UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT
OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Confidential,for Use of the Commission Only(as permitted by Rule14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NANOMETRICS INCORPORATED
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NANOMETRICS INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF NANOMETRICS INCORPORATED:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Nanometrics Incorporated, a California corporation (the "Company"), will be held
on Friday, August 26, 2005 at 1:00 p.m., local time, at the Company's principal
offices located at 1550 Buckeye Drive, Milpitas, California 95035. At the annual
meeting, you will be asked to consider and vote upon the following:
1. A proposal to elect seven candidates nominated by the board of directors
to serve until the next annual meeting of shareholders at which their respective
successors are elected and qualified, or until the earlier of their death,
resignation or removal.
2. A proposal to approve the reincorporation of the Company under the laws
of the State of Delaware through a merger with Big League Merger Corporation, a
wholly-owned subsidiary of the Company.
3. Proposals to approve various governance-related provisions in the form
of certificate of incorporation of the Company to be effective upon the
completion of the reincorporation merger consisting of the following proposals:
o 3A--a proposal to approve a provision limiting the Company's
stockholders' right to call special meetings of stockholders;
o 3B--a proposal to approve a provision limiting the Company's
stockholders' ability to act by written consent;
o 3C--a proposal to approve a provision requiring a super-majority
vote of the Company's stockholders to amend certain provisions
of its certificate of incorporation;
o 3D--a proposal to approve a provision requiring a super-majority
vote of the Company's stockholders to amend certain provisions
of the Company's bylaws;
o 3E--a proposal to approve a provision limiting the Company's
stockholders' right to remove directors from the board without
cause;
o 3F--a proposal to approve the classification of the board of
directors into separate classes with staggered terms; and
o 3G--a proposal to approve a provision limiting cumulative voting
rights in connection with the election of directors.
4. A proposal to approve the adoption of the Company's 2005 Equity
Incentive Plan (the "Plan") and the reservation of 1,200,000 shares of common
stock for issuance thereunder.
5. A proposal to ratify the appointment of BDO Seidman, LLP as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2005.
6. Such other business as may properly come before the annual meeting or
any postponements or adjournments thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice of annual meeting of shareholders.
Only shareholders of record at the close of business on July 12, 2005 are
entitled to notice of and to vote at the annual meeting and any postponements or
adjournments thereof.
All shareholders are cordially invited to attend the annual meeting in
person. However, to ensure representation at the annual meeting, you are urged
to mark, sign, date and return the enclosed proxy card as promptly as possible
in the postage-prepaid envelope enclosed for that purpose. Any shareholder of
record attending the annual meeting may vote in person even if that shareholder
previously returned a proxy card for the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
-------------------
Vincent J. Coates
Chairman of the Board of Directors and Secretary
Milpitas, California
August __, 2005
NANOMETRICS INCORPORATED
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This proxy statement is being provided to the shareholders of Nanometrics
Incorporated (the "Company") as part of a solicitation of proxies by the board
of directors for use at the 2005 annual meeting of shareholders. This proxy
statement provides shareholders with information they need to know to be able to
vote or instruct their vote to be cast at the annual meeting.
Date, Time and Place
The annual meeting will be held on Friday, August 26, 2005 at 1:00 p.m.,
local time, at the Company's principal offices located at 1550 Buckeye Drive,
Milpitas, California 95035.
Purpose; Other Matters
The annual meeting is being held to consider and vote upon the following:
1. A proposal to elect seven director nominees to the board of directors to
serve until the next annual meeting of shareholders at which their respective
successors are elected and qualified, or until the earlier of their death,
resignation or removal.
2. A proposal to approve the reincorporation of the Company under the laws
of the State of Delaware through a merger with Big League Merger Corporation, a
wholly-owned subsidiary of the Company.
3. Proposals to approve various governance-related provisions in the form
of certificate of incorporation of the Company to be effective upon the
completion of the reincorporation merger consisting of the following proposals:
o 3A--a proposal to approve a provision limiting the Company's
stockholders' right to call special meetings of stockholders;
o 3B--a proposal to approve a provision limiting the Company's
stockholders' ability to act by written consent;
o 3C--a proposal to approve a provision requiring a super-majority
vote of the Company's stockholders to amend certain provisions
of its certificate of incorporation;
o 3D--a proposal to approve a provision requiring a super-majority
vote of the Company's stockholders to amend certain provisions
of the Company's bylaws;
o 3E--a proposal to approve a provision limiting the Company's
stockholders' right to remove directors from the board without
cause;
o 3F--a proposal to approve the classification of the board of
directors into separate classes with staggered terms; and
o 3G--a proposal to approve a provision limiting cumulative voting
rights in connection with the election of directors.
4. A proposal to approve the adoption of the Company's 2005 Equity
Incentive Plan (the "Plan") and the reservation of 1,200,000 shares of common
stock for issuance thereunder.
5. A proposal to ratify the appointment of BDO Seidman, LLP as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2005.
Shareholders will also be asked to consider and vote upon any other
business as may properly come before the annual meeting or any adjournments or
postponements of the annual meeting. The Company does not expect that any matter
other than the proposals presented in this proxy statement will be brought
before the annual meeting. However, if other matters incident to the conduct of
the annual meeting are properly presented at the annual meeting or any
adjournment or postponement of the annual meeting, the persons named as proxies
will vote in accordance with their best judgment with respect to those matters.
If you vote "AGAINST" any of the proposals, the proxy holders will not be
authorized to vote for any adjournments or postponements of the annual meeting,
including for the purpose of soliciting additional proxies, unless you so
indicate by marking the appropriate box on the proxy card for the annual
meeting.
Recommendation of the Board of Directors
The board of directors unanimously recommends that you vote:
o "FOR" the proposal to elect seven candidates nominated by the board of
directors to serve until the next annual meeting of shareholders at
which their respective successors are elected and qualified, or until
the earlier of their death, resignation or removal;
o "FOR" the proposal to approve the reincorporation of the Company under
the laws of the State of Delaware through a merger with Big League
Merger Corporation, a wholly-owned subsidiary of the Company;
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o "FOR" the proposals to approve the governance-related provisions in
the Company's certificate of incorporation to be effective upon
completion of the reincorporation merger;
o "FOR" the proposal to approve the adoption of the Plan and the
reservation of 1,200,000 shares of common stock for issuance
thereunder; and
o "FOR" the proposal to ratify the appointment of BDO Seidman, LLP as
the Company's independent registered public accounting firm for the
fiscal year ending December 31, 2005.
Record Date; Outstanding Shares; Voting Rights
Only holders of record of common stock at the close of business on the
record date for the annual meeting, July 12, 2005, are entitled to notice of and
to vote at the annual meeting. As of the record date, there were 12,793,207
shares of common stock outstanding and entitled to vote at the annual meeting,
held by approximately 140 holders of record. Each record holder of common stock
on the record date is entitled to one vote for each share of common stock held
as of the record date with respect to all proposals except with respect to the
election of directors.
The candidates receiving the seven highest vote totals will be elected to
the board of directors. Every shareholder voting for the election of the board
of directors may (i) cumulate such shareholder's votes and give any one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of shares that such shareholders holds on the record
date for the annual meeting, or (ii) distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more than seven candidates. However, no
shareholder will be entitled to cumulate votes for a candidate unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the annual meeting
prior to the voting of the intention to cumulate votes.
A list of shareholders will be available for review at the annual meeting
and at the Company's executive offices during regular business hours for a
period of ten days before the annual meeting.
Admission to the Annual Meeting
Only shareholders, their designated proxies and guests of the Company may
attend the annual meeting. If you plan to attend the annual meeting and wish to
vote in person, you will be given a ballot at the annual meeting. Please note,
however, that if your shares are held in "street name," which means your shares
are held of record by a broker, bank or other nominee, and you wish to vote at
the annual meeting, you must bring to the annual meeting a "legal proxy" from
the record holder of your shares authorizing you to attend and vote at the
annual meeting.
Quorum and Vote Required
A quorum of shareholders is necessary to hold a valid annual meeting of
shareholders. In order to have a quorum for the transaction of business at the
annual meeting, a majority of shares of common stock issued and outstanding and
entitled to vote on the record date must be present in person or by proxy at the
annual meeting. Shares that are voted "FOR," "AGAINST," "ABSTAIN" or "WITHHOLD
AUTHORITY" a matter are treated as being present at the annual meeting for
purposes of establishing a quorum.
In addition, the vote required to approve each proposal is as follows:
Proposal 1
The candidates for the board of directors receiving the seven highest vote
totals will be elected to serve as directors of the Company.
Proposal 2
Approval of the reincorporation merger will require the affirmative vote of
the holders of a majority of the outstanding shares of common stock entitled to
vote on the record date.
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Proposals 3A-G
Under applicable state law, shareholder approval of the reincorporation
merger is sufficient to implement the proposed governance-related provisions in
the certificate of incorporation of the Company. Under rules promulgated by the
Securities and Exchange Commission, however, we are required to present each of
the proposed governance-related provisions as a separate proposal for
shareholder approval. Accordingly, if we complete the reincorporation merger, we
have determined that we will not implement the proposed governance-related
provisions unless they are independently approved by the affirmative vote of the
holders of a majority of the shares of the Company's common stock represented
and voting on each proposed governance-related provision at the annual meeting.
Proposal 4
Approval of the Plan and the reservation of shares of common stock for
issuance thereunder will require the affirmative vote of the holders of a
majority of the shares of common stock represented in person or by proxy and
voting at the annual meeting.
Proposal 5
Approval by the shareholders of the selection of the independent registered
public accounting firm is not required, but the audit committee believes it is
desirable as a matter of good corporate governance to submit this matter to the
shareholders. If holders of a majority of the common stock represented and
voting at the annual meeting do not ratify the appointment of BDO Seidman, LLP
as the Company's independent registered public accounting firm for the fiscal
year ending December 31, 2005, the audit committee will consider whether it
should select another independent registered public accounting firm.
Voting
General
Shareholders of record as of the record date may vote their shares by
attending the annual meeting and voting their shares in person or by completing,
signing and dating their respective proxy cards for the annual meeting and
mailing them in the postage pre-paid envelope enclosed for that purpose.
Shareholders holding shares of common stock in "street name," which means that
their shares are held of record by a broker, bank, or other nominee, may vote by
mail by completing, signing and dating the voting instruction forms for the
annual meeting provided by their respective brokers, banks, or other nominees
and returning their respective voting instruction forms to the record holders of
their shares of common stock. Even if you plan to attend the annual meeting, the
Company recommends that you vote by proxy prior to the annual meeting. You can
always change your vote as described below.
Voting by Proxy
All properly executed proxies that are received prior to the annual meeting
and not revoked will be voted at the annual meeting according to the
instructions indicated on the proxies. If your proxy does not specify how you
wish the Company to vote your shares, your shares will be voted:
o "FOR" the proposal to elect seven candidates nominated by the board of
directors to serve until the next annual meeting of shareholders at
which their respective successors are elected and qualified, or until
the earlier of their death, resignation or removal;
o "FOR" the proposal to approve the reincorporation of the Company under
the laws of the State of Delaware through a merger with Big League
Merger Corporation, a wholly-owned subsidiary of the Company;
o "FOR" the proposals to approve the governance-related provisions in
the Company's certificate of incorporation to be effective upon
completion of the reincorporation merger;
o "FOR" the proposal to approve the adoption of the Plan and the
reservation of 1,200,000 shares of common stock for issuance
thereunder; and
o "FOR" the proposal to ratify the appointment of BDO Seidman, LLP as
the Company's independent registered public accounting firm for the
fiscal year ending December 31, 2005.
You may receive more than one proxy card depending on how you hold your
shares of common stock. Generally, you need to sign and return all of your proxy
cards to vote all of your shares. For example, if you hold shares through
someone else, such as a broker, you may get proxy material from that person.
Changing Your Vote
If you are the record holder of your shares of common stock, you can
change your vote at any time before your proxy is voted at the annual meeting
by:
o delivering to the Company's corporate secretary a signed notice of
revocation;
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o granting the proxy holders a new, later-dated proxy, which must be
signed and delivered to the Company's corporate secretary in advance
of the vote at the annual meeting; or
o attending the annual meeting and voting in person.
Your attendance alone, however, will not revoke your previously granted
proxy. If you hold your shares in street name and you have provided voting
instructions to your broker, bank or other nominee for the annual meeting, you
must follow the instructions provided by your broker, bank or other nominee in
order to change your vote or revoke your proxy for the annual meeting.
Abstentions and Broker Non-Votes
An abstention occurs when a shareholder attends a meeting, either in person
or by proxy, but abstains from voting. While there is no definitive statutory or
case law authority in California as to the proper treatment of abstentions, the
Company believes that abstentions should be counted for purposes of determining
both (i) the presence or absence of a quorum for the transaction of business and
(ii) the total number of shares of common stock represented and voting with
respect to a proposal. In the absence of controlling authority to the contrary,
the Company intends to treat abstentions in this manner.
"Broker non-votes" are shares held by a broker or other nominee that are
represented at the annual meeting, but with respect to which the broker or
nominee is not instructed by the beneficial owner of the shares to vote on the
particular proposal and the broker does not have discretionary voting power on
the proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but will not be counted for purposes of
determining the number of shares represented and voting with respect to a
proposal.
For proposal 1, neither abstentions nor broker non-votes will have any
effect on the election of the seven directors.
For proposal 2, abstentions and broker non-votes will have the same effect
as voting against approval of the reincorporation merger.
For proposals 3A-3G, neither abstentions nor broker non-votes will have any
effect on the approvals of the governance-related proposals.
For proposal 4, abstentions will have the same effect as voting against the
approval of the Plan and the reservation of shares of common stock for issuance
thereunder; broker non-votes will have no effect.
For proposal 5, abstentions will have the same effect as voting against
ratification of the appointment of BDO Seidman, LLP as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2005;
broker non-votes will have no effect.
Proxy Solicitation
The Company is soliciting proxies for the annual meeting from its
shareholders. The Company will bear the entire cost of soliciting proxies from
the shareholders. In addition to the solicitation of proxies by mail, the
Company will request that brokers, banks and other nominees send proxies and
proxy materials to the beneficial owners of common stock held by them and secure
their voting instructions, if necessary. The Company will reimburse those record
holders for their reasonable expenses. The Company also may use several of its
regular employees, who will not be specially compensated, to solicit proxies
from shareholders, either personally or by telephone, Internet, telegram,
facsimile or special delivery letter.
Assistance
If you need assistance in completing your proxy card or have questions
regarding the annual meeting, please contact Investor Relations at (408)
435-9600 or write to Nanometrics Incorporated, 1550 Buckeye Drive, Milpitas,
California 95035, Attn: Investor Relations.
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Shareholder Proposals
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the 2005 Annual Meeting. Shareholders are entitled
to present proposals for action at the Company's annual meetings. For any
proposal to be considered for inclusion in the Company's proxy statement and
form of proxy for submission to the shareholders at an annual meeting, the
proposal must comply with the requirements of Rule 14a-8 under the Exchange Act
and be submitted in writing by notice delivered or mailed by first-class United
States mail, postage prepaid, to Nanometrics Incorporated, 1550 Buckeye Drive,
Milpitas, California 95035, Attention: Office of the Secretary. Typically,
proposals must be received by the Company no later than 120 calendar days before
the date the proxy statement was released to shareholders in connection with the
previous year's annual meeting. If the Company changes the date of its annual
meeting to a date more than 30 days from the date of the previous year's annual
meeting, than the deadline for receipt of shareholder proposals will be changed
to a reasonable time before the Company begins to print and mail its proxy. The
submission of a shareholder proposal does not guarantee that it will be included
in the Company's proxy statement. Additionally, shareholder proposals to be
considered at an annual meeting outside the processes of Rule 14a-8 (which are
not intended to be included in the proxy materials for such annual meeting) must
be delivered to or mailed and received at the Company's executive offices at
least 45 days before the date that the proxy statement was released to
shareholders in connection with the previous year's annual meeting.
Material Proceedings
To the best of management's knowledge, there are no material proceedings to
which any director or officer is a party and (i) is adverse to the Company or
any of its subsidiaries or (ii) has a material interest adverse to the Company
or any of its subsidiaries.
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PROPOSAL 1
ELECTION OF NANOMETRICS' DIRECTORS
Nominees
At the 2005 annual meeting of shareholders, unless otherwise instructed,
the proxy holders will vote the proxies received by them for the seven nominees
named below, each of whom is presently a director of the Company. In the event
that any nominee is unable or declines to serve as a director at the time of the
annual meeting, the proxies will be voted for any nominee who shall be
designated by the present board of directors to fill the vacancy. The proxy
holders intend to vote all proxies received by them in such a manner and in
accordance with cumulative voting as will ensure the election of as many of the
nominees listed below as possible and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The Company is not aware
of any nominee who will be unable or will decline to serve as a director
The names of the seven nominees and certain information about them are set
forth below:
Name of Nominee Age Director Since
--------------- --- --------------
Vincent J. Coates 80 1975
John D. Heaton 45 1995
Edmond R. Ward 65 1999
William G. Oldham 66 2000
Stephen J Smith 58 2004
J. Thomas Bentley 55 2004
Norman V. Coates 55 2004
Vincent J. Coates has been Chairman of the Board since the Company was
founded in 1975. He has been the Company's Secretary since February 1989. He
also served as Chief Executive Officer through April 1998 and President from the
Company's founding through May 1996, except for the period of January 1986
through February 1987 when he served exclusively as Chief Executive Officer. Mr.
Coates has also served as Chairman of the Board of Nanometrics Japan Ltd., a
subsidiary of the Company, since its inception in November 1984. Prior to his
employment at the Company, Mr. Coates co-founded Coates and Welter Instrument
Corporation, a designer of electron microscopes, the assets of which were
subsequently acquired by the Company. Mr. Coates also spent over twenty years
working in engineering, sales and international operations for the Perkin-Elmer
Corporation, a manufacturer of analytical instruments. In 1995, he received an
award which recognized his contribution to the industry from Semiconductor and
Equipment and Materials International, an industry trade organization.
John D. Heaton has served as a director of the Company since July 1995.
Since April 1998, he has been Chief Executive Officer of the Company. From May
1996 to April 1998, he served as the Company's President and Chief Operating
Officer. Mr. Heaton has also served as President of Nanometrics Japan Ltd., a
subsidiary of the Company, since January 1998. Beginning in 1978, Mr. Heaton
served in various technical positions at National Semiconductor, a semiconductor
manufacturer, and prior to joining the Company in 1990.
Edmond R. Ward has served as a director of the Company since July 1999.
Beginning in January 2002, Mr. Ward has served as Chief Technical Officer of
Unity Semiconductor, a semiconductor design and manufacturing company. Since
April 1999, Mr. Ward has been a General Partner of Virtual Founders, a venture
capital firm. From April 1992 to June 1997, Mr. Ward was the Vice President of
Technology at Silicon Valley Group, Inc., a supplier of wafer processing
equipment.
William G. Oldham has served as a director of the Company since June 2000.
Since 1964, Mr. Oldham has been a faculty member at the University of
California, Berkeley, where he researches EUV and Maskless Lithography and,
since 1996, has been the Director of the DARPA/SRC Research Network for Advanced
Lithography. He has served as a consultant in various intellectual property
matters and serves on the board of directors of Cymer, Inc., a supplier of light
sources for deep ultraviolet (DUV) photolithography systems used in the
manufacturing of semiconductors.
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Stephen J Smith has served as a director of the Company since April 2004.
Dr. Smith has been a professor in the Department of Molecular and Cellular
Physiology at the Stanford University School of Medicine since 1989, where he
researches brain development and function with special interests in the dynamic
and structural aspects of synapse and circuit formation and synaptic plasticity.
Dr. Smith is the author of numerous research articles in the fields of cellular
and molecular neuroscience.
J. Thomas Bentley has served as a director of the Company since April 2004.
Mr. Bentley is a co-founder of Alliant Partners, a leading merger and
acquisition firm for emerging and mid-market technology companies. For the past
10 years, Mr. Bentley has worked with some of Alliant's largest clients on their
strategic acquisitions and divestitures. His expertise is in financial, tax and
accounting structuring of merger transactions. Mr. Bentley holds a Master of
Science degree in Management from M.I.T. and currently serves as a senior
advisor to Alliant Partners.
Norman V. Coates served as a director of the Company from May 1988 through
June 2001. He was re-appointed to the board of directors on June 30, 2004. He
has operated Gem of the River Produce, a farming and produce packing operation
in Orleans, California, as a sole proprietor since 1978. He has also been
manager of the Boise Creek Farm operation since 1985 and a manager of Coates
Vineyards since 1997.
The candidates for the board of directors receiving the seven highest vote
totals will be elected to serve as directors of the Company. The directors
elected at the annual meeting will serve until the next annual meeting or until
such director's successor has been elected or qualified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE SEVEN NOMINEES SET FORTH HEREIN.
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Security Ownership of Management and Certain Beneficial Owners
The following table sets forth beneficial ownership of common stock of the
Company as of July 12, 2005, the record date, by each director or nominee, by
each of the Named Officers (as defined in the section of this proxy statement
entitled "Compensation of Executive Officers" beginning on page 13), by all
directors and Named Officers as a group, and by all persons known to the Company
to be the beneficial owners of more than 5% of the Company's common stock.
Quentin Wright and Michael Weber are not listed on the table below because they
did not join the Company in their capacities as executive officers until after
January 1, 2005 and are not Named Officers. Unless otherwise indicated, all
persons named below can be reached at Nanometrics Incorporated, 1550 Buckeye
Drive, Milpitas, California 95035.
Number of Shares
of Common Stock
Beneficially
Name of Beneficial Owner Owned(1) Percent of Total
------------------------ -------- ----------------
Vincent J. Coates(2) 3,376,274 26.4%
Artemis Investment Management LLC(3) 881,800 6.9%
437 Madison Avenue
New York, New York 10022
Dimensional Fund Advisors Inc.(4) 913,148 7.1%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
John D. Heaton(5) 365,000 2.8%
Edmond R. Ward(6) 32,000 *
William G. Oldham(7) 30,000 *
Paul B. Nolan(8) 28,334 *
Roger Ingalls, Jr. (9) 22,667 *
Stephen J Smith (10) 3,333 *
J. Thomas Bentley (11) 3,333 *
Norman V. Coates (12) 3,333 *
All Named Officers and directors as a group (nine(9)persons) (13) 5,659,222 44.2%
* Represents less than 1% of outstanding shares of common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially owned
by a person includes shares of common stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of July
12, 2005. Such shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person holding
such options but are not deemed outstanding for the purposes of computing
the percentage ownership of each other person.
(2) Includes 3,376,154 shares of common stock held of record by the Vincent J.
Coates Separate Property Trust, U/D/T dated August 7, 1981, for which Mr.
Coates acts as trustee.
(3) According to a Schedule 13G filed on February 10, 2004, Artemis Investment
Management LLC may be deemed to be the beneficial owner of 881,800 shares
of common stock.
(4) According to a Schedule 13G/A filed on February 9, 2005, Dimensional Fund
Advisors Inc. may be deemed to be the beneficial owner of 913,148 shares of
common stock.
(5) Includes 365,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
(6) Includes 30,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
(7) Includes 30,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
(8) Includes 23,334 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
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(9) Includes 22,667 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
(10) Includes 3,333 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of July 12, 2005.
(11) Includes 3,333 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of July 12, 2005.
(12) Includes 3,333 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of July 12, 2005.
(13) Includes 481,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of July 12, 2005.
Board Meetings and Committees
The board of directors met (or acted by written consent) a total of nine
(9) times during fiscal year ended January 1, 2005. During the fiscal year ended
January 1, 2005, all incumbent directors attended at least 75% of meetings of
the board of directors and meetings of committees, if any, upon which such
directors served. The standing committees of the board of directors include an
audit committee, a compensation/stock option committee and a
nominating/governance committee.
The board of directors has determined that all of its directors meet the
independence requirements of the Nasdaq National Market, with the exception of
Vincent J. Coates, Norman V. Coates and John D. Heaton.
It is the policy of the Company to require its directors to attend its
annual meetings absent a valid reason, such as a schedule conflict. All of the
directors who served on the board of directors for the entire fiscal year
attended the 2004 annual meeting of shareholders.
Audit Committee
The audit committee of the board of directors reviews and monitors the
Company's financial reporting as well as its internal and external audits,
including among other things, the Company's internal audit and control
functions, the results and scope of the annual audit and other services provided
by the Company's independent auditors, and the Company's compliance with legal
matters that may have a significant impact on the Company's financial reports.
In addition, the audit committee has the responsibility to consider and
recommend the employment of, and to review fee arrangements with, the Company's
independent auditors. The audit committee also monitors transactions between the
Company and its officers, directors and employees for any potential conflicts of
interest. The audit committee met (or acted by written consent) five (5) times
during the fiscal year ended January 1, 2005.
The members of the audit committee during the fiscal year ended January 1,
2005 were William Oldham, Nathaniel Brenner (through March 2004), Edmond R. Ward
and J. Thomas Bentley (beginning in April 2004). Mr. Brenner, the audit
committee's financial expert in the fiscal year ended January 3, 2004, resigned
his position as director as well as his committee assignments effective as of
March 2004. At the recommendation of the nominating/governance committee, the
board of directors appointed J. Thomas Bentley to the audit committee as of May
26, 2004. Mr. Bentley was appointed by the board of directors to serve as the
audit committee's financial expert and chairman.
Each member of the Company's audit committee is an "independent director"
as that term is defined under the applicable Nasdaq National Market listing
standards. The audit committee has adopted a written charter, which is available
on the Company's website at www.nanometrics.com.
Compensation/Stock Option Committee
The compensation/stock option committee reviews and makes recommendations
to the board of directors regarding the Company's compensation policy and all
forms of compensation to be provided to certain of the executive officers of the
Company, including the chief executive officer.
9
The compensation/stock option committee is responsible for approving the
grant of stock options to the Company's employees under the Company's 2000
Employee Stock Option Plan and 2002 Nonstatutory Stock Option Plan.
The members of the compensation/stock option committee serving in the
fiscal year ended January 1, 2005 were Edmond Ward, J. Thomas Bentley, Stephen J
Smith and Nathaniel Brenner. Mr. Ward was appointed as chairman of the
compensation/stock option committee by the board of directors. As indicated
above, Mr. Brenner resigned his position as director as well as his committee
assignments effective as of March 2004. The compensation/stock option committee
met (or acted by written consent) seven (7) times during fiscal 2004. The
compensation/stock option committee has adopted a written charter, which is
available on the Company's website at www.nanometrics.com.
Nominating/Corporate Governance Committee
The Company maintains a standing nominating/corporate governance committee
that assists the board of directors in identifying and qualifying candidates to
join the board of directors and addressing governance issues. All members of the
nominating committee are independent. The nominating committee utilizes a
variety of methods for identifying and evaluating nominees. Its general policy
is to assess the appropriate size of the board of directors and whether any
vacancies are expected due to retirement or otherwise. In the event those
vacancies are anticipated, or otherwise arise, the nominating committee will
consider recommending various potential candidates to fill such vacancies.
Candidates may come to the attention of the nominating committee through its
current members, shareholders or other persons. The board of directors may
consider properly submitted shareholder nominations for candidacy. Nominees may
be submitted by shareholders in accordance with the shareholder communication
policy described below.
The nominating/corporate governance committee has no specific, minimum
qualifications for director candidates. In general, however, persons considered
for board of directors positions must have demonstrated leadership capabilities,
be of sound mind and high moral character, have no personal or financial
interest that would conflict or appear to conflict with the interests of the
Company and be willing and able to commit the necessary time for board of
directors and committee service.
The nominating/corporate governance committee believes that board members
should represent a balance of diverse backgrounds and skills, including
marketing, finance, manufacturing, engineering, science, and international
experience. The nominating/corporate governance committee consists of William
Oldham and Stephen Smith. Mr. Oldham was appointed as chairman of the
nominating/corporate governance committee by the board of directors. The
nominating/corporate governance committee met once in the fiscal year ended
January 1, 2005 and has adopted a written charter, which is available on the
Company's website at www.nanometrics.com.
Shareholder Communication Policy
The board of directors has established a formal process for shareholders to
send communications to the board of directors or to individual directors. The
names of all directors are available to shareholders in this proxy statement. If
the Company receives any shareholder communication intended for the full board
of directors or any individual director, the Company will forward the
communication to the full board of directors or the individual director, unless
the communication is clearly of a marketing nature or is unduly hostile,
threatening, illegal or similarly inappropriate, in which case the Company has
the authority to discard the communications or take appropriate legal action
regarding the communication.
Compensation/Stock Option Committee Interlocks and Insider Participation
No member of the compensation/stock option committee of the Company's board
of directors serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's board of directors or compensation/stock option
committee.
Compensation of Directors
Directors who are not also employees of the Company receive an annual
retainer fee of $5,000, plus $1,000 for each board and committee meeting
attended. Directors are also eligible to participate in the Company's Directors'
Stock Option Plan. Each audit committee member receives an additional $3,000
annual retainer and $500 for attending
10
quarterly earnings release conference calls. Additionally, the audit committee
chairman receives an incremental $2,000 retainer for serving in such capacity.
Compensation of Executive Officers
The following table sets forth the compensation paid by the Company during
the past three fiscal years to (i) the chief executive officer, (ii) each of the
four most highly compensated executive officers (or such lesser number of
executive officers as the Company may have) of the Company not serving as chief
executive officer and (iii) up to an additional two individuals that would have
been included under item (ii) but for the fact that the individuals were not
serving as executive officers as of January 1, 2005, all of whom are
collectively referred to as the "Named Officers". Quentin Wright and Michael
Weber are not listed on the table below because they did not join the Company in
their capacities as executive officers until after January 1, 2005.
Summary Compensation Table
Long Term
Compensation
Awards
---------------
Annual Compensation Securities
------------------------------------------ Underlying
Name Fiscal Year Salary Bonus Options (#)
---------- ------------- ------------- ------------ ----------------
John D. Heaton 2004 $ 341,800 $ 79,314 100,000
President and Chief Executive Officer 2003 342,800 -- 572,500
2002 343,800 -- 275,000
Vincent J. Coates 2004 $ 204,800 -- --
Chairman of the Board and Secretary 2003 204,800 -- --
2002 204,800 -- --
Roger Ingalls, Jr. 2004 $ 195,265 $ 29,658 5,000
Senior Vice President of Standalone Sales 2003 198,965 -- 31,500
2002 201,834 -- 25,000
Paul B. Nolan 2004 $ 183,055 $ 29,864 --
Vice President and Chief Financial Officer 2003 179,050 -- --
2002 162,234 -- 50,000
Stock Options Granted in the Fiscal Year Ended January 1, 2005
The following table sets forth information with respect to stock options
granted during the fiscal year ended January 1, 2005 to each of the Named
Officers. Quentin Wright and Michael Weber are not listed on the table below
because they did not join the Company in their capacities as executive officers
until after January 1, 2005. All options were granted under the Company's 2000
Stock Option Plan. The potential realizable value amounts in the last two
columns of the following chart represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The assumed 5% and 10% annual rates of stock price appreciation from the date of
grant to the end of the option term are provided in accordance with rules of the
Securities and Exchange Commission and do not represent the Company's estimate
or projection of the future common stock price. Actual gains, if any, on stock
option exercises are dependent on the future performance of the common stock,
overall market conditions and the option holder's continued employment through
the vesting period.
11
Option Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------------------
Number of % of Total Potential Realized Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees Option Term
Granted (#) in Fiscal Exercise Price Expiration -----------------------------
Name (1) Year (2) ($/Sh) Date 5%($) 10%($)
------- ---------- ---------- -------------- ---------- ------------- -------------
John D. Heaton 100,000 22% $ 12.02 5/26/11 $ 332,000 $ 734,000
Vincent J. Coates 0 0 -- -- --
Roger Ingalls, Jr. 5,000 1.1% 10.37 8/23/11 14,350 31,650
Paul B. Nolan 0 0 -- -- --
------------------------------
(1) All options granted to the Named Officers in fiscal 2004 were granted at
exercise prices equal to the fair market value of the Company's common
stock on the dates of grant. Historically, options granted become
exercisable at the rate of 33% on the first anniversary date of the option
grant and 33% of the total number of option shares each full year
thereafter, such that full vesting occurs three years after the date of
grant. Options (whether vested or unvested) expire after 7 years or 90 days
after termination of employment.
(2) Based on 453,550 options granted during the fiscal year ended January 1,
2005.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named Officers
at January 1, 2005. Quentin Wright and Michael Weber are not listed on the table
below because they did not join the Company in their capacities as executive
officers until after January 1, 2005. As indicated below, two (2) Named
Officers, John D. Heaton and Paul B. Nolan, exercised stock options during the
fiscal year ended January 1, 2005.
Number of Securities
Underlying Value of Unexercised In-the-
Unexercised Options at Money Options at
Shares Value Fiscal Year-End (#) Fiscal Year-End ($)(2)
Acquired on Realized($) ----------------------------- ----------------------------
Name Exercise(#) (1) Exercisable Unexercisable Exercisable Unexercisable
-------------- ----------- ---------- ----------- ------------- ----------- -------------
John D. Heaton 100,000 $ 674,000 219,583 402,917 $ 2,243,722 $ 3,477,728
Vincent J. Coates -- -- -- -- -- --
Roger Ingalls, Jr. -- -- 15,750 20,750 164,115 192,865
Paul B. Nolan 26,666 213,594 16,666 16,668 9,132 135,107
------------------------------
(1) The value realized upon exercise is (i) the fair market value of the
Company's common stock on the date of exercise, less the option exercise
price per share, multiplied by (ii) the number of shares underlying the
options exercised.
(2) The value of unexercised options is (i) the fair market value of the
Company's common stock on December 31, 2004 ($16.12 per share), less the
option exercise price of in-the-money options, multiplied by (ii) the
number of shares underlying such options.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Pursuant to the terms of an agreement between the Company and Vincent J.
Coates, the Chairman of the Board of the Company, dated May 1, 1985, as amended
and restated in August 1996 and April 1998, the Company is obligated to continue
to pay Mr. Coates his salary and benefits for five years from the date of his
resignation in the event Mr. Coates is required to resign as Chairman of the
Board under certain circumstances, including a change of control.
12
In April 1998, the Company entered into an agreement with John D. Heaton
pursuant to which the Company agreed to pay Mr. Heaton his annual salary
(excluding bonuses) for a period of one year from the date that he is required
or requested for any reason not involving good cause, including a change of
control, to involuntarily relinquish his positions with the Company as
President, Chief Executive Officer and director. If Mr. Heaton leaves the
Company voluntarily, or if he is asked to leave under certain circumstances, no
such severance payment is required.
In March 1995, the Company entered into an agreement with Roger Ingalls,
Jr. pursuant to which the Company agreed to pay Mr. Ingalls his annual salary
(excluding bonuses) for a period of one hundred twenty (120) days from the date
he is terminated without cause.
Equity Compensation Plan Information
All of the Company's equity compensation plans except the 2002 Non
Statutory Stock Option Plan were approved by the Company's shareholders. The
following table sets forth, for all of the Company's existing equity
compensation plans, the number of outstanding option grants and the number of
shares remaining available for issuance as of the fiscal year ended January 1,
2005.
Number of
Securities
Number of Remaining
Securities to be Weighted Available for
Issued Upon Average Future Issuance
Exercise of Exercise Price Under Equity
Outstanding of Outstanding Compensation
Options Options Plans (1)
--------------- ---------------- ---------------
Equity Compensation Plans Approved by Security Holders 1,555,629 $ 11.94 483,444
Equity Compensation Plans Not Approved by Security Holders 1,076,646 $ 8.13 35,359
------------------------------
(1) Excludes securities to be issued upon exercise of outstanding options.
Certain Relationships
Vincent J. Coates is the father of Norman V. Coates. There are no other
family relationships between any of the foregoing nominees or between any such
nominees and any of the executive officers of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the Nasdaq National
Market. Executive officers, directors and greater than ten percent shareholders
are required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms that they file. Based solely on
its review of the copies of such forms received by it or written representations
from certain reporting persons, the Company believes that, with the exception of
Roger Ingalls, Jr., during the fiscal year ended January 1, 2005, its executive
officers, directors and greater than ten percent shareholders complied with all
applicable filing requirements. Mr. Ingalls failed to timely report an option
grant on Form 4.
13
Report of the Audit Committee of the Board of Directors
The following is the report of the audit committee of the board of
directors describing its review of materials and determinations with respect to
its auditors and financial statements for the fiscal year ended January 1, 2005.
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 filing under
the Securities Act or Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
In accordance with its written charter adopted by the board of directors,
the audit committee assists the board of directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During the fiscal
year ended January 1, 2005, the audit committee met (or acted by written
consent) five (5) times, and the audit committee chairman, as representative of
the committee, discussed the interim financial information contained in
quarterly earnings announcements with the chief financial officer and
independent auditors prior to public release.
The audit committee received from the Company's independent auditors a
formal written statement, consistent with Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," which describes all
relationships between the auditors and the Company that, in the auditors'
professional opinion, might reasonably be thought to bear on the auditors'
independence. The audit committee discussed with the auditors these
relationships and satisfied itself as to the auditors' independence.
The audit committee also discussed and reviewed with the independent
auditors all communications required by the Public Company Accounting Oversight
Board (the "PCAOB") standards, including those described in Statement on
Auditing Standards No. 61, as amended, "Communication with Audit Committees"
and, with and without management present, discussed and reviewed the results of
the independent auditors' Audit of the Company's financial statements.
Additionally, the audit committee reviewed and discussed the audited
financial statements of the Company as of and for the fiscal year ended January
1, 2005 with management and the independent auditors. Management has the
responsibility for the preparation of the Company's financial statements and the
independent auditors have the responsibility for the Audit of those statements.
Based on the foregoing review and discussions with management and the
independent auditors, the audit committee recommended to the board of directors
that the Company's audited financial statements as of and for the year ended
January 1, 2005 be included in its Annual Report on Form 10-K for the fiscal
year ended January 1, 2005 for filing with the Securities and Exchange
Commission. The audit committee also recommended the appointment, subject to
shareholder approval, of the independent auditors and the board of directors
concurred in such recommendation.
Members of the Audit Committee
J. Thomas Bentley, Chairman
Edmond R. Ward
William G. Oldham
14
Report of the Compensation/Stock Option Committee of the Board of Directors
The following is the report of the compensation/stock option committee of
the board of directors describing compensation policies and rationales
applicable to certain of its executive officers with respect to the compensation
paid to such executive officers for the fiscal year ended January 1, 2005. The
information contained in such 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 filing under
the Securities Act or Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
General. The compensation/stock option committee is responsible for making
recommendations to the board of directors with respect to cash compensation
levels for certain of the Company's executive officers. During fiscal year ended
January 1, 2005, the compensation/stock option committee also was responsible
for determining levels of equity-based compensation for the Company's employees.
Compensation Philosophy. The compensation/stock option committee makes
recommendations as to the salaries of certain of the executive officers by
considering (i) the salaries of executive officers in similar positions at
comparably-sized peer companies, (ii) the Company's financial performance over
the past year based upon revenues and operating results and (iii) the
achievement of individual performance goals related to each executive officer's
duties and areas of responsibility. The compensation/stock option committee
makes recommendations as to the levels of cash bonuses awarded to certain of the
Company's executive officers and views such bonuses as being an integral part of
its performance based compensation program. Such bonuses are based on the
Company's profits and are determined as a percentage of the officer's salaries.
Equity-Based Compensation. The compensation/stock option committee views
stock options as an important part of its long-term, performance-based
compensation program. The compensation/stock option committee grants stock
options to all employees of the Company under its 2000 Stock Option Plan and
2002 Nonstatutory Stock Option Plan based upon the committee's estimation of
each employee's contribution to the long-term growth and profitability of the
Company. The 2000 Stock Option Plan is intended to provide additional incentives
to the executive officers to maximize shareholder value. Options are granted
under the 2000 Stock Option Plan and the 2002 Nonstatutory Stock Option Plan at
the then-current market price and are generally subject to three-year vesting
periods to encourage key employees to remain with the Company.
Compensation of the Chief Executive Officer. The compensation/stock option
committee has reviewed all components of the chief executive officer's
compensation, including salary, bonus, equity, stock options, and the
obligations under the Company's change of control severance agreement with Mr.
Heaton.
Based on this review, the compensation/stock option committee found Mr.
Heaton's total compensation (and, in the case of the change of control severance
agreement, potential payout) in the aggregate to be reasonable and not
excessive. Furthermore, although Mr. Heaton made valuable contributions to the
Company during fiscal year ended January 3, 2004, in light of economic
conditions, the compensation/stock option committee determined that an increase
to the base salary of the chief executive officer would not be appropriate. It
should be noted that when the compensation/stock option committee considers any
component of the chief executive officer's total compensation, the aggregate
amounts and mix of all the components, including accumulated (realized and
unrealized) option gains are taken into consideration in the compensation/stock
option committee's decisions.
Section 162(m). The Company intends that awards granted under the Company's
2000 Stock Option Plan and 2002 Nonstatutory Stock Option Plan be deductible by
the Company under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
Members of the Compensation/Stock Option Committee
Edmond Ward, Chairman
J. Thomas Bentley
Stephen J Smith
15
Stock Performance Graph
The following graph compares the cumulative total return to shareholders of
the Company's common stock from December 31, 1999 through December 31, 2004 to
the cumulative total return over such period of (i) the Nasdaq Stock Market
(U.S.) Index and (ii) the RDG Technology Composite Index. The results shown
assume that $100 was invested on December 31, 1999 in the Company's common stock
and in each of the other two indices with any dividends reinvested. Information
about RDG Technology Composite Index may be obtained at the Research Data Group,
Inc. website address www.researchdatagroup.com/ComponentsTech.htm or by calling
Research Data Group at (415) 643-6000.
The information contained in the performance graph shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG NANOMETRICS
INCORPORATED, THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE RDG TECHNOLOGY
COMPOSITE INDEX
[GRAPHIC OMITTED][GRAPHIC OMITTED]
(Performance Graph)
16
"Householding" of Proxy Materials
The Securities and Exchange Commission has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery requirements
for proxy statements with respect to two or more shareholders sharing the same
address by delivering a single proxy statement addressed to those shareholders.
This process, which is commonly referred to as "householding," potentially
provides extra convenience for shareholders and cost savings for companies. The
Company and some brokers household proxy materials, delivering a single proxy
statement to multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholders. Once you have
received notice from your broker or the Company that the broker or the Company
will be householding materials to your address, householding will continue until
you are notified otherwise or until you revoke your consent. Upon written or
oral request to the Investor Relations department of the Company, by mail at
1550 Buckeye Drive, Milpitas, California, 95035 or by telephone at (408)
435-9600, the Company will promptly deliver a copy of its proxy statement to a
shareholder if that shareholder shares an address with another shareholder to
which a single copy of the proxy statement was delivered. A shareholder may
notify the Company as described above if the shareholder wishes to receive a
separate copy of the proxy statement in the future or, alternatively, if the
shareholder wishes to receive a single copy of the materials instead of multiple
copies.
17
PROPOSAL 2
REINCORPORATION FROM CALIFORNIA INTO DELAWARE
(THE REINCORPORATION MERGER)
General
The board of directors, by a unanimous vote at a special meeting of the
board of directors, adopted a resolution approving a change in the state of its
incorporation from California to Delaware. If approved by the requisite vote of
the Company's shareholders, this reincorporation shall be effected through a
merger of the Company with its wholly owned subsidiary, Big League Merger
Corporation, a Delaware corporation.
Proposal
The Company is proposing to merge with and into Big League Merger
Corporation. This merger is referred to herein as the reincorporation merger.
Big League Merger Corporation will succeed to all of the rights, properties,
assets and liabilities of the Company. Upon completion of the reincorporation
merger, the Company will cease to exist and Big League Merger Corporation will
continue to operate the business of the Company under the name "Nanometrics
Incorporated" as a Delaware corporation. For convenience, Nanometrics
Incorporated, after the reincorporation merger, is sometimes referred to as the
Delaware company. Each outstanding share of the Company's common stock, no par
value per share, will be automatically converted into one share of common stock
of the Delaware company, $0.001 par value per share, upon the effective date of
the reincorporation merger. It will not be necessary for shareholders of the
Company to exchange their existing stock certificates for stock certificates of
the Delaware company. Upon completion of the reincorporation merger,
certificates which immediately prior to the reincorporation merger represented
shares of common stock of the Company will be deemed for all purposes to
represent the same number of shares of the Delaware company's common stock.
Nevertheless, shareholders may exchange their certificates if they so choose.
The Company's common stock is listed for trading on the Nasdaq National Market
and, after the reincorporation merger, the Delaware company's common stock will
continue to be traded on the Nasdaq National Market without interruption, under
the same symbol, NANO, as the shares of the Company's common stock are currently
traded.
The reincorporation merger has been approved by the Company's board of
directors, by a unanimous vote at a special meeting. If approved by the
requisite vote of the Company's shareholders, it is anticipated that the
reincorporation merger will become effective as soon as practicable following
the annual meeting of shareholders. The Company's shareholders will have no
appraisal rights with respect to the reincorporation merger.
Immediately following the completion of the reincorporation merger, the
composition of the board of directors of Big League Merger Corporation will be
the same as the composition of the board of directors of the Company immediately
prior to the reincorporation merger.
After the reincorporation merger, the rights of the Company's stockholders
and the Company's corporate affairs will be governed by the Delaware General
Corporation Law, and the certificate of incorporation and bylaws of the Delaware
company, or the Delaware charter documents, rather than by the California
General Corporation Law, and the current articles of incorporation and bylaws of
the Company, or the California charter documents. There are differences between
the California charter documents and the Delaware charter documents that may be
important to you. See the section of this proxy statement entitled "Comparison
of Rights of Holders and Corporate Governance Matters" for a comparison of the
material rights of equity holders and matters of corporate governance before and
after the reincorporation merger.
The summary and discussion of the proposed reincorporation merger set forth
in this proxy statement is qualified in its entirety by reference to the
California General Corporation Law, the Delaware General Corporation Law, the
California charter documents and the Delaware charter documents. Copies of the
California charter documents are available for inspection at the Company's
executive offices. Additionally, the Company will send such documents to you
upon request. Copies of the Delaware company charter documents are attached to
this proxy statement as Appendix A and B. We urge you to read each of these
documents carefully for a complete understanding of your rights.
Principal Reasons for the Reincorporation Merger
As the Company plans for the future, the board of directors and management
believe that it is essential to be able to draw upon well-established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's
18
corporate governance decisions can be based, and the Company believes that its
shareholders will benefit from the responsiveness of Delaware corporate law to
their needs and to those of the corporation they own.
Prominence, Predictability and Flexibility of Delaware Law
For many years, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has been a leader in adopting,
construing and implementing comprehensive, flexible corporate laws responsive to
the legal and business needs of corporations organized under its laws. Many
corporations have chosen Delaware initially as a state of incorporation or have
subsequently changed their corporate domicile to Delaware. Because of Delaware's
prominence as the state of incorporation for many major corporations, both the
legislature and courts in Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs. The
Delaware courts have developed considerable expertise in dealing with corporate
issues, and a substantial body of case law has developed construing Delaware
law, resulting in greater predictability with respect to corporate legal
affairs.
Increased Ability to Attract and Retain Qualified Directors
Both California and Delaware law permit a corporation to include a
provision in its charter which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has expanded the risks facing directors and officers of corporations in
exercising their respective duties. The amount of time and money required to
respond to such claims and to defend such litigation can be substantial. The
Company desires to reduce these risks to its directors and officers and to limit
situations in which monetary damages can be recovered against its directors so
that it may continue to attract and retain qualified directors who otherwise
might be unwilling to serve because of the risks involved. The Company believes
that, in general, Delaware law provides greater protection to directors than
California law and that Delaware law regarding a corporation's ability to limit
director liability is more developed and provides more guidance than California
law.
Well Established Principles of Corporate Governance
There is substantial judicial precedent in the Delaware courts as to the
legal principles applicable to measures that may be taken by a corporation and
as to the conduct of the board of directors, such as the business judgment rule
and other standards. This tends to assure a significant measure of certainty to
legal aspects of the conduct of business and a sound basis for planning.
Therefore, the Company believes that its shareholders will benefit from the
well-established principles of corporate governance that Delaware law affords.
No Change in Board Members, Business, Management, Employee Benefit Plans or
Location of Principal Facilities
The reincorporation merger will effect a change in the legal domicile of
the Company and certain other changes of a legal nature which are described in
this proxy statement. Except as contemplated in connection with the
reincorporation merger, the reincorporation merger will NOT result in any change
in the Company's business, management, assets or liabilities or the location of
its principal facilities. Under United States generally accepted accounting
principles, the proposed reincorporation will not result in any gain or loss to
the Company. The consolidated financial statements and results of operations of
the Delaware company immediately following the reincorporation merger will be
identical to that of the Company immediately prior to the reincorporation
merger. The directors of the Company immediately prior to the reincorporation
merger will become the directors of the Delaware company immediately following
the reincorporation merger. All employee benefit, stock option and employee
stock purchase plans of the Company will be assumed and continued by the
Delaware company, and each option or right issued pursuant to such plans will
automatically be converted into an option or right to purchase the same number
of shares common stock of the Delaware company, at the same price per share,
upon the same terms, and subject to the same conditions. Shareholders should
note that approval of this proposal 2 will also constitute approval of the
assumption of these plans by the Delaware company. Other employee benefit
arrangements of the Company will also be continued by the Delaware company upon
the terms and subject to the conditions currently in effect. As noted above,
after the reincorporation merger, the shares of common stock of the Delaware
company will continue to be traded, without interruption, in the same principal
market (the Nasdaq National Market) and under the same symbol, NANO, as the
shares of common stock of the Company are currently traded. The Company believes
that the proposed reincorporation will not affect any of its material contracts
with any third parties and that the Company's rights and obligations under such
material contractual arrangements will continue and be assumed by the Delaware
company. See the section of this proxy statement entitled "Comparison of Rights
of Holders and Corporate Governance Matters" for a comparison of the material
rights of equity holders and matters of corporate governance before and after
the reincorporation merger.
19
Material United States Federal Income Tax Consequences of the Reincorporation
Merger
This section of the proxy statement summarizes the material United States
federal income tax considerations of the reincorporation merger to the Company's
shareholders. The summary is based on the Internal Revenue Code of 1986, as
amended, applicable United States Treasury regulations under the Internal
Revenue Code, administrative rulings and judicial authority, all as of the date
of this proxy statement. All of the foregoing authorities are subject to change,
with or without retroactive effect, and any change could affect the continuing
validity of this summary. A ruling from the Internal Revenue Service in
connection with the reincorporation merger will not be requested, and we cannot
assure you that the Internal Revenue Service will conclude that the
reorganization merger qualifies as a reorganization under Section 368(a) of the
Internal Revenue Code.
The summary assumes that the Company's shareholders hold their shares as
capital assets. The summary does not address the tax consequences that may be
applicable to particular shareholders in light of their individual circumstances
or to shareholders who are subject to special tax rules, such as non-United
States persons, dealers in securities, shareholders who acquired shares of
common stock through the exercise of options or otherwise as compensation or
through a qualified retirement plan, and shareholders who hold their common
stock as part of a straddle, hedge, or conversion transaction. In addition, this
summary does not address the tax consequences of the reincorporation merger to
holders of options or warrants to acquire capital stock of or the tax
consequences of transactions effectuated prior or subsequent to, or concurrently
with, the reincorporation merger, whether or not any such transactions are
undertaken in connection with the reincorporation merger. This summary also does
not address any consequences arising under the tax laws of any state, local, or
foreign jurisdiction.
The reincorporation merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, which will result in the
following federal income tax consequences to the Company's shareholders:
o shareholders will not recognize any gain or loss upon the receipt of
common stock in the reincorporation merger;
o the aggregate tax basis of the common stock received by shareholders
in the reincorporation merger will be the same as the aggregate tax
basis of the common stock surrendered in exchange therefor;
o the holding period of the common stock received by each shareholder in
the reincorporation merger will include the period for which common
stock surrendered in exchange therefor was considered to be held; and
o the Company will not recognize gain or loss solely as a result of the
reincorporation merger.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
Vote Required
The affirmative vote of the holders of a majority of the outstanding shares
of common stock entitled to vote on the record date is required to approve its
reincorporation from a California corporation to a Delaware corporation. Unless
otherwise instructed, the proxies will vote "FOR" this proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL
2.
20
PROPOSALS 3A-G
GOVERNANCE PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
If approved by the requisite vote of the Company's shareholders, the
Company will change the state of its incorporation from California to Delaware.
Upon completion of the reincorporation merger, the Company will be governed by
the Delaware General Corporation Law and the certificate of incorporation of Big
League Merger Corporation, currently a wholly-owned subsidiary of the Company.
The proposed certificate of incorporation that will govern the Company following
the completion of the reincorporation merger differs in some material respects
from the Company's existing articles of incorporation. At the annual meeting,
you will be asked to consider and vote on each of the governance-related
provisions in the Company's certificate of incorporation to be in effect after
the reincorporation merger described below.
The following is a summary of selected governance-related provisions of the
form of certificate of incorporation of the Company to be in effect after the
reincorporation merger. While the Company believes that this description covers
the material governance-related provisions of the certificate of incorporation
of the Company to be in effect after the reincorporation merger which differ
materially from the Company's existing articles of incorporation, it may not
contain all of the information that is important to you and is qualified in its
entirety by reference to the form of certificate of incorporation and bylaws of
the Company which are attached to this proxy statement as Appendix A and B,
respectively. We urge you to read each of these documents carefully. See also
the section of this proxy statement entitled "Comparison of Rights of Holders
and Corporate Governance Matters" for a comparison of rights of equity holders
and matters of corporate governance before and after the reincorporation merger.
Proposal 3A: A proposal to approve a provision limiting the Company's
stockholders' right to call special meetings of stockholders.
Under the Company's current bylaws, a special meeting of shareholders may
be called at any time by one or more shareholders holding shares in the
aggregate entitled to cast at least 10% of the votes at that meeting. However,
the Company's certificate of incorporation to be in effect after the
reincorporation merger provides that special meetings of stockholders may be
called by the chairman of the board of directors or by a majority of the board
of directors, but such special meetings may not be called by any other person or
persons.
See Article VIII of the form of certificate of incorporation of the Company
to be in effect after the reincorporation merger.
Proposal 3B: A proposal to approve a provision limiting the Company's
stockholders' ability to act by written consent.
Under the Company's current bylaws, any action which may be taken at any
annual or special meeting of shareholders may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all shares entitled to vote on that action were present
and voted. In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors.
Delaware law permits stockholders to act by written consent, unless
otherwise provided in the certificate of incorporation. However, the Company's
certificate of incorporation to be in effect after the reincorporation merger
does not permit stockholder action by written consent and provides that no
action may be taken by the
21
stockholders except at an annual or special meeting of stockholders called in
accordance with the certificate of incorporation and bylaws.
See Article VIII of the form of certificate of incorporation of the Company
to be in effect after the reincorporation merger.
Proposal 3C: A proposal to approve a provision requiring a super-majority vote
of the Company's stockholders to amend certain provisions of its certificate of
incorporation.
Under the Company's current articles of incorporation, certain amendments
to the articles of incorporation requires the affirmative vote of board of
directors and the holders of at least a majority of the outstanding shares
entitled to vote. The certificate of incorporation of the Company to be in
effect after the reincorporation merger requires the affirmative vote of the
holders of at least 66.67% of the outstanding shares entitled to vote to amend,
repeal or adopt a provision inconsistent with the provisions of the certificate
of incorporation relating to (i) shares authorized; (ii) amendment of bylaws;
(iii) authority to call special stockholder meetings; and (iv) amendment of the
certificate of incorporation.
See Article X of the form of certificate of incorporation of the Company to
be in effect after the reincorporation merger.
Proposal 3D: A proposal to approve a provision requiring a super-majority vote
of the Company's stockholders to amend certain provisions of the Company's
bylaws.
Under California law and the Company's current bylaws, the bylaws may be
adopted, amended or repealed either by the board of directors or a majority of
the outstanding shares entitled to vote. Under the Company's certificate of
incorporation to be in effect after the reincorporation merger, bylaws may be
adopted, amended, altered or repealed by the board of directors or the
affirmative vote of the holders of at least 66.67% of the shares of capital
stock of the corporation issued, outstanding and entitled to vote.
See Article VI of the form of certificate of incorporation of the Company
to be in effect after the reincorporation merger.
Proposal 3E: A proposal to approve a provision limiting the Company's
stockholders' right to remove directors from office without cause.
Under California law, any director or the entire board of directors may be
removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote. However, the Company's certificate of
incorporation to be in effect after the reincorporation merger provides that
directors may be removed from office by the stockholders only for cause. Under
Delaware law, such stockholder action must occur by a majority of outstanding
stock entitled to vote.
See Article V of the form of certificate of incorporation of the Company to
be in effect after the reincorporation merger.
Proposal 3F: A proposal to approve the classification of the board of directors
into separate classes with staggered terms.
The Company's current articles of incorporation and bylaws do not classify
the board of directors into separate classes with staggered terms. However, the
Company's bylaws to be in effect after the reincorporation merger provides for
the classification of the board of directors into three separate classes,
consisting as nearly equal in number as may be practicable of 1/3 of the total
number of directors constituting the entire board of directors, with staggered
three-year terms. Any vacancies which occur during a year may be filled by a
majority of the directors then in office. Persons elected to fill vacancies in
this manner may serve until the next election of the class for which such
director shall have been chosen
See Article III, Section 3.4 of the form of bylaws of the Company to be in
effect after the reincorporation merger.
22
Proposal 3G: A proposal to approve a provision limiting cumulative voting rights
in connection with the election of directors.
The Company's current bylaws provide for cumulative voting for the election
of directors at meetings of shareholders. Every shareholder voting for the
election of the Company's board of directors may (i) cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of shares that such shareholders holds or
(ii) distribute such shareholder's votes on the same principle among as many
candidates as the shareholder may select, provided that votes cannot be cast for
more than the number of candidates standing for election. However, no
shareholder shall be entitled to cumulate votes for a candidate unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the intention to cumulate votes.
The Company's certificate of incorporation to be in effect after the
reincorporation merger will not provide for cumulative voting in connection with
the election of directors. Under Delaware law, directors are elected by the
affirmative vote of a plurality of the shares present in person or by proxy at a
stockholder meeting entitled to vote on the election of directors.
Purpose
The Company's board of directors has approved the certificate of
incorporation that includes the provisions described above. These provisions,
including, for example, the elimination of shareholders' rights to call special
meetings, may have the effect of delaying or deterring unsolicited takeover
transactions. The board of directors determined that it was appropriate to adopt
these provisions in the Company's certificate of incorporation to be in effect
after the reincorporation merger, notwithstanding the fact that such provisions
are absent from the Company's current articles of incorporation in order to
enhance stockholder value by helping the Company thwart hostile or coercive
overtures that are not supported by the board of directors.
Vote Required
Under applicable state law, stockholder approval of the reincorporation
merger is sufficient to implement the proposed governance-related provisions in
the Company's certificate of incorporation. Under rules promulgated by the
Securities and Exchange Commission, however, we are required to present each of
the proposed governance-related provisions as a separate proposal for
stockholder approval. Accordingly, we have determined that we will not implement
any of the proposed governance-related provisions unless it is approved by the
affirmative vote of the holders of a majority of the shares of the Company's
common stock represented and voting on each proposed governance-related
provision at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSALS 3A-G.
23
COMPARISON OF RIGHTS OF HOLDERS AND CORPORATE GOVERNANCE MATTERS
The Company is incorporated under the laws of the State of California and
accordingly, the rights of the shareholders of Company are currently governed by
the California General Corporation Law and the Company's articles of
incorporation and bylaws. Upon completion of the reincorporation merger, the
Company will be a Delaware corporation, and the rights of the stockholders of
the Company will be governed by the Delaware General Corporation law and the
Company's certificate of incorporation and bylaws.
The following is a summary of the material differences between the current
rights of holders of the Company's common stock and the rights of holders of the
Company's common stock upon completion of the reincorporation merger. The
Company will send copies of the Company's articles of incorporation and bylaws
to you, without charge, upon your request. Copies of the Delaware company
certificate of incorporation and bylaws are attached to this proxy statement as
Appendix A and B, respectively.
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Authorized Capital Stock The authorized capital stock of the The authorized capital stock of the
Company consists of 50,000,000 shares Delaware company consists of
of common stock, no par value per 47,000,000 shares of common stock,
share. par value $0.001 per share, and
3,000,000 shares of preferred stock, par value
$0.001 per share. The board of directors of the
Delaware company is authorized to issue preferred
stock in series, to establish from time to time the
number of shares to be included in each series, and
to fix the designation, powers, preferences and
relative rights of each such series and the
qualifications, limitations or restrictions
thereof.
Number of Directors The Company's bylaws provide that the No fixed number of directors is
board of directors shall consist of not required by either the bylaws or
less than five nor more than seven certificate of incorporation of the
members. The exact number shall be Delaware company. Rather, the
seven, however, until an amendment to authorized number of directors is to
the bylaws otherwise fixing the number be determined from time to time by
is duly adopted by the board of resolution of the board of directors.
directors or shareholders. The number of The board of directors of the Delaware
directors may be changed by an amendment company currently consists of two
to the articles of incorporation or by directors. Upon completion of the
an amendment to the bylaws, duly adopted reincorporation merger, the Delaware
by the vote or written consent of company board of directors will be
holders of a majority of the outstanding expanded to consist of seven
shares entitled to vote; provided, directors.
however, that an amendment reducing the
fixed number or the minimum number of
directors to a number less than five
cannot be adopted if the votes cast
against its adoption at a meeting, or
the shares not consenting in the case of
an action by written consent, are equal
to more than 16 (2)/3% of the
outstanding shares entitled to vote
thereon. No amendment may change the
stated maximum number of authorized
directors to a number greater than two
times the stated minimum number of
directors minus one.
24
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Cumulative Voting The Company's bylaws provide for The certificate of incorporation and
cumulative voting for the election of bylaws, as proposed, do not provide
directors at meetings of shareholders. for cumulative voting. If the
Accordingly, the Company's shareholders Company's shareholders approve
have cumulative voting rights proposal 3G, the Delaware company
in connection with the election stockholders will not have cumulative
of directors. voting rights in connection with the
election of directors. If the
Company's shareholders do not approve
proposal 3G, the Delaware company
bylaws will provide for cumulative
voting.
Classification of Board of The Company's articles of incorporation The Delaware company's bylaws classify
Directors and bylaws do not classify the the board of directors into three
Company's board of directors into separate classes as nearly equal in
separate classes with staggered terms. size as practicable, with staggered
three-year terms. This classification of the
Delaware company's board of directors can make it
difficult for a potential acquirer to obtain
control of the Delaware company's board of
directors.
Removal of Directors Under California law, the board of The Delaware company's certificate of
directors may declare vacant the office incorporation, as proposed, provides
of a director who has been declared of that directors may be removed from
unsound mind by an order of court or office by the stockholders only for
convicted of a felony. Further, any cause. If the Company's shareholders
director or the entire board of approve proposal 3E, then a majority
directors may be removed, with or vote of the Delaware company's
without cause, with the approval of a stockholders would be required to
majority of the outstanding shares remove a director for cause.
entitled to vote thereon; however, no
director may be removed (unless the
entire board is removed) if the number
of shares voted to elect the director
under cumulative voting. Shareholders
holding at least 10% of the outstanding
shares in any class may sue in superior
county court to remove from office
any officer or director for fraud,
dishonest acts or gross abuse of
authority or discretion.
Filling Vacancies on the Under California law, any vacancy on the Under Delaware law, unless otherwise
Board of Directors board of directors other than one provided in the certificate of
created by removal of a director may be incorporation or the bylaws, (i)
filled by the board of directors, unless vacancies on a board of directors; and
otherwise provided in the articles of (ii) newly created directorships
incorporation or bylaws. If the number resulting from an increase in the
of directors is less than a quorum, a number of directors, may be filled by
vacancy may be filled by the unanimous a majority of the directors then in
written consent of the directors then in office. In the case of the classified
office, by the affirmative vote of a board of directors of the Delaware
majority of the directors at a meeting company, directors elected to fill
held pursuant to notice or waivers of vacancies or newly created
notice, or by a sole remaining director. directorships will hold office until
A vacancy created by removal of a the next election of the class for
director can only be filled by the which the directors have been chosen.
shareholders unless board approval is The certificate of incorporation and
authorized by a corporation's articles bylaws of the Delaware company provide
of incorporation or by a bylaw approved that any vacancies on its board of
by the corporation's shareholders. directors may be filled by the
Neither the articles of incorporation affirmative vote of a majority of the
nor the bylaws of the Company permit the remaining directors in office, even if
board of directors to fill a vacancy less than a quorum, or by a sole
created by the removal of a director. remaining director.
25
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Special Meetings of The Company's bylaws, in accordance with The Delaware company's certificate of
Shareholders California law, provide that a special incorporation, as proposed, provides
meeeting of shareholders may that special meetings of the stockholders
be convened at any time by for any purpose or purpose may be called
the board directors, or by at any time by the chairman of the board of
the chairman of the board of directors or by a majority of the authorized
directors, or by the number of directors, but such special meetings
president, or by one or more may not be called by any other person or
shareholders holding shares persons. If the Company's shareholders
in the aggregate entitled to approve proposal 3A, then the Delaware
cast at least 10% of the company stockholders will not have the
votes at that meeting. ability to call special meetings.
Advance Notice Provisions for The Company's bylaws, in The Delaware company's certificate of
Meetings of Shareholders accordance with California incorporation, in accordance with Delaware
law, provide that written law, provides that written notice of a special
notice of a special meeting meeting of the stockholders specifying the place,
of the shareholders if any, date and hour of the meeting, the means of
specifying the place, date remote communication, if any, and the purpose of the
and hour of the meeting and meeting must be given to each stockholder
the purpose of the meeting entitled to vote not less than 10 nor more than 60
must be given to each days before the date of the meeting.
shareholder not less than 10
nor more than 60 days before
the date of the meeting.
Action by Written Consent of The Company's bylaws provide that any The Delaware company's certificate of
the Shareholders action which may be taken at any annual incorporation, as proposed, does not
or special meeting of shareholders may allow action to be taken by its
be taken without a meeting and without stockholders by written consent. If
prior notice, if a consent in writing, the Company's shareholders approve
setting forth the action so taken, is proposal 3B, then no action may be
signed by the holders of outstanding taken by the Delaware company
shares having not less than the minimum stockholders except at an annual or
number of votes that would be necessary special meeting of stockholders called
to authorize or take that action at a in accordance with the Delaware
meeting at which all shares entitled to company's certificate of incorporation
vote on that action were present and and bylaws.
voted. In the case of election of
directors, such a consent shall be
effective only if signed by the holders
of all outstanding shares entitled to
vote for the election of directors. This
provision allows the Company's
shareholders to take action without a
shareholder meeting and thereby dispense
with the limits on who may call, and the
notice requirements of, shareholders
meetings.
26
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Proxies The Company's bylaws, in accordance with The Delaware company's bylaws enable
California law, provide that any each stockholder entitled to vote at a
shareholder entitled to vote for meeting of stockholders to authorize
directors, or any other matter, shall another person or persons to act for such
have the right to do so by designating stockholder by proxy authorized by an
another person to act for such instrument in writing or by a transmission
shareholder by proxy. No proxy, however, permitted by law filed in accordance with
shall be voted or acted upon after the procedure established for the meeting.
11 months from its date, unless the No proxy, however, may be voted or acted
proxy provides for a longer period. upon after three years from its date
unless the proxy specifies a longer period.
Charter Amendment Under California law, unless otherwise Under Delaware law, unless the
specified in the articles of certificate of incorporation requires a
incorporation, an amendment to the greater vote, an amendment to the
articles of incorporation requires the certificate of incorporation requires
approval of the corporation's board of (i) the approval and recommendation of
directors and the affirmative vote of a the board of directors; (ii) the
majority of the outstanding shares affirmative vote of a majority of the
entitled to vote thereon, either before outstanding stock entitled to vote on
or after the board of directors the amendment; and (iii) the
approval, although certain minor affirmative vote of a majority of the
amendments may be adopted by the board outstanding stock of each class
of directors alone, such as amendments entitled to vote on the amendment as a
causing stock splits (including an class. The certificate of incorporation
increase in the authorized number of of the Delaware company, as proposed,
shares in proportion thereto) and further requires the affirmative vote
amendments changing names and addresses of the holders of at least 66.67% of
given in the articles. The Company's the shares of capital stock of the
articles of incorporation do not require corporation issued and outstanding and
a greater level of approval. Under entitled to vote to amend, repeal or
California law, the holders of the adopt a provision inconsistent with
outstanding shares of a class of stock provisions of the Delaware company's
are entitled to vote as a class if a certificate of incorporation concerning
proposed amendment to the articles of (i) shares authorized; (ii) amendment
incorporation would: (i) increase or of bylaws; (iii) authority to call
decrease the aggregate number of special stockholder meetings; and
authorized shares of such class; (ii) (iv) amendment of the certificate of
effect an exchange, reclassification or incorporation. If the Company's shareholders
cancellation of all or part of the approve proposal 3C, then the affirmative vote
shares of such class, other than a of the holders of at least 66.67% of
stock split; (iii) effect the Delaware company's shares will be
required to approve any charter amendments described above.
an exchange, or create a right of
exchange, of all or part of the shares
of another class into the shares of such
class; (iv) change the rights,
preferences, privileges or restrictions
of the shares of such class; (v) create
a new class of shares having rights,
preferences or privileges prior to the
shares of such class, or increase the
rights, preferences or privileges or the
number of authorized shares having
rights, preference or privileges prior
to the shares of such class; (vi) in the
case of preferred shares, divide the
shares of any class into series having
different rights, preferences,
privileges or restrictions or authorize
the board of directors to do so; or
(vii) cancel or otherwise affect
dividends on the shares of such class
which have accrued but have not been
paid.
27
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Amendment of Bylaws Under California law, and according to The Delaware company certificate of
the Company's bylaws, the bylaws of the incorporation, as proposed, authorizes
Company may be adopted, amended or the board of directors to adopt, amend
repealed either by the board of or repeal the bylaws. Notwithstanding
directors or a majority of the the foregoing, the holders of at least
outstanding shares entitled to vote. 66.67% of the shares of capital stock
of the Delaware company issued and
outstanding and entitled to vote may,
by affirmative vote, adopt, amend, alter or
repeal the bylaws of the Delaware company.
If the Company's shareholders approve
proposal 3D, then it will be more difficult
for the Delaware company's stockholders to
amend the Delaware company's bylaws than
it is for the Company's shareholders
to amend the Company's bylaws.
Dividends and Repurchases of Under California law, no distributions Under Delaware law, the board of
Shares to a corporation's shareholders may be directors of a corporation may,
made unless: (i) the amount of the subject to any restrictions contained
retained earnings of the corporation in its certificate of incorporation,
immediately prior to the distribution declare and pay dividends upon the
equals or exceeds the amount of the shares of its capital stock either (i)
proposed distribution; (ii) immediately out of its surplus; or (ii) if there
after the distribution, the sum of the is not surplus, out of net profits for
assets of the corporation (excluding the fiscal year in which the dividend
certain items) is at least equal to is declared or the preceding fiscal
1 (1)/4 times its liabilities; and the year, provided that if the capital of
current assets of the corporation is at the corporation is less than the aggregate
least equal to its current liabilities, amount of capital represented by the
or if the average of the earnings of the issued and outstanding stock of all
corporation before taxes on income and classes having a preference upon the
before interest expense for the two distributions of the assets of the
preceding fiscal years was less than the corporation, then the board of
average of the interest expense of the directors may not declare and pay
corporation for those fiscal years, at dividends out of net profits. Delaware
least equal to 1 (1)/4 times its current law generally provides that a
liabilities. California law generally corporation may redeem or purchase its
provides that a corporation may acquire shares only if such redemption or
its own shares, with the payment for repurchase would not impair the
such shares being subject to the same capital of the corporation.
restrictions as dividend payments.
28
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Dissenters' Rights Under California law, if the approval of Under Delaware law, stockholders of a
the outstanding shares of the corporation that is a constituent
corporation is required for a merger or corporation in a merger generally have
reorganization, each shareholder the right to demand and receive
entitled to vote on the transaction, and payment of the fair value of their
who did not vote in favor of the merger stock in lieu of receiving the merger
or reorganization, may require the consideration. However, appraisal
corporation to purchase for cash at fair rights are not available to holders of
market value the shares owned by such shares: (i) listed on a national
shareholder. No appraisal rights are securities exchange; (ii) designated
available for shares listed on any as a national market system security
national securities exchange certified on an interdealer quotation system
by the Commissioner of Corporations or operated by the National Association
listed on the Nasdaq National Market, of Securities Dealers, Inc.; or (iii)
unless there exists with respect to such held of record by more than 2,000
shares any restriction on transfer stockholders; unless holders of stock
imposed by the corporation or by any law are required to accept in the merger
or regulation or if demands for payment anything other than any combination
are filed with respect to 5% or more of: (a) shares of stock or depositary
of the outstanding shares of that class. receipts of the surviving corporation
in the merger; (b) shares of stock or
depositary receipts of another corporation
that, at the effective date of the merger,
will be either: (1) listed on a national
securities exchange; (2) designated as a
national market system security on an
interdealer quotation system operated by
the National Association of Securities
Dealers, Inc.; or (3) held of record by
more than 2,000 stockholders; (c) cash in
lieu of fractional shares of the stock or
depositary receipts received; or (d) any
combination thereof.
In addition, appraisal rights are not available
to the holders of shares of the surviving
corporation in the merger, if the merger does not
require the approval of the stockholders of that
corporation.
Section 2115 of the California General
Corporation Law may impose California law
regarding appraisal rights to the exclusion of
Delaware law.
29
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Liability and Indemnity The Company's articles of incorporation Under Delaware law, a corporation may
eliminate the personal liability of the indemnify any director, officer,
Company's directors to the fullest extent employee or agent made or threatened to
permitted by California law. The Company's be made a party to any threatened,
bylaws provide that Company shall pending or completed proceeding if
indemnify its directors and officers to the person acted in good faith and in a
the fullest extent permitted by manner such person reasonably believed
California law, and grants the power to be in the best interests of the
to indemnify its employees and agents. corporation, and, with respect to any
The Company's bylaws provide that criminal action or proceeding, had no
the Company shall pay any expenses reasonable cause to believe that his or
incurred in defending any indemnified her conduct was unlawful. The Delaware
action, in advance of final disposition company's certificate of incorporation
of such action or proceeding, upon and bylaws contains provisions that
receipt of an undertaking by or on require the Delaware company to indemnify
behalf of the indemnified party to directors, officers, employees and
repay such amount if it shall ultimately agents to the full extent permitted by
be determined that the indemnified party Delaware law. The corporation would be
is not entitled to indemnification. required to indemnify a person in
connection with a proceeding initiated by
such person, however, only if the
proceeding was authorized by the board of
directors. The Delaware company's bylaws
also provide that the corporation shall
advance expenses incurred by its directors
or officers in defending a civil or
criminal action, suit or proceeding
because that person is a director or
officer, and may advance the expenses
incurred by any employee or agent of the
corporation. Such payment, however, will be
made only upon receipt of an undertaking by
or on behalf of the indemnified party to repay
such amount if it shall ultimately be determined
that the indemnified party is not entitled
to indemnification.
Indemnity Insurance The Company's bylaws authorize the The Delaware company's bylaws
purchase of indemnity insurance for the authorize the purchase of indemnity
benefit of any person required or insurance for the benefit of any
permitted to be indemnified pursuant to person required or permitted to be
the Company's bylaws. The Company has indemnified pursuant to the Delaware
not, however, purchased any such company's bylaws.
indemnity insurance to date.
30
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Preemptive Rights Under California law, a shareholder is Under Delaware law, a stockholder is
not entitled to preemptive rights to not entitled to preemptive rights to
subscribe for additional issuances of subscribe for additional issuances of
stock, or any security convertible into stock, or any security convertible
stock, unless the rights are into stock, unless the rights are
specifically granted in the articles of specifically granted in the
incorporation. The Company's articles of certificate of incorporation. The
incorporation do not provide for any Delaware company's certificate of
such preemptive rights. incorporation does not provide for any
such preemptive rights.
Certain Business Combination Under California law, except where the Section 203 of the Delaware General
Restrictions fairness of the transaction has been Corporation Law prohibits "business
approved by the California Commissioner combinations," including mergers,
of Corporations and except in a consolidations, sales and leases of
"short-form" merger (the merger of a assets, issuances of securities and
parent corporation with a subsidiary in similar transactions, by a corporation
which the parent owns at least 90% of the or a subsidiary with an "interested stockholder"
outstanding shares of each class of the who beneficially owns 15% or more of a
subsidiary's stock), if the surviving corporation's voting stock, for three
corporation or its parent corporation years after the person or entity
owns, directly or indirectly, shares of becomes an interested stockholder,
the target corporation representing more unless (i) prior to the time that the
than 50% of the voting power of the stockholder became an interested
target corporation prior to the merger, stockholder, the board of directors
the nonredeemable common stock of a approved either the business
target corporation may be converted only combination or the transaction that
into nonredeemable common stock of the resulted the stockholder becoming an
surviving corporation or its parent interested stockholder; (ii) after
corporation, unless all of the completion of the transaction in which
shareholders of the class consent. The the stockholder became an interested
effect of this provision is to prohibit stockholder, the interested
a cash-out merger of minority stockholder holds at least 85% of the
shareholders, except where the majority voting stock of the corporation not
shareholders already own 90% or more of including: (a) shares held by
the voting power of the target directors who are also officers and
corporation and could, therefore, effect (b) shares granted under certain
a short-form merger to accomplish such a employee benefit plans; or (iii) after
cash-out of minority shareholders. the stockholder becomes an interested
stockholder, the business combination
California law also provides that, is approved by the board of directors
except in certain circumstances, when a and the holders of at least 66 (2)/3%
tender offer or a proposal for of the outstanding voting stock,
reorganization or for a sale of assets excluding shares held by the
is made by an interested party interested stockholder.
(generally a controlling or managing
party of the target corporation), an A Delaware corporation may elect in
affirmative opinion in writing as to the its certificate of incorporation not
fairness of the consideration to be paid to be governed by Section 203. The
to the shareholders must be delivered Delaware company's certificate of
to shareholders. This fairness opinion incorporation, however, does not contain
requirement does not apply to a such an opt-out provision.
corporation that does not have shares
held of record by at least 100 persons
or to a transaction that has been
qualified under California state
securities laws. Furthermore, if a
tender of shares or vote is sought
pursuant to an interested party's
proposal and a later proposal is made
by another party at least 10 days prio
to the date of acceptance of the
interested party's proposal, the
shareholders must be informed of the
later offer and be afforded a
reasonable opportunity to withdraw any
vote, consent or proxy, or to withdraw
any tendered shares.
31
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Vote on Extraordinary Under California law, the principal Under Delaware law, unless otherwise
Corporate Transactions terms of a merger or reorganization must provided in the certificate of
be approved by a vote of the board of incorporation, a sale or other
directors of each constituent disposition of all or substantially
corporation in a merger or sale of all of the corporation's assets, a
assets reorganization. California law merger or a consolidation of the
also generally requires the affirmative corporation with another corporation
vote of a majority of the outstanding requires the affirmative vote of a
shares of each class entitled to vote majority of the board of directors
thereon (two classes of common stock (except in certain limited
differing only as to voting rights are circumstances) and, with certain
considered to be a single class for exceptions, the affirmative vote of a
these purposes), except that, unless majority of the outstanding shares
required by its articles of entitled to vote on the matter. The
incorporation, no authorizing Delaware company's certificate of
shareholder vote is required of a incorporation does not contain voting
corporation surviving a merger if the requirements for extraordinary
shareholders of such corporation shall corporate transactions in addition to
own, immediately after the merger, more or different from the approvals
than 5/6 of the voting power of the mandated by law.
surviving corporation. Regardless of the
voting power exercised by the Furthermore, under Delaware law,
shareholders in the resulting unless otherwise provided in the
corporation, however, California law corporation's certificate of
requires the affirmative vote of a incorporation, approval of the
majority of the outstanding shares stockholders of a surviving
entitled to vote thereon if (i) the corporation in a merger is not
surviving corporation's articles of required if: (i) the plan of merger
incorporation will be amended and does not amend in any respect the
would otherwise require shareholder certificate of incorporation of the surviving
approval; or (ii) shareholders of such corporation; (ii) the shares outstanding
corporation will receive shares of the immediately before the effectiveness of the
surviving corporation having different merger are not changed by the merger; and
rights, preferences, privileges or (iii) either no shares of common stock
restrictions (shares in a foreign of the surviving corporation and no
corporation are, by definition, shares, securities or obligations
considered to have different rights) convertible into this stock are to be
than the shares surrendered. The issued or delivered under the plan of
Company's articles of incorporation do merger, or the authorized unissued
not modify these statutory requirements. shares or the treasury shares of
common stock of the surviving
corporation to be issued or delivered
under the plan of merger, plus those
initially issuable upon conversion of any other
shares, securities or obligations to be issued or
delivered under the plan do not exceed 20% of the
shares of common stock of the surviving
corporation outstanding immediately prior to the
merger. The Delaware company's certificate of
incorporation does not provide otherwise.
32
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Fiduciary Duties of Directors Under California law, the duty of Under Delaware law, the duty of
loyalty requires directors to perform loyalty may be summarized as the duty
their duties in good faith in a manner to act in good faith, not out of
that the director reasonably believes to self-interest and in a manner that the
be in the best interests of the director reasonably believes to be in
corporation and its shareholders. The the best interests of the corporation.
duty of care requires that the directors The duty of care requires that the
act with such care, including reasonable directors act in an informed and
inquiry, as an ordinarily prudent person deliberative manner and to inform
in a like position would use under themselves, prior to making a business
similar circumstances. decision, of all material information
reasonably available to them.
Interested Party Transactions Under California law, no contract or Under Delaware law, no contract or
transaction that is between a transaction that is between a
corporation and one or more of its corporation and one or more of its
directors, or between a corporation and directors or officers, between a
another firm in which one or more of the corporation and another corporation in
corporation's directors has a material which one or more of the corporation's
financial interest is void or voidable directors or officers are directors or
solely because such director or other officers, or between a corporation and
corporation or firm is a party or another corporation in which one or
because the director is present at or more of the corporation's directors or
participates in the meeting of the board officers has a financial interest is
of directors or committee that void or voidable solely because of
authorizes the contract or transaction, such relationship or interest, or
if one or more of the following is true: solely because the director or officer
(i) the material facts of the is present at or participates in the
transaction and the director's interest meeting of the board of directors or
are fully disclosed to or known by the committee that authorizes the contract
board of directors or a committee of the or transaction, or solely because the
board of directors, and the board of director's or officer's vote was
directors or the committee authorizes or counted for this purpose, if one or
ratifies the transaction in good faith more of the following is true: (i) the
by a vote sufficient without counting material facts of the contract or
the vote of any interested director, and transaction and the director's or
such contract or transaction is just and officer's relationship or interest are
reasonable as to the corporation at the disclosed to or known by the board of
time the board of directors approves or directors or a committee of the board
ratifies it; (ii) the material facts of of directors, and the board of
the transaction and the director's directors or the committee in good
interest are fully disclosed to or known faith authorizes the contract or
by the uninterested shareholders transaction by an affirmative vote of
entitled to vote on the matter and they the majority of the disinterested
specifically approve in good faith the directors (even though these directors
contract or transaction; or (iii) the are less than a quorum); (ii) the
contract or transaction is just and material facts of the contract or
reasonable to the corporation at the transaction and the director's or
time it was approved or ratified. officer's relationship or interest are
disclosed to or known by the
shareholders entitled to vote on the
matter and they specifically approve
in good faith the contract or
transaction; or (iii) the contract or
transaction is fair to the corporation
as of the time it was authorized,
approved or ratified.
33
Nanometrics Nanometrics
(California Corporation) (Delaware Corporation)
-------------------------------------- ---------------------------------------
Shareholder Suits Under California law, a shareholder Under Delaware law, a stockholder may
bringing a derivative action on behalf initiate a derivative action to
of the corporation need not have been a enforce a right of a corporation if
shareholder at the time of the the corporation wrongfully fails to
transaction in question, provided that enforce the right itself. An
certain tests are met concerning the individual may also commence a class
fairness of allowing the action to go action suit on behalf of himself and
forward. The shareholder must make his other similarly situated stockholders
or her demands on the board of directors to enforce an obligation owed to the
before filing suit. stockholders directly where the requirements
for maintaining a class action under
California law also provides that the Delaware law have been met. The
corporation or the defendant in a complaint must: (i) state that the
derivative suit may make a motion to the plaintiff was a stockholder at the
court for an order requiring the time of the transaction of which the
plaintiff shareholder to furnish a plaintiff complains or that the plaintiff's
security bond. shares thereafter devolved on the plaintiff by
operation of law; and (ii) with respect to a
derivative action: (a) allege with particularity
the efforts made by the plaintiff to obtain the
action the plaintiff desires from the directors;
or (b) allege with particularity that such effort
would have been futile.
Additionally, the plaintiff must remain a
stockholder through the duration of the suit. The
action will not be dismissed or compromised
without the approval of the Delaware Court of
Chancery.
Inspection of Books and Under California law, shareholders Under Delaware law, any stockholder is
Records holding an aggregate of 5% or more of entitled to inspect and copy books and
the corporation's voting shares, or records, including the corporation's
shareholders holding an aggregate of 1% stock ledger and a list of its
or more of such shares who have stockholders, as long as the
contested the election of directors and inspection is for a proper purpose and
who have filed a Schedule 14A with the during the usual hours of business.
Securities and Exchange Commission,
an absolute right to inspect and copy Section 1601 of the California General
the corporation's shareholder list. Corporation Law applies to any
corporation with its principal
In addition, Section 1601 of the executive offices in the State of
California General Corporation Law California, even if that corporation
provides that any shareholder may is incorporated in another
inspect the accounting books and records jurisdiction. The principal executive
and minutes of a corporation, provided offices of the Delaware company will
that the inspection is for a purpose be in California even though the
reasonably related to the person's Delaware will be incorporated in
interests as a shareholder. Delaware. Accordingly, the Delaware
company stockholders will have the right to
inspect the books and records of the Delaware
company pursuant to Section 1601 of the
California General Law.
34
PROPOSAL 4
APPROVAL OF THE
2005 EQUITY INCENTIVE PLAN
We are asking stockholders to approve the Company's adoption of the 2005
Equity Incentive Plan (the "2005 Plan") so that we can use the 2005 Plan to
achieve the Company's goals and also receive a federal income tax deduction for
certain compensation paid under the 2005 Plan. The board of directors and the
Company's compensation committee have approved the 2005 Plan, subject to
stockholder approval at the annual meeting. Our named executive officers and
directors have an interest in this proposal by virtue of their being eligible to
receive equity awards under the 2005 Plan. The full text of the 2005 Plan is
attached hereto as Appendix C.
A total of 1,200,000 shares of common stock have initially been reserved
for issuance under the 2005 Plan, plus an annual increase to be added on the
first day of the Company's fiscal year for three years (beginning in 2006 and
ending after the 2008 increase), equal to the least of (i) 3% of the Company's
outstanding common stock on that date or (ii) an amount determined by the board
of directors.
We strongly believe that the approval of the 2005 Plan is essential to our
continued success. The board of directors and management believe that equity
awards motivate high levels of performance, align the interests of employees and
stockholders by giving employees the perspective of an owner with an equity
stake in the Company, and provide an effective means of recognizing employee
contributions to the success of the Company. The board of directors and
management believe that equity awards are of great value in recruiting and
retaining personnel who help the Company meet its goals, as well as rewarding
and encouraging current employees. The board of directors and management believe
that the ability to grant equity awards will be important to the future success
of the Company.
The Company's 2000 Stock Option Plan had only 518,803 shares remaining
available for issuance as of January 1, 2005. As a result, if the stockholders
do not approve this proposal, the Company will be limited in its ability to make
discretionary option or other equity award grants under an equity incentive plan
to assist in recruiting and retaining personnel.
Summary of the Plan
The following paragraphs provide a summary of the principal features of the
2005 Plan and its operation. The Plan is set forth in its entirety as Appendix C
to this proxy statement. The following summary is qualified in its entirety by
reference to the 2005 Plan.
Background and Purpose of the 2005 Plan
The 2005 Plan permits the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units and performance shares (each
individually, an "Award"). The 2005 Plan is intended to attract and retain the
best available personnel for positions of substantial responsibility, including
(1) employees of the Company and any parent or subsidiary, (2) consultants who
provide services to the Company and any parent or subsidiary, and (3) directors
of the Company. The 2005 Plan also is designed to provide additional incentive
to these services providers, to promote the success of the Company's business
and to permit the payment of compensation that qualifies as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)").
Administration of the 2005 Plan
A committee (the "Committee") of the board of directors will administer the
2005 Plan. The Committee generally will be the compensation/stock option
committee, which will consist of two or more directors who qualify as
"non-employee directors" under Rule 16b-3 of the Securities Exchange Act of
1934, and as "outside directors" under Section 162(m) (so that the Company is
entitled to a federal tax deduction for certain compensation paid under the 2005
Plan). Notwithstanding the foregoing, the Board may itself administer the 2005
Plan or appoint one or more committees to administer the 2005 Plan with respect
to different groups of service providers. The Board, the compensation committee
or other committee administering the 2005 Plan is referred to herein as the
"Administrator."
Subject to the terms of the 2005 Plan, the Administrator has the sole
discretion to select the employees, consultants, and directors who will receive
Awards, determine the terms and conditions of Awards (for example, the
35
exercise price and vesting schedule), and interpret the provisions of the 2005
Plan and outstanding Awards. The Administrator may not, however, reprice Awards
or exchange Awards for other Awards, cash or a combination thereof, without the
approval of the stockholders.
If an Award is settled is cancelled, expires, or is forfeited or
repurchased by the Company for any reason without having been fully exercised or
vested, the unvested, cancelled, forfeited or repurchased number of shares of
Company common stock ("Shares") generally will be returned to the available pool
of Shares reserved for issuance under the 2005 Plan. Any Shares subject to
options or stock appreciation rights generally will be counted against the
available pool as one Share for every Share subject to the option or stock
appreciation rights. Any Shares of restricted stock or Shares subject to
performance shares or restricted stock units with a per share or unit purchase
price lower than 100% of Fair Market Value on the date of grant generally will
be counted against the available pool as two Shares for every one Share subject
thereto. Shares actually issued under the 2005 Plan or withheld to pay the
exercise price of an Award or to satisfy tax withholding obligations with
respect to an Award will not be returned to the 2005 Plan and will not be
available for future issuance under the plan. Also, if the Company experiences
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares, a
proportional adjustment will be made to the number of Shares available for
issuance under the 2005 Plan, the number and price of Shares subject to
outstanding Awards and the per-person limits on Awards, as appropriate to
reflect the stock dividend or other change, should the Administrator determine
that such an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the 2005 Plan.
Eligibility to Receive Awards
The Administrator selects the employees, consultants, and directors who
will be granted Awards under the 2005 Plan. The actual number of individuals who
will receive Awards cannot be determined in advance because the Administrator
has the discretion to select the participants.
Stock Options
A stock option is the right to acquire Shares at a fixed exercise price for
a fixed period of time. Under the 2005 Plan, the Administrator may grant
nonstatutory stock options and/or incentive stock options (which entitle
employees, but not the Company, to more favorable tax treatment). The
Administrator will determine the number of Shares covered by each option, but
during any fiscal year of the Company, no participant may be granted options and
stock appreciation rights together covering more than 500,000 Shares.
The exercise price of the Shares subject to each option is set by the
Administrator but cannot be less than 100% of the fair market value (on the date
of grant) of the Shares covered by the option. In addition, the exercise price
of an incentive stock option must be at least 110% of fair market value if (on
the grant date) the participant owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
subsidiaries. The aggregate fair market value of the Shares (determined on the
grant date) covered by incentive stock options which first become exercisable by
any participant during any calendar year also may not exceed $100,000.
Options issued under the 2005 Plan become exercisable at the times and on
the terms established by the Administrator. The Administrator also establishes
the time at which options expire, but the expiration of an incentive stock
option may not be later than ten years after the grant date (such term to be
limited to 5 years in the case of an incentive stock option granted to a
participant who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of parent or subsidiary of
the Company).
The exercise price of each option must be paid in full at the time of
exercise. The exercise price may be paid in any form as determined by the
Administrator, including, but not limited to, cash, check, surrender of Shares
that have a fair market value on the date of surrender equal to the aggregate
exercise price of the shares as to which the option is being exercise,
consideration received pursuant to a cashless exercise program, promissory note,
through a reduction in the amount of Company liability to the participant, or
other legal methods of consideration.
36
If a participant's service relationship with us terminates for any reason
(excluding death or disability), then the participant may exercise the option
within a period of time as determined by the Administrator and specified in the
Award agreement to the extent that the Award is vested on the date of
termination (but in no event later than the expiration of the term of such
Award). In the absence of a specified time set forth in the Award agreement, the
option will remain exercisable for three months following the termination of the
participant's service relationship. If a participant's service relationship
terminates due to the participant's disability or death, the participant (or his
or her estate or beneficiary) may exercise the option within a period of time as
determined by the Administrator and specified in the Award agreement to the
extent the Award was vested on the date of termination of the service
relationship (but in no event later than the expiration of the term of such
Award). In the absence of a specified time in the Award agreement, the option
will remain exercisable for the twelve months following the termination of the
participant's service due to disability or death.
Stock Appreciation Rights
Stock appreciation rights are Awards that grant the participant the right
to receive an amount equal to (1) the number of Shares exercised, times (2) the
amount by which the Company's stock price exceeds the exercise price. The
Administrator set the exercise price. An individual will be able to profit from
a stock appreciation right only if the fair market value of the stock increases
above the exercise price. The Company's obligation arising upon the exercise of
a stock appreciation right may be paid in Shares or in cash, or any combination
thereof, as the Administrator may determine.
Awards of stock appreciation rights may be granted in connection with all
or any part of an option or may be granted independently of options. No
participant may be granted stock appreciation rights and options together
covering more than 500,000 shares in any fiscal year of the Company.
The Administrator determines the terms of stock appreciation rights. A
stock appreciation right will be exercisable, in whole or in part, at such time
as the Administrator will specify in the Award agreement, but will expire no
later than ten (10) years after the date of grant.
If a participant's service relationship with us terminates for any reason
(excluding death or disability), then the participant may exercise the stock
appreciation right within a period of time as determined by the Administrator
and specified in the Award agreement to the extent that the Award is vested on
the date of termination (but in no event later than the expiration of the term
of such Award). In the absence of a specified time set forth in the Award
agreement, the stock appreciation right will remain exercisable for three months
following the termination of the participant's service relationship. If a
participant's service relationship terminates due to the participant's
disability or death, the participant (or his or her estate or beneficiary) may
exercise the stock appreciation right within a period of time as determined by
the Administrator and specified in the Award agreement to the extent the Award
was vested on the date of termination of the service relationship (but in no
event later than the expiration of the term of such Award). In the absence of a
specified time in the Award agreement, the stock appreciation right will remain
exercisable for the twelve months following the termination of the participant's
service due to disability or death.
Restricted Stock
Awards of restricted stock are Shares that vest in accordance with the
terms and conditions established by the Administrator. The Administrator may set
vesting criteria based upon the achievement of Company-wide, departmental,
business unit or individual goals, which may include continued employment or
service, applicable federal or state securities or any other basis determined by
the Committee. If the Administrator desires that the Award qualify as
performance-based compensation under Section 162(m), any restrictions will be
based on a specified list of performance goals (see "Performance Goals" below
for more information). The Administrator will determine the number of Shares of
restricted stock granted to any employee, consultant or director, but during any
fiscal year of the Company, no participant may be granted more than 250,000
Shares in the aggregate of restricted stock, performance shares or restricted
stock units.
37
Unless the Administrator determines otherwise, Shares of restricted stock
will be held by the Company as escrow agent until any restrictions on the Shares
have lapsed. The Administrator may accelerate the time at which any restriction
may lapse or be removed.
On the date set forth in the Award agreement, all unvested restricted stock
will be forfeited to the Company.
Restricted Stock Units
Awards of restricted stock units are Shares that vest in accordance with
terms and conditions established by the Administrator. The Administrator
determines the number of restricted stock units granted to any employee,
consultant or director, but during any fiscal year of the Company, no
participant may be granted more than 250,000 Shares in the aggregate subject to
restricted stock units, performance shares or restricted stock.
In determining whether an Award of restricted stock units should be made,
and/or the vesting schedule for any such Award, the Administrator may impose
whatever conditions to vesting it determines to be appropriate. The number of
restricted stock units paid out to the participant will depending on the extent
to which the vesting criteria are met. The Administrator may set vesting
criteria based upon the achievement of Company-wide, departmental, business unit
or individual goals, which may include continued employment or service,
applicable federal or state securities or any other basis determined by the
Committee. Notwithstanding the foregoing, if the Administrator desires that the
Award qualify as performance-based compensation under Section 162(m), any
restrictions will be based on a specified list of performance goals (see
"Performance Goals" below for more information).
Upon satisfying the applicable vesting criteria, the participant shall be
entitled to the payout specified in the Award agreement. Notwithstanding the
foregoing, at any time after the grant of restricted stock units, the
Administrator may reduce or waive any vesting criteria that must be met to
receive a payout. The Administrator, in its sole discretion, may pay earned
restricted stock units in cash, Shares, or a combination thereof. Shares
represented by restricted stock units that are fully paid in cash will again be
available for grant under the Plan. On the date set forth in the Award
agreement, all unearned restricted stock units will be forfeited to the Company.
Performance Shares
Performance shares are Awards that will result in a payment to a
participant only if performance objectives established by the Administrator are
achieved or the Awards otherwise vest. The Administrator may set vesting
criteria based upon the achievement of Company-wide, departmental, business unit
or individual goals, which may include continued employment or service,
applicable federal or state securities or any other basis determined by the
Committee. Notwithstanding the foregoing, if the Administrator desires that the
Award qualify as performance-based compensation under Section 162(m), any
restrictions will be based on a specified list of performance goals (see
"Performance Goals" below for more information).
Performance shares have an initial value equal to the fair market value of
a share on the date of grant. Performance shares may be granted to employees,
consultants or directors at any time as shall be determined by the Administrator
in its sole discretion. Subject to the terms of the 2005 Plan, the Administrator
will have complete discretion to determine the number of shares subject to a
performance share award and the conditions that must be satisfied, which
typically will be based principally or solely on achievement of performance
milestones but may include a service based component, upon which is conditioned
on the grant or vesting of performance shares. Subject to the terms of the Plan,
the Administrator will determined the number of performance shares granted to a
service provider, during any fiscal year of the Company, no participant may be
granted more than 250,000 Shares in the aggregate subject to performance shares,
restricted stock units, or restricted stock.
On the date set forth in the Award agreement, all unearned or unvested
performance shares will be forfeited to the Company
38
Performance Goals
Under Section 162(m) of the Code, the annual compensation paid to our Chief
Executive Officer and to each of our other four most highly compensated
executive officers may not be deductible to the extent it exceeds $1 million.
However, we are able to preserve the deductibility of compensation in excess of
$1 million if the conditions of Section 162(m) are met. These conditions include
stockholder approval of the 2005 Plan, setting limits on the number of awards
that any individual may receive and for awards other than options, establishing
performance criteria that must be met before the award actually will vest or be
paid.
We have designed the Plan so that it permits us to pay compensation that
qualifies as performance-based under Section 162(m). Thus, the Administrator (in
its discretion) may make performance goals applicable to a participant with
respect to an award. At the Administrator's discretion, one or more of the
following performance goals may apply (all of which are defined in the Plan):
annual revenue, cash position, earnings per share, net income, individual
performance objectives, marketing and sales expenses as a percentage of sales,
net income as a percentage of sales, net income, operating cash flow, operating
income, return on assets, return on equity, return on sales, and total
stockholder return. The Performance Goals may differ from Participant to
Participant and from Award to Award.
Any criteria used may be measured, as applicable (1) in absolute terms, (2)
in relative terms (including, but not limited to, passage of time and/or against
another company or companies), (3) on a per-share basis, (4) against the
performance of the Company as a whole or a business unit of the Company, and/or
(5) on a pre-tax or after-tax basis. The Administrator also will adjust any
evaluation of performance under a performance goal to exclude (i) any
extraordinary non-recurring items, or (ii) the effect of any changes in
accounting principles affecting the Company's or a business units' reported
results.
Merger or Change in Control
In the event of a merger "change in control" of the Company, the successor
corporation will either assume or provide a substitute award for each
outstanding Award. In the event the successor corporation refuses to assume or
provide a substitute award, the Award will immediately vest and become
exercisable as to all of the Shares subject to such Award, or, if applicable,
the Award will be deemed fully earned and will be paid out prior to the merger
or change in control. In addition, if an option, stock appreciation right or
right to purchase restricted stock has become fully vested and exercisable in
lieu of assumption or substitution, the Committee will provide at least 15 days'
notice that the option, stock appreciation right or right to purchase restricted
stock will immediately vest and become exercisable as to all of the Shares
subject to such Award and all outstanding options, stock appreciation rights and
rights to purchase restricted stock will terminate upon the expiration of such
notice period.
Awards to be Granted to Certain Individuals and Groups
The number of Awards (if any) that an employee, consultant, or director may
receive under the 2005 Plan is in the discretion of the Administrator and
therefore cannot be determined in advance. Our executive officers and directors
have an interest in this proposal because they are eligible to receive Awards
under the 2005 Plan. To date, stock options have been granted under existing
Company equity plans. The following table sets forth for each of the Company's
executive officers and directors (a) the total number of Shares subject to
options granted during the last fiscal year and (b) the average per Share
exercise price of such options. Quentin Wright and Michael Weber are not listed
on the table below because they did not join the Company in their capacities as
executive officers until after January 1, 2005.
Number of Average Per Share
Name of Individual or Group Options Granted Exercise Price
-------------------------- --------------- ---------------
Vincent J. Coates -- $
John D. Heaton 100,000 $12.02
Edmond R. Ward -- $
William G. Oldham -- $
Paul B. Nolan -- $
Roger Ingalls, Jr. 5,000 $10.37
Stephen J Smith, Jr. 10,000 $16.71
J. Thomas Bentley 10,000 $16.71
Norman V. Coates 10,000 $11.39
All executive officers, 105,000 $11.94
as a group (4 persons)
All directors who are not 30,000 $14.94
executive officers, as a
group (5 persons)
All employees who are not 308,550 $12.64
executive officers, as a group
39
Limited Transferability of Awards
Awards granted under the 2005 Plan generally may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the applicable laws of descent and distribution and may be exercised during
the lifetime of the participant, only by the participant. Notwithstanding the
foregoing, the Administrator may permit an individual to transfer an Award. Any
transfer shall be made in accordance with procedures established by the
Administrator.
Federal Tax Aspects
The following paragraphs are a summary of the general federal income tax
consequences to U.S. taxpayers and the Company of Awards granted under the 2005
Plan. Tax consequences for any particular individual may be different.
Nonstatutory stock options
No taxable income is recognized when a nonqualified stock option is granted
to a participant. Upon exercise, the participant will recognize ordinary income
in an amount equal to the excess of the fair market value of the Shares on the
exercise date over the exercise price. Any additional gain or loss recognized
upon later disposition of the Shares is capital gain or loss.
Incentive Stock Options
No taxable income is recognized when an incentive stock option is granted
or exercised (except for purposes of the alternative minimum tax, in which case
taxation is the same as for nonstatutory stock options). If the participant
exercises the option and then later sells or otherwise disposes of the Shares
more than two years after the grant date and more than one year after the
exercise date, the difference between the sale price and the exercise price will
be taxed as capital gain or loss. If the participant exercises the option and
then later sells or otherwise disposes of the Shares before the end of the two-
or one-year holding periods described above, he or she generally will have
ordinary income at the time of the sale equal to the fair market value of the
Shares on the exercise date (or the sale price, if less) minus the exercise
price of the option. Any additional gain or loss will be capital gain or loss.
Stock Appreciation Rights
No taxable income is reportable when a stock appreciation right is granted
to a participant. Upon exercise, the participant generally will recognize
ordinary income in an amount equal to the amount of cash received and the fair
market value of any Shares received. Any additional gain or loss recognized upon
any later disposition of the Shares would be capital gain or loss.
Restricted Stock, Restricted Stock Units and Performance Shares
A participant will not have taxable income upon grant unless he or she
elects to be taxed at that time. Instead, he or she generally will recognize
ordinary income at the time of vesting equal to the fair market value (on the
vesting date) of the Shares or cash received minus any amount paid for the
Shares.
Tax Effect for the Company
The Company generally will be entitled to a tax deduction in connection
with an Award under the 2005 Plan in an amount equal to the ordinary income
realized by a participant and at the time the participant recognizes such income
(for example, the exercise of a nonqualified stock option). As discussed above,
special rules limit the deductibility of compensation paid to our Chief
Executive Officer and to each of our four most highly compensated executive
officers.
40
However, the 2005 Plan has been designed to permit the Administrator to grant
Awards that qualify as performance-based compensation under Section 162(m),
thereby permitting the Company to receive a federal income tax deduction in
connection with such Awards.
Amendment and Termination of the Plan
The Board generally may amend, alter, suspend or terminate the 2005 Plan at
any time and for any reason. However, no amendment, alter, suspension, or
termination may impair the rights of any participant in the 2005 Plan without
his or her consent. Amendments will be contingent on stockholder approval if
required by applicable law. Unless terminated earlier by the Board, the 2005
Plan will continue in effect until ten (10) years following the date of the
Board of Director's adoption of the 2005 Plan.
Summary
We believe strongly that the approval of the 2005 Plan is essential to our
continued success. Awards such as those provided under the 2005 Plan constitute
an important incentive and help us to attract and retain people whose skills and
performance are critical to our success. Our employees and directors are our
most important asset. The Company's 2000 Stock Option Plan has only 518,803
shares remaining available for issuance. As a result, if the stockholders do not
approve the 2005 Plan, the Company will be severely limited in its ability to
make any discretionary option or other equity award grants under an equity
incentive plan to assist in recruiting and retaining personnel. The board of
directors believes that the 2005 Plan is vital to our ability to attract and
retain outstanding and highly skilled individuals to work for the Company and
serve on our board of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" PROPOSAL 4.
41
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of the board of directors has appointed BDO Seidman,
LLP, independent registered public accounting firm, to audit the consolidated
financial statements of the Company for the fiscal year ending December 31,
2005.
Deloitte & Touche LLP previously audited the Company's financial statements
from fiscal 1991 through the fiscal year ended January 3, 2004. Deloitte &
Touche LLP resigned effective as of August 23, 2004. BDO Seidman, LLP was
selected by the audit committee to serve as the Company's independent registered
public accounting firm effective as of September 3, 2004.
The reports of Deloitte & Touche LLP on the Company's financial statements
for the fiscal years ended December 28, 2002 and January 3, 2004 do not contain
an adverse opinion or a disclaimer of opinion, and are not qualified or modified
as to uncertainty, audit scope or accounting principles, except that such
reports include an explanatory paragraph relating to a change in method of
accounting for goodwill and other intangible assets.
During the fiscal years ended December 28, 2002 and January 3, 2004, and
through August 23, 2004, there were no disagreements between the Company and
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statements disclosure, or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of Deloitte & Touche LLP,
would have caused Deloitte & Touche LLP to make reference thereto in the firm's
reports on the Company's financial statements for such periods. In addition, no
reportable events, as defined in Item 304 (a)(1)(v) of Regulation S-K, occurred
during the Company's two most recent fiscal years.
Representatives of BDO Seidman, LLP are expected to be present at the
Company's annual meeting with the opportunity to make a statement if they desire
to do so, and are also expected to be available to respond to appropriate
questions.
Audit Fees
The following table summarizes the aggregate fees that the Company expects
to pay BDO Seidman, LLP for fiscal 2004 and fees billed to the Company by
Deloitte & Touche LLP for fiscal 2003 and 2002.
Type of fees Fiscal 2004(5) Fiscal 2003 Fiscal 2002
---------- -------------- ----------- -----------
Audit Fees(1) $ 221,335 $ 263,680 $ 264,239
Audit-Related Fees(2) 4,400 -- --
Tax Fees(3) -- 127,690 222,255
All Other Fees(4) -- 7,500 --
-------------- ----------- -----------
Total Fees $ 225,735 $ 398,870 $ 486,494
============== =========== ===========
------------------------------
(1) Fees for audit services consist of:
o Audit of the Company's annual financial statements
o Reviews of the Company's quarterly financial statements
o Statutory and regulatory audits, consents and other services related
to Securities and Exchange Commission filings
(2) Fees for audit-related services billed in fiscal 2004 consisted of
consultations on Securities and Exchange Commission comment letters
(3) Fees for tax services billed in fiscal 2003 consisted of tax compliance
assistance, transfer pricing documentation and assistance with tax return
filings in certain foreign jurisdictions
(4) All other fees consisted of training on the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002
(5) In fiscal 2004, Deloitte & Touche LLP billed the Company $74,036, $57,330,
$13,913 and $0 for audit, audit-related, tax and all other fees,
respectively.
42
In considering the nature of the services provided by the independent
registered public accountants, the audit committee determined that such services
are compatible with the provision of independent audit services. The audit
committee discussed these services with the independent registered public
accountants and the Company's management to determine that they are permitted
under the rules and regulations concerning auditors' independence promulgated by
the Securities and Exchange Commission to implement the Sarbanes-Oxley Act of
2002, as well as the American Institute of Certified Public Accountants.
Audit Committee Pre-Approval Policy
Pursuant to the audit committee charter, the audit committee must
pre-approve all audit and non-audit services, and the related fees, provided to
the Company by its independent auditors, or subsequently approve non-audit
services in those circumstances where a subsequent approval is necessary and
permissible under the Exchange Act or the rules of the Securities and Exchange
Commission. Accordingly, the audit committee pre-approved all services and fees
provided by Deloitte & Touche LLP and BDO Seidman, LLP during the year ended
January 1, 2005 and has concluded that the provision of these services is
compatible with the accountants' independence.
Matters Not Required to be Submitted to Security Holders
Approval by the shareholders of the selection of the independent registered
public accounting firm is not required, but the audit committee believes it is
desirable as a matter of good corporate governance to submit this matter to the
shareholders. If holders of a majority of the common stock represented and
voting at the annual meeting do not ratify the appointment of BDO Seidman, LLP
as the Company's independent registered public accounting firm for the fiscal
year ending December 31, 2005, the audit committee will consider whether it
should select another independent registered public accounting firm.
Vote Required
As a matter of good corporate governance, the Company is seeking the
affirmative vote of the holders of a majority of the shares of common stock
represented and voting at the annual meeting to approve this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2005.
43
OTHER MATTERS
The Company knows of no other matters to be submitted to the annual
meeting. If any other matters properly come before the annual meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the board of directors may recommend.
THE BOARD OF DIRECTORS
Dated: August __, 2005
44
NANOMETRICS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2005 ANNUAL MEETING OF SHAREHOLDERS
August 26, 2005
The undersigned shareholder(s) of Nanometrics Incorporated, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated August __, 2005, and hereby
appoints Vincent J. Coates and Paul B. Nolan, and each of them, Proxies and
Attorneys-in-Fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2005 Annual Meeting
of Shareholders of Nanometrics Incorporated to be held on Friday, August 26,
2005 at 1:00 p.m., local time, at the principal offices of the Company located
at 1550 Buckeye Drive, Milpitas, California, 95035 and at any adjournments
thereof, and to vote all shares of common stock which the undersigned is
entitled to vote on the matters set forth below:
ITEM 1. Election of Directors:
( ) FOR all nominees listed below (except as indicated)
( ) WITHHOLD AUTHORITY to vote for all nominees listed below
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Vincent J. Coates J. Thomas Bentley John D. Heaton
Stephen J Smith Edmond R. Ward William G. Oldham Norman V. Coates
ITEM 2. Proposal to approve the reincorporation of the Company under the laws
of the State of Delaware through a merger with Big League Merger
Corporation, a wholly-owned subsidiary of the Company.
( ) FOR ( ) AGAINST ( ) ABSTAIN
ITEM 3. PLEASE COMPLETE EITHER THIS ITEM OR THE INDIVIDUAL PROPOSALS BELOW, BUT
NOT BOTH. You may vote on all proposals to approve the governance and
other provisions in the certificate of incorporation and bylaws of the
Company to be contingent and effective upon the completion of the
reincorporation merger by marking the box below. If you mark both this
item and any individual proposal below only your vote on this item will
be counted.
( ) FOR ( ) AGAINST ( ) ABSTAIN
A. Proposal to approve a provision limiting the Company's stockholders' right to
call special meetings of stockholders.
( ) FOR ( ) AGAINST ( ) ABSTAIN
B. Proposal to approve a provision limiting the Company's stockholders' ability
to act by written consent.
( ) FOR ( ) AGAINST ( ) ABSTAIN
C. Proposal to approve a provision requiring a super-majority vote of the
Company's stockholders to amend certain provisions of its certificate of
incorporation.
( ) FOR ( ) AGAINST ( ) ABSTAIN
D. Proposal to approve a provision requiring a super-majority vote of the
Company's stockholders to amend certain provisions of the Company's bylaws.
( ) FOR ( ) AGAINST ( ) ABSTAIN
E. Proposal to approve a provision limiting the Company's stockholders' right to
remove directors from the board without cause.
( ) FOR ( ) AGAINST ( ) ABSTAIN
F. Proposal to approve the classification of the board of directors into
separate classes with staggered terms.
( ) FOR ( ) AGAINST ( ) ABSTAIN
G. Proposal to approve a provision limiting cumulative voting rights in
connection with the election of directors.
( ) FOR ( ) AGAINST ( ) ABSTAIN
ITEM 4. Proposal to approve the adoption of the Company's 2005 Employee Stock
Option Plan and the reservation of 1,200,000 shares of common stock
for issuance thereunder.
( ) FOR ( ) AGAINST ( ) ABSTAIN
ITEM 5. Proposal to ratify the appointment of BDO Seidman, LLP as the Company's
independent registered public accounting firm for the fiscal year
ending December 31, 2005:
( ) FOR ( ) AGAINST ( ) ABSTAIN
(Continued and to be signed, on reverse side)
45
(Continued from other side)
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NAMED HEREIN, "FOR" THE
PROPOSALS LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS
MAY COME BEFORE THE MEETING.
_____________________________________________________________
Typed or Printed Name(s)
_____________________________________________________________
Signature
_____________________________________________________________
Signature
_____________________________________________________________
Title, if applicable
_______________________________
Type and Number of Shares owned
Dated:___________________, 2005
THIS PROXY SHOULD BE MARKED, DATED, SIGNED BY THE SHAREHOLDER(S) EXACTLY AS HIS
OR HER NAME APPEARS HEREON AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE.
PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE. IF SHARES ARE HELD
BY JOINT TENANTS OR AS COMMUNITY PROPERTY, BOTH SHOULD SIGN.
46
APPENDIX A
RESTATED
CERTIFICATE OF INCORPORATION
NANOMETRICS INCORPORATED
Nanometrics Incorporated, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
A. The corporation was originally incorporated under the name of Minor
League Merger Corporation, and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
January 18, 2005.
B. Pursuant to Section 251 of the General Corporation Law of the State of
Delaware (the "DGCL"), this Restated Certificate of Incorporation amends and
restates the provisions of the original Certificate of Incorporation of the
corporation.
C. This Restated Certificate of Incorporation has been duly approved by the
Board of Directors of the corporation in accordance with Section 251 of the
DGCL.
D. The Certificate of Incorporation of the corporation is hereby amended
and restated in its entirety to read as follows:
ARTICLE I
The name of the corporation is Nanometrics Incorporated.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the DGCL.
ARTICLE IV
The corporation shall have authority to issue shares as follows:
47,000,000 shares of Common Stock, par value $0.001 per share. Each share
of Common Stock shall entitle the holder thereof to one (1) vote on each matter
submitted to a vote at a meeting of stockholders.
A-1
3,000,000 shares of Preferred Stock, par value $0.001 per share, which may
be issued from time to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the Board of Directors of
the corporation (authority to do so being hereby expressly vested in the Board
of Directors of the corporation). The Board of Directors of the corporation is
further authorized, subject to limitations prescribed by law, to fix by
resolution or resolutions the designations, powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, of any wholly unissued
series of Preferred Stock, including without limitation authority to fix by
resolution or resolutions the dividend rights, dividend rate, conversion rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and liquidation preferences of any such
series, and the number of shares constituting any such series and the
designation thereof, or any of the foregoing.
The Board of Directors of the corporation is further authorized to increase
(but not above the total number of authorized shares of the class) or decrease
(but not below the number of shares of any such series then outstanding) the
number of shares of any series, the number of which was fixed by it, subsequent
to the issuance of shares of such series then outstanding, subject to the
powers, preferences and rights, and the qualifications, limitations and
restrictions thereof stated in this Certificate of Incorporation or the
resolution of the Board of Directors of the corporation originally fixing the
number of shares of such series. If the number of shares of any series is so
decreased, then the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
ARTICLE V
The number of directors that constitutes the entire Board of Directors of
the corporation shall be determined in the manner set forth in the Bylaws of the
corporation. At each annual meeting of stockholders, each director of the
corporation shall be elected to hold office, and shall serve, until the
expiration of the term for which he or she is elected and until his or her
successor is duly elected and qualified or until his or her death, resignation,
or removal; except that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in accordance with
the DGCL.
Any director may be removed from office by the stockholders of the
corporation only for cause. Vacancies occurring on the Board of Directors of the
corporation for any reason and newly created directorships resulting from an
increase in the authorized number of directors may be filled only by vote of a
majority of the remaining members of the Board of Directors of the corporation,
although less than a quorum, at any meeting of the Board of Directors of the
corporation. A person so elected by the Board of Directors of the corporation to
fill a vacancy or newly created directorship shall hold office until the next
election of the class for which such director shall have been chosen and until
his or her successor shall have been duly elected and qualified.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the corporation is expressly authorized to adopt,
amend or repeal the Bylaws of the corporation. Notwithstanding the foregoing,
the holders of at least 66.67% of the shares of capital stock of the corporation
issued and outstanding and entitled to vote may by affirmative vote adopt,
amend, alter or repeal the Bylaws of the corporation.
ARTICLE VII
The election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
A-2
ARTICLE VIII
Special meetings of the stockholders of the corporation for any purpose or
purposes may be called at any time by the chairperson of the Board of Directors
of the corporation or a majority of the authorized number of directors, but such
special meetings may not be called by any other person or persons. No action
shall be taken by the stockholders of the corporation except at an annual or
special meeting of the stockholders called in accordance with this Certificate
of Incorporation or the Bylaws of the corporation, and no action shall be taken
by the stockholders by written consent.
ARTICLE IX
The corporation shall indemnify and hold harmless, to the fullest extent
permitted by the DGCL as it presently exists or may hereafter be amended, any
director or officer of the corporation who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding") by reason of
the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person in connection with any such
Proceeding. The corporation shall be required to indemnify a person in
connection with a Proceeding initiated by such person only if the Proceeding was
authorized by the Board of Directors of the corporation.
The corporation shall have the power to indemnify and hold harmless, to the
extent permitted by applicable law as it presently exists or may hereafter be
amended, any employee or agent of the corporation who was or is made or is
threatened to be made a party or is otherwise involved in any Proceeding by
reason of the fact that he or she, or a person for whom he or she is the legal
representative, is or was an employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person in connection with any such Proceeding.
Neither any amendment nor repeal of this Article IX, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article IX, shall eliminate or reduce the effect of this Article IX in respect
of any matter occurring, or any cause of action, suit or claim accruing or
arising or that, but for this Article IX, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE X
Except as provided in Article IX above, the corporation reserves the right
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding the foregoing, any other provision of law, this
Certificate of Incorporation or the Bylaws of the corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least 66.67% of the shares of capital
stock of the corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with,
Article IV, Article VI, Article VIII or Article X of this Certificate of
Incorporation.
A-3
IN WITNESS WHEREOF, Nanometrics Incorporated has caused this Restated
Certificate of Incorporation to be signed by the President and Chief Executive
Officer of the corporation on this day of 2005.
By:
------------------------------------
John D. Heaton
President and Chief Executive
Officer
A-4
APPENDIX B
AMENDED AND RESTATED BYLAWS OF
NANOMETRICS INCORPORATED
(initially adopted on January 18, 2005)
(as amended and restated on [________, 2005])
TABLE OF CONTENTS
Page
---------
ARTICLE I - CORPORATE OFFICES B- 1
1.1 REGISTERED OFFICE B- 1
1.2 OTHER OFFICES B- 1
ARTICLE II - MEETINGS OF STOCKHOLDERS B- 1
2.1 PLACE OF MEETINGS B- 1
2.2 ANNUAL MEETING B- 1
2.3 SPECIAL MEETING B- 1
2.4 ADVANCE NOTICE PROCEDURES; NOTICE OF STOCKHOLDERS' MEETINGS B- 1
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE B- 3
2.6 QUORUM B- 3
2.7 ADJOURNED MEETING; NOTICE B- 3
2.8 CONDUCT OF BUSINESS B- 3
2.9 VOTING B- 3
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS B- 4
2.11 PROXIES B- 4
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE B- 4
2.13 INSPECTORS OF ELECTION B- 4
ARTICLE III - DIRECTORS B- 5
3.1 POWERS B- 5
3.2 NUMBER OF DIRECTORS B- 5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS B- 5
3.4 CLASS OF DIRECTORS B- 5
3.5 RESIGNATION AND VACANCIES B- 6
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE B- 6
3.7 REGULAR MEETINGS B- 7
3.8 SPECIAL MEETINGS; NOTICE B- 7
3.9 QUORUM B- 7
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING B- 7
3.11 FEES AND COMPENSATION OF DIRECTORS B- 7
3.12 REMOVAL OF DIRECTORS B- 8
ARTICLE IV - COMMITTEES B- 8
4.1 COMMITTEES OF DIRECTORS B- 8
4.2 COMMITTEE MINUTES B- 8
4.3 MEETINGS AND ACTION OF COMMITTEES B- 8
ARTICLE V - OFFICERS B- 9
5.1 OFFICERS B- 9
5.2 APPOINTMENT OF OFFICERS B- 9
5.3 SUBORDINATE OFFICERS B- 9
5.4 REMOVAL AND RESIGNATION OF OFFICERS B- 9
5.5 VACANCIES IN OFFICES B- 9
5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS B- 9
5.7 AUTHORITY AND DUTIES OF OFFICERS B- 9
B-i
TABLE OF CONTENTS
(continued)
Page
---------
ARTICLE VI - RECORDS AND REPORTS B- 10
6.1 MAINTENANCE AND INSPECTION OF RECORDS B- 10
6.2 INSPECTION BY DIRECTORS B- 10
ARTICLE VII - GENERAL MATTERS B- 10
7.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS B- 10
7.2 STOCK CERTIFICATES; PARTLY PAID SHARES B- 10
7.3 SPECIAL DESIGNATION ON CERTIFICATES B- 11
7.4 LOST CERTIFICATES B- 11
7.5 CONSTRUCTION; DEFINITIONS B- 11
7.6 DIVIDENDS B- 11
7.7 FISCAL YEAR B- 11
7.8 SEAL B- 12
7.9 TRANSFER OF STOCK B- 12
7.10 STOCK TRANSFER AGREEMENTS B- 12
7.11 REGISTERED STOCKHOLDERS B- 12
7.12 WAIVER OF NOTICE B- 12
ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION B- 12
8.1 NOTICE BY ELECTRONIC TRANSMISSION B- 12
8.2 DEFINITION OF ELECTRONIC TRANSMISSION B- 13
8.3 INAPPLICABILITY B- 13
ARTICLE IX - INDEMNIFICATION B- 13
9.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS B- 13
9.2 INDEMNIFICATION OF OTHERS B- 13
9.3 PREPAYMENT OF EXPENSES B- 14
9.4 DETERMINATION; CLAIM B- 14
9.5 NON-EXCLUSIVITY OF RIGHTS B- 14
9.6 INSURANCE B- 14
9.7 OTHER INDEMNIFICATION B- 14
9.8 AMENDMENT OR REPEAL B- 14
ARTICLE X - AMENDMENTS B- 14
B-ii
AMENDED AND RESTATED BYLAWS
OF
NANOMETRICS INCORPORATED
ARTICLE I - CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The registered office of Nanometrics Incorporated shall be fixed in the
corporation's certificate of incorporation, as the same may be amended from time
to time.
1.2 OTHER OFFICES.
The corporation's board of directors (the "Board") may at any time
establish other offices at any place or places where the corporation is
qualified to do business.
ARTICLE II - MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board. In the absence of any such
designation or determination, stockholders' meetings shall be held at the
corporation's principal executive office.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held each year. The Board
shall designate the date and time of the annual meeting. In the absence of such
designation the annual meeting of stockholders shall be held on the second
Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding business day. At the annual meeting, directors shall be elected and
any other proper business may be transacted.
2.3 SPECIAL MEETING.
A special meeting of the stockholders may be called as provided in the
certificate of incorporation.
No business may be transacted at such special meeting other than the
business specified in such notice to stockholders. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
may be held.
2.4 ADVANCE NOTICE PROCEDURES; NOTICE OF STOCKHOLDERS' MEETINGS.
(i) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board, (B) otherwise properly brought before the
meeting by or at the direction of the Board, or (C) otherwise properly
brought before the meeting by a stockholder. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation
not less than one hundred twenty (120) calendar days before the one year
anniversary of the date on which the corporation first mailed its proxy
statement to stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the event that no
annual meeting was held in the previous year or the date of the annual
meeting has been
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changed by more than thirty (30) days from the date of the prior year's
meeting, notice by the stockholder to be timely must be so received not
later than the close of business on the later of one hundred twenty (120)
calendar days in advance of such annual meeting and ten (10) calendar days
following the date on which public announcement of the date of the meeting
is first made. A stockholder's notice to the secretary shall set forth as
to each matter the stockholder proposes to bring before the annual
meeting: (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at
the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the
class and number of shares of the corporation that are beneficially owned
by the stockholder, (d) any material interest of the stockholder in such
business, and (e) any other information that is required to be provided by
the stockholder pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent
to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934
Act. Notwithstanding anything in these bylaws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (i). The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the meeting
that business was not properly brought before the meeting and in
accordance with the provisions of this paragraph (i), and, if he should so
determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(ii) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (ii) shall be eligible for election as
directors. Nominations of persons for election to the Board may be made at
a meeting of stockholders by or at the direction of the Board or by any
stockholder of the corporation entitled to vote in the election of
directors at the meeting who complies with the notice procedures set forth
in this paragraph (ii). Such nominations, other than those made by or at
the direction of the Board, shall be made pursuant to timely notice in
writing to the secretary of the corporation in accordance with the
provisions of paragraph (i) of this Section 2.4. Such stockholder's notice
shall set forth (a) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a director: (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and
number of shares of the corporation that are beneficially owned by such
person, (D) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nominations are to be made
by the stockholder, and (E) any other information relating to such person
that is required to be disclosed in solicitations of proxies for elections
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as
a nominee and to serving as a director if elected); and (b) as to such
stockholder giving notice, the information required to be provided
pursuant to paragraph (i) of this Section 2.4. At the request of the
Board, any person nominated by a stockholder for election as a director
shall furnish to the secretary of the corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the
procedures set forth in this paragraph (ii). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by
these bylaws, and if he should so determine, he shall so declare at the
meeting, and the defective nomination shall be disregarded.
These provisions shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors and
committees of the Board, but in connection therewith no new business shall be
acted upon at any such meeting unless stated, filed and received as herein
provided. Notwithstanding anything in these bylaws to the contrary, no business
brought before a meeting by a stockholder shall be conducted at an annual
meeting except in accordance with procedures set forth in this Section 2.4.
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All notices of meetings of stockholders shall be sent or otherwise given
in accordance with either Section 2.5 or Section 8.1 of these bylaws not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notice shall specify the place, if any,
date and hour of the meeting, the means of remote communication, if any, by
which stockholders and proxy holders may be deemed to be present in person and
vote at such meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall be given:
(i) if mailed, when deposited in the United States mail, postage
prepaid, directed to the stockholder at his or her address as it appears
on the corporation's records; or
(ii) if electronically transmitted as provided in Section 8.1 of
these bylaws.
An affidavit of the secretary or an assistant secretary of the corporation
or of the transfer agent or any other agent of the corporation that the notice
has been given by mail or by a form of electronic transmission, as applicable,
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
2.6 QUORUM.
The holders of a majority of the stock issued and outstanding and entitled
to vote, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. If,
however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairperson of the meeting, or (ii) the
stockholders entitled to vote at the meeting, present in person or represented
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time, place if any thereof, and the means of remote communications if any by
which stockholders and proxy holders may be deemed to be present in person and
vote at such adjourned meeting are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairperson of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING.
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to Section 217 (relating to voting rights of fiduciaries, pledgors and
joint owners of stock) and Section 218 (relating to voting trusts and other
voting agreements) of the Delaware General Corporation Law (the "DGCL").
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
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2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which record date shall
not precede the date on which the resolution fixing the record date is adopted
and which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other such action.
If the Board does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
2.11 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by proxy
authorized by an instrument in writing or by a transmission permitted by law
filed in accordance with the procedure established for the meeting, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Section
212 of the DGCL.
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. The corporation shall not
be required to include electronic mail addresses or other electronic contact
information on such list. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting for a period of at least 10
days prior to the meeting: (i) on a reasonably accessible electronic network,
provided that the information required to gain access to such list is provided
with the notice of the meeting, or (ii) during ordinary business hours, at the
corporation's principal executive office. In the event that the corporation
determines to make the list available on an electronic network, the corporation
may take reasonable steps to ensure that such information is available only to
stockholders of the corporation. If the meeting is to be held at a place, then
the list shall be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
If the meeting is to be held solely by means of remote communication, then the
list shall also be open to the examination of any stockholder during the whole
time of the meeting on a reasonably accessible electronic network, and the
information required to access such list shall be provided with the notice of
the meeting. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
2.13 INSPECTORS OF ELECTION
A written proxy may be in the form of a telegram, cablegram, or other
means of electronic transmission which sets forth or is submitted with
information from which it can be determined that the telegram, cablegram, or
other means of electronic transmission was authorized by the person.
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Before any meeting of stockholders, the Board shall appoint an inspector
or inspectors of election to act at the meeting or its adjournment. The number
of inspectors shall be either one (1) or three (3). If any person appointed as
inspector fails to appear or fails or refuses to act, then the chairperson of
the meeting may, and upon the request of any stockholder or a stockholder's
proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(i) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(ii) receive votes, ballots or consents;
(iii) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(iv) count and tabulate all votes or consents;
(v) determine when the polls shall close;
(vi) determine the result; and
(vii) do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
The inspectors of election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three (3) inspectors of election, the decision, act or certificate of
a majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
ARTICLE III - DIRECTORS
3.1 POWERS.
Subject to the provisions of the DGCL and any limitations in the
certificate of incorporation or these bylaws relating to action required to be
approved by the stockholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board.
3.2 NUMBER OF DIRECTORS.
The authorized number of directors shall be determined from time to time
by resolution of the Board. No reduction of the authorized number of directors
shall have the effect of removing any director before that director's term of
office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.5 of these bylaws, each director,
including a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and until such director's successor is
elected and qualified or until such director's earlier death, resignation or
removal. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws. The certificate of incorporation
or these bylaws may prescribe other qualifications for directors.
3.4 CLASS OF DIRECTORS
The directors shall be divided into three classes as nearly equal in size as is
practicable, hereby designated Class I, Class II and Class III. The term of
office of the initial Class I directors shall expire at the first
regularly-scheduled annual meeting of the stockholders following the effective
date of these bylaws (the "Effective Date"), the term of office of the initial
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Class II directors shall expire at the second annual meeting of the stockholders
following the Effective Date and the term of office of the initial Class III
directors shall expire at the third annual meeting of the stockholders following
the Effective Date. At each annual meeting of stockholders, commencing with the
first regularly-scheduled annual meeting of stockholders following the Effective
Date, each of the successors elected to replace the directors of a Class whose
term shall have expired at such annual meeting shall be elected to hold office
until the third annual meeting next succeeding his or her election and until his
or her respective successor shall have been duly elected and qualified.
If the number of directors is hereafter changed, any newly created
directorships or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is practicable,
provided that no decrease in the number of directors constituting the Board
shall shorten the term of any incumbent director.
3.5 RESIGNATION AND VACANCIES.
Any director may resign at any time upon notice given in writing or by
electronic transmission to the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws, vacancies and newly created directorships resulting from any increase in
the authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director. A
person so elected by the directors then in office to fill a vacancy or newly
created directorship shall hold office until the next election of the class for
which such director shall have been chosen and until his or her successor shall
have been duly elected and qualified.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the DGCL.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole Board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least 10% of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office as aforesaid, which election shall be
governed by the provisions of Section 211 of the DGCL as far as applicable.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board may hold meetings, both regular and special, either within or
outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the Board, or any committee designated by the Board, may
participate in a meeting of the Board, or any committee, by means of conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
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3.7 REGULAR MEETINGS.
Regular meetings of the Board may be held without notice at such time and
at such place as shall from time to time be determined by the Board.
3.8 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board for any purpose or purposes may be called at
any time by the chairperson of the Board, the chief executive officer, the
president, the secretary or a majority of the authorized number of directors.
Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier or by telephone;
(ii) sent by United States first-class mail, postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that director's address, telephone number,
facsimile number or electronic mail address, as the case may be, as shown on the
corporation's records.
If the notice is (i) delivered personally by hand, by courier or by
telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be
delivered or sent at least 24 hours before the time of the holding of the
meeting. If the notice is sent by United States mail, it shall be deposited in
the United States mail at least four days before the time of the holding of the
meeting. Any oral notice may be communicated to the director. The notice need
not specify the place of the meeting (if the meeting is to be held at the
corporation's principal executive office) nor the purpose of the meeting.
3.9 QUORUM.
At all meetings of the Board, a majority of the authorized number of
directors shall constitute a quorum for the transaction of business. The vote of
a majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board, except as may be otherwise specifically provided
by statute, the certificate of incorporation or these bylaws. If a quorum is not
present at any meeting of the Board, then the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the
Board, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing or by electronic transmission and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of the
Board or committee. Such filing shall be in paper form if the minutes are
maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the Board shall have the authority to fix the compensation of directors.
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3.12 REMOVAL OF DIRECTORS.
Any director may be removed from office by the stockholders of the
corporation only for cause.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV - COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board may, by resolution passed by a majority of the authorized number
of directors, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board or in these bylaws, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) approve or adopt, or recommend to the stockholders, any action
or matter expressly required by the DGCL to be submitted to stockholders for
approval, or (ii) adopt, amend or repeal any bylaw of the corporation.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report the
same to the Board when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of:
(i) Section 3.6 (place of meetings and meetings by telephone);
(ii) Section 3.7 (regular meetings);
(iii) Section 3.8 (special meetings and notice);
(iv) Section 3.9 (quorum);
(v) Section 7.12 (waiver of notice); and
(vi) Section 3.10 (board action by written consent without a meeting)
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the Board and its members. However:
(i) the time of regular meetings of committees may be determined
either by resolution of the Board or by resolution of the committee;
(ii) special meetings of committees may also be called by resolution
of the Board; and
(iii) notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of
the committee. The Board may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
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ARTICLE V - OFFICERS
5.1 OFFICERS.
The officers of the corporation shall be a president and a secretary. The
corporation may also have, at the discretion of the Board, a chairperson of the
Board, a vice chairperson of the Board, a chief executive officer, a chief
financial officer or treasurer, one or more vice presidents, one or more
assistant vice presidents, one or more assistant treasurers, one or more
assistant secretaries, and any such other officers as may be appointed in
accordance with the provisions of these bylaws. Any number of offices may be
held by the same person.
5.2 APPOINTMENT OF OFFICERS.
The Board shall appoint the officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Sections 5.3
and 5.5 of these bylaws, subject to the rights, if any, of an officer under any
contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board may appoint, or empower the chief executive officer or, in the
absence of a chief executive officer, the president, to appoint, such other
officers and agents as the business of the corporation may require. Each of such
officers and agents shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the Board may from
time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board at any regular or special meeting
of the Board or, except in the case of an officer chosen by the Board, by any
officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice. Unless otherwise
specified in the notice of resignation, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice to
the rights, if any, of the corporation under any contract to which the officer
is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall be filled by
the Board or as provided in Section 5.2.
5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairperson of the Board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the Board or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
5.7 AUTHORITY AND DUTIES OF OFFICERS.
All officers of the corporation shall respectively have such authority and
perform such duties in the management of the business of the corporation as may
be designated from time to time by the Board or the stockholders and, to the
extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board.
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ARTICLE VI - RECORDS AND REPORTS
6.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive office or at such
place or places as designated by the Board, keep a record of its stockholders
listing their names and addresses and the number and class of shares held by
each stockholder, a copy of these bylaws as amended to date, accounting books,
and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal executive
office.
6.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
ARTICLE VII - GENERAL MATTERS
7.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the Board or within the agency power of an officer, no officer,
agent or employee shall have any power or authority to bind the corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or for any amount.
7.2 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of the corporation shall be represented by certificates,
provided that the Board may provide by resolution or resolutions that some or
all of any or all classes or series of its stock shall be uncertificated shares.
Any such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the corporation. Notwithstanding the adoption
of such a resolution by the Board, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the chairperson or vice-chairperson of the Board, or the president or
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
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The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
7.3 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the DGCL, in lieu of the
foregoing requirements there may be set forth on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
7.4 LOST CERTIFICATES.
Except as provided in this Section 7.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
7.5 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the DGCL shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
7.6 DIVIDENDS.
The Board, subject to any restrictions contained in either (i) the DGCL,
or (ii) the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock. Dividends may be paid in cash, in property, or in
shares of the corporation's capital stock.
The Board may set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose and may
abolish any such reserve. Such purposes shall include but not be limited to
equalizing dividends, repairing or maintaining any property of the corporation,
and meeting contingencies.
7.7 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution of the
Board and may be changed by the Board.
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7.8 SEAL.
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the Board. The corporation may use the corporate seal by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
7.9 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
7.10 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the DGCL.
7.11 REGISTERED STOCKHOLDERS.
The corporation:
(i) shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to
vote as such owner;
(ii) shall be entitled to hold liable for calls and assessments the
person registered on its books as the owner of shares; and
(iii) shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of another person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
7.12 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the DGCL,
the certificate of incorporation or these bylaws, a written waiver, signed by
the person entitled to notice, or a waiver by electronic transmission by the
person entitled to notice, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to notice. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice or any waiver by
electronic transmission unless so required by the certificate of incorporation
or these bylaws.
ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION
8.1 NOTICE BY ELECTRONIC TRANSMISSION.
Without limiting the manner by which notice otherwise may be given
effectively to stockholders pursuant to the DGCL, the certificate of
incorporation or these bylaws, any notice to stockholders given by the
corporation under any provision of the DGCL, the certificate of incorporation or
these bylaws shall be effective if given by a form of electronic transmission
consented to by the stockholder to whom the notice is given. Any such consent
shall be revocable by the stockholder by written notice to the corporation. Any
such consent shall be deemed revoked if:
(i) the corporation is unable to deliver by electronic transmission
two consecutive notices given by the corporation in accordance with such
consent; and
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(ii) such inability becomes known to the secretary or an assistant
secretary of the corporation or to the transfer agent, or other person
responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall
not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed
given:
(i) if by facsimile telecommunication, when directed to a number at
which the stockholder has consented to receive notice;
(ii) if by electronic mail, when directed to an electronic mail
address at which the stockholder has consented to receive notice;
(iii) if by a posting on an electronic network together with separate
notice to the stockholder of such specific posting, upon the later of (A)
such posting and (B) the giving of such separate notice; and
(iv) if by any other form of electronic transmission, when directed
to the stockholder.
An affidavit of the secretary or an assistant secretary or of the transfer
agent or other agent of the corporation that the notice has been given by a form
of electronic transmission shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
8.2 DEFINITION OF ELECTRONIC TRANSMISSION.
An "electronic transmission" means any form of communication, not directly
involving the physical transmission of paper, that creates a record that may be
retained, retrieved, and reviewed by a recipient thereof, and that may be
directly reproduced in paper form by such a recipient through an automated
process.
8.3 INAPPLICABILITY.
Notice by a form of electronic transmission shall not apply to Sections
164, 296, 311, 312 or 324 of the DGCL.
ARTICLE IX - INDEMNIFICATION
9.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall indemnify and hold harmless, to the fullest extent
permitted by the DGCL as it presently exists or may hereafter be amended, any
director or officer of the corporation who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding") by reason of
the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person in connection with any such
Proceeding. The corporation shall be required to indemnify a person in
connection with a Proceeding initiated by such person only if the Proceeding was
authorized by the Board.
9.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power to indemnify and hold harmless, to
the extent permitted by applicable law as it presently exists or may hereafter
be amended, any employee or agent of the corporation who was or is made or is
threatened to be made a party or is otherwise involved in any Proceeding by
reason of the fact that he or she, or a person for whom he or she is the legal
representative, is or was an employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
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enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person in connection with any such Proceeding.
9.3 PREPAYMENT OF EXPENSES
The corporation shall pay the expenses incurred by any officer or director
of the corporation, and may pay the expenses incurred by any employee or agent
of the corporation, in defending any Proceeding in advance of its final
disposition; provided, however, that the payment of expenses incurred by a
person in advance of the final disposition of the Proceeding shall be made only
upon receipt of an undertaking by the person to repay all amounts advanced if it
should be ultimately determined that the person is not entitled to be
indemnified under this Article IX or otherwise.
9.4 DETERMINATION; CLAIM
If a claim for indemnification or payment of expenses under this Article
IX is not paid in full within sixty days after a written claim therefor has been
received by the corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
9.5 NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Article IX shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the certificate of incorporation, these bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
9.6 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the DGCL.
9.7 OTHER INDEMNIFICATION
The corporation's obligation, if any, to indemnify any person who was or
is serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or non-profit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or
non-profit enterprise.
9.8 AMENDMENT OR REPEAL
Any repeal or modification of the foregoing provisions of this Article IX
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification."
ARTICLE X - AMENDMENTS
These bylaws may be adopted, amended or repealed by the affirmative vote
of the holders of at least 66.67% of the shares of capital stock of the
corporation issued and outstanding and entitled to vote. However, the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal these bylaws upon the directors. The fact that such power has
been so conferred upon the directors shall not divest the stockholders of the
power, nor limit their power to adopt, amend or repeal these bylaws as set forth
above.
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NANOMETRICS INCORPORATED
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned hereby certifies that he or she is the duly elected,
qualified, and acting Secretary of Nanometrics Incorporated, a Delaware
corporation and that the foregoing bylaws, comprising seventeen (17) pages, were
amended and restated on , 2005 by the corporation's board of directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
day of , 2005.
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Secretary
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APPENDIX C
NANOMETRICS INCORPORATED
2005 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Plan are:
o to attract and retain the best available personnel for positions of
substantial responsibility,
o to provide additional incentive to Service Providers, and
o to promote the success of the Company's business.
Awards granted under the Plan may be Incentive Stock Options,
Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights,
Performance Shares and Restricted Stock Units, as determined by the
Administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Annual Revenue" means the Company's or a business unit's net sales
for the Fiscal Year, determined in accordance with generally accepted accounting
principles.
(c) "Applicable Laws" means the requirements relating to the
administration of equity compensation plans under U.S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any other country or jurisdiction where Awards are, or will
be, granted under the Plan.
(d) "Award" means, individually or collectively, a grant under the Plan
of Options, Restricted Stock, Stock Appreciation Rights, Performance Shares or
Restricted Stock Units.
(e) "Award Agreement" means the written or electronic agreement setting
forth the terms and provisions applicable to each Award granted under the Plan.
The Award Agreement is subject to the terms and conditions of the Plan.
(f) "Awarded Stock" means the Common Stock subject to an Award.
(g) "Board" means the Board of Directors of the Company.
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(h) "Cash Position" means the Company's level of cash and cash
equivalents.
(i) "Change in Control" means the occurrence of any of the following
events, in one or a series of related transactions:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company, a subsidiary of the Company or a
Company employee benefit plan, including any trustee of such plan acting as
trustee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the election
of directors; or
(ii) the consummation of a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or
(iii) the sale or disposition by the Company of all or
substantially all the Company's assets; or
(iv) a change in the composition of the Board, as a result of which
fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are Directors as of the date this
Plan is approved by the Board, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the Incumbent
Directors and whose election or nomination was not in connection with any
transaction described in (i) or (ii) above or in connection with an actual or
threatened proxy contest relating to the election of directors of the Company.
(j) "Code" means the Internal Revenue Code of 1986, as amended.
(k) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(l) "Common Stock" means the common stock of the Company.
(m) "Company" means Nanometrics Incorporated, a California corporation.
(n) "Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services.
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(o) "Continuous Status as a Service Provider" means the absence of any
interruption or termination of the employment or service relationship with the
Company or any Subsidiary. Continuous Status as a Service Provider shall not be
considered interrupted in the case of (i) medical leave, military leave, family
leave, or any other leave of absence approved by the Administrator, provided, in
each case, that such leave does not result in termination of the employment and
service relationship with the Company or any Subsidiary, as the case may be,
under the terms of the respective Company policy for such leave; however,
vesting may be tolled while a Service Provider is on an approved leave of
absence under the terms of the respective Company policy for such leave; or (ii)
in the case of transfers between locations of the Company or between the
Company, its Parent or any Subsidiary, or any successor. For purposes of
Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then three (3) months following the 91st day of such leave
any Incentive Stock Option held by the Participant shall cease to be treated as
an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(p) "Director" means a member of the Board.
(q) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(r) "Dividend Equivalent" means a credit, payable in cash, made at the
discretion of the Administrator, to the account of a Participant in an amount
equal to the cash dividends paid on one Share for each Share represented by an
Award held by such Participant.
(s) "Earnings Per Share" means as to any Performance Period, the
Company's or a business unit's Net Income, divided by a weighted average number
of common shares outstanding and dilutive common equivalent shares deemed
outstanding, determined in accordance with generally accepted accounting
principles.
(t) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Chairman nor as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(v) "Exchange Program" means a program under which (i) outstanding
Awards are surrendered or cancelled in exchange for Awards of the same type
(which may have lower exercise prices and different terms), Awards of a
different type, and/or cash, and/or (ii) the exercise price of an outstanding
Award is reduced. The terms and conditions of any Exchange Program will be
determined by the Administrator in its sole discretion.
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(w) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system, on the last market
trading day prior to the date of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the date of
determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(x) "Fiscal Year" means a fiscal year of the Company.
(y) "Individual Performance Objective" means as to a Participant, the
objective and measurable goals set by a "management by objectives" process and
approved by the Committee (in its discretion).
(z) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder and is expressly designated by the
Administrator at the time of grant as an incentive stock option.
(aa) "Marketing and Sales Expenses as a Percentage of Sales" means as
to any Performance Period, the Company's or a business unit's marketing and
sales expenses stated as a percentage of sales, determined in accordance with
generally accepted accounting principles.
(bb) "Net Income as a Percentage of Sales" means as to any Performance
Period, the Company's or a business unit's Net Income stated as a percentage of
sales, determined in accordance with generally accepted accounting principles.
(cc) "Net Income" means as to any Performance Period, the income after
taxes of the Company or a business unit determined in accordance with generally
accepted accounting principles, provided that prior to the beginning of the
Performance Period, the Committee shall determine whether any significant
item(s) shall be included or excluded from the calculation of Net Income with
respect to one or more Participants.
(dd) "Nonstatutory Stock Option" means an Option that by its terms does
not qualify or is not intended to qualify as an Incentive Stock Option.
(ee) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
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(ff) "Operating Cash Flow" means the Company's or a business unit's sum
of Net Income plus depreciation and amortization less capital expenditures plus
changes in working capital comprised of accounts receivable, inventories, other
current assets, trade accounts payable, accrued expenses, product warranty,
advance payments from customers and long-term accrued expenses, determined in
accordance with generally acceptable accounting principles.
(gg) "Operating Income" means the Company's or a business unit's income
from operations determined in accordance with generally accepted accounting
principles.
(hh) "Outside Director" means a Director who is not an Employee.
(ii) "Option" means a stock option granted pursuant to the Plan.
(jj) "Participant" means the holder of an outstanding Award granted
under the Plan.
(kk) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(ll) "Performance Goals" means the goal(s) (or combined goal(s))
determined by the Committee (in its discretion) to be applicable to a
Participant with respect to an Award. As determined by the Committee, the
Performance Goals applicable to an Award may provide for a targeted level or
levels of achievement using one or more of the following measures: (a) Annual
Revenue, (b) Cash Position, (c) Earnings Per Share, (d) Individual Performance
Objectives, (e) Marketing and Sales Expenses as a Percentage of Sales, (f) Net
Income as a Percentage of Sales, (g) Net Income, (h) Operating Cash Flow, (i)
Operating Income, (j) Return on Assets, (k) Return on Equity, (l) Return on
Sales, and (m) Total Shareholder Return. The Performance Goals may differ from
Participant to Participant and from Award to Award. The Committee shall
appropriately adjust any evaluation of performance under a Performance Goal to
exclude (i) any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management's discussion and analysis
of financial conditions and results of operations appearing in the Company's
annual report to shareholders for the applicable year, or (ii) the effect of any
changes in accounting principles affecting the Company's or a business units'
reported results. Any criteria used may be measured, as applicable, (i) in
absolute terms, (ii) in relative terms (including, but not limited to, passage
of time and/or against another company or companies), (iii) on a per-share
basis, (iv) against the performance of the Company as a whole or of a business
unit of the Company, and/or (v) to the extent not otherwise specified by the
definition of the Performance Goal, on a pre-tax or after-tax basis.
(mm) "Performance Period" means the time period of any Fiscal Year or
such longer period as determined by the Committee in its sole discretion during
which the performance objectives must be met.
(nn) "Performance Share" means a performance share Award granted to a
Participant pursuant to Section 14.
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(oo) "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock are subject to restrictions and therefore, the
Shares are subject to a substantial risk of forfeiture. Such restrictions may be
based on the passage of time (including the continuation of employment or
service), the achievement of target levels of performance, or the occurrence of
other events as determined by the Administrator.
(pp) "Plan" means this 2005 Equity Incentive Plan.
(qq) "Restricted Stock" means shares of Common Stock granted pursuant
to Section 12 of the Plan, as evidenced by an Award Agreement.
(rr) "Restricted Stock Unit" means a bookkeeping entry representing an
amount equal to the Fair Market Value of one Share, granted pursuant to Section
13. Each Restricted Stock Unit represents an unfunded and unsecured obligation
of the Company.
(ss) "Return on Assets" means the percentage equal to the Company's or
a business unit's Operating Income before incentive compensation, divided by
average net Company or business unit, as applicable, assets, determined in
accordance with generally accepted accounting principles.
(tt) "Return on Equity" means the percentage equal to the Company's Net
Income divided by average shareholder's equity, determined in accordance with
generally accepted accounting principles.
(uu) "Return on Sales" means the percentage equal to the Company's or a
business unit's Operating Income before incentive compensation, divided by the
Company's or the business unit's, as applicable, revenue, determined in
accordance with generally accepted accounting principles.
(vv) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(ww) "Section 16(b)" means Section 16(b) of the Exchange Act.
(xx) "Service Provider" means an Employee, Director or Consultant.
(yy) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 17 of the Plan.
(zz) "Stock Appreciation Right" or "SAR" means a stock appreciation
right granted pursuant to Section 10 below.
(aaa) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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(bbb) "Total Shareholder Return" means the total return (change in
share price plus reinvestment of any dividends) of a share of the Company's
common stock.
3. Stock Subject to the Plan. Subject to the provisions of Section 17 of
the Plan, the maximum aggregate number of Shares which may issued under the Plan
is 1,200,000 Shares, plus an annual increase to be added on the first day of the
Company's Fiscal Year for three years beginning in 2006 and ending after the
2008 annual increase equal to the least of (i) 3% of the outstanding Shares on
such date or (ii) an amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.
Any Shares subject to Options or SARs shall be counted against the
numerical limits of this Section 3 as one Share for every Share subject thereto.
Any Shares of Restricted Stock or Shares subject to Performance Shares or
Restricted Stock Units with a per share or unit purchase price lower than 100%
of Fair Market Value on the date of grant shall be counted against the numerical
limits of this Section 3 as two Shares for every one Share subject thereto. To
the extent that a Share that was subject to an Award that counted as two Shares
against the Plan reserve pursuant to the preceding sentence is recycled back
into the Plan under the next paragraph of this Section 3, the Plan shall be
credited with two Shares.
If an Award expires or becomes unexercisable without having been exercised
in full or is surrendered pursuant to an Exchange Program, or, with respect to
Options, Restricted Stock, Performance Shares or Restricted Stock Units, is
forfeited to or repurchased by the Company, the unpurchased Shares (or for
Awards other than Options and SARs, the forfeited or repurchased shares) which
were subject thereto shall become available for future grant or sale under the
Plan (unless the Plan has terminated). With respect to SARs, Shares actually
issued pursuant to an SAR as well as the Shares withheld to pay the exercise
price shall cease to be available under the Plan. Shares that have actually been
issued under the Plan under any Award shall not be returned to the Plan and
shall not become available for future distribution under the Plan; provided,
however, that if Shares of Restricted Stock, Performance Shares or Restricted
Stock Units are repurchased by the Company at their original purchase price or
are forfeited to the Company, such Shares shall become available for future
grant under the Plan. Shares used to pay the exercise price of an Option or the
purchase price of Restricted Stock shall not become available for future grant
or sale under the Plan. Shares used to satisfy tax withholding obligations shall
not become available for future grant or sale under the Plan. To the extent an
Award under the Plan is paid out in cash rather than stock, such cash payment
shall not reduce the number of Shares available for issuance under the Plan. Any
payout of Dividend Equivalents, because they are payable only in cash, shall not
reduce the number of Shares available for issuance under the Plan. Conversely,
any forfeiture of Dividend Equivalents shall not increase the number of Shares
available for issuance under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Board or different
Committees with respect to different groups of Service Providers may administer
the Plan.
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(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (a) the Board or (b) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted
hereunder;
(iii) to determine the number of shares of Common Stock or
equivalent units to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the date of grant, the time
or times when Awards may be exercised (or are earned) (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the
Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to institute an Exchange Program; however, the Administrator
may not institute an Exchange Program without shareholder approval.
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws and/or
qualifying for preferred tax treatment under foreign tax laws;
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(ix) to modify or amend each Award (subject to Section 19(c) of the
Plan), including the discretionary authority to extend the post-termination
exercisability period of Options and SARs longer than is otherwise provided for
in the Plan;
(x) to allow Participants to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares or cash to be issued upon
exercise of an Option, SAR or right to purchase Restricted Stock or upon vesting
or payout of another Award, that number of Shares or cash having a Fair Market
Value equal to the minimum amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by a Participant to have
Shares or cash withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
(xi) to determine whether Awards will be adjusted for Dividend
Equivalents;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Award previously granted by
the Administrator; and
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Participants and any other holders of Awards.
5. Eligibility. Awards may be granted to Service Providers; provided,
however, that Incentive Stock Options may be granted only to Employees.
6. No Employment Rights. Neither the Plan nor any Award shall confer upon a
Participant any right with respect to continuing the Participant's relationship
as an Employee or other Service Provider with the Company or its Subsidiaries,
nor shall they interfere in any way with the Participant's right or the
Company's or Subsidiary's right, as the case may be, to terminate such
relationship at any time, with or without cause.
7. Code Section 162(m) Provisions.
(a) Option and SAR Annual Share Limit. No Participant shall be granted,
in any Fiscal Year, Options and Stock Appreciation Rights to purchase more than
500,000 Shares; provided, however, that such limit shall be 250,000 Shares in
the Participant's first Fiscal Year of Company service.
(b) Restricted Stock, Performance Share and Restricted Stock Unit
Annual Limit. No Participant shall be granted, in any Fiscal Year, more than
250,000 Shares in the aggregate of the following: (i) Restricted Stock, (ii)
Performance Shares, or (iii) Restricted Stock Units; provided, however, that
such limit shall be 125,000 Shares in the Participant's first Fiscal Year of
Company service.
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(c) Section 162(m) Performance Restrictions. For purposes of qualifying
grants of Restricted Stock, Performance Shares or Restricted Stock Units as
"performance-based compensation" under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the
achievement of Performance Goals. The Performance Goals shall be set by the
Administrator on or before the latest date permissible to enable the Restricted
Stock, Performance Shares or Restricted Stock Units to qualify as
"performance-based compensation" under Section 162(m) of the Code. In granting
Restricted Stock, Performance Shares or Restricted Stock Units which are
intended to qualify under Section 162(m) of the Code, the Administrator shall
follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of the
Code (e.g., in determining the Performance Goals).
(d) Changes in Capitalization. The numerical limitations in Sections
7(a) and (b) shall be adjusted proportionately in connection with any change in
the Company's capitalization as described in Section 17(a).
(e) If an Award is cancelled in the same Fiscal Year in which it was
granted (other than in connection with a transaction described in Section 17 of
the Plan), the cancelled Award will be counted against the limits set forth in
subsections (a) and (b) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
8. Term of Plan. Subject to Section 23 of the Plan, the Plan will become
effective upon its adoption by the Board. It will continue in effect for a term
of ten (10) years unless terminated earlier under Section 19 of the Plan.
9. Stock Options.
(a) Type of Option. Each Option shall be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, not withstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 9(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Term. The term of each Option shall be stated in the Award
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
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all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.
(c) Option Exercise Price and Consideration.
(i) Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option will be determined by the
Administrator, subject to the following:
(1) In the case of an Incentive Stock Option granted to an
Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
will be no less than 110% of the Fair Market Value per Share on the date of
grant.
(2) In the case of all other Options, the per Share exercise
price will be no less than 100% of the Fair Market Value per Share on the date
of grant.
(3) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(ii) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(iii) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Subject to
Applicable Laws, such consideration may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised and which meet the conditions established by the
Administrator to avoid adverse accounting consequences (as determined by the
Administrator);
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(5) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(6) a reduction in the amount of any Company liability to the
Participant, including any liability attributable to the Participant's
participation in any Company-sponsored deferred compensation program or
arrangement;
(7) any combination of the foregoing methods of payment;
(8) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or
(9) any combination of the foregoing methods of payment.
10. Stock Appreciation Rights.
(a) Grant of SARs. Subject to the terms and conditions of the Plan, a
SAR may be granted to Service Providers at any time and from time to time as
will be determined by the Administrator, in its sole discretion.
(b) Number of Shares. The Administrator will have complete discretion
to determine the number of SARs granted to any Service Provider, subject to the
limits set forth in Section 7.
(c) Exercise Price and Other Terms. The Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and
conditions of SARs granted under the Plan.
(d) Exercise of SARs. SARs will be exercisable on such terms and
conditions as the Administrator, in its sole discretion, will determine.
(e) SAR Agreement. Each SAR grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.
(f) Expiration of SARs. An SAR granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth
in the Award Agreement; provided, however, that no SAR will have a term of more
than ten (10) years fom the date of grant.
(g) Payment of SAR Amount. Upon exercise of an SAR, a Participant will
be entitled to receive payment from the Company in an amount determined by
multiplying:
(i) The difference between the Fair Market Value of a Share on the
date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the SAR is
exercised.
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(h) Form of Payment. The Company's obligation arising upon the exercise
of a SAR may be paid in Common Stock or in cash, or in any combination of Common
Stock and cash, as the Administrator, in its sole discretion, may determine.
Shares issued upon the exercise of a SAR shall be valued at their Fair Market
Value as of the date of exercise.
11. Exercise of Option or SAR.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option or SAR
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. An Option may not be exercised for a fraction of a
Share.
An Option or SAR shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the terms of the
Option or SAR) from the person entitled to exercise the Option or SAR, and (ii)
full payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Award Agreement and the Plan. Shares issued
upon exercise of an Option or SAR shall be issued in the name of the Participant
or, if requested by the Participant, in the name of the Participant and his or
her spouse. Until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Awarded Stock, notwithstanding the
exercise of the Option. The Company shall issue or cause to be issued (and which
issuance may be in electronic entry form) such Shares promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 17 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised. Exercise of
a SAR in any manner shall, to the extent the SAR is exercised, result in a
decrease in the number of Shares which thereafter shall be available for
purposes of the Plan, and the SAR shall cease to be exercisable to the extent it
has been exercised.
(b) Termination of Continuous Status as a Service Provider. Upon
termination of a Participant's Continuous Status as a Service Provider (other
than termination by reason of the Participant's death or Disability), the
Participant may exercise his or her Option or SAR within such period of time as
is specified in the Award Agreement to the extent that the Award is vested on
the date of termination (but in no event later than the expiration of the term
of such Award as set forth in the Award Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
three (3) months following the Participant's termination. If the Option or SAR
is not so exercised within the time specified herein, the Option or SAR shall
terminate, and the Shares covered by such Option or SAR shall revert to the
Plan. Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option or SAR,
the Shares covered by the unvested portion of the Option or SAR will revert to
the Plan on the date one (1) month following the Participant's termination.
Notwithstanding the foregoing, in no event shall an Option or SAR be exercisable
after the expiration of the term of the Award as provided in the Award
Agreement.
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(c) Disability of Participant. If a Participant terminates his or her
Continuous Status as a Service Provider as a result of his or her Disability,
the Participant may exercise his or her Option or SAR within such period of time
as is specified in the Award Agreement to the extent the Option or SAR is vested
on the date of termination (but in no event later than the expiration of the
term of such Option or SAR as set forth in the Award Agreement). In the absence
of a specified time in the Award Agreement, the Option or SAR shall remain
exercisable for twelve (12) months following the Participant's termination. If,
after termination, the Participant does not exercise his or her Option or SAR
within the time specified herein, the Option or SAR shall terminate, and the
Shares covered by such Option or SAR shall revert to the Plan. Unless otherwise
provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option or SAR, the Shares covered by the
unvested portion of the Option or SAR will revert to the Plan on the date one
(1) month following the Participant's termination. Notwithstanding the
foregoing, in no event shall an Option or SAR be exercisable after the
expiration of the term of the Award as provided in the Award Agreement.
(d) Death of Participant. If a Participant dies while a Service
Provider, the Option or SAR may be exercised following the Participant's death
within such period of time as is specified in the Award Agreement (but in no
event may the option be exercised later than the expiration of the term of such
Option or SAR as set forth in the Award Agreement), by the Participant's
designated beneficiary, provided such beneficiary has been designated prior to
Participant's death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be
exercised by the personal representative of the Participant's estate or by the
person(s) to whom the Option or SAR is transferred pursuant to the Participant's
will or in accordance with the laws of descent and distribution. In the absence
of a specified time in the Award Agreement, the Option or SAR shall remain
exercisable for twelve (12) months following Participant's death. If the Option
or SAR is not so exercised within the time specified herein, the Option or SAR
shall terminate, and the Shares covered by such Option or SAR shall revert to
the Plan. Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option or SAR,
the Shares covered by the unvested portion of the Option or SAR will revert to
the Plan on the date one (1) month following the Participant's termination.
Notwithstanding the foregoing, in no event shall an Option or SAR be exercisable
after the expiration of the term of the Award as provided in the Award
Agreement.
12. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of
the Plan (including the limits set forth in Section 7), the Administrator, at
any time and from time to time, may grant Shares of Restricted Stock to Service
Providers in such amounts as the Administrator, in its sole discretion, will
determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction, the
number of Shares granted, and such other terms and conditions as the
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Administrator, in its sole discretion, will determine. Unless the Administrator
determines otherwise, Shares of Restricted Stock will be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.
(c) Transferability. Unless determined otherwise by the Administrator,
Shares of Restricted Stock may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution until the end of the applicable Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.
(i) General Restrictions. The Administrator may set restrictions
based upon the achievement of Company-wide, departmental, business unit, or
individual goals (including, but not limited to, continued employment or
service), applicable federal or state securities laws, or any other basis
determined by the Administrator in its discretion.
(ii) Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation" under
Section 162(m) of the Code, the Committee, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Committee on or before the latest date permissible to
enable the Restricted Stock to qualify as "performance-based compensation" under
Section 162(m) of the Code. In granting Restricted Stock which is intended to
qualify under Section 162(m) of the Code, the Committee shall follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
(e) Removal of Restrictions. Except as otherwise provided in this
Section 12, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan will be released from escrow as soon as practicable after
the last day of the Period of Restriction. The Administrator, in its discretion,
may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights. During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Administrator determines
otherwise.
(g) Dividends and Other Distributions. During the Period of
Restriction, Service Providers holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with respect to
such Shares unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares will be subject to the
same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.
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(h) Return of Restricted Stock to Company. On the date set forth in the
Award Agreement, the Restricted Stock for which restrictions have not lapsed
will revert to the Company and again will become available for grant under the
Plan.
13. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from
time to time as determined by the Administrator. Each Restricted Stock Unit
grant shall be evidenced by an Award Agreement that shall specify such other
terms and conditions as the Administrator, in its sole discretion, shall
determine, including all terms, conditions, and restrictions related to the
grant, the number of Restricted Stock Units (subject to the limitations set
forth in Section 7) and the form of payout, which, subject to Section 13(d), may
be left to the discretion of the Administrator.
(b) Vesting Criteria and Other Terms. The Administrator shall set
vesting criteria in its discretion, which, depending on the extent to which the
criteria are met, will determine the number of Restricted Stock Units that will
be paid out to the Participant.
(i) General Restrictions. The Administrator may set vesting
criteria based upon the achievement of Company-wide, departmental, business
unit, or individual goals (including, but not limited to, continued employment
or service), applicable federal or state securities laws, or any other basis
determined by the Administrator in its discretion.
(ii) Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock Units as "performance-based compensation"
under Section 162(m) of the Code, the Committee, in its discretion, may set
performance objectives based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest date
permissible to enable the Restricted Stock Units to qualify as
"performance-based compensation" under Section 162(m) of the Code. In granting
Restricted Stock Units that are intended to qualify under Section 162(m) of the
Code, the Committee shall follow any procedures determined by it from time to
time to be necessary or appropriate to ensure qualification of the Restricted
Stock Units under Section 162(m) of the Code (e.g., in determining the
Performance Goals).
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting
criteria, the Participant shall be entitled to receive a payout as specified in
the Award Agreement. Notwithstanding the foregoing, at any time after the grant
of Restricted Stock Units, the Administrator, in its sole discretion, may reduce
or waive any vesting criteria that must be met to receive a payout.
(d) Form and Timing of Payment. Payment of earned Restricted Stock
Units shall be made as soon as practicable after the date(s) set forth in the
Award Agreement. The Administrator, in its sole discretion, may pay earned
Restricted Stock Units in cash, Shares, or a combination thereof. Shares
represented by Restricted Stock Units that are fully paid in cash again shall be
available for grant under the Plan.
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(e) Cancellation. On the date set forth in the Award Agreement, all
unearned Restricted Stock Units shall be forfeited to the Company.
14. Performance Shares.
(a) Grant of Performance Shares. Subject to the terms and conditions of
the Plan, Performance Shares may be granted to Service Providers at any time as
shall be determined by the Administrator, in its sole discretion. Subject to
Section 7 hereof, the Administrator shall have complete discretion to determine
the number of Shares subject to a Performance Share Award granted to any Service
Provider.
(b) Value of Performance Shares. Each Performance Share will have an
initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms. The Administrator will set
performance objectives in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Shares that will
be paid out to the Service Providers. Each Award of Performance Shares will be
evidenced by an Award Agreement that will specify the performance period during
which the applicable objectives must be met, and such other terms and conditions
as the Administrator, in its sole discretion, will determine.
(i) General Restrictions. The Administrator may set performance
objective based upon the achievement of Company-wide, departmental, business
unit, or individual goals (including, but not limited to, continued employment
or service), applicable federal or state securities laws, or any other basis
determined by the Administrator in its discretion.
(ii) Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Performance Shares as "performance-based compensation"
under Section 162(m) of the Code, the Committee, in its discretion, may set
performance objectives based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest date
permissible to enable the Performance Shares to qualify as "performance-based
compensation" under Section 162(m) of the Code. In granting Performance Shares
that are intended to qualify under Section 162(m) of the Code, the Committee
shall follow any procedures determined by it from time to time to be necessary
or appropriate to ensure qualification of the Performance Shares under Section
162(m) of the Code (e.g., in determining the Performance Goals).
(d) Earning of Performance Shares. After the applicable Performance
Period has ended, the holder of Performance Shares will be entitled to receive a
payout of the number of Performance Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance objectives have been achieved. After the grant of a
Performance Share, the Administrator, in its sole discretion, may reduce or
waive any performance objectives for such Performance Share.
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(e) Form and Timing of Payment of Performance Shares. Payment of earned
Performance Shares will be made as soon as practicable after the expiration of
the applicable Performance Period. The Administrator, in its sole discretion,
may pay earned Performance Shares in the form of cash, in Shares (which have an
aggregate Fair Market Value equal to the value of the earned Performance Shares
at the close of the applicable performance period) or in a combination thereof.
(f) Cancellation of Performance Shares. On the date set forth in the
Award Agreement, all unearned or unvested Performance Shares will be forfeited
to the Company, and again will be available for grant under the Plan.
15. Leaves of Absence. Unless the Administrator provides otherwise or
except as otherwise required by Applicable Laws, vesting of Awards granted
hereunder shall cease commencing on the first day of any unpaid leave of absence
and shall only recommence upon return to active service.
16. Transferability of Awards. Unless determined otherwise by the
Administrator or as otherwise provided in the Plan, an Award may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution, and may be exercised,
during the lifetime of the Participant, only by the Participant. If the
Administrator makes an Award transferable, such Award shall contain such
additional terms and conditions as the Administrator deems appropriate.
17. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Change in Control.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Award and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Award, as well as the price per share, if any, of Common Stock covered by
each such outstanding Award and the 162(m) fiscal year share issuance limits
under Sections 7(a) and (b) hereof shall, shall be proportionately adjusted for
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares should the
Committee (in its sole discretion) determine such an adjustment to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Such adjustment
shall be made by the Board or the Committee, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Awards will terminate
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immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator. The Administrator in its discretion may provide
for a Participant to have the right to exercise his or her Option, SAR or right
to purchase Restricted Stock until ten (10) days prior to such transaction as to
all of the Awarded Stock covered thereby, including Shares as to which the Award
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option or forfeiture rights applicable to any Award
shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the
proposed dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised (with respect
to Options, SARs and right to purchase Restricted Stock) or vested (with respect
to other Awards), an Award will terminate immediately prior to the consummation
of such proposed action.
(c) Merger or Change in Control. In the event of a merger or Change in
Control, each outstanding Award shall be assumed or an equivalent award
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Award, the Participant shall (i) fully vest in and
have the right to exercise the Option, SAR or right to purchase Restricted Stock
as to all of the Awarded Stock, including Shares as to which it would not
otherwise be vested or exercisable, and (ii) fully earn and receive a payout
with respect to other Awards. If an Award is not assumed or substituted for in
the event of a merger or Change in Control, the Administrator shall notify the
Participant in writing or electronically that (i) the Option, SAR or right to
purchase Restricted Stock shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and (ii) all outstanding
Options, SARs and rights to purchase Restricted Stock shall terminate upon the
expiration of such period and (iii) all other outstanding Awards shall be paid
out immediately prior to the merger or Change in Control. For the purposes of
this paragraph, the Award shall be considered assumed if, following the merger
or Change in Control, the assumed Award confers the right to purchase or
receive, for each Share of Awarded Stock subject to the Award immediately prior
to the merger or Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the merger or Change in Control by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or Change
in Control is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise (or payout or
vesting, as applicable) of the Award, for each Share of Awarded Stock subject to
the Award, to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the merger or Change in Control.
18. Date of Grant. The date of grant of an Award shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Participant within a
reasonable time after the date of such grant.
19. Amendment and Termination of the Plan.
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(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Plan will be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval will be obtained in the manner and to the
degree required under Applicable Laws. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing (or electronic format) and
signed by the Participant and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of
such termination.
20. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise or payout, as applicable, of an Award unless the exercise or payout, as
applicable, of such Award and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise or
payout, as applicable, of an Award, the Company may require the person
exercising such Option, SAR or right to purchase Restricted Stock, or in the
case of another Award, the person receiving the payout, to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
21. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
22. Severability. Notwithstanding any contrary provision of the Plan or an
Award to the contrary, if any one or more of the provisions (or any part
thereof) of this Plan or the Awards shall be held invalid, illegal or
unenforceable in any respect, such provision shall be modified so as to make it
valid, legal and enforceable, and the validity, legality and enforceability of
the remaining provisions (or any part thereof) of the Plan or Award, as
applicable, shall not in any way be affected or impaired thereby.
23. Shareholder Approval. Subject to Section 19 of the Plan, the Plan will
become effective upon its adoption by the Board. It will continue in effect for
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a term of five (5) years from the date of approval by the shareholders of the
Company unless terminated earlier under Section 19 of the Plan.
24. Non-U.S. Employees. Notwithstanding anything in the Plan to the
contrary, with respect to any employee who is resident outside of the United
States, the Administrator may, in its sole discretion, amend the terms of the
Plan in order to conform such terms to the requirements of local law or to meet
the objectives of the Plan. The Administrator may, where appropriate, establish
one or more sub-plans for this purpose.
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