<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
GASONICS INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 4, 1999
------------------------
TO THE STOCKHOLDERS OF GASONICS INTERNATIONAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of GaSonics International Corporation, a Delaware corporation (the
"Company"), will be held on Thursday, March 4, 1999, at 9:00 a.m. Pacific
Standard Time, at the offices of the Company located at 2730 Junction Avenue,
San Jose, California 95134-1909, for the following purposes, as more fully
described in the Proxy Statement accompanying this Notice:
1. To elect directors to serve until the next Annual Meeting, or until
their successors are elected and qualified;
2. To approve an amendment to the Company's 1994 Stock Option/Stock
Issuance Plan (the "Option Plan") to increase the number of shares of
Common Stock authorized for issuance under the Option Plan by an
additional 400,000 shares to 3,500,000 shares;
3. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending September 30, 1999; and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on January 11, 1999 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed between the record date and the date of the meeting. A
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection at the executive offices of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed Proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
[LOGO]
Dave Toole
CHAIRMAN OF THE BOARD OF DIRECTORS
San Jose, California
January 26, 1999
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
GASONICS INTERNATIONAL CORPORATION
2730 JUNCTION AVENUE
SAN JOSE, CALIFORNIA 95134-1909
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 4, 1999
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of GaSonics International Corporation, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on
Thursday, March 4, 1999 (the "Annual Meeting"). The Annual Meeting will be held
at 9:00 a.m., Pacific Standard Time, at the offices of the Company located at
2730 Junction Avenue, San Jose, California 95134-1909. These proxy solicitation
materials were mailed on or about January 26, 1999 to all stockholders entitled
to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On January 11, 1999, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 14,304,889
shares of the Company's common stock, $.001 par value ("Common Stock"), were
issued and outstanding. No shares of the Company's preferred stock were
outstanding. Each stockholder is entitled to one vote for each share of Common
Stock held by such stockholder on January 11, 1999. Stockholders may not
cumulate votes in the election of directors.
All votes will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the tabulations
of votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved or not.
REVOCABILITY OF PROXIES
You may revoke or change your Proxy at any time before the Annual Meeting by
filing with Mr. Terry R. Gibson, the Secretary of the Company, at the Company's
principal executive offices, GaSonics International Corporation, 2730 Junction
Avenue, San Jose, California 95134-1909, a notice of revocation or another
signed Proxy with a later date. You may also revoke your Proxy by attending the
Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors,
1
<PAGE>
officers or employees of the Company. No additional compensation will be paid to
these individuals for any such services. Except as described above, the Company
does not presently intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting must be received at
the Company's principal executive offices no later than September 29, 1999, in
order that they may be included in the proxy statement and form of proxy
relating to that meeting.
In addition, the proxy solicited by the Board of Directors for the 2000
Annual Meeting of Stockholders will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless the Company is
provided with notice of such proposal no later than December 12, 1999.
2
<PAGE>
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTORS
The persons named below are nominees for director to serve until the next
annual meeting of stockholders or until their successors have been duly elected
and qualified. The Certificate of Incorporation and Bylaws of the Company
provide that the authorized number of directors shall be determined by
resolution of the Board of Directors. The authorized number of directors is
currently seven. The Board of Directors has selected six nominees, all of whom
are currently directors of the Company. Proxies cannot be voted for a greater
number of directors than six. Each person nominated for election has agreed to
serve if elected and management has no reason to believe that any nominee will
be unavailable to serve. Unless otherwise instructed, the proxy holders will
vote the Proxies received by them FOR the nominees named below. The six
candidates receiving the highest number of affirmative votes of the shares
entitled to vote at the Annual Meeting will be elected Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL
THE NEXT ANNUAL MEETING FOLLOWING THE ANNUAL MEETING OR UNTIL THEIR RESPECTIVE
SUCCESSORS HAVE BEEN ELECTED AND QUALIFIED.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below is information regarding the nominees, including information
furnished by them as to principal occupations, certain other directorships held
by them, any arrangements pursuant to which they are selected as directors or
nominees and their ages as of September 30, 1998:
<TABLE>
<CAPTION>
NOMINEES AGE POSITION(S) WITH THE COMPANY
- ---------------------------------------- --- ----------------------------------------
<S> <C> <C>
Dave Toole.............................. 43 Chairman of the Board of Directors
Monte M. Toole.......................... 67 Vice Chairman of the Board of Directors
Asuri Raghavan.......................... 45 Chief Executive Officer, President and
Director
Kenneth L. Schroeder.................... 52 Director
Kenneth M. Thompson..................... 60 Director
F. Joseph Van Poppelen.................. 71 Director
</TABLE>
BUSINESS EXPERIENCE OF BOARD NOMINEES
DAVE TOOLE was appointed Chairman of the Board of Directors in April 1998.
Mr. Toole served as the Company's Chief Executive Officer from December 1994 to
April 1998. Between May 1993 and April 1998, Mr. Toole served as President and
Chief Operating Officer. Prior to that time, Mr. Toole served as Vice President,
Commercial Operations from May 1991 to May 1993, and as the Company's Vice
President and General Manager from April 1989 to May 1991. Mr. Toole served as
the Company's Vice President, Sales and Marketing from October 1986 to April
1989 and has served as a Director since April 1979. Mr. Toole has held various
other positions in purchasing, manufacturing, marketing and sales since joining
the Company in 1979. Prior to 1979, Mr. Toole was employed by Advanced Micro
Devices, a semiconductor manufacturer.
MONTE M. TOOLE founded the Company in March 1971 and currently serves as
Vice Chairman of the Board. Mr. Toole served as Chairman of the Board from the
Company's inception until April 1998. Mr. Toole served as Chief Executive
Officer from the inception of the Company to December 31, 1994. Between March
1971 and May 1993, Mr. Toole also served as President of the Company. Prior to
founding the Company, Mr. Toole was a representative of semiconductor equipment
manufacturers at Monte Toole
3
<PAGE>
and Associates, Inc., a manager at Fairchild Semiconductor and a systems analyst
at IBM. From October 1991 to June 1993, Mr. Toole served on the Board of
Directors of Integrated Process Equipment Corporation, a semiconductor equipment
company.
ASURI RAGHAVAN joined the Company in April 1998 as Chief Executive Officer,
President and a Director. Prior to joining the Company, Mr. Raghavan was
employed by Kulicke and Soffa Industries, Inc. ("Kulicke"), a semiconductor
equipment manufacturer, from 1988 to 1998 where he served as President of the
Equipment Group beginning in 1997. Mr. Raghavan also served as Senior Vice
President of Marketing of Kulicke from 1995 to 1997, and as Vice President of
the wire bonding business from 1993 to 1995. From 1991 to 1993, Mr. Raghavan was
Vice President of Strategic Development and from 1988 to 1991 was Director of
Marketing for Kulicke's Equipment Group. From 1985 to 1988, Mr. Raghavan was
employed by American Optical Corporation where he held the position of Director
of Research and Technology. From 1980 to 1985, Mr. Raghavan held various
engineering, marketing and product development positions with Kulicke.
KENNETH L. SCHROEDER became a Director of the Company in July 1995. Mr.
Schroeder has been the President, Chief Operating Officer, and a Director of
KLA-Tencor Corporation, a semiconductor equipment manufacturer, since November
1991. Mr. Schroeder served as the President and Chief Operating Officer of
Genus, Inc., a semiconductor equipment manufacturer, from May 1990 to October
1991. Prior to that time Mr. Schroeder held a variety of management positions
with KLA Instruments.
KENNETH M. THOMPSON became a Director of the Company in June 1998. Prior to
joining the Company, Mr. Thompson was employed by Intel Corporation for 25 years
in various management positions, most recently as Vice President of
Manufacturing Technology Engineering. Mr. Thompson has been a Director of Lam
Research Corporation since October 1998, a Director of PRI Automation Inc. since
June 1989, and a Director of Silicon Valley Group since July 1989.
F. JOSEPH VAN POPPELEN became a Director of the Company in July 1995. Mr.
Van Poppelen has been the President of The Van Poppelen Company, a consulting
firm focused on marketing and business strategies for high technology companies
since 1989. From 1975 to 1989, Mr. Van Poppelen served as Senior Vice President,
Worldwide Marketing and Sales of National Semiconductor Corporation, a
semiconductor manufacturer. Mr. Van Poppelen currently serves on the Board of
Directors of Novellus Systems, Inc., a semiconductor equipment manufacturer.
There are no family relationships among the members of the Board of
Directors or the officers, other than Monte M. Toole and Dave Toole who are
father and son.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1998, the Board of Directors held
seven (7) meetings and acted by unanimous written consent on one (1) occasion.
The Board of Directors has an Audit Committee and a Compensation Committee. Each
of the directors attended or participated in 75% or more of the aggregate of (i)
the total meetings of the Board of Directors and (ii) the total number of
meetings held by all committees on which he served during the last fiscal year.
The Audit Committee currently consists of two (2) directors, Messrs.
Schroeder and Van Poppelen. The Audit Committee reviews internal auditing
procedures, the adequacy of internal controls and the results and scope of the
audit and other services provided by the Company's independent auditors. The
Audit Committee meets periodically with management and the independent auditors.
The Audit Committee held two (2) meetings during the last fiscal year.
The Compensation Committee currently consists of two (2) directors, Messrs.
Schroeder and Van Poppelen. The Compensation Committee establishes salaries,
incentives and other forms of compensation for officers and other employees of
the Company and administers the incentive compensation and benefit plans of the
Company, including the Employee Stock Purchase Plan. The Compensation Committee
also
4
<PAGE>
has exclusive authority to administer the Company's 1994 Stock Option/Stock
Issuance Plan (the "Option Plan") and to make option grants and direct stock
issuances under such Option Plan. Pursuant to the provisions of the Option Plan,
the Compensation Committee has appointed a Secondary Committee of the
Compensation Committee, which consisted of Mr. Dave Toole through November 3,
1998 and currently consists of Mr. Raghavan (the "Secondary Committee"), to make
option grants and direct stock issuances to eligible persons other than officers
and directors subject to the short-swing profit restrictions of the federal
securities laws. During the last fiscal year, the Compensation Committee held
three (3) meetings and acted by unanimous written consent on two (2) occasions,
and the Secondary Committee acted by unanimous written consent on twenty (20)
occasions during the last fiscal year.
DIRECTOR COMPENSATION
Board members who are employees of the Company do not receive cash
compensation for their service on the Board. However, the Company has entered
into compensation arrangements with each of the existing non-employee Board
members, Messrs. Schroeder, Thompson and Van Poppelen. Each such agreement
provides that a cash fee of $5,000 be paid to each non-employee Board member for
service on the Board during that fiscal quarter.
The Company also paid Mr. M. Toole $119,438 during fiscal year 1998 in
consideration for his services as Chairman of the Board from October 1997 to
April 1998 and as Vice Chairman of the Board from April 1998 through September
1998. The Company also paid the following automobile-related expenses on behalf
of Mr. Toole during fiscal year 1998: (i) $9,550 for automobile lease payments
and (ii) $3,102 for automobile insurance. The Company also made a contribution
of $2,077 on behalf of Mr. Toole under the Company's 401(k) profit sharing plan.
Each non-employee Board member will also receive, over his period of Board
service, a series of option grants under the Automatic Option Grant Program in
effect under the Option Plan. Each individual who first becomes a non-employee
Board member, whether through appointment by the Board or upon election by the
stockholders, will automatically receive, at the time of such election or
appointment, an automatic option grant for 30,000 shares of Common Stock,
provided he has not previously been in the Company's employ. Each such option
will have an exercise price equal to the fair market value per share of Common
Stock on the grant date and will become exercisable in a series of 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 grant date.
Should the optionee cease Board service prior to completion of such four
(4)-year period, then he will have a twelve (12)-month period, measured from the
date of cessation of Board service, in which to exercise the option for any or
all of the shares for which the option is exercisable at the time of such
cessation of Board service plus an additional twenty-five percent (25%) of the
option shares will become exercisable on the next anniversary of the grant date
following the optionee's cessation of Board service. A 30,000-share option grant
was made to Mr. Thompson on June 24, 1998 in connection with his appointment to
the Board. The option has an exercise price of $7.03 per share, the fair market
value per share of Common Stock on the date of the option grant.
In addition, each non-employee Board member will receive an annual option
grant for 7,500 shares on each successive anniversary of the grant date of his
initial 30,000-share option, beginning with the fourth anniversary of the grant
date of the initial 30,000-share option, provided he continues to serve on the
Board. For a non-employee Board member who was previously employed by the
Company, the initial 7,500 annual option grant will be made at the Annual
Stockholders Meeting at which that individual is first elected as a non-employee
Board member. Each such annual option grant will have an exercise price per
share equal to the fair market value of the Common Stock on the grant date and
will become exercisable for all of the option shares one year after the grant
date, whether or not the optionee in fact continues in Board service after the
grant date. None of these 7,500-share option grants were made during the 1998
fiscal year.
5
<PAGE>
Each option grant made under the Automatic Option Grant Program will
accelerate and become immediately exercisable for all of the option shares upon
(i) the optionee's death or permanent disability while a Board member, (ii) an
acquisition of the Company by merger or asset sale or (iii) the successful
completion of a hostile tender offer for more than fifty percent (50%) of the
Company's outstanding voting stock or a change in the majority of the Board
effected through one or more proxy contests for Board membership. In addition,
upon the successful completion of a hostile tender offer for more than fifty
percent (50%) of the Company's outstanding voting stock, each outstanding
automatic option grant may be surrendered to the Company for a cash distribution
per surrendered option share in an amount equal to the excess of (a) the highest
price per share of Common Stock paid in connection with such tender offer over
(b) the exercise price payable for such share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE ABOVE NOMINEES.
6
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE
1994 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve an amendment to the
1994 Stock Option/ Stock Issuance Plan (the "Option Plan") which will increase
the maximum number of shares of Common Stock authorized for issuance over the
term of the Option Plan by an additional 400,000 shares, from 3,100,000 shares
to 3,500,000 shares.
The increase to the share reserve is designed to ensure that a sufficient
reserve of Common Stock is available under the Option Plan to attract and retain
the services of key individuals essential to the Company's long-term growth and
success.
The following is a summary of the principal features of the Option Plan, as
most recently amended. However, the summary does not purport to be a complete
description of all the provisions of the Option Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Corporate Secretary at the Company's principal executive
offices in San Jose, California.
The Option Plan became effective on January 27, 1994 upon adoption by the
Board of Directors and was approved by the stockholders in March 1994. Since
that time, a number of amendments increasing the share reserve under the Option
Plan have been adopted by the Board and approved by the stockholders. The
amendment which is the subject of this Proposal Two was adopted by the Board on
December 12, 1998, subject to stockholder approval at the 1999 Annual Meeting.
EQUITY INCENTIVE PROGRAMS
The Option Plan contains three separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) an Automatic Option Grant Program and
(iii) a Stock Issuance Program. The principal features of these programs are
described below. The Option Plan (other than the Automatic Option Grant Program
thereunder) is administered by the Compensation Committee of the Board. The
Compensation Committee acting in such administrative capacity (the "Plan
Administrator") has complete discretion, subject to the provisions of the Option
Plan, to authorize option grants and direct stock issuances under the Option
Plan. However, pursuant to authority granted in the Option Plan, the
Compensation Committee has also appointed a Secondary Committee to authorize
option grants and direct stock issuances to eligible persons other than
executive officers and Board members subject to the short-swing liability
provisions of the federal securities laws. All grants under the Automatic Option
Grant Program are to be made in strict compliance with the provisions of that
program, and no administrative discretion will be exercised by the Plan
Administrator with respect to the grants made under such program.
SHARE RESERVE
A total of 3,500,000 shares of Common Stock has been reserved for issuance
over the ten-year term of the Option Plan, assuming stockholder approval of the
400,000-share increase which forms part of this Proposal. In no event may any
one participant in the Option Plan be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
825,000 shares in the aggregate over the term of the Option Plan.
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and class of securities issuable under the Option
Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Option Plan, (iii) the
7
<PAGE>
number and class of securities for which option grants will subsequently be made
under the Automatic Option Grant Program to each newly-elected or continuing
non-employee Board member and (iv) the number and class of securities and the
exercise price per share in effect under each outstanding option.
Should an option expire or terminate for any reason prior to exercise in
full, the shares subject to the portion of the option not so exercised will be
available for subsequent issuance under the Option Plan. Unvested shares issued
under the Option Plan and subsequently repurchased by the Company at the
original option or issue price paid per share will be added back to the share
reserve and will accordingly be available for subsequent issuance under the
Option Plan. Shares subject to any option surrendered in accordance with the
stock appreciation right provisions of the Option Plan will not be available for
subsequent issuance.
ELIGIBILITY
Officers and other employees of the Company and its subsidiaries (whether
now existing or subsequently established), non-employee members of the Board or
the board of directors of any parent or subsidiary corporation and independent
consultants and advisors in the service of the Company or its subsidiaries will
be eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs. Non-employee members of the Board will also be eligible to participate
in the Automatic Option Grant Program.
As of November 30, 1998, three (3) executive officers, three (3)
non-employee Board members and approximately 392 other employees were eligible
to participate in the Discretionary Option Grant and Stock Issuance Programs,
and the three (3) non-employee Board members were also eligible to participate
in the Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the Option Plan will be the closing selling price per share on that date on The
Nasdaq National Market. On November 30, 1998, the fair market value per share
determined on such basis was $7.88.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than eighty-five percent (85%) of the fair
market value per share of Common Stock on the option grant date. No granted
option will have a term in excess of ten years. The options will generally
become exercisable in a series of installments over the optionee's period of
service with the Company.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares in which the
optionee is vested at that time. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
TANDEM STOCK APPRECIATION RIGHTS provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
8
<PAGE>
LIMITED STOCK APPRECIATION RIGHTS may be provided to one or more
officers of the Company as part of their option grants. Any option with such
a limited stock appreciation right may be surrendered to the Company upon
the successful completion of a hostile tender offer for more than fifty
percent (50%) of the Company's outstanding voting stock. In return for the
surrendered option, the officer will be entitled to a cash distribution from
the Company in an amount per surrendered option share equal to the excess of
(a) the highest price paid per share of Common Stock paid in connection with
the tender offer over (b) the exercise price payable for such share.
The shares of Common Stock acquired upon the exercise of one or more options
may be unvested and subject to repurchase by the Company, at the original
exercise price paid per share, if the optionee ceases service with the Company
prior to vesting in those shares. The Plan Administrator will have complete
discretion to establish the vesting schedule to be in effect for any such
unvested shares and may at any time cancel the Company's outstanding repurchase
rights with respect to those shares and thereby accelerate the vesting of those
shares.
The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant Program
which have exercise prices in excess of the then current market price of the
Common Stock and to issue replacement options with an exercise price based on
the lower market price of Common Stock at the time of the new grant.
On November 3, 1998, the Plan Administrator implemented an option
cancellation/regrant program for all employees of the Company, including the
Company's executive officers. Pursuant to that program, each such employee was
given the opportunity to surrender his or her outstanding options under the
Option Plan with exercise prices in excess of $5.625 per share in return for a
new option grant for the same number of shares but with an exercise price of
$5.625 per share, the closing selling price per share of Common Stock as
reported on the Nasdaq National Market on the November 3, 1998 grant date of the
new option. Options for a total of 947,731 shares with a weighted average
exercise price of $9.874 per share were surrendered for cancellation, and new
options for the same number of shares were granted with the $5.625 per share
exercise price. Each new option will become exercisable for twenty-five percent
(25%) of the option shares upon the optionee's completion of one year of service
with the Company measured from the November 3, 1998 grant date and will become
exercisable for the balance of the option shares in a series of thirty-six (36)
successive equal monthly installments upon the optionee's completion of each
additional month of service over the next thirty-six (36) months of service
thereafter. However, the option granted to Mr. Raghavan in cancellation of his
350,000-share option grant with an exercise price of $10.75 per share will
become exercisable for twenty percent (20%) of the option shares upon his
completion of one year of service with the Company measured from the November 3,
1998 grant date and will become exercisable for the balance of the option shares
in a series of forty-eight (48) successive equal monthly installments upon his
completion of each additional month of service over the next forty-eight (48)
months of service thereafter. Each new option has a maximum term of ten (10)
years measured from the November 3, 1998 grant date, subject to earlier
termination following the optionee's cessation of service with the Company.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member on or after July 19, 1995, whether through election
by the stockholders or appointment by the Board, will 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 of Common Stock, provided such
individual has not previously been in the Company's employ. Each non-employee
Board member who receives such an initial 30,000-share option grant will
automatically be granted, on each successive anniversary of the Initial Grant
Date on which he or she continues to serve as a Board member, beginning with the
fourth anniversary of such Initial Grant Date, a non-statutory option to
purchase an additional 7,500 shares of Common Stock. An individual who becomes a
non-employee Board member after
9
<PAGE>
previously serving in the Company's employ will receive his or her initial
7,500-share annual grant at the first Annual Stockholders Meeting at which such
individual is elected as a non-employee Board member and will receive an
additional 7,500-share automatic option grant at each subsequent Annual
Stockholders Meeting at which he or she is re-elected to the Board as a
non-employee director. There will be no limit on the number of such 7,500-share
option grants which any one non-employee Board member may receive over his or
her period of Board service.
Stockholder approval of this Proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program on or after the
date of the 1999 Annual Meeting and the subsequent exercise of that option in
accordance with the provisions of the Automatic Option Grant Program summarized
below.
Each 30,000-share or 7,500-share option granted under the Automatic Option
Grant Program will have an exercise price per share equal to one hundred percent
(100%) of the fair market value per share of Common Stock on the option grant
date and a maximum term of ten (10) years measured from the grant date, subject
to earlier termination at the end of the twelve (12)-month period measured from
the date of the optionee's cessation of Board service. Each initial 30,000-share
automatic option grant will become exercisable for the option shares 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. 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 next
twelve (12) months, 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 will become exercisable for an additional twenty-five
percent (25%) of the option shares on the next anniversary of the Initial Grant
Date immediately following the optionee's cessation of Board service. Each
annual 7,500-share automatic option grant will become exercisable for all of the
option shares one (1) year following the grant date, whether or not the optionee
continues in Board service.
Each automatic option grant will accelerate and become immediately
exercisable for all of the option shares upon (i) the optionee's death or
permanent disability while a Board member, (ii) an acquisition of the Company by
merger or asset sale or (iii) the successful completion of a hostile tender
offer for more than fifty percent (50%) of the Company's outstanding voting
stock or a change in the majority of the Board effected through one or more
proxy contests for Board membership. In addition, upon the successful completion
of a hostile tender offer for more than fifty percent (50%) of the Company's
outstanding voting stock, each automatic option grant may be surrendered to the
Company for a cash distribution per surrendered option share in an amount equal
to the excess of (a) the highest price per share of Common Stock paid in
connection with such tender offer over (b) the exercise price payable for such
share. Stockholder approval of this Proposal will constitute approval of each
option granted with such a cash surrender right on or after the date of the 1999
Annual Meeting and the subsequent exercise of that option in accordance with the
foregoing provisions. No additional approval of the Plan Administrator or the
Board will be required at the time of the actual option surrender and cash
distribution.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share not
less than eighty-five percent (85%) of fair market value at the time of sale,
payable in cash or by a promissory note payable to the Company. Shares may also
be issued as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any and all unvested shares
outstanding under the Option Plan.
10
<PAGE>
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation will automatically accelerate in full,
and all unvested shares under the Discretionary Option Grant and Stock Issuance
Programs will immediately vest, except to the extent the Company's repurchase
rights with respect to those shares are to be assigned to the successor
corporation. Any options assumed in connection with such acquisition may, in the
Plan Administrator's discretion, be subject to immediate acceleration, and any
unvested shares which do not vest at the time of such acquisition may be subject
to full and immediate vesting, in the event the individual's service with the
successor entity is subsequently terminated within a specified period following
the acquisition. In connection with a hostile change in control of the Company
(whether by successful tender offer for more than fifty percent (50%) of the
outstanding voting stock or by proxy contest for the election of Board members),
the Plan Administrator will have the discretionary authority to provide for
automatic acceleration of outstanding options under the Discretionary Option
Grant Program and the automatic vesting of all unvested shares outstanding under
the Discretionary Option Grant and Stock Issuance Programs, with such
acceleration or vesting to occur either at the time of such change in control or
upon the subsequent termination of the individual's service.
The acceleration of vesting upon a change in the ownership or control of the
Company may be viewed as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
STOCKHOLDER RIGHTS/OPTION TRANSFERABILITY
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price
for the purchased shares. Options granted under the Discretionary Option Grant
Program are generally not assignable or transferable other than by will or the
laws of inheritance and, during the optionee's lifetime, the option may be
exercised only by such optionee. However, the Plan Administrator may allow
non-statutory options to be transferred or assigned 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, to the extent such
transfer or assignment is in furtherance of the optionee's estate plan. In
addition, all option grants under the Automatic Option Grant Program have such
an assignability feature.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase of
shares under the Discretionary Option Grant and Stock Issuance Programs. The
Plan Administrator has complete discretion to determine the terms of any such
financial assistance. However, the maximum amount of financing provided any
individual may not exceed the cash consideration payable for the issued shares
plus all applicable taxes. Any such financing may be subject to forgiveness in
whole or in part, at the discretion of the Plan Administrator, over the
participant's period of service.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
11
<PAGE>
STOCK AWARDS
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the Option Plan between October 1, 1997 through November 30, 1998, together with
the weighted average exercise price payable per share. To the extent any option
granted during the indicated period was subsequently cancelled and regranted as
part of the November 3, 1998 cancellation and regrant program, the table below
only reflects the number of shares and exercise price in effect under the new
option and does not include the number of shares and exercise price of the
cancelled higher-priced option.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME AND TITLE (NUMBER OF SHARES) EXERCISE PRICE
- ------------------------------------------------------------ ------------------ ------------------
<S> <C> <C>
Asuri Raghavan.............................................. 350,000 $ 5.625
President and Chief Executive Officer
Dave Toole.................................................. 90,000 $ 5.625
Former President and Chief Executive Officer
Avner Shelem................................................ 0 --
Former Vice President, General Manager, Engineering and
Operations
Bill N. Alexander........................................... 65,000 $ 5.625
Vice President, Sales and Field Operations
Terry Gibson................................................ 40,000 $ 5.625
Vice President, Finance and Chief Financial Officer
All executive officers as a group........................... 545,000 $ 5.625
Monte M. Toole.............................................. 0 --
Director
Kenneth L. Schroeder........................................ 0 --
Director
F. Joseph Van Poppelen...................................... 0 --
Director
Kenneth M. Thompson......................................... 30,000 $ 7.03
Director
All directors who are not executive officers as a group..... 30,000 $ 7.03
All employees, excluding executive officers, as a group..... 550,781 $ 6.236
</TABLE>
As of November 30, 1998, options covering 2,089,858 shares of Common Stock
were outstanding under the Option Plan, 951,978 shares remained available for
future option grant assuming stockholder approval of the 400,000 share increase
which is the subject of this Proposal, and 458,164 shares have been issued
pursuant to the exercise of options granted under the Option Plan.
12
<PAGE>
AMENDMENT AND TERMINATION
The Board may amend or modify the Option Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law or
regulation. The Board may terminate the Option Plan at any time, and the Option
Plan will in all events terminate on December 31, 2003.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Option Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two (2)
holding periods is not satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income
13
<PAGE>
tax deduction equal to such distribution for the taxable year in which the
ordinary income is recognized by the optionee.
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the Option
Plan will be substantially the same as those summarized above for the exercise
of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of Internal Revenue Code Section
162(m) and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executive officers of the Company. Accordingly, all compensation
deemed paid with respect to those options will remain deductible by the Company
without limitation under Internal Revenue Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than the
fair market value of the shares on the grant or issue date will result in a
compensation expense to the Company's earnings equal to the difference between
the exercise or issue price and the fair market value of the shares on the grant
or issue date. Such expense will be accruable by the Company over the period
that the option shares or issued shares are to vest. Option grants or stock
issuances with exercise or issue prices equal to the fair market value of the
shares at the time of issuance or grant will not result in any charge to the
Company's earnings, but the Company must disclose, in pro-forma statements to
the Company's financial statements, the impact those option grants would have
upon the Company's reported earnings were the fair value of those options
treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
NEW PLAN BENEFITS
As of November 30, 1998, no options were granted on the basis of the
400,000-share increase to the Option Plan which is the subject of this Proposal.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendment to the Option Plan. Should such
stockholder approval not be obtained, then any options granted on the basis of
the 400,000-share increase which forms part of this Proposal will terminate
without becoming exercisable for any of the shares of Common Stock subject to
those options, and no further options will be granted on the basis of such share
increase. The Option Plan will, however, continue to remain in effect, and
option grants and stock issuances may continue to be made pursuant to the
provisions of the Option Plan prior to the amendment until the available reserve
of Common Stock under the Option Plan as last approved by the stockholders is
issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT TO THE OPTION PLAN.
14
<PAGE>
PROPOSAL THREE
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent public auditors for the Company during fiscal year 1998, to serve in
the same capacity for the fiscal year ending September 30, 1999, and is asking
the stockholders to ratify this appointment. The affirmative vote of a majority
of the shares represented and voting at the Annual Meeting is required to ratify
the selection of Arthur Andersen LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
15
<PAGE>
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of November
30, 1998 by (i) all persons who are beneficial owners of five percent (5%) or
more of the Company's Common Stock, (ii) each director and nominee, (iii) the
executive officers named in the Summary Compensation Table below, and (iv) all
current directors and executive officers as a group. Unless otherwise indicated,
each of the stockholders has sole voting and investment power with respect to
the shares beneficially owned, subject to community property laws, where
applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
NUMBER OF SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED (2)
- ------------------------------------------------------------------------ ------------------ ------------------
<S> <C> <C>
Capital Guardian Trust Company
333 So. Hope Street, 52nd Floor
Los Angeles, CA 90071 (3)............................................. 1,417,000 10.0 %
Wisconsin Investment Board
P.O. Box 7842
Madison, WI 53707..................................................... 1,058,700 7.5 %
Northwest Mutual Life Insurance
720 E. Wisconsin Ave.
Milwaukee, WI 53202 (4)............................................... 881,600 6.2 %
Monte M. Toole (5)...................................................... 2,119,728 15.0 %
Dave Toole (6).......................................................... 1,072,477 7.5 %
Asuri Raghavan.......................................................... -- --
Avner Shelem (7)........................................................ 47,332 *
Terry Gibson (8)........................................................ 33,207 *
Kenneth M. Thompson..................................................... -- --
Bill N. Alexander....................................................... 7,300 *
Kenneth L. Schroeder (9)................................................ 30,000 *
F. Joseph Van Poppelen (10)............................................. 40,000 *
All directors and executive officers as a group (9 persons) (11)........ 3,350,044 23.3 %
</TABLE>
- ------------------------
* Less than one percent of the outstanding Common Stock.
(1) Unless otherwise specified, the address of each beneficial owner is 2730
Junction Avenue, San Jose, California 95134-1909.
(2) Percentage of ownership is based on 14,169,227 shares of Common Stock
outstanding on November 30, 1998. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options or warrants currently exercisable
or convertible, or exercisable or convertible within 60 days of November
30, 1998, are deemed outstanding for computing the ownership percentage of
the person holding such option or warrant but are not deemed outstanding
for computing the ownership percentage of any other person.
(3) Includes 90,000 shares held by Capital International, Inc., an affiliate of
Capital Guardian Trust Company.
(4) Includes 439,800 shares held by Growth Stock Portfolio of Northwestern
Mutual Series Fund, Inc., a wholly owned subsidiary of The Northwestern
Mutual Life Insurance Company, 62,000 shares held in The Northwestern
Mutual Life Insurance Company Group Annuity Separate Account and 4,400
shares held by the Asset Allocation Fund of Mason Street Funds, Inc., an
affiliate of The Northwestern Mutual Life Insurance Company.
16
<PAGE>
(5) Includes 912,999 shares of Common Stock held by the Monte M. Toole Family
Limited Partnership, of which Monte M. Toole is the sole General Partner.
(6) Includes 154,999 shares of Common Stock held by the David Toole Family
Limited Partnership, of which Dave Toole and his wife, Diane Toole, are the
sole General Partners, and 793,562 shares of Common Stock held by the David
Toole and Diane L. Toole Family Trust, of which Dave and Diane Toole are
the sole Trustees. Excludes 59,998 shares of Common Stock held by the
trustee of the David Toole and Diane L. Toole Children's Trust for the
benefit of Mr. and Mrs. Toole's two minor children. Mr. D. Toole disclaims
beneficial ownership of such 59,998 shares. Also excludes 32,462 shares
held by the David and Diane L. Toole Charitable Remainder Unitrust. Mr.
Toole disclaims beneficial ownership of such 32,462 shares. Also excludes
6,500 shares held by the David and Diane L. Toole Charitable Foundation.
Mr. D. Toole disclaims beneficial ownership of such 6,500 shares. Includes
75,519 shares underlying stock options which are currently exercisable or
which will become exercisable within 60 days after November 30, 1998.
(7) Represents 47,331 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after November
30, 1998.
(8) Includes 30,207 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after November
30, 1998.
(9) Represents 30,000 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after November
30, 1998.
(10) Includes 10,000 shares held by Trust Company of America, FBO F. Joseph Van
Poppelen. Also includes 30,000 shares underlying stock options which are
currently exercisable or which will become exercisable within 60 days
after November 30, 1998.
(11) Includes 213,057 shares underlying stock options held by two officers and
three directors which are currently exercisable or which will become
exercisable within 60 days after November 30, 1998.
17
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table provides certain information summarizing the
compensation earned, by each individual serving as the Company's Chief Executive
Officer during fiscal year 1998 and the two other executive officers whose
compensation was in excess of $100,000 for fiscal year 1998, for services
rendered in all capacities to the Company and its subsidiaries for each of the
last three fiscal years, as applicable. The table also includes (i) the former
President and Chief Executive Officer who resigned from such position during the
1998 fiscal year and was appointed Chairman of the Board and (ii) one other
executive officer who left the Company's employ during the 1998 fiscal year. The
individuals named in the table will be referred to as the "Named Executive
Officers." No other executive officers who would have been included in the table
on the basis of their salary and bonus for fiscal year 1998 resigned or
terminated employment during fiscal year 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------
ANNUAL COMPENSATION NUMBER OF
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION OPTION(#) COMPENSATION($)(2)
- ---------------------------------------- ---- -------------- ----------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan ......................... 1998 148,845(3) 77,000(4) -- 350,000 39,028
President and Chief Executive Officer
Dave Toole (5) ......................... 1998 306,558(6) -- -- 40,000 39,362
Former President and Chief 1997 290,239 196,256 -- 50,000 27,422
Executive Officer 1996 258,922 179,850 -- 125,000 30,175
Avner Shelem (7) ....................... 1998 166,107 -- -- -- 3,386
Former Vice President, General 1997 181,807 33,584 -- 15,000 4,663
Manager, 1996 154,621 32,000 -- 20,000 4,038
Engineering and Operations
Bill N. Alexander ...................... 1998 192,369(8) 12,750 -- -- 3,350
Vice President, Sales and Field 1997 -- -- -- 15,000 --
Operations 1996 -- -- -- 50,000 --
Terry Gibson ........................... 1998 172,498 -- -- -- 1,060
Vice President, Finance 1997 164,846 28,114 -- 15,000 3,332
and Chief Financial Officer 1996 -- -- -- 25,000 --
</TABLE>
- --------------------------
(1) For fiscal year 1998, salary includes deferred salary of $21,151 and $17,298
for Messrs. Shelem and Gibson, respectively.
(2) For fiscal year 1998, All Other Compensation includes: (i) the contributions
allocated under the Company's profit sharing plan on behalf of Messrs. Toole
($200), Shelem ($200), Alexander ($200) and Gibson ($200); (ii) the
contributions made by the Company to the Section 401(k) Profit Sharing Plan
and Trust on behalf of Messrs. Raghavan ($2,042), D. Toole ($3,846),
Alexander ($3,150), Gibson ($860) and Shelem ($3,186); (iii) the premium of
$25,316 paid by the Company on the split dollar life insurance policies
maintained for Mr. D. Toole pursuant to which the Company will, upon Mr. D.
Toole's death or liquidation of the policy, be entitled to the refund of all
premium payments made on that policy, and the balance of the policy proceeds
will be paid to Mr. D. Toole or his designated beneficiaries and (iv)
reimbursement of $36,986 of moving and relocation expenses incurred in
connection with Mr. Raghavan's relocation to California.
(3) Represents portion of Mr. Raghavan's $300,000 annual salary paid since
joining the Company as Chief Executive Officer and President on March 24,
1998.
(4) Represents sign-on bonus paid when Mr. Raghavan joined the Company as
President and Chief Executive Officer.
(5) Mr. D. Toole resigned as President and Chief Executive Officer on March 24,
1998.
(6) Represents $69,556 paid to Mr. D. Toole in his capacity as President and
Chief Executive officer up to March 24, 1998 and $237,002 in his capacity as
Chairman of the Board for the remainder of fiscal year 1998. Includes (i)
$65,000 of loan forgiveness accrued over fiscal year 1998 pursuant to a
special bonus program established for
18
<PAGE>
Mr. D. Toole in January 1994, (ii) $956 of tax gross up to reimburse Mr. D.
Toole for the medicare tax incurred in connection with such loan forgiveness
and (iii) forgiveness of $61,334 in interest which had accrued since 1994 in
fiscal year 1997 in connection with the loan. Under the loan forgiveness
program, $300,000 of principal due under the note which Mr. D. Toole issued
to the Company on November 11, 1993 in payment of the option exercise price
for 566,665 shares of Common Stock was subject to forgiveness over his
continued period of service with the Company. Accordingly, $100,000 of
principal was forgiven on the first day of each of the 1995 and 1996
calendar years and $65,000 of principal was forgiven on the first day of the
1997 calendar year. In addition, the Company forgave the interest which had
accrued since 1994 on the outstanding balance of the loan.
(7) Mr. Shelem resigned from the Company on May 28, 1998.
(8) Includes $34,837 in sales commissions.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers for fiscal year 1998. No stock
appreciation rights ("SARs") were granted to these individuals during such
fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDAL GRANT STOCK PRICE
------------------------------- APPRECIATION FOR
NUMBER OF
SECURITIES % OF TOTAL OPTION TERM
UNDERLYING OPTIONS GRANTED --------------------
OPTIONS TO EMPLOYEES IN EXERCISE OR BASE 10%
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH) (1) EXPIRATION DATE 5% ($)(2) ($)(2)
- ------------------------------------------ -------------- --------------- ---------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan............................ 350,000 41.5 10.75 03/23/08 2,366,216 5,996,456
Dave Toole................................ 40,000 4.7 7.00 06/21/08 176,090 446,248
Avner Shelem.............................. -- -- -- -- -- --
Bill N. Alexander......................... 15,000 1.8 7.00 06/21/08 66,034 167,343
Terry Gibson.............................. 15,000 1.8 7.00 06/21/08 66,034 167,343
</TABLE>
- ------------------------------
(1) Each option has a maximum term of ten (10) years measured from the grant
date, subject to earlier termination following the optionee's cessation of
service. The shares subject to the option grant made to Mr. Raghavan will
become exercisable as follows: twenty percent (20%) of the option shares
upon Mr. Raghavan's completion of one (1) year of service measured from the
March 24, 1998 grant date and the balance of the option shares in a series
of forty-eight (48) successive equal monthly installments over Mr.
Raghavan's completion of each additional month of service over the
forty-eight (48)-month period measured from the first anniversary of the
grant date. The shares subject to the option grants made to Messrs. Toole,
Alexander and Gibson will each become exercisable as follows: twenty-five
percent (25%) of the option shares upon completion of one (1) year of
service measured from the June 22, 1998 grant date and the balance of the
option shares in a series of thirty-six (36) successive equal monthly
installments upon completion of each additional month of service over the
thirty-six (36)-month period measured from the first anniversary of the
grant date. As part of the November 3, 1998 option cancellation/regrant
program described in Proposal Two, "Approval of Amendment to the 1994 Stock
Option/Stock Issuance Plan," above, the option grants made to Messrs.
Raghavan, Toole, Alexander and Gibson were each cancelled, and new options
for the same number of shares were regranted with an exercise price of
$5.625 per share. The new options have the same five (5)-year or four
(4)-year vesting schedule as the cancelled options, except that the vesting
period is now measured from the November 3, 1998 regrant date. All of the
options are subject to accelerated vesting in connection with certain
changes in control or ownership of the Company.
(2) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price appreciation
over the ten-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
19
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The table below sets forth certain information with respect to the Named
Executive Officers concerning their exercise of options during fiscal year 1998
and the unexercised options they held as of the end of such fiscal year. No SARs
were exercised by such individuals during fiscal year 1998, nor did any
individual hold any outstanding SARs at the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)(2)
ACQUIRED ON VALUE ------------------------ ------------------------
NAME EXERCISE(#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan.......................... -- -- -- 350,000 0 0
Dave Toole.............................. -- -- 89,061 125,938 0 0
Avner Shelem............................ -- -- 45,874 25,625 0 0
Bill N. Alexander....................... -- -- 15,624 49,376 0 0
Terry Gibson............................ -- -- 37,500 52,500 0 0
</TABLE>
- ------------------------------
(1) Based on the fair market value of the shares on the exercise date less the
exercise price paid for those shares.
(2) Based on the fair market value of the option shares at fiscal year-end
($4.25 per share on the basis of the closing selling price on the Nasdaq
National Market at fiscal year-end) less the exercise price. If the closing
price is less than the exercise price, then the value of unexercised options
equals zero.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS
The Company does not have any existing employment agreements with the Chief
Executive Officer or any other Named Executive Officer. However, pursuant to the
offer letter accepted by Mr. Raghavan, he is to receive an annual base salary of
$300,000 and was paid a sign-on bonus of $77,000 and granted an option for
350,000 shares of the Company's Common Stock which is to vest over a five
(5)-year period of service. In addition, the Company made an interest-free loan
to Mr. Raghavan in the amount of $250,000 to cover Mr. Raghavan's relocation
costs which is to be forgiven in a series of four (4) successive equal annual
installments upon Mr. Raghavan's completion of each of his first four (4) years
of service with the Company.
The Compensation Committee of the Board has the discretionary authority as
Plan Administrator of the Option Plan to provide for the accelerated vesting of
the shares of Common Stock subject to the outstanding options or direct stock
issuances under the Option Plan which are held by the Chief Executive Officer
and the Company's other executive officers, in the event their employment were
to be terminated (whether involuntarily or through a forced resignation)
following (i) an acquisition of the Company by merger or asset sale or (ii) a
hostile take-over of the Company effected through a successful tender offer for
more than 50% of the Company's outstanding Common Stock or through a change in
the majority of the Board as a result of one or more contested elections for
Board membership. All outstanding options granted to date to the Company's
executive officers contain such an acceleration provision.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board is currently comprised of Messrs.
Schroeder and Van Poppelen. None of the present or former members of the
Compensation Committee were at any time during fiscal year 1998 or at any other
time an officer or employee of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
20
<PAGE>
COMPENSATION COMMITTEE REPORT
OVERVIEW AND PHILOSOPHY
The Compensation Committee (the "Committee") of the Company's Board of
Directors is responsible for establishing the compensation payable to the
Company's executive officers, including the Named Executive Officers. Such
compensation is primarily comprised of the following elements: base salary,
annual performance incentives, stock options and executive benefits.
It is the Committee's objective that executive compensation be directly
influenced by the Company's business results. Accordingly, the Company's
executive compensation program is structured to stimulate and reward exceptional
performance that results in enhanced corporate and stockholder values. The
Committee retains independent compensation consultants to provide objective and
expert advice in the review of executive compensation plans. Technology industry
compensation surveys are also reviewed in the Committee's assessment of
appropriate compensation levels.
The Committee recognizes that the highly-specialized industry sector in
which the Company operates is extremely competitive world-wide, with the result
that there is substantial demand for high-caliber, seasoned executives. It is
crucial that the Company be assured of retaining and rewarding its executive
personnel essential in contributing to the attainment of the Company's
performance goals. For these reasons, the Committee believes the Company's
executive compensation arrangements must remain competitive with companies in
the semiconductor and semiconductor equipment industries.
CASH COMPENSATION
A key objective of the Company's executive compensation program is to
position its key executives to earn annual cash compensation (base salary plus
bonus) generally equaling or exceeding that which the executive would earn at
other companies in the industry.
Base salaries for the executive officers are established considering a
number of factors, including the Company's growth and profit margins, the
executive's performance and contribution to overall Company performance, and the
salary levels of comparable positions reported in high-technology industry
surveys. The Committee adheres to a compensation philosophy of moderate levels
of fixed compensation such as base salary. Base salary decisions are made as
part of a formal review process. Generally, base salaries for fiscal year 1998
were set close to the 50th percentile (median) of the salaries reported in
high-technology industry surveys.
Under the Executive Incentive Plan ("EIP"), an executive's annual incentive
award depends on improved profit results and the executive's specific
contribution. The performance goals for the Company and for each business unit
or function are derived from the Company's business plans that include critical
performance targets relating to strategic product positioning, revenue growth
and profits for the fiscal year. The EIP provides no payment until a threshold
profit level is attained. Individual executive incentive targets as a percentage
of base salary are established using a number of factors: industry averages
reported in external surveys; the importance of the position to the Company's
success; the ratio to the target percentage of the CEO; and the judgment of the
individual's relative value. This target percentage ranges from 45% - 60% of an
executive's base salary. The incentive target is generally set at a higher
percentage for more senior officers, with the result that the more senior
executive officers have a higher percentage of their potential cash compensation
at risk. If business plans are exceeded by 50%, executives can earn up to a
maximum of 90% - 120% of their base salaries. The Committee annually reviews and
approves specific bonus targets, maximums and performance criteria for each
executive. At its discretion, the Committee can also reduce total or individual
bonus awards derived by the performance results formulae.
For purposes of the stock price performance graph which appears later in
this Proxy Statement, the Company has selected the Hambrecht & Quist
Semiconductor Sector Index as the industry index. Several of the companies
included in the index were also among the companies which the Committee surveyed
for
21
<PAGE>
comparative compensation purposes. However, in selecting companies to survey for
such compensation purposes, the Committee focused primarily on whether those
companies were actually competitive with the Company in seeking executive talent
and whether those companies had a management style and corporate culture similar
to the Company's. For this reason, the number of companies surveyed for
compensation data was substantially less than the number of companies included
in the Hambrecht & Quist Semiconductor Sector Index.
STOCK OPTIONS
The Committee grants stock options under the Option Plan to provide direct
linkage with stockholder interests. The Committee considers the stock options
previously granted to that individual, industry practices, the executive's
performance and accountability level, and assumed, potential stock value when
determining stock option grants. The Committee relies upon competitive guideline
ranges of retention-effective, target gain objectives to be derived from option
gains based upon relatively aggressive assumptions relating to planned growth
and earnings. In this manner, the potential executive gains parallel those of
other stockholders over the long-term. Therefore, the stock option program
serves as the Company's only long-term incentive and retention tool for
executives and other key employees. The exercise prices of stock options granted
to the named executive officers are equal to the market value of the stock on
the date of grant. Therefore, stock options provide an incentive to executives
to maximize the Company's profitable growth which ordinarily, over time, should
be reflected in the price of the Company's stock.
BENEFITS
The Company provides benefits to the named executive officers that are
generally available to other executives in the industry. The amount of such
executive-level benefits and perquisites, as determined in accordance with the
rules of the Securities and Exchange Commission relating to compensation, did
not, for any executive officer, exceed 10% of his or her total salary and bonus
for fiscal year 1998. The Committee believes, based upon the review of industry
practices and published benefits surveys, that the Company's officers receive
approximately average benefit levels when compared to other companies in the
same industry.
CHIEF EXECUTIVE OFFICER PERFORMANCE AND COMPENSATION
In setting Mr. Raghavan's annual base salary of $300,000 for fiscal year
1998, the Committee reviewed the salaries and bonuses of chief executive
officers of other companies in the industry and Mr. Raghavan's skills and
experience. The Committee structured Mr. Raghavan's compensation package so that
a significant portion of Mr. Raghavan's total compensation is tied to the
Company's attainment of specific revenue, profit and strategic objectives.
As part of the terms of his offer letter from the Company, Mr. Raghavan
received a sign-on bonus of $77,000 and was granted an option to purchase
350,000 shares of Common Stock which is to vest incrementally over his first
five (5) years of service with the Company. The Company also made a $250,000
non-interest bearing loan to Mr. Raghavan, which will be forgiven in four (4)
successive equal annual installments upon his completion of each of his first
four (4) years of service with the Company. The Company will also reimburse Mr.
Raghavan for the federal and state taxes attributable to such loan forgiveness.
If Mr. Raghavan leaves the Company or is terminated for cause at any time prior
to the fourth anniversary of his employment, the remaining principal balance of
the loan will become immediately due and payable.
In setting Mr. D. Toole's annual base salary of $306,558 for fiscal year
1998, the Committee reviewed the salaries and bonuses of chief executive
officers of other companies in the industry and Mr. D. Toole's skills and
experience. The Committee structured Mr. D. Toole's compensation package so that
a significant
22
<PAGE>
portion of Mr. D. Toole's total compensation was tied to the Company's
attainment of specific revenue, profit and strategic objectives.
The Committee granted Mr. D. Toole a stock option to purchase 40,000 shares
of Common Stock in connection with his appointment as Chairman of the Board. The
option will vest incrementally over a four (4)-year period of service with the
Company measured from the June 22, 1998 grant date.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. The
compensation to be paid to the Company's executive officers for fiscal year 1998
did not exceed the $1 million limit per officer, nor is it expected that the
compensation to be paid to the Company's executive officers for fiscal year 1999
will exceed that limit. The Company's 1994 Stock Option/ Stock Issuance Plan is
structured so that any compensation deemed paid to an executive officer when he
exercises an outstanding option under that Plan with an exercise price equal to
the fair market value of the option shares on the grant date will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. Because it is very unlikely that the cash compensation payable to
any of the Company's executive officers in the foreseeable future will approach
the $1 million limit, the Compensation Committee has decided at this time not to
take any other action to limit or restructure the elements of cash compensation
payable to the Company's executive officers. The Compensation Committee will
reconsider this decision should the individual compensation of any executive
officer ever approach the $1 million level.
It is the opinion of the Committee that the adopted executive compensation
policies and plans provide the necessary total remuneration program to properly
align the Company's performance and the interests of the Company's stockholders
with competitive and equitable executive compensation in a balanced and
reasonable manner, for both the short- and long-term.
The Compensation Committee of the
Board
Kenneth L. Schroeder
F. Joseph Van Poppelen
23
<PAGE>
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for the Company, The Nasdaq Stock Market Index and the Hambrecht & Quist
Semiconductor Sector Index.
COMPARISON OF CUMULATIVE TOTAL RETURN (1)(2)(3)
GASONICS INTERNATIONAL
H&Q SEMICONDUCTOR SECTOR INDEX
NASDAQ STOCK MARKET-U.S. INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
<S> <C> <C> <C>
1998 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
Gasonics International The Nasdaq Stock Hambrecht & Quiist
Corporation Market (US) Semiconductor Sector
Index
3/21/1994 100.00 100.00 100.00
Mar-94 105.77 93.07 99.43
Apr-94 110.58 91.86 94.87
May-94 96.15 92.09 96.88
Jun-94 94.23 88.72 93.41
Jul-94 84.62 90.54 98.06
Aug-94 105.77 96.31 105.54
Sep-94 133.65 96.07 102.09
Oct-94 155.77 97.95 110.36
Nov-94 132.69 94.70 107.77
Dec-94 125.00 94.97 107.78
Jan-95 121.15 95.51 109.56
Feb-95 134.62 100.56 123.09
Mar-95 155.77 103.54 130.16
Apr-95 176.92 106.81 148.58
May-95 188.46 109.56 160.85
Jun-95 219.23 118.44 182.67
Jul-95 261.54 127.15 208.38
Aug-95 267.31 129.72 204.49
Sep-95 286.54 132.71 206.45
Oct-95 253.85 131.94 193.99
Nov-95 204.81 135.04 171.66
Dec-95 155.77 134.32 150.00
Jan-96 124.04 134.98 147.96
Feb-96 121.87 140.12 148.72
Mar-96 106.73 140.58 141.66
Apr-96 174.52 152.24 162.31
May-96 152.88 159.23 157.28
Jun-96 121.15 152.05 135.77
Jul-96 83.65 138.49 120.53
Aug-96 92.31 146.25 131.92
Sep-96 92.31 157.44 154.13
Oct-96 85.10 155.70 155.55
Nov-96 124.04 165.32 196.03
Dec-96 118.27 165.17 194.27
Jan-97 206.25 176.91 234.21
Feb-97 193.27 167.13 222.97
Mar-97 164.42 156.21 218.34
Apr-97 98.08 161.10 237.07
May-97 137.02 179.35 255.99
Jun-97 157.21 184.85 246.23
Jul-97 214.90 204.36 301.16
Aug-97 204.81 204.05 306.87
Sep-97 240.14 216.11 307.79
Oct-97 178.85 204.91 240.95
Nov-97 152.88 205.94 232.46
Dec-97 113.94 202.65 204.88
Jan-98 134.13 209.01 228.86
Feb-98 168.75 228.63 251.40
Mar-98 118.27 237.06 234.91
Apr-98 142.79 241.08 255.52
May-98 119.71 227.85 209.99
Jun-98 80.77 243.91 201.82
Jul-98 80.05 241.27 208.11
Aug-98 57.69 194.11 159.07
Sep-98 49.04 220.89 175.95
</TABLE>
- ---------------------
(1) The graph covers the period from March 21, 1994, the date the Company's
initial public offering commenced, through fiscal year 1998.
(2) The graph assumes that $100 was invested on March 21, 1994 in the Company's
Common Stock and in each index, and that all dividends were reinvested. No
cash dividends have been declared on the Company's Common Stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
24
<PAGE>
CERTAIN TRANSACTIONS
In addition to the indemnification provisions contained in the Company's
Restated Certificate of Incorporation and Bylaws, the Company has entered into
separate indemnification agreements with each of its directors and officers.
These agreements require the Company, among other things, to indemnify such
director or officer against expenses (including attorneys' fees), judgments,
fines and settlements (collectively, "Liabilities") paid by such individual in
connection with any action, suit or proceeding arising out of such individual's
status or service as a director or officer of the Company (other than
Liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by the
Company.
All future transactions between the Company and its officers, directors,
principal stockholders and affiliates will be approved by a majority of the
independent and disinterested members of the Board of Directors and will be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the Company
and persons who hold more than 10% of the Company's outstanding Common Stock are
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, which require them to file reports with
respect to their ownership of the Common Stock and their transactions in such
Common Stock. Based upon (i) the copies of Section 16(a) reports which the
Company received from such persons for their fiscal year 1998 transactions in
the Common Stock and their Common Stock holdings, and (ii) the written
representations received from one or more of such persons that no annual Form 5
reports were required to be filed by them for fiscal year 1998, the Company
believes that the executive officers and the Board members complied with all
their reporting requirements under Section 16(a) for such fiscal year.
ANNUAL REPORT
A copy of the Annual Report of the Company for fiscal year 1998 has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. Except for "Executive Officers of
the Registrant" from Part I of the Company's Annual Report on Form 10-K for
fiscal year 1998, the Annual Report is not incorporated into this Proxy
Statement and is not considered proxy solicitation material.
FORM 10-K
The Company filed an Annual Report on Form 10-K for fiscal year 1998 with
the Securities and Exchange Commission. Stockholders may obtain a copy of this
report, without charge, by writing to Mr. Terry R. Gibson, the Secretary of the
Company, at the Company's principal offices located at 2730 Junction Avenue, San
Jose, California 95134-1909.
Dated: January 26, 1999
THE BOARD OF DIRECTORS OF
GASONICS INTERNATIONAL CORPORATION
25
<PAGE>
GASONICS INTERNATIONAL CORPORATION
1994 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 12, 1998)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1994 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of GaSonics International Corporation, a
Delaware corporation or any successor corporation (the "Corporation")
adopting the Plan, by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible
for the management, growth and financial success of the Corporation (or its
parent or subsidiary corporations), (ii) the non-employee members of the
Board and (iii) consultants and other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations) with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the Service of the Corporation (or its parent
or subsidiary corporations).
B. The Plan became effective upon adoption by the Board of
Directors of Gasonics International Corporation, a California corporation
("Gasonics California") on January 27, 1994, and such date shall accordingly
constitute the Effective Date of the Plan. The Plan was subsequently assumed
by the Corporation in connection with the merger (the "Merger") of Gasonics
California into the Corporation in February, 1994.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. the direct or indirect acquisition by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
<PAGE>
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.
FAIR MARKET VALUE: the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:
2.
<PAGE>
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.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
3.
<PAGE>
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 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:
4.
<PAGE>
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.
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
5.
<PAGE>
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.
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.
6.
<PAGE>
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 3,500,000 shares,(4) subject to adjustment from
time to time in accordance with the provisions of this Section VI. Such
share reserve includes (i) the 400,000-share increase authorized by the Board
on January 20, 1998 and approved by the stockholders at the 1998 Annual
Stockholders Meeting and (ii) the 400,000 share increase approved by the
Board on December 12, 1998, subject to stockholder approval at the 1999
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 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
- -------------------------
(4) Each number reflects the 3-for-2 split of the Common Stock effected by
the Corporation on November 20, 1995. In no event, however, may more than
3,041,836 shares of Common Stock be issued under the Plan after November
30, 1998, including the shares subject to options outstanding under the Plan
on that date.
7.
<PAGE>
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;
c. full payment in a combination of shares of Common
9.
<PAGE>
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.
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
11.
<PAGE>
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.
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.
12.
<PAGE>
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.
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
13.
<PAGE>
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 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.
14.
<PAGE>
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 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.
15.
<PAGE>
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(5) of Common Stock
upon the terms and conditions of this Article Three.
ANNUAL GRANT. Each Eligible Director who receives an initial
30,000-share option grant shall automatically be granted, on each
successive anniversary of the Initial Grant Date on which he or she
continues to serve as an Eligible Director, beginning with the fourth
anniversary of such Initial Grant Date, a Non-Statutory Option to purchase
an additional 7,500 shares(6) of Common Stock upon the terms and conditions
of this Article
- -------------------------
(5) This number reflects the 3-for-2 split of the Common Stock effected by
the Corporation on November 20, 1995.
(6) This number reflects the 3-for-2 split of the Common Stock effected by
the Corporation on November 20, 1995.
17.
<PAGE>
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 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
18.
<PAGE>
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 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:
19.
<PAGE>
INITIAL 30,000-SHARE GRANT
a. Should the Optionee cease Board service prior to the
fourth anniversary of the Initial Grant Date, then the Optionee may,
at any time during the Post-Service Exercise Period, exercise the
option for any or all of the option shares for which the option is
exercisable at the time of such cessation of Board service. In
addition, the option shall become exercisable for an additional
twenty-five percent (25%) of the option shares on the next anniversary
of the Initial Grant Date following the Optionee's cessation of Board
service and shall remain so exercisable until the expiration date of
the Post-Service Exercise Period.
b. If the Optionee ceases Board service on or after the
fourth anniversary of the Initial Grant Date, then the Optionee may,
at any time during the Post-Service Exercise Period, exercise the
option for any or all of the option shares for which the option is
exercisable at the time of such cessation of Board service.
c. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding with respect to any and all option shares for which the
option is not otherwise at that time exercisable or for which it is
not otherwise to become exercisable in accordance with clause a.
above.
ANNUAL 7,500-SHARE GRANT
a. The option shall become exercisable for all of the
option shares on the first anniversary of the grant date, whether or
not the Optionee continues in Board service, and shall remain so
exercisable for any or all of those shares until the expiration date
of the Post-Service Exercise Period.
b. Should the Optionee die after his or her cessation of
Board service but while holding one or more automatic option grants
under this Article Three, then the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution shall have the remainder of the
applicable Post-Service Exercise Period in which to exercise each such
option in accordance with the parameters established for the Optionee
in Paragraph 1.
c. Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability while holding one or more
automatic option grants under this Article Three, then such individual
(or the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such
20.
<PAGE>
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).
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
21.
<PAGE>
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.
<PAGE>
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 of future
Service or the Corporation's attainment of specified performance objectives as
the Plan Administrator may establish at the time of issuance.
23.
<PAGE>
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 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
24.
<PAGE>
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 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:
25.
<PAGE>
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.
<PAGE>
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.
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
27.
<PAGE>
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 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
28.
<PAGE>
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 and (ii) increase the maximum number of shares
of Common Stock for which any one individual may be granted stock options and
direct stock issuances under the Plan by an additional 250,000 shares (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 amended and 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 Amendment") 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 Amendment"). Both the June 1995 Amendment
and the November 1995 Amendment were approved by the stockholders at the 1996
Annual Meeting.
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.
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 was approved by the stockholders the 1997 Annual Meeting.
D. The Plan was again amended by the Board on January 20, 1998
to increase the number of shares of Common Stock issuable under the Plan by
an additional 400,000 shares, from 2,700,000 to 3,100,000 shares (the
"January 1998 Amendment"). The stockholders approved the January 1998
Amendment at the 1998 Annual Meeting.
E. The Plan was most recently amended by the Board on December
12, 1998
- ------------------------
(7) The numbers do not reflect the 3-for-2 split of the Common Stock
effected by the Corporation on November 20, 1995.
29.
<PAGE>
(the "December 1998 Amendment") to effect the following change: increase the
number of shares of Common Stock issuable under the Plan by an additional
400,000 shares from 3,100,000 to 3,500,000 shares. No direct stock issuances
shall be made on the basis of the December 1998 Amendment, and no option
grants made on the basis of the December 1998 Amendment shall become
exercisable in whole or in part, unless and until the December 1998 Amendment
is approved by the stockholders at the 1999 Annual Stockholders Meeting.
Should such stockholder approval not be obtained, then each option grant made
pursuant to the December 1998 Amendment shall terminate and cease to remain
outstanding, and no further option grants shall be made on the basis of that
amendment. All the other provisions of the Plan as in effect immediately
prior to the December 1998 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 until the share reserve
under the Plan as last approved by the stockholders shall have been issued.
All option grants and direct stock issuances made prior to the December 1998
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 1998 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 issuancs under the Plan at any time before the date fixed
herein for the termination of the Plan.
F. 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.
30.
<PAGE>
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.
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>
INTERNATIONAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, MARCH 4, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GASONICS INTERNATIONAL CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held on March 4, 1999 and the
Proxy Statement and appoints Dave Toole and Asuri Raghavan, and each of them, as
the Proxy of the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Annual Meeting of
Stockholders of the Company to be held at the offices of the Company located at
2730 Junction Avenue, San Jose, California 95134-1909, on Thursday, March 4,
1999, at 9:00 a.m. (the "Annual Meeting"), and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this Proxy
shall be voted in the following manner:
1. To elect the following directors to serve until the next annual meeting of
stockholders or until their successors are elected and qualified:
<TABLE>
<S> <C> <C> <C> <C> <C>
Dave Toole FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ] Monte M. Toole FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ]
F. Joseph Van Poppelen FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ] Kenneth L. Schroeder FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ]
Kenneth M. Thompson FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ] Asuri Raghavan FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ]
</TABLE>
2. Proposal to approve an amendment to the Company's 1994 Stock Option/Stock
Issuance Plan (the "1994 Option Plan") to increase the number of shares of
Common Stock authorized for issuance under the 1994 Option Plan by an
additional 400,000 shares to 3,500,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the Board of Directors' selection of Arthur Andersen LLP to serve
as the Company's independent auditors for the fiscal year ending September
30, 1998; and
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
The Board of Directors recommends a vote FOR each of the directors listed
above and a vote FOR the other proposals. This Proxy, when properly executed,
well be voted as specified above. THE PROXY WILL BE VOTED FOR THE ELECTION OF
THE DIRECTORS LISTED ABOVE AND FOR THE OTHER PROPOSALS IF NO SPECIFICATION IS
MADE.
Please print the name(s) appearing on
each share certificate(s) over which
you have voting authority:
_____________________________________
(Print name(s) on certificate(s)
_____________________________________
Please sign your name
_____________________________________
(Authorized Signature(s))
Date:________________________________
