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Ultratech DEF 14A 2007 Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ) Filed by the Registrant þ
Filed by a Party other than the Registrant o Check the appropriate box:
Ultratech, Inc.
Payment of Filing Fee (Check the appropriate box):
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NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO THE STOCKHOLDERS OF ULTRATECH, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(the “Annual Meeting”) of Ultratech, Inc., a Delaware
corporation (the “Company”), will be held on
July 24, 2007, at 2:00 p.m. local time, at the
Company’s corporate offices located at Building 2,
2880 Junction Avenue, San Jose, California 95134, for the
following purposes, as more fully described in the Proxy
Statement accompanying this Notice:
1. To elect three (3) directors to serve for the
ensuing two years until the expiration of their terms in 2009,
or until their successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP
as independent auditors of the Company for the fiscal year
ending December 31, 2007;
3. To approve an amendment to the non-employee director
automatic grant program under the Company’s 1993 Stock
Option/Stock Issuance Plan to provide for the award of
restricted stock units instead of stock options and to set the
number of shares subject to such restricted stock unit awards
and other applicable terms;
4. To consider and vote on a stockholder proposal relating
to the classification of the Company’s Board of Directors,
if properly presented at the Annual Meeting; and
5. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof,
including the election of any director if any of the above
nominees is unable to serve or for good cause will not serve.
Only stockholders of record at the close of business on
June 5, 2007 are entitled to notice of and to vote at the
Annual Meeting. The stock transfer books will not be closed
between the record date and the date of the meeting. A list of
stockholders entitled to vote at the Annual Meeting will be
available for inspection at the executive offices of the Company
for a period of ten (10) days before the Annual Meeting.
All stockholders are cordially invited to attend the meeting in
person. Whether or not you plan to attend, please submit your
proxy over the Internet, by telephone or by signing and
returning the enclosed proxy as promptly as possible in the
envelope enclosed for your convenience. Should you receive more
than one proxy because your shares are registered in different
names and addresses, each proxy should be submitted over the
Internet, by telephone or by mail to ensure that all your shares
will be voted. You may revoke your proxy at any time prior to
the Annual Meeting. If you attend the Annual Meeting and vote by
ballot, your proxy will be revoked automatically and only your
vote at the Annual Meeting will be counted.
Sincerely,
Arthur W. Zafiropoulo
Chairman of the Board and Chief Executive Officer
June 11, 2007
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF
SHARES YOU OWN. PLEASE READ THE ATTACHED PROXY STATEMENT
CAREFULLY AND SUBMIT YOUR PROXY OVER THE INTERNET, BY TELEPHONE,
OR BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE AND RETURNING IT IN THE ENCLOSED
ENVELOPE.
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ULTRATECH,
INC.
3050 Zanker Road San Jose, California 95134
FOR THE ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON JULY 24,
2007
The enclosed proxy (“Proxy”) is solicited on behalf of
the Board of Directors of Ultratech, Inc., a Delaware
corporation (the “Company”), for use at the Annual
Meeting of Stockholders to be held on July 24, 2007 (the
“Annual Meeting”), or at any adjournment or
postponement thereof. The Annual Meeting will be held at
2:00 p.m. at the Company’s corporate offices located
at Building 2, 2880 Junction Avenue, San Jose,
California 95134. These proxy solicitation materials were mailed
on or about June 11, 2007 to all stockholders entitled to
vote at the Annual Meeting.
The specific proposals to be considered and acted upon at the
Annual Meeting are summarized in the accompanying Notice and are
described in more detail in this Proxy Statement. On
June 5, 2007, the record date for determination of
stockholders entitled to notice of and to vote at the Annual
Meeting, 23,297,477 shares of the Company’s common
stock, $.001 par value (“Common Stock”), were
issued and outstanding, and there were 320 holders of record of
the Company’s Common Stock. No shares of the Company’s
preferred stock were outstanding. Each stockholder is entitled
to one vote for each share of Common Stock held by such
stockholder on June 5, 2007. Stockholders may not cumulate
votes in the election of directors.
All votes will be tabulated by the inspector of elections
appointed for the meeting who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. Broker non-votes are shares which are not voted by
the broker who is the record holder of the shares because the
broker does not receive voting instructions from the beneficial
owners of those shares or does not vote the shares in other
circumstances in which proxy authority is defective or has been
withheld with respect to any matter. Directors are elected by a
plurality vote. The other matters submitted for stockholder
approval at this Annual Meeting will be decided by the
affirmative vote of the holders of a majority of shares present
in person or represented by proxy and entitled to vote on such
matter. With regard to the election of directors, votes may be
cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have
no effect. Abstentions and broker non-votes are counted as
present for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions with respect
to any matter other than the election of directors will be
treated as shares present or represented and entitled to vote on
that matter and will thus have the same effect as negative
votes. Broker non-votes are deemed not to be entitled to vote on
the matter and accordingly are not counted for purposes of
determining whether stockholder approval of that matter has been
obtained.
If the enclosed form of proxy is properly signed and returned or
if you submit your proxy and voting instructions over the
Internet or by telephone, the shares represented thereby will be
voted at the Annual Meeting in accordance with the instructions
specified thereon. Stockholders submitting proxies over the
Internet or by telephone should not mail the proxy voting
instruction form. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR
the election of each director proposed by the Board unless the
authority to vote for the election of any such director is
withheld and, if no contrary instructions are given, the proxy
will be voted FOR the approval of Proposals 1, 2 and 3 and
AGAINST Proposal 4, and with respect to any other proposals
properly brought before the Annual Meeting, as the Board of
Directors recommends. If you vote your proxy by mail, you may
revoke or change your proxy at any time before the Annual
Meeting by filing with the Secretary of the Company at the
Company’s principal executive offices, a notice of
revocation or another signed
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proxy with a later date. If you choose to vote your proxy over
the Internet or by telephone, you can change your vote by voting
again using the same method used for the original vote (i.e.,
over the Internet or by telephone) so long as you retain the
proxy card referencing your voter control number. You may also
revoke your proxy by attending the Annual Meeting and voting in
person.
The Company will bear the entire cost of solicitation, including
the preparation, assembly, printing and mailing of this Proxy
Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will
be furnished to brokerage houses, fiduciaries, and custodians
holding shares in their names that are beneficially owned by
others so that they may forward this solicitation material to
such beneficial owners. In addition, the Company may reimburse
such persons for their costs in forwarding the solicitation
materials to such beneficial owners. The original solicitation
of proxies by mail may be supplemented by a solicitation by
telephone, telegram, or other means by directors, officers or
employees. Such individuals, however, will not be compensated by
the Company for those services. Except as described above, the
Company does not presently intend to solicit proxies other than
by mail. The Company has engaged Georgeson Inc. to assist in the
solicitation of proxies, and the Company expects to pay
Georgeson approximately $8,500 for its services.
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company’s 2008 Annual
Meeting and to be included in the Company’s proxy statement
and form of proxy relating to that meeting must be received no
later than February 9, 2008. Any other proposals of
stockholders that are intended to be presented by such
stockholders at the Company’s 2008 Annual Meeting must be
received no later than 90 days prior to the meeting date
pursuant to and in accordance with the Company’s bylaws,
provided that if less than 100 days notice or prior public
disclosure of the date of the meeting is given or made to
stockholders, notice must be so received not later than the
close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made. In addition, the proxy solicited by the
Board of Directors for the 2008 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal
presented at that meeting, unless the Company receives notice of
such proposal before April 27, 2008.
MATTERS
TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL 1
ELECTION
OF DIRECTORS
On July 23, 1993, the Board of Directors and stockholders
of the Company approved the Company’s Amended and Restated
Certificate of Incorporation to provide for a classified Board
of Directors consisting of two classes of directors, each
serving staggered two-year terms. The Amended and Restated
Certificate of Incorporation became effective on October 6,
1993 and was amended in 1995 and 1998 by the stockholders to
give effect to increases in the number of authorized shares of
Common Stock. The Amended and Restated Certificate of
Incorporation was amended in 2003 by the stockholders to change
the name of the Company to Ultratech, Inc.
The class of directors whose term of office expires at the
Annual Meeting currently consists of three directors, all of
whom are current directors of the Company. The directors elected
to this class will serve for a term of two years, expiring at
the 2009 Annual Meeting of Stockholders, or until their
successors have been duly elected and qualified. The names and
ages of the persons who are nominees for director, the terms of
their proposed directorship, and their positions and offices
with the Company as of May 15, 2007 are set forth below.
Each person nominated for election has agreed to serve if
elected, and management has no reason to believe that any of the
nominees will be unavailable to serve. In the event any of the
nominees are unable or decline to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any
nominee who may be designated by the present Board of Directors
to fill the vacancy. Unless otherwise instructed, the proxy
holders will vote the
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proxies received by them FOR the nominees named below. The three
candidates receiving the highest number of affirmative votes of
the shares represented and voting on this particular matter at
the Annual Meeting will be elected directors of the Company, to
serve for their respective terms or until their successors have
been elected and qualified. The proxies solicited by this Proxy
Statement may not be voted for more than three nominees.
Dennis R. Raney, 64, has served as a director of the
Company since April 2003. Mr. Raney has served as Principal
of Liberty-Greenfield, LLP, a company that advises clients on
real estate issues that have significant financial or
operational consequences to their business, since May 2005.
Mr. Raney served as Chief Financial Officer of eONE Global,
LP, a company that identifies, develops and operates emerging
electronic payment systems and related technologies that address
e-commerce
challenges, from July 2001 to June 2003. From March 1998 to July
2001, Mr. Raney served as Chief Financial Officer and
Executive Vice President of Novell, Inc., a producer of network
software. From January 1997 to December 1997, Mr. Raney
served as Chief Financial Officer and Executive Vice President
of QAD, Inc., a provider of enterprise resource planning
software. Mr. Raney has also served as a director of
EasyLink Services Corporation, a provider of information
exchange services, since March 2003, and has served as chair of
the audit committee of EasyLink’s board of directors since
June 2004. In addition, since February 2004, Mr. Raney has
served as a director of ViewPoint Corporation, a provider of
visual application development, content assembly and delivery
technology, and as chair of the audit committee of
Viewpoint’s board of directors. Mr. Raney has served
as a director, and as chair of the audit committee of the board
of directors, of Infiniti Solutions, a provider of semiconductor
testing, assembly and prototyping services, since July 2004.
Mr. Raney served as a director of Equinix, a provider of
data center and internet exchange services from April 2003 to
June 2005, and served as chair of the audit committee of
Equinix’s board of directors during that time. From July
2002 to June 2003, Mr. Raney served as a director of
ProBusiness Services, Inc., which was acquired by Automatic Data
Processing, Inc. in June 2003. Mr. Raney also served as a
director and audit committee member of Redleaf, Inc., a
technology operating company that provides services and capital
for pre-seed state technology companies, from April 1999 to June
2003. Mr. Raney previously served as a director and audit
committee member of W.R. Hambrecht & Company, an
investment banking firm, from March 1999 to July 2001 and served
as a director and audit committee member of ADAC Laboratories, a
company that designs, develops, manufactures, sells and services
electronic medical imaging and information systems, from March
1999 to March 2001. Mr. Raney holds a B.S. degree in
chemical engineering from the South Dakota School of
Mines & Technology and an MBA from the University of
Chicago.
Henri Richard, 49, has served as a director of the
Company since April 2006. Mr. Richard is Executive Vice
President, Chief Sales and Marketing Officer at Advanced Micro
Devices, Inc. (“AMD”). His current duties include
oversight of the company’s global field sales and support
organization, corporate marketing, and
go-to-market
activities for all AMD customer segments, including commercial,
consumer and innovative solutions groups, and the company’s
50x15 digital inclusion initiative. Mr. Richard joined AMD
in April 2002 as Group Vice President, Worldwide Sales. He was
promoted to Senior Vice President in May 2003 and was appointed
to his current position as an executive officer in February
2004. Prior to joining AMD, Mr. Richard was Executive Vice
President of Worldwide Field Operations at WebGain, Inc., a
privately held provider of Java software for Fortune
500 companies. Before WebGain, he was vice president of
Worldwide Sales and Support for IBM’s Technology Group.
Mr. Richard has also held senior executive positions with
several notable companies in the U.S. and Europe, including
tenures as President of the Computer Products Group at Bell
Microproducts, Executive Vice President at Karma International,
and Vice President at Seagate Technology/Conner Peripherals.
Vincent F. Sollitto, Jr., 59, has served as a
director of the Company since July 2000. Since November 2005,
Mr. Sollitto has served as Chairman and Chief Executive
Officer of Syntax-Brillian Corp., a high definition television
developer and manufacturer. From September 2003 to November 2005
when it merged with Syntax Groups Corporation, Mr. Sollitto
served as President and Chief Executive Officer, and as a
director of Brillian Corp., a high definition television
developer and manufacturer. Between February 2003 and August
2003, Mr. Sollitto served as President of Sollitto
Associates, a management consulting firm. Mr. Sollitto
served as a director and the Chief Executive Officer for Photon
Dynamics, a manufacturer of test, repair and inspection
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equipment for the flat panel display industry, from June 1996 to
February 2003. Mr. Sollitto served as acting Chief
Financial Officer of Photon Dynamics from March 1998 to July
1998. From July 1993 to February 1996, Mr. Sollitto served
as Vice-President and General Manager of Fujitsu
Microelectronics, a semiconductor and electronics device
company. Mr. Sollitto served as a director, and as a member
of the audit and compensation committees of the board of
directors, of Irvine Sensors Corporation, a developer of
advanced signal processing and image stabilization technologies,
from 1997 to 2004. Mr. Sollitto has served as a director,
and as a member of the audit committee and chairman of the
compensation committees of the board of directors, of Applied
Films Corporation, a solutions provider of thin film technology
for the flat panel display industry, since July 1999.
Arthur W. Zafiropoulo, 68, founded the Company in
September 1992 to acquire certain assets and liabilities of the
Ultratech Stepper Division (the “Predecessor”) of
General Signal Technology Corporation (“General
Signal”) and, since March 1993, has served as Chief
Executive Officer and Chairman of the Board. Additionally,
Mr. Zafiropoulo served as President of the Company from
March 1993 to March 1996, from May 1997 until April 1999, and
from April 2001 to January 2004. Between September 1990 and
March 1993, he was President of the Predecessor. From February
1989 to September 1990, Mr. Zafiropoulo was President of
General Signal’s Semiconductor Equipment Group
International, a semiconductor equipment company. From August
1980 to February 1989, Mr. Zafiropoulo was President and
Chief Executive Officer of Drytek, Inc., a plasma dry-etch
company that he founded in August 1980, and which was later sold
to General Signal in 1986. From July 1987 to September 1989,
Mr. Zafiropoulo was also President of Kayex, a
semiconductor equipment manufacturer, which was a unit of
General Signal. From July 2001 to July 2002,
Mr. Zafiropoulo served as Vice Chairman of SEMI
(Semiconductor Equipment and Materials International), an
international trade association representing the semiconductor,
flat panel display equipment and materials industry. From July
2002 to June 2003, Mr. Zafiropoulo served as Chairman of
SEMI; and Mr. Zafiropoulo has been on the board of
directors of SEMI since July 1995.
Joel F. Gemunder, 67, has been a director of the Company
since October 1997. Mr. Gemunder has been President and a
member of the board of directors of Omnicare, Inc., a pharmacy
services provider, since 1981, and has been Chief Executive
Officer of Omnicare since May 2001. Mr. Gemunder has also
served as a member of the board of directors of Chemed Corp., a
company operating in the sewer, drain and pipe cleaning, HVAC
services and plumbing repair business and the HVAC and appliance
repair and maintenance business, since 1977.
Nicholas Konidaris, 62, has served as a director of the
Company since July 2000. Mr. Konidaris has served as
President and Chief Executive Officer of Electro Scientific
Industries, Inc., a global supplier of manufacturing equipment
to increase productivity for customers in the semiconductor,
passive components and electronic equipment markets, since
January 2004. From July 1999 to January 2004, Mr. Konidaris
served as President and Chief Executive Officer of Advantest
America, Corp., a holding company of Advantest America, Inc.,
which is a manufacturer of testers and handlers. From February
1997 to July 2000, Mr. Konidaris served as the Chief
Executive Officer of Advantest America, Corp. From July 1997 to
January 2004, Mr. Konidaris also served as Chairman of the
Board, President and Chief Executive Officer of Advantest
America, Inc.
Rick Timmins, 55, has served as a director of the Company
since August 2000. From January 1996 until April 2007,
Mr. Timmins served as Vice-President of Finance for Cisco
Systems, Inc. Mr. Timmins has served as a member of the
board of directors of Transmeta Corporation, a developer of
computing, microprocessing and semiconductor technologies, since
May 2003, and is the chairman of the audit committee of
Transmeta’s board of directors. Mr. Timmins holds a
B.S. degree in accounting and finance from the University of
Arizona and an M.B.A. degree from St. Edward’s University.
Board
Committees and Meetings
During the fiscal year ended December 31, 2006, the Board
of Directors held eight (8) meetings and did not act by
unanimous written consent. The Board of Directors has an Audit
Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee. Current copies of the charters
of the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee as well as the
Corporate Governance Policies of the Board of Directors can be
found on the Company’s website at www.ultratech.com.
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During the respective term of his service on the Board and its
committees during the past fiscal year, each of the directors
attended or participated in 75% or more of the aggregate of
(i) the total number of meetings of the Board of Directors
and (ii) the total number of meetings held by all
committees of the Board on which he served.
Executive sessions of non-management directors are generally
held four times a year, at the end of a regular meeting of the
Board of Directors. The sessions are chaired by the Chair of the
Nominating and Corporate Governance Committee.
Any stockholder may communicate with the Board of Directors by
postal mail. Communications that are intended specifically for
non-management directors should be sent to the attention of the
Chair of the Nominating and Corporate Governance Committee.
Communications that are intended for a specific director should
be sent to the attention of that director. Communications should
be sent to: Investor Relations, Attn: Board of Directors,
c/o Ultratech,
Inc., 3050 Zanker Road, San Jose, California 95134. The
Company’s Investor Relations department will screen all
communications for offensive or otherwise inappropriate
messages, including advertisements and other solicitations
unrelated to the Company or the activities of the Board of
Directors.
The Company strongly encourages attendance by each incumbent
director and each nominee to the Board at its Annual Meetings of
Stockholders. Four Board members attended the Company’s
2006 Annual Meeting of Stockholders.
The Compensation Committee currently consists of two
(2) directors, Messrs. Gemunder and Sollitto. The
Board of Directors has determined that each current member of
the Compensation Committee is an “independent
director” as that term is defined in Marketplace
Rule 4200 of The Nasdaq Stock Market. The Compensation
Committee has a written charter, which was adopted by the Board
of Directors in January 2003 and amended in February 2004. The
Compensation Committee is primarily responsible for approving
the Company’s general compensation policies and setting
compensation levels for the Company’s executive officers.
The Compensation Committee also administers the Company’s
1993 Stock Option/Stock Issuance Plan (the “1993
Plan”) and the Company’s 1998 Supplemental Stock
Option/Stock Issuance Plan. For the 2006 fiscal year, the
Compensation Committee was initially comprised of
Messrs. Gemunder, Konidaris and Thomas George (who retired
from the Board of Directors at the 2006 Annual Meeting).
Mr. George left the Compensation Committee in February
2006, and Mr. Sollitto joined the Compensation Committee in
March 2006. In April 2006, Mr. Richard became a member of
the Compensation Committee and Mr. Konidaris left the
Compensation Committee. In the 2006 fiscal year, the
Compensation Committee held six (6) meetings and acted by
written consent on three (3) occasions. AMD, a company for
which Mr. Richard serves as an executive officer, accounted
for more than 5% of the Company’s consolidated gross
revenues in fiscal 2006. As a result, the Board of Directors
determined that, in accordance with Marketplace Rule 4200
of The Nasdaq Stock Market, Mr. Richard is not an
independent director, and therefore he no longer serves on the
Compensation Committee.
The Audit Committee currently consists of three
(3) directors, Messrs. Konidaris, Raney and Timmins.
The Audit Committee is responsible for overseeing the integrity
of the Company’s financial statements and the appointment,
compensation, qualifications, independence and performance of
the Company’s independent auditors, as well as compliance
with related legal and regulatory requirements and performance
of the Company’s accounting practices and internal
controls. For the 2006 fiscal year, the Audit Committee was
initially comprised of Messrs. Raney, Sollitto and Timmins.
In April 2006, Mr. Sollitto left the Audit Committee and
Mr. Konidaris joined
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the Audit Committee. In the 2006 fiscal year, the Audit
Committee held nine (9) meetings during that fiscal year
and did not act by unanimous written consent.
The Board of Directors adopted and approved a written charter
for the Audit Committee on June 8, 2000. The Audit
Committee’s charter was substantially revised on
January 28, 2003 and was further amended on
February 2, 2004. The Board of Directors has determined
that each current member of the Audit Committee is
“independent” as that term is defined in
Rule 10A-3
under the Securities Exchange Act of 1934 and an
“independent director” as that term is defined in
Marketplace Rule 4200 of The Nasdaq Stock Market. In
addition, the Board of Directors has determined that each of
Mr. Raney and Mr. Timmins is an “Audit Committee
Financial Expert” as that term is defined by Item 407
of SEC
Regulation S-K.
The Nominating Committee, which was formed in April 2001, and
which was changed to the Nominating and Corporate Governance
Committee in January 2003, currently consists of two
(2) directors, Messrs. Konidaris and Timmins. The
Board of Directors has determined that each current member of
the Nominating and Corporate Governance Committee is an
“independent director” as that term is defined in
Rule 4200 of the listing standings of the National
Association of Securities Dealers. For the 2006 fiscal year, the
Nominating and Corporate Governance Committee held one
(1) meeting during the last fiscal year and did not act by
unanimous written consent. In January 2003, the Board of
Directors substantially revised the written charter for the
Nominating and Corporate Governance Committee. The Nominating
and Corporate Governance Committee recommends to the Board of
Directors the individuals to be nominated to stand for election
to the Board by stockholders at each annual meeting and to fill
vacancies on the Board, implements the Board’s criteria for
selecting new directors, develops and recommends or assesses
corporate governance policies of the Company and the Board, and
oversees the Board’s annual evaluation.
Consideration
of Director Nominees
The Nominating and Corporate Governance Committee will consider
candidates for election to the Board recommended by
stockholders. In evaluating such candidates, the Nominating and
Corporate Governance Committee seeks to achieve a balance of
knowledge, experience and capability on the Board and to address
the membership criteria set forth under “Director
Qualifications.” The notice of recommendation delivered to
the Company must be received within the time permitted for
submission of a stockholder proposal for inclusion in the
Company’s proxy statement for the relevant Annual Meeting
of Stockholders and must set forth as to each proposed nominee
who is not an incumbent director (i) all information
relating to the individual recommended or nominated that is
required to be disclosed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 (including such
person’s written consent to be named in the proxy statement
as a nominee and to serving as a director if elected),
(ii) the name(s) and address(es) of the stockholders making
the recommendation and the amount of the Company’s
securities which are owned beneficially and of record by such
stockholder(s), (iii) appropriate biographical information
(including a business address and a telephone number) and a
statement as to the individual’s qualifications, with a
focus on any criteria publicly stated to be considered by the
Nominating and Corporate Governance Committee in evaluating
prospective Board candidates, including those identified below,
(iv) a representation that the stockholder is a holder of
record of stock of the Company entitled to vote on the date of
submission of such written materials, and (v) any material
interest of the stockholder in the recommendation. Any
stockholder recommendations proposed for consideration by the
Nominating and Corporate Governance Committee should be
addressed to: Chair of the Nominating and Corporate Governance
Committee, Ultratech, Inc., 3050 Zanker Road, San Jose,
California 95134.
The Board of Directors’ policy is to encourage selection of
directors who will contribute to the Company’s overall
corporate goals of responsibility to its stockholders, industry
leadership, customer success, positive working environment, and
integrity in financial reporting and business conduct. The Board
and the Nominating and Corporate Governance Committee review
from time to time the experience and characteristics appropriate
for
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Board members and Director candidates in light of the
Board’s composition at the time and skills and expertise
needed at the Board and committee levels. In addition, the
Nominating and Corporate Governance Committee considers whether
the candidate:
The Nominating and Corporate Governance Committee nominates
individuals for election as directors at each annual meeting of
stockholders and for appointment to fill vacancies on the Board
of Directors in consultation with the Company’s Chief
Executive Officer. The Committee identifies and evaluates
candidates who, based on their biographical information and
other information available to the Committee, appear to meet any
minimum criteria adopted by the Committee
and/or have
the specific qualities, skills or experience being sought (based
on input from the full Board and the Chief Executive Officer).
The Committee operates and chooses nominees or appointees in
accordance with its charter.
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The following table sets forth certain information regarding the
compensation of each non-employee director for service on the
Board of Directors during the 2006 fiscal year.
Director Annual Retainer and Meeting
Fees. During the fiscal year ended
December 31, 2006, the cash compensation paid to the
non-employee Board members was as follows: (i) an annual
retainer fee of $25,000 for the Chairman of the Audit Committee,
$24,000 for the Chairman of the Compensation Committee and
$20,000 for each of the other non-employee Board members;
(ii) a per meeting fee for Audit Committee meetings that do
not occur on the same day as regular Board meetings of $2,500;
(iii) a per meeting fee for meetings of the other Board
committees that do not occur on the same day as regular Board
meetings of $1,000; and (iv) a per meeting fee for Board
meetings of $1,000. The Company also reimburses each
non-employee Board member for expenses incurred in connection
with his attendance at such Board and committee meetings.
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In January 2007 the Board increased the cash compensation of
non-employee Board members for their service on the Board or any
Board committee beginning in the 2007 year. The cash
compensation to be paid to the non-employee Board members for
the 2007 year is as follows: (i) an annual cash
retainer fee of $30,000, (ii) an additional cash fee of
$10,000 for service as Chairman of the Audit Committee,
(iii) an additional cash fee of $7,500 for service as
Chairman of any standing Board committee other than the Audit
Committee, (iv) a cash fee of $2,000 per Board
meeting, (v) a cash fee of $2,000 per standing Board
committee meeting (except no fee for a Board committee meeting
held on the same day as a Board meeting), and (vi) a cash
fee of $1,000 per standing Board committee meeting held on
the day before or after a Board meeting at the Company’s
headquarters.
1993 Stock Option/Stock Issuance
Plan. Pursuant to the Automatic Option Grant
Program currently in effect under the 1993 Plan, each individual
who becomes a non-employee Board member automatically is
granted, on the date of his or her initial election or
appointment to the Board, a non-statutory stock option to
purchase 12,000 shares of the Company’s common stock.
The option will have an exercise price equal to the fair market
value per share of the Company’s common stock on the
applicable grant date and a maximum term of ten (10) years
measured from such grant date, subject to earlier termination
following the optionee’s cessation of Board service. The
option will be immediately exercisable for all of the option
shares, but any unvested shares purchased upon exercise of the
option will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee’s
cessation of Board service prior to vesting in those shares. The
shares will vest as follows: (i) fifty percent (50%) of the
shares will vest upon completion of one (1) year of Board
service measured from the grant date and (ii) the remaining
shares will vest in three (3) successive equal annual
installments upon completion of each of the next three
(3) years of Board service thereafter. Mr. Richard
received his initial
12,000-share
option grant under the Automatic Option Grant Program on
April 18, 2006 upon his appointment to the Board as a
non-employee director. The grant has an exercise price of
$21.45 per share, the fair market value per share of the
Company’s common stock on the grant date.
Pursuant to the Automatic Option Grant Program currently in
effect under the 1993 Plan, on the date of each Annual Meeting
of Stockholders, each non-employee Board member who is to
continue to serve on the Board, whether or not he or she is
standing for re-election to the Board at that particular Annual
Meeting, and who has served on the Board at least six months
receives an automatic option grant for 8,000 shares of the
Company’s common stock. Each such option will have an
exercise price per share equal to the fair market value per
share of the common stock on the grant date and a maximum term
of ten (10) years measured from that date, subject to
earlier termination following the optionee’s cessation of
Board service. The option is immediately exercisable for all the
option shares. However, any unvested shares purchased upon
exercise of the option will be subject to repurchase by the
Company, at the option exercise price paid per share, upon the
optionee’s cessation of Board service prior to vesting in
those shares. The shares subject to each such
8,000-share
grant will vest upon the earlier of (i) the optionee’s
completion of one (1) year of Board service measured from
the grant date and (ii) the optionee’s continuation in
Board service through the day immediately preceding the date of
the first Annual Meeting of Stockholders following the grant
date. On July 18, 2006, the date of the 2006 Annual Meeting
of Stockholders, Messrs. Konidaris, Timmins, Raney, Richard
and Sollito each received, as a continuing non-employee
director, an option grant under the Automatic Option Grant
Program for 8,000 shares of the Company’s common stock
with an exercise price of $13.51 per share, the fair market
value per share of the common stock on that date.
The shares subject to each outstanding option under the
Automatic Option Grant Program will vest immediately upon an
acquisition of the Company by merger or asset sale or upon
certain other changes in control or ownership of the Company.
Upon the successful completion of a hostile tender offer for
more than 50% of the Company’s outstanding common stock,
each automatic option grant made prior to January 1,
2006 may be surrendered to the Company in return for a cash
distribution from the Company in an amount per surrendered
option share equal to the excess of (i) the fair market
value per share of the Company’s common stock on the date
the option is surrendered to the Company or, if greater, the
highest reported price per share of such common stock paid in
the tender offer, over (ii) the option exercise price
payable per share.
In light of his exceptional services as a non-employee Board
member, Mr. Richard was granted a stock option to purchase
8,000 shares of the Company’s common stock on
February 5, 2007, with an exercise price per share equal to
$11.96, the fair market value of the Company’s common stock
on such date. This option grant represents the same number of
option shares and vests on the same vesting schedule as the
option that Mr. Richard would have
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received under the Automatic Option Grant Program at the 2006
Annual Meeting, if he had completed six months of Board service
prior to the 2006 Annual Meeting date.
If Proposal 3 is approved by the Company’s
stockholders at the Annual Meeting, the Automatic Grant Program
will be amended, effective as of the Annual Meeting, to provide
for the grant to non-employee Board members of restricted stock
units instead of stock options, as more fully explained under
Proposal 3 below.
The Board of Directors recommends that the stockholders
vote FOR the election of each of the above nominees.
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PROPOSAL 2
The Audit Committee of the Board of Directors has appointed the
firm of Ernst & Young LLP, independent auditors for
the Company during the fiscal year ended December 31, 2006,
to serve in the same capacity for the fiscal year ending
December 31, 2007, and is asking the stockholders to ratify
this appointment. The affirmative vote of a majority of the
shares represented and entitled to vote at the Annual Meeting is
required to ratify the selection of Ernst & Young LLP
as the Company’s independent auditors.
In the event the stockholders fail to ratify the appointment,
the Audit Committee of the Board of Directors will reconsider
its selection. Even if the selection is ratified, the Audit
Committee in its discretion may direct the appointment of a
different independent auditing firm at any time during the year
if the Audit Committee believes that such a change would be in
the best interests of the Company and its stockholders.
Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting, will have the opportunity to
make a statement if they desire to do so, and will be available
to respond to appropriate questions.
Audit fees billed to the Company by Ernst & Young LLP
for professional services rendered for the audit of the
Company’s 2006 annual financial statements, review of
quarterly financial statements, audit services in connection
with statutory filings, consents, review of documents filed with
the SEC, Section 404 review of internal control over
financial reporting, and accounting and financial reporting
consultation totaled $1,486,262. Audit fees billed to the
Company by Ernst & Young LLP for professional services
rendered for the audit of the Company’s 2005 annual
financial statements, review of quarterly financial statements,
audit services in connection with statutory filings, consents,
review of documents filed with the SEC, Section 404 review
of internal control over financial reporting, and accounting and
financial reporting consultation totaled $1,011,891.
There were no audit-related fees billed to the Company by
Ernst & Young LLP during the Company’s 2006 and
2005 fiscal years.
There were no tax fees billed to the Company by
Ernst & Young LLP during the Company’s 2006 and
2005 fiscal years.
Other than as set forth above, there were no other fees billed
to the Company by Ernst & Young LLP during the
Company’s 2006 and 2005 fiscal years.
The Company did not engage Ernst & Young LLP to
provide advice to the Company regarding financial information
systems design and implementation during fiscal year 2006.
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All of the 2006 audit fees, audit-related fees and tax fees, and
all other fees, were approved by the Audit Committee of the
Company’s Board of Directors. The Audit Committee has
delegated to Mr. Timmins the ability to approve, on behalf
of the Audit Committee and in accordance with Section 10A
under the Securities Exchange Act of 1934, services to be
performed by the Company’s independent auditors.
The Audit Committee considered whether the provision of
audit-related services, tax services, financial information
systems design and implementation services and other non-audit
services is compatible with the principal accountants’
independence.
The Board of Directors recommends that the stockholders
vote FOR the ratification of the selection of
Ernst & Young LLP to serve as the Company’s
independent auditors for the fiscal year ending
December 31, 2007.
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PROPOSAL 3
APPROVAL
OF AN AMENDMENT TO THE 1993
The Company’s stockholders are being asked to approve an
amendment to the automatic option grant program in effect for
non-employee Board members under the Company’s 1993 Stock
Option/Stock Issuance Plan (the “1993 Plan”). The
amendment, which was adopted by the Board on January 30,
2007, will revise the automatic option grant program by
substituting a restricted stock unit award for each stock option
grant a non-employee Board member would otherwise receive under
the terms of the existing automatic stock option grant program.
Each restricted stock unit will entitle the non-employee Board
member to one share of the Company’s common stock upon the
vesting of that unit, and the substitution will be effected at
the rate of one restricted stock unit for every 1.6 shares
of such common stock which would have been the subject of an
automatic option grant made under the existing program. The
proposed amendment will first become effective with the grants
to be made to the continuing non-employee Board members at the
2007 Annual Meeting, if this Proposal is approved by the
stockholders. Except for such changes, no other changes will be
made to the terms and provisions of the 1993 Plan pursuant to
the amendment.
The proposed amendment will implement a revised equity incentive
program for our non-employee Board members which will provide
those individuals with a competitive equity compensation package
while at the same time reducing the total number of shares
issuable under the automatic grant program as a result of the
new restricted stock unit feature.
The following is a summary of the principal features of the 1993
Plan, as most recently amended by the Board (i) to revise
the automatic grant program for the non-employee Board members
and (ii) expand the list of equity restructuring events
which may trigger adjustments to the share reserve under the
1993 Plan and the outstanding awards under such plan so as avoid
any adverse accounting consequences should those events occur.
The summary, however, does not purport to be a complete
description of all the provisions of the 1993 Plan. Any
stockholder who wishes to obtain a copy of the actual plan
document may do so upon written request to the Corporate
Secretary at the Company’s executive offices in
San Jose, California.
The 1993 Plan became effective on September 29, 1993 in
connection with the initial public offering of the
Company’s common stock and is designed to provide the
Company’s officers and other key employees, the
non-employee members of the Board and independent consultants
with an opportunity to acquire an equity interest in the Company
as an incentive for them to remain in the Company’s
service. The 1993 Plan serves as the successor to the
Company’s 1993 Stock Option Plan and 1993 Stock Issuance
Plan (the “Predecessor Plans”), and all outstanding
stock options and stock issuances under the Predecessor Plans
have been incorporated into the 1993 Plan.
The 1993 Plan contains three (3) separate equity incentive
programs: (i) the discretionary grant program under which
key employees (including officers), non-employee Board members
and consultants may be granted options to purchase shares of
common stock at an exercise price not less than the fair market
value of such shares on the grant date or stock appreciation
rights tied to the value of the Company’s common stock,
(ii) the stock issuance program under which those
individuals may be issued shares of common stock pursuant to
restricted stock awards, restricted stock units or other share
right awards which vest upon the completion of a designated
service period or the attainment of pre-established performance
milestones, or such shares may be issued through direct purchase
of those shares (at fair market value) or as a bonus for past
services rendered to the Company, and (iii) the automatic
grant program under which each non-employee Board member will
receive a series of periodic restricted stock unit awards over
his or her period of continued Board service.
As of April 30, 2007, two executive officers, approximately
three hundred and eight other employees, approximately ten
independent consultants or other advisors, and six non-employee
Board members were eligible to participate in the discretionary
grant and stock issuance programs. The six non-employee Board
members were also eligible to participate in the automatic grant
program.
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Options granted under the discretionary grant program may be
either incentive stock options designed to meet the requirements
of Section 422 of the Internal Revenue Code or
non-statutory stock options not intended to satisfy such
requirements.
The table below shows, as to each of the Named Executive
Officers who appear in the Summary Compensation Table which
appears later in this Proxy Statement and the various other
indicated individuals and groups, the number of shares of common
stock subject to options granted under the 1993 Plan during the
period January 1, 2006 through April 30, 2007,
together with the weighted average exercise price payable per
share.
The table below shows, as to each of the Named Executive
Officers who appear in the Summary Compensation Table which
appears later in this Proxy Statement and the various other
indicated individuals and groups, the number of shares of common
stock subject to restricted stock units granted under the 1993
Plan during the period January 1, 2006 through
April 30, 2007.
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The maximum number of shares of common stock available for
issuance over the term of the 1993 Plan is currently limited to
10,776,779 shares. As of April 30, 2007, options for
4,360,338 shares and restricted stock units for
152,899 shares were outstanding under the 1993 Plan,
4,681,886 shares have been issued, and
1,581,656 shares were available for future grant.
In October 1998, the Company implemented the Supplemental Stock
Option/Stock Issuance Plan (the “Supplemental Plan”),
pursuant to which an additional 1,950,000 shares of common
stock have been reserved for issuance to employees of the
Company, other than those employees who are either executive
officers or hold the title of Vice President or General Manager.
The provisions of the Supplemental Plan are substantially the
same as those in effect under the discretionary grant and stock
issuance programs of the 1993 Plan, except that only
non-statutory options may be granted under the Supplemental
Plan. As of April 30, 2007, options for 993,208 shares
were outstanding under the Supplemental Plan,
759,553 shares had actually been issued under the
Supplemental Plan, and 197,239 shares remained available
for future grant.
In no event may any individual participant in the 1993 Plan be
granted stock options, separately exercisable stock appreciation
rights, direct stock issuances or other stock based awards
(whether in the form of restricted stock units or other
share-right awards) for more than 400,000 shares in the
aggregate per fiscal year. However, for the fiscal year in which
an individual receives his or her initial award under the 1993
Plan, the limit is 600,000 shares.
15
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These limitations, together with the requirement that all stock
options under the discretionary grant program have an exercise
price per share equal not less than the fair market value per
share of our common stock on the grant date, will assure that
any deductions to which the Company would otherwise be entitled
upon the exercise of stock options granted under the
discretionary grant program or the subsequent sale of the shares
purchased under those options will not be subject to the
$1 million limitation on the income tax deductibility of
compensation paid per executive officer imposed under
Section 162(m) of the Internal Revenue Code.
Should an outstanding option, restricted stock unit award or
other stock-based award under the 1993 Plan (including
outstanding options under the Predecessor Plans incorporated
into the 1993 Plan) expire or terminate for any reason prior to
the issuance of the shares of common stock subject to those
options or awards, those shares will be available for subsequent
issuance under the 1993 Plan. Unvested shares issued under the
1993 Plan and subsequently repurchased by the Company at the
option exercise or direct issue price paid per share will be
added back to the share reserve and will accordingly be
available for subsequent issuance under the 1993 Plan. Shares
subject to any exercised stock appreciation rights will reduce
on a share-for-share basis the number of shares of common stock
available for subsequent issuance under the 1993 Plan.
Should the exercise price of an outstanding option under the
1993 Plan (including any option incorporated from the
Predecessor Plans) be paid with shares of the Company’s
common stock or should shares of common stock otherwise issuable
under the Plan be withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan or the issuance of vested
shares pursuant to a stock or stock-based award made under the
Plan, then the number of shares of common stock available for
issuance under the Plan will be reduced by the gross number of
shares for which the option is exercised or for which the stock
or stock-based award was made, and not by the net number of
shares of common stock actually issued to the holder of such
option or award.
The fair market value per share of the Company’s common
stock on any relevant date under the 1993 Plan will be deemed to
be equal to the closing price per share of that common stock on
the date in question on the NASDAQ Global Market or any other
national securities exchange which may subsequently serve as the
primary market for the common stock. The fair market value of
the common stock on June 5, 2007 was $12.96 per share
on the basis of the last reported sale price on that date on the
NASDAQ Global Market.
Both the discretionary grant and the stock issuance programs are
administered by the Compensation Committee of the Board, which
currently consists of two (2) non-employee Board members.
The Compensation Committee acting in its capacity as the plan
administrator will have complete discretion to determine which
eligible individuals are to receive option grants, stock
appreciation rights, stock issuances or other stock-based
awards, the time or times when such awards are to be made, the
number of shares subject to each such award, the status of any
granted option as either an incentive stock option or a
non-statutory option under the federal tax laws, the vesting
schedule (if any) to be in effect for the award and the maximum
term for which any granted option is to remain outstanding.
The exercise price per share for each stock option granted under
the discretionary grant program. will not be less than the fair
market value of the common stock on the grant or issue date. No
granted option will have a maximum term in excess of ten
(10) years. Options are generally not assignable or
transferable other than by will or the laws of inheritance and,
during the optionee’s lifetime, the option may be exercised
only by such optionee. However, the plan administrator may allow
non-statutory options to be transferred or assigned during the
optionee’s lifetime to one or more members of the
optionee’s immediate family or to a trust established
exclusively for one or more such family members.
No optionee or holder of a stock appreciation right will have
any stockholder rights with respect to the shares underlying the
option or stock appreciation right until the award is exercised
and (with respect to an option) the exercise price is paid for
the purchased shares. The exercise price may be paid in cash or
in shares of common stock valued at fair market value on the
exercise date. The option exercise price may also, to the extent
permissible under applicable law and Company policy, be paid
through a
same-day
sale program pursuant to which there will be an immediate sale
of the shares purchased under the option and a portion of the
sale proceeds available on the
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settlement date will be paid over to the Company to cover the
exercise price for the purchased shares plus all applicable
withholding taxes.
Should the optionee cease to remain in the Company’s
service while holding one or more options granted under the
discretionary grant program, then the optionee will in general
have no more than three (3) months after such cessation of
service in which to exercise such outstanding options. Under no
circumstances, however, may any option be exercised after the
specified expiration date of the option term. Each such option
will normally, during such limited period, be exercisable only
for the number of shares of common stock in which the optionee
is vested at the time of cessation of service. The plan
administrator will have complete discretion to extend the period
following the optionee’s cessation of service during which
his or her outstanding options may be exercised
and/or to
accelerate the exercisability of those options in whole or in
part. Such discretion may be exercised at any time while the
options remain outstanding, whether before or after the
optionee’s actual cessation of service.
Shares may be issued under the stock issuance program as either
a fully vested bonus for past services or subject to a vesting
schedule tied to the participant’s period of future service
or the Company’s attainment of designated performance
goals. Any unvested shares issued under the program will be
subject to repurchase by the Company, at the issue price paid
per share, upon the participant’s cessation of service
prior to vesting in the shares. However, the plan administrator
will have the discretionary authority to accelerate the vesting
of any unvested shares, in whole or in part, at any time. Shares
of common stock may also be issued under the stock issuance
program pursuant to share right awards or restricted stock units
which entitle the recipients to receive the shares underlying
those awards or units upon the attainment of designated
performance goals or the satisfaction of specified service
requirements, or upon the expiration of a designated time period
following the vesting of those awards or units. Individuals
holding shares of common stock issued under the stock issuance
program will have full stockholder rights with respect to those
shares, whether the shares are vested or unvested.
In the event of a change in control, each outstanding option or
stock appreciation right under the discretionary grant program
will automatically accelerate in full, unless assumed or
otherwise continued in effect by the successor corporation or
replaced with a cash incentive program which preserves the
spread existing on the unvested option or stock appreciation
right (the excess of the fair market value of those shares over
the option exercise price payable for such shares) and provides
for subsequent payout of that spread in accordance with the same
vesting schedule in effect for that option or stock appreciation
right. The plan administrator will have complete discretion to
grant one or more options or stock appreciation rights under the
discretionary grant program which will become exercisable for
all the shares subject to the option or stock appreciation right
in the event the optionee’s service with the Company or the
successor entity is terminated (actually or constructively)
within a designated period following a change in control
transaction in which those options or stock appreciation rights
are assumed or otherwise continued in effect. Restricted stock
units awarded under the 1993 Plan may also be structured so that
the underlying shares of the Company’s common stock will
vest and become issuable on an accelerated basis upon similar
terms and conditions.
The plan administrator will have the discretion to structure one
or more option grants under the discretionary grant program so
that those options will immediately vest upon a change in
control, whether or not the options are to be assumed or
otherwise continued in effect. The plan administrator may also
structure restricted stock units under the stock issuance
program so that the underlying shares of the Company’s
common stock will vest and become issuable on an accelerated
basis upon a change in control.
A change in control will be deemed to occur in the event
(i) the Company is acquired by merger or asset sale,
(ii) there is a change in the majority of the Board
effected through one or more contested elections for Board
membership or (iii) any person or group of related persons
becomes directly or indirectly the beneficial owner of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company’s outstanding
securities pursuant to a tender or exchange offer made directly
to the Company’s stockholders.
Immediately after the consummation of the change in control
event, all outstanding options under the discretionary grant
program will terminate and cease to remain outstanding, except
to the extent assumed by the successor corporation (or its
parent company) or otherwise continued in effect.
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The acceleration of options in the event of a change in control
may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or
other efforts to gain control of the Company.
The plan administrator is authorized to issue tandem stock
appreciation rights in connection with option grants made under
the discretionary grant program. Tandem stock appreciation
rights provide the holders with the right to surrender their
options for an appreciation distribution from the Company equal
in amount to the excess of (a) the fair market value of the
vested shares of common stock subject to the surrendered option
over (b) the aggregate exercise price payable for those
shares. Such appreciation distribution may, at the discretion of
the plan administrator, be made in cash or in shares of common
stock.
The plan administrator will have the authority to effect, on one
or more separate occasions, the cancellation of outstanding
options under the discretionary grant program (including options
incorporated from the Predecessor Plans) which have exercise
prices in excess of the then current market price of the common
stock and to issue replacement options with an exercise price
based on the market price of the common stock at the time of the
new grant.
The terms and conditions governing the restricted stock unit
grants that may be made under the automatic option grant program
are summarized below. All grants under the automatic grant
program will be made in strict compliance with the express
provisions of such program. Stockholder approval of this
Proposal will also constitute pre-approval of each restricted
stock unit award granted on or after the date of the Annual
Meeting pursuant to the provisions of the automatic grant
program summarized below. Each restricted stock unit awarded
under the program will entitle the non-employee Board member to
one share of common stock on the date that unit vests.
Pursuant to the automatic grant program, each individual first
elected or appointed to the Board as a non-employee director
will receive a one-time automatic grant of restricted stock
units covering 7,500 shares of the Company’s common
stock at the time of his or her initial election or appointment
to the Board, provided such individual has not previously been
in the Company’s employ. On the date of each Annual Meeting
of Stockholders, each non-employee Board member who is
continuing to serve on the Board, whether or not he or she is
standing for re-election to the Board at that particular Annual
Meeting and whether or not he or she has been in the prior
employ of the Company, will automatically receive an award of
restricted stock units covering 5,000 shares of the
Company’s common stock. There is no limit on the number of
such
5,000-share
annual restricted stock unit awards any one individual may
receive over his or her period of continued Board service, but
no individual will receive a
5,000-share
restricted stock unit award for a particular year under the
automatic grant program if he or she has received his or her
initial restricted stock unit award under the automatic grant
program within the immediately preceding six (6) months.
Each restricted stock unit award granted under the automatic
grant program will be subject to the following terms and
conditions:
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Prior to the amendment to the automatic grant program which is
the subject of this Proposal, stock options were granted to the
non-employee Board members. Initial and annual grants were for
12,000 and 8,000 shares of the Company’s common stock,
respectively, and each had an exercise price per share equal to
the fair market value of the Company’s common stock on the
grant date. The options vested in the same manner as the 7,500
and 5,000 share restricted stock unit awards under the
revised program and had a maximum term of ten (10) years.
The plan administrator may provide one or more holders of
non-statutory options or other stock-based awards with the right
to have the Company withhold a portion of the shares of common
stock otherwise issuable upon the exercise of those options or
the issuance or vesting of those awards in order to satisfy the
Federal, state and local income and employment withholding taxes
to which such individuals may become subject in connection with
the option exercise or the issuance or vesting of such awards.
Alternatively, the plan administrator may allow such individuals
to deliver previously acquired shares of common stock in payment
of such withholding tax liability.
In the event any change is made to the outstanding shares of our
common stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
spin-off transaction or other change affecting the outstanding
common stock as a class effected without our receipt of
consideration or should the value of the outstanding shares of
common stock be substantially reduced by reason of a spin-off
transaction or extraordinary dividend or distribution, equitable
adjustments will be made to (i) the maximum number
and/or class
of securities issuable under the 1993 Plan, (ii) the
maximum number
and/or class
of shares for which any one participant may be granted stock
options or other stock-based awards in any fiscal calendar year,
(iii) the number
and/or class
of securities for which restricted stock unit awards will
subsequently be made under the automatic grant program to each
newly-elected or continuing non-employee Board member,
(iv) the number
and/or class
of securities and price per share in effect under each
outstanding option or stock appreciation right, (v) the
number
and/or class
of shares subject to each outstanding restricted stock unit or
other stock-based award and the cash consideration (if any)
payable per share and (vi) the number
and/or class
of securities and price per share in effect under each
outstanding option incorporated into the 1993 Plan from the
Predecessor Plans.
Awards under the 1993 Plan will not affect the right of the
Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its
business or assets.
The Board may amend or modify the provisions of the 1993 Plan in
any or all respects whatsoever, subject to any stockholder
approval required under applicable law or regulation. The Board
may terminate the 1993 Plan at any time, and the 1993 Plan will
in all events terminate no later than February 28, 2011.
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All options grants and direct share issuances that were
outstanding under the Predecessor Plans on the
September 29, 1993 effective date of the 1993 Plan have
been transferred to the 1993 Plan. However, each option and
direct share issuance so transferred continues to be governed
solely by the terms of the documents evidencing that option or
share issuance, and no provision of the 1993 Plan will affect or
otherwise modify the rights or obligations of the holders of
those transferred options or share issuances with respect to
their acquisition of shares of common stock. However, the plan
administrator will have complete discretion to extend the
vesting acceleration provisions of the 1993 Plan applicable to a
change in control event to one or more of the transferred
options or unvested stock issuances under the Predecessor Plans
which do not otherwise contain such acceleration provisions.
Options granted under the 1993 Plan may be either incentive
stock options which satisfy the requirements of Section 422
of the Internal Revenue Code or non-statutory options which are
not intended to meet such requirements. The Federal income tax
treatment for the two types of options differs as described
below:
Incentive Stock Options. No taxable income is
recognized by the optionee at the time of the option grant, and
no taxable income is generally recognized at the time the option
is exercised, although taxable income may arise at that time for
alternative minimum tax purposes. The optionee will, however,
recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of certain
dispositions.
For Federal income tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying.
The optionee will make a qualifying disposition of the purchased
shares if the sale or other disposition of such shares is made
more than two (2) years after the date the option for the
shares involved in such sale or disposition was granted and more
than one (1) year after the date the option was exercised
for those shares. If the sale or disposition occurs before these
two requirements are satisfied, then a disqualifying disposition
will result.
Upon a qualifying disposition, the optionee will recognize
long-term capital gain in an amount equal to the excess of
(i) the amount realized upon the sale or other disposition
of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of
those shares on the exercise date over (ii) the exercise
price paid for the shares will be taxable as ordinary income to
the optionee. Any additional gain recognized upon the
disposition will be taxable as a capital gain.
If the optionee makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income
tax deduction, for the taxable year in which such disposition
occurs, equal to the excess of (i) the fair market value of
such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will
the Company be allowed a deduction with respect to the
optionee’s disposition of the purchased shares.
Non-Statutory Options. No taxable income is
recognized by an optionee upon the grant of a non-statutory
option. The optionee will in general recognize ordinary income,
in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the
exercise date over the exercise price paid for the shares, and
the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the
acquisition of unvested shares of Common Stock under a
non-statutory option. These special provisions may be summarized
as follows:
(a) If the shares acquired upon exercise of the
non-statutory option are subject to repurchase by the Company,
at the original exercise price paid per share, upon the
optionee’s termination of service prior to vesting in
shares, then the optionee will not recognize any taxable income
at time of exercise but will have to report as ordinary income,
as the Company’s repurchase right lapses, an amount equal
to the excess of (i) the fair market value of the shares on
the date the Company’s repurchase right lapses with respect
to those shares over (ii) the exercise price paid for the
shares.
(b) The optionee may, however, elect under
Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise of the non-statutory
option an amount equal to the excess of (i) the fair market
value of the purchased shares on the exercise date (determined
as if the shares were not subject to the Company’s
repurchase right) over (ii) the exercise price paid for
such shares. If the Section 83(b) election is
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made, the optionee will not recognize any additional income as
and when the Company’s repurchase right lapses.
The Company will be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the
optionee with respect to the exercised non-statutory option. The
deduction will in general be allowed for the taxable year of the
Company in which such ordinary income is recognized by the
optionee.
Stock Appreciation Rights. An optionee who is
granted a stock appreciation right will recognize ordinary
income in the year of exercise equal to the amount of the
appreciation distribution. The Company will be entitled to a
business expense deduction equal to the appreciation
distribution for the taxable year of the Company in which the
ordinary income is recognized by the optionee.
Direct Stock Issuance. The tax principles
applicable to direct stock issuances under the 1993 Plan will be
substantially the same as those summarized above for the
exercise of non-statutory option grants.
Restricted Stock Units. No taxable income is
recognized upon receipt of a restricted stock unit. The holder
will recognize ordinary income in the year in which the shares
subject to that unit are actually issued to the holder. The
amount of that income will be equal to the fair market value of
the shares on the date of issuance, and the holder and the
Company will be required to satisfy certain tax withholding
requirements applicable to such income.
The Company will be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the holder
at the time the shares are issued. The deduction will in general
be allowed for our taxable year in which such ordinary income is
recognized by the holder.
Deductibility of Executive Compensation. The
Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock
option shares or exercises of non-statutory options granted with
exercise prices not less than the fair market value of the
option shares on the grant date will qualify as
performance-based compensation for purposes of Internal Revenue
Code Section 162(m) and will not have to be taken into
account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid
to certain executive officers of the Company. Accordingly, all
compensation deemed paid with respect to those options will
remain deductible by the Company without limitation under
Internal Revenue Code Section 162(m).
Pursuant to the accounting standards established by
SFAS 123R the Company is required to recognize all
share-based payments, including grants of stock options,
restricted stock units and stock issuances, in our financial
statements. Accordingly, stock options that are granted to our
employees and non-employee directors are valued at fair value as
of the grant date under an appropriate valuation formula, and
that value is charged as stock-based compensation expense
against our reported GAAP earnings over the designated service
period. For shares issuable upon the vesting of restricted stock
units awarded under the 1993 Plan, we are required to expense
over the service period compensation cost equal to the fair
market value of the underlying shares on the date of the award.
If any other shares are unvested at the time of their direct
issuance, the fair market value of those shares at that time
(less any cash consideration paid for those shares) will be
charged to our reported earnings ratably over the applicable
service period. Such accounting treatment for restricted stock
units and direct stock issuances will be applicable whether
vesting is tied to service periods or performance goals. The
issuance of a fully-vested stock bonus will result in an
immediate charge to our earnings equal to the fair market value
of the bonus shares on the issuance date.
Stock options and stock appreciation rights granted to
non-employee consultants will result in a direct charge to our
reported earnings based on the fair value of the grant measured
on the vesting date of each installment of the underlying
shares. Accordingly, such charge will take into account the
appreciation in the fair value of the grant over the period
between the grant date and the vesting date of each installment
comprising that grant.
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If this Proposal is approved by the stockholders, then each of
the continuing non-employee Board members listed below will
receive at the Annual Meeting an automatic restricted stock unit
award covering 5,000 shares of common stock:
Messrs. Raney, Richard, Gemunder, Konidaris, Sollitto and
Timmins.
The Board of Directors recommends that the stockholders
vote FOR the approval of the amendment to the 1993 Plan as
described in this Proposal. The affirmative vote of the holders
of a majority of the common stock present or represented at the
Annual Meeting and entitled to vote on this Proposal is required
for approval of this amendment. If the stockholders do not
approve the proposal, then the revisions to the automatic option
grant program will not be implemented, and the automatic option
grant program for the non-employee Board members will continue
in effect in accordance with the provisions of that program
prior to the January 30, 2007 revisions. Accordingly, each
of the continuing non-employee Board members would receive an
option grant for 8,000 shares of the Company’s common
stock at the Annual Meeting with an exercise price equal to the
fair market value of the common stock on such date. In addition,
the 1993 Plan will continue to remain in effect, and option
grants and direct stock issuances may continue to be made
pursuant to the provisions of the 1993 Plan until the available
reserve of common stock as last approved by the stockholders has
been issued or until the February 28, 2011 expiration date
of such plan.
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STOCKHOLDER PROPOSAL REGARDING CLASSIFICATION
OF THE BOARD OF DIRECTORS
William C. Thompson, Jr., Comptroller, City of New York, on
behalf of the New York City Employees’ Retirement System,
the New York City Teachers’ Retirement System, the New York
City Police Pension Fund, the New York City Fire Department
Pension Fund and the New York City Board of Education Retirement
System (together, the “Systems”), which are the
beneficial owners of an aggregate of a reported
111,227 shares of the Company’s Common Stock with an
address of 1 Centre Street Room 736, New York, NY
10007-2341,
has notified the Company that the Systems intend to present the
following proposal at the Annual Meeting:
BE IT RESOLVED, that the stockholders of Ultratech, Inc.
request that the Board of Directors take the necessary steps to
declassify the Board of Directors and establish annual elections
of directors, whereby directors would be elected annually and
not by classes. This policy would take effect immediately, and
be applicable to the re-election of any incumbent director whose
term, under the current classified system subsequently expires.
We believe that the ability to elect directors is the single
most important use of the shareholder franchise. Accordingly,
directors should be accountable to shareholders on an annual
basis. The election of directors by classes, for two-year terms,
in our opinion, minimizes accountability and precludes the full
exercise of the rights of shareholders to approve or disapprove
annually the performance of a director or directors.
In addition, since only one-half of the Board of Directors is
elected annually (currently the Company has seven directors,
four of whom are elected one year and three the next), we
believe that classified boards could frustrate, to the detriment
of long-term shareholder interest, the efforts of a bidder to
acquire control or a challenger to engage successfully in a
proxy contest.
We urge your support for the proposal to repeal the classified
board and establish that all directors be elected annually.
The Board of Directors has carefully considered the foregoing
proposal. As provided in the Company’s Certificate of
Incorporation, the Company has two classes of directors, with
members of each class elected to two-year terms. The classes are
staggered, such that stockholders vote on one class of directors
each year. The Company has had this structure continuously since
it went public in 1993, which was approved by the Company’s
stockholders. The Board of Directors believes that the
classified board structure continues to promote the best
interests of the Company’s stockholders while providing
appropriate accountability to stockholders.
The Company’s classified board structure is designed to
promote continuity and stability of leadership. Electing
directors to staggered two-year terms helps ensure that the
Board will have directors with prior experience with, and
knowledge of, the Company’s business and strategy.
Directors who have experience with the Company and knowledge of
its business and strategic plans are a valuable resource and, in
our view, are well-positioned to make fundamental decisions in
the best interests of the Company and its stockholders. Further,
the Board of Directors believes that a longer term enhances the
independence of non-employee directors by reducing pressure to
act too quickly or in an uninformed manner and properly focusing
directors on long-term and sustainable growth, profitability and
stockholder value. The Board of Directors believes that this
knowledge, continuity and stability facilitates the
Company’s ability to maximize stockholder value and that
the risk of losing all directors in a single year could result
in significant harm to the Company and its stockholders.
The Board of Directors further believes that the benefits of the
current classified board structure do not come at the cost of
directors’ accountability to stockholders. The
Company’s directors are required to uphold their fiduciary
duty to the Company and its stockholders, regardless of the
length of their term of service. In addition, unlike many
companies with classified boards, the Company’s board has
only two classes (as opposed to three classes), which
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means that roughly half the directors (depending on the size of
the board) are presented to stockholders for election each year
and each director is presented at least every two years.
Further, five of the seven members of the board of directors are
independent directors. In the view of the Board of Directors,
these factors ensure that directors remain accountable to the
stockholders.
The Board of Directors also observes that a large number of
well-respected companies have classified boards, including many
companies in the S&P 500.
Having a classified board structure also operates to give the
Board of Directors adequate time to consider an acquisition
offer, explore alternatives and negotiate the best price for all
of the Company’s stockholders, while reducing the risk that
a third party could quickly take control of the Company’s
business and assets without paying fair value. The Board of
Directors believes that having a classified board strongly
encourages a person or persons seeking to obtain control of the
Company to negotiate mutually agreeable terms with the Board of
Directors. The classified Board structure provides the Board of
Directors with greater leverage to evaluate the adequacy and
fairness of any takeover proposal, to negotiate on behalf of all
stockholders and to consider alternative methods of maximizing
stockholder value. The Company’s classified board structure
and the leverage it creates takes on additional importance in
light of the recent expiration of the Company’s shareholder
rights plan. It is important to note, however, that although the
Company’s classified board can enhance the leverage of the
Board of Directors in seeking a course of action in the best
interests of the stockholders, the classified board would not
preclude a person from ultimately taking control of the Company.
Stockholders should be aware that approval of this proposal is
not binding on the Company or the Board of Directors, and it
would not eliminate the Company’s classified board
structure. In the event the Company’s stockholders approve
this proposal, further action by the Board of Directors and
subsequently the stockholders would be required to amend the
Company’s Certificate of Incorporation to declassify the
Board of Directors. Any such amendment would need to be approved
by the Board of Directors and presented at a subsequent meeting
of stockholders for their approval. While the Board of Directors
would duly reconsider the merits of declassifying the board in
light of an approval of this proposal by the stockholders, it
would do so consistent with its fiduciary duty to act in a
manner it believes to be in the best interests of the Company
and all its stockholders.
The Board of Directors has always taken and will always take the
views of its stockholders seriously and, with the assistance of
outside legal counsel, carefully considered this proposal and
the arguments both in favor of and in opposition to classified
boards of directors and the particular circumstances of the
Company. Following extensive review and deliberation, the Board
of Directors concluded that the Company’s classified board
structure continues to promote the best interests of the
Company’s stockholders.
In addition, the Board of Directors notes that the notice of
this proposal was not properly submitted under the
Company’s bylaws. Nevertheless, the Company has agreed to
allow the proposal to be presented and voted upon at the Annual
Meeting.
For all of the foregoing reasons, the Board of Directors
unanimously recommends that you vote AGAINST this proposal.
Proxies received by the Company will be voted against this
proposal unless the stockholder otherwise specifies in the proxy.
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The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters
properly come before the Annual 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 recommends.
Discretionary authority with respect to such other matters is
granted by the execution of the enclosed Proxy.
OWNERSHIP
OF SECURITIES
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of the
Company’s Common Stock as of March 31, 2007 (unless
otherwise stated in the footnotes) by (i) all persons known
to the Company who are or who may be deemed beneficial owners of
five percent (5%) or more of the Company’s Common Stock
based solely on a review of Form 4, Schedule 13G and
Schedule 13D filings with the Securities and Exchange
Commission since January 1, 2006, (ii) each director
of the Company, (iii) the named executive officers and
(iv) all current directors and executive officers as a
group. Unless otherwise indicated, the principal address of each
of the stockholders below is
c/o Ultratech,
Inc., 3050 Zanker Road, San Jose, CA, 95134. Unless
otherwise indicated, each of the security holders has sole
voting and investment power with respect to the shares
beneficially owned, subject to community property laws, where
applicable. Except as otherwise indicated in the footnotes to
the table or for shares of common stock held in brokerage
accounts, which may from time to time, together with other
securities held in those accounts, serve as collateral for
margin loans made from such accounts, to the Company’s
knowledge none of the shares reported as beneficially owned are
currently pledged as securities for any outstanding loan or
indebtedness. In some instances the beneficially owned shares
include unvested shares subject to currently exercisable
options. If unvested shares are in fact purchased under those
options, the Company will have the right to repurchase those
shares at the exercise price paid per share should the
optionee’s service terminate prior to vesting in those
shares.
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26
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The following table provides information as of December 31,
2006 with respect to the shares of the Company’s common
stock that may be issued under the Company’s existing
equity compensation plans. There are no outstanding options
assumed by the Company in connection with its acquisitions of
other companies, and there are no assumed plans under which
options can currently be granted.
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The Supplemental Stock Option/Stock Issuance Plan
The Supplemental Stock Option/Stock Issuance Plan (the
“Supplemental Plan”) was implemented by the Board in
October 1998 as a non-stockholder approved plan under which
option grants or direct stock issuances may be made to employees
who at the time of the grant are neither executive officers or
Board members nor hold the title of Vice President or General
Manager. The Board has authorized 1,950,000 shares of
Common Stock for issuance under the Supplemental Plan. All
option grants must have an exercise price per share not less
than the fair market value per share of the Common Stock on the
grant date, and all direct issuances of Common Stock under the
Supplemental Plan must have an issue price not less than the
fair market value of the shares at the time of issuance. Options
will have a maximum term not in excess of ten years and will
terminate earlier within a specified period following the
optionee’s cessation of service with the Company (or any
parent or subsidiary company). Each granted option will vest in
one or more installments over the optionee’s period of
service with the Company. However, the options will vest on an
accelerated basis in the event the Company is acquired and those
options are not assumed, replaced or otherwise continued in
effect by the acquiring entity. Direct stock issuances may be
made with similar vesting conditions. All options granted under
the Supplemental Plan will be non-statutory stock options under
the Federal tax laws. As of December 31, 2006, options
covering 1,127,989 shares of Common Stock were outstanding
under the Supplemental Plan, 73,418 shares remained
available for future grants, and options covering 748,593 had
been exercised.
Share issuances under the 1993 Stock Option/Stock Issuance Plan
will not reduce or otherwise affect the number of shares of
Common Stock available for issuance under the Supplemental Plan,
and share issuances under the Supplemental Plan will not reduce
or otherwise affect the number of shares of Common Stock
available for issuance under the 1993 Stock Option/Stock
Issuance Plan.
Compensation
Discussion and Analysis
Introduction. It is our intent in this
Compensation Discussion and Analysis to inform our stockholders
of the policies and objectives underlying the compensation
programs for our executive officers. Accordingly, we will
address and analyze each element of the compensation provided
our chief executive officer, our chief financial officer and the
other executive officers named in the Summary Compensation Table
which follows this discussion. We are engaged in a very
competitive industry, and our success depends upon our ability
to attract and retain qualified executives through competitive
compensation packages. The Compensation Committee of our Board
of Directors administers the compensation programs for our
executive officers with this competitive environment in mind.
However, we believe that the compensation paid to our executive
officers should also be substantially dependent on our financial
performance and the value created for our stockholders. For this
reason, the Compensation Committee also utilizes our
compensation programs to provide meaningful incentives for the
attainment of our short-term and long-term strategic objectives
and thereby reward those executive officers who make a
substantial contribution to the attainment of those objectives.
Compensation Policy for Executive Officers. We
have designed the various elements comprising the compensation
packages of our executive officers to achieve the following
objectives:
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Each executive officer’s compensation package typically
consists of three elements: (i) a base salary, (ii) a
cash bonus tied to our attainment of pre-established financial
objectives, and (iii) long-term, stock-based incentive
awards, in the form of stock options and restricted stock unit
awards, designed to align and strengthen the mutuality of
interests between our executive officers and our stockholders.
In determining the appropriate level for each element of such
compensation, the Compensation Committee has consistently
followed the practice of setting the compensation levels for our
executive officers, other than Mr. Zafiropoulo, at or above
the 50th percentile of the relevant market data, and for
Mr. Zafiropoulo, at or above the
75th percentile
of the relevant market data. In determining the appropriate
level of each component of compensation for an executive
officer, the Compensation Committee also subjectively reviews
and evaluates the level of performance of the Company and the
executive’s level of individual performance and potential
to contribute to the Company’s future growth. Accordingly,
an executive officer’s actual compensation may be higher or
lower than the
50th percentile
(75th percentile
for Mr. Zafiropoulo) for his or her position depending on
Company performance and operating results and his or her
individual performance. Consistent with our philosophy of
emphasizing pay for performance, the total cash compensation
packages are designed to pay above the target when the Company
exceeds its goals and below the target when the Company does not.
Comparative Framework. For purposes of
measuring the competitive levels of the various elements of our
executive officer compensation package, the Compensation
Committee historically has engaged Compensation Strategies, a
compensation consulting firm, to provide competitive
compensation data and general advice on the Company’s
compensation programs and policies for executive officers. The
Compensation Committee uses such data to conduct periodic
reviews of compensation levels among comparable companies in the
high-tech and precision manufacturing industries. However, such
comparative reviews are not conducted every year, and based on
Compensation Strategies’ assessment that comparable
companies were typically maintaining salary increases at 2005
levels, that bonus targets were steady and that long-term
incentives were in a period of fluctuation due to the
implementation of FAS 123R, no comparative review was
undertaken in 2006. The companies which have historically
comprised the comparative peer group are as follows:
It is our objective to target the various elements of the
compensation package provided each of our executive officers,
other than Mr. Zafiropoulo, at the following percentiles
when compared to the peer group data:
It is our objective to target the various elements of the
compensation package provided to Mr. Zafiropoulo at a point
between the following percentiles when compared to the peer
group data:
Elements of Compensation. Each of the three
major elements comprising the compensation package for executive
officers (salary, bonus and equity) is designed to achieve one
or more of our overall objectives in fashioning a competitive
level of compensation, tying compensation to the attainment of
one or more of our strategic business objectives and subjecting
a substantial portion of the executive officer’s
compensation to our
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financial success as measured in terms of our stock price
performance. The manner in which the Compensation Committee has
so structured each element of compensation may be explained as
follows.
Salary. The Compensation Committee
reviews the base salary level of each executive officer in
January each year, with any salary adjustments for the year
generally to be made retroactive to January 1 of that year. The
base salary for each executive officer named in the Summary
Compensation Table is determined on the basis of his or her
level of responsibility and experience. However, in light of the
Company’s fiscal year 2005 financial results, the
Compensation Committee decided for the 2006 fiscal year to
maintain the base salary of each executive officer at the level
established for the 2005 fiscal year, representing the second
consecutive fiscal year in which the executive officers did not
receive an increase in their level of base salary.
For the 2006 fiscal year, the annual rate of base salary for our
executive officer group ranged from a high of $555,000 to a low
of $266,863.
Incentive Compensation. In January 2006
the Compensation Committee approved the Long-Term Incentive
Compensation Plan designed to advance our pay-for-performance
policy by focusing the attention of our executive officers on
the attainment of key objectives over one or more years. In 2006
the plan provided our executive officers with a direct financial
incentive in the form of a bonus award to be paid in cash and
tied to our achievement of aggressive pre-established
operational goals for the 2006 year. Half of the actual
bonus amount was to be paid to each participant following the
close of the 2006 fiscal year, provided the participant
continued in the company’s employ through such date or is
otherwise eligible for such portion by reason of his or her
retirement at or after age 65. The other half was to be
deferred and subject to an annual installment vesting schedule
tied to the participant’s continued service with the
company over an additional three-year period. The deferred
portion was to be paid as it vested and earn interest at a
designated rate until paid. The plan provided for pro-ration of
the non-deferred portion of the bonus in the event the
participant’s employment should terminate under certain
defined circumstances during the performance period. The
deferred portion of the bonus was to immediately vest and become
payable in the event the participant’s employment
terminates under certain defined circumstances during the
deferral period. Accelerated payouts under the plan may also
occur in the event of certain changes in control or ownership of
the company.
The operational goals were tied to the following measures of our
financial performance for the 2006 fiscal year, weighted as
indicated: revenue (50% weighting) and earnings per share (50%
weighting). For each executive officer, bonus opportunities for
the revenue and earnings per share goals were established at
threshold, target, above-target tier-I and above-target
tier II levels of attainment, with the aggregate dollar
amount of such bonuses not to exceed $4,908,300 for the 2006
fiscal year. No bonuses were to be paid under the plan unless
those operational goals were each attained at not less than
threshold level. At the time the goals were set in January 2006,
we believed that the goals, though aggressive in light of prior
fiscal year goals, were attainable at the established target
levels, but substantial uncertainty nevertheless existed as to
the actual attainment of the goals at any of the established
levels. Because the performance goals were aggressive, the bonus
opportunity originally set for each executive officer at target
level was between 90 percent and 150 percent of his
base salary for the 2006 fiscal year, representing significantly
higher percentages than have been set in past years. However, on
March 14, 2006, the Compensation Committee reduced by 15%
the dollar amount of the various bonus potentials previously
approved for the executive officers for each level of attained
company performance, and reduced the target earnings per share
to reflect certain adjustments the Compensation Committee had
intended to include at the time the target was set, but which
were not actually included in the bonus plan document.
For the purposes of determining whether the revenue and earnings
per share objectives were met for the 2006 fiscal year, the
Compensation Committee used the numbers we reported for
financial statement purposes in accordance with generally
accepted accounting principles in the United States
(“GAAP”).
In January 2007, the Compensation Committee determined that our
financial performance for the 2006 year was below the
threshold level for the revenue and earnings per share goals. As
a result, no incentive bonuses were awarded under the plan.
Long-Term Incentives. We have
structured our long-term incentive program for executive
officers in the form of equity awards under our 1993 Stock
Option/Stock Issuance Plan (the “1993 Plan”). For many
years stock option
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grants were the sole form of our equity awards. Currently, we
use stock option grants in combination with other forms of
equity awards available under the 1993 Plan to provide long-term
incentives to our executive officers.
Generally, the Compensation Committee approves equity awards
each year in the first quarter of the fiscal year in connection
with the annual review of the performance of our executive
officers. In January 2007, the Compensation Committee approved a
general policy to grant equity awards at a regularly scheduled
meeting of the Compensation Committee, with such awards to be
effective at the close of the second full trading day following
the release of the Company’s earnings for the previous
quarter and an exercise price equal to the closing price on the
effective date.
In December 2005, the Compensation Committee decided to
accelerate the 2006 fiscal year option grants by making those
grants in December 2005, before the Company became subject to
the new stock-based compensation accounting rules under
Statement of Financial Accounting Standards No. 123
(revised 2004) “FAS 123(R)”. By granting
fully vested options at the end of the 2005 fiscal year with
restrictions on the sale of the shares purchased under those
options, the Company was able to avoid having to expense those
options on its financial statements and thereby avoid impacting
its reported earnings in the future. However, those options
contain restrictions on the sale of the underlying shares which
preclude the optionees from selling any shares acquired under
those options and realizing any option gain until the sale
restrictions lapse over periods ranging as long as two years.
Each stock option grant is designed to align the interests of
the executive officer with those of the stockholders and to
provide each individual with a significant incentive to manage
the company from the perspective of an owner with an equity
stake in the business. Each grant allows the officer to acquire
shares of our common stock at a fixed price per share (the
closing selling price on the grant date) over a specified
period, usually ten years. Other than the fully-vested options
granted in December 2005, options granted in past years
generally vest and become exercisable in a series of
installments over a fifty month service period, contingent upon
the officer’s continued employment with the company.
Accordingly, each option will provide a return to the executive
officer only to the extent he remains employed with us during
the vesting period, and then only if the fair market value of
the underlying shares appreciates over the period between grant
and exercise of the option.
In January 2006, the Compensation Committee began to award
restricted stock units (“RSUs”) as part of our
long-term incentive program. We believe that RSUs are a valuable
addition to our long-term incentive program for several reasons,
including ongoing concerns over the dilutive effect of option
grants on our outstanding shares, our desire to have a more
direct correlation between the FAS 123(R) compensation
expense we must take for financial accounting purposes and the
actual value delivered to our executive officers and other
employees, and the fact that the incentive effects of RSUs are
less subject to market volatility than stock options. Each RSU
entitles the recipient to one share of our common stock at a
designated issue date following the vesting of that unit,
without the payment of an exercise price or other consideration.
The units will vest in a series of three successive equal annual
installments over the executive officer’s period of
continued employment, subject to accelerated vesting in the
event the officer’s employment terminates under certain
circumstances or upon certain changes in control or ownership of
the Company. The shares underlying the vested units will be
issued following the completion of that three-year vesting
period (or, if earlier, upon the occurrence of any of the
accelerated vesting events), subject to the Company’s
collection of the applicable withholding taxes.
As part of the introduction of the RSU program, the Compensation
Committee established certain guidelines as to the number of
shares of the Company’s common stock for which long-term
equity compensation awards are to be made to the executive
officers in the future, but has the flexibility to make
adjustments to those guidelines at its discretion. The current
guidelines provide for the grant of equity awards in the form of
combined stock option and RSU grants that involve fewer shares
of common stock than in earlier years due to the inclusion of
the RSU component.
The equity awards made during the 2006 fiscal year to our chief
executive officer and the other executive officers named in the
Summary Compensation Table are set forth in that table and the
accompanying Grants of Plan-Based Awards table. In determining
the total number of shares to award each executive officer in
the combined form of stock options and RSUs, the Compensation
Committee’s objective historically has been to bring the
total direct compensation (salary, bonus and equity) of each
executive officer other than Mr. Zafiropoulo to a point
between the
55th and
the
65th percentile
of the peer group, and to bring the total direct compensation of
Mr. Zafiropoulo to a point
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between the
75th and
the
90th percentile
of the peer group. For such purpose, RSUs were valued at the
closing selling price of the underlying shares of common stock
on the award date and option awards were valued on the basis of
their grant date fair value as disclosed in the annual report on
Form 10-K
for the most recently completed fiscal year of each company in
the peer group.
The Compensation Committee believes that the new long-term
incentive program involving a combination of RSUs and stock
options will provide our executive officers and other employees
with a competitive and more balanced equity compensation
package, while at the same time reducing the total number of
shares of our common stock issuable under those stock-based
awards. This is particularly important for us, since the total
direct compensation of our executive officers is weighted to the
equity award component.
Market Timing of Equity Awards. The
Compensation Committee does not engage in any market timing of
the equity awards made to the executive officers or other award
recipients. Except as mentioned above for the December 2005
option grants, the awards for existing executive officers and
employees are made in connection with the annual review process
which generally occurs in the first quarter each year. Equity
awards for new hires are typically made at the next scheduled
Compensation Committee meeting following the employee’s
hire date. It is our intent that all stock option grants have an
exercise price per share equal to the fair market value per
share on the grant date.
The Company has entered into Employment Agreements with
Mr. Zafiropoulo and Mr. Wright. A summary of the
material terms of those employment agreements, together with a
quantification of the benefits available under the agreements,
may be found below in the section entitled “Executive
Compensation and Other Information — Employment
Contracts, Termination of Employment and Change in Control
Arrangements.”
During the 2006 fiscal year, the Compensation Committee
addressed on several occasions the provision of lifetime retiree
health (medical and dental) coverage to Mr. Wright and his
spouse and finally decided to provide such coverage in the event
Mr. Wright’s employment with the Company occurs
(i) by reason of his retirement after attainment of
age 62 and completion of at least 10 years of service
with the Company or in connection with a change of control of
the Company. The Compensation Committee believes that the
retiree health care package for Mr. Wright and his spouse
is fair and reasonable when we consider the years of service of
Mr. Wright and the level of dedication and commitment that
he has rendered to us over that period, the contributions he has
made to our growth and financial success, and the value we
expect to receive from retaining his services prior to his
retirement.
On January 30, 2006, the Company entered into an employment
agreement with Mr. Rick Friedman, then the Company’s
Senior Vice President, World-wide Sales. In connection with the
termination of Mr. Friedman’s employment with the
Company on January 14, 2007, the Company entered into a
Separation and General Release Agreement and an amendment to his
January 30, 2006 employment agreement (collectively, the
“Separation Agreement”). Pursuant to the Separation
Agreement, upon his execution of a general release in favor of
the Company, Mr. Friedman became entitled to receive the
severance benefits that he was entitled to receive under the
January 30, 2006 employment agreement. Accordingly,
Mr. Friedman became entitled to receive the following
benefits: (i) 12 months of continued base salary,
(ii) accelerated vesting of twenty-five percent of each
outstanding equity award granted to him, (iii) an extension
of the time to exercise his vested stock options of up to one
year and 90 days following the termination of his
employment and (iv) reimbursement of COBRA costs for
continued medical coverage for up to 18 months.
On November 24, 2003, the Company entered into an
employment agreement with Mr. John Denzel, then the
Company’s President and Chief Operating Officer. In
connection with the termination of Mr. Denzel’s
employment with the Company on November 3, 2006, the
Company entered into a Separation and General Release Agreement
and an Amended and Restated Employment Agreement with
Mr. Denzel (collectively, the “Denzel Separation
Agreement”). Pursuant to the Denzel Separation Agreement,
upon his execution of a general release in favor of the Company,
Mr. Denzel became entitled to receive the severance
benefits that he was entitled to receive under the
November 24, 2003 employment agreement, plus an additional
benefit in the form of the accelerated vesting of twenty-five
percent of each outstanding option granted to him before
July 21, 2003. Accordingly, Mr. Denzel became entitled
to receive the following benefits: (i) 12 months of
continued base salary, (ii) acceleration of vesting
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of twenty five percent of each outstanding equity award granted
to him, (iii) an extension of the time to exercise certain
of his vested stock options of up to one year and 90 days
following the termination of his employment and
(iv) reimbursement of COBRA costs for continued medical
coverage for up to 18 months.
The Compensation Committee believes that the severance
arrangements for Mr. Friedman and Mr. Denzel are fair
and reasonable in consideration of the years of service of those
officers and the level of dedication and commitment that they
have rendered to us over those years.
Executive Officer Perquisites. It is not our
practice to provide our executive officers with any meaningful
perquisites. We do, however, provide Mr. Zafiropoulo with a
company automobile which he uses from time to time for personal
matters.
Other Programs. Our executive officers are
eligible to participate in our 401(k) plan on the same basis as
all other regular U.S. employees.
Deferred Compensation Programs. In addition
to the bonus component subject to mandatory deferral under the
Company’s Long-Term Incentive Compensation Plan described
under “Incentive Compensation” above, we maintain a
non-qualified deferred compensation program for our executive
officers. Such program is described below under the heading
“Nonqualified Deferred Compensation”. However, we
believe that the equity award component of each executive
officer’s total direct compensation package should serve as
a major source of wealth creation, including the accumulation of
substantial resources to fund the executive officer’s
retirement years.
Compliance with Internal Revenue Code
Section 162(m). Section 162(m) of the
Internal Revenue Code disallows a tax deduction to publicly held
companies for compensation paid to certain of their executive
officers to the extent such compensation exceeds
$1.0 million per covered officer in any year. The
limitation applies only to compensation that is not considered
to be performance-based under the terms of Section 162(m).
The stock options granted to our executives have been structured
to qualify as performance based compensation.
Non-performance-based compensation paid to our executive
officers for 2006 did not exceed the $1.0 million limit per
officer. However, because we have begun to include
service-vesting restricted stock units as a component of equity
compensation, it is likely that the non-performance-based
compensation payable to our executive officers will exceed the
$1.0 million limit in one or more future years. We believe
that in establishing the cash and equity incentive compensation
programs for our executive officers, the potential deductibility
of the compensation payable under those programs should be only
one of a number of relevant factors taken into consideration,
and not the sole governing factor. For that reason, we may deem
it appropriate to provide one or more executive officers with
the opportunity to earn incentive compensation, whether through
cash bonus programs tied to our financial performance or through
RSUs tied to the executive officer’s continued service,
which may, together with base salary, exceed in the aggregate
the amount deductible by reason of Section 162(m) or other
provisions of the Internal Revenue Code. We believe it is
important to maintain cash and equity incentive compensation at
the levels needed to attract and retain the executive officers
essential to our success, even if all or part of that
compensation may not be deductible by reason of the
Section 162(m) limitation.
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Summary
Compensation Information
The following table provides certain summary information
concerning the compensation earned for services rendered in all
capacities to the Company and its subsidiaries for the year
ended December 31, 2006 by the Company’s Chief
Executive Officer, Chief Financial Officer and each of the
Company’s two other most highly compensated executive
officers whose total compensation for the 2006 year was in
excess of $100,000. The listed individuals shall be hereinafter
referred to as the “named executive officers.”
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The following table provides certain summary information
concerning each grant of an award made to a named executive
officer in the 2006 Fiscal Year under a compensation plan.
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Outstanding
Equity Awards at Fiscal Year-End
The following table provides certain summary information
concerning outstanding equity awards held by the named executive
officers as of December 31, 2006.
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37
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The following table sets forth for each of the named executive
officers, the number of shares of the Company’s common
stock acquired and the value realized on each exercise of stock
options during the year ended December 31, 2006, and the
number and value of shares of the Company’s common stock
subject to each restricted stock or restricted stock unit award
that vested during the year ended December 31, 2006. No
stock appreciation rights were exercised by the named executive
officers during the 2006 fiscal year, and none of those officers
held any stock appreciation rights as of December 31, 2006.
The following table shows the deferred compensation activity for
each named executive officer during the 2006 fiscal year under
the Company’s Executive Deferred Compensation Plan.
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Executive Deferred Compensation Plan. The
Company has established the Executive Deferred Compensation Plan
in order to provide its executive officers and other key
employees with the opportunity to defer all or portion of their
cash compensation each year. Pursuant to the plan, each
participant can elect to defer between 1% and 100% of his or her
salary, commissions, bonuses and other awards. Each
participant’s contributions to the plan are credited to an
account maintained in his or her name on the Company’s
books, in which the participant is fully vested at all times.
The account is credited with notional earnings (or losses) based
on the participant’s investment elections among a select
group of investment funds utilized to track the notional
investment return on the account balance. There are a total of
17 investment funds available for election, and the participant
may change his or her investment choices daily. Upon the
participant’s termination of employment for reasons other
than retirement or disability, he or she will receive a lump sum
distribution of his or her account balance within 60 days
(or after 6 months for compensation deferred after
December 31, 2004) following the termination date.
Upon the participant’s disability or retirement, his or her
account balance will be distributed in a lump sum, or in 12 or
more monthly installments (but not more than 180), pursuant to
the participant’s prior election. In the event a
participant dies prior to receiving a distribution under the
plan, his or her beneficiary will receive a lump-sum
distribution of the participant’s account balance under the
plan. In the event a participant dies after distribution of his
or her account balance has begun, the remaining balance will be
distributed to the participant’s beneficiary in accordance
with the distribution schedule that had already begun.
The Compensation Committee of the Board of Directors has the
authority as the plan administrator of the Company’s 1993
Plan to provide for accelerated vesting of any shares of the
Company’s common stock subject to outstanding equity awards
under such plan held by the Chief Executive Officer and the
Company’s other executive officers in the event their
employment were to be terminated (whether involuntarily or
through a resignation for good reason) following (i) an
acquisition of the Company by merger or asset sale or
(ii) a change in control of the Company effected through
the acquisition of more than 50% of the Company’s
outstanding common stock or through a change in the majority of
the Board as a result of one or more contested elections for
Board membership.
In November 2003, the Company entered into employment agreements
with Messrs. Zafiropoulo, Denzel and Wright, effective as
of January 1, 2004, and in January 2006, the Company
entered into an employment agreement with Mr. Friedman,
effective as of February 1, 2006.
The Company has entered into an employment agreement with
Mr. Zafiropoulo that provides that he will serve as the
Chief Executive Officer of the Company and that the Company will
use its reasonable best efforts to see that he is elected as a
member of the Board of Directors and as Chairman of the Board as
long as he remains employed by the Company under the employment
agreement. The employment agreement also provides for a base
salary of $555,000, a target bonus of up to 60% of base salary
(which can be increased by the Compensation Committee and which
was initially set at 150% for the 2006 fiscal year) and stock
option or other equity awards. In addition,
Mr. Zafiropoulo’s employment agreement also provides
for lifetime retiree health (medical and dental) coverage for
Mr. Zafiropoulo and his spouse. If the retiree health
benefit becomes taxable to Mr. Zafiropoulo or his spouse,
the
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Company will pay him or her a
“gross-up”
payment to cover the taxes attributable to such coverage and any
taxes that apply to the
gross-up
payment.
Mr. Zafiropoulo’s employment may be terminated by
either party at any time, with or without cause. If the Company
terminates his employment for any reason other than cause, or in
the event of his death, disability or resignation for good
reason, Mr. Zafiropoulo (or his beneficiary) will be
entitled to receive the deferred portions of any annual bonuses
previously earned, 12 months of continued base salary at
the rate then in effect, accelerated vesting of 25% of the stock
options and other equity awards granted to him on or after
July 21, 2003, an extension of the time to exercise those
vested stock options of up to one year and 90 days
following the termination of his employment and continued use of
a Company car for 12 months. In addition, the Board of
Directors may, in its discretion, partially accelerate vesting
and extend the exercise period for options granted prior to
July 21, 2003.
If, however, Mr. Zafiropoulo’s employment terminates
for any reason in connection with a change of control of the
Company, then he will, instead, receive the deferred portions of
any annual bonuses previously earned, 24 months of
continued base salary at the rate then in effect (or, if
greater, in effect immediately prior to the change of control)
and continued use of a Company car for 24 months. In
addition, regardless of whether Mr. Zafiropoulo’s
employment is terminated following a change of control of the
Company, the stock options and other equity awards granted to
him on or after July 21, 2003 will fully vest upon a change
of control, and the time for exercising those options will be
extended up to one year and 90 days following the
termination of his employment. In addition, upon a change of
control, the Board of Directors may, in its discretion, fully
accelerate vesting and extend the exercise period for options
granted prior to July 21, 2003. If Mr. Zafiropoulo
incurs an excise tax under Section 4999 of the Internal
Revenue Code (relating to “excess parachute payments”)
with respect to any payments he receives from the Company, the
Company will make a
“gross-up”
payment to Mr. Zafiropoulo to cover this excise tax
liability and any income and employment taxes that apply to the
gross-up
payment. For this purpose, a change of control generally
includes:
Mr. Wright’s employment agreement provides that he
will serve as the Senior Vice President, Finance, Chief
Financial Officer, and Secretary of the Company. The employment
agreement provides for a base salary of $275,000, a target bonus
of up to 40% of base salary (which can be increased by the
Compensation Committee and which was initially set at 100% for
fiscal year 2006) and stock option or other equity awards.
For fiscal 2007, the Compensation Committee of the Board
increased Mr. Wright’s salary to $295,000 and set his
target bonus at approximately 80%.
Mr. Wright’s employment may be terminated by either
party at any time, with or without cause. If the Company
terminates his employment for any reason other than cause, or in
the event of his death, disability or resignation for good
reason, Mr. Wright (or his beneficiary) will be entitled to
receive the deferred portions of any annual bonuses previously
earned, 12 months of continued base salary at the rate then
in effect, accelerated vesting of 25% of the stock options and
other equity awards granted to him on or after July 21,
2003, an extension of the time to exercise those vested stock
options of up to one year and 90 days following the
termination of his employment and, except in the case of death,
reimbursement of COBRA costs for continued medical coverage for
up to 18 months following termination of his employment. In
addition, the Board of Directors may, in its discretion,
partially accelerate vesting and extend the exercise period for
options granted prior to July 21, 2003.
If, however, Mr. Wright’s employment terminates for
any reason in connection with a change of control of the
Company, then he will, instead, receive the deferred portions of
any annual bonuses previously earned and
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24 months of continued base salary at the rate then in
effect (or, if greater, in effect immediately prior to the
change of control) and reimbursement of COBRA costs for
continued medical coverage for up to 18 months following
the termination of his employment. In addition, regardless of
whether Mr. Wright’s employment is terminated
following a change of control of the Company, the stock options
and other equity awards granted to him on or after July 21,
2003 will fully vest upon a change of control, and the time for
exercising those options will be extended up to one year and
90 days following the termination of his employment. In
addition, the Board of Directors may, in its discretion, fully
accelerate vesting and extend the exercise period for options
granted prior to July 21, 2003. A change of control in
Mr. Wright’s employment agreement has the same meaning
as in Mr. Zafiropoulo’s employment agreement described
above.
In January 2007 the Compensation Committee amended
Mr. Wright’s employment agreement to provide
Mr. Wright and his spouse with lifetime retiree health
(medical and dental) coverage under either of the following two
circumstances: (i) if at the time of his retirement from
the Company Mr. Wright is over 62 years old and has
accumulated at least 10 years of service with the Company,
or (ii) in the event of a change of control of the Company.
The terms of Mr. Denzel’s employment agreement,
effective January 1, 2004, were substantially similar to
the agreement described above for Mr. Wright (prior to its
amendment in January 2007). In connection with the termination
of Mr. Denzel’s employment with the Company on
November 3, 2006, the Company entered into a Separation and
General Release Agreement and an Amended and Restated Employment
Agreement (collectively, the “Denzel Separation
Agreement”) with Mr. Denzel. Pursuant to the Denzel
Separation Agreement upon Mr. Denzel’s execution of a
general release in favor of the Company he became entitled to
receive the severance benefits that he was entitled to receive
under the original employment agreement, plus an additional
benefit in the form of the accelerated vesting of twenty-five
percent of each outstanding option granted to him before
July 21, 2003. Pursuant to the Denzel Separation Agreement,
Mr. Denzel became entitled to receive the following
benefits: (i) 12 months of continued base salary,
(ii) acceleration of vesting of twenty five percent of each
outstanding equity award granted to him, whether before or after
July 21, 2003, (iii) an extension of the time to
exercise certain of his vested stock options of up to one year
and 90 days following the termination of his employment and
(iv) reimbursement of COBRA costs for continued medical
coverage for up to 18 months.
The terms of Mr. Friedman’s employment agreement,
dated January 30, 2006, were substantially similar to the
agreement described above for Mr. Wright (prior to its
amendment in January 2007). In connection with the termination
of Mr. Friedman’s employment with the Company on
January 14, 2007, the Company entered into a Separation and
General Release Agreement and an amendment to the
January 30, 2006 employment agreement (collectively, the
“Friedman Separation Agreement”). Pursuant to the
Friedman Separation Agreement, upon Mr. Friedman’s
execution of a general release in favor of the Company,
Mr. Friedman became entitled to receive the severance
benefits that he was entitled to receive under the
January 30, 2006 employment agreement. Pursuant to the
Friedman Separation Agreement, Mr. Friedman became entitled
to receive the following benefits: (i) 12 months of
continued base salary, (ii) acceleration of vesting of
twenty five percent of each outstanding equity award granted to
him, (iii) an extension of the time to exercise his vested
stock options of up to one year and 90 days following the
termination of his employment and (iv) reimbursement of
COBRA costs for continued medical coverage for up to
18 months.
The charts below quantify the potential payments
Mr. Zafiropoulo and Mr. Wright would receive based
upon the following assumptions:
(i) the executive’s employment terminated on
December 31, 2006 under circumstances entitling him to
severance benefits under his employment agreement,
(ii) as to any benefits tied to the executive’s rate
of base salary, the rate of base salary is assumed to be the
executive’s rate of base salary as of December 31,
2006, and
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(iii) with respect to the first chart below, as to any
benefits tied to a change in control, the change in control is
assumed to have occurred on December 31, 2006 and the
change in control consideration paid per share of outstanding
common stock is assumed to be equal to the closing selling price
of our common stock on December 29, 2006, which was $12.48
per share.
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The following chart quantifies the amounts payable to
Messrs. Denzel and Friedman in connection with the
termination of their employment on November 3, 2006 and
January 14, 1007, respectively:
Messrs. Gemunder, Richard and Sollitto served as members of
the Company’s Compensation Committee during the fiscal year
completed December 31, 2006. No member of the Compensation
Committee is a former or current officer or employee of the
Company or any of its subsidiaries. No executive officer of the
Company serves as a member of the board of directors or
compensation committee of any entity which has one or more of
its executive officers serving as a member of the Company’s
Board of Directors or Compensation Committee. The Board of
Directors has determined that because of the relationship
between the Company and Advanced Micro Devices, Inc.
(“AMD”), a company with which Mr. Richard is
affiliated, which relationship is described under the section
entitled “Certain Relationships and Related
Transactions” below, Mr. Richard no longer qualifies
as an independent director under such Rule and no longer serves
as a member of the Company’s Compensation Committee.
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis contained in this Proxy
Statement with management, and the Compensation Committee
recommended that the Compensation Discussion and Analysis, as
contained herein, be included herein.
Compensation Committee
Joel F. Gemunder Vincent F. Sollitto, Jr., Chairman
The Company’s Amended and Restated Certificate of
Incorporation and Bylaws provide for indemnification of all
directors and officers. In addition, each director and officer
of the Company has entered into a separate indemnification
agreement with the Company.
Scott Zafiropoulo, the son of Arthur Zafiropoulo, the
Company’s Chairman of the Board and Chief Executive
Officer, is an employee of the Company. In fiscal 2006,
Mr. S. Zafiropoulo earned approximately $137,000 in salary
and received a restricted stock unit award in connection with
his employment of 3,000 shares subject to vesting in three
equal annual installments.
In fiscal year 2006, AMD purchased Company products for a total
of $8.9 million, representing 6.1% of the Company’s
net sales for that year. Mr. Henri Richard is an executive
officer of AMD. In accordance with Marketplace Rule 4200 of
The Nasdaq Stock Market, the Board of Directors has determined
that Mr. Richard is not an “independent director”.
The Board of Directors has adopted a policy that all material
transactions with affiliates will be on terms no more or less
favorable to the Company than those available from unaffiliated
third parties and will be approved by a majority
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of the disinterested members of the Board of Directors and the
Audit Committee. The Board of Directors and the Audit Committee
have authorized the Company to sell product and services to AMD
in the ordinary course of business.
The information contained in this report 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 filings
with the Securities and Exchange Commission, or subject to the
liabilities of Section 18 of the Securities Exchange Act of
1934, as amended, except to the extent that the Company
specifically incorporates it by reference into a document filed
under the Securities Act of 1933, as amended, or Securities
Exchange Act of 1934, as amended.
The following is the report of the Audit Committee with respect
to the Company’s audited financial statements for the
fiscal year ended December 31, 2006, included in the
Company’s Annual Report on
Form 10-K
for that year.
The Audit Committee has reviewed and discussed these audited
financial statements with management of the Company.
The Audit Committee has discussed with the Company’s
independent auditors, Ernst & Young LLP, the matters
required to be discussed by SAS 61, as amended by SAS 90
(Communication With Audit Committee).
The Audit Committee has received the written disclosures and the
letter from Ernst & Young LLP required by Independence
Standards Board Standard No. 1 (“Independence
Discussions with Audit Committees”), as amended, and has
discussed with Ernst & Young LLP the independence of
Ernst & Young LLP from the Company.
Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the Company’s
Board of Directors that the audited financial statements be
included in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2006 for filing with the
Securities and Exchange Commission.
Submitted by the Audit Committee
of the Board of Directors
Nicholas Konidaris
Dennis Raney Rick Timmins, Chairman
Section 16(a) of the Securities Exchange Act of 1934
requires the Company’s directors, executive officers and
any persons who are the beneficial owners of more than ten
percent (10%) of the Company’s common stock to file reports
of ownership and changes in ownership with the SEC. Such
directors, officers and greater than ten percent (10%)
beneficial stockholders are required by SEC regulations 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 and written representations from reporting persons for the
2006 fiscal year, the Company believes that all of the
Company’s executive officers, directors and greater than
ten percent (10%) beneficial stockholders complied with all
applicable Section 16(a) filing requirements for the 2006
fiscal year.
A copy of the Annual Report of the Company for the fiscal year
ended December 31, 2006 has been mailed concurrently with
this proxy statement to all stockholders entitled to notice of
and to vote at the Annual Meeting. Except for “Executive
Officers of the Registrant” from Part I of the
Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, the Annual
Report is not incorporated into this Proxy Statement and is not
considered proxy solicitation material.
The Board of Directors of
Ultratech, Inc.
Dated: June 11, 2007
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APPENDIX A
1993
STOCK OPTION/STOCK ISSUANCE PLAN
(Amended and Restated as of January 30, 2007)
ARTICLE ONE
GENERAL
This 1993 Stock Option/Stock Issuance Plan (“Plan”) is
intended to promote the interests of Ultratech, Inc., a Delaware
corporation (the “Corporation”), by providing
(i) key employees (including officers) of the Corporation
(or its parent or subsidiary corporations) who are responsible
for the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations),
(ii) the non-employee members of the Corporation’s
Board of Directors and (iii) independent consultants and
other advisors who provide valuable services to the Corporation
(or its parent or subsidiary corporations) with the opportunity
to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
A. The Plan became effective on September 29, 1993,
the date on which the shares of the Corporation’s Common
Stock were registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the
“1934 Act”). Such date is hereby designated as
the Effective Date for the Plan.
B. This Plan shall serve as the successor to the
Corporation’s existing 1993 Stock Option and 1993 Stock
Issuance Plans (the “Predecessor Plans”), and no
further option grants or share issuances shall be made under the
Predecessor Plans from and after the Effective Date of this
Plan. All outstanding stock options and unvested share issuances
under the Predecessor Plans on the Effective Date are hereby
incorporated into this Plan and shall accordingly be treated as
outstanding stock options and unvested share issuances under
this Plan. However, each outstanding option grant and unvested
share issuance so incorporated shall continue to be governed
solely by the express terms and conditions of the instrument
evidencing such grant or issuance, and no provision of this Plan
shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such incorporated options with
respect to their acquisition of shares of Common Stock
thereunder. All unvested shares of Common Stock outstanding
under the Predecessor Plans on the Effective Date shall continue
to be governed solely by the express terms and conditions of the
instruments evidencing such issuances, and no provision of this
Plan shall be deemed to affect or modify the rights or
obligations of the holders of such unvested shares.
A. For purposes of the Plan, the following definitions
shall be in effect:
Board: the Corporation’s Board of
Directors.
Code: the Internal Revenue Code of 1986, as
amended.
Committee: the committee of two (2) or
more non-employee Board members appointed by the Board to
administer the Plan.
Common Stock: shares of the Corporation’s
common stock.
Change in Control: a change in ownership or
control of the Corporation effected through either of the
following transactions:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of
Rule 13d-3
of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the
Corporation’s
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outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders; or
b. there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of one or
more proxy contests for the election of Board members, to be
comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board
members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
Corporate Transaction: any of the following
stockholder-approved transactions to which the Corporation is a
party:
a. a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State in which the Corporation
is incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities are transferred to
person or persons different from the persons holding those
securities immediately prior to such merger.
Employee: an individual who performs services
while in the employ of the Corporation or one or more parent or
subsidiary corporations, subject to the control and direction of
the employer entity not only as to the work to be performed but
also as to the manner and method of performance.
Fair Market Value: the Fair Market Value per
share of Common Stock determined in accordance with the
following provisions:
a. If the Common Stock is at the time listed or admitted to
trading on the Nasdaq Global or Global Select Market, the Fair
Market Value shall be the closing selling price per share on the
date in question, as such price is reported by the National
Association of Securities Dealers on such exchange. If there is
no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be
determinative of Fair Market Value.
b. If the Common Stock is at the time listed or admitted to
trading on any other national stock exchange, then the Fair
Market Value shall be the closing selling price per share on the
date in question on the exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation
exists.
Optionee: any person to whom an option or
stock appreciation right is granted under the Discretionary
Grant Program in effect under the Plan.
Participant: any person who receives a direct
issuance of Common Stock under the Stock Issuance Program in
effect under the Plan or a restricted stock unit award under the
Automatic Grant Program.
Plan Administrator: the Committee in its
capacity as the administrator of the Plan.
Permanent Disability or Permanently
Disabled: the inability of the Optionee or the
Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.
Service: the performance of services on a
periodic basis to the Corporation (or any parent or subsidiary
corporation) in the capacity of an Employee, a non-employee
member of the board of directors or an independent consultant or
advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement. For
purposes of the Plan, an Optionee or Participant shall be deemed
to
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cease Service immediately upon the occurrence of the either of
the following events: (i) the Optionee or Participant no
longer performs services in any of the foregoing capacities for
the Corporation or any Parent or Subsidiary or (ii) the
entity for which the Optionee or Participant is performing such
services ceases to remain a Parent or Subsidiary of the
Corporation, even though the Optionee or Participant may
subsequently continue to perform services for that entity.
Service shall not be deemed to cease during a period of military
leave, sick leave or other personal leave approved by the
Corporation; provided, however, that except to the
extent otherwise required by law or expressly authorized by the
Plan Administrator or the Corporation’s written leave of
absence policy, no Service credit shall be given for vesting
purposes for any period the Optionee or Participant is on a
leave of absence.
B. The following provisions shall be applicable in
determining the parent and subsidiary corporations of the
Corporation:
Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be
considered to be a parent of the Corporation, provided
each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations which begins with the Corporation shall be
considered to be a subsidiary of the Corporation,
provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain.
A. Stock Programs. The Plan shall
be divided into three separate components: the Discretionary
Grant Program specified in Article Two, the Automatic Grant
Program specified in Article Three and the Stock Issuance
Program specified in Article Four. Under the Discretionary
Grant Program, eligible individuals may, at the discretion of
the Plan Administrator in accordance with the provisions of
Article Two, be granted options to purchase shares of
Common Stock or stock appreciation rights tied to the value of
such Common Stock. Under the Automatic Grant Program,
non-employee Board members will receive a series of automatic
restricted stock unit awards over their period of continued
Board service in accordance with the provisions of
Article Three. Under the Stock Issuance Program, eligible
individuals may, at the discretion of the Plan Administrator, be
issued shares of Common Stock pursuant to restricted stock
awards, restricted stock units or other share right awards which
vest upon the completion of a designated service period or the
attainment of pre-established performance milestones, or such
shares of Common Stock may be issued through direct purchase or
as a bonus for services rendered the Corporation (or any Parent
or Subsidiary) or the Corporation’s attainment of financial
objectives.
B. General Provisions. Unless the
context clearly indicates otherwise, the provisions of
Articles One and Five shall apply to the Discretionary
Grant Program, the Automatic Grant Program and the Stock
Issuance Program and shall accordingly govern the interests of
all individuals under the Plan.
A. Both the Discretionary Grant Program and the Stock
Issuance Program shall be administered by a committee
(“Committee”) of two or more non-employee Board
members. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal
by the Board at any time.
B. The Committee as Plan Administrator shall have full
power and authority (subject to the express provisions of the
Plan) to establish rules and regulations for the proper
administration of the Discretionary Grant and Stock Issuance
Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any
outstanding option grants, stock issuances or other stock-based
awards thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding
on all parties who have an interest in the Discretionary Grant
or Stock Issuance Program or any outstanding stock option, stock
appreciation right, share issuance or other stock-based award
thereunder.
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C. Administration of the Automatic Grant Program shall be
self-executing in accordance with the express terms and
conditions of Article Three, and the Committee as Plan
Administrator shall exercise no discretionary functions with
respect to restricted stock unit awards made pursuant to that
program.
A. The persons eligible to participate in the Discretionary
Grant Program under Article Two or the Stock Issuance
Program under Article Four shall be limited to the
following:
1. officers and other key employees of the Corporation (or
its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of
the Corporation (or its parent or subsidiary corporations);
2. non-employee members of the Board; and
3. those independent consultants or other advisors who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The Plan Administrator shall have full authority to
determine, (I) with respect to the grant of stock options
or stock appreciation rights under the Discretionary Grant
Program, which eligible individuals are to receive such grants,
the time or time when those grants are to be made, the number of
shares to be covered by each such grant, the time or times at
which each option or stock appreciation right is to vest and
become exercisable, the status of a granted stock option as
either an incentive stock option (“Incentive Option”)
which satisfies the requirements of Section 422 of the Code
or a non-statutory stock option not intended to meet such
requirements, and the maximum term for which the granted stock
option or stock appreciation right may remain outstanding and
(II) with respect to stock issuances or other stock-based
awards under the Stock Issuance Program, which eligible persons
are to receive such issuances or awards, the time or times when
the issuances or awards are to be made, the number of shares
subject to each such issuance or award, the vesting schedule (if
any) applicable to the shares which are the subject of such
issuance or award and the consideration for those shares.
A. Shares of Common Stock shall be available for issuance
under the Plan and shall be drawn from either the
Corporation’s authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market.
Subject to the automatic share increase provisions of
Section VI. B. of this Article One, the maximum number
of shares of Common Stock reserved for issuance over the term of
the Plan shall be limited to
10,776,779 shares.1
Such share reserve includes (i) the initial number of
shares incorporated into this Plan from the Predecessor Plans on
the Effective Date, (ii) an additional 600,000-share
increase authorized by the Board on March 21, 1996 and
approved by the stockholders at the 1996 Annual Stockholders
Meeting, (iii) an additional 277,239 shares
attributable to the automatic annual share increase for fiscal
1996 which was effected on January 2, 1996, (iv) an
additional 284,346 shares attributable to the automatic
annual share increase for fiscal 1997 which was effected on
January 2, 1997, (v) an additional 450,000 shares
authorized by the Board on March 18, 1997 and approved by
the stockholders at the 1997 Annual Meeting, (vi) an
additional 291,008 shares attributable to the automatic
annual share increase for fiscal 1998 which was effected on
January 2, 1998, (vii) an additional
295,480 shares attributable to the automatic annual share
increase for fiscal 1999 which was effected on January 4,
1999, (viii) an additional 299,490 shares attributable
to the automatic annual share increase for fiscal 2000 which was
effected on January 3, 2000, (ix) an additional
898,045 shares of Common Stock added to the share reserve
on January 2, 2002 by reason of the automatic increase
provision of Section VI.B of this Article One,
(x) an additional 905,088 shares of Common Stock added
to the share reserve on January 2, 2003 by reason of the
automatic increase provision of Section VI.B of this
Article One, (xi) an additional 943,285 shares of
Common Stock added to the share reserve on January 2, 2004
by reason of the automatic increase provision of
Section VI.B of this Article One, (xii) an
additional 954,141 shares of Common Stock added to the
share reserve on January 2, 2005 by reason of the automatic
increase provision of Section VI.B of this Article One
and (xiii) an additional 949,991 shares of Common
Stock added to the share reserve on January 3,
1 All
figures have been adjusted to reflect the 2:1 stock split the
Corporation effected May 10, 1995.
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2006 by reason of the automatic increase provision of
Section VI.B of this Article One. The share reserve in
effect from time to time under the Plan shall be subject to
periodic adjustment in accordance with the provisions of this
Section VI. To the extent one or more outstanding options
under the Predecessor Plans which have been incorporated into
this Plan are subsequently exercised, the number of shares
issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares available for
issuance under this Plan.
B. The number of shares of Common Stock available for
issuance under the Plan shall automatically increase on the
first trading day of January of each calendar year, beginning
with calendar year 2002 and continuing through calendar year
2006, by an amount equal to four percent (4%) of the total
number of shares of Common Stock outstanding on the last trading
day of the calendar year immediately preceding the calendar year
of each such share increase, but in no event shall any such
annual increase exceed 1,700,000 shares.
C. In no event may the aggregate number of shares of Common
Stock for which any one individual participating in the Plan may
be granted stock options, stand-alone stock appreciation rights,
direct stock issuances (whether vested or unvested) or other
stock-based awards (whether in the form of restricted stock
units or other share-right awards) exceed 400,000 shares
per fiscal year, beginning with the 1995 fiscal year. However,
for the fiscal year in which an individual receives his or her
initial stock option or stock appreciation right, direct stock
issuance or other stock-based award under the Plan, the limit
shall be increased to 600,000 shares. Such limitations
shall be subject to adjustment from time to time in accordance
with the provisions of this Section VI.
D. Shares of Common Stock subject to outstanding options
(including options transferred to this Plan from the Predecessor
Plan) or other awards made under the Plan shall be available for
subsequent issuance under the Plan to the extent those options
or awards expire or terminate for any reason (including, without
limitation, the cancellation of one or more options in
accordance with the cancellation-regrant provisions of
Section IV of Article Two of the Plan) prior to the
issuance of the shares of Common Stock subject to those options
or awards. Unvested shares issued under the Plan and
subsequently repurchased by the Corporation, at the original
exercise or issue price paid per share, pursuant to the
Corporation’s repurchase rights under the Plan shall be
added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for
reissuance through one or more subsequent option grants or
direct stock issuances under the Plan. Shares subject to any
stock appreciation rights exercised in accordance with
Section V of Article Two shall reduce on a
share-for-share basis the number of shares of Common Stock
available for subsequent issuance under the Plan. In addition,
should the exercise price of an outstanding option under the
Plan (including any option incorporated from the Predecessor
Plans) be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an outstanding
option under the Plan or the issuance of vested shares pursuant
to a stock or stock-based award made under the Plan, then the
number of shares of Common Stock available for issuance under
the Plan shall be reduced by the gross number of shares for
which the option is exercised or for which the stock or
stock-based award was made, and not by the net number of shares
of Common Stock actually issued to the holder of such option or
award.
E. In the event any change is made to the outstanding
shares of Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of
shares, spin-off transaction or other change affecting the
outstanding Common Stock as a class effected without the
Corporation’s receipt of consideration or should the value
of the outstanding shares of Common Stock be substantially
reduced by reason of a spin-off transaction or extraordinary
dividend or distribution, equitable adjustments shall be made to
(i) the maximum number
and/or class
of securities issuable under the Plan, (ii) the maximum
number
and/or class
of securities for which any one person may be granted stock
options, stand-alone stock appreciation rights, direct stock
issuances and other stock-based awards under this Plan per
calendar year, (iii) the number
and/or class
of securities for which restricted stock unit awards are to be
subsequently made per eligible non-employee Board member under
the Automatic Grant Program, (iv) the number
and/or class
of securities and exercise price per share in effect under each
stock option or stock appreciation right outstanding under the
Discretionary Grant Program or Automatic Grant Program,
(v) the number
and/or class
of securities subject to each outstanding restricted stock unit
or other stock-based award under the Plan and the issue price
(if any) payable per share and (vi) the number
and/or class
of securities and price per share in effect under each
outstanding option incorporated into this Plan from the
Predecessor Plans. Such adjustments to the outstanding options
and other stock-based awards are to be effected in a manner
which shall preclude the enlargement or dilution of rights and
benefits under those outstanding options,
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stock appreciation rights and other awards. The adjustments
determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY
GRANT PROGRAM
Options granted pursuant to the Discretionary Grant Program
shall be authorized by action of the Plan Administrator and may,
at the Plan Administrator’s discretion, be either Incentive
Options or non-statutory options. Individuals who are not
Employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each
granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however,
that each such instrument shall comply with the terms and
conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this
Article Two.
A. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator and shall in no event be less than one hundred
percent (100%) of the fair market value of such Common Stock on
the grant date.
2. The option price shall become immediately due upon
exercise of the option and, subject to the provisions of
Section I of Article Four and the instrument
evidencing the grant, shall be payable in one of the following
alternative forms specified below:
For purposes of this subparagraph (2), the Exercise Date shall
be the date on which written notice of the option exercise is
delivered to the Corporation. Except to the extent the sale and
remittance procedure is utilized in connection with the exercise
of the option, payment of the option price for the purchased
shares must accompany such notice.
B. Term and Exercise of
Options. Each option granted under this
Discretionary Grant Program shall be exercisable at such time or
times and during such period as is determined by the Plan
Administrator and set forth in the instrument evidencing the
grant. No such option, however, shall have a maximum term in
excess of ten (10) years from the grant date.
C. Limited Transferability. During
the lifetime of the Optionee, Incentive Options shall be
exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and
distribution following the Optionee’s death. However,
non-statutory options may, in connection with the
Optionee’s
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estate plan, be assigned in whole or in part during the
Optionee’s lifetime to one or more members of the
Optionee’s immediate family or to a trust established
exclusively for the Optionee or one or more such family members.
The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator
may deem appropriate.
D. Termination of Service.
1. The following provisions shall govern the exercise
period applicable to any outstanding options held by the
Optionee at the time of cessation of Service or death.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any
time while the option remains outstanding, to permit one or more
options held by the Optionee under this Article Two to be
exercised, during the limited post-Service exercise period
applicable under subparagraph (1) above, not only with
respect to the number of vested shares of Common Stock for which
each such option is exercisable at the time of the
Optionee’s cessation of Service but also with respect to
one or more subsequent installments of the option shares in
which the Optionee would have otherwise vested had such
cessation of Service not occurred.
3. The Plan Administrator shall also have full power and
authority to extend the period of time for which the option is
to remain exercisable following the Optionee’s cessation of
Service or death from the limited period in effect under
subparagraph (1) above to such greater period of time as
the Plan Administrator shall deem appropriate. In no event,
however, shall such option be exercisable after the specified
expiration date of the option term.
E. Stockholder Rights. An Optionee
shall have no stockholder rights with respect to any shares
covered by the option until such individual shall have exercised
the option and paid the option price for the purchased shares.
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F. Repurchase Rights. The shares
of Common Stock acquired upon the exercise of any
Article Two option grant may be subject to repurchase by
the Corporation in accordance with the following provisions:
a. The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under
this Article Two. Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the
right to repurchase any or all of those unvested shares at the
option price paid per share. The terms and conditions upon which
such repurchase right shall be exercisable (including the period
and procedure for exercise and the appropriate vesting schedule
for the purchased shares) shall be established by the Plan
Administrator and set forth in the instrument evidencing such
repurchase right.
b. All of the Corporation’s outstanding repurchase
rights under this Article Two shall automatically
terminate, and all shares subject to such terminated rights
shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such
repurchase right is expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate
Transaction or (ii) such accelerated vesting is precluded
by other limitations imposed by the Plan Administrator at the
time the repurchase right is issued.
c. The Plan Administrator shall have the discretionary
authority, exercisable either before or after the
Optionee’s cessation of Service, to cancel the
Corporation’s outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee
under this Option Grant Program and thereby accelerate the
vesting of such shares in whole or in part at any time.
The terms and conditions specified below shall be applicable to
all Incentive Options granted under this Article Two.
Incentive Options may only be granted to individuals who are
Employees of the Corporation. Options which are specifically
designated as “non-statutory” options when issued
under the Plan shall not be subject to such terms and conditions.
A. Dollar Limitation. The
aggregate fair market value (determined as of the respective
date or dates of grant) of the Common Stock for which one or
more options granted to any Employee after December 31,
1986 under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for
the first time become exercisable as incentive stock options
under the Federal tax laws during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000).
To the extent the Employee holds two (2) or more such
options which become exercisable for the first time in the same
calendar year, then for purposes of the foregoing limitations on
the exercisability of such options as incentive stock options
under the Federal tax laws, each of those other options shall be
deemed to become first exercisable in that calendar year on the
basis of the chronological order in which they were granted,
except to the extent otherwise provided under applicable law or
regulation. Should the number of shares of Common Stock for
which any Incentive Option first becomes exercisable in any
calendar year exceed the applicable One Hundred Thousand Dollar
($100,000) limitation, then that option may nevertheless be
exercised in that calendar year for the excess number of shares
as a non-statutory option under the Federal tax laws.
B. 10% Stockholder. If any
individual to whom an Incentive Option is granted is the owner
of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation or any
one of its parent or subsidiary corporations, then the option
price per share shall not be less than one hundred and ten
percent (110%) of the fair market value per share of Common
Stock on the grant date, and the option term shall not exceed
five (5) years, measured from the grant date.
Except as modified by the preceding provisions of this
Section II, the provisions of Articles One, Two and
Five of the Plan shall apply to all Incentive Options granted
hereunder.
A. In the event of any Corporate Transaction, each option
or stock appreciation right which is at the time outstanding
under this Article Two shall automatically accelerate so
that each such option or stock appreciation right shall,
immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable
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with respect to the total number of shares of Common Stock at
the time subject to such option or stock appreciation right and
may be exercised as to all or any portion of such shares as
fully-vested shares. However, an outstanding option or stock
appreciation right under this Article Two shall not
so accelerate if and to the extent: (i) such option or
stock appreciation right is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation
or parent thereof or to be replaced with a comparable option or
stock appreciation right relating to shares of the capital stock
of the successor corporation or parent thereof, (ii) such
option or stock appreciation right is to be replaced with a cash
incentive program of the successor corporation which preserves
the spread existing on that option or stock appreciation right
at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule
applicable to such option or stock appreciation right, or
(iii) the acceleration of such option or stock appreciation
right is subject to other limitations imposed by the Plan
Administrator at the time of the grant of such option or stock
appreciation right. The determination of the comparability of
the replacement option or stock appreciation right under
clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options or stock appreciation right
under this Article Two shall terminate and cease to be
outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two
which is assumed in connection with the Corporate Transaction or
is otherwise to continue in effect shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would
have been issued to the option holder, in consummation of such
Corporate Transaction, had such person exercised the option
immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per
share, provided the aggregate option price payable for
such securities shall remain the same. In addition, appropriate
adjustments to reflect the Corporate Transaction shall be made
to (i) the class and number of securities available for
issuance over the remaining term of the Plan, (ii) the
maximum number
and/or class
of securities for which any one person may be granted stock
options, stand-alone stock appreciation rights, direct stock
issuances (whether vested or unvested) or other stock-based
awards (whether in the form of restricted stock units or other
share-right awards) under this Plan per calendar year and
(iii) the maximum number
and/or class
of securities which may be issued pursuant to Incentive Options
granted under the Plan.
D. The Plan Administrator shall have the discretion,
exercisable either at the time the option or stock appreciation
right is granted or at any time while the option or stock
appreciation right remains outstanding, to provide (upon such
terms as it may deem appropriate) for the automatic acceleration
of one or more outstanding options or stock appreciation rights
which are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time, in the event the
Optionee’s Service should subsequently terminate within a
designated period following the effective date of such Corporate
Transaction.
E. The grant of options or stock appreciation rights under
this Article Two shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
F. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option or stock
appreciation right is granted or at any time while the option or
stock appreciation right remains outstanding, to provide for the
automatic acceleration of one or more outstanding options or
stock appreciation rights under this Article Two (and the
termination of one or more of the Corporation’s outstanding
repurchase rights under this Article Two) upon the
occurrence of any Change in Control. The Plan Administrator
shall also have full power and authority to condition any such
acceleration of outstanding options or stock appreciation rights
(and the termination of any outstanding repurchase rights) upon
the subsequent termination of the Optionee’s Service within
a specified period following the Change in Control.
G. Any option or stock appreciation right accelerated in
connection with the Change in Control shall remain fully
exercisable until the expiration or sooner termination of the
term of that option or stock appreciation right.
H. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this
Section III in connection with a Corporate Transaction or
Change in Control shall remain subject to the dollar
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limitation of Section II of this Article Two. To the
extent such dollar limitation is exceeded, the accelerated
option shall be exercisable as a non-statutory option under the
Federal tax laws.
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected
optionees, the cancellation of any or all outstanding options
under this Article Two (including outstanding options under
the Predecessor Plans incorporated into this Plan) and to grant
in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an option
price per share not less than the Fair Market Value of the
Common Stock on the new grant date.
A. Authority. The Plan
Administrator shall have full power and authority, exercisable
in its sole discretion, to grant tandem stock appreciation
rights in accordance with this Section V to selected
Optionees or other individuals eligible to receive option grants
under the Discretionary Grant Program.
B. Tandem Rights. The following
terms and conditions shall govern the grant and exercise of
Tandem Rights.
1. One or more Optionees may be granted a Tandem Right,
exercisable upon such terms and conditions as the Plan
Administrator may establish, to elect between the exercise of
the underlying stock option for shares of Common Stock or the
surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (i) the
Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over
(ii) the aggregate exercise price payable for such vested
shares.
2. No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender
is so approved, then the distribution to which the Optionee
shall accordingly become entitled under this Section V
shall be made in shares of Common Stock valued at Fair Market
Value on the option surrender date.
3. If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever
rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and
may exercise such rights at any time prior to the later
of (i) five (5) business days after the receipt of
the rejection notice or (ii) the last day on which the
option is otherwise exercisable in accordance with the terms of
the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date
of the option grant.
C. Share Counting. Upon the
exercise of any Tandem Right under this Section V, the
share reserve under Section VI of Article One shall be
reduced by the gross number of shares as to which such Tandem
Right is exercised.
ARTICLE THREE
AUTOMATIC
GRANT PROGRAM
A. Automatic Grants. The
provisions of the Automatic Grant Program were revised,
effective January 29, 2007, to amend the automatic option
grant program to eliminate the periodic option grant program and
to implement in its place a new program of periodic restricted
stock unit awards for the eligible Board members. The revised
program is subject to stockholder approval at the 2007 Annual
Meeting. Accordingly, if such stockholder approval
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is obtained, the awards to be made pursuant to the Automatic
Grant Program on and after the date of the 2007 Annual Meeting
shall be as follows:
1. Each individual who is first elected or appointed as a
non-employee Board member at any time on or after the date of
the 2007 Annual Meeting shall automatically be granted, on the
date of such initial election or appointment, restricted stock
units covering 7,500 shares of Common Stock, provided such
individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary (the “Initial
Grant”).
2. On the date of each annual stockholders meeting,
beginning with the 2007 Annual Meeting, each individual who is
to continue to serve as a non-employee Board member, whether or
not such individual is standing for re-election to the Board at
that particular annual meeting, shall automatically be granted
restricted stock units covering 5,000 shares of Common
Stock, provided that such individual has served as a
non-employee Board member for a period of at least six
(6) months (the “Annual Grant”). There shall be
no limit on the number of such Annual Grants any one continuing
non-employee Board member may receive over his or her period of
Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent
or Subsidiary) shall be eligible to receive one or more such
Annual Grants over their period of continued Board service.
3. Each restricted unit awarded under this
Article Three shall entitle the non-employee Board member
to one share of Common Stock on the applicable issuance date
following the vesting of that unit.
B. Vesting of Awards and Issuance of
Shares.
1. The shares of Common Stock subject to each Initial Grant
shall vest as follows: fifty percent (50%) of the shares shall
vest upon the non-employee Board member’s completion of one
(1) year of Board service measured from the date of the
award, and the remaining shares shall vest in three
(3) successive equal annual installments upon the
non-employee Board member’s completion of each of the next
three (3) years of Board service thereafter.
2. The shares of Common Stock subject to each Annual Grant
shall vest upon earlier of (i) the non-employee Board
member’s completion of one (1) year of Board service
measured from the date of the award or (ii) the
non-employee Board member’s continuation in Board service
through the day immediately preceding the date of the first
annual stockholders meeting following the award date.
3. Notwithstanding Paragraphs B.1 and B.2, should a
non-employee Board member cease Board service by reason of death
or Permanent Disability, then each Initial and Annual Grant made
to such individual under this Article Three and outstanding
at the time of such cessation of Board service shall vest in
full.
4. The shares of Common Stock underlying each Initial or
Annual Grant which vest in accordance with the foregoing vesting
provisions shall be issued as they vest; provided,
however, that the Plan Administrator may structure one
or more Grants so that the issuance of the shares of Common
Stock which vest under those award is deferred, in accordance
with the applicable requirements of Code Section 409A and
the regulations thereunder, beyond the vesting date to a
designated date or the occurrence of any earlier event such as
cessation of Board service or a Change in Control.
C. Dividend Equivalent
Rights. Each restricted stock unit awarded
under this Article Three shall include a dividend
equivalent right pursuant to which a book account shall be
established for the non-employee Board member and credited from
time to time with each dividend or distribution, whether in
cash, securities or other property (other than shares of Common
Stock) which is made per issued and outstanding share of Common
Stock during the period the share of Common Stock underlying
that restricted stock unit remains unissued. The amount credited
to the book account with respect to such restricted stock unit
shall be paid to the non-employee Board member concurrently with
the issuance of the share of Common Stock underlying that unit,
subject to the Corporation’s collection of any applicable
withholding taxes.
Should the non-employee Board member continue in Board service
until the effective date of an actual Change in Control
transaction, then the shares of Common Stock subject to each
outstanding Initial and Annual Grant made to such Board member
shall, immediately prior to the effective date of that Change in
Control transaction, vest in
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full and shall be issued to him or her as soon as
administratively practicable thereafter, but in no event more
than fifteen (15) business days after such effective date,
or shall otherwise be converted into the right to receive the
same consideration per share of Common Stock payable to the
other stockholders in the Change in Control and distributed at
the same time as such stockholder payments, but in no event
later than the later of (i) the close of the calendar year
in which the Change in Control occurs or (ii) the fifteenth
(15th) day of the third (3rd) calendar month following the
effective date of the Change in Control.
ARTICLE FOUR
STOCK
ISSUANCE PROGRAM
Shares may be issued under the Stock Issuance Program through
direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock
Issuance Agreement (“Issuance Agreement”) that
complies with the terms and conditions of this
Article Four. Shares of Common Stock may also be issued
under the Stock Issuance Program pursuant to share right awards
or restricted stock units which entitle the recipients to
receive the shares underlying those awards or units upon the
attainment of designated performance goals or the satisfaction
of specified Service requirements or upon the expiration of a
designated time period following the vesting of those awards or
units.
A. Consideration.
1. Shares of Common Stock drawn from the Corporation’s
authorized but unissued shares of Common Stock (“Newly
Issued Shares”) shall be issued under the Stock Issuance
Program for one or more of the following items of consideration
which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or cash equivalents (such as a personal check or
bank draft) paid the Corporation;
(ii) a promissory note payable to the Corporation’s
order in one or more installments, which may be subject to
cancellation in whole or in part upon terms and conditions
established by the Plan Administrator;
(iii) past services rendered to the Corporation or any
parent or subsidiary corporation; or
(iv) any other valid consideration under the Delaware
General Corporation Law.
2. Shares of Common Stock reacquired by the Corporation and
held as treasury shares (“Treasury Shares”) may be
issued under the Stock Issuance Program for such consideration
(including one or more of the items of consideration specified
in subparagraph 1. above) as the Plan Administrator may deem
appropriate. Treasury Shares may, in lieu of any cash
consideration, be issued subject to such vesting requirements
tied to the Participant’s period of future Service or the
Corporation’s attainment of specified performance
objectives as the Plan Administrator may establish at the time
of issuance.
3. The consideration for any Newly Issued Shares or
Treasury Shares issued under this Stock Issuance Program shall
have a value determined by the Plan Administrator to be not less
than one-hundred percent (100%) of the Fair Market Value of
those shares at the time of issuance.
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan
Administrator, be fully and immediately vested upon issuance or
may vest in one or more installments over the Participant’s
period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under
the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
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(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated
into the Issuance Agreement executed by the Corporation and the
Participant at the time such unvested shares are issued. Shares
of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards or restricted stock units
which entitle the recipients to receive the shares underlying
those awards or units upon the attainment of designated
performance goals or the satisfaction of specified Service
requirements or upon the expiration of a designated time period
following the vesting of those awards or units, including
(without limitation) a deferred distribution date following the
termination of the Participant’s Service.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under
the Plan, whether or not his or her interest in those shares is
vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid
on such shares. Any new, additional or different shares of stock
or other property (including money paid other than as a regular
cash dividend) which the Participant may have the right to
receive with respect to his or her unvested shares by reason of
any stock dividend, stock split, reclassification of Common
Stock or other similar change in the Corporation’s capital
structure or by reason of any Corporate Transaction shall be
issued, subject to (i) the same vesting requirements
applicable to his or her unvested shares and (ii) such
escrow arrangements as the Plan Administrator shall deem
appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the
Plan, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no
further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent
(including the Participant’s purchase-money promissory
note), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel
the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to such surrendered shares.
The surrendered shares may, at the Plan Administrator’s
discretion, be retained by the Corporation as Treasury Shares or
may be retired to authorized but unissued share status.
4. The Participant shall not have any stockholder rights
with respect to the shares of Common Stock subject to a
restricted stock unit or share right award until that award
vests and the shares of Common Stock are actually issued
thereunder. However, dividend-equivalent units may be paid or
credited, either in cash or in actual or phantom shares of
Common Stock, on outstanding restricted stock unit or share
right awards, subject to such terms and conditions as the Plan
Administrator may deem appropriate.
5. The Plan Administrator may in its discretion elect to
waive the surrender and cancellation of one or more unvested
shares of Common Stock (or other assets attributable thereto)
which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant’s
interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before
or after the Participant’s cessation of Service or the
attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards or restricted stock units
under the Stock Issuance Program shall automatically terminate,
and no shares of Common Stock shall actually be issued in
satisfaction of those awards or units, if the performance goals
or Service requirements established for such awards or units are
not attained or satisfied. The Plan Administrator, however,
shall have the discretionary authority to issue vested shares of
Common Stock under one or more outstanding share right awards or
restricted stock units as to which the designated performance
goals or Service requirements have not been attained or
satisfied.
A. Upon the occurrence of any Corporate Transaction, all
unvested shares of Common Stock at the time outstanding under
the Stock Issuance Program shall immediately vest in full,
except to the extent the Plan Administrator imposes limitations
in the Issuance Agreement which preclude such accelerated
vesting in whole or in part.
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B. The Plan Administrator shall have the discretionary
authority, exercisable either in advance of any
actually-anticipated Change in Control or at the time of an
actual Change in Control, to provide for the immediate and
automatic vesting of one or more unvested shares outstanding
under the Stock Issuance Program at the time of such Change in
Control. The Plan Administrator shall also have full power and
authority to condition any such accelerated vesting upon the
subsequent termination of the Participant’s Service within
a specified period following the Change in Control.
C. Each outstanding restricted stock unit or share right
award assumed in connection with a Corporate Transaction or
Change in Control or otherwise continued in effect shall be
adjusted immediately after the consummation of that Corporate
Transaction or Change in Control so as to apply to the number
and class of securities into which the shares of Common Stock
subject to the award immediately prior to the Corporate
Transaction or Change in Control would have been converted in
consummation of such Corporate Transaction or Change in Control
had those shares actually been outstanding at that time. If any
such restricted stock unit or share right award is not so
assumed or otherwise continued in effect or replaced with a cash
incentive program of the successor corporation which preserves
the Fair Market Value of the underlying shares of Common Stock
at the time of the Change in Control and provides for the
subsequent payout of that value in accordance with the same
vesting schedule applicable to those shares, then such unit or
award shall vest, and the shares of Common Stock subject to that
unit or award shall be issued as fully-vested shares,
immediately prior to the consummation of the Corporate
Transaction or Change in Control.
D. The Plan Administrator shall have the discretionary
authority to structure one or more restricted stock unit or
other share right awards under the Stock Issuance Program so
that the shares of Common Stock subject to those awards shall
automatically vest and become issuable in whole or in part
immediately upon the occurrence of a Corporate Transaction or
Change in Control or upon the subsequent termination of the
Participant’s Service by reason of an Involuntary
Termination within a designated period following the effective
date of that Corporate Transaction or Change in Control.
A. Unvested shares may, in the Plan Administrator’s
discretion, be held in escrow by the Corporation until the
Participant’s interest in such shares vests or may be
issued directly to the Participant with restrictive legends on
the certificates evidencing such unvested shares. To the extent
an escrow arrangement is utilized, the unvested shares and any
securities or other assets issued with respect to such shares
(other than regular cash dividends) shall be delivered in escrow
to the Corporation to be held until the Participant’s
interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the
Participant, the restrictive legend on the certificates for such
shares shall read substantially as follows:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED
AND ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER
RESTRICTIONS AND (II) CANCELLATION OR REPURCHASE IN THE
EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST)
CEASES TO REMAIN IN THE CORPORATION’S SERVICE. SUCH
TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH
CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) DATED
,
20 , A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION.”
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under the
Stock Issuance Program. For purposes of this restriction, the
term “transfer” shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary.
Upon any such attempted transfer, the unvested shares shall
immediately be cancelled, and neither the Participant nor the
proposed transferee shall have any rights with respect to those
shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Stock Issuance
Program to his or her spouse or issue, including adopted
children, or to a trust established for such spouse or issue,
provided the donee of such shares delivers to the Corporation a
written agreement to be bound by all the provisions of the Stock
Issuance Program and the Issuance Agreement applicable to the
gifted shares.
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ARTICLE FIVE
MISCELLANEOUS
The Plan Administrator may, in its discretion, assist any
Optionee or Participant (other than an Optionee or Participant
who is an executive officer of the Corporation or any Parent or
Subsidiary subject to the loan prohibition provisions of the
Sarbanes-Oxley Act of 2002) in the exercise of one or more
options granted to such Optionee under the Discretionary Grant
Program or the purchase of one or more shares issued to such
Participant under the Stock Issuance Program, including the
satisfaction of any Federal and State income and employment tax
obligations arising therefrom, by (i) authorizing the
extension of a loan from the Corporation to such Optionee or
Participant or (ii) permitting the Optionee or Participant
to pay the option price or purchase price for the purchased
Common Stock in installments over a period of years. Any such
loan or installment method of payment (including the interest
rate and terms of repayment) shall be upon such terms as the
Plan Administrator specifies in the applicable option or
issuance agreement or otherwise deems appropriate under the
circumstances; provided, however, that all such terms shall be
in compliance with applicable laws and regulations. Loans or
installment payments may be authorized with or without security
or collateral. However, the maximum credit available to the
Optionee or Participant may not exceed the option or purchase
price of the acquired shares plus any Federal and State income
and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan (or any component thereof)
in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations
with respect to stock options, stock appreciation rights,
unvested stock issuances or other stock-based awards at the time
outstanding under the Plan unless the Optionee or the
Participant consents to such amendment or modification. In
addition, amendments to the Plan will be subject to stockholder
approval to the extent required under applicable law or
regulation or pursuant to the listing standards of the stock
exchange (or the Nasdaq National Market) on which the Common
Stock is at the time primarily traded.
B. Options and stock appreciation rights may be granted
under the Discretionary Program and stock-based awards may be
made under the Stock Issuance Program that in each instance
involve shares of Common Stock in excess of the number of shares
then available for issuance under the Plan, provided no shares
shall actually be issued pursuant to those grants or awards
until the number of shares of Common Stock available for
issuance under the Plan is sufficiently increased either by
(1) the automatic annual share increase provisions of
Section VI.B. of Article One or (2) the
stockholder approval of an amendment of the Plan sufficiently
increasing the share reserve. If stockholder approval is
required and is not obtained within twelve (12) months
after the date the first excess grant or award made against such
contingent increase, then any options, stock appreciation rights
or other stock-based awards granted on the basis of such excess
shares shall terminate and cease to be outstanding.
A. The Corporation’s obligation to deliver shares of
Common Stock upon the exercise of stock options or stock
appreciation rights or upon the issuance or vesting of such
shares under the Plan shall be subject to the satisfaction of
all applicable Federal, State and local income tax and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide
any or all holders of non-statutory stock options, stock
appreciation rights, restricted stock units (other than the
restricted stock units or stock option grants awarded under the
Automatic Grant Program) or any other share right awards
pursuant to which vested shares of Common Stock are to be issued
under the Plan and any or all Participants to whom vested or
unvested shares of Common Stock are issued in a direct issuance
under the Stock Issuance Program with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding
Taxes to which such holders may become subject in connection
with the exercise of their options or stock appreciation rights,
the issuance to them of vested shares or the subsequent
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vesting of unvested shares issued to them. Such right may be
provided to any such holder in either or both of the following
formats:
Stock Withholding: The election to have
the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such non-statutory
option or stock appreciation right or upon the issuance of
fully-vested shares, a portion of those shares with an aggregate
Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
Stock Delivery: The election to deliver
to the Corporation, at the time the non-statutory option or
stock appreciation right is exercised, the vested shares are
issued or the unvested shares subsequently vest, one or more
shares of Common Stock previously acquired by such holder (other
than in connection with the exercise, share issuance or share
vesting triggering the Withholding Taxes) with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by the
holder. The shares of Common Stock so delivered shall not be
added to the shares of Common Stock authorized for issuance
under the Plan.
A. The Plan was adopted by the Board on July 23, 1993,
and was approved by the stockholders on the same date. The Plan
became effective on September 29, 1993, the date on which
the shares of the Corporation’s Common Stock were first
registered under the 1934 Act. No further option grants or
stock issuances shall be made under the Predecessor Plans from
and after the Effective Date.
B. Each stock option grant outstanding under the
Predecessor Plans immediately prior to the Effective Date of the
Discretionary Grant Program shall be incorporated into this Plan
and treated as an outstanding option under this Plan, but each
such option shall continue to be governed solely by the terms
and conditions of the instrument evidencing such grant, and
nothing in this Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such options
with respect to their acquisition of shares of Common Stock
thereunder. Each unvested share of Common Stock outstanding
under the Predecessor Plans on the Effective Date of the Stock
Issuance Program shall continue to be governed solely by the
terms and conditions of the instrument evidencing such share
issuance, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holder of such
unvested shares.
C. The option/vesting acceleration provisions of
Section III of Article Two and Section II of
Article Four relating to Corporate Transactions and Changes
in Control may, in the Plan Administrator’s discretion, be
extended to one or more stock options or unvested share
issuances which are outstanding under the Predecessor Plans on
the Effective Date of the Discretionary Option Grant and Stock
Issuance Programs but which do not otherwise provide for such
acceleration.
D. On March 16, 1995, the Board adopted an amendment
to the Plan which (i) increased the number of shares of
Common Stock available for issuance under the Plan by an
additional 600,000 shares (as adjusted for the May 1995
stock split), (ii) provided for an automatic annual
increase to the existing share reserve on the first trading day
in each of the next five (5) fiscal years, beginning with
the 1996 fiscal year and continuing through fiscal year 2000,
equal to 1.4% of the total number of shares of Common Stock
outstanding on the last trading day of the fiscal year
immediately preceding the fiscal year of each such share
increase and (iii) imposed certain limitations required
under applicable Federal tax laws with respect to Incentive
Option grants. The amendment was approved by the stockholders at
the 1995 Annual Meeting on May 17, 1995.
E. On March 21, 1996, the Board adopted an amendment
to the Plan which (i) increased the number of shares of
Common Stock available for issuance under the Plan by an
additional 600,000 shares, (ii) increased the limit on
the maximum number of shares of Common Stock issuable under the
1993 Plan prior to the required cessation of further Incentive
Option grants to 3,780,000 shares plus an additional
increase of 277,000 shares per fiscal year over each of the
next four (4) fiscal years, beginning with the 1997 fiscal
year, (iii) revised the Automatic Option Grant Program to
eliminate the special one-time option grant for
28,800 shares of Common Stock to each newly-elected or
newly-appointed non-employee Board member and implement a new
option grant program pursuant to which all
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eligible non-employee Board members will receive a series of
automatic option grants over their period of continued Board
service. The amendment was approved by the stockholders at the
1996 Annual Meeting.
F. On March 18, 1997, the Board adopted a series of
amendments to the Plan which (i) increased the number of
shares of Common Stock reserved for issuance over the term of
the Plan by an additional 450,000 shares,
(ii) rendered all non-employee Board members eligible to
receive option grants and direct stock issuances under the
Discretionary Option Grant and Stock Issuance Programs,
(iii) allowed unvested shares issued under the Plan and
subsequently repurchased by the Corporation at the option
exercise price or direct issue price paid per share to be
reissued under the Plan, (iv) eliminated the plan
limitation which precluded the grant of additional Incentive
Options once the number of shares of Common Stock issued under
the Plan, whether as vested or unvested shares, exceeded a
certain level, (v) removed certain restrictions on the
eligibility of non-employee Board members to serve as Plan
Administrator, and (vi) effected a series of additional
changes to the provisions of the Plan (including the stockholder
approval requirements) in order to take advantage of the recent
amendments to
Rule 16b-3
of the 1934 Act which exempts certain officer and director
transactions under the Plan from the short-swing liability
provisions of the federal securities laws. The March 18,
1997 amendments were approved by the stockholders at the 1997
Annual Meeting.
G. On March 14, 2001, the Board adopted an amendment
to the Plan which (i) established an automatic share
increase feature pursuant to which the share reserve under the
Plan will automatically increase on the first trading day in
January of each of the next five (5) calendar years,
beginning with the 2002 calendar year and continuing through the
2006 calendar year, by an amount equal to 4% of the total number
of shares of Common Stock outstanding on the last trading day of
the calendar year immediately preceding the calendar year of
each such share increase and (ii) extended the termination
date of the Plan from June 30, 2003 to February 28,
2011. The March 14, 2001 amendment was approved by the
stockholders at the 2001 Annual Meeting.
H. On July 16, 2002, the Board adopted an amendment to
the Plan which revised the Automatic Option Grant Program to
increase the size of the annual option grant to be received by
all eligible non-employee Board members over their period of
continued Board service from 4,000 to 8,000 shares of
Common Stock. This amendment is subject to stockholder approval
at the 2003 Annual Meeting.
I. On January 30, 2006, the Board amended and restated
the Plan in order to effect the following changes:
(i) expand the scope of the Stock Issuance Program to
include restricted stock units and other stock-based awards
which vest and become payable upon the attainment of designated
performance goals or the satisfaction of specified service
requirements or upon the expiration of a designated time period
following such vesting events, (ii) eliminate the limited
stock appreciation right provisions of the Plan so that no
grants made on or after January 1, 2006 under the
Discretionary Grant Program or the Automatic Option Grant
Program shall contain those limited cash-out rights,
(iii) bring the provisions of the Plan into compliance with
recent changes in the Nasdaq requirements for listed companies
and the final federal tax regulations applicable to incentive
stock options, (iv) specifically incorporate the
prohibition of the Sarbanes-Oxley Act of 2002 against loans to
executive officer and (v) effect a series of additional
revisions to facilitate plan administration.
J. On January 30, 2007, the Board amended and restated
the Plan, subject to stockholder approval at the 2007 Annual
Meeting, to revise the Automatic Grant Program to substitute
restricted stock unit awards for the stock option grants the
non-employee Board member would otherwise receive under the
terms of the then-existing automatic stock option grant program.
Each restricted stock unit will cover one share of Common Stock,
and the substitution is accordingly effected at the rate of one
restricted stock unit for every 1.6 shares of Common Stock
which would otherwise have been the subject of an automatic
option grant made under the automatic stock option grant
program. The January 30, 2007 amendment also effected
certain technical revisions to the Plan relating to changes in
capital structure.
K. The Plan shall terminate upon the earlier of
(i) February 28, 2011 or (ii) the date on which
all shares available for issuance under the Plan shall have been
issued as vested shares or cancelled pursuant to the exercise of
stock appreciation or other cash-out rights granted under the
Plan. If the date of the plan termination is determined under
clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the
instruments evidencing such grants or issuances.
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Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the
Plan shall be used for general corporate purposes.
A. The implementation of the Plan, the granting of any
option under the Plan, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon
the exercise or surrender of the option grants made hereunder
shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall
have been compliance with all applicable requirements of Federal
and State securities laws, including the filing and
effectiveness of the
Form S-8
registration statement for the shares of Common Stock issuable
under the Plan, and all applicable listing requirements of any
securities exchange (or the Nasdaq National Market, if
applicable) on which shares of the Common Stock are then listed
for trading.
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor
any provision of the Plan shall be construed so as to grant any
individual the right to remain in the employ or service of the
Corporation (or any parent or subsidiary corporation) for any
period of specific duration, and the Corporation (or any parent
or subsidiary corporation retaining the services of such
individual) may terminate such individual’s employment or
service at any time and for any reason, with or without cause.
A. The right to acquire Common Stock or other assets under
the Plan may not be assigned, encumbered or otherwise
transferred by any Optionee or Participant.
B. The provisions of the Plan relating to the exercise of
options and the vesting of shares shall be governed by the laws
of the State of California, as such laws are applied to
contracts entered into and performed in such State.
C. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or
assigns, whether by Corporate Transaction or otherwise, and the
Participants and Optionees and the legal representatives, heirs
or legatees of their respective estates.
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APPENDIX B
Form of Proxy
ULTRATECH, INC.
PROXY ANNUAL MEETING OF STOCKHOLDERS JULY 24, 2007 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arthur W. Zafiropoulo and Bruce R. Wright and each of them as Proxies of the undersigned
with full power of substitution, and hereby authorizes each of them to represent and to vote, as designated below, all of the shares of Common Stock of Ultratech, Inc., a Delaware corporation (the “Company”), held of record by the undersigned on
June 5, 2007 at the Annual Meeting of Stockholders of Ultratech, Inc. to be held on July 24, 2007 at 2:00 p.m., local
time, at Ultratech, Inc.’s Corporate Headquarters, Building No. 2, 2880 Junction Avenue, San Jose, California 95134, or
at any adjournment or postponement thereof, with the same force and effect as the undersigned might or could do if
personally present thereat. The shares represented by this Proxy shall be voted in the manner set forth on the reverse
side.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder(s). If
no direction is made, this proxy will be voted FOR Proposals 1, 2 and 3, and AGAINST Proposal 4.
(continued, and to be signed, on the other side)
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Please sign exactly as your name(s) is (are) shown on the share certificate to which the Proxy applies. When shares are held
by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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