SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
AXCELIS TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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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
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 2001
The 2001 annual meeting of the stockholders of Axcelis Technologies, Inc.,
a Delaware corporation, will be held at the State Street Bank Building, 225
Franklin Street, Boston, Massachusetts, at 11:00 a.m. on Thursday, June 28, 2001
for the following purposes:
1. To elect two (2) directors to serve until the 2004 Annual Meeting of
Stockholders.
2. To ratify the appointment of independent auditors.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 30, 2001 will
be entitled to vote at the annual meeting or at any adjournment.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR
PROXY WILL NOT BE USED.
By order of the Board of Directors,
Lynnette C. Fallon
SECRETARY
Dated: May 14, 2001
PROXY STATEMENT
The board of directors of Axcelis Technologies, Inc. ("Axcelis" or the
"Company") is soliciting your proxy for use at the 2001 annual meeting of
stockholders to be held on Thursday, June 28, 2001 and at any adjournment of the
meeting. This proxy statement and the accompanying proxy card are first being
sent or given to stockholders of Axcelis on or about May 14, 2001.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. You may vote your shares of Axcelis common stock at the
annual meeting if you were a stockholder of record at the close of business on
April 30, 2001. On that date, there were 97,073,127 shares of common stock
outstanding. You are entitled to one vote for each share of common stock that
you held on the record date.
HOW TO VOTE YOUR SHARES. You may vote your shares either by proxy or by
attending the meeting and voting in person. If you choose to vote by proxy,
please complete, date, sign and return the proxy card in the enclosed postage
prepaid envelope. The proxies named in the proxy card will vote your shares as
you have instructed. If you sign and return the proxy card without indicating
how your votes should be cast, the proxies will vote your shares in favor of
each of the proposals contained in this proxy statement, as recommended by our
board of directors. Even if you plan to attend the meeting, please complete and
mail your proxy card to ensure that your shares are represented at the meeting.
If you attend the meeting, you can still revoke your proxy by voting in person.
If your shares are held in a brokerage or bank account, you must make
arrangements with your broker or bank to vote your shares in person.
PROPOSALS TO BE CONSIDERED AT THE ANNUAL MEETING. The principal business
expected to be transacted at the meeting, as more fully described below, will be
the election of two directors and the ratification of the selection of
independent auditors of the Company.
QUORUM. A quorum of stockholders is required to transact business at the
meeting. A majority of the outstanding shares of common stock entitled to vote,
represented at the meeting in person or by proxy, constitutes a quorum for the
transaction of business.
NUMBER OF VOTES REQUIRED. The number of votes required to approve the
proposals that are scheduled to be presented at the meeting is as follows:
PROPOSAL REQUIRED VOTE
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o Election of two nominees as directors. Each nominee must receive a
plurality of the votes cast.
o Ratification of auditors. This requires the affirmative vote of a
majority of the shares present or represented at the meeting.
ABSTENTIONS AND BROKER NON-VOTES. Abstentions and broker non-votes will be
counted in determining whether a quorum exists. A broker non-vote occurs when a
broker cannot vote a customer's shares registered in the broker's name because
the customer did not send the broker instructions on how to vote on the matter
and the broker is barred by law or Nasdaq regulations from exercising its
discretionary voting authority in the particular matter. In voting on the
proposal to ratify the appointment of our auditors, abstentions and broker
non-votes will be counted as votes against the proposal.
DISCRETIONARY VOTING BY PROXIES ON OTHER MATTERS. Aside from the proposals
for the election of directors and the ratification of our selection of auditors,
we do not know of any other proposals that may be presented at the 2001 annual
meeting. If another matter is properly presented for consideration at the
meeting, the persons named in the accompanying proxy card will exercise their
discretion in voting on the matter.
HOW YOU MAY REVOKE YOUR PROXY. You may revoke the authority granted by your
executed proxy card at any time before we exercise it by filing with our
Corporate Secretary, Lynnette C. Fallon, a written revocation or a duly executed
proxy card bearing a later date, or voting in person at the meeting. If your
shares are held in a brokerage or bank account, you must make arrangements with
your broker or bank to revoke your proxy.
EXPENSES OF SOLICITATION. We will bear all costs of soliciting proxies. We
will upon request reimburse brokers, custodians and fiduciaries for
out-of-pocket expenses incurred in forwarding proxy solicitation materials to
the beneficial owners of stock held in their names. In addition to solicitations
by mail, our directors, officers and employees may solicit proxies from
stockholders in person or by other means of communication, including telephone,
facsimile and e-mail, without additional remuneration.
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SHARE OWNERSHIP
The following table shows the amount of our common stock beneficially owned
as of March 31, 2001 by (i) persons known by us to own more than 5% of our
common stock, (ii) the executive officers named in the Summary Compensation
Table on page 15 and all other executive officers, (iii) our directors and (iv)
all of our current executive officers and directors as a group.
The number of shares beneficially owned by each person listed below
includes any shares over which a person has sole or shared voting or investment
power as well as shares which the person has the right to acquire on or before
May 30, 2001 (60 days after March 31, 2001) by exercising a stock option or
other right. Unless otherwise noted, each person has sole investment and voting
power (or shares that power with his or her spouse) over the shares listed in
the table. The percentage ownership of each person listed in the table was
calculated using the total number of shares outstanding on March 31, 2001, plus
any shares these persons could acquire upon the exercise of any options held by
them on or before May 30, 2001.
OPTIONS OR
WARRANTS TOTAL SHARES
SHARES EXERCISABLE AS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED(1) MAY 30, 2001 OWNED OF CLASS
- --------------- --------- --------------- ----------- ------
5% STOCKHOLDER
Wellington Management
Company, LLP(1) ............. 12,989,637 0 12,989,637 13.4%
75 State Street
Boston, MA 02109
EXECUTIVE OFFICERS
Brian R. Bachman ............ 25,890 797,025 822,915 *
Kevin M. Bisson ............. 753 13,137 13,890 *
Michael L. Dreyer ........... 1,000 0 1,000 *
Michael J. Luttati .......... 5,266 209,632 214,898 *
Ted S. Miller ............... 7,000 32,982 39,982 *
Robert A. Mionis ............ 3,234 75,999 79,233 *
Cornelius F. Moses, III ..... 5,000 0 5,000 *
Kevin O'Connor .............. 5,099 0 5,099 *
Mary G. Puma ................ 53,314(2) 225,809 279,123 *
NON-EXECUTIVE DIRECTORS
Alexander M. Cutler ......... 29,184(3) 24,000 53,184 *
Stephen R. Hardis ........... 65,735 24,000 89,735 *
Ned C. Lautenbach ........... 7,358 24,000 31,358 *
Philip S. Paul .............. 5,000 24,000 29,000 *
Naoki Takahashi ............. 1,000 24,000 25,000 *
Gary L. Tooker .............. 13,573(4) 24,000 37,573 *
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP
(15 PERSONS) ................ 228,406 1,498,584 1,726,990 1.8%
- ------------------
* Indicates less than 1%.
(1) Based on a Schedule 13G filed by Wellington Management Company, LLP
("Wellington") with the Securities and Exchange Commission in February
2001, which reports that such shares are held of record by clients of
Wellington. Wellington shares voting and investment power over such shares
with such clients, one of which, Vanguard Winsor Fund, owns more than 5% of
the outstanding Common Stock.
(2) Includes 47,522 shares that are subject to forfeiture to the Company, which
lapses as to 23,761 shares on each of December 31, 2003 and 2004.
(3) Includes 7,279 shares owned by Mr. Cutler's wife and 1,178 shares owned by
a trust of which Mr. Cutler is a beneficiary.
(4) Includes 3,573 shares held by a trust of which Mr. Tooker is a beneficiary.
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PROPOSAL 1: ELECTION OF DIRECTORS
Our board of directors has currently fixed the number of directors at
eight, which number is subject to increase by the Board. Under our charter, our
board is divided into three classes, with each class being as nearly equal in
number of directors as possible. The term of one class expires, and their
successors are elected for a term of three years, at each annual stockholders'
meeting. At the upcoming annual meeting, two directors will be elected to hold
office for a term of three years and until their successors are elected and
qualified. Each of the board's nominees, Alexander M. Cutler and Gary L. Tooker,
has consented to serve if elected. However, if any nominee is unable to serve,
proxies will be voted for any other candidate nominated by the board.
The following table contains biographical information about the nominees
for director and current directors whose term of office will continue after the
meeting.
PRESENT
BUSINESS EXPERIENCE DIRECTOR TERM
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES
- ------------ ----------------------- ----- -------
Alexander M. Cutler* Mr. Cutler is Chairman and Chief Executive Officer 2000 2001
Age: 50 of Eaton Corporation, a manufacturer of industrial
components. Prior to assuming this position in
August 2000, Mr. Cutler was President and Chief
Operating Officer of Eaton Corporation since 1995.
Mr. Cutler served as Eaton's Executive Vice
President and Chief Operating Officer - Controls
from 1993 to 1995, as Executive Vice President -
Operations from 1991 and as President of its
Industrial Group from 1986. He is also a director of
KeyCorp.
Gary L. Tooker* Mr. Tooker is a consultant to Motorola, Inc. and 2000 2001
Age: 61 Morgan Stanley Dean Witter. Mr. Tooker
served as Vice Chairman of Motorola, Inc., a
manufacturer of electronics equipment, from June
to December 1999. Prior to that, he was Motorola's
Chairman from 1997, and Vice Chairman and Chief
Executive Officer from 1993. Mr. Tooker is a
director of Avnet, Inc., Eaton Corporation and
Motorola.
Brian R. Bachman Mr. Bachman has been the Company's Chief Executive 2000 2002
Age: 56 Officer and Vice Chairman since May 2000. From
December 1995 to July 2000, he was Senior Vice
President and Group Executive-Hydraulics,
Semiconductor Equipment and Specialty Controls of
Eaton Corporation. From 1991 to 1995, he was Vice
President and General Manager for the Standard
Products Business Group of Philips Semiconductor.
He is a member of the Board of Directors of
Keithley Instruments, Inc. He also serves on
Northwestern University's Kellogg McCormick Master
of Management in Manufacturing Program Advisory
Board.
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PRESENT
BUSINESS EXPERIENCE DIRECTOR TERM
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES
- ------------ ----------------------- ----- -------
Stephen R. Hardis Mr. Hardis is the Chairman of the Company's Board 2000 2002
Age: 65 of Directors. He was Chairman and Chief Executive
Officer of Eaton Corporation until July 31, 2000.
Mr. Hardis became Eaton's Chairman in January 1996
and its Chief Executive Officer in September 1995.
Prior to that, he served as Eaton's Vice Chairman
from 1986 and its Executive Vice President -
Finance and Administration from 1979. Mr. Hardis
is a director of American Greetings Corporation,
Lexmark International Group, Inc., Marsh &
McLennan Companies, Inc., Nordson Corporation,
Progressive Corporation and Apogent Technologies
Inc.
Ned C. Lautenbach Mr. Lautenbach is a partner of Clayton, Dubilier & 2000 2002
Age: 57 Rice, Inc., an investment firm specializing in
structuring leveraged buyouts. Before joining
CD&R, Mr. Lautenbach was employed by IBM from 1968
until his retirement in 1998. At IBM, he held
several executive positions, including Vice
President, President of IBM Asia Pacific, Senior
Vice President, Chairman of IBM World Trade
Corporation, Senior Vice President and Group
Executive, Sales and Distribution, and was a
member of IBM's Corporate Executive Committee. He
is a director of Eaton Corporation, Acterna
Corporation, Complete Business Solutions, Inc.,
ChoicePoint, Inc., Dynatech Corp., Fidelity Mutual
Funds and Fairfield University.
Mary G. Puma Ms. Puma has been the Company's President and 2000 2003
Age: 43 Chief Operating Officer since May 2000. Prior to
her current position, she served as the Company's
Vice President from February 1999 to May 2000. In
1998, she became General Manager and Vice
President of Eaton Corporation's Implant Systems
Division. In May 1996, she joined Eaton as General
Manager of the Commercial Controls Division. Prior
to joining Eaton, Ms. Puma spent 15 years in
various marketing and general management positions
for General Electric Company.
5
PRESENT
BUSINESS EXPERIENCE DIRECTOR TERM
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES
- ------------ ----------------------- ----- -------
Philip S. Paul
Age: 62 Mr. Paul is Chairman of Paul Capital Partners, 2000 2003
L.L.C., a private investment firm and registered
investment advisor that he founded in 1991. Prior
to 1991, Mr. Paul was Chairman and Chief Executive
Officer of Hillman Ventures, Inc., a private
equity investment firm which funded venture
capital and buyouts. Prior to 1984, Mr. Paul had
been Chairman and Chief Executive Officer of
Wabash Datatech, Inc. Mr. Paul is a director of
Soma Networks, Inc. and serves on the Board of
Advisors for U.S. Venture Partners, Bay Partners,
New Enterprise Associates, The Danske Bank's
Private Equity Program (Copenhagen), and S.E.D.
Ventures (Paris).
Naoki Takahashi Mr. Takahashi has been Director, Senior Vice 2000 2003
Age: 55 President and General Manager of the Precision
Products Division of Sumitomo Heavy Industries,
Ltd., an industrial holding company, since April
2000. From 1998 to 2000, Mr. Takahashi was
Director and General Manager of Corporate
Technology Operations Group of Sumitomo. From 1996
to 1998, he was General Manager of the Research
and Development Center of Sumitomo.
- ---------------------------
* Indicates a nominee for election as director.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
Our board of directors held seven meetings during 2000. Our board has
standing Audit and Compensation Committees but does not have a Nominating
Committee.
AUDIT COMMITTEE. The Audit Committee selects and evaluates the Company's
independent auditors, reviews the audited financial statements and discusses the
adequacy of the Company's internal controls with management and the auditors.
The Audit Committee, which met one time during 2000, consists of Messrs. Paul
(Chairman), Lautenbach and Tooker. For information about the Audit Committee,
see the "Audit Committee Report" below.
COMPENSATION COMMITTEE. The Compensation Committee determines the
compensation to be paid to our executive officers and also administers our 2000
Stock Plan (the "Stock Plan"). Additionally, the Compensation Committee reviews
the management succession plan for the organization. The members of the
Compensation Committee are each of the directors other than Mr. Bachman and Ms.
Puma. The Compensation Committee and its subcommittee held five meetings in
2000. For information about the Compensation Committee, see the "Compensation
Committee Report on Executive Compensation" below.
DIRECTOR COMPENSATION
DIRECTOR FEES. Other than the Chairman of the Board, our directors do not
receive any cash fees. Mr. Hardis, the Chairman of the Board, receives an annual
retainer of $200,000, payable quarterly.
AUTOMATIC OPTION GRANTS. All non-employee directors of Axcelis are eligible
to receive automatic initial and annual grants under our 2000 Stock Plan,
provided that while Eaton Corporation was our controlling stockholder, employees
of Eaton were ineligible. Under the Stock Plan, at the time of our initial
public offering all eligible
6
directors received an initial grant of an option to purchase 24,000 shares. Any
director becoming eligible thereafter receives an initial grant of an option for
24,000 shares. In addition, eligible directors will receive options for 12,000
shares once a year, at the meeting of the Board of Directors after July 1 of
each year, beginning in 2001. Options are fully exercisable on the 181st day
after the date the option is granted, provided the optionee is still a director
on that date. The options have a term of ten years and an exercise price equal
to the closing price of our common stock on the business day immediately
preceding the grant date.
The directors who are currently eligible to receive these automatic grants
are Messrs. Hardis, Cutler, Lautenbach, Tooker, Paul and Takahashi. At our
initial public offering in July 2000, each of Mr. Lautenbach, Mr. Tooker, Mr.
Paul and Mr. Takahashi received an option for 24,000 shares with an exercise
price of $22.00. Mr. Hardis became eligible to receive an option upon his
retirement from Eaton Corporation, and received an option for 24,000 shares with
an exercise price of $16.625 in August 2000. Mr. Cutler did not become eligible
to receive an automatic grant until January 2001.
AUDIT COMMITTEE REPORT
An Audit Committee of the Board was formed prior to our initial public
offering, composed entirely of non-management directors. The members of the
Audit Committee meet the independence and financial sophistication requirements
of the Nasdaq Stock Market Rules. Our Board of Directors adopted a charter for
the Audit Committee that establishes the responsibilities of the Committee. A
copy of this charter is attached as Appendix A to this proxy statement.
The Committee schedules four of its meetings to occur after the preparation
of quarterly and annual financial statements but prior to the public release of
financial results for the period. Two additional meetings are also planned
during the year to discuss the Company's internal control systems with the
independent auditors and to review the scope and results of the Company's
internal audit plans. In 2000, the first quarterly period ending after our
initial public offering was the quarter ended September 30, 2000, and therefore
only one meeting was held during 2000. The Committee met in January 2001 prior
to the release of the 2000 annual financial results and in April 2001 prior to
the release of the financial results for the first quarter of 2001. At these
meetings, Axcelis' Chief Financial Officer was present, as was our General
Counsel and our independent auditors. The Committee's agenda is established by
the Committee's chairman, with input from the Company's Chief Financial Officer.
Depending on the content of the meeting, the Committee holds private sessions
with the Company's independent auditors and, separately, with the Chief
Financial Officer, at which candid discussions of financial management,
accounting and internal control issues can take place.
The Board of Directors engaged Ernst & Young LLP as our independent
auditors for 2000. We have discussed with our independent auditors and the
Company's Chief Financial Officer overall audit scopes and plans, the results of
external audit examinations, evaluations by the auditors of the Company's
internal controls and the quality of the Company's financial reporting.
Management has reviewed with the Audit Committee the audited 2000
consolidated financial statements in our Form 10-K Annual Report filed with the
Securities and Exchange Commission and included in the Annual Report to
Stockholders which accompanies this proxy statement. The review included a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
In its meetings with representatives of the independent auditors, the
Committee asks them to address, and discusses their response to, several
questions that the Committee believes are particularly relevant to its
oversight. These questions include:
o Are there any significant accounting judgments made by management
in preparing the financial statements that would have been made
differently had the auditors themselves prepared and been
responsible for the financial statements?
7
o Based on the auditors' experience and their knowledge of the
Company, do the Company's financial statements fairly present to
investors, with clarity and completeness, the Company's financial
position and performance for the reporting period in accordance
with generally accepted accounting principles and SEC disclosure
requirements?
o Based on the auditors' experience and their knowledge of the
Company, has the Company implemented internal controls and
internal audit procedures that are appropriate for the Company?
The Committee believes that, by focusing its discussions with the
independent auditors, it can promote a meaningful dialogue that provides a basis
for its oversight judgements.
The Committee received from the independent auditors their annual written
reports covering (1) matters required to be discussed by the auditors with the
Committee under Statement on Auditing Standards No. 61, COMMUNICATION WITH AUDIT
COMMITTEES and (2) their independence from the Company and its management, which
report is made under Independence Standards Board Standard No. 1, INDEPENDENCE
DISCUSSIONS WITH AUDIT COMMITTEES. Both reports were discussed with the auditors
and management at an Audit Committee meeting, including a discussion of any
relationship that may impact the objectivity and independence of our auditors
and whether the provision of any non-audit services by the auditors is
compatible with maintaining their independence.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity. Necessarily, in its oversight role, the Committee relies on
the work and assurances of the Company's management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors, who in their report on the audited annual financial statements express
an opinion on the conformity of the Company's annual financial statements to
generally accepted accounting principles.
In reliance on these reviews and discussions and the report of the
independent auditors, the Audit Committee has recommended to the Board of
Directors, and the Board of Directors has approved, that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, for filing with the Securities and Exchange Commission.
The Committee and the Board have also recommended, subject to reconsideration in
the absence of shareholder ratification, the selection of the Company's
independent auditors for the current year.
By the Audit Committee,
Philip S. Paul
Ned C. Lautenbach
Gary L. Tooker
8
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers our
executive compensation program. Mr. Hardis chairs the Committee, and membership
includes Mr. Cutler, Mr. Tooker, Mr. Takahashi, Mr. Paul, and Mr. Lautenbach. In
addition, during 2000, we had a subcommittee of the Compensation Committee, the
Executive Equity Compensation Committee (the "EECC"), which was composed of all
members of the Compensation Committee except Mr. Cutler. The EECC addressed all
equity grants to executive officers under the 2000 Stock Plan in order to
maintain qualification of such compensation under Internal Revenue Code Section
162(m). This report is submitted by the Committee and addresses the compensation
policies for fiscal year 2000 as they affected Mr. Bachman, as Chief Executive
Officer, and the top four executive officers other than Mr. Bachman each of
whose salary and bonus combined for fiscal year 2000 exceeded $100,000, and who
are named in the Summary Compensation Table. This report also covers
compensation policies for Cornelius F. Moses, III, who joined the Company in
October 2000, but who has been included in the Summary Compensation Table.
COMPENSATION PHILOSOPHY
During 2000, the Committee was responsible for recommending the
compensation package of each existing and newly recruited executive officer. In
making decisions regarding executive compensation, the Committee retained the
services of PricewaterhouseCoopers, LLP, an independent compensation consulting
firm. Additionally, the Committee reviewed benchmarking data obtained from other
compensation consultants, including Iquantic, Executive Alliance, and Watson
Wyatt Worldwide, to assess the Company's compensation programs.
In order to attract, retain and motivate the talented personnel it needs to
meet corporate objectives, Axcelis has structured its executive compensation
program to provide its employees with total cash compensation (base compensation
plus incentive compensation) at the 50th percentile of the compensation paid by
other similar sized technology companies if our corporate objectives are
achieved. If such objectives are exceeded, Axcelis' compensation program will
deliver total compensation at or above the 75th percentile for total
compensation paid by our peer group. Bonuses are primarily based on corporate
performance, and actual awards will vary year to year according to the Company's
overall performance and the individual's impact on that performance.
The Company's executive compensation program consists of base salary, cash
bonuses and stock option awards. All three components are intended to attract
and retain executives and motivate management to meet and exceed Company growth
and profitability goals and align management interests with those of our
stockholders. In determining the total amount and mix of the compensation
package for each executive officer, the Committee members subjectively consider
the overall value to the Company of the executive in light of numerous factors
such as contributions to the Company's competitive position in the marketplace,
individual performance, and the past and expected contribution by the executive
toward the achievement of the Company's performance objectives.
BASE SALARY
The Company's base salaries are structured to be within the median range of
salaries paid by similar companies for comparable positions. The Committee
believes that the Company's most direct competitors for executive positions are
not necessarily the same as the peer companies in the Philadelphia Semiconductor
Index, but, depending upon the position, may represent a broader group of
similar sized technology companies. The Company actively participates in survey
groups facilitated by Iquantic and Executive Alliance. While data from these
surveys is categorized by industry type, revenue, and/or geographic locale, the
Committee emphasizes the survey cut representing companies with revenues between
$300 million and $1 billion, as this most accurately represents companies in a
similar position to Axcelis.
In establishing the management team in 2000 to prepare for our initial
public offering, officer salaries were reviewed and adjusted accordingly based
upon survey data provided by PricewaterhouseCoopers. Adjustments were made
ranging from 1.1% to 17%.
9
CASH BONUSES
Cash bonus targets are set based upon a variety of factors, including
market data and anticipated impact of the individual. For the elected officers
these targets range from 30% up to 50% in the case of the Chief Executive
Officer.
For 2000, the Company implemented a cash bonus plan with two components.
Because Axcelis was a wholly owned subsidiary of Eaton Corporation until July
2000, the first half of the year was based upon Eaton's earnings per share and a
"Balanced Scorecard" for Axcelis divisional performance, including cash flow
return on gross capital and several other factors. The second half of the year
2000 was based upon Axcelis's earnings per share and specific "Balanced
Scorecard" performance designed to drive longer term, more subjective goals. The
Company's performance during 2000 resulted in a 111% average weighted score for
the first half of the year and a 200% score for the second half of the year.
Individual performance factors may also modify a particular executive's bonus.
STOCK OPTIONS
The Committee believes it is in the best interests of the Company and its
shareholders to grant stock options as the long-term component of executive and
key employee compensation. Stock option grants to executive officers and other
key employees are intended to bring employee financial interest in line with
long-term shareholder value.
Stock option awards are at the discretion of the Committee, taking into
account the individual's performance and contribution in meeting the goals of
the Company. Beginning with our initial public offering in July 2000, stock
options were granted to the executive officers and other key employees. The
options granted in July 2000 have an exercise price of $22.00, which equals the
price to the public in the initial public offering. Subsequent grants to newly
hired employees (which includes Mr. Moses) or bonus grants have an exercise
price equal to the closing price of the Company's common stock on the day
preceding the date of grant. All options granted to executive officers provide
for vesting over a period of four years, except in the case of Mr. Bachman, who
has a three year vesting schedule, and Ms. Puma, who has a five year vesting
schedule.
In accordance with an agreement between Eaton and Axcelis, on December 29,
2000, Axcelis employees holding terminating Eaton stock options were provided
with replacement options for Axcelis common stock to recognize their past and
future contributions. The exercise price of these options was fixed at a price
having the same relationship to the closing price of Axcelis common stock on
December 29, 2000 as the exercise price of the Eaton option being replaced had
to the Eaton market price on that date. The exercisability terms of these grants
were carried over from the Eaton options. Mr. Bachman and Ms. Puma voluntarily
forfeited their rights to 444,675 replacement stock options in order to reduce
the total number of shares granted upon such conversion. Without this
forfeiture, the conversion formula in the agreement with Eaton would have
resulted in the grant of significantly higher numbers of options than originally
contemplated due to an increase in the spread between the Eaton stock price and
Axcelis stock price.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER
Mr. Bachman was appointed Chief Executive Officer in May 2000. Pursuant to
an employment agreement negotiated with the Company, his base salary for this
position was established at $600,000 with a target bonus for 2000 equal to 50%
of his base salary. As a result of Company performance under the cash bonus plan
and individual performance factors, Mr. Bachman's actual bonus for 2000 was
$415,830.
Ms. Puma was appointed President and Chief Operating Officer in May 2000.
Pursuant to an employment agreement negotiated with the Company, her base salary
for this position was established at $380,000 with a target bonus for 2000 equal
to 45% of her base salary. As a result of Company performance under the cash
bonus plan and individual performance factors, Ms. Puma's actual bonus for 2000
was $312,391.
10
As a result of the separation from Eaton Corporation, Ms. Puma and Mr.
Bachman lost a number of executive perquisites provided by Eaton. In exchange
for these forfeitures, Mr. Bachman and Ms. Puma received one-time payments of
$99,999 and $70,000, respectively, less applicable deductions and taxes.
Additionally, Eaton assigned to Axcelis a note payable by Ms. Puma of $175,000.
Assuming Ms. Puma continues her employment with Axcelis, one third of this
obligation will be forgiven annually through 2003.
In addition to the cash compensation described above, Mr. Bachman was
granted 909,100 non-qualified stock options with an exercise price of $22.00 per
share in July 2000. These options will vest 15% in each of July 2001 and 2002
and 70% in July 2003. At December 29, 2000, Mr. Bachman was granted options for
an aggregate of 1,011,315 shares at exercise prices from $6.26 to $8.48,
reflecting the terms of the Eaton Corporation options being replaced.
In July 2000, Ms. Puma was granted 606,100 non-qualified stock options at
an exercise price of $22.00 per share. These options will vest 16.5% in each of
July 2001 and 2002, 17% in July 2003, 30% in July 2004 and 20% in July 2005. Ms.
Puma also received options for an aggregate of 343,033 shares on December 29,
2000 with exercise prices from $7.17 to $10.44, reflecting the terms of Eaton
Corporation options being replaced. Ms. Puma also received a restricted stock
grant of 47,522 shares of our common stock in December 2000 which replaced a
grant of restricted stock from Eaton Corporation which Ms. Puma forfeited as a
result of the separation. The forfeiture provision lapses as to 23,761 shares on
each of December 31, 2003 and 2004, assuming Ms. Puma's employment continues
until those dates.
COMPENSATION DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code denies a tax deduction to a
public corporation for annual compensation in excess of one million dollars paid
to its Chief Executive Officer and its four other highest compensated officers.
This provision excludes certain types of "performance based compensation" from
the compensation subject to the limitation on deductibility.
The 2000 Stock Plan contains an individual annual limit on the number of
stock options that may be granted under the plan so that the awards will qualify
for the exclusion from the limitation on deductibility for performance-based
compensation. The Committee will continue to assess the impact of Section 162(m)
on its compensation practices and determine what further action, if any, is
appropriate.
By the Compensation Committee,
Stephen R. Hardis, Chairman
Alexander M. Cutler
Philip S. Paul
Ned C. Lautenbach
Gary L. Tooker
Naoki Takahashi
11
The following tables contain compensation information in respect of the
fiscal year ended December 31, 2000 paid to our Chief Executive Officer, the
four other most highly paid executive officers and Cornelius F. Moses, who
joined the Company October 1, 2000 as Chief Financial Officer. None of Messrs.
Luttati, Mionis, Bisson or Moses was an executive officer of the Company during
1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- ----------------------------------------
AWARDS PAYOUTS
----------------------- ----------
RESTRICTED SECURITIES LONG-TERM
STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND POSTION YEAR SALARY ($) BONUS ($) AWARDS ($) OPTIONS (#) PAYOUTS COMPENSATION
- ---------------- ------ --------- --------- ------------ --------- ---------- ------------
Brian R. Bachman 2000 $500,010 $415,830 1,920,415 0 $109,839(2)
President and Chief 1999(1) 380,040 364,656 0 $414,037 14,560(3)
Executive Officer
Mary G. Puma 2000 320,012 312,391 $341,588(4) 949,133 0 76,923(5)
President and Chief 1999(1) 224,700 264,839 0 81,700 12,522(3)
Operating Officer
Michael J. Luttati 2000 239,106 206,177 564,603 0 8,650(6)
Senior Vice President - Manager,
Implant Systems and
Thermal Processing Division
Robert A. Mionis 2000 217,003 174,796 280,094 0 8,507(6)
Senior Vice President -
Worldwide Operations
Kevin M. Bisson 2000 159,679 97,291 108,508 0 76,258(7)
Vice President and Controller
Cornelius F. Moses, III(8) 2000 82,500 105,000 215,000 0 80,000(9)
Executive Vice President
and Chief Financial Officer
- ------------------
(1) Represents cash compensation paid by Eaton Corporation in respect of Mr.
Bachman and Ms. Puma's services during 1999, all or part of which services
related to the Company's business. This disclosure does not include options
granted by Eaton Corporation to Mr. Bachman and Ms. Puma during 1999 and
2000 or to any other named executive officer in 2000. Those options
terminated in 2000 and were replaced by options for Axcelis common stock
granted in 2000.
(2) Mr. Bachman received a one-time payment of $99,999 in consideration of the
forfeiture of certain perquisites provided by Eaton Corporation and $9,840
representing the market value of shares of Eaton Common Stock received by
Mr. Bachman as a matching contribution to Eaton's 401(k) plan at the end of
2000.
(3) Represents several components. Under the Eaton Corporation Share Purchase
and Investment Plan, Eaton made matching contributions in 1999 as follows:
Mr. Bachman, $4,392 and Ms. Puma, $4,357. Under an Eaton Corporation
program, Eaton funded $9,486 towards the purchase of an automobile by Mr.
Bachman and $7,459 toward the purchase of an automobile by Ms. Puma. Eaton
Corporation paid annual premiums for individual whole life insurance during
1999 as follows: Mr. Bachman, $682 and Ms. Puma, $706.
(4) Represents the value of 47,522 shares using the closing price on the date
of grant, December 1, 2000 ($7.188). At December 31, 2000, Ms. Puma held
47,522 shares of restricted stock, which had a value (based on the closing
price on December 29, 2000) of $421,757.75. No other executives held
restricted stock on that date. Ms. Puma's restricted stock is subject to
forfeiture to the Company if her employment terminates. This forfeiture
provision expires as to 23,761 shares on each of December 31, 2003 and
2004. Ms. Puma would be entitled to receive any dividends paid on these
shares.
(5) Ms. Puma received a one-time payment of $70,000 in consideration of the
forfeiture of certain perquisites provided by Eaton Corporation and $6,923
representing the market value of shares of Eaton Common Stock received by
Ms. Puma as a matching contribution to Eaton's 401(k) plan at the end of
2000.
(6) Represents the market value of shares of Eaton Common Stock received as a
matching contribution in Eaton's 401(k) plan at the end of 2000.
(7) Mr. Bisson received a $70,000 signing bonus on commencement of employment
and $6,258 representing the market value of shares of Eaton Common Stock
received as a matching contribution to Eaton's 401(k) plan at the end of
2000.
(8) Mr. Moses commenced employment on October 1, 2000.
(9) This amount represents a signing bonus paid to Mr. Moses on commencement of
employment.
12
OPTION GRANT TABLE
The following table provides information on stock options granted under our
Stock Plan during fiscal year 2000 to the executive officers named in the
Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO MARKET OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE PRICE ON FOR OPTION TERM(11)
OPTIONS IN FISCAL PRICE PER DATE OF EXPIRATION -----------------------------
NAME GRANTED YEAR SHARE GRANT DATE 0% 5% 10%
- ------- --------- ---------- ------------------- ---------- ------------------------------
Brian R. Bachman ......... 909,100(1) 11.65% $22.00 $22.00 7/10/10 $0 $12,578,018 $31,875,168
164,317(2) 2.11 6.26 8.875 1/2/06 429,689 925,655 1,554,867
381,149(2) 4.88 8.48 8.875 1/27/07 150,554 1,527,651 3,359,777
169,399(3) 2.17 8.44 8.875 1/25/10 73,689 1,019,179 2,469,747
296,450(4) 3.8 8.43 8.875 1/26/09 131,920 1,582,451 3,704,672
Mary G. Puma ............. 606,100(5) 7.77 22.00 22.00 7/10/10 0 8,385,807 21,251,281
12,705(2) 0.16 10.44 8.875 1/27/08 0 33,953 109,064
67,759(2) 0.87 7.17 8.875 4/30/06 115,529 320,050 579,516
84,699(3) 1.09 8.44 8.875 1/25/10 36,844 509,587 1,234,866
177,870(4) 2.28 8.43 8.875 1/26/04 79,152 949,476 2,222,804
Michael J. Luttati ....... 213,100(6) 2.73 22.00 22.00 7/10/10 0 2,948,384 7,471,783
88,935(4) 1.14 8.43 8.875 1/26/09 39,576 474,738 1,111,402
194,809(7) 2.50 8.22 8.875 11/16/08 127,600 953,087 2,104,785
67,759(3) 0.87 8.44 8.875 1/25/10 29,475 407,668 987,890
Robert A. Mionis ......... 152,200(6) 1.95 22.00 22.00 7/10/10 0 2,105,791 5,336,487
50,819(4) 0.65 8.43 8.875 1/26/09 22.614 306,257 741,422
25,409(8) 0.33 10.62 8.875 5/29/08 0 63,330 213,546
51,666(3) 0.66 8.44 8.875 1/25/10 22,475 310,845 753,263
Kevin M. Bisson .......... 68,700(6) 0.88 22.00 22.00 7/10/10 0 905,511 2,408,782
27,950(9) 0.36 8.53 8.875 1/17/10 10.333 162,644 404,980
11,858(3) 0.15 8.44 8.875 1/25/10 5,158 71,343 172,883
Cornelius F. Moses, III .. 215,000(10) 2.75 11.1875 11.1875 10/02/10 0 1,512,688 3,833,449
- -----------------------
(1) These options were granted on July 10, 2000 and become exercisable with
respect to 15% of the shares on each of July 10, 2001 and 2002 and 70% of
the shares on July 10, 2003.
(2) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and were fully exercisable on the date of grant.
(3) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and 33% of the shares became exercisable on January
25, 2001, 33% of the shares will become exercisable on January 25, 2002,
and the remaining 34% of the shares will become exercisable on January 25,
2003.
(4) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and 33% of the shares were exercisable on the date of
grant, 33% became exercisable on January 26, 2001 and the remaining 34%
will become exercisable on January 26, 2002.
(5) These options were granted on July 10, 2000 and 16.5 % of the shares will
become exercisable on each of July 10, 2001 and July 10, 2002, 17% of the
shares will become exercisable on July 10, 2003, 30% of the shares will
become exercisable on July 10, 2004 and the remaining 20% of the shares
will become exercisable on July 10, 2005.
(6) These options were granted on July 10, 2000 and become exercisable with
respect to 25% on each of the first four anniversaries of the grant date.
13
(7) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and 66% of the shares were exercisable on the date of
grant, and the remaining 34% of the shares will become exercisable on
November 16, 2001.
(8) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and 66% of the shares were exercisable on the date of
grant, and the remaining 34% of the shares will become exercisable on May
29, 2001.
(9) These options were issued to replace terminating Eaton Corporation options
on December 29, 2000 and 33% of the shares became exercisable on January
17, 2001, 33% of the shares will become exercisable on January 17, 2002 and
the remaining 34% of the shares will become exercisable on January 17,
2003.
(10) These options were granted on October 2, 2000 and become exercisable with
respect to 25% of the shares on each of the first four anniversaries of the
grant date.
(11) The values in this column are given for illustrative purposes and do not
reflect our estimate or projection of future stock prices. The values are
based on an assumption that our common stock's market price will appreciate
at the stated rate, compounded annually, from the date of the option grant
until the end of the option's 10-year term. Actual gains, if any, on stock
option exercises will depend upon the future performance of our common
stock's price, which will benefit all stockholders proportionately.
FISCAL YEAR-END OPTION TABLE
The following table provides information on the total number of exercisable
and unexercisable stock options held at December 31, 2000 by the executive
officers named in the Summary Compensation Table.
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ------ ------------ --------- --------------------- ---------------------
Brian R. Bachman 0 $0 643,294/1,277,121 $623,776/$162,075
Mary G. Puma 0 0 139,841/809,972 141,649/89,876
Michael J. Luttati 0 0 157,922/406,681 97,275/99,375
Robert A. Mionis 0 0 33,540/246,554 7,463/37,626
Kevin M. Bisson 0 0 0/108,508 --/14,800
Cornelius F. Moses, III 0 0 0/215,000 --/0
- -------------------
(1) Based on the difference between the option's exercise price and the closing
price of $8.875 of the underlying common stock on December 29, 2000 as
reported by the Nasdaq Stock Market.
EXECUTIVE AGREEMENTS
EMPLOYMENT AGREEMENTS WITH MR. BACHMAN AND MS. PUMA. We have entered into
employment agreements with Mr. Bachman and Ms. Puma which were effective as of
July 10, 2000. Each agreement provides for a three-year term of employment. Mr.
Bachman's agreement can be extended by mutual consent of the parties. Ms. Puma's
is self-extending unless one party notifies the other that the agreement will
not be extended. The agreements provide that neither employee may compete with
us for a period of 12 months after termination of his or her active employment
or the remaining term of his or her agreement, whichever is longer, and neither
may reveal confidential information for a specified period of time. In the event
the agreement and the employee's employment is terminated prior to the end of
the term for reasons other than cause, death, disability or voluntary
resignation, or, in the case of Mr. Bachman, his agreement is not extended, the
employee is entitled to receive all compensation accrued to date, acceleration
of vesting of options and other equity rights and base compensation and target
bonus, for Mr. Bachman, for the greater of 12 months or the then remaining term
or, for Ms. Puma, two years, in each case from the date of termination of
employment.
14
Under his agreement, Mr. Bachman's minimum base salary is $600,000 per year
and he will have an annual target incentive compensation of 50% of base salary.
Ms. Puma's minimum base salary is $380,000 per year and her annual target
incentive compensation opportunity is 45% of base salary. Actual incentive
compensation for any year may be greater or less if actual performance is
greater or less than the target. Base salary and incentive opportunities can be
increased by our Board of Directors. The agreements provide that both executives
will also participate in the Stock Plan, the defined contribution/401(k) Savings
Plan and the welfare benefit plans which we sponsor.
CHANGE IN CONTROL AGREEMENTS. We also have entered into change in control
agreements with each of our executive officers, including Mr. Bachman and Ms.
Puma. These agreements provide that in the event there is both a change in
control and a termination of employment within three years of that change in
control for reasons other than voluntary resignation, cause, death or
disability, the senior officer would be entitled to severance compensation.
Under the change in control agreement, a resignation by a senior officer for
reasons of a demotion or reduction in compensation, benefits or position is a
termination by us and is not a voluntary resignation. If severance compensation
is payable, severance consists of (i) a cash payment equal to the sum of (a)
incentive compensation for the completed portion of the incentive period and (b)
the amount determined by multiplying the employee's then salary and average
bonus by three, and (ii) continuation of our medical, life and other welfare
benefits for three years. We will also reimburse the employee for the effects,
including federal, state and local income tax consequences, of any excise tax
due on severance compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2000, the Compensation Committee
of the board of directors consisted of Mr. Hardis, Mr. Cutler, Mr. Tooker, Mr.
Paul, Mr. Lautenbach and Mr. Takahashi.
RELATIONSHIP WITH EATON CORPORATION
On June 30, 2000 we entered into a number of agreements with Eaton
Corporation, which company then owned all of our outstanding common stock. After
our initial public offering in July 2000, Eaton's ownership was reduced to 82%
of our outstanding common stock. At December 29, 2000, Eaton distributed to its
stockholders all of the shares of common stock held by Eaton at that time.
AGREEMENTS RELATED TO THE SEPARATION OF OUR BUSINESS FROM EATON CORPORATION.
IN GENERAL. Under these agreements, Eaton transferred to us the assets
related to our business and we assumed the actual and contingent liabilities
related to our business, except as specifically excluded. The transfer of
international assets and assumption of international liabilities was
accomplished through agreements entered into between international subsidiaries
on various dates preceding December 29, 2000. Eaton did not warrant as to the
value of any asset transferred, the existence of any liens or encumbrances or
the legal sufficiency of any conveyance of title.
Effective as of June 30, 2000, subject to specified exceptions, we released
Eaton and its affiliates, agents, successors and assigns, and Eaton released us,
and our affiliates, agents, successors and assigns, from any liabilities arising
from events occurring on or before June 30, 2000, including events occurring in
connection with the activities to implement the separation, our initial public
offering and the distribution of our shares by Eaton. We agreed to bear any
liability arising from any untrue statement of a material fact or any omission
of a material fact in our initial public offering prospectus.
EMPLOYEE MATTERS. We entered into an employee matters agreement with Eaton
to allocate assets, liabilities and responsibilities relating to our current and
former employees and their participation in the benefit plans. All of our
eligible employees continued to participate in Eaton benefit plans until
December 29, 2000. The assets relating to Eaton's qualified employee benefit
plans have been transferred to our related plans.
The employee matters agreement also required us to assume all Eaton options
held by our employees as of December 29, 2000. This was done in accordance with
a conversion formula set forth in the agreement under which employees received
Axcelis options which had the same intrinsic value as Eaton options which
terminated at the end of 2000 due to the separation.
15
Both Eaton and Axcelis agreed not to directly solicit or recruit employees
of the other without the other's consent until December 29, 2002, except in the
case of general recruitment efforts carried out through public or general
solicitation or where the solicitation is employee-initiated.
TAX MATTERS. We entered into a tax sharing and indemnification agreement
with Eaton that allocates responsibilities and liabilities for tax matters. The
agreement requires us to pay Eaton for our allocable share of any taxes due with
respect to consolidated, combined or unitary tax returns that Eaton files for
all periods between December 31, 1999 and December 29, 2000. This agreement also
provides that until December 29, 2002, Axcelis will not, without Eaton's prior
written consent, liquidate, merge or consolidate with any other person, or enter
into any transaction or make any change in our equity structure that may cause
the distribution of our shares by Eaton to be treated as part of a plan pursuant
to which one or more persons acquire a 50 percent or greater interest in our
stock. The agreement also requires us to indemnify Eaton for certain taxes
(including interest and penalties) that would not have been payable but for the
breach by us of any representation, warranty or obligation.
REAL ESTATE. Our real estate matters agreement describes the manner in
which Eaton transferred to us, or shares with us, various leased and owned
properties. Under this agreement, we acquired title to our properties in
Beverly, Massachusetts, and leases to properties in other locations.
We have agreed to indemnify Eaton and its affiliates, agents, successors
and assigns from all liabilities arising from environmental conditions
occurring, present at, caused by or related to any of our properties or
operations before June 30, 2000 as to any of the facilities transferred to us,
and arising from environmental conditions occurring, present at, caused by or
related to any of our properties or operations on or after that date.
INSURANCE MATTERS. We also have an indemnification and insurance matters
agreement with Eaton, which contains provisions governing our insurance coverage
from June 30, 2000 until December 29, 2000. During that time, Eaton maintained
insurance coverage on our behalf. In general, we agree to reimburse Eaton for
premium expenses related to insurance coverage during the period.
TRADEMARK LICENSE. Eaton granted us a royalty free, worldwide license to
use the name "EATON" as a trademark for photostabilizers and ion implantation
equipment. The license is for a period of two years and thereafter is terminable
at will by Eaton with six months prior notice to us, or immediately for cause.
INFORMATION EXCHANGE. Both Eaton and we have agreed to share information
relating to governmental, accounting, contractual and other similar requirements
of our ongoing businesses, unless the sharing would be commercially detrimental.
ACCOUNTING AND AUDITING PRACTICES. In light of the fact that Eaton will be
consolidating and reporting on our results of operations and financial position
through December 29, 2000, the transition agreements contain a number of
covenants limiting our ability to change accounting policies or principles
relating to that period and otherwise facilitating Eaton's reporting
requirements.
EXPENSE ALLOCATION. We agreed to bear the costs and expenses associated
with the separation of businesses and with our initial public offering. Eaton
agreed to bear the costs and expenses associated with their distribution of our
shares. We will each bear our own internal costs incurred in consummating these
transactions. Any nonrecurring costs and expenses that are not allocated in the
agreement are the responsibility of the party that incurs the costs and
expenses.
DISPUTE RESOLUTION. We have agreed with Eaton to resolve any dispute first
through good faith negotiation, then non-binding mediation, followed by binding
arbitration, unless the failure to initiate litigation would cause serious and
irreparable injury to one of the parties or to others.
TRANSITIONAL SERVICES AGREEMENT
The transitional services agreement provides for the delivery of
transitional services by Eaton to us on an interim basis, generally for not
longer than December 31, 2001. The agreement provides for services, systems and
support for our operations, including voice and data transmissions and other
data-related operations, accounts
16
receivables, accounts payable, fixed assets, payroll, general accounting,
financial accounting consolidations, cash management, human resources, legal and
real estate. Services are generally priced at cost prior to Eaton's divestiture
on December 29, 2000 and thereafter at cost plus our additional fee. We paid
Eaton approximately $5.5 million for transitional services provided during 2000.
RELATIONSHIP WITH SUMITOMO EATON NOVA
Mr. Takahashi, one of our directors, is a Director, Senior Vice President
and General Manger of the Precision Products Division of Sumitomo Heavy
Industries, Ltd. We have a joint venture with Sumitomo Heavy Industries, Ltd.,
known as Sumitomo Eaton Nova, or SEN. SEN, of which we own 50% of the equity,
provides us with additional manufacturing capacity for our ion implant products
and local access to the Japanese semiconductor equipment market. Under our
arrangements with Sumitomo Heavy Industries, Ltd., our ion implant products may
be sold in Japan only through the joint venture. SEN may sell its products
outside Japan only with our consent and through us as exclusive distributor.
There are isolated sales of our equipment into Japan to our non-Japanese
customers and isolated sales of SEN equipment outside of Japan primarily to its
Japanese customers and their joint ventures. SEN manufactures ion implantation
equipment at its Toyo, Japan location under the license from us described below.
From time to time, we sell ion implantation equipment and other products to SEN.
In 2000, our net sales of products to SEN amounted to $11.9 million.
As part of the joint venture arrangement, we have entered into a separate
license agreement with SEN, last renewed in 1996, under which we have granted
SEN an exclusive license in Japan to use our current and future ion implantation
technology and to manufacture, use and sell products using our current and
future ion implantation patents. We have also granted SEN a non-exclusive
license to sell ion implantation products outside of Japan, subject to the terms
of an Export Sales Agreement under which we are exclusive marketing agent. The
license agreement expires on December 31, 2004 and is automatically renewable
for successive five year periods unless either party has provided one year's
prior notice of termination. We also have a trademark license agreement with SEN
which will terminate on December 31, 2004 and which obligates SEN to pay us a
0.5% royalty on net sales. In 2000, we recognized royalty income from SEN under
these license agreements of approximately $13.5 million.
17
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's Common Stock from July 10, 2000, the date
the Company's Common Stock was first traded on the Nasdaq Stock Market, through
the end of the Company's fiscal year ended December 31, 2000, with the
percentage change in the cumulative total return for the Philadelphia
Semiconductor Index (known as "SOXX") and the Nasdaq Stock Market Composite
Index. The comparison assumes an investment of $100 on July 10, 2000 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends, if any. The stock performance shown in the graph
below is not necessarily indicative of future price performance.
[PERFORMANCE GRAPH]
BASE DATE
COMPANY/INDEX NAME JULY 10, 2000 DECEMBER 31, 2000
- ------------------ ------------- -----------------
Axcelis Technologies, Inc. $100.00 $37.08
NASDAQ Stock Market Index $100.00 $62.44
SOXX Index $100.00 $51.39
18
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board of Directors has
appointed the accounting firm of Ernst & Young LLP as independent auditors to
conduct the annual audit of Axcelis' books and records for 2001 and is seeking
stockholder ratification of the appointment. Ernst & Young LLP is an
internationally recognized public accounting firm that audited the Company's
books in 2000 and which the Audit Committee believes is well qualified to
continue. The submission of this matter to the stockholders at the annual
meeting is not required by law or by our bylaws. The Board of Directors is
nevertheless submitting it to the shareholders to ascertain their views. If this
proposal is not approved at the annual meeting by the affirmative vote of
holders of a majority of the shares present or represented at the meeting, the
Board intends to reconsider its appointment of Ernst & Young LLP as independent
auditors. The Board may retain the firm for 2001 notwithstanding a negative
stockholder vote.
Representatives of Ernst & Young are expected to attend the annual meeting
and be available to respond to appropriate questions. They will also have the
opportunity to make a statement if they desire. The fees for services provided
by Ernst & Young to the Company in 2000 were as follows:
AUDIT FEES .............................. $250,450
AUDIT RELATED FEES ...................... $76,314
ALL OTHER FEES .......................... $83,925
The Board of Directors recommends a vote for ratification of the
appointment of Ernst & Young LLP.
CERTAIN TRANSACTIONS
Three members of our board of directors serve as directors and/or officers
of Eaton Corporation. One member of our board of directors serves as a director
and officer of Sumitomo Heavy Industries, Ltd. We are involved in various
financial and business transactions with Eaton Corporation and Sumitomo Heavy
Industries, Ltd. See "Compensation Committee Interlocks and Insider
Participation."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive
officers and persons owning more than 10% of our registered equity securities,
to file with the SEC reports of their initial ownership and of changes in their
ownership of our common stock and to provide us with copies of all Section 16(a)
reports they file.
To our knowledge, based solely on our review of copies of reports furnished
to us and written representations that no other reports were required during the
fiscal year ended December 31, 2000, we believe that during the 2000 fiscal
year, our directors, officers, and 10% stockholders complied with all Section
16(a) filing requirements, except that one report of one acquisition of shares
was filed late for each of Brian R. Bachman, Ted Miller and Kevin M. Bisson and
one report of one disposition of shares was filed late by Eaton Corporation.
DEADLINE FOR STOCKHOLDER PROPOSALS
Assuming the 2002 annual meeting is not more than 60 days before or 60 days
after June 28, 2002, if you wish to bring business before or propose director
nominations at the 2002 annual meeting, you must give written notice to Axcelis
by March 30, 2002 (the date 90 days before the anniversary of the 2001 annual
meeting).
If you intend to bring such a proposal or nomination at the 2002 annual
meeting, and you would like us to consider the inclusion of your proposal or
nomination in our proxy statement for the meeting, you must provide written
notice to Axcelis of such proposal or nomination prior to January 24, 2002 (120
days before the anniversary date of the mailing of this proxy statement),
assuming our 2002 meeting date does not change by more than 30 days from our
2001 meeting date.
Notices of stockholder proposals and nominations shall be given in writing
to Axcelis Technologies, Inc., 55 Cherry Hill Drive, Beverly, Massachusetts
01915, Attn: Corporate Secretary.
19
APPENDIX A
AXCELIS TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee shall be responsible to assist the Board of Directors
in monitoring and oversight of (1) the integrity of the Company's financial
statements and its systems of internal accounting and financial controls and (2)
the independence and performance of the Company's internal and independent
auditors.
The Audit Committee shall be comprised of at least three Directors
appointed by the Board, each of whom shall (1) be independent, as described in
the Nasdaq Stock Market Marketplace Rules (the "Nasdaq Rules"), except that one
member who is not independent may be appointed to the Audit Committee in
exceptional and limited circumstances as permitted by the Nasdaq Rules and (2)
be able to read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement, or will
become able to do so within a reasonable period of time after such person's
appointment to the Audit Committee. Additionally, at least one member of the
Audit Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in such member's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board concerning the
Committee's actions, conclusions and recommendations.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
2. Review the annual audited financial statements with management and the
independent auditor before publication, including major issues regarding
accounting and auditing principles and practices as well as the adequacy of
internal controls that could significantly affect the financial statements,
and recommend to the Board that the financial statements be included in the
annual report to shareholders and annual report on Form 10-K.
3. Review analyses prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's annual financial statements.
4. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors or
management.
5. Review with the Company's General Counsel legal matters that may have a
material impact on the Company's financial statements.
6. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
A-1
7. Recommend to the Board the appointment of the independent auditor, which
will be accountable to the Audit Committee and the Board, as
representatives of the stockholders of the Company.
8. Approve the fees to be paid to the independent auditor for audit services.
9. Obtain annually a formal written statement from the independent auditor
delineating all relationships between the auditor and the Company,
consistent with Independence Standards Board Standard No. 1, and discuss
such statement with the auditor and, if so determined by the Audit
Committee, recommend that the Board take appropriate action to satisfy
itself of the independence of the auditor.
10. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Review the appointment and any replacement of the Company's director of
internal auditing.
12. Meet with the director of internal auditing and independent auditor prior
to the Company's annual audit to review the scope, planning and staffing of
the audit.
13. Discuss with the independent auditor any matters raised by the auditor
under generally accepted auditing standards relating to the conduct of the
Company's annual audit and quarterly reviews, including the independent
auditor's judgment about the quality of the Company's accounting principles
as applied in its financial reporting. In regard to quarterly reviews, this
discussion may be held either through the entire Committee or through its
Chairman on the Committee's behalf.
14. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter.
15. Review with management and the independent auditor the Company's quarterly
financial statements as early as possible and in any case prior to the
filing of each Form 10-Q report. This review may be conducted either
through the entire Committee or through its Chairman on the Committee's
behalf.
16. Meet at least annually with the Company's chief financial officer, director
of internal auditing and independent auditor in separate executive
sessions.
17. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
While the Audit Committee shall have the responsibilities and powers set
forth in this Charter, it shall not be the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles. These instead shall be the responsibility of management and the
independent auditor. Nor shall it be the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent auditor or to assure compliance with laws and regulations or the
Company's code of conduct.
A-2
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AXCELIS TECHNOLOGIES, INC. ("AXCELIS") FOR ANNUAL MEETING ON JUNE 28, 2001.
P R O X Y
THE UNDERSIGNED hereby appoints Brian R. Bachman, Mary G. Puma or Lynnette
C. Fallon, or any of them, and any substitute or substitutes, to be the
attorneys and proxies of the undersigned at the Annual Meeting of Stockholders
of Axcelis Technologies, Inc. ("Axcelis") to be held at 10:00 a.m. EST on
Thursday, June 28, 2001 at the State Street Bank Building, 225 Franklin Street,
33rd Floor, Boston, Massachussetts, or at any adjournment thereof, and to vote
at such meeting the shares of common stock of Axcelis the undersigned held of
record on the books of Axcelis on the record date for the meeting for the
election of the nominees listed below, on Proposal 2 referred to on the reverse
side and described in the Proxy Statement, and on any other business before the
meeting, with all powers the undersigned would possess if personally present.
(change of address/comments)
ELECTION OF DIRECTORS, NOMINEES: ----------------------------------------
----------------------------------------
Alexander M. Cutler ----------------------------------------
Gary L. Tooker ----------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this
INDEPENDENT AUDITORS:
Ernst & Young LLP
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK
ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SEE REVERSE SIDE
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
/ X / PLEASE MARK YOUR 6811
VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR
Proposals 1, 2 and 3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR COMPANY PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors. (see reverse) / / / /
For, except vote withheld from the following nominee(s):
---------------------------------------
2. Ratification of appointment of independent auditors.
FOR AGAINST ABSTAIN
/ / / / / /
Change of Address/ Comments on Reverse Side
/ /
All as more particularly described in the Proxy Statement relating to such
meeting, receipt of which is hereby acknowledged.
Please sign exactly as name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
-----------------------------------
-----------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
AXCELIS THIS IS YOUR PROXY.
AXCELIS TECHNOLOGIES, INC. YOUR VOTE IS IMPORTANT
DO YOU NEED ASSISTANCE IN ANY OF THE FOLLOWING AREAS?
o ADDRESS CHANGES - LEGAL TRANSFERS
o CONSOLIDATION OF ACCOUNTS - ELIMINATE MULTIPLE ACCOUNTS FOR ONE HOLDER AND
CERTAIN DUPLICATE SHAREHOLDER MAILINGS GOING TO ONE ADDRESS.
JUST CALL OUR TRANSFER AGENT'S TELEPHONE RESPONSE CENTER:
(201) 324-1225
OR WRITE TO:
EQUISERVE TRUST CO., L.L.P.
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500