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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Adept Technology, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions 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):
- - --------------------------------------------------------------------------------
(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.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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[adept logo]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 5, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Adept
Technology, Inc., a California corporation (the "Company"), will be held on
Thursday, November 5, 1998 at 9:00 a.m. local time, at the Santa Clara Marriott,
2700 Mission College Boulevard, Santa Clara, California 95054 for the following
purposes:
1. To elect six (6) directors to serve until the next Annual Meeting of
Shareholders or until their successors are duly elected and qualified.
2. To approve (i) the adoption of the Company's 1998 Employee Stock
Purchase Plan, (ii) the reservation of 600,000 shares of Common Stock
for issuance thereunder and (iii) an annual increase in the number of
shares of Common Stock reserved for issuance thereunder, beginning on
July 1, 1999, in an amount equal to the lesser of (x) 300,000 shares,
(y) 3.0% of Common Stock outstanding as of the last day of the prior
fiscal year or (z) such amount as may be determined by the Board of
Directors.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 30, 1999.
4. To transact such other business as may properly come before the Annual
Meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies if necessary, or before any
adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on September 25, 1998 are entitled to notice of and to vote at the
meeting and any adjournment thereof.
FOR THE BOARD OF DIRECTORS OF
ADEPT TECHNOLOGY, INC.
/s/ Bruce E. Shimano
---------------------------------
Bruce E. Shimano
Secretary
San Jose, California
October 5, 1998
YOUR VOTE IS IMPORTANT.
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ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE. ANY SHAREHOLDER
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS
RETURNED A PROXY.
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ADEPT TECHNOLOGY, INC.
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PROXY STATEMENT FOR 1998
ANNUAL MEETING OF SHAREHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Adept Technology, Inc., a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held Thursday,
November 5, 1998 at 9:00 a.m. local time, or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the Santa
Clara Marriott, 2700 Mission College Boulevard, Santa Clara, California 95054.
The Company's principal executive office is located at 150 Rose Orchard Way, San
Jose, California 95134, and its telephone number at that location is (408)
432-0888.
When proxies are properly dated, executed and returned, the shares they
represent will be voted at the Annual Meeting in accordance with the
instructions of the shareholder. If no specific instructions are given, the
shares will be voted for the election of the nominees for directors set forth
herein; for approval of the adoption of the Company's 1998 Employee Stock
Purchase Plan, the reservation of 600,000 shares of the Company's Common Stock
for issuance thereunder and an annual increase in the number of shares of Common
Stock reserved for issuance thereunder, beginning July 1, 1999, in an amount
equal to the lesser of (i) 300,000 shares, (ii) three percent (3.0%) of the
Company's Common Stock outstanding as of the last day of the prior fiscal year
or (iii) such amount as determined by the Company's Board of Directors; for the
ratification of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending June 30, 1999; and at the discretion of the proxy holders,
upon such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Shareholders
for the fiscal year ended June 30, 1998, including financial statements, were
first mailed on or about October 5, 1998 to all shareholders entitled to vote at
the Annual Meeting.
Record Date and Shares Outstanding
Shareholders of record at the close of business on September 25, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 8,533,824 shares of the Company's Common Stock, no par value,
were issued and outstanding and held of record by 367 shareholders.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
Voting
Each shareholder is entitled to one vote for each share of Common Stock
held by such shareholder on the Record Date. Every shareholder voting for the
election of directors (Proposal One) may cumulate such shareholder's votes and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of shares that such shareholder is entitled to
vote, or distribute such shareholder's votes on the same principle among as many
candidates as the shareholder may select, provided that votes cannot be cast for
more than six candidates. However, no shareholder shall be entitled to cumulate
votes unless the candidate's name has been placed in nomination prior to the
voting and the
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shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the shareholder's intention to cumulate the shareholder's votes.
On all other matters, each share of Common Stock has one vote. A quorum
comprising the holders of a majority of the outstanding shares of Common Stock
on the Record Date must be present or represented for the transaction of
business at the Annual Meeting. Abstentions and broker non-votes will be counted
as present for the purpose of determining the presence of a quorum for the
transaction of business but will not be treated as votes cast for purposes of
the proposals presented herein.
Solicitation of Proxies
The cost of this solicitation will be borne by the Company. The Company has
retained the services of ChaseMellon Shareholder Services, L.L.C. to aid in the
solicitation of proxies from brokers, bank nominees, and other institutional
owners. The Company estimates that it will pay ChaseMellon Shareholder Services
L.L.C. a fee of approximately $6,000 for its services and will reimburse it for
reasonable out-of-pocket expenses. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally or by
telephone, facsimile, or telegram.
Deadline for Receipt of Shareholder Proposals for 1999 Annual Meeting
Shareholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules established by
the Securities and Exchange Commission. Proposals of shareholders of the Company
that are intended to be presented by such shareholders at the Company's 1999
Annual Meeting of Shareholders must be received by the Company no later than
June 7, 1999 in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a shareholder intends to
submit a proposal at the Company's Annual Meeting, which is not eligible for
inclusion in the proxy statement relating to that meeting, the shareholder must
give notice to the Company in accordance with the requirements set forth in the
Securities Exchange Act of 1934, as amended, no later than August 21, 1999. If
such a shareholder fails to comply with the foregoing notice provision, the
proxy holders will be allowed to use their discretionary voting authority when
and if the proposal is raised at the Company's Annual Meeting in 1999.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of six directors is to be elected at the Annual Meeting. The Board
of Directors of the Company has authorized the nomination at the Annual Meeting
of the persons named herein as candidates. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the Company's six
nominees named below, all of whom are presently directors of the Company. In the
event that any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. The Company is not aware of any nominee who will be unable or will
decline to serve as a director. The Board of Directors will consider the names
and qualifications of candidates for the Board submitted by shareholders in
accordance with the procedures set forth in "Deadline for Receipt of Shareholder
Proposals for 1999 Annual Meeting" above and in the Company's Bylaws. In the
event that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner (in
accordance with cumulative voting) as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The term of office for
each person elected as a director will continue until the next Annual Meeting of
Shareholders or until a successor has been elected and qualified.
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Vote Required
If a quorum is present and voting, the six nominees receiving the highest
number of affirmative votes will be elected to the Board of Directors.
Abstentions and broker non-votes are not counted in the election of directors.
Nominees
The names of the nominees and certain information about them are set forth
below:
Director
Name of Nominee Age Position(s) with the Company Since
- - ----------------------------- ----- --------------------------------------------------- ----------
Brian R. Carlisle ........... 47 Chairman of the Board and Chief Executive Officer 1983
Bruce E. Shimano ............ 49 Vice President, Research and Development, 1983
Secretary and Director
Ronald E. F. Codd(1) ........ 43 Director 1998
Michael P. Kelly (1) ........ 50 Director 1997
Cary R. Mock(2) ............ 55 Director 1990
John E. Pomeroy(2) ......... 57 Director 1994
<FN>
- - -----------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
</FN>
There is no family relationship between any director or executive officer
of the Company.
Brian R. Carlisle has served as the Company's Chief Executive Officer and
Chairman of the Board of Directors since he co-founded the Company in June 1983.
From June 1980 to June 1983, he served as General Manager of Unimation, Inc.
("Unimation"), and from June 1977 to June 1980, he served as project manager of
the West Coast Division of Unimation. At Unimation, Mr. Carlisle was responsible
for new product strategy and development for Unimation's electric robots,
control systems, sensing systems and other robotics applications. Mr. Carlisle
received B.S. and M.S. degrees in Mechanical Engineering from Stanford
University.
Bruce E. Shimano has served as the Company's Vice President, Research and
Development, Secretary, and as a director since he co-founded the Company in
June 1983. Prior to that time, he was Director of Software Development at
Unimation. Mr. Shimano received B.S., M.S. and Ph.D. degrees in Mechanical
Engineering from Stanford University.
Ronald E. F. Codd has served as a director of the Company since February
1998. Mr. Codd joined PeopleSoft, Inc. ("PeopleSoft") in September 1991 has
served at PeopleSoft in various capacities, and currently serves as PeopleSoft's
Senior Vice President of Finance and Administration, Chief Financial Officer and
Secretary. From March 1989 to September 1991, Mr. Codd was Corporate Controller
of MIPS Computer Systems, Inc., a microprocessor designer and computer
manufacturer. Mr. Codd is also a director of Information Advantage, Inc., an
on-line analytical processing software company. Mr. Codd is a Certified Public
Accountant, a Certified Managerial Accountant, and holds a Certified Production
and Inventory Management credential. Mr. Codd received a B.S. in Business
Administration from the University of California, Berkeley and an M.M. from the
J. L. Kellogg Graduate School of Management (Northwestern University).
Michael P. Kelly has served as a director of the Company since April 1997.
Since 1994, Mr. Kelly has served as a managing director of Broadview Associates,
LLC, a corporate finance advisory firm. From 1993 to 1994, Mr. Kelly served as
the president of Emerald Partners, a mergers and acquisitions firm and as a
managing director of Emerald Partners' predecessor Flemings from 1988 to 1993.
From 1985 to 1988, Mr. Kelly was a partner at Touche Ross & Co., an independent
accounting firm. Mr. Kelly received a B.A. degree from Western Illinois
University and an M.B.A. from St. Louis University.
Cary R. Mock has served as a director of the Company since December 1990.
Since January 1996, Mr. Mock has served as a financial advisor specializing in
acquisitions and related corporate development activities. From October 1983 to
December 1995, Mr. Mock served as Director of Acquisitions and
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Divestitures for Westinghouse Electric Corporation ("Westinghouse"), having
served in other positions since joining Westinghouse in 1964. Mr. Mock received
a B.S. in Electrical Engineering from the Massachusetts Institute of Technology
and an M.B.A. from the State University of New York at Buffalo.
John E. Pomeroy has served as a director of the Company since August 1994.
Since May 1987, Mr. Pomeroy has served as President and Chief Executive Officer
of Dover Technologies, a subsidiary of Dover Corporation and a manufacturer of
production equipment for printed circuit board assembly. Mr. Pomeroy is also a
director of Dover Corporation and HADCO Corporation, a supplier of electronic
interconnect products and services. Mr. Pomeroy received a B.S. in Electrical
Engineering from Purdue University.
The Board of Directors recommends a vote "FOR" all six nominees listed
above.
Board and Committee Meetings
The Board of Directors of the Company held four meetings during fiscal
1998. Each incumbent director attended all meetings of the Board of Directors
during the period of fiscal 1998 in which he served as a director and all
meetings of the committees thereof, if any, upon which such director served
during the period in which such individual was a director of the Company. The
Board of Directors has an Audit Committee and a Compensation Committee. The
Board of Directors has no nominating committee or any committee performing such
functions.
The Audit Committee, which currently consists of Messrs. Codd and Kelly, is
responsible for overseeing actions taken by the Company's independent auditors
and reviewing the Company's internal financial procedures and controls. During
fiscal 1998, the Audit Committee consisted of directors Mock and Kelly. The
Audit Committee met once in fiscal 1998. Mr. Mock resigned from the Audit
Committee when Mr. Codd was appointed to the Board and the Audit Committee.
The Compensation Committee, which consisted of Messrs. Mock and Pomeroy, is
responsible for determining salaries, incentives and other forms of compensation
for directors, officers and other employees of the Company and administering
various incentive compensation and benefit plans. The Compensation Committee met
once during fiscal 1998.
PROPOSAL TWO
ADOPTION OF 1998 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the shareholders are being asked to approve (i) the
adoption of the Company's 1998 Employee Stock Purchase Plan (the "Purchase
Plan"), (ii) the initial reservation of 600,000 shares for sale thereunder, and
(iii) an annual increase in the number of shares reserved for sale thereunder,
beginning July 1, 1999, in an amount equal to the lesser of (A) 300,000 shares,
(B) three percent (3%) of the Company's total outstanding capital stock on the
last day of the prior fiscal year or (C) such amount as may be determined by the
Company's Board of Directors. The Board established the share thresholds for
annual increases based on the Company's current forecast for share requirements
under the Purchase Plan. The number of shares actually issued under the Purchase
Plan will depend on a number of factors outside the Company's control.
Accordingly, the Board has retained the right to fix the annual increase at a
lesser number of shares than otherwise established if, in its discretion, such
increase is aggressive relative to the forecasts then available to the Company.
The Board of Directors approved the Purchase Plan, contingent on
shareholder approval at the Annual Meeting, in September 1998. In addition, the
Board of Directors also terminated the Company's 1995 Employee Stock Purchase
Plan (the "1995 Plan"), effective upon shareholder approval of the Purchase
Plan. If shareholders do not approve the Purchase Plan, the 1995 Plan will not
terminate. Other than the number of shares reserved for issuance thereunder and
the annual share reserve adjustment mechanism described herein, the terms of the
Purchase Plan are substantially similar to the terms of the 1995 Plan as
presently in effect. The Board's objective in adopting the Purchase Plan is to
avoid potential adverse accounting consequences that could result if the number
of shares reserved under an employee stock purchase plan proved, at the end of
an offering period, insufficient to cover the then-outstanding rights under such
a plan. See "--Recent Accounting Pronouncement; Effect on Fiscal 1998
Operations."
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Recent Accounting Pronouncement; Effect on Fiscal 1998 Operating Results
In September 1997, the Emerging Issues Task Force of the Financial
Accounting Standards Board issued a consensus interpretation of generally
accepted accounting principles applicable to stock purchase plans, entitled
"Accounting for Increased Share Authorizations in an IRS Section 423 Employee
Stock Purchase Plan" (Issue No. 97-12) ("EITF 97-12"). Generally, under EITF
97-12, an issuer would be required to record compensation expense in situations
where (i) the shares reserved for issuance under an employee stock purchase plan
are, at the beginning of an offering period under the plan, insufficient to
cover all shares issuable throughout the offering period, (ii) the issuer's
shareholders subsequently approve additional shares allocable to an offering
period prior to the date of shareholder approval and (iii) the fair market value
of the shares issuable under the plan at the time of shareholder approval is
higher than the then-applicable purchase price under the plan.
Under prior practice, an issuer would typically seek shareholder approval
to increase the share reserve under an employee stock purchase plan when the
shares remaining appeared insufficient for the ensuing offering period. The 1995
Plan, for example, provides for 12 month offering periods consisting of two six
month purchase periods, with a new offering period beginning every six months.
Applied to this structure, the treatment specified by EITF 97-12 would require
that, in order to avoid compensation charges, the number of shares reserved for
issuance under the 1995 Plan never be permitted to decline below a level
required to maintain projected purchases for at least two offering periods.
Because EITF 97-12 was adopted at a time when the Company was seeking
shareholder approval of an increase in the share reserve under the 1995 Plan by
500,000 shares, and because EITF 97-12 contained no grandfather provision, the
Company was required to recognize unanticipated compensation expense of $675,000
in fiscal 1998 in connection with the over subscription of shares relative to
those available at the beginning of the offering periods then in effect.
The Purchase Plan, as compared to the 1995 Plan, is structured to mitigate
the risk that the Company will be required to recognize unanticipated
compensation expense as a result of any failure to have sufficient shares
reserved for issuance. Like the 1995 Plan, the Purchase Plan provides for 12
month offering periods, comprised of two six month purchase periods, but also
contains an automatic annual share reserve increase mechanism that is designed
to reduce the likelihood that the Purchase Plan will have an insufficient share
reserve. Specifically, the Purchase Plan provides for an initial share reserve
of 600,000 shares with an annual automatic increase, beginning July 1, 1999, in
an amount equal to the lesser of (i) 300,000 shares, (ii) three percent (3%) of
the outstanding shares of the Company's capital stock on the last day of the
prior fiscal year or (iii) such amount as determined by the Company's Board of
Directors.
Purposes of Employee Stock Purchase Plans; Board's Recommended Response to EITF
97-12
Employee stock purchase plans are intended to provide employees of the
Company with an opportunity to purchase its Common Stock through accumulated
payroll deductions. The Company believes that stock ownership is one of the
prime methods of attracting and retaining key personnel responsible for the
continued development and growth of the Company's business. The shortage of
qualified technical and management personnel is particularly acute in Silicon
Valley, where the Company's primary development and operational activities are
located. Attractive employee stock incentives, including employee stock purchase
plans, are considered by employees to be an important element of an employer's
compensation package and by employers, including the Company, to be a
competitive necessity.
The Board of Directors has recommended approval of the Purchase Plan (and
resulting termination of the 1995 Plan) in order to insure that the Company
continues to offer competitive stock benefit programs while avoiding the adverse
accounting implications of EITF 97-12. In particular, the Board believes that
the automatic share increase provision of the Purchase Plan is necessary to
ensure the continued availability of an employee stock purchase plan given the
unpredictable effects of the application of EITF 97-12. The number of shares
purchased under an employee stock purchase plan are influenced by (i) an
issuer's hiring rates, which affects the number of employees participating, and
(ii) the volatility of the issuer's stock price, which affects the number of
shares each participant purchases. For example, if an issuer's stock price falls
dramatically during an offering period, it could experience an
5
unanticipated increase in the number of shares purchased during each purchase
period. Under EITF 97-12, however, unless the issuer reduced the number of
shares participants could otherwise purchase based on a pro-rata allocation, it
would be unable to avoid recognizing a compensation expense if, as a result of
increased hiring rates or a decline in stock price, it realized after the
commencement of the offering period that it would have insufficient shares
available for issuance. Many issuers would be reluctant to require such a
pro-rata allocation, however, because of its adverse effects on employee morale.
The Board of Directors believes that the automatic annual increase feature
of the Purchase Plan should reduce the risk of insufficient share reserves. The
Purchase Plan provides for an annual increase equal to the lesser of (i) 300,000
shares, (ii) that number of shares equal to three percent (3%) of the Company's
outstanding capital stock or (iii) such amount determined by the Company's Board
of Directors. As a result, the share reserve under the Purchase Plan cannot be
increased by more than 300,000 shares in any given year, which represents the
Company's current estimates of its annual share requirements under the 1995
Plan. In addition, the Board of Directors retains the discretion to fix the
annual increase at a lesser number of shares less than otherwise established
under the Purchase Plan, if it determines, at the time of such increase and
based on forecasts then available to the Company, then the increase established
under the Purchase Plan would be unnecessarily aggressive relative to the
forecast. At the Company's 1997 Annual Meeting of Shareholders, shareholders
approved an increase by 500,000 shares in the number of shares reserved for
issuance under the 1995 Plan. As of September 30, 1998, 328,187 shares remained
available for issuance under the 1995 Plan, but, as a result of the simultaneous
termination of the 1995 Plan, the shares remaining available after the October
31, 1998 purchases under the two open offering periods will not be issued if the
Purchase Plan is approved.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the Purchase Plan. For this purpose, the "Votes Cast"
are defined to be the shares of the Company's Common Stock represented and
voting at the Annual Meeting. In addition, the affirmative votes must constitute
at least a majority of the required quorum, which quorum is a majority of the
shares outstanding at the Record Date. Votes that are cast against the proposal
will be counted for purposes of determining both (i) the presence or absence of
a quorum and (ii) the total number of Votes Cast with respect to the proposal.
Abstentions and broker non-votes will be counted as present for the purpose of
determining the presence of a quorum for the transaction of business but will
not be treated as votes cast for purposes of the proposals presented herein.
The Board Recommends a Vote "FOR" the Adoption of the Purchase Plan.
The essential terms of the Purchase Plan are summarized as follows:
Summary of the Purchase Plan
General. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll deductions.
Administration. The Purchase Plan may be administered by the Board of
Directors or a committee appointed by the Board of Directors. All questions of
interpretation or application of the Purchase Plan are determined by the Board
of Directors or its appointed committee, and its decisions are final, conclusive
and binding upon all participants.
Eligibility. Each employee of the Company (including officers), whose
customary employment with the Company is at least 20 hours per week and more
than two months in any calendar year, is eligible to participate in an Offering
Period (as defined below); provided, however, that no employee shall be granted
an option under the Purchase Plan (i) to the extent that, immediately after the
grant, such employee would own five percent of either the voting power or value
of the stock of the Company, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company accrues at
a rate which exceeds $25,000 worth of stock (determined at the fair market value
of
6
the shares at the time such option is granted) for each calendar year. Eligible
employees become participants in the Purchase Plan by filing with the Company a
subscription agreement authorizing payroll deductions prior to the beginning of
each Offering Period unless a later time for filing the subscription agreement
has been set by the Board.
Participation in an Offering. The Purchase Plan is implemented by
consecutive overlapping offering periods lasting for 12 months (an "Offering
Period"), with a new Offering Period commencing on May 1 and November 1 of each
year; provided, however, that the first Offering Period under the Purchase Plan
shall commence on November 6, 1998 and end on October 31, 1999. Common Stock may
be purchased under the Purchase Plan every six months (a "Purchase Period"),
unless the participant withdraws or terminates employment earlier. To the extent
the fair market value of the Common Stock on any exercise date in an Offering
Period is lower than the fair market value of the Common Stock on the first day
of the Offering Period, then all participants in such Offering Period will be
automatically withdrawn from such Offering Period immediately after the exercise
of their options on such exercise date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof. The Board of
Directors may change the duration of the Purchase Periods or the length or date
of commencement of an Offering Period. To participate in the Purchase Plan, each
eligible employee must authorize payroll deductions pursuant to the Purchase
Plan. Such payroll deductions may not exceed 15% of a participant's
compensation. Compensation is defined as base straight time gross earnings,
sales commissions, bonuses, incentive compensation and payments for overtime and
shift premiums. Once an employee becomes a participant in the Purchase Plan, the
employee will automatically participate in each successive Offering Period until
such time as the employee withdraws from the Purchase Plan or the employee's
employment with the Company terminates. At the beginning of each Offering
Period, each participant is automatically granted options to purchase shares of
the Company's Common Stock. The option expires at the end of the Purchase Period
or upon termination of employment, whichever is earlier, but is exercised at the
end of each Purchase Period to the extent of the payroll deductions accumulated
during such Purchase Period. The number of shares subject to the option may not
exceed 3,000 shares of the Company's Common Stock in each Purchase Period.
Purchase Price, Shares Purchased. Shares of Common Stock may be purchased
under the Purchase Plan at a price not less than 85% of the lesser of the fair
market value of the Common Stock on (i) the first day of the Offering Period or
(ii) the last day of Purchase Period. The "fair market value" of the Common
Stock on any relevant date will be the closing price per share as reported on
The Nasdaq National Market (or the mean of the closing bid and asked prices, if
no sales were reported) as quoted on such exchange or reported in The Wall
Street Journal. The number of shares of Common Stock a participant purchases in
each Purchase Period is determined by dividing the total amount of pay-roll
deductions withheld from the participant's compensation during that Purchase
Period by the Purchase Price. To the extent permitted by any applicable laws,
regulations, or stock exchange rules if the fair market value on the last date
of any purchase period is lower than the fair market value on the first day of
the offering period, then all participants in the offering period then open will
be automatically withdrawn from such offering period immediately after the
purchase on that date and automatically re-enrolled in the immediately following
offering period.
Termination of Employment. Termination of a participant's employment for
any reason, including disability or death, or the failure of the participant to
remain in the continuous scheduled employ of the Company for at least 20 hours
per week, cancels his or her option and participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of death, to the person
or persons entitled thereto as provided in the Purchase Plan.
Adjustment Upon Change in Capitalization. In the event that the stock of
the Company is changed by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other change in the capital structure
of the Company effected without the receipt of consideration, appropriate
proportional adjustments shall be made in the number and class of shares of
stock subject to the Purchase
7
Plan, the number and class of shares of stock subject to options outstanding
under the Purchase Plan and the exercise price of any such outstanding options.
Any such adjustment shall be made by the Board of Directors, whose determination
shall be conclusive.
Dissolution or Liquidation. In the event of a proposed dissolution or
liquidation, the Offering Period then in progress will be shortened and a new
exercise date will be set.
Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation or a sale of substantially all of the Company's assets, each
outstanding option may be assumed or substituted by the successor corporation.
If the successor corporation refuses to assume or substitute the outstanding
options, the Offering Period then in progress will be shortened and a new
exercise date will be set.
Amendment and Termination of the Plan. The Board of Directors may at any
time terminate or amend the Purchase Plan. An Offering Period may be terminated
by the Board of Directors at the end of any Purchase Period if the Board
determines that termination of the Purchase Plan is in the best interests of the
Company and its shareholders. Notwithstanding anything to the contrary in the
Purchase Plan, the Board of Directors may in its sole discretion amend the
Purchase Plan to the extent necessary and desirable to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. No amendment shall be effective unless it is approved by
the holders of a majority of the Votes Cast at a duly held shareholders'
meeting, if such amendment would require shareholder approval in order to comply
with Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
The Purchase Plan will terminate in September 2008.
Withdrawal. Generally, a participant may withdraw from an Offering Period
at any time without affecting his or her eligibility to participate in future
Offering Periods. However, once a participant withdraws from a particular
offering, that participant may not participate again in the same offering.
Federal Tax Information for Purchase Plan. The Purchase Plan, and the right
of participants to make purchases thereunder, is intended to qualify under the
provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the holding period. If the shares are sold or
otherwise disposed of more than two years from the first day of the Offering
Period and more than one year from the date of transfer of the stock to the
participant, then the participant will recognize ordinary income measured as the
lesser of (i) the excess of the fair market value of the shares at the time of
such sale or disposition over the Purchase Price or (ii) an amount equal to 15%
of the fair market value of the shares as of the first day of the Offering
Period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the Purchase Price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant except to the extent that
ordinary income is recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding periods described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
Participation in the 1995 Plan and the Purchase Plan
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future
8
purchases under the Purchase Plan are not determinable. Nonemployee directors
are not eligible to participate in the Purchase Plan and were not eligible to
participate in the 1995 Plan.
The following table sets forth certain information regarding shares
purchased during the fiscal year ended June 30, 1998 by each of the executive
officers named in the Summary Compensation Table below, all current executive
officers as a group, all nonemployee directors as a group and all other
employees who participated in the 1995 Plan as a group:
Number of Shares Dollar
Name of Individual or Identity of Group and Position Purchased (#) Value ($)(1)
---------------------------------------------------- ------------- ------------
Brian R. Carlisle, Chairman of the Board and Chief Executive Officer ................... 3,677 $ 20,064
Charles S. Duncheon, Senior Vice President, Marketing and Sales ........................ 3,175 24,207
Bruce E. Shimano, Vice President, Research and Development,
Secretary and Director ................................................................ 1,828 10,318
Richard J. Casler, Vice President, Engineering ......................................... -- --
Betsy A. Lange, Vice President, Finance and Chief Financial Officer .................... 1,787 8,773
All Current Executive Officers as a group (6 Persons) .................................. 10,467 63,363
Non-Employee Directors as a group ...................................................... * *
All Other Employees as a group ......................................................... 178,051 976,621
<FN>
- - -----------------
* Not eligible to participate in the Purchase Plan or 1995 Plan.
(1) Market value of shares on date of purchase minus the purchase price under
the 1995 Plan.
</FN>
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1999 and recommends that shareholders vote for
ratification of such appointment. Notwithstanding the selection, the Board of
Directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the Board of Directors feels that such
a change would be in the best interests of the Company and its shareholders. In
the event of a negative vote on ratification, the Board of Directors will
reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements annually
since 1984. Representatives of Ernst & Young LLP are expected to be present at
the meeting with the opportunity to make a statement, if they desire to do so,
and are expected to be available to respond to questions.
The Board recommends a vote "FOR" the ratification of the appointment of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending June 30, 1999.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of the Record Date as to (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director, (iii) each of the
executive officers named in the Summary Compensation Table below and (iv) all
directors and executive officers as a group.
Common Stock
Five Percent Shareholders, Beneficially Approximate Percentage
Directors and Certain Executive Officers Owned Owned (1)
- - ---------------------------------------- ------------ ----------------------
Kopp Investment Advisors Inc. (2) .......... 1,892,850 21.9%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Brian R. Carlisle (3) ...................... 333,221 3.9
Bruce E. Shimano (4) ....................... 309,196 3.6
John E. Pomeroy (5) ........................ 17,811 *
Cary R. Mock (6) ........................... 12,811 *
Michael P. Kelly (7) ....................... 6,499 *
Ronald E. F. Codd (8) ...................... -- --
Charles S. Duncheon (9) .................... 164,558 1.9
Richard J. Casler, Jr. (10) ................ 23,583 *
Betsy A. Lange (11) ........................ 44,955 *
All directors and executive officers
as a group (10 persons) (12) .............. 912,634 10.7%
- - -----------------
* Less than 1%
(1) Applicable percentage ownership is based on 8,533,824 shares of Common
Stock outstanding as of the Record Date together with applicable options
for the shareholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days after the
Record Date are deemed outstanding for computing the percentage ownership
of the person holding the options but are not deemed outstanding for
computing the percentage of any other person.
(2) Reflects ownership as reported on Schedule 13G/A dated May 9, 1998 filed
with the Commission by Kopp Investment Advisors, Inc. ("KIA"). As set forth
in KIA's filing, represents shares beneficially owned by (i) KIA, a
registered investment advisor, (ii) Kopp Holding Company ("Holding"), (iii)
Kopp Funds, Inc. ("Funds"), a registered investment advisor, and (iv) LeRoy
C. Kopp individually and through his ownership of a controlling interest in
KIA and his control over Holdings and Funds. KIA has sole voting power over
794,000 shares of the Company's Common Stock, sole dispositive power over
615,000 shares of the Company's Common Stock and shared dispositive power
over 1,872,850 shares of the Company's Common Stock. Holding has beneficial
ownership of 1,872,850 shares of the Company's Common Stock. Funds has
beneficial ownership of 615,000 shares of the Company's Common Stock. Mr.
Kopp has beneficial ownership of 1,892,850 shares of the Company's Common
Stock and sole voting and dispositive power over 20,000 shares of the
Company's Common Stock.
(3) Includes 65,623 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date. Mr. Carlisle is Chairman of the Board of
Directors and Chief Executive Officer of the Company.
(4) Includes 49,685 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date and 18,000 shares held by Mr. Shimano as
custodian for his children under the California Uniform Transfers to Minors
Act. Mr. Shimano is Vice President, Research and Development, Secretary and
a director of the Company.
10
(5) Includes 17,811 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date.
(6) Includes 12,811 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date.
(7) Includes 6,499 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date.
(8) Mr. Codd became a director of the Company in February 1998.
(9) Includes 31,872 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date and 4,500 shares held by Mr. Duncheon's
wife. Mr. Duncheon is Senior Vice President, Marketing and Sales of the
Company.
(10) Includes 13,333 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date. Mr. Casler is the Company's Vice
President, Engineering.
(11) Includes 16,395 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date. Ms. Lange is the Company's Vice
President, Finance and Chief Financial Officer.
(12) Includes 214,029 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of the Record Date.
11
EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
next four most highly compensated executive officers of the Company for services
rendered in all capacities to the Company for the fiscal year ended June 30,
1998.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
-------------
Awards
-------------
Number of
Annual Compensation (1) Securities
Fiscal ------------------------ Underlying All Other
Name and Principal Position Year Salary Bonus (2) Options Compensation($)
- - ----------------------------- -------- ---------- ----------- ------------- -----------------
Brian R. Carlisle ........... 1998 $262,117 $ 31,000 25,000 $ 12,377(4)
Chairman of the Board and 1997 217,442 -- 100,000 15,289(5)
Chief Executive Officer 1996 209,245 25,000 -- 20,305(6)
Charles S. Duncheon ......... 1998 186,439 59,437 20,000 12,468(4)
Senior Vice President, 1997 171,996 46,283 50,000 11,482(5)
Marketing and Sales 1996 165,540 70,000 -- 14,178(6)
Bruce E. Shimano ............ 1998 178,555 13,000 20,000 11,488(4)
Vice President, Research and 1997 166,346 -- 75,000 11,366(5)
Development, Secretary and 1996 159,742 15,000 -- 15,507(6)
Director
Richard J. Casler ........... 1998 159,744 18,053 10,000 10,245(4)
Vice President, Engineering 1997 140,825 -- 10,000 9,915(5)
1996 135,565 14,000 6,250 9,606(6)
Betsy A. Lange (3) .......... 1998 121,947 8,000 7,000 10,685(4)
Vice President, Finance and 1997 133,612 -- 10,000 11,609(5)
Chief Financial Officer 1996 135,547 11,133 8,750 10,036(6)
<FN>
- - -----------------
(1) Other than salary, bonus and all other compensation described herein, the
Company did not pay the persons named in the Summary Compensation Table any
compensation, including incidental personal benefits, that in the aggregate
constituted an excess of 10% of such executive officer's salary.
(2) Bonus compensation for fiscal 1998 consists in part of (i) bonuses earned
in fiscal 1998 but paid in fiscal 1999 of $31,000 for Mr. Carlisle, $13,000
for Mr. Shimano, $18,053 for Mr. Casler and $8,000 for Ms. Lange and (ii)
commission income of $59,437 for Mr. Duncheon. Bonus compensation for
fiscal 1997 consisted of commission income of $46,283 for Mr. Duncheon.
Bonus compensation for fiscal 1996 consists in part of (i) bonuses earned
in fiscal 1996 and paid in fiscal 1997 of $25,000 for Mr. Carlisle, $6,370
for Mr. Duncheon, $15,000 for Mr. Shimano, $14,000 for Mr. Casler and
$11,133 for Ms. Lange; and (ii) commission income of $63,630 for Mr.
Duncheon.
(3) The annual reductions in Ms. Lange's compensation beginning in fiscal 1997
reflect the Company's agreement between Ms. Lange and the Company
permitting her to work a reduced work week.
(4) Other compensation for fiscal 1998 consists of (i) group term life excess
premiums of $1,008 for Mr. Carlisle, $1,116 for Mr. Duncheon, $686 for Mr.
Shimano, $601 for Mr. Casler and $362 for Ms. Lange; (ii) automobile
allowances of $8,736 for Mr. Carlisle, $9,638 for Mr. Duncheon, $8,736 for
Mr. Shimano, $8,736 for Mr. Casler and $8,736 for Ms. Lange; (iii)
supplemental life insurance premiums of $1,633 for Mr. Carlisle, $1,116 for
Mr. Duncheon, $1,066 for Mr. Shimano, $909 for Mr. Casler and $624 for Ms.
Lange; and (iv) matching contributions of $1,000 by the Company under its
401(k) Plan for each of Messrs. Carlisle, Duncheon and Shimano and Ms.
Lange.
12
(5) Other compensation for fiscal 1997 consisted of (i) group term life excess
premiums of $844 for Mr. Carlisle, $668 for Mr. Duncheon, $646 for Mr.
Shimano, $548 for Mr. Casler and $573 for Ms. Lange; (ii) automobile
allowances of $12,104 for Mr. Carlisle, $8,790 for Mr. Duncheon, $8,736 for
Mr. Shimano, $8,736 for Mr. Casler and $9,711 for Ms. Lange; (iii)
supplemental life insurance premiums of $1,340 for Mr. Carlisle, $1,024 for
Mr. Duncheon, $984 for Mr. Shimano, $632 for Mr. Casler and $325 for Ms.
Lange; and (iv) matching contributions under its 401(k) Plan of $1,000 for
each of Messrs. Carlisle, Duncheon and Shimano and Ms. Lange.
(6) Other compensation for fiscal 1996 consists of (i) group term life excess
premiums of $755 for Mr. Carlisle, $592 for Mr. Duncheon, $953 for Mr.
Shimano, $435 for Mr. Casler and $414 for Ms. Lange; (ii) automobile
allowances of $13,894 for Mr. Carlisle, $12,370 for Mr. Duncheon, $8,736
for Mr. Shimano, $8,736 for Mr. Casler and $8,736 for Ms. Lange; (iii)
supplemental life insurance premiums of $755 for Mr. Carlisle, $592 for Mr.
Duncheon, $935 for Mr. Shimano, $435 for Mr. Casler and $262 for Ms. Lange;
(iv) matching contributions of $624 by the Company under its 401(k) Plan
for each of Messrs. Carlisle, Duncheon and Shimano and Ms. Lange; and (v)
reimbursement of accrued interest on outstanding note obligations to the
Company of $4,277 for each of Messrs. Carlisle and Shimano. The note
obligations of Messrs. Carlisle and Shimano were incurred in connection
with the purchase of Common Stock of the Company and were repaid in January
1996.
</FN>
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information regarding the grant of
stock options to the persons named in the Summary Compensation Table during the
fiscal year ended June 30, 1998.
Individual Grants Potential Realizable
--------------------------------------------------------------- Value at Assumed
Annual Rates
Number of Percentage of of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term (1)
Options Employees in Price Per Expiration ------------------------
Name Granted (2) Fiscal Year Share (3)(4) Date 5% 10%
- - ------------------------------- ------------- --------------- -------------- ------------ ---------- -----------
Brian R. Carlisle ............. 25,000 6.2% $ 11.75 8/14/07 $184,738 $ 468,162
Charles S. Duncheon ........... 20,000 4.9 11.75 8/14/07 147,790 374,529
Bruce E. Shimano .............. 20,000 4.9 11.75 8/14/07 147,790 374,529
Richard J. Casler, Jr. ........ 10,000 2.5 11.75 8/14/07 73,895 187,265
Betsy A. Lange (5) ............ 7,000 1.7 11.75 8/14/07 51,727 131,085
<FN>
- - -----------------
* Less than 1%.
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimates of future stock price growth.
(2) Each of the options becomes exercisable as to 1|M/48th of the option shares
each month with full vesting occurring on the fourth anniversary of the
date of grant.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant.
(4) Exercise price may be paid in cash, promissory note, by delivery of
already-owned shares subject to certain conditions, or pursuant to a
cashless exercise procedure under which the optionee provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to remit
to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
(5) Ms. Lange received a lower number of shares in fiscal 1998 due to her
reduced work week.
</FN>
13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise
of stock options in the last fiscal year by the persons named in the Summary
Compensation Table and the value of options held by such individuals as of June
30, 1998.
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired June 30, 1998 (#) June 30, 1998 ($)(1)
on Value ------------------------------- -------------------------------
Name Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------------------- ---------- -------------- ------------- --------------- ------------- ---------------
Brian R. Carlisle ............ 62,500 $522,688 53,644 71,356 $ 50,935 $55,365
Charles S. Duncheon ......... -- -- 65,540 41,460 255,648 27,683
Bruce E. Shimano ............ 27,500 246,543 40,519 54,481 38,201 41,524
Richard J. Casler, Jr. ...... 17,750 202,800 13,019 14,481 10,435 6,417
Betsy A. Lange ............... 13,000 151,775 16,082 12,168 14,547 6,417
<FN>
- - -----------------
(1) Market value of the Company's Common Stock at June 30, 1998 minus the
exercise price.
(2) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
</FN>
Employment Contracts and Change-In-Control Arrangements
The Company currently has no employment contracts with any of the executive
officers listed in the Summary Compensation Table, and no compensatory plan or
arrangement with such executive officers which are activated upon resignation,
termination or retirement of any such executive officer upon a change in control
of the Company.
Compensation of Directors
No director currently receives any cash compensation for attendance at
Board or committee meetings, except that directors will be reimbursed for travel
and lodging expenses incurred in attending Board and committee meetings. The
Company's 1995 Director Option Plan provides that options shall be granted to
non-employee directors of the Company pursuant to an automatic nondiscretionary
grant mechanism. Upon joining the Board of Directors, each new non-employee
director is granted an option automatically (the "Initial Grant") at the first
meeting of the Board of Directors that occurs after such person becomes a
director. Mr. Codd received an Initial Grant to purchase 15,000 shares of the
Company's Common Stock on February 12, 1998 at an exercise price of $13.25 per
share. Each non-employee director is granted an option to purchase 3,000 shares
of Common Stock annually (the "Annual Grant") for so long as such individual
remains a member of the Board at the first meeting of the Board of Directors
after the Annual Meeting of Shareholders. Messrs. Kelly, Mock and Pomeroy each
received an Annual Grant of an option to purchase 3,000 shares of the Company's
Common Stock on February 12, 1998 at an exercise price of $13.25 per share. All
such options were granted at the fair market value of the Common Stock on the
date of grant. The Initial Grants to non-employee directors vest at a rate of
25% on the first anniversary date of grant and at a rate of 1/48th of the shares
per month thereafter, and the Annual Grants become exercisable at a rate of
1/48th of the shares subject to such options on the monthly anniversary of the
date of grant.
Compensation Committee Interlocks and Insider Participation
In fiscal 1998, the Compensation Committee consisted of Messrs. Mock and
Pomeroy. There are no interlocking relationships, as described by the Securities
and Exchange Commission, between the Compensation Committee members.
14
Report of Compensation Committee
This Report of the Compensation Committee shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended (the "Securities
Act") or under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), except to the extent that the Company specifically incorporates this
information by reference into such filing.
The following is the Report of the Compensation Committee describing the
compensation policies and rationales applicable to the Company's executive
officers with respect to the compensation paid to such executive officers for
the fiscal year ended June 30, 1998.
General. The responsibilities of the Compensation Committee are to
administer the Company's various incentive plans, including the 1995 Plan and
the Company's 1993 Stock Option Plan (collectively, the "Equity Plans") and to
set compensation policies applicable to the Company's executive officers. The
Committee's fundamental policy is to offer the Company's executive officers
competitive compensation opportunities based upon overall Company performance,
the individual contribution of officers to the financial success of the Company
and market rates of compensation at similarly situated technology companies. It
is the Committee's objective to have a substantial portion of each officer's
compensation contingent upon the Company's performance, as well as upon such
officer's own level of performance. Accordingly, each executive officer's
compensation package is comprised of three elements: (i) base salary, which is
established primarily on the basis of individual performance and market
considerations, (ii) annual variable performance awards payable in cash and tied
to the Company's achievement of financial performance goals and the executive's
contribution and (iii) long-term stock-based incentive awards that are intended
to strengthen the mutuality of interests between the executive officers and the
shareholders.
Base Salary. Individual salaries are determined based on individual
experience, performance and breadth of responsibility within the Company. The
Compensation Committee reviews these factors for each executive officer each
year. In addition, the Compensation Committee considers executive officers'
salaries for relative competitiveness with similarly situated companies.
Commissions and Bonuses. Incentive cash compensation for Charles S.
Duncheon, the Company's Senior Vice President of Marketing and Sales, consists
of commission income. Mr. Duncheon received $59,437 in fiscal 1999 for
commissions earned in fiscal 1998. The Company has also established a cash bonus
plan for its other executive officers. Brian R. Carlisle, the Company's Chief
Executive Officer, was awarded a bonus of $31,000 in fiscal 1998 upon
achievement of certain individual and corporate goals. Bruce E. Shimano, the
Company's Vice President, Research and Development, Richard J. Casler, its Vice
President, Engineering, and Betsy A. Lange, its Vice President, Finance and
Chief Financial Officer, were also awarded bonuses of $13,000, $18,053 and
$8,000, respectively, in fiscal 1998. The Compensation Committee sets new goals
for each executive and the Company as a whole each fiscal year on the basis of
past performance and objectives for the next fiscal year.
Equity Plans. The Equity Plans are long-term incentive plans for all
employees. These plans are intended to align shareholder and employee interests
by creating a direct link between long-term rewards and the value of the
Company's shares. The Compensation Committee believes that long-term stock
ownership by executive officers and all employees is an important factor in
retaining valued employees and in achieving growth in share value. The options
utilize vesting periods that encourage employees to continue in the employ of
the Company. Because the value of an option bears a direct relationship to the
Company's stock price, the Compensation Committee believes that options motivate
executive officers and employees to manage the Company in a manner which will
benefit all shareholders.
The Equity Plans authorize the Compensation Committee to award stock
options to employees at any time. The size of stock option grants is determined
by a number of factors, including comparable grants to executive officers and
employees of similarly situated companies, as well as the executive officer's
relative position and responsibilities with the Company, the individual
performance of the executive officer over the previous fiscal year and the
anticipated contribution of the executive officer to the attainment of the
Company's long-term strategic performance goals. The exercise price per share of
each
15
stock option is generally equal to the prevailing market value of a share of the
Company's Common Stock on the date such option is granted. The Committee views
stock option grants as an important component of its long-term,
performance-based compensation philosophy.
CEO Compensation. The compensation of Mr. Carlisle consists of base salary,
bonuses and stock options. The Board of Directors periodically reviews Mr.
Carlisle's base salary and bonus and revises his compensation based on the
Board's overall evaluation of his performance toward the achievement of the
Company's financial, strategic and other goals, with consideration given to his
length of service and to competitive chief executive officer compensation
information. In fiscal 1998, Mr. Carlisle earned a base salary of $262,117 as
set by the Compensation Committee. Based upon his achievement of certain
individual and company-wide performance goals, Mr. Carlisle was awarded a bonus
of $31,000 in fiscal 1998 that was paid in fiscal 1999. Mr. Carlisle was granted
stock options to purchase 25,000 shares of Common Stock at an exercise price of
$11.75 per share in fiscal 1998. The Compensation Committee granted Mr. Carlisle
the option to purchase such shares following consideration of Mr. Carlisle's
unvested option position relative to industry norms for chief executive officers
of similarly situated companies.
Section 162(m)
The Board has considered the potential future effects of Section 162(m) of
the Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1 million in any taxable year
for any of the executive officers named in the proxy statement, unless such
compensation is performance-based. The Company has adopted a policy that, where
reasonably practicable, the Company will seek to qualify the variable
compensation paid to its executive officers for an exemption from the
deductibility limitations of Section 162(m).
Respectfully submitted,
The Compensation Committee:
Cary R. Mock
John E. Pomeroy
16
Performance Graph
The stock price performance graph set forth below under the caption
"Performance Graph" shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any filing under the Securities Act or under
the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference into such filings.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
ADEPT TECHNOLOGY, INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
12/15/95 06/01/96 06/01/97 06/01/98
-------- -------- -------- --------
Adept Technology, Inc. 100 147 92 80
Peer Group 100 81 124 83
Nasdaq Stock Market (U.S) 100 116 141 186
This graph assumes that $100 was invested on December 15, 1995 in the
Company's Common Stock and in the Nasdaq Stock Market US Index and in a Peer
Group Index, comprised of fourteen companies in the robotics and vision systems
industries, and that all dividends were reinvested.
No dividends have been declared or paid on the Company's Common Stock. The
Company intends to retain future earnings, if any, to fund its business and does
not anticipate paying any cash dividends in the foreseeable future. Shareholder
returns over the period indicated should not be considered indicative of future
shareholder returns.
Certain Transactions
In connection with the hiring of Marcy R. Alstott as Vice President,
Operations, in March 1998, the Company loaned Ms. Alstott $300,000 pursuant to a
promissory note secured by Ms. Alstott's residence at an initial interest rate
of 5.64% to be adjusted annually to the applicable short-term rate then in
effect. The purpose of the loan was to provide Ms. Alstott relocation assistance
as she was moving from a lower-cost housing market on the East Coast to Silicon
Valley, where housing costs are among the highest nationwide. The loan is
evidenced by a promissory note that provides for forgiveness of principal at a
rate of $30,000 per year over ten years so long as Ms. Alstott continues as an
employee of the Company. Ms. Alstott's loan included an obligation for the
Company to reimburse Ms. Alstott for taxes payable by her and for interest
payable each year on May 1. In the event that Ms. Alstott ceases employment
voluntarily within the first four years of her employment, the loan will become
due and payable 180 days after the
17
effective date of such termination. If Ms. Alstott leaves the Company after four
years, the loan will be forgiven. If Ms. Alstott's employment by the Company is
terminated involuntarily for any reason by the Company or she dies or becomes
disabled, the remaining balance of principal and interest due on the loan will
be forgiven.
All future transactions, including loans, between the Company and its
officers, directors, principal shareholders and their affiliates will be
approved by the Compensation Committee of the Board of Directors, which consists
of independent and disinterested outside directors, and will continue to be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the National
Association of Securities Dealers, Inc. Executive officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1998 all executive officers and directors of the Company complied with
all applicable filing requirements other than one delinquent filing of a Form 4
for Richard J. Casler.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend. See "Deadline for Receipt of Shareholder
Proposals for 1999 Annual Meeting."
ADJOURNMENT OF THE ANNUAL MEETING
In the event that there are not sufficient votes to approve any proposal
incorporated herein at the time of the Annual Meeting, such proposal could not
be approved unless the Annual Meeting were adjourned in order to permit further
solicitation of proxies from holders of the Company's Common Stock. Proxies that
are being solicited by the Company's Board grant discretionary authority to vote
for any such adjournment, if necessary. If it is necessary to adjourn the Annual
Meeting, and the adjournment is for a period of less than 45 days, no notice of
the time and place of the adjourned meeting is required to be given to the
shareholders other than an announcement of such time and place at the Annual
Meeting. A majority of the shares represented and voting at the Annual Meeting
is required to approve such adjournment, regardless of whether there is a quorum
present at the Annual Meeting.
THE BOARD OF DIRECTORS
Dated: October 5, 1998
18
Appendix A
- - --------------------------------------------------------------------------------
PROXY ADEPT TECHNOLOGY, INC. PROXY
1998 ANNUAL MEETING OF SHAREHOLDERS
November 5, 1998
This Proxy is solicited on behalf of the Board of Directors
The undersigned shareholder of ADEPT TECHNOLOGY, INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated October 5, 1998, and hereby
appoints Brian R. Carlisle and Betsy A. Lange, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Shareholders of ADEPT TECHNOLOGY, INC. to be held on November 5, 1998 at 9:00
a.m. local time, at the Santa Clara Marriott, 2700 Mission College Boulevard,
Santa Clara, California 95054 and at any adjournment or adjournments thereof,
and to vote all shares of Common Stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth below:
(Continued, and to be signed on the other side)
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED. IT IS TO SHOW THE TEXT
POSITION ON THE FRONT OF THIS PROXY CARD
- - ------------------------------------------------------------------------------------------------------------------------------------
[X] Please mark
your votes
as this
FOR AGAINST ABSTAIN
WITHHOLD
1. ELECTION OF DIRECTORS: FOR FOR ALL 2. Proposal to approve (i) the adoption of the [ ] [ ] [ ]
NOMINEES: [ ] [ ] 1998 Employee Stock Purchase Plan, (ii) the
reservation of 600,000 shares of Common
Stock for issuance thereunder and (iii) an
Brian R. Carlisle, annual increase beginning on July 1, 1999
Bruce E. Shimano, Ronald E. F. Codd, Michael P. Kelly, of the lesser of (A) 300,000 shares, (B)
Cary R. Mock, John E. Pomeroy 3.0% of outstanding shares on the last day
of the prior fiscal year or (C) such amount
INSTRUCTION: If you wish to withhold authority to vote as may be determined by the Board of
for any individual nominee, write that nominee's name in Directors.
the space provided below.
3. Proposal to ratify the appointment of Ernst [ ] [ ] [ ]
_______________________________________________________ & Young LLP as the independent auditors of
the Company for the fiscal year ending June
30, 1999.
and, in their discretion, upon such other
matter or matters which may properly come
before the meeting or any adjournment or
adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR,
IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR THE ADOPTION OF THE 1998
EMPLOYEE STOCK PURCHASE PLAN AND
RESERVATION OF SHARES THEREUNDER, FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Signature(s) ___________________________________________________________________ Dated ____________________________________, 1998
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as his or her name appears hereon, and returned
promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants
or as community property, both should sign.)
- - ------------------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED. IT IS TO SHOW THE
TEXT POSITION ON THE FRONT OF THIS PROXY CARD
Appendix B
ADEPT TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock
Purchase Plan of Adept Technology, Inc.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the
Company.
(d) "Company" shall mean Adept Technology, Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings, commissions, and payments for overtime.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than two (2) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sale price for
the Common Stock (or the mean of the closing bid and asked prices, if no sales
were reported), as quoted on such exchange or system for the last market trading
day on the date of such determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(3) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(k) "Offering Period" shall mean the period of approximately
twelve (12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
(beginning in 1998) of each year and terminating on the last Trading Day in the
period ending twelve months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after
November 6, 1998, and ending on the last Trading Day on or before October 31,
1999. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 1998 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date; provided,
however, that the first Purchase Period under the Plan shall commence with the
first Trading Day on or after November 6, 1998, and shall end on the last
Trading Day on or before April 30, 1999.
(n) "Purchase Price" shall mean 85% of the Fair Market Value
of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be adjusted by
the Board pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
-2-
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day on or after May 1 and November 1 of each year, or on
such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after November 6, 1998, and ending on the last Trading Day on or before
October 31, 1999. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such
-3-
authorization is applicable, unless sooner terminated by the participant as
provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period, provided, however, the aggregate of such payroll deductions under two or
more employee stock purchase plans of the Company that are overlapping may not
exceed fifteen percent (15%) of the participant's Compensation which he or she
receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) by the
participant at any time during a Purchase Period. Payroll deductions shall
recommence at the rate provided in such participant's subscription agreement at
the beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
-4-
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than 3,000 shares of the Company's Common Stock (subject to any
adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof, and the option shall
expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed:
(i) the number of shares of Common Stock that were
available for sale under the Plan on the Enrollment Date of the applicable
Offering Period, or
(ii) the number of shares available for sale under
the Plan on such Exercise Date, the Board may in its sole discretion
(x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or
-5-
(y) provide that the Company shall make a
pro rata allocation of the shares available for purchase on such Enrollment Date
or Exercise Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Exercise Date,
and terminate any or all Offering Periods then in effect pursuant to Section 20
hereof.
The Company may make a pro rata allocation of the shares available on the
Enrollment Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional shares for issuance
under the Plan by the Company's shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions will not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she will be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 15 hereof, and
such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an
-6-
Employee for the participant's customary number of hours per week of employment
during the period in which the participant is subject to such payment in lieu of
notice.
12. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be 600,000 shares, plus an annual increase to be added on the first day of
the Company's fiscal year beginning in July 1999 equal to the lesser of (i)
300,000 shares or (ii) 3% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or
a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such partici pant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant,
-7-
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7), as
well as the price per share and the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the
-8-
consummation of such proposed dissolution or liquidation, unless provided
otherwise by the Board. The New Exercise Date shall be before the date of the
Company's proposed dissolution or liquidation. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common
-9-
Stock for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(1) altering the Purchase Price for any Offering
Period including an Offering Period underway at the time of the change in
Purchase Price;
(2) shortening any Offering Period so that the
Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Board action; and
(3) allocating shares pursuant to Section 8(b)
above.
Such modifications or amendments shall not require
shareholder approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
ADEPT TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ________________________________hereby elects to participate in the
Adept Technology, Inc. 1998 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15% under all
employee stock purchase plans of the Company) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please
note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and spouse only):____
________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me
over the price which I paid for the shares. I hereby agree to notify
the Company in writing within 30 days after the date of any disposition
of my shares and I will make adequate provision for Federal, state or
other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to
meet any applicable withholding obligation including any withholding
necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
2-year and 1-year holding periods, I understand that I will be treated
for federal income tax purposes as having received income only at the
time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of
such disposition over the purchase price which I paid for the shares,
or (2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
______________________________________ _____________________________________
Relationship
_____________________________________
(Address)
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Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature
(If beneficiary other than spouse)
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EXHIBIT B
ADEPT TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Adept
Technology, Inc. 1998 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically termi nated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________