EXCEL TECHNOLOGY, INC.
41 Research Way
E. Setauket, NY 11733
..............................
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 6, 2006
..............................
Notice is hereby given that the Annual Meeting of Stockholders of
Excel Technology, Inc. (the "Company") will be held at the offices of
Excel Technology, Inc., 41 Research Way, East Setauket, New York 11733,
on December 6, 2006, at 10:00 A.M. EST, for the following purposes:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified;
2. To ratify the selection of KPMG LLP to serve as independent
registered public accounting firm for the year ending December 31, 2006;
and
3. To ratify and approve the 2006 Stock Option / Stock Issuance Plan;
4. To ratify and approve the Excel Technology, Inc. 2006 Annual
Incentive Compensation Plan for Key Executives; and
5. To transact such other business as may properly be presented for
action at the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November
3, 2006 as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting or any adjournment thereof.
Holders of a majority of the outstanding shares must be present in
person or by proxy in order for the meeting to be held. Whether or not
you plan to attend the meeting, please complete, sign, date and return
the accompanying proxy in the enclosed postage-paid envelope. The giving
of such proxy will not affect your right to revoke such proxy before it
is exercised or to vote in person should you later decide to attend the
meeting.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ J. Donald Hill
...................................
J. Donald Hill,
Chairman of the Board
November 8, 2006
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM BE COMPLETED
AND RETURNED PROMPTLY.
EXCEL TECHNOLOGY, INC.
41 Research Way
E. Setauket, NY 11733
.............................
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 6, 2006
.............................
SOLICITATION AND REVOCATION OF PROXIES
This statement is furnished in connection with the solicitation by
the Board of Directors of Excel Technology, Inc., a Delaware corporation
(the "Company"), of proxies to be voted at the Annual Meeting of the
Stockholders of the Company to be held on December 6, 2006, at 10:00 A.M.
EST, at the offices of the Company, 41 Research Way, East Setauket, New
York 11733 and any adjournments thereof (the "Meeting").
A form of proxy is enclosed for use at the Meeting. The proxy may
be revoked by a stockholder at any time before it is voted by execution
of a proxy bearing a later date or by written notice to the Corporate
Secretary before the Meeting, and any stockholder present at the Meeting
may revoke his proxy thereat and vote in person if he so desires. When
such proxy is properly executed and returned, the shares it represents
will be voted at the Meeting in accordance with any instructions noted
thereon. If no direction is indicated, all shares represented by valid
proxies received pursuant to this solicitation (and not revoked prior to
exercise) will be voted by the person named in the form of proxy (i) FOR
the election of the nominees for directors named herein, (ii) FOR the
ratification of the appointment of KPMG LLP as the Company's independent
registered public accounting firm for the year ending December 31, 2006,
and (iii) for the ratification and approval of the 2006 Stock Option /
Stock Issuance Plan, (iv) for the ratification and approval of the Excel
Technology, Inc. 2006 Annual Incentive Compensation Plan for Key
Executives, and (v) in accordance with the judgment of the persons named
in the proxy as to such other matters as may properly come before the
Meeting.
The cost of soliciting proxies on behalf of the Board of Directors
will be borne by the Company. In addition to solicitation by mail,
proxies may be solicited by directors, officers or regular employees of
the Company (who will receive no extra compensation for these services)
in person or by telephone or telefax. The Company may also request
brokerage houses, custodians, nominees and fiduciaries to forward these
proxy materials to the beneficial owners of the Company's common stock
(the "Common Stock"), and will reimburse such holders for their
reasonable expenses in connection therewith. The approximate date of
mailing of this proxy statement is November 8, 2006.
Only stockholders of record at the close of business on November 3,
2006 (the "Record Date") will be entitled to notice of, and to vote at,
the Meeting. At the close of business on the Record Date, there were
12,067,196 shares of Common Stock issued and outstanding. Each share of
Common Stock entitles the holder thereof to one vote. The holders of a
majority of the shares of Common Stock outstanding on the Record Date and
entitled to vote at the Meeting, present in person or by proxy, will
constitute a quorum for the transaction of business at the Meeting.
Abstentions and broker non-votes each shall be included as shares present
and voting for purposes of determining whether a quorum is present at the
Meeting. Each vote shall be tabulated separately. Abstentions shall be
counted as votes present and entitled to be cast for purposes of
determining whether a proposal has been approved. As a result, they will
have the same effect as a vote against a proposal. Broker non-votes, if
any, will be treated as not present or represented for purposes of
determining whether stockholder approval of the matter has been obtained.
Accordingly, a broker non-vote will not affect the outcome of the voting
on any proposal. Other than the election of directors, which requires a
plurality of the votes entitled to be cast by holders of shares
represented in person or by proxy at the Meeting, each matter submitted
to the stockholders requires the affirmative vote of a majority of the
votes entitled to be cast by holders of shares represented in person or
by proxy at the Meeting.
PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
Five persons, four of whom are members of the present Board of
Directors, are nominees for election to hold office until the next Annual
Meeting of Stockholders and until their respective successors are elected
and qualified. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for the election of the five nominees named
below. If any nominee should refuse or be unable to serve, the shares
represented by the proxies will be voted for any nominee as shall be
designated by the Board of Directors to replace any such nominee. Each
of the nominees named herein has consented to serve as a director if
elected.
REQUIRED VOTE
Approval of the nominees for election to the Board of Directors
requires the affirmative vote of the holders of a plurality of the
outstanding shares of the Company's Common Stock present at the Annual
Meeting in person or by proxy and entitled to vote.
The Board of Directors recommends that the stockholders vote FOR the
election of all nominees to the Board of Directors listed below.
Name Age Position
.... ... ........
J. Donald Hill 74 Chairman of the Board of Directors
Antoine Dominic 45 Chief Executive Officer, President &
Chief Operating Officer
Steven Georgiev (1) 72 Director
Ira J. Lamel (1) 59 Director
Donald E. Weeden (1) 76 Director
(1) Member of the Audit, Compensation and Nominating Committees.
The following information is submitted based upon information
received by the Company from such persons:
Mr. Hill has been Chairman of the Board of Directors since January
1996. He served as Chief Executive Officer of the Company from January
1996 to October 2000, President of the Company from August 1994 until
February 1998, and Chief Financial Officer of the Company from January
1994 until March 1995. In addition, he was President of Quantronix
Corporation ("Quantronix"), a subsidiary of the Company, from November
1992 until January 1996, and was a business consultant to Quantronix from
February 1992 to November 1992. From January 1991 to October 1991, Mr.
Hill was Chief Executive Officer of Medstone International, Inc., a
company engaged in the manufacture, marketing and sale of shock wave
therapy devices. From 1988 to 1990, he was Director of Corporate Finance
at Weeden & Co., an investment firm and member of the New York Stock
Exchange. Mr. Hill served as Vice Chairman of First Affiliated
Securities, Inc. from 1978 to 1988, and from 1966 to 1977 he was a
General Partner of Loeb, Rhoades & Company.
Mr. Dominic has been Chief Executive Officer since October 2000 and
President and Chief Operating Officer of the Company since February 1998.
He served as Chief Financial Officer of the Company from March 1995 until
December 26, 2004 and as a director of the Company from January 1996
through April 2004. In addition, Mr. Dominic served as President of
Quantronix from January 1996 until October 2000. From June 1992 to
January 1995, Mr. Dominic was Executive Vice President, Chief Financial
Officer and Director of CompuDyne Corporation, a manufacturer of data
acquisition equipment and access control systems, and Corcap Inc., a
holding company (both are related publicly-held companies). From March
1990 to June 1992, Mr. Dominic was the Chief Financial Officer for
CompuDyne Corporation and Corcap, Inc. From August 1987 to March 1990,
Mr. Dominic was Chief Financial Officer of Quanta Systems Corporation, a
division of CompuDyne Corporation. Mr. Dominic holds a B.S. in
accounting, an M.B.A., and is a non-practicing CPA.
Mr. Georgiev has been a director of the Company since December 1991.
From 1993 to 1997, he served as Chairman and CEO of Palomar Medical
Technologies, Inc. ("Palomar"), a biotechnology company. Since 1988, he
has acted as a business and management consultant to several high
technology companies, including EG&G, Inc., Cybernetics Products, Inc.,
Camber, Inc., Dynatrend, Inc. and Palomar. From 1972 to 1975, and later
from 1978 to 1988, Mr. Georgiev was Chairman, President and Treasurer of
Dynatrend, Inc., which specializes in providing engineering and program
management services primarily to the United States Government. From 1961
to 1972, and later from 1975 to 1978, Mr. Georgiev held a variety of
positions with Avco Systems, a high technology aerospace business,
including Project Director - Missile Systems; Director of Engineering;
Director of Advanced Programs; and Vice President - Marketing and
Planning. Since 1980, Mr. Georgiev also has been involved in the start-
up and subsequent development of several companies. Mr. Georgiev has a
B.S. degree in engineering physics and an M.S. degree in management.
Mr. Lamel has been a director of the Company since April 2004. He
has been Executive Vice President, Chief Financial Officer and Treasurer
of Hain Celestial Group since October 2001, and he has served as
Corporate Secretary since January 2003. From June 1973 to September
2001, Mr. Lamel, a certified public accountant, was at Ernst & Young LLP
where he served in various capacities including partner. Ernst & Young
LLP served as the Company's independent registered public accounting firm
for the year ended December 31, 2000, and Mr. Lamel directed the
Company's audit that year. In addition, Mr. Lamel currently serves as
director of Harvey Electronics, Inc., a publicly-held company engaged in
the retail sale, service and custom installation of audio, video and home
theater equipment.
Mr. Weeden has been a director of the Company since May 2003. Since
1987, Mr. Weeden has been Chairman of Weeden Securities Corporation, the
General Partner of Weeden & Co., L.P., a New York Stock Exchange member
firm, and a member of the National Association of Securities Dealers.
Over the years, Mr. Weeden has participated as an early venture investor
in a number of companies involved in the semiconductor industry. Mr.
Weeden graduated from Stanford University with a B.A. in economics.
Director Compensation
The Board of Directors currently consists of five persons: J.
Donald Hill, Howard S. Breslow, Steven Georgiev, Ira Lamel and Donald
Weeden. On February 7, 2005, each member of the Board of Directors was
granted immediately exercisable, non-incentive options to purchase 20,000
shares of Common Stock at an exercise price of $22.59 per share, the fair
market value on such date.
Board Meetings
The Board held nine meetings during the year ended December 31,
2005. Each director (during the period in which he was a director)
attended at least 75% of the total number of Board meetings and meetings
of all committees on which he served. Although the Company does not have
a formal policy regarding attendance by the Board of Directors at the
Company's Annual Meeting of Stockholders, it strongly encourages
directors to attend. All except one of the members of the Company's
current Board of Directors attended last year's Annual Meeting of
Stockholders.
Board Committees
Audit Committee. The Board of Directors has an Audit Committee
which operates under a written charter adopted by the Board of Directors.
The Audit Committee held four meetings during the year ended December
31, 2005. The Audit Committee is comprised of Messrs. Georgiev, Lamel,
and Weeden. Mr. Georgiev, Mr. Weeden and Mr. Lamel are "independent
directors" as defined under NASDAQ rules. Mr. Georgiev and Mr. Lamel are
qualified as audit committee financial experts within the meaning of the
SEC regulations.
Compensation Committee. Management compensation for 2005 was
determined by a Compensation Committee which met once during 2005. The
Compensation Committee is comprised of Messrs. Georgiev, Lamel, and
Weeden. The role of the Compensation Committee is to evaluate the
performance of the Company's executive officers, and to determine and
approve their compensation.
Nominating Committee. The Company did not have a Nominating Committee
during 2005. On September 25, 2006, the Board of Directors appointed a
Nominating Committee consisting of Messrs. Georgiev, Lamel and Weeden.
The current nominees for the Board of Directors were recommended to the
Board of Directors by the Nominating Committee, which had one meeting
during 2006. A copy of the Nominating Committee charter can be found on
the Company's website at www.exceltechinc.com.
The Nominating Committee is responsible for (1) reviewing
suggestions of candidates for director made by directors and others; (2)
identifying individuals qualified to become Board members; and (3)
recommending to the Board the Director nominees for the next annual
meeting of stockholders. There is no difference in the manner in which a
nominee is evaluated based on whether the nominee is recommended by a
stockholder or otherwise.
The Company does not have a formal policy concerning stockholder
recommendations of nominees to the Board of Directors. The need for such
a policy has not arisen since, to date, the Company has not received any
recommendations from stockholders requesting that the Nominating
Committee consider a candidate for inclusion among the Board's slate of
nominees in the Company's proxy statement. The absence of such a policy
does not mean, however, that a recommendation would not have been
considered had one been received. The Company will consider director
candidates recommended by stockholders. Any stockholder desiring to
make such a recommendation should send the recommendation, in writing, to
the Corporate Secretary at the address of the Company set forth on the
first page of this Proxy Statement, no later than the date by which
stockholder proposals for action must be submitted. The recommendation
should include the recommended candidate's biographical data, and should
be accompanied by the candidate's written consent to nomination and to
serving as a director, if elected.
The Company's goal is to assemble a Board of Directors that brings
to the Company a variety of perspectives and skills derived from business
and professional experience. The Company does not have any formal rules
or policies regarding minimum qualifications for nominees, but expects
that its candidates be of the highest ethical character, share the values
of the Company, have reputations, both personal and professional,
consistent with the image and reputation of the Company, be highly
accomplished in their respective field, and possess the relevant
expertise and experience necessary to assist the Board and the Company to
increase stockholder value.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant
to the Company's business and who are willing to continue in service are
considered for re-nomination, balancing the value of continuity of
service by existing members of the Board with that of obtaining a new
perspective. If any member of the Board does not wish to continue in
service or if the Nominating Committee decides not to re-nominate a
member for re-election, the Nominating Committee will seek to identify
nominees that possess the characteristics outlined above. Current
members of the Board of Directors are polled for suggestions. Research
also may be performed to identify qualified individuals. To date, the
Company has not engaged third parties to identify, evaluate, or assist in
identifying potential nominees, although the Company reserves the right
in the future to retain a third party search firm, if necessary.
In evaluating director nominees, the Nominating Committee may
consider the following factors:
- the appropriate size and the diversity of the Company's Board of
Directors;
- the needs of the Company with respect to the particular talents
and experience of its directors;
- the knowledge, skills and experience of nominees, including
experience in technology, business, or finance, in light of
prevailing business conditions and the knowledge, skills and
experience already possessed by other members of the Board;
- familiarity with national and international business matters;
- experience with accounting rules and practices; and
- the need to satisfy governance and other standards set by the SEC
and NASDAQ.
The Nominating Committee may also consider such other factors as it
may deem to be in the best interests of the Company and its stockholders.
Audit Committee Report
The Company's management is responsible for preparing the Company's
financial statements, and the independent registered public accounting
firm is responsible for auditing those financial statements. The Audit
Committee is responsible for monitoring and reviewing these processes on
behalf of the Board of Directors.
The Audit Committee has reviewed and discussed the audited financial
statements with management. Management represented to the Audit
Committee that the Company's financial statements were prepared in
accordance with U.S. generally accepted accounting principles.
The Audit Committee discussed with the independent registered public
accounting firm matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees). In addition, the
Audit Committee has received the written disclosures and the letter from
the independent registered public accounting firm required by
Independence Standards Board Standard No. 1 (Independence Discussions
With Audit Committees), and has discussed with the independent registered
public accounting firm the auditors' independence from the Company and
its management. In concluding that the auditors are independent, the
Audit Committee considered, among other factors, whether the nonaudit
services provided by KPMG LLP were compatible with their independence.
In reliance on the reviews and discussions referred to above, the
Audit Committee recommended to the Board of Directors (and the Board
subsequently approved the recommendation) that the audited financial
statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2005 for filing with the Securities and
Exchange Commission.
Steven Georgiev
Ira Lamel
Donald Weeden
EXECUTIVE OFFICERS AND SUBSIDIARY PRESIDENTS
The Company's executive officers, as well as the Presidents of the
Company's directly and indirectly owned subsidiaries, are listed in the
table below. Information concerning such employees follows the table.
Name Age Position
.... ... ........
Executive Officers
..................
J. Donald Hill 74 Chairman of the Board
Antoine Dominic 45 Chief Executive Officer,
President, Chief Operating Officer
Alice Varisano 53 Chief Financial Officer
Subsidiary Presidents
.....................
Greg Anderson 54 President, Control Systemation, Inc.
Redmond P. Aylward 55 President, Cambridge Technology, Inc.
Reinhard Baumert 62 President, Excel Technology Europe GmbH
Dave Clarke 44 President, Synrad, Inc.
Laurence E. Cramer 55 President, Continuum Electro-Optics, Inc.
Francis Dominic 48 President, The Optical Corporation and
President, Photo Research, Inc.
Qiang Fu 44 President, Quantronix Corporation
Stephen C. Graham 50 President, Control Laser Corporation
Kuni Kobayashi 64 President, Excel Technology Japan K.K.
Ooi Poay Chuan 52 President, Excel Technology Asia Sdn. Bhd.
Alice Varisano, a certified public accountant, has been the Chief
Financial Officer since December 27, 2004. From 1987 through 2004 she
was a principal at Ernst & Young LLP where she coordinated services for
many multinational public companies. Ms. Varisano holds a B.S. in
Accounting and M.S. in Taxation.
Mr. Anderson has been the President of Control Systemation, Inc., a
subsidiary of the Company, since October 2000. Previously, Mr. Anderson
had been with Control Laser Corporation for almost 20 years and had
served in many positions within the company including Project Engineer,
Mechanical Engineering Manager, Custom Systems Manager, Software Manager
and as Vice President. Mr. Anderson has worked previously as
Manufacturing Engineering Manager for Acme Cleveland Corporation and
Plant Engineer for General Motors Corporation. Mr. Anderson holds a B.S.
in Engineering and Computer Science.
Mr. Aylward has been President of Cambridge Technology, Inc.
("Cambridge"), a subsidiary of the Company, since February 1999. He
joined Cambridge as Director of Sales & Marketing in 1994, and was
promoted to Vice President of Sales & Marketing in 1997. Prior to
Cambridge, he worked for GenRad, Inc., where he held positions in Product
Line Management, Marketing Management, Engineering Management and Design
Engineering for over 18 years. Mr. Aylward holds B.S. and M.S. degrees
in Electrical Engineering from Northeastern University.
Dr. Baumert has been President of Excel Technology Europe GmbH, a
subsidiary of the Company, since November 1990. From 1982 to 1985, he
developed commercial laser and laser applications at Battelle
Institute/Frankfurt. In 1985, he joined Spectra Physics as Export Sales
Manager. Dr. Baumert holds a Ph.D. in physics.
Mr. Clarke has been President of Synrad, Inc. ("Synrad"), a
subsidiary of the Company, since September 1998. Mr. Clarke joined
Synrad in 1994 as International Sales Manager. In 1995, he became Vice
President of Marketing and President of Emerald Laser, Synrad's then
research and development division. Previously, Mr. Clarke worked for
Optilas Ltd., a European distributor of laser technology, for eight years
in various positions including General Manager. Mr. Clarke holds a B.S.
degree in Applied Physics.
Dr. Cramer has been President of Continuum Electro-Optics, Inc.
("Continuum"), a subsidiary of the Company, since October of 2002. He
joined Continuum as Vice President of R&D in April of 1999 and was
promoted to Executive Vice President/General Manager in June of 2001.
Prior to Continuum, Dr. Cramer was President of Laser Diode, Inc. for
five years and worked at Spectra Physics, Inc. where he held positions in
Product Line Management, Marketing and Sales Management, Engineering
Management and General Management for over 15 years. Dr. Cramer holds a
B.A. in Chemistry and Physics and M.S. and Ph.D. degrees in Chemical
Physics.
Mr. Francis Dominic has been President of Photo Research, Inc., a
subsidiary of the Company, since November 1996, and President of The
Optical Corporation, a subsidiary of the Company, since June 2000. From
1988 to 1996, he was Vice President and General Manager of Seth-Cole, a
manufacturer of reprographics and graphic arts media. He holds a B.S.
degree in Engineering and an M.B.A. Francis Dominic is the brother of
Antoine Dominic.
Dr. Qiang Fu has been President of Quantronix Corporation
("Quantronix"), a subsidiary of the Company, since October 2000. He
joined Quantronix in 1992 as a senior R&D scientist. He was promoted to
Director of Research and Development in 1996, Vice President of Research
and Development in 1998, and Executive Vice President in 1999. Dr. Fu
holds B.S., M.S. and Ph.D. degrees in Physics and an M.S. degree in
Electrical Engineering.
Mr. Graham has been President of Control Laser Corporation ("CLC"),
a subsidiary of the Company, since October 2000, and he was Executive
Vice President of CLC from September 1997 to September 2000. Having
worked with CLC for almost eighteen years, he has held several positions
including Design Engineer, Electrical Engineering Manager, Program
Manager, Production & Manufacturing Manager and Sales & Marketing
Director. Prior to joining CLC, he worked as an Electrical Design
Engineer at Insystec, Inc., a manufacturer of notebook computers, and at
TRW Financial Systems, Inc., a manufacturer of ATMs and Point of Sale
Terminals. Mr. Graham holds a B.S. degree in Electrical Engineering and
an M.B.A.
Mr. Kobayashi has been President of Excel Technology Japan K.K., a
subsidiary of the Company, since it was established in September 2002.
He had been involved with solid and ion laser development for 10 years
before he began selling and servicing the lasers. As the owner of
OptoFocus Corp., he represented Quantronix as an exclusive representative
in Japan for over 22 years. In September 2002, he sold OptoFocus Corp.
to the Company. Mr. Kobayashi holds a B.S. degree in Physics.
Mr. Ooi Poay Chuan has been President of Excel Technology Asia Sdn.
Bhd. ("Excel Asia"), a subsidiary of the Company, since November 1999.
From April 1998 to October 1999, he was Operations Manager for Excel
Asia. Prior to April 1998, he worked for Lumonics Corporation, Inc. as
Service Engineer, Service Manager and Regional Sales Manager covering
Asian Pacific territories. He has extensive laser training on marking
and industrial laser systems. Mr. Ooi holds a degree in Electrical
Engineering.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation earned by the Named Executive Officers for services rendered
to the Company for each of the last three years. The Named Executive
Officers include the Company's Chief Executive Officer and the executive
officers of the Company (other than the Chief Executive Officer) who
received salary and bonus payments in excess of $100,000 in 2005. In
accordance with SEC rules, perquisites totaling the lesser of either
$50,000, or 10% of the officer's annual salary and bonus, have been
omitted.
Long-term
Annual Compensation Compensation
.................... .............
Securities
Name and Underlying
Principal Salary Bonus Options/SARs
Position Year ($) (1) ($) (1) (#) (2)
....................... ..... ........ .......... .............
J. Donald Hill 2005 $191,000 $ 0 100,000
Chairman of the Board, 2004 $175,000 $ 0 20,000
Excel Technology, Inc. 2003 $175,000 $ 0 10,000
...............
Antoine Dominic 2005 $542,000 $1,153,764 200,000
President, Chief Executive 2004 $500,000 $1,104,500 20,000
Officer, Chief Operating, 2003 $425,000 $ 885,500 10,000
Officer, Excel Technology, Inc.
................
Alice Varisano
Chief Financial Officer 2005 $275,000 $ 65,200 0
Excel Technology, Inc. 2004 $ 0 $ 5,000 40,000
.............................................................
(1) The amounts indicated reflect salaries and bonuses for the years in
which they were earned.
(2) Represents options to acquire shares of Common Stock.
OPTION GRANTS DURING 2005
The following table provides information related to options granted
to the Named Executive Officers during the year ended December 31, 2005:
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term <F1>
.................................................................... .......................
Number of % of Total
Shares Options
Underlying Granted to
Options Employees Exercise Price Expiration
Name Granted <F2> in Fiscal Year $/Share <F3> Date 5% 10%
................. ............ ............... ............... ................ ......... ..........
J. Donald Hill 100,000 27.1% $22.59 2/08/15 $1,420,673 $3,600,264
Antoine Dominic 200,000 54.2% $22.59 2/08/15 $2,841,346 $7,200,528
<F1> The potential realizable value portion of the foregoing table illustrates value that might be received upon
exercise of the options immediately prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Common Stock over the term of the options. These numbers are calculated based
on the requirements of the Securities and Exchange Commission and do not reflect the Company's estimate of
future stock price growth.
<F2> Fully vested options to acquire shares of Common Stock.
<F3> The exercise price equaled the fair market value of the Common Stock on the date of grant.
</FN>
OPTION EXERCISES DURING 2005
AND YEAR END OPTION VALUES
The following table provides information related to options exercised by
the Named Executive Officers during 2005 and the number and value of
unexercised options held at year-end. The Company does not have any
outstanding stock appreciation rights.
Value of Unexercised
Number of Unexercised In-the-Money
Option/SARs Options/SARs
at Fiscal Year End (#) at Fiscal Year End ($) <F1>
........................... ...........................
Shares Acquired Value Realized
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
................ ............... .............. ............ .............. ............ .............
J. Donald Hill 0 0 436,667 0 $3,670,306 0
Antoine Dominic 0 0 489,792 0 $1,763,422 0
Alice Varisano 0 0 40,000 0 0 0
..................................................................................................................
<F1> The closing price for the Common Stock as reported on the NASDAQ National Market System on December 31, 2005
was $23.78. Value is calculated on the basis of the difference between the option exercise price and $23.78,
multiplied by the number of shares of Common Stock underlying the option.
</FN>
EMPLOYMENT AND RELATED AGREEMENTS
In October 2000, the Company entered into a five-year employment
agreement with J. Donald Hill, which agreement was amended on October 3,
2002 to, among other things, adjust Mr. Hill's base salary. Pursuant to
such agreement, Mr. Hill's base salary is subject to annual review and
was increased to $194,000 in February 2005. In addition, Mr. Hill is
eligible to receive bonus compensation in accordance with corporate bonus
plans adopted by the Board from time to time. In the event the Company
terminates Mr. Hill's employment without cause, he is entitled to receive
his base salary for a period of two years from termination. On March 11,
2005, the agreement was amended further to (a) extend the term thereof
for a period of two years, and (b) provide for the payment to Mr. Hill,
in the event of a change in control (as defined in such amendment), of
$1,000,000 plus a gross-up of any excise tax payable by him with respect
to any portion of such payment constituting an excess parachute payment
under Section 280G of the Internal Revenue Code. The agreement expires
in October, 2007.
In October 2000, the Company entered into a five-year employment
agreement with Antoine Dominic, which automatically renews for additional
one-year periods unless employment is terminated as provided in the
agreement. Pursuant to such agreement, Mr. Dominic's base salary is
subject to annual review and was increased to $550,000 in February 2005.
Mr. Dominic is eligible to receive bonus compensation in accordance with
corporate bonus plans adopted by the Board from time to time. The
agreement provides that in the event the Company terminates Mr. Dominic's
employment without cause, he is entitled to receive his base salary for a
period of two years from termination. On March 11, 2005, the agreement
was amended to (a) extend the term thereof for a period of one year, and
(b) provide for the payment to Mr. Dominic, in the event of a change in
control (as defined in the agreement), of an amount equal to 300% of his
base salary for the year in which the change of control takes place, (but
in no event less than $1,000,000), plus a gross-up of any excise tax
payable by him with respect to any portion of such payment constituting
an excess parachute payment under Section 280G of the Internal Revenue
Code.
In December 2004, the Company entered into a four-year employment
agreement with Alice Varisano. The agreement provides for a base salary
of $275,000, a non-accountable expense allowance of $25,000, and a yearly
bonus as determined by the Board which bonus shall not be less than
$50,000. The Agreement also provides that (a) in the event the Company
terminates Ms. Varisano's employment without cause or if she resigns for
Good Reason (as defined in the employment agreement), she is entitled to
receive a severance payment equal to one year of compensation (including
base salary, expense allowance and minimum bonus), (b) if her employment
is terminated due to a Change in Control (as defined in the employment
agreement), she is entitled to receive a severance payment equal to two
years compensation (including base salary, expense allowance and minimum
bonus), and (c) in the event of a change in control, she is entitled to
receive a payment of $300,000, plus a gross-up of any excise tax payable
by her with respect to any portion of such payment constituting an excess
parachute payment under Section 280G of the Internal Revenue Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Management compensation for 2005 was determined by the non-employee
directors of the Company. None of these outside directors was at any
time during 2005 or at any other time an officer or employee of the
Company, and none of them had any relationship with the Company requiring
disclosure under SEC rules.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Guidelines
The Company is engaged in a highly competitive industry and must
attain high levels of quality and safety in the design, production, and
servicing of its products. To succeed, the Company believes that it must
offer executive compensation that reflects competitive pay practices of
other companies and job responsibility, and enables the Company to
attract, retain, and reward qualified, experienced executives. The
Company also believes that any competitive pay package should be
structured, in part, to align management's interests with the success of
the Company by making a portion of compensation dependent on operating
achievements and, to a lesser extent, on stock performance. The
Compensation Committee has determined that these objectives are best met
by offering the Company's three executive officers competitive base
salaries, stock options that vest immediately or over time, and where
appropriate, quarterly bonuses which are payable based on a percentage of
pre-tax profits, with the percentage increasing as pre-tax profits
increase.
Chief Executive Officer Compensation
Based on the criteria described above, the Compensation Committee of
the Board of Directors approved an increase in Mr. Dominic's annual base
salary, effective February 2005, from $500,000 to $550,000. In
determining Mr. Dominic's base salary increase, the Compensation
Committee considered several factors including the Company's revenues,
earnings and cash-flow. Mr. Dominic's bonus under his performance-based
bonus plan (as amended) increased from $1,104,500 in 2004 to $1,153,764
in 2005 as a result of increases in the Company's pre-tax earnings from
the prior year.
Ira Lamel
Steven Georgiev
Donald Weeden
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth certain information based upon
publicly available filings or information provided to the Company, as of
March 6, 2006, with respect to the beneficial ownership of our common
stock by (i) each director of the Company, (ii) each of our executive
officers, (iii) all of our directors and executive officers as a group
and (iv) each person known by us to own more than five percent of our
common stock.
Name Number
(and Address of 5% Holders) Owned (1) Percentage of Class**
....................................... ............ .....................
CAM North America, LLC, 1,806,558(2) 15.0%
Smith Barney Fund Management LLC &
Solomon Brothers Asset
Management, Inc.
399 Park Avenue
New York, NY 10022
Manulife Financial Corporation
& Subsidiaries 864,681(3) 7.2%
200 Bloor Street
East Toronto, Ontario, Canada
Columbia Wanger Asset Management, L.P., 804,000(4) 6.7%
WAM Acquisition GP, Inc. &
Columbia Acorn Trust
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Wasatch Advisors, Inc. 777,623(5) 6.4%
150 Social Hall Ave.
Salt Lake City, UT 84111
Royce & Associates, LLC 709,700(6) 5.9%
1414 Avenue of the Americas
New York, NY 10019
J. Donald Hill 617,100(7) 4.9%
Antoine Dominic 528,825(8) 4.2%
Alice Varisano 40,000(9) *
Steven Georgiev 40,000(10) *
Howard S. Breslow 92,000(11) *
Donald E. Weeden 50,000(12) *
Ira Lamel 60,000(13) *
Executive officers and directors
as a group (seven persons) 1,427,925(14) 10.8%
* Less than 1%.
** Based on the number of shares outstanding on March 6, 2006, the Record
Date for the special meeting of the stockholders of the Company.
(1) Unless otherwise indicated below, all shares are owned beneficially
and of record.
(2) Information with respect to CAM North America, LLC ("CAM"), Smith
Barney Fund Management LLC ("SBFM") and Salomon Brothers Asset
Management, Inc. ("SBAM") is based on the Schedule 13G, dated
January 10, 2006, filed jointly by those parties. Of the total
shares reported, CAM has shared voting and dispositive power with
respect to 1,095,708 shares, SBFM has shared voting and dispositive
power with respect to 705,100 shares and SBAM has shared voting and
dispositive power with respect to 5,750 shares.
(3) Information with respect to Manulife Financial Corporation ("MFC"),
and MFC's indirect, wholly-owned subsidiaries, MFC Global Investment
Management (U.S.A.) Limited ("MFC Global"), Independence
Investments, LLC ("IIA") and John Hancock Advisers, LLC ("JHA") is
based on the Schedule 13G, dated February 8, 2006, filed jointly by
those parties. Of the total shares reported, MFC Global has shared
voting and dispositive power with respect to 64,981 shares, IIA has
sole voting and dispositive power with respect to 626,400 shares,
JHA has sole voting power with respect to 173,300 shares and shared
dispositive power with respect to 173,000 shares. MFC may be deemed
to have beneficial ownership of all of the shares held by MFC
Global, IIA and JHA through its parent-subsidiary relationship to
them.
(4) Information with respect to Columbia Wanger Asset Management, L.P.
("WAM") and WAM Acquisition GP, Inc., the general partner of WAM
("WAM GP") is based on the Schedule 13G, dated February 13, 2006,
filed by those parties. Of the total shares reported, WAM and WAM
GP have shared voting and dispositive power with respect to 804,000
shares.
(5) Information with respect to Wasatch Advisors, Inc. ("Wasatch") is
based on the Schedule 13G, dated February 14, 2006, filed by that
party. Of the total shares reported, Wasatch has sole voting and
dispositive power with respect to 777,623 shares.
(6) Information with respect to Royce & Associates, LLC ("Royce") is
based on the Schedule 13G, dated January 20, 2006, filed by that
party. Of the total shares reported, Royce has sole voting and
dispositive power with respect to 709,700 shares.
(7) Includes 436,667 shares of Common Stock underlying exercisable stock
options.
(8) Includes 489,792 shares of Common Stock underlying exercisable stock
options.
(9) Consists of 40,000 shares of Common Stock underlying exercisable
stock options.
(10) Consists of 40,000 shares of Common Stock underlying exercisable
stock options.
(11) Includes 80,000 shares of Common Stock underlying exercisable stock
options.
(12) Consists of 50,000 shares of Common Stock underlying exercisable
stock options.
(13) Consists of 60,000 shares of Common Stock underlying exercisable
stock options.
(14) Includes 1,196,460 shares of Common Stock underlying exercisable
stock options.
STOCK PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock during the period
from December 31, 2000 through December 31, 2005, with the cumulative
total return on the S&P 500 and the Company Peer Group. The Company Peer
Group is made up of the following 7 companies all of which are in the
laser technology field: Coherent, Inc., Electro Scientific Industries,
Inc., Thermo Electron Corp., Laserscope, Rofin-Sinar Technologies, Inc.,
Spectranetics Corporation (The) and GSI Lumonics, Inc.
(Assumes Initial Investment of $100 & Reinvestment of Dividends)
2000 2001 2002 2003 2004 2005
.... ...... ...... ...... ...... ......
EXCEL TECH INC $100 87.27 89.74 164.80 130.40 119.26
S&P 500 Index -
Total Return $100 88.12 68.65 88.33 97.93 102.74
Peer Only $100 87.54 69.25 94.56 114.05 113.18
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee of the Board of Directors has selected the
accounting firm of KPMG LLP ("KPMG") to serve as independent registered
public accounting firm of the Company for the year ending December 31,
2006. KPMG has audited the Company's financial statements since the year
ended December 31, 2003.
Audit and Non-Audit Fees
The following table sets forth the aggregate fees billed by the
Company's independent registered public accounting firm for audit
services rendered in connection with the financial statements and reports
for 2004 and 2005, and for other services normally rendered by such
independent registered public accounting firm during 2004 and 2005 on
behalf of the Company and its subsidiaries. The information in the table
reflects services provided by KPMG, except for the information set forth
under "Tax Fees" which reflects the tax services that Ernst &Young LLP
provides to the Company. The Audit Committee approved all engagements of
the independent registered public accounting firm in 2005 in advance of
any such engagement.
Year ended December 31,
2005 2004
......... ...........
Audit Fees and Fees Related to Section 404
of Sarbanes-Oxley Act $ 666,300 $ 1,051,000
Tax Fees (a) 83,000 167,000
......... ...........
Total $ 749,300 $ 1,218,000
......... ...........
......... ...........
(a) Primarily for federal, state and international tax return
preparation, planning and consultation services; also includes
assistance with matters related to audits.
REQUIRED VOTE
Ratification of the appointment of the independent registered public
accounting firm requires the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock present
at the Annual Meeting in person or by proxy and entitled to vote.
The Board of Directors recommends a vote FOR ratification of the
selection of KPMG as the independent registered public accounting firm
for the Company for the year ending December 31, 2006.
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF THE
2006 STOCK OPTION / STOCK ISSUANCE PLAN
The Company believes that stock options and share ownership are
important factors in order for it to attract, retain and motivate key
employees. Accordingly, the Company's 2006 Stock Option/Stock Issuance
Plan (the "Equity Plan") was adopted by the Board of Directors effective
November 1, 2006 in the form attached hereto as Exhibit A, subject to
approval of the stockholders. A maximum of 750,000 shares of Common
Stock may be issued pursuant to the Equity Plan, of which none have been
granted to date. As of December 31, 2005, only 445,000 shares of Common
Stock were available for issuance under the Company's 2004 Stock Option
Plan. The Company will discontinue granting options under this plan. The
Equity Plan does not reserve significantly more shares than that
available under the 2004 Stock Option Plan, but provides for the issuance
of Stock which, in the current environment, has more favorable
implications to the Company and employees than the grant of stock
options.
The essential features of the Equity Plan are outlined below. The
following description of the Equity Plan does not purport to be complete
and is qualified in its entirety by the text of the Equity Plan attached
to this Proxy Statement as Exhibit A.
The Equity Plan provides that it shall be administered by the
Company's Compensation Committee ("Committee").
The Equity Plan authorizes the granting of incentive stock options
to employees of the Company or any of its subsidiaries, including
officers, and non-statutory stock options to employees, including
officers, and directors of the Company, as well as to certain consultants
and advisors. The options to be granted under the Equity Plan and
designated as incentive stock options are intended to receive incentive
stock option tax treatment pursuant to Section 422 of the Internal
Revenue Code, as amended (the "Code").
The Equity Plan also authorizes direct issuance of stock to eligible
participants in the Equity Plan. The Committee may, but need not, require
a Participant to pay an amount per share determined by the Committee as a
condition for receiving an issuance of stock. Shares of Common Stock
issued under the Stock Issuance Plan may, in the discretion of the
Committee, be fully and immediately vested upon issuance or may vest in
one or more installments over the Participant's period of Service or upon
attainment of specified performance objectives. The Participant shall
have full stockholder rights with respect to any shares of Common Stock
issued to the Participant under the Stock Issuance Program, whether or
not the Participant's interest in those shares is vested.
If the Committee determines that any shares of Common Stock to be
issued under the Stock Issuance Program to an eligible Employee should
qualify as "performance-based compensation" for purposes of Section
162(m) of the Code, the grant or vesting of such award (each, a
"Performance Award") shall be contingent upon achievement of pre-
established performance goals and other terms set forth in the Equity
Plan.
The performance goals for such Performance Awards shall consist of
one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the
Committee consistent with the provisions of the Equity Plan. The
performance goals shall be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations thereunder
(including Treasury Regulation 1.162-27 and successor regulations
thereto), including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted or vested upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant or vesting.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
One or more of the following business criteria for the Company
and/or for specified Subsidiaries or affiliates or divisions or other
business units or lines of business of the Company and/or of its
Subsidiaries or affiliates shall be used by the Committee in establishing
performance goals for such Performance Awards: appreciation in value of
the Company's common stock; total shareholder return; pretax earnings;
return on capital, equity or assets; earnings measures/ratios (on a
gross, net, pretax or posttax basis), including basic earnings per share,
diluted earnings per share, total earnings, operating earnings, earnings
growth, earnings before interest and taxes, and earnings before interest,
taxes, depreciation and amortization; operating income; net income; pro
forma net income; economic value created or economic profit; operating
profit; sales; sales growth; gross margin; direct margin; book value;
revenues; expenses (including expense ratio); loss ratio; new business
production; capital markets and/or acquisition transactions; investment
programs initiated; per period or cumulative cash flow (including but not
limited to operating cash flow and free cash flow); cash flow return on
investment; operating margin; net profit margin; inventory turns;
financial return ratios; market share; balance sheet measurements such as
receivable turnover; improvement in or attainment of expense levels;
improvement in or attainment of working capital levels; debt reduction;
strategic innovation; strategic plan development and implementation;
customer or employee satisfaction; improvements in productivity; and any
combination of the foregoing. Performance goals may be expressed as
absolute or relative goals, goals compared to past performance, goals
compared to the performance of a published or special index or benchmark
deemed applicable by the Committee, goals compared to the performance of
peer companies, or otherwise as determined by the Committee.
Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period, as specified by the
Committee. A performance goal shall be established not later than the
earlier of (A) 90 days after the beginning of any performance period
applicable to such Performance Award or (B) the date on which 25% of such
performance period has elapsed.
The Committee may, in its discretion, reduce the number of shares of
Common Stock otherwise issued or vesting in connection with such
Performance Awards, but may not exercise discretion to increase any such
amount payable to the Participant in respect of a Performance Award.
In all cases, the maximum Performance Award of any Participant shall
be 200,000 shares.
The Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, the authorization of
Performance Awards and performance goals in recognition of unusual,
nonrecurring or non-operational events, including without limitation
stock splits, stock dividends, mergers, consolidations, large, special
and non-recurring dividends, the effects of currency fluctuations,
litigation or claim judgments or settlements, accruals for reorganization
and restructuring programs, asset write-downs, acquisitions and
dispositions of businesses and assets, and any or all items that are
excluded from the calculation of non-GAAP earnings as reflected in any
Company press release and Form 8-K filing relating to an earnings
announcement, affecting the Company and its Subsidiaries or any business
unit thereof, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions
or in view of the Committee's assessment of the business strategy of the
Company, any Subsidiary or affiliate or business unit thereof,
performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant; provided,
however, that no such adjustment shall be authorized or made if and to
the extent that the existence or exercise of such authority would cause a
Performance Award to fail to qualify as "performance-based compensation"
under Section 162(m) of the Code.
The aggregate amount of Common Stock subject to the Equity Plan,
whether issuable upon the exercise of stock options or granted directly
to an eligible participant, consists of 750,000 shares of Common Stock,
which may be shares that are authorized but unissued or reacquired by the
Company. The maximum amount of 750,000 shares issuable upon the exercise
of options or direct issuance and the number of shares and the exercise
price per share in effect under each outstanding option are subject to
adjustment upon the occurrence of certain events, including, but not
limited to, stock dividends, stock splits, combinations, mergers,
consolidations, reorganizations, exchanges or other capital adjustments.
The exercise price for the Common Stock underlying the options is
determined by the Committee, but in no event shall it be less than 100%
of the fair market value of the Common Stock on the date the option is
granted (110% in the case of incentive stock options granted to optionees
who own more than 10% of the voting power of all classes of stock of the
Company). The Code limits to $100,000 the fair market value (determined
at the time the option is granted) of the Common Stock with respect to
which incentive options are first exercisable by any individual employee
during any calendar year.
No option granted under the Equity Plan may be exercised after the
expiration of the option, which may not, in any case, exceed ten years
from the date of grant (five years in the case of incentive options
granted to persons who own more than 10% of the voting power of all
classes of the stock of the Company). Options granted under the Equity
Plan are exercisable on such basis as determined by the Committee.
In the event of a sale, transfer or other disposition of the
Company's assets in complete liquidation or dissolution of the Company or
a merger or consolidation of the Company resulting in a transfer of more
than 50% of the voting power of the Company's securities, any unexercised
options theretofore granted under the Equity Plan shall, immediately
prior to such transaction, become fully exercisable. If not exercised
prior to such transaction, all options shall be deemed cancelled unless
the surviving corporation in any such merger or consolidation elects to
assume the options under the Equity Plan. All shares of stock issued
pursuant to the Equity Plan shall also be immediately vested in the event
of such a transaction.
The exercise of an option is contingent upon receipt by the Company
of a written notice of exercise from the holder thereof, and payment to
the Company of the purchase price for the shares of Common Stock, either
in cash, a check to its order, in certain circumstances, shares of Common
Stock, or through a sales and remittance procedure through a brokerage
firm from the proceeds of the sale of shares purchased on exercise of the
options. Options granted under the Equity Plan may not be transferred by
the participant other than by will or the laws of descent and
distribution and may be exercised during the holder's lifetime only by
such holder.
If an optionee ceases to provide services to the Company or any
subsidiary thereof other than on account of disability or misconduct,
prior to his exercise of the option, the option granted to such optionee
shall automatically terminate, lapse and expire 90 days from the date of
termination; provided, however, that if such optionee is an executive
officer, such optionee may exercise such options at any time within
twelve months from the date of termination of such service. If an
optionee ceases to provide services to the Company or any subsidiary
thereof, by reason of disability, such holder may exercise any option he
holds at any time within twelve months from the date of termination for
such cause.
If an optionee dies while holding an outstanding option, his option
rights may be exercised by the person or persons to whom such rights
under the option are transferred by will or the laws of descent and
distribution within twelve months from the date of death.
Under no circumstances shall any option be exercisable after the
specified expiration of the option term.
In all cases, the maximum stock option award of any participant
shall be 200,000 shares.
Subject to the terms of the Equity Plan, the Committee has authority
to determine and designate those employees, including officers, and
directors, consultants and advisors, who are to be granted options or
shares and (i) in the case of options, the number of shares to be covered
by each such grant, the status as either incentive option or non-
statutory option, the vesting schedule and term, and (ii) in the case of
stock issuances, the number of shares to be issued to each Participant,
the vesting schedule, the consideration, if any, to be paid by the
Participant, whether the award shall be a Performance Award and, if so,
the terms of such Performance Award. One or more officers of the Company
may be delegated the authority to grant options to persons who are not
subject to the requirements of Section 16 of the Securities Exchange Act
of 1934, as amended, or Section 162(m) of the Internal Revenue Code of
1986, as amended, provided that the Committee shall have fixed the total
number of shares subject to such grants. Subject to the express
provisions of the Equity Plan, the Committee also has the authority to
interpret the Equity Plan and to prescribe, amend and rescind the rules
and regulations relating thereto.
Unless previously terminated in certain circumstances, the Equity
Plan will terminate ten years after the date the Equity Plan is adopted
by the Board of Directors. The Board of Directors may terminate or
suspend the Equity Plan or make such modifications or amendments thereto
as it shall deem advisable; provided, however, that no amendment,
termination or modification shall adversely affect the rights of a holder
of an option previously granted there under.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax
consequences of certain transactions under the Equity Plan based on
Federal income tax laws in effect on December 1, 2006. This summary is
not intended to be complete and does not describe state or local tax
consequences.
Tax Consequences to Participants
NON-QUALIFIED STOCK OPTIONS. In general, (i) no income will be
recognized by an optionee at the time a non-qualified option is granted;
(ii) at the time of exercise of a non-qualified option, ordinary income
will be recognized by the optionee in an amount equal to the difference
between the option price paid for the shares and the fair market value of
the shares, if unrestricted, on the date of exercise; and (iii) at the
time of sale of shares acquired pursuant to the exercise of a non-
qualified option, appreciation (or depreciation) in value of the shares
after the date of exercise will be treated as a capital gain (or loss).
INCENTIVE STOCK OPTIONS. No income generally will be recognized by
an optionee upon the grant or exercise of an incentive option. If shares
of common stock are issued to the optionee pursuant to the exercise of an
incentive option, and if no disqualifying disposition of such shares is
made by such optionee within two years after the date of grant or within
one year after the transfer of such shares to the option, then upon sale
of such shares, any amount realized in excess of the option price will be
taxed to the optionee as a capital gain and any loss sustained will be a
capital loss.
If common shares acquired upon the exercise of an incentive option
are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in
the year of disposition in an amount equal to the excess (if any) of the
fair market value of such shares at the time of exercise (or, if less,
the amount realized on the disposition of such shares if a sale or
exchange) over the option price paid for such shares. Any further gain
(or loss) realized by the participant generally will be taxed as a
capital gain (or loss).
SHARE ISSUANCES. The recipient of shares of common stock under the
Equity Plan generally will be subject to tax at ordinary income rates on
the fair market value of the shares (reduced by any amount paid by the
participant for such shares) at such time as the shares are no longer
subject to forfeiture or restrictions on transfer for purposes of Section
83 of the Code ("Restrictions"). However, a recipient who so elects
under Section 83(b) of the Code within 30 days of the date of transfer of
the shares will have taxable ordinary income on the date of transfer of
the shares equal to the excess of the fair market value of such shares
(determined without regard to the Restrictions) over the purchase price,
if any, of such shares. If a Section 83(b) election has not been made,
any dividends received with respect to shares issued under the Equity
Plan that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Tax Consequences to the Company
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a
corresponding deduction provided that, among other things, the income
meets the test of reasonableness, is an ordinary and necessary business
expense, is not an "excess parachute payment" within the meaning of
Section 280G of the Code and is not disallowed by the $1 million
limitation on certain executive compensation under Section 162(m) of the
Code.
REQUIRED VOTE
The ratification and approval of the Equity Plan requires the
affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote.
The Board of Directors recommends a vote FOR the ratification and
approval of the 2006 Stock Option / Stock Issuance Plan.
PROPOSAL NO. 4
RATIFICATION AND APPROVAL OF THE EXCEL TECHNOLOGY, INC.
2006 ANNUAL INCENTIVE COMPENSATION PLAN
General
The Board of Directors has adopted and recommends that the
stockholders approve the Excel Technology, Inc. 2006 Annual Incentive
Compensation Plan (the "Bonus Plan"). The general purpose of the Bonus
Plan is to provide the Company with an additional means to attract and
retain executive officers by providing them with an opportunity to earn
incentive compensation each year, contingent on the achievement of
certain performance goals, as an incentive and reward for their
contributions to the growth, profitability and success of the Company
from year to year by granting performance-based awards that are fully tax
deductible to our Company.
Summary of the Plan
The following general description of certain features of the Bonus
Plan is qualified in its entirety by reference to the Bonus Plan, a copy
of which is attached to Exhibit B to this Proxy Statement. Capitalized
terms not otherwise defined in this summary have the meanings given to
them in the Bonus Plan. The Bonus Plan will permit incentive
compensation bonus awards to be structured to qualify as "performance-
based" compensation under Section 162(m) of the Code.
Administration
The Plan shall be administered by the Compensation Committee
("Committee") of the Board of Directors. The Committee shall have the
authority to establish each Performance Period and the performance goals
for the awarding of Awards for each Performance Period; to determine the
Participants for each Performance Period; to determine whether
performance goals for each Performance Period have been achieved; to
authorize payment of Awards under the Plan, including determining the
form and timing of payment and any conditions (such as further service
requirements) that will apply to such payment; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as
it shall deem advisable; and to interpret the terms and provisions of the
Plan.
Bonus Opportunity and Performance Goals
On the Determination Date with respect to each Performance Period,
the Committee shall determine the Participants who shall have an
opportunity to receive an Award for that Performance Period, the
performance goal or goals applicable with respect to each Participant,
the terms and conditions of each Award, and the amount (if any) that each
Participant shall have the opportunity to receive under the Award based
on the actual level of performance measured against the performance goal
or goals. The terms of each Award shall include minimum and target
thresholds, and a mathematical formula or matrix that shall contain
weighting for each performance goal and indicate the extent to which
Awards will be paid if the Participant's performance thresholds with
respect to his or her performance goals are achieved or exceeded. The
entitlement of a Participant to payment under an Award shall be
contingent on the attainment of one or more objective performance goals
established by the Committee in writing on the Determination Date. The
outcome with respect to such performance goal or goals must be
substantially uncertain on the Determination Date. The amount that may
be paid to a Participant with respect to any Award or Awards under this
Plan during any calendar year shall in no event exceed $3,000,000 in
the aggregate. Performance goals may vary as among Participants and
shall be based upon one or more of the following criteria, as the
Committee may deem appropriate: appreciation in value of the Company's
common stock; total shareholder return; pretax earnings; return on
capital, equity or assets; earnings measures/ratios (on a gross, net,
pretax or post tax basis), including basic earnings per share, diluted
earnings per share, total earnings, operating earnings, earnings growth,
earnings before interest and taxes, and earnings before interest, taxes,
depreciation and amortization; operating income; net income; pro forma
net income; economic value created or economic profit; operating profit;
sales; sales growth; gross margin; direct margin; book value; revenues;
expenses (including expense ratio); loss ratio; new business production;
capital markets and/or acquisition transactions; investment programs
initiated; per period or cumulative cash flow (including but not limited
to operating cash flow and free cash flow); cash flow return on
investment; operating margin; net profit margin; inventory turns;
financial return ratios; market share; balance sheet measurements such as
receivable turnover; improvement in or attainment of expense levels;
improvement in or attainment of working capital levels; debt reduction;
strategic innovation; strategic plan development and implementation;
customer or employee satisfaction; improvements in productivity; and any
combination of the foregoing. Performance goals may be expressed as
absolute or relative goals, goals compared to past performance, goals
compared to the performance of a published or special index or benchmark
deemed applicable by the Committee, goals compared to the performance of
peer companies, or otherwise as determined by the Committee. The
performance goals may be determined by reference to the performance of
the Company and/or a subsidiary or affiliate of the Company, or of a
division or unit of any of the foregoing. So long as an Award is fully
contingent upon a measure of performance as specified in the Bonus Plan,
the Committee may consider other measures of performance or other
circumstances in its exercise of discretion ("negative discretion") to
reduce the final Award. The Committee may specify at the time an Award
opportunity is authorized or at any other time such other performance
measures or other terms upon which it will exercise negative discretion.
In no event may the Committee exercise discretion to increase the amount
otherwise payable to a Participant under the terms of an Award.
The Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, the authorization of Awards
and performance goals in recognition of unusual, nonrecurring or non-
operational events, including without limitation stock splits, stock
dividends, mergers, consolidations, large, special and non-recurring
dividends, the effects of currency fluctuations, litigation or claim
judgments or settlements, accruals for reorganization and restructuring
programs, asset write-downs, acquisitions and dispositions of businesses
and assets, and any or all items that are excluded from the calculation
of non-GAAP earnings as reflected in any Company press release and Form
8-K filing relating to an earnings announcement, affecting the Company
and its subsidiaries or any business unit thereof, or the financial
statements of the Company or any subsidiary, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any subsidiary or
affiliate or business unit thereof, performance of comparable
organizations, economic and business conditions, and any other
circumstances deemed relevant; provided, however, that no such adjustment
shall be authorized or made if and to the extent that the existence or
exercise of such authority would cause an Award potentially grantable
under the Bonus Plan to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code.
An Award (if any) earned by a Participant for a Performance Period
shall be paid on such date following the end of such Performance Period
as the Committee shall determine but in no event later than two and one-
half months following the end of the calendar year in which the
Performance Period ends; provided, however, that the Committee shall have
first certified in writing (i) that the applicable performance goal or
goals with respect to such Participant for such Performance Period were
satisfied and the level of the attainment of such goal or goals, (ii)
that all other material terms upon which payment of the Award is
conditioned were satisfied and (iii) the amount of each Participant's
Award. The Committee, unless it determines otherwise, may exercise
negative discretion to reduce the amount that would otherwise be payable
under an Award by reason of the applicable performance goal's having been
achieved.
The Board may terminate the Plan at any time and may amend it from
time to time. Amendments to the Plan may be made without shareholder
approval except as required to satisfy Section 162(m) of the Code.
Effective Date of Plan; Shareholder Approval
The Plan shall become effective as of September 29, 2006; provided,
however, that no Award shall be payable under the Plan unless and until
it has been approved by the Company's shareholders. The Company intends
that the Plan will subsequently be submitted for reapproval of
shareholders no later than the first meeting of shareholders that occurs
in the fifth year following the year in which shareholders of the Company
previously approved the Plan.
REQUIRED VOTE
The ratification and approval of the Bonus Plan requires the
affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote.
The Board of Directors recommends a vote FOR ratification and
approval of the Excel Technology, Inc. 2006 Annual Incentive Compensation
Plan for Key Executives.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who
own more than 10% of the Common Stock (collectively, the "Reporting
Persons"), to file reports of ownership and changes in ownership with the
SEC, and to furnish a copy of such reports to the Company. Based solely
on review of the copies of such forms furnished to the Company, the
Company believes that during the year ended December 31, 2005, the
Reporting Persons complied with all applicable Section 16(a) filing
requirements.
STOCKHOLDER COMMUNICATIONS AND PROPOSALS
Stockholders of the Company interested in communicating with the
Board of Directors may do so by sending their communication to Excel
Technology Board of Directors, c/o Corporate Secretary, at the address of
the Company set forth on the first page of this Proxy Statement. All
such correspondence received by the Corporate Secretary will be delivered
to one or more members of the Board of Directors.
Stockholder proposals for action at the 2007 Annual Meeting of
Stockholders must be submitted in writing to the Corporate Secretary at
the address of the Company set forth on the first page of this Proxy
Statement, and must be received by the Corporate Secretary no later than
July 12, 2007 in order that they may be considered for inclusion in next
year's proxy statement and proxy card. However, if we decide to change
the date of the 2007 Annual Meeting of Stockholders by more than 30 days
from December 6, 2007, we will provide you with a reasonable time before
we begin to print and mail our proxy statements for the 2007 Annual
Meeting of Stockholders in order to allow you an opportunity to make
proposals in accordance with the rules of the Securities and Exchange
Commission relating to stockholder proposals. Stockholders who intend to
present a proposal at the Company's 2007 Annual Meeting of Stockholders
without inclusion of such proposal in the Company's proxy materials are
required to provide notice of such proposal to the Company no later than
September 25, 2007. However, if we decide to change the date of the 2007
Annual Meeting of Stockholders by more than 30 days from December 6,
2007, then in order for the stockholder's notice to be timely it must be
received by our Corporate Secretary in accordance with any adjusted
deadline we publicly announce, which deadline will be a reasonable period
of time prior to the mailing of our proxy material for the 2007 Annual
Meeting of Stockholders. The Company reserves the right to reject, rule
out of order, or take other appropriate action with respect to any
proposal that does not comply with these and other applicable
requirements.
CODE OF ETHICS
The Company has a Code of Ethics that is applicable to all employees
of the Company, including the Company's executive officers. The Code of
Ethics has been filed with the SEC as an exhibit to its Form 10-K dated
and filed on March 15, 2005. The Company will provide an electronic or
paper copy of the Code of Ethics free of charge upon request. Requests
may be made by calling Investor Relations at (631) 784-6175, or by
writing to Investor Relations at 41 Research Way, East Setauket, New York
11733.
MAILINGS TO STOCKHOLDERS
The Annual Report to stockholders of the Company for the year ended
December 31, 2005, including audited financial statements, is being
mailed to the stockholders along this Proxy Statement. Such report is not
incorporated in this Proxy Statement and is not deemed to be a part of
the proxy solicitation material.
For those stockholders who share a single address, only one Annual
Report and Proxy Statement will be sent to that address unless the
Company has received a request from one or more of such stockholders to
the contrary. This practice, known as "house holding," is designed to
reduce the Company's printing and postage costs. Upon request, the
Company will promptly send a separate Annual Report or Proxy Statement to
any stockholder residing at such an address. Requests may be made by
calling Investor Relations at (631) 784-6175 or by writing to Investor
Relations at 41 Research Way, East Setauket, New York 11733. If any
stockholder residing at such an address wishes to receive a separate
annual report or proxy statement in the future, or if any stockholder
receiving multiple copies of the Company's annual report and proxy
statement desires house holding, they may contact Investor Relations in
the same manner.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Meeting. Should any
other matters come before the Meeting or any adjournments thereof, then
with respect to such matters, the proxy holders will have the
discretionary authority to vote all proxies received by them in
accordance with their judgments.
A copy of the Company's Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission (exclusive of exhibits), will be
furnished without charge to any stockholder upon written request to
Investor Relations, 41 Research Way, East Setauket, New York, 11733.
By Order of the Board of Directors
/s/ J. Donald Hill
..................................
J. Donald Hill,
Chairman of the Board
E. Setauket, New York
November 8, 2006
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. YOUR PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION IS APPRECIATED.
Exhibit A
EXCEL TECHNOLOGY, INC.
2006 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
..................
I. PURPOSE OF THE PLAN
This 2006 Stock Option/Stock Issuance Plan is intended to
promote the interests of Excel Technology Inc, a Delaware corporation, by
providing eligible persons 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.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity
programs:
(i) the Option Grant Program under which eligible persons
may, at the discretion of the Committee, be granted options to purchase
shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Committee, be issued shares of Common Stock
directly.
B. The provisions of Articles One and Four shall apply to
both equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Committee. Members
of the Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Committee shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding options and awards of
shares of Common Stock thereunder as it may deem necessary or advisable.
Decisions of the Committee shall be final and binding on all parties who
have an interest in the Plan or any option or issuance of shares of
Common Stock thereunder.
c. The Committee may delegate to one or more officers of the
Corporation the authority to grant options under the Option Grant Program
and/or shares of Common Stock under the Stock Issuance Program to
eligible persons who are not subject to the requirements of Section 16 of
the Exchange Act or Section 162(m) of the Code and the rules and
regulations thereunder, provided that the Committee shall have fixed the
total number of shares of Common Stock subject to such grants. Any such
delegation shall be subject to the limitations of Section 157(c) of the
Delaware General Corporation Law. The Committee may revoke any such
allocation or delegation at any time for any reason with or without prior
notice.
D. No member of the Board or the Committee, nor any officer
or employee of the Corporation acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination or
interpretation taken or made with respect to the Plan, and all members of
the Board or the Committee and all officers or employees of the
Corporation acting on their behalf shall, to the extent permitted by law,
be fully indemnified and protected by the Corporation in respect of any
such action, determination or interpretation.
E. The Committee may employ attorneys, consultants,
accountants or other persons, and the Committee and the Corporation and
its officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as
follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. The Committee shall have full authority to determine (i)
with respect to the grants under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those
grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or
a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain
outstanding, and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive such stock
issuances, the time or times when such issuances are to be made, the
number of shares to be issued to each Participant, the vesting schedule
(if any) applicable to the issued shares, the consideration (if any) to
be paid by the Participant for such shares, whether such award shall be a
Performance Award, and if it is a Performance Award, the terms of such
Performance Award consistent with Section I.C. of Article Three.
C. The Committee shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
D. Subject to Section V.C. of this Article One relating to
changes made to Common Stock by reason of certain events, no Employee
shall be eligible to be granted options covering more than two hundred
thousand (200,000) shares of Common Stock during any one calendar year.
E. Subject to Section V.C. of this Article One relating to
changes made to Common Stock by reason of certain events, the maximum
number of shares of Common Stock that may be issued to any Employee in
connection with Performance Awards under the Stock Issuance Program
during any calendar year shall be two hundred thousand (200,000) shares.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number
of shares of Common Stock which may be issued over the term of the Plan
shall not exceed seven hundred and fifty thousand (750,000) shares.
B. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent
(i) the options expire or terminate for any reason prior to exercise in
full or (ii) the options are canceled in accordance with the
cancellation-regrant provisions of Article Two. Unvested shares issued
under the Plan and subsequently repurchased by the Corporation, at the
option exercise price or direct issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to
the number of shares of Common Stock reserved for issuance under the Plan
and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.
C. Should any change be made to the Common Stock 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, appropriate adjustments shall be made by the Committee to
(i) the maximum number and/or class of securities issuable under the Plan
and (ii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments
determined by the Committee shall be final, binding and conclusive.
ARTICLE TWO
OPTION GRANT PROGRAM
....................
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Committee; provided, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Committee, and shall in no event be less than the Fair Market Value per
share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in
cash or check made payable to the Corporation. Should the Common Stock
be registered under Section 12(g) of the 1934 Act at the time the option
is exercised, then the exercise price may also be paid as follows:
(i) in shares of Common Stock (including shares that are
subject to risk of forfeiture or restrictions on transfer ("Restricted
Shares")) 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, provided that, unless otherwise
determined by the Committee, if Restricted Shares are surrendered, shares
received by the Optionee upon exercise of the Options, equal in number to
the Restricted Shares surrendered, shall be subject to the same risks of
forfeiture or restrictions on transfer as those that applied to the
Restricted Shares surrendered by the Optionee, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions (A) 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 by reason of such exercise and (B) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number
of shares as shall be determined by the Committee and set forth in the
documents evidencing the option grant. However, no option shall have a
term in excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or
death:
(i) Should the Optionee cease to remain in Service for any
reason other than death, Disability or Misconduct, then, subject to
Section I. C. 2. (i) and (ii) of this Article Two, the Optionee shall
have a period of three (3) months following the date of such cessation of
Service during which to exercise each outstanding option held by such
Optionee; provided, however, that if such Optionee is an executive
officer, then such Optionee may exercise such Options at any time within
twelve (12) months from the date of termination of such Service.
(ii) Should Optionee's Service terminate by reason of
Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to exercise
each outstanding option held by such Optionee.
(iii) If the Optionee dies while holding an outstanding option,
then the personal representative of his or her estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or the laws of inheritance shall have a twelve (12)-month period
following the date of the Optionee's death to exercise such option.
(iv) Under no circumstances, however, shall any such option be
exercisable after the specified expiration of the option term.
(v) Subject to Section I.C.2.(i) and (ii) of this Article
Two, during the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option
shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding with respect to any and all option shares for which the
option is not otherwise at the time exercisable or in which the Optionee
is not otherwise at that time vested.
(vi) Should Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to remain outstanding.
2. The Committee shall have the discretion, exercisable
either at the time an option is granted or at any time while the option
remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following Optionee's cessation of Service or death
from the limited period otherwise in effect for that option to such
greater period of time as the Committee shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of
vested shares of Common Stock for which such option is exercisable at the
time of the Optionee's cessation of Service but also with respect to one
or more additional installments in which the Optionee would have vested
under the option had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have
no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise
price and become a holder of record of the purchased shares.
E. Unvested Shares. The Committee shall have the discretion
to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, any or all of those unvested shares. The
terms 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 Committee
and set forth in the document evidencing such repurchase right. The
Committee may not impose a vesting schedule upon any option grant or the
shares of Common Stock subject to that option which is more restrictive
than twenty percent (20%) per year vesting, with the initial vesting to
occur not later than one (1) year after the option grant date. However,
such limitation shall not be applicable to any option grants made to
individuals who are officers of the Corporation, non-employee Board
members or independent consultants.
F. Limited Transferability of Options. During the lifetime
of the Optionee, the option 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.
G. Withholding. The Corporation's obligation to deliver
shares of Common Stock upon the exercise of any options granted under the
Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all
the provisions of the Plan shall be applicable to Incentive Options.
Options which are specifically designated as Non-Statutory Options shall
not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Dollar Limitation. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates
of grant) for which one or more options granted to any Employee under the
Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive
Options during any one (1) calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds
two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then (i) the option term shall
not exceed five (5) years measured from the option grant date and (ii)
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
option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the
Plan at the time of a Corporate Transaction shall automatically vest in
full so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable for all of
the shares of Common Stock at the time subject to that option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation
(or parent thereof).
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted by the Committee,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Corporate Transaction, had the option been exercised
immediately prior to such Corporate Transaction. Appropriate adjustments
shall also be made by the Committee to (i) the number and class of
securities available for issuance under the Plan following the
consummation of such Corporate Transaction and (ii) the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.
E. The Committee shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration (in whole
or in part) of one or more outstanding options (and the immediate
termination of the Corporation's repurchase rights with respect to the
shares).
ARTICLE THREE
STOCK ISSUANCE PROGRAM
......................
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued by the Committee under the
Stock Issuance Program through direct and immediate issuances without any
intervening option grants. Each such stock issuance shall be evidenced
by a Stock Issuance Agreement which complies with the terms specified
below.
A. Payment for Shares.
The Committee may, but need not, require a Participant to pay
an amount per share determined by the Committee as a condition for
receiving an issuance of shares of Common Stock under the Stock Issuance
Program.
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Committee, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified
performance objectives. However, the Committee may not impose a vesting
schedule upon any stock issuance effected under the Stock Issuance
Program (other than in connection with a Performance Award) which is more
restrictive than twenty percent (20%) per year vesting, with initial
vesting to occur not later than one (1) year after the issuance date.
Such limitation shall not apply to any Common Stock issuances made to the
officers of the Corporation, non-employee Board members or independent
consultants.
2. Any new, substituted or additional securities 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 the
Participant's unvested shares of Common Stock 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 shall be issued
subject to (i) the same vesting requirements applicable to the
Participant's unvested shares of Common Stock and (ii) such escrow
arrangements as the Committee shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's 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.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the
Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common
Stock, then, subject to Section I. B. 5. of this Article Three, those
shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder
rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid
in cash or cash equivalent (including the Participant's purchase-money
indebtedness), 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.
5. The Committee may in its discretion 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 (unless the
shares were issued in connection with a Performance Award and vesting was
contingent on meeting performance goals). 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.
C. Performance Awards.
1. If the Committee determines that any shares of Common
Stock to be issued under the Stock Issuance Program to an eligible
Employee should qualify as "performance-based compensation" for purposes
of Section 162(m) of the Code, the grant or vesting of such award (each,
a "Performance Award") shall be contingent upon achievement of pre-
established performance goals and other terms set forth in this Section
I.C. of this Article III.
(i) The performance goals for such Performance Awards shall
consist of one or more business criteria and a targeted level or levels
of performance with respect to each of such criteria, as specified by the
Committee consistent with this Section I.C. of this Article III. The
performance goals shall be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations thereunder
(including Treasury Regulation 1.162-27 and successor regulations
thereto), including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted or vested upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant or vesting.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) One or more of the following business criteria for the
Corporation and/or for specified Subsidiaries or affiliates or divisions
or other business units or lines of business of the Corporation and/or of
its Subsidiaries or affiliates shall be used by the Committee in
establishing performance goals for such Performance Awards: appreciation
in value of the Corporation's common stock; total shareholder return;
pretax earnings; return on capital, equity or assets; earnings
measures/ratios (on a gross, net, pretax or posttax basis), including
basic earnings per share, diluted earnings per share, total earnings,
operating earnings, earnings growth, earnings before interest and taxes,
and earnings before interest, taxes, depreciation and amortization;
operating income; net income; pro forma net income; economic value
created or economic profit; operating profit; sales; sales growth; gross
margin; direct margin; book value; revenues; expenses (including expense
ratio); loss ratio; new business production; capital markets and/or
acquisition transactions; investment programs initiated; per period or
cumulative cash flow (including but not limited to operating cash flow
and free cash flow); cash flow return on investment; operating margin;
net profit margin; inventory turns; financial return ratios; market
share; balance sheet measurements such as receivable turnover;
improvement in or attainment of expense levels; improvement in or
attainment of working capital levels; debt reduction; strategic
innovation; strategic plan development and implementation; customer or
employee satisfaction; improvements in productivity; and any combination
of the foregoing. Performance goals may be expressed as absolute or
relative goals, goals compared to past performance, goals compared to the
performance of a published or special index or benchmark deemed
applicable by the Committee, goals compared to the performance of peer
companies, or otherwise as determined by the Committee.
(iii) Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period, as
specified by the Committee. A performance goal shall be established not
later than the earlier of (A) 90 days after the beginning of any
performance period applicable to such Performance Award or (B) the date
on which 25% of such performance period has elapsed.
(iv) The Committee may, in its discretion, reduce the number
of shares of Common Stock otherwise issued or vesting in connection with
such Performance Awards, but may not exercise discretion to increase any
such amount payable to the Participant in respect of a Performance Award.
(v) In all cases, the maximum Performance Award of any
Participant shall be subject to the limitation set forth in Section IV.E.
of Article One.
(vi) The Committee is authorized to make adjustments in the
terms and conditions of, and the criteria included in, the authorization
of Performance Awards and performance goals in recognition of unusual,
nonrecurring or non-operational events, including without limitation
stock splits, stock dividends, mergers, consolidations, large, special
and non-recurring dividends, the effects of currency fluctuations,
litigation or claim judgments or settlements, accruals for reorganization
and restructuring programs, asset write-downs, acquisitions and
dispositions of businesses and assets, and any or all items that are
excluded from the calculation of non-GAAP earnings as reflected in any
Corporation press release and Form 8-K filing relating to an earnings
announcement, affecting the Corporation and its Subsidiaries or any
business unit thereof, or the financial statements of the Corporation or
any Subsidiary, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee's assessment of the business
strategy of the Corporation, any Subsidiary or affiliate or business unit
thereof, performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant; provided,
however, that no such adjustment shall be authorized or made if and to
the extent that the existence or exercise of such authority would cause a
Performance Award to fail to qualify as "performance-based compensation"
under Section 162(m) of the Code.
2. Determinations by the Committee as to the establishment
of performance goals for Performance Awards, the amount potentially
payable in respect of Performance Awards, the level of actual achievement
of the specified performance goals relating to Performance Awards and the
amount of any final Performance Award shall be recorded in writing.
Specifically, the Committee shall certify in writing, in a manner
conforming to applicable regulations under Section 162(m) of the Code,
prior to issuance or vesting of each such Performance Award, that the
performance objective relating to the Performance Award and other
material terms of the Performance Award upon which issuance or vesting of
the Performance Award was conditioned have been satisfied.
II. CORPORATE TRANSACTION
Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Committee's discretion, be held by
a custodian designated 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 those
unvested shares.
ARTICLE FOUR
MISCELLANEOUS
.............
I. FINANCING
The Committee may permit any Optionee or Participant to pay the
option exercise price under the Option Grant Program or the purchase
price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the
Committee in its sole discretion. In no event may the maximum credit
available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the
purchased shares (less the par value of those shares) plus (ii) any
Federal, state and local income and employment tax liability incurred by
the Optionee or the Participant in connection with the option exercise or
share purchase.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the
Board, but no option granted under the Plan may be exercised, and no
shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained
within twelve (12) months after the date of the Board's adoption of the
Plan, then all options previously granted under the Plan shall terminate
and cease to be outstanding, and no further options shall be granted and
no shares shall be issued under the Plan. Subject to such limitation,
the Committee may grant options and issue shares under the Plan at any
time after the effective date of the Plan and before the date fixed
herein for termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for
issuance under the Plan shall have been issued as vested shares or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. All options and unvested stock issuances outstanding at
that time under the Plan shall continue to have full force and effect in
accordance with the provisions of the documents evidencing such options
or issuances.
C. The Corporation intends that the Plan will be submitted
for reapproval by the Corporation's stockholders no later than the first
meeting of stockholders that occurs in the fifth year following the year
in which the Corporation's stockholders previously approved the Plan.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However,
no such amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain
amendments may require stockholder approval pursuant to Section 162(m) or
422 of the Code or pursuant to other applicable laws and regulations or
the rules of any stock exchange on which the shares of Common Stock may
be listed or quoted.
B. Options may be granted under the Option Grant Program and
shares may be issued under the Stock Issuance Program which are in each
instance in excess of the number of shares of Common Stock then available
for issuance under the Plan, provided any excess shares actually issued
under those programs shall be held by a custodian designated by the
Corporation until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
shares are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii)
the Corporation shall promptly refund to the Optionees and the
Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held by a custodian designated by the
Corporation, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held by the custodian, and such
shares shall thereupon be automatically canceled and cease to be
outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any options or upon the vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the shares of Common Stock issued pursuant
to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of
the Corporation (or any Parent or Subsidiary employing or retaining such
person) or of the Optionee or the Participant, which rights are hereby
expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding
option under the Plan, unless such individual is a key Employee whose
duties in connection with the Corporation (or any Parent or Subsidiary)
assure such individual access to equivalent information.
IX. GOVERNING LAW
The validity, construction, and effect of the Plan and any
rules and regulations or documents hereunder shall be determined in
accordance with the laws (including those governing contracts) of
Delaware, without giving effect to principles of conflicts of laws.
APPENDIX
........
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
.....
B. Code shall mean the Internal Revenue Code of 1986, as amended.
....
C. Committee shall mean the Compensation Committee of the Board.
.........
The Committee shall have at least two members, each of whom shall be a
"non-employee director" as defined in Rule 16b-3 under the Exchange Act
and an "outside director" as defined in Section 162(m) of the Code and
the regulations thereunder, and, if applicable, meet the independence
requirements of the applicable stock exchange, quotation system or other
self-regulatory organization on which the shares of Common Stock are
traded. However, no act of the Committee shall be void or deemed to be
without authority due to the failure of a member to meet any
qualification requirement at the time the action is taken.
D. Common Stock shall mean the Corporation's common stock.
............
E. Corporate Transaction shall mean either of the following
.....................
stockholder-approved transactions to which the Corporation is a party:
(a) a merger or consolidation 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 transaction, or
(b) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. Corporation shall mean Excel Technology, Inc, a Delaware
...........
corporation.
G. Disability shall mean the inability of the Optionee or the
..........
Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment and shall be
determined by the Committee on the basis of such medical evidence as the
Committee deems warranted under the circumstances.
H. Employee shall mean an individual who is in the employ of the
........
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and
the manner and method of performance.
I. Exercise Date shall mean the date on which the Corporation shall
.............
have received written notice of the option exercise.
J. Fair Market Value per share of Common Stock on any relevant date
.................
shall be determined by the Committee in accordance with the following
provisions:
(a) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(b) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Committee 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
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(c) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Committee after taking
into account such factors as the Committee shall deem appropriate.
K. Incentive Option shall mean an option which satisfies the
................
requirements of Code Section 422.
L. Misconduct shall mean the commission of any act of fraud,
..........
embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information
or trade secrets of the Corporation (or any Parent or Subsidiary), or any
other intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of
the Corporation (or any Parent or Subsidiary).
M. 1934 Act shall mean the Securities Exchange Act of 1934, as
........
amended.
N. Non-Statutory Option shall mean an option not intended to
....................
satisfy the requirements of Code Section 422.
O. Option Grant Program shall mean the option grant program in
....................
effect under the Plan.
P. Optionee shall mean any person to whom an option is granted
........
under the Plan.
Q. Parent shall mean any corporation (other than the Corporation)
......
in an unbroken chain of corporations ending with the Corporation,
provided each 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.
R. Participant shall mean any person who is issued shares of Common
...........
Stock under the Stock Issuance Program.
S. Performance Award shall mean a Performance Award as that term is
.................
defined in Section I.C.1. of Article Three.
T. Plan shall mean the Corporation's 2006 Stock Option/Stock
....
Issuance Plan, as set forth in this document.
U. Service shall mean the provision of services to the Corporation
.......
(or any Parent or Subsidiary) by a person in the capacity of an Employee,
a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided
in the documents evidencing the option grant.
V. Stock Exchange shall mean either the American Stock Exchange or
..............
the New York Stock Exchange or the Nasdaq Stock Market LLC.
W. Stock Issuance Agreement shall mean the agreement entered into
........................
by the Corporation and the Participant at the time of issuance of shares
of Common Stock under the Stock Issuance Program.
X. Stock Issuance Program shall mean the stock issuance program in
......................
effect under the Plan.
Y. Subsidiary shall mean any corporation (other than the
..........
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation)
in the unbroken chain 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.
Z. 10% Stockholder shall mean the owner of stock (as determined
...............
under Code Section 424(d)) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation
(or any Parent or Subsidiary).
Exhibit B
EXCEL TECHNOLOGY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN FOR KEY EXECUTIVES
SECTION 1. Purpose.
Excel Technology, Inc. (the "Company") has established this
Annual Incentive Compensation Plan for Key Executives (the "Plan") in
order to provide the Company with an additional means to attract and
retain executive officers by providing them with an opportunity to earn
incentive compensation each year, contingent on the achievement of
certain performance goals, as an incentive and reward for their
contributions to the growth, profitability and success of the Company
from year to year.
The Company intends that compensation payable under the Plan
will constitute qualified performance-based compensation under Section
162(m) of the Code (as hereinafter defined). The Plan shall be
interpreted and construed in a manner consistent with such intent.
SECTION 2. Definitions.
2.1 "Award" means the amount of incentive compensation to
which a Participant is entitled for each Performance Period as determined
by the Committee pursuant to Sections 4 and 5 of the Plan.
2.2 "Board" means the Company's Board of Directors.
2.3 "Code" means the Internal Revenue Code of 1986, as
amended, including applicable regulations thereunder.
2.4 "Committee" means the Compensation Committee of the
Board, which shall be comprised solely of at least two persons who, to
the extent required to satisfy the exception for performance-based
compensation under Section 162(m) of the Code, are "outside directors"
within the meaning of such section. However, no act of the Committee
shall be void or deemed to be without authority due to the failure of a
member to meet any qualification requirement at the time the action is
taken.
2.5 "Determination Date" means the date on which on the
performance goals with respect to an Award for a Performance Period shall
be established, which shall not be later than the earlier of (i) 90 days
after the commencement of the Performance Period or (ii) the expiration
of 25 percent of the Performance Period.
2.6 "Eligible Employee" means any executive officer (as that
term is defined in Rule 3b-7 under the Securities Exchange Act of 1934,
as amended) or other key executive of the Company or its subsidiaries.
2.7 "Participant" means an Eligible Employee who has been
selected by the Committee to potentially receive an Award for a given
Performance Period, subject to achievement of one or more performance
goals and satisfaction of other conditions under the Plan or specified by
the Committee. The Eligible Employees selected by the Committee as
Participants shall be those Eligible Employees who are expected to be
"covered employees" for purposes of Section 162(m) of the Code at the
time the Award is to be paid.
2.8 "Performance Period" shall mean the Plan Year, the
calendar quarter or such other period as may be established by the
Committee with respect to an Award.
2.9 "Plan Year" means the fiscal year of the Company.
SECTION 3. Administration.
The Plan shall be administered by the Committee. The
Committee shall have the authority to establish each Performance Period
and the performance goals for the awarding of Awards for each Performance
Period; to determine the Participants for each Performance Period; to
determine whether performance goals for each Performance Period have been
achieved; to authorize payment of Awards under the Plan, including
determining the form and timing of payment and any conditions (such as
further service requirements) that will apply to such payment; to adopt,
alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable; and to interpret the terms
and provisions of the Plan. All determinations made by the Committee
with respect to the Plan and Awards thereunder shall be final and binding
on all persons, including the Company and all Eligible Employees.
SECTION 4. Determination of Awards.
On the Determination Date with respect to each Performance
Period, the Committee shall determine the Participants who shall have an
opportunity to receive an Award for that Performance Period, the
performance goal or goals applicable with respect to each Participant,
the terms and conditions of each Award, and the amount (if any) that each
Participant shall have the opportunity to receive under the Award based
on the actual level of performance measured against the performance goal
or goals. The terms of each Award shall include minimum and target
thresholds, and a mathematical formula or matrix that shall contain
weighting for each performance goal and indicate the extent to which
Awards will be paid if the Participant's performance thresholds with
respect to his or her performance goals are achieved or exceeded. The
entitlement of a Participant to payment under an Award shall be
contingent on the attainment of one or more objective performance goals
established by the Committee in writing on the Determination Date. The
outcome with respect to such performance goal or goals must be
substantially uncertain on the Determination Date. The amount that may
be paid to a Participant with respect to any Award or Awards under this
Plan during any calendar year shall in no event exceed $3,000,000 in the
aggregate. Performance goals may vary as among Participants and shall be
based upon one or more of the following criteria, as the Committee may
deem appropriate: appreciation in value of the Company's common stock;
total shareholder return; pretax earnings; return on capital, equity or
assets; earnings measures/ratios (on a gross, net, pretax or posttax
basis), including basic earnings per share, diluted earnings per share,
total earnings, operating earnings, earnings growth, earnings before
interest and taxes, and earnings before interest, taxes, depreciation and
amortization; operating income; net income; pro forma net income;
economic value created or economic profit; operating profit; sales; sales
growth; gross margin; direct margin; book value; revenues; expenses
(including expense ratio); loss ratio; new business production; capital
markets and/or acquisition transactions; investment programs initiated;
per period or cumulative cash flow (including but not limited to
operating cash flow and free cash flow); cash flow return on investment;
operating margin; net profit margin; inventory turns; financial return
ratios; market share; balance sheet measurements such as receivable
turnover; improvement in or attainment of expense levels; improvement in
or attainment of working capital levels; debt reduction; strategic
innovation; strategic plan development and implementation; customer or
employee satisfaction; improvements in productivity; and any combination
of the foregoing. Performance goals may be expressed as absolute or
relative goals, goals compared to past performance, goals compared to the
performance of a published or special index or benchmark deemed
applicable by the Committee, goals compared to the performance of peer
companies, or otherwise as determined by the Committee. The performance
goals may be determined by reference to the performance of the Company
and/or a subsidiary or affiliate of the Company, or of a division or unit
of any of the foregoing. So long as an Award is fully contingent upon a
measure of performance as specified in this Section 4, the Committee may
consider other measures of performance or other circumstances in its
exercise of discretion ("negative discretion") to reduce the final Award.
The Committee may specify at the time an Award opportunity is authorized
or at any other time such other performance measures or other terms upon
which it will exercise negative discretion. In no event may the
Committee exercise discretion to increase the amount otherwise payable to
a Participant under the terms of an Award.
SECTION 5. Payment of Award.
An Award (if any) earned by a Participant for a Performance
Period shall be paid on such date following the end of such Performance
Period as the Commitee shall determine but in no event later than two and
one-half months following the end of the calendar year in which the
Performance Period ends; provided, however, that the Committee shall have
first certified in writing (i) that the applicable performance goal or
goals with respect to such Participant for such Performance Period were
satisfied and the level of the attainment of such goal or goals, (ii)
that all other material terms upon which payment of the Award is
conditioned were satisfied and (iii) the amount of each Participant's
Award. The Committee, unless it determines otherwise, may exercise
negative discretion to reduce the amount that would otherwise be payable
under an Award by reason of the applicable performance goal's having been
achieved. Payments shall be made in cash. In order to be entitled to
receive the amount earned under an Award for a Performance Period, the
Participant must be in the employ of the Company on the last day of the
Performance Period; provided, however, that, notwithstanding anything in
this Plan to the contrary, the Committee may determine, by separate
agreement with any Participant or otherwise, that all or a portion of an
Award for a Performance Period shall be payable to the Participant in the
event of the Participant's death, disability or termination of employment
with the Company or its subsidiaries, or in the event of a change of
control of the Company, during the Performance Period.
SECTION 6. Non-transferability.
No Award or rights under this Plan may be transferred or
assigned other than by will or by the laws of descent and distribution.
SECTION 7. Amendments and Termination.
The Board may terminate the Plan at any time and may amend it
from time to time, provided, however, that no termination or amendment of
the Plan shall materially and adversely affect the rights of a
Participant or a beneficiary with respect to a previously certified Award
except with the written consent of such Participant or beneficiary.
Amendments to the Plan may be made without shareholder approval except as
required to satisfy Section 162(m) of the Code.
SECTION 8. General Provisions.
8.1 Nothing set forth in this Plan shall prevent the Board
or the Committee from adopting other or additional compensation
arrangements.
8.2 No member of the Board or the Committee, nor any officer
or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination or
interpretation taken or made with respect to the Plan, and all members of
the Board or the Committee and all officers or employees of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
8.3 The Committee may employ attorneys, consultants,
accountants or other persons, and the Committee and the Company and its
officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons.
8.4 The Committee is authorized to make adjustments in the
terms and conditions of, and the criteria included in, the authorization
of Awards and performance goals in recognition of unusual, nonrecurring
or non-operational events, including without limitation stock splits,
stock dividends, mergers, consolidations, large, special and non-
recurring dividends, the effects of currency fluctuations, litigation or
claim judgments or settlements, accruals for reorganization and
restructuring programs, asset write-downs, acquisitions and dispositions
of businesses and assets, and any or all items that are excluded from the
calculation of non-GAAP earnings as reflected in any Company press
release and Form 8-K filing relating to an earnings announcement,
affecting the Company and its subsidiaries or any business unit thereof,
or the financial statements of the Company or any subsidiary, or in
response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view
of the Committee's assessment of the business strategy of the Company,
any subsidiary or affiliate or business unit thereof, performance of
comparable organizations, economic and business conditions, and any other
circumstances deemed relevant; provided, however, that no such adjustment
shall be authorized or made if and to the extent that the existence or
exercise of such authority would cause an Award potentially grantable
hereunder to fail to qualify as "performance-based compensation" under
Section 162(m) of the Code.
8.5 The Company shall deduct from any payment in settlement
of a Participant's Award or other payment to the Participant any Federal,
state, or local withholding or other tax or charge which the Company is
then required to deduct under applicable law with respect to the Award.
8.6 Neither the adoption of this Plan nor the granting of
any Award hereunder shall be construed to confer upon any Participant any
right to continued employment with the Company or any of its subsidiaries
or to interfere in any way with the right of the Company or a subsidiary
to terminate the employment of the Participant at any time or for any
reason.
8.7 The validity, construction, and effect of the Plan and
any rules and regulations or document hereunder shall be determined in
accordance with the laws (including those governing contracts) of
Delaware, without giving effect to principles of conflicts of laws.
SECTION 9. Effective Date of Plan; Shareholder Approval
The Plan shall become effective as of September 29, 2006;
provided, however, that no Award shall be payable under the Plan unless
and until it has been approved by the Company's shareholders. The
Company intends that the Plan will subsequently be submitted for
reapproval of shareholders no later than the first meeting of
shareholders that occurs in the fifth year following the year in which
shareholders of the Company previously approved the Plan.
[FORM OF PROXY CARD]
ANNUAL MEETING OF STOCKHOLDERS OF
EXCEL TECHNOLOGY, INC.
December 6, 2006
Please date, sign and mail
your proxy card in the
envelope provided
as soon as possible.
Please detach along perforated line and mail in the envelope provided.
.........................................................................
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSALS 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE. [X]
.........................................................................
1. ELECTION OF DIRECTORS
NOMINEES:
[ ] FOR ALL NOMINEES ( ) J. Donald Hill
( ) Antoine Dominic
[ ] WITHHOLD AUTHORITY ( ) Steven Georgiev
FOR ALL NOMINEES ( ) Ira J. Lamel
( ) Donald E. Weeden
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: to withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the circle
next to each nominee you wish to withhold,
as shown here: (X)
2. PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP TO SERVE AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING
DECEMBER 31, 2006.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY AND APPROVE THE 2006 STOCK OPTION / STOCK
ISSUANCE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY AND APPROVE THE EXCEL TECHNOLOGY, INC. 2006
ANNUAL INCENTIVE COMPENSATION PLAN FOR KEY EXECUTIVES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY BE PRESENTED FOR
ACTION AT THE MEETING OR ANY ADJOURNMENT THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE
.........................................................................
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be
submitted via this method. [ ]
.........................................................................
Signature of Stockholder........................... Date...............
Signature of Stockholder........................... Date...............
Note: Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
.........................................................................
EXCEL TECHNOLOGY, INC.
41 Research Way
E. Setauket, NY 11733
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, acknowledging receipt of the proxy statement dated
November 8, 2006 of Excel Technology, Inc., hereby appoints Antoine
Dominic and J. Donald Hill and each or any of them, attorney, agent and
proxy of the undersigned, with full power of substitution to each of
them, for and in the name, place and stead of the undersigned, to appear
and vote all the shares of stock of Excel Technology, Inc. standing in
the name of the undersigned on the books of said corporation on November
8, 2006 at the Annual Meeting of Stockholders of Excel Technology, Inc.
to be held at the offices of Excel Technology, Inc., 41 Research Way,
East Setauket, NY 11733, on December 6, 2006, at 10:00 A.M., and any
adjournment thereof.
When properly executed, this proxy will be voted as designated by
the undersigned. If no choice is specified, the proxy will be voted FOR
the following proposals, which are set forth in the Proxy Statement:
(Continued and to be signed on the reverse side)