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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ETEC SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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LOGO
ETEC SYSTEMS, INC.
26460 CORPORATE AVENUE
HAYWARD, CA 94545
(510) 783-9210
OCTOBER 29, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Etec Systems, Inc., which will be held on Tuesday, December 14, 1999, at 2:00
p.m., Pacific Standard Time (PST), at our offices located at 26460 Corporate
Avenue, Hayward, California 94545.
The formal Notice of the Annual Meeting and the Proxy Statement are
included with this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at
an early date, the enclosed proxy in the prepaid envelope addressed to Morrow &
Co., Inc., our agent, to ensure that your shares will be represented. YOUR
SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
BY MAIL, PROVIDE A PROXY OVER THE INTERNET OR BY TELEPHONE, OR ATTEND THE ANNUAL
MEETING AND VOTE IN PERSON.
A copy of our Annual Report on Form 10-K is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
LOGO
Stephen E. Cooper
Chairman of the Board,
President and Chief Executive Officer
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LOGO
ETEC SYSTEMS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 1999
------------------------
To the Stockholders of Etec Systems, Inc.;
The Annual Meeting of Stockholders of Etec Systems, Inc., a Nevada
corporation (the "Company"), will be held on Tuesday, December 14, 1999, at 2:00
p.m. Pacific Standard Time (PST), at the Company's principal executive offices
located at 26460 Corporate Avenue, Hayward, California, 94545, for the following
purposes:
1. To elect eight directors;
2. To approve an amendment to the 1995 Omnibus Incentive Plan to
increase the number of available shares by 800,000;
3. To approve an amendment to the 1995 Directors' Stock Option Plan to
increase the number of available shares by 50,000;
4. To approve an amendment to the 1995 Employee Stock Purchase Plan to
increase the number of available shares by 200,000;
5. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants; and
6. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
Stockholders of record as of the close of business on October 18, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD BY MAIL OR PROVIDE A PROXY OVER THE INTERNET
OR BY TELEPHONE. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND THE MEETING OR TO
VOTE IN PERSON AT THE MEETING.
By Order of the Board of Directors
LOGO
W. Russell Wayman
Secretary
Hayward, California
October 29, 1999
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LOGO
ETEC SYSTEMS, INC.
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Etec Systems, Inc., a Nevada corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders, to be held at the Company's principal executive offices located
at 26460 Corporate Avenue, Hayward, California, 94545, on Tuesday, December 14,
1999, at 2:00 p.m., Pacific Standard Time (PST), and any adjournment thereof
(the "Annual Meeting").
The shares represented by the proxies received in response to this
solicitation and not revoked will be voted at the Annual Meeting. A proxy may
also be provided electronically or telephonically by following the instructions
printed on the proxy card. A proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting. The Company's transfer agent, which is tabulating votes with respect to
the Annual Meeting, will count the last vote received from a stockholder,
whether by telephone, proxy card, electronically through the Internet, or by
ballot at the meeting in person. On the matters coming before the Annual Meeting
for which a choice has been specified by a stockholder by means of a proxy, the
shares will be voted accordingly. If no choice is specified, the shares will be
voted FOR the election of the nominees for directors listed in this Proxy
Statement, FOR approval of Proposals 2, 3, 4 and 5 described in the Notice of
Annual Meeting and in this Proxy Statement, and in the discretion of the
proxyholders as to any other matter that is properly brought before the Annual
Meeting.
Stockholders of record at the close of business on October 18, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, the Company had 21,540,478 shares
of Common Stock outstanding and entitled to vote. The presence in person or by
proxy of the holders of a majority of the Company's outstanding shares entitled
to vote constitutes a quorum for the transaction of business at the Annual
Meeting. Each holder of Common Stock is entitled to one vote for each share held
as of the Record Date. The closing price of the Company's Common Stock on the
Nasdaq Stock Market for the Record Date was $35.94 per share.
Directors are elected by a plurality vote. There is no cumulative voting in
the election of directors. Under Nevada law, the other matters submitted for
stockholder approval at this Annual Meeting require that the number of votes
cast in favor of the matter exceed the number of votes cast against the matter.
Abstentions with respect to any matter are counted for quorum purposes but do
not affect the outcome of the vote. If a broker who is the record holder of
certain shares indicates on a proxy that he or she does not have discretionary
authority to vote on a particular matter as to such shares, or if shares are not
voted in other circumstances in which proxy authority is defective or has been
withheld with respect to any matter, these non-voted shares will be counted for
quorum purposes but will not affect the outcome of the vote.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of the Company's Common Stock. The Company has
retained Morrow & Co., Inc. to assist in the solicitation of proxies at a cost
of approximately $7,500.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders, together with the 1999 Annual Report to Stockholders, on or about
October 29, 1999.
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IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT,
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, YOUR SHARES CAN
BE VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
as to shares of the Company's Common Stock beneficially owned by: (i) each of
the Company's executive officers named in the Summary Compensation Table
(collectively the "Named Officers"), (ii) each of the Company's directors, (iii)
all current directors and executive officers of the Company as a group, and (iv)
each person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock.
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(1)(2)
------------ ------------
Capital Guardian Trust Company(3)........................... 2,545,700 11.82%
11100 Santa Monica Blvd., Los Angeles, CA 90025
Pioneering Investment Management(4)......................... 1,951,000 9.1%
60 State St., Boston, MA 02109
Franklin Resources, Inc.(5)................................. 1,241,960 5.77%
777 Mariners Island, San Mateo, CA 94403
Capital Research and Management Company(6).................. 1,226,600 5.69%
333 S. Hope St., Los Angeles, CA 90071
SMALLCAP World Fund(7)...................................... 1,210,000 5.62%
333 S. Hope St., Los Angeles, CA 90071
Stephen E. Cooper(8)........................................ 172,481 .8%
William D. Cole(8).......................................... 44,417 *
Edward Gelbach(8)........................................... 30,000 *
John McBennett(8)........................................... 14,000 *
William J. Ryan(8).......................................... 11,668 *
William T. Siegle(8)........................................ 11,000 *
William D. Snyder(8)........................................ 44,750 *
Takeshi (John) Suzuki(8).................................... 41,833 *
Thomas M. Trent(8).......................................... 17,000 *
Paul A. Warkentin(8)........................................ 92,373 *
Robert L. Wehrli(8)......................................... 9,000 *
All current directors and executive officers as a group (11
persons)(2)............................................... 488,522 2.27%
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* Amount represents less than 1% of the Company's Common Stock.
(1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable, and the information contained in the footnotes to this table.
(2) For purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, shares that such
person or group has the right to acquire within 60 days after such date are
deemed to be outstanding, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person.
(3) As reported in Schedule 13G dated February 8, 1999, filed by Capital
Guardian Trust Company ("CGTC") as to 2,204,600 shares, Capital
International, Inc. ("CII") as to 283,900 shares, Capital International S.A.
("CISA") as to 31,200 shares, and Capital International Limited ("CIL") as
to
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26,000 shares. CGTC, CII, CISA and CIL are affiliated entities; however,
they disclaim membership in a group for all purposes other than making the
joint filing.
(4) As reported in Schedule 13G dated January 8, 1999 filed by Pioneer
Investment Management, Inc.
(5) As reported on Schedule 13G dated January 22, 1999 filed by Franklin
Resources, Inc., Franklin Advisory Services, Charles B. Johnson and Rupert
H. Johnson, Jr. The shares are beneficially owned by one or more investment
companies or other managed accounts which are advised by direct and indirect
investment advisory subsidiaries (the "Adviser Subsidiaries") of Franklin
Resources, Inc. ("FRI"). Charles B. Johnson and Rupert H. Johnson, Jr. (the
"Principal Shareholders") each owns in excess of 10% of the outstanding
Common Stock of FRI and are the principal shareholders of FRI. FRI, the
Principal Shareholders, and each of the Adviser Subsidiaries disclaim any
beneficial ownership in any of the shares.
(6) As reported in Schedule 13G dated February 8, 1999, filed by Capital
Research and Management Company.
(7) As reported in Schedule 13G dated February 8, 1999, filed by SMALLCAP World
Fund, Inc., which is advised by Capital Research and Management Company.
(8) Includes shares issuable upon exercise of options within 60 days of the
Record Date. For the Named Officers and Directors, the amounts of such
shares are as follows: Mr. Cooper, 105,143; Mr. Cole, 33,500; Mr. Gelbach,
20,000; Mr. McBennett, 14,000; Mr. Ryan, 11,668; Mr. Siegle, 11,000; Mr.
Snyder, 44,000; Mr. Suzuki, 28,500; Mr. Trent, 9,000; Mr. Warkentin, 63,000;
Mr. Wehrli, 9,000; and all executive officers and directors as a group (11
persons), 348,811.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
A total of eight directors are to be elected at the Annual Meeting, each to
serve for a term of one year. Directors are elected to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. If any nominee is unable or declines to serve as director at the time
of the Annual Meeting, an event not now anticipated, proxies will be voted for
any nominee designated by the Board of Directors to fill the vacancy. Each of
the Company's nominees is currently serving as a director of the Company.
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The names of the nominees, their ages as of the Record Date and certain
information about them are set forth below:
PRINCIPAL OCCUPATION DIRECTOR
NOMINEES AGE DURING THE LAST FIVE YEARS SINCE
-------- --- -------------------------- --------
Mr. Stephen E. Cooper.................. 53 Chairman of the Board since April 1995, 1993
President since January 1993 and Chief
Executive Officer of the Company since
July 1993. Mr. Cooper served as Chief
Operating Officer from January 1993
until July 1993. Mr. Cooper is also a
director of Vivid Semiconductor.
Mr. Takeshi (John) Suzuki.............. 61 President and Director of Etec Japan, a 1994
subsidiary of the Company, since May
1990.
Mr. Edward L. Gelbach(2)............... 68 Private investor for more than the past 1995
five years. Mr. Gelbach is also a
director of Bell Microproducts and was
a director of Richey Electronics, Inc.
until January 1999.
Mr. John McBennett(1).................. 61 Vice President, Internal Audit of PE 1994
Corporation, A LIFE SCIENCES COMPANY,
since 1977.
Mr. William J. Ryan.................... 60 Vice President and General Manager, IPG 1997
Division of the Company since February
1999. From 1994 until February 1999,
Executive Vice President, Operations
and Director of Angstrom Technologies,
Inc., a manufacturer of electro-optical
scanners.
Mr. William T. Siegle(1)............... 60 Senior Vice President for Technology 1997
Development and Chief Scientist of
Advanced Micro Devices, Inc., a
semiconductor manufacturer, since 1990.
Mr. Thomas M. Trent (2)................ 54 Currently retired. Mr. Trent is also a 1994
director for Stellar One Corporation.
From 1986 through 1996, he was a vice
president of Micron Technology, Inc., a
semiconductor manufacturer.
Mr. Robert L. Wehrli (2)............... 77 Owner and Chief Executive Officer of 1995
Chronometry, a consulting firm, since
1977. Mr. Wehrli is also a director of
PECO Controls Co., a packing control
company. From 1985 to 1998 he was a
director of Siliconix, Inc., a
semiconductor manufacturer, and was
Chairman during the last four years of
that period.
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
There are no family relationships among any directors or executive officers
of the Company.
Under the Company's Bylaws, nominations for the election of Directors may
be made by any stockholder entitled to vote in the election of Directors, but
only if written notice of such stockholder's intent to make such nominations has
been received by the Company at its principal executive office not less than 60
days prior to the first anniversary of the day on which notice of the date of
the prior year's annual meeting was mailed to stockholders. Such stockholder's
notice must set forth: (a) with respect to each proposed nominee, the name, age,
business and residence address, principal occupation or employment, class and
number of shares of stock of the Company owned, written consent to be named as a
nominee and to serve as a director if elected, and any other information that
would be required to be disclosed in solicitations of proxies for election of
directors; and (b) with respect to the stockholder giving the notice, the name,
address and class and number of shares of the
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Company that are beneficially owned by such stockholder, and a description of
any arrangements or understandings between the stockholder, the nominee and any
other person relating to the nomination. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure. The Company has not received notice from any
stockholder of the intent to nominate a person from the floor at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE DIRECTOR NOMINEES AS SET FORTH ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five meetings during the fiscal year ended July
31, 1999. The average attendance at the aggregate number of meetings of the
Board and committees of the Board was 88%. Mr. Siegle attended fewer than 75% of
the aggregate number of meetings of the Board and the committees on which he
serves.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee. The Compensation Committee and Audit Committee are comprised entirely
of non-employee directors, who are identified in the list of directors under
"Nominees" above. The Company does not have a nominating committee or a
committee performing the functions of a nominating committee.
The Compensation Committee held four meetings during fiscal 1999. The
Compensation Committee's functions are to review and approve salaries and
incentive compensation of the executive officers of the Company, and to
establish basic guidelines and generally review the Company's incentive
compensation and benefit plans for all employees. See "Report of the
Compensation Committee of the Board of Directors on Executive Compensation"
below.
The Audit Committee held four meetings during fiscal 1999. The Audit
Committee's functions are to review the annual financial statements of the
Company, review the results and the scope of the annual audit and the other
services provided by the Company's independent accountants, and monitor the
effectiveness of the Company's internal financial and accounting organization
and controls and financial reporting.
DIRECTORS' COMPENSATION
Employee directors (Messrs. Cooper, Ryan and Suzuki) receive no additional
compensation for service on the Board of Directors. Non-employee directors of
the Company receive an annual retainer of $10,000. In addition, they receive
$1,500 for each regularly scheduled Board meeting attended in person, $500 for
each Board committee meeting attended in person and $500 for each regularly
scheduled Board or committee meeting held by telephone. Directors are also
reimbursed for their expenses for each meeting attended in person and are
eligible to participate in the Company's 1995 Directors' Stock Option Plan (the
"Directors' Plan").
Under the terms of the Directors' Plan, upon appointment to the Board, each
non-employee director receives a non-statutory option to purchase 8,000 shares
of Common Stock (an "Initial Option"). These one-time grants vest in two
installments, with half of the shares vesting on the first anniversary of the
grant date and the other half vesting on the second anniversary of the grant
date. In addition, during his or her tenure, each non-employee director receives
an annual grant of an option to purchase 3,000 shares on each anniversary (an
"Annual Option"). Annual Options vest in full on the first anniversary of the
grant date. Under the 1995 Directors' Plan, each option's exercise price is 100%
of the fair market value of the underlying shares on the grant date and its term
is ten years. For a more detailed description of the Directors' Plan, see
"Proposal 3 -- Approval of Increase in Shares Under the 1995 Directors' Plan."
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered to the
Company in all capacities for the three fiscal years ended July 31, 1997, 1998
and 1999 by (i) the Company's Chief Executive Officer, and (ii) the Company's
four other most highly compensated executive officers.
LONG-TERM
COMPENSATION
-----------------
AWARDS/SECURITIES
ANNUAL COMPENSATION -----------------
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ----------------- ---------------
Stephen E. Cooper....................... 1999 424,710 0 80,000 3,000(1)
Chairman of the Board, President and 1998 418,655 147,000 80,000 2,000(1)
Chief Executive Officer 1997 348,950 234,500 100,000 2,000(1)
Paul A. Warkentin....................... 1999 282,009 0 0 1,402(1)
Senior Vice President, 1998 218,847 66,000 90,000 1,498(1)
Advanced Reticle Solutions 1997 159,432 64,320 40,000 1,470(1)
Takeshi (John) Suzuki................... 1999 249,666 0 24,000 56,067(2)
President, Etec Japan 1998 175,027 56,960 -- 42,327(2)
1997 206,992 55,551 15,000 60,618(2)
William D. Snyder(3).................... 1999 231,202 0 32,000 2,321(1)
Vice President and Chief Financial 1998 212,021 56,250 96,000 1,299(1)
Officer 1997 -- -- -- --
William D. Cole......................... 1999 200,294 0 16,000 2,231(1)
Vice President, Sales and 1998 200,001 50,000 10,000 1,712(1)
Customer Support 1997 202,187 80,400 16,000 1,442(1)
- ---------------
(1) Represents contributions by the Company under its 401(k) plan.
(2) Represents housing allowance payments.
(3) Mr. Snyder's employment with the Company commenced on August 18, 1997.
STOCK OPTIONS
The following table summarizes options granted to the Named Officers during
fiscal year 1999.
OPTION GRANTS IN FISCAL YEAR 1999
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME GRANTED(#)(1) IN FISCAL YEAR SHARE($/SH) DATE 5%($) 10%($)
---- ------------- -------------- ----------- ---------- ----------- -----------
Stephen E. Cooper........... 80,000 6.81% $29.32 06/14/09 $1,475,135 $3,738,282
Takeshi (John) Suzuki....... 16,000 1.36% $32.75 08/05/08 $ 329,541 $ 835,121
8,000 .68% $29.32 06/14/09 $ 147,514 $ 373,828
Paul A. Warkentin........... -- -- -- -- -- --
William D. Snyder........... 12,000 1.02% $43.50 03/03/09 $ 328,283 $ 831,934
20,000 1.70% $29.32 06/14/09 $ 368,784 $ 934,571
William D. Cole............. 16,000 1.36% $29.32 06/14/09 $ 295,027 $ 747,646
- ---------------
(1) Standard options are granted under the 1995 Omnibus Incentive Plan. The
exercise price is the fair market value on the date of grant. Options vest
25% each year beginning one year from the date of grant and expire 10 years
from the date of grant. Options are exercisable for 60 days after
termination of employment to the extent vested at that time. All options
outstanding will vest in the event of termination of employment after a
merger or consolidation of the Company with, or the sale of substantially
all the
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Company's assets to, any other person or corporation (except for a merger or
consolidation in which at least 80% of the total voting power after such
merger or consolidation was held by the same persons holding such voting
power immediately prior to such merger or consolidation). Options are not
transferable, except upon death by testamentary will or pursuant to the laws
of descent and distribution, or pursuant to a Qualified Domestic Relations
Order as defined by the U.S. Internal Revenue Code.
(2) Potential realizable value is calculated based on assumptions set forth in
SEC rules and does not in any way represent the Company's estimate of future
stock price. There can be no assurance provided to any executive officer or
any other holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the 5% and 10% assumed
annual rates of compounded stock price appreciation or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option exercise price, no value will be realized from the option grant made
to the Named Officer.
The following table summarizes exercises of options during fiscal 1999 by
the Named Officers and the value of options held by each such person at the end
of fiscal 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
JULY 31, 1999(#) AT JULY 31, 1999($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
Stephen E. Cooper........ 17,000 $624,750 105,143 201,000 $846,371 $1,109,480
Takeshi (John) Suzuki.... 0 $ 0 24,500 34,500 $400,460 $ 193,700
Paul A. Warkentin........ 0 $ 0 53,000 91,250 $253,240 $ 185,175
William D. Snyder........ 0 $ 0 24,000 104,000 $ 14,000 $ 213,200
William D. Cole.......... 12,000 $165,803 33,500 49,000 $362,490 $ 432,360
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) Calculated on the basis of the fair market value of the underlying
securities at July 30, 1999 ($37.88 per share) minus the exercise price.
EMPLOYMENT AGREEMENTS AND TERMINATION AGREEMENTS
None of the Named Officers has an employment agreement with the Company,
except Mr. Cooper, who is entitled to 26 weeks of salary continuance if the
Company terminates his employment other than for cause.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension plan or long-term incentive plan for its
executives. However, the Company makes an annual contribution to Mr. Suzuki's
retirement plan pursuant to an agreement between the Company and Mr. Suzuki.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Edward L. Gelbach,
Thomas M. Trent and Robert L. Wehrli. None of these individuals was at any time
during fiscal year 1999, or at any other time, an officer or employee of the
Company. No executive officer of the Company serves as a member of the Board of
Directors or compensation committee of any other entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Until March 2, 1999, the Compensation Committee of the Company's Board of
Directors was comprised of three non-employee directors: Messrs. William T.
Siegle, Thomas M. Trent and Robert L. Wehrli. Effective March 2, 1999, Mr.
Siegle left the Compensation Committee and was replaced by Mr. Edward L.
Gelbach. The Compensation Committee meets regularly, prior to scheduled meetings
of the Board of Directors, and holds special meetings as required.
The charter of the Compensation Committee is to provide guidance and
leadership to the Chief Executive Officer and the Vice President of Corporate
Services to enable them to design and implement executive compensation packages
to enable the Company to attract and retain executive management. The primary
role of the Compensation Committee is to review and approve the salary, bonus,
stock options and other benefits, direct or indirect, of the Company's senior
management.
EXECUTIVE COMPENSATION OBJECTIVES
The Company's major objectives in determining executive officer
compensation are to:
- Attract and retain key executive management and leadership to ensure the
success of the Company;
- Align executive compensation targets with the annual, as well as
long-term, financial, operational and strategic objectives of the
Company; and
- Reward key executives for their contribution to the long-term success of
the Company by providing opportunities for them to acquire an ownership
interest in the Company.
COMPONENTS OF EXECUTIVE COMPENSATION
The primary components of the Company's executive compensation package are
base salary, annual cash incentives and long-term stock-based incentives.
Base Salary. The base salary for executive officers of the Company takes
into account individual performance, the scope of the executive officer's
responsibilities and comparative compensation data for companies of a similar
size and organizational structure that are located in the Northern California
area ("Comparable Companies"). Approximately one third of the Comparable
Companies are included in the Hambrecht & Quist Semiconductor Index and all of
the Comparable Companies are included in the Nasdaq Stock Market Index. Both
indexes are used in the Stock Price Performance Graph. In fiscal year 1999, none
of the Named Officers received increases to their base salaries.
Annual Cash Incentives. The Company's Senior Management Incentive Plan
("SMIP") provides for annual cash bonuses that are earned according to a formula
designed to reward key executive officers for meeting or exceeding certain
established targets set by the Compensation Committee. For fiscal 1999, the key
targets were earnings per share, market share and customer satisfaction. The
maximum payout under the SMIP is capped at twice each participant's targeted
percentage of salary. The targeted percentage of salary ranges between 20% and
70%. Based on the Company's results during fiscal year 1999, the SMIP paid no
cash incentive compensation to executive officers.
The Compensation Committee approves the SMIP target financial, operational
and performance objectives so that they are properly aligned with the
performance of the Company. In addition, the Compensation Committee approves
participation in the SMIP and determines to what extent the objectives have been
met.
Long-Term Stock-Based Incentives. Long-term stock-based incentives are
provided through periodic stock option grants pursuant to the Company's 1995
Omnibus Incentive Plan. Such options are granted at an exercise price equal to
the market price of the Company's outstanding shares on the date of the grant.
The objective of these grants is to ensure that the interests and objectives of
the executive officers are more closely aligned with the long-term interests and
returns that will be realized by stockholders. The number of shares to
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be subject to an option is determined by the Compensation Committee after a
review of grant levels of Comparable Companies. In awarding option grants, the
Compensation Committee also considers the vesting schedule of an executive
officer's current options. However, the Compensation Committee does not intend
to adhere to any specific guidelines and may elect to vary the size of an option
grant to any executive officer in consideration of his or her overall option and
compensation package.
CHIEF EXECUTIVE OFFICER (CEO) COMPENSATION
Chief Executive Officer compensation is comprised of the same components as
the other executive officers' compensation: base salary, annual cash incentives
and long-term stock-based incentives. The compensation payable to Mr. Stephen E.
Cooper, the Chief Executive Officer, during fiscal year 1999, was determined by
the Compensation Committee in consideration of comparable base salary levels in
effect for chief executive officers of Comparable Companies. Mr. Cooper's
compensation package was designed to achieve two primary objectives: (1) to
provide a base compensation level that is competitive with that paid to other
chief executive officers of Comparable Companies according to the criteria
described above, and (2) to base a significant portion of his compensation on
the annual and long-term performance of the Company. There was no cash bonus
paid to Mr. Cooper for the 1999 fiscal year.
Mr. Cooper's fiscal 1998 base salary of $420,000 remained the same in
fiscal year 1999. A stock option for an additional 80,000 shares of Common Stock
was granted to Mr. Cooper on June 14, 1999 to bring his unvested option holdings
to a level maintaining significant incentive for him to continue in the
employment of the Company and to increase the Company's stock price.
DEDUCTIBILITY OF COMPENSATION UNDER INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally disallows a tax deduction to a publicly-held company for certain
compensation ("162(m) compensation") in excess of $1 million paid or accrued to
certain executive officers in any year. The 162(m) compensation paid to the
Company's executive officers for the 1999 fiscal year did not exceed $1 million
for any executive officer, and it is not expected that the 162(m) compensation
paid in fiscal year 2000 will exceed the $1 million limit for any executive
officer of the Company.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Edward L. Gelbach (since March 2, 1999)
William T. Siegle (until March 2, 1999)
Thomas M. Trent
Robert L. Wehrli
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company's Common Stock with The Nasdaq Stock Market Index (U.S.) and Hambrecht &
Quist Semiconductor Index. The comparison assumes the investment of $100 on
October 24, 1995 (the date the Company's Common Stock became registered under
Section 12 of the Securities Exchange Act of 1934) based on the closing price of
such stock on the date of such initial public offering, and assumes that
dividends, if any, were reinvested when paid. The comparisons in the graph are
required by the Securities and Exchange Commission and are not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
COMPARISON OF 45 MONTH CUMULATIVE TOTAL RETURN*
AMONG ETEC SYSTEMS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST SEMICONDUCTORS INDEX
NASDAQ STOCK HAMBRECHT & QUIST
ETEC SYSTEMS, INC. MARKET (U.S.) SEMICONDUCTORS
------------------ ------------- -----------------
10/24/95 100 100 100
7/96 235 105 63
7/97 543 155 156
7/98 338 182 108
7/99 389 259 231
*$100 INVESTED ON 10/24/95 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JULY 31.
PROPOSAL 2 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 OMNIBUS INCENTIVE
PLAN
Since 1995, the Company has provided stock options as an incentive to its
employees to promote increased stockholder value. Management believes that stock
options are one of the prime ways to attract and retain key personnel
responsible for the continued development and growth of the Company's business,
and to motivate all employees to increase stockholder value. In addition, stock
options are considered a competitive necessity in semiconductor equipment and
other high technology industries.
The Company currently grants options to all employees worldwide upon
initial hire, and periodically to key employees or in recognition of achievement
of certain performance criteria. In the recent fiscal year,
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critical hires were made in finance, administration, engineering, service,
manufacturing, operations, sales and marketing, The number of employees during
fiscal 1999 grew from 1,085 to 1,109 at fiscal year end and normal turnover also
led to the hiring of a number of replacement employees. In total, there were 193
new hires during the fiscal year who were granted a total of 403,410 shares from
the 1995 Omnibus Incentive Plan (the "Option Plan"). In addition, a total of
681,000 shares were issued as retention grants from the Option Plan to other
employees of the Company.
The Company believes that the proposed increase in the number of shares
available under the Option Plan will enable the Company to provide appropriate
incentives to its current and future employees, and will be sufficient to meet
the Company's option granting requirements for the next year.
PROPOSED AMENDMENT
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the Option Plan to increase the number of
shares reserved for issuance under the Option Plan by 800,000 shares from
3,975,000 shares to 4,775,000 shares. At the Annual Meeting, stockholders are
being asked to approve the increase in shares reserved under the Option Plan.
The proposed amendment amends and restates Article 4.1 of the 1995 Omnibus
Incentive Plan to read as follows:
"ARTICLE 4. Shares Available for Grants
4.1 Basic Limitation. Shares issued pursuant to the Plan shall be
authorized but unissued Shares and Shares acquired in the open market. The
aggregate number of Shares reserved for award as Restricted Shares, Stock
Units, and Options shall be 4,775,000 Shares, provided that no more than
10% of the preceding amount may be awarded as Restricted Shares. Any Shares
that have been reserved but not awarded as Restricted Shares, Stock Units
or Options during any calendar year shall remain available for award in any
subsequent calendar year. The limitation of this Section 4.1 shall be
subject to adjustment pursuant to Article 10."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the Option Plan at
a duly held meeting at which a quorum is present must exceed the votes cast
against such proposal in order to approve the amendment of the Option Plan.
Unless marked to the contrary, proxies received will be voted "FOR" approval of
the amendment to the Option Plan to increase the shares reserved thereunder by
800,000.
GENERAL
The Option Plan provides an incentive to employees and consultants whose
present and potential contributions are important to the continued success of
the Company, affords them an opportunity to acquire a proprietary interest in
the Company, and enables the Company to enlist and retain the best available
talent for the conduct of its business. The Option Plan permits the granting of
incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"),
restricted stock (up to 10% of the total authorized shares under the Option
Plan) and stock units. The Company does not currently have any specific plans to
grant any awards under the Option Plan other than stock options.
ELIGIBILITY
Awards may be granted under the Option Plan to employees (including
officers and directors) and consultants of the Company and its subsidiaries. The
Option Plan provides that NSOs may be granted to employees and consultants of
the Company or any majority-owned subsidiary or other entity of the Company.
ISOs may be granted only to employees of the Company or any parent or subsidiary
of the Company.
As of the Record Date, all employees of the Company worldwide, a total of
1,080 persons, are eligible for stock option awards under the Option Plan. In
addition, approximately 51 consultants are currently eligible for awards under
the Option Plan.
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ADMINISTRATION
The Option Plan may be administered by the Board of Directors or by a
committee of the Board (the "Administrator"), and is currently administered by
the Compensation Committee, which is composed solely of non-employee directors,
for grants of options to officers, and by the Stock Option Committee for grants
of options to non-officer, non-director employees and consultants. The
Administrator has full power to select, among the employees and consultants
eligible for awards, the individuals to whom awards will be granted, to make any
combination of awards to any participant and to determine the specific terms of
each grant, subject to the provisions of the Option Plan and to guidelines
approved by the full Board of Directors. The interpretation and construction of
any provision of the Option Plan by the Administrator shall be final and
conclusive.
TERMS OF AWARDS
Restricted shares or stock units shall become vested, in full or in
installments, upon satisfaction of the conditions specified in the Stock Award
Agreement. A restricted share shall not vest less than one year from the grant
date if the vesting is based on meeting performance targets established by the
Committee, or, in all other cases, not less than three years from the grant
date. In both cases, the vesting limitation is subject to the following
exceptions: A Stock Award Agreement may provide for accelerated vesting in the
event of a merger, consolidation or sale of substantially all of the assets of
the Company that constitutes a Change in the Control of the Company, as defined
in the Option Plan.
Vesting of stock options is specified in individual agreements. Stock
options become immediately exercisable in the event of death or total and
permanent disability. See also "Change-in-Control Provisions" below.
The exercise price of Options granted under the Option Plan cannot be less
than 100% of the fair market value of the Common Stock on the date of grant.
Options granted to a holder of more than 10% of the voting power of the Company
must have an exercise price of not less than 110% of such fair market value. The
maximum term of an option is ten years, or five years if the option is granted
to a holder of more than 10% of the voting power of the Company.
SHARES UNDER THE PLAN
At the Record Date, options to purchase 3,136,962 shares were outstanding
and options to purchase 438,384 shares had been exercised under the Option Plan.
No restricted shares or stock units have been granted under the Option Plan.
Excluding the 800,000 shares that have been approved by the Board but are
subject to stockholder approval, there are currently 399,654 shares available
for future grant under the Option Plan. If any restricted shares or options
granted under the Option Plan are forfeited, then they will again become
available for awards under the Option Plan.
TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP
Under the Option Plan, ISOs may be exercised following an optionee's
termination for a period up to one year from the date of termination, if the
termination was caused by death or disability, and up to 60 days from the date
of termination if the termination was for any other reason. Subject to this
limitation, the period of time during which an option may be exercised following
an optionee's termination of employment or consulting relationship for any
reason is as determined by the Administrator, but not longer than the term of
the option.
WRITTEN AGREEMENTS
All awards granted under the Option Plan are evidenced by a written
agreement between the Company and the employee or consultant to whom such award
is granted.
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RIGHTS NONTRANSFERABLE
Options granted pursuant to the Option Plan are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
USE OF STOCK FOR TAX WITHHOLDING
The Option Plan permits participants to satisfy tax withholding obligations
arising from the grant, vesting or exercise of options by surrendering shares of
Common Stock already owned, or by directing the Company to withhold from the
shares of Common Stock issued or issuable pursuant to the award in question that
number of shares having a fair market value equal to the tax withholding
liability as of the applicable tax date. All elections to utilize stock for tax
withholding are subject to the approval of the Administrator.
CHANGE-IN-CONTROL PROVISIONS
The Administrator may determine, at the time of granting an option or
thereafter, that such option shall become fully exercisable as to all shares
subject to such option in the event of a Change in Control of the Company. A
Change in Control is defined as approval by the shareholders of a merger or
consolidation of the Company with, or the sale of substantially all of the
Company's assets to, any other person or corporation, except for a merger or
consolidation that would result in the Company's voting securities outstanding
immediately prior to such merger or consolidation continuing to represent at
least 80% of the voting securities immediately after such merger or
consolidation.
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend or discontinue the Option Plan at any
time, but any such amendment, alteration, suspension or discontinuation shall
not adversely affect any outstanding option under the Option Plan without the
consent of the holder thereof. The Company may not amend the Option Plan without
stockholder approval if the amendment would materially increase the benefits
available under the Option Plan. Because the Option Plan permits the granting of
ISOs, tax regulations require stockholder approval of any increase in shares
under the Option Plan or any change in the class of persons eligible to receive
awards under the Option Plan. The Option Plan will terminate by its terms on
July 18, 2005, and no ISOs may be granted under the Option Plan after May 31,
2005.
Subject to applicable laws and the specific terms of the Option Plan, the
Administrator may accelerate any option or waive any condition or restriction
pertaining to such option at any time.
FEDERAL TAX INFORMATION FOR STOCK OPTIONS
An optionee will recognize no taxable income upon grant or exercise of an
ISO under the Option Plan, unless the alternative minimum tax rules apply. The
Company will not be allowed a deduction for federal income tax purposes in
connection with the grant or exercise of an ISO. Upon an optionee's sale or
other disposition of the underlying shares (assuming that the sale occurs no
sooner than two years after grant of the option and one year after exercise of
the option (the "statutory holding periods")), any gain or loss will be taxed to
the optionee as long-term capital gain or loss. If the statutory holding periods
are not satisfied (i.e., the optionee makes a "disqualifying disposition"), the
optionee will recognize compensation income equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock at the
date of the option exercise or (ii) the sale price of the stock, and the Company
will be entitled to a deduction in the same amount. Any additional gain or loss
recognized on a disqualifying disposition of the shares will be characterized as
short-term or long-term capital gain or loss, as the case may be.
An optionee will not recognize any taxable income at the time he or she is
granted an NSO under the Option Plan. However, upon exercise of the NSO, the
optionee will generally recognize compensation income for federal tax purposes
measured by the excess, if any, of the then fair market value of the shares over
the
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exercise price. The Company will be entitled to a tax deduction in the same
amount, subject to Section 162(m) of the Code. Upon an optionee's disposition of
such shares, any difference between the amount realized and the fair market
value of such shares on the date of exercise will be treated as capital gain or
loss and will qualify for long-term capital gain or loss treatment if the shares
have been held for more than one year.
The compensation income recognized upon exercise of an NSO by an optionee
who is also an employee will be treated as wages for tax purposes and will be
subject to tax withholding by the Company out of the current compensation paid
to such person, if any. If such current compensation is insufficient to satisfy
the tax-withholding obligation, such person will be required to make direct
payment to the Company for the tax liability. Any required withholding in
connection with the exercise of any NSO may, with the consent of the
Administrator, be satisfied by an optionee, in whole or in part, by surrendering
to the Company shares of Common Stock previously owned by such person or shares
issued upon exercise of the option. For such purpose, the surrendered shares are
valued at their fair market value at the time of surrender.
In order for compensation in excess of $1 million realized by any of the
Named Officers with respect to options granted under the Option Plan to be
deductible by the Company, IRS regulations require, among other things, that the
Option Plan limit the number of shares that can be granted to any one
individual. Under the terms of the Option Plan, no employee may be granted
options to purchase more than 100,000 shares in any fiscal year. While the
Company does not expect to grant this number of options to an individual on a
regular basis, the Company does expect that this would be the maximum number of
options that would be necessary to recruit or retain any outstanding top
executive.
PARTICIPATION IN THE OPTION PLAN
The grant of options, stock units and restricted stock awards under the
Option Plan to employees, including Named Officers, is subject to the discretion
of the Board and the Administrator. As of the date of this proxy statement,
there has been no determination by the Board or Administrator with respect to
future awards under the Option Plan. Accordingly, future awards are not
determinable. Non-employee directors are not eligible to participate in the
Option Plan.
The following table sets forth information with respect to the grant of
options to the Named Officers, to all current executive officers as a group, and
to all other employees as a group during the last fiscal year.
AMENDED PLAN BENEFITS
1995 OMNIBUS INCENTIVE PLAN
WEIGHTED AVERAGE
NAME OF INDIVIDUAL OR OPTIONS EXERCISE PRICE
IDENTITY OF GROUP AND POSITION GRANTED(#) PER SHARE($/SH)
------------------------------ ---------- ----------------
Stephen E. Cooper........................................... 80,000 $29.32
Chairman of the Board, President and Chief Executive
Officer
Takeshi (John) Suzuki....................................... 24,000 $31.61
President, Etec Japan
Paul A. Warkentin........................................... 0 0
Senior Vice President, Advanced Reticle Solutions
William D. Snyder........................................... 32,000 $34.64
Chief Financial Officer
William D. Cole............................................. 16,000 $29.32
Vice President, Sales and Customer Support
All current Named Officers as a group....................... 152,000 $30.80
All other employees as a group.............................. 870,060 $31.70
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL 2 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 OMNIBUS INCENTIVE PLAN.
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PROPOSAL 3 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 DIRECTORS' PLAN
In 1995, the Company established the 1995 Directors' Stock Option Plan (the
"Directors' Plan") to promote the long-term success of the Company by
encouraging non-employee directors to focus on critical long-range objectives,
encourage the attraction and retention of non-employee directors with
exceptional qualifications, and link non-employee directors directly to
stockholder interests through increased stock ownership. The Directors' Plan
seeks to achieve this purpose by providing for the grant of non-statutory
options to purchase Shares of Common Stock to non-employee directors.
The Company believes that the proposed increase in the number of shares
available under the Directors' Plan will be sufficient to meet the Company's
option granting requirements for at least the next two years.
PROPOSED AMENDMENT
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the Directors' Plan to increase the number of
shares reserved for issuance under the Directors' Plan by 50,000, from 150,000
shares to 200,000 shares. At the Annual Meeting, stockholders are being asked to
approve this increase in shares reserved under the Directors' Plan.
The proposed amendment amends and restates Article 4(a) of the 1995
Directors' Stock Option Plan to read as follows:
"ARTICLE 4(a). Stock Subject to Plan
4(a) Basic Limitation. Shares offered under the Directors' Plan shall
be treasury Shares or authorized but unissued Shares. Subject to adjustment
pursuant to Section 7, a total of 200,000 Shares are subject to Options and
are available for issuance under the Directors' Plan. The Company, during
the term of the Directors' Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the purposes of the Directors'
Plan."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the Directors' Plan
at a duly held meeting at which a quorum is present must exceed the votes cast
against such proposal in order to approve the amendment of the Directors' Plan.
Unless marked to the contrary, proxies received will be voted "FOR" approval of
the amendment to the Directors' Plan to increase the shares reserved thereunder
by 50,000.
GENERAL
The Directors' Plan provides an incentive to non-employee Directors whose
present and potential contributions are important to the continued success of
the Company. The Directors' Plan permits the granting of non-statutory stock
options ("NSOs").
ELIGIBILITY
The Directors' Plan provides that NSOs may be granted only to non-employee
Directors of the Company and its subsidiaries. Non-employee Directors ("Outside
Directors") shall mean a member of the Board of Directors who is not and has
never been an employee (within the meaning of section 3401(c) of the Code and
the regulations thereunder) of the Company, of a Subsidiary of the Company or of
an affiliate of the Company (within the meaning of the Securities Act of 1933)
and who is not prohibited under the terms of his or her employment from
accepting the Options granted under the Directors' Plan.
As of the Record Date, a total of five Outside Directors are eligible for
stock option awards under the Directors' Plan. Six Directors have received
options under the Directors' Plan, but Mr. Ryan is no longer eligible for
additional grants.
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ADMINISTRATION
The Directors' Plan is administered by the Board of Directors (the
"Administrator"). The Administrator has full authority and discretion to
interpret the Directors' Plan and to apply its provisions, to adopt, amend or
rescind rules, procedures and forms relating to the Directors' Plan, to
authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Directors' Plan, and to take any other
actions deemed necessary or advisable for the administration of the Directors'
Plan.
TERMS OF OPTIONS
Under the terms of the Directors' Plan, upon appointment to the Board, each
Outside Director automatically receives a non-statutory stock option to purchase
8,000 shares of Common Stock (an "Initial Option"). These one-time grants vest
in two installments, with half of the shares vesting on the first anniversary of
the grant date and the other half vesting on the second anniversary of the grant
date. In addition, during his or her tenure, each Outside Director receives an
annual grant of an option to purchase 3,000 shares on each anniversary (an
"Annual Option"). Annual Options vest in full on the first anniversary of the
grant date. Under the Directors' Plan, each option's exercise price is 100% of
the fair market value of the underlying shares on the grant date and its term is
ten years.
SHARES UNDER THE DIRECTORS' PLAN
At the Record Date, options to purchase 69,000 shares were outstanding and
options to purchase 41,000 shares had been exercised under the Directors' Plan.
Excluding the 50,000 shares that have been approved by the Board but are subject
to stockholder approval, there are currently 40,000 shares available for future
grants under the Directors' Plan. If any options granted under the Directors'
Plan are forfeited, then they will again become available for awards under the
Directors' Plan.
TERMINATION OF SERVICE AS A DIRECTOR
Under the Directors' Plan, if an Outside Director's service as a director
terminates for any reason, then any options held by him or her that were granted
under the Directors' Plan shall expire one year from the date of termination.
The Outside Director may exercise all or part of his or her option at any time
before its expiration, but only to the extent that such option is exercisable in
accordance with the vesting schedule. The unexercisable balance of such option
shall lapse immediately upon the Outside Director's termination except for
termination due to the death of the Outside Director. In the event that the
Outside Director's service terminates because of death or the Outside Director
dies after the termination of his or her service but before the expiration of
his or her option, all or part of such option may be exercised (prior to
expiration) by the executors or administrators of the Outside Director's estate
or by any person who has acquired such option directly from him or her by
bequest, inheritance or beneficiary designation, but only to the extent that
such option is exercisable in accordance with the vesting schedule.
WRITTEN AGREEMENTS
All awards granted under the Directors' Plan are evidenced by a written
agreement between the Company and the Outside Director to whom such award is
granted.
RIGHTS NONTRANSFERABLE
Options granted pursuant to the Directors' Plan are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
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USE OF STOCK FOR TAX WITHHOLDING
The Directors' Plan permits participants to satisfy tax withholding
obligations arising from the grant, vesting or exercise of options by
surrendering shares of Common Stock already owned, or by directing the Company
to withhold from the shares of Common Stock issued or issuable pursuant to the
award in question that number of shares having a fair market value equal to the
tax withholding liability as of the applicable tax date. All elections to
utilize stock for tax withholding are subject to the approval of the
Administrator.
REORGANIZATIONS
In the event that the Company is a party to a merger or consolidation,
outstanding options shall become subject to the agreement of merger or
consolidation. Such agreement may provide, without limitation, for the
assumption of outstanding options by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one share under such agreement and the exercise price,
or for the acceleration of their exercisability followed by the cancellation of
options not exercised, in all cases without the optionees' consent. Any
cancellation shall not occur earlier than 30 days after such acceleration is
effective and optionees have been notified of such acceleration.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Directors' Plan at any time, but not
more than every six months unless such amendment is required to comply with the
Internal Revenue Code of 1986, as amended, or the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. Rights and
obligations under any option granted before amendment of the Directors' Plan
shall not be materially altered or impaired by such amendment, except with
consent of the optionee. An amendment of the Directors' Plan shall be subject to
the approval of the Company's stockholders only to the extent required by the
applicable laws, regulations or rules. The Directors' Plan will terminate by its
terms on July 18, 2005.
FEDERAL TAX INFORMATION FOR STOCK OPTIONS
An optionee will not recognize any taxable income at the time he or she is
granted an NSO under the Directors' Plan. However, upon exercise of the NSO, the
optionee will generally recognize income (subject to tax withholding) for
federal tax purposes measured by the excess, if any, of the then fair market
value of the shares over the exercise price. The Company will be entitled to a
tax deduction in the same amount. Upon an optionee's disposition of such shares,
any difference between the amount realized and the fair market value of such
shares on the date of exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the shares have been
held for more than one year.
Any required withholding in connection with the exercise of any NSO may,
with the consent of the Administrator, be satisfied by an optionee, in whole or
in part, by surrendering to the Company shares of Common Stock previously owned
by such person or shares issued upon exercise of the option. For such purpose,
the surrendered shares are valued at their fair market value at the time of
surrender.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL 3 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE
1995 DIRECTORS' PLAN.
PROPOSAL 4 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 EMPLOYEE STOCK
PURCHASE PLAN
Since 1995, the Company has provided eligible employees with an opportunity
to purchase Common Stock from the Company on favorable terms and to pay for such
purchases through payroll deductions. The 1995 Employee Stock Purchase Plan
("ESPP") is intended to qualify under section 423 of the Internal Revenue Code
(the "Code"), as amended.
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The Company believes that the proposed increase in the number of shares
available under the ESPP will enable the Company to provide appropriate
incentives to its current and future employees, and will be sufficient to meet
the Company's issuance requirements for the next two years.
PROPOSED AMENDMENT
In September 1999, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the ESPP to increase the number of shares
reserved for issuance under the ESPP by 200,000, from 500,000 shares to 700,000
shares. At the Annual Meeting, stockholders are being asked to approve the
increase in shares reserved under the ESPP.
The proposed amendment amends and restates Article 13.1 of the 1995
Employee Stock Purchase Plan of Etec Systems, Inc. to read as follows:
"ARTICLE 13. Common Stock Offered Under the ESPP
13.1 Authorized Shares. The aggregate number of shares of Common
Stock available for purchase under the ESPP shall be 700,000, subject to
adjustment pursuant to this Article 13."
VOTE REQUIRED
The votes cast in favor of the increase in shares under the ESPP at a duly
held meeting at which a quorum is present must exceed the votes cast against
such proposal in order to approve the amendment of the ESPP. Unless marked to
the contrary, proxies received will be voted "FOR" approval of the amendment to
the ESPP to increase the shares reserved thereunder by 200,000.
GENERAL
The ESPP provides eligible employees of the Company with an opportunity to
purchase the Company's Common Stock at a discounted price through payroll
deductions.
ELIGIBILITY
Eligible employee means any employee of the Company and any subsidiary
company electing to participate whose customary employment is for more than five
months per calendar year and for more than 20 hours per week. As of the Record
Date, a total of 1,080 employees were eligible to participate in the ESPP.
ADMINISTRATION
The ESPP may be administered by the Board of Directors or by a committee of
the Board (the "Administrator"), and is currently administered by the
Compensation Committee, which is composed solely of non-employee directors. The
interpretation and construction by the Compensation Committee of any provision
of the ESPP or of any right to purchase Common Stock granted under the ESPP
shall be conclusive and binding on all persons. The Compensation Committee may
adopt such rules and forms under the ESPP as it considers appropriate.
TERMS OF THE ESPP
Accumulation Periods: While the ESPP is in effect, two six-month
Accumulation Periods shall commence in each calendar year on January 1 and July
1.
Duration of Participation: Once enrolled, a participant may continue to
participate in the ESPP for each succeeding Accumulation Period until he or she
ceases to be an eligible employee, withdraws from the ESPP or reaches the end of
the Accumulation Period in which he or she discontinued contributions.
Employee Contributions: Payroll deductions commence with the first payday
in the Accumulation Period and continue on each subsequent payday during
participation in the ESPP. Eligible employees designate a
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percentage of their gross base salary to be withheld for the purchase of Common
Stock, at a rate not less than 1% or more than 15%.
Offering Period: An Offering Period is an 18-month period commencing
January 1 or July 1.
Purchase Price: The purchase price for each share of Common Stock shall be
the lower of 85% of the fair market value of such share as of the day the
Offering Period commences, or 85% of the fair market value of such share as of
the last day in the Accumulation Period.
Purchase of Shares: A participant's enrollment in the ESPP commences on the
first day of the next Offering Period. During each Offering Period, as of the
last day of each Accumulation Period, each participant shall be deemed to have
elected to purchase the number of shares of Common Stock determined by dividing
the amount then in the participant's plan account by the purchase price of such
shares. Notwithstanding the foregoing, no purchase shall be made at the end of
an Accumulation Period if the participant has previously elected to withdraw
from the ESPP, no participant shall purchase more than a maximum of 250 shares
of Common Stock with respect to any Accumulation Period, and no participant
shall purchase shares of Common Stock in excess of the authorized shares. The
Compensation Committee may determine that any fractional share may be rounded
down to the next lower whole share.
SHARES UNDER THE ESPP
At the Record Date, 336,920 shares had been issued under the ESPP.
Excluding the 200,000 shares that have been approved by the Board but are
subject to stockholder approval, there are currently 163,080 shares available
for future issuance under the ESPP.
TERMINATION OF EMPLOYMENT OR DEATH
Under the ESPP, termination of employment for any reason, including death,
shall be treated as an automatic withdrawal from the ESPP.
WRITTEN AGREEMENTS
All participation in the ESPP is evidenced by a written agreement between
the Company and the employee.
RIGHTS NON-TRANSFERABLE
Options granted pursuant to the ESPP are non-transferable by the
participant, other than by will or by the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order, as defined by the Code.
Options may be exercised, during the lifetime of the participant, only by the
participant or by a permitted transferee.
REORGANIZATION
In the event of a dissolution or liquidation of the Company, or a merger or
consolidation to which the Company is a constituent corporation, the ESPP shall
terminate unless the plan of merger, consolidation or reorganization provides
otherwise, and all amounts that have been withheld but not yet applied to
purchase Common Stock shall be refunded, without interest. The ESPP shall in no
event be construed to restrict in any way the Company's right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.
AMENDMENT OR DISCONTINUANCE
The Board shall have the right to amend, suspend or terminate the ESPP at
any time and without notice. Any increase in the aggregate number of shares of
Common Stock to be issued under the ESPP shall be subject to approval by a vote
of the stockholders of the Company. In addition, any other amendment of the ESPP
shall be subject to approval by a vote of the stockholders of the Company to the
extent required by an applicable law or regulation. The ESPP will terminate by
its terms on July 18, 2005.
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FEDERAL TAX INFORMATION FOR ESPP
The ESPP is intended to qualify as an "employee stock purchase plan" under
section 423 of the Code. No income is recognized by a participant at the time
the right to purchase shares is granted. Likewise, no taxable income is
recognized at the time of the purchase, even though the purchase price reflects
a discount from the market value of the shares at that time.
A participant must recognize taxable income upon a disposition of shares
acquired under the ESPP. The tax treatment may be more favorable if the
disposition occurs after the holding-period requirements of section 423 have
been satisfied (a "Qualifying Disposition").
To satisfy the holding-period requirements of section 423, shares acquired
under the ESPP cannot be disposed of within two years after the first day of the
Offering Period during which the Shares were purchased nor within one year of
the date of purchase.
The federal income tax consequences of a Qualifying Disposition are as
follows:
- The participant recognizes ordinary income equal to the lower of (i) the
excess of the fair market value of the shares on the date of the
disposition over the actual purchase price or (ii) 15% of the fair market
value of the shares immediately before the applicable Offering Period.
The Company will not be entitled to any deduction under these
circumstances.
- The excess, if any, of the fair market value of the shares on the date of
the disposition over the sum of the purchase price plus the amount of
ordinary income recognized (as described above) will be taxed as a
long-term capital gain. If a taxable disposition produces a loss (i.e.,
the fair market value of the Shares on the date of the disposition is
less than the purchase price) and the disposition involves certain
unrelated parties, then the loss will be a long-term capital loss.
A participant who disposes of shares acquired under the ESPP within two
years after the beginning of the applicable Offering Period or within one year
of the date of purchase makes a non-qualifying disposition of such shares (a
"Non-qualifying Disposition").
The federal income tax consequences of a Non-qualifying Disposition of
shares acquired under the ESPP are as follows:
- The entire difference between the purchase price and the market value of
the shares on the date of purchase will be taxed to the participant as
ordinary income in the year of disposition. The Company will be entitled
to a deduction for the same amount.
- The excess, if any, of the amount realized on the date of disposition
over the market value on the date of purchase will be taxed as a capital
gain (long-term or short-term, depending on how long the shares have been
held). If the value of the shares on the date of disposition is less than
their value on the date of purchase, then the difference will result in a
capital loss (long-term or short-term, depending upon the holding
period), provided the disposition involves certain unrelated parties. Any
such loss will not affect the ordinary income recognized upon the
disposition.
Certain transfers of shares acquired under the ESPP are not considered
"dispositions" for purposes of the foregoing rules, including: (i) A transfer of
shares to a descendant's estate or to an heir by bequest or inheritance; (ii)
certain transfers of shares pursuant to certain tax-free exchanges; and (iii)
pledge of shares unless the shares are actually disposed of pursuant to the
pledge.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR
PROPOSAL 4 -- APPROVAL OF AN INCREASE IN SHARES UNDER THE 1995 STOCK PURCHASE
PLAN.
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PROPOSAL 5 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of PricewaterhouseCoopers LLP as the Company's independent
accountants for the fiscal year ended July 31, 2000. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Company's Annual
Meeting. They will have an opportunity to make a statement, if they desire to do
so, and will be available to respond to appropriate questions.
PricewaterhouseCoopers LLP (or its predecessor) has audited the Company's
financial statements since April 1995.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR
PROPOSAL 5 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting and that the
stockholder desires to have included in the Company's proxy statement must be
received by the Secretary of the Company no later than August 31, 2000 in order
that they may be considered for possible inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
With respect to stockholder proposals that are not sought to be included in
the Company's proxy statement and form of proxy relating to the 2000 Annual
Meeting, the Company's Bylaws require that advance notice of such proposals be
given to the Company no later than August 31, 2000. See "Other Matters" for a
description of such Bylaw provision. Proposals received after that date will not
be eligible to be raised or voted upon at the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, file
reports of ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal year 1999.
OTHER MATTERS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting, it
is intended that proxies in the enclosed form will be voted in accordance with
the judgment of the persons voting the proxies. Under the Company's Bylaws, in
order to be deemed properly presented, notice must be delivered to, or mailed
and received by, the Company not less than 60 days prior to the first
anniversary of the day on which notice of the prior year's annual meeting was
mailed to stockholders. The stockholder's notice must set forth, as to each
proposed matter: (a) a brief description of the business and reason for
conducting such business at the meeting; (b) the name and address of the
stockholder proposing such business; (c) a lawful representation that the
stockholder is entitled to vote at the meeting and intends to appear in person
or by proxy at the meeting to present the matter; (d) any material interest of
the stockholder in such business; and (e) such other information with respect to
such matter as would be required in a proxy statement soliciting proxies
regarding such matter. The presiding officer of the meeting may refuse to
acknowledge any matter not made in compliance with the foregoing procedure.
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Whether or not you intend to be present at the Annual Meeting, we urge you
to return your signed proxy promptly.
By Order of the Board of Directors.
LOGO
W. Russell Wayman
Secretary
Hayward, California
October 29, 1999
UPON WRITTEN REQUEST OF ANY STOCKHOLDER ENTITLED TO RECEIVE THIS PROXY
STATEMENT, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
REQUEST SHOULD BE ADDRESSED TO THE COMPANY AT 26460 CORPORATE AVENUE, HAYWARD,
CALIFORNIA 94545, ATTENTION: INVESTOR RELATIONS.
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PROXY
ETEC SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Stephen E. Cooper, W. Russell Wayman, and Saul
E. Arnold as Proxies, with full power in each to act without the other and with
the power of substitution in each, to represent and to vote all the shares of
the stock that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Etec Systems, Inc. to be held on December 14, 1999, or at any
postponement or adjournment thereof, with respect to the matters set forth on
the reverse side.
The proxy will be voted in accordance with specifications made on the reverse
side.
IF YOU DO NOT INDICATE HOW YOU WISH THIS PROXY TO BE VOTED, THE PROXYHOLDERS
WILL VOTE "FOR" ALL OF MANAGEMENT'S NOMINEES FOR DIRECTOR, "FOR" PROPOSALS 2,3,4
AND 5, AND IN THEIR DISCRETION ON SUCH OTHER MATTERS AS ARE PROPERLY BROUGHT
BEFORE THE MEETING.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient, and immediate! It's fast, convenient, and immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683)
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompany Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). For http://www.eproxyvote.com/etec
shareholders residing outside the United
States call collect on a touch-tone phone 3. Enter your 14 digit Voter Control Number
1-201-536-8073 located on your Proxy Card above your name.
3. Enter your 14 digit Voter Control Number 4. Follow the instructions provided.
located on your Proxy Card above your name.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/etec anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
1. Election of eight Board of Directors.
Nominees: (01) Stephen E. Cooper, (02) Takeshi (John) Suzuki,
(03) Edward L. Gelbach, (04) John McBennett,
(05) William J. Ryan, (06) William T. Siegle,
(07) Thomas M. Trent, (08) Robert L. Wehrij
FOR ALL NOMINEES / / / / WITHHELD FROM ALL NOMINEES
/ / For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
2. To approve an amendment to the 1995 Omnibus Incentive Plan to increase the
number of available shares by 800,000.
For / / Against / / Abstain / /
3. To approve an amendment to the 1995 Directors' Stock Option Plan to increase
the number of available shares by 50,000.
For / / Against / / Abstain / /
4. To approve an amendment to the 1995 Employee Stock Purchase Plan to increase
the number of available shares by 200,000.
For / / Against / / Abstain / /
5. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants.
For / / Against / / Abstain / /
6. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
This proxy should be signed by the shareholder(s) exactly as his or her name(s)
appear(s) hereon, dated and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both persons should sign.