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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, 1997
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
GASONICS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2159729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2540 Junction Avenue, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 570-7000
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
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At March 31, 1997, there were 13,650,090 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, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Operations for the
three and six month periods ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the
six month periods ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Securityholders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
Exhibit Index 24
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PART I . FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GASONICS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MAR. 31, Sept. 30,
ASSETS 1997 1996
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(UNAUDITED)
Current assets:
Cash and cash equivalents $ 8,615 $ 11,774
Marketable securities 12,463 14,135
Trade accounts receivable, net 35,823 23,032
Inventories 25,472 26,817
Prepaid and deferred income taxes 3,451 3,451
Prepaid expenses & other current assets 1,879 3,204
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Total current assets 87,703 82,413
Property & equipment, net 13,543 11,575
Deposits and other assets 2,362 2,442
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Total assets $ 103,608 $ 96,430
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LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 2,455 $ 2,455
Accounts payable 10,367 7,318
Income taxes payable 1,856 1,100
Accrued expenses 12,032 12,316
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Total current liabilities 26,710 23,189
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Long-term liabilities 490 552
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Stockholders' equity:
Common stock &
additional paid-in capital 32,865 31,413
Unrealized gain on investment 909 902
Note receivable from stockholder (15) (65)
Retained earnings 42,649 40,439
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Total stockholders' equity 76,408 72,689
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Total liabilities & stockholders' equity $ 103,608 $ 96,430
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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,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 29,592 $ 36,997 $ 59,278 $ 70,779
Cost of sales 16,405 17,024 33,429 32,301
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Gross margin 13,187 19,973 25,849 38,478
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Operating expenses:
Research & development 4,328 4,618 8,417 8,787
Selling, general & administrative 7,124 9,130 14,323 17,059
--------- --------- --------- ---------
Total operating expenses 11,452 13,748 22,740 25,846
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Operating income 1,735 6,225 3,109 12,632
Other income 236 344 291 636
--------- --------- --------- ---------
Income before provision for income taxes 1,971 6,569 3,400 13,268
Provision for income taxes 690 2,299 1,190 4,644
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Net income $ 1,281 $ 4,270 $ 2,210 $ 8,624
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--------- --------- --------- ---------
Net income per share $ 0.09 $ 0.32 $ 0.16 $ 0.64
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common &
common equivalent shares 14,276 13,512 14,198 13,618
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes.
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GASONICS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
MARCH 31,
------------------------
1997 1996
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Cash flows from operating activities:
Net cash used for operating activities $ (3,052) $ (10,443)
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Cash flows from investing activities:
Purchases of property & equipment (3,238) (3,746)
Decrease in marketable securities 1,679 11,710
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Net cash provided by (used for)
investing activities (1,559) 7,964
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Cash flows from financing activities:
Proceeds from issuance of common stock 1,452 922
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Net cash provided by financing activities 1,452 922
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Net decrease in cash and cash equivalents (3,159) (1,557)
Cash & cash equivalents at beginning of period 11,774 7,595
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Cash & cash equivalents at end of period $ 8,615 $ 6,038
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See accompanying notes.
5
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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, 1997 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 in the Company's Annual Report
on Form 10-K for the year ended September 30, 1996. Certain
reclassifications have been made to prior year amounts to conform to current
year presentation.
2. INVENTORIES
Inventories consist of the following (in thousands):
March 31, September 30,
1997 1996
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(unaudited)
Raw Materials $12,657 $12,985
Work in Process 7,200 7,648
Finished Goods 5,615 6,184
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$25,472 $ 26,817
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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).
In February, 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
simplifies the standards for computing earnings per share previously found in
Accounting Principles Board Opinion ("APBO") No. 15. SFAS No. 128 replaces
the presentation of primary earnings per share with a presentation of basic
earnings per share, which excludes dilution. SFAS No. 128 also requires dual
presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation. Diluted earnings per share is computed similarly
to fully diluted earnings per share pursuant to APBO No. 15. SFAS No. 128
must be adopted for financial statements issued for periods ending after
December 15, 1997, including interim periods: earlier application is not
permitted. SFAS No.
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128 requires restatement of all prior-period earnings per share data
presented. The Company has determined that adoption of SFAS No. 128 will not
have a material impact on its financial position or results of operations.
The Company plans to adopt SFAS No. 128 during the first quarter of fiscal
1998.
4. LONG TERM DEBT
On March 4, 1997 the Company entered into a new loan agreement with Union
Bank that increased the unsecured line of credit from $15 million to $20
million. The new loan agreement expires on February 27, 1998. There are no
balances due under this loan agreement.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, FASB issued SFAS No. 129, "Disclosure of Information about
Capital Structures", which will be adopted by the Company in the first
quarter of 1998. SFAS No. 129 requires companies to disclose certain
information about their capital structure. The Company does not anticipate
that SFAS NO. 129 will have a material impact on its financial position,
results of operations, or cash flows.
7
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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 of fiscal 1997 ended
March 31, 1997 decreased 20.0% to $29.6 million and 16.2% to $59.3 million,
respectively, compared to net sales of $37.0 million and $70.8 million for
the comparable two periods in fiscal 1996. This decrease in net sales was
principally due to the effect of the current business slowdown in the
semiconductor industry. Order and shipment levels for the industry had been
strong through March 1996, and the Company shipped record numbers of single
chamber ash systems in the first six months of the last fiscal year. For the
six months ended March 31, 1997, however, revenues, particularly from the
sales of single chamber photoresist removal products, spare parts and
service, were materially adversely impacted by the current business slowdown.
Due to this slowdown, the Company has experienced significant delays of new
orders and rescheduling of existing orders that have materially adversely
affected the results of operations of the Company during its last two fiscal
quarters of 1996 and the first half of fiscal 1997. The decrease in the
sale of single chamber systems and in spare parts and service revenues was
partially offset by revenues from shipments of the Company's new performance
enhancing platform (PEP) systems. Multiple system PEP shipments were made in
the first six months of fiscal 1997 to fabrication facilities in Taiwan,
Southeast Asia and Europe. Also offsetting, in part, the decrease in revenue
from single chamber systems compared to the last year, was an increase in
revenue from the sale of flat panel display equipment from the Company's
liquid crystal display ("LCD") division in Japan and from the new Vertical
High Pressure (VHP) furnace equipment.
The Pacific Rim , North America and Europe accounted for approximately 49%,
35% and 16% of net sales, respectively, for the six month period ended March
31, 1997 compared to approximately 24%, 50% and 26%, respectively, for the
six month period ended March 31, 1996.
The Company's bookings of new orders for the quarter ended March 31, 1997
were less than the proceeding quarter and were also less then net sales for the
quarter ended March 31, 1997. The Company expects that its future sales will
continue to be materially adversely impacted by the current business climate
and other factors as discussed herein.
GROSS MARGIN as a percentage of net sales for the second quarter and six
month period of fiscal 1997 was 45% and 44%, respectively, compared to 54%
for the same quarter and six month period of fiscal 1996. The significant
decrease in gross margin percentage as compared to the prior year was
primarily due to several factors, including significantly lower sales volume
of the more mature, higher margin single chamber systems, underutilization of
the manufacturing and
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field service and support operations and increased revenues of lower margin
new products including the PEP and flat panel display equipment. The
Company's gross margin as a percentage of net sales is 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. The Company expects that its gross margin will continue to be
materially adversely impacted by inefficiencies associated with new product
introductions, sales of lower margin PEP systems and flat panel display
equipment products, 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 1997
were $4.3 million or 14.6% of net sales compared to $4.6 million or 12.5% of
net sales for the second quarter of fiscal 1996. For the six month period of
fiscal 1997 and fiscal 1996, research and development expenses were $8.4
million or 14.2% of net sales and $8.8 million or 12.4% of net sales,
respectively. Research and development expenses consist primarily of
salaries, project materials, consultant fees and other costs associated with
the Company's research and development efforts. The overall level of
absolute dollar spending in the second quarter and the six month period ended
March 31, 1997 was slightly less than the same periods last fiscal year.
Increased spending for new product development including the PEP and VHP,
customization of current products and next generation programs including new
products to accommodate 300MM wafers was offset by reduced spending in other
areas of engineering including sustaining, product design and LCD product
engineering. The Company anticipates that research and development spending
in absolute dollars may increase in subsequent quarters due to the emphasis
placed by the Company on new product development.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES of $7.1 million in the second
quarter of fiscal 1997 and $14.3 million for the six month period of fiscal
1997 decreased from $9.1 million and $17.1 million for the second quarter and
six month period, respectively, of fiscal 1996. As a percentage of net
sales, selling, general and administrative expenses also decreased in the
second quarter of fiscal 1997 to 24.1% from 24.7% for the same quarter of
fiscal 1996 and remained essentially unchanged at approximately 24.1% for
the six month periods of fiscal 1997 and 1996. The decrease in absolute
dollars from the corresponding period last year is primarily due to lower
third party commissions which are payable on a significant portion of the
international sales and, to a lesser extent, to the reduction in headcount
that occurred in late fiscal 1996. Third party commissions can fluctuate
significantly in any period depending on the mix of domestic versus foreign
sales that are subject to third party commissions. While international sales
accounted for approximately 59% of the net sales for the second quarter of
fiscal 1997 and 65% for the six month period ended March 31, 1997 compared to
49% for both the same quarter and six month period last fiscal year, a
significant portion of fiscal 1997 international sales were not subject to
third party commissions. The Company has and is continuing to build an
infrastructure worldwide to provide direct sales and support which is
lessening the Company's dependence on third party representatives for these
services. Consequently, third party commissions in some regions have been
eliminated or reduced. Although the Company has taken steps to manage its
spending due to the uncertainties of the current business climate, it
anticipates that selling, general and administrative spending may increase
modestly in absolute dollars in subsequent quarters.
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OTHER INCOME AND EXPENSES primarily consists of interest expense and interest
income. Interest expense of approximately $16,000 for the quarter and $30,000
for the six month period of fiscal 1997 compared to $21,000 for the quarter
and $47,000 for the six month period of fiscal 1996 is for a short-term loan
from the Bank of Tokyo-Mitsubishi made to the Company's wholly owned
subsidiary in Japan, GaSonics International Japan K.K., in the amount of 270
million yen which is equivalent to approximately $2.5 million as of March 31,
1997. Interest income from the Company's short-term investments was
approximately $155,000 for the second quarter and $372,000 for the six month
period of fiscal 1997 compared to $365,000 and $683,000 for second quarter
and six month period of fiscal 1996, respectively. This decrease is
essentially due to a decline in the Company's investments in marketable
securities, cash and cash equivalents that were used to fund operating
activities.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1997, cash, cash equivalents and
marketable securities decreased by $4.8 million to $21.1 million at March 31,
1997 from $25.9 million at September 30, 1996. Operating activities used
$3.1 million of cash for the six month period ended March 31, 1997 compared
to the use of $10.4 million for the same period of fiscal 1996.
Investing activities for the first six months of fiscal 1997 used cash of
approximately $1.6 million as capital spending of $3.2 million was partially
offset by proceeds from the sale of marketable securities of $1.7 million.
Capital spending included purchases of equipment and the installation of a
new computer system. For the same six month period last year, the Company
received proceeds from the sale of $11.7 million in marketable securities
and used $3.7 million to purchase equipment and leasehold improvements.
Financing activities provided $1.5 million and $922,000 for the six month
periods ended March 31, 1997 and 1996, respectively, primarily from the
issuance of stock in connection with the Company's employee stock purchase
and stock option plans.
At March 31, 1997, the Company had working capital of $61.0 million compared
to $59.2 million at September 30, 1996. Accounts receivable at March 31,
1997 increased $12.8 million from September 30, 1996 due primarily to $7.5
million due from one customer who is experiencing delays in obtaining
financing, extended final acceptance and payment terms for two customers, and
due to an increase in current quarter revenue over the quarter ending
September 30, 1996. If any such customer is unable to pay for the Company's
equipment, the Company's financial condition and results of operations could
be materially adversely affected. Inventory decreased $1.3 million from
September 30, 1996 to March 31, 1997 reflecting volume production and
shipment of PEP systems and efforts focused on cycle time reduction. 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.
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The Company's principal sources of liquidity at March 31, 1997 consisted of
approximately $8.6 million in cash and cash equivalents, $12.5 million in
marketable securities and a $20.0 million unsecured line of credit with Union
Bank which was entered into on March 4, 1997. A commercial letter of credit
provision of $500,000 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.
The 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, 1997, except for $69,193 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. The line of
credit agreement expires February 28, 1998. As of March 31, 1997, GaSonics
International Japan KK had an outstanding loan of approximately $2.5 million
from the Bank of Tokyo-Mitsubishi against a promissory note which is secured
by a Letter of Guarantee issued by the Company. This loan was repaid in
April, 1997 and the Company is currently negotiating a new line of credit
agreement with the Bank of Tokyo-Mitsubishi.
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
will continue to fluctuate significantly in the future. The Company
anticipates that factors continuing to affect 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, the ability of any customer to
finance its purchases of the Company's equipment, 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 will continue to 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's gross margin and overall gross margin rate has
sharply declined from the level attained less than a year ago due, in part,
to start-up inefficiencies associated with new products, competitive pricing
pressures, changes in product mix from fewer higher margin rate and mature
single chamber products to lower margin rate dual chamber products, products
sold by the Company's LCD division in Japan, and other factors.
Additionally, sales and earnings for the last half of fiscal 1996 and the
first half of fiscal 1997 were materially adversely impacted by the current
semiconductor business slowdown and, while the Company has and is continuing
to attempt to manage its expenses to partially offset the loss of income from
the decline in revenue, it is anticipated that this slowdown in the industry
will continue throughout fiscal 1997 and will continue to have a material
adverse affect on the Company's future revenues and operating results.
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 $700,000 for its photoresist removal systems
and up to approximately $2.0 million or more for its other products. As a
result, the timing of recognition of revenue for a single transaction could
continue to 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
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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 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, most of the Company's quarterly 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, significant investments in
research and development, capital equipment and customer service and support
capability worldwide have resulted in significant fixed costs which the
Company will not be able to reduce rapidly if sales goals for a particular
period are not met, which has recently been the case. 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 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. However, in the last
year the semiconductor industry has experienced a cyclical downturn. The
Company has experienced significant delays of new orders and rescheduling of
existing orders that have materially adversely affected the Company's last
two quarters of fiscal 1996 and the first half of fiscal 1997 financial
results and is expected to materially adversely affect future financial
results. Accordingly, the Company can give no assurance that it will be able
to achieve or maintain its current level of sales. Additionally, the Company
anticipates that a significant portion of new orders depend upon demand from
integrated circuit ("IC") manufacturers building or expanding large
fabrication facilities, and there can be no assurance that such demand will
exist.
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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 announced the
introduction of, or have introduced, competitive products that offer other
technologies and improvements. Applied Materials and Lam Research have
introduced and currently sell 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 has led to reduced demand and lower
prices for the Company's 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 1994, 1995 and 1996 and the first
six months of fiscal 1997 accounted for approximately 71%, 68%, 51% and 68%
of net sales, respectively. The Company expects that sales of its products to
relatively few customers will continue to account for a high percentage of
net sales in the foreseeable future. None
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of the Company's customers has entered into a long-term agreement requiring
it to purchase the Company's products. Moreover, sales to certain of its
customers have decreased as those customers have completed or delayed
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 reductions from recent
buying patterns, market, economic or competitive conditions in the
semiconductor industry or in the industries that manufacture products
utilizing ICs, could materially adversely affect the Company's business,
financial condition and results of operations. The Company's ability to
increase or maintain current sales levels 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 has undergone 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, France, Italy,
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 due to the recent
slowdown in new orders, it is anticipated that the Company's future operating
results will continue to be materially adversely affected.
The past 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.
The Company successfully implemented new management information,
manufacturing and cost accounting systems during the second quarter of fiscal
1997. There can be no assurance, however, 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 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
has led to intensified price-based competition resulting in lower prices and
margins, which has and could continue to 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,
15
<PAGE>
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 VHP and the PEP. There can be no
assurance that any such product will achieve any significant revenues or
contribute to any 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 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 of new systems or enhancements. The
Company's inability to complete the development or meet the technical
specifications of any of its new systems 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 few number of systems to Japanese
semiconductor manufacturers, although there was a significant increase in
16
<PAGE>
the Company's sales from Japan in fiscal 1996 compared to fiscal 1995 and for
the first half of fiscal 1997 compared to the same period of fiscal 1996. To
date, for its photoresist business, the Company has not fully developed a
customer service and support capability in Japan and remains at a
disadvantage in selling, servicing and supporting such products in Japan. 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 its LCD
division in Japan, but there can be no assurance that this company will
enable the Company to penetrate the photoresist removal market in 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 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 41%, 40%, 54% and 65% of net sales in
fiscal years 1994, 1995, 1996 and the first half of fiscal 1997,
respectively. The Company has established independent operations in the
United Kingdom, France, Italy, 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, difficulty in satisfying existing
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.
17
<PAGE>
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 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 three 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
18
<PAGE>
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 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
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.
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. During the last twelve months, a number of senior management
personnel have left the Company to pursue other opportunities. Although the
Company has replaced these senior management personnel, there can be no
assurance that these individuals will successfully integrate into the
Company's senior management team. 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
19
<PAGE>
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, 1997, the Company's officers, directors and members of their
families that may be deemed affiliates of such persons beneficially owned
approximately 25.4% 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.
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. 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.
20
<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 March 3, 1997.
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 NON-
VOTES FOR WITHHELD ABSTENTIONS VOTES
Monte M. Toole 9,094,100 523,813 - -
Dave Toole 9,094,100 523,627 - -
Kenneth Schroeder 9,094,859 523,054 - -
F. Joseph Van Poppelen 9,093,980 523,933 - -
2. An amendment to the Company's 1994 Stock Option/Stock Issuance
Plan (the "Option Plan") to (a) increase the maximum number of
shares of Common Stock authorized for issuance over the term of the
Option Plan from 2,200,000 to 2,700,000 shares, (b) render the
non-employee Board members eligible to receive option grants and
direct stock issuances under the Discretionary Option Grant and
Stock Issuance Programs in effect the Option Plan, (c) allow
unvested shares issued under the Option Plan and subsequently
repurchased by the Company at the option exercise price or issue
price paid per share to be reissued under the Option Plan and (d)
remove certain restrictions on the eligibility of non-employee
Board members to serve as Plan Administrator and effect a series of
additional changes to the provisions of the Option Plan (including
stockholder approval requirements) in order to take advantage of
recent amendments to Rule 16b-3 of the Securities
21
<PAGE>
Exchange Act of 1934, as amended, was approved with 9,617,913
shares of the Company's voting securities voting on the matter, of
which 3,633,951 voted for the proposal, 1,999,126 voted against,
77,918 abstained from voting and 3,906,918 were broker non-voters.
3. An amendment to the Company's Employee Stock Purchase Plan (the
"Purchase Plan") to increase the number of shares of Common Stock
authorized for issuance over the term of the Purchase Plan from
700,000 to 1,100,000 shares was approved with 9,617,913 shares of
the Company's voting securities voting on the matter, of which
3,930,578 voted for the proposal, 1,715,093 voted against, 65,324
abstained from voting and 3,906,918 were broker non-voters.
4. A proposal to ratify the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending
September 30, 1997, was approved with 9,617,913 shares of the
Company's voting securities voting on the matter, of which
9,443,527 voted for the proposal, 36,025 voted against, 42,862
abstained from voting and 95,499 were broker non-voters.
ITEM 5. OTHER INFORMATION.
Ralph Kerns, Vice President of Technology, resigned on April 18,
1997. The Company intends to recruit a suitable replacement.
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, effective December 17, 1996
and approved by the Stockholders on March 3, 1997
Exhibit 10.3 Amended and Restated 1994 Employee Stock Purchase
Plan, effective December 17, 1996 and approved by
the Stockholders on March 3, 1997
Exhibit 10.21 Loan agreement dated March 4, 1997 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 quarter ended
March 31, 1997.
22
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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\ Terry R. Gibson
----------------------------
Date: May 2, 1997 By: Terry R. Gibson
Vice President, Finance
Chief Financial Officer
23
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION SEQUENTIALLY
NUMBERED
PAGE
10.2 Amended and Restated 1994 Stock Option/Stock Issuance Plan
10.3 Amended and Restated Employee Stock Purchase Plan
10.21 Loan agreement dated March 4, 1997 between Registrant and
Union Bank, a California banking corporation
27 Financial Data Schedule
24
<PAGE>
Exhibit 10.2
GASONICS INTERNATIONAL CORPORATION
1994 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 17, 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
<PAGE>
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; 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: 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.
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.
3.
<PAGE>
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: 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: 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: 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.
SECTION 16 INSIDER: an executive officer of the Company or a
member of the Board subject to the short-swing liability provisions of
Section 16(b) of the 1934 Act.
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
4.
<PAGE>
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 persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs shall be limited to the following:
(i) Employees of the Corporation or any parent or
subsidiary, whether now existing or subsequently established,
(ii) non-employee members of the Board or the board of
directors of any parent or subsidiary corporation, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any parent or subsidiary
corporation).
B. 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.
C. 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).
D. 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.
E. 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.
6.
<PAGE>
F. 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.
G. 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 2,700,000 shares,(1) subject to adjustment from
time to time in accordance with the provisions of this Section VI. Such
share reserve includes the 500,000-share increase authorized by the Board on
December 17, 1996, subject to stockholder approval at the 1997 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. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation at the original option or issue price paid per share will be added
back to the share reserve and will accordingly be made 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 shall not be available for subsequent issuance under 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
- ----------------------------
(1) 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
2,604,008 shares of Common Stock be issued under the Plan after November 15,
1996, including the shares subject to options outstanding under the Plan on
that date.
7.
<PAGE>
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.
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
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted under 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. 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;
9.
<PAGE>
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 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.
C. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest
in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
10.
<PAGE>
D. 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 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.
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.
11.
<PAGE>
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 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.
E. 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.
F. 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.
12.
<PAGE>
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.
II. 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
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.
13.
<PAGE>
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.
III. 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.
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 at the time the option is granted or at any time while the option
remains outstanding, 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
14.
<PAGE>
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 at the time the option is granted or at any time while the
option remains outstanding, 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 a 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.
IV. CANCELLATION AND REGRANT OF OPTIONS
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.
V. 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
15.
<PAGE>
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, either at the time of the option
surrender or at any earlier time. 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. 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 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. The Plan Administrator shall pre-approve, at the time the
limited right is granted, the subsequent exercise of that right in accordance
with the terms of the grant and the provisions of this Section V. No
additional approval of the Plan Administrator or the Board shall be required
at the time of the actual 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.
D. 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
------------------------------
I. ELIGIBILITY
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.
II. 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 (2) 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
- --------------------------
(2) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
17.
<PAGE>
Option to purchase an additional 7,500 shares(3) 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
is 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
- --------------------------
(3) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
18.
<PAGE>
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 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. LIMITED 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 to one or more immediate family members or a trust established
exclusively for one or more such family members. The assigned portion of may
only be exercised by the person or persons who acquire a
19.
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proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for
the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem fit.
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:
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.
20.
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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 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.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each Article Three
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).
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B. In connection with any Change in Control of the Corporation,
each Article Three 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 Three option held by him or her. 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. At the time of each Article Three option grant, the Board shall
concurrently pre-approve any subsequent surrender of that option in
accordance with the provisions of this Section III.C, and no additional
approval of the Board or any Plan Administrator shall accordingly be required
at the time of the actual 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.
22.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. 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
23.
<PAGE>
of future Service or the Corporation's attainment of specified performance
objectives as the Plan Administrator may establish at the time of issuance.
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 and made available for
24.
<PAGE>
subsequent issuance. 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 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.
II. 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 at the time the stock issuance is made or at any time
while that issuance remains outstanding, 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 a 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.
III. 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
25.
<PAGE>
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:
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.
26.
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ARTICLE FIVE
MISCELLANEOUS
-------------
I. 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.
II. 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, 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. In addition,
certain amendments may require stockholder approval in accordance with
applicable laws and regulations.
27.
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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.
III. 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 the
option exercise or share vesting
28.
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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.
IV. 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 (4) (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(4) (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") and was amended in November 1995 to increase the number of
shares available for issuance under the Plan by an additional 750,000 shares
(the "November 1995 Increase"). Both the June 1995 and the November 1995
Share Increase were approved by the stockholders at the 1996 Annual Meeting.
The Plan was subsequently amended on December 17, 1996 (the "December 1996
Amendment") to effect the following changes: (i) increase the number of
shares of Common Stock authorized for issuance over the term of the Plan by
an additional 500,000 shares, (ii) render the non-employee Board members
eligible to receive option grants and direct stock issuances under the
Discretionary Option Grant and Stock Issuance Programs, (iii) allow unvested
shares issued under the Plan and subsequently repurchased by the Corporation
at the option exercise price or issue price paid per share to be reissued
under the Plan and (iv) effect a series of technical changes to the
provisions of the Plan in order to take advantage of the recent amendments to
Rule 16b-3 of the Securities Exchange Act of 1934 which exempts certain
officer and director transactions under the Plan from the short-swing
liability provisions of the federal securities laws. The December 1996
Amendment is subject to stockholder approval at the 1997 Annual Meeting, and
no option grants made on the basis of the December 1996 share increase shall
become exercisable in whole or in part unless and until the December 1996
Amendment is approved by the stockholders. Should such stockholder approval
not be obtained at the 1997 Annual Meeting, then each option grant made
pursuant to the
- -----------------------
(4) 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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December 1996 share increase shall terminate and cease to remain outstanding,
and no further option grants shall be made on the basis of that share
increase. However, the provisions of the Plan as in effect immediately prior
to the December 1996 Amendment shall automatically be reinstated, and option
grants and direct stock issuances may thereafter continue to be made pursuant
to the reinstated provisions of the Plan. All option grants and direct stock
issuances made prior to the December 1996 Amendment shall remain outstanding
in accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the December 1996
Amendment shall be deemed to modify or in any way affect those outstanding
options or issuances. Subject to the foregoing limitations, the Plan
Administrator may make option grants and direct stock issuances 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.
V. 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.
VI. 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.
30.
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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.
VII. NO EMPLOYMENT/SERVICE RIGHTS
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.
VIII. 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.
<PAGE>
Exhibit 10.3
GASONICS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 17, 1996)
I. PURPOSE
A. The GaSonics International Corporation Employee Stock Purchase
Plan (the "Plan") is intended to provide eligible employees of the
Corporation and one or more of its Corporate Affiliates with the opportunity
to acquire a proprietary interest in the Corporation through participation in
a payroll-deduction based employee stock purchase plan designed to qualify
under Section 423 of the Code.
B. The Plan was adopted on January 27, 1994 by the Board of
Directors of Gasonics International Corporation, a California corporation
("Gasonics California"). The Plan was subsequently assumed by the
Corporation in connection with the merger of Gasonics California with and
into the Corporation in February 1994.
II. DEFINITIONS
For purposes of administration of the Plan, the following terms
shall have the meanings indicated:
BASE SALARY means the regular base salary paid to a Participant by
one or more Participating Companies during such individual's period of
participation in the Plan, plus any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code
Section 125 cafeteria benefit program now or hereafter established by the
Corporation or any Corporate Affiliate. The following items of compensation
shall NOT be included in Base Salary: (i) all overtime payments, bonuses,
commissions (other than those functioning as base salary equivalents),
profit-sharing distributions and other incentive-type payments and (ii) any
and all contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Corporation or one or
more Corporate Affiliates under any employee benefit or welfare plan now or
hereafter established.
BOARD means the Board of Directors of the Corporation.
CODE means the Internal Revenue Code of 1986, as periodically
amended.
COMMON STOCK means shares of the Corporation's common stock, par
value $0.001 per share.
<PAGE>
CORPORATE AFFILIATE means any parent or subsidiary corporation of
the Corporation (as determined in accordance with Code Section 424),
including any parent or subsidiary corporation which becomes such after the
Effective Time.
CORPORATION means GaSonics International Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of GaSonics International Corporation which shall by
appropriate action adopt the Plan.
EFFECTIVE TIME means the time at which the Underwriting Agreement
for the initial public offering of the Common Stock is executed and finally
priced. The initial offering period under the Plan shall start at the time of
such execution and pricing of the Underwriting Agreement. Any Corporate
Affiliate which becomes a Participating Corporation in the Plan after such
Effective Time shall designate a subsequent Effective Time with respect to
its employee-Participants.
ELIGIBLE EMPLOYEE means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week for more
than five (5) months per calendar year, in the rendition of personal services
to the Corporation or any other Participating Corporation as an employee for
earnings considered wages under Section 3401(a) of the Code.
ENTRY DATE means the Semi-Annual Entry Date on which an Eligible
Employee first joins the offering period in effect under the Plan. However,
the first Entry Date for the initial offering period under the Plan shall be
the Effective Time.
FAIR MARKET VALUE means, for the Effective Time at which the
initial offering period under the Plan begins, the price per share at which
the Common Stock is to be sold in the initial public offering of the Common
Stock pursuant to the Underwriting Agreement. For any subsequent date under
the Plan on which the Common Stock is registered under Section 12(g) of the
1934 Act and traded on the open market, Fair Market Value means the closing
selling price per share of the Common Stock on such date, as officially
quoted on the principal securities exchange on which the Common Stock is at
the time traded or, if not traded on any securities exchange, the closing
selling price per share of the Common Stock on such date, as reported on the
Nasdaq National Market System. If there are no sales of the Common Stock on
such day, then the closing selling price per share on the next preceding day
for which such closing selling price is quoted shall be determinative of Fair
Market Value.
1933 ACT means the Securities Act of 1933, as amended.
1934 ACT means the Securities Exchange Act of 1934, as amended.
2.
<PAGE>
PARTICIPANT means any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
PARTICIPATING CORPORATION means the Corporation and such Corporate
Affiliate or Affiliates as may be authorized from time to time by the Board
to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan, as of the Effective Time, are listed
in attached Schedule A.
PLAN ADMINISTRATOR shall have the meaning given such term in
Article III.
SEMI-ANNUAL ENTRY DATE means the first business day of January and
July each calendar year within an offering period in effect under the Plan.
However, the first Semi-Annual Entry Date for the initial offering period
under the Plan shall be deemed to be the Effective Time.
SEMI-ANNUAL PERIOD OF PARTICIPATION means each semi-annual period
for which the Participant actually participates in an offering period in
effect under the Plan. There shall be a maximum of four (4) semi-annual
periods of participation within each offering period. The first such
semi-annual period (which may actually be less than six (6) months for the
initial offering period) shall extend from the Effective Time through the
last business day in June 1994. Subsequent semi-annual periods shall be
measured from the first business day of July to the last business day of
December each calendar year and from the first business day of January in the
succeeding calendar year to the last business day of June in that calendar
year.
SEMI-ANNUAL PURCHASE DATE means the last business day of June and
December each calendar year on which shares of Common Stock are automatically
purchased for Participants under the Plan. The initial Semi-Annual Purchase
Date shall be June 30, 1994.
III. ADMINISTRATION
The Plan Administrator shall have sole and exclusive authority to
administer the Plan and shall consist of a committee (the "Plan
Administrator") of two (2) or more non-employee Board members appointed by
the Board. The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with
the requirements of Code Section 423. Decisions of the Plan Administrator
shall be final and binding on all parties who have an interest in the Plan.
3.
<PAGE>
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated in accordance with Subsection I of Article VII, Subsection A of
Article IX or Subsection B of Article X.
B. Each offering period shall have a maximum duration of
twenty-four (24) months. The duration of each offering period shall be
designated by the Plan Administrator prior to the start date. However, the
initial offering period shall run from the Effective Time to the last
business day in December 1995. The next offering period shall commence on
the first business day in January 1996 and end on the last business day in
December 1997. Subsequent offering periods shall commence as designated by
the Plan Administrator.
C. The Participant shall be granted a separate purchase right for
each offering period in which he or she participates. The purchase right
shall be granted on the Entry Date on which such individual first joins the
offering period in effect under the Plan and shall be automatically exercised
in successive semi-annual installments on the last business day of June and
December of each year. Accordingly, each purchase right may be exercised up
to two (2) times each calendar year it remains outstanding.
D. No purchase rights granted under the Plan shall be exercised,
and no shares of Common Stock shall be issued hereunder, until such time as
(i) the Plan shall have been approved by the stockholders of Gasonics
California and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of
Common Stock issuable under the Plan on a Form S-8 registration statement
filed with the Securities and Exchange Commission), all applicable listing
requirements of any securities exchange on which the Common Stock is listed
for trading and all other applicable requirements established by law or
regulation.
E. The Participant's acquisition of Common Stock under the Plan
on any Semi-Annual Purchase Date shall neither limit nor require the
Participant's acquisition of Common Stock on any subsequent Semi-Annual
Purchase Date, whether within the same or a different offering period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee of a Participating Corporation shall be
eligible to participate in the Plan in accordance with the following
provisions:
- An individual who is an Eligible Employee on the start date of
any offering period under the Plan shall be eligible to commence
participation in that
4.
<PAGE>
offering period on such start date or on any subsequent Semi-Annual
Entry Date within that offering period. The date on which the Eligible
Employee commences participation in the offering period shall constitute
his/her Entry Date for that offering period, and on that date such
individual shall be granted his/her purchase right for the offering
period.
- An individual who first becomes an Eligible Employee after the
start date of any offering period under the Plan may enter that offering
period on the first Semi-Annual Entry Date on which he/she is an Eligible
Employee or on any subsequent Semi-Annual Entry Date within that offering
period, provided he/she remains an Eligible Employee. The Semi-Annual
Entry Date on which such Eligible Employee enters the offering period shall
constitute his/her Entry Date for that offering period, and on that date
such individual shall be granted his/her purchase right for the offering
period.
B. To participate in the Plan for a particular offering period,
the Eligible Employee must complete the enrollment forms prescribed by the
Plan Administrator (including a purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his/her scheduled Entry Date.
C. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any
multiple of one percent (1%) of the Base Salary paid to the Participant
during each Semi-Annual Period of Participation within the offering period,
up to a maximum of fifteen percent (15%). The deduction rate so authorized
shall continue in effect for the remainder of the offering period, except to
the extent such rate is changed in accordance with the following guidelines:
- The Participant may, at any time during a Semi-Annual Period
of Participation, reduce his/her rate of payroll deduction to become
effective as soon as possible after filing of the requisite reduction
form with the Plan Administrator. The Participant may not, however,
effect more than one such reduction per Semi-Annual Period of
Participation.
- The Participant may, prior to the commencement of any new
Semi-Annual Period of Participation within the offering period,
increase the rate of his/her payroll deduction by filing the
appropriate form with the Plan Administrator. The new rate (which may
not exceed the fifteen percent (15%) maximum) shall become effective
as of the first day of the first Semi-Annual Period of Participation
following the filing of such form.
D. Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Section VII below.
5.
<PAGE>
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable under the Plan shall, solely in
the discretion of the Plan Administrator, be made available from either
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Corporation, including shares of Common Stock purchased on
the open market. The total number of shares of Common Stock which may be
issued under the Plan shall not exceed 1,100,000 shares(1) (subject to
adjustment under Section VI.B below). Such share reserve includes (i) the
400,000 share-increase(1) authorized by the Board on November 6, 1995 and
approved by the stockholders at the 1996 Annual Stockholders Meeting plus
(ii) an additional 400,000 share increase authorized by the Board on December
17, 1996, subject to stockholder approval at the 1997 Annual Stockholders
Meeting. No shares of Common Stock shall be issued under the Plan on the
basis of the December 1996 share increase unless that increase is approved by
the stockholders at the 1997 Annual Meeting, and in no event shall more than
773,695 shares of Common Stock be issued after November 15, 1996, assuming
stockholder approval of the December 1996 share increase.
B. In the event any change is made to the Corporation's
outstanding Common Stock by reason of any stock dividend, stock split,
exchange or combination of shares, recapitalization or any other change
affecting the Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of securities issuable over
the term of the Plan, (ii) the class and maximum number of securities
purchasable per Participant on any one Semi-Annual Purchase Date and (iii)
the class and number of securities and the price per share in effect under
each purchase right at the time outstanding under the Plan. Such adjustments
shall be designed to preclude the dilution or enlargement of rights and
benefits under the Plan.
VII. PURCHASE RIGHTS
An Eligible Employee who participates in the Plan for a particular
offering period shall have the right to purchase shares of Common Stock, in a
series of successive semi-annual installments during such offering period,
upon the terms and conditions set forth below and shall execute a purchase
agreement embodying such terms and conditions and such other provisions (not
inconsistent with the Plan) as the Plan Administrator may deem advisable.
A. PURCHASE PRICE. Common Stock shall be purchasable on each Semi-
Annual Purchase Period within the offering period at a purchase price equal to
eighty-five percent (85%) of the LOWER of (i) the Fair Market Value per share of
Common Stock on the
- ---------------------------------
(1) Each number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
6.
<PAGE>
Participant's Entry Date into that offering period or (ii) the Fair Market
Value per share on that Semi-Annual Purchase Date. However, for each
Participant whose Entry Date is other than the start date of the offering
period, the clause (i) amount shall in no event be less than the Fair Market
Value of the Common Stock on the start date of that offering period.
B. NUMBER OF PURCHASABLE SHARES. The number of shares
purchasable per Participant on each Semi-Annual Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Semi-Annual Period of Participation ending with that Semi-Annual Purchase
Date (together with any carryover deductions from the preceding Semi-Annual
Period of Participation) by the purchase price in effect for the Participant
for such Semi-Annual Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any Semi-Annual Purchase Date
shall not exceed One Thousand Eight Hundred (1,800) shares(2), subject to
periodic adjustment under Section VI.B.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Corporation or any of its Corporate Affiliates.
C. PAYMENT. Payment for the Common Stock purchased under the
Plan shall be effected by means of the Participant's authorized payroll
deductions. Such deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of the offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held
in any segregated account or trust fund and may be commingled with the
general assets of the Corporation and used for general corporate purposes.
D. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
- A Participant may, at any time prior to the next Semi-Annual
Purchase Date, terminate his/her outstanding purchase right under the Plan
by filing the prescribed notification form with the Plan Administrator (or
its designate), and no
- -------------------------
(2) Such number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
7.
<PAGE>
further payroll deductions shall be collected from the Participant with
respect to the terminated purchase right. Any payroll deductions
collected for the Semi-Annual Period of Participation in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the Semi-Annual Purchase
Date immediately following such termination. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
- The termination of such purchase right shall be irrevocable, and
the Participant may not subsequently rejoin the offering period for which
the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must re-
enroll in the Plan (by making a timely filing of a new stock purchase
agreement and enrollment form) on or before his/her scheduled Entry Date
into that offering period.
- Should the Participant cease to remain an Eligible Employee for
any reason (including death, disability or change in status) while his/her
purchase right remains outstanding, then that purchase right shall
immediately terminate and all of the Participant's payroll deductions for
the Semi-Annual Period of Participation in which such cessation of Eligible
Employee status occurs shall be immediately refunded.
E. STOCK PURCHASE. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose
payroll deductions have previously been refunded in accordance with the
Termination of Purchase Right provisions above) on each Semi-Annual Purchase
Date. The purchase shall be effected by applying each Participant's payroll
deductions for the Semi-Annual Period of Participation ending on such
Semi-Annual Purchase Date (together with any carryover deductions from the
preceding Semi-Annual Period of Participation) to the purchase of whole
shares of Common Stock (subject to the limitation on the maximum number of
purchasable shares imposed under subsection B. of this Article VII) at the
purchase price in effect for the Participant for that Semi-Annual Purchase
Date. Any payroll deductions not applied to such purchase because they are
not sufficient to purchase a whole share shall be held for the purchase of
Common Stock on the next Semi-Annual Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on
the Semi-Annual Purchase Date shall be promptly refunded to the Participant.
F. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata allocation
of the available shares on a uniform and nondiscriminatory basis, and the
payroll deductions of each Participant, to the extent in
8.
<PAGE>
excess of the aggregate purchase price payable for the Common Stock pro-rated
to such individual, shall be refunded to such Participant.
G. RIGHTS AS STOCKHOLDER. A Participant shall have no
stockholder rights with respect to the shares subject to his/her outstanding
purchase right until the shares are actually purchased on the Participant's
behalf in accordance with the applicable provisions of the Plan. No
adjustments shall be made for dividends, distributions or other rights for
which the record date is prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as practicable
after each Semi-Annual Purchase Date, a stock certificate for the number of
shares purchased on the Participant's behalf. Such certificate may, upon the
Participant's request, be issued in the names of the Participant and his/her
spouse as community property or as joint tenants with right of survivorship.
Alternatively, the Participant may request the issuance of such certificate
in "street name" for immediate deposit in a Corporation-designated brokerage
account.
H. ASSIGNABILITY. No purchase right granted under the Plan shall
be assignable or transferable by the Participant other than by will or by the
laws of descent and distribution following the Participant's death, and
during the Participant's lifetime the purchase right shall be exercisable
only by the Participant.
I. CHANGE IN OWNERSHIP. Should any of the following transactions
(a "Change in Ownership") occur during the offering period:
- 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,
- 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
- 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,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the effective date of such
Change in Ownership by applying the payroll deductions of each Participant
for the Semi-Annual Period of Participation in which such Change in Ownership
occurs to the purchase of whole shares of Common Stock at eighty-five percent
(85%) of the LOWER of (i) the Fair Market Value of
9.
<PAGE>
the Common Stock on the Participant's Entry Date into the offering period in
which such Change in Ownership occurs or (ii) the Fair Market Value of the
Common Stock immediately prior to the effective date of such Change in
Ownership. However, the applicable share limitations of Articles VII and VIII
shall continue to apply to any such purchase, and the clause (i) amount above
shall not, for any Participant whose Entry Date for the offering period is
other than the start date of that offering period, be less than the Fair
Market Value of the Common Stock on such start date.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Ownership,
and Participants shall, following the receipt of such notice, have the right
to terminate their outstanding purchase rights in accordance with the
applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if
and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right outstanding under this
Plan and (ii) similar rights accrued under other employee stock purchase
plans (within the meaning of Code Section 423) of the Corporation or its
Corporate Affiliates, would otherwise permit such Participant to purchase
more than $25,000 worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the fair market value of such stock on
the date or dates such rights are granted) for each calendar year such rights
are at any time outstanding.
B. For purposes of applying such accrual limitations, the right
to acquire Common Stock pursuant to each purchase right outstanding under the
Plan shall accrue as follows:
- The right to acquire Common Stock under each such purchase right
shall accrue in a series of successive semi-annual installments as and when
the purchase right first becomes exercisable for each such installment on
the last business day of each Semi-Annual Period of Participation for which
the right remains outstanding.
- No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire Common Stock under one or more
other purchase rights at a rate equal to $25,000 worth of Common Stock
(determined on the basis of the Fair Market Value on the date or dates of
grant) for each calendar year during which one or more of those purchase
rights were at any time outstanding.
- If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Semi-Annual Period of
Participation,
10.
<PAGE>
then the payroll deductions which the Participant made during that
Semi-Annual Period of Participation with respect to such purchase right
shall be promptly refunded.
C. In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Semi-Annual Period of Participation. However, the
Board may not, without the approval of the Corporation's stockholders:
- materially increase the number of shares issuable under the Plan
or the maximum number of shares purchasable per Participant on any one
Semi-Annual Purchase Date, except that the Plan Administrator shall have
the authority, exercisable without such stockholder approval, to effect
adjustments to the extent necessary to reflect changes in the Corporation's
capital structure pursuant to Subsection B of Article VI; or
- alter the purchase price formula so as to reduce the purchase
price payable for the shares purchasable under the Plan; or
- materially increase the benefits accruing to Participants under
the Plan or materially modify the requirements for eligibility to
participate in the Plan.
B. The Corporation shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Semi-Annual
Period of Participation. Should the Corporation elect to exercise such
right, then the Plan shall terminate in its entirety. No further purchase
rights shall thereafter be granted or exercised, and no further payroll
deductions shall thereafter be collected, under the Plan.
X. GENERAL PROVISIONS
A. The Plan was initially adopted by the Board on January 27,
1994 and approved by the stockholders in March 1994. On November 6, 1995,
the Board authorized a 400,000 share increase(3) to the number of shares of
Common Stock available for issuance under the Plan, and stockholders approved
that share increase at the 1996 Annual Stockholders Meeting. On December 17,
1996, the Board amended the Plan to increase the
- --------------------
(3) As adjusted for the 3-for-2 split of the Common Stock effected on
November 20, 1995.
11.
<PAGE>
number of shares of Common Stock reserved for issuance under the Plan by an
additional 400,000 shares. However, no purchase rights shall be granted
under the Plan on the basis of such share increase, and no shares of Common
Stock shall accordingly be issued on the basis of that increase, unless and
until the increase shall have been approved by the Corporation's stockholders
at the 1997 Annual Stockholders Meeting. Should such stockholder approval
not be obtained, then the 400,000-share increase authorized by the Board on
December 17, 1996 shall not be implemented. However, all outstanding
purchase rights under the Plan which have NOT been granted on the basis of
that 400,000-share increase shall remain outstanding in accordance with the
terms and provisions of the agreements evidencing those grants, whether or
not stockholder approval of such share increase is obtained.
B. On November 6, 1995, the Board also amended the Plan to allow
Eligible Employees to enter an offering period under the Plan on any
Semi-Annual Entry Date within that offering period on which they remain in
Eligible Employee status. Prior to such amendment, Eligible Employees were
only allowed to enter the offering period on the first Semi-Annual Entry Date
on which they satisfied such Eligible Employee requirement. The
stockholders approved such amendment at the 1996 Annual Stockholders Meeting.
C. The Plan shall terminate upon the EARLIER of (i) the last
business day in December 2003 or (ii) the date on which all shares available
for issuance under the Plan shall have been sold pursuant to purchase rights
exercised under the Plan.
D. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation.
E. Neither the action of the Corporation in establishing the
Plan, nor any action taken under the Plan by the Board or the Plan
Administrator, nor any provision of the Plan itself shall be construed so as
to grant any person the right to remain in the employ of the Corporation or
any of its Corporate Affiliates for any period of specific duration, and such
person's employment may be terminated at any time, with or without cause.
F. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
12.
<PAGE>
SCHEDULE A
----------
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
------------------------
GaSonics International Corporation
GaSonics International Europe Limited
GaSonics International Japan, Kabushiki Kaisha
GaSonics International Korea Corporation
Tekisco, Inc.
<PAGE>
[LOGO]
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and entered
into as of March 4, 1997 by and between GaSonics International Corporation, a
Delaware corporation ("Borrower") and UNION BANK OF CALIFORNIA, N.A. ("Bank").
This Agreement amends and restates in its entirety that certain loan agreement
dated March 5, 1996 between Bank and Borrower.
SECTION 1. THE LOAN
1.1 THE REVOLVING LOAN. Bank will loan to Borrower an amount not
to exceed Twenty Million Dollars ($20,000,000) 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 One
Hundred Fifty Thousand Dollars ($150,000.00) 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 27, 1998, 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 accurately evidence advances and payments on the Revolving
Loan. 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 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
27, 1998.
1.2 GASONICS INTERNATIONAL JAPAN K.K. CREDIT FACILITIES. Borrower
has a subsidiary known as Gasonics International Japan K.K. ("Gasonics
International Japan"). Gasonics International Japan has yen credit facilities
aggregating Y290,000,000 with Bank of Tokyo-Mitsubishi, Ltd. Bank and Borrower
have agreed that the aggregate United States Dollar equivalent of these credit
facilities shall reduce, dollar for dollar, the maximum amount available under
the Revolving Loan. For purposes of determining from time to time the United
States Dollar equivalent of the principal amount outstanding under Gasonics
International Japan's yen facilities with Bank of Tokyo-Mitsubishi, Ltd., Bank
shall convert the yen amount outstanding into United States Dollars at the rate
of exchange which Bank can use to make such conversion, measured by the offered
rate as determined by Bank of yen for United States Dollars prevailing on the
last day of each most recently completed month during the term of Borrower's
Revolving Loan with Bank ("Conversion Figure"). Thereafter, for the following
month, Borrower's availability under the Revolving Loan shall be reduced by the
Conversion Figure.
1.2.1 The intent of Bank and Borrower is to remove uncertainties
as to what exchange rate should be applied, and to place the risk of any change
in market value of yen on Borrower.
1.3 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all the
credit facilities described above.
-1-
<PAGE>
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.
1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for general working capital purposes.
1.5 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.
1.6 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.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.8 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.
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.
-2-
<PAGE>
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 December 31, 1996 together with supporting
schedules, and an income statement for the three (3) months ended December 31,
1996, 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 December 31, 1996, 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.
3.10 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-
<PAGE>
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 1.4 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.
4.5 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
consolidating and consolidated balance sheet as of the close of such fiscal
quarter, its unaudited consolidated and consolidating 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 consolidating and consolidated balance sheet as of the close of such fiscal
year, its consolidating and consolidated 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;
-4-
<PAGE>
(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 QUICK RATIO. Borrower shall maintain at all times a ratio of
current assets to current liabilities of at least 1.75:1.0, 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 Sixty Five Million Dollars ($65,000,000). "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.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promp tly, 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.
-5-
<PAGE>
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.
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 to support
Borrower's Japanese subsidiary, Gasonics International Japan K.K. The same
limitation applies to any now existing or hereafter created affiliates of
Borrower where such loans, advances and guarantees exceed an aggregate of Five
Million Dollars ($5,000,000).
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.
-6-
<PAGE>
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.
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-
<PAGE>
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.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK
By: Mark P. Gilles
Title Vice President /s/ Mark P. Gilles
--------------------------------------
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
By: Terry Gibson
Title Chief Financial Officer /S/ Terry R. Gibson
------------------------------------------------------
By: Dave Toole
Title President /s/ Dave Toole
-------------------------------
Address: 2730 Junction Avenue
San Jose, CA 95134
Attention: Jerald P. Shaevitz
Telecopier: (408) 325-6691
Telephone: (408) 325-1222
<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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,615
<SECURITIES> 12,463
<RECEIVABLES> 36,488
<ALLOWANCES> 665
<INVENTORY> 25,472
<CURRENT-ASSETS> 87,703
<PP&E> 18,548
<DEPRECIATION> 5,005
<TOTAL-ASSETS> 103,608
<CURRENT-LIABILITIES> 26,710
<BONDS> 0
0
0
<COMMON> 605
<OTHER-SE> 75,803
<TOTAL-LIABILITY-AND-EQUITY> 103,608
<SALES> 29,592
<TOTAL-REVENUES> 29,592
<CGS> 16,405
<TOTAL-COSTS> 16,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 1,971
<INCOME-TAX> 690
<INCOME-CONTINUING> 1,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,281
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
