<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
APPLIED SCIENCE AND TECHNOLOGY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 CABOT ROAD
WOBURN, MASSACHUSETTS 01801
October 19, 1998
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 19, 1998, at 10:30 a.m. at the offices of the Corporation, 35 Cabot
Road, Woburn, Massachusetts 01801.
At the Annual Meeting, you will be asked (i) to elect two (2) members of
the Board of Directors of the Corporation; and (ii) to ratify the appointment 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
<PAGE> 3
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 19, 1998 at 10:30 a.m. at 35 Cabot Road, Woburn,
Massachusetts, for the following purposes:
1. To elect two (2) members of the Board of Directors for a term of three
(3) years;
2. To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent auditors for the Corporation for the
fiscal year ending June 26, 1999; and
3. 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 October 14, 1998,
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 19, 1998
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE> 4
APPLIED SCIENCE AND TECHNOLOGY, INC.
35 CABOT ROAD
WOBURN, MASSACHUSETTS 01801
------------------------
PROXY STATEMENT
OCTOBER 19, 1998
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 19,
1998, at 10:30 a.m. at the Corporation's offices, 35 Cabot Road, Woburn,
Massachusetts, and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on October 14, 1998, will
be entitled to vote at the Annual Meeting or any adjournment thereof. On that
date, 8,584,823 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 vote. The other
proposal to be voted upon by the stockholders of the Corporation requires the
vote of a majority of shares of Common Stock present and voting at the Annual
Meeting for passage. Votes withheld from any nominee, abstentions and broker
non-votes (which result when a broker holding shares for a beneficial holder 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 as present or represented for purposes of determining the presence
or absence of a quorum at the Annual Meeting. Abstentions and broker non-votes
have no effect on whether a proposal has been approved.
THE DIRECTORS, NOMINATED DIRECTORS AND EXECUTIVE OFFICERS OF THE
CORPORATION AS A GROUP OWN OR MAY BE DEEMED TO CONTROL 1,585,746 SHARES OF
COMMON STOCK, CONSTITUTING APPROXIMATELY 18.5% 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 and FOR the ratification
of the appointment of KPMG Peat Marwick LLP as the Corporation's independent
auditors for the fiscal year ending June 26, 1999. 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 27, 1998 ("Fiscal Year
1998"), June 28, 1997 ("Fiscal Year 1997") and June 29, 1996
2
<PAGE> 5
("Fiscal Year 1996") 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 19, 1998.
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 members of Class
II, Messrs. Tarrh and Kahl are currently proposed for reelection to the Board of
Directors. The terms of the members of Class I, Dr. Post and Mr. Anderson,
expire in 2001, 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. A
director elected to fill a vacancy on the Board of Directors will be elected for
a term expiring at the annual meeting when the term of a director in such Class
would naturally expire. 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 MR. JOHN M. TARRH AND
MR. HANS-JOCHEN KAHL 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.
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................ 55 I 1987 Chief Executive Officer, President
and Chairman of the Board of
Directors
John M. Tarrh*....................... 51 II 1987 Senior Vice President, Finance,
Secretary, Treasurer and Director
Donald K. Smith, Ph.D................ 45 III 1987 Senior Vice President, Advanced
Technology, and Director
Robert R. Anderson................... 60 I 1995 Director
Michel de Beaumont................... 56 III 1993 Director
John R. Bertucci..................... 57 III 1994 Director
Hans-Jochen Kahl*.................... 59 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.
3
<PAGE> 6
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 1998 attended at least 75% of the meetings of the Board of Directors and
the committees on which they served during Fiscal Year 1998. The Board of
Directors met six (6) times formally, while the Executive Committee met
informally on a number of occasions during Fiscal Year 1998.
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. The Compensation and Audit Committees met two (2) and four (4)
times, respectively, during Fiscal Year 1998.
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. 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. He also completed the Owner/President Management Program
at Harvard Business School.
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 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
4
<PAGE> 7
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. Mr.
Anderson is presently the Chairman of Silicon Valley Research, Inc. ("Silicon
Valley"), a manufacturer of EDA software for integrated circuit design and
manufacture. From 1996 to 1998, Mr. Anderson served as the Chief Executive
Officer of Silicon Valley. 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 Chairman of the Board of Directors of Integral
Domain Technologies, Inc., a manufacturer of yield management software. 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 Chairman, 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 ("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.
5
<PAGE> 8
EXECUTIVE OFFICERS, OFFICERS AND KEY EMPLOYEES
The executive officers, officers and certain other key employees of the
Corporation as of October 1, 1998, their ages and positions held in the
Corporation are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ---------------------------------------------------------
<S> <C> <C>
Richard S. Post, Ph.D................ 55 President, Chief Executive Officer and Chairman of the
Board of Directors
Brian R. Chisholm.................... 50 Chief Operating Officer and Senior Vice President
Donald K. Smith, Ph.D................ 45 Senior Vice President, Advanced Technology and Director
John M. Tarrh........................ 51 Senior Vice President, Finance, Director, Secretary and
Treasurer
Avishay Katz, Ph.D................... 40 Senior Vice President, Global Customer Operations
Robert E. Bettilyon.................. 49 Director, Corporate Controller
Jill E. Maunder...................... 42 Vice President, Human Resources
Michael C. DeLuca.................... 40 Vice President, Manufacturing Operations
</TABLE>
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 Chief Operating Officer
and Senior Vice President since May 1998. From November 1996 to May 1998, he was
the Corporation's Senior Vice President of Operations. 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 Master of Science degree
in Physics from Virginia Polytechnic Institute and a Bachelor of Arts degree in
Physics from Northeastern University.
DR. AVISHAY KATZ has been the Corporation's Senior Vice President, Global
Customer Operations since May 1998. From 1997 to 1998, Dr. Katz was Vice
President of Strategic Marketing and Chief Technical Officer of Watkins Johnson
Company, a manufacturer of thin film deposition capital equipment for the
semiconductor industry. From 1996 to 1997, Dr. Katz was manager of Power
Electronics Technology at EPRI -- The Electric Power Research Institute, where
he was in charge of designing the power electronic device and system strategy
for the electrical industry. Previously, since 1988, Dr. Katz was a member of
the technical staff and team leader for the AT&T Bell Laboratories, where he
performed research and development of metal, dielectric and semiconductor thin
film technology for micoelectronics and optoelectronics applications. Dr. Katz
received a Ph.D. degree in Materials Science and Engineering and a Bachelor of
Science degree in Engineering from the Technion -- Israel Institute of
Technology.
MR. ROBERT E. BETTILYON has been the Corporation's Director, Corporate
Controller from August 1993 to September 1998. 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.
MS. JILL E. MAUNDER has been the Vice President of Human Resources since
February 1998. From February 1996 to February 1998, Ms. Maunder was the
President for Outsourcing Solutions, Inc., a human resources consulting firm.
From September 1993 to January 1996, Ms. Maunder was Vice President, Human
Resources Consulting for Strategic Outsourcing, Inc., a human resources
outsourcing practice. Prior to that Ms. Maunder was Director, Human Resources
for Bull HN Worldwide Information Services. Ms. Maunder holds a Bachelor of Arts
degree in Social Service from the University of New Hampshire.
6
<PAGE> 9
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.
7
<PAGE> 10
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of October 14, 1998, 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, (iii) each executive officer named in the Summary Compensation Table,
and (iv) 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. On November 26, 1997, the Corporation announced
a 3-for-2 split of its Common Stock, which was distributed to stockholders in
the form of a stock dividend on December 12, 1997. The stock ownership
information contained herein has been adjusted to reflect the stock split.
<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.(3).................... 1,129,714 13.2%
George D. Bjurman & Associates(4).................... 570,670 6.6%
Richard S. Post, Ph.D.(5)............................ 650,602 7.5%
Donald K. Smith, Ph.D.(6)............................ 463,978 5.4%
John M. Tarrh(7)..................................... 415,836 4.8%
Robert R. Anderson(8)(9)............................. 85,500 1.0%
John Bertucci(10).................................... 99,000 1.1%
Michel de Beaumont(11)............................... 79,230 *
Hans-Jochen Kahl(9)(12).............................. 20,000 *
All Officers and Directors as a Group (11 persons)
(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)(15)(16)(17).... 1,887,046 21.2%
</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. The address for George D. Bjurman & Associates is
10100 Santa Monica Boulevard, Suite 1200, Los Angeles, CA 90067.
(2) The number of shares of Common Stock issued and outstanding on October 14,
1998 was 8,584,823. 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 from September 24, 1998 pursuant to the 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) Based solely upon a Schedule 13G filed in October 1998 by Kopp Investment
Advisors, Inc. ("KIA") on behalf of KIA, Kopp Holding Company and Leroy C.
Kopp. KIA is an investment adviser that is wholly-owned by Kopp Holding
Company, which is wholly-owned by Leroy C. Kopp. KIA has sole voting power
as to 323,750 of such shares and sole dispositive power as to 165,000 of
such shares. Leroy C. Kopp has sole voting and dispositive power as to
15,000 of such shares.
(4) Reported holdings of George D. Bjurman & Associates, an investment
adviser, based solely upon information reported by the Carson Group as of
June 30, 1998.
(5) Includes (i) 17,650 shares of Common Stock owned by Dr. Post's wife; (ii)
6,000 shares of Common Stock issuable upon the exercise of the vested
portion of an option to purchase up to 7,500 shares, at an exercise price
of $7.417 per share, which expires on July 2, 2000; (iii) 22,500 shares of
Common Stock issuable upon the exercise of the vested portion of an option
to purchase up to 37,500 shares, at an exercise price of $8.417 per share,
which expires on December 28, 2000; (iv) 27,001 shares of Common Stock
issuable upon the exercise of the vested portion of options to purchase up
to an aggregate of 45,000 shares, at an exercise price of $6.417 per share,
each option expires on August 5, 2001; (v) 2,100 shares of Common Stock
issuable upon the exercise of an option, at an exercise price of $5.083 per
share, which expires on November 20, 2001; (vi) 11,999 shares of Common
Stock issuable upon exercise of the vested portion of options to purchase
up to an aggregate of 30,000 shares, at an exercise price of $6.00 per
share, each option expires on June 30, 2002; and (vii) 6,800 shares of
Common Stock issuable upon the exercise of the vested portion of an option
to purchase up to 34,000 shares, at an exercise price of $3.875 per share,
which expires on October 4, 2003. The options set forth in (vi) above were
repriced in September 1998 from $11.167 to $6.00 per share.
(6) Includes (i) 2,400 shares of Common Stock issuable upon the exercise of the
vested portion of an option to purchase up to 3,000 shares, at an exercise
price of $7.417 per share, which expires on July 2, 2000; (ii) 13,500
shares of Common Stock issuable upon the exercise of the vested portion of
an option to purchase up to 22,500 shares, at an exercise price of $8.417
per share, which expires on December 28,
8
<PAGE> 11
2000; (iii) 13,500 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 $6.417 per share, which expires on August 5, 2001; (iv) 1,500
shares of Common Stock issuable upon the exercise of an option at an
exercise price of $5.083 per share, which expires on November 20, 2001;
(v) 8,400 shares of Common Stock issuable upon exercise of the vested
portion of options to purchase up to an aggregate of 21,001 shares, at an
exercise price of $6.00 per share, each option expires on June 30, 2002;
and (vi) 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 $3.875 per share, which expires on October 4, 2003. The options
set forth in (v) above were repriced in September 1998 from $11.167 to
$6.00 per share.
(7) Includes (i) an aggregate of 1,313 shares of Common Stock owned by Mr.
Tarrh's wife and minor son; (ii) 1,200 shares of Common Stock issuable upon
the exercise of the vested portion of an option to purchase up to 1,500
shares, at an exercise price of $7.417 per share, which expires on July 2,
2000; (iii) 6,300 shares of Common Stock issuable upon the exercise of the
vested portion of an option to purchase up to 10,500 shares at an exercise
price of $8.417 per share, which expires on December 28, 2000; (iv) 5,850
shares of Common Stock issuable upon the exercise of the vested portion of
an option to purchase up to 9,750 shares at an exercise price of $6.417 per
share, which expires on August 5, 2001; (v) 1,350 shares of Common Stock
issuable upon the exercise of an option at an exercise price of $5.083 per
share, which expires on November 20, 2001; (vi) 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 $6.00 per share,
which expires on June 30, 2002; and (vii) 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 $3.875 per share, which
expires on October 4, 2003. The options set forth in (vi) above were
repriced in September 1998 from $11.167 to $6.00 per share.
(8) Includes (i) 52,500 shares of Common Stock owned directly by Mr. Anderson;
and (ii) 15,000 shares of Common Stock held in trust for the benefit of a
child of Mr. Anderson, of which Mr. Anderson is the trustee.
(9) Includes 18,000 shares of Common Stock issuable upon the exercise an option
at an exercise price of $10.667 per share, which expires on November 15,
2005.
(10) Includes (i) 22,500 shares of Common Stock owned directly by Mr. Bertucci;
(ii) 52,500 shares of Common Stock held by MKS Instruments, Inc., of which
Mr. Bertucci is the majority shareholder; (iii) 6,000 shares of Common
Stock issuable upon the exercise of an option at an exercise price of
$4.707 per share, which expires on November 18, 2004; and (iv) 18,000
shares of Common Stock issuable upon the exercise of an option at an
exercise price of $10.667 per share, which expires on November 15, 2005.
(11) Includes (i) 55,230 shares of Common Stock held by various trust
arrangements, of which Mr. de Beaumont is a beneficiary; (ii) 6,000 shares
of Common Stock issuable upon the exercise of an option at an exercise
price of $4.707 per share, which expires on November 18, 2004; and (iii)
18,000 shares of Common Stock issuable upon the exercise of an option at an
exercise price of $10.667 per share, which expires on November 15, 2005.
(12) Includes 2,000 shares of Common Stock issuable upon the exercise of an
option at an exercise price of $7.25 per share, which expires on August 2,
2003. This option was repriced in September 1998 to $6.00 per share.
(13) Includes the following options owned by Brian R. Chisholm, the
Corporation's Senior Vice President of Operations: (i) 900 shares of Common
Stock issuable upon the exercise of an option at an exercise price of
$5.083 per share, which expires on November 20, 2001; (ii) 27,000 shares of
Common Stock issuable upon the exercise of the vested portion of an option
to purchase up to 45,000 shares, at an exercise price of $6.00 per share,
which expires on November 25, 2001; (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 $6.00 per share, which expires
on June 30, 2002; (iv) 2,000 shares of Common Stock issuable upon
exercise of the vested portion of an option to purchase up to 10,000
shares, at an exercise price of $6.00 per share, which expires on May 13,
2003; and (v) 5,000 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 $3.875 per share, which expires on October 4, 2003. The
options set forth in (iii) and (iv) above were repriced in September 1998
from $11.167 to $6.00 per share.
9
<PAGE> 12
(14) Includes the following options owned by Dr. Avishay Katz, the Corporation's
Senior Vice President of Global Customer Operations: (i) 9,000 shares of
Common Stock issuable upon the exercise of the vested portion of an option
to purchase up to 45,000 shares, at an exercise price of $6.00, which
expires on May 13, 2003; and (ii) 5,000 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 $3.875 per share, which expires on
October 4, 2003. The option set forth in (i) above was repriced in
September 1998 from $12.25 to $6.00 per share.
(15) Includes the following options owned by Michael C. DeLuca, the
Corporation's Vice President of Manufacturing: (i) 12,000 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 $7.667 per share,
which expires on May 1, 2002; and (ii) 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 $3.875 per share, which
expires on October 4, 2003.
(16) Includes the following options owned by Jill E. Maunder, the Corporation's
Vice President of Human Resources: (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 $6.00 per share, which expires
on February 1, 2003; and (ii) 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 $3.875 per share, which expires on October
4, 2003. The option set forth in (i) above was repriced in September 1998
from $12.25 to $6.00 per share.
(17) Excludes the following stock and options owned by Timothy E. Coutts, a
former Vice President of the Corporation named in the Summary Compensation
Table: (i) 9,793 shares of Common Stock; (ii) 21,753 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) 18,000 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 $8.417 per share,
which expires on December 31, 2000; (iv) 7,200 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 $6.417 per share, which
expires on August 5, 2001; (v) 900 shares of Common Stock issuable upon the
exercise of an option at an exercise price of $5.083 per share, which
expires on November 20, 2001; and (vi) 5,400 shares of Common Stock
issuable upon the exercise of the vested portion of an option to purchase
up to 13,500 shares, at an exercise price of $11.167 per share, which
expires on June 30, 2002. Effective October 1, 1998, Mr. Coutts was no
longer an executive officer of the Corporation, and effective December
1998, he will no longer be an employee of the Corporation.
10
<PAGE> 13
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 and Mr.
Coutts, a former Vice President of the Corporation during Fiscal Years 1998,
1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- -------------------------------------------------------------------- ------------
(a) (c) (d) (e)
(b) SECURITIES (f)
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTION COMPENSATION(2)
--------------------------- ------ --------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Richard S. Post..................... 1998 $190,299 $52,681 30,000 $4,179
President, Chief Executive Officer 1997 $160,790 $33,692 47,100 $1,598
and Chairman of the Board 1996 $142,500 $57,200 45,000 $1,244
Brian R. Chisholm................... 1998 $148,609 $34,648 25,000 $4,431
Chief Operating Officer and 1997 $ 62,362 $10,096 45,900 $1,021
Senior Vice President
Donald K. Smith..................... 1998 $126,192 $32,763 21,001 $2,239
Senior Vice President, 1997 $111,280 $17,115 24,000 $ 898
Advanced Technology, and Director 1996 $114,000 $40,040 25,500 $ 652
John M. Tarrh....................... 1998 $108,288 $19,563 15,000 $3,322
Senior Vice President, Finance, 1997 $ 98,750 $10,495 11,100 $1,313
Secretary, Treasurer and Director 1996 $ 95,366 $28,710 12,000 $1,023
Timothy E. Coutts (3)(4)............ 1998 $138,459 $25,927 13,500 $4,205
Former Vice President 1997 $122,977 $11,030 12,900 $2,893
1996 $ 63,846 $ 2,640 30,000 $1,936
</TABLE>
- ---------------
(1) Amounts shown indicate cash compensation earned and received by Drs. Post
and Smith and Messrs. Tarrh and Coutts; no amounts were earned but deferred
at their election. Drs. Post and Smith and Messrs Tarrh and Chisholm
participate in the Corporation's group health and life insurance programs
and other benefits generally available to all employees of the Corporation.
(2) Amounts shown represent matching contributions made by the Corporation under
its 401(k) Plan.
(3) Effective October 1, 1998, Mr. Coutts was no longer an executive officer of
the Corporation, and effective in December 1998, he will no longer be an
employee of the Corporation.
(4) Excludes sums paid to Mr. Coutts by Ehrhorn Technological Operations, Inc.
("Ehrhorn") in connection with this exercise of non-qualified options and
the lapse of the restrictions on restricted stock of Ehrhorn held by Mr.
Coutts as a result of the acquisition of Ehrhorn by the Corporation.
11
<PAGE> 14
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)(6)
- ------------------------------------------------------------------------------- ---------------------------
(a) (b) (c) (d) (e) (f) (g)
- --------------------- ---------------- ---------- ----------- ---------- ---------- -----------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED(#)(1)(2) YEAR(3) ($/SH)(4) DATE(5) 5% 10%
---- ---------------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Post...... 30,000 6.4% $11.17 06/30/2002 $92,554 $204,521
Donald K. Smith...... 21,001 4.5% $11.17 06/30/2002 $64,791 $143,172
Brian R. Chisholm.... 15,000 3.2% $11.17 06/30/2002 $46,277 $102,261
10,000 2.1% $12.25 05/14/2003 $38,845 $ 74,787
John M. Tarrh........ 15,000 3.2% $11.17 06/30/2002 $46,277 $102,261
Timothy E. Coutts.... 13,500 2.9% $11.17 06/30/2002 $41,650 $ 92,035
</TABLE>
- ---------------
(1) None of the above-named executive officers has exercised any of the options
granted during Fiscal Year 1998.
(2) The options granted in Fiscal Year 1998 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 fourth anniversary
date.
(3) In Fiscal Year 1998, options to purchase a total of 465,579 shares of Common
Stock were granted to employees of the Corporation, including executive
officers.
(4) These options were subsequently repriced in September 1998 to $6.00 per
share.
(5) The options are subject to earlier termination upon certain events related
to termination of employment.
(6) 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.
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 18,000 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 1,000 shares of Common Stock will vest
immediately and additional options to purchase 1,000 shares of Common Stock will
vest quarterly, subject to the option holder's continued service as a Director
of the Corporation.
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 approximately $190,000, $126,000, and $108,000 respectively,
during Fiscal Year 1998. 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 approximately $53,000, $33,000
and $20,000, respectively, during Fiscal Year 1998. Each individual is entitled
to receive benefits offered to the
12
<PAGE> 15
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 and
DeLuca, Dr. Katz and Ms. Maunder which expire on December 3, 1998, April 30,
1999, June 30, 1999, and January 31, 1999, respectively. These agreements are
automatically renewed for successive periods of one year, unless a notice of
non-renewal is given. The initial base salaries of Messrs. Chisholm and DeLuca,
Dr. Katz, and Ms. Maunder were $147,400, $125,117, $170,000 and $130,000,
respectively. Messrs. Chisholm and DeLuca, Dr. Katz, and Ms. Maunder are
entitled to receive bonuses up to 35%, 25%, 40% and 25%, respectively, of their
base salaries. During Fiscal 1998, Messrs. Chisholm and DeLuca, Dr. Katz, and
Ms. Maunder received bonuses of $35,000, $19,000, $11,429 and $5,766,
respectively. Each of these individuals is entitled to severance benefits if he
or she is terminated without cause. Mr. Chisholm receives severance benefits for
twelve (12) months; and Mr. DeLuca, Dr. Katz, and Ms. Maunder receive severance
benefits for six (6) months. These agreements also preclude each individual (i)
from competing with the Corporation during his or her employment and, in the
cases of Messrs. Chisholm and DeLuca, and Ms. Maunder, for at least two (2)
years thereafter, and (ii) from disclosing confidential information. 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 Messrs. 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. The employment agreements for Dr. Katz and Ms. Maunder also provide that
in the event of a sale or change of control in the Corporation, if (i) their
employment is terminated without cause, (ii) their base salary or
Corporation-paid benefits are reduced, or (iii) they have a significant
reduction in responsibility with the Corporation, then (A) Dr. Katz shall be
entitled to receive 100% of the severance benefits due for each full year or
portion thereof that he has been employed by the Corporation, up to a maximum of
100% of the severance benefits set forth above, and (B) Ms. Maunder shall be
entitled to receive 100% of the severance benefits set forth above.
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
13
<PAGE> 16
matching contributions to the 401(k) Plan during Fiscal Year 1998 of $324,127 on
behalf of all eligible employees.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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.
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) to recognize individual initiative, leadership and
achievement; (iii) short-term bonus incentives for management to meet the
Corporation's net income performance goals; and (iv) 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, Smith
and Katz, and Messrs. Tarrh, Chisholm and DeLuca and Ms. Maunder. 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 1998, Dr. Post's base salary was increased
from $170,000 in Fiscal Year 1997 to $190,000 per annum; Dr. Smith's base salary
has been increased from $117,000 in Fiscal Year 1997 to $126,000 per annum; and
Mr. Tarrh's base salary was increased from $103,000 in Fiscal Year 1997 to
$108,000. The base salaries of Dr. Katz, Messrs. Chisholm and DeLuca and Ms.
Maunder are $170,000, $149,000, $125,117 and $130,000, 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.
LONG TERM INCENTIVE COMPENSATION. Long-term incentive compensation, in the
form of stock options, allows the executive officers to share in any
appreciation in the value of the Corporation's Common Stock. The Committee
believes that stock option participation aligns executive officers' interests
with those of the stockholders. In addition, the Committee believes that equity
ownership by executive officers helps to balance the short term focus of annual
incentive compensation with a longer term view and may help to retain key
executive officers.
14
<PAGE> 17
When establishing stock option grant levels, the Committee considers
general corporate performance, the Chief Executive Officer's recommendations,
level of seniority and experience, existing levels of stock ownership, previous
grants of stock options, vesting schedules of outstanding options and the
current stock price.
It is the standard policy of the Corporation to grant an initial stock
option grant to all executive officers at the time they commence employment
consistent with the number of options granted to executive officers in the
industry at similar levels of seniority. In addition, the Committee may also
make performance-based grants throughout the year. In making such
performance-based grants, the Committee considers individual contributions to
the Corporation's financial, operational and strategic objectives.
Senior management also participates in company-wide employee benefit plans,
including the Corporation's 401(k) Plan. Benefits under these plans are not
dependent upon individual performance.
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
advancing the Corporation in obtaining its strategic goals.
COMPENSATION COMMITTEE
Hans-Jochen Kahl,
Chairman
October 14, 1998
15
<PAGE> 18
PERFORMANCE GRAPHS
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, 1997 and 1998, 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 graph was compiled by Media General Financial Services, Inc. The
stock price performance on the graph below is not necessarily indicative of
future price performance.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------
COMPANY/INDEX 11/10/93 07/02/94 07/01/95 06/29/96 06/28/97 06/27/98
- ------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Applied Science and Technology, Inc. $100.00 $ 55.68 $101.14 $109.09 $154.55 $105.63
NASDAQ Market Index $100.00 $ 99.38 $116.55 $146.72 $176.74 $234.28
SIC Code Index $100.00 $117.88 $250.96 $185.29 $308.07 $245.23
</TABLE>
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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") 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)
Mr. de Beaumont failed to timely file four Form 4's reporting an aggregate of
four sale transactions and two purchase transactions; (ii) Mr. Chisholm failed
to timely file one Form 4 reporting the grant of an option; and (iii) Mr. Tarrh
failed to timely file one Form 4 reporting one sale transaction.
16
<PAGE> 19
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
------------------------
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
The persons named in the enclosed proxy will vote to ratify the appointment
of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending June
26, 1999. The Board proposes that the Stockholders ratify this appointment,
although such ratification is not required under Delaware law or the
Corporation's Certificate of Incorporation or Bylaws, each as amended. 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
voting at the Annual Meeting is required to ratify the appointment of the
independent auditors.
In the event that the ratification of the appointment of KPMG Peat Marwick
LLP as the independent public accountants for the Company is not obtained at the
Meeting, the Board of Directors will reconsider its appointment.
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 October 14, 1998 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 8,584,823
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
17
<PAGE> 20
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 1999 Annual Meeting,
tentatively scheduled for November 18, 1999, stockholders' proposed resolutions
must be received by the Corporation on or before June 21, 1999. To be considered
for presentation at the Annual Meeting, although not included in the proxy
statement, proposals must be received no earlier than August 20, 1999 and no
later than September 20, 1999. 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 27, 1998.
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 19, 1998
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.
18
<PAGE> 21
APPLIED SCIENCE AND TECHNOLOGY, INC.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
APPLIED SCIENCE AND TECHNOLOGY, INC.
The undersigned, revoking any previous proxies relating to these shares,
hereby acknowledges receipt of the Notice and Proxy Statement dated October 19,
1998, in connection with the Annual Meeting to be held at 10:30 a.m. on
Thursday, November 19, 1998, at the offices of the Corporation located at 35
Cabot Road, Woburn, Massachusetts and hereby appoints Richard S. Post, Ph.D.,
with full power to act alone, the attorney and proxy of the undersigned, with
power of substitution, to vote all shares of the Common Stock of Applied Science
and Technology, Inc. (the "Corporation") registered in the name provided herein
which the undersigned is entitled to vote at the 1998 Annual Meeting of
Stockholders, and at any adjournments thereof, with all the powers the
undersigned would have if personally present. Without limiting the general
authorization hereby given, said proxy is instructed to vote or act as follows
on the proposals set forth in said Proxy.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
IN HIS DISCRETION THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
ELECTION OF DIRECTORS (or if any nominee is not available for election, such
substitute as the Board of Directors may designate)
NOMINEES: JOHN M. TARRH HANS-JOCHEN KAHL
SEE REVERSE SIDE FOR BOTH PROPOSALS. If you wish to vote in accordance with
the Board of Directors' recommendations, just sign on the reverse side. You need
not mark any boxes.
1. Election of Directors (See reverse). [ ] FOR [ ] WITHHELD
[ ] ____________________________________________________________________________
For all nominees except as noted on the line above
<PAGE> 22
[X] PLEASE MARK VOTES AS
IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS
1 AND 2.
2. Proposal to ratify and confirm the selection of KPMG Peat Marwick LLP as the
Corporation's independent auditors for the fiscal year ending June 26, 1999.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Please sign exactly as name(s)
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
Date:__________________________
Signature:_____________________
Signature:_____________________
