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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 240.14a-11(c) or 240.14a-12
GASONICS INTERNATIONAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[GASONICS LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 10, 2000
------------------------
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 Friday, March 10, 2000, 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 amendments to the Company's 1994 Stock Option/Stock Issuance
Plan (the "Option Plan") to (i) increase the number of shares of Common
Stock authorized for issuance under the Option Plan by an additional
550,000 shares to 3,650,000 shares and (ii) amend the vesting provisions
of the 7,500 share automatic grants to non-employee directors so that
such grants will be fully exercisable and vested as of the grant date.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending September 30, 2000; 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, 2000 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,
/s/ DAVE TOOLE
Dave Toole
CHAIRMAN OF THE BOARD OF DIRECTORS
San Jose, California
January 28, 2000
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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.
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<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 10, 2000
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 Friday,
March 10, 2000 (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 28, 2000 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, 2000, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 14,723,257
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, 2000. 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. John Arnold, the Controller 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, officers or employees of the
Company. No additional compensation will be paid to these individuals for
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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 2001 Annual Meeting must be received at
the Company's principal executive offices no later than September 28, 2000, 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 2001
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, 2000.
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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, 1999:
<TABLE>
<CAPTION>
NOMINEES AGE POSITION(S) WITH THE COMPANY
- -------- -------- ----------------------------------
<S> <C> <C>
Dave Toole........................ 44 Chairman of the Board of Directors
Monte M. Toole.................... 68 Vice Chairman of the Board of
Directors
Asuri Raghavan.................... 46 Chief Executive Officer, President
and Director
Kenneth L. Schroeder.............. 53 Director
Kenneth M. Thompson............... 61 Director
F. Joseph Van Poppelen............ 72 Director
</TABLE>
BUSINESS EXPERIENCE OF BOARD NOMINEES
DAVE TOOLE was appointed Chairman of the Board of Directors in April 1998.
In addition, Mr. Toole has served as the President of Outhink, Inc., a corporate
performance portal company, since April 1999. 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
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the Company, Mr. Toole was a representative of semiconductor equipment
manufacturers at Monte Toole 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., 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 Executive Officer, and a Director of
KLA-Tencor Corporation, a semiconductor equipment manufacturer, since
July 1999. From November 1991 until June 1999, he was President and Chief
Operating Officer and a Director of KLA-Tencor. Mr. Schroeder has been employed
by KLA-Tencor for 17 years in various management positions. Mr. Schroeder is
also a director of SEMI, the trade association for the semiconductor capital
equipment industry.
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 Avant Com since June 1999.
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 and
ULSI Systems.
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, 1999, the Board of Directors held
nine (9) meetings and acted by unanimous written consent on three
(3) occasions. The Board of Directors has an Audit Committee, a Nominating
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 three (3) directors,
Messrs. Schroeder, Thompson 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 one (1) meeting during the last
fiscal year.
The Compensation Committee currently consists of three (3) directors,
Messrs. D. Toole, Thompson and Van Poppelen. The Compensation Committee
establishes salaries, incentives and other forms of
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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 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. D. Toole through November 3, 1999 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 zero (0) meetings and acted by
unanimous written consent on three (3) occasions. The Secondary Committee acted
by unanimous written consent on twenty-one (21) occasions during the last fiscal
year.
The Nominating Committee currently consists of three (3) directors,
Messrs. D. Toole, Raghavan and Thompson. The Nominating Committee may act in all
matters concerning the identification and nomination of potential members by the
Board of Directors. The committee will not consider nominees recommended by
stockholders.
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 $50,000 during fiscal year 1999 in
consideration for his services as Vice Chairman of the Board. The Company also
paid the following automobile-related expenses on behalf of Mr. M. Toole during
fiscal year 1999: (i) $10,685 for automobile lease payments, (ii) $2,130 for
automobile insurance, and (iii) $283 for disability and accidental death
insurance.
In addition, the Company paid Mr. D. Toole $250,000 during the fiscal year
1999 in consideration for his services as Chairman of the Board. The Company
also paid $1,890 for automobile insurance and $9,841 for automobile lease
payments on behalf of Mr. D. Toole.
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.
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
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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 be exercisable for all of the option shares on the
grant date, whether or not the optionee in fact continues in Board service after
the grant date. Only Messrs. Schroeder and Van Poppelin received such a
7,500-share option grant during the 1999 fiscal year.
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.
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PROPOSAL TWO
APPROVAL OF AMENDMENTS 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 550,000 shares, from 3,100,000 shares
to 3,650,000.
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 second amendment will allow the Company to provide more beneficial
equity incentives to non-employee Board members as an inducement for their
continued service.
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
amendments which are the subject of this Proposal Two were adopted by the Board
on December 8, 1999, subject to stockholder approval at the 2000 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 3,650,000 shares of Common Stock has been reserved for issuance
over the ten-year term of the Option Plan, assuming stockholder approval of the
550,000-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
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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 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, 1999, six (6) 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, 1999, the fair market value per share
determined on such basis was $15.38.
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
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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.
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.
In January 2000, the Company's Board of Directors amended the Option Plan to
provide that the Plan Administrator may not 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 issue replacement options with a lower exercise price without first
obtaining stockholder approval if such cancelled options are to be returned to
the Option Plan and made available for future grant.
The Plan Administrator does have the authority, however, 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 provided
that the cancelled options are not returned to the option pool and are no longer
available for grant.
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 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 2000 Annual Meeting and the subsequent exercise of that option in
accordance with the provisions of the Automatic Option Grant Program summarized
below.
9
<PAGE>
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. Assuming stockholder approval of the amendment to the Company's
Automatic Option Grant Program under the Option Plan, which constitutes part of
this proposal, each annual 7,500-share automatic option grant will be
exercisable for all of the option shares on the grant date, whether or not the
optionee continues in Board service thereafter.
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 2000
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.
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
10
<PAGE>
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.
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, 1998 through November 30, 1999, together with
the weighted average exercise price payable per share. The table does not
include option grants which were cancelled on November 3, 1998 in exchange for a
new option for the same number of shares with an exercise price of $5.63. For
further information concerning these options, see the discussion of option
repricing under the Executive Compensation and Related Information Section.
11
<PAGE>
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
Bill N. Alexander........................................... 80,000 $ 6.84
Vice President, Worldwide Sales and Field Operations
Terry Gibson................................................ 40,000 $ 5.625
Vice President, Finance and Chief Financial Officer
Graham W. Hills............................................. 50,000 $ 14.50
Vice President, Engineering and Technology and Chief
Technical Officer
John R. Villadsen........................................... 45,000 $15.625
Vice President, Manufacturing Operations
All executive officers as a group........................... 565,000 $ 7.379
Dave Toole.................................................. 90,000 $ 5.625
Director
Monte M. Toole.............................................. 0 --
Director
Kenneth L. Schroeder........................................ 7,500 $ 15.75
Director
F. Joseph Van Poppelen...................................... 7,500 $ 15.75
Director
Kenneth M. Thompson......................................... 0 --
Director
All directors who are not executive officers as a group..... 105,000 $ 7.071
All employees, excluding executive officers, as a group..... 1,012,231 $ 9.532
</TABLE>
As of November 30, 1999, options covering 2,088,758 shares of Common Stock
were outstanding under the Option Plan, 822,161 shares remained available for
future option grant assuming stockholder approval of the 550,000 share increase
which is the subject of this Proposal, and 1,577,231 shares have been issued
pursuant to the exercise of options granted under the Option Plan.
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
12
<PAGE>
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 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
13
<PAGE>
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, 1999, no options had been granted on the basis of the
550,000-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 550,000-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 and all annual 7,500 share grants to the Company's non-employee Board
members will continue to become exercisable for all the option plans one
(1) year following the grant date. 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
AMENDMENTS 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 1999, to serve in
the same capacity for the fiscal year ending September 30, 2000, 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, 2000.
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, 1999 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>
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
- --------------------------------------- ------------------ ---------------------
<S> <C> <C>
Capital Guardian Trust Company
333 So. Hope Street, 52nd Floor
Los Angeles, CA 90071(3)................................ 1,588,500 10.9%
Wisconsin Investment Board
P.O. Box 7842
Madison, WI 53707....................................... 1,108,700 7.6%
Northwest Mutual Life Insurance
720 E. Wisconsin Ave.
Milwaukee, WI 53202(4).................................. 1,142,800 8.0%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11 Floor
Santa Monica, CA 90401(5)............................... 743,900 5.1%
Monte M. Toole(6)......................................... 1,885,728 12.9%
Dave Toole(7)............................................. 952,475 6.5%
Asuri Raghavan(8)......................................... 104,081 *
Kenneth M. Thompson(9).................................... 7,500 *
Kenneth L. Schroeder(10).................................. 15,000 *
F. Joseph Van Poppelen(11)................................ 25,000 *
Bill N. Alexander(12)..................................... 28,738 *
Terry Gibson.............................................. 3,000 *
Graham W. Hills........................................... -- --
John R. Villadsen......................................... -- --
All directors and executive officers as a group (10
persons)(13)............................................ 3,021,522 20.3%
</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 14,622,968 shares of Common Stock
outstanding on November 30, 1999. 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, 1999, 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.
16
<PAGE>
(3) Includes 105,000 shares held by Capital International, Inc., an affiliate of
Capital Guardian Trust Company.
(4) Includes 491,000 shares held by Growth Stock Portfolio of Northwestern
Mutual Series Fund, Inc., a wholly owned subsidiary of The Northwestern
Mutual Life Insurance Company, 127,800 shares held in The Northwestern
Mutual Life Insurance Company Group Annuity Separate Account and 6,900
shares held by the Asset Allocation Fund of Mason Street Funds, Inc., an
affiliate of The Northwestern Mutual Life Insurance Company.
(6) Includes 997,999 shares of Common Stock held by the Monte M. Toole Family
Limited Partnership, of which Monte M. Toole is the sole General Partner.
(7) Includes 94,999 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 686,062 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 133,017 shares
underlying stock options which are currently exercisable or which will
become exercisable within 60 days after November 30, 1999.
(8) Includes 102,081 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after
November 30, 1999.
(9) Represents 7,500 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after
November 30, 1999
(10) Represents 15,000 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after
November 30, 1999.
(11) Includes 10,000 shares held by Trust Company of America, FBO F. Joseph Van
Poppelen. Also includes 15,000 shares underlying stock options which are
currently exercisable or which will become exercisable within 60 days after
November 30, 1999.
(12) Includes 18,955 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days after
November 30, 1999.
(13) Includes 291,553 shares underlying stock options held by two officers and
five directors (one director which is also an officer) which are currently
exercisable or which will become exercisable within 60 days after
November 30, 1999.
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 1999 and the four other executive officers whose
compensation was in excess of $100,000 for fiscal year 1999, for services
rendered in all capacities to the Company and its subsidiaries for each of the
last three fiscal years, as applicable. The table also includes one other
executive officer who left the Company's employ during the 1999 fiscal year. The
individuals named in the table will be referred to as the "Named Executive
Officers." No other executive officers who would have been included in the table
on the basis of their salary and bonus for fiscal year 1999 resigned or
terminated employment during fiscal year 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER NUMBER OF
ANNUAL SECURITIES ALL
NAME AND COMPEN- UNDERLYING OTHER COM-
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) SATION OPTION(#)(2) PENSATION($)(3)
- ------------------ -------- ------------ -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan..................... 1999 285,431 185,423(4) -- 350,000 7,800
President and Chief Executive 1998 148,845 96,082 -- 350,000 41,130
Officer
Bill N. Alexander.................. 1999 227,991(5) 21,000 -- 80,000 7,800
Vice President, Sales and Field 1998 192,369 12,750 -- 15,000 9,600
Operations 1997 -- -- -- 50,000 --
Terry Gibson(6).................... 1999 114,337 -- -- 40,000 3,900
Former Vice President, Finance 1998 172,498 19,319 -- -- 7,210
and Chief Financial Officer 1997 164,846 28,114 -- 15,000 3,332
Graham W. Hills.................... 1999 51,156 32,825(7) -- 50,000 2,318
Vice President and Chief
Technical Officer
DAVE TOOLE......................... 1999 270,057 -- -- 90,000 37,047
Chairman of the Board 1998 306,558 38,176 -- 40,000 92,249
1997 290,239 196,256 -- 50,000 27,422
JOHN R. VILLADSEN.................. 1999 19,039 6,683 -- 45,000 1,300
Vice President, Manufacturing
Operations
</TABLE>
- ------------------------
(1) For fiscal year 1999, salary includes deferred salary of $16,000 for
Mr. Gibson.
(2) 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 (excluding his option grant of 15,000
shares) 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.
(3) For fiscal year 1999, All Other Compensation includes: (i) the contributions
made by the Company to the Section 401(k) Profit Sharing Plan and Trust on
behalf of Messrs. D. Toole ($4,807), Raghavan ($2,150), Gibson ($0.00),
Hills ($968), Villadsen ($190), and Alexander ($2,019); and (ii) the premium
18
<PAGE>
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.
(4) Includes (i) $62,496 of loan forgiveness accrued over fiscal year 1999
pursuant to the terms of Mr. Raghavan's offer letter from the Company and
(ii) $65,177 of tax gross up to reimburse Mr. Raghavan for the tax incurred
in connection with such loan. Under the Promissory Note, $250,000 of
principal due under the note which Mr. Raghavan issued to the Company on
May 26, 1998 was subject to forgiveness over his continued period of service
with the Company.
(5) Includes $57,678 in sales commissions.
(6) Mr. Gibson left the Company in April 1999.
(7) Includes $20,000 sign-on bonus paid when Mr. Hills joined the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers for fiscal year 1999. No stock
appreciation rights ("SARs") were granted to these individuals during such
fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
-------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS GRANTED APPRECIATION FOR OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE OR BASE -----------------------------
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH)(1) EXPIRATION DATE 5%($)(2) 10%($)(2)
- ---- -------------- --------------- ---------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan....... 350,000 62.0 5.63 11/03/08 1,239,237 3,140,470
Bill N. Alexander.... 65,000 11.5 5.63 11/03/08 230,144 583,230
15,000 2.7 12.13 06/01/09 114,427 289,981
Terry Gibson......... 40,000 7.1 5.63 11/03/08 141,627 358,911
Graham W. Hills...... 50,000 8.9 14.50 06/14/09 455,949 1,155,463
Dave Toole........... 90,000 16.0 5.63 11/03/08 318,378 806,832
John R. Villadsen.... 45,000 8.0 15.63 06/14/09 442,333 1,120,959
</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
November 3, 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. Alexander, Gibson, Hills and Villadsen 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 respective grant dates 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 (excluding his option grant of 15,000
shares) and Gibson were each cancelled, and new options for the same number
of shares were regranted with an exercise price of $5.625 per share. The new
options have the same five (5)-year or four (4)-year vesting schedule as the
cancelled options, except that the vesting period is now measured from the
November 3,
19
<PAGE>
1998 regrant date. All of the options are subject to accelerated vesting in
connection with certain changes in control or ownership of the Company.
(2) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price appreciation
over the ten-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The table below sets forth certain information with respect to the Named
Executive Officers concerning their exercise of options during fiscal year 1999
and the unexercised options they held as of the end of such fiscal year. No SARs
were exercised by such individuals during fiscal year 1999, nor did any
individual hold any outstanding SARs at the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan............ -- -- 0 350,000 0 3,806,250
Bill N. Alexander......... -- -- 0 80,000 0 772,500
Terry Gibson.............. 32,290 174,837 -- -- -- --
Graham W. Hills........... -- -- -- 50,000 -- 100,000
Dave Toole................ -- -- 96,353 118,647 891,265 1,243,736
John R. Villadsen......... -- -- -- 45,000 -- 39,375
</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
($16.50 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.
20
<PAGE>
OPTION REPRICING
As discussed in the Compensation Committee Report on Executive Compensation
below, the Company implemented an option cancellation/regrant program for
executive officers and other employees holding stock options with an exercise
price per share in excess of the market price of the Company's Common Stock at
the time the cancellation/regrant occurred. The cancellation/regrant was
effected on November 3, 1998, and a number of outstanding options with an
exercise price in excess of $5.63 per share were cancelled and new options for
the same aggregate number of shares were granted with an exercise price of $5.63
per share.
The following table sets forth information with respect to each of the
Company's executive officers concerning his or her participation in the Option
cancellation/regrant programs effected on August 5, 1996 and November 3, 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE EXERCISE PRICE
UNDERLYING OF STOCK AT OF STOCK AT
OPTIONS TIME OF TIME OF NEW LENGTH OF OPTION TERM
REPRICING REPRICED OR REPRICING OR REPRICING OR EXERCISE REMAINING AT DATE OF
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR AMENDMENT
- ---- --------- ----------- ------------ -------------- -------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Asuri Raghavan............. 11/03/98 303,490 5.63 10.75 5.63 9 years, 140 days
11/03/98 46,510 5.63 10.75 5.63 9 years 140 days
Bill N. Alexander.......... 11/03/98 2,485 5.63 7.00 5.63 9 years 231 days
11/03/98 12,515 5.63 7.00 5.63 9 years 231 days
11/03/98 31,100 5.63 16.06 5.63 8 years, 287 days
11/03/98 18,900 5.63 16.06 5.63 8 years, 287 days
Terry Gibson............... 11/03/98 4,228 $5.63 7.00 5.63 9 years, 231 days
11/03/98 10,772 $5.63 7.00 5.63 9 years, 231 days
11/03/98 18,000 $5.63 8.88 5.63 8 years 178 days
11/03/98 7,000 $5.63 8.88 5.63 8 years 178 days
Dave Toole................. 11/03/98 15,258 $5.63 $ 7.00 $5.63 9 years, 231 days
11/03/98 24,742 $5.63 $ 8.88 $5.63 8 years, 149 days
11/03/98 50,000 $5.63 $ 7.00 $5.63 9 years, 231 days
08/05/96 16,368 $7.25 $ 9.17 $7.25 8 years, 46 days
08/05/96 43,632 $7.25 $ 9.17 $7.25 8 years, 46 days
08/05/96 15,000 $7.25 $16.33 $7.25 8 years, 298 days
Pascal Didier.............. 08/05/96 22,500 $7.25 $16.33 $7.25 8 years, 298 days
08/05/96 1,620 $7.25 $20.00 $7.25 9 years, 66 days
08/05/96 13,380 $7.25 $20.00 $7.25 9 years, 66 days
Jeannine P. Sargent........ 08/05/96 39,024 $7.25 $10.25 $7.25 9 years, 185 days
08/05/96 10,976 $7.25 $10.25 $7.25 9 years, 185 days
</TABLE>
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.
21
<PAGE>
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. D. Toole, Thompson and Van Poppelen. None of the present or former
members of the Compensation Committee were at any time during fiscal year 1999
or at any other time an officer or employee of the Company, except that Dave
Toole was an officer of the Company until April 1998.
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.
22
<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.
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 Company's 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 1999 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 to the Company and accomplishment of pre-determined milestones and
objectives. 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. 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 comparative compensation purposes. However, in selecting companies to survey
for such compensation
23
<PAGE>
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 1999. 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 $285,431 for fiscal year
1999, 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.
SPECIAL OPTION REGRANT PROGRAM
During the 1999 fiscal year, the Compensation Committee felt that
circumstances had made it necessary for the Company to implement an option
cancellation/regrant program pursuant to which a number of outstanding options
held by the Company's executive officers and other employees under the
24
<PAGE>
Option Plan were cancelled, and new options for the same number of shares were
granted with a lower exercise price per share equal to the market price of the
Company's Common Stock on the regrant date.
The Compensation Committee determined that this program was necessary
because equity incentives are a significant component of the total compensation
package of the Company's employees and play a sugstantial role in the Company's
ability to retain the services of individuals essential to the Company's
long-term financial success. Prior to the implementation of the program, the
market price of the Company's Common Stock had fallen as a result of market
factors which affected stock prices throughout the semiconductor and
semiconductor capital equipment industries and which did not necessarily reflect
the market's particular assessment of the Company's progress. The Compensation
Committee felt that the Company's ability to retain key employees would be
significantly impaired, unless value were restored to their options in the form
of regranted options at the current market price of the Company's Common Stock.
Howegver, in order for the regranted options to serve their primary purpose of
assuring the continued service of each optionee, a new four-year vesting
schedule was imposed with respect to all regranted option shares so that the
optionee would only have the opportunity to acquire the option shares at the
lower exercise price if he or she remained in the Company's employ.
Accordingly, on November 3, 1998, a number of outstanding options held by
the Company's executive officers and other employees with an exercise price in
excess of $5.63 per share were cancelled, and new options for the same number of
shares were granted with an exercise price of $5.63 per share, the market price
of the Common Stock on that date. Each new option includes a new four-year
vesting schedule reasured from the grant date.
As a result of the new vesting schedules imposed on the regranted options,
the Compensation Committee believes that the program strikes an appropriate
balance between the interests of the option holders and those of the
stockholders. The lower exercise price in effect under the regranted options
make those options valuable once again to the executive officers and key
employees critical to the Company's financial performance. However, those
individuals will enjoy the benefits of the regranted options only if they in
fact remain in the Company's employ and contribute to the Company's financial
success.
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 1999
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 2000
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
Ken Thompson
Dave Toole
F. Joseph Van Poppelen
25
<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)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
<S> <C> <C> <C>
Gasonics Nasdaq Stock Semiconductor
International Market (U.S.) Sector Index
9/30/94 100.00 100.00 100.00
Oct-94 131.04 102.64 108.13
Nov-94 111.63 99.24 105.59
Dec-94 105.16 99.55 105.60
Jan-95 101.92 100.07 107.34
Feb-95 113.25 105.33 120.60
Mar-95 131.04 108.46 127.53
Apr-95 148.84 111.87 145.57
May-95 158.55 114.77 157.59
Jun-95 184.43 124.06 178.98
Jul-95 220.02 133.17 204.17
Aug-95 224.88 135.87 200.36
Sep-95 241.05 139.00 202.27
Oct-95 213.55 138.20 190.06
Nov-95 172.30 141.44 168.19
Dec-95 131.04 140.69 146.97
Jan-96 104.35 141.40 144.97
Feb-96 102.53 146.79 145.71
Mar-96 89.79 147.28 138.80
Apr-96 146.82 159.48 159.02
May-96 128.62 166.80 154.10
Jun-96 101.92 159.28 133.03
Jul-96 70.37 145.10 118.09
Aug-96 77.65 153.24 129.25
Sep-96 77.65 164.95 151.01
Oct-96 71.59 163.13 152.41
Nov-96 104.35 173.25 192.06
Dec-96 99.50 173.10 190.34
Jan-97 173.51 185.39 229.48
Feb-97 162.59 175.13 218.46
Mar-97 138.32 163.72 213.92
Apr-97 82.51 168.81 232.27
May-97 115.27 187.94 250.81
Jun-97 132.26 193.71 241.25
Jul-97 180.79 214.12 295.07
Aug-97 172.30 213.81 300.66
Sep-97 202.02 226.49 301.57
Oct-97 150.46 214.69 236.08
Nov-97 128.62 215.83 227.75
Dec-97 95.86 212.11 200.74
Jan-98 112.84 218.82 224.23
Feb-98 141.96 239.40 246.32
Mar-98 99.50 248.23 230.15
Apr-98 120.12 252.42 250.35
May-98 100.71 238.40 205.74
Jun-98 67.95 255.05 197.74
Jul-98 67.34 252.07 203.90
Aug-98 48.53 202.25 155.85
Sep-98 41.25 230.32 172.40
Oct-98 49.75 240.27 215.84
Nov-98 76.44 264.57 245.42
Dec-98 84.93 298.90 281.77
Jan-99 118.91 342.36 351.74
Feb-99 100.71 311.68 297.56
Mar-99 106.78 334.34 319.62
Apr-99 116.48 343.73 325.43
May-99 117.70 335.83 336.14
Jun-99 135.90 365.81 419.16
Jul-99 134.68 360.49 436.13
Aug-99 152.88 374.78 470.31
Sep-99 160.16 374.20 470.33
</TABLE>
(1) The graph covers the period from September 29, 1994, through fiscal year
1999.
(2) The graph assumes that $100 was invested on September 29, 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.
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
26
<PAGE>
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 1999 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 1999, 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 1999 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 1999, 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 1999 with
the Securities and Exchange Commission. Stockholders may obtain a copy of this
report, without charge, by writing to Mr. John Arnold, the Company's Controller,
at the Company's principal offices located at 2730 Junction Avenue, San Jose,
California 95134-1909.
Dated: January 28, 2000
THE BOARD OF DIRECTORS OF
GASONICS INTERNATIONAL CORPORATION
27
<PAGE>
GASONICS INTERNATIONAL CORPORATION
1994 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY __, 2000)
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
<PAGE>
tender or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept; or
b. a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's common stock, par value
$0.001 per share.
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Corporation is incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from the persons holding
those securities immediately prior to such merger.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded on the
2.
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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.
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
3.
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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:
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
4.
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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
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
5.
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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.
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 3,100,000 shares,(1) subject to adjustment
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(1) Each number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995. In no event, however, may more than
2,604,008 shares of Common Stock be issued under the Plan after
November 15, 1996, including the shares subject to options outstanding
under the Plan on that date.
6.
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from time to time in accordance with the provisions of this Section VI. Such
share reserve includes the 400,000-share increase authorized by the Board on
January 20, 1998, subject to stockholder approval at the 1998 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 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.
7.
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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 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
8.
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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.
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.
9.
<PAGE>
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 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
10.
<PAGE>
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.
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
11.
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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 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
12.
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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.
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
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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. However, the approval of
the holders of a majority of the Corporation's outstanding voting stock must be
received if the cancelled shares are returned to the Plan in accordance with
Article One Section V.C.
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.
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.
14.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
ELIGIBLE DIRECTORS. The individuals eligible to receive automatic
option grants pursuant to the July 19, 1995 restated provisions of this Article
Three program shall be limited to (i) those individuals who are continuing to
serve as non-employee Board members on July 19, 1995 and (ii) those individuals
who are first elected or appointed as non-employee Board members on or after
July 19, 1995. A non-employee Board member who has previously been in the employ
of the Corporation (or any parent or subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but such individual shall be
eligible to receive periodic option grants under the Automatic Option Grant
Program upon his or her continued service as a non-employee Board member. Any
non-employee Board member eligible to participate in the Automatic Option Grant
Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of this Article Three.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Option grants shall be made pursuant to the July 19,
1995 restated provisions of this Article Three on the dates specified below:
INITIAL GRANT. Each individual who first becomes an Eligible
Director on or after July 19, 1995, whether through election by the
stockholders or appointment by the Board, shall automatically be
granted, at the time of such initial election or appointment (the
"Initial Grant Date"), a Non-Statutory Option to purchase 30,000
shares(2) of Common Stock upon the terms and conditions of this
Article Three.
ANNUAL GRANT. Each Eligible Director who receives an initial
30,000-share option grant shall automatically be granted, on each
successive anniversary of the Initial Grant Date on which he or she
continues to serve as an Eligible Director, beginning with the fourth
anniversary of such Initial Grant Date, a Non-Statutory Option to
purchase an additional 7,500 shares(3) of Common Stock upon the terms
and conditions of this Article Three. In addition, each individual who
is an
- ----------
(2) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
(3) This number reflects the 3-for-2 split of the Common Stock effected by the
Corporation on November 20, 1995.
15.
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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 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.
16.
<PAGE>
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:
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
17.
<PAGE>
shall remain so exercisable until the expiration date of the Post-Service
Exercise Period.
b. If the Optionee ceases Board service on or after the
fourth anniversary of the Initial Grant Date, then the Optionee may, at any
time during the Post-Service Exercise Period, exercise the option for any
or all of the option shares for which the option is exercisable at the time
of such cessation of Board service.
c. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding with respect to any and all option shares for which the option
is not otherwise at that time exercisable or for which it is not otherwise
to become exercisable in accordance with clause a. above.
ANNUAL 7,500-SHARE GRANT
a. The option shall become exercisable for all of the option
shares on the first anniversary of the grant date, whether or not the
Optionee continues in Board service, and shall remain so exercisable for
any or all of those shares until the expiration date of the Post-Service
Exercise Period.
b. Should the Optionee die after his or her cessation of
Board service but while holding one or more automatic option grants under
this Article Three, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution shall have the remainder of the applicable Post-Service
Exercise Period in which to exercise each such option in accordance with
the parameters established for the Optionee in Paragraph 1.
c. Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability while holding one or more automatic
option grants under this Article Three, then such individual (or the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution) shall have a
twelve (12)-month period following the date of such cessation 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
18.
<PAGE>
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
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.
19.
<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.
20.
<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 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.
21.
<PAGE>
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:
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
22.
<PAGE>
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.
23.
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ARTICLE FIVE
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee
or Participant, to the extent such Optionee or Participant is an Employee
(including an Optionee or Participant who is an officer of the Corporation), in
the exercise of one or more options granted to such Optionee under the
Discretionary Option Grant Program or the purchase of one or more shares issued
to such Participant under the Stock Issuance Program, including the satisfaction
of any Federal, state and local income and employment tax obligations arising
therefrom, by (i) authorizing the extension of a loan from the Corporation to
such Optionee or Participant or (ii) permitting the Optionee or Participant to
pay the exercise price or purchase price for the purchased shares in
installments over a period of years. The terms of any loan or installment method
of payment (including the interest rate and terms of repayment) shall be upon
such terms as the Plan Administrator specifies in the applicable option or
issuance agreement or otherwise deems appropriate under the circumstances. Loans
or installment payments may be authorized with or without security or
collateral. However, the maximum credit available to the Optionee or Participant
may not exceed the exercise or purchase price of the acquired shares (less the
par value of such shares) plus any Federal, state and local income and
employment tax liability incurred by the Optionee or Participant in connection
with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment. The amendment or
modification of Article Two Section IV. of the Plan shall require the approval
of a majority of the holders of the Corporation's outstanding voting stock. 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
24.
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available for issuance under the Plan, provided any excess shares actually
issued under the Discretionary Option Grant Program or the Stock Issuance
Program are held in escrow until stockholder approval is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (i) any unexercised excess options shall terminate and cease to be
exercisable and (ii) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of Non-Statutory Options (other than the automatic option grants made
pursuant to Article Three of the Plan) or unvested shares under the Plan with
the right to use shares of the Corporation's Common Stock in satisfaction of all
or part of the Federal, state and local income and employment tax liabilities
incurred by such holders in connection with the exercise of their options or the
vesting of their shares (the "Taxes"). Such right may be provided to any such
holder in either or both of the following formats:
STOCK WITHHOLDING: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the
Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option or the vesting
of such shares, a portion of those shares with an aggregate Fair
Market Value to exceed one hundred percent (100%) of the applicable
Taxes.
STOCK DELIVERY: The Plan Administrator may, in its discretion,
provide the holder of the Non-Statutory Option or the unvested shares
with the election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such individual (other
than in connection with the option exercise or share vesting
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
25.
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A. This Plan became effective immediately upon adoption by the Board
of Directors of Gasonics California. This Plan was subsequently assumed by the
Corporation in connection with the Merger. Stock options and share issuances may
be made under Articles Two and Four of the Plan from and after the Effective
Date.
B. The Plan was amended by the Board on September 21, 1994 to (i)
increase the number of shares of Common Stock issuable under the Plan by an
additional 500,000 shares(4) 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(5) (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"), subject to stockholder approval at the 1998 Annual Meeting. No
option grants made on the basis of the January 1998 Amendment shall become
exercisable in whole or in part unless and until the January 1998
- ----------
(4) The numbers DO NOT reflect the 3-for-2 split of the Common Stock effected
by the Corporation on November 20, 1995.
26.
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Amendment is approved by the stockholders. Should such stockholder approval not
be obtained at the 1998 Annual Meeting, then each option grant made pursuant to
the January 1998 Amendment shall terminate and cease to remain outstanding, and
no further option grants shall be made on the basis of that share increase.
However, the provisions of the Plan as in effect immediately prior to the
January 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. All option grants and direct stock issuances
made prior to the January 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 January 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 issuances under the Plan at any time before the date fixed herein
for the termination of the Plan.
E. The Plan was again amended by the Board on January __, 2000 to (i)
limit the Plan Administrator's ability to implement a cancellation/ regrant
program under Article Two Section IV. of the Plan by adding a shareholder
approval requirement and (ii) limit the Board's ability to amend or modify
Article Five Section II.A. of the Plan by adding a shareholder approval
requirement.
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.
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
27.
<PAGE>
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.
28.
<PAGE>
GASONICS INTERNATIONAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, MARCH 10, 2000
THIS PROXY IS SOLICITIED 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 10, 2000 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 Friday, March 10,
2000, 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 amendments to the Company's 1994 Stock Option/Stock
Issuance Plan (the "Option Plan") to (i) increase the number of shares of
Common Stock authorized for issuance under the Option Plan by an additional
550,000 shares to 3,650,000 shares and (ii) amend the vesting provisions of
the 7,500 share automatic grants to non-employee directors so that such
grants will be fully exercisable and vested as of the grant date.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the appointment of Arthur Andersen LLP to serve as the Company's
independent auditors for the fiscal year ending September 30, 2000; and
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
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,
will 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:______________________________
