<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________________ to __________________________
Commission file number: 0-23372
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GASONICS INTERNATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 94-2159729
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2450 Junction Avenue, San Jose, California 95134
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 325-1200
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
At March 31, 1996, there were 13,337,120 shares of the Registrant's Common
Stock, $0.001 par value per share, outstanding.
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GASONICS INTERNATIONAL CORPORATION
FORM 10-Q
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1996
and September 30, 1995 3
Condensed Consolidated Statements of Operations for the three
and six month periods ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the six
month periods ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Securityholders 19
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
Exhibit Index 22
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PART I . FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GASONICS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAR. 31, Sept. 30,
ASSETS 1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,038 $ 7,595
Marketable securities 15,984 29,004
Trade accounts receivable, net 33,433 16,974
Inventories 25,796 19,123
Prepaid expenses & other current assets 5,277 3,992
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Total current assets 86,528 76,688
Property & equipment, net 9,420 7,935
Other assets 1,038 744
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Total assets $ 96,986 $ 85,367
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LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 2,791 $ 2,894
Accounts payable 10,850 7,343
Accrued expenses 11,284 11,321
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Total current liabilities 24,925 21,558
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Long-term liabilities 587 621
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Stockholders' equity:
Common stock &
additional paid-in capital 30,389 29,468
Unrealized gain on investment 1,067 2,376
Note receivable from stockholder (115) (165)
Retained earnings 40,133 31,509
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Total stockholders' equity 71,474 63,188
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Total liabilities & stockholders' equity $ 96,986 $ 85,367
------------ ------------
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</TABLE>
See accompanying notes.
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GASONICS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ ------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 36,997 $ 23,679 $ 70,779 $ 44,021
Cost of sales 17,024 10,256 32,301 18,675
--------- --------- --------- ---------
Gross margin 19,973 13,423 38,478 25,346
--------- --------- --------- ---------
Operating expenses:
Research & development 4,618 2,985 8,787 5,623
Selling, general & administrative 8,971 5,832 16,889 10,874
--------- --------- --------- ---------
Total operating expenses 13,589 8,817 25,676 16,497
--------- --------- --------- ---------
Operating income 6,384 4,606 12,802 8,849
Other income (expense)
Interest expense (21) - (47) -
Interest and other income (expense), net 206 210 513 265
--------- --------- --------- ---------
Income before provision for income taxes 6,569 4,816 13,268 9,114
--------- --------- --------- ---------
Provision for income taxes 2,299 1,760 4,644 3,307
--------- --------- --------- ---------
Net income $ 4,270 $ 3,056 $ 8,624 $ 5,807
========= ========= ========= =========
Net income per share $ 0.32 $ 0.24 $ 0.64 $ 0.46
========= ========= ========= =========
Weighted average common &
common equivalent shares 13,512 12,716 13,618 12,582
========= ========= ========= =========
</TABLE>
See accompanying notes.
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GASONICS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net cash used for operating activities $ (10,443) $ (735)
----------- ---------
Cash flows from investing activities:
Purchases of property & equipment & leasehold
improvements (3,746) (1,644)
Decrease (increase) in marketable securities 11,710 (13,861)
----------- ---------
Net cash provided by (used for) investing activities 7,964 (15,505)
----------- ---------
Cash flows from financing activities:
Principal payments under capital lease obligations - (22)
Proceeds from issuance of common stock 922 12,828
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Net cash provided by financing activities 922 12,806
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Net decrease in cash and cash equivalents (1,557) (3,434)
Cash & cash equivalents at beginning of period 7,595 13,131
----------- ---------
Cash & cash equivalents at end of period $ 6,038 $ 9,697
----------- ---------
----------- ---------
</TABLE>
See accompanying notes.
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GASONICS INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been prepared
by the Company without audit and reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position and the results of operations of the Company for the interim periods.
The statements have been prepared in accordance with the regulations of the
Securities and Exchange Commission. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles.
The results of operations for the six months ended March 31, 1996 are not
necessarily indicative of the operating results to be expected for the full
fiscal year. Such financial statements should be read in conjunction with the
information contained herein, including Risk Factors, and in the Company's
Annual Report on Form 10-K for the year ended September 30, 1995 and the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995.
Any party interested in receiving a copy of these Annual and Quarterly Reports
should request a copy from the Chief Financial Officer of the Company.
2. INVENTORIES
Inventories consist of the following (in thousands):
March 31, 1996 September 30, 1995
------------------ ----------------------
(unaudited)
Raw Materials $12,094 $7,492
Work in Process 9,221 7,656
Finished Goods 4,481 3,975
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$25,796 $19,123
======= =======
3. NET INCOME PER SHARE
Net income per share data has been computed using the weighted average number of
shares of common stock and dilutive common equivalent shares from stock options
(using the treasury stock method).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain forward-looking statements which involve
numerous risks and uncertainties. The Company's actual results could differ
materially from those anticipated in any such forward-looking statements as a
result of certain factors, including those set forth under "Additional Risk
Factors".
RESULTS OF OPERATIONS
NET SALES for the second quarter and six month period ended March 31, 1996
increased 56% to $37.0 million and 61% to $70.8 million, respectively, compared
to net sales for the comparable two periods in fiscal 1995. This growth in
revenue was principally due to increased demand for the Company's stand alone,
8-inch downstream plasma photoresist removal products. The Company also began
shipping for revenue in the quarter ended March 31, 1996, its new performance
enhancing platform product (the "PEP") and its flat panel display equipment from
the Company's LCD division in Japan (formerly called Tekisco) which was acquired
in August 1995. Sales of spare parts, service and support also increased as a
result of retrofits to older systems and from maintenance revenues resulting
from a larger number of systems in the Company's installed base. International
sales, which are predominantly to customers in Europe and Asia Pacific,
accounted for approximately 51% of net sales for the six month period ended
March 31, 1996 compared to approximately 40% for the same period ended March 31,
1995.
GROSS MARGIN as a percentage of net sales for both the second quarter and six
month period of fiscal 1996 was 54% compared to 57% and 58% for the same quarter
and six month period, respectively, of fiscal 1995. The decrease in gross
margin for both periods of the current fiscal year is attributable to several
factors, including a less favorable product sales mix which is, in part, due to
the sale of flat panel display equipment from the Company's LCD division in
Japan which has significantly lower gross margins than the Company's photoresist
removal systems, and an increase in material costs as well as additional
inventory reserves primarily associated with new products. Additionally, gross
margins have been negatively impacted by an increase in field service costs
related to the building of an international direct service capability worldwide
and new product support capability. The Company's gross margin as a percentage
of net sales has been, and will continue to be, affected by a variety of
factors, including the mix and average selling prices of products sold and the
costs to manufacture, service and support new product introductions and
enhancements. Gross margins for new systems are typically lower than those of
mature products due to, in part, the inefficiencies associated with the startup
of manufacturing operations. The Company does not expect its gross margin to
remain at the level attained during fiscal 1995 due, in part, to inefficiencies
associated with new product introductions, sales of flat panel display equipment
products from the Company's LCD division in Japan, competitive pricing
pressures, changes in product mix and other factors including those referred to
above..
RESEARCH AND DEVELOPMENT expenditures for the second quarter of fiscal 1996 were
$4.6 million or 12.5% of net sales compared to $3.0 million or 12.6% of net
sales for the second quarter of fiscal 1995. For the six month period of fiscal
1996 and fiscal 1995, research and development
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expenses were $8.8 million or 12.4% of net sales and $5.6 million or 12.8% of
net sales, respectively. The increase in overall spending in both periods from
that of the comparable periods last fiscal year primarily reflects expenses
associated with additional headcount, an increase in services performed by
consultants, including customer specification and customization of current
products and new product development, including the PEP product development
program. Additionally, the current periods of fiscal 1996 include research and
development expenses associated with the Company's LCD division in Japan which
was acquired in August 1995. The Company anticipates that the current level of
research and development spending will continue and may increase in absolute
dollars throughout fiscal 1996 due, in part, to the anticipated significant
continued investment in new product development.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased to $9.0 million in the
second quarter of fiscal 1996 and increased to $16.9 million for the six month
period of fiscal 1996 from $5.8 million and $10.9 million for the second quarter
and six month period, respectively, of fiscal 1995. As a percentage of net
sales, selling, general and administrative expenses decreased in the second
quarter and six month period of fiscal 1996 to 24.2% and 23.9%, respectively,
from 24.6% and 24.7% for the second quarter and six month period, respectively,
of fiscal 1995. The increase in absolute dollars in both periods when compared
to the comparable periods last fiscal year is principally due to additional
headcount, primarily in sales and marketing, third party commissions in
connection with higher international sales volume, and expenses associated with
the operations of the LCD division in Japan. The Company anticipates that the
current level of selling, general and administrative spending will continue and
may increase in absolute dollars throughout fiscal 1996 due, in part, to
additional staffing and other costs associated with anticipated increases in
operating activities.
OTHER INCOME (EXPENSE) consisting primarily of interest income was $185,000 for
the second quarter and $466,000 for six month period of fiscal 1996 compared to
$210,000 and $265,000 for second quarter and six month period of fiscal 1995,
respectively. The increase in the six month period of fiscal 1996 from the same
period of fiscal 1995 is primarily the result of a $144,000 reserve established
against an impairment in value of one of the Company's investments in the first
quarter of fiscal 1995. This reserve was subsequently reversed in the third
quarter of fiscal 1995 when this investment was recovered in full.
INCOME TAXES for the first six months of fiscal 1996 were accrued at 35% of
income before income taxes compared to 36.3% for the same period last year. The
reduction in the effective tax rate was primarily attributable to a projected
increase in international sales as a percentage of total sales that may result
in a greater tax benefit derived from the Company's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities of the Company used cash of $10.4 million for the six month
period ended March 31, 1996 compared to $0.7 million for the same period of
fiscal 1995. This increased use of cash from operating activities was
principally due to an increase in accounts receivable resulting from higher
sales and a disproportionately higher percentage of sales occurring in the last
month of the March 1996 quarter, and an increase in inventory, primarily
attributable to the
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production of the new PEP products and the flat panel display products from the
Company's LCD division in Japan.
Financing activities provided $.9 million and $12.8 million for the periods
ended March 31, 1996 and 1995, respectively, primarily from the issuance of
stock in connection with the Company's employee stock purchase plan and, for the
period ended March 31, 1995, the issuance of stock in connection with the
Company's secondary public offering.
The Company's investing activities for the first six months of fiscal 1996
provided cash of $11.7 million from marketable securities to fund operating
activities and used cash of $3.7 million for the purchase of equipment and
leasehold improvements. For the same period last fiscal year, the Company
invested cash of $13.9 million in marketable securities and used $1.6 million to
purchase equipment and leasehold improvements.
At March 31, 1996, the Company had working capital of $61.6 million compared to
$55.1 at September 30, 1995. Accounts receivable and inventories at March 31,
1996 were $33.4 million and $25.8 million, respectively. Accounts receivable at
March 31, 1996 increased $16.5 million primarily due to a disproportionately
higher percentage of sales late in the quarter. Inventory increased by $6.7
million from September 30, 1995 to March 31, 1996 principally from the purchase
of materials needed to ramp production of the PEP system for current demand, a
build-up in the LCD division inventory for orders scheduled to ship later this
fiscal year and, to a lesser extent, an increase in spare parts inventory to
support the newly established part depot located in Singapore and to support
sales levels. The Company expects future inventory levels to fluctuate from
period to period, and believes that because of the relatively long manufacturing
cycle of its products, its investment in inventories will continue to represent
a significant portion of working capital. As a result of such investment in
inventories, the Company may be subject to an increasing risk of inventory
obsolescence, which could materially adversely affect the Company's operating
results.
The Company's principal sources of liquidity at March 31, 1996 consisted of
approximately $6.0 million in cash and cash equivalents, $16.0 million in
marketable securities and a $15 million unsecured line of credit with Union Bank
which was entered into on March 4, 1996. A commercial letter of credit
provision of $.5 million and a foreign exchange contract provision of $1.0
million is also provided under the credit line. Available borrowing under the
credit line is reduced by the amount of outstanding letters of credit. As of
March 31, 1996, $69,193 was outstanding under the letter of credit provision.
This line of credit contains certain covenants, including covenants relating to
financial ratios and tangible net worth which must be maintained by the Company.
As of March 31, 1996, except for the amount outstanding under the letter of
credit provision, there were no borrowings outstanding under this line, and the
Company was in compliance with its bank covenants. This line of credit
agreement expires February 28, 1997.
The Company believes anticipated cash flows from operations, funds available
under its existing revolving line of credit facility and existing cash, cash
equivalents and marketable securities will be sufficient to meet the Company's
cash requirements during the next twelve months. Beyond the next twelve months,
the Company may require additional equity or debt financing to achieve its
working capital or capital equipment needs.
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ADDITIONAL RISK FACTORS
SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results have fluctuated significantly in the past and
may fluctuate significantly in the future. The Company anticipates that factors
affecting its future operating results will include the cyclicality of the
semiconductor industry and the markets served by the Company's customers, the
timing of significant orders, patterns of capital spending by customers, the
proportion of direct sales and sales through distributors, the proportion of
international sales to net sales, changes in pricing by the Company, its
competitors, customers or suppliers, market acceptance of new and enhanced
versions of the Company's products, the mix of products sold, financial systems,
procedures and controls, discounts, the timing of new product announcements and
releases by the Company or its competitors, delays, cancellations or
rescheduling of orders due to customer financial difficulties or otherwise, the
Company's ability to produce systems in volume and meet customer requirements,
changes in overhead absorption levels due to changes in the number of systems
manufactured, political and economic instability and lengthy sales cycles. Gross
margins have varied and may vary materially based on a variety of factors
including the mix and average selling prices of systems sales, the mix of
revenues, including service and support revenues, and the costs associated with
new product introductions and enhancements and the customization of systems.
Furthermore, announcements by the Company or its competitors of new products and
technologies could cause customers to defer purchases of the Company's existing
systems, which would also materially adversely affect the Company's business,
financial condition and results of operations. The Company expects to continue
to expend significant resources with respect to the development, any ramp up
of production and commercial shipments of three new products, the Strata, a
high selectivity etch system, the VHP, a vertical high pressure furnace system,
and the PEP and does not expect its gross margin to remain at the level
attained during fiscal 1995 due, in part, to start-up inefficiencies associated
with these introductions, competitive pricing pressures, changes in product
mix, including the products sold by the Company's LCD division in Japan, and
other factors. Although the Company has significantly increased its expense
levels to support its recent growth, the Company does not expect that its rate
of growth, if any, will equal or exceed the levels achieved to date.
LIMITED SYSTEM SALES; BACKLOG
The Company derives a substantial portion of its sales from the sale of a
relatively small number of systems which typically range in purchase price from
approximately $150,000 to $600,000 for its photoresist removal systems and up to
approximately $1.5 million for its other products. As a result, the timing of
recognition of revenue for a single transaction could have a material adverse
effect on the Company's sales and operating results. The Company's backlog at
the beginning of a quarter typically does not include all sales required to
achieve the Company's sales objectives for that quarter. Moreover, all customer
purchase orders are subject to cancellation or rescheduling by the customer with
limited or no penalties and, therefore, backlog at any particular date is not
necessarily representative of actual sales for any succeeding period. The
Company's net sales and operating results for a quarter may depend upon the
Company obtaining orders for systems to be shipped in the same quarter that the
order is received. The Company's business and financial
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results for a particular period could be materially adversely affected if an
anticipated order for even one system is not received in time to permit shipment
during such period. Furthermore, a significant portion of the Company's net
sales have recently been realized near the end of the quarter. A delay in a
shipment near the end of a particular quarter, due, for example, to an
unanticipated shipment rescheduling, to cancellations or deferrals by customers,
to unexpected manufacturing difficulties experienced by the Company or to supply
shortages, may cause net sales in a particular quarter to fall significantly
below the Company's expectations and may materially adversely affect the
Company's operating results for such quarter. In addition, continued significant
investments in research and development, capital equipment and customer service
and support capability worldwide will result in significant fixed costs which
the Company will not be able to reduce rapidly if sales goals for a particular
period are not met. Because the Company builds its systems according to
forecast, a reduction in customer orders or backlog could present further
difficulties regarding the Company's ability to plan production and inventory
levels, which could adversely impact operating results. The impact of these and
other factors on the Company's operating results in any future period cannot be
forecasted accurately.
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The Company's business depends in significant part upon capital expenditures
by manufacturers of semiconductor devices, including manufacturers that are
opening new or expanding existing fabrication facilities, which, in turn,
depend upon the current and and anticipated market demand for such devices
and products utilizing such devices. The semiconductor industry is highly
cyclical and historically has experienced periods of oversupply, resulting in
significantly reduced demand for capital equipment, including systems
manufactured and marketed by the Company. The semiconductor industry has
experienced significant growth in recent years which has resulted in
significant growth in the capital equipment industry. There can be no
assurance that such growth can be sustained or that, in the event such growth
continues, the Company can be competitive in the semiconductor capital
equipment industry. The Company anticipates that a significant portion of new
orders will depend upon demand from IC manufacturers building or expanding
large fabrication facilities, and there can be no assurance that such demand
will exist. Moreover, the Company's sales and operating results will be
materially adversely affected if unanticipated downturns or slowdowns in the
semiconductor market recur in the future.
HIGHLY COMPETITIVE INDUSTRY
The semiconductor capital equipment industry is intensely competitive. A
substantial investment is required by customers to install and integrate capital
equipment into a semiconductor production line. As a result, once a
semiconductor manufacturer has selected a particular vendor's capital equipment,
the Company believes that the manufacturer generally relies upon that equipment
for the specific production line application and frequently will attempt to
consolidate its other capital equipment requirements with the same vendor.
Accordingly, the Company expects to experience difficulty in selling to a
particular customer for a significant period of time if that customer selects a
competitor's capital equipment. The Company currently has only one principal
product line and experiences intense competition worldwide from a number of
foreign and domestic manufacturers, including Alcantech, Applied Materials,
Inc., Fusion Systems Corporation, Lam Research Corporation, Matrix Semiconductor
Systems, Inc., Mattson Technology, Inc., Plasma Systems and Ramco, many of which
have substantially greater installed bases and greater financial, marketing,
technical and other resources than the Company. Certain of the Company's
competitors have recently announced the introduction of, or have introduced,
competitive products that offer other technologies and improvements. Applied
Materials and Lam Research have introduced modules to their products which
remove photoresist using dry chemical processing and, therefore, compete with
the Company's products. The Company expects its competitors to continue to
develop enhancements to and future generations of competitive products that may
offer improved price or performance features. New product introductions and
enhancements by the Company's competitors could cause a significant decline in
sales or loss of market acceptance of the Company's systems in addition to
intense price competition or otherwise make the Company's systems or technology
obsolete or noncompetitive. In addition, by virtue of its reliance on sales of
advanced dry chemistry processing equipment, the Company could be at a
disadvantage compared to certain competitors that offer more diversified product
lines. The Company believes that it will continue to face competition from
current and new vendors employing other technologies, such as wet chemistry,
traditional dry chemistry and other ashing techniques, as such competitors
attempt to extend the capabilities of their existing products. Increased
competitive pressure could lead to reduced demand and lower prices for the
Company's
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products, thereby materially adversely affecting the Company's operating
results. There can be no assurance that the Company will be able to compete
successfully in the future.
Competitors of the Company's LCD division in Japan include Japan-based companies
and Japan-based joint ventures such as Applied Komatsu and Koyo Lindbergh. These
competitors manufacture alternative technology systems and they could, at any
time, enter the Company's markets with improved technology or with systems that
are directly competitive with those of the Company's LCD division.
DEPENDENCE ON KEY CUSTOMERS
Historically, the Company has sold a significant proportion of its systems in
any particular period to a limited number of customers. Sales to the
Company's ten largest customers in fiscal 1993, 1994, 1995 and the six month
period of fiscal 1996 ended March 31, 1996 accounted for approximately 74%,
71%, 68% and 63% of net sales, respectively. The Company expects that sales
of its products to relatively few customers, particularly Advanced Micro
Devices, IBM, Intel, Motorola, Samsung, SGS Thomson and Siemens will continue
to account for a high percentage of net sales in the foreseeable future. None
of the Company's customers has entered into a long-term agreement requiring
it to purchase the Company's products. Moreover, the Company believes that
sales to certain of its customers will decrease in the near future as those
customers complete current purchasing requirements for new or expanded
fabrication facilities. Although the composition of the group comprising the
Company's largest customers has varied from year to year, the loss of a
significant customer or any reduction in orders from any significant
customer, including departures from recent buying patterns, market, economic
or competitive conditions in the semiconductor industry or in the industries
that manufacture products utilizing integrated circuits, could materially
adversely affect the Company's business, financial condition and results of
operations. The Company's ability to increase its sales in the future will
depend in part upon its ability to obtain orders from new customers as well
as the financial condition and success of its customers and the general
economy, of which there can be no assurance.
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
The Company is currently undergoing a period of rapid growth. Since 1993, the
Company has significantly increased the scale of its operations to support
increased sales levels and has expanded its operations to address critical
infrastructure requirements, including the hiring of additional personnel,
commencement of independent operations in the United Kingdom, Korea, Japan,
Singapore and Taiwan and significant investments in research and development to
support product development. The Company's expansion has resulted in
significantly higher operating expenses, and the Company expects that its
operating expenses will continue to increase significantly. If the Company is
unable to achieve significantly increased sales or its sales fall below
expectations, the Company's operating results will be materially adversely
affected. Any failure to expand these areas in an efficient manner could have a
material adverse effect on the Company's operating results. Moreover, there can
be no assurance that net sales will increase or remain at or above recent
levels.
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The recent growth in the Company's sales and expansion in the scope of its
operations has placed a considerable strain on its management, financial and
other resources and has required the Company to initiate an extensive
reevaluation of its operating and financial systems, procedures and controls. In
this regard, in connection with their examination of the fiscal 1995 financial
statements, the Company's auditors noted that the Company's current systems had
a number of limitations and identified a significant deficiency in the Company's
internal control structure due to the absence of a comprehensive set of written
policies and procedures. Although the Company is engaged in defining and
implementing new management information, manufacturing and cost accounting
systems, these systems are not currently expected to be fully operational until
late fiscal 1996 at the earliest. While the Company continues to devote
resources to the improvement of its systems and the expansion of its financial
staff, additional personnel will need to be hired to fully implement new
systems and procedures. There can be no assurance that the Company can
successfully add such personnel in a timely fashion or that any existing or new
systems, procedures or controls will be adequate to support the Company's
operations or that its new systems will be designed and implemented in a cost
effective and timely manner.
RAPID TECHNOLOGICAL CHANGE; IMPORTANCE OF TIMELY PRODUCT INTRODUCTION
The semiconductor manufacturing industry is subject to rapid technological
change and new product introductions and enhancements. The Company's ability
to be competitive will depend in part upon its ability to develop new and
enhanced systems and to introduce these systems at competitive prices and in
a timely and cost effective manner to enable customers to integrate the
systems into their operations either prior to or upon commencement of volume
product manufacturing. In addition, new product introductions or enhancements
by the Company's competitors could cause a decline in sales or loss of market
acceptance of the Company's existing products. Increased competitive pressure
could also lead to intensified price-based competition resulting in lower
prices and margins, which would materially adversely affect the Company's
business, financial condition and results of operations. Any success of the
Company in developing, introducing and selling new and enhanced systems
depends upon a variety of factors including product selection, timely and
efficient completion of product design and development, timely and efficient
implementation of manufacturing and assembly processes, effective sales and
marketing and product performance in the field. In particular, the Company's
future performance will depend in part upon the successful commercialization
of the Strata, the VHP and the PEP. There can be no assurance that any such
product will achieve any significant revenues or contribute to the
profitability of the Company. Because new product development commitments
must be made well in advance of sales, new product decisions must anticipate
both the future demand for the type of integrated circuits ("ICs") under
development by leading IC manufacturers and the equipment required to produce
such ICs. There can be no assurance that the Company will be successful in
selecting, developing, manufacturing and marketing new products or in
enhancing existing products.
Because of the large number of components in, and the complexity of, the
Company's systems, significant delays can occur between a system's initial
introduction and the commencement of volume production. As is typical in the
semiconductor capital equipment market, the Company has experienced delays from
time to time in the introduction of, and certain technical and manufacturing
difficulties with, certain of its systems and enhancements and may experience
delays and technical and manufacturing difficulties in future introductions or
volume production
Page 13
<PAGE>
of new systems or enhancements. The Company's inability to complete the
development or meet the technical specifications of any of its new systems,
including the Strata, the VHP and the PEP or enhancements or to manufacture and
ship these systems or enhancements in volume and in a timely manner would
materially adversely affect the Company's business, financial condition and
results of operations as well as its customer relationships. In addition, the
Company may incur substantial unanticipated costs to ensure the functionality
and reliability of its future product introductions early in the product's life
cycle. If new products have reliability or quality problems, reduced orders or
higher manufacturing costs, delays in collecting accounts receivable and
additional service and warranty expenses may result, which events could
materially adversely affect the Company's business, financial condition and
results of operations.
LENGTHY SALES CYCLE
Sales of the Company's systems depend, in significant part, upon the decision of
a prospective customer to increase manufacturing capacity through the expansion
of existing fabrication facilities or the opening of new facilities, which
typically involves a significant capital commitment. The Company often
experiences delays in finalizing system sales following initial system
qualification while the customer evaluates and receives approvals for the
purchase of the Company's systems and completes a new or expanded facility. Due
to these and other factors, the Company's systems typically have a lengthy sales
cycle during which the Company may expend substantial funds and management
effort. The Company believes that the length of the sales cycle will continue to
increase as certain of its customers centralize purchasing decisions into one
decision making entity, which is expected to intensify the evaluation process
and require additional sales and marketing expenditures by the Company.
RISKS ASSOCIATED WITH THE JAPANESE MARKET
The Company believes that increased penetration of the Asia Pacific market,
particularly Japan, will be essential to its future financial performance.
The Company has sold a relatively small number of systems to Japanese
semiconductor manufacturers. To date, the Company has not fully developed a
customer service and support capability in Japan and remains at a
disadvantage in selling, servicing and supporting products locally. The
Japanese semiconductor market (including fabrication plants operated outside
of Japan by Japanese semiconductor manufacturers) represents a substantial
percentage of the worldwide semiconductor manufacturing capacity, and has
been difficult for non-Japanese companies to penetrate. Furthermore, the
licensing of products and process technologies by Japanese semiconductor
manufacturers to non-Japanese semiconductor manufacturers could result in a
recommendation to use certain semiconductor capital equipment manufactured by
Japanese companies. Late in fiscal 1995, the Company acquired a local company
in Japan, but there can be no assurance that this company will enable the
Company to penetrate Japan. In addressing this market, the Company is at a
distinct competitive disadvantage compared to leading Japanese suppliers,
many of which have long-standing collaborative relationships with Japanese
semiconductor manufacturers. In addition, since 1992, Japanese semiconductor
manufacturers have substantially reduced their levels of capital spending on
new fabrication facilities and equipment, thereby increasing competitive
pressures in the Japanese market. Although the Company is investing
significant resources in
Page 14
<PAGE>
Japan which has significantly increased operating expenses, there can be no
assurance that the Company will be able to achieve significant sales to the
Japanese semiconductor market.
INTERNATIONAL SALES
International sales accounted for 42%, 41%, 40% and 51% of net sales in fiscal
years 1993, 1994, 1995 and for the six month period ended March 31, 1996 of
fiscal 1996, respectively. The Company has established independent operations in
the United Kingdom, Korea, Japan, Singapore and Taiwan and acquired a company in
Japan. The Company anticipates that international sales will continue to account
for a significant portion of net sales. International sales are subject to
certain risks, including unexpected changes in regulatory requirements, exchange
rates, foreign currency fluctuations, tariffs and other barriers, political and
economic instability, potentially adverse tax consequences, natural disasters,
outbreaks of hostilities, difficulties in accounts receivable collection,
extended payment terms, difficulties in managing distributors or representatives
and difficulties in staffing and managing foreign subsidiary and branch
operations. The Company is also subject to the risks associated with the
imposition of legislation and import and export regulations. The Company cannot
predict whether tariffs, quotas, duties, taxes or other charges or restrictions
will be implemented by the United States, Japan or any other country upon the
importation or exportation of the Company's products in the future. There can be
no assurance that these factors will not have a material adverse effect on the
Company's business, financial condition and results of operations.
INTELLECTUAL PROPERTY RIGHTS
Although the Company attempts to protect its intellectual property rights
through patents, copyrights, trade secrets and other measures, it believes that
its financial performance will depend more upon the innovation, technological
expertise and marketing abilities of its employees than upon such protection.
There can be no assurance that any of the Company's pending patent applications
will be issued or that foreign intellectual property laws will protect the
Company's intellectual property rights. There can be no assurance that any
patent issued to the Company will not be challenged, invalidated or circumvented
or that the rights granted thereunder will provide competitive advantages to the
Company. Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or, if
patents are issued to the Company, design around the patents issued to the
Company.
As is typical in the semiconductor industry, the Company has received notices
from time to time from third parties alleging infringement claims. Although
there are currently no pending claims or lawsuits against the Company regarding
any possible infringement claims, there can be no assurance that infringement
claims by third parties or claims for indemnification resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to have merit, will not materially adversely affect the Company's
business, financial condition and results of operations. If any such claims are
asserted against the Company, the Company may seek to obtain a license under the
third party's intellectual property rights. There can be no assurance that a
license will be available on reasonable terms or at all. The Company could
decide, in the alternative, to resort to litigation to challenge such claims.
Such challenges could be extremely
Page 15
<PAGE>
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations.
SOLE OR LIMITED SOURCES OF SUPPLY; RELIANCE ON SUBCONTRACTORS; COMPLEXITY IN
MANUFACTURING PROCESS
Certain components, subassemblies and services necessary for the manufacture of
the Company's systems are obtained from a sole supplier or a limited group of
suppliers. Specifically, the Company relies on two companies for supply of the
robotics used in its products and two other companies for microwave power
supplies used in all of its ashing systems. The Company does not maintain any
long-term supply agreements with any of its suppliers. The Company is relying
increasingly on outside vendors to manufacture certain components and
subassemblies. The Company's reliance on sole or a limited group of suppliers
and the Company's increasing reliance on subcontractors involve several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control over pricing and timely delivery of components
and subassemblies. Because the manufacture of certain of these components and
subassemblies is an extremely complex process and requires long lead times,
there can be no assurance that delays or shortages caused by suppliers will not
occur in the future. Certain of the Company's suppliers have relatively limited
financial and other resources. Any inability to obtain adequate deliveries or
any other circumstance that would require the Company to seek alternative
sources of supply or to manufacture such components internally could delay the
Company's ability to ship its products, which could damage relationships with
current and prospective customers and could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's LCD division in Japan, is heavily dependent on one key supplier
for quartz and ceramic fabrication and is seeking alternative sources.
FUTURE ACQUISITIONS
In August 1995, the Company acquired its flat panel display equipment (LCD)
division in Japan (formerly called Tekisco). In the future, the Company may
pursue acquisitions of additional product lines, technologies or businesses.
Future acquisitions by the Company may result in potentially dilutive issuances
of equity securities, incurrence of debt and amortization expenses related to
goodwill and other intangible assets, which could materially adversely affect
the Company's financial condition and results of operations. In addition,
acquisitions involve numerous risks, including difficulties in the assimilation
of the operations, technologies and products of the acquired companies, the
diversion of management's attention from other business concerns, risks of
entering markets in which the Company has no or limited direct prior experience,
and the potential loss of key employees of the acquired company. From time to
time, the Company has engaged in preliminary discussions with third parties
concerning potential acquisitions of product lines, technologies and businesses;
however, there are currently no negotiations, commitments or agreements with
respect to any acquisition. In the event that such an acquisition does occur,
there can be no assurance as to the effect thereof on the Company's business,
financial condition or operating results.
Page 16
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's financial performance will depend in significant part upon the
continued contributions of its officers and key personnel, many of whom would be
difficult to replace. No employee has an employment or noncompetition agreement
with the Company. The loss of any key person could have a material adverse
effect on the business, financial condition and results of operations of the
Company. In addition, the Company's future operating results depend in part upon
its ability to attract and retain other qualified management, engineering,
financial and accounting, technical, marketing and sales and support personnel
for its operations. Competition for such personnel is intense, and there can be
no assurance that the Company will be successful in attracting or retaining such
personnel. The failure to attract or retain such persons could materially
adversely affect the Company's business, financial condition and results of
operations.
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of governmental regulations relating to the
use, storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances used to manufacture the
Company's products. The Company believes that it is currently in compliance in
all material respects with such regulations and that it has obtained all
necessary environmental permits to conduct its business. Nevertheless, the
failure to comply with current or future regulations could result in substantial
fines being imposed on the Company, suspension of production, alteration of its
manufacturing process or cessation of operations. Such regulations could require
the Company to acquire expensive remediation equipment or to incur substantial
expenses to comply with environmental regulations. Any failure by the Company to
control the use, disposal or storage of, or adequately restrict the discharge
of, hazardous or toxic substances could subject the Company to significant
liabilities.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
As of March 31, 1996, the Company's officers, directors and members of their
families that may be deemed affiliates of such persons owned approximately 28.1%
of the Company's outstanding shares of common stock. Accordingly, these
stockholders will be able to significantly influence the election of the
Company's directors and the outcome of corporate actions requiring stockholder
approval, such as mergers and acquisitions, regardless of how other stockholders
of the Company may vote. Such a high level of ownership by such persons or
entities may have a significant effect in delaying, deferring or preventing a
change in control of the Company and may adversely affect the voting and other
rights of other holders of common stock. Certain provisions of the Company's
Certificate of Incorporation, 1994 Stock Option/Stock Issuance Plan, Bylaws and
Delaware law may also discourage certain transactions involving a change in
control of the Company. In addition to the foregoing, the ability of the
Company's Board of Directors to issue preferred stock without further
stockholder approval could have the effect of delaying, deferring or preventing
a change in control of the Company.
Page 17
<PAGE>
VOLATILITY OF STOCK PRICE
The Company believes that factors such as announcements of developments related
to the Company's business, fluctuations in the Company's operating results,
sales of the Company's common stock into the market place, failure to meet or
changes in analysts' expectations, natural disasters, outbreaks of hostilities,
general conditions in the semiconductor industry or the worldwide economy,
announcements of technological innovations or new products or enhancements by
the Company or its competitors, developments in patents or other intellectual
property rights and developments in the Company's relationships with its
customers and suppliers could cause the price of the Company's common stock to
fluctuate, perhaps substantially. In addition, in recent years the stock market
in general, and the market for shares of small capitalization stocks in
particular, have experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. Many companies in
the semiconductor equipment industry, including the Company, have recently
approached or experienced historical highs in the market prices of their common
stock. There can be no assurance that the market price of the Company's common
stock will not experience significant fluctuations in the future, including
fluctuations that are unrelated to the Company's performance.
Page 18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
The following proposals were voted upon by the Company's stockholders
at the Annual Meeting of Stockholders held on February 13, 1996.
1. The following four directors nominated to serve until the next
Annual Meeting, or until their successors are elected and qualified
were elected by the stockholders.
BROKER
VOTES FOR VOTES ABSTENTIONS NON-
WITHHELD VOTES
-----------------------------------------------
Monte M. Toole 10,021,710 139,438 - -
Dave Toole 10,020,960 140,188 - -
Kenneth Schroeder 10,021,975 139,173 - -
F. Joseph Van Poppelen 10,022,275 138,873 - -
2. An amendment to the Company's 1994 Stock Option/Stock Issuance
Plan (the "1994 Option Plan") which will increase a) the number of
shares of common stock authorized for issuance over the term of the
1994 Option Plan by an additional 750,000 shares and b) the number of
shares of common stock subject to the automatic option grants made to
the new and continuing non-employee Board members under the 1994
Option Plan was approved by the vote of 6,828,347 shares for the
proposal, 1,726,776 shares voting against, 18,672 shares abstained
from voting and 1,587,353 were broker non-votes.
3. An amendment to the Company's Employee Stock Purchase Plan the
"Purchase Plan") which will a) increase the number of shares of common
stock authorized for issuance over the term of the Purchase Plan by an
additional 400,000 shares and b) allow eligible employees to join the
Purchase Plan on any semi-annual entry date within an offering period
was approved by the vote of 7,507,117 shares for the proposal,
1,122,427 shares voting against, 10,589 shares abstained from voting
and 1,521,015 were broker non-votes.
Page 19
<PAGE>
4. A proposal to ratify the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending
September 30, 1996 was approved by the vote of 10,051,441 shares
voting for the proposal, 82,665 shares voting against, 27,042 shares
abstained from voting and -0- broker non-votes.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit 10.2 Amended and restated 1994 Stock Option/Stock Issuance
Plan
Exhibit 10.20 Loan agreement dated March 4, 1996 between Registrant
and Union Bank, a California banking corporation.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three month period ended
March 31, 1996
Page 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the registrant duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GASONICS INTERNATIONAL CORPORATION
(Registrant)
\s\ Jerald P. Shaevitz
----------------------------------
Date: May 14, 1996 By: Jerald P. Shaevitz
Vice President, Finance
Chief Financial Officer
Page 21
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description Numbered Page
10.2 Amended and restated 1994 Stock Option/Stock
Issuance Plan
10.20 Loan Agreement dated March 4, 1996 between
Registrant and Union Bank
27 Financial Data Schedule
Page 22
<PAGE>
GASONICS INTERNATIONAL CORPORATION
1994 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1996)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1994 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of GaSonics International Corporation, a
Delaware corporation or any successor corporation (the "Corporation") adopting
the Plan, by providing (i) key employees (including officers) of the Corporation
(or its parent or subsidiary corporations) who are responsible for the
management, growth and financial success of the Corporation (or its parent or
subsidiary corporations), (ii) the non-employee members of the Board and (iii)
consultants and other independent contractors who provide valuable services to
the Corporation (or its parent or subsidiary corporations) with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the Service
of the Corporation (or its parent or subsidiary corporations).
B. The Plan became effective upon adoption by the Board of Directors
of Gasonics International Corporation, a California corporation ("Gasonics
California") on January 27, 1994, and such date shall accordingly constitute the
Effective Date of the Plan. The Plan was subsequently assumed by the
Corporation in connection with the merger (the "Merger") of Gasonics California
into the Corporation in February, 1994.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's
<PAGE>
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board does not recommend such
stockholders to accept; or
b. a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's common stock, par value
$0.001 per share.
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Corporation is incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from the persons holding
those securities immediately prior to such merger.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.
2.
<PAGE>
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market or
any successor system. If there is no reported closing selling price for
the Common Stock on the date in question, then the closing selling price on
the last preceding date for which such quotation exists shall be
determinative of Fair Market Value.
b. If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the Fair Market Value
shall be the closing selling price per share on the date in question on the
securities exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
c. If the Common Stock is on the date in question neither
listed nor admitted to trading on any national securities exchange nor
traded on the Nasdaq National Market, then the Fair Market Value of the
Common Stock on such date shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall deem
appropriate.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:
a. the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, AND
b. the acceptance of more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer from holders other
than the officers and directors of the Corporation subject to the short-
swing profit restrictions of Section 16 of the 1934 Act.
3.
<PAGE>
INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
1934 ACT: the Securities and Exchange Act of 1934, as amended from
time to time.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program in effect under the
Plan.
PARTICIPANT: any person who receives a direct issuance of Common
Stock under the Stock Issuance Program in effect under the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
PLAN ADMINISTRATOR: shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
PRIMARY COMMITTEE: shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.
SERVICE: the performance of services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement.
SECONDARY COMMITTEE: shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
SECTION 12(G) REGISTRATION DATE: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act becomes
effective.
4.
<PAGE>
TAKE-OVER PRICE: the GREATER of (a) the Fair Market Value per share
of Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (a) price per
share.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a
PARENT of the Corporation, provided each such corporation in the unbroken
chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to
be a SUBSIDIARY of the Corporation, provided each such corporation in the
unbroken chain (other than the last corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
III. STRUCTURE OF THE PLAN
A. STOCK PROGRAMS. The Plan shall be divided into three (3)
separate components: the Discretionary Option Grant Program specified in
Article Two, the Automatic Option Grant Program specified in Article Three and
the Stock Issuance Program specified in Article Four. Under the Discretionary
Option Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Automatic Option Grant
Program, non-employee members of the Board will receive special option grants at
periodic intervals to purchase shares of Common Stock in accordance with the
provisions of Article Three. Under the Stock Issuance Program, eligible
individuals may be issued shares of Common Stock directly, either through the
immediate purchase of such shares at a price not less than eighty-five percent
(85%) of the Fair Market Value of the shares at the time of issuance or as a
bonus tied to the performance of services or the Corporation's attainment of
financial objectives.
B. GENERAL PROVISIONS. Unless the context clearly indicates
otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interests of all
individuals under the Plan.
5.
<PAGE>
IV. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. No non-employee Board member shall be eligible
to serve on the Primary Committee if such individual has, during the twelve
(12)-month period immediately preceding the date of his or her appointment to
the Primary Committee or (if shorter) the period commencing with the Section
12(g) Registration Date and ending with the date of his or her appointment to
the Primary Committee, received an option grant or direct stock issuance under
the Plan or any other stock option, stock appreciation, stock bonus or other
stock plan of the Corporation (or any Parent or Subsidiary), other than pursuant
to the Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The member or
members of the Secondary Committee may be comprised of one or more Board members
who are Employees eligible to receive discretionary option grants or direct
stock issuances under the Plan or any other stock option, stock appreciation,
stock bonus or other stock plan of the Corporation (or any Parent or
Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
6.
<PAGE>
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
V. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 2,200,000 shares,(1) subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such share reserve includes
the 750,000-share increase(1) authorized by the Board on November 6, 1995,
subject to stockholder approval at the 1996 Annual Stockholders Meeting.
B. In no event shall the aggregate number of shares of Common Stock
for which any one individual participating in the Plan may be granted stock
options and direct stock issuances exceed 825,000 shares(1) over the term of the
Plan.
C. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section IV
of Article Two of the Plan), then the shares subject to the portion of each
option not so exercised shall be available for subsequent issuance under the
Plan. Shares subject to any option or portion thereof surrendered in accordance
with Section V of Article Two or Section III of Article Three and all share
issuances under the Plan, whether or not the shares are subsequently repurchased
by the Corporation pursuant to its repurchase rights under the Plan, shall
reduce on a share-for-share basis the number of shares of Common Stock available
for subsequent issuance the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the share issuance,
and not by the net number of shares of Common Stock actually issued to the
holder of such option or share issuance.
- --------------------
(4) Each number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995. In no event, however, may more than 2,152,483
shares of Common Stock be issued under the Plan after December 31, 1995,
including the shares subject to options outstanding under the Plan on that date.
7.
<PAGE>
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one individual participating in the Plan may be granted
stock options and direct stock issuances in the aggregate over the term of the
Plan, (iii) the number and/or class of securities for which automatic option
grants are to be subsequently made per newly-elected or continuing non-employee
Board member under the Automatic Option Grant Program and (iv) the number and/or
class of securities and price per share in effect under each option outstanding
under the Discretionary Option Grant or Automatic Option Grant Program. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
8.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
VI. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; PROVIDED, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
a. The exercise price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of such Common Stock on the grant
date.
b. The exercise price per share of the Common Stock
subject to a Non-Statutory Option shall in no event be less than eighty-
five percent (85%) of the Fair Market Value of such Common Stock on the
grant date.
2. The exercise price shall become immediately due upon
exercise of the option and, subject to the provisions of Section I of
Article Five and the instrument evidencing the grant, shall be payable in one of
the alternative forms specified below:
a. full payment in cash or check made payable to the
Corporation's order;
b. full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date;
c. full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's
9.
<PAGE>
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date and cash or check made payable to the Corporation's
order; or
d. to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide concurrent irrevocable written
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation in connection with such purchase
and (ii) to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure is utilized in
connection with the exercise of the option, payment of the exercise price for
the purchased shares must accompany such notice.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under this
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years measured from the grant date. During
the lifetime of the Optionee, the option, together with any stock appreciation
rights pertaining to such option, shall be exercisable only by the Optionee and
shall not be assignable or transferable by the Optionee except for a transfer of
the option effected by will or by the laws of descent and distribution following
the Optionee's death.
C. TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
a. Should an Optionee cease Service for any reason
(including death or Permanent Disability) while holding one or more
outstanding options under this Article Two, then none of those options
shall (except to the extent otherwise provided pursuant to subparagraph 3
below) remain exercisable for more than a thirty-six (36)-month period (or
such shorter period determined by the Plan Administrator and set forth in
the instrument evidencing the grant) measured from the date of such
cessation of Service.
b. Any option held by the Optionee under this Article Two
and exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's
estate or by the
10.
<PAGE>
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
However, the right to exercise such option shall lapse upon the EARLIER of
(i) the third anniversary of the date of the Optionee's death (or such
shorter period determined by the Plan Administrator and set forth in the
instrument evidencing the grant) or (ii) the specified expiration date of
the option term. Accordingly, upon the occurrence of the earlier event,
the option shall terminate and cease to remain outstanding.a)
c. Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
d. During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares (if any) in which the Optionee is vested at the time of his or her
cessation of Service. Upon the expiration of the limited post-Service
exercise period or (if earlier) upon the specified expiration date of the
option term, each such option shall terminate and cease to remain
outstanding with respect to any vested shares for which the option has not
otherwise been exercised. However, each outstanding option shall
immediately terminate and cease to remain outstanding, at the time of the
Optionee's cessation of Service, with respect to any shares for which the
option is not otherwise at that time exercisable or in which the Optionee
is not otherwise vested.
e. Should (i) the Optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (ii) the Optionee make any
unauthorized use or disclosure of confidential information or trade secrets
of the Corporation or its parent or subsidiary corporations, then in any
such event all outstanding options held by the Optionee under this Article
Two shall terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post-Service exercise
period applicable under this paragraph C., not only with respect to the number
of vested shares of Common Stock for which each such option is exercisable at
the time of the Optionee's cessation of Service but also with respect to one or
more subsequent installments of vested shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
3. The Plan Administrator shall also have full power and
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of Service or
death from the limited period in effect under subparagraph 1. above to such
11.
<PAGE>
greater period of time as the Plan Administrator shall deem appropriate. In no
event, however, shall such option be exercisable after the specified expiration
date of the option term.
D. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the exercise price for the purchased shares.
E. REPURCHASE RIGHTS. The shares of Common Stock acquired upon the
exercise of any Article Two option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:
1. The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this Article
Two. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase any or all of those unvested
shares at the exercise price paid per share. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
instrument evidencing such repurchase right.
2. All of the Corporation's outstanding repurchase rights under
this Article Two shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such termination is precluded
by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
3. The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the Optionee under this
Discretionary Option Grant Program and thereby accelerate the vesting of such
shares in whole or in part at any time.
VII. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall NOT be
subject to such terms and conditions.
A. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its parent or subsidiary
12.
<PAGE>
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. Should the
number of shares of Common Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, then that option may nevertheless be exercised in
such calendar year for the excess number of shares as a non-statutory option
under the Federal tax laws.
B. 10% STOCKHOLDER. If any individual to whom an Incentive Option
is granted is the owner of stock (as determined under Section 424(d) of the
Code) possessing ten percent (10%) or more of the total combined voting power of
all classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date, and the option term shall not exceed five (5) years, measured
from the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
VIII. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which is
at the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to remain outstanding, except to the extent assumed by the successor
corporation or parent company.
13.
<PAGE>
C. Each outstanding option under this Article Two which is assumed
in connection with the Corporate Transaction or is otherwise to continue in
effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder, in consummation of such Corporate
Transaction, had such person exercised the option immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share, PROVIDED the aggregate exercise price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion, exercisable
either in advance of any actually-anticipated Corporate Transaction or at the
time of an actual Corporate Transaction, to provide (upon such terms as it may
deem appropriate) for (i) the automatic acceleration of one or more outstanding
options granted under the Plan which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time and/or (ii) the
subsequent termination of one or more of the Corporation's outstanding
repurchase rights which are assigned in connection with the Corporate
Transaction and do not otherwise terminate at that time, in the event Optionee's
Service should subsequently terminate within a designated period following such
Corporate Transaction.
E. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
immediate termination of one or more of the Corporation's outstanding repurchase
rights under this Article Two) upon the occurrence of the Change in Control.
The Plan Administrator shall also have full power and authority to condition any
such option acceleration (and the termination of any outstanding repurchase
rights) upon the subsequent termination of the Optionee's Service within a
specified period following the Change in Control.
F. Any options accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term.
G. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
H. The portion of any Incentive Option accelerated under this
Section III in connection with a Corporate Transaction or Change in Control
shall remain exercisable as an incentive stock option under the Federal tax laws
only to the extent the dollar limitation of Section II of this Article Two is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a non-statutory option under the
Federal tax laws.
IX. CANCELLATION AND REGRANT OF OPTIONS
14.
<PAGE>
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but with an exercise price per share not less
than (i) eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the new grant date or (ii) one hundred percent (100%) of such Fair
Market Value in the case of an Incentive Option.
X. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this Article Two in exchange for a distribution
from the Corporation in an amount equal to the excess of (i) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate exercise price payable for such vested
shares.
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the LATER of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the short-
swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over, the officer shall have a thirty (30)-day
period in which he or she may surrender any outstanding options with such a
limited stock appreciation right in effect for at least six (6) months to the
Corporation, to the extent such option is at the time exercisable for fully
vested shares of Common Stock. The officer shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the vested shares of Common Stock at the time subject to
each surrendered option (or surrendered portion of such option) over (ii) the
aggregate exercise price payable for such shares. The cash distribution shall
be made within five (5) days following the date the option is surrendered to the
Corporation, and neither the approval of the Plan Administrator nor the consent
of the Board shall be required in connection with
15.
<PAGE>
the option surrender and cash distribution. Any unsurrendered portion of the
option shall continue to remain outstanding and become exercisable in accordance
with the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section V shall NOT be available
for subsequent issuance under the Plan.
16.
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
XI. ELIGIBILITY
A. ELIGIBLE DIRECTORS. The individuals eligible to receive
automatic option grants pursuant to the July 19, 1995 restated provisions of
this Article Three program shall be limited to (i) those individuals who are
continuing to serve as non-employee Board members on July 19, 1995 and (ii)
those individuals who are first elected or appointed as non-employee Board
members on or after July 19, 1995. A non-employee Board member who has
previously been in the employ of the Corporation (or any parent or subsidiary)
shall not be eligible to receive an option grant under the Automatic Option
Grant Program at the time he or she first becomes a non-employee Board member,
but such individual shall be eligible to receive periodic option grants under
the Automatic Option Grant Program upon his or her continued service as a non-
employee Board member. Any non-employee Board member eligible to participate in
the Automatic Option Grant Program pursuant to the foregoing criteria shall be
designated an Eligible Director for purposes of this Article Three.
B. LIMITATION. Except for the option grants to be made pursuant to
the provisions of this Automatic Option Grant Program, an Eligible Director
shall not be entitled to receive any additional option grants or stock issuances
under this Plan or any other stock plan of the Corporation (or any parent or
subsidiary) during his or her period of Board service.
XII. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Option grants shall be made pursuant to the July
19, 1995 restated provisions of this Article Three on the dates specified below:
INITIAL GRANT. Each individual who first becomes an Eligible
Director on or after July 19, 1995, whether through election by the
stockholders or appointment by the Board, shall automatically be granted,
at the time of such initial election or appointment (the "Initial Grant
Date"), a Non-Statutory Option to purchase 30,000 shares(1) of Common Stock
upon the terms and conditions of this Article Three.
ANNUAL GRANT. Each Eligible Director who receives an initial
30,000-share option grant shall automatically be granted, on each
successive anniversary of the Initial Grant Date on which he or she
continues to serve as an Eligible Director, beginning with the fourth
anniversary of such Initial Grant Date, a Non-Statutory Option to purchase
an additional 7,500
- --------------------
(5) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
17.
<PAGE>
shares(1) of Common Stock upon the terms and conditions of this Article Three.
In addition, each individual who is an Eligible Director on July 19, 1995 but
who is not otherwise to receive an initial 30,000-share grant on such date shall
automatically be granted, on July 19, 1995 and each subsequent anniversary of
that grant date on which he or she continues to serve as an Eligible Director, a
Non-Statutory Option to purchase an additional 7,500 shares of Common Stock upon
the terms and conditions of this Article Three. Any Eligible Director
previously in the Corporation's employ shall receive his or her initial 7,500-
share option grant under this Article Three at the first Annual Stockholders
Meeting at which he or she is elected as a non-employee Board member and shall
automatically be granted, on the date of each succeeding Annual Stockholders
Meeting at which he or she is re-elected as a non-employee Board member, a Non-
Statutory Option to purchase an additional 7,500 shares of Common Stock upon the
terms and conditions of this Article Three.
There shall be no limit on the number of such 7,500-share option
grants any one Eligible Director may receive over his or her period of Board
service. The number of shares for which the automatic option grants are to be
made to each newly-elected or continuing Eligible Director shall be subject to
periodic adjustment pursuant to the applicable provisions of Section VI.C. Of
Article One.
B. EXERCISE PRICE. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. PAYMENT. The exercise price shall be payable in one of the
alternative forms specified below:
1. full payment in cash or check made payable to the
Corporation's order;
2. full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date;
3. full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date and cash or check made payable to the Corporation's
order; or
4. full payment through a sale and remittance procedure
pursuant to which the non-employee Board member shall provide concurrent
irrevocable written
- --------------------
(6) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
18.
<PAGE>
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares and
(ii) to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
D. OPTION TERM. Each automatic grant under this Article Three shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. EXERCISABILITY. Option grants made under this Article Three
shall become exercisable as specified below:
INITIAL GRANT. Each initial 30,000-share automatic grant shall
become exercisable in four (4) successive equal annual installments upon
the Optionee's completion of each year of Board service over the four (4)-
year period measured from the Initial Grant Date.
ANNUAL GRANT. Each annual 7,500-share automatic grant shall
become exercisable upon the Optionee's completion of one (1) year of Board
service measured from the grant date.
Each option granted under this Article Three shall automatically
accelerate and become fully exercisable for all of the shares of Common Stock at
the time subject to the option:
- should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, or
- should there occur an acceleration event specified in
Section III of this Article Three.
F. NON-TRANSFERABILITY. During the lifetime of the Optionee, each
automatic option grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following the
Optionee's death.
G. TERMINATION OF BOARD SERVICE.
1. Should the Optionee cease to serve as a Board member for any
reason other than death or Permanent Disability while holding one or more
automatic option grants under this Article Three, then each of those options
may, during the twelve (12)-month period measured from the date of such
cessation of Board service (the "Post-Service Exercise Period"), be exercised in
accordance with the following parameters:
19.
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INITIAL 30,000-SHARE GRANT
a. Should the Optionee cease Board service prior to the fourth
anniversary of the Initial Grant Date, then the Optionee may, at any time
during the Post-Service Exercise Period, exercise the option for any or all
of the option shares for which the option is exercisable at the time of
such cessation of Board service. In addition, the option shall become
exercisable for an additional twenty-five percent (25%) of the option
shares on the next anniversary of the Initial Grant Date following the
Optionee's cessation of Board service and shall remain so exercisable until
the expiration date of the Post-Service Exercise Period.
b. If the Optionee ceases Board service on or after the fourth
anniversary of the Initial Grant Date, then the Optionee may, at any time
during the Post-Service Exercise Period, exercise the option for any or all
of the option shares for which the option is exercisable at the time of
such cessation of Board service.
c. However, the option shall, immediately upon the Optionee's
cessation of Board service, terminate and cease to be outstanding with
respect to any and all option shares for which the option is not otherwise
at that time exercisable or for which it is not otherwise to become
exercisable in accordance with clause a. above.
ANNUAL 7,500-SHARE GRANT
a. The option shall become exercisable for all of the option
shares on the first anniversary of the grant date, whether or not the
Optionee continues in Board service, and shall remain so exercisable for
any or all of those shares until the expiration date of the Post-Service
Exercise Period.
b. Should the Optionee die after his or her cessation of Board
service but while holding one or more automatic option grants under this
Article Three, then the personal representative of the Optionee's estate or
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution
shall have the remainder of the applicable Post-Service Exercise Period in
which to exercise each such option in accordance with the parameters
established for the Optionee in Paragraph 1.
c. Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability while holding one or more automatic
option grants under this Article Three, then such individual (or the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution) shall have a
twelve (12)-month period following the date of such cessation
20.
<PAGE>
of Board service in which to exercise each such option for any or all of
the option shares at the time subject to the option, whether or not the
option would otherwise at that time be exercisable for those shares.
2. In no event shall any automatic grant under this Article
Three remain exercisable after the expiration date of the ten (10)-year option
term.
H. STOCKHOLDER RIGHTS. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. REMAINING TERMS. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Automatic Stock Option
Agreement attached as Exhibit A.
XIII. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each Article III
option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as fully-
vested shares. Immediately following the consummation of the Corporate
Transaction, all automatic option grants under this Article Three shall
terminate and cease to be outstanding, except to the extent assumed by the
acquiring company (or parent thereof).
B. In connection with any Change in Control of the Corporation, each
Article III option, to the extent outstanding at the time but not otherwise
fully exercisable, shall automatically accelerate so that each such option
shall, immediately prior to the specified effective date for the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of such
shares as fully-vested shares. Each such option shall remain so exercisable for
all the option shares following the Change in Control, until the expiration or
sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
Article III option held by him or her for a period of at least six (6) months.
The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the option is otherwise at the time exercisable for those shares) over (ii)
the aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to the
Corporation.
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Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option surrender and cash
distribution. The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under the Plan.
D. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
XIV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, together with
the automatic option grants outstanding under this Article Three, may not be
amended at intervals more frequently than once every six (6) months, other than
to the extent necessary to comply with applicable Federal income tax laws and
regulations.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
XV. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Four.
A. CONSIDERATION.
1. Shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock ("Newly Issued Shares") shall be
issued under the Stock Issuance Program for one or more of the following items
of consideration which the Plan Administrator may deem appropriate in each
individual instance:
a. full payment in cash or check made payable to the
Corporation's order;
b. a promissory note payable to the Corporation's order in
one or more installments, which may be subject to cancellation in whole or
in part upon terms and conditions established by the Plan Administrator; or
c. past services rendered to the Corporation or any parent
or subsidiary corporation.
2. Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than one
hundred percent (100%) of the Fair Market Value of such shares at the time of
issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
3. Shares of Common Stock reacquired by the Corporation and
held as treasury shares ("Treasury Shares") may be issued under the Stock
Issuance Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1 above) as the Plan Administrator may
deem appropriate, whether such consideration is in an amount less than, equal to
or greater than the Fair Market Value of the Treasury Shares at the time of
issuance. Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service or the Corporation's attainment of specified performance objectives as
the Plan Administrator may establish at the time of issuance.
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B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
a. the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
b. the number of installments in which the shares are to
vest,
c. the interval or intervals (if any) which are to lapse
between installments, and
d. the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction shall be
issued, subject to (i) the same vesting requirements applicable to his or her
unvested shares and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then those shares shall be immediately surrendered to the Corporation
for cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares. The surrendered
24.
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shares may, at the Plan Administrator's discretion, be retained by the
Corporation as Treasury Shares or may be retired to authorized but unissued
share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
XVI. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under this Stock Issuance Program
shall immediately vest in full and the Corporation's repurchase rights shall
terminate, except to the extent: (i) any such repurchase right is expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such termination is precluded by other limitations
imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic vesting
of one or more unvested shares outstanding under the Stock Issuance Program (and
the immediate termination of the Corporation's repurchase rights with respect to
those shares) at the time of such Change in Control. The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service within a
specified period following the Change in Control.
XVII. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets distributed with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or the distributed securities or assets)
vests. If the unvested shares are issued directly to the Participant, the
restrictive legend on the certificates for such shares shall read substantially
as follows:
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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF
SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) DATED , 199 , A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift or other disposition
of such shares, whether voluntary or involuntary. Upon any such attempted
transfer, the unvested shares shall immediately be cancelled in accordance with
substantially the same procedure in effect under Section I.B.3 of this Article
Four, and neither the Participant nor the proposed transferee shall have any
rights with respect to such cancelled shares. However, the Participant shall
have the right to make a gift of unvested shares acquired under the Stock
Issuance Program to his or her spouse or issue, including adopted children, or
to a trust established for such spouse or issue, provided the donee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Issuance Agreement applicable
to the gifted shares.
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ARTICLE FIVE
MISCELLANEOUS
XVIII. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant, to the extent such Optionee or Participant is an
Employee (including an Optionee or Participant who is an officer of the
Corporation), in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the purchase of one or more
shares issued to such Participant under the Stock Issuance Program, including
the satisfaction of any Federal, state and local income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or Participant or (ii) permitting the Optionee
or Participant to pay the exercise price or purchase price for the purchased
shares in installments over a period of years. The terms of any loan or
installment method of payment (including the interest rate and terms of
repayment) shall be upon such terms as the Plan Administrator specifies in the
applicable option or issuance agreement or otherwise deems appropriate under the
circumstances. Loans or installment payments may be authorized with or without
security or collateral. However, the maximum credit available to the Optionee
or Participant may not exceed the exercise or purchase price of the acquired
shares (less the par value of such shares) plus any Federal, state and local
income and employment tax liability incurred by the Optionee or Participant in
connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
XIX. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment, and (ii) any amendment made
to the Automatic Option Grant Program (or any options outstanding thereunder)
shall be in compliance with the limitation of Section IV of Article Three. In
addition, the Board may not, without the approval of the Corporation's
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan or the number of shares for which options may be
granted to newly- elected or continuing Eligible Directors under Article Three
of the Plan or the maximum number of shares for which any one individual
participating in the Plan may be granted stock options and direct stock
issuances in the
27.
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aggregate over the term of the Plan,, except for permissible adjustments under
Section VI.C. of Article One, (ii) materially modify the eligibility
requirements for plan participation or (iii) materially increase the benefits
accruing to plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and (ii) shares of Common Stock may
be issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program or the Stock Issuance Program are held in escrow until stockholder
approval is obtained for a sufficient increase in the number of shares available
for issuance under the Plan. If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then (i) any unexercised excess options shall
terminate and cease to be exercisable and (ii) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
XX. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of Non-Statutory Options (other than the automatic option grants made
pursuant to Article Three of the Plan) or unvested shares under the Plan with
the right to use shares of the Corporation's Common Stock in satisfaction of all
or part of the Federal, state and local income and employment tax liabilities
incurred by such holders in connection with the exercise of their options or the
vesting of their shares (the "Taxes"). Such right may be provided to any such
holder in either or both of the following formats:
STOCK WITHHOLDING: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value to exceed one
hundred percent (100%) of the applicable Taxes.
STOCK DELIVERY: The Plan Administrator may, in its discretion,
provide the holder of the Non-Statutory Option or the unvested shares with
the election to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of Common Stock
previously acquired by such individual (other than in connection with
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the option exercise or share vesting triggering the Taxes) with an
aggregate Fair Market Value not to exceed one hundred percent (100%) of the
Taxes incurred in connection with such option exercise or share vesting.
XXI. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective immediately upon adoption by the Board
of Directors of Gasonics California. This Plan was subsequently assumed by the
Corporation in connection with the Merger. Stock options and share issuances
may be made under Articles Two and Four of the Plan from and after the Effective
Date.
B. The Plan was amended by the Board on September 21, 1994 to (i)
increase the number of shares of Common Stock issuable under the Plan by an
additional 500,000 shares(1) and (ii) increase the maximum number of shares of
Common Stock for which any one individual may be granted stock options and
direct stock issuances under the Plan by an additional 250,000 shares(1) (the
"1994 Amendment"). The stockholders approved the 1994 Amendment at the 1995
Annual Meeting which was held on February 14, 1995. The Plan was subsequently
restated by the Board on July 19, 1995 to revise the provisions of the Automatic
Option Grant Program in effect under Article III (the "June 1995 Restatement").
The June 1995 Restatement became effective when adopted by the Board. However,
no automatic option grants made pursuant to the restated provisions of the
Automatic Option Grant Program shall become exercisable in whole or in part
unless and until the June 1995 Restatement is approved by the stockholders.
Should such stockholder approval not be obtained at the 1996 Annual Meeting,
then each automatic option grant made pursuant to the June 1995 Restatement
shall terminate and cease to remain outstanding, to the extent of the increased
number of shares subject to that grant as a result of the provisions of the June
1995 Restatement, and the balance of each such option shall continue in full
force and effect. No further automatic option grants shall be made on the basis
of the June 1995 Restatement. However, the provisions of the Automatic Option
Grant Program as in effect immediately prior to the June 1995 Restatement shall
automatically be reinstated, and automatic option grants may thereafter continue
to be made pursuant to the reinstated provisions of the Automatic Option Grant
Program. All automatic option grants made prior to the June 1995 Restatement
shall remain outstanding in accordance with the terms and conditions of the
respective instruments evidencing those options, nothing in the 1995 Restatement
shall be deemed to modify or in any way affect those outstanding options. On
November 6, 1995, the Board authorized an additional increase to the number of
shares of Common Stock available for issuance under the Plan. Such share
increase, as adjusted for the 3-for-2 split of the Common Stock effected on
November 20, 1995, has made an additional 750,000 shares available for issuance
under the Plan. However, no option granted on the basis of such increase shall
become exercisable, in whole or in part, unless and until the stockholders
approve the increase. If such stockholder approval is not obtained at the 1996
Annual
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(7) The numbers DO NOT reflect the 3-for-2 split of the Common Stock effected by
the Corporation on November 20, 1995.
29.
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Meeting, then any options previously granted on the basis of the 750,000-share
increase shall terminate, and no further options based on such increase shall be
granted. All outstanding options under the Plan which have NOT been granted on
the basis of the 750,000-share increase shall remain outstanding in accordance
with the terms and provisions of the agreements evidencing those grants, whether
or not stockholder approval of the share increase is obtained. Subject to the
foregoing limitations, the Plan Administrator may grant options under the plan
at any time before the date fixed herein for the termination of the Plan.
C. The Plan was amended on February 1, 1996 to authorize the
appointment of the Secondary Committee for purposes of administering the
Discretionary Option Grant and Stock Issuance Programs with respect to
individuals who are non Section 16 insiders. The Primary Committee shall also
retain separate but concurrent authority to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to such individuals.
D. The Plan shall terminate upon the EARLIER of (i) December 31,
2003 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued or cancelled pursuant to the exercise, surrender or cash-
out of the options granted under the Plan or the issuance of shares (whether
vested or unvested) under the Stock Issuance Program. If the date of
termination is determined under clause (i) above, then all option grants and
unvested share issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grants or issuances.
XXII. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
XXIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
or stock appreciation right under the Plan, the issuance of any shares under the
Stock Issuance Program and the issuance of Common Stock upon the exercise of the
stock options or stock appreciation rights granted hereunder shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options and
stock appreciation rights granted under it and the Common Stock issued pursuant
to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.
XXIV. NO EMPLOYMENT/SERVICE RIGHTS
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Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or any parent or subsidiary corporation) for any
period of specific duration, and the Corporation (or any parent or subsidiary
corporation retaining the services of such individual) may terminate such
individual's Service at any time and for any reason, with or without cause.
XXV. MISCELLANEOUS PROVISIONS
A. Except to the extent otherwise expressly provided in the Plan,
the right to acquire Common Stock or other assets under the Plan may not be
assigned, encumbered or otherwise transferred by any Optionee or Participant.
B. The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules, as such laws
are applied to contracts entered into and performed in such State.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
31.
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[LOGO]
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and entered
into as of March 4, 1996 by and between GaSonics International Corporation, a
California corporation ("Borrower") and UNION BANK, a California banking
corporation ("Bank"). This Agreement amends and restates in its entirety that
certain loan agreement dated April 19, 1995 between Bank and Borrower.
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an
amount not to exceed Fifteen Million Dollars ($15,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in amounts not less than Twenty
Five Thousand Dollars ($25,000) in accordance with the terms of the Revolving
Note; provided, however, that for at least thirty (30) consecutive days during
each twelve (12)- month period, the principal amount outstanding under the
Revolving Loan must be zero (0). All borrowings of the Revolving Loan must be
made before February 28, 1997, at which time all unpaid principal and interest
of the Revolving Loan shall be due and payable. The Revolving Loan shall be
evidenced by a promissory note (the "Revolving Note") on the standard form used
by Bank for commercial loans. Bank shall enter each amount borrowed and repaid
in Bank's records and such entries shall be deemed to be the amount of the
Revolving Loan outstanding. Omission of Bank to make any such entries shall not
discharge Borrower of its obligation to repay in full with interest all amounts
borrowed.
1.1.1.1 THE STANDBY L/C SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable, standby letters of credit (individually, an "L/C" and collectively,
the "L/Cs"). All such standby L/Cs shall be drawn on such terms and conditions
as are acceptable to Bank. The aggregate amount available to be drawn under all
outstanding L/Cs and the aggregate amount of unpaid reimbursement obligations
under drawn L/Cs shall not exceed Five Hundred Thousand Dollars ($500,000) and
shall reduce, dollar for dollar, the maximum amount available under the
Revolving Loan. No standby L/C shall have an expiry date more than twelve (12)
months from its date of issuance and each L/C shall be governed by the terms of
(and Borrower agrees to execute) Bank's standard form for standby L/C
applications and reimbursement agreements. No L/C shall expire after February
28, 1997.
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1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all the
credit facilities described above.
As used herein the word "Note" shall mean, collectively, all the
promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for general working capital purposes.
1.4 INTEREST. The unpaid principal balance of the Revolving Loan
shall bear interest at the rate or rates provided in the Revolving Note and
selected by Borrower. The Revolving Loan may be prepaid in full or in part
only in accordance with the terms of the Revolving Note and any such prepayment
shall be subject to the prepayment fee provided for therein.
1.5 BALANCES. Borrower shall maintain its major depository accounts
with Bank until the Note and all sums payable pursuant to this Agreement have
been paid in full.
1.6 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.7 CONTROLLING DOCUMENT. In the event of any inconsistency between
the terms of this Agreement and any Note or any of the other Loan Documents, the
terms of such Note or other Loan Documents will prevail over the terms of this
Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with all
terms and conditions required by this Agreement to be performed or complied with
by it prior to or at the date of the making of such disbursement and shall have
executed and delivered to Bank the Note and other documents deemed necessary by
Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 TERMINATION STATEMENTS. Borrower shall have provided Bank with
UCC-2 termination statements executed by such secured creditors as may be
required by Bank suitable for filing with the Secretary of State in each state
designated by Bank.
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<PAGE>
2.4 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
design and manufacturing of semiconductor manufacturing equipment.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest) and their addresses, and the names of
Borrower's principal shareholders, are as provided on a schedule delivered to
Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance of
this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms of
any indenture, agreement or undertaking to which Borrower is a party or by which
it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of Borrower,
including both a balance sheet at September 30, 1995 together with supporting
schedules, and an income statement for the twelve (12) months ended September
30, 1995, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby. Since September 30, 1995, there has been no material adverse change in
the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to all of
the property reflected in its financial statements delivered to Bank and to all
property acquired by Borrower since the date of said financial statements, free
and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any of
its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.
3.8 ORGANIZATION. Borrower is duly organized and existing under the
laws of the state of its organization, and has the power and authority to carry
on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
- 3 -
<PAGE>
3.10 AUTHORIZATION. This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with respect
to any applicable laws, rules, ordinances or regulations which materially affect
the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently planned
by Borrower, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and none of the proceeds of the Loan will be used directly or
indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan only
as provided in subsection 1.3 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
- 4 -
<PAGE>
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within Fifty (50) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited
balance sheet as of the close of such fiscal quarter, its unaudited income and
expense statement with supportive schedules and statement of retained earnings
for that fiscal quarter, prepared in accordance with generally accepted
accounting principles;
(b) Within One Hundred Twenty (120) days after the close of each
fiscal year, a copy of its statement of financial condition including at least
its balance sheet as of the close of such fiscal year, its income and expense
statement and retained earnings statement for such fiscal year, examined and
prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year;
(c) Such other financial statements and information as Bank may
reasonably request from time to time;
(d) In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants;
(e) Within Fifty (50) days after each fiscal quarter, a
certification of compliance with all covenants under this Agreement, executed by
Borrower's chief financial officer or other duly authorized officer of Borrower,
in form acceptable to Bank;
(f) Prompt written notice to Bank of all events of default under
any of the terms or provisions of this Agreement or of any other agreement,
contract, document or instrument entered, or to be entered into with Bank; and
of any litigation which, if decided adversely to Borrower, would have a
material adverse effect on Borrower's financial condition; and of any other
matter which has resulted in, or is likely to result in, a material adverse
change in its financial condition or operations; and
(g) Prior written notice to Bank of any changes in Borrower's
officers and other senior management; Borrower's name; and location of
Borrower's assets, principal place of business or chief executive office.
4.6 CURRENT RATIO. Borrower will at all times maintain a ratio of
current assets to current liabilities of at least 2.0:1.0, as such terms are
defined by generally accepted accounting principles.
4.7 TANGIBLE NET WORTH. Borrower will at all times maintain Tangible
Net Worth of not less than Fifty Eight Million Dollars ($58,000,000).
"Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times maintain
a ratio of total liabilities to tangible net worth of not greater than 1.0 :1.0.
4.9 PROFITABILITY. Borrower will maintain a net profit, after
provision for income taxes, of any positive amount for any consecutive twelve
month period, as reported at the end of each fiscal quarter.
4.10 INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties. Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.
- 5 -
<PAGE>
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.
4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorneys' fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and legal staff.
4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except pursuant to agreements made with Bank.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another; provided, however, Borrower may acquire, merge or
consolidate with another corporation if Borrower is the surviving corporation
and the aggregate value of the assets so transferred does not exceed Ten Million
Dollars ($10,000,000) in any fiscal year and such assets will not be subject to
any lien or encumbrance following the effective date of such combination.
- 6 -
<PAGE>
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or advances,
become a guarantor or surety, pledge its credit or properties in any manner or
extend credit, with the exception of loans, advances, and guaranties of up to
Ten Million Dollars ($10,000,000) in aggregate to support Borrower's Japanese
subsidiary.
5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of deposit
of Bank, direct U.S. Government obligations and commercial paper issued by
corporations with the top ratings of Moody's or Standard & Poor's, provided all
such permitted investments shall mature within one year of purchase.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any
dividends, other than a dividend payable in its own common stock, or authorize
or make any other distribution with respect to any of its stock now or hereafter
outstanding.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire any
share of its capital stock for value.
5.8 PARENT AND SUBSIDIARY PROPERTY. Borrower will not transfer any
property to its parent or any affiliate of its parent, except for value received
in the normal course of business as business would be conducted with an
unrelated or unaffiliated entity. In no event shall management fees or fees for
services be paid by Borrower to any such direct or indirect affiliate without
Bank's prior written approval.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or observance of
any covenant or condition of the Loan Documents;
6.4 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or
6.5 There is a change in ownership or control of ten percent (10%) or
more of the issued and outstanding stock of Borrower or any Guarantor, or (if
Borrower is a partnership) there is a change in ownership or control of any
general partner's interest.
- 7 -
<PAGE>
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment of Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing signed
by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may be
changed from time to time by notice delivered as provided above.
- 8 -
<PAGE>
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK
/s/ Mark P. Gilles
By: Mark P. Gilles
Title Vice President
/s/ Kelly D. Takahashi
By: Kelly D. Takahashi
Title Vice President
Address: 350 California Street, 10th floor
San Francisco, CA 94104-1402
Attention: Kelly D. Takahashi
Telecopier: (415) 705-7111
Telephone: (415) 705-7098
GASONICS INTERNATIONAL CORPORATION
/s/ Jerald P. Shaevitz
By: Jerald P. Shaevitz
Title Chief Financial Officer
/s/ Dave Toole
By: Dave Toole
Title President
Address: 2730 Junction Avenue
San Jose, CA 95134
Attention: Jerald P. Shaevitz
Telecopier: (408) 325-6691
Telephone: (408) 325-1222
- 9 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 6,038
<SECURITIES> 15,984
<RECEIVABLES> 33,984
<ALLOWANCES> 551
<INVENTORY> 25,796
<CURRENT-ASSETS> 86,528
<PP&E> 12,126
<DEPRECIATION> 2,706
<TOTAL-ASSETS> 96,986
<CURRENT-LIABILITIES> 24,925
<BONDS> 0
0
0
<COMMON> 604
<OTHER-SE> 70,870
<TOTAL-LIABILITY-AND-EQUITY> 96,986
<SALES> 70,779
<TOTAL-REVENUES> 70,779
<CGS> 32,301
<TOTAL-COSTS> 32,301
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 13,268
<INCOME-TAX> 4,644
<INCOME-CONTINUING> 8,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,624
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
