987, and since November 1996, he has
served as a director of Solid State Measurement, a privately held manufacturer
of high precision measurement tools.
MR. JORDAN L. GOLDING, a certified public accountant, has served as an
advisor to the Board of Directors since 1989. Mr. Golding served as a partner in
KPMG Peat Marwick LLP until his retirement in 1988, where his client
responsibilities included high technology, merchandising, banking and emerging
companies. After service in the U.S. Navy, he became a partner in Golding,
Golding & Company, which in 1967 merged with KPMG Peat Marwick LLP. He has
served as President of the Massachusetts Society of Certified Public Accountants
and was Chairman of the Management Advisory Services Committee of the American
Institute of Certified Public Accountants. Mr. Golding presently serves as a
director of Canadian Western Bank, a publicly held commercial bank. Mr. Golding
serves on the Advisory Board of New Balance, Inc., the privately held parent
company of New Balance Athletic Shoe, Inc., and of Grand Circle Corporation, the
parent company of Grand Circle Travel, Inc. and Overseas Adventure Travel, Inc.,
and as a consultant to other corporations. Mr. Golding earned a Master of
Business Administration degree from Harvard Business School, and graduated from
Harvard College.
8
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and certain other key employees of the
Corporation, their ages and positions held in the Corporation are as follows:
NAME AGE POSITION
- ---- --- --------
Richard S. Post, Ph.D........ 54 President, Chief Executive Officer and
Chairman of the Board of Directors
Brian R. Chisholm............ 49 Senior Vice President, Operations
Donald K. Smith, Ph.D........ 44 Senior Vice President, Advanced
Technology
John M. Tarrh................ 50 Senior Vice President, Finance,
Secretary and Treasurer
Robert E. Bettilyon.......... 48 Controller
Timothy E. Coutts............ 42 President - ETO, Inc.
Michael C. DeLuca............ 39 Vice President, Manufacturing Operations
Lorrie Ferraro............... 35 Director of Human Resources
Richard W. Hartnell.......... 56 Director of Operations of AGL
William M. Holber, Ph.D...... 43 Director of Technical Marketing
The following is a brief summary of the background of each executive
officer or key employee of the Corporation, other than Drs. Post and Smith and
Mr. Tarrh, whose backgrounds are described above:
MR. BRIAN R. CHISHOLM has been the Corporation's Senior Vice President
of Operations since November 1996. From 1994 to August 1996, Mr. Chisholm was
the Research and Development Manager - Thin Film Systems for Varian Associates,
a developer and producer of automated systems for depositing thin films, where
he was responsible for advanced development, engineering and support of all thin
film products. Previously, Mr. Chisholm was the Vice President, Engineering and
Product Management for IRT Corporation, a publicly held company that provides
machine vision based x-ray inspection systems and radiation processing services.
Mr. Chisholm received a Master of Business Administration degree from
Northeastern University, a
9
Master of Science degree in Physics from Virginia Polytechnic Institute and a
Bachelor of Arts degree in Physics from Northeastern University.
MR. ROBERT E. BETTILYON has been the Corporation's Controller since
August 1993. From 1983 to 1993, Mr. Bettilyon was Controller at Coherent
General, Inc., a private manufacturer of industrial lasers and laser systems for
materials processing and medical applications, and has served at each of its
Massachusetts, Tokyo and Munich facilities. Mr. Bettilyon previously served as a
Senior Financial Planning Analyst at Standard Oil of Ohio from 1980 to 1983, and
as an Audit Senior at Touche Ross (now Deloitte and Touche) from 1977 to 1980.
Mr. Bettilyon holds a Bachelor of Science degree in Accounting from the
University of Utah and is a Certified Public Accountant.
MR. TIMOTHY E. COUTTS has been the President of ETO, Inc. since January
1996. Effective November 1997, Mr. Coutts will be the Corporation's Vice
President and General Manager of ETO, Inc. From October 1992 to December 1995,
Mr. Coutts was employed by Ehrhorn Technological Operations, Inc. ("Ehrhorn")
most recently as the President, Chief Operating Officer and a director. Ehrhorn
was acquired by the Corporation in January 1996. At Ehrhorn, Mr. Coutts'
responsibilities included general management of Ehrhorn. Mr. Coutts received a
Bachelor of Science degree in Accounting from the University of North Dakota and
is a Certified Public Accountant.
MR. MICHAEL C. DELUCA has been the Corporation's Vice President of
Manufacturing since May 1997. From 1995 to 1997, Mr. DeLuca was the Director of
Operations for Applied Fiberoptics, Inc. a fiberoptics manufacturing company
where he was responsible for all aspects of manufacturing. From 1993 to 1995,
Mr. DeLuca was Pharmaceutical Operations Manager for Millipore Corporation, a
manufacturer of high technology filtration devices . Previously, he was the
Plant Manager for Veratec, a manufacturer of components for the computer
diskette industry. Mr. DeLuca received a Master of Business Administration
degree from Babson Graduate School of Business, and a Bachelor of Arts degree in
Physics from the College of The Holy Cross.
MS. LORRIE FERRARO has been the Corporation's Director of Human
Resources since June 1995. Prior to joining the Corporation, Ms. Ferraro owned
and operated a privately held human resources consulting firm, AmCan Marketing,
in Lowell, Massachusetts. Prior to founding AmCan Marketing in 1990, Ms. Ferraro
was employed from 1989 to 1990 by Metcalf and Eddy Companies, Inc., as Human
Resource Manager. Ms. Ferraro received an Associate degree in Human Resources
from McGill University and an Associate degree in Education from Northern Lights
College.
MR. RICHARD W. HARTNELL has served as Director of Operations for
Astex/Gerling Laboratories, Inc. ("AGL") AGL since 1994. Prior to joining the
Corporation, from 1979 to 1993, Mr. Hartnell was Director of Operations for
Teledyne CME, a publicly held electronics manufacturing company, where he was
responsible for
10
manufacturing, manufacturing engineering and quality control. Mr. Hartnell
received a Bachelor of Science degree in Electrical Engineering from San Jose
State University.
WILLIAM M. HOLBER, PH.D. has been the Corporation's Director of
Technical Marketing since July 1995. From May 1993 to July 1995, Dr. Holber was
the Corporation's Director of Technology Development for OEM products. From 1986
to May 1993, Dr. Holber was a research staff member for the IBM T.J. Watson
Research Center where he performed research on various aspects of electron
cyclotron resonance (ECR) plasmas for microelectronic applications. Dr. Holber
received a Ph.D. in Applied Physics from Columbia University, a Master of City
and Regional Planning degree from Harvard University, Kennedy School of
Government, a Master of Science degree in Physics from the University of Chicago
and a Bachelor of Science degree from Brown University.
11
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of September 24, 1997, certain
information concerning stock ownership of the Corporation by (i) each person
known by the Corporation to own of record or be the beneficial owner of more
than five percent (5%) of the Corporation's Common Stock, (ii) each of the
Corporation's directors, and (iii) all directors and officers as a group. Except
as otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS
---------------------- --------------------- --------
<S> <C> <C>
Kopp Investment Advisors, Inc............. 922,518 20.2%
Richard S. Post, Ph.D.(3)................. 420,435 9.2%
Donald K. Smith, Ph.D.(4) ................ 297,452 6.5%
John M. Tarrh(5).......................... 277,658 6.1%
Michel de Beaumont(6)..................... 48,012 1.1%
John Bertucci(7).......................... 62,000 1.4%
Robert R. Anderson(8) .................... 53,000 1.2%
Hans-Jochen Kahl(8)....................... 8,000 *
All Officers and Directors
as a Group (10 persons)
(3)(4)(5)(6)(7)(8)(9)(10)(11)............. 1,213,788 25.9%
</TABLE>
* Less than one percent (1%)
(1) The address for all officers and directors is c/o Applied Science and
Technology, Inc., 35 Cabot Road, Woburn, Massachusetts 01801. The
address for Kopp Investment Advisors, Inc. is 7701 France Avenue South,
Suite 500, Edina, Minnesota 55435.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock that an individual or group has a right to acquire
within 60 days pursuant to the
12
exercise of options or warrants are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual or
group, but are not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person in the table.
(3) Includes (i) 5,000 shares of Common Stock owned by Dr. Post as
custodian for his two children; (ii) 12,000 shares of Common Stock
owned by Dr. Post's wife; (iii) 3,000 shares of Common Stock issuable
upon the exercise of the vested portion of an option to purchase up to
5,000 shares, at an exercise price of $11.125 per share, which expires
on July 2, 2000; (iv) 10,000 shares of Common Stock issuable upon the
exercise of the vested portion of an option to purchase up to 25,000
shares, at an exercise price of $12.625 per share, which expires on
December 28, 2000; (v) 12,000 shares of Common Stock issuable upon the
exercise of the vested portion of options to purchase up to an
aggregate of 30,000 shares, at an exercise price of $9.625 per share,
each option expires on August 5, 2001; (vi) 1,400 shares of Common
Stock issuable upon the exercise of an option, at an exercise price of
$7.625 per share, which expires on November 20, 2001; and (vii) 4,000
shares of Common Stock issuable upon exercise of the vested portion of
an option to purchase up to 13,478 shares, at an exercise price of
$16.75 per share, which expires on June 30, 2002.
(4) Includes (i) 1,200 shares of Common Stock issuable upon the exercise of
the vested portion of an option to purchase up to 2,000 shares, at an
exercise price of $11.125 per share, which expires on July 2, 2000;
(ii) 6,000 shares of Common Stock issuable upon the exercise of the
vested portion of an option to purchase up to 15,000 shares, at an
exercise price of $12.625 per share, which expires on December 28,
2000; (iii) 6,000 shares of Common Stock issuable upon the exercise of
the vested portion of an option to purchase up to 15,000 shares at an
exercise price of $9.625 per share, which expires on August 5, 2001;
(iv) 1,000 shares of Common Stock issuable upon the exercise of an
option, at an exercise price of $7.625 per share, which expires on
November 20, 2001; and (v) 2,800 shares of Common Stock issuable upon
exercise of the vested portion of options to purchase up to an
aggregate of 14,000 shares, at an exercise price of $16.75 per share,
each option expires on June 30, 2002.
(5) Includes (i) an aggregate of 876 shares of Common Stock owned by Mr.
Tarrh's wife and minor son; (ii) 600 shares of Common Stock issuable
upon the exercise of the vested portion of an option to purchase up to
1,000 shares, at an exercise price of $11.125 per share, which expires
on July 2, 2000; (iii) 2,800 shares of Common Stock issuable upon the
exercise of the vested portion of an option to purchase up to 7,000
shares at an exercise price of $12.625 per share, which expires on
December 28, 2000; (iv) 2,600 shares of Common Stock issuable upon the
exercise of the vested portion of an option to purchase up to 6,500
shares at an exercise price of $9.625 per share, which expires on
August 5, 2001; (v) 900 shares of Common Stock issuable upon the
exercise of an option at a price of $7.625 per share, which expires on
November 20, 2001; and (vi) 2,000 shares of Common
13
Stock issuable upon the exercise of the vested portion of an option to
purchase up to 10,000 shares, at an exercise price of $16.75 per share,
which expires on June 30, 2002. Excludes 12,500 shares of Common Stock
held by Mr. Tarrh's father and sisters, in which Mr. Tarrh disclaims
any beneficial interest.
(6) Includes (i) 36,012 shares of Common Stock held by various trust
arrangements, of which Mr. de Beaumont is a beneficiary; (ii) 4,000
shares of Common Stock issuable upon the exercise of an option to
purchase up to 4,000 shares, at an exercise price of $7.06 per share,
which expires on November 18, 2004; and (iii) 8,000 shares of Common
Stock issuable upon the exercise of the vested portion of an option to
purchase up to 12,000 shares at an exercise price of $16.00 per share,
which expires on November 15, 2005.
(7) Includes (i) 15,000 shares of Common Stock owned directly by Mr.
Bertucci; (ii) 35,000 shares of Common Stock held by MKS Instruments,
Inc., of which Mr. Bertucci is the majority shareholder; (iii) 8,000
shares of Common Stock issuable upon the exercise of the vested portion
of an option to purchase up to 12,000 shares, at an exercise price of
$16.00 per share, which expires on November 15, 2005; and (iv) 4,000
shares of Common Stock issuable upon the exercise of the vested portion
of an option to purchase up to 4,000 shares, at an exercise price of
$7.06 per share, which expires on November 18, 2004.
(8) Includes (i) 35,000 shares of Common Stock owned directly by Mr.
Anderson; (ii) 10,000 shares of Common Stock held in trust for the
benefit of a child of Mr. Anderson, of which Mr. Anderson is the
trustee; and (iii) 8,000 shares of Common Stock issuable upon the
exercise of the vested portion of an option to purchase up to 12,000
shares at an exercise price of $16.00 per share, which expires on
November 15, 2005.
(9) Includes the following options owned by Brian R. Chisholm, the
Corporation's Senior Vice President of Operations: (i) 600 shares of
Common Stock issuable upon the exercise of an option at an exercise
price of $7.625 per share, which expires on November 20, 2001; (ii)
6,000 shares of Common Stock issuable upon the exercise of the vested
portion of an option to purchase up to 30,000 shares, at an exercise
price of $9.00 per share, which expires on November 25, 2001; and (iii)
2,000 shares of Common Stock issuable upon the exercise of the vested
portion of an option to purchase up to 10,000 shares, at an exercise
price of $16.75 per share, which expires on June 30, 2002.
(10) Includes the following stock and options owned by Timothy E. Coutts,
the President of ETO, Inc.: (i) 8,529 shares of Common Stock; (ii)
12,502 shares of Common Stock held in escrow for the benefit of Mr.
Coutts in connection with the Corporation's acquisition of Ehrhorn,
which shares will be released upon satisfaction of certain escrow
obligations; (iii) 8,000 shares of Common Stock issuable upon the
exercise of the vested portion of an option to purchase up to 20,000
shares, at an exercise price of $12.625 per share, which
14
expires on December 31, 2000; (iv) 3,200 shares of Common Stock
issuable upon the exercise of the vested portion of an option to
purchase up to 8,000 shares, at an exercise price of $9.625 per share,
which expires on August 5, 2001; (v) 600 shares of Common Stock
issuable upon the exercise of an option at an exercise price of $7.625
per share, which expires on November 20, 2001; and (vi) 1,800 shares of
Common Stock issuable upon the exercise of the vested portion of an
option to purchase up to 9,000 shares, at an exercise price of $16.75
per share, which expires on June 30, 2002.
(11) Includes the following option owned by Michael C. DeLuca, the
Corporation's Vice President of Manufacturing: (i) 4,000 shares of
Common Stock issuable upon the exercise of the vested portion of an
option to purchase up to 20,000 shares, at an exercise price of $11.50
per share, which expires on May 6, 2002.
COMPENSATION OF OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
The table on the following page sets forth the compensation paid to Dr.
Post, the Corporation's Chief Executive Officer, President and Chairman of the
Board of Directors, Mr. Tarrh, the Corporation's Senior Vice President, Finance,
Dr. Smith, the Corporation's Senior Vice President, Advanced Technology, Mr.
Coutts, the President of ETO, Inc., and Mr. Lloyd, the Corporation's former Vice
President, Manufacturing Operations during Fiscal Years 1997, 1996 and 1995.
15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------- ------------------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Name and Restricted Underlying LTIP All Other
Principal Fiscal Other Annual Stock Options/ Payouts Compen-
Position Year Salary(1) Bonus Compensation(2) Awards SARs (#) $ sation (3)
- -------- ---- --------- ----- --------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard S. Post 1997 $160,790 $33,692 -0- -0- 31,400 -0- $ 6,716
President, Chief 1996 $142,500 $57,200 -0- -0- 30,000 -0- $ 2,344
Executive Officer 1995 $130,000 $17,679 -0- -0- -0- -0- $ 1,739
and Chairman of the
Board
Donald K. Smith 1997 $111,280 $17,115 -0- -0- 16,000 -0- $ 6,424
Senior Vice President, 1996 $114,000 $40,040 -0- -0- 17,000 -0- $ 1,534
Advanced Technology, 1995 $104,000 $16,143 -0- -0- -0- -0- $ 1,512
and Director
John M. Tarrh 1997 $ 98,750 $10,495 -0- -0- 7,400 -0- $ 6,270
Senior Vice President, 1996 $ 95,366 $28,710 -0- -0- 8,000 -0- $ 1,761
Finance, Secretary, Treasurer 1995 $ 87,006 $10,139 -0- -0- -0- -0- $ 1,255
and Director
Timothy E. Coutts(4) 1997 $122,977 $11,030 -0- -0- 8,600 -0- $ 6,659
President, ETO, Inc. 1996 $ 63,846 $ 2,640 -0- -0- 20,000 -0- $ 2,936
John D. Lloyd(5) 1997 $ 81,942 -0- $25,575 -0- 2,800 -0- $21,896
Former Vice President, 1996 $ 93,437 $23,100 -0- -0- 7,000 -0- $ 1,672
Manufacturing Operations 1995 $ 80,846 $ 7,000 -0- -0- 4,000 -0- $ 913
</TABLE>
(1) Amounts shown indicate cash compensation earned and received by Drs.
Post and Smith and Messrs. Tarrh, Coutts and Lloyd; no amounts were
earned but deferred at their election. Drs. Post and Smith and Messrs.
Tarrh and Coutts participate in the Corporation's group health and life
insurance programs and other benefits generally available to all
employees of the Corporation.
(2) Represents the difference between the exercise price and fair market
value of the Common Stock at the time of exercise of certain options to
purchase Common Stock held by Mr. Lloyd.
(3) Amounts shown represent premium payments on life and long-term
disability insurance policies for Drs. Post and Smith and Messrs.
Tarrh, Coutts and Lloyd (which are available to all employees of the
Corporation) and contributions paid by the Corporation in connection
with its 401(k) Plan and health insurance premiums.
(4) Excludes sums paid to Mr. Coutts by Ehrhorn in connection with this
exercise of non-qualified options and the lapse of the restrictions on
restricted stock of Ehrhorn held by Mr. Coutts as a result of the
acquisition of Ehrhorn by the Corporation.
(5) In March 1997, the Corporation entered into a severance agreement with
Mr. Lloyd (the "Severance Agreement"). Of the total 13,800 options
reflected in column (g), 1,600 were exercised subsequent to Fiscal 1997
and the balance of the options were cancelled effective September 30,
1997, with the exception of 2,000 shares underlying an option which may
vest on or before October 31, 1997. Of the $21,896 reflected in column
(i), severance payments of $18,223 were made pursuant to the Severance
Agreement.
16
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants For Option Term (1)(5)
- -------------------------------------------------------------------------------------------- --------------------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------ ----------------- ------------ -------------- ------------- ------- --------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (#)(1)(2) Year(3) ($/Sh) Date(4) 5% 10%
- ------------------------ ----------------- ------------ -------------- ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Post 30,000 12.9% $9.625 08/05/2001 $79,776 $176,285
1,400 * $7.625 11/20/2001 $ 2,949 $ 6,517
Donald K. Smith 15,000 6.5% $9.625 08/05/2001 $39,888 $ 88,142
1,000 * $7.625 11/20/2001 $ 2,107 $ 4,655
Timothy E. Coutts 8,000 3.4% $9.625 08/05/2001 $21,274 $ 47,009
600 * $7.625 11/20/2001 $ 1,264 $ 2,793
John M. Tarrh 6,500 2.8% $9.625 08/05/2001 $17,285 $ 38,195
900 * $7.625 11/20/2001 $ 1,896 $ 4,190
John D. Lloyd(6) 3,500 1.5% $9.625 08/05/2001 $ 9,307 $ 20,567
800 * $7.625 11/20/2001 $ 1,685 $ 3,724
</TABLE>
- -----------------------------------
* Less than 1%.
(1) Except for Mr. John D. Lloyd, none of the above-named executive
officers has exercised any of the options granted during Fiscal Year
1997.
(2) Except for the options granted in November 1996, which were fully
vested on grant, options granted in Fiscal Year 1997 are exercisable as
follows: 20% of the shares become exercisable the date of the issuance
of the option and an additional 20% of the option shares become
exercisable on each successive anniversary date, with full vesting
occurring on the fifth anniversary date.
(3) In Fiscal Year 1997, options to purchase a total of 231,725 shares of
Common Stock were granted to employees of the Corporation, including
executive officers.
(4) The options are subject to earlier termination upon certain events
related to termination of employment.
(5) The dollar gains under these columns result from calculations
discussing hypothetical growth rates as set by the Commission and are
not intended to forecast future price appreciation of the Common Stock.
17
(6) Pursuant to the Severance Agreement, the balance of the option to
purchase 3,500 shares of Common Stock (2,100 shares) was cancelled as
of September 30, 1997. The option to purchase 800 shares of Common
Stock was exercised by Mr. Lloyd in February 1997.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- -------------------------- ------------------- ------------ ---------------- -------------
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options Fiscal Year-
Value at Fiscal Year- End Exercisable/
Shares Acquired Realized End Exercisable/ Unexercisable
Name on Exercise ($) Unexercisable(1) ($)(1)(2)
- -------------------------- ------------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
John D. Lloyd 5,500 $ 25,575 1,600/12,200 $7,000/$93,275
</TABLE>
- ------------------------
(1) Pursuant to the terms of the Severance Agreement, the unexercisable
options at fiscal year end were cancelled effective September 30, 1997,
with the exception of 2,000 shares underlying an option which may vest
on or before October 31, 1997.
(2) In-the-Money options are those options for which the fair market value
of the underlying Common Stock is greater than the exercise price of
the option. On June 27, 1997 the last trading day of Fiscal Year 1997,
the fair market value of the Corporation's Common Stock underlying the
options (as determined by the last sale price quoted on NASDAQ/NMS) was
$17.00.
COMPENSATION OF DIRECTORS
Messrs. Anderson, Bertucci, and Kahl receive $1,000 per meeting for
participation in Board of Directors meetings, and $500 per meeting for
participation in Committee meetings. All non-employee directors receive
reimbursement of reasonable travel expenses.
In addition, pursuant to the Corporation's Formula Plan, effective on
and commencing as of November 16, 1995, all non-employee directors received a
grant of options to purchase twelve thousand (12,000) shares of Common Stock at
an exercise price equal to the fair market value of the Common Stock on the date
of grant. Under the Formula Plan, options to purchase one thousand (1,000)
shares of Common Stock will vest immediately and additional options to purchase
one thousand (1,000) shares of Common Stock will vest quarterly, subject to the
option holder's continued service as a Director of the Corporation. Upon the
vesting of these options, each non-
18
employee director will receive an additional grant of options to purchase twelve
thousand (12,000) shares of Common Stock, to vest on the same terms as above.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Corporation has entered into employment agreements with Drs. Post
and Smith and Mr. Tarrh which are renewable annually. These agreements provide
for base salaries of $170,000, $117,000, and $103,000 respectively, during
Fiscal Year 1997. However, during the second and third quarters of Fiscal Year
1997, Drs. Post and Smith and Mr. Tarrh recommended and implemented a 10%
reduction in their base salaries as part of an expense reduction effort by the
Corporation. Base salaries and bonuses are determined by the Board of Directors,
with each officer eligible to receive a bonus if the Corporation exceeds
operating profit goals (exclusive of extraordinary items of gain and loss) for
the fiscal year (the "Bonus Plan"). Pursuant to the Bonus Plan, Drs. Post and
Smith, and Mr. Tarrh received bonuses of $33,692, $17,115 and $10,495,
respectively, during Fiscal Year 1997. Each individual is entitled to receive
benefits offered to the Corporation's employees generally and to receive twelve
(12) months base salary as severance in the event his employment is terminated
by the Corporation without cause. In addition, the employment agreements
preclude each individual from competing with the Corporation during his
employment and for at least two years thereafter, from disclosing confidential
information, and each agreement contains an ownership provision in the
Corporation's favor for techniques, discoveries and inventions arising during
the term of employment.
Each of the employment agreements for Drs. Post and Smith and Mr. Tarrh
were amended in July 1996, to provide that in addition to the severance benefits
discussed above, in the event of a sale or change of control in the Corporation,
and if their employment is terminated without cause, or if they are transferred
outside of Eastern Massachusetts or if any individual has a significant
reduction in responsibility with the Corporation, then he shall be entitled to
receive 299% of his prior year's compensation (as determined by Section 280G of
the Internal Revenue Code of 1986, as amended). In addition, these employment
agreements, as modified, provide that if any executive remains with the
Corporation for one year after a sale or change of control in the Corporation,
then he shall receive as a bonus an amount equal to 18 months of his then
current base salary.
The Corporation also has employment agreements with Messrs. Chisholm,
Coutts and DeLuca which expire on December 3, 1997, December 31, 1998 and April
30, 1998, respectively. These agreements are automatically renewed for
successive periods of one year, unless a notice of non-renewal is given. The
base salaries of Messrs. Chisholm, Coutts and DeLuca are $147,400, $128,000 and
$120,000, respectively. Messrs. Chisholm and DeLuca are entitled to receive
bonuses up to 35% and 25%, respectively, of their base salaries. Mr. Coutts
receives a bonus in accordance with earnings targets established by the Board of
Directors. Each of these individuals is entitled to severance benefits if he is
terminated without cause, Mr. Chisholm receives severance benefits for twelve
(12) months; Mr. Coutts receives severance benefits for thirty (30) days; and
Mr. DeLuca receives severance benefits for six (6) months. These agreements also
preclude each individual from competing with the Corporation during his
employment and for at least two years
19
thereafter, from disclosing confidential information, and each agreement
contains an ownership provision in the Corporation's favor for techniques,
discoveries and inventions arising during the term of employment.
The employment agreements for Chisholm and DeLuca also provide that in
the event of a sale or change of control in the Corporation, and if Mr.
Chisholm's or Mr. DeLuca's employment is terminated without cause, or their base
salary or Corporation-paid benefits are reduced, or if they are transferred
outside of Eastern Massachusetts or if they have a significant reduction in
responsibility with the Corporation, then they shall be entitled to receive 100%
of the severance benefits due for each full year or portion thereof that they
have been employed by the Corporation, up to a maximum of 299% of the severance
benefits set forth above. Mr. Chisholm's employment agreement also provides that
if he remains with the Corporation for one year after a sale or change of
control in the Corporation, then he shall receive as a bonus an amount equal to
50% of his then current base salary and bonuses paid during the preceding fiscal
year.
401(K) PLAN
Effective July 1990, the Corporation adopted and established a 401(k)
Employee Benefit Plan (the "401(k) Plan"). Under the 401(k) Plan, any employee
who has completed 90 days of service and has attained the age of 21 years is
eligible to participate. Under the terms of the 401(k) Plan, an employee may
defer up to 15% of his or her compensation through contributions to the 401(k)
Plan. Also, the Corporation may make discretionary matching contributions on
behalf of the participating employees. Amounts contributed to the 401(k) Plan by
the Corporation are subject to a six year vesting schedule. The Corporation made
voluntary contributions to the 401(k) Plan during Fiscal Year 1997 of $74,653 on
behalf of all eligible employees.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
On October 15, 1992, the Securities and Exchange Commission adopted
substantial amendments to its disclosure rules relating to executive
compensation. To adequately address and comply with these rules, the Board of
Directors established a Compensation Committee (the "Committee") in November
1994. The Committee is currently composed of Mr. Kahl, with Mr. Golding serving
as an advisor, and is responsible for setting and administering the policies
which govern annual compensation for the Corporation's executives. Following
review and approval by the Committee of the compensation policies, all issues
pertaining to executive compensation are submitted to the Board of Directors for
approval. Following the Annual Meeting, the Board of Directors may appoint an
additional non-employee director to join Mr. Kahl on the Compensation Committee.
This report is not incorporated by reference in prior Securities Act of
1933 and Securities Exchange Act of 1934 filings made by the Corporation that
might have incorporated future filings in their entirety, except to the extent
that the Corporation specifically incorporates this information by reference,
and should not be otherwise deemed filed under such Acts.
20
The Committee believes that the primary objectives of the Corporation's
compensation policies are to attract and retain a management team that can
effectively implement and execute the Corporation's strategic business plan.
These compensation policies include (i) an overall management compensation
program that is competitive with management compensation programs at companies
of similar size; (ii) short-term bonus incentives for management to meet the
Corporation's net income performance goals; and (iii) long-term incentive
compensation in the form of stock options and other long-term equity
compensation that will encourage management to continue to focus on shareholder
return.
The Committee's goal is to use compensation policies to closely align
the interests of the Corporation with the interests of shareholders so that the
Corporation's management have incentives to achieve short-term performance goals
while building long-term value for the Corporation's shareholders. The Committee
will review its compensation policies from time to time in order to determine
the reasonableness of the Corporation's compensation programs and to take into
account factors which are unique to the Corporation.
The Committee has entered into employment agreements with Drs. Post and
Smith, and Messrs. Tarrh, Chisholm, Coutts and DeLuca. These agreements are
renewable annually, and provide for termination for cause as well as termination
without cause and limit competition if the officer's employment is terminated.
Base Salaries. For Fiscal Year 1997, Dr. Post's base salary was
increased from $143,000 in Fiscal Year 1996 to $170,000 per annum; Dr. Smith's
base salary has been increased from $114,000 in Fiscal Year 1996 to $117,000 per
annum; and Mr. Tarrh's base salary was increased from $97,500 in Fiscal Year
1996 to $103,000. However, during the second and third quarters of Fiscal Year
1997, Drs. Post and Smith and Mr. Tarrh recommended and implemented a 10%
reduction in their base salaries as part of an expense reduction effort by the
Corporation. The base salaries of Messrs. Chisholm, Coutts and DeLuca are
$147,400, $128,000 and $120,000, respectively. The Compensation Committee
believes that these salaries reflect base salaries paid to senior officers of
other companies of similar size and also reflect improvements in the
Corporation's financial performance to date.
Bonus Plan. To further incentivize management to continue to improve
operating results, in August 1994, the Board of Directors implemented the Bonus
Plan. Pursuant to the Bonus Plan, the Board of Directors may grant bonuses to
certain executive officers based on each individual's achievement of certain
specified goals previously approved by the Board of Directors. The amounts to be
distributed pursuant to the Bonus Plan are determined by the amount by which
operating profits exceed the operating profit goal, which is established
annually. The Committee believes that the Bonus Plan provides significant
incentive to the executive officers of the Corporation to exceed the operating
profit goal.
21
Compensation for Chief Executive Officer. Dr. Post's compensation was
based upon careful analysis of other comparable public companies' Chief
Executive Officers' compensation and Dr. Post's efforts and success in the
following areas: improving the Corporation's operating results; establishing
strategic goals and objectives for the long-term growth of the Corporation; and
raising equity capital needed to allow the Corporation to advance in its
strategic goals.
COMPENSATION COMMITTEE
September 24, 1997 Hans-Jochen Kahl, Chairman
22
PERFORMANCE GRAPHS
As a result of the Corporation's expanded business, the Corporation is
changing the SIC Code Index comparison from 3679 (Electronic Components) to 3559
(Special Industry Machinery, N.E.C.), which more accurately reflects the
Corporation's current business activities. The following graph compares the
cumulative total stockholder return (assuming reinvestment of dividends) from
investing $100 on November 10, 1993 (the day the Corporation's Common Stock
began trading separately on The National Association of Securities Dealers
Automated Quotation System ("NASDAQ")), and plotted at the end of Fiscal Years
1994, 1995, 1996 and 1997, in each of (i) the Corporation's Common Stock, (ii)
the NASDAQ Market Index of companies (the "NASDAQ Market Index"); and (iii) a
Peer Group Index based on Standard Industry Classification Number 3559, Special
Industry Machinery, N.E.C. (the "SIC Code Index"), which consists of other
companies in the Special Industry Machinery. The stock price performance on the
graph below is not necessarily indicative of future price performance.
[GRAPH]
<TABLE>
<CAPTION>
11/10/93 07/02/94 07/01/95 06/29/96 06/28/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Applied Science and Technology, Inc. $100.00 $ 55.68 $101.14 $109.09 $154.55
NASDAQ Market Index $100.00 $ 99.38 $116.55 $146.72 $176.74
SIC Code Index $100.00 $ 117.88 $250.96 $185.29 $308.07
</TABLE>
23
For comparison purposes only, the Corporation has also provided a
performance graph using its former SIC Code Index (3679 - Electronic
Components). The following graph compares the cumulative total stockholder
return (assuming reinvestment of dividends) from investing $100 on November 10,
1993 (the day the Corporation's Common Stock began trading separately on
NASDAQ), and plotted at the end of Fiscal Years 1995, 1996 and 1997, in each of
(i) the Corporation's Common Stock, (ii) the NASDAQ Market Index; and (iii) a
Peer Group Index based on Standard Industry Classification Number 3679,
Electronic Components (the "SIC Code Index"), which consists of other companies
in the Electronic Component industry. The stock price performance on the graph
below is not necessarily indicative of future price performance.
[GRAPH]
<TABLE>
<CAPTION>
11/10/93 07/02/94 07/01/95 06/29/96 06/28/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Applied Science and Technology, Inc. $100.00 $ 55.68 $101.14 $109.09 $154.55
NASDAQ Market Index $100.00 $ 99.38 $116.55 $146.72 $176.74
SIC Code Index $100.00 $ 106.38 $142.80 $183.35 $166.45
</TABLE>
24
PRICE RANGE OF COMMON STOCK
The Corporation's Common Stock and the Redeemable Warrants trade on the
National Association of Securities Dealers Automated Quotation System National
Market System ("NASDAQ/NMS") under the symbols "ASTX" and "ASTXW," respectively.
On September 24, 1997, the closing bid and ask prices for the Corporation's
Common Stock as reported by NASDAQ/NMS were $21 5/8 and $21 7/8, respectively,
and the bid and asked prices for the Redeemable Warrants were $3 1/2 and $3 3/4,
respectively. The Redeemable Warrants were called for redemption by the
Corporation. The redemption date was October 7, 1997. As of September 24, 1997,
the Corporation had 169 holders of record of its Common Stock. Management
believes that there are approximately 2,100 beneficial owners of its Common
Stock.
For the periods indicated, the following table sets forth the high and
low closing sale prices for the Common Stock as reported by NASDAQ/NMS from July
2, 1995 through September 24, 1997. Such quotations represent interdealer
quotations without adjustment for retail markups, markdowns or commissions and
may not represent actual transactions.
<TABLE>
<CAPTION>
SALE
----
HIGH LOW
---- ---
FISCAL YEAR
<S> <C> <C>
1996
----
First Quarter.................................... $18 $11 1/8
Second Quarter................................... 17 1/4 11 3/4
Third Quarter.................................... 16 3/8 12 5/8
Fourth Quarter................................... 23 11 3/4
1997
----
First Quarter.................................... $12 5/8 $ 7 3/4
Second Quarter................................... 12 3/4 6 3/4
Third Quarter.................................... 14 5/8 8 3/4
Fourth Quarter................................... 17 9 1/8
1998
----
First Quarter (through September 24, 1997)....... $23 3/8 $15 5/8
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Section 16(a)") requires executive officers, directors, and persons who
beneficially own more than ten percent (10%) of the Corporation's stock to file
initial reports of ownership on Form 3 and reports of changes in ownership on
Form 4 with the Securities and Exchange Commission (the "Commission")
25
and any national securities exchange on which the Corporation's securities are
registered. Executive officers, directors and greater than ten percent (10%)
beneficial owners are required by the Commission's regulations to furnish the
Corporation with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Corporation and written representations from the executive officers and
directors, the Corporation believes that all its executive officers, directors,
and greater than ten percent (10%) beneficial owners complied with all
applicable Section 16(a) filing requirements, with the following exceptions: (i)
Dr. Post failed to timely file a Form 5 reporting three stock option grants;
(ii) Mr. Tarrh and Dr. Smith failed to timely file a Form 5 each reporting two
stock option grants; (iii) Dr. Smith failed to timely file one Form 4 reporting
an aggregate of six sale transactions; (iv) Mr. Chisholm failed to timely file a
Form 5 reporting one stock option grant; and (v) Mr. de Beaumont failed to
timely file two Form 4s reporting an aggregate of six sale transactions.
DIVIDEND POLICY
The Corporation has not paid dividends on its Common Stock since its
inception and has no intention of paying any dividends in the foreseeable
future. The Corporation's current credit facility arrangements restrict the
Corporation's ability to declare cash dividends without the lender's prior
written consent. The Corporation intends to reinvest future earnings, if any, in
the development and expansion of its business. Any declaration of dividends will
be at the election of the Board of Directors and will depend upon the earnings,
capital requirements and financial position of the Corporation, general economic
conditions, requirements of any bank lending arrangements which may then be in
place, and other pertinent factors.
PROPOSAL NO. 2
--------------
AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK,
AND TO ADOPT A THREE-FOR-TWO STOCK SPLIT
On August 14, 1997, the Board of Directors unanimously adopted a
resolution proposing that the Corporation's Certificate of Incorporation be
amended to increase the total number of shares of Common Stock, $.01 par value
per share, that the Corporation is authorized to issue from 10,000,000 to
30,000,000. This amendment is being proposed because as of September 24, 1997
the Corporation has only 2,547,306 remaining shares of Common Stock which are
authorized but not issued or reserved (assuming Proposal No. 3 is approved at
the Annual Meeting).
The Board believes that it is prudent to have additional shares of
Common Stock available for general corporate purposes, including acquisitions,
equity financings, grants of stock options, payment of stock dividends, stock
splits or other recapitalizations, none of which, except for the Stock Split
described below, is specifically planned or known at the present time, but which
will be able to be done expediently if such increase is approved by the
stockholders at this Annual
26
Meeting, as a stockholder vote is required to increase the number of authorized
shares of Common Stock and, given the time normally needed to complete a proxy
solicitation, such increase could not be done expediently in the future. The
Board will determine whether, when and on what terms the issuance of shares of
Common Stock may be warranted in connection with any of the foregoing purposes.
In addition, further authorization for the issuance of the securities by a vote
of stockholders will not be solicited prior to such issuance. These shares of
Common Stock will not carry pre-emptive rights.
On October 14, 1997, the Board of Directors approved a 3:2 stock split
to be effected in the form of a stock dividend (the "Stock Split") to record
holders of Common Stock as of November 28, 1997, subject to approval of the
increase in the number of authorized shares. In addition, as a result of the
Stock Split, the number of Shares of Common Stock issuable under the
Corporation's various stock option plans and outstanding warrants will also be
adjusted accordingly. The Board believes that the Stock Split will result in a
market price that should be more attractive to a broader spectrum of investors
and therefore may result in a broader market for the shares. The Corporation
will apply for listing on the NASDAQ/NMS of the additional shares of Common
Stock to be issued.
If the proposed amendment is adopted, the Stock Split would be
accomplished by mailing to each stockholder of record, as of the close of
business on November 28, 1997, certificates representing one additional share of
Common Stock for every two shares of Common Stock then owned by the stockholder.
Any fractional shares will be redeemed for cash by the Corporation at the fair
market value of such shares on November 28, 1997.
PRESENT CERTIFICATES WILL CONTINUE TO REPRESENT THE NUMBER OF SHARES
EVIDENCED THEREBY. PRESENT CERTIFICATES WILL NOT BE EXCHANGED FOR NEW
CERTIFICATES. CERTIFICATES SHOULD NOT BE RETURNED TO THE CORPORATION OR TO ITS
TRANSFER AGENT, AS IT WILL NOT BE NECESSARY TO SUBMIT OUTSTANDING CERTIFICATES
FOR EXCHANGE.
The Corporation expects that the payable date for such dividends will
be on or about December 12, 1997, or as soon thereafter as possible.
The Corporation has been advised by tax counsel that the proposed Stock
Split would result in no gain or loss or realization of taxable income to owners
of Common Stock under existing United States federal income tax laws. The cost
basis for tax purposes of each new share and each retained share of Common Stock
would be equal to two-thirds of the cost basis for tax purposes of the
corresponding share immediately preceding the Stock Split. In addition, the
holding period for the additional shares issued pursuant to the Stock Split
would be deemed to be the same as the holding period for the original share of
Common Stock. The laws of jurisdictions other than the United States may impose
income taxes on the issuance of the additional shares and stockholders are urged
to consult their tax advisors.
If the stockholders dispose of their shares subsequent to the Stock
Split, they may pay higher brokerage commissions on the same relative interest
in the Corporation because that interest is represented by a greater number of
shares. Stockholders may wish to consult their respective brokers to ascertain
the brokerage commission that would be charged for disposing of the greater
number of shares.
As of September 24, 1997, of the 10,000,000 shares of Common Stock the
Corporation is authorized to issue 4,556,899 shares were issued and outstanding,
992,162 shares of Common Stock were issuable upon the exercise of the
Corporation's Redeemable Purchase Warrants issued in its initial public
offering, a total of 261,273 shares were issuable upon the exercise of warrants
granted to the underwriter of the Corporation's initial public offering, and an
aggregate of 887,360 shares of Common Stock have been reserved under the
Corporation's 1987 and 1993 Stock Option Plans (with an additional 755,000
shares to be reserved under the Corporation's 1993 Stock Option Plan if Proposal
No. 3 is passed by the stockholders) and the Corporation's 1994 Formula Stock
Option Plan. The Corporation's Redeemable Purchase Warrants were called for
redemption by the Corporation and an additional 876,907 shares of Common Stock
were issued by the Corporation. The redemption date was October 7, 1997.
As with the issuance of any shares of the Corporation's Common Stock
other than on a pro-rata basis to all current stockholders, the issuance of
additional shares pursuant to the proposed amendment would reduce the
proportionate interests in the Corporation held by current stockholders.
If the proposed amendment is adopted by the stockholders, it will
become effective upon filing and recording a Certificate of Amendment as
required by the General Corporation Law of Delaware.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is required to approve the
amendment to the Corporation's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 10,000,000 to 30,000,000, and
to adopt a three-for-two stock split.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ADOPTION OF AN
AMENDMENT TO THE CORPORATION'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, $.01 PAR VALUE, FROM 10,000,000 TO
30,000,000, AND TO ADOPT A THREE-FOR-TWO STOCK SPLIT, AND PROXIES SOLICITED BY
THE BOARD WILL BE VOTED IN FAVOR OF SUCH AMENDMENT UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
27
PROPOSAL NO. 3
--------------
PROPOSAL TO APPROVE AN AMENDMENT TO THE CORPORATION'S
1993 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK THAT HAVE BEEN RESERVED FOR ISSUANCE
PURSUANT TO THE PLAN TO 1,500,000
Prior to the Corporation's initial public offering in 1993, the Board
of Directors recommended and the stockholders of the Corporation approved the
1993 Stock Option Plan (the "1993 Plan") that provides for the granting to
employees, officers, directors, consultants and non-employees of the Corporation
of options to purchase up to 250,000 shares of Common Stock. In 1995, the Board
of Directors increased the number of shares of Common Stock that have been
reserved for issuance under the 1993 Plan by an additional 495,000 shares. At
this Meeting, the Board of Directors have recommended and the stockholders will
be asked to approve an amendment to the 1993 Plan to increase the number of
shares of Common Stock that have been reserved for issuance pursuant to such
plan to 1,500,000 (subject to adjustment in the event Proposal No. 2 is approved
by the Stockholders). The Board believes that the increase is advisable to give
the Corporation the flexibility needed to attract, retain and motivate
employees, directors and consultants. A copy of the 1993 Plan, as amended, is
attached as Exhibit A to this Proxy Statement. Options granted under the 1993
Plan may be either "incentive stock options" within the meaning of Section
422(a) of the United States Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified options. Incentive stock options may be granted only
to employees of the Corporation (including directors who are employees), while
non-qualified options may be issued to non-employee directors, employees,
consultants and any other non-employee of the Corporation.
The brief summary of the 1993 Plan that follows is qualified in its
entirety by reference to the complete text attached hereto as Exhibit A.
The 1993 Plan is administered by the Board of Directors or a committee
of non-employee directors. These duties involve determining those individuals
who shall receive options, the time period during which the options may be
partially or fully exercised, the number of shares of Common Stock that may be
purchased under each option, and the option price.
The per share exercise price of the Common Stock subject to incentive
stock options granted pursuant to the 1993 Plan may not be less than the fair
market value of the Common Stock on the date the option is granted. Under the
1993 Plan, the aggregate fair market value (determined as of the date the option
is granted) of the Common Stock that first became exercisable by any employee in
any one calendar year pursuant to the exercise of incentive stock options may
not exceed $100,000. No person who owns, directly or indirectly, at the time of
the granting of an incentive stock option to him, 10% or more of the total
combined voting power of all classes of stock of the Corporation (a "10%
Stockholder"), shall be eligible to receive any incentive stock options under
the 1993 Plan unless the option price is at least 110% of the fair market value
of the Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to this limitation.
28
No incentive stock option may be transferred by an optionee other than
by will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by the optionee. Pursuant to the
terms of the 1993 Plan, in the event of termination of employment, other than by
death or permanent total disability, the optionee will have up to three months
after such termination to exercise the option. The 1993 Plan provides that upon
termination of employment of an optionee by reason of death or permanent total
disability, an option remains exercisable for one year thereafter to the extent
it was exercisable on the date of such termination.
Options under the 1993 Plan must be granted by September 1, 2003.
Incentive stock options granted under the 1993 Plan cannot be exercised more
than ten (10) years from the date of grant, except that incentive stock options
issued to a 10% Stockholder are limited to five year terms.
Any unexercised options under the Plans that expire or that terminate
upon an employee's ceasing to be employed with the Corporation become available
once again for issuance.
All options granted under the Plans provide for the payment of the
exercise price in cash or by delivery to the Corporation of shares of Common
Stock already owned by the optionee having a fair market value equal to the
exercise price of the options being exercised, or by a combination of such
methods of payment. Therefore, an optionee may be able to tender shares of
Common Stock to purchase additional investment other than his or her original
shares.
The 1993 Plan may be amended by the stockholders of the Corporation.
The 1993 Plan may also be amended by the Board of Directors or appropriate
committee, provided that 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 incentive stock options
under Code Section 422, is subject to obtaining such stockholder approval.
On September 24, 1997, the fair market value of the Corporation's
Common Stock underlying the options (as determined by the average high and low
sale prices quoted on the NASDAQ/NMS on such date) was $21 7/8.
The following table sets forth, as of September 24, 1997, all options
granted pursuant to the 1993 Plan to (i) the named executive officers, (ii) all
other current officers of the Corporation as a group, (iii) all current
directors of the Corporation who are not officers as a group, and (iv) all
employees as a group:
29
<TABLE>
<CAPTION>
Person Options
------ -------
<S> <C>
Richard S. Post, Ph.D...................................................... 81,400
Donald K. Smith, Ph.D...................................................... 47,000
John M. Tarrh.............................................................. 25,400
All other current officers as a group (3 persons).......................... 98,200
All current directors who are not executive officers (4 persons)........... 0
All employees who are not executive officers as a group (241 persons)(1)... 392,942
</TABLE>
- ----------------------
(1) Net of all cancelled options. Does not include options to purchase
40,061 shares of Common Stock that have been exercised by all such
employees.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth certain United States income tax
considerations in connection with the ownership of Common Stock. These tax
considerations are stated in general terms and are based on the Internal Revenue
Code of 1986, as amended, regulations thereunder and judicial and administrative
interpretations thereof. This discussion does not address state or local tax
considerations with respect to the ownership of Common Stock. Moreover, the tax
considerations relevant to ownership of the Common Stock may vary depending on a
holder's particular status.
No tax obligation will arise for the optionee or the Corporation upon
the granting of incentive stock options or non-qualified stock options under the
1993 Plan. Upon exercise of a non-qualified stock option, an optionee will
recognize ordinary income in an amount equal to the excess, if any, of the fair
market value, on the date of exercise, of the stock acquired over the exercise
price of the option. Thereupon, the Corporation will be entitled to a tax
deduction (as a compensation expense) in an amount equal to the ordinary income
recognized by the optionee. Any additional gain or loss realized by an optionee
on disposition of the stock generally will be capital gain or loss to the
optionee and will not result in any additional tax deduction to the Corporation.
The income recognized at the end of any deferred period will include any
appreciation in the value of the stock during that period and the capital gain
holding period will not begin to run until the completion of such period.
Upon the exercise of an incentive stock option, an optionee recognizes
no immediate taxable income. The tax cost is deferred until the optionee
ultimately sells the shares of stock. If the optionee does not dispose of the
option shares within two years from the date the option was granted and within
one year after the exercise of the option, and the option is exercised no later
than three months after the termination of the optionee's employment (unless the
Board of Directors has provided in the instrument evidencing the option that a
shorter time period applies), the gain on the sale will be treated as long term
capital gain. Subject to the limitations in the 1993 Plan, certain of these
holding periods and employment requirements are liberalized in the event of the
optionee's
30
death or disability while employed by the Corporation. The Corporation is not
entitled to any tax deduction, except that if the stock is not held for the full
term of the holding period outlined above, the gain on the sale of such stock,
being the lesser of (i) the fair market value of the stock on the date of
exercise minus the option price, or (ii) the amount realized on disposition
minus the option price, will be taxed to the optionee as ordinary income and the
Corporation will be entitled to a deduction in the same amount. Any additional
gain or loss realized by an optionee upon disposition of shares prior to the
expiration of the full term of the holding period outlined above generally will
be capital gain or loss to the optionee and will not result in any additional
tax deduction to the Corporation. The "spread" upon exercise of an incentive
stock option constitutes a tax preference item within the computation of the
"alternative minimum tax" under the Code. The tax benefits which might otherwise
accrue to an optionee may be affected by the imposition of the alternative
minimum tax if applicable to the optionee's individual circumstances.
GRANT OF OPTIONS UNDER THE 1993 PLAN
As of September 24, 1997, 741,425 options have been granted by the
Corporation pursuant to the 1993 Plan.
The affirmative vote of a majority of the votes present or represented
and entitled to vote at the Annual Meeting is required to approve the increase
in the aggregate number of shares of Common Stock available under the 1993 Plan.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ADOPTION OF AN
AMENDMENT TO THE 1993 PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE PURSUANT TO THE 1993 PLAN TO 1,500,000 (SUBJECT TO
ADJUSTMENT IN THE EVENT PROPOSAL NO. 2 IS APPROVED BY THE STOCKHOLDERS), AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH AMENDMENT UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
PROPOSAL NO. 4
--------------
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
The persons named in the enclosed proxy will vote to ratify the
selection of KPMG Peat Marwick LLP as independent auditors for the fiscal year
ending June 27, 1998 unless otherwise directed by the stockholders. A
representative of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting, and will have the opportunity to make a statement and answer questions
from stockholders if he or she so desires.
The affirmative vote of a majority of the shares present or represented
and entitled to vote at the Annual Meeting is required to ratify the appointment
of the independent auditors.
31
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
VOTING AT MEETING
The Board of Directors has fixed September 24, 1997 as the record date
for the determination of stockholders entitled to vote at this meeting. At the
close of business on that date, there were outstanding and entitled to vote
4,556,899 shares of Common Stock.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Corporation.
In addition to the solicitation of proxies by mail, officers and employees of
the Corporation may solicit in person or by telephone. The Corporation may
reimburse brokers or persons holding stock in their names, or in the names of
their nominees, for their expense in sending proxies and proxy material to
beneficial owners. Solicitation of proxies by mail may be supplemented by
telephone, telegram, telex and personal solicitation by the directors, officers
or employees of the Corporation. No additional compensation will be paid for
such solicitation.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all proxies
received by the Corporation will be effective, notwithstanding any transfer of
the shares to which such proxies relate, unless prior to the Annual Meeting the
Corporation receives a written notice of revocation signed by the person who, as
of the record date, was the registered holder of such shares. The notice of
revocation must indicate the certificate number or numbers of the shares to
which such revocation relates and the aggregate number of shares represented by
such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in proxy material for the 1998 Annual Meeting,
tentatively scheduled for November 19, 1998, stockholders' proposed resolutions
must be received by the Corporation on or before June 5, 1998. The Corporation
suggests that proponents submit their proposals by certified mail, return
receipt requested, addressed to the President of the Corporation.
ANNUAL REPORT
THE CORPORATION IS PROVIDING TO EACH STOCKHOLDER, TOGETHER WITH THIS
PROXY STATEMENT WITHOUT CHARGE, A COPY OF THE CORPORATION'S ANNUAL REPORT,
INCLUDING THE FINANCIAL STATEMENTS FOR THE CORPORATION'S MOST RECENT FISCAL YEAR
ENDED JUNE 28, 1997.
32
MISCELLANEOUS
Management does not know of any other matter which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
By Order of the Board of Directors
John M. Tarrh
Secretary
October __, 1997
MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING AND YOUR COOPERATION WILL
BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
33
APPLIED SCIENCE AND TECHNOLOGY, INC.
PROXY OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Richard S. Post and John M. Tarrh as
Proxies, with full power of substitution to each, to vote for and on behalf of
the undersigned at the Annual Meeting of Stockholders of APPLIED SCIENCE AND
TECHNOLOGY, INC. to be held at the St. Francis/Westin Hotel located at 325
Powell Street, San Francisco, California, on Thursday, November 20, 1997 at 2:00
p.m., and at any adjournment or adjournments thereof. The undersigned hereby
directs the said Richard S. Post and John M. Tarrh to vote in accordance with
their judgment on any matters that may properly come before the Annual Meeting,
all as indicated in the Notice of the Annual Meeting, receipt of which is hereby
acknowledged, and to act on the following matters set forth in such notice as
specified by the undersigned:
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4.
(1) Proposal to elect two (2) members of the Board of Directors of the
Corporation for a term of three years, each of whom is currently serving as
a Director of the Corporation.
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE STRIKE
SUCH NOMINEE'S NAME FROM THE LIST BELOW.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
listed below
RICHARD S. POST, PH.D., ROBERT R. ANDERSON
(2) Proposal to approve an amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 10,000,000 to
30,000,000, and to adopt a three-for-two stock split.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) Proposal to approve an amendment to the Corporation's 1993 Stock Option Plan
to increase the number of shares of Common Stock available for issuance
pusuant to the plan to 1,500,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) Proposal to ratify and approve the selection of KPMG Peat Marwick LLP as
independent auditors of the Corporation for the fiscal year ending June 27,
1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) In their discretion to transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR AND IN FAVOR OF THE
ITEMS SET FORTH ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears below.
Dated:___________________________ , 1996
________________________________________
Signature
________________________________________
Signature if held jointly
________________________________________
Printed Name
________________________________________
Address
NOTE: When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If the person named on
the stock certificate has died, please
submit evidence of your authority. If a
corporation, please sign in full
corporate name by the President or
authorized officer and indicate the
signer's office. If a partnership,
please sign in partnership name by
authorized person.
EXHIBIT A
---------
APPLIED SCIENCE AND TECHNOLOGY, INC.
1993 STOCK OPTION PLAN (AS AMENDED)
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Plan is to encourage and enable employees,
consultants, directors and others who are in a position to make significant
contributions to the success of APPLIED SCIENCE AND TECHNOLOGY, INC. and of its
Affiliated Corporations upon whose judgment, initiative and efforts the
Corporation depends for the successful conduct of its business, to acquire a
closer identification of their interests with those of the Corporation by
providing them with opportunities to purchase stock in the Corporation pursuant
to options granted hereunder, thereby stimulating their efforts on behalf of the
Corporation and strengthening their desire to remain involved with the
Corporation. Any person designated to participate in the Plan is referred to as
a "Participant."
ARTICLE II
DEFINITIONS
2.1 "Affiliated Corporation" means any stock corporation of which a
majority of the voting common or capital stock is owned directly or indirectly
by the Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation or, if one
or more has been appointed, a Committee of the Board of Directors of the
Corporation.
-1-
2.4 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 "Committee" means a Committee composed solely of two or more
Non-Employee Directors appointed
by the Board to administer the Plan.
2.6 "Corporation" means APPLIED SCIENCE AND TECHNOLOGY, INC., a
Delaware corporation, or its successor.
2.7 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated Corporation on or after the
effective date of the Plan.
2.8 "Incentive Stock Option" ("ISO") means an option that qualifies as
an incentive stock option as defined in Section 422 of the Code, as amended.
2.9 "Non-Employee Director" means (unless otherwise provided under Rule
16b-3 of the Securities Exchange Act of 1934) a member of the Board who is not
currently an officer or Employee of the Corporation.
2.10 "Non-Qualified Option" means any option not intended to qualify as
an Incentive Stock Option.
2.11 "Option" means an Incentive Stock Option or Non-Qualified Option
granted by the Board under Article V of this Plan in the form of a right to
purchase Stock evidenced by an instrument containing such provisions as the
Board may establish. Except as otherwise expressly provided with respect to an
Option grant, no Option granted pursuant to the Plan shall be an Incentive Stock
Option.
2.12 "Participant" means a person selected by the Board or by the
Committee to receive an award under the Plan.
2.13 "Plan" means this 1993 Stock Option Plan, as amended.
-2-
2.14 "Restricted Period" means the period of time selected by the
Committee during which an award may be forfeited by the Participant.
2.15 "Stock" means the Common Stock, $.01 par value, of the Corporation
or any successor, including any adjustments in the event of changes in capital
structure of the type described in Article X.
-3-
ARTICLE III
ADMINISTRATION OF THE PLAN
3.1 Administration by Board. This Plan shall be administered by the
Board of Directors of the Corporation. The Board may, from time to time, in its
discretion delegate any of its functions under this Plan to one or more
Committees. All references in this Plan to the Board shall also include the
Committee or Committees, if one or more have been appointed by the Board. From
time to time the Board may increase the size of the Committee or committees and
appoint additional Directors as members thereto, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies however
caused, or remove all members of the Committee or committees and thereafter
directly administer the Plan. No member of the Board or a Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any options granted under it.
If a Committee is appointed by the Board, a majority of the members of
the Committee shall constitute a quorum, and all determinations of the Committee
under the Plan shall be made by a majority of its members and may be made
without notice or meeting of the Committee by a writing signed by a majority of
Committee members.
3.2 Powers. The Board of Directors and/or any Committee appointed by
the Board shall have full and final authority to operate, manage and administer
the Plan on behalf of the Corporation. This authority includes, but is not
limited to:
-4-
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of any instruments
evidencing Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the
incentive features of the Plan, and otherwise to prescribe and
rescind regulations for interpretation, management and
administration of the Plan,
(e) The power to delegate responsibility for Plan operation,
management and administration on such terms, consistent with
the Plan, as the Board may establish,
(f) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's
purpose, and
(g) The power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purpose, including
but not limited to, banks, insurance companies, brokerage
firms and consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of
the Corporation, the Board or any Committee appointed by it shall have full and
final authority in its discretion: (a) to determine the number of shares of
Stock subject to each Option; (b) to determine the time or times at which
Options will be granted; (c) to determine the option price of the shares of
Stock subject to each Option, which price shall be not less than the minimum
price specified in Article V of this Plan; (d) to determine the time or times
when each Option shall become exercisable and the duration of the exercise
period (including the acceleration of any
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exercise period), which shall not exceed the maximum period specified in Article
V; (e) to determine whether each Option granted shall be an Incentive Stock
Option or a Non-Qualified Option; and (f) to waive, generally and in particular
instances, compliance by a Participant with any obligation to be performed by
him under an Option, to waive any condition or provision of an Option, and to
amend or cancel any Option (and if an Option is canceled, to grant a new Option
on such terms as the Board may specify), except that the Board may not take any
action with respect to an outstanding option that would adversely affect the
rights of the Participant under such Option without such Participant's consent.
Nothing in the preceding sentence shall be construed as limiting the power of
the Board to make adjustments required by Article X.
In no event may the Corporation grant an Employee any Incentive Stock
Option that is first exercisable during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted) exceeds $100,000 (under all stock option plans of the Corporation and
any Affiliated Corporation); provided, however, that this paragraph shall have
no force and effect if its inclusion in the Plan is not necessary for Incentive
Stock Options issued under the Plan to qualify as such pursuant to Section
422(d)(1) of the Code.
ARTICLE IV
ELIGIBILITY
4.1 Eligible Employees. All Employees (including Directors who are
Employees) are eligible to be granted Incentive Stock Option and Non-Qualified
Option Awards under this Plan. Incentive Stock Options shall be granted only to
Employees.
4.2 Consultants, Directors and other Non-Employees. Any consultant,
Director (whether or not an Employee) and any other non-employee is eligible to
be granted
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Non-Qualified Option Awards under the Plan, provided the person has not
irrevocably elected to be ineligible to participate in the Plan.
4.3 Relevant Factors. In selecting individual Employees, consultants,
Directors and other non-employees to whom Awards shall be granted, the Board
shall weigh such factors as are relevant to accomplish the purpose of the Plan
as stated in Article I. An individual who has been granted an Award may be
granted one or more additional Awards, if the Board so determines. The granting
of an Award to any individual shall neither entitle that individual to, nor
disqualify him from, participation in any other grant of Awards.
ARTICLE V
STOCK OPTION AWARDS
5.1 Number of Shares. Subject to the provisions of Article X of this
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed 1,500,000 shares. The shares to be delivered
upon exercise of Options under this Plan shall be made available, at the
discretion of the Board, either from authorized but unissued shares or from
previously issued and reacquired shares of Stock held by the Corporation as
treasury shares, including shares purchased in the open market.
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Stock issuable upon exercise of an Option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
5.2 Effect of Expiration, Termination or Surrender. If an Option under
this Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Corporation shall reacquire any unvested shares issued pursuant to
Options under the Plan, such shares shall thereafter be available for the
granting of other Options under this Plan, subject to the limits set forth in
Section 5.1 hereof.
5.3 Term of Options. The full term of each Option granted hereunder
shall be for such period as the Board shall determine. In the case of Incentive
Stock Options granted hereunder, the term shall not exceed ten (10) years from
the date of granting thereof. Each Option shall be subject to earlier
termination as provided in Sections 6.3 and 6.4. Notwithstanding the foregoing,
the term of Options intended to qualify as Incentive Stock Options shall not
exceed five (5) years from the date of granting thereof if such Option is
granted to any Employee who at the time such Option is granted owns, directly or
indirectly, or is deemed to own by reason of the attribution rules set forth in
Section 425(d) of the Code, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation and its Affiliated
Corporations (a ATen-Percent Shareholder@).
5.4 Option Price. The Option price shall be determined by the Board at
the time any Option is granted. In the case of Incentive Stock Options, the
exercise price shall not be less than l00% of the fair market value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par value), provided that no Incentive Stock Option
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shall be granted hereunder to any Employee who is a Ten-Percent Shareholder
unless the Incentive Stock Option price equals not less than 110% of the fair
market value of the shares covered thereby at the time the Incentive Stock
Option is granted. In the case of Non-Qualified Stock Options, the exercise
price shall not be less than 85% of fair market value.
5.5 Fair Market Value. If, at the time an Option is granted under the
Plan, the Corporation's Stock is publicly traded, then "fair market value" shall
be determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded on a national securities exchange; or (ii)
the last reported sale price (on that date) of the Stock on the NASDAQ National
Market List, if the Stock is then traded on the NASDAQ National Market System;
or (iii) the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Stock is not reported on the NASDAQ National Market System. However, if the
Stock is not publicly traded at the time an Option is granted under the Plan,
"fair market value" shall be deemed to be the fair value of the Stock as
determined in good faith by the Board after taking into consideration all
factors that it deems appropriate, including without limitation, recent sale and
offer prices of the Stock in private transactions negotiated at arm's length.
5.6 Non-Transferability of Options. No Incentive Stock Option granted
under this Plan shall be transferable by the grantee otherwise than by will or
the laws of descent and distribution, and such Incentive Stock Option may be
exercised during the grantee's lifetime only by the grantee.
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5.7 Foreign Nationals. Awards may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
ARTICLE VI
EXERCISE OF OPTION
6.1 Exercise. Each Option granted under this Plan shall be exercisable
on such date or dates and during such period and for such number of shares as
shall be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise of any
option, provided that, the Board shall not accelerate the exercise date of any
Incentive Stock Option without the optionee's prior written consent if such
acceleration would violate the annual vesting limitation contained in Section
422(d)(1) of the Code.
6.2 Notice of Exercise. A person electing to exercise an Option shall
give written notice to the Corporation of such election and of the number of
shares he or she has elected to purchase and shall at the time of exercise
tender the full purchase price of the shares he or she has elected to purchase.
The purchase price can be paid partly or completely in shares of the
Corporation's stock valued at Fair Market Value as defined in Section 5.5
hereof, or by any such other lawful consideration as the Board may determine.
Until such person has been issued a certificate or certificates for the shares
so purchased, he or she shall possess no rights of a record holder with respect
to any of such shares.
6.3 Option Unaffected by Change in Duties. No Incentive Stock Option
(and, unless
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otherwise determined by the Board of Directors, no Non-Qualified Option granted
to a person who is, on the date of the grant, an Employee of the Corporation or
an Affiliated Corporation) shall be affected by any change of duties or position
of the optionee (including transfer to or from an Affiliated Corporation), so
long as he or she continues to be an Employee. Employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Board shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Corporation or any Affiliated
Corporation to continue the employment of the optionee after the approved period
of absence.
If the optionee shall cease to be an Employee for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights, if any, which have accrued as of the date of such cessation;
provided that (i) the Board may provide in the instrument evidencing any Option
that the Board may in its absolute discretion, upon any such cessation of
employment, determine (but be under no obligation to determine) that such
accrued purchase rights shall be deemed to include additional shares covered by
such Option; and (ii) unless the Board shall otherwise provide in the instrument
evidencing any Option, upon any such cessation of employment, such remaining
rights to purchase shall in any event terminate upon the earlier of (A) the
expiration of the original term of the Option; or (B) where such cessation of
employment is on account of disability, the expiration of one year from the date
of such cessation of employment and, otherwise, the expiration of three months
from such date. For purposes of
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the
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Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code.
In the case of a Participant who is not an employee, provisions
relating to the exercisability of an Option following termination of service
shall be specified in the award. If not so specified, all Options held by such
Participant shall terminate on termination of service to the Corporation.
6.4 Death of Optionee. Should an optionee die while in possession of
the legal right to exercise an Option or Options under this Plan, such persons
as shall have acquired, by will or by the laws of descent and distribution, the
right to exercise any Options theretofore granted, may, unless otherwise
provided by the Board in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the date of death; provided, that
such Option or Options shall expire in all events no later than the last day of
the original term of such Option; provided, further, that any such exercise
shall be limited to the purchase rights which have accrued as of the date when
the optionee ceased to be an Employee, whether by death or otherwise, unless the
Board provides in the instrument evidencing such Option that, in the discretion
of the Board, additional shares covered by such Option may become subject to
purchase immediately upon the death of the optionee.
ARTICLE VII
TERMS AND CONDITIONS OF OPTIONS
Options shall be evidenced by instruments (which need not be identical)
in such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles V and VI hereof and
may contain such other provisions as the
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Board deems advisable which are not inconsistent with the Plan, including
restrictions applicable to shares of Stock issuable upon exercise of Options. In
granting any Non-Qualified Option, the Board may specify that such Non-Qualified
Option shall be subject to the restrictions set forth herein with respect to
Incentive Stock Options, or to such other termination and cancellation
provisions as the Board may determine. The Board may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Corporation to execute and deliver such instruments. The
proper officers of the Corporation are authorized and directed to take any and
all action necessary or advisable from time to time to carry out the terms of
such instruments.
ARTICLE VIII
BENEFIT PLANS
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Board may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Participant any right to continue as an Employee of, or consultant or
advisor to, the Corporation or an Affiliated Corporation or affect the right of
the Corporation or any Affiliated Corporation to terminate them at any time.
Except as specifically provided by the Board in any particular case, the loss of
existing or potential profits granted under this Plan shall not constitute an
element of damages in the event of termination of the relationship of a
Participant even if the termination is in violation of an obligation of the
Corporation to the Participant by contract or otherwise.
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ARTICLE IX
AMENDMENT, SUSPENSION OR TERMINATION
OF THE PLAN
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Board may also amend the Plan from time to time, except that
amendments which affect the following subjects must be approved by stockholders
of the Corporation:
(a) Except as provided in Article X relative to capital changes,
the number of shares as to which Options may be granted
pursuant to Article V;
(b) The requirements as to eligibility for participation in the
Plan.
Awards granted prior to suspension or termination of the Plan may not
be canceled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
ARTICLE X
CHANGES IN CAPITAL STRUCTURE
The instruments evidencing Options granted hereunder shall be subject
to adjustment in the event of changes in the outstanding Stock of the
Corporation by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of an Award to the
same extent as would affect an actual share of Stock issued and outstanding on
the effective date of such change. Such adjustment to outstanding Options shall
be made without change in the total price applicable to the unexercised portion
of such options, and a corresponding adjustment in the applicable option price
per share shall be made. In the event of any such change, the aggregate
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number and classes of shares for which Options may thereafter be granted under
Section 5.1 of this Plan may be appropriately adjusted as determined by the
Board so as to reflect such change.
Notwithstanding the foregoing, any adjustments made pursuant to this
Article X with respect to Incentive Stock Options shall be made only after the
Board, after consulting with counsel for the Corporation, determines whether
such adjustments would constitute a "modification" of such Incentive Stock
Options (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Board determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments.
In the event of the proposed dissolution or liquidation of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as shall be determined by the Board.
Except as expressly provided herein, no issuance by the Corporation 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 subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
No fractional shares shall be issued under the Plan and the optionee
shall receive from the Corporation cash in lieu of such fractional shares.
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ARTICLE XI
EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective on September 1, 1993. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options may be granted under this Plan on
or after the tenth anniversary of the date on which the Plan was adopted by the
Board.
ARTICLE XII
CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS; TERMINATION OF ISOS
The Board, at the written request of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's
Incentive Stock Options, that have not been exercised on the date of conversion,
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation 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 such Options. At the time of such conversion, the
Board or the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the Board
or the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board or the Committee takes appropriate action. The Board, with
the consent of the optionee, may also terminate any portion of any
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Incentive Stock Option that has not been exercised at the time of such
termination.
ARTICLE XIII
APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of shares
pursuant to Options granted under the Plan shall be used for general corporate
purposes.
ARTICLE XIV
GOVERNMENTAL REGULATION
The Corporation's obligation to sell and deliver shares of Stock under
this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
ARTICLE XV
WITHHOLDING OF ADDITIONAL INCOME TAXES
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Article XVI) the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
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ARTICLE XVI
NOTICE TO CORPORATION OF DISQUALIFYING DISPOSITION
Each Employee who receives an Incentive Stock Option must agree to
notify the Corporation in writing immediately after the employee makes a
Disqualifying Disposition of any Stock acquired pursuant to the exercise of an
Incentive Stock Option. A Disqualifying Disposition is any disposition
(including any sale) of such Stock before the later of (a) two years after the
date the employee was granted the Incentive Stock Option or (b) one year after
the date the Employee acquired Stock by exercising the Incentive Stock Option.
If the Employee has died before such Stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.
ARTICLE XVII
CONDITIONS ON DELIVERY OF STOCK
The Corporation shall not be obligated to deliver any shares of Stock
pursuant to Options granted under the Plan until, (a) in the opinion of the
Corporation's counsel, all applicable federal and state laws and regulations
have been complied with, and (b) all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Corporation's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Corporation may require, as a condition to exercise of
the option, such representations or agreements as counsel for the Corporation
may consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
ARTICLE XVIII
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GOVERNING LAW; CONSTRUCTION
The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the laws of the State of Delaware
(without regard to the conflict of law principles thereof). In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.
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