<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
SpeedFam International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Stathy Darcy, Chapman and Cutler, 312-845-2992
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
SPEEDFAM INTERNATIONAL, INC.
7406 WEST DETROIT
CHANDLER, ARIZONA 85226
----------------
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 11, 1996
----------------
The Annual Meeting of Shareholders of SpeedFam International, Inc., an
Illinois corporation (the "Company") will be held at the Wyndham Garden Hotel
at 7475 West Chandler Boulevard, Chandler, Arizona 85226, on Friday, October
11, 1996, at 11:00 a.m., local time, for the following purposes as described
in the attached Proxy Statement:
1. To elect a Board of seven Directors; and
2. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
Shareholders of record of the Company at the close of business on September
3, 1996, will be entitled to vote at the meeting. A copy of the Company's 1996
Annual Report, which includes audited financial statements, is enclosed. The
officers and directors of the Company cordially invite you to attend the
Annual Meeting.
By Order of the Board of Directors,
/s/ James N. Farley
James N. Farley
Chairman of the Board
September 9, 1996
IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
SPEEDFAM INTERNATIONAL, INC.
7406 WEST DETROIT
CHANDLER, ARIZONA 85226
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished to the shareholders of SpeedFam
International, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for use at the Company's Annual
Meeting of Shareholders to be held on October 11, 1996.
Any shareholder giving a proxy will have the right to revoke it at any time
prior to the time it is voted. A proxy may be revoked by written notice to the
Company, execution of a subsequent proxy or attendance at the annual meeting
and voting in person. Attendance at the meeting will not automatically revoke
the proxy. All shares represented by effective proxies will be voted at the
meeting or at any adjournment thereof.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, officers and employees of the Company may solicit
proxies by telephone or in person. The Company may also reimburse brokers,
banks, nominees, and other fiduciaries for postage and reasonable clerical
expenses of forwarding the proxy material to their principals who are
beneficial owners of the Common Stock.
The information included herein should be reviewed in conjunction with the
financial statements, notes to financial statements, and independent auditors'
report included in the Company's 1996 Annual Report. This Proxy Statement and
form of proxy were first mailed to shareholders on or about September 9, 1996.
VOTING
Shareholders of record on the books of the Company at the close of business
on September 3, 1996, will be entitled to notice of and to vote at the
meeting. A list of the shareholders entitled to vote at the meeting shall be
open to the examination of any shareholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting at the Wyndham Garden Hotel at 7475 West Chandler
Boulevard, Chandler, Arizona 85226. The Company had outstanding on September
3, 1996, 10,580,613 shares of Common Stock. Each outstanding share of Common
Stock entitles the holder to one vote on each matter submitted to a vote at
the meeting.
The shares represented by proxies will be voted as directed in the proxies.
In the absence of specific direction, the shares represented by proxies will
be voted FOR the election of all of the nominees as Directors of the Company.
In the event any nominee for Director shall be unable to serve, which is not
now contemplated, the shares represented by proxies may be voted for a
substitute nominee. If any matters are to be presented at the Annual Meeting
other than the matter referred to in this Proxy Statement, the shares
represented by proxies will be voted in the discretion of the proxy holders.
The Company's Bylaws provide that a majority of all of the shares of Common
Stock entitled to vote, whether present in person or represented by proxy,
shall constitute a quorum for the transaction of business at the meeting.
Votes for and against, abstentions and "broker non-votes" will each be counted
as present for purposes of determining the presence of a quorum. To determine
whether a specific proposal has received sufficient votes to be passed, for
shares deemed present, an abstention and a broker non-vote will have the same
effect as a vote "against" the proposal. The seven nominees for Director who
receive the most votes will be elected.
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Seven Directors are to be elected at the annual meeting to serve terms of
one year or until their respective successors have been elected. The nominees
for Director, all of whom are now serving as Directors of the Company with the
exception of Mr. Neil R. Bonke, are listed below together with certain
biographical information. Except as otherwise indicated, each nominee for
Director has been engaged in his present occupation for at least the past five
years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE
NOMINEES LISTED BELOW AS DIRECTORS.
James N. Farley (67) has been a director of SpeedFam International, Inc.
since 1961. He was appointed Chairman and Chief Executive Officer by the Board
of Directors in 1993. Mr. Farley had been President of SpeedFam International,
Inc. from 1967 to 1993. Prior to that, he was Vice President of Sales and had
served as Business Manager since joining SpeedFam International, Inc. in 1960.
Mr. Farley was instrumental in developing the organization and is presently
responsible for developing and directing the future strategy of SpeedFam
International, Inc. Mr. Farley also serves on the board of two privately-held
companies. He holds a BSEE from Northwestern University.
Makoto Kouzuma (56) has been a director of SpeedFam International, Inc.
since 1982. He was appointed President and Chief Operating Officer of Speedfam
International, Inc. in 1993. He was Executive Vice President of SpeedFam
International, Inc. and had the additional post of President of SpeedFam
Corporation from 1990 to 1993. He is also Executive Vice President and General
Manager of SpeedFam Co., Ltd., the Company's joint venture in the Far East
(the "Far East Joint Venture"). He has been responsible for the day to day
operations of both Speedfam International, Inc. and the Far East Joint
Venture, the latter since 1971. Mr. Kouzuma joined SpeedFam International,
Inc. in 1969 to open a Japanese liaison office. He graduated as an Electrical
Engineer from Chuo University in Tokyo, Japan. Mr. Kouzuma is a resident of
Japan.
Neil R. Bonke (54) was appointed director of SpeedFam International, Inc. by
the Board of Directors in May 1996. Such appointment is effective upon Mr.
Bonke's attendance at a SpeedFam International, Inc. Board meeting. Mr. Bonke
will attend his first Board of Directors meeting on September 12, 1996. He has
been Chairman of the Board of Electroglas, Inc. since April 1993, and its
Chief Executive Officer from April 1993 through April 1996. He also serves on
the Board of Directors of Sanmina Corp. and FSI International Inc.
Electroglas, Inc., Sanmina Corp. and FSI International Inc., each a public
company, are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended. Mr. Bonke was a Group Vice President of General
Signal and President of General Signal's Semiconductor Equipment Operations
from September 1991 to July 1993.
Thomas J. McCook (72) has been a director of SpeedFam International, Inc.
since 1979. He is currently serving as Vice Chairman of the Economic
Development Council of Cape Coral, Florida and was formerly Vice President of
Stewart-Warner, an automotive parts manufacturer.
Dr. Stuart Meyer (59) has been a director of SpeedFam International, Inc.
since 1982. He has been an Associate Professor of Management and Strategy at
the Kellogg Graduate School of Management, Northwestern University since 1977.
Robert M. Miller (69) has been a director of SpeedFam International, Inc.
since 1990. He is currently Chairman of Okuma Technology Institute in
Charlotte, North Carolina. The Okuma Technology Institute is dedicated to
machine tool and cutting tool research and development. Since 1985, Mr. Miller
has been President of ITMC Inc., a marketing consulting firm providing service
to capital equipment manufacturers.
Carl S. Pedersen (82) has been a director of SpeedFam International, Inc.
since 1979. Since 1988, he has been Chairman Emeritus of Luther & Pedersen, a
capital equipment distributor in Aurora, Illinois. He previously served as
Chairman of Luther & Pedersen.
2
<PAGE>
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS
The Board of Directors currently consists of seven persons. The Company's
non-employee directors each receive an annual retainer of $2,500, plus a fee
of $500 for each Board meeting and Committee meeting they attend. In addition,
each non-employee director annually receives an option to purchase 2,000
shares of Common Stock pursuant to the 1995 Stock Plan for Employees and
Directors of the Company. All directors are reimbursed for expenses incurred
in connection with attending Board and Committee meetings.
The Compensation Committee consists of Messrs. McCook, Meyer and Miller. The
duties of the Compensation Committee are to provide a general review of the
Company's compensation and benefit plans to ensure that they meet corporate
objectives. The Compensation Committee (i) determines compensation for all
officers of the Company, (ii) grants awards to officers under the Company's
compensation and benefit plans and (iii) adopts major Company compensation
policies and practices. The Compensation Committee met one time during fiscal
1996.
The Audit Committee consists of Messrs. McCook, Meyer and Pedersen. The
Audit Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors and reviews the independence of such
auditors, approves the scope of the annual audit activities of the independent
auditors, approves the audit fees payable to the independent auditors and
reviews audit results. The Audit Committee did not meet during fiscal 1996.
The Board of Directors held 9 meetings during fiscal 1996. All of the
Directors attended at least 75% of the meetings of the Board of Directors and
the committees on which they served.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Farley and Kouzuma receive certain amounts from SpeedFam Co., Ltd.
consisting of directors' fees and bonuses, as well as dividends on their
individual holdings of stock in certain of SpeedFam Co., Ltd.'s subsidiaries.
During the Far East Joint Venture's fiscal year ended April 30, 1995, Messrs.
Farley and Kouzuma received an aggregate of approximately (Yen)15.3 million
($156,600) and (Yen)32.9 million, ($336,800), respectively (based upon the
yen/dollar exchange rate on dates of payment). During the Far East Joint
Venture's fiscal year ended April 30, 1996, Mr. Kouzuma received an aggregate
of approximately (Yen)39.2 million ($399,587) (based upon the yen/dollar
exchange rate on dates of payment). Pursuant to Mr. Farley's employment
agreement with the Company, all amounts payable to Mr. Farley from the Far
East Joint Venture since the date of his employment agreement and through
April 30, 1996, totaling approximately $85,000, were directed to the Company.
Prior to entering into his employment agreement with the Company and for the
fiscal year ended April 30, 1996, Mr. Farley received an aggregate of
approximately $44,000 from the Far East Joint Venture (based upon the
yen/dollar exchange rate on dates of payment).
Both Messrs. Farley and Kouzuma serve as directors of SpeedFam Co., Ltd. In
addition, both serve as directors of SpeedFam Clean Systems Co. Ltd., a
majority owned subsidiary of SpeedFam Co., Ltd. Mr. Kouzuma also serves as
President of SpeedFam Clean Systems Co. Ltd. In addition, each of Messrs.
Farley and Kouzuma own 5% of the outstanding capital stock of SpeedFam Clean
Systems Co., Ltd. Messrs. Farley and Kouzuma also serve as directors of Met-
Coil Limited, SpeedFam Co. Ltd.'s 50%-owned joint venture. Mr. Kouzuma owns
10.62% of the outstanding capital stock of Saku Seiki, a majority owned
subsidiary of SpeedFam Co., Ltd., and serves as a director of Saku Seiki.
Messrs. Farley and Kouzuma also serve as directors of several wholly owned
subsidiaries of SpeedFam Co. Ltd., namely SpeedFam Korea Limited, SpeedFam
Incorporated in Taiwan and SpeedFam India (Pvt.) Ltd.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file reports of ownership and changes in ownership
of the Company's Common Stock with the Securities and Exchange Commission. The
Company is required to disclose in this proxy statement any late filings of
those
3
<PAGE>
reports made by its directors and executive officers in fiscal 1996. Under the
Section 16(a) rules and subject to certain exceptions, directors and executive
officers are required to file a Form 4 on or before the tenth day after the
end of the month in which a change in beneficial ownership has occurred.
Messrs. Roger K. Marach and Christopher E. Augur, Chief Financial Officer of
the Company and President of SpeedFam Corporation, respectively, were
delinquent in their filing of such reports during fiscal 1996, each for two
transactions. Messrs. Makoto Kouzuma and Robert R. Smith, Chief Operating
Officer of the Company and Managing Director of SpeedFam Limited,
respectively, were also delinquent in their filing of such reports during
fiscal 1996, each for one transaction. Mr. James N. Farley, Chairman and Chief
Executive Officer of the Company, was delinquent in his filing of such reports
during fiscal 1996 for 16 transactions primarily related to gifts of Common
Stock. Messrs. Farley and Marach were delinquent in their filing of such
reports as co-trustees of the SpeedFam Employees Profit Sharing Trust during
fiscal 1996, each for two transactions.
In addition, Messrs. McCook, Meyer, Miller, Pedersen, each a director of the
Company, were delinquent in their filing of such reports during fiscal 1996,
each for one transaction.
Reports describing all such transactions were subsequently filed.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP,
certified public accountants, as independent auditors to examine the annual
consolidated financial statements of the Company and its subsidiaries for
fiscal 1997. A representative of KPMG Peat Marwick LLP will be present at the
meeting to make a statement, if such representative so desires, and to respond
to shareholders' questions.
4
<PAGE>
OWNERSHIP OF SPEEDFAM INTERNATIONAL, INC. COMMON STOCK
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September
3, 1996 by (i) each shareholder who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) each of the Company's
directors, (iii) each Named Executive Officer (as defined herein) and (iv) all
directors and executive officers of the Company as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
NAME AND ADDRESS NUMBER PERCENT
- ---------------- ------------ ----------
<S> <C> <C>
James N. Farley(1)(2)................................... 2,562,525 24.2%
Nancy Jo Farley(1)(3)................................... 1,110,850 10.5
Makoto Kouzuma(1)(4).................................... 835,420 7.8
SpeedFam Employees Profit Sharing Trust(1)(5)........... 339,380 3.2
Roger K. Marach(6)...................................... 70,808 *
Christopher E. Augur.................................... 54,608 *
Robert R. Smith(7)...................................... 172,624 1.6
Neil R. Bonke........................................... 0 *
Thomas J. McCook........................................ 50,400 *
Dr. Stuart Meyer........................................ 76,780 *
Robert M. Miller........................................ 18,780 *
Carl S. Pedersen(8)..................................... 70,780 *
All directors and executive officers as a group
(10 persons)........................................... 3,912,725 36.2%
</TABLE>
- --------
*Less than one percent.
(1) The business address of Messrs. Farley and Kouzuma, Mrs. Farley and the
SpeedFam Employees Profit Sharing Trust is 7406 West Detroit, Chandler,
Arizona 85226.
(2) All shares beneficially owned by Mr. Farley are held in the James N.
Farley Trust, of which Mr. Farley acts as sole trustee. Excludes (i)
shares beneficially owned by Nancy Jo Farley (Mr. Farley's spouse), (ii)
an aggregate of 1,588,525 shares beneficially owned by Mr. Farley's adult
children, (iii) 762,780 shares held in the Makoto Kouzuma Trust, a
revocable trust, of which Mr. Farley serves as co-trustee, and (iv)
339,380 shares owned by the SpeedFam Employees Profit Sharing Trust, of
which Mr. Farley acts as co-trustee. Mr. Farley disclaims beneficial
ownership of all shares referred to (i) through (iv) above.
(3) Of such shares, 727,400 are held in the Nancy Jo Farley Trust, a revocable
trust. Charles A. Kelly, Secretary of the Company, acts as co-trustee of
such trust with Mr. Farley (the spouse of Nancy Jo Farley). Pursuant to
the trust agreement, Mr. Kelly has sole voting and dispositive power over
shares held in the trust. The Nancy Jo Farley Trust may be voluntarily
terminated by Mrs. Farley at any time. Includes 383,450 shares of Common
Stock over which Mrs. Farley has sole voting and dispositive power as
Custodian for ten minor grandchildren. Mrs. Farley disclaims beneficial
ownership as to such shares. Excludes shares beneficially owned by Mr.
Farley and an aggregate of 1,588,525 shares beneficially owned by Mrs.
Farley's adult children, as to all of which Mrs. Farley disclaims
beneficial ownership.
(4) Of such shares, 762,780 are held in the Makoto Kouzuma Trust, a revocable
trust. Mr. Kelly and Mr. Farley act as co-trustees of such trust and share
voting and dispositive power over shares held in the trust. The Makoto
Kouzuma Trust may be voluntarily terminated by Mr. Kouzuma at any time.
The remaining 72,640 shares are subject to issuance to Mr. Kouzuma upon
the exercise of certain stock options.
(5) Messrs. Farley, Marach and Kelly act as co-trustees of the Plan and share
voting and dispositive power over shares held by the Plan.
(6) Excludes 339,380 shares owned by the SpeedFam Employees Profit Sharing
Trust of which Mr. Marach serves as co-trustee. Mr. Marach disclaims
beneficial ownership of such shares.
(7) Includes 50,000 shares beneficially owned by Mr. Smith's spouse.
(8) Of such shares, 62,000 are held in the Pedersen Family Limited
Partnership, of which Pedersen Holdings, Inc. is sole general partner and
Mr. Pedersen serves as sole limited partner. Mr. Pedersen serves as
President of Pedersen Holdings, Inc. and owns 33% of its outstanding
stock. The remaining 8,380 shares are subject to issuance to Mr. Pedersen
upon the exercise of certain stock options.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows the compensation awarded or paid by the Company to
the Chief Executive Officer and the four executive officers (the "Named
Executive Officers") of the Company during the fiscal years ended May 31, 1995
and 1996:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
NAME AND FISCAL ----------------- OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (# SHARES) COMPENSATION(2)
------------------ ------ -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
James N. Farley(3)
Chairman and Chief 1996 $252,120 $100,000 $13,754 0 $2,097
Executive Officer...... 1995 303,748 258,267 13,754 0 900
Makoto Kouzuma(3)
President and Chief Op- 1996 $166,859 $140,000 -- 46,796 $1,800
erating Officer........ 1995 254,823 117,906 -- 22,000 900
Roger K. Marach
Treasurer and Chief Fi- 1996 $144,200 $ 92,500 $ 6,838 31,198 $1,337
nancial Officer........ 1995 118,844 47,000 31,168 19,040 900
Christopher E. Augur
President of SpeedFam 1996 $139,327 $ 90,000 $ 6,838 28,078 $1,005
Corporation............ 1995 117,974 45,000 7,524 19,040 900
Robert R. Smith
Managing Director-- 1996 $141,883 $ 41,292 $18,118 12,479 --
SpeedFam Limited....... 1995 137,164 37,752 18,772 9,520 --
</TABLE>
- --------
(1) Represents auto allowances and, for Mr. Marach in fiscal 1995, relocation
expenses of $24,330.
(2) Consists of the Company's matching contribution to the Company's 401(k)
Plan and, for fiscal 1996 only, payments of life insurance premiums.
(3) Messrs. Farley and Kouzuma received an aggregate of approximately $156,600
and $336,800, respectively, from the Far East Joint Venture during the Far
East Joint Venture's fiscal year ended April 30, 1995. During the Far East
First Venture's fiscal year ended April 30, 1996, Mr. Kouzuma received an
aggregate of approximately $399,587 from the Far East Joint Venture and,
prior to entering into his employment agreement with the Company, Mr.
Farley received an aggregate of approximately $44,000 from the Far East
Joint Venture (based upon the yen/dollar exchange rate on dates of
payment). See "Certain Relationships."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with James N. Farley as
Chairman of the Board of Directors and Chief Executive Officer, Makoto Kouzuma
as President and Chief Operating Officer and Roger K. Marach as Chief
Financial Officer and Treasurer; SpeedFam Corporation, a wholly owned
subsidiary of the Company in the U.S., has entered into an employment
agreement with Christopher E. Augur as President; and SpeedFam Limited, the
Company's British subsidiary, has entered into an employment agreement with
Robert R. Smith, its Managing Director (collectively, the "Employment
Agreements"). The Employment Agreements, each dated September 1995, have an
initial term of one year and may be terminated only for cause.
The Employment Agreements set salaries, provide for bonuses at the
discretion of the Compensation Committee of the Board of Directors, grant car
allowances, and entitle the employee to participate in and receive the
benefits of any and all pension, profit sharing, health, disability and
insurance plans which the respective company may maintain. Salaries for each
of Messrs. Farley, Kouzuma, Marach, Augur and Smith have been set by their
respective Employment Agreement at an annual amount of $250,000, $100,000,
$145,000, $140,000
6
<PAGE>
and (Pounds)91,254 (approximately $147,000) (based on pound/dollar exchange
rate on May 31, 1995), respectively. Mr. Farley has agreed to pay to the
Company all compensation received from the Far East Joint Venture.
In the event of sickness or disability which renders the employee unable to
perform his duties, the respective company may, at its option, cease to pay
compensation to the employee other than premiums on group health, disability
and life insurance plans until the employee is able to reassume his duties.
The Employment Agreements provide that upon the termination of the employee,
the employee agrees not to disclose trade secrets of the respective company,
agrees that for a period of one year any inventions relating to the respective
company's business will be the property of the respective company, and the
employee further agrees not to compete against the respective company for a
period of one year.
Messrs. Farley, Kouzuma, Marach, Augur and Smith have also separately
entered into severance agreements with the Company which provide for a
severance payment to the employee of 2.5 times the employee's Base Annual
Salary (as defined in the severance agreements) in the event of (a) a
voluntary or involuntary termination within a certain period following a
change in control, or (b) an involuntary termination (defined to mean a
termination other than for cause, or by reason of death or disability, or a
voluntary resignation) outside of a change in control period. As provided in
the agreements, the employee is entitled to the severance payment if a change
of control occurs resulting from a tender offer, exchange offer, merger,
consolidation or other business combination (each a "transaction") such that
(i) any person, other than James N. Farley or his affiliates, becomes the
beneficial owner of more than 50% of the combined voting power of the
outstanding securities of the Company; (ii) the directors of the Company,
prior to such transaction, cease to constitute a majority of the directors
following the transaction; (iii) the shareholders of the Company, prior to
such transaction, own, in the aggregate, less than 70% of the outstanding
voting securities of the surviving entity in the case of a merger or
consolidation; (iv) more than 50% of the voting securities of the Company are
transferred as a result of a tender offer or exchange offer; or (v) the
Company transfers substantially all of its assets to another corporation of
which the Company owns less than 50% of the outstanding voting securities.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended May 31, 1996 to each of the Named Executive Officers. Mr.
Farley, Chairman and Chief Executive Officer, has not been granted any stock
options. No stock appreciation rights were granted during such year to any of
the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
-------------------------------------------------------- -----------------------------
PERCENT OF
NUMBER OF SECURITIES TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EXERCISE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR(2) ($/SH)(3) DATE 5% 10%
- ---- -------------------- -------------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Makoto Kouzuma.......... 46,796 14% $20.50 5/31/06 $603,310 $1,415,805
Roger K. Marach......... 31,198 9% $20.50 5/31/06 402,215 943,890
Christopher E. Augur.... 28,078 8% $20.50 5/31/06 361,991 849,495
Robert R. Smith......... 12,479 4% $20.50 5/31/06 160,884 377,550
</TABLE>
- --------
(1) Options become exercisable over a five-year period with 20% vesting
annually beginning May 31, 1997. The term of the options is ten years.
(2) Based on an aggregate of 330,976 options granted to employees in fiscal
1996 including the Named Executive Officers.
(3) The exercise price per share of each option was equal to 100% of the fair
market value of the Common Stock on the date of grant as determined by the
Board of Directors.
(4) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and the option
is exercised and sold on the last day of its term for the appreciated
stock price. No gain to the optionee is possible unless the stock price
increases over the option term.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number and value of the unexercised
options held by each of the Named Executive Officers at May 31, 1996. Mr.
Farley, Chairman and Chief Executive Officer, has not been granted any stock
options.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
Makoto Kouzuma.......... 0 $ 0 72,640/93,856 $1,161,806/691,804
Roger K. Marach......... 11,000 139,748 44,808/75,830 722,429/676,490
Christopher E. Augur.... 0 0 39,608/72,710 636,926/676,490
Robert R. Smith......... 20,000 251,360 30,304/44,095 491,114/491,165
</TABLE>
- --------
(1) Value is based on the difference between the stock option exercise price
and the closing price on May 31, 1996 of $20.50, multiplied by the number
of shares of Common Stock underlying the stock options.
1995 PURCHASE PLAN
The Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan")is
designed to provide employees of the Company and its Designated Subsidiaries
(as defined in the 1995 Purchase Plan) with an opportunity to purchase Common
Stock of the Company.
A summary of the principal features of the 1995 Purchase Plan follows.
Term. The 1995 Purchase Plan became effective on October 6, 1995 and will
continue in effect for a term of 20 years unless terminated earlier pursuant
to the provisions of the 1995 Purchase Plan.
Administration. The 1995 Purchase Plan is administered by the Board of
Directors or a committee of members of the Board appointed by the Board.
Participation. Only employees may participate in the 1995 Purchase Plan. For
this purpose, an "employee" is any person, including an officer, who is
regularly employed at least 20 hours per week and more than five months per
calendar year by the Company or one of its Designated Subsidiaries. No
employee shall be permitted to subscribe for shares under the 1995 Purchase
Plan if, immediately after the grant of the option, the employee would own 5%
or more of the total combined voting power or value of all classes of stock of
the Company or of any subsidiary (including stock issuable upon exercise of
options held by him or her), nor shall any employee be granted an option that
would permit him or her to buy more than $25,000 worth of stock (determined at
the fair market value of the shares at the time the option is granted) under
the 1995 Purchase Plan in any calendar year. At May 31, 1996 there were 382
employees eligible to participate in the 1995 Purchase Plan.
Type of Awards. On the first day of an offering period, each eligible
employee participating in the 1995 Purchase Plan will be granted an option to
purchase (at the per share option price) up to a certain number of shares of
Common Stock. There will generally be one offering under the 1995 Purchase
Plan during each six month period. The first offering period commenced on
October 6, 1995 and was terminated on December 31, 1995. Subsequent offering
periods have been and are currently intended to be January 1 through June 30
and July 1 through December 31 and continue until the 1995 Purchase Plan is
terminated. The Board of Directors of the Company, or any committee designated
by the Board of Directors to administer the 1995 Purchase Plan will have the
power to change the duration of future offering periods with respect to future
offerings without shareholder approval if the change is announced at least
fifteen days prior to the first offering period to be affected.
8
<PAGE>
Shares Available. The maximum number of shares of Common Stock originally
available for sale under the plan was 500,000 shares. In the event of any
changes in the capitalization of the Company effected without receipt of
consideration by the Company, such as stock splits, reverse stock splits or
stock dividends, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of outstanding shares of Common
Stock, proportionate adjustments will be made by the Company in the shares
subject to purchase and in the price per share.
Stock Options. The per share option price of shares sold in an offering
under the 1995 Purchase Plan will be the lower of (i) 85% of the fair market
value of a share of Common Stock of the Company on the first day of an
offering period or (ii) 85% of the fair market value of a share of Common
Stock on the last day of an offering period. The fair market value of a share
of Common Stock on a given date shall be the closing price as reported in The
Wall Street Journal or, if not so reported, the fair market value shall be
determined pursuant to the provisions of the 1995 Purchase Plan. The 1995
Purchase Plan provides that the purchase price of such shares of Common Stock
during the offering period shall not exceed 15% of the employee's total
compensation during such offering period. Funds received upon sales of Common
Stock under the 1995 Purchase Plan will be used for general corporate
purposes. The option for the purchase of shares available to each participant
in the 1995 Purchase Plan will be exercised automatically on the last day of
an offering period, and the maximum number of shares will be purchased for
such participant subject to payment in full by the participant for such shares
within 30 days. An eligible employee who is a participant in the 1995 Purchase
Plan may terminate his or her interest in a given offering by signing and
delivering to the Company a notice of withdrawal from the 1995 Purchase Plan
at least fifteen days prior the last day of the offering period. Termination
of a participant's employment for any reason, including retirement or death,
cancels his or her participation in the 1995 Purchase Plan immediately.
Adjustments. The Board of Directors may make provision for adjusting the
number of shares of Common Stock reserved, as well as the price per share of
Common Stock covered by each outstanding option, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation. In the event of the proposed liquidation or dissolution of the
Company, the offering period will cease and an employee's participation in the
1995 Purchase Plan will be terminated immediately before consummation of such
proposed event unless otherwise provided by the Board of Directors. In the
event of a sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the employee's
rights may be satisfied by assumption of the Company's obligations by such
acquiring or successor corporation unless the Board of Directors determines
that the employee will have the right to exercise the option as to all of the
optioned stock, including shares as to which the option would not otherwise be
exercisable. If the Board of Directors makes an option fully exercisable in
lieu of assumption or substitution in such event, the employee's option will
be fully exercisable for fifteen days from the date of notice by the Board of
Directors, after which the employee's rights under the 1995 Purchase Plan
shall terminate.
Termination and Amendment. The Board of Directors may at any time amend or
terminate the 1995 Purchase Plan, except that no such termination may affect
options previously granted and no amendment may make any change in any option
granted prior to such time which adversely affects the rights of any
participant in the 1995 Purchase Plan. Under the 1995 Purchase Plan, an
amendment to increase the number of shares reserved for issuance requires the
prior approval of the shareholders of the Company.
1995 STOCK PLAN
The 1995 Stock Plan for Employees and Directors of the Company (the "1995
Stock Plan") is designed to enhance the long-term profitability and
shareholder value of the Company by offering stock-based incentives to those
individuals who are key to the growth and success of the Company, to attract
and retain executives and directors with experience and ability on a basis
competitive with industry practice and to encourage executives and directors
to acquire and maintain stock ownership in the Company. At May 31, 1996,
options and rights to acquire 8,000 shares of Common Stock under the 1995
Stock Plan were outstanding.
9
<PAGE>
A summary of the principal features of the 1995 Stock Plan follows.
Term. The 1995 Stock Plan became effective as of July 27, 1995 and has no
fixed expiration date.
Administration. The 1995 Stock Plan is administered by the Compensation
Committee which has the exclusive authority to make awards under the 1995
Stock Plan and all interpretations and determinations affecting the 1995 Stock
Plan. No Compensation Committee member will be eligible to participate in the
1995 Stock Plan or may be awarded equity securities of the Company pursuant to
the 1995 Stock Plan or any other plan of the Company during the year prior to
Compensation Committee service unless the 1995 Stock Plan or any other such
plan and the award under the 1995 Stock Plan or any other such plan comply
with the applicable requirements of Rule 16b-3 ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The 1995
Stock Plan and the grant of stock options to the directors pursuant to the
1995 Stock Plan have been structured to comply with the applicable
requirements of Rule 16b-3 and may only be amended to the extent permitted by
Rule 16b-3.
Participation. Participation in the 1995 Stock Plan is limited to key
officers and other employees of the Company and any of its subsidiaries
("Employees") and any member of the Board of Directors of the Company who is
not then an Employee or beneficial owner, either directly or indirectly, of
more than 10% of the Common Stock ("Eligible Director"), who are selected from
time to time by the Compensation Committee. Employees who are participants in
the 1995 Stock Plan are also eligible to participate in any other incentive
plan of the Company. Eligible Directors are eligible to receive automatic
grants of non-qualified stock options pursuant to the provisions of the 1995
Stock Plan.
Type of Awards. Awards under the 1995 Stock Plan may be in the form of stock
options (including incentive stock options ("ISOs") which meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and in particular with all such requirements which apply to
employees owning 10% or more of the total combined voting power of all classes
of stock of the Company), restricted shares and restricted units. Stock
Appreciation Rights ("SARs") may be awarded by the Compensation Committee in
connection with any option granted under the Plan, either at the time the
option is granted or thereafter at any time prior to the exercise, termination
or expiration of the option ("tandem right"), or separately ("freestanding
right"). Awards will be granted for no cash consideration or for such minimal
cash consideration as may be required by applicable law. However, the exercise
price per share of Common Stock purchasable under any ISO and the option price
of any SAR accompanying an ISO will not be less than 100% of the fair market
value of a share of Common Stock on the date of grant of the ISO or SAR
accompanying an ISO.
Shares Available. No more than 1,000,000 shares of Common Stock may be
issued under the 1995 Stock Plan (subject to adjustment as described below for
stock splits, stock dividends, recapitalizations, mergers and other events as
described in the 1995 Stock Plan). Generally, any shares of Common Stock which
cease to be subject to purchase under a granted option, or any forfeited
restricted shares or restricted units, will become available for subsequent
awards under the 1995 Stock Plan.
Stock Options. The term of all options granted to Employees under the 1995
Stock Plan will be fixed by the Compensation Committee; however, the term of
ISOs may not exceed ten years from the grant date. The exercise price for any
shares of Common Stock purchasable under an option granted to Employees will
be determined by the Compensation Committee subject to adjustment as described
below. The exercise price for any shares purchasable under an ISO will not be
less than 100% of the fair market value of a share of Common Stock on the date
the ISO is granted. Each option granted to an Employee will become exercisable
as determined by the Compensation Committee, provided the Compensation
Committee may, in its discretion, accelerate the exercisability of any option,
in whole or in part, at any time. The terms of non-qualified stock options
granted to Eligible Directors, the exercise price for shares purchasable under
such options and the date such options become exercisable are determined
pursuant to the formula provision of the 1995 Stock Plan which can only be
amended to the extent permitted by Rule 16b-3. However, each option granted
either to an Employee or Eligible Director will become exercisable in full at
the earliest of the death, Eligible Retirement (as defined in the 1995 Stock
10
<PAGE>
Plan) or Total Disability (as defined in the 1995 Stock Plan) of the option
holder or a Change in Control (as defined in the 1995 Stock Plan) of the
Company. Each option shall be exercisable in full or in part, subject to
certain requirements in the 1995 Stock Plan, by payment of the exercise price
in cash or already owned shares for the number of shares of Common Stock to be
purchased.
Stock Appreciation Rights. The Compensation Committee may grant SARs in
connection with any option granted under the 1995 Stock Plan, either as a
tandem right or a freestanding right. Each tandem right is subject to the same
terms and conditions as the related options. The exercise price of SARs
granted under the 1995 Stock Plan will be determined by the Compensation
Committee; however, the exercise price of each SAR granted in connection with
an ISO will not be less than 100% of the fair market value of a share of
Common Stock on the date the ISO is granted. Upon exercise of an SAR, the
holder will be entitled to receive the excess of the fair market value of a
share of Common Stock over the total exercise price for a share of Common
Stock, payable in cash (unless otherwise determined by the Compensation
Committee).
SARs may be granted to Employees deemed officers for purposes of Section 16
of the Exchange Act. SARs granted to such officers may not be transferred or
disposed of within six months from the date of grant or within six months of
the date the exercise price is fixed. SARs granted to such officers generally
may be exercised only during the ten business days beginning on the third
business day following announcement of the Company's quarterly earnings.
Restricted Shares. The Compensation Committee may make awards of shares of
Common Stock on such terms, conditions and restrictions as it determines. The
holder of such shares will generally have the rights of shareholders subject
to the provisions of the 1995 Stock Plan. The Compensation Committee may at
any time, in its sole discretion, waive the terms and conditions and/or
shorten the restricted period established for any award. All restrictions with
respect to a restricted share award will lapse upon the earliest to occur of
the death, Eligible Retirement or Total Disability of the holder or a Change
in Control of the Company. Except as set forth elsewhere in this summary and
in the 1995 Stock Plan, all restricted shares and all rights with respect to
such restricted shares will be forfeited by reason of termination of
employment. None of the shares subject to a restricted share award may be
sold, transferred, assigned or pledged until they are delivered to the holder
of the share award.
Restricted Units. The Compensation Committee is authorized to grant and to
determine the terms, conditions and restrictions of any restricted unit
awards. No shares of Common Stock will be issued at the time the award is made
and the Company will not be required to set aside funds for the payment of any
such award. The Compensation Committee may at any time, in its sole
discretion, waive the terms and conditions and/or shorten the restricted
period established for any award. All restrictions with respect to a
restricted unit award will lapse upon the earliest to occur of the death,
Eligible Retirement or Total Disability of the holder or a Change in Control
of the Company. Restricted unit awards may be paid in cash or shares or any
combination thereof.
Adjustments. The Compensation Committee may, at any time, in the event of
any stock dividend, stock split, recapitalization, merger, consolidation or
other change in the capitalization of the Company or similar corporate
transaction or event affecting the Common Stock, in such manner as it deems
equitable, adjust, among other things, (i) the limitation of 1,000,000 shares
that may be issued under the 1995 Stock Plan; (ii) the number and class of
shares that may be subject to stock options, restricted shares or restricted
units that have not been issued; (iii) the exercise price to be paid for
unexercised stock options; and (iv) the share value used to determine the
amount or value of any award under the 1995 Stock Plan.
Termination and Amendment. The Board of Directors may suspend, terminate,
modify or amend the 1995 Stock Plan at any time, but if any such amendment
requires shareholder approval in order to meet the requirements of the then
applicable rules under Section 16(b) of the Exchange Act, such amendment may
not be effected without obtaining shareholder approval. The Board of Directors
may terminate the 1995 Stock Plan, but the terms of the 1995 Stock Plan will
continue to apply to awards granted prior to such termination. No
11
<PAGE>
suspension, termination, modification or amendment of the 1995 Stock Plan may
adversely affect the rights of an Employee or Eligible Director under
previously granted awards.
1991 STOCK PLAN
The 1991 Employee Incentive Stock Option Plan, as amended (the "1991 Stock
Plan") is designed to reward valued employees of the Company by granting
incentive stock options to those individuals who are key to the growth and
success of the Company. Directors who are not employees are not eligible to
participate in the 1991 Stock Plan.
A summary of the principal features of the 1991 Stock Plan follows.
Term. The 1991 Stock Plan expires on May 31, 2001.
Administration. The 1991 Stock Plan is administered by the Compensation
Committee which has the exclusive authority to make awards under the 1991
Stock Plan and all interpretations and determinations affecting the 1991 Stock
Plan. No member of the Compensation Committee will be eligible to participate
in the 1991 Stock Plan.
Participation. Participation in the 1991 Stock Plan is available only to
persons who are employees of the Company or of any of its subsidiaries (as
defined in Section 425 of the Code) ("Employees"). No person may be granted an
option under the 1991 Stock Plan who is the beneficial owner, either directly
or indirectly, of more than 10% of the Common Stock of the Company at the time
the option is granted, except as provided in the 1991 Stock Plan. The
Compensation Committee of the Board of Directors of the Company will determine
the employees to be granted options under the 1991 Stock Plan, the number of
shares of Common Stock subject to each option, and the period and terms and
conditions of each option in accordance with the provisions of the 1991 Stock
Plan.
Shares Available. No more than 1,500,000 shares of Common Stock may be
issued and sold pursuant to options granted under the 1991 Stock Plan (subject
to adjustment for stock splits, stock dividends, recapitalizations, mergers or
consolidations). At May 31, 1996, options to acquire 1,265,068 shares of
Common Stock under the 1991 Stock Plan were outstanding.
Stock Options. Awards under the 1991 Stock Plan will be in the form of
incentive stock options ("ISOs") which meet the requirements of Section 422 of
the Code and in particular with all such requirements which apply to employees
owning 10% or more of the total combined voting power of all classes of stock
of the Company. The term of all options granted to Employees under the 1991
Stock Plan will be fixed by the Compensation Committee, however, the term of
ISOs may not exceed 10 years from the grant date, unless the Employee to whom
the option is granted owns, at the time the option is granted, more than 10%
of the total combined voting power of all classes of stock of the Company,
then the term of such option may not exceed five years from the grant date.
The exercise price for any shares purchasable under an ISO will be determined
by the Compensation Committee but will not be less than 100% of the fair
market value of the shares of Common Stock on the date the ISO is granted.
Each option granted to an Employee will become exercisable as determined by
the Compensation Committee provided the Compensation Committee may, in its
discretion, accelerate the exercisability of any option, in whole or in part,
at any time.
Restrictions. The aggregate fair market value of the Common Stock
(determined at the time the option is granted) with respect to which ISO's are
exercisable for the first time by an Employee during any calendar year may not
exceed $100,000. The Compensation Committee may make awards of shares of
Common Stock on such terms, conditions and restrictions as it determines. Any
option granted to an officer of the Company, or the shares of Common Stock
into which any such option is exercised, may not be transferred or disposed of
within six months from the date of grant. Except as set forth elsewhere in
this summary and in the 1991 Stock Plan, all shares of Common Stock and all
rights with respect to such shares of Common Stock will be forfeited by reason
12
<PAGE>
of termination of employment. The right to purchase shares of Common Stock
under an option granted under the 1991 Stock Plan may not be sold,
transferred, assigned, pledged or otherwise disposed of, except that any
options granted to an Employee may be transferred upon the death of such
Employee.
Termination and Amendment. The Board of Directors may suspend, terminate,
modify or amend the 1991 Stock Plan at any time, but if any such amendment
requires shareholder approval in order to meet the requirements of the then
applicable rules under Section 16(b) of the Exchange Act, such amendment may
not be effected without obtaining shareholder approval. Without the approval
of shareholders, no amendment may be made to the 1991 Stock Plan which
increases the number of shares of Common Stock which may be purchased (except
with respect to certain recapitalizations), changes the purchase price or
extends the period during which the shares of Common Stock may be purchased
under any option. The Board of Directors may amend the 1991 Stock Plan at any
time and without shareholder approval to the extent necessary to cause ISOs
granted under the 1991 Stock Plan to meet the requirements of Section 422A of
the Code.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee was appointed on July 27, 1995, in connection
with the Company's initial public offering, and consists of Messrs. McCook,
Meyer and Miller. The duties of the Compensation Committee are to provide a
general review of the Company's compensation and benefit plans to ensure that
they meet corporate objectives. Specifically, the Compensation Committee,
after consultation with senior management: (i) determines compensation for all
officers of the Company, (ii) grants awards to officers under the Company's
compensation and benefit plans, and (iii) adopts major Company compensation
policies and practices. The Compensation Committee met one time during fiscal
1996 and reviewed the compensation packages of all executive officers and
determined appropriate bonuses and other compensation, including the granting
of options to purchase Common Stock. Prior to, and specifically in connection
with the Company's preparation for an initial public offering in 1995, the
Company's executive officers consulted with certain financial advisers
regarding appropriate compensation levels and implemented their
recommendations. The Compensation Committee did not undertake compensation-
related duties until completion of the Company's initial public offering in
October 1995.
The Compensation Committee's executive compensation policies are intended to
enable the Company to attract and retain qualified executives through a
compensation program consisting of base salary, annual incentives and stock
options. The level of compensation for the executive officers are generally
intended to be competitive with those of other executives in similar positions
and companies in the semiconductor equipment manufacturing business and other
high technology-related companies, based upon the relative size of those
companies and the scope of the executive's responsibilities. It is the
Company's policy to target both base salaries and stock option awards at a
competitive level with this group. Annual incentive opportunities are set
slightly above the competitive group. This competitive group of companies is
similar to, but not identical to, those companies used in the Peer Group Index
described on page 15 of this Proxy Statement.
After determining the level of compensation for each executive officer as
compared with such person's counterparts, the Compensation Committee weighs
the individual's performance and considers such officer's contribution to the
financial and other objectives of the Company. The goals and objectives are
established in advance of the performance period, and may reflect specific
individual objectives for the officer, financial or other objectives for the
Company, or a combination of these factors. Among the criteria used by the
Company in making pay decisions both for salary actions and incentive awards
are revenues, earnings, results of operations and special projects and the
overall financial performance of the Company from year to year. Further, the
Compensation Committee may adjust awards to an individual based on the
specific achievements of the individual officer.
In fiscal 1996, the Compensation Committee reviewed each officer's
performance evaluation and the recommendations of the Chairman as to the
achievements of the Company's and individual officer's performance goals.
Based upon these reviews, the Compensation Committee determined the annual
compensation payments
13
<PAGE>
reflected in the Summary Compensation Table included in this Proxy Statement.
The fiscal 1996 compensation figures for the Named Executive Officers include
compensation earned prior to the Company's initial public offering in October
1995 and, therefore, prior to the commencement of the employment agreements
that were entered into by each Named Executive Officer in connection with such
offering. See "Compensation of Executive Officers--Employment Agreements."
The Compensation Committee also may grant executives and other employees
stock options under the Company's stock option plans. The Compensation
Committee believes that stock ownership by management encourages management to
maximize share owner value. Stock options granted to executives and other
employees of the Company give optionees the right to purchase shares of the
Company's Common Stock. Generally, the Compensation Committee grants stock
options based on a number of factors, including, but not limited to,
competitive practice, the individual's position in the Company, and the
individual's performance and potential.
The Company intends, to the extent practicable, to preserve the
deductibility under the Internal Revenue Code for all compensation paid to its
executive officers while maintaining compensation programs to attract, retain
and motivate the highly qualified executives needed by the Company to operate
successfully in a highly competitive marketplace.
The Compensation Committee's bases for determining the compensation of the
Company's Chairman and Chief Executive Officer, Mr. James Farley, have been
substantially the same as those referred to for the other executive officers
of the Company. In determining Mr. Farley's annual compensation, the
Compensation Committee considered the extent to which the Company had achieved
its financial and operating goals. At Mr. Farley's request, the Compensation
Committee did not grant any stock options to Mr. Farley.
Messrs. Makoto Kouzuma, Roger Marach and Christopher Augur each received
bonuses for fiscal 1996 in excess of that which is provided for in their
respective employment agreements. The Compensation Committee, in consultation
with the entire Board of Directors, determined that such bonuses, in addition
to stock options granted, were appropriate based on the financial performance
of the Company for the year ended May 31, 1996.
COMPENSATION COMMITTEE
----------------------
Thomas J. McCook
Dr. Stuart Meyer
Robert M. Miller
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no transactions involving members of the Compensation Committee
and the Company.
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the eight month cumulative total return on the
Common Stock to the eight month cumulative total returns on the Nasdaq Market
Index and the Peer Group Index. This measurement period begins on the date the
Common Stock began trading and ends on the last trading date of the Company's
last completed fiscal year. The Company designs, develops, manufactures,
markets and services high throughput precision surface processing systems used
in the fabrication of thin film memory disk media, semiconductor wafers,
general industrial components and semiconductor devices through chemical
mechanical polishing or CMP. The Peer Group Index used by the Company consists
of nine companies that the Company believes engage in a similar business and
serve similar markets as that of the Company. The companies in the Peer Group
Index are as follows: Applied Materials Inc., FSI International, Inc.,
Integrated Process Equipment Corp., Lam Research Corp., Novellus Systems Inc.,
OnTrak Systems Inc., PRI Automation, Inc., Semitool Inc., and Silicon Valley
Group, Inc.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
10/10/95 11/30/95 2/29/96 5/31/96
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SpeedFam International, Inc. 100.00 143.26 119.10 184.27
- --------------------------------------------------------------------------------------
NASDAQ Market Index 100.00 108.00 112.06 127.37
- --------------------------------------------------------------------------------------
Peer Group Index 100.00 102.56 75.90 80.42
</TABLE>
In the case of the Nasdaq Market Index and the Peer Group Index, a $100
investment made on October 10, 1995, and reinvestment of all dividends are
assumed. In the case of the Company, a $100 investment made on October 10,
1995, is assumed (the Company paid no dividends in 1995 or 1996).
STOCKHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1997 annual meeting
of the Company's shareholders must be received at the principal executive
offices of the Company by May 9, 1997, in order to be considered for inclusion
in the Company's proxy materials relating to that meeting.
15
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters to be
brought before the meeting other than the matter referred to in this Proxy
Statement.
By Order of the Board of Directors,
/s/ James N. Farley
James N. Farley
Chairman of the Board
September 9, 1996
16
