SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FEI Company
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]
7451 NW EVERGREEN PARKWAY
HILLSBORO, OR 97124-5830
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2000
------------------------
To the Shareholders of
FEI COMPANY:
The annual meeting of shareholders of FEI Company will be held on May 18,
2000 at 9:00 a.m. local time, at the OSSHE Facility, 18640 NW Walker Road,
Beaverton, Oregon, for the following purposes:
1. To consider and vote on a proposal to amend the 1995 Stock Incentive Plan
(i) to increase the number of shares of FEI common stock reserved for
issuance under the plan to 4,000,000; (ii) to increase the total number of
shares subject to options or stock appreciation rights that may be granted
under the plan on a per-employee basis to 150,000 for grants made in 1999;
and (iii) to increase the number of shares subject to options or stock
appreciation rights that may be granted to any employee in any single year,
subsequent to the initial grant, from 50,000 to 100,000.
2. To consider and vote on a proposal to amend the FEI Employee Share Purchase
Plan to increase the number of shares of FEI common stock reserved for
issuance under the plan from 350,000 to 950,000.
3. To elect members of the FEI board of directors to serve for the following
year and until their successors are elected.
4. To transact other business related to the proposals above that may properly
come before the meeting or any postponement or adjournment.
Only shareholders of record at the close of business on April 6, 2000 will
be entitled to vote at the annual meeting. A form of proxy and a proxy statement
containing more detailed information about the matters to be considered at the
annual meeting accompany this notice. We urge you to give this material your
careful attention.
You are respectfully requested to date and sign the enclosed proxy and
return it in the postage-prepaid envelope enclosed for that purpose. You may
attend the meeting in person even though you have sent in your proxy; retention
of the proxy is not necessary for admission to the meeting.
By Order of the Board of Directors,
Bradley J. Thies
SECRETARY
Hillsboro, Oregon
April 7, 2000
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE,
COMPLETE AND MAIL THE ENCLOSED PROXY CARD
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
FEI COMPANY
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PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
---------------------
This document is being furnished to shareholders of FEI as part of the
solicitation of proxies by the FEI board of directors for use at the annual
meeting of shareholders to be held on May 18, 2000 at 9:00 a.m. local time, at
the OSSHE Facility, 18640 NW Walker Road, Beaverton, Oregon. This proxy
statement and the enclosed form of proxy are first being mailed to shareholders
on or about April 10, 2000.
Upon written request to Bradley J. Thies, Secretary, any person whose proxy
is solicited by this proxy statement will be provided, without charge, a copy of
the our Annual Report on Form 10-K.
SOLICITATION, VOTING SECURITIES AND REVOCABILITY OF PROXIES
The cost of soliciting proxies for the annual meeting will be borne by FEI.
In addition to soliciting proxies by mail, proxies may be solicited personally
or by telephone, facsimile, or other means of communications by directors,
officers and employees of FEI. These persons will not be specifically
compensated for these activities, but they may be reimbursed for reasonable
out-of-pocket expenses in connection with this solicitation. Arrangements also
will be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of shares held of
record by these persons. FEI will reimburse these brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection with this solicitation.
The board has fixed the close of business on April 6, 2000 as the record
date to determine the shareholders entitled to receive notice of and to vote at
the annual meeting. Each holder of common stock on the record date is entitled
to one vote per share held on all matters properly presented at the annual
meeting. The common stock is the only outstanding authorized voting security of
FEI. The common stock does not have cummulative voting rights. As of the close
of business on the record date, 27,952,591 shares of common stock were
outstanding and entitled to vote, held by approximately 150 holders of record.
All votes on the proposals set forth below will be taken by ballot. For purposes
of the votes on all proposals set forth below, the holders of a majority of the
shares entitled to vote, represented in person or by proxy, will constitute a
quorum at our annual meeting which is necessary for the transaction of business.
Abstentions and broker non-votes (the submission of a proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the matter) will be counted as present for purposes of determining the presence
or absence of a quorum for the transaction of business.
The following table shows the votes required to approve each proposal.
PROPOSAL VOTE REQUIRED
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- - Amendments to the 1995 stock incentive plan A majority of the outstanding shares of FEI
- - Amendment to the employee share purchase plan must be present at the annual meeting in
person or by proxy and a majority of the
votes cast must vote in favor of the
proposals.
- - Election of directors A majority of the outstanding shares of FEI
must be present at the annual meeting in
person or by proxy. The directors are
elected by a plurality of the votes cast.
The Oregon statutory term "plurality"
means that the eight director nominees
who receive the most votes will be
elected.
1
Philips Business Electronics International B.V. ("Philips Business
Electronics"), FEI's majority shareholder, has informed FEI it intends to vote
in favor of the amendments to the stock option plan and the employee share
purchase plan and for the slate of nominees for the board of directors. Philips
Business Electronics is a wholly-owned subsidiary of Koninklijke Philips
Electronics N. V. ("Philips"). As a result, assuming Philips Business
Electronics votes its shares at the annual meeting as it has agreed and
indicated, the approval of each of the proposals to be voted on at the meeting
is assured.
The shareholders present at the annual meeting may continue to transact
business until adjournment, notwithstanding the subsequent withdrawal of enough
shareholders to leave less than a quorum or the refusal of any shareholder
present in person or by proxy to vote or participate in the annual meeting. If
the annual shareholders meeting is adjourned for any reason, the approval of any
of the proposals may be considered and voted upon by shareholders at the
subsequent reconvened meeting. All proxies will be voted in the same manner as
they would have been voted at the original meeting, except for any proxies that
have been properly withdrawn or revoked.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by
- filing with the our Secretary, Bradley J. Thies, at or before the vote at
the annual meeting, a written notice of revocation dated after the date of
the proxy
- signing a later proxy relating to the same shares and delivering it to our
Secretary before the annual meeting or
- attending the annual meeting and voting in person
Attendance at the annual meeting, however, will not in and of itself
constitute a revocation of a proxy. All valid, unrevoked proxies will be vote at
the annual meeting in accordance with the instructions given.
PROPOSAL TO APPROVE AND ADOPT AMENDMENTS TO THE FEI STOCK INCENTIVE PLAN
FEI maintains the 1995 Stock Incentive Plan for the benefit of its employees
and others who provide services to FEI. The board of directors believes the
availability of stock incentives is an important factor in FEIs ability to
attract and retain experienced and competent employees and to provide an
incentive for them to exert their best efforts on behalf of FEI. As of
March 31, 2000, out of a total of 2,000,000 shares reserved for issuance under
the Plan, only approximately 43,000 shares remained available for grant. The
board of directors believes additional shares will be needed under the plan to
provide appropriate incentives to employees of its newly acquired subsidiary
Micrion Corporation ("Micrion"). Accordingly, on January 27, 2000 the board of
directors approved an amendment to the plan, subject to shareholder approval, to
reserve an additional 2,000,000 shares under the plan. The total number of
shares reserved for issuance under the plan would thus be increased from
2,000,000 to 4,000,000 shares.
To comply with Section 162(m) of the Internal Revenue Code, per-employee
grants of options and stock appreciation rights under the plan are subject to
specified limits. Currently, those limits are 200,000 shares for new hires and
50,000 shares annually otherwise. In October 1999, the board of directors made a
grant of option shares to a senior executive in excess of the 50,000 share
annual limit. The directors believed the grant was appropriate in the
circumstance and consistent with FEI's stated compensation policy of creating
incentives that align management interests with shareholder interests.
Accordingly, the board has also approved an amendment to the plan, subject to
shareholder approval, to increase the per-employee limits on grants of options
and stock appreciation rights under the plan to 150,000 shares solely for grants
made in 1999.
The board also recommends amending the plan to increase the limit on annual
stock option grants from the current 50,000 shares per employee to 100,000
shares for grants subsequent to 1999. The board has determined the Company's
annual limit of 50,000 shares per employee is no longer appropriate given
2
the growth of the Company, current industry compensation trends and the
compensation incentives being offered by competitors. The per-employee limit for
new hires will not be affected by this amendment. Shareholder approval of this
proposal will constitute a reapproval of the per-employee limits on grants of
options and stock appreciation rights under the plan. This reapproval is
required every five years for continued compliance with proposed regulations
under Section 162(m) of the Internal Revenue Code. See "--Tax Consequences."
Key provisions of the plan are described below. The complete text of the
plan, marked to show the proposed amendments, is attached to this document as
Appendix A. We urge FEI shareholders to read the amendments to the plan
carefully.
DESCRIPTION OF THE PLAN
ELIGIBILITY. All employees, officers and directors of FEI and its
subsidiaries, approximately 1,000 persons in total, are eligible to participate
in the plan. Also eligible are non-employee agents, consultants, advisors,
persons involved in the sale or distribution of FEI's products and independent
contractors of FEI or any subsidiary.
ADMINISTRATION. The FEI board is authorized to administer the plan. The FEI
board may promulgate rules and regulations for the operation of the plan and
generally supervises the administration of the plan. The FEI board has delegated
authority to administer the plan to the compensation committee of the FEI board.
Only the FEI board, however, may amend, modify or terminate the plan.
TERM OF PLAN. The plan will continue until all shares available for
issuance under the plan have been issued and all restrictions on such shares
have lapsed. The FEI board may suspend or terminate the plan at any time.
STOCK OPTIONS. The compensation committee determines
- the persons to whom options are granted
- the option price
- the number of shares to be covered by each option
- the term of each option
- the times at which options may be exercised and
- whether the option is an incentive stock option or a nonqualified stock
option.
If the option is an incentive stock option, the option price cannot be less than
the fair market value of the FEI common stock on the date of grant. If an
optionee at the time of grant of an incentive stock option owns stock
representing more than 10% of the combined voting power of FEI, the option price
may not be less than 110% of the fair market value of the FEI common stock on
the date of grant. In addition, the plan limits the amount of incentive stock
options that may become exercisable under the plan in any year to $100,000 per
optionee, based on the fair market value of the stock on the date of grant. No
monetary consideration is paid to FEI upon the granting of options. Currently,
no employee may be granted options or stock appreciation rights under the plan
for more than 200,000 shares in connection with the hiring of the employee or
50,000 shares in any subsequent year. If this proposal to amend the plan is
approved, the annual per-employee limit for grants of stock options and stock
appreciation rights will increase from 50,000 to 150,000 shares for grants in
1999, and 100,000 shares for any subsequent year.
Options granted under the plan generally continue in effect for the term
fixed by the compensation committee, except that incentive stock options are not
exercisable after the expiration of 10 years from the date of grant. Options are
exercisable in accordance with the terms of an option agreement entered into at
the time of grant. Options are nontransferable except on death of a holder.
Options may be exercised only
3
while an optionee is employed by FEI or a subsidiary or within 12 months
following termination of employment by reason of death or disability or 30 days
following termination for any other reason. The compensation committee may
extend the exercise period for any period up to the expiration date of the
option and may increase the number of shares for which the option may be
exercised up to the total number of shares underlying the option. The purchase
price for each share purchased on the exercise of options must be paid in
- cash, including cash that may be the proceeds of a loan from FEI
- shares of FEI common stock valued at fair market value
- restricted stock
- performance units or other contingent awards denominated in either stock
or cash
- deferred compensation credits or
- other forms of consideration,
as determined by the compensation committee. On the exercise of an option, the
number of shares subject to the option and the number of shares available under
the plan for future option grants are reduced by the number of shares with
respect to which the option is exercised.
STOCK OPTION GRANTS TO INDEPENDENT DIRECTORS. Each individual who becomes
an independent director receives a non-statutory option to purchase 5,000 shares
of FEI common stock when the individual becomes a director. In addition, each
independent director of FEI is automatically granted an annual
non-discretionary, nonstatutory option to purchase 3,000 shares of FEI common
stock.
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SARs") may be
granted under the plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the plan. A SAR
gives the holder the right to payment from FEI of an amount equal in value to
the excess of the fair market value on the date of exercise of a share of FEI
common stock over its fair market value on the date of grant, or if granted in
connection with an option, the option price per share under the option to which
the SAR relates.
A SAR is exercisable only at the time or times established by the
compensation committee. If a SAR is granted in connection with an option, it is
exercisable only to the extent and on the same conditions that the related
option is exercisable. Payment by FEI upon exercise of a SAR may be made in
- FEI common stock valued at its fair market value
- cash or
- partly in stock and partly in cash,
as determined by the compensation committee. The compensation committee may
withdraw any SAR granted under the plan at any time and may impose any condition
upon the exercise of a SAR. The compensation committee may also adopt rules and
regulations from time to time affecting the rights of holders of SARs. No SARs
have been granted under the plan.
The existence of SARs, as well as the bonus rights described below, would
require charges to income over the life of the right based on the amount of
appreciation, if any, in the market value of the common stock of FEI over the
exercise price of shares subject to exercisable SARs or bonus rights.
STOCK BONUS AWARDS. The compensation committee may award FEI common stock
as a stock bonus under the plan. The compensation committee may determine the
persons to receive awards, the number of shares to be awarded and the time of
the award. Stock received as a stock bonus is subject to the terms, conditions
and restrictions determined by the compensation committee at the time the stock
is awarded.
4
RESTRICTED STOCK. FEI may issue restricted stock in amounts, for
consideration, subject to restrictions and on terms determined by the
compensation committee.
CASH BONUS RIGHTS. The compensation committee may grant cash bonus rights
under the plan in connection with
- options granted or previously granted
- SARs granted or previously granted
- stock bonuses awarded or previously awarded and
- shares sold or previously sold under the plan.
Bonus rights may be used to provide cash to employees for the payment of taxes
in connection with awards under the plan.
PERFORMANCE UNITS. The compensation committee may grant performance units
consisting of monetary units that may be earned in whole or in part if FEI
achieves goals established by the compensation committee over a designated
period of time not to exceed 10 years. Payment of an award earned may be in cash
or stock or both and may be made when earned, or vested and deferred, as the
compensation committee determines. No performance units have been granted under
the plan.
FOREIGN QUALIFIED GRANTS. Awards under the plan may be granted to eligible
persons residing in foreign jurisdictions. The compensation committee may adopt
supplements to the plan required to comply with the applicable laws of foreign
jurisdictions and to afford participants favorable treatment under those laws,
but no award may be granted under any supplement with terms that are more
beneficial to the participants than the terms permitted by the plan.
CHANGES IN CAPITAL STRUCTURE. If the outstanding FEI common stock is
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of FEI or of another corporation by reason of
any recapitalization, stock split or other specified transactions, the
compensation committee will make appropriate adjustment to the number and kind
of shares available for awards under the plan. If FEI is a party to a merger,
consolidation or plan of exchange or if FEI sells all or substantially all of
its assets, the compensation committee may select one of the following
alternatives for treating outstanding options under the plan:
- outstanding options will remain in effect in accordance with their terms
- outstanding options shall be converted into options to purchase stock in
the corporation that is the surviving or acquiring corporation in the
transaction or
- a 30-day period before the completion of the transaction will be provided
during which outstanding options will be exercisable to the extent
exercisable and, upon the expiration of the 30-day period, all unexercised
options will immediately terminate.
The compensation committee may accelerate the exercisability of options so that
they are exercisable in full during the 30-day period. If FEI is dissolved,
options will be treated as described in the third subparagraph above.
TAX CONSEQUENCES
Some options authorized to be granted under the plan are intended to qualify
as incentive stock options for federal income tax purposes. Under federal income
tax law now in effect, an optionee will recognize no income upon grant or upon a
proper exercise of the incentive stock option. If an employee exercises an
incentive stock option and does not dispose of any of the option shares within
two years following the date of grant and within one year following the date of
exercise, any gain realized on
5
subsequent disposition of the shares will be treated as income from the sale or
exchange of a capital asset. If an employee disposes of shares acquired upon
exercise of an incentive stock option before the expiration of either the
one-year holding period or the two-year waiting period, any amount realized will
be taxable as ordinary compensation income in the year of the disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value of the shares on the date of
disposition exceeds the exercise price. FEI will not be allowed any deduction
for federal income tax purposes at either the time of the grant or exercise of
an incentive stock option. On any disqualifying disposition by an employee, FEI
will generally be entitled to a deduction to the extent the employee realized
ordinary income.
Other options authorized to be granted under the plan will be treated as
nonqualified stock options for federal income tax purposes. Under federal income
tax law now in effect, no income is realized by the grantee of a nonqualified
stock option until the option is exercised. At the time of exercise of a
nonqualified stock option, the optionee will realize ordinary compensation
income, and FEI will generally be entitled to a deduction, in the amount by
which the market value of the shares subject to the option at the time of
exercise exceeds the exercise price. FEI is required to withhold on the income
amount. On the sale of shares acquired upon exercise of a nonqualified stock
option, the excess of the amount realized from the sale over the market value of
the shares on the date of exercise will be taxable.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of section 83 of the Internal
Revenue Code, and no section 83(b) election is made. If the shares are not
vested at the time of receipt, the employee will realize taxable income in each
year in which a portion of the shares substantially vest, unless the employee
elects under section 83(b) within 30 days after the original transfer. FEI will
generally be entitled to a tax deduction in the amount includable as income by
the employee at the same time or times as the employee recognizes income with
respect to the shares. FEI is required to withhold on the income amount. A
participant who receives a cash bonus right under the plan will generally
recognize income equal to the amount of the cash bonus paid at the time of
receipt, and FEI will generally be entitled to a deduction equal to the income
recognized by the participant.
Section 162(m) of the Internal Revenue Code limits to $1,000,000 per person
the amount that FEI may deduct for compensation paid to any of its most highly
compensated officers in any year. Under IRS regulations, compensation received
through the exercise of an option or a SAR is not subject to the $1,000,000
limit if the option or SAR and the plan meet certain requirements. One
requirement is shareholder approval at least once every five years of
per-employee limits on the number of shares as to which options and SARs may be
granted. Other requirements are that the option or SAR be granted by a committee
of at least two outside directors and that the exercise price of the option or
SAR be not less than fair market value of the FEI common stock on the date of
grant.
RECOMMENDATION OF THE BOARD
The board of directors recommends the shareholders vote FOR the proposal.
The affirmative vote of a majority of the outstanding shares present at the
annual meeting is required to approve this proposal. Abstentions have the same
effect as "no" votes in determining whether the amendment is approved. Broker
non-votes have no effect on the results of the vote. The proxies will be voted
for or against the proposal of as an abstention, in accordance with the
instructions specified on the proxy form. If no instructions are given, proxies
will be voted FOR the proposal.
PROPOSAL TO AMEND THE EMPLOYEE SHARE PURCHASE PLAN
FEI maintains an employee share purchase plan for the benefit of its
employees and others who provide services to FEI. The FEI board believes the
availability of stock incentives is an important factor in FEIs ability to
attract and retain experienced and competent employees and to provide an
incentive for
6
them to exert their best efforts on behalf of FEI. As of March 31, 2000 out of a
total of 350,000 shares reserved for issuance under the plan, only approximately
32,000 shares remained available for purchase. The FEI board believes additional
shares will be needed under the plan to provide appropriate incentives to
employees. Accordingly, on January 27, 2000 the FEI board approved an amendment
to the plan, subject to shareholder approval, to reserve an additional 600,000
shares for the plan, and thus increasing the total number of shares reserved for
issuance under the plan from 350,000 to 950,000 shares.
Key provisions of the employee share purchase plan are described below. The
complete text of the plan, marked to show the proposed amendment, is attached to
this document as Appendix B.
DESCRIPTION OF THE EMPLOYEE SHARE PURCHASE PLAN
ELIGIBILITY. Except as described below, all full-time employees of FEI and
designated subsidiaries, including employees who are officers or directors, are
eligible to participate in the plan. Any employee who owns or would be deemed to
own five percent or more of the voting power or value of all classes of stock of
FEI is ineligible to participate in the plan.
PLAN OFFERINGS AND PURCHASE OF SHARES. Offering periods are 12 months long
and commence on about March 1 and September 1 of each year and end on the last
day of February and August following. On the first trading day of each offering
period, known as the "offering date," each eligible employee is automatically
granted an option to purchase shares of FEI common stock to be automatically
exercised on the last trading day of each of the two six-month purchase periods
comprising an offering period. The last trading day of a purchase period is
known as a "purchase date." No option will permit an employee to purchase more
than 1,000 shares or permit an employee's right to purchase shares under the
plan to accrue at a rate that exceeds $25,000 of fair market value (determined
at the offering date) for each calendar year that the option is outstanding.
Each eligible employee may elect to participate in the plan by filing a
subscription and payroll deduction authorization. Shares may be purchased under
the plan only through payroll deductions of not more than 15 percent of an
employee's base pay plus commissions. On the purchase date the amounts withheld
will be applied to purchase shares for the employee from FEI. The purchase price
will be the lesser of 85 percent of the closing market price of FEI common stock
on the offering date or on the purchase date.
An employee may terminate participation in the plan by written notice to FEI
at least 10 days before the purchase date. The employee will then receive all
funds withheld from his or her pay and not yet used to purchase shares. No
interest will be paid on funds withheld from employees unless otherwise
determined by the FEI board. An employee may reinstate participation in the
plan, but only after the first purchase date following termination. The rights
of employees under the plan are not transferable.
AUTOMATIC WITHDRAWAL FROM AN OFFERING PERIOD. If the fair market value of a
share of FEI common stock on a purchase date other than the final purchase date
of an offering period is less than the fair market value of a share of FEI
common stock on the offering date of the offering period, every participant will
be (a) automatically withdrawn from that offering period at the close of the
purchase date and after the acquisition of shares of FEI common stock for the
purchase period and (b) enrolled in the offering period commencing on the first
business day following that purchase date. A participant may elect not to be
automatically withdrawn from an offering period by written notice to FEI.
ADMINISTRATION. The plan is administered by the compensation committee of
the FEI board. The committee may change the duration of the offering periods or
the purchase periods (except that no offering period may have a duration
exceeding 27 months), promulgate rules and regulations for the operation of the
plan, adopt forms for use in connection with the plan, decide any question of
interpretation of the plan or rights arising under the plan and generally
supervise the administration of the plan. FEI pays all expenses of the plan
other than commissions on sales of shares for employees' accounts by the
custodian.
7
CUSTODIAN. An independent custodian maintains the records under the plan.
Shares purchased by employees under the plan are delivered to and held by the
custodian on behalf of the employees. By appropriate instructions from an
employee, all or part of the shares may be sold or transferred into the
employee's own name and delivered to the employee.
AMENDMENTS. The FEI board may amend the plan, except that without the
approval of the shareholders of FEI, the plan may not be amended to increase the
number of reserved shares or decrease the purchase price of shares. The FEI
board may terminate the plan at any time, except that termination will not
affect outstanding options.
TAX CONSEQUENCES
The plan is intended to qualify as an "employee purchase plan" within the
meaning of Section 423 of the Internal Revenue Code. Under the code, employees
will not recognize taxable income or gain with respect to shares purchased under
the plan either at the offering date or at a purchase date. If a current or
former employee disposes of shares purchased under the plan more than two years
after the offering date, or in the event of the employee's death at any time,
the employee or the employee's estate will be required to report as ordinary
compensation income for the taxable year of disposition or death an amount equal
to the lesser of
- the excess of the fair market value of the shares at the time of
disposition or death over the purchase price, or
- 15 percent of the fair market value of the shares on the offering date.
In the case of such a disposition or death, FEI will not be entitled to any
deduction from income. Any gain on the disposition in excess of the amount
treated as ordinary compensation income will be capital gain. If the disposition
is by gift, the employee will not be taxed on any gain in excess of the amount
treated as ordinary compensation income, and for the purpose of determining gain
or loss on a subsequent disposition, the recipient of the gift will be treated
as having purchased the shares for the price paid by the employee plus the
amount treated as ordinary compensation to the employee as a result of the gift.
If an employee disposes of shares purchased under the plan within two years
after the offering date, the employee will be required to report the excess of
the fair market value of the shares on the purchase date over the purchase price
as ordinary compensation income for the year of disposition. If the disposition
is by sale, any difference between the fair market value of the shares on the
purchase date and the disposition price will be capital gain or loss. If the
disposition is by gift, the employee will not be taxed on any gain in excess of
the amount treated as ordinary compensation income, and for the purpose of
determining gain or loss on a subsequent disposition, the recipient of the gift
shares will be treated as having purchased the shares at their fair market value
on the purchase date. In the event of a disposition within two years after the
offering date, FEI will be entitled to a deduction from income in the year of
such disposition equal to the amount that the employee is required to report as
ordinary compensation income.
Under the terms of the plan, participants are required to pay to FEI any
amounts necessary to satisfy any tax withholding determined by FEI to be
required in connection with either the purchase or sale of shares acquired under
the plan.
RECOMMENDATION OF THE BOARD
The board of directors recommends the shareholders vote FOR the proposal.
The affirmative vote of a majority of the outstanding shares present at the
annual meeting is required to approve this proposal. Abstentions have the same
effect as "no" votes in determining whether the amendment is approved. Broker
non-votes have no effect on the results of the vote. The proxies will be voted
for or against the proposal of as an abstention, in accordance with the
instructions specified on the proxy form. If no instructions are given, proxies
will be voted FOR the proposal.
8
ELECTION OF DIRECTORS
The directors of FEI are elected at the annual meeting to serve until their
successors are elected and qualified. If any of the nominees for director at the
annual meeting becomes unavailable for election for any reason (none being
known), the proxy holders will have discretionary authority to vote pursuant to
the proxy for a suitable substitute or substitutes. The following table briefly
describes the nominees for directors.
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS AGE SINCE
- -------------------------------------------------- -------- --------
Michael J. Attardo. Dr. Attardo has served as a director of
FEI since April 1999. From 1992 to 1999, Dr. Attardo was
General Manager of International Business Machine
Corporation's ("IBM") Microelectronics Division. Dr.
Attardo enjoyed more than 30 years of experience in
engineering, management and development at IBM. Prior to
serving as General Manager of the Microelectronics
Divsion, Dr. Attardo was General Manager of the
Manufacturing and Process Development Division for IBM. He
serves as a member of both the board of directors of the
Semiconductor Industries Association and the Engineering
Council of the Columbia University School of Engineering
and Applied Science. He also serves on the joint
industry-government Semiconductor Technology Council for
the United States Department of Defense. Dr. Attardo sits
on the board of directors of Silicon Valley Group, Inc.,
("SVG") a supplier of advanced wafer processing equipment
to the world-wide semiconductor industry.................. 58 1999
William E. Curran. Mr. Curran has served as a director of
FEI since February 1997. Since July 1999 he has been
President and Chief Executive Officer of Philips
Electronics North America Corporation ("Philips North
America"), a Philips affiliate. From 1996 until October
1999, Mr. Curran was Senior Vice President, Chief
Financial Officer of Philips North America. In addition,
Mr. Curran has been a director of Philips North America
since 1996. From March 1993 to February 1996, he was Chief
Operating Officer of Philips Medical Systems and from
February 1987 to February 1996 Mr. Curran was Chief
Financial Officer of Philips Medical Systems. Mr. Curran
holds a B.S. in Management Engineering from Rensselaer
Polytechnic Institute and an M.B.A. from the University of
Pennsylvania.............................................. 51 1997
Eric H. Goeld. Mr. Goeld has served as a director of FEI
since January 2000. He is Executive Vice President and
General Manager of the MultiMarket Products Business Unit
of Philips Semiconductors (a division of Philips), a
position he has held since February 1999. Before joining
Philips, Mr. Goeld spent more than 25 years with Motorola
Semiconductor, a subsidiary of Motorola Corporation, where
he most recently served as its Vice President and Director
of Strategy from January 1997 to December 1998. From 1993
to December 1996, Mr. Goeld was Vice President and General
Manager for the Analog IC Division of Motorola
Semiconductor. Mr. Goeld holds a B.S.E.E. from
Massachusetts Institute of Technology and a M.S.E.E. from
Northeastern University................................... 54 2000
9
DIRECTOR
NAME, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS AGE SINCE
- -------------------------------------------------- -------- --------
Dr. William W. Lattin. Dr. Lattin joined FEI as a director
in April 1999. Dr. Lattin was an Executive Vice President
of Synopsys, Inc., from October 1994 until October 1999.
From September 1986 through February 1994, Dr. Lattin
served as President and Chief Executive Officer of Logic
Modeling Corp. From 1975 to 1986, Dr. Lattin held various
engineering and management positions with Intel
Corporation. Dr. Lattin also serves as a director on the
boards of RadiSys Corporation, the Oregon Graduate
Institute, EasyStreet Online Services, Inc., and Synopsys,
Inc. Dr. Lattin holds a Ph.D. in electrical engineering
from Arizona State University and a M.S.E.E. and B.S.E.E.
from the University of California-Berkeley................ 59 1999
Vahe A. Sarkissian. Mr. Sarkissian joined FEI as President
and Chief Executive Officer and a director in May 1998.
From 1994 to 1995, he was President and Chief Executive
Officer of Metrologix, Inc., an electron beam metrology
company. Mr. Sarkissian was with SVG from 1989 to 1993, as
President and Chief Operating Officer, and before that as
President and Chief Executive Officer of SVG Lithography
Systems, a subsidiary of SVG. Before SVG he was a Vice
President of Data General Corp. He has held several
technical and management positions with semiconductor
companies, including Advanced Micro Devices, Inc. He has
served as a member of the board of directors for several
technology companies. Mr. Sarkissian holds a B.S.E.E. from
Northrop University and an M.S.E.E. from the University of
Santa Clara............................................... 57 1998
Jan C. Lobbezoo. Mr. Lobbezoo has served as a director of
FEI since July 1999. He has been Executive Vice President
and Chief Financial Officer of Philips Semiconductors
International B.V. (an affiliate of Philips) since May
1994. He joined Philips in 1970 and served in a number of
finance and control positions in Nigeria, South Africa and
Scandinavia as well as in the Netherlands. Mr. Lobbezoo
has a Masters degree in Business Economics from Erasmus
University, Rotterdam, the Netherlands. He also serves on
the board of directors of Taiwan Semiconductor
Manufacturing Co., Ltd.................................... 54 1999
Dr. Lynwood W. Swanson. Dr. Swanson co-founded FEI in 1971
and has served as a director since that time. He served as
President of FEI until October 1994, at which time he
became Chairman of the board of directors. Dr. Swanson was
appointed Chief Scientist in May 1990 and served as Chief
Executive Officer of FEI from May 1988 to February 1997.
Dr. Swanson holds B.S. degrees in physics and chemistry
from the University of the Pacific and a Ph.D. degree in
physical chemistry from the University of California at
Davis..................................................... 65 1971
Donald R. VanLuvanee. Mr. VanLuvanee has served as a
director of FEI since November 1995. Mr. VanLuvanee has
been President, Chief Executive Officer and a director of
Electro Scientific Industries, Inc., an electronics
company, since July 1992. Mr. VanLuvanee also serves as a
director of Micro Component Technology, Inc., a
semiconductor equipment manufacturing company............. 54 1995
FEI BOARD MEETINGS AND COMMITTEES
The FEI board met seven times during 1999. Mr. Theo J.H.J. Sonnemans, who
resigned as a director in July 1999, attended fewer than 75% of the aggregate
number of board meetings and committee meetings of the committee on which he
served during 1999. Dr. Alfred B. Bok, who resigned from the board in
January 2000, also attended fewer than 75% of the aggregate number of board
meetings and committee meetings of the committee on which he served during 1999.
No other director attended fewer than 75% of the meetings of the board of
directors and the committees of which the director was a member during 1999.
Throughout 1999, the standing committees of the board of directors were the
audit
10
committee and the compensation committee. In January 2000, the board created a
nominating committee to review qualifications and make recommendations to the
board concerning nominees to the board of directors and board membership. The
nominating committee has not put in place a procedure for considering nominees
recommended by security holders.
The audit committee makes recommendations concerning the engagement of the
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of the audit and non-audit
fees and reviews the adequacy of FEI's internal accounting controls. The audit
committee met four times in fiscal 1999. At the end of fiscal 1999 the audit
committee consisted of Michael J. Attardo, Jan C. Lobbezoo and Donald R.
VanLuvanee. Mr. Sonnemans served on the audit committee from January 1999 until
July 1999, when he was replaced by Mr. Lobbezoo.
The compensation committee determines compensation for FEI's executive
officers and administers FEI's stock incentive plan and the employee share
purchase plan. During all of 1999 the compensation committee consisted of
William W. Lattin, Alfred B. Bok, William E. Curran, and Donald VanLuvanee. The
compensation committee met four times in fiscal 1999.
DIRECTOR COMPENSATION
Under the terms of the stock incentive plan, each individual who becomes an
independent director receives a nonqualified option to purchase 5,000 shares of
common stock when the individual becomes a director. In addition, each
independent director of FEI is automatically granted an annual
non-discretionary, non-statutory option to purchase 3,000 shares of common
stock. In 1999, independent directors were each paid $7,500 per year for their
services, $1,000 for attendance at each board meeting and an additional $500 for
attendance at each committee meeting, provided the committee meeting was not
held at the same location and within 24 hours of a scheduled board meeting.
No directors other than independent directors receive fees or option grants
for services as a director. All directors were reimbursed in 1999 for reasonable
expenses incurred in attending meetings.
RECOMMENDATION OF THE BOARD
The board of directors recommends the shareholders vote FOR the slate of
nominees named in this proxy statement. If a quorum is present at the annual
meeting, directors will be elected by a vote of a plurality of the shares cast
in person or by proxy. Accordingly, the eight nominees receiving the most votes
at the annual meeting will be elected. Abstentions and broker non-votes will
have no effect on the results of the vote.
11
FEI EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by FEI with respect to
the last three years to the chief executive officer and the most highly
compensated four other current executive officers.
FEI SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------- -----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTION COMPENSATION
- --------------------------- -------- -------- -------- ------------ ---------- ---------- ------------
Vahe A. Sarkissian........ 1999 $310,000 $346,885(1) 0 0 $136,665(2)
President & Chief 1998 197,923 0 0 370,313(3) 98,760(4) 0
Executive Officer 1997 0 0 0 0 0 0
William P. Mooney......... 1999 $180,000 $ 80,444 0 0 $116,739(5)
Executive Vice President 1998 0 0 0 0 0 0
& Chief Financial Officer 1997 0 0 0 0 0 0
Karel D. van der Mast..... 1999 $195,384 $ 66,300 $ 0 0 0 0
Executive Vice President 1998 180,000 20,000 0 0 100,000(4) 0
& General Manager, 1997 127,108 13,851 0 0 0 0
Microelectronics
Product Division
Lynwood W. Swanson........ 1999 $150,000 $ 49,725 $ 0 0 0 $ 0
Chairman of the Board 1998 150,000 15,750 0 0 95,000(4) 0
1997 161,955 11,250 0 0 0 0
Nico Vrijenhoek........... 1999 $133,302(6) $ 46,410 $ 0 0 0 $ 0
Senior Vice President & 1998 12,071 0 2,000 0 0 0
General Manager, Electron 1997 0 0 0 0 0 0
Optics Product Division
- --------------------------
(1) Amount represents incentive payment included in 1998 hiring arrangements of
$200,000 paid to Mr. Sarkissian on July 30, 1999 for the period May 1998
through May 1999, plus a performance award of $146,885 for 1999 paid for the
period June 1999 through December 1999 under the Company's senior manager
bonus plan.
(2) Amount represents allocation for 1999 housing of $71,026 which includes tax
protection, plus $65,639 for forgiveness of loans to pay state and federal
taxes on a share grant, including tax protection. The loan to pay taxes on
the share grant bears an interest rate of 5.58% and is forgiven at the rate
of 20% each year.
(3) Amount represents the fair market value of a 50,000 share grant to Mr.
Sarkissian on June 25, 1998, based on the closing price on that date of
$7.41 per share. 25,000 shares of the 50,000 share award were subject to
forfeiture if Mr. Sarkissian's employment as Chief Executive Officer of FEI
had terminated before June 25,1999.
(4) A portion of the stock options granted in 1998 includes options which were
canceled on September 18, 1998 as result of an option repricing.
(5) Amount represents relocation reimbursements of $116,739, including amounts
to cover state and federal taxes associated with these reimbursements.
(6) Amount represents compensation paid in Dutch guilders converted to U.S.
dollars using an average conversion rate of 2.1 guilders to the dollar.
12
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1999 to the
persons named in the summary compensation table.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
- ----------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ---- ---------- ------------ -------- ---------- --------- -----------
Vahe A. Sarkissian................ 100,000 0.0981 $ 7.281 10/21/2009 $457,898 $1,160,404
100,000 0.0981 10.875 01/28/2009 683,923 1,733,195
William P. Mooney................. 30,000 0.0294 $ 7.281 10/21/2009 $137,369 $ 348,121
50,000 0.049 9.25 02/09/2009 290,864 737,106
Karel D. van der Mast............. 15,000 0.0147 $ 7.281 10/21/2009 $ 68,685 $ 174,061
20,000 0.0196 10.875 01/28/2009 136,785 346,639
Lynwood W. Swanson................ 10,000 0.0098 $10.875 01/28/2009 $ 68,392 $ 173,319
Nico Vrijenhoek................... 10,000 0.0098 $ 7.281 10/21/2009 $ 45,790 $ 116,040
- --------------------------
(1) The 5% and 10% assumed rates of appreciation are required by the Securities
and Exchange Commission and do not represent FEI's estimate or projection of
the future stock price.
FEI OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth, for each of the persons named in the summary
compensation table, the shares acquired and the value realized on exercise of
stock options during 1999 and the fiscal year-end number and value of
unexercised options:
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF SHARES SUBJECT OPTIONS AT FY-END
TO UNEXERCISED OPTIONS AT --------------------
SHARES FY-END
ACQUIRED ------------------------- EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE UNEXERCISABLE(1)
- --------------------------------- ----------- -------------- ------------------------- --------------------
Vahe A. Sarkissian............... 0 0 19,752/229,628 $175,299/$1,546,800
William P. Mooney................ 0 0 10,000/70,000 $62,500/$496,600
Karel D. van der Mast............ 0 0 20,000/65,000 $177,500/$481,800
Lynwood W. Swanson............... 0 0 52,000/63,000 $368,250/$499,570
Nico Vrijenhoek.................. 0 0 11,200/26,800 $105,000/$239,916
- --------------------------
(1) Calculated on the December 31, 1999 closing price of $15.50, less the
exercise price, multiplied by the number of shares underlying the option
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE
OF CONTROL AGREEMENTS
On August 1, 1997, the Company entered into an employment agreement with
Dr. van der Mast, the Company's Executive Vice President, which terminates on
June 30, 2002. The agreement establishes a
13
minimum base salary of $180,000, subject to annual review and specifies certain
other benefits commensurate with those available to similarly situated
employees, including incentive compensation. In the event of termination without
cause, Dr. van der Mast is entitled to a severance payment equal to one and
one-half times base salary.
On May 14, 1998, the Company confirmed the employment terms for
Mr. Sarkissian through a letter agreement. The agreement established a base pay
of $310,000 subject to annual review and an ongoing bonus eligibility of 67%,
based on achieving established objectives. It also included an initial grant of
50,000 shares of Company common stock, options for 49,380 shares and a
restricted stock purchase of 150,620 shares, funded through a loan from the
Company. The letter specifies eligibility for future option grants, confirms a
severance benefit should employment be terminated in the first three years of
employment equal to one year of base salary, loan forgiveness and an additional
one year vesting of options.
On August 13, 1999, the Company entered an employment agreement with
Dr. Nicolas P. Economou, the Company's Chief Operating Officer, providing for
payment of base salary and certain benefits through August 13, 2001, in the
event Dr. Economou is terminated from his position of Chief Operating Officer
without cause. The terms of the employment agreement were agreed to at the time
of execution of the merger agreement with Micrion in December 1998. The
agreement includes a noncompetition provision that bars Dr. Economou from
competing against the Company for two years following termination of employment.
FEI COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION(1)
The FEI compensation committee presently consists of three directors and,
pursuant to authority delegated by the board of directors, determines and
administers the compensation of FEI(1)s executive officers. In setting the
compensation for the executive officers other than the President and Chief
Executive Officer, the compensation committee works closely with the Chief
Executive Officer, who makes specific recommendations to the committee
concerning compensation for each of the other executive officers. Although the
board of directors has granted the compensation committee full authority to set
executive compensation, in practice the decisions of the compensation committee
are usually reported as recommendations to the full board of directors, which
has in the past generally approved the recommendations.
Internal Revenue Code Section 162(m), as adopted in 1993, limits to
$1,000,000 per person the amount that FEI may deduct for compensation paid to
any of its most highly compensated officers in any year after 1993. The levels
of salary and bonus paid by FEI have not exceeded this limit. Upon the exercise
of nonqualified incentive stock options, however, the excess of the current
market price over the option price (option spread) is treated as compensation
and, therefore, it may be possible for option exercises by an officer in any
year to cause the officer's total compensation to exceed $1,000,000. Under
certain regulations, option spread compensation from options that meet certain
requirements will not be subject to the $1,000,000 cap on deductibility, and it
is FEI's current policy generally to grant options that meet those requirements.
- ------------------------
(1) This section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of FEI under the Securities Act of 1933 or the
Securities Exchange Act of 1934, regardless of date or any other general
incorporation language in such filing.
14
COMPENSATION PRINCIPLES
Executive compensation is based on several general principles, which are
summarized below:
- Provide competitive total compensation that enables FEI to attract and
retain key executives.
- Link corporate and individual performance to compensation.
- Encourage long-term success and align shareholder interests with
management interests by giving executives the opportunity to acquire stock
in FEI.
- Reward initiative.
COMPENSATION COMPONENTS
The primary components of FEI's executive officer compensation program are
base salary, annual incentive arrangements and long-term incentive compensation
in the form of stock options.
BASE SALARY. FEI attempts to establish base salary levels for FEI's
executive officers that are competitive with those established by companies of
similar size in the electronics industry. When determining salaries, the
compensation committee also takes into account individual experience levels, job
responsibility and individual performance. Each executive officer's salary is
reviewed annually, and increases to base salary are made to reflect competitive
market increases and the individual factors described above.
SENIOR MANAGER BONUS PLAN. In 1999 senior managers of FEI were eligible for
payment of an annual bonus, at levels generally ranging from 20% to 40% of base
salary, with the amount being determined based on a combination of company-wide,
divisional and individual performance. For 1999, the compensation committee
decided that there would be no pay-out for individual performance unless the
Company met certain minimum financial targets. Based on these criteria and
conditions actual bonuses paid to FEI's senior managers ranged generally from
22% to 44% of each individual's base salary in 1999. The Chief Executive Officer
participated in the senior manager bonus plan based on a bonus eligibility of
67% of base salary, for a portion of the year as described below.
LONG-TERM INCENTIVES OPTIONS AND RESTRICTED STOCK. FEI's primary long-term
incentive compensation is through stock options. The compensation committee
believes that the motivation of senior managers increases as the market value of
FEI's common stock increases. Options and restricted stock grants, in
particular, reward executive officers and other key employees for performance
that results in increases in the market price of FEI's common stock, which
directly benefits all shareholders. In order to align the financial interests of
executive officers and other key employees with those of the shareholders, FEI
grants stock options on a periodic basis, taking into account, among other
factors, the size and terms of previous grants of equity-based compensation and
stock holdings. The option terms and conditions are consistent with those of
similarly situated companies and are described more fully in the description of
the incentive option plan appearing elsewhere in this document. The compensation
committee administers the stock incentive plan and establishes awards of stock
options to senior managers and other key employees of FEI.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The principal components of compensation for the Company's Chief Executive
Officer, Vahe A. Sarkissian in fiscal 1999 were: base salary in the amount of
$310,000; a fixed additional cash payment for his initial 12 month period of
employment of $200,000 (through May 1999), along with a pro-rated performance
bonus of $146,885 paid under the senior management bonus plan; and stock options
to purchase 200,000 shares of common stock. In 1999, the Company also paid
certain compensation agreed to at the time Mr. Sarkissian was recruited to the
Company, which included vesting of 50% of a share bonus of 50,000 shares, as
well as loan forgiveness of $65,639 for a loan provided to pay taxes on the
share bonus.
15
30,124 shares vested from a restricted share purchase by Mr. Sarkissian that was
funded through a Company loan.
In setting compensation for the Chief Executive Officer for 1999, the
Committee considered a number of factors:
- Concluding the merger agreement with Micrion.
- New product introduction and enhanced marketing efforts.
- Attainment of certain financial performance goals.
- Building knowledge of the Company in the financial community.
- Recruiting new management team members.
- Restructuring the Company's product and sales operations.
- Redefining the Company's strategic objectives.
COMPENSATION COMMITTEE MEMBERS
William E. Curran
William W. Lattin
Donald R. VanLuvanee
16
FEI PERFORMANCE(2)
Set forth below is a line graph comparing the cumulative total shareholder
return of FEI common stock, with the cumulative total return of the Nasdaq Stock
Market Index ("Nasdaq Index") and the Non-Financial Nasdaq Index, assuming the
investment of $100 on December 29, 1995 and reinvestment of any dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
FEI Company $100 $87 $116 $71 $144
Nasdaq Index $100 $123 $151 $212 $384
Non-Financial Nasdaq Index $100 $121 $142 $208 $402
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
FEI Company........................................ $100 $ 87 $116 $ 71 $144
Nasdaq Index....................................... $100 $123 $151 $212 $384
Non-Financial Nasdaq Index......................... $100 $121 $142 $208 $402
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information regarding the beneficial
ownership as of February 29, 2000 of the common stock by (i) each person who
owns beneficially more than 5% of the outstanding shares of common stock,
(ii) each director of FEI, (iii) each executive officer of FEI named in the
- ------------------------
(2) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of FEI under the Securities Act of 1933 or the
Securities Exchange Act of 1934, regardless of date or any other general
incorporation language in such filing.
17
Summary Compensation Table and (iv) all executive officers and directors as a
group. This information is based on information received from or on behalf of
the named individuals.
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED(1) OF SHARES
- ---------------- ------------ ----------
Philips Business Electronics International B.V. ............ 13,905,202 50%
Building VP-1, PO Box 218
5600 MD Eindhoven
The Netherlands
Lynwood W. Swanson(2) ...................................... 466,988 1.7%
c/o 7451 NW Evergreen Parkway
Hillsboro, OR 97124
Vahe A. Sarkissian(3)....................................... 248,372 *
Karel D. van der Mast(4).................................... 34,104 *
William P. Mooney(5)........................................ 20,000 *
Donald R. VanLuvanee(6)..................................... 11,499 *
Nico Vrijenhoek(7).......................................... 11,200 *
Michael J. Attardo(8)....................................... 2,499 *
William E. Curran........................................... -- --
Nicholas P. Economou........................................ 216,247 *
Jan C. Lobbezoo............................................. -- --
Eric H. Goeld............................................... -- --
William W. Lattin(9)........................................ 2,499 *
All directors and executive officers as a group 1,027,908 3.7%
(14 persons)(10)..........................................
- ------------------------
* Less than 1%
(1) Shares that the person has the right to acquire within 60 days after
February 29, 2000 are deemed to be outstanding in calculating the percentage
ownership of the person or group but are not deemed to be outstanding as to
any other person or group.
(2) Includes shares held jointly by Dr. Swanson and his wife and 56,000 shares
subject to options exercisable within 60 days after February 29, 2000.
(3) Includes 39,752 shares subject to options exercisable within 60 days after
February 29, 2000.
(4) Includes 24,000 shares subject to options exercisable within 60 days after
February 29, 2000.
(5) Includes 20,000 shares subject to options exercisable within 60 days after
February 29, 2000.
(6) Includes 11,499 shares subject to options exercisable within 60 days after
February 29, 2000.
(7) Includes 11,200 shares subject to options exercisable within 60 days after
February 29, 2000.
(8) Includes 2,499 shares subject to options exercisable within 60 days after
February 29, 2000.
(9) Includes 2,499 shares subject to options exercisable within 60 days after
February 29, 2000.
18
(10) Includes 11,000 shares subject to options exercisable within 60 days after
February 29, 2000 held by executive officers not listed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS AND RELATIONSHIPS BETWEEN FEI AND PHILIPS
GENERAL. Pursuant to the terms of the combination agreement (the "PEO
Combination Agreement"), effective February 21, 1997 (the "PEO Combination"),
Philips Business Electronics became the majority shareholder of FEI. Philips
Business Electronics is a wholly-owned subsidiary of Philips. FEI has entered
into a number of arrangements with Philips and its affiliates that bear on many
aspects of the Company's operations, as described more fully below. Consistent
with the requirements of Oregon corporate law the Company's board of directors
has mandated a policy that any transaction or arrangement with a related party,
including Philips and Philips affiliates, should be on terms no less favorable
than could be obtained in independent negotiations with outside third parties.
Further, such transactions must be approved by a majority of disinterested
directors. Some of the Philips arrangements, however, date from the period prior
to the PEO Combination and therefore were not the result of arms-length
negotiations between independent parties. These arrangements were established
when the electron optics business of Philips, acquired by FEI in the PEO
Combination, was an unincorporated division of Philips. With regard to certain
arrangements with Philips, it is difficult to determine with certainty that
terms obtained from Philips are as favorable as could be obtained in arms-length
negotiations. The Company believes, however, that taken as a whole, its
relationship with Philips accommodates the parties' interests in a manner that
is fair to both parties. The following is a summary of certain past, present and
prospective arrangements and transactions between Philips and FEI:
PHILIPS' BUSINESS ELECTRONICS RIGHT TO PURCHASE ADDITIONAL SHARES. Under
various arrangements with the Company Philips Business Electronics has rights to
obtain certain shares of the Company's common stock at or below market price.
- In connection with the Micrion merger and pursuant to the terms of a share
purchase agreement that the Company and Philips Business Electronics
entered into at the time the merger agreement with Micrion was executed,
Philips Business Electronics acquired 3,913,299 shares of Company common
stock at a price of $8.02 per share on August 13, 1999.
- Under the PEO Combination Agreement, Philips Business Electronics has
rights to receive additional FEI shares to maintain its percentage
ownership of FEI based on issuance of shares pursuant to stock option
exercises. In fiscal 1999, Philips Business Electronics obtained rights to
24,108 shares based on option exercises.
- Also under the PEO Combination Agreement until such time as the Philips
Business Electronics ownership interest drops below 40%, Philips Business
Electronics has certain top-up rights that require the Company to give
notice to Philips Business Electronics when it cumulatively issues more
than 0.05% of its shares. Philips Business Electronics has a right to
purchase additional shares at market price, sufficient to allow it to
obtain ownership of up to 55% of the Company's outstanding capital stock.
No shares were offered to Philips Business Electronics in fiscal 1999
pursuant to this provision.
PHILIPS SERVICES AGREEMENTS. Effective February 21, 1997, the closing date
of the PEO Combination, Philips and its affiliates, including Philips Business
Electronics, began providing a variety of administrative services to FEI and its
non-U.S. subsidiaries. Some of these service arrangements are contained in
specific agreements and others are not. The services provided by Philips and its
affiliates include:
- Human Resources--services related to personnel and personnel management
systems; payroll services; access to Philips collective bargaining
arrangements; access to Philips rate for social charges.
19
- Letters of Credit--arrangements for export sales.
- Guarantees--relating to customer prepayments.
- Philips Research--contract research with the central Philips research
laboratory related to electron optics microscopy technology.
- Corporate Purchasing--access to certain products and discounts; access to
standardized purchasing coding; central electronic payment system;
purchasing information and training; negotiation of new purchasing
arrangements.
- Central Finance and Administration--fixed asset registration, VAT, customs
and import duties services.
- Legal Services--local support outside the US, and corporate and commercial
support in The Netherlands.
- Corporate Bureau on Environment and Energy--support and review on
environmental matters and energy costs.
- Insurance--participation in the Philips insurance program.
- Information Technologies--access to proprietary databases; use of global
network.
During the year ended December 31, 1999, FEI paid Philips and its affiliates
approximately $2.8 million for these administrative and other services. FEI
expects that for the near term Philips and its affiliates will continue to
provide the above-described services. In the event, however, that Philips ceases
to be a majority shareholder of the Company, some or all of these arrangements
might terminate. It is unclear whether in the event of such termination, the
Company would be able to find replacement services at a similar or lower price.
In addition, there may be other indirect costs associated with obtaining new
vendors for these services and addressing additional needs, including diversion
of management time and resources.
ACQUISITION OF WORLD-WIDE ASSETS FROM PHILIPS AND TERMINATION OF
DISTRIBUTION AGREEMENTS. At the time of the PEO Combination, FEI entered into a
three-year distribution agreement with Philips Business Electronics under which
Philips' affiliates in specified territories provided sales and service
activities for FEI. FEI sold its products to these affiliates at a discount from
list price for resale to end-users. Sales to Philips entities under these
arrangements amounted to approximately $10.1 million during the year ended
December 31, 1999. Pursuant to the terms of the PEO Combination Agreement,
Philips and FEI negotiated a termination of these distribution arrangements in
27 countries in October 1999 and the acquisition of certain assets and
liabilities of the former distributors in approximately 20 countries. The
purchase price for these businesses was $3.1 million. The final purchase price
was subject to adjustment based on a review of the assets of the acquired
businesses. During 1999, the Company transferred distribution businesses in
three countries to independent representatives and intends to transfer
additional such businesses to independent representatives in certain smaller
market countries during 2000. Liabilities assumed in the acquisition included
employee severance obligations. For certain countries, the Company entered into
service agreements with Philips entities for financial and administrative
services, leased office space, payroll and other services. These service
arrangements have one-year renewable terms and are cancelable on 180 days'
notice.
SALES OF PRODUCT TO PHILIPS ENTITIES. From time to time some affiliates of
Philips buy FEI products for their own use. In fiscal 1999, these purchases
amounted to $3.27 million. The Company believes these transactions were
negotiated at arms-length prices.
PHILIPS CREDIT FACILITY. On February 25, 1999, the Company entered into a
credit facility with Philips (the "Philips Credit Facility"). The Philips Credit
Facility provides borrowing capacity of up to $50 million, interest at LIBOR
plus 0.75%, and matures on February 26, 2002. The line of credit is unsecured,
allows
20
borrowing in three different currencies, and requires that the Company meet
certain financial covenants. As of December 31, 1999, the Company was in
compliance with all of the covenants of the agreement. As of December 31, 1999
the weighted average interest rate on outstanding borrowings was 5.02%. The
amount outstanding under the Philips Credit Facility as of December 31, 1999 was
$34.8 million. The Company believes the Philips Credit Facility was negotiated
at arms-length.
PHILIPS MACHINE FACTORY. A substantial portion of the subassemblies
included in the Company's products are purchased from Philips Machinefabrieken
Nederland B.V. ("Philips Machine Factory"), an affiliate of Philips. Materials
purchases from Philips Machine Factory and other Philips-owned suppliers
amounted to approximately $18.6 million in 1999.
OTHER MATTERS
ACCUREL CONTRACT. The Company's President and Chief Executive Officer,
Mr. Sarkissian owns 50% of the outstanding shares of stock of Accurel Systems
International Corp., a semiconductor analytical services laboratory firm based
in Sunnyvale, California ("Accurel"). In April 1999, Accurel purchased products
from FEI with a purchase price of $558,950, payable in 25 monthly installments
from acceptance, with the balance bearing interest at 10% per annum. In
addition, the Company entered into a service arrangement with Accurel for these
products that requires payment of $114,000 over two years. Payments for fiscal
1999 amounted to $60,000 under these arrangements. The Company believes this
transaction was negotiated at arms-length.
SURFACE/INTERFACE ARRANGEMENTS. In September 1999, FEI entered into a
distribution arrangement and made an equity investment in
Surface/Interface, Inc. ("Surface/Interface"), a semiconductor equipment
manufacturer. Mr. Sarkissian and members of his immediate family hold
approximately 10% of the outstanding capital stock of Surface/Interface and
Mr. Sarkissian is Chairman of its board of directors. Pursuant to the
Distribution Agreement, FEI obtained exclusive rights to distribute
Surface/Interface's Stylus-NanoProfilometer atomic force microscopy tool in
North America and Europe. The agreement has an initial term of two years but is
terminable by either party without cause on 180 days' notice and includes
customary terms and conditions for a distribution agreement. Simultaneous with
the execution of the distribution agreement, the Company invested $3 million in
Surface/Interface Series D Preferred Stock, purchasing 1,231,982 shares for
$2.4351 per share. This represents approximately 10% of the outstanding capital
stock of Surface/Interface. In addition, the Company was granted a warrant, with
a term of two years, to allow the Company to purchase up to an aggregate of
19.5% of Surface/Interface. The stock purchase agreement contains customary
representations and warranties. The rights and preferences of the Series D
Preferred Stock are designated in the Amended and Restated Articles of
Incorporation of Surface/Interface and are customary for preferred shares. In
connection with this investment, the Company also entered into an investors'
rights agreement with certain other shareholders of Surface/Interface and with
Surface/Interface whereby the Company obtained information rights, registration
rights and rights of first refusal. In addition, the Company presently is
represented on the Board of Surface/Interface. The Company believes this
transaction was negotiated at arms-length.
INDEPENDENT ACCOUNTANTS
Representatives of Deloitte & Touche LLP are expected to attend the annual
meeting. These representatives will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the of the Securities Act of 1934, as amended, requires
reports of all transactions in the Company's common stock by the Company's
executive officers and directors to be filed with the
21
Securities and Exchange Commission. Based solely on its review of copies of
these reports and representations of such reporting persons, the Company
believes that during 1999, except for one late filing by Mr. Sarkissian, each of
its executive officers and directors complied with the requirements of
Section 16(a).
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for transaction
of such other business as may properly come before the meeting, the board of
directors has no knowledge of any matters to be presented at the meeting other
than those referred to herein. The enclosed proxy, however, gives discretionary
authority to the proxy holders to vote in accordance with the recommendation of
management if any other matters are presented.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposals that FEI shareholders wish to be considered for inclusion in
the proxy statement for FEI's 2001 annual shareholders meeting must be received
by FEI at its principal executive office no later than January 6, 2001. Such
proposals should be submitted to the Secretary of FEI by certified mail, return
receipt requested. If notice of a shareholder proposal to be raised at FEI's
2001 annual shareholders meeting is received at the principal executive offices
of FEI after February 25, 2001 (45 days before the month and date in 2000
corresponding to the date on which FEI mailed its proxy materials for the 2000
annual meeting) such proposal will be considered untimely. Proxy voting on such
proposals at the 2001 annual shareholders meeting will be subject to the
discretionary voting authority of the designated proxy holders.
22
APPENDIX A
FEI COMPANY
1995 STOCK INCENTIVE PLAN, AS AMENDED
As proposed to be amended under Proposal 1
1. PURPOSE. The purpose of this Stock Incentive Plan (the "Plan") is to
enable FEI (the "Company") to attract and retain the services of (1) selected
employees, officers and directors of the Company or of any subsidiary of the
Company and (2) selected nonemployee agents, consultants, advisors, persons
involved in the sale or distribution of the Companys products and independent
contractors of the Company or any subsidiary.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below and
in paragraph 13, the shares to be offered under the Plan shall consist of common
stock of the Company, and the total number of shares of common stock that may be
issued under the Plan shall not exceed <#>2,000,000</#> 4,000,000 shares. The
shares issued under the Plan may be authorized and unissued shares or reacquired
shares. If an option, stock appreciation right or performance unit granted under
the Plan expires, terminates or is canceled, the unissued shares subject to such
option, stock appreciation right or performance unit shall again be available
under the Plan. If shares sold or awarded as a bonus under the Plan are
forfeited to the Company or repurchased by the Company, the number of shares
forfeited or repurchased shall again be available under the Plan.
- --------------------------------------------------------------------------------
LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>" AND FOLLOWED BY A
"</#>".
- --------------------------------------------------------------------------------
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective as of April 21,
1995. No option, stock appreciation right or performance unit granted under
the Plan shall become exercisable, however, until the Plan is approved by
the affirmative vote of the holders of a majority of the shares of common
stock represented at a shareholders meeting at which a quorum is present and
any such awards under the Plan prior to such approval shall be conditioned
on and subject to such approval. Subject to this limitation, options, stock
appreciation rights and performance units may be granted and shares may be
awarded as bonuses or sold under the Plan at any time after the effective
date and before termination of the Plan.
(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board of Directors may suspend or terminate
the Plan at any time except with respect to options, performance units and
shares subject to restrictions then outstanding under the Plan. Termination
shall not affect any outstanding options, any right of the Company to
repurchase shares or the forfeitability of shares issued under the Plan.
4. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to
time the individuals to whom awards shall be made, the amount of the awards
and the other terms and conditions of the awards. Subject to the provisions
of the Plan, the Board of Directors may from time to time adopt and amend
rules and regulations relating to administration of the Plan, advance the
lapse of any waiting period, accelerate any exercise date, waive or modify
any restriction applicable to shares (except those restrictions imposed by
law) and make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The
interpretation and construction of the provisions of the Plan and related
agreements by the Board of Directors shall be final and conclusive. The
Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency
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in the Plan or in any related agreement in the manner and to the extent it
shall deem expedient to carry the Plan into effect, and it shall be the sole
and final judge of such expediency.
(b) COMMITTEE. The Board of Directors may delegate to a committee of
the Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If
authority is delegated to a Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors, (ii) that only the Board of
Directors may amend or terminate the Plan as provided in paragraphs 3 and 15
and (iii) that a Committee including officers of the Company shall not be
permitted to grant options to persons who are officers of the Company.
5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may, from time
to time, take the following action, separately or in combination, under the
Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as provided in
paragraphs 6(a) and 6(b); (ii) grant options other than Incentive Stock
Options ("Non-Statutory Stock Options") as provided in paragraphs 6(a) and
6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell shares
subject to restrictions as provided in paragraph 8; (v) grant stock
appreciation rights as provided in paragraph 9; (vi) grant cash bonus rights
as provided in paragraph 10; (vii) grant performance units as provided in
paragraph 11 and (viii) grant foreign qualified awards as provided in
paragraph 12. Any such awards may be made to employees, including employees
who are officers or directors, and to other individuals described in
paragraph 1 who the Board of Directors believes have made or will make an
important contribution to the Company or any subsidiary of the Company;
provided, however, that only employees of the Company shall be eligible to
receive Incentive Stock Options under the Plan. The Board of Directors shall
select the individuals to whom awards shall be made and shall specify the
action taken with respect to each individual to whom an award is made. At
the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award. No
employee may be granted options or stock appreciation rights under the Plan
for more than an aggregate of 200,000 shares of common stock in connection
with the hiring of the employee or OTHERWISE IN ANY CALENDAR AS FOLLOWS:
100,000 shares of common stock in the 1998 calendar year <#>and 50,000</#>;
150,000 shares of common stock in THE 1999 CALENDAR YEAR; AND 100,000 SHARES
OF COMMON STOCK IN any calendar thereafter.
- --------------------------------------------------------------------------------
LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>" AND FOLLOWED BY A
"</#>".
- --------------------------------------------------------------------------------
6. OPTION GRANTS.
(a) GENERAL RULES RELATING TO OPTIONS.
(i) TERMS OF GRANT. The Board of Directors may grant options under
the Plan. With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the option price,
the period of the option, the time or times at which the option may be
exercised and whether the option is an Incentive Stock Option or a
Non-Statutory Stock Option. At the time of the grant of an option or at
any time thereafter, the Board of Directors may provide that an optionee
who exercised an option with common stock of the Company shall
automatically receive a new option to purchase additional shares equal to
the number of shares surrendered and may specify the terms and conditions
of such new options.
(ii) EXERCISE OF OPTIONS. Except as provided in
paragraph 6(a)(iv) or as determined by the Board of Directors, no option
granted under the Plan may be exercised unless at the time of such
exercise the optionee is employed by or in the service of the Company or
any subsidiary of the Company and shall have been so employed or provided
such service continuously since the date such option was granted. Absence
on leave or on account of illness or disability under rules established
by the Board of Directors shall not, however, be deemed an interruption
of employment or service for this purpose. Unless otherwise determined by
the Board of Directors, vesting of options shall not continue during an
absence on leave (including an extended illness) or on
A-2
account of disability. Except as provided in paragraphs 6(a)(iv) and 13,
options granted under the Plan may be exercised from time to time over
the period stated in each option in such amounts and at such times as
shall be prescribed by the Board of Directors, provided that options
shall not be exercised for fractional shares. Unless otherwise determined
by the Board of Directors, if the optionee does not exercise an option in
any one year with respect to the full number of shares to which the
optionee is entitled in that year, the optionees rights shall be
cumulative and the optionee may purchase those shares in any subsequent
year during the term of the option.
(iii) NONTRANSFERABILITY. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors, each other option granted
under the Plan by its terms shall be nonassignable and nontransferable by
the optionee, either voluntarily or by operation of law, except by will
or by the laws of descent and distribution of the state or country of the
optionees domicile at the time of death.
(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined by the Board of
Directors, in the event the employment or service of the optionee
with the Company or a subsidiary terminates for any reason other than
because of physical disability or death as provided in subparagraphs
6(a)(iv)(B) and (C), the option may be exercised at any time prior to
the expiration date of the option or the expiration of 30 days after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY. Unless otherwise
determined by the Board of Directors, in the event of the termination
of employment or service because of total disability, the option may
be exercised at any time prior to the expiration date of the option
or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination. The term "total disability" means a medically
determinable mental or physical impairment which is expected to
result in death or which has lasted or is expected to last for a
continuous period of 12 months or more and which causes the optionee
to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of total
disability to the Company.
(C) TERMINATION BECAUSE OF DEATH. Unless otherwise determined by
the Board of Directors, in the event of the death of an optionee
while employed by or providing service to the Company or a
subsidiary, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after
the date of death, whichever is the shorter period, but only if and
to the extent the optionee was entitled to exercise the option at the
date of death and only by the person or persons to whom such
optionees rights under the option shall pass by the optionees will or
by the laws of descent and distribution of the state or country of
domicile at the time of death.
(D) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO TERMINATION. The
Board of Directors, at the time of grant or, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of
time not longer than the original expiration date of the option, and
may increase the portion of an option that is exercisable, subject to
such terms and conditions as the Board of Directors may determine.
A-3
(E) FAILURE TO EXERCISE OPTION. To the extent that the option of
any deceased optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and
terminate.
(v) PURCHASE OF SHARES. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted under the
Plan only upon receipt by the Company of notice in writing from the
optionee of the optionees intention to exercise, specifying the number of
shares as to which the optionee desires to exercise the option and the
date on which the optionee desires to complete the transaction, and if
required in order to comply with the Securities Act of 1933, as amended,
containing a representation that it is the optionees present intention to
acquire the shares for investment and not with a view to distribution.
Unless the Board of Directors determines otherwise, on or before the date
specified for completion of the purchase of shares pursuant to an option,
the optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Board of Directors,
cash that may be the proceeds of a loan from the Company (provided that,
with respect to an Incentive Stock Option, such loan is approved at the
time of option grant)) or, with the consent of the Board of Directors, in
whole or in part, in common stock of the Company valued at fair market
value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration. The fair market value of common stock provided in payment
of the purchase price shall be determined by the Board of Directors. If
the common stock of the Company is not publicly traded on the date the
option is exercised, the Board of Directors may consider any valuation
methods it deems appropriate and may, but is not required to, obtain one
or more independent appraisals of the Company. If the common stock of the
Company is publicly traded on the date the option is exercised, the fair
market value of common stock provided in payment of the purchase price
shall be the closing price of the common stock as reported in THE WALL
STREET JOURNAL on the last trading day preceding the date the option is
exercised, or such other reported value of the common stock as shall be
specified by the Board of Directors. No shares shall be issued until full
payment for the shares has been made. With the consent of the Board of
Directors (which, in the case of an Incentive Stock Option, shall be
given only at the time of option grant), an optionee may request the
Company to apply automatically the shares to be received upon the
exercise of a portion of a stock option (even though stock certificates
have not yet been issued) to satisfy the purchase price for additional
portions of the option. Each optionee who has exercised an option shall
immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If additional withholding
is or becomes required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the
optionee, including salary, subject to applicable law. With the consent
of the Board of Directors an optionee may satisfy this obligation, in
whole or in part, by having the Company withhold from the shares to be
issued upon the exercise that number of shares that would satisfy the
withholding amount due or by delivering to the Company common stock to
satisfy the withholding amount. Upon the exercise of an option, the
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued upon exercise of the option.
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be subject
to the following additional terms and conditions:
(i) LIMITATION ON AMOUNT OF GRANTS. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market
value, on the date of grant, of the common
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stock with respect to which Incentive Stock Options are exercisable for
the first time by that employee during any calendar year under the Plan
and under all incentive stock option plans (within the meaning of
Section 422 of the Code) of the Company or any parent or subsidiary of
the Company exceeds $100,000.
(ii) LIMITATIONS ON GRANTS TO 10 PERCENT SHAREHOLDERS. An Incentive
Stock Option may be granted under the Plan to an employee possessing more
than 10 percent of the total combined voting power of all classes of
stock of the Company or of any parent or subsidiary of the Company only
if the option price is at least 110 percent of the fair market value, as
described in paragraph 6(b)(iv), of the common stock subject to the
option on the date it is granted and the option by its terms is not
exercisable after the expiration of five years from the date it is
granted.
(iii) DURATION OF OPTIONS. Subject to paragraphs 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue
in effect for the period fixed by the Board of Directors, except that no
Incentive Stock Option shall be exercisable after the expiration of
10 years from the date it is granted.
(iv) OPTION PRICE. The option price per share shall be determined by
the Board of Directors at the time of grant. Except as provided in
paragraph 6(b)(ii), the option price shall not be less than 100 percent
of the fair market value of the common stock covered by the Incentive
Stock Option at the date the option is granted. The fair market value
shall be determined by the Board of Directors. If the common stock of the
Company is not publicly traded on the date the option is granted, the
Board of Directors may consider any valuation methods it deems
appropriate and may, but is not required to, obtain one or more
independent appraisals of the Company. If the common stock of the Company
is publicly traded on the date the option is exercised, the fair market
value shall be deemed to be the closing price of the common stock as
reported in THE WALL STREET JOURNAL on the day preceding the date the
option is granted, or, if there has been no sale on that date, on the
last preceding date on which a sale occurred or such other value of the
common stock as shall be specified by the Board of Directors.
(v) LIMITATION ON TIME OF GRANT. No Incentive Stock Option shall be
granted on or after the tenth anniversary of the effective date of the
Plan.
(vi) CONVERSION OF INCENTIVE STOCK OPTIONS. The Board of Directors
may at any time without the consent of the optionee convert an Incentive
Stock Option to a Non-Statutory Stock Option.
(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options shall be
subject to the following terms and conditions in addition to those set forth
in Section 6(a) above:
(i) OPTION PRICE. The option price for Non-Statutory Stock Options
shall be determined by the Board of Directors at the time of grant and
may be any amount determined by the Board of Directors.
(ii) DURATION OF OPTIONS. Non-Statutory Stock Options granted under
the Plan shall continue in effect for the period fixed by the Board of
Directors.
7. STOCK BONUSES. The Board of Directors may award shares under the Plan
as stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. If shares are subject to forfeiture, all
dividends or other distributions paid by the Company with respect to the shares
shall be retained by the Company until the shares are no longer subject to
forfeiture, at which time all accumulated amounts shall be paid to the
recipient. The Board of Directors may require the recipient to sign an agreement
as a condition of the award, but may not require the recipient to pay any
monetary consideration other than amounts necessary to satisfy tax withholding
requirements. The agreement may
A-5
contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the shares
awarded shall bear any legends required by the Board of Directors. The Company
may require any recipient of a stock bonus to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the recipient, including salary or fees for services, subject to applicable law.
With the consent of the Board of Directors, a recipient may deliver common stock
to the Company to satisfy this withholding obligation. Upon the issuance of a
stock bonus, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued.
8. RESTRICTED STOCK. The Board of Directors may issue shares under the
Plan for such consideration (including promissory notes and services) as
determined by the Board of Directors. Shares issued under the Plan shall be
subject to the terms, conditions and restrictions determined by the Board of
Directors. The restrictions may include restrictions concerning transferability,
repurchase by the Company and forfeiture of the shares issued, together with
such other restrictions as may be determined by the Board of Directors. If
shares are subject to forfeiture or repurchase by the Company, all dividends or
other distributions paid by the Company with respect to the shares shall be
retained by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All common stock issued pursuant to this paragraph 8 shall be subject
to a purchase agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement may contain
any terms, conditions, restrictions, representations and warranties required by
the Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. The Company may require any
purchaser of restricted stock to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the purchaser,
including salary, subject to applicable law. With the consent of the Board of
Directors, a purchaser may deliver common stock to the Company to satisfy this
withholding obligation. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
9. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms, and conditions as the
Board of Directors prescribes.
(b) EXERCISE.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount
equal in value to the excess of the fair market value on the date of
exercise of one share of common stock of the Company over its fair market
value on the date of grant (or, in the case of a stock appreciation right
granted in connection with an option, the excess of the fair market value
of one share of common stock of the Company over the option price per
share under the option to which the stock appreciation right relates),
multiplied by the number of shares covered by the stock appreciation
right or the option, or portion thereof, that is surrendered. No stock
appreciation right shall be exercisable at a time that the amount
determined under this subparagraph is negative. Payment by the Company
upon exercise of a stock appreciation right may be made in common stock
valued at fair market value, in cash, or partly in common stock and
partly in cash, all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at the time
or times established by the Board of Directors. If a stock appreciation
right is granted in connection with an option, the following rules shall
apply: (1) the stock appreciation right shall be exercisable only to the
extent and on the same conditions that the related option could be
exercised; (2) the stock appreciation
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rights shall be exercisable only when the fair market value of the stock
exceeds the option price of the related option; (3) the stock
appreciation right shall be for no more than 100 percent of the excess of
the fair market value of the stock at the time of exercise over the
option price; (4) upon exercise of the stock appreciation right, the
option or portion thereof to which the stock appreciation right relates
terminates; and (5) upon exercise of the option, the related stock
appreciation right or portion thereof terminates.
(iii) The Board of Directors may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations
from time to time affecting the rights of holders of stock appreciation
rights. Such rules and regulations may govern the right to exercise stock
appreciation rights granted prior to adoption or amendment of such rules
and regulations as well as stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the fair market value of the
common stock shall be determined as of the date the stock appreciation
right is exercised, under the methods set forth in paragraph 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal
to the value of the fraction or, if the Board of Directors shall
determine, the number of shares may be rounded downward to the next whole
share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors, each other stock appreciation right granted under the Plan by
its terms shall be nonassignable and nontransferable by the holder,
either voluntarily or by operation of law, except by will or by the laws
of descent and distribution of the state or country of the holders
domicile at the time of death, and each stock appreciation right by its
terms shall be exercisable during the holders lifetime only by the
holder.
(vii) Each participant who has exercised a stock appreciation right
shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant including salary, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon the exercise that number of shares that
would satisfy the withholding amount due or by delivering common stock to
the Company to satisfy the withholding amount.
(viii) Upon the exercise of a stock appreciation right for shares, the
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued. Cash payments of stock appreciation rights
shall not reduce the number of shares of common stock reserved for
issuance under the Plan.
10. CASH BONUS RIGHTS.
(a) GRANT. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted,
(ii) stock appreciation rights granted or previously granted, (iii) stock
bonuses awarded or previously awarded and (iv) shares sold or previously
sold under the Plan. Cash bonus rights will be subject to rules, terms and
conditions as the Board of Directors may prescribe. Unless otherwise
determined by the Board of Directors, each cash bonus right granted under
the Plan by its terms shall be nonassignable and nontransferable by the
holder, either voluntarily or by operation of law, except by will or by the
laws of descent and distribution of
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the state or country of the holders domicile at the time of death. The
payment of a cash bonus shall not reduce the number of shares of common
stock reserved for issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus right
granted in connection with an option will entitle an optionee to a cash
bonus when the related option is exercised (or terminates in connection with
the exercise of a stock appreciation right related to the option) in whole
or in part if, in the sole discretion of the Board of Directors, the bonus
right will result in a tax deduction that the Company has sufficient taxable
income to use. If an optionee purchases shares upon exercise of an option
and does not exercise a related stock appreciation right, the amount of the
bonus, if any, shall be determined by multiplying the excess of the total
fair market value of the shares to be acquired upon the exercise over the
total option price for the shares by the applicable bonus percentage. If the
optionee exercises a related stock appreciation right in connection with the
termination of an option, the amount of the bonus, if any, shall be
determined by multiplying the total fair market value of the shares and cash
received pursuant to the exercise of the stock appreciation right by the
applicable bonus percentage. The bonus percentage applicable to a bonus
right, including a previously granted bonus right, may be changed from time
to time at the sole discretion of the Board of Directors but shall in no
event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to
a cash bonus payable when the stock bonus is awarded or restrictions, if
any, to which the stock is subject lapse. If bonus stock awarded is subject
to restrictions and is repurchased by the Company or forfeited by the
holder, the cash bonus right granted in connection with the stock bonus
shall terminate and may not be exercised. The amount and timing of payment
of a cash bonus shall be determined by the Board of Directors.
(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash bonus
right granted in connection with the purchase of stock pursuant to
paragraph 8 will entitle the recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any
cash bonus right granted in connection with shares purchased pursuant to
paragraph 8 shall terminate and may not be exercised in the event the shares
are repurchased by the Company or forfeited by the holder pursuant to
applicable restrictions. The amount of any cash bonus to be awarded and
timing of payment of a cash bonus shall be determined by the Board of
Directors.
(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
11. PERFORMANCE UNITS. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders equity, return on invested capital, and such other goals as may be
established by the Board of Directors. In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent of the monetary value of the performance
units shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in common stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors. Unless otherwise determined by the Board of Directors, each
performance unit granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state or country of
the holders domicile at the time of death. Each participant who has been awarded
a performance unit shall, upon notification of the amount due, pay to the
Company in cash
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amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the participant, including salary or fees for services, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from any shares
to be issued that number of shares that would satisfy the withholding amount due
or by delivering common stock to the Company to satisfy the withholding amount.
The payment of a performance unit in cash shall not reduce the number of shares
of common stock reserved for issuance under the Plan. The number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued upon payment of an award.
12. FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to such
officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. CHANGES IN CAPITAL STRUCTURE.
(a) STOCK SPLITS; STOCK DIVIDENDS. If the outstanding common stock of
the Company is hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company
by reason of any stock split, combination of shares or dividend payable in
shares, recapitalization or reclassification appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares available
for grants under the Plan. In addition, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be
exercisable, so that the optionees proportionate interest before and after
the occurrence of the event is maintained. Notwithstanding the foregoing,
the Board of Directors shall have no obligation to effect any adjustment
that would or might result in the issuance of fractional shares, and any
fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.
(b) MERGERS, REORGANIZATIONS, ETC. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock,
separation, reorganization or liquidation to which the Company or a
subsidiary is a party or a sale of all or substantially all of the Companys
assets (each, a "Transaction"), the Board of Directors shall, in its sole
discretion and to the extent possible under the structure of the
Transaction, select one of the following alternatives for treating
outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance with
their terms.
(ii) Outstanding options shall be converted into options to purchase
stock in the corporation that is the surviving or acquiring corporation
in the Transaction. The amount, type of securities subject thereto and
exercise price of the converted options shall be determined by the Board
of Directors of the Company, taking into account the relative values of
the companies involved in the Transaction and the exchange rate, if any,
used in determining shares of the surviving corporation to be issued to
holders of shares of the Company. Unless otherwise determined by the
Board of Directors, the converted options shall be vested only to the
extent that the vesting requirements relating to options granted
hereunder have been satisfied.
(iii) The Board of Directors shall provide a 30-day period prior to
the consummation of the Transaction during which outstanding options may
be exercised to the extent then exercisable, and upon the expiration of
such 30-day period, all unexercised options shall immediately
A-9
terminate. The Board of Directors may, in its sole discretion, accelerate
the exercisability of options so that they are exercisable in full during
such 30-day period.
(c) DISSOLUTION OF THE COMPANY. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph 13(b)(iii).
(d) RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock
bonuses and cash bonuses and issue restricted stock under the Plan having
terms, conditions and provisions that vary from those specified in this Plan
provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options, stock appreciation
rights, stock bonuses, cash bonuses, restricted stock and performance units
granted, awarded or issued by another corporation and assumed or otherwise
agreed to be provided for by the Company pursuant to or by reason of a
Transaction.
14. AMENDMENT OF PLAN. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(a)(iv), 9, 10 and 13, however,
no change in an award already granted shall be made without the written consent
of the holder of such award.
15. APPROVALS. The obligations of the Company under the Plan are subject
to the approval of state and federal authorities or agencies with jurisdiction
in the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Companys shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver common stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
16. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such employee is
employed to terminate such employees employment at any time, for any reason,
with or without cause, or to decrease such employees compensation or benefits,
or (ii) confer upon any person engaged by the Company any right to be retained
or employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
17. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any common stock until the
date of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
18. OPTION GRANTS TO INDEPENDENT DIRECTORS.
(a) INITIAL BOARD GRANTS. Each person who is an Independent Director
when the Plan is adopted or who becomes an Independent Director thereafter
shall be automatically granted an option to purchase 5,000 shares of common
stock on the date the Plan is approved by the shareholders of the Company or
when he or she becomes an Independent Director. An "Independent Director" is
a director who is not an officer or employee of the Company or any of its
subsidiaries and who does not have a relationship which, in the opinion of
the Board of Directors of the Company, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
(b) ADDITIONAL GRANTS. Each Independent Director shall be
automatically granted an option to purchase additional shares of common
stock in each calendar year subsequent to the year in which such Independent
Director was granted an option pursuant to paragraph 18(a), such option to
be granted as of the date of the Companys annual meeting of shareholders
held in such calendar year,
A-10
provided that the Independent Director continues to serve in such capacity
as of such date. The number of shares subject to each additional grant shall
be 3,000 shares for each Independent Director.
(c) EXERCISE PRICE. The exercise price of options for 5,000 shares
granted pursuant to paragraph 18(a) as of the date the Plan is approved by
the Shareholders of the Company shall be equal to the price per share to the
public in the Company's initial public offering, unless otherwise determined
by the Board. The exercise price of all other options granted pursuant to
this paragraph 18 shall be equal to 100 percent of the fair market value of
the common stock determined pursuant to paragraph 6(b)(iv).
(d) TERM OF OPTION. The term of each option granted pursuant to this
paragraph 18 shall be 10 years from the date of grant.
(e) EXERCISABILITY. Until an option expires or is terminated and
except as provided in paragraphs 18(f) and 13, an option granted under this
paragraph 18 shall be exercisable according to the following schedule: 2.78%
for each complete month of continuous service after the date of grant,
rounded up to the next full share, until fully vested.
For purposes of this paragraph 18(e), a complete month shall be deemed
to be the period which starts on the day of grant and ends on the same day
of the following calendar month, so that each successive "complete month"
ends on the same day of each successive calendar month (or, in respect of
any calendar month which does not include such a day, that "complete month"
shall end on the first day of the next following calendar month).
(f) TERMINATION AS A DIRECTOR. If an optionee ceases to be a director
of the Company for any reason, including death, the option may be exercised
at any time prior to the expiration date of the option or the expiration of
30 days (or 12 months in the event of death) after the last day the optionee
served as a director, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option as of the last
day the optionee served as a director.
(g) NONTRANSFERABILITY. Each option by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death, and
each option by its terms shall be exercisable during the optionee's lifetime
only by the optionee.
(h) EXERCISE OF OPTIONS. Options may be exercised upon payment of cash
or shares of common stock of the Company in accordance with
paragraph 6(a)(v).
Adopted: April 21, 1995
Amended: May 5, 1995
May 15, 1996
May 15, 1997
May 21, 1998
June 10, 1999
MAY 18, 2000
A-11
APPENDIX B
FEI COMPANY
EMPLOYEE SHARE PURCHASE PLAN, AS AMENDED
As proposed to be amended under Proposal 2
1. PURPOSE OF THE PLAN. FEI Company (the "Company") believes that
ownership of shares of its Common Stock by employees of the Company and its
Participating Subsidiaries (hereinafter defined) is desirable as an incentive to
better performance and improvement of profits, and as a means by which employees
may share in the rewards of growth and success. The purpose of this Employee
Share Purchase Plan (the "Plan") is to provide a convenient means by which
employees of the Company and Participating Subsidiaries may purchase the
Company's shares through payroll deductions and a method by which the Company
may assist and encourage such employees to become share owners.
2. SHARES RESERVED FOR THE PLAN. There are <#>350,000</#> 950,000 shares
of the Companys authorized Common Stock reserved for issuance under the Plan.
The number of shares reserved for issuance under the Plan is subject to
adjustment in the event of any stock dividend, stock split, combination of
shares, recapitalization or other change in the outstanding Common Stock of the
Company. The determination of whether an adjustment shall be made and the manner
of any such adjustment shall be made by the Board of Directors of the Company,
which determination shall be conclusive.
- --------------------------------------------------------------------------------
LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>" AND FOLLOWED BY A
"</#>".
- --------------------------------------------------------------------------------
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors. The Board of Directors may promulgate rules and regulations for
the operation of the Plan, adopt forms for use in connection with the Plan, and
decide any question of interpretation of the Plan or rights arising thereunder.
The Board of Directors may consult with counsel for the Company on any matter
arising under the Plan. All determinations and decisions of the Board of
Directors shall be conclusive. Notwithstanding the foregoing, the Board of
Directors, if it so desires, may delegate to the Compensation Committee of the
Board the authority for general administration of the Plan.
4. ELIGIBLE EMPLOYEES. Except as indicated below, all full-time employees
of the Company and all full-time employees of each of the Company's subsidiary
corporations which is designated by the Board of Directors of the Company as a
participant in the Plan (such participating subsidiary being hereinafter called
a "Participating Subsidiary") are eligible to participate in the Plan. Any
employee who would, after a purchase of shares under the Plan, own or be deemed
(under Section 424(d) of the Internal Revenue Code of 1986, as amended (the
"Code")) to own stock (including stock subject to any outstanding options held
by the employee) possessing five percent or more of the total combined voting
power or value of all classes of stock of the Company or any parent or
subsidiary of the Company, shall be ineligible to participate in the Plan. A
"full-time employee" is one who is in the active service of the Company or a
Participating Subsidiary excluding, however, any employee whose customary
employment is 20 hours or less per week or whose customary employment is for not
more than five months per calendar year.
5. OFFERINGS.
(a) OFFERING PERIODS. The Plan shall be implemented by a series of
offering periods of approximately twelve months' duration or such other
duration as the Board of Directors shall determine ("Offering Periods"),
commencing on or about March 1 and September 1 of each year and ending on
the last day of February or August, respectively, occurring thereafter. The
initial Offering Period shall commence on March 1, 1998 and shall end on
February 28, 1999. Notwithstanding the foregoing, the Board of Directors may
establish a different duration for one or more future Offering Periods,
provided, however, that no Offering Period may have a duration exceeding
twenty-seven (27) months. Each Offering Period shall be comprised of a
series of two purchase periods ("Purchase Periods"), as
B-1
provided in clause (b) below. The first day of each Purchase Period is an
"Offering Date" and the last day of each Purchase Period is a "Purchase
Date" for the Offering Period. If an Offering Date or a Purchase Date falls
on a day on which the public equity securities markets in the United States
are not open for trading, the Company shall specify the trading day that
will be deemed that Offering Date, or Purchase Date, as the case may be. On
each Offering Date, each eligible employee shall be granted an option under
the Plan to purchase shares of Common Stock on the Purchase Date for the
price determined under paragraph 7 of the Plan exclusively through payroll
deductions authorized under paragraph 6 of the Plan; provided, however, that
(a) no option shall permit the purchase of more than 1,000 shares, and
(b) no option may be granted under the Plan that would allow an employee's
right to purchase shares under all stock purchase plans of the Company and
its parents and subsidiaries to which Section 423 of the Code applies to
accrue at a rate that exceeds $25,000 of fair market value of shares
(determined at the date of grant) for each calendar year in which such
option is outstanding.
(b) PURCHASE PERIODS. Each Offering Period shall consist of two
(2) consecutive Purchase Periods of approximately six (6) months' duration,
or such other number or duration as the Board shall determine. A Purchase
Period commencing on or about March 1 shall end on or about the next
August 31. A Purchase Period commencing on or about September 1 shall end on
or about the next February 28. Notwithstanding the foregoing, the Board may
establish a different duration for one or more future Purchase Periods or
different commencing or ending dates for such Purchase Periods.
6. PARTICIPATION IN THE PLAN.
(a) INITIATING PARTICIPATION. An eligible employee may participate in
an Offering Period under the Plan by filing with the Company no later than
ten days prior to the Offering Date, on forms furnished by the Company, a
subscription and payroll deduction authorization. Once filed, a subscription
and payroll deduction authorization shall remain in effect for subsequent
Offering Periods unless amended or terminated. The payroll deduction
authorization will authorize the employing entity to make payroll deductions
in the specified amount from each paycheck of the participating employee.
Payroll deductions for any Purchase Period may not exceed 15 percent of the
gross amount of base pay plus commissions, if any, in the aggregate payable
to the employee for such Purchase Period. If a payroll deduction is made by
a Participating Subsidiary, that entity will promptly remit the amount of
the deduction to the Company. Eligible employees may not participate
simultaneously in more than one Offering Period.
(b) AMENDING OR TERMINATING PARTICIPATION. A participating employee
may amend his or her payroll deduction authorization, but any such amendment
will not become effective until the first paycheck following a Purchase
Date. A permitted change in payroll deductions shall be effective for any
pay period only if written notice is received by the Company at least three
business days prior to the payroll effective date published by the Company
for that pay period. After an employee has begun participating in the Plan,
he or she may terminate participation in the Plan by written notice received
by the Company at any time up to the tenth day before a Purchase Date.
Participation in the Plan shall also terminate when a participant ceases to
be an eligible employee for any reason, including death or retirement. A
participant may not reinstate participation in the Plan with respect to a
particular Offering Period after once terminating participation in the Plan
with respect to that Offering Period. Upon termination of a participant's
participation in the Plan, all amounts deducted from the participant's pay
and not previously used to purchase shares under the Plan shall be returned
to the participant.
(c) AUTOMATIC WITHDRAWAL FROM AN OFFERING PERIOD. If the fair market
value of a share of Common Stock on a Purchase Date other than the final
Purchase Date of an Offering Period is less than the fair market value of a
share of Common Stock on the Offering Date of the Offering Period, then
every participant shall be (a) automatically withdrawn from such Offering
Period at the close of such Purchase Date and after the acquisition of
shares of Common Stock for the Purchase Period and
B-2
(b) enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Date. A participant may elect not to be
automatically withdrawn from an Offering Period pursuant to this
paragraph 6(c) by delivering to the Company not later than the close of
business on the Purchase Date a written notice indicating such election.
7. OPTION PRICE. The price at which shares shall be purchased in an
Purchase Period shall be the lower of (a) 85% of the fair market value of a
share of Common Stock on the Offering Date of the applicable Offering Period or
(b) 85% of the fair market value of a share of Common Stock on that Purchase
Date. The fair market value of a share of Common Stock on any date shall be the
closing price of the Common Stock for such date as reported by NASDAQ or, if the
Common Stock is not reported on NASDAQ, such other reported value of the Common
Stock as shall be specified by the Board of Directors.
8. NEWLY ELIGIBLE EMPLOYEES. A person who becomes an eligible employee
after the Offering Date of an Offering Period shall not be eligible to
participate in such Offering Period but may participate in any subsequent
Offering Period provided he or she is still an eligible employee as of the
Offering Date of such subsequent Offering Period.
9. PURCHASE OF SHARES. All amounts withheld from the pay of a participant
shall be credited to his or her account under the Plan by the Custodian
appointed under paragraph 10. No interest will be paid on such accounts unless
the Board of Directors determines otherwise. On each Purchase Date of an
Offering Period, the amount of the account of each participant will be applied
to the purchase of whole shares by such participant from the Company at the
price determined under paragraph 7. Any cash balance remaining in a
participant's account after a Purchase Date because it was less than the amount
required to purchase a full share shall be retained in the participant's account
for the next Purchase Period.
10. DELIVERY AND CUSTODY OF SHARES. Shares purchased by participants
pursuant to the Plan will be delivered to and held in the custody of such
investment or financial firm (the "Custodian") as shall be appointed by the
Board of Directors. The Custodian may hold in nominee or street name
certificates for shares purchased pursuant to the Plan and may commingle shares
in its custody pursuant to the Plan in a single account without identification
as to individual participants. By appropriate instructions to the Custodian on
forms to be provided for that purpose, a participant may from time to time
obtain (a) transfer into the participant's own name of some or all of the shares
held by the Custodian for the participant's account and delivery of such shares
to the participant; (b) transfer of some or all of the shares held for the
participant's account by the Custodian to a regular individual brokerage account
in the participant's own name, either with the firm then acting as Custodian or
with another firm, or (c) sale of some or all of the shares held by the
Custodian for the participant's account at the market price at the time the
order is executed and remittance of the net proceeds of sale to the participant.
Upon termination of participation in the Plan, a participant may elect to have
the shares held by the Custodian for his or her account transferred and
delivered in accordance with (a) above, transferred to a brokerage account in
accordance with (b), or sold in accordance with (c).
11. RECORDS AND STATEMENTS. The Custodian will maintain the records of the
Plan. As soon as practicable after each Purchase Date the Custodian will furnish
to each participant a statement showing the activity in the participant's
account for the period covered by the statement and the cash and share balances
in the account as of the Purchase Date. Participants will be furnished such
other reports and statements, and at such intervals, as the Board of Directors
shall determine from time to time.
12. EXPENSE OF THE PLAN. The Company will pay all expenses incident to
operation of the Plan, including costs of record keeping, accounting fees, legal
fees, commissions and issue or transfer taxes on purchases pursuant to the Plan
and on delivery of shares to a participant or into his or her brokerage account.
The Company will not pay expenses, commissions or taxes incurred in connection
with sales of shares by the Custodian at the request of a participant. Expenses
to be paid by a participant will be deducted from the proceeds of sale prior to
remittance.
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13. RIGHTS NOT TRANSFERABLE. The right to purchase shares under this Plan
is not transferable by a participant, and such right is exercisable during the
participant's lifetime only by the participant. Upon the death of a participant,
any shares held by the Custodian for the participant's account shall be
transferred to the persons entitled thereto under the laws of the state of
domicile of the participant upon a proper showing of authority.
14. DIVIDENDS AND OTHER DISTRIBUTIONS. Cash dividends and other cash
distributions, if any, on shares held by the Custodian will be paid currently to
the participants entitled thereto unless the Company subsequently adopts a
dividend reinvestment plan and the participant directs that his or her cash
dividends be invested in accordance with such plan. Stock dividends and other
distributions in shares of the Company on shares held by the Custodian shall be
issued to the Custodian and held by it for the account of the respective
participants entitled thereto.
15. VOTING AND SHAREHOLDER COMMUNICATIONS. In connection with voting on
any matter submitted to the shareholders of the Company, the Custodian will
furnish to each participant a proxy authorizing the participant to vote the
shares held by the custodian for his account. Copies of all general
communications to shareholders of the Company will be sent to participants in
the Plan.
16. TAX WITHHOLDING. Each participant who has purchased shares under the
Plan shall immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state,
local, national or other governmental tax withholding determined by the Company
to be required in any country having taxing jurisdiction. If the Company
determines that additional withholding is required beyond any amount deposited
at the time of purchase, the participant shall pay such amount to the Company on
demand. If the participant fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the
participant, including salary, subject to applicable law.
17. RESPONSIBILITY AND INDEMNITY. Neither the Company, its Board of
Directors, the Custodian, any Participating Subsidiary, nor any member, officer,
agent, or employee of any of them, shall be liable to any participant under the
Plan for any mistake of judgment or for any omission or wrongful act unless
resulting from gross negligence, willful misconduct or intentional misfeasance.
The Company will indemnify and save harmless its Board of Directors, the
Custodian and any such member, officer, agent or employee against any claim,
loss, liability or expense arising out of the Plan, except such as may result
from the gross negligence, willful misconduct or intentional misfeasance of such
entity or person.
18. CONDITIONS AND APPROVALS. The obligations of the Company under the
Plan shall be subject to and conditional upon compliance with all applicable
U.S. state, federal and foreign laws and regulations, compliance with the rules
of any stock exchange or market on which the Company's securities may be listed,
and approval of such federal, state and foreign authorities or agencies as may
have jurisdiction over the Plan or the Company. The Company will use its best
effort to comply with such laws, regulations and rules and to obtain such
approvals.
19. AMENDMENT OF THE PLAN. The Board of Directors of the Company may from
time to time amend the Plan in any and all respects, except that without the
approval of the shareholders of the Company, the Board of Directors may not
increase the number of shares reserved for the Plan or decrease the purchase
price of shares offered pursuant to the Plan.
20. TERMINATION OF THE PLAN. The Plan shall terminate when all of the
shares reserved for purposes of the Plan have been purchased, provided that the
Board of Directors in its sole discretion may at any time terminate the Plan
without any obligation on account of such termination, except as hereinafter in
this paragraph provided. Upon termination of the Plan, the cash and shares, if
any, held in the account of each participant shall forthwith be distributed to
the participant or to the participant's order, provided that if prior to the
termination of the Plan, the Board of Directors and shareholders of the Company
shall have adopted and approved a substantially similar plan, the Board of
Directors may in its discretion determine
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that the account of each participant under this Plan shall be carried forward
and continued as the account of such participant under such other plan, subject
to the right of any participant to request distribution of the cash and shares,
if any, held for his account.
21. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective on
March 1, 1998, subject to approval not later than June 30, 1998, by the
affirmative vote, in person or by proxy, of the holders of at least a majority
of the shares of the Company represented and voting on the approval of the Plan
at a validly held meeting of the shareholders.
Adopted: October 14, 1997
Amended: May 20, 1999
MAY 18, 2000
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PROXY
FEI COMPANY
ANNUAL MEETING, MAY 18, 2000
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Vahe A. Sarkissian, Lynwood W. Swanson and Bradley J. Thies, and each of them, proxies with
power of substitution to vote on behalf of the undersigned all shares that the undersigned may be entitled to vote at the annual
meeting of shareholders of FEI Company (the "Company") on May 18, 2000 and any adjournments thereof, with all powers that the
undersigned would possess if personally present, with respect to the following:
The shares represented by this proxy will be voted as specified on the reverse hereof, but if no specification is made, this
proxy will be voted for each of the shareholder proposals. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS THAT MAY
COME BEFORE THIS MEETING.
(Continued, and to be signed on the other side)
SEE REVERSE
SIDE
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THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS Please mark
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. your votes as
indicated in /X/
this example
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
(1) AMENDMENT OF THE COMPANY'S 1995 / / / / / / (2) AMENDMENT OF THE COMPANY'S EMPLOYEE / / / / / /
STOCK INCENTIVE PLAN TO (I) SHARE PURCHASE PLAN TO INCREASE THE
INCREASE THE TOTAL NUMBER OF TOTAL NUMBER OF SHARES RESERVED FOR
SHARES RESERVED FOR ISSUANCE ISSUANCE UNDER THE PLAN FROM 350,000
UNDER THE PLAN FROM 2,000,000 TO 950,000 SHARES.
TO 4,000,000 SHARES, (II) TO
INCREASE THE TOTAL NUMBER OF (3) ELECTION OF DIRECTORS: FOR all WITHHOLD
SHARES SUBJECT TO OPTIONS OR (INSTRUCTIONS: To withhold authority nominees AUTHORITY
STOCK APPRECIATION RIGHTS THAT to vote for any individual, strike except as to vote
MAY BE GRANTED UNDER THE PLAN a line through the nominee's name below.) marked for all
ON A PER-EMPLOYEE BASIS TO Michael J. Attardo, William E. Curran, to the nominees
150,000 FOR GRANTS MADE IN Eric H. Goeld, William W. Lattin, Jan C. contrary listed
1999, AND (III) TO INCREASE Lobbezoo, Vahe Sarkissian, Lynwood W. below below.
THE NUMBER OF SHARES SUBJECT Swanson, and Donald R. VanLuvanee / / / /
TO OPTIONS OR STOCK
APPRECIATION RIGHTS THAT MAY (4) TRANSACTION OF ANY BUSINESS THAT PROPERLY COMES BEFORE THE MEETING
BE GRANTED TO ANY EMPLOYEE IN OR ANY ADJOURNMENTS THEREOF. A MAJORITY OF THE PROXIES OR
ANY SINGLE YEAR, SUBSEQUENT TO SUBSTITUTES AT THE MEETING MAY EXERCISE ALL THE POWERS GRANTED
THE INITIAL GRANT, FROM 50,000 HEREBY.
TO 100,000.
SIGNATURE AND SIGNATURES
PLEASE DATE AND SIGN AS NAME IS IMPRINTED HEREON, INCLUDING DESIGNATION
AS EXECUTOR, TRUSTEE, ETC., IF APPLICABLE. A CORPORATION MUST SIGN ITS
NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER.
THE ANNUAL MEETING OF SHAREHOLDERS OF FEI COMPANY WILL BE HELD ON
MAY 18, 2000 AT 9:00 A.M., PACIFIC TIME, AT THE OSSHE FACILITY, 18640 NW
WALKER ROAD, BEAVERTON, OREGON.
PLEASE NOTE: ANY SHARES OF STOCK OF THE COMPANY HELD IN THE NAME OF
FIDUCIARIES, CUSTODIANS OR BROKERAGE HOUSES FOR THE BENEFIT OF THEIR
CLIENTS MAY ONLY BE VOTED BY THE FIDUCIARY, CUSTODIAN OR BROKERAGE
HOUSE ITSELF--THE BENEFICIAL OWNER MAY NOT DIRECTLY VOTE OR APPOINT
A PROXY TO VOTE THE SHARES AND MUST INSTRUCT THE PERSON OR ENTITY IN
WHOSE NAME THE SHARES ARE HELD HOW TO VOTE THE SHARES HELD FOR THE
BENEFICIAL OWNER. THEREFORE, IF ANY SHARES OF STOCK OF THE COMPANY
ARE HELD IN "STREET NAME" BY A BROKERAGE HOUSE, ONLY THE BROKERAGE
HOUSE, AT THE INSTRUCTIONS OF ITS CLIENT, MAY VOTE OR APPOINT A PROXY
TO VOTE THE SHARES.
Signature(s)______________________________________________________ Dated ___________________________________, 2000
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