SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-12
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Intevac, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
(set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Dear Shareholder:
You are cordially invited to attend the Annual
Meeting of Shareholders of Intevac, Inc., a California
corporation, which will be held May 14, 2004, at
10:00 a.m., local time, at the our headquarters,
3560 Bassett Street, Santa Clara, California 95054.
At the Annual Meeting, you will be asked to
consider and vote upon the following proposals: (i) to
elect seven (7) directors of Intevac, (ii) to approve
the 2004 Equity Incentive Plan and reserve 1,200,000 shares
for issuance thereunder and (iii) to ratify the appointment
of Grant Thornton LLP as independent accountants of Intevac for
the fiscal year ending December 31, 2004.
The enclosed Proxy Statement more fully describes
the details of the business to be conducted at the Annual
Meeting. After careful consideration, our Board of Directors has
unanimously approved the proposals and recommends that you vote
FOR
each proposal.
After reading the Proxy Statement, please mark,
date, sign and return the enclosed proxy card in the
accompanying reply envelope to ensure receipt by our Transfer
Agent no later than May 11, 2004. Any shareholder attending
the Annual Meeting may vote in person even if he or she has
returned a proxy.
YOUR SHARES CANNOT BE VOTED UNLESS YOU
SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL
MEETING IN PERSON.
A copy of Intevacs 2003 Annual Report has
been mailed with this Proxy Statement to all shareholders
entitled to notice of and to vote at the Annual Meeting.
We look forward to seeing you at the Annual
Meeting. Please notify Sandra Thompson at (408) 496-2242 if
you plan to attend.
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Sincerely yours,
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Kevin Fairbairn
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President and Chief Executive
Officer
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Santa Clara, California
March 29, 2004
IMPORTANT
Whether or not you plan to attend the meeting,
please mark, date and sign the enclosed proxy and return it at
your earliest convenience in the enclosed postage-prepaid return
envelope.
INTEVAC, INC.
3560 Bassett Street
Santa Clara, California 95054
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 14, 2004
To OUR SHAREHOLDERS:
You are cordially invited to attend the Annual
Meeting of Shareholders of Intevac, Inc., a California
corporation, to be held May 14, 2004 at 10:00 a.m.,
local time, at our headquarters, 3560 Bassett Street,
Santa Clara, California 95054, for the following purposes:
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1. To elect directors to serve for the
ensuing year or until their respective successors are duly
elected and qualified. The nominees are Norman H. Pond, Kevin
Fairbairn, David S. Dury, Stanley J. Hill, David N. Lambeth,
Robert Lemos and Arthur L. Money.
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2. To approve the 2004 Equity Incentive Plan
and reserve 1,200,000 shares for issuance thereunder.
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3. To ratify the appointment of Grant
Thornton LLP as independent accountants of Intevac for the
fiscal year ending December 31, 2004.
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4. To transact such other business as may
properly come before the meeting or any adjournment thereof.
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The foregoing items of business are more fully
described in the Proxy Statement that accompanies this Notice.
Only shareholders of record at the close of
business March 18, 2004 are entitled to notice of and to
vote at the Annual Meeting and at any continuation or
adjournment thereof.
All shareholders are cordially invited and
encouraged to attend the Annual Meeting. In any event, to ensure
your representation at the meeting, please carefully read the
accompanying Proxy Statement which describes the matters to be
voted on at the Annual Meeting and sign, date and return the
enclosed proxy card in the reply envelope provided. Should you
receive more than one proxy because your shares are registered
in different names and addresses, each proxy should be returned
to ensure that all your shares will be voted. If you attend the
Annual Meeting and vote by ballot, your proxy will be revoked
automatically and only your vote at the Annual Meeting will be
counted. The prompt return of your proxy card will assist us in
preparing for the Annual Meeting.
We look forward to seeing you at the Annual
Meeting. Please notify Sandra Thompson at (408) 496-2242 if
you plan to attend.
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BY ORDER OF THE BOARD OF DIRECTORS
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CHARLES B. EDDY III
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Vice President, Finance and
Administration,
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Chief Financial Officer, Treasurer and
Secretary
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Santa Clara, California
March 29, 2004
ALL SHAREHOLDERS
ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. IN
ANY EVENT, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
YOU ARE URGED TO VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED.
TABLE OF CONTENTS
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
INTEVAC, INC.
To Be Held May 14, 2004
GENERAL
This Proxy Statement is furnished in connection
with the solicitation by the Board of Directors of
Intevac, Inc., a California corporation, of proxies to be
voted at the Annual Meeting of Shareholders to be held
May 14, 2004, or at any adjournment or postponement
thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Shareholders. Shareholders of record
March 18, 2004 will be entitled to vote at the Annual
Meeting. The Annual Meeting will be held at 10:00 a.m.,
local time, at our headquarters, 3560 Bassett Street,
Santa Clara, California 95054.
It is anticipated that this Proxy Statement and
the enclosed proxy card will be first mailed to shareholders on
or about April 2, 2004.
VOTING RIGHTS
The close of business March 18, 2004 was the
record date for shareholders entitled to notice of and to vote
at the Annual Meeting and any adjournments thereof. At the
record date, we had 19,988,493 shares of our Common Stock
outstanding and entitled to vote at the Annual Meeting, held by
121 shareholders of record. We believe that approximately
1,900 beneficial owners hold shares through brokers, fiduciaries
and nominees. Holders of Common Stock are entitled to one vote
for each share of Common Stock they hold.
If any shareholder is unable to attend the Annual
Meeting, the shareholder may still vote by proxy. The enclosed
proxy is solicited by our Board of Directors, and, when the
proxy card is returned properly completed, it will be voted as
directed by the shareholder on the proxy card. Shareholders are
urged to specify their choices on the enclosed proxy card. If a
proxy card is signed and returned without choices specified, in
the absence of contrary instructions, the shares of Common Stock
represented by the proxy will be voted FOR Proposals 1, 2
and 3 and will be voted in the proxy holders discretion as
to other matters that may properly come before the Annual
Meeting.
QUORUM; ABSTENTIONS; BROKER
NON-VOTES
The presence at the Annual Meeting, either in
person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote shall
constitute a quorum for the transaction of business. While there
is no definitive statutory or case law authority in California
as to the proper treatment of abstentions and broker non-votes,
we intend to include abstentions and broker non-votes as present
or represented for purposes of establishing a quorum for the
transaction of business, but to exclude abstentions and broker
non-votes from the calculation of shares voting on any matter.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke
it at any time before its exercise. A proxy may be revoked by
filing with the Secretary of Intevac an instrument of revocation
or a duly executed proxy bearing a later date, or by attending
the Annual Meeting and voting in person.
SOLICITATION OF PROXIES
Intevac will bear the cost of soliciting proxies.
Copies of solicitation material will be furnished to brokerage
houses, fiduciaries and custodians holding shares in their names
that are beneficially owned by others to forward to such
beneficial owners. We may reimburse such persons for their costs
of forwarding the
solicitation material to beneficial owners. The
original solicitation of proxies by mail may be supplemented by
solicitation by telephone, telegram or other means by directors,
officers, employees or agents of Intevac. No additional
compensation will be paid to these individuals for these
services. Except as described above, we do not currently intend
to solicit proxies other than by mail.
The Annual Report of Intevac for the fiscal
year ended December 31, 2003 has been mailed concurrently
with the mailing of this Notice of Annual Meeting and Proxy
Statement to all shareholders entitled to notice of and to vote
at the Annual Meeting. The Annual Report is not incorporated
into this Proxy Statement and is not considered proxy soliciting
material.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
At the Annual Meeting, seven directors
(constituting the entire board) are to be elected to serve until
the next Annual Meeting of Shareholders and until a successor
for each such director is elected and qualified, or until the
death, resignation or removal of such director. It is intended
that the proxies will be voted for the seven nominees named
below unless authority to vote for any such nominee is withheld.
All seven nominees are currently directors of Intevac, and all
except Mr. Hill and Mr. Money were elected to the
Board by the shareholders at the last Annual Meeting. Each
person nominated for election has agreed to serve if elected,
and the Board of Directors has no reason to believe that any
nominee will be unavailable or will decline to serve. In the
event, however, 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 other person who is designated by the
current Board of Directors to fill the vacancy. Unless otherwise
instructed, the proxy holders will vote the proxies received by
them for the nominees named below. The seven candidates
receiving the highest number of the affirmative votes of the
shares entitled to vote at the Annual Meeting will be elected
directors of Intevac. The proxies solicited by this Proxy
Statement may not be voted for more than seven nominees.
NOMINEES
Set forth below is information regarding the
nominees to the Board of Directors.
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Name
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Position(s) with Intevac
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Age
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Norman H. Pond
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Chairman of the Board
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65
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Kevin Fairbairn
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President and Chief Executive Officer
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50
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David S. Dury(1)(3)
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Director
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55
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Stanley J. Hill(3)
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Director
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62
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David N. Lambeth(2)
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Director
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57
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Robert Lemos(1)(2)
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Director
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63
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Arthur L. Money(1)
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Director
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64
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(1)
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Member of the Audit Committee
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(2)
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Member of the Compensation Committee
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(3)
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Member of the Nominating and Governance Committee
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BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION
AS DIRECTORS
Mr. Pond
is a
founder of Intevac and has served as Chairman of the Board since
February 1991. Mr. Pond served as President and Chief
Executive Officer from February 1991 until July 2000 and again
from September 2001 through January 2002. Mr. Pond holds a
BS in physics from the University of Missouri at Rolla and an MS
in physics from the University of California at Los Angeles.
2
Mr. Fairbairn
joined Intevac as President and Chief
Executive Officer in January 2002 and was appointed a director
in February 2002. Before joining Intevac, Mr. Fairbairn was
employed by Applied Materials from July 1985 to January 2002,
most recently as Vice-President and General Manager of the
Conductor Etch Organization with responsibility for the Silicon
and Metal Etch Divisions. From 1996 to 1999, Mr. Fairbairn
was General Manager of Applieds Plasma Enhanced Chemical
Vapor Deposition Business Unit and from 1993 to 1996, he was
General Manager of Applieds Plasma Silane CVD Product
Business Unit. Mr. Fairbairn holds an MA in Engineering
Sciences from Cambridge University.
Mr. Dury
has
served as a director of Intevac since July 2002. Mr. Dury
is a co-founder of Mentor Capital Group, a venture capital firm.
From 1996 to 2000, Mr. Dury served as Senior Vice-President
and Chief Financial Officer of Aspect Development, a software
development firm. Mr. Dury holds a BA in psychology from
Duke University and an MBA from Cornell University. He is also a
director of Phoenix Technologies Ltd.
Mr. Hill
was
appointed as a director of Intevac in March 2004. Mr. Hill
joined Kaiser Aerospace and Electronics Corporation
(Kaiser), a privately held manufacturer of
electronics and electro-optical systems, in 1969 and served as
Chief Executive Officer and Chairman of both Kaiser and
K Systems, Inc., Kaisers parent company, from
1997 to 2000. Prior to his appointment as Chief Executive
Officer, Mr. Hill served in a number of executive positions
at Kaiser. Mr. Hill holds a BS in Mechanical Engineering
from the University of Maine and a Master of Engineering from
the University of Connecticut and has completed post graduate
studies at the University of Santa Clara business school.
He is also a director of First Aviation Services, Inc.
Dr. Lambeth
has
served as a director of Intevac since May 1996. Dr. Lambeth
has been Professor of both Electrical and Computer Engineering
and Material Science Engineering at Carnegie Mellon University
since 1989. Dr. Lambeth was Associate Director of the Data
Storage Systems at Carnegie Mellon University from 1989 to 1999.
Since 1988, Dr. Lambeth has been the owner of Lambeth
Systems, an engineering consulting and research firm.
Dr. Lambeth holds a BS in electrical engineering from the
University of Missouri and a Ph.D. in physics from the
Massachusetts Institute of Technology.
Mr. Lemos
has
served as a director of Intevac since August 2002.
Mr. Lemos retired from Varian Associates, Inc. in 1999
after 23 years, including serving as Vice-President and
Chief Financial Officer from 1988 to 1999. Mr. Lemos has a
BS in Business from the University of San Francisco, a JD
in law from Hastings College and an LLM in law from
New York University.
Mr. Money
has
served as a director of Intevac since October 2003.
Mr. Money served as the Assistant Secretary of Defense for
Command, Control, Communication and Intelligence (C3I) from
October 1999 to April 2001. Prior to his Senate confirmation in
that role, he was the Senior Civilian Official, Office of the
Assistant Secretary of Defense (C3I) from February 1998.
Mr. Money also served as the Chief Information Officer for
the Department of Defense from 1998 to 2001. From 1996 to 1998,
he served as Assistant Secretary of the Air Force for Research,
Development and Acquisition. Prior to his government service,
Mr. Money held senior management positions with ESL Inc., a
subsidiary of TRW, and the TRW Avionics and Surveillance Group.
He is also a director of CACI International, Essex
Corporation, Intelli-Check, Rainbow
Technologies, Inc., Silicon Graphics, Inc. and
Terremark Worldwide, Inc. Mr. Money holds an MS in
Mechanical Engineering from the University of Santa Clara
and a BS in Mechanical Engineering from San Jose State
University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during
fiscal 2003. All members of the Board of Directors during fiscal
2003 attended at least seventy-five percent of the aggregate of
the total number of meetings of the Board of Directors held
during the fiscal year and the total number of meetings held by
all committees of the Board on which each such director served
(based on the time that each member served on the Board of
Directors and the committees). There are no family relationships
among executive officers or directors of Intevac. The Board of
Directors has an Audit Committee and a Compensation Committee.
In March 2004, the Board of Directors formed a Nominating and
Governance Committee.
3
The Audit Committee of the Board of Directors
held four meetings during fiscal 2003. The Audit Committee,
which during 2003 was comprised of Mr. Dury, Mr. Lemos
and Mr. Money (after his appointment in October 2003), is
responsible for overseeing our accounting and financial
reporting processes, overseeing the audits of our financial
statements and assisting the Board of Directors in oversight and
monitoring of (i) the integrity of the financial statements
of Intevac, (ii) the compliance by Intevac with legal and
regulatory requirements, (iii) the qualifications,
independence and performance of Intevacs external auditors
and (iv) Intevacs internal accounting and financial
controls. Each member of the Audit Committee is
independent as defined in the listing standards of
The Nasdaq National Market.
The Compensation Committee of the Board of
Directors held two meetings during fiscal 2003. The Compensation
Committee, which during 2003 was comprised of Dr. Lambeth
and Dr. Robert Hempstead (a Board member who resigned in
October 2003), has responsibility for the compensation of
Intevacs executive officers and employees, including
approving executive officer compensation plans, stock option
grants, succession plans and compensation strategy for
Intevacs employees. In the fourth quarter of 2003,
Mr. Lemos was appointed to the Compensation Committee,
replacing Dr. Hempstead.
The Corporate Governance and Nominating Committee
of the Board of Directors was established in March 2004. The
Corporate Governance and Nominating Committee is comprised of
Mr. Hill and Mr. Dury, each of whom the board had
determined is independent. The Corporate Governance and
Nominating Committee is responsible for (i) overseeing
compliance by the board and its committees with corporate
governance aspects of the Sarbanes-Oxley Act and related SEC and
Nasdaq rules, (ii) determining the criteria for membership
on the Board, (iii) monitoring compliance with our Code of
Ethics, (iv) consider issues of possible conflicts of
interest of board members or corporate officers, and
(v) making recommendations to the board regarding
composition and size of the board and its committees, review and
selection of director nominees, and other corporate governance
issues generally. The Corporate Governance and Nominating
Committees charter is available on our website at
http://www.intevac.com
DIRECTOR COMPENSATION
Through 2002, directors of Intevac did not
receive fees for services provided as a director. Beginning in
2003, non-employee directors of Intevac received a retainer of
$3,000 per quarter as compensation for their efforts
serving on the Board and its subcommittees. Directors are
reimbursed for reasonable expenses incurred in attending Board
or committee meetings. We do not pay fees for committee
participation or special assignments of the Board of Directors.
The directors are eligible to receive periodic option grants
under the Discretionary Option Grant Program in effect under the
1995 Stock Option/ Stock Issuance Plan. Under the Discretionary
Option Grant Program, all directors are eligible to receive
option grants, when and as determined by the Board of Directors.
During fiscal 2003, Mr. Dury, Dr. Lambeth and
Mr. Lemos each received option grants of 5,000 shares,
and Mr. Money received an option grant of
30,000 shares under the Discretionary Option Grant Program.
Under the proposed 2004 Equity Incentive Plan, directors will
continue to be eligible to receive discretionary option grants,
when and as determined by the Board of Directors or the
Committee administering the plan.
CORPORATE GOVERNANCE MATTERS
Director
independence.
The Board has determined
that, with the exception of Mr. Pond and
Mr. Fairbairn, all of its members are independent
directors as that term is defined in the listing standards
of The Nasdaq Stock Market.
Contacting the Board of
Directors.
Any shareholder who desires
to contact our chairman of the board or the other members of our
board of directors may do so by writing to: Board of Directors,
c/o Stanley J. Hill, Chairman Nominating and Governance
Committee, Intevac, Inc., 3560 Bassett Street,
Santa Clara, California, 95054. Communications received
will be distributed to the chairman of the board or the other
members of the board as appropriate depending on the facts and
circumstances outlined in the communication received.
4
Board attendance at annual shareholder
meetings.
Although we do not have a
formal policy regarding attendance by members of the board at
our Annual Meeting of Shareholders, we encourage, but do not
require, directors to attend. Mr. Pond, Mr. Fairbairn
and Mr. Smead (a director of Intevac until his death in
December 2003) attended our 2003 Annual Meeting of Shareholders;
the other Board members did not attend.
Policy regarding board
nominees.
It is the policy of the
Nominating and Governance Committee of the Company to consider
recommendations for candidates to the Board of Directors from
shareholders. Shareholder recommendations for candidates to the
Board of Directors must be directed in writing to
Intevac, Inc., 3560 Bassett Street, Santa Clara,
California, 95054 and must include the candidates name,
home and business contact information, detailed biographical
data and qualifications, information regarding any relationships
between the candidate and the Company within the last three
years, and evidence of the nominating persons ownership of
Company stock.
The Committees criteria and process for
evaluating and identifying the candidates that it selects, or
recommends to the full Board for selection, as director
nominees, are as follows:
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The Committee periodically reviews the current
composition, size and effectiveness of the Board.
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In its evaluation of director candidates,
including the members of the Board of Directors eligible for
re-election, the Committee seeks to achieve a balance of
knowledge, experience and capability on the Board and considers
(1) the current size and composition of the Board of
Directors and the needs of the Board of Directors and the
respective committees of the Board, (2) such factors as
issues of character, judgment, diversity, age, expertise,
business experience, length of service, independence, other
commitments and the like, (3) the relevance of the
candidates skills and experience to our businesses and
(4) such other factors as the Committee may consider
appropriate.
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While the Committee has not established specific
minimum qualifications for Director candidates, the Committee
believes that candidates and nominees must reflect a Board that
is comprised of directors who (1) are predominantly
independent, (2) are of high integrity, (3) have
broad, business-related knowledge and experience at the
policy-making level in business, government or technology,
including understanding of our industry and our business in
particular, (4) have qualifications that will increase
overall Board effectiveness and (5) meet other requirements
as may be required by applicable rules, such as financial
literacy or financial expertise with respect to audit committee
members.
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With regard to candidates who are properly
recommended by shareholders or by other means, the Committee
will review the qualifications of any such candidate, which
review may, in the Committees discretion, include
interviewing references for the candidate, direct interviews
with the candidate, or other actions that the Committee deems
necessary or proper.
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In evaluating and identifying candidates, the
Committee has the authority to retain or terminate any third
party search firm that is used to identify director candidates,
and has the authority to approve the fees and retention terms of
any search firm.
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The Committee will apply these same principles
when evaluating Board candidates who may be elected initially by
the full Board to fill vacancies or add additional directors
prior to the Annual Meeting of Shareholders at which directors
are elected.
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After completing its review and evaluation of
director candidates, the Committee selects, or recommends to the
full Board of Directors for selection, the director nominees.
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Neither Mr. Money nor Mr. Hill has
previously been elected by the shareholders. Mr. Money, who
joined the board in October 2003, was identified to us during a
search for a candidate with Department of Defense background by
a consultant working for Intevac in Washington D.C.
Mr. Hill, who joined the board in March 2004, was
identified during a general search conducted by the Board for
potential candidates for board membership.
5
CODE OF ETHICS
We have adopted a Code of Ethics that applies to
our principal executive officer and senior financial and
accounting officers. You can find our Code of Ethics on our
website at
http://www.intevac.com
. We will post any
amendments to the Code of Ethics, as well as any waivers that
are required to be disclosed by the rules of either the SEC or
the Nasdaq Stock Market, on our website.
Required Vote
The seven nominees receiving the highest number
of affirmative votes of the shares present or represented and
entitled to be voted at the Annual Meeting shall be elected as
directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum for
the transaction of business, but have no other legal effect on
the election of directors under California law.
The Board of Directors recommends that
shareholders vote FOR election of all of the above nominees as
directors.
PROPOSAL NO. 2:
APPROVAL OF THE INTEVAC 2004 EQUITY INCENTIVE
PLAN AND
RESERVATION OF 1,200,000 SHARES FOR ISSUANCE
THEREUNDER
We are asking our shareholders to approve our
2004 Equity Incentive Plan so that we can use it to achieve our
goals and also receive a federal income tax deduction for
certain compensation paid under the Equity Incentive Plan. Our
Board of Directors has approved the 2004 Equity Incentive Plan,
subject to approval from our shareholders at the Annual Meeting.
Approval of the 2004 Equity Incentive Plan requires the
affirmative vote of the holders of a majority of the shares of
our Common Stock represented and voting at the Annual Meeting
(provided that that vote also constitutes the affirmative vote
of a majority of the required quorum). Our named executive
officers and directors have an interest in this proposal.
A total of 1,200,000 shares of our Common
Stock have initially been reserved for issuance under the Equity
Incentive Plan.
We believe strongly that the approval of the 2004
Equity Incentive Plan is essential to our continued success. Our
employees are our most valuable assets. Stock options and other
awards such as those provided under the 2004 Equity Incentive
Plan are vital to our ability to attract and retain outstanding
and highly skilled individuals in the extremely competitive
labor markets in which we must compete. Such awards also are
crucial to our ability to motivate employees to achieve our
goals.
Summary of the Equity Incentive Plan
The following paragraphs provide a summary of the
principal features of the 2004 Equity Incentive Plan (the
Plan) and its operation. The following summary is
qualified in its entirety by reference to the Plan.
Background and Purpose of the Plan
The Plan permits the grant of the following types
of incentive awards: (1) stock options, (2) stock
appreciation rights, (3) restricted stock,
(4) performance units, and (5) performance shares
(individually, an Award). The Plan is intended to
help us to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional
incentives to employees, directors and consultants, and promote
the success of Intevac.
Administration of the Plan
Our Board of Directors or the Compensation
Committee of our Board of Directors (in either case, the
Committee) will administer the Plan. Members of the
Committee generally must qualify as outside
directors under Section 162(m) of the Internal
Revenue Code (so that we are entitled to receive a federal
6
tax deduction for certain compensation paid under
the Incentive Plan) and must meet such other requirements as are
established by the Securities and Exchange Commission for plans
intended to qualify for exemption under Rule 16b-3. (For
the plan to qualify for exemption under Rule 16b-3, members
of the Committee must be non-employee directors.)
Notwithstanding the foregoing, the Board of Directors also may
appoint one or more separate committees to administer the
Incentive Plan with respect to employees who are not officers or
directors of Intevac.
Subject to the terms of the Plan, the Committee
has the sole discretion to select the employees and consultants
who will receive Awards, determine the terms and conditions of
Awards (for example, the exercise price and vesting schedule),
and interpret the provisions of the Plan and outstanding Awards.
A total of 1,200,000 shares of our Common
Stock have initially been reserved for issuance under the Equity
Incentive Plan; however, no more than 10% of the shares reserved
for issuance under the Plan may be issued pursuant to Awards
that are not stock options or stock appreciation rights that are
granted at exercise prices equal to 100% of the fair market
value on the date of grant (that is, pursuant to Awards of
restricted stock, performance units, performance shares,
discounted stock options or discounted stock appreciation
rights). In addition, shares which have been reserved but not
issued under our 1995 Stock Option/ Stock Issuance Plan (the
1995 Plan) as of the effective date of the Equity
Incentive Plan, as well as any shares returned to the 1995 Plan
will be available for issuance under the Equity Incentive Plan.
As of March 23, 2004, there were 4,948 shares
available for issuance under the 1995 Plan. Once the new Plan
has been approved by the shareholders, we will no longer grant
new Awards from the 1995 Plan.
If an Award expires or is cancelled without
having been fully exercised or vested, the unvested or cancelled
shares generally will be returned to the available pool of
shares reserved for issuance under the Plan. Also, if we
experience a stock dividend, reorganization or other change in
our capital structure, the Committee has discretion to adjust
the number of shares available for issuance under the Plan, the
outstanding Awards, and the per-person limits on Awards, as
appropriate to reflect the stock dividend or other change.
Eligibility to Receive Awards
The Committee selects the employees and
consultants who will be granted Awards under the Plan. The
actual number of individuals who will receive an Award under the
Plan cannot be determined in advance because the Committee has
the discretion to select the participants.
Stock Options
A stock option is the right to acquire shares of
our Common Stock at a fixed exercise price for a fixed period of
time. Under the Plan, the Committee may grant non-statutory
stock options and/or incentive stock options (which entitle
employees, but not Intevac, to more favorable tax treatment).
The Committee will determine the number of shares covered by
each option, but during any fiscal year, no participant may be
granted options covering more than 200,000 shares, except
options for an additional 300,000 shares may be granted to
a participant in connection with his or her initial employment.
The exercise price of the shares subject to each
option is set by the Committee but cannot be less than 100% of
the fair market value (on the date of grant) of the shares
covered by incentive stock options or non-statutory options that
are intended to qualify as performance based under
Section 162(m) of the Internal Revenue Code.
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 our
stock or any of our 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.
An option granted under the Plan cannot generally
be exercised until it becomes vested. The Committee establishes
the vesting schedule of each option at the time of grant.
Options become exercisable at the times and on the terms
established by the Committee. Options granted under the Plan
expire at the times
7
established by the Committee, but the term of an
incentive stock option cannot be greater than 10 years
after the grant date (such term to be limited to no more than
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 our stock or any
of our subsidiaries).
The exercise price of each option granted under
the Plan must be paid in full at the time of exercise. The
exercise price may be paid in any form as determined by the
Committee, including, but not limited to, cash, check, surrender
of shares that, if acquired from us, have been held for at least
six months or pursuant to a cashless exercise program. The
Committee may also permit, in some cases, the exercise price to
be paid by means of a promissory note or through a reduction in
the amount of our liability to the participant.
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 our stock price exceeds the exercise price. The
exercise price will be set on the date of grant, but can vary in
accordance with a predetermined formula. 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.
Awards of stock appreciation rights may be
granted in connection with all or any part of an option, either
concurrently with the grant of an option or at any time
thereafter during the term of the option, or may be granted
independently of options. There are three types of stock
appreciation rights available for grant under the Plan. A
tandem stock appreciation right is a stock
appreciation right granted in connection with an option that
entitles the participant to exercise the stock appreciation
right by surrendering to us a portion of the unexercised related
option. A tandem stock appreciation right may be exercised only
with respect to the shares for which its related option is then
exercisable. An affiliated stock appreciation right
is a stock appreciation right granted in connection with an
option that is automatically deemed to be exercised upon the
exercise of the related option, but does not necessitate a
reduction in the number of shares subject to the related option.
A freestanding stock appreciation right is one that
is granted independent of any options. No participant may be
granted stock appreciation rights covering more than
200,000 shares in any fiscal year, except that a
participant may receive stock appreciation rights covering an
additional 300,000 shares in connection with his or her
initial employment.
The Committee determines the terms of stock
appreciation rights, except that the exercise price of a tandem
or affiliated stock appreciation right will be equal to the
exercise price of the related option. When a tandem stock
appreciation right, granted in connection with an option, is
exercised, the related option, to the extent surrendered, will
cease to be exercisable. A tandem or affiliated stock
appreciation right, which is granted in connection with an
option, will be exercisable until, and will expire, no later
than the date on which the related option ceases to be
exercisable or expires. A freestanding stock appreciation right,
which is granted without a related option, will be exercisable,
in whole or in part, at such time as the Committee will specify
in the stock appreciation right agreement.
The participant who exercises a stock
appreciation right will receive from us an amount equal to the
excess of the fair market value of a share on the date of
exercise of the stock appreciation right over the exercise price
times the number of shares with respect to which the stock
appreciation right is exercised. Our obligation arising upon the
exercise of a stock appreciation right may be paid in shares or
in cash, or any combination thereof, as the Committee may
determine.
Restricted Stock
Awards of restricted stock are shares that vest
in accordance with the terms and conditions established by the
Committee. The Committee will determine the number of shares of
restricted stock granted to any employee or consultant, but
during any fiscal year, no participant may be granted more than
125,000 shares of restricted stock, except that a
participant may receive up to an additional 175,000 shares
of restricted stock in connection with his or her initial
employment.
8
In determining whether an Award of restricted
stock should be made, and/or the vesting schedule for any such
Award, the Committee may impose whatever conditions to vesting
as it determines to be appropriate. Upon termination of service,
unvested shares of restricted stock generally will be forfeited.
Performance Units and Performance
Shares
Performance units and performance shares are
Awards that will result in a payment to a participant only if
performance objectives established by the Committee are achieved
or the Awards otherwise vest. The applicable performance
objectives will be determined by the Committee, and may be based
upon the achievement of Company-wide, divisional or individual
goals upon applicable federal or state securities laws or upon
any other basis determined by the Committee. Performance units
have an initial value that is established by the Committee on or
before the date of grant. Performance shares have an initial
value equal to the fair market value of a share on the date of
grant. Subject to the terms of the Plan, the Committee will
determined the number of performance units and performance
shares granted to a participant; provided that during any fiscal
year, no participant may be granted performance units with an
initial value greater $750,000 or granted more than 125,000
performance shares, except that a participant may receive
performance units with an initial value up to an additional
$750,000 and/or an additional 175,000 performance shares in
connection with his or her initial employment.
Performance Goals
Under Section 162(m) of the Internal Revenue
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 shareholder approval of the 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 Committee (in its discretion) may
make performance goals applicable to a participant with respect
to an Award. At the Committees discretion, one or more of
the following performance goals may apply (all of which are
defined in the Plan): cost of sales as a percentage of sales,
earnings per share, marketing and sales expenses as a percentage
of sales, net income as a percentage of sales, operating margin,
revenue, total shareholder return and working capital.
Change of Control
In the event of a change in control
of Intevac, 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. In
addition, if an option or stock appreciation right has become
fully vested and exercisable in lieu of assumption or
substitution, the Committee will provide at least
15 days notice that the option or stock appreciation
right will immediately vest and become exercisable as to all of
the shares subject to that Award. The Award will then terminate
upon the expiration of the notice period.
Awards to be Granted to Certain Individuals
and Groups
The number of Awards that an employee or
consultant may receive under the Plan is in the discretion of
the Committee and therefore cannot be determined in advance. Our
executive officers have an interest in this proposal, because
they are eligible to receive discretionary Awards under the
Plan. Our non-employee directors are eligible to receive
discretionary Awards under the Plan. As a result, our
non-employee directors have an interest in this proposal.
9
To date, only stock options have been granted
under the 1995 Plan. The following table sets forth (a) the
aggregate number of shares subject to options granted to various
persons during the last fiscal year, and (b) the average
per share exercise price of those options. All options listed
below were granted under our 1995 Stock Option/ Stock Issuance
Plan.
|
|
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|
|
|
|
|
|
|
|
Number of
|
|
Average Per
|
|
|
Options
|
|
Share
|
Name of Individual or Group
|
|
Granted
|
|
Exercise Price
|
|
|
|
|
|
Norman H. Pond
|
|
|
|
|
|
$
|
|
|
Kevin Fairbairn
|
|
|
|
|
|
|
|
|
Charles B. Eddy
|
|
|
|
|
|
|
|
|
Verle Aebi
|
|
|
|
|
|
|
|
|
David S. Dury
|
|
|
5,000
|
|
|
|
5.070
|
|
Stanley J. Hill
|
|
|
|
|
|
|
|
|
David N. Lambeth
|
|
|
5,000
|
|
|
|
5.070
|
|
Robert Lemos
|
|
|
5,000
|
|
|
|
5.070
|
|
Arthur L. Money
|
|
|
30,000
|
|
|
|
15.400
|
|
All executive officers, as a group
|
|
|
|
|
|
|
|
|
All directors who are not executive officers, as
a group(1)
|
|
|
55,000
|
|
|
|
10.705
|
|
All employees who are not executive officers, as
a group
|
|
|
204,000
|
|
|
|
7.302
|
|
|
|
(1)
|
Includes grants of 5,000 shares each made to
former Board members Robert D. Hempstead and H. Joseph
Smead.
|
Limited Transferability of Awards
Awards granted under the 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.
Federal Tax Aspects
The following paragraphs are a summary of the
general federal income tax consequences to U.S. taxpayers
and Intevac of Awards granted under the Plan. Tax consequences
for any particular individual may be different.
Non-statutory
Stock Options
No taxable income is reportable when a
non-statutory 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 (on the
exercise date) of the shares purchased over the exercise price
of the option. Any additional gain or loss recognized upon any
later disposition of the shares would be capital gain or loss,
which may be long- or short-term depending on the holding period.
Incentive
Stock Options
No taxable income is reportable when an incentive
stock option is granted or exercised unless the alternative
minimum tax rules apply, in which case taxation occurs upon
exercise. 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.
10
Stock
Appreciation Rights
No taxable income is reportable when a stock
appreciation right is granted to a participant. Upon exercise,
the participant 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, Performance Units and Performance Shares
A participant will not have taxable income upon
grant of restricted stock, performance units or performance
shares, unless he or she elects to be taxed at that time.
Instead, he or she 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
We generally will be entitled to a tax deduction
in connection with an Award under the Plan in an amount equal to
any ordinary income realized by a participant at the time the
participant recognizes such income (for example, upon the
exercise of a non-statutory stock option). Special rules limit
the deductibility of compensation paid to our Chief Executive
Officer and to each of our four most highly compensated
executive officers, as discussed above under Performance
Goals.
Amendment and Termination of the
Plan
The Board generally may amend or terminate the
Plan at any time and for any reason. Amendments will be
contingent on stockholder approval if required by applicable law
or stock exchange listing requirements. By its terms, the
Incentive Plan automatically will terminate in 2014, although
any Awards outstanding at that time will continue for their term.
Summary
We believe strongly that the approval of the Plan
is essential to our continued success. Awards such as those
provided under the Plan constitute an important incentive for
our key employees and other service providers and help us to
attract, retain and motivate people whose skills and performance
are critical to our success. Our employees are our most valuable
asset. We strongly believe that the Plan is essential for us to
compete for talent in the labor markets in which we operate.
Required Vote
The affirmative vote of the holders of a majority
of the shares represented and voting at the Annual Meeting
(provided that that vote also constitutes the affirmative vote
of a majority of the required quorum) will be required for
approval of the Intevac 2004 Equity Incentive Plan.
The Board of Directors recommends that
shareholders vote FOR the adoption of the Intevac 2004 Equity
Incentive Plan and the reservation of 1,200,000 shares for
issuance thereunder.
11
PROPOSAL NO. 3:
RATIFICATION OF INDEPENDENT PUBLIC
ACCOUNTANTS
The Audit Committee of the Board of Directors has
selected Grant Thornton LLP as our independent public
accountants for the fiscal year ending December 31, 2004.
Grant Thornton LLP began auditing our financial statements in
2000. Its representatives are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to
appropriate questions.
Fees Paid To Accountants For Services
Rendered
Audit
Fees
The aggregate fees billed by Grant Thornton LLP
for professional services rendered to the Company for the years
ended December 31, 2003 and 2002, were $137,000 and
$217,000, respectively, including fees for the audits of the
Companys annual financial statements, statutory audits
required internationally, the review of the financial statements
included in the Companys Quarterly Reports on
Form 10-Q and the review of SEC registration statements and
other filings.
Audit-Related
Fees
The aggregate fees billed by Grant Thornton LLP
for audit-related services rendered to the Company for the years
ended December 31, 2003 and 2002 were $14,000 and $19,000,
respectively. Audit-related services principally include
accounting consultations.
Tax
Fees
The aggregate fees billed by Grant Thornton LLP
for tax services rendered to the Company for the years ended
December 31, 2003 and 2002 were $24,000 and $37,000,
respectively. Tax services include tax compliance, tax advice
and tax planning.
All
Other Fees
The aggregate fees billed by Grant Thornton LLP
for services rendered to the Company other than those described
above for the years ended December 31, 2003 and 2002 were
$44,000 and $67,000, respectively. These services include the
annual audit of our 401(k) Profit Sharing Plan and Trust and
assistance in responding to an audit by the State of California
Franchise Tax Board.
Pre-Approval of Audit and Non-Audit
Services
Our Audit Committee approves in advance all
significant engagements with Grant Thornton LLP, including the
audit of our annual financial statements, the review of the
financial statements included in our Quarterly Reports on
Form 10-Q, the audit of our 401(k) Profit Sharing Plan and
Trust and tax compliance services. Fees billed by Grant Thornton
LLP for other services are reviewed and approved by the Audit
Committee on a quarterly basis.
Required Vote
Shareholder ratification of the selection of
Grant Thornton LLP as Intevacs independent public
accountants is not required by our by-laws or other applicable
legal requirements. However, the Board is submitting the
selection of Grant Thornton LLP to the shareholders for
ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee
will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee at its discretion may
direct the appointment of a different independent accounting
firm at any time during the year, if it determines that such a
change would be in the best interests of Intevac and its
shareholders.
12
The affirmative vote of the holders of a majority
of the shares represented and voting at the Annual Meeting
(provided that that vote also constitutes the affirmative vote
of a majority of the required quorum) will be required to ratify
the selection of Grant Thornton LLP as Intevacs
independent public accountants for the year ending
December 31, 2004.
The Board of Directors recommends that
shareholders vote FOR the proposal to ratify the selection of
Grant Thornton LLP as Intevacs independent public
accountants for the fiscal year ending December 31,
2004.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain
information regarding the ownership of our Common Stock as of
March 3, 2004 by (i) all persons known by us to be
beneficial owners of five percent or more of our outstanding
Common Stock, based upon a review of filings made pursuant to
Sections 13(d), 13(f) and 13(g) with the Securities and
Exchange Commission during 2003, (ii) each director of
Intevac, (iii) the Chief Executive Officer and each of the
three other executive officers of Intevac serving as such as of
the end of the last fiscal year whose compensation for such year
was in excess of $100,000, and (iv) all executive officers
and directors of Intevac as a group.
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|
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|
|
|
|
Amount and Nature of
|
|
|
Beneficial Ownership(1)
|
|
|
|
Name and Address of Beneficial Owner
|
|
Number of Shares
|
|
Percent Owned(2)
|
|
|
|
|
|
Redemco, L.L.C.(3)
|
|
|
3,255,969
|
|
|
|
16.3%
|
|
|
395 Mill Creek Circle
|
|
|
|
|
|
|
|
|
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Vail, CO 81657
|
|
|
|
|
|
|
|
|
Kern Capital Management, LLC
|
|
|
2,117,000
|
|
|
|
10.6%
|
|
|
114 West 47th Street, Suite 1926
|
|
|
|
|
|
|
|
|
|
New York, NY 10036
|
|
|
|
|
|
|
|
|
Norman H. Pond(4)
|
|
|
1,060,575
|
|
|
|
5.3%
|
|
|
3560 Basset Street
|
|
|
|
|
|
|
|
|
|
Santa Clara, CA 95054
|
|
|
|
|
|
|
|
|
Kevin Fairbairn(5)
|
|
|
126,645
|
|
|
|
*
|
|
Charles B. Eddy(6)
|
|
|
139,103
|
|
|
|
*
|
|
Verle Aebi(7)
|
|
|
79,539
|
|
|
|
*
|
|
David S. Dury(8)
|
|
|
35,000
|
|
|
|
*
|
|
Stanley J. Hill(9)
|
|
|
|
|
|
|
*
|
|
David N. Lambeth(10)
|
|
|
55,000
|
|
|
|
*
|
|
Robert Lemos(11)
|
|
|
38,000
|
|
|
|
*
|
|
Arthur L. Money(12)
|
|
|
30,000
|
|
|
|
*
|
|
All directors and executive officers as a group
(9 persons)(13)
|
|
|
1,563,862
|
|
|
|
7.7%
|
|
|
|
|
|
(1)
|
Except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power
with respect to all shares of Common Stock. The number of shares
beneficially owned includes shares which such individual had the
right to acquire either on or within 60 days after
March 3, 2004, including upon the exercise of an option.
|
|
|
(2)
|
Percentage of beneficial ownership is based upon
19,981,993 shares of Common Stock that were outstanding on
March 3, 2004. For each individual, this percentage
includes shares which such individual had the right to acquire
either on or within 60 days after March 3, 2004,
including upon the exercise of an option; however, such shares
are not considered outstanding for the purpose of computing the
percentage owned by any other individual as required by
Rule 13d-3(d)(1)(i) under the Securities Exchange Act of
1934.
|
|
|
(3)
|
These shares may be deemed to be beneficially
owned by Mill Creek Systems, LLC and by Ann Becher Smead. Mill
Creek Systems, LLC is the Managing Member of Redemco, L.L.C.,
and Ann Becher Smead is the Manager of Mill Creek Systems, LLC.
|
|
|
(4)
|
Includes 776,528 shares held by the Norman
Hugh Pond and Natalie Pond Trust DTD 12/23/80 and
182,357 shares held by the Pond 1996 Charitable Remainder
Unitrust, both of whose trustees are Norman Hugh Pond and
Natalie Pond. Also includes options exercisable for
63,333 shares of Common Stock outstanding under the 1995
Stock Option/Stock Issuance Plan (the 1995 Option
Plan).
|
14
|
|
|
|
(5)
|
Includes options exercisable for
112,499 shares of Common Stock under the 1995 Option Plan.
|
|
|
(6)
|
Includes 83,155 shares held by the Eddy
Family Trust DTD 02/09/00, whose trustees are Charles Brown
Eddy III and Melissa White Eddy, and options exercisable
for 48,433 shares of Common Stock under the 1995 Option
Plan.
|
|
|
(7)
|
Includes options exercisable for
42,666 shares of Common Stock under the 1995 Option Plan.
|
|
|
(8)
|
On March 10, 2004, Mr. Hill was granted
an option exercisable for 30,000 shares of Common Stock
under the 1995 Option Plan.
|
|
|
(9)
|
Includes options exercisable for
35,000 shares of Common Stock under the 1995 Option Plan.
|
|
|
(10)
|
Includes options exercisable for
55,000 shares of Common Stock under the 1995 Option Plan.
|
|
(11)
|
Includes options exercisable for
35,000 shares of Common Stock under the 1995 Option Plan.
|
|
(12)
|
Includes options exercisable for
30,000 shares of Common Stock under the 1995 Option Plan.
|
|
(13)
|
Includes options exercisable for
618,832 shares of Common Stock under the 1995 Option Plan.
|
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange
Act of 1934 requires our directors and executive officers, and
persons who own more than ten percent of a registered class of
our equity securities to file with the Securities and Exchange
Commission initial reports of ownership on Form 3 and
reports of changes in ownership on Form 4 or Form 5 of
Common Stock and other equity securities of Intevac. Officers,
directors and greater than ten percent shareholders are required
by SEC regulations to furnish Intevac with copies of all
Section 16(a) forms they file.
Based solely upon review of the copies of such
reports furnished to us and written representations that no
other reports were required, we believe that during the fiscal
year ended December 31, 2003, our officers, directors and
holders of more than ten percent of our Common Stock complied
with all Section 16(a) filing requirements, with the
following exception: One former director, Robert Hempstead,
filed one late report on a Form 4, covering the sale of
600 shares of our Common Stock.
15
EXECUTIVE COMPENSATION AND RELATED
INFORMATION
Summary of Cash and Certain Other
Compensation
The following table provides certain summary
information concerning the compensation earned by (i) our
Chief Executive Officer and (ii) each of our three other
executive officers whose salary and bonus was in excess of
$100,000 for fiscal 2003, for services rendered in all
capacities to Intevac and its subsidiaries for each of the last
three fiscal years. Such individuals are referred to as the
Named Executive Officers. No executive officer who
would have otherwise been includible in the table on the basis
of salary and bonus earned for fiscal 2003 resigned or
terminated employment during the fiscal year.
Summary Compensation Table
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Long-Term
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Compensation
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Awards
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Annual Compensation
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Securities
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Underlying
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All Other
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Name and Principal Position
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Years
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Salary($)(1)
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Bonus
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Options (#)
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Compensation(2)
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Norman H. Pond
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2003
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$
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67,922
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$
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2,798
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Chairman of the Board
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2002
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140,805
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3,562
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2001
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349,313
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4,456
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Kevin Fairbairn(3)
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2003
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270,304
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$
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85,000
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2,609
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President and Chief
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2002
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216,734
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250,000
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2,312
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Executive Officer
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2001
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Charles B. Eddy III
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2003
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185,704
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2,375
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Vice President, Finance and
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2002
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184,304
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2,373
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Administration, Chief Financial
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2001
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181,456
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5,000
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2,359
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Officer, Treasurer and Secretary
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Verle Aebi
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2003
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187,708
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2,248
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President of Photonics
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2002
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186,294
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2,247
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Technology Division
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2001
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183,914
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5,000
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2,238
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(1)
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Includes salary deferral contributions to
Intevacs 401(k) Plan.
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(2)
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The indicated amount for each Named Executive
Officer comprises the contributions made by Intevac on behalf of
such individual to our 401(k) Plan, which match a portion of the
officers salary deferral contributions to that plan, and
the cost of any life insurance in excess of $50,000 paid by
Intevac.
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(3)
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Mr. Fairbairn joined Intevac in
January 2002 as President and Chief Executive Officer,
replacing Mr. Pond.
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16
Stock Options
No stock option grants were made to any of the
Named Executive Officers during the fiscal year ended
December 31, 2003.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
The following table sets forth information
concerning option exercises and option holdings for fiscal 2003
by each of the Named Executive Officers. Each option also
includes a limited stock appreciation right which provides the
optionee with a right, exercisable upon the successful
completion of a hostile tender offer for fifty percent or more
of Intevacs outstanding voting securities, to surrender
the option to Intevac, to the extent the option is at that time
exercisable for vested shares, in return for a cash distribution
per surrendered option share equal to the excess of (i) the
highest price per share of Common Stock paid in the hostile
tender offer over (ii) the option exercise price payable
per share. No other stock appreciation rights were outstanding
at the end of the fiscal year.
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Number of
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Securities
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Underlying
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Unexercised
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Value of Unexercised
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Options/SARs at
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in-the-Money
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Fiscal Year-End(#)
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Options/SARs at Fiscal
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Shares Acquired
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Value
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Exercisable/
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Year-End Exercisable/
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Name
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on Exercise(#)
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Realized(1)
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Unexercisable
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Unexercisable(2)
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Norman H. Pond
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100,000
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$
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1,088,000
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63,333/0
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$
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512,997/0
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Kevin Fairbairn
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95,833/154,167
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$
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1,099,205/1,768,295
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Charles B. Eddy III
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28,833
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$
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272,832
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48,433/4,400
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$
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389,371/45,540
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Verle Aebi
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9,733
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$
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142,656
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42,666/5,000
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$
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332,750/51,712
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(1)
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Equal to the fair market value of the purchased
shares on the option exercise date less the exercise price paid
for those shares.
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(2)
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Based on the market price of $14.10 per
share, which was the closing price per share of our Common Stock
on the Nasdaq National Market on the last day of fiscal 2003,
less the exercise price payable for such shares. Options for
which the exercise price is greater than $14.10 are excluded
from this calculation.
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EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes the number of
outstanding options granted to employees and directors, as well
as the number of securities remaining available for future
issuance, under our equity compensation plans at
December 31, 2003.
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(a)
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(c)
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Number of securities
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(b)
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Number of securities
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to be issued upon
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Weighted-average
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remaining available
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exercise of
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exercise price of
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for future issuance
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outstanding options,
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outstanding options,
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under equity
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Plan Category
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warrants and rights
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warrants and rights
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compensation plans(1)
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Equity compensation plans approved by security
holders(2)
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1,426,285
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$
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5.26
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467,515
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Equity compensation plans not approved by
security holders
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$
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Total
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1,426,285
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$
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5.26
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467,515
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(1)
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Excludes securities reflected in column (a).
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(2)
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Included in the column (c) amount are
358,197 shares available for future issuance under our 2003
Employee Stock Purchase Plan.
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17
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT
AND CHANGE-IN-CONTROL AGREEMENTS
None of our executive officers except Kevin
Fairbairn has an employment agreement with us, and all of our
executive officers employment may be terminated at any
time at the discretion of the Board of Directors. For
Mr. Fairbairn, in the event of the involuntary termination
from his position as President and Chief Executive Officer for
any reason not involving good cause, but subject to his
execution of a waiver and release of claims that is acceptable
to us, we will continue to pay his base salary for twelve months
following termination. Upon a change of control of Intevac, all
options held by Mr. Fairbairn will immediately vest in full
unless the acquiring company assumes the options or substitutes
new options and Mr. Fairbairn chooses not to accept the
assumed of substituted options. In addition, in the event of
involuntary termination of Mr. Fairbairn following a change
of control, he will be entitled to receive a lump sum equal to
twelve months of base salary. If his employment continues, he
will be entitled to an amount equal to two times his annual
salary after twelve months of employment.
Pursuant to the express provisions of the 1995
Stock Option/ Stock Issuance Plan, the outstanding options under
the 1995 Option Plan held by the Chief Executive Officer and our
other executive officers would immediately accelerate in full,
and all unvested shares of Common Stock at the time held by such
individuals under the 1995 Option Plan would immediately vest,
if their employment were to be terminated either involuntarily
or through a forced resignation within twelve months after any
acquisition of Intevac by merger or asset sale in which those
options and shares did not otherwise vest. In addition, the
Compensation Committee of the Board of Directors has the
authority as administrator of the 1995 Plan to provide for the
accelerated vesting of outstanding options under the 1995 Option
Plan held by the Chief Executive Officer and our other executive
officers, and the immediate vesting of all unvested shares of
Common Stock at the time held by such individuals under the 1995
Option Plan, if their employment were to be terminated either
involuntarily or through a forced resignation following a
hostile take-over of Intevac effected through a successful
tender offer for more than fifty percent of our outstanding
Common Stock or through a change in the majority of the Board as
a result of one or more contested elections for Board membership.
Under the proposed 2004 Equity Incentive Plan,
the Board of Directors or its Compensation Committee, as
administrator of the plan, has the authority to provide for the
accelerated vesting of outstanding options under the plan,
including options held by our executive officers, under such
circumstances and at such time as the board or committee deems
appropriate, including in the event of termination of the
optionee or a change in control of Intevac.
18
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The information contained in this report shall
not be deemed to be soliciting material or to be
filed with the SEC, nor shall such information be incorporated
by reference into any past or future filing under the Securities
Act or the Exchange Act, except to the extent Intevac
specifically incorporates it by reference into such
filing.
The purpose of the Compensation Committee of the
Board of Directors is to discharge the Boards
responsibilities relating to compensation of our executive
officers and employees. The Committee has overall responsibility
for: approving executive officer compensation plans, reviewing
and approving an annual report on executive compensation for
inclusion in our Proxy statement, reviewing succession plans on
an annual basis, and oversight of compensation strategy for our
employees with attention to key employees.
In addition, the Compensation Committee has
exclusive responsibility for administering the 1995 Stock
Option/ Stock Issuance Plan, under which stock option grants and
direct stock issuances may be made to executive officers and
other employees. In carrying out its duties, the Compensation
Committee has access to independent compensation consultants and
outside survey data. The Compensation Committee is currently
comprised of two non-employee independent directors, David N.
Lambeth and Robert Lemos. The Compensation Committees
responsibilities are further defined in its Charter, which is
available on our internet home page, located at www.intevac.com.
In the discussion below, we describe our
executive compensation policies and practices. We also identify
the procedures we use to determine the compensation of our Chief
Executive Officer, the next three most highly compensated
executive officers and other key officers.
Compensation
Philosophy.
We operate in diverse
technology market segments, each with varying growth rates at
any point in time. To succeed, each business must have specific
strategies, tactics and measures of performance appropriate to
its competitive environment, as well as compensation programs to
support its objectives.
Our Committee relies on four core aspects with
regards to executive compensation policies and practices.
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Market Driven: Our programs are structured to be
competitive both in their design and in the total compensation
opportunity they offer. Comparison groups will vary by business,
based on the leading competitors in the industries in which we
compete for business and in the markets in which we compete for
talent.
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Shareholder-Aligned: To focus on the common
linkage to Intevac, employees have some portion of their
compensation dependent upon company-wide financial performance.
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Performance-Based: Employees have their pay
linked to a combination of company, team and individual
performance. The specific measures of success that apply and the
forms of compensation that are affected vary by business and by
position. Individual performance is objectively assessed via a
formal performance management process.
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Values-Oriented: The design and administration of
our compensation programs are supportive of our values and
commitment to diversity. Our assessments of individual
performance are measured against our values.
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Total Annual
Compensation.
After reviewing
compensation information from various surveys of companies in
the high technology industry that compete with us for executive
talent and/or have revenues comparable to our revenues, the
Committee determines each officers total annual cash
compensation. Our goal is to target base pay near the median
level and establish total cash compensation based on achieved
performance goals.
Bonuses.
Our
Compensation Committee has the power to set target bonuses for
each officer based on his or her potential impact on our
operating and financial results and based on market competitive
pay practices. The actual bonus that is paid to each officer
under the bonus plan depends on the achievement of business unit
and financial performance goals and overall company performance.
19
Long-Term Stock-Based Incentive
Compensation.
Long-term incentives are
provided through stock option grants. Our committee believes
that stock options motivate our officers to maximize shareholder
value and to remain employed with Intevac. All Intevac stock
options to date have had a per share exercise price equal to the
fair market value of our common stock on the grant date.
The size of the option grant to each officer is
designed to create a meaningful opportunity for stock ownership
and is based upon the officers current position with
Intevac, internal comparability with option grants made to other
Intevac executives, the officers current level of
performance and the officers potential for future
responsibility and promotion over the option term. The
Compensation Committee also takes into account the number of
vested and unvested options held by the officer, to maintain an
appropriate level of equity incentive for that individual.
However, the Compensation Committee does not adhere to any
specific guidelines as to the relative option holdings of our
officers.
COMPENSATION OF CHIEF EXECUTIVE
OFFICER.
During the fiscal year ended
December 31, 2003, Mr. Fairbairn received a base
salary of $270,304. His base salary was set at a level which the
Compensation Committee believed would be competitive with the
base salary levels in effect for chief executive officers at
similarly-sized companies within our industry.
TAX DEDUCTIBILITY OF EXECUTIVE
COMPENSATION.
Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows
a tax deduction to publicly held companies for compensation paid
to certain executive officers, to the extent that that
compensation exceeds $1 million per officer in any year.
The compensation paid to all of our executive officers for
fiscal 2003 did not exceed the $1 million limit per
officer, and it is not expected the compensation to be paid to
any of our executive officers for fiscal 2004 will exceed that
limit. In addition, our 1995 Stock Option/ Stock Issuance Plan
and the proposed 2004 Equity Incentive Plan are both structured
so that any compensation deemed paid to an executive officer in
connection with the exercise of his or her outstanding options
under the 1995 Plan will qualify as performance-based
compensation that will not be subject to the $1 million
limitation.
This report is submitted by the Compensation
Committee.
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David N. Lambeth
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Robert Lemos
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Compensation Committee of our Board of
Directors was formed September 14, 1995 and during 2003 was
comprised of David N. Lambeth and Robert Hempstead. Neither of
these individuals was at any time during fiscal 2003, or at any
other time, an officer or employee of Intevac. None of our
executive officers serves as a member of the board of directors
or compensation committee of any other entity that has one or
more executive officers serving as a member of our Board of
Directors or Compensation Committee.
20
AUDIT COMMITTEE REPORT
The information contained in this report shall
not be deemed to be soliciting material or to be
filed with the SEC, nor shall such information be incorporated
by reference into any past or future filing under the Securities
Act or the Exchange Act, except to the extent Intevac
specifically incorporates it by reference into such
filing.
COMPOSITION.
The
Audit Committee currently consists of Mr. Dury,
Mr. Lemos and Mr. Money, each of whom is a
non-employee director who the Board of Directors has determined
meets the independence and other requirements to serve on the
Audit Committee under the listing standards of The Nasdaq Stock
Market. The Board has also determined that each member of the
committee is an audit committee financial expert as
defined in Item 401 of Regulation S-K.
RESPONSIBILITIES.
The Audit Committee operates under a written charter that has
been adopted by the Board. The Audit Committee is responsible
for overseeing our accounting and financial reporting processes,
overseeing the audits of our financial statements and assisting
the Board of Directors in oversight and monitoring of
(i) the integrity of our financial statements,
(ii) our compliance with legal and regulatory requirements,
(iii) the qualifications, independence and performance of
our external auditors, and (iv) our internal accounting and
financial controls. Our management is responsible for
maintaining: (a) our books of account and preparing
periodic financial statements based thereon; and (b) the
system of internal controls. The independent accountants are
responsible for auditing our annual financial statements. The
Audit Committees responsibilities are further defined in
its Charter, which is attached as Appendix A.
Review with Management and Independent
Accountants.
In this context, the
Audit Committee hereby reports as follows:
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1. The Audit Committee has reviewed and discussed
with management and the independent accountants our audited
consolidated financial statements contained in our Annual Report
on Form 10-K for the fiscal year ended December 31,
2003.
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2. The Audit Committee has discussed with the
independent accountants matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with
Audit Committees).
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3. The Audit Committee has received from the
independent accountants, Grant Thornton LLP, the written
disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee has discussed with Grant
Thornton LLP the independent accountants independence.
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4. The Audit Committee has considered whether the
provision of services covered by Fees Paid To Accountants For
Services Rendered is compatible with maintaining the
independence of Grant Thornton LLP.
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Based on the review and discussion referred to in
paragraphs 1-4 above, the Audit Committee recommended to
the Board, and the Board has approved, that the audited
consolidated financial statements be included in our Annual
Report on Form 10-K for the fiscal year ended
December 31, 2003, for filing with the SEC.
The Audit Committee has recommended to the Board
that Grant Thornton LLP be selected as our independent
accountants for the fiscal year ending December 31, 2004
This report is submitted by the Audit Committee.
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David S. Dury (Chairman)
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Robert Lemos
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Arthur L. Money
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21
PERFORMANCE GRAPH
The following graph compares the cumulative total
shareholder return on the Common Stock of Intevac with that of
the NASDAQ Stock Market Total Return Index, a broad market index
published by the Center for Research in Security Prices
(CRSP), and the NASDAQ Computer Manufacturers Stock
Total Return Index compiled by CRSP. The comparison for each of
the periods assumes that $100 was invested December 31,
1998 in our Common Stock, the stocks included in the NASDAQ
Stock Market Total Return Index and the stocks included in the
NASDAQ Computer Manufacturers Stock Total Return Index. These
indices, which reflect formulas for dividend reinvestment and
weighting of individual stocks, do not necessarily reflect
returns that could be achieved by individual investors.
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE
DECEMBER 31, 1998
AMONG INTEVAC, NASDAQ STOCK MARKET TOTAL
RETURN INDEX AND
NASDAQ COMPUTER MANUFACTURERS TOTAL RETURN
INDEX
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12/31/98
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12/31/99
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12/31/00
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12/31/01
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12/31/02
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12/31/03
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Intevac, Inc.
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$
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100
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$
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55
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$
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49
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$
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37
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$
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63
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$
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221
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Nasdaq Stock Market Total Return Index
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100
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185
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112
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89
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61
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92
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Nasdaq Computer Manufacturers Total Return Index
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100
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212
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121
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83
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55
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77
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Notwithstanding anything to the contrary set
forth in any of our previous filings under the Securities Act of
1933 or the Exchange Act that might incorporate future filings,
including this Proxy Statement, in whole or in part, the
preceding Compensation Committee Report on Executive
Compensation, the preceding Audit Committee Report and the
preceding Performance Graph shall not be incorporated by
reference into any such filings; nor shall such reports or graph
be incorporated by reference into any future filings.
22
OTHER BUSINESS
The Board of Directors knows of no other business
that will be presented for consideration at the Annual Meeting.
If other matters are properly brought before the Annual Meeting,
however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on
such matters in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders which are intended to
be presented at our Annual Meeting of Shareholders to be held in
2005 must be received by Intevac no later than December 1,
2004 to be included in the proxy statement and proxy relating to
that meeting. If a shareholder intends to raise a proposal at
our 2005 Annual Meeting of Shareholders that is not eligible for
inclusion in the proxy statement relating to the meeting and the
shareholder fails to give us notice in accordance with the
requirements set forth in the Securities Exchange Act by
March 31, 2005, the proxy holders will be allowed to use
their discretionary authority when and if the proposal is raised
at our 2005 Annual Meeting.
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BY ORDER OF THE BOARD OF DIRECTORS
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CHARLES B. EDDY III
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Vice President, Finance and Administration,
Chief
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Financial Officer, Treasurer and
Secretary
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March 29, 2004
23
Appendix A Audit Committee
Charter
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
INTEVAC, INC.
Approved October 16, 2003
Purpose:
The purpose of the Audit Committee of the Board
of Directors of Intevac, Inc. (the
Company
) shall be to:
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Oversee the accounting and financial reporting
processes of the Company and audits of the financial statements
of the Company;
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Assist the Board in oversight and monitoring of
(i) the integrity of the Companys financial
statements, (ii) the Companys compliance with legal
and regulatory requirements related to financial affairs and
reporting, (iii) the independent auditors
qualifications, independence and performance, and (iv) the
Companys internal accounting and financial controls;
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Prepare the report that the rules of the
Securities and Exchange Commission (the SEC) require
be included in the Companys annual proxy statement;
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Periodically provide the Companys Board
with the results of its monitoring and recommendations derived
therefrom; and
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Provide to the Board such additional information
and materials as it may deem necessary to make the Board aware
of significant financial matters that require the attention of
the Board.
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In addition, the Audit Committee will undertake
those specific duties and responsibilities listed below and such
other duties as the Board of Directors may from time to time
prescribe.
Membership:
The Audit Committee members will be appointed by,
and will serve at the discretion of, the Board of Directors. The
Audit Committee will consist of three members of the Board of
Directors. Members of the Audit Committee must meet the
following criteria (as well as any criteria required by the SEC):
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Each member will be an independent director, as
defined in (i) NASDAQ Rule 4200 and (ii) the
rules of the SEC;
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Each member will be able to read and understand
fundamental financial statements, in accordance with the NASDAQ
National Market Audit Committee requirements;
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At least one member will have past employment
experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or
background, including a current or past position as a principal
financial officer or other senior officer with financial
oversight responsibilities;
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At least one member will be an audit committee
financial expert, as defined in the rules of the SEC.
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The Audit Committee shall elect a Chairman at any
time the membership changes or when circumstances make this
appropriate.
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Responsibilities:
The responsibilities of the Audit Committee shall
include:
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1. Reviewing on a continuing basis the
reports of management and the independent auditors concerning
the design, implementation, maintenance and adequacy of the
Companys system of internal controls and procedures for
financial reporting, including meeting periodically with the
Companys
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A-1
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management and the independent auditors to review
their assessment of the adequacy of such controls and to review
before release the disclosure regarding such system of internal
controls required under SEC rules to be contained in the
Companys periodic filings and the attestations or reports
by the independent auditors relating to such disclosure;
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2. Appointing, compensating and overseeing
the work of the independent auditors (including resolving
disagreements between management and the independent auditors
regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work;
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3. Pre-approving audit and permissible
non-audit services provided to the Company by the independent
auditors (or subsequently approving non-audit services in those
circumstances where a subsequent approval is necessary and
permissible); in this regard, the Audit Committee shall have the
sole authority to approve the hiring and firing of the
independent auditors, all audit engagement fees and terms and
all non-audit engagements, as may be permissible, with the
independent auditors;
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4. Reviewing and providing guidance with
respect to the external audit and the Companys
relationship with its independent auditors by (i) reviewing
the independent auditors proposed audit scope, approach
and independence; (ii) obtaining on a periodic basis a
statement from the independent auditors regarding relationships
and services with the Company which may impact independence and
presenting this statement to the Board of Directors, and to the
extent there are relationships, monitoring and investigating
them; (iii) discussing with the Companys independent
auditors the financial statements and audit findings, including
any significant adjustments, management judgments and accounting
estimates, significant new accounting policies and disagreements
with management and any other matters described in SAS
No. 61, as may be modified or supplemented; and
(iv) reviewing reports submitted to the audit committee by
the independent auditors in accordance with the applicable SEC
requirements;
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5. Reviewing and discussing with management
and the independent auditors the annual audited financial
statements and quarterly un-audited financial statements,
including the Companys disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations and other sections of
the documents prior to filing the Companys Annual Report
on Form 10-K and Quarterly Reports on Form 10-Q,
respectively, with the SEC;
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6. Directing the Companys independent
auditors to review before filing with the SEC the Companys
interim financial statements included in Quarterly Reports on
Form 10-Q, using professional standards and procedures for
conducting such reviews;
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7. Conducting a post-audit review of the
financial statements and audit findings, including any
significant suggestions for improvements provided to management
by the independent auditors;
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8. Reviewing before release the unaudited
quarterly operating results in the Companys quarterly
earnings release;
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9. Overseeing compliance with the
requirements of the SEC for disclosure of auditors
services and audit committee members, member qualifications and
activities;
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10. Reviewing, approving and monitoring the
Companys code of ethics for its senior financial officers;
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11. Reviewing managements monitoring
of compliance with the Companys standards of business
conduct and with the Foreign Corrupt Practices Act;
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12. Reviewing, in conjunction with counsel,
any legal matters that could have a significant impact on the
Companys financial statements;
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13. Providing oversight and review at least
annually of the Companys risk management policies,
including its investment policies;
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14. Reviewing the Companys compliance
with employee benefit plans,
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15. Overseeing and reviewing the
Companys policies regarding information technology and
management information systems,
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16. If necessary, instituting special
investigations with full access to all books, records,
facilities and personnel of the Company;
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17. As appropriate, obtaining advice and
assistance from outside legal, accounting or other advisors;
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18. Reviewing and approving in advance any
proposed related party transactions;
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19. Reviewing its own charter, structure,
processes and membership requirements;
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20. Providing a report in the Companys
proxy statement in accordance with the rules and regulations of
the SEC;
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21. Establishing procedures for receiving,
retaining and treating complaints received by the Company
regarding accounting, internal accounting controls or auditing
matters and procedures for the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters;
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22. Reviewing its performance on an annual
basis.
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MEETINGS:
The Audit Committee will establish its own
schedule, which it will provide to the Board of Directors in
advance. The Audit Committee will also hold additional meetings,
with any personnel it deems necessary, if it deems additional
meetings are necessary to carrying out its duties.
The Audit Committee will meet at least once each
quarter to review and approve the quarterly/annual financial
results prepared by management. Attendees at the meeting will
include the:
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1. Audit Committee
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2. CEO and CFO
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3. The Companys Auditors
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4. Others as appropriate
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During these quarterly reviews, management will
review the following:
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1. Status of action items from the previous
meeting
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2. Revenue breakdown
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3. Inventory valuation and reserves
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4. Accounts receivable greater than
60 days old and bad debt reserves
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5. Warranty reserves
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6. Significant estimates and any unusual
items
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7. Draft earnings press release
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8. Any other items requiring routine Audit
Committee review or requested by the Audit Committee
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9. Any other items not noted above that are
appropriate for audit committee review (the objective here is to
put the onus on management to make sure that the Audit Committee
is briefed on all items appropriate for their consideration
consistent with the Audit Committee charter).
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During these quarterly reviews, the
Companys Auditors will make all necessary regulatory
disclosures including the following,
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1. Critical accounting policies
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2. Material written communications
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3. Alternative accounting treatments
discussed with management and auditors preferred treatment
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4. Disputes with management, if any
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After the above items have been reviewed to the
satisfaction of the Audit Committee, management will leave the
meeting and the Audit Committee will meet in closed session with
the Companys auditors to determine if any additional
issues need to be addressed in the absence of management. Upon
completion of the closed session, management will return to the
meeting and the Audit Committee will either approve the draft
financial results presented by management for public release, or
define a set of necessary conditions and/or follow-up actions
for management to take prior to the release of financial results
to the public.
MINUTES:
The Audit Committee will maintain written minutes
of its meetings, which minutes will be filed with the minutes of
the meetings of the Board of Directors. On a quarterly basis,
the Audit Committee Chairman will review the Audit Committee
Checklist with the Committee to insure that all necessary Audit
Committee duties have been addressed and submit an updated copy
of the Audit Committee Checklist to the Chairman of the Company.
The Chief Financial Officer will act as Secretary of the Audit
Committee and prepare minutes of meetings for Audit Committee
approval.
REPORTS:
In addition to preparing the report in the
Companys proxy statement in accordance with the rules and
regulations of the SEC, the Audit Committee will summarize its
examinations and recommendations to the Board of Directors as
may be appropriate, consistent with the Committees
charter, but in no case less than once per quarter in regularly
scheduled board of directors meetings.
DELEGATION OF AUTHORITY:
To the extent permitted by SEC and Nasdaq rules,
the Audit Committee may delegate to one or more designated
members of the Audit Committee the authority to pre-approve
audit and permissible non-audit services, provided the person to
whom such authority has been delegated reports such pre-approval
decision to the full Audit Committee at its next scheduled
meeting.
COMPENSATION:
Members of the Audit Committee may not receive
any compensation from the Company, except the fees that they
receive for service as a member of the Board of Directors or a
committee thereof, if any. Such fees may be in the form of cash
or equity compensation, or both, as determined by the Board of
Directors.
A-4
ITV-PS-04
INTEVAC, INC.
2004 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Plan are:
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to attract and retain the best available personnel
for positions of substantial responsibility,
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to provide additional incentive to Employees,
Directors and Consultants, and
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to promote the success of the Companys business.
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The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock
Options, Restricted Stock, Stock Appreciation Rights, Performance Units and
Performance Shares.
2. Definitions. As used herein, the following definitions will apply:
(a) Administrator means the Board or any of its Committees as will be
administering the Plan, in accordance with Section 4 of the Plan.
(b) Affiliated SAR means a SAR that is granted in connection with a
related Option, and which automatically will be deemed to be exercised at the
same time that the related Option is exercised.
(c) Applicable Laws means the requirements relating to the
administration of equity-based awards 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 foreign 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, SARs, Restricted Stock, Performance Units or Performance Shares.
(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.
(h) Change in Control means the occurrence of any of the following
events:
(i) Any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 of the
Exchange Act),
directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Companys
then outstanding voting securities; or
(ii) The consummation of the sale or disposition by the Company of all or
substantially all of the Companys assets;
(iii) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. Incumbent Directors means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but will not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iv) The consummation of a merger or consolidation 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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately
after such merger or consolidation.
(i) Code means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code herein will be a reference to any successor
or amended section of the Code.
(j) Committee means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(k) Common Stock means the common stock of the Company, or in the case
of Performance Units, the cash equivalent thereof.
(l) Company means Intevac, Inc., a California corporation, or any
successor thereto.
(m) Consultant means any natural person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
(n) Cost of Sales as a Percentage of Sales means as to any Performance
Period, the Companys cost of sales stated as a percentage of sales, determined
in accordance with generally accepted accounting principles.
(o) Director means a member of the Board.
(p) Disability means total and permanent disability as defined in
Section 22(e)(3) of the Code.
-2-
(q) Earnings Per Share means as to any Performance Period, the Companys
Profit After Tax, 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.
(r) Employee means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a directors fee by the Company will be
sufficient to constitute employment by the Company.
(s) Exchange Act means the Securities Exchange Act of 1934, as amended.
(t) 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.
(u) 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
will 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 day 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 will be the mean between the high bid and low asked prices for the
Common Stock on the day of determination, as reported in
The Wall Street
Journal
or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value will be determined in good faith by the Administrator.
(v) Fiscal Year means the fiscal year of the Company.
(w) Free Cash Flow means as to any Performance Period, the Companys
earnings before interest, taxes, depreciation and amortization (EBITDA),
determined in accordance with generally accepted accounting principles.
(x) Freestanding SAR means a SAR that is granted independently of any
Option.
-3-
(y) 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.
(z) Inside Director means a Director who is an Employee.
(aa) Marketing and Sales Expenses as a Percentage of Sales means as to
any Performance Period, the Companys 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 Companys net income stated as a percentage of sales, determined in
accordance with generally accepted accounting principles.
(cc) Nonstatutory Stock Option means an Option that by its terms does
not qualify or is not intended to qualify as an Incentive Stock Option.
(dd) 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.
(ee) Operating Margin means as to any Performance Period, the Companys
net operating income divided by Revenues, determined in accordance with
generally accepted accounting principles.
(ff) Option means a stock option granted pursuant to the Plan.
(gg) Outside Director means a Director who is not an Employee.
(hh) Parent means a parent corporation, whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(ii) Participant means a Service Provider who holds an outstanding Award
granted under the Plan.
(jj) 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) Cost of
Sales as a Percentage of Sales, (b) Earnings Per Share, (c) Free Cash Flow, (d)
Marketing and Sales Expenses as a Percentage of Sales, (e) Net Income as a
Percentage of Sales, (f) Operating Margin, (g) Revenue, (h) Total Shareholder
Return and (i) Working Capital. The Performance Goals may differ from
Participant to Participant and from Award to Award. 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 a segment of the Company and/or (v) on a pre-tax or
after-tax basis. Prior to the latest possible date that will not jeopardize an
Awards qualification as performance-based compensation under Section 162(m)
of the Code, the Committee shall
-4-
determine whether any element(s) or item(s) shall be included in or
excluded from the calculation of any Performance Goal with respect to any
Participants.
(kk) 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.
(ll) Performance Share means an Award granted to a Participant pursuant
to Section 10.
(mm) Performance Unit means an Award granted to a Participant pursuant
to Section 10.
(nn) 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, the achievement of target levels of
performance, or the occurrence of other events as determined by the
Administrator.
(oo) Plan means this 2004 Equity Incentive Plan.
(pp) Profit After Tax means as to any Performance Period, the Companys
income after taxes, determined in accordance with generally accepted accounting
principles.
(qq) Restricted Stock means shares of Common Stock issued pursuant to a
Restricted Stock award under Section 8 of the Plan or issued pursuant to the
early exercise of an Option.
(rr) Revenue means as to any Performance Period, the Companys net
revenues generated from third parties, determined in accordance with generally
accepted accounting principles.
(ss) 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.
(tt) Section 16(b) means Section 16(b) of the Exchange Act.
(uu) Service Provider means an Employee, Director or Consultant.
(vv) Share means a share of the Common Stock, as adjusted in accordance
with Section 13 of the Plan.
(ww) Stock Appreciation Right or SAR means an Award, granted alone or
in connection with an Option, that pursuant to Section 9 is designated as a
SAR.
(xx) Subsidiary means a subsidiary corporation, whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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(yy) Tandem SAR means a SAR that is granted in connection with a related
Option, the exercise of which will require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR will be canceled to the same extent).
(zz) Total Shareholder Return means as to any Performance Period, the
total return (change in share price plus reinvestment of any dividends) of a
Share.
(aaa) Unvested Awards shall mean Options or Restricted Stock that (i)
were granted to an individual in connection with such individuals position as
an Employee and (ii) are still subject to vesting or lapsing of Company
repurchase rights or similar restrictions.
(bbb) Working Capital means the Companys current assets minus current
liabilities, determined in accordance with generally accepted accounting
principles.
3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 1,200,000 Shares plus (a) the number of shares which have
been reserved but not issued under the Companys 1995 Stock Option/Stock
Issuance Plan (the 1995 Plan) as of the effective date of the Plan, and (b)
any Shares returned to the 1995 Plan as a result of termination of options or
repurchase of Shares issued under such plan. The Shares may be authorized, but
unissued, or reacquired Common Stock. Shares shall not be deemed to have been
issued pursuant to the Plan with respect to any portion of an Award that is
settled in cash. Upon payment in Shares pursuant to the exercise of an SAR,
the number of Shares available for issuance under the Plan shall be reduced
only by the number of Shares actually issued in such payment. If the exercise
price of an Option is paid by tender to the Company, or attestation to the
ownership, of Shares owned by the Participant, the number of Shares available
for issuance under the Plan shall be reduced by the gross number of Shares for
which the Option is exercised. Notwithstanding anything to the contrary
herein, the total number of Shares subject to Awards other than Options or SARs
that were granted at per Share exercise prices equal to 100% of Fair Market
Value per Share on the grant date may not exceed 20% of the Shares reserved for
issuance under the Plan.
(b) Lapsed Awards. 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
Performance Units, is forfeited back 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, only Shares actually issued pursuant to an SAR shall cease to
be available under the Plan; all remaining Shares under SARs shall remain
available for future grant or sale under the Plan (unless the Plan has
terminated). However, 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, except that if unvested
Shares of Restricted Stock, Performance Shares or Performance Units are
repurchased by the Company or are forfeited to the Company, such Shares shall
become available for future grant under the Plan. To the extent an Award
under the Plan is paid out in cash rather
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than stock, such cash payment shall not result in reducing the number of
Shares available for issuance under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to
different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator determines it
to be desirable to qualify Options granted hereunder as performance-based
compensation within the meaning of Section 162(m) of the Code, the Plan will
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
will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will 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 will 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 to be covered by each Award
granted hereunder;
(iv) to approve forms of 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 time or times when
Awards may be exercised (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 will determine;
(vi) to institute an Exchange Program;
(vii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan;
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(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 applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 17(c) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Awards 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 or vesting of an 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 any Shares to be withheld will 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 will be made in
such form and under such conditions as the Administrator may deem necessary or
advisable;
(xi) 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;
(xii) to allow a Participant to defer the receipt of the payment of cash
or the delivery of Shares that would otherwise be due to such Participant under
an Award;
(xiii) to make all other determinations deemed necessary or advisable for
administering the Plan.
(c) Exchange Program. Notwithstanding anything in this Plan to the
contrary, the Administrator shall not have the authority to institute an
Exchange Program without the consent of the shareholders.
(d) Effect of Administrators Decision. The Administrators decisions,
determinations and interpretations will be final and binding on all
Participants and any other holders of Awards.
5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock
Appreciation Rights, Performance Units and Performance Shares may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Each Option will be designated in the Award Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding 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 will be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options will be taken into account in the
order in which they were granted. The Fair Market Value of the Shares will be
determined as of the time the Option with respect to such Shares is granted.
-8-
(b) The following limitations will apply to grants of Options and Stock
Appreciation Rights with an exercise price equal to or exceeding 100% of Fair
Market Value on the grant date:
(i) No Service Provider will be granted, in any Fiscal Year, Options or
SARs to purchase more than 200,000 Shares.
(ii) In connection with his or her initial service, a Service Provider may
be granted Options or SARs to purchase up to an additional 300,000 Shares,
which will not count against the limit set forth in Section 6(b)(i) above.
(iii) The foregoing limitations will be adjusted proportionately in
connection with any change in the Companys capitalization as described in
Section 13.
(iv) If an Option or SAR is cancelled in the same Fiscal Year in which it
was granted (other than in connection with a transaction described in Section
13), the cancelled Option or SAR will be counted against the limits set forth
in subsections (i) and (ii) 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.
7. Stock Options.
(a) Term of Option. The term of each Option will be stated in the Award
Agreement. In the case of an Incentive Stock Option, the term will 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 all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award Agreement.
(b) 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
a) 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.
b) granted to any Employee other than an Employee described in paragraph
(a) immediately above, the per Share exercise price will be no less than 100%
of the Fair Market Value per Share on the date of grant.
-9-
(2) In the case of a Nonstatutory Stock Option, the per Share exercise
price will be determined by the Administrator. In the case of a Nonstatutory
Stock Option intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Code, 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, Incentive Stock 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 will fix the period within which the Option may be exercised
and will determine any conditions that must be satisfied before the Option may
be exercised.
(iii) Form of Consideration. The Administrator will 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 will
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of: (1) cash; (2) check; (3) promissory
note; (4) other Shares, provided Shares acquired directly or indirectly from
the Company, (A) have been owned by the Participant and not subject to
substantial risk of forfeiture for more than six months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option will be
exercised; (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 Participants participation in any
Company-sponsored deferred compensation program or arrangement; (7) any
combination of the foregoing methods of payment; or (8) such other
consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.
(c) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder will 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 will be deemed exercised when the Company receives: (x) written
or electronic notice of exercise (in accordance with the Award Agreement) from
the person entitled to exercise the Option, and (y) 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 will 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 stockholder will exist with
respect to the Awarded Stock, notwithstanding the exercise of the Option. The
Company will issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment
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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 13 of
the Plan.
Exercising an Option in any manner will 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.
(d) Termination of Relationship as a Service Provider. If a Participant
ceases to be a Service Provider, other than upon the Participants death or
Disability, the Participant may exercise his or her Option within such period
of time as is specified in the Award Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement). In the absence
of a specified time in the Award Agreement, the Option will remain exercisable
for three (3) months following the Participants termination. Unless otherwise
provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified by
the Administrator, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.
(e) Disability of Participant. If a Participant ceases to be a Service
Provider as a result of the Participants Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following
the Participants termination. Unless otherwise provided by the Administrator,
if on the date of termination the Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will
revert to the Plan. If after termination the Participant does not exercise his
or her Option within the time specified herein, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.
(f) Death of Participant. If a Participant dies while a Service Provider,
the Option may be exercised following the Participants death within such
period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participants designated beneficiary, provided
such beneficiary has been designated prior to Participants 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 Participants estate or by the person(s) to whom the
Option is transferred pursuant to the Participants will or in accordance with
the laws of descent and distribution. In the absence of a specified time in
the Award Agreement, the Option will remain exercisable for twelve (12) months
following Participants death. Unless otherwise provided by the Administrator,
if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.
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(g) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to
the Participant at the time that such offer is made.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, 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 provided that during any Fiscal Year, no
Service Provider shall receive more than 125,000 Shares of Restricted Stock
except that such Service Provider may receive up to an additional 175,000
Shares of Restricted Stock in the fiscal year of the Company in which his or
her service as a Service Provider first commences.
(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
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. Except as provided in this Section 8, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated 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 specific performance objectives (Company-wide,
departmental, or individual), applicable federal or state securities laws, or
any other basis determined by the Committee 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
8, 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.
-12-
(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.
(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.
9. 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. The Administrator
may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.
(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 6.
(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; provided, however, that no SAR
may have a term of more than ten (10) years from the date of grant. However,
the exercise price of Tandem or Affiliated SARs will equal the exercise price
of the related Option.
(d) Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR will expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the
payout with respect to the Tandem SAR will be for no more than one hundred
percent (100%) of the difference between the exercise price of the underlying
Incentive Stock Option and the Fair Market Value of the Shares subject to the
underlying Incentive Stock Option at the time the Tandem SAR is exercised; and
(c) the Tandem SAR will be exercisable only when the Fair Market Value of the
Shares subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
(e) Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR will not necessitate a reduction in the number of Shares subject
to the related Option.
-13-
(f) Exercise of Freestanding SARs. Freestanding SARs will be exercisable
on such terms and conditions as the Administrator, in its sole discretion, will
determine.
(g) 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.
(h) 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. Notwithstanding the foregoing, the rules of Sections
7(d), 7(e) and 7(f) also will apply to SARs.
(i) 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.
At the discretion of the Administrator, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.
(j) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares a Stock Appreciation Right previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Participant at the time that such offer is made.
10. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Subject to the terms and
conditions of the Plan, Performance Units and Performance Shares 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. The Administrator will have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Service Provider, provided that during any
Fiscal Year, (a) no Service Provider shall receive Performance Units having an
initial value greater than $750,000, except that such Service Provider may
receive Performance Units in the fiscal year of the Company in which his or her
service as an Employee first commences with an initial value no greater than
$750,000, and (b) no Service Provider shall receive more than 125,000
Performance Shares, except that such Service Provider may receive up to an
additional 175,000 Performance Shares in the fiscal year of the Company in
which his or her service as a Service Provider first commences. The
Administrator will have complete discretion in determining the conditions that
must be satisfied.
(b) Value of Performance Units/Shares. Each Performance Unit will have an
initial value that is established by the Administrator on or before the date of
grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.
-14-
(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
Units/Shares that will be paid out to the Service Providers. Each Award of
Performance Units/Shares will be evidenced by an Award Agreement that will
specify the Performance Period, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. The Administrator may
set performance objectives based upon the achievement of Company-wide,
divisional, or individual goals, applicable federal or state securities laws,
or any other basis determined by the Administrator in its discretion.
(d) Section 162(m) Performance Objectives. For purposes of qualifying
grants of Performance Units and/or Performance Shares as performance-based
compensation under Section 162(m) of the Code, the Committee, in its
discretion, may determine that the performance objectives applicable to
Performance Units and/or Performance Shares shall be based on 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 Units and/or
Performance Shares to qualify as performance-based compensation under Section
162(m) of the Code. In granting Performance Units and/or Performance Shares
which 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 Units and/or
Performance Shares under Section 162(m) of the Code (e.g., in determining the
Performance Goals).
(e) Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units/Shares will be entitled to
receive a payout of the number of Performance Units/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 Unit/Share, the Administrator, in its sole
discretion, may reduce or waive any performance objectives for such Performance
Unit/Share.
(f) Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/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 Units/Shares in the form of cash,
in Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.
(g) Cancellation of Performance Units/Shares. On the date set forth in
the Award Agreement, all unearned or unvested Performance Units/Shares will be
forfeited to the Company, and again will be available for grant under the Plan.
11. Leaves of Absence. Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence, such that vesting shall cease on the first day of any unpaid leave
of absence and shall only recommence upon return to active service. A Service
Provider will not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, or any Subsidiary. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) 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
-15-
Company is not so guaranteed, then three months following the 91st day of
such leave any Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.
12. Transferability of Awards. Unless determined otherwise by the
Administrator, 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 will contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments; Dissolution or Liquidation; or Change in Control.
(a) Adjustments. Subject to any required action by the shareholders of
the Company, the number of Shares covered by each outstanding Award, the number
of Shares 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 and the number of Shares as well as
the price per share of Common Stock covered by each such outstanding Award and
the 162(m) annual share issuance limits under Section 3, 6, 8(a), 9(b) and
10(a) shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
effected without receipt of consideration. Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator will notify each Participant
as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for a Participant
to have the right to exercise his or her Option or SAR 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 and SARs) or vested
(with respect to other Awards), an Award will terminate immediately prior to
the consummation of such proposed action.
(c) Change in Control.
(i) Stock Options and SARS. In the event of a Change in Control, each
outstanding Option and SAR shall be assumed or an equivalent option or SAR
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option or SAR, the Participant shall
-16-
fully vest in and have the right to exercise the Option or SAR as to all
of the Awarded Stock, including Shares as to which it would not otherwise be
vested or exercisable. If an Option or SAR becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a Change in
Control, the Administrator shall notify the Participant in writing or
electronically that the Option or SAR shall be fully vested and exercisable for
a period of fifteen (15) days from the date of such notice, and the Option or
SAR shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or SAR shall be considered assumed if, following the
Change in Control, the option or stock appreciation right confers the right to
purchase or receive, for each Share of Awarded Stock subject to the Option or
SAR immediately prior to Change in Control, the consideration (whether stock,
cash, or other securities or property) received in the 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 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 of the Option or SAR, for
each Share of Awarded Stock subject to the Option or SAR, 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 Change
in Control. Notwithstanding anything herein to the contrary, an Award that
vests, is earned or paid-out upon the satisfaction of one or more performance
goals will not be considered assumed if the Company or its successor modifies
any of such performance goals without the Participants consent; provided,
however, a modification to such performance goals only to reflect the successor
corporations post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.
(ii) Restricted Stock, Performance Shares and Performance Units. In the
event of a Change in Control, each outstanding Restricted Stock, Performance
Share and Performance Unit award shall be assumed or an equivalent Restricted
Stock, Performance Share and Performance Unit 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 Restricted Stock, Performance Share or Performance Unit award, the
Participant shall fully vest in the Restricted Stock, Performance Share or
Performance Unit including as to Shares (or with respect to Performance Units,
the cash equivalent thereof) which would not otherwise be vested. For the
purposes of this paragraph, a Restricted Stock, Performance Share and
Performance Unit award shall be considered assumed if, following the Change in
Control, the award confers the right to purchase or receive, for each Share (or
with respect to Performance Units, the cash equivalent thereof) subject to the
Award immediately prior to the Change in Control, the consideration (whether
stock, cash, or other securities or property) received in the 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 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, for each Share and each unit/right to acquire
a Share 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 Change in Control.
Notwithstanding anything herein to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more performance
-17-
goals will not be considered assumed if the Company or its successor
modifies any of such performance goals without the Participants consent;
provided, however, a modification to such performance goals only to reflect the
successor corporations post-Change in Control corporate structure will not be
deemed to invalidate an otherwise valid Award assumption.
14. No Effect on Employment or Service. Neither the Plan nor any Award
will confer upon a Participant any right with respect to continuing the
Participants relationship as a Service Provider with the Company, nor will
they interfere in any way with the Participants right or the Companys right
to terminate such relationship at any time, with or without cause, to the
extent permitted by Applicable Laws.
15. Date of Grant. The date of grant of an Award will 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 will be provided to each Participant within a
reasonable time after the date of such grant.
16. Term of Plan. Subject to Section 20 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 17 of the Plan.
17. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder 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 will impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company. Termination of the Plan will not affect the Administrators
ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.
18. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to the exercise
of an Award unless the exercise of such Award and the issuance and delivery of
such Shares will comply with Applicable Laws and will 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 of an
Award, the Company may require the person exercising such Award 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.
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19. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Companys counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.
20. Stockholder Approval. The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted. Such stockholder approval will be obtained in the manner and to
the degree required under Applicable Laws.
-19-
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INTEVAC, INC.
Kevin Fairbairn and Charles B. Eddy III, or either of them, are hereby
appointed as the lawful agents and proxies of the undersigned (with all powers
the undersigned would possess if personally present, including full power of
substitution) to represent and to vote all shares of capital stock of Intevac,
Inc. which the undersigned is entitled to vote at our Annual Meeting of
Shareholders on May 14, 2004, and at any adjournments or postponements thereof,
as follows on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
The Board of Directors recommends a vote FOR each of the proposals below. This
Proxy will be voted as directed, or, if no direction is indicated, will be
voted FOR each of the proposals below and at the discretion of the persons
named as proxies upon such other matters as may properly come before the
meeting. This proxy may be revoked at any time before it is voted.
1.
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The election of all nominees listed below for the Board of Directors, as
described in the Proxy Statement:
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Nominees:
Norman H. Pond, Kevin Fairbairn, David S. Dury, Stanley J. Hill,
David N. Lambeth, Robert Lemos and Arthur L. Money
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(INSTRUCTION
: To withhold authority to vote for any individual nominee,
write such name or names in the space provided below.)
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2.
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Proposal to approve the 2004 Equity Incentive Plan and reserve 1,200,000 shares
for issuance thereunder:
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FOR
o
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AGAINST
o
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ABSTAIN
o
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3.
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Proposal to ratify the appointment of Grant Thornton LLP as independent
public accountants of Intevac for the fiscal year ending December 31,
2004:
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FOR
o
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AGAINST
o
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ABSTAIN
o
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4.
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Transaction of any other business which may properly come before the
meeting and any adjournment or postponement thereof.
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DATE:
, 2004
(Signature)
(Signature if held jointly)
(Please sign exactly as shown on your stock certificate and on the envelope in
which this proxy was mailed. When signing as partner, corporate officer,
attorney, executor, administrator, trustee, guardian or in any other
representative capacity, give full title as such and sign your own name as
well. If stock is held jointly, each joint owner should sign.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.