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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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January 31, 2008 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o 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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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
FSI International, 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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þ No fee required. |
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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) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
FSI
INTERNATIONAL, INC.
3455 Lyman Boulevard
Chaska, Minnesota
55318-3052
952-448-5440
November 30,
2007
Dear Shareholder:
You are cordially invited to attend the 2008 Annual Meeting of
Shareholders to be held at the offices of
FSI International, Inc. at 3455 Lyman Boulevard, Chaska,
Minnesota, commencing at 3:30 p.m., Central Time, on
Wednesday, January 16, 2008.
The Secretarys Notice of Annual Meeting of Shareholders
and the proxy statement which follow describe the matters on
which action will be taken. During the meeting we will also
review the activities of the past year and items of general
interest about FSI.
Please review the proxy materials carefully and use this
opportunity to take part in the affairs of FSI by voting on the
items to be considered at this meeting.
All shareholders are cordially invited to attend the meeting in
person. However, to assure your representation at the meeting,
we urge you to vote either online by following the instructions
in the Notice Regarding the Availability of Proxy Materials
previously mailed to you or, if you requested a paper copy of
the proxy materials, by completing and returning the enclosed
proxy in the accompanying envelope. If you attend the meeting,
you may vote in person even if you have previously returned a
proxy to us either online or by mail.
Sincerely,
Donald S. Mitchell
Chairman Chief Executive Officer
FSI
INTERNATIONAL, INC.
Notice of Annual Meeting of
Shareholders
to be held on January 16,
2008
To Our
Shareholders:
The 2008 Annual Meeting of Shareholders of FSI International,
Inc. will be held at our offices in Chaska, Minnesota on
Wednesday, January 16, 2008, at 3:30 p.m., Central
Time, for the following purposes:
1. To elect two Class III directors to serve for the
ensuing three years until the expiration of their term in 2011,
or until their successors are duly elected and qualified.
2. To act upon a proposal to approve the FSI International,
Inc. 2008 Omnibus Stock Plan.
3. To approve an amendment to our Employees Stock Purchase
Plan to increase the aggregate number of shares of our common
stock reserved for issuance under the Plan by 500,000.
4. To ratify the appointment of KPMG LLP as our independent
registered public accounting firm for the fiscal year ending
August 30, 2008.
5. To transact such other business as may properly come
before the meeting.
Our board of directors has fixed November 19, 2007 as the
record date for the meeting, and only shareholders of record at
the close of business on that date are entitled to receive
notice of and vote at the meeting.
By Order of the Board of Directors
Benno G. Sand
Executive Vice President
Business Development, Investor Relations
and Secretary
Chaska, Minnesota
November 30, 2007
TABLE OF CONTENTS
FSI
INTERNATIONAL, INC.
ANNUAL MEETING OF
SHAREHOLDERS
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
Information
This proxy statement and the related proxy are being furnished
in connection with the solicitation by the board of directors of
FSI International, Inc. (we or us or
Company or FSI), a Minnesota
corporation, of proxies for use in connection with the 2008
Annual Meeting of Shareholders to be held on Wednesday,
January 16, 2008, and any adjournment of the meeting, for
the purposes described below as well as in the Notice Regarding
the Availability of Proxy Materials and the Notice of Annual
Meeting of Shareholders. The meeting will be held at our offices
at 3455 Lyman Boulevard, Chaska, Minnesota beginning at
3:30 p.m. Central Time. A form of photo identification
and, if not a record holder, proof of ownership of FSI common
stock (such as a recent brokerage statement or letter from your
broker), are requested for admission to the 2008 annual meeting.
So far as our board and management are aware, no matters other
than those described in this proxy statement will be acted upon
at the meeting. If, however, any other matters properly come
before the meeting, it is the intention of the persons named in
the proxy to vote the same in accordance with their judgment on
such matters.
The address of our principal executive office is 3455 Lyman
Boulevard, Chaska, Minnesota
55318-3052
and our telephone number is 952.448.5440. The mailing of the
Notice Regarding the Availability of Proxy Materials will
commence on or about December 3, 2007, and the related
proxy materials will be available on line at
http://library.corporate-ir.net/library/67/67168/2007ProxyAR.pdf
as of the same date. Please refer to the Notice Regarding the
Availability of Proxy Materials for additional information,
including the required control number, regarding online access
to the proxy materials.
Householding
of Documents
We are sending only one copy of the Notice Regarding the
Availability of Proxy Materials to eligible shareholders who
share a single address unless we received instructions to the
contrary from any shareholder at that address. This practice,
known as householding, is designed to reduce our
printing and postage costs. If a registered shareholder residing
at an address with other registered shareholders wishes to
receive a separate Notice Regarding the Availability of Proxy
Materials now or in the future, he or she may contact Benno G.
Sand, our Secretary, at telephone number 952.448.5440, or by
mail to the address in the above paragraph. You can also request
delivery of single copies of our documents if you are receiving
multiple copies by contacting Mr. Sand by email
at: benno.sand@fsi-intl.com
Solicitation
of Proxies
We will pay the cost of soliciting proxies. We may reimburse
brokerage firms and custodians, nominees and other record
holders for forwarding soliciting materials to the beneficial
owners of our common stock. In addition to solicitation by the
use of the mails and of the Internet, our directors, officers
and employees may solicit proxies by telephone, personal contact
or special letter without additional compensation to them.
Record
Date and Outstanding Voting Securities
Only shareholders of record at the close of business on
November 19, 2007 are entitled to vote at the meeting. On
the record date, 30,544,758 shares of our common stock, our
only authorized and issued voting security, were
1
outstanding. Each shareholder is entitled to one vote for each
share held and is not entitled to cumulate votes for the
election of directors.
Proxies voted online or by mail, if a paper copy of the proxy
materials has been requested, will, unless otherwise specified,
be voted for Proposals 1 through 4 on the proxy and voted
in the discretion of the proxy holders as to any other matter
that may properly come before the meeting. Proxies voted by mail
must be properly signed and duly returned to us in order for the
designated proxy to vote on all matters to come before the
meeting.
You may view this years proxy materials, including our
annual report to shareholders, at
http://library.corporate-ir.net/library/67/67168/2007ProxyAR.pdf.
If you are a shareholder through a broker or bank, you may vote
your shares either electronically or by mail upon requesting
paper copies of the proxy materials. If at the close of business
on November 19, 2007 your shares were registered directly
in your name with our transfer agent, ComputerShare Investor
Services, LLC, then you are a shareholder of record.
Requesting
Paper Copies and Voting by Mail
Pursuant to the new Securities and Exchange Commission rules
related to the availability of proxy materials, we have chosen
to make our proxy statement and related materials, including our
annual report to shareholders, available online and, as
permitted by the new rules, we will only provide paper copies of
these materials upon request. To request a paper copy of the
proxy materials, including our annual report to shareholders,
free of charge, please follow the instructions contained in the
Notice Regarding the Availability of Proxy Materials previously
mailed to you. To vote by mail, you must request paper copies of
the proxy materials as instructed above, mark your selections on
the proxy card mailed to you, date and sign your name exactly as
it appears on your proxy card, and mail the proxy card in the
accompanying postage-paid envelope.
Electronic
Voting
If you are a shareholder of record you may vote online by
following the instructions in the Notice Regarding the
Availability of Proxy Materials previously mailed to you.
Electronic voting is available 24 hours a day until
11:59 p.m., Eastern Time, on January 15, 2008.
Electronic
Enrollment
If you are a shareholder through a broker or bank, you can
enroll to receive notice of future meetings via email at
www.proxyvote.com.
Voting
Requirement
A shareholder voting through a proxy who abstains with respect
to any matter is considered to be present and entitled to vote
on that matter at the meeting, and is in effect a negative vote,
but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on
any matter shall not be considered present and entitled to vote
on that matter.
Votes cast by proxy or in person at the annual meeting will be
tabulated by the inspector of elections. The inspector will also
determine whether or not a quorum is present. In general, under
Minnesota law, a quorum consists of a majority of the shares
entitled to vote which are present or represented by proxy at
the meeting. A nominee for director will be elected to the board
if the nominee receives a plurality vote of the shares present
or represented and entitled to vote at the meeting.
All other matters submitted for shareholder approval at this
Annual Meeting will be decided by the affirmative vote of the
greater of (1) a majority of shares present in person or
represented by proxy and entitled to vote on each matter, or
(2) a majority of the minimum number of shares entitled to
vote that would constitute a quorum for the transaction of
business at the meeting. Abstentions with respect to any such
matter are treated as shares present or represented and entitled
to vote on that matter and have the same effect as negative
votes. If shares are not voted by the person or institution that
is the record holder of the shares, or if shares are not voted
in other circumstances in
2
which proxy authority is effective or has been withheld with
respect to any matter, these non-voted shares are deemed not to
be present or represented for purposes of determining whether
shareholder approval of that matter has been obtained.
If you are not planning to attend the Annual Meeting and vote
your shares in person, your shares of common stock cannot be
voted until you vote online by following the instructions in the
Notice Regarding the Availability of Proxy Materials or a signed
proxy is returned to the Company.
Revocability
of Proxies
A shareholder executing a proxy retains the right to revoke it
at any time before it is exercised by providing notice in
writing to any of our officers of termination of the
proxys authority or by voting again by Internet or mail,
if we have mailed a written proxy to you (provided that such new
vote is received in a timely manner).
(This space has been left blank intentionally.)
3
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table lists, as of November 19, 2007 (unless
otherwise indicated below), certain information regarding the
beneficial ownership of our common stock by (i) each person
or entity known by us to own beneficially more than five percent
of our outstanding common stock, (ii) each director,
(iii) each nominee for director, (iv) each executive
officer named in the Summary Compensation Table in this proxy
statement (the Named Executives), and (v) all
of the directors, director-nominees and Named Executives as a
group. Except as otherwise noted below, each listed beneficial
owner has sole voting and investment power with respect to such
shares.
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Number of Shares
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Percent of Shares
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Name of Person or Identity of Group
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Beneficially Owned**
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Beneficially Owned**
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State of Wisconsin Investment Board
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3,504,783
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(1)
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11.5
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%
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121 East Wilson Street
Madison, WI
53707-3474
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Chapman Capital LLC
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2,311,224
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(2)
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7.6
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%
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222 North Sepulveda Boulevard
El Segundo, CA
90245-5659
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Dimensional Fund Advisors LP
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2,409,083
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(3)
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7.9
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%
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1299 Ocean Avenue
Santa Monica, CA
90401-1005
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Rutabaga Capital Management
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1,617,100
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(4)
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5.3
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%
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64 Broad Street
Boston, MA
02109-4346
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Westcliff Capital Management, LLC
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1,868,380
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(5)
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6.1
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%
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200 Seventh Avenue
Santa Cruz, CA
95062-4669
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James A. Bernards
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76,500
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(6)
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*
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John C. Ely
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256,516
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(6)
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*
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Terrence W. Glarner
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72,156
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(6)
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*
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Patricia M. Hollister
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222,278
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(6)
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*
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Willem D. Maris
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72,500
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(6)
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*
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Donald S. Mitchell
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884,609
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(6)(7)
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2.8
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%
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Benno G. Sand
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330,520
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(6)(8)
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1.1
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%
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David V. Smith
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35,000
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(6)
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*
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All directors, director-nominees and Named Executives as a group
(8 persons)
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1,950,079
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(6)
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6.0
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%
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*
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Less than one percent.
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**
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Beneficial ownership is determined
in accordance with the rules of the SEC that generally attribute
beneficial ownership of securities to persons who possess sole
or shared voting power and/or investment power with respect to
those securities and includes shares of common stock issuable
pursuant to the exercise of stock options that are immediately
exercisable or exercisable within 60 days. Unless otherwise
indicated, the persons or entities identified in this table have
sole voting and investment power with respect to all shares
shown as beneficially owned by them. Percentage ownership
calculations are based on 30,544,758 shares of common stock
outstanding as of November 19, 2007.
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(1)
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Based on Amendment No. 10 to
Schedule 13G filed with the SEC on February 12, 2007.
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(2)
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Based on Amendment No. 1 to
Schedule 13D filed with the SEC on June 14, 2007. Of
such shares, Chap-Cap Activist Partners Master Fund, Ltd. has
shared voting power with respect to 1,325,328 shares,
Chap-Cap Partners II Master Fund, Ltd. has shared voting
power with respect to 985,896 shares and Chapman Capital
L.L.C. and Robert L. Chapman, Jr each have shared voting power
with respect to 2,311,224 shares.
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(3)
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Based on Amendment No. 5 to
Schedule 13G filed with the SEC on February 9, 2007.
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(4)
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Based on a Schedule 13G filed
with the SEC on January 23, 2007. Of such shares, Rutabaga
Capital Management has sole voting power with respect to
533,600 shares and shared voting power with respect to
1,083,580 shares.
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(5)
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Based on a Schedule 13G filed
with the SEC on February 6, 2007. Westcliff Capital
Management, LLC, and Richard S. Spencer III (as
Westcliffs manager and majority owner), have shared voting
and dispositive power with respect to all such shares.
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(6)
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Includes the following shares that
may be purchased pursuant to stock options that are exercisable
within 60 days of November 19, 2007:
Mr. Bernards, 59,000; Mr. Ely, 252,516;
Mr. Glarner, 66,500; Ms. Hollister, 215,682;
Mr. Maris, 72,500; Mr. Mitchell, 843,883;
Mr. Sand, 287,649; and Mr. Smith, 35,000; and all
directors, director-nominees and Named Executives as a group,
1,832,730.
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(7)
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Includes 5,500 shares in which
Mr. Mitchell shares voting and investment power with his
spouse.
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(8)
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Includes 18,615 shares in
which Mr. Sand shares voting and investment power with his
spouse.
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4
ELECTION
OF DIRECTORS
(Proposal 1)
The
Nominees and Directors
Our Articles of Incorporation, as amended, provide that the
board be divided into three classes of directors of as nearly
equal size as possible. The members of each class are elected to
serve a three-year term, and the terms are staggered. Terrence
W. Glarner and David V. Smith are Class III directors with
terms expiring at the 2008 Annual Meeting of Shareholders. James
A. Bernards and Donald S. Mitchell are Class I directors
with terms expiring at the 2009 Annual Meeting of Shareholders.
Willem D. Maris is a Class II director with a term expiring
at the 2010 Annual Meeting of Shareholders. The board will
continue to have a vacancy after the 2008 Annual Meeting of
Shareholders and will continue its search for a qualified
director candidate to fill such vacancy.
The board, including all of the independent directors, acting
upon the recommendation of the Corporate Governance and
Nomination Committee, has nominated Messrs. Glarner and
Smith for re-election as Class III directors.
Messrs. Glarner and Smith have indicated a willingness to
serve as directors if elected. In case Messrs. Glarner or
Smith are not candidates for any reason, the proxies named in
the enclosed form of proxy may vote for substitute nominees in
their discretion, unless an instruction to the contrary is
indicated on the proxy. We have no reason to believe that
Messrs. Glarner or Smith will be unable to serve as
directors if elected.
The proxy will be voted in favor of the election of the
nominees, unless the shareholder giving the proxy indicates to
the contrary on the proxy.
OUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE DIRECTOR-NOMINEES
Certain information concerning the nominee and other directors
follows:
Nominees
for Election at the 2008 Shareholders Meeting as
Class III Directors
Terrence W. Glarner, age 64, has served as a
director of FSI since October 1988. Since February 1993,
Mr. Glarner has been President of West Concord Ventures,
Inc., a venture capital company. From 1982 to February 1993,
Mr. Glarner was President of North Star Ventures, Inc. and
North Star Ventures II, Inc., venture capital funds.
Mr. Glarner is also a director of Aetrium, Inc. and NVE
Corporation.
David V. Smith, age 63, was appointed to the board
of directors of FSI in December 2005 to fill a vacancy on the
board and is standing for election by the shareholders for the
first time. He was recommended as a director nominee by our
independent directors. Mr. Smith retired as the President
of TECH Semiconductor Singapore Pte. Ltd. (TECH
Semiconductor) in June 2002. TECH Semiconductor is a joint
venture DRAM memory chip manufacturing company formed by Texas
Instruments, the Economic Development Board of Singapore, Canon
and Hewlett-Packard. Prior to joining TECH Semiconductor,
Mr. Smith was the Managing Director of Texas Instruments
Singapore and the Deputy Worldwide Memory Operations Manager of
Texas Instruments Malaysia, Bipolar Operations manager of Texas
Instruments Malaysia and Discrete Operations Manager.
Mr. Smith was Texas Instruments Koreas Manager
from 1978 to 1980. Since January 2006, Mr. Smith has been
President, Chief Executive Officer and Director of GlobiTech
Holding Company, a privately-held epitaxial services company
based in Sherman, Texas. Mr. Smith also serves on the board
of directors of several other privately-held companies.
Class I
Directors Whose Terms Continue Until the
2009 Shareholders Meeting
James A. Bernards, age 61, has served as a director
of FSI since July 1981. Since June 1993, Mr. Bernards has
been President of Facilitation, Inc., which provides business
and financial consulting services. Mr. Bernards was
President of the accounting firm of Stirtz, Bernards &
Company from May 1981 to June 1993. Since 1986,
Mr. Bernards has been President of Brightstone Capital,
Ltd., a venture capital fund manager. He is also a director of
several privately-held companies.
5
Donald S. Mitchell, age 52, was named President and
Chief Executive Officer of FSI in December 1999, appointed a
director in March 2000 and became Chairman of the board on
January 23, 2002. From its formation in 1998 until December
1999, he was President of Air Products Electronic Chemicals,
Inc., a division of Pennsylvania-based Air Products and
Chemicals, Inc. From 1991 to 1998, he served as President of
Schumacher, a leading global chemical equipment and services
supplier to the semiconductor industry. Mr. Mitchell served
as the
1999-2000
Chairman of the Board of Directors of Semiconductor Equipment
and Materials International (SEMI), a leading global
industry trade association. Mr. Mitchell is also a director
of Advanced Material Sciences, Inc., a privately-held
manufacturer of thin substrate materials for the semiconductor
industry.
Class II
Director Whose Term Continues Until the
2010 Shareholders Meeting
Willem D. Maris, age 67, has served as a director of
FSI since January 2001. He is past Chairman of the Board of
Management, President and Chief Executive Officer of ASM
Lithography (ASML), a Netherlands company.
Mr. Maris retired from ASML in December 1999 after serving
as Chairman of the Board of Management, President and Chief
Executive Officer since 1990. He is currently a member of the
board of directors of Photronics, Inc. and is the Chairman of
the Supervisory Board of BE Semiconductor Industries N.V.
None of the directors or the nominees are related to one another
or to any of our executive officers. The board has determined
that each of Messrs. Bernards, Glarner, Maris and Smith is
independent as that term is defined under the National
Association of Securities Dealers listing standards.
Information
Concerning the Board of Directors
The board met four times and adopted resolutions by written
action one time in fiscal 2007. The board has an Audit and
Finance Committee, a Compensation Committee, and a Corporate
Governance and Nomination Committee.
The Audit and Finance Committee, consisting of
Messrs. Bernards, Glarner and Maris, met six times and
adopted four resolutions by written action in fiscal 2007. The
purpose of the Audit and Finance Committee is to oversee our
accounting and financial reporting processes and the audits of
our financial statements. The primary duties and
responsibilities of the Audit and Finance Committee include
selecting and evaluating our independent auditors and monitoring
their independence; reviewing our financial reporting and
disclosure matters; and overseeing certain compliance and
regulatory matters.
Our board of directors has determined that at least one member
of our Audit and Finance Committee, James A. Bernards, is an
audit committee financial expert, as that term is
defined under Section 407 of the Sarbanes-Oxley Act of 2002
and the rules promulgated by the Securities and Exchange
Commission in furtherance of Section 407. Each member of
the Audit and Finance Committee is independent as that term is
defined under the National Association of Securities
Dealers listing standards, Section 301 of the
Sarbanes-Oxley Act of 2002 and the rules adopted by the
Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002. The Audit and Finance Committee
operates under a written charter adopted by the board of
directors. A copy of the Audit and Finance Committee Charter, as
amended to date, can be found on our website at
www.fsi-intl.com.
The Compensation Committee, consisting of Messrs. Bernards
and Glarner, met five times and adopted resolutions by written
action two times in fiscal 2007. Each member of the Compensation
Committee is independent as that term is defined under the
National Association of Securities Dealers listing
standards. The Compensation Committees functions include:
reviewing and reporting to the board on the programs for
developing senior management personnel; approving and reporting
to the board the executive compensation plans and the
compensation (including incentive awards) of certain executives;
and reviewing and approving our incentive plans. The
Compensation Committee also grants or makes recommendations to
the board concerning employee stock options and oversees our
1994 Omnibus Stock Plan, 1997 Omnibus Stock Plan and Employees
Stock Purchase Plan. The Compensation Committee operates under a
written charter adopted by the board of directors, a copy of
which can be found on our website at
www.fsi-intl.com.
The Corporate Governance and Nomination Committee, consisting of
Messrs. Maris and Smith, met two times and did not adopt
any resolutions by written action in fiscal 2007. Each member of
the Corporate Governance and
6
Nomination Committee is independent as that term is defined
under the National Association of Securities Dealers
listing standards. Its functions include: evaluating and
recommending qualified individuals to the board; reviewing the
qualifications of individuals for election or re-election as
members of the board; and reviewing the charters and membership
of the boards committees and board membership guidelines.
It also oversees matters of corporate governance, including
evaluation of our board and board committee performance and
evaluation of our corporate governance guidelines. The Corporate
Governance and Nomination Committee will consider persons whom
shareholders recommend as candidates for election as Company
directors provided shareholders follow the procedures as set
forth below in the Director Nomination Process and
Selection Criteria section of this proxy statement. The
Corporate Governance and Nomination Committee operates under a
written charter adopted by the board of directors, a copy of
which can be found on our website at
www.fsi-intl.com.
Each committee reviews its charter annually in light of new
corporate governance developments and may make additional
recommendations to the Corporate Governance and Nomination
Committee (if applicable) and the board for further revisions to
reflect evolving best practices. During fiscal 2007, each of the
directors attended all meetings of the board. During fiscal
2007, each of the directors attended all committee meetings on
which he served with the exception of Mr. Bernards who
missed one committee meeting.
The Companys Share Rights Plan Committee of the Board of
Directors, which was charged with periodically determining
whether the Share Rights Plan adopted by the Company in March
1998 continued to be in the best interests of the Company and
reporting its conclusions to the board, terminated upon the
expiration of the Share Rights Plan in June 2007.
Director
Compensation and Benefits
Before or at the beginning of each calendar year, our
Compensation Committee reviews the total compensation paid to
non-management directors. The purpose of the review is to ensure
that the level of compensation is appropriate to attract and
retain a diverse group of directors with the breadth of
experience necessary to perform the boards duties, and to
fairly compensate directors for their services. The Compensation
Committee considers the time and effort required for service on
the board and on a board committee, and reviews available board
compensation survey information for comparably-sized public
companies. For fiscal 2007, the components of compensation for
our non-management directors were as follows:
|
|
|
Quarterly Retainer
|
|
$3,000 per quarter
|
Fee for attending Board Meetings
|
|
$1,000 per meeting
|
Fee for attending Committee Meetings
|
|
$500 per meeting(1)
|
Stock Option Grants
|
|
New directors receive an initial grant of 20,000 stock options
which become fully exercisable six months after the date of
grant.
Re-elected directors receive an annual grant of 7,500 stock
options which become exercisable on January 1 after the date of
grant.
|
Reimbursement of expenses
|
|
FSI reimburses directors for travel and other reasonable
out-of-pocket expenses incurred as a director or member of a
committee of the board.
|
|
|
|
(1)
|
|
If not held in connection with a
board meeting.
|
7
The following table summarizes the compensation earned by our
non-management directors during fiscal 2007.
Director
Compensation For Fiscal 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Option
|
|
|
|
|
Name
|
|
Paid in Cash ($)
|
|
|
Awards ($)(1)(2)
|
|
|
Total ($)
|
|
|
James A. Bernards
|
|
$
|
20,000
|
|
|
$
|
22,900
|
|
|
$
|
42,900
|
|
Terrence W. Glarner
|
|
$
|
20,500
|
|
|
$
|
22,900
|
|
|
$
|
43,400
|
|
Willem D. Maris
|
|
$
|
20,000
|
|
|
$
|
22,900
|
|
|
$
|
42,900
|
|
David V. Smith
|
|
$
|
17,500
|
|
|
$
|
22,900
|
|
|
$
|
40,400
|
|
|
|
|
(1)
|
|
The amounts in this column reflect
the expense (without any reduction for forfeiture assumptions
related to service-based vesting conditions) recognized for
financial statement purposes in fiscal 2007 in accordance with
Statement of Financial Accounting Standards No. 123
(Revised 2004), Share Based Payment
(SFAS 123R), in connection with all
outstanding stock option awards (including those granted before
fiscal 2007) made to the respective directors under our
1997 Omnibus Stock Plan. The assumptions used in calculating
these amounts, and the grant date fair value shown in footnote 2
to this table of awards made in fiscal 2007, are set forth in
Note 14, Stock Options to the Consolidated
Financial Statements included in our Annual Report on
Form 10-K
for the fiscal year ended August 25, 2007.
|
|
(2)
|
|
On January 17, 2007, FSI
granted a stock option covering 7,500 shares to each of
Messrs. Bernards, Glarner, Maris and Smith, at an exercise
price of $5.00 per share, which was the closing sale price on
January 17, 2007. The grant date fair value of each of
these option awards was $23,650. As of August 25, 2007, the
aggregate number of exercisable and non-exercisable option
shares held by each non-employee director was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Shares Underlying
|
|
|
Number of Shares
|
|
Unexercisable
|
|
|
Underlying Exercisable
|
|
Options
|
Name
|
|
Options at 8/25/07
|
|
at 8/25/07
|
|
James A. Bernards
|
|
|
51,500
|
|
|
|
7,500
|
|
Terrence W. Glarner
|
|
|
59,000
|
|
|
|
7,500
|
|
Willem D. Maris
|
|
|
65,000
|
|
|
|
7,500
|
|
David V. Smith
|
|
|
27,500
|
|
|
|
7,500
|
|
Director
Nomination Process and Selection Criteria
The Corporate Governance and Nomination Committee (the
Governance Committee) will consider properly
submitted shareholder nominations for candidates for membership
on our board of directors as described below. In evaluating such
nominations, the Governance Committee seeks to achieve a balance
of knowledge, experience and capability.
The Governance Committee will select nominees for directors
pursuant to the following process:
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|
|
|
the identification of director candidates by the Governance
Committee based upon suggestions from current directors and
senior management and recommendations by shareholders;
|
|
|
|
a review of the candidates qualifications by the
Governance Committee to determine which candidates best meet the
boards required and desired criteria, as further described
below;
|
|
|
|
interviews of interested candidates, among those who best meet
the desired criteria, by the chairman of the Governance
Committee or the entire Governance Committee;
|
|
|
|
a report to the board by the Governance Committee on the
selection process; and
|
|
|
|
formal nomination by the Governance Committee for inclusion in
the slate of directors for the annual meeting of shareholders or
appointment by the board to fill a vacancy during the intervals
between shareholder meetings.
|
The Governance Committee will reassess the qualifications of a
director, including the directors past contributions to
the board and the directors attendance and contributions
at board and committee meetings, prior to recommending a
director for re-election to another term.
8
The Governance Committee will consider candidates recommended by
shareholders in the same manner as candidates recommended by the
Governance Committee, provided shareholders follow the
procedures set forth below in submitting recommendations.
Shareholders who wish to recommend candidates for consideration
by the Governance Committee must do so by submitting a written
recommendation to:
Corporate Secretary
FSI International, Inc.
3455 Lyman Boulevard
Chaska, Minnesota
55318-3052
USA
Recommendations must be sent by certified or registered mail and
received by our Corporate Secretary by September 1 of each year,
for consideration at the next Annual Meeting of Shareholders.
Recommendations must include the following:
|
|
|
|
|
shareholders name, number of shares owned, length of
period held, and proof of ownership.
|
|
|
|
name, address, phone number and age of the candidate.
|
|
|
|
a resume describing, among other things, the candidates
educational background, occupation, employment history, and
material outside commitments (e.g., memberships on other boards
and committees, charitable foundations, etc.).
|
|
|
|
a supporting statement which describes the candidates
reasons for seeking election to the board and documents his or
her ability to satisfy the director qualifications.
|
|
|
|
the candidates consent to a background investigation.
|
|
|
|
the candidates written consent to stand for election if
nominated by the board and to serve if elected by the
shareholders.
|
|
|
|
any other information that will assist the Governance Committee
in evaluating the candidate.
|
The Corporate Secretary will promptly forward these materials to
the Governance Committee Chairman and the Chairman of the board.
The Corporate Secretary will also maintain copies of these
materials for two years after receipt for future reference by
the Governance Committee when filling board positions.
The Governance Committee may contact recommended candidates to
request additional information necessary for its evaluation or
for disclosure under applicable rules of the Securities and
Exchange Commission.
Alternatively, shareholders may directly nominate a person for
election to our board by complying with the procedures set forth
in our by-laws, any applicable rules and regulations of the
Securities and Exchange Commission and any applicable laws.
Candidates for director nominees are reviewed in the context of
the current composition of the board, our operating requirements
and the long-term interests of our shareholders.
The Governance Committee will consider, at a minimum, the
following factors in recommending to our board potential new
board members, or the continued service of existing members in
addition to other factors it deems appropriate based on the
current needs and desires of the board:
|
|
|
|
|
demonstrated character and integrity; an inquiring mind;
experience at a strategy/policy setting level; sufficient time
to devote to the affairs of the company; high-level managerial
experience;
|
|
|
|
whether the member/potential member is subject to a
disqualifying factor, such as relationships with competitors,
customers, suppliers, contractors, counselors or consultants, or
recent previous employment with the Company;
|
|
|
|
the member or potential members independence;
|
|
|
|
whether an existing member has reached retirement age or a term
limit;
|
9
|
|
|
|
|
whether the member/potential member assists in achieving a mix
of board members that represents a diversity of background and
experience, including the consideration of age, gender,
international background, race and specialized industry
experience;
|
|
|
|
whether the member/potential member, by virtue of particular
experience, technical expertise, or specialized skills, will add
specific value as a board member; and
|
|
|
|
any factors related to the ability and willingness of a new
member to serve, or an existing member to continue
his/her
service.
|
In addition to the above factors, our board has also adopted
certain board guidelines which provide that (1) when a
director of the Company turns 72, such director will
automatically retire from the board at our annual meeting of
shareholders following the date such director turns 72; and
(2) the Governance Committee may not recommend any person
to serve as a director of the Company after such person has
passed his or her 70th birthday.
Executive
Sessions of Outside Directors
Our board has regularly scheduled, and used, time near the end
of board meetings to meet without any Company management present.
Communications
with Directors
You can contact our full board, our independent directors as a
group or any of the directors by writing to our Corporate
Secretary at 3455 Lyman Boulevard, Chaska, Minnesota
55318-3052
USA. All communications will be compiled by the Corporate
Secretary and submitted to the addressees on a periodic basis.
Other
Information
Three directors attended our annual shareholders meeting in
January 2007. Additional information concerning the board,
including committee charters and our Code of Business Conduct
and Ethics applicable to our directors, employees and
representatives, is available at www.fsi-intl.com.
INTERESTS
OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
As of November 19, 2007, we owned approximately
20 percent of the outstanding capital stock of mFSI
LTD, which distributes certain of our products in Japan.
Mr. Benno G. Sand, Executive Vice President, Business
Development and Investor Relations and Secretary, is a director
of mFSI LTD.
During the 2007 fiscal year, we sold approximately $5,355,000 of
our products to mFSI LTD. Sales to mFSI LTD are
made by us on commercially reasonable terms.
The board has adopted a policy regarding transactions, other
than sales in the normal course of business, between us and our
affiliates, requiring that all such transactions be approved by
a majority of the board and a majority of the disinterested
non-employee directors and that all such transactions be for a
bona fide business purpose and be entered into on terms at least
as favorable to us as could be obtained from unaffiliated
independent third parties.
Various policies and procedures of our Company, including our
Code of Business Conduct and Ethics, our bylaws, the
Companys Corporate Governance Guidelines and annual
questionnaires completed by all of our directors and executive
officers, require disclosure of and otherwise identify to the
Company transactions or relationships that may constitute
conflicts of interest or otherwise require disclosure under
applicable Securities and Exchange Act rules as related
person transactions between our Company or its
subsidiaries and related persons. For these purposes, a related
person is a director, executive officer, nominee for director,
or 5% shareholder of the Company since the beginning of the last
fiscal year and their immediate family members.
Although the Companys processes vary with the particular
transaction or relationship, in accordance with our Code of
Business Conduct and Ethics, directors, executive officers and
other Company employees are directed to inform appropriate
supervisory personnel as to the existence or potential existence
of such a transaction or
10
relationship. To the extent a related person is involved in the
relationship or has a material interest in the transaction, the
Companys Corporate Governance Guidelines provide that the
Audit Committee is responsible for reviewing the transaction.
The transaction or relationship will be evaluated by the Audit
Committee, which will approve or ratify it if it is determined
that the transaction or relationship is fair and in the best
interests of the Company.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF
1934
Section 16(a) of the Securities and Exchange Act of 1934
requires our directors, certain officers and persons who own
more than 10 percent of a registered class of our equity
securities, to file reports of ownership on Form 3 and
changes in ownership on Forms 4 or 5 with the Securities
and Exchange Commission. These directors, officers and
10 percent shareholders are also required by the Securities
and Exchange Commissions rules to furnish us with copies
of all Section 16(a) reports they file.
Specific due dates for such reports have been established by the
Securities and Exchange Commission and we are required to
disclose in this proxy statement any failure to file reports by
such dates during fiscal 2007. Based solely on our review of the
copies of such reports received by us and written
representations from certain reporting persons, we believe that
during the fiscal year ended August 25, 2007, all
Section 16(a) filing requirements applicable to our
officers and directors and any 10 percent shareholders were
complied with.
(This space has been left blank intentionally.)
11
REPORT OF
THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF
DIRECTORS
Membership
and Role of the Audit and Finance Committee
The Audit and Finance Committee of the board is composed
entirely of directors who are independent of management and free
from any relationship that, in the opinion of the board of
directors, would interfere with the exercise of independent
judgment as a committee member. The current members of the Audit
and Finance Committee are Messrs. Bernards, Glarner and
Maris. The purpose of the Audit and Finance Committee is to
oversee our accounting and financial reporting processes and the
audits of our financial statements. The primary duties and
responsibilities of the Audit and Finance Committee include
selecting and evaluating our independent auditors and monitoring
their independence; reviewing our financial reporting and
disclosure matters; and overseeing certain compliance and
regulatory matters.
The Audit and Finance Committee operates under a written charter
adopted by the board of directors, a copy of which can be found
on our website at www.fsi-intl.com. The Audit and
Finance Committee charter includes additional duties and
responsibilities of the Audit and Finance Committee as required
by the Sarbanes-Oxley Act of 2002, the rules promulgated by the
Securities and Exchange Commission and the Nasdaq corporate
governance rules.
Review of
Our Audited Consolidated Financial Statements for the Fiscal
Year Ended August 25, 2007
The Audit and Finance Committee has reviewed and discussed our
audited consolidated financial statements for the fiscal year
ended August 25, 2007 with management and with
representatives of KPMG LLP, our independent registered public
accountants. The Audit and Finance Committee has also discussed
with KPMG LLP the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
The Audit and Finance Committee has received from its
independent registered public accountants the written
disclosures regarding KPMG LLPs independence as required
by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees), and discussed
the independence of KPMG LLP with representatives of our
independent registered public accountants.
Based on the Audit and Finance Committees review and
discussions noted above, the Audit and Finance Committee
recommended that our audited consolidated financial statements
be included in our Annual Report on
Form 10-K
for the fiscal year ended August 25, 2007 for filing with
the Securities and Exchange Commission.
|
|
|
|
|
|
James A.
Bernards |
Terrence
W. Glarner |
Willem D.
Maris |
|
Members of the Audit and Finance Committee
(This space has been left blank intentionally.)
12
Independent
Registered Public Accountants Fees
The following table shows the aggregate fees billed to us by
KPMG LLP for services rendered during the fiscal years ended
August 25, 2007 and August 26, 2006.
|
|
|
|
|
|
|
|
|
Description of Fees
|
|
Fiscal 2007 Amount
|
|
|
Fiscal 2006 Amount
|
|
|
Audit Fees (1)
|
|
$
|
424,877
|
|
|
$
|
354,900
|
|
Audit-Related Fees
|
|
|
0
|
|
|
|
0
|
|
Tax Fees (2)
|
|
|
50,538
|
|
|
|
49,296
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
475,415
|
|
|
$
|
404,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes fees for the audit of the
August 25, 2007 and August 26, 2006 financial
statements and internal controls, reviews of the related
quarterly financial statements and fees related to the
preparation of the financial statements of mFSI LTD, the
companys former Japanese affiliate, in accordance with
United States Generally Accepted Accounting Principles
(GAAP).
|
|
(2)
|
|
Includes fees for domestic and
international tax returns, statutory reports, expatriate tax
work, value added tax, customs and duty reporting and
international tax planning.
|
The Audit and Finance Committee approved all of the services
described above.
Auditor
Independence
The Audit and Finance Committee has considered whether, and has
determined that, the provision of non-audit services described
under Audit-Related Fees, Tax Fees and
All Other Fees was compatible while maintaining the
independence of KPMG LLP as our principal accountants.
Audit
Committee Pre-Approval Policies
In order to ensure that our independent registered public
accountants are engaged only to provide audit and non-audit
services that are compatible with maintaining their
independence, the Audit and Finance Committee requires that all
audit and permissible non-audit services provided by our
independent registered public accountants be pre-approved by the
Audit and Finance Committee or a designated member of the Audit
and Finance Committee. These services may include audit
services, audit-related services, tax services, Sarbanes-Oxley
Section 404 review and other services. Any pre-approval is
detailed as to the particular service or category of services.
The Audit and Finance Committee reviews each non-audit service
to be provided and assesses the impact of the service on the
auditors independence.
(This space has been left blank intentionally.)
13
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy and Objectives
The Compensation Committee of the board is composed entirely of
directors who are independent of management and free from any
relationship that, in the opinion of the board of directors,
would interfere with the exercise of independent judgment as a
committee member. The current members of the Compensation
Committee are Messrs. Bernards and Glarner. The
Compensation Committee operates under a written charter adopted
by the board of directors, a copy of which can be found on our
website at www.fsi-intl.com. The Compensation Committees
basic responsibility is to assure that the senior executives of
the Company and its wholly-owned subsidiaries are compensated
effectively in a manner consistent with the stated compensation
objectives of the Company, internal equity considerations,
competitive practice, and the requirements of the appropriate
regulatory bodies. The Committee shall also communicate to
shareholders the Companys compensation policies as
required by the Securities and Exchange Commission. Specific
responsibilities are listed in the Compensation Committee
charter.
The primary objectives of the compensation program for our
senior executives consist of the following:
|
|
|
|
|
Provide overall compensation levels that are sufficiently
competitive to attract, motivate and retain executive officers
and key personnel.
|
|
|
|
Align the interests of our executive officers and key personnel
with those of our shareholders.
|
|
|
|
Provide a direct financial incentive to executives to meet or
exceed our annual corporate financial and operating goals.
|
|
|
|
Make a substantial portion of total compensation contingent on,
and variable with, achievement of objective corporate
performance goals, with that portion increasing as an
executives responsibilities increase.
|
Our executive compensation program strives to be competitive
with the compensation provided by comparably-sized companies in
the high technology and semiconductor equipment industry. In
that respect, we compare ourselves to a self-selected peer group
of companies. The self-selected peer group is subject to
occasional change as members of the peer group alter their
focus, merge or are acquired, or as new peers or competitors
emerge. For fiscal 2007, the peer group was comprised of the
following companies: Semitool, Inc.; Nanometrics, Inc.;
Ultratech, Inc.; Rudolph Technologies, Inc.; and Zygo
Corporation. We also utilize compensation survey data pertaining
to comparably-sized technology companies that has been developed
and published by AON Corporations Radford Surveys and
Consulting Group in our market reviews to add a perspective of
the broader technology labor market. The Compensation Committee
uses a comparison with a specific compensation peer group and
Radford survey data because we believe there are public
companies of comparable size devoted substantially to all of the
same markets in which we compete. Total compensation for
executive officers, including the Chief Executive Officer, is
generally targeted at the competitive median of comparable
positions in the selected peer group and Radford survey data.
The Compensation Committee annually conducts a review of its
executive compensation program. The purpose of the review is to
ensure that our executive compensation program meets the
objectives listed above. In its review, the Compensation
Committee considers individual and Company performance data
submitted by management and benchmark data described above. The
Compensation Committee has full and sole authority to retain and
terminate compensation consultants to assist in the evaluation
of compensation for the Chief Executive Officer, executive
staff, and non-employee directors. The Compensation Committee
has not, however, chosen to retain compensation consultants
because it does not believe it is a necessary use of company
resources, and because members of our Compensation Committee, by
virtue of experience in compensation management and service on
other boards, have reasonable knowledge of compensation
practices.
Elements
of Executive Compensation
Executive compensation at FSI has three primary components: base
salary, annual cash incentives and stock options. Our executive
officers also participate in benefit programs on a basis
consistent with other salaried employees, receive certain
personal benefits described below, and will receive additional
or accelerated payments
14
and benefits if a change in control of the Company occurs or if
their employment is terminated under certain circumstances,
generally in connection with a change in control. The
Compensation Committee uses its discretion to set executive
compensation at levels which, in its judgment, are warranted by
external, internal and individual factors. These factors include
compensation benchmark data and practices, industry conditions,
Company financial and operating performance and individual
performance against specified performance goals. In particular,
the compensation program is designed to set total compensation
potential (salary, annual bonus and stock options) at a level
similar to the median level of total compensation paid to
similarly positioned executives within our compensation peer
group. We have no pre-established policy or target for the
allocation between salary and performance-based compensation,
and generally allocate target compensation among the various
elements based on competitive practice. In 2007, the allocation
was approximately 50 percent fixed compensation (base
salary) and 50 percent variable compensation (cash
incentive and stock option).
Base
Salary
The base salary of each of the named executive officers,
including the Chief Executive Officer, is targeted to be at or
near the competitive median within the peer group. In
determining an individuals base salary, the Compensation
Committee considers the compensation levels of similar positions
within the peer group, the responsibilities and performance of
the individual named executive officer, our recent financial
performance and industry conditions.
Generally, salary decisions are made by the Compensation
Committee at the beginning of each calendar year based upon an
evaluation of the Chief Executive Officer by the Compensation
Committee, and evaluations and recommendations of the other
executive officers made by the Chief Executive Officer. A
performance assessment for each executive officer reporting to
the Chief Executive Officer is submitted by the Chief Executive
Officer to the Compensation Committee. The appraisal typically
assesses such individuals performance in the following
areas: accountabilities of the position, individual goals and
objectives recommended by the Chief Executive Officer and
approved by the Compensation Committee, special projects and
assignments, management skills, leadership competencies and the
achievement of learning and development goals. Generally, a
salary recommendation is made by the Chief Executive Officer
based upon the individuals overall performance assessment
and where the individuals salary falls within the range of
salaries reported for similar positions in the peer group and
the Radford survey data.
In evaluating and setting the Chief Executive Officers
base salary and target annual cash incentive as described below,
the Compensation Committee reviews our business and financial
performance and total compensation data from the comparable peer
group. That review is based upon a number of factors including
sales, earnings, market share, cash flow and total shareholder
return. The Compensation Committee does not assign relative
weights or rankings to these factors, but instead makes a
subjective determination based upon a consideration of all of
these factors as well as the progress made with respect to our
long-term goals and strategies.
In recent years, industry conditions and the Companys
financial performance have had a significant impact on the
Compensation Committees decisions regarding salary levels
for executive officers, including the timing of salary actions
and whether to implement salary increases or decreases.
Weakening industry conditions resulted in a ten percent
reduction in base salaries for executive officers in March 2001
and an additional five percent reduction in January 2002.
Although base salaries for executive officers were restored to
fiscal 2000 levels in January 2004, weakening industry
conditions again resulted in a ten percent salary reduction for
employees, including executive officers, beginning July 29,
2007. This reduction was reversed near the end of October 2007
in light of its impact on employee retention and cost reductions
realized from other personnel actions.
Annual
Cash Incentives
Executive officers are each eligible to receive an annual cash
incentive payment at the end of the fiscal year based upon our
financial performance during the fiscal year. For fiscal 2007,
the financial goals to be achieved were expressed in terms of
operating income. The purpose of this annual cash incentive
program is to provide a direct financial incentive to executives
to meet or exceed our annual corporate operating income goals.
15
The target cash incentive opportunity for each executive officer
is expressed as a specified percentage of base salary, with that
percentage determined primarily upon the individuals job
level within the organization and survey data from our selected
peer group and the Radford survey data for comparable positions.
This percentage is determined at the beginning of the fiscal
year by the Compensation Committee, based on its assessment with
regard to the Chief Executive Officer and upon recommendations
made by the Chief Executive Officer with respect to other
executive officers. For fiscal 2007, the target cash incentive
percentages were 100% of base salary for the Chief Executive
Officer, and 80% of base salary for the other Named Executive
Officers.
As a result of weakening industry conditions, the Company did
not achieve our target operating income goal of
$10.5 million for fiscal 2007. Therefore, no cash
incentives under the plan were paid to Named Executive Officers.
The Compensation Committee also has the authority to grant
discretionary bonuses to executive officers and other employees
to recognize extraordinary efforts or outstanding contributions
relating to our important projects. It has done so infrequently.
No such bonuses were paid to Named Executive Officers in fiscal
2007.
Stock
Options
Stock options are the principal vehicle used by us for the
payment of long-term compensation. We award stock options to
align the interests of our executive officers and key personnel
with those of our shareholders and to increase our long-term
value. Through deferred vesting, this component of our
compensation creates an incentive for individuals to remain with
us. The objectives of stock option grants are to assist in the
recruitment, motivation and retention of executive officers and
key personnel as well as to reward eligible employees for
outstanding performance and to provide a stock-based incentive
to improve our financial performance.
Generally, stock options are granted to eligible employees from
time to time based primarily upon survey data from our selected
peer group and the Radford survey data for comparable positions,
an assessment of the individuals actual
and/or
potential contributions and our financial performance. To date,
all stock options have been granted at fair market value.
Generally, such options vest over a period of several years.
Accordingly, a Named Executive Officer receiving an option
generally is rewarded only if the market price of our common
stock appreciates. Stock options are authorized by the
Compensation Committee. Since long-term options generally vest
over time, we periodically grant new options to provide
continuing incentives for future performance. The size of
previous grants and the number of options held are considered by
the Compensation Committee, but are not entirely determinative
of future grants. Stock options were awarded to Named Executive
Officers in December 2006.
Personal
Benefits
In addition to Company-paid premiums on term life and long-term
disability policies for executive officers, the Company also
pays the cost for Mr. Mitchell to commute to our
headquarters in Minneapolis from his permanent residence in
San Diego, and for his lodging expenses while in
Minneapolis. This arrangements were agreed to by the Company and
Mr. Mitchell in 1999 in connection with his original hiring
by the Company.
Severance
and Change in Control Arrangements
We have agreed to pay Messrs. Mitchell and Sand severance
equal to one years base salary if they are terminated by
us without cause. We have also agreed with each executive
officer to provide specified severance benefits if the
executives employment is terminated by us within two years
of a change in control other than for cause, or by the executive
during the same period for reasons that would constitute
constructive involuntary termination (see page 21 under the
caption Employment and Management Agreements). Our
stock option award agreements also provide for accelerated
vesting and exercisability of the awards if an executive
officers employment is terminated due to death or
disability or if a change in control occurs.
We have entered into these arrangements in part to better enable
us to attract and retain capable executives to work at a
relatively small company operating in an intensely competitive
industry, particularly where a significant part of their
long-term compensation potential is dependent on future stock
price appreciation and the compensation risk may be perceived as
higher than at other employment alternatives available to these
individuals. The change in control arrangements also mitigate a
potential disincentive for executives when they are evaluating a
potential
16
acquisition of the Company, particularly when the future
services of the executive may not be required by the acquiring
company, and at the same time provide a strong retention device
during change in control discussions. In addition, the
single trigger acceleration of options upon a change
in control provides employees the same opportunity as
shareholders who are free to sell their stock in the Company at
the time of the change in control event.
Actions
Affecting Fiscal 2007 Compensation
Base
Salary
In determining the base salary for each Named Executive Officer
for fiscal 2007, the Compensation Committee considered current
industry conditions in addition to the other factors described
above. As a result of this review, none of the Named Executive
Officers received a salary increase during fiscal 2007. In
addition, as discussed earlier, weakening industry conditions
resulted in a ten percent salary reduction for all employees,
including the Named Executive Officers, from July 2007 through
October 2007.
Annual
Cash Incentives
For fiscal 2007, we did not achieve our operating income goal
for the year. Accordingly, none of the Named Executive Officers
received an annual cash incentive payment.
Stock
Options
Each of the Named Executive Officers was granted a stock option
in December 2006 in accordance with the guidelines and
procedures described above. Details of these awards are provided
in the section below entitled Grants of Plan Based
Awards. The number of shares subject to these option
awards was constrained by the number of shares remaining
available for issuance under our 1997 Omnibus Stock Plan.
The Role
of Named Executive Officers in Compensation Decisions
The Compensation Committee makes all compensation decisions for
the Chief Executive Officer and his staff. The Committee is
responsible for any equity awards to any employee. The Chief
Executive Officer annually reviews the performance of each
member of his staff. The conclusions reached and recommendations
based on these reviews, including salary adjustments and
performance-based compensation, are presented to the
Compensation Committee. The Compensation Committee has
discretion to modify any of the Chief Executive Officers
recommendations.
Tax
Considerations Affecting Compensation Decisions
We do not currently have a policy with respect to the limit
under Internal Revenue Code Section 162(m) on the
deductibility of the qualifying compensation paid to our
executives, and have not sought to qualify annual cash
incentives as performance based compensation for
purposes of Section 162(m).
COMPENSATION
COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, we
recommended to the board that the Compensation Discussion and
Analysis be included in this Proxy Statement.
|
|
|
|
|
James A.
Bernards |
Terrence
W. Glarner |
|
Members of the Compensation Committee
(This space has been left blank intentionally.)
17
COMPENSATION
OF EXECUTIVE OFFICERS
Set forth below is summary information concerning certain
compensation earned, paid or awarded during fiscal 2007 by the
Company to our chief executive officer, our chief financial
officer and to the two other executive officers. They are our
only Named Executive Officers (NEOs).
Biographical
Information
The biographical information about Donald S. Mitchell, our
Chairman and Chief Executive Officer, can be found under
Proposal 1, Election of Directors. The
biographical information for the other three NEOs can be found
in Item 4A, Executive Officers of the Company,
in the Companys most recent
Form 10-K.
Summary
Compensation Table
The following table summarizes the compensation paid to our NEOs
for the fiscal year ended August 25, 2007. The employment
and management agreements that we have entered into with our
NEOs are described on page 21 under the caption
Employment and Management Agreements.
Summary
Compensation Table for Fiscal 2007
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Non-equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Option
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|
Incentive Plan
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All Other
|
|
|
|
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Named Executive Officer and
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|
|
Salary
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)
|
|
|
Donald S. Mitchell
|
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|
2007
|
|
|
$
|
383,738
|
|
|
$
|
62,688
|
|
|
|
|
|
|
$
|
67,467
|
(3)
|
|
$
|
513,893
|
|
Chairman, President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benno G. Sand
|
|
|
2007
|
|
|
$
|
260,063
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|
|
$
|
36,483
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|
|
|
|
|
|
$
|
17,858
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|
|
$
|
314,404
|
|
Executive Vice President,
Business Development,
Investor Relations and Secretary
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia M. Hollister
|
|
|
2007
|
|
|
$
|
224,209
|
|
|
$
|
32,920
|
|
|
|
|
|
|
$
|
10,714
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|
|
$
|
267,843
|
|
Chief Financial Officer
and Assistant Secretary
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Ely
|
|
|
2007
|
|
|
$
|
229,190
|
|
|
$
|
41,082
|
|
|
|
|
|
|
$
|
10,522
|
|
|
$
|
280,794
|
|
Vice President Global
Sales and Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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(1)
|
|
The amounts in this column reflect
the expense (without any reduction for forfeiture assumptions
related to service-based vesting conditions) recognized for
financial statement purposes in fiscal 2007 in accordance with
Statement of Financial Accounting Standards No. 123
(Revised 2004), Share Based Payment
(SFAS 123R), in connection with all
outstanding stock option awards (including those granted before
fiscal 2007) made to the respective officers under our 1997
Omnibus Stock Plan. The assumptions used in calculating these
amounts are set forth in Note 14, Stock Options to the
Consolidated Financial Statement included in our Annual Report
on
Form 10-K
for the fiscal year ended August 25, 2007.
|
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(2)
|
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For each individual, the amount
shown includes the Company matching contributions to the
Companys 401(k) Plan; Company paid term life insurance
premiums; and Company-paid long-term disability premiums.
|
|
(3)
|
|
In addition to the items discussed
in note (2), for Mr. Mitchell the amount shown also
includes $26,282 in airfare and ground transportation related to
his commute from his residence in San Diego, California to
our company headquarters in Minneapolis, Minnesota, and $23,269
in costs related to Company-provided lodging in Minneapolis. The
aggregate incremental cost to the Company of the airfare and
ground transportation is determined by amounts paid to
third-party providers, and the amount disclosed for the
Company-provided lodging reflects the total lease and utilities
costs incurred by the Company for an apartment in Minneapolis,
even though the apartment is available for use by Company
personnel in addition to Mr. Mitchell.
|
18
Grants of
Plan Based Awards
For services during fiscal 2007, our NEOs received two types of
plan-based awards: (i) annual cash incentive awards, and
(ii) non-qualified stock option awards under our 1997
Omnibus Stock Plan. The annual cash incentive plan is described
on page 15 in the Compensation Discussion and
Analysis section. No payouts were made to the NEOs under
the annual cash incentive plan for the 2007 fiscal year. Each
stock option awarded during fiscal 2007 vests and becomes
exercisable in 12 equal cumulative quarterly increments
beginning on the first quarter anniversary of the date of grant.
All options have a term of ten years and an exercise price equal
to the closing price of a share of our common stock on the day
before the date of grant. Generally all of the options will
become fully exercisable upon approval by our shareholders of a
merger, plan of exchange, sale of substantially all of our
assets or plan of liquidation.
Grants of
Plan-Based Awards in Fiscal 2007
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|
|
|
|
|
|
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|
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|
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|
|
|
|
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|
All Other
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Awards:
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
|
Securities
|
|
|
Base Price
|
|
|
of Stock and
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
|
Underlying
|
|
|
of Option
|
|
|
Option
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
($/Sh)(2)
|
|
|
($)(3)
|
|
|
Donald S. Mitchell
|
|
|
2/22/07
|
|
|
|
|
|
|
|
370,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/27/06
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|
|
|
|
|
|
|
|
|
|
|
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|
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30,000
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|
|
|
5.24
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|
|
$
|
94,800
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|
Benno G. Sand
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|
|
2/22/07
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|
|
|
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|
196,807
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|
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|
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|
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12/27/06
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|
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|
|
|
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|
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|
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16,000
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|
|
|
5.24
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|
|
$
|
50,600
|
|
Patricia M. Hollister
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|
|
2/22/07
|
|
|
|
|
|
|
|
168,014
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
12/27/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
5.24
|
|
|
$
|
44,300
|
|
John C. Ely
|
|
|
2/22/07
|
|
|
|
|
|
|
|
172,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/27/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
5.24
|
|
|
$
|
50,600
|
|
|
|
|
(1)
|
|
The Target column
presents the possible payment to each NEO under the annual cash
incentive plan for fiscal 2007. No payouts were made to the NEOs
under the annual cash incentive plan for the 2007 fiscal year.
|
|
(2)
|
|
The exercise price for the options
granted was the closing price of the Companys common stock
on the Nasdaq Global Select Market on December 26, 2006,
the day before the options were granted.
|
|
(3)
|
|
This column shows the full grant
date fair value under SFAS 123R of the stock options
granted to the NEOs in fiscal 2007. Generally, the full grant
date fair value is the amount that the Company would expense in
its financial statements over the vesting schedule of the award.
|
(This
space has been left blank intentionally.)
19
Outstanding
Stock Options at Fiscal Year End
The table below provides information on each NEOs
outstanding equity awards as of August 25, 2007. The equity
awards consist solely of stock options granted under the 1997
Omnibus Stock Plan.
Outstanding
Equity Awards at Fiscal 2007 Year-End
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
Option
|
|
|
|
Grant
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Option
|
|
|
Expiration
|
|
Name
|
|
Date
|
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Exercise Price ($)
|
|
|
Date
|
|
|
Donald S. Mitchell
|
|
|
12/13/1999
|
|
|
|
400,000
|
|
|
|
|
|
|
$
|
10.25
|
|
|
|
12/13/2009
|
|
|
|
|
3/16/2001
|
|
|
|
73,050
|
|
|
|
|
|
|
$
|
8.13
|
|
|
|
3/16/2011
|
|
|
|
|
4/25/2002
|
|
|
|
74,000
|
|
|
|
|
|
|
$
|
11.00
|
|
|
|
4/25/2012
|
|
|
|
|
6/9/2003
|
|
|
|
145,000
|
|
|
|
|
|
|
$
|
3.17
|
|
|
|
6/9/2013
|
|
|
|
|
2/26/2004
|
|
|
|
75,000
|
|
|
|
|
|
|
$
|
7.67
|
|
|
|
2/26/2014
|
|
|
|
|
1/6/2005
|
|
|
|
35,000
|
|
|
|
|
|
|
$
|
4.31
|
|
|
|
1/6/2015
|
|
|
|
|
6/30/2005
|
|
|
|
16,667
|
|
|
|
8,333
|
|
|
$
|
3.73
|
|
|
|
6/30/2015
|
|
|
|
|
4/18/2006
|
|
|
|
9,166
|
|
|
|
12,834
|
|
|
$
|
5.09
|
|
|
|
4/18/2016
|
|
|
|
|
12/27/2006
|
|
|
|
5,000
|
|
|
|
25,000
|
|
|
$
|
5.24
|
|
|
|
12/27/2016
|
|
Benno G. Sand
|
|
|
7/30/1998
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
7.66
|
|
|
|
7/30/2008
|
|
|
|
|
5/18/1999
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
7.25
|
|
|
|
5/18/2009
|
|
|
|
|
4/18/2000
|
|
|
|
26,000
|
|
|
|
|
|
|
$
|
13.06
|
|
|
|
4/18/2010
|
|
|
|
|
3/16/2001
|
|
|
|
38,550
|
|
|
|
|
|
|
$
|
8.13
|
|
|
|
3/16/2011
|
|
|
|
|
4/25/2002
|
|
|
|
34,600
|
|
|
|
|
|
|
$
|
11.00
|
|
|
|
4/25/2012
|
|
|
|
|
6/9/2003
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
3.17
|
|
|
|
6/9/2013
|
|
|
|
|
2/26/2004
|
|
|
|
40,000
|
|
|
|
|
|
|
$
|
7.67
|
|
|
|
2/26/2014
|
|
|
|
|
1/6/2005
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
4.31
|
|
|
|
1/6/2015
|
|
|
|
|
6/30/2005
|
|
|
|
9,333
|
|
|
|
4,667
|
|
|
$
|
3.73
|
|
|
|
6/30/2015
|
|
|
|
|
4/18/2006
|
|
|
|
5,416
|
|
|
|
7,584
|
|
|
$
|
5.09
|
|
|
|
4/18/2016
|
|
|
|
|
12/27/2006
|
|
|
|
2,666
|
|
|
|
13,334
|
|
|
$
|
5.24
|
|
|
|
12/27/2016
|
|
Patricia M. Hollister
|
|
|
7/30/1998
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
7.66
|
|
|
|
7/30/2008
|
|
|
|
|
5/18/1999
|
|
|
|
12,500
|
|
|
|
|
|
|
$
|
7.25
|
|
|
|
5/18/2009
|
|
|
|
|
4/18/2000
|
|
|
|
22,000
|
|
|
|
|
|
|
$
|
13.06
|
|
|
|
4/18/2010
|
|
|
|
|
3/16/2001
|
|
|
|
26,750
|
|
|
|
|
|
|
$
|
8.13
|
|
|
|
3/16/2011
|
|
|
|
|
4/25/2002
|
|
|
|
34,100
|
|
|
|
|
|
|
$
|
11.00
|
|
|
|
4/25/2012
|
|
|
|
|
6/9/2003
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
3.17
|
|
|
|
6/9/2013
|
|
|
|
|
2/26/2004
|
|
|
|
43,000
|
|
|
|
|
|
|
$
|
7.67
|
|
|
|
2/26/2014
|
|
|
|
|
1/6/2005
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
4.31
|
|
|
|
1/6/2015
|
|
|
|
|
6/30/2005
|
|
|
|
9,333
|
|
|
|
4,667
|
|
|
$
|
3.73
|
|
|
|
6/30/2015
|
|
|
|
|
4/18/2006
|
|
|
|
5,000
|
|
|
|
7,000
|
|
|
$
|
5.09
|
|
|
|
4/18/2016
|
|
|
|
|
12/27/2006
|
|
|
|
2,333
|
|
|
|
11,667
|
|
|
$
|
5.24
|
|
|
|
12/27/2016
|
|
John C. Ely
|
|
|
7/30/1998
|
|
|
|
4,667
|
|
|
|
|
|
|
$
|
7.66
|
|
|
|
7/30/2008
|
|
|
|
|
5/18/1999
|
|
|
|
2,667
|
|
|
|
|
|
|
$
|
7.25
|
|
|
|
5/18/2009
|
|
|
|
|
4/18/2000
|
|
|
|
3,000
|
|
|
|
|
|
|
$
|
13.06
|
|
|
|
4/18/2010
|
|
|
|
|
3/16/2001
|
|
|
|
56,750
|
|
|
|
|
|
|
$
|
8.13
|
|
|
|
3/16/2011
|
|
|
|
|
4/25/2002
|
|
|
|
52,100
|
|
|
|
|
|
|
$
|
11.00
|
|
|
|
4/25/2012
|
|
|
|
|
6/9/2003
|
|
|
|
30,000
|
|
|
|
|
|
|
$
|
3.17
|
|
|
|
6/9/2013
|
|
|
|
|
2/26/2004
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
7.67
|
|
|
|
2/26/2014
|
|
|
|
|
1/6/2005
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
4.31
|
|
|
|
1/6/2015
|
|
|
|
|
6/30/2005
|
|
|
|
12,000
|
|
|
|
6,000
|
|
|
$
|
3.73
|
|
|
|
6/30/2015
|
|
|
|
|
4/18/2006
|
|
|
|
9,334
|
|
|
|
6,666
|
|
|
$
|
5.09
|
|
|
|
4/18/2016
|
|
|
|
|
12/27/2006
|
|
|
|
2,666
|
|
|
|
13,334
|
|
|
$
|
5.24
|
|
|
|
12/27/2016
|
|
|
|
|
(1)
|
|
All options not yet exercisable
become exercisable in 12 equal cumulative quarterly increments
beginning on the first quarter anniversary of the date of grant.
|
20
Option
Exercises
The table below provides information regarding stock option
exercises by the NEOs during the fiscal year ended
August 25, 2007. None of the NEOs had any form of equity
award other than options that vested during the most recent
fiscal year.
Option
Exercises and Stock Vested in Fiscal 2007
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
|
Exercise
|
|
|
on Exercise
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
Donald S. Mitchell
|
|
|
5,000
|
|
|
$
|
14,200
|
|
Benno G. Sand
|
|
|
|
|
|
|
|
|
Patricia M. Hollister
|
|
|
|
|
|
|
|
|
John C. Ely
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents the difference between
the market value of the shares acquired upon exercise
(calculated using the closing price of a share of our common
stock on the Nasdaq Global Select Market on the date of
exercise) and the aggregate exercise price of the shares
acquired.
|
Employment
and Management Agreements
In December 1999, in connection with the hiring of Donald S.
Mitchell, we entered into agreements with Mr. Mitchell, our
current Chairman, President and Chief Executive Officer, that
provides that if he is terminated by us without cause (as
defined in the agreement), we will pay him his base annual
salary for one year after such termination, with any such
payments to be made to him in accordance with the Companys
normal payroll periods. These agreements contain confidentiality
and noncompete provisions in favor of the Company. In addition,
under these agreements the Company pays for commuting expenses;
the lease of an apartment or condominium in the Minneapolis area
during any time Mr. Mitchell remains a California resident;
and if any such payments are taxable to Mr. Mitchell, a
gross-up
amount to cover such taxes.
In March 2001, we entered into an agreement with Mr. Benno
G. Sand, our current Executive Vice President Business
Development and Secretary, that provides that if he is
terminated by us without cause (as defined in the agreement), or
if he resigns after giving at least 90 days notice or if he
dies while employed, we will pay him, or in the case of his
death his legal representative, his base annual salary for one
year after such termination, with such payments to be made in
accordance with the Companys normal payroll practices.
This agreement contains confidentiality and noncompete
provisions in favor of the Company.
We also have management agreements with Messrs. Mitchell,
Sand and Ely and Ms. Hollister. The management agreements
are operative only upon the occurrence of certain changes in
control (as defined in the agreements) of FSI. Absent a change
in control, the management agreements do not require us to
retain the executive officers or to pay them any specified level
of compensation or benefits.
Each management agreement provides that if, within two years
after a change in control, as defined in the management
agreements, the executive officers employment is
terminated by us other than (i) for cause, (ii) on
account of the death, disability or retirement of the executive,
or (iii) voluntarily by the executive (other than voluntary
terminations following events that constitute a
Constructive Involuntary Termination, as defined in
the management agreements, and which term includes compensation
reductions, demotions, relocations and excessive travel), the
executive is entitled to receive a lump sum severance payment.
The amount of the lump sum severance payment is equal to two
times the individuals highest rate of compensation during
the 12 months immediately preceding the change in control.
In addition, in lieu of no longer being eligible to participate
in our incentive plans, the individual would receive a lump sum
amount equal to two times the target level payment in effect for
the individual under the then-current incentive plan, together
with an aggregate per-diem amount, at the target level, for the
number of days elapsed in the then-current fiscal year through
the individuals date of termination. The management
agreements also provide for certain cash payments for
21
outplacement services and in lieu of certain insurance and
benefit plans. In addition, each management agreement provides
that if the executive officer receives payments due to a change
in control that would subject such executive officer to any
federal excise tax under Section 4999 of the Internal
Revenue Code, then such executive officer will also receive a
cash
gross-up
payment so that he or she will be in the same net after-tax
position that he or she would have been had such excise tax not
been applied. However, if the amount of the payments received
due to a change in control exceeds by less than $25,000 the
amount that would cause the excise tax to be assessed, the
payments shall be reduced to a level that would cause no excise
tax to apply.
For purposes of these agreements, cause generally
refers to willful and gross neglect of duties by an executive or
acts by an executive that constitute a felony and are
substantially detrimental to the Company. A change in
control for purposes of these agreements generally refers
to (i) the acquisition by a person of 30% or more of our
voting stock, (ii) specified changes in the composition of
our Board, or (iii) approval by our shareholders of a
merger or consolidation involving the Company, a sale of all or
substantially all of the Companys assets, or the
liquidation or dissolution of the Company.
22
Potential
Payments Upon Termination or Change in Control
The table that follows summarizes the estimated payments and
benefits that would be provided to our NEOs or their
beneficiaries under the employment and management agreements
described above, and under our 1997 Omnibus Stock Plan, under
various scenarios involving a termination of employment
and/or a
change in control, and assuming that the event(s) occurred on
August 25, 2007, the end of our most recent fiscal year.
Stock option award agreements under our 1997 Omnibus Stock Plan
provide that the vesting and exercisability of a
participants option awards will be accelerated if the
participants employment is terminated due to death or
disability, or if a change in control of the Company (as defined
above) occurs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Change in
|
|
|
Change in
|
|
|
|
Without Cause
|
|
|
Death or
|
|
|
Control (Single
|
|
|
Control (Double
|
|
Compensation Element
|
|
($)
|
|
|
Disability ($)
|
|
|
Trigger) ($)(1)
|
|
|
Trigger) ($)(2)
|
|
|
Severance(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
$
|
370,162
|
|
|
|
|
|
|
|
|
|
|
$
|
740,324
|
|
Benno G. Sand
|
|
$
|
246,009
|
|
|
$
|
246,009
|
|
|
|
|
|
|
$
|
492,018
|
|
Patricia M. Hollister
|
|
$
|
105,009
|
|
|
|
|
|
|
|
|
|
|
$
|
420,034
|
|
John C. Ely
|
|
$
|
107,509
|
|
|
|
|
|
|
|
|
|
|
$
|
430,034
|
|
Lump Sum Bonus(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,110,486
|
|
Benno G. Sand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
590,422
|
|
Patricia M. Hollister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
504,041
|
|
John C. Ely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
516,041
|
|
Accelerated Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
|
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Benno G. Sand
|
|
|
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Patricia M. Hollister
|
|
|
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
John C. Ely
|
|
|
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Benefits and Perquisites(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,750
|
|
Benno G. Sand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,750
|
|
Patricia M. Hollister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,300
|
|
John C. Ely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,450
|
|
Excise Tax
Gross-Up(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
884,876
|
|
Benno G. Sand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
515,024
|
|
Patricia M. Hollister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,317
|
|
John C. Ely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
448,016
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald S. Mitchell
|
|
$
|
370,162
|
|
|
|
|
|
|
|
(5
|
)
|
|
$
|
2,795,436
|
|
Benno G. Sand
|
|
$
|
246,009
|
|
|
$
|
246,009
|
|
|
|
(5
|
)
|
|
$
|
1,657,214
|
|
Patricia M. Hollister
|
|
$
|
105,009
|
|
|
|
|
|
|
|
(5
|
)
|
|
$
|
1,424,692
|
|
John C. Ely
|
|
$
|
107,509
|
|
|
|
|
|
|
|
(5
|
)
|
|
$
|
1,453,541
|
|
|
|
|
(1)
|
|
There is a change in control but
the individual continues in his job.
|
|
(2)
|
|
There is a change in control and
within two years of the change in control the executive either
(i) is terminated by the Company without cause or
(ii) terminates his employment under circumstances that
constitute a constructive involuntary termination as
described above.
|
|
(3)
|
|
The amount shown for each of
Mr. Mitchell and Mr. Sand is equal to one years
base salary. With respect to Ms. Hollister and
Mr. Ely, this amount is equal to 50% of one years
base salary, which is the current severance policy in place for
officers and certain other senior management of the Company. Any
additional severance amounts for Ms. Hollister or
Mr. Ely would be at the discretion of the board. However,
with respect to each such officer, if the termination occurs
within two years of a change of control, the amount would be two
times the highest annual rate of base salary in effect since one
year prior to the change in control.
|
|
(4)
|
|
Each amount shown is equal to two
times the annual payment at target level under the
Companys then current annual cash incentive plan, plus a
pro rata portion of such annual payment at target
level corresponding to the portion of the then current fiscal
year during which the executive was employed. Under the
assumption that termination occurred as of the last day of the
fiscal year, the pro rata portion effectively increases the
total estimated payment to three times the annual payment at
target level.
|
23
|
|
|
(5)
|
|
Because the exercise price of all
outstanding stock options was greater than the closing price of
our common stock on August 24, 2007, the last trading day
of the fiscal year, there was no intrinsic value as of that date
in any of the stock option awards that would be accelerated as a
result of any of these events. No value is shown in the
Change of Control (Double Trigger) column because by
operation of the applicable plan, any value would have already
been realized upon the occurrence of the change in control.
|
|
(6)
|
|
Each amount shown is equal to a
lump sum payment to be received in lieu of health and welfare
benefits, outplacement services and perquisites.
|
|
(7)
|
|
Each amount shown represents the
amount of a payment to be received by the executive sufficient
to cause him to retain, after taxes, an amount equal to the
excise tax imposed by Section 4999 of the Internal Revenue
Code on any excess parachute payment received by the
executive.
|
Equity
Compensation Plan Information
The following table provides information as of August 25,
2007 for our compensation plans under which equity securities
may be issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
(a)
|
|
|
(b)
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Future Issuance Under Equity
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price
|
|
|
Compensation Plans
|
|
|
|
Exercise of Outstanding
|
|
|
of Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Options, Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a)(2)
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,577,608
|
(1)
|
|
$
|
7.19
|
|
|
|
118,381
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,577,608
|
|
|
$
|
7.19
|
|
|
|
118,381
|
|
|
|
|
(1)
|
|
Represents shares of common stock
subject to issued but unexercised options under our 1997 Omnibus
Stock Plan. Effective January 2007, no more options or other
awards were issuable under the 1997 Omnibus Stock Plan.
|
|
(2)
|
|
Represents shares of common stock
available for issuance under our Employees Stock Purchase Plan.
|
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Bernards
and Glarner. Neither Mr. Bernards nor Mr. Glarner was
at any time during our 2007 fiscal year an officer or employee
of FSI or was formerly an officer of FSI. In the 2007 fiscal
year, no member of the Compensation Committee engaged in any
reportable transactions with related persons, promoters or
control persons.
None of our executive officers has served on the board of
directors or compensation committee of any other entity that has
or has had one or more executive officers serving as a member of
our board of directors.
24
PROPOSAL TO
ADOPT THE FSI 2008 OMNIBUS STOCK PLAN
(Proposal 2)
The 2008
Omnibus Stock Plan of FSI
On November 7, 2007, our Board of Directors, acting upon
the recommendation of our Compensation Committee, authorized the
adoption of the 2008 Omnibus Stock Plan of FSI (the 2008
Omnibus Plan), a copy of which is attached as
Appendix A to this proxy statement. The board also directed
the company to submit the 2008 Omnibus Plan to our shareholders
for approval at the Annual Meeting. If the shareholders approve
the 2008 Omnibus Plan, it will be effective January 16,
2008.
Our current incentive stock plan, the 1997 Omnibus Stock Plan
(the 1997 Omnibus Plan), terminated by its terms with
respect to the grant of any awards thereunder, in January 2007.
As of November 19, 2007, there were 3,483,868 shares
subject to issued but unexercised options under the 1997 Omnibus
Plan.
Our board has reserved an aggregate of 1,000,000 shares for
issuance under the 2008 Omnibus Plan, representing approximately
3.3% of our shares outstanding as of November 19, 2007.
Our Compensation Committee and the board of directors continue
to believe that stock-based compensation programs are a key
element in achieving our continued financial and operational
success.
OUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE APPPROVAL OF THE 2008 OMNIBUS PLAN
(This
space has been left blank intentionally.)
25
If approved by our shareholders at the Annual Meeting, we intend
to file a registration statement with the Securities and
Exchange Commission covering the shares issuable our 2008
Omnibus Plan.
The following is a summary of the 2008 Omnibus Plan. This
summary is qualified in its entirety by reference to the
complete 2008 Omnibus Plan attached to this proxy as
Appendix A.
Purpose
The purpose of the 2008 Omnibus Plan is to promote our interests
and the interests of our shareholders by providing key
personnel, including non-employee directors, with an opportunity
to acquire a proprietary interest in us, to compensate key
personnel and non-employee directors for their contributions and
to aid in attracting and retaining key personnel and
non-employee directors. The plan provides for the granting of
both incentive and non-statutory stock options but options
granted under the 2008 Omnibus Plan to non-employee directors
may only be non-statutory stock options that do not meet the
requirements of Section 422 of the Internal Revenue Code.
Administration
The 2008 Omnibus Plan will be periodically reviewed by the
Compensation Committee. The Compensation Committee has the
authority to adopt, revise and waive rules relating to the 2008
Omnibus Plan and to determine the timing and identity of
participants, the amount of awards and any other terms and
conditions of awards, as consistent with the plan. The
Compensation Committee may also amend the terms of the
agreements evidencing awards. The Compensation Committee may
delegate its responsibilities under the 2008 Omnibus Plan to
members of our management or to others with respect to the
selection and grants of awards to our employees who are not
deemed to be officers, directors or ten percent shareholders
under applicable federal securities laws. Notwithstanding the
foregoing, our board of directors has the exclusive power to
administer any awards granted to non-employee directors. Certain
grants of options and the amount and nature of the awards to be
granted to non-employee directors are automatic. Because the
2008 Omnibus Plan has two basic components, options for
non-employee directors and discretionary options for employees
and consultants, the terms of which are substantially different,
these two separate components of the 2008 Omnibus Plan are
described separately below.
Awards to
Employees and Consultants
Eligibility
and Number of Shares
All of our employees and the employees of our affiliates,
including our subsidiaries and any joint venture entity in which
we directly or indirectly own an equity interest of 20% or more,
are eligible to receive awards under the 2008 Omnibus Plan at
the discretion of the Compensation Committee. Non-statutory
stock options under the 2008 Omnibus Plan also may be awarded by
the Compensation Committee to individuals who are not employees
but who provide services to FSI or our affiliates as advisors,
directors or consultants. We and our subsidiaries had an
aggregate of approximately 429 employees as of
August 25, 2007.
The 2008 Omnibus Plan provides that all awards are subject to
agreements containing the terms and conditions of the awards,
including conditions relating to vesting, exercisability,
lapsing of restrictions or payments tied to performance
measures. Such agreements will be entered into by the recipients
of the awards and us on or after the time the awards are granted
and are subject to amendment to the extent permitted by law,
including unilateral amendment by us unless such amendments are
determined by the Compensation Committee to be materially
adverse to the participant. Except in the case of certain
adjustments for changes in our capitalization, in no event may
an option or stock appreciation right be amended to decrease its
exercise price per share or be cancelled in connection with the
grant of a new option or stock appreciation right with a lower
exercise price. Any shares of our common stock that are subject
to awards under the 2008 Omnibus Plan, but which are not used
because the terms and conditions of the awards are not met, may
be reallocated as though they had not previously been awarded
unless such shares were used to calculate the value of stock
appreciation rights which have already been exercised.
The number of shares that may be granted under the 2008 Omnibus
Plan may not exceed 1,000,000, of which not more than 200,000
may be the subject of awards other than options and stock
appreciation rights, subject to adjustment as provided in the
plan.
26
Types
of Awards
The types of awards that may be granted under the 2008 Omnibus
Plan include restricted and unrestricted stock, incentive and
non-statutory stock options, stock appreciation rights,
performance units and other stock-based awards. Subject to the
restrictions described in this proxy statement with respect to
incentive stock options, such awards are exercisable by the
participants at such times as determined by the Compensation
Committee. Except as noted below, only the recipient of an award
(or that persons successor as defined in the plan) may
exercise an option or stock appreciation right, or receive
payment with respect to performance units or any other award. No
award may be sold, assigned, transferred, exchanged or otherwise
encumbered other than to a successor upon the participants
death or, except in the case of an incentive stock option,
pursuant to a qualified domestic relations order. However, the
Compensation Committee may provide that an award (other than
incentive stock options) may be transferable to members of the
participants immediate family or to one or more trusts for
the benefit of such family members or partnerships in which such
family members are the only partners, if the participant does
not receive any consideration for the transfer. Generally, any
award granted under the 2008 Omnibus Plan may not become fully
exercisable until three years from its grant date, except for
awards subject to performance measures and certain other
exceptions as further described in the plan.
Options, stock appreciation rights, restricted stock and other
awards may be granted under the 2008 Omnibus Plan to employees
of entities acquired by us in substitution for, or in connection
with the assumption of, awards previously granted to them by the
acquired entity.
In addition to the general characteristics of all of the awards
described in this proxy statement, the basic characteristics of
each type of award that may be granted to an employee (and in
some cases, a consultant, director or other advisor) under the
2008 Omnibus Plan are as follows:
Restricted
and Unrestricted Stock and Other Stock-Based
Awards
The Compensation Committee is authorized to grant, either alone
or in conjunction with other awards, stock and stock-based
awards. The Compensation Committee shall determine the persons
to whom such awards are made, the timing and amount of such
awards and all other terms and conditions. Our common stock
granted to participants may be unrestricted or may contain such
restrictions, including provisions requiring forfeiture and
imposing restrictions upon stock transfer, as the Compensation
Committee may determine. Unless forfeited, the recipient of
restricted common stock will have all other rights of a
shareholder, including without limitation, voting and dividend
rights. The 2008 Omnibus Plan provides that no more than
25,000 shares subject to restricted stock awards may be
granted to any one participant in a calendar year.
Incentive
and Non-statutory Stock Options
Both incentive stock options and non-statutory stock options may
be granted to participants at such exercise prices as the
Compensation Committee may determine, but which may not be less
than 100 percent of the fair market value (as defined in
the 2008 Omnibus Plan) of the underlying stock as of the date
the option is granted. Stock options may be granted and
exercised at such times as the Compensation Committee may
determine, except that unless applicable federal tax laws are
modified, (i) no incentive stock options may be granted
more than ten years after the effective date of the 2008 Omnibus
Plan, (ii) an incentive stock option shall not be
exercisable more than ten years after the date of grant,
(iii) the aggregate fair market value of the shares of our
common stock with respect to which incentive stock options held
by an employee under the 2008 Omnibus Plan and any of our (or
our affiliates) other option plans may first become
exercisable in any calendar year may not exceed $100,000 and
(iv) an incentive stock option will not be exercisable more
than one year from a termination of employment due to death or
disability or more than three months upon termination of
employment for any other reason. Additional restrictions apply
to an incentive stock option granted to an individual who
beneficially owns ten percent or more of our outstanding shares.
A maximum of 100,000 shares subject to options may be
granted to any single participant in a calendar year.
The purchase price for stock purchased upon the exercise of the
options may be payable in cash, by the withholding of stock
otherwise issuable having a fair market value on the date the
option is exercised equal to the option price of the stock being
purchased, delivery of stock already owned by the participant or
in a combination of
27
cash and stock, as determined by the Compensation Committee. The
Compensation Committee may permit optionees to simultaneously
exercise options and sell the stock purchased upon such exercise
pursuant to brokerage or similar relationships and use the sale
proceeds to pay the purchase price.
Stock
Appreciation Rights and Performance Units
The value of a stock appreciation right granted to a participant
is determined by the appreciation in our common stock, subject
to any limitations upon the amount or percentage of total
appreciation that the Compensation Committee may determine at
the time the right is granted. The participant receives all or a
portion of the amount by which the fair market value of a
specified number of shares, as of the date the stock
appreciation right is exercised, exceeds a price specified by
the Committee at the time the right is granted. The price
specified by the Compensation Committee must be at least
100 percent of the fair market value of the specified
number of shares of our common stock to which the right relates
determined as of the date the stock appreciation right is
granted. A maximum of 100,000 shares subject to stock
appreciation rights may be granted to any single participant in
a calendar year.
Performance units entitle the participant to payment in amounts
determined by the Compensation Committee based upon the
achievement of specified performance measures during a specified
term. The Compensation Committee determines whether any such
performance measures have been met. Under the 2008 Omnibus Plan,
any award subject to a performance measure must not have a
performance cycle shorter than one year, with certain exceptions
as described in the plan.
Payments with respect to stock appreciation rights and
performance units may be paid in cash, shares of our common
stock or a combination of cash and shares as determined by the
Compensation Committee. No participant may receive awards of
performance units relating to more than 25,000 shares in
any year under this plan.
Termination
of Employment, Fundamental Changes, and Forfeiture
Upon termination of a participants employment due to death
or disability, any options or stock appreciation rights not
expired or otherwise terminated become exercisable in full for a
period of one year, unless the participant was not continuously
employed by us or one of our affiliates from the date of grant
until termination of employment, or three months prior to
termination of employment in the case of a participants
death. If a participants employment terminates for any
reason other than death, disability or cause (as discussed
below), any currently outstanding option or stock appreciation
right will remain exercisable, but only to the extent it may be
exercised, for a period of three months following the
participants termination of employment, unless provided
otherwise in the agreement. However, in no event will an option
or stock appreciation right be exercisable subsequent to its
scheduled expiration date as set forth in the applicable award
agreement.
Upon termination of a participants employment due to death
or disability during a performance cycle or as otherwise
provided by the Compensation Committee or award agreement, a
participant eligible for performance units is entitled to
receive a pro rata payment with respect to such performance
units to the extent any performance measures were satisfied. The
pro rata payment with respect to the performance units is based
on the amount of time the participant was employed during the
performance cycle. Upon a termination of a participants
employment due to death or disability or as otherwise provided
by the Compensation Committee or award agreement, a participant
is entitled to have restricted stock vest on a pro rata basis,
based on the amount of time the participant was employed by us
during the scheduled vesting period.
If an employee is terminated for cause (as defined in the 2008
Omnibus Plan) all awards granted to such employee terminate
immediately.
The Compensation Committee may provide for the lapse of
restrictions on restricted stock, stock appreciation rights and
other awards or acceleration of the term with respect to which
the achievement of performance targets for performance units is
determined upon: (i) the occurrence of an Event (as defined
in the plan); (ii) other fundamental changes in our
corporate structure; or (iii) such other events as the
Compensation Committee may determine. The 2008 Omnibus Plan
provides that the Compensation Committee may declare each
outstanding option or stock appreciation right, whether or not
exercisable, cancelled upon a fundamental change in exchange for
a cash
28
payment. Upon this declaration, any options and stock
appreciation rights not currently exercisable become fully
vested.
Unless the applicable agreement states otherwise, the
Compensation Committee may cancel, rescind, suspend or otherwise
limit or restrict any unexpired, unvested, unpaid or deferred
awards upon the occurrence of any of the following: (i) a
participants unauthorized competition with us or any of
our affiliates; (ii) the unauthorized disclosure by the
participant of any of our or our affiliates material
proprietary or confidential information; (iii) a
participants termination of employment for cause; and
(iv) any other conduct that the Compensation Committee
determines to be detrimental to us or any of our affiliates.
Further, if a participant engages in any such conduct within a
twelve-month period before or after termination of employment,
the Compensation Committee may rescind the exercise of an award
by the participant, requiring the participant to forfeit any
cash and/or
shares received in connection with the rescinded transaction.
Adjustments,
Modifications, Termination
The 2008 Omnibus Plan gives the Compensation Committee
discretion to amend the terms and conditions of any outstanding
award agreement; however, no modifications may be made which
materially and adversely affect any right acquired by a
participant unless otherwise agreed to by the affected
participant. Except in the case of certain adjustments for
changes in our capitalization, in no event may an option or
stock appreciation right be amended to decrease its exercise
price per share or be cancelled in connection with the grant of
a new option or stock appreciation right with a lower exercise
price. Further, our by-laws currently provide that neither the
board nor a board committee may reprice options already issued
and outstanding without prior approval of our shareholders.
Otherwise, our board of directors may, at any time, terminate,
suspend or modify the 2008 Omnibus Plan, except that amendments
to the plan will be submitted to our shareholders for approval
if the rules of The Nasdaq Stock Market, Inc. or applicable laws
or regulations require shareholder approval of such amendment.
Non-Employee
Director Options
Agreements
The 2008 Omnibus Plan provides that all options granted under
the plan be subject to agreements governing the terms and
conditions of the awards. Such agreements will be entered into
by the non-employee directors and us on or after the time the
options are granted. Any shares of common stock subject to an
option under the 2008 Omnibus Plan that are not used because the
terms and conditions of the option are not met may be
reallocated under the plan as though they had not previously
been awarded.
Types
of Awards
Two types of options are automatically granted under the terms
of the 2008 Omnibus Plan: initial non-employee director options
and annual non-employee director options.
Initial
Non-Employee Director Options
Each non-employee director first elected or appointed to the
board on or after our January 2008 Annual Meeting is entitled to
receive a single option grant, on the date such director first
becomes a director, to purchase 20,000 shares of our common
stock.
Subject to the prior expiration of an initial non-employee
director option as described below, these options vest and
become exercisable six months after the date of grant. Upon the
occurrence of an Event (as defined in the 2008 Omnibus Plan) or
the death of a non-employee director, certain initial
non-employee director options held by such individual or his or
her legal representative that were not previously exercisable
shall become immediately exercisable in full.
Annual
Non-Employee Directors Options
For each Annual Meeting of Shareholders during the term of the
2008 Omnibus Plan, beginning with our January 2008 Annual
Meeting, each individual serving as our non-employee director
immediately following such
29
annual meeting shall be granted, by virtue of serving as our
non-employee director, a non-statutory stock option to purchase
7,500 shares of our common stock. Such annual non-employee
directors options shall be deemed to be granted to each
non-employee director immediately after such annual meeting and
shall be granted regardless of whether or not such non-employee
director previously received, or simultaneously receives, an
initial non-employee director option. Initial non-employee
director options and annual non-employee director options
together are hereinafter sometimes referred to as
non-employee director options.
Annual non-employee director options shall vest and become
exercisable on the January 1st following the date of
grant. Each such option, to the extent exercisable, shall be
exercisable in whole or in part.
Upon the occurrence of an Event or the death of a non-employee
director, grants of annual non-employee director options held by
such individual or his or her legal representative that were not
previously exercisable shall become immediately exercisable in
full.
Termination
of Non-Employee Director Options
Each non-employee director option granted pursuant to the 2008
Omnibus Plan and all rights to purchase common stock thereunder
shall terminate on the earliest of:
(i) ten years after the date such option is granted;
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(ii)
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the expiration of the period specified in the agreement after
the death or permanent disability of a non-employee director;
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(iii)
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the date, if any, fixed for cancellation pursuant to the 2008
Omnibus Plan (e.g., in the event of a dissolution, liquidation
or merger, etc.); or
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(iv)
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90 days after the date the non-employee director ceases to
be our director; provided, however, that the option shall be
exercisable during this
90-day
period only to the extent that the option was exercisable as of
the date the person ceases to be a non-employee director, unless
the cessation results from the directors death or
permanent disability. Notwithstanding the preceding sentence, if
a non-employee director who resigns or whose term expires then
becomes our consultant or employee within 90 days of such
resignation or term expiration, the non-employee director
options of such person shall continue in full force and effect.
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In no event shall such option be exercisable at any time after
its original expiration date. When an option is no longer
exercisable, it shall be deemed to have lapsed or terminated and
will no longer be outstanding.
Purchase
Price and Exercise of Non-Employee Director
Options
All non-employee director options granted pursuant to the 2008
Omnibus Plan are non-statutory stock options and the price per
share of common stock subject to a non-employee director option
is 100 percent of the fair market value of our common stock
on the date of grant as defined in the 2008 Omnibus Plan.
A non-employee director option may be exercised in whole or in
part by delivery of a written notice of exercise accompanied by
payment in full of the exercise price in cash, in shares of
previously acquired common stock having a fair market value at
the time of exercise equal to the exercise price or a
combination thereof.
During the lifetime of a non-employee director, only the
non-employee director or his or her guardian or legal
representative may exercise the option. An option may be
assignable or transferable by the non-employee director to the
extent authorized by the Compensation Committee. An option may
be exercised after the death or permanent disability of the
non-employee director by such individuals successors, but
only within the period specified in the agreement relating to
such non-employee director options.
Other
Awards
The Compensation Committee, in its discretion, may grant options
or other awards to a non-employee director, but only in
substitution for non-employee director options held by that
director.
30
Adjustments,
Modifications, Termination
The Compensation Committee may provide for the accelerated
exercisability of non-employee director options in the event of
a fundamental change of FSI, or other changes in our corporate
structure, or such other events as the Compensation Committee
may determine. The Compensation Committee may also provide that
certain awards may be exercised in certain events after the
termination of services of the non-employee director or the
death of the recipient.
In addition, the termination of a non-employee directors
award may be delayed in the event that the non-employee director
enters into a consulting or other advisory role with us which
may, in some cases, involve entering into a non-compete
agreement with us.
Federal
Tax Considerations
We have been advised by our counsel that awards made under the
2008 Omnibus Plan generally will result in the following tax
events for United States citizens under current United States
federal income tax laws:
Restricted
and Unrestricted Stock
Unless the participant files an election to be taxed under
Section 83(b) of the Internal Revenue Code, (a) the
participant will not realize income upon the grant of restricted
stock, (b) the participant will realize ordinary income,
and we will be entitled to a corresponding deduction, when the
restrictions have been removed or expire, and (c) the
amount of such ordinary income and deduction will be the fair
market value of the restricted stock on the date the
restrictions are removed or expire. If the recipient files an
election to be taxed under Section 83(b) of the Internal
Revenue Code, the tax consequences to the participant and us
will be determined as of the date of the grant of the restricted
stock rather than as of the date of the removal or expiration of
the restrictions.
With respect to awards of unrestricted stock, (a) the
participant will realize ordinary income and we will be entitled
to a corresponding deduction upon the grant of the unrestricted
stock and (b) the amount of such ordinary income and
deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the participant disposes of restricted or unrestricted
stock, the difference between the amount received upon such
disposition and the fair market value of such shares on the date
the recipient realizes ordinary income will be treated as a
capital gain or loss.
Incentive
Stock Options
No taxable income to a participant will be realized, and we will
not be entitled to any related deduction, at the time any
incentive stock option is granted under the 2008 Omnibus Plan.
If certain statutory employment and holding period conditions
are satisfied before the participant disposes of shares acquired
pursuant to the exercise of such an option, then no taxable
income will result upon the exercise of such option and we will
not be entitled to any deduction in connection with such
exercise. Upon disposition of the shares after expiration of the
statutory holding periods, any gain or loss realized by a
recipient will be a capital gain or loss. We will not be
entitled to a deduction with respect to a disposition of the
shares by a participant after the expiration of the statutory
holding periods.
Except in the event of death, if shares acquired by a
participant upon the exercise of an incentive stock option are
disposed of by such participant before the expiration of the
statutory holding periods (a disqualifying
disposition), such participant will be considered to have
realized as compensation, taxable as ordinary income in the year
of disposition, an amount, not exceeding the gain realized on
such disposition, equal to the difference between the exercise
price and the fair market value of the shares on the date of
exercise of the option. We will be entitled to a deduction at
the same time and in the same amount as the participant is
deemed to have realized ordinary income. Any gain realized on
the disposition in excess of the amount treated as compensation
will constitute capital gain and any loss realized on the
disposition will constitute capital loss. If the participant
pays the option price with shares that were originally acquired
pursuant to the exercise of an incentive stock option and the
statutory holding periods for such shares have not been met, the
participant will be treated as having made a disqualifying
disposition of such shares, and the tax consequences of such
disqualifying disposition will be as described above.
31
The foregoing discussion applies only for regular tax purposes.
For alternative minimum tax purposes an incentive stock option
will be treated as if it were a non-statutory stock option, the
tax consequences of which are discussed below.
Non-statutory
Stock Options
A participant will realize no taxable income, and we will not be
entitled to any related deduction, at the time any non-statutory
stock option is granted under the 2008 Omnibus Plan. At the time
shares are transferred to the participant pursuant to the
exercise of a non-statutory stock option, the participant will
realize ordinary income, and we will be entitled to a deduction,
equal to the excess of the fair market value of the stock on the
date of exercise over the option price. Upon disposition of the
shares, any additional gain or loss realized by the participant
will be taxed as a capital gain or loss.
Stock
Appreciation Rights and Performance Units
Generally (a) the participant will not realize income upon
the grant of a stock appreciation right or performance unit
award, (b) the participant will realize ordinary income,
and we will be entitled to a corresponding deduction, in the
year cash, shares of common stock or a combination of cash and
shares are delivered to the participant upon exercise of a stock
appreciation right or in payment of the performance unit award
and (c) the amount of such ordinary income and deduction
will be the amount of cash received plus the fair market value
of the shares of common stock received on the date they are
received. The federal income tax consequences of a disposition
of unrestricted shares received by the participant upon exercise
of a stock appreciation right or in payment of a performance
unit award are the same as described above with respect to a
disposition of unrestricted shares.
Withholding
The 2008 Omnibus Plan permits us to withhold from cash awards,
and to require a participant receiving common stock under the
2008 Omnibus Plan to pay us in cash, an amount sufficient to
cover the minimum statutory withholding taxes. In lieu of cash,
the Compensation Committee may permit a participant to cover
withholding obligations through a reduction in the number of
shares delivered to such participant or a surrender to us of
shares currently owned by the participant.
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space has been left blank intentionally.)
32
PROPOSAL TO
AMEND THE FSI EMPLOYEES STOCK PURCHASE PLAN
(Proposal 3)
Our board of directors recently approved an amendment to our
Employees Stock Purchase Plan, as amended, increasing the number
of shares reserved for issuance under the plan by
500,000 shares. The board took this action to enable us to
continue to offer our employees the opportunity to realize stock
appreciation and facilitate stock ownership in FSI. Our
shareholders are being asked to approve this amendment at the
meeting.
If approved by our shareholders at the Annual Meeting, we intend
to file a registration statement with the Securities and
Exchange Commission covering the shares issuable under our
Employees Stock Purchase Plan.
Purpose
The purpose of the Employees Stock Purchase Plan is to permit
eligible employees (including officers) to purchase our common
stock through payroll deductions at a specified percentage of
our common stocks fair market value. The plan is an
employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended.
Adoption
of the Stock Plan and Prior Amendments
In 1990, we adopted the Employees Stock Purchase Plan and
reserved 200,000 shares of common stock for issuance
thereunder. Pursuant to amendments previously approved by our
shareholders, the number of shares of common stock available for
distribution has been increased to 2,800,000.
Administration
The Employees Stock Purchase Plan is periodically reviewed by
the Compensation Committee of the board (acting as the
Stock Plan Committee). No person may participate in
the Employees Stock Purchase Plan while serving as a member of
the Stock Plan Committee. Subject to the express provisions of
the plan, the Compensation Committee, by majority action, is
authorized to interpret, prescribe, amend and rescind rules
relating to the Employees Stock Purchase Plan, and to make all
other determinations necessary or advisable for administration
of the plan.
Eligibility
and Number of Shares
As of November 19, 2007, the total number of shares of our
common stock available for distribution under the Employees
Stock Purchase Plan was 118,381, subject to appropriate
adjustments by the Stock Plan Committee in the event of certain
changes in the outstanding shares of common stock by reason of a
stock dividend, stock split, combination, recapitalization or
reclassification. If this proposed amendment is approved by our
shareholders at the Annual Meeting, an additional
500,000 shares of common stock will be available for
distribution under the plan (subject to adjustments as described
above). Shares delivered pursuant to the plan shall be newly
issued shares of our common stock.
Any of our employees or the employees of our designated
subsidiaries (including officers and any directors who are also
employees) is eligible to participate in the Employees Stock
Purchase Plan so long as such employee was employed on the
fifteenth day of the month immediately preceding the first day
of a stock purchase period (January 1st or
July 1st) under the plan.
No eligible employee may be granted the right to purchase common
stock under, or otherwise participate in, the Employees Stock
Purchase Plan if after the purchase such employee would own (or
have the right to purchase) our stock possessing five percent or
more of the total combined voting power or value of all of our
classes of stock.
As of November 19, 2007, approximately 400 employees
were eligible to participate in the Employees Stock Purchase
Plan.
33
Participation
An eligible employee who elects to participate in the Employees
Stock Purchase Plan may contribute funds for the purchase of
common stock under the plan by electing to direct his or her
employer to withhold from one to ten percent of that
employees base earnings (as defined in the
plan).
A participant may elect to reduce (but not increase) the rate of
withholding or to make no further deductions as set forth in
greater detail in the Employees Stock Purchase Plan. Amounts
withheld are held by the participants employer until the
end of the applicable stock purchase period (January 1 to June
30 and July 1 to December 31) and are automatically applied
to purchase our common stock unless the participant elects in
writing to receive a refund pursuant to rules adopted by the
Stock Plan Committee and as set forth in the plan.
Purchase
of Stock
Amounts withheld, which are not otherwise refunded, from a
participant in the Employees Stock Purchase Plan are used to
purchase our common stock as of the last business day of the
stock purchase period at a price equal to 85 percent of the
lesser of the fair market value (as defined in the plan) of a
share of common stock on either the first or last business day
of the stock purchase period. All amounts so withheld are used
to purchase the largest number of shares, including fractional
shares, of common stock purchasable with such amount, unless the
participant has properly notified the Stock Plan Committee in
advance that he or she elects to have less than the entire
amount contributed by such participant used to purchase shares
in the plan or to receive the entire amount in cash.
As soon as practicable after the close of the stock purchase
period, we are required to issue to an agent on behalf of all
participants in the Employees Stock Purchase Plan a single
certificate representing the respective shares of common stock
purchased under the plan, at which time participants shall have
privileges as shareholders with respect to such shares.
No participant in the Employees Stock Purchase Plan may purchase
common stock under the plan and all of our other employee stock
purchase plans and any subsidiaries at a rate in excess of
$25,000 of the fair market value of such stock (determined at
the time the option to purchase stock is granted) for the
calendar year in which any such option to purchase stock granted
to such participant is outstanding at any time.
Death,
Disability, Retirement or Other Termination of
Employment
No shares of common stock may be purchased by a participant with
respect to a stock purchase period if the participants
employment terminates more than three months prior to the end of
such stock purchase period. Any amount withheld from or
otherwise contributed by such a participant during the stock
purchase period is repaid to the participant with interest due,
if any. If a participant dies at any time during a stock
purchase period, any amount withheld from or otherwise
contributed by such a participant is repaid to the
participants personal beneficiary with interest due, if
any.
Rights
Not Transferable
The rights of a participant in the Employees Stock Purchase Plan
are exercisable only by the participant during his or her
lifetime. No right or interest of any participant in the plan is
assumable, transferable or subject to any lien, directly or
indirectly, by operation of law or otherwise.
Amendment
or Modification
Our board of directors may at any time terminate, amend or
modify the Employees Stock Purchase Plan, provided that approval
by our shareholders is required to (i) increase the total
amount of common stock awarded under the plan (except for
adjustments in the outstanding shares of common stock by reason
of a stock dividend or split, combination, recapitalization or
reclassification), (ii) change the class of employees
eligible to participate in the plan, (iii) withdraw the
administration of the plan from the Stock Plan Committee,
(iv) permit any member of the Stock Plan Committee to be
eligible to participate in the plan or (v) extend the
duration of the plan.
34
Federal
Tax Considerations
Payroll deductions under the Employees Stock Purchase Plan are
made after taxes. Participants do not recognize any additional
income as a result of participation in the Employees Stock
Purchase Plan until the disposal of shares of common stock
acquired under the plan or the death of the participant.
Participants who hold their shares of common stock for more than
eighteen months or die while holding their shares of common
stock will recognize ordinary income in the year of disposition
or death equal to the lesser of: (a) the excess of the fair
market value of the shares of common stock on the date of
disposition or death over the purchase price paid by the
participant; or (b) 15% of the fair market value of the
shares of common stock on the first day of the purchase period
as of which the shares were purchased. If the eighteen month
holding period has been satisfied when the participant sells the
shares of common stock or if the participant dies while holding
the shares of common stock, we will not be entitled to any
deduction in connection with the disposition of such shares by
the participant.
Participants who dispose of their shares of common stock within
eighteen months after the shares of common stock were purchased
will be considered to have realized ordinary income in the year
of disposition in an amount equal to the excess of the fair
market value of the shares of common stock on the date they were
purchased by the participant over the purchase price paid by the
participant. If such dispositions occur, we generally will be
entitled to a deduction at the same time and in the same amount
as the participants who make those dispositions are deemed to
have realized ordinary income.
Participants will have a basis in their shares of common stock
equal to the purchase price of their shares of common stock plus
any amount that must be treated as ordinary income at the time
of disposition of the shares of common stock, as explained
above. Any additional gain or loss realized on the disposition
of shares of common stock acquired under the Employees Stock
Purchase Plan will be capital gain or loss.
OUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENT TO OUR EMPLOYEES STOCK PURCHASE PLAN
(This
space has been left blank intentionally.)
35
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
(Proposal 4)
Our Audit and Finance Committee has selected KPMG LLP as our
registered public accounting firm, to audit the consolidated
financial statements of the Company for the fiscal year ending
August 30, 2008 and recommends that the shareholders ratify
such selection. Shareholder ratification of the selection of
KPMG LLP as our registered public accounting firm is not
required by our Articles of Incorporation or otherwise. However,
our board is submitting the selection of KPMG LLP as our
registered public accounting firm to our shareholders for
ratification as a matter of good corporate practice. If our
shareholders fail to ratify the selection, our Audit and Finance
Committee will reconsider whether or not to retain that firm.
Even if the selection is ratified, our Audit and Finance
Committee in its discretion may direct the appointment of
different independent auditors at any time during the year if
our Audit and Finance Committee determines that such a change
would be in our and our shareholders best interests.
Representatives of KPMG LLP will be present at the Annual
Meeting of Shareholders, will have the opportunity to make a
statement if they so desire and will be available to respond to
appropriate questions.
KPMG LLP has audited the Companys consolidated financial
statements since fiscal 1984.
OUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE APPOINTMENT OF KPMG LLP AS OUR REGISTERED PUPLIC ACCOUNTING
FIRM
SHAREHOLDER
PROPOSALS AND OTHER MATTERS
Shareholder proposals intended to be considered at the Annual
Meeting of Shareholders for the fiscal year ended
August 30, 2008 and desired to be included in the proxy
statement for the meeting must be received by us no later than
August 15, 2008 and comply with certain rules and
regulations promulgated by the Securities and Exchange
Commission. A shareholder who may be interested in submitting
such a proposal is advised to contact legal counsel familiar
with the detailed requirements of the applicable rules and
regulations. Under our by-laws, if a shareholder intends to
propose an item of business to be presented at next years
Annual Meeting of Shareholders, that shareholder is required to
give notice of the proposal to us and such notice must be
received by us at our principal executive office no later than
90 days before the first anniversary of this years
meeting date, unless next years meeting is more than
30 days before or after such anniversary, in which case
notice must be received not less than 90 days in advance
or, if later, within ten days of the first public announcement
of the meeting date. The proposals also must comply with all
applicable statutes and regulations.
ANNUAL
REPORTS
Our annual report to shareholders for fiscal 2007, which
report includes our Annual Report on
Form 10-K
for the fiscal year ended August 25, 2007, is available
online at
http://library.corporate-ir.net/library/67/67168/2007ProxyAR.pdf
or at www.investorEconnect.com and will be sent to any
shareholder, without charge, upon written request. Except as
expressly provided in our Annual Report on
Form 10-K,
our annual report to shareholders is not to be deemed a part of
the proxy solicitation material and is not incorporated herein
by reference.
By Order of the Board of Directors
Benno G. Sand
Executive Vice President, Business Development
Investor Relations and Secretary
36
APPENDIX A
FSI International, Inc.
2008 Omnibus Stock Plan of FSI International, Inc.
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1. |
Purpose. The purpose of the 2008 Omnibus Stock
Plan of FSI International, Inc. (the Plan) is to
promote the interests of FSI International, Inc. (the
Company) and its shareholders by providing key
personnel of the Company and its Affiliates with an opportunity
to acquire a proprietary interest in the Company and reward them
for achieving a high level of corporate performance and thereby
develop a stronger incentive to put forth maximum effort for the
continued success and growth of the Company and its Affiliates.
In addition, the opportunity to acquire a proprietary interest
in the Company will aid in attracting and retaining key
personnel of outstanding ability. The Plan is also intended to
provide Non-Employee Directors with an opportunity to acquire a
proprietary interest in the Company, to compensate Non-Employee
Directors for their contribution to the Company and to aid in
attracting and retaining Non-Employee Directors.
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2. Definitions.
2.1 The capitalized terms used elsewhere in the Plan have
the meanings set forth below.
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(a)
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Affiliate means any corporation that is a
parent corporation or subsidiary
corporation of the Company, as those terms are defined in
Code Sections 424(e) and (f), or any successor provisions,
and, for purposes other than the grant of Incentive Stock
Options, any joint venture entity in which the Company or any
such parent corporation or subsidiary
corporation owns an equity interest of 20% or more.
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(b)
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Agreement means any written or electronic agreement,
instrument or document evidencing the grant of an Award in such
form as has been approved by the Committee, including all
amendments thereto.
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(c)
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Award means a grant made under the Plan in the form
of Restricted Stock, Options, Stock Appreciation Rights,
Performance Units, Stock or any other stock-based award.
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(d) Board means the Board of Directors of the
Company.
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(e)
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Cause shall have the meaning ascribed to it in any
employment, management, separation or similar written agreement
between a Participant and the Company or any of its Affiliates,
or in the absence of any such agreement or any such defined term
in such agreement, shall mean (i) the Participants
material breach of any confidentiality, non-disclosure,
non-solicitation, non-competition, invention assignment or
similar agreement with the Company or any Affiliate;
(ii) an act or acts of dishonesty undertaken by the
Participant resulting in gain or personal enrichment of the
Participant at the expense of the Company; (iii) persistent
failure by the Participant to perform the duties of the
Participant s employment, which failure is demonstrably
deliberate on the part of the Participant and constitutes gross
neglect of duties by the Participant; (iv) any failure by
the Participant to materially conform to the Companys Code
of Business Conduct and Ethics; or (v) the indictment or
conviction of the Participant for a felony if the act or acts
constituting the felony are substantially detrimental to the
Company or its reputation.
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(f)
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Code means the Internal Revenue Code of 1986, as
amended and in effect from time to time or any successor
statute, and the regulations promulgated thereunder.
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(g)
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Committee means two or more Non-Employee Directors
designated by the Board to administer the Plan under Plan
Section 3.1, each member of which shall be (i) an
independent director within the meaning of Rule 4200(15) of
the Nasdaq Marketplace Rules, (ii) considered a
non-employee director within the meaning of Exchange Act
Rule 16b-3,
and (iii) an outside director for purposes of Code
Section 162(m).
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(h)
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Company means FSI International, Inc., a Minnesota
corporation, or any successor to all or substantially all of its
businesses by merger, consolidation, purchase of assets or
otherwise.
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(i)
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Disability means the disability of a Participant
such that the Participant is considered disabled under any
retirement plan of the Company which is qualified under
Section 401 of the Code, or as otherwise determined by the
Committee.
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(j)
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Employee means an employee (including an officer or
director who is also an employee) of the Company or an Affiliate.
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(k)
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Event means one of the following:
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(1)
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Less than a majority of the Board shall consist of members of
the Incumbent Board, where Incumbent Board is
defined to mean individuals who are members of the Board as of
the effective date of this Plan, individuals whose election or
nomination for election by the Companys shareholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board or any individual elected or
appointed by the Board to fill a vacancy on the Board caused by
death or resignation (but not removal) or to fill a newly
created directorship, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest which was (or, if
threatened, would have been) subject to
Rule 14a-11
of the Exchange Act.
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(2)
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30% or more of (1) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (Outstanding
Company Voting Securities) or (2) the then
outstanding Shares of Stock (Outstanding Company Common
Stock) is acquired or beneficially owned (as defined in
Rule 13d-3
under the Exchange Act, or any successor rule thereto) by any
individual, entity or group (within the meaning of
Section 13d(3) or 14(d)(2) of the Exchange Act), provided,
however, that the following acquisitions and beneficial
ownership shall not constitute an Event pursuant to this Section
2(k)(2):
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(i)
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any acquisition or beneficial ownership by the Company or a
subsidiary of the Company, or
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(ii)
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any acquisition or beneficial ownership by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or one or more of its subsidiaries, or
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(iii)
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with respect to a recipient of an Award, any acquisition or
beneficial ownership by that recipient or any group that
includes that recipient; or
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(iv)
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any acquisition or beneficial ownership by any corporation
(including without limitation an acquisition of the nature
described in Section 2(k)(3) with respect to which,
immediately following such acquisition, more than 70% of,
respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of
the persons who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding
Company Common Stock and the Outstanding Company Voting
Securities, as the case may be.
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(i)
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a merger or consolidation of the Company with or into another
entity, other than (1) a merger or consolidation with a
Subsidiary of the Company or (2) a merger or consolidation
in which all or substantially all of the persons who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and the Outstanding Voting Company Securities
immediately prior to such merger or consolidation beneficially
own, directly or indirectly, immediately after the merger or
consolidation, more than 70% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from the merger or
consolidation or its parent corporation, in substantially the
same proportions as their ownership immediately prior to such
merger or consolidation of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may
be;
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(ii)
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an exchange, pursuant to a statutory exchange, of Outstanding
Company Common Stock or Outstanding Company Voting Securities
held by shareholders of the Company immediately prior to the
exchange for cash, securities or other property, unless all or
substantially all of the persons who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
statutory exchange beneficially own, directly or indirectly,
immediately after the statutory exchange, more than 70% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities of the parent corporation of the Company entitled to
vote generally in the election of directors, in substantially
the same proportions as their ownership, immediately prior to
the statutory exchange, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may
be; or
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(iii)
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a sale or other disposition of all or substantially all of the
assets of the Company (in one transaction or a series of
transactions), other than to a corporation with respect to
which, immediately following such sale or other disposition,
more than 70% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportions
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be.
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Notwithstanding the foregoing, no Event shall be deemed to occur
with respect to a recipient of an Award if at least 30% of the
common stock or the combined voting power of the voting
securities (or voting equity interests) of the surviving
corporation or its parent corporation or of any corporation (or
other entity) acquiring all or substantially all of the assets
of the Company shall be beneficially owned, directly or
indirectly, immediately following a merger, consolidation,
statutory exchange or disposition of assets referred to in this
Section 2(k)(3), by that recipient or a group of
individuals
and/or
entities, including that recipient, acting in concert.
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(4)
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The shareholders of the Company approve a definitive agreement
or plan to liquidate or dissolve the Company.
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(l)
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Exchange Act means the Securities Exchange Act of
1934, as amended and in effect from time to time or any
successor statute.
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(m)
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Fair Market Value as of any date means, unless
otherwise expressly provided in the Plan, the closing sale price
of a Share on the Nasdaq Global Market (or such other national
securities exchange as may at the time be the principal market
for the Shares) on that date or, if no sale of the
Companys Shares occurred on that date, on the next
preceding day on which a sale of Shares occurred. If the Shares
are not then listed and traded upon the Nasdaq Global Market or
other national securities exchange, Fair Market Value shall be
what the Committee determines in good faith to be 100% of the
fair market value of a Share on that date, using such criteria
as it shall determine, in its sole discretion, to be appropriate
for valuation.
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(n)
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Fundamental Change means a dissolution or
liquidation of the Company, a sale of substantially all of the
assets of the Company, a merger or consolidation of the Company
with or into any other corporation, regardless of whether the
Company is the surviving corporation, or a statutory share
exchange involving capital stock of the Company.
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(o)
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Grant Date means (i) the date on which the
Committee approves the grant of an Award under the Plan, or
(ii) such later date as may be specified by the Committee
on the date the Committee approves the Award, or (iii) in
the case of Non-Employee Director Options, the date specified in
Plan Section 9.3.
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(p)
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Incentive Stock Option means any Option designated
as such and granted in accordance with the requirements of Code
Section 422 or any successor provision.
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(q)
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Insider as of a particular date means any person
who, as of that date, is an officer of the Company as defined
under Exchange Act
Rule 16a-1(f)
or its successor provision.
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(r)
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Non-Employee Director means a member of the Board
who is not an Employee.
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(s)
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Non-Statutory Stock Option means an Option other
than an Incentive Stock Option.
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(t)
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Option means a right to purchase a number of Shares
at a specified price, including both Non-Statutory Stock Options
and Incentive Stock Options.
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(u)
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Participant means a person to whom an Award is or
has been made in accordance with the Plan.
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(v)
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Performance-Based Compensation means an Award to a
covered officer (as defined in
Section 162(m)(3) of the Code) that is intended to
constitute performance-based compensation within the
meaning of Section 162(m)(4)(c) of the Code.
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(w)
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Performance Cycle means the period of time as
specified in an Agreement over which Performance Units or any
other Awards subject to Performance Measures are to be earned.
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(x)
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Performance Measures means any measures of
performance established by the Committee in connection with the
grant of an Award. In the case of any such grant intended to
constitute Performance-Based Compensation, the Performance
Measures shall consist of one or a combination of two or more of
the following performance-based metrics as approved by the
Committee: [revenue; asset quality; non-performing assets;
revenue growth; earnings before interest, taxes, depreciation
and amortization; earnings before interest and taxes; operating
income; pre- or after-tax income; earnings per share; cash flow;
cash flow per share; return on equity; return on invested
capital; return on assets; return on operating assets; economic
value added (or an equivalent metric); share price performance;
total shareholder return; improvement in or attainment of
expense levels or cost savings; or improvement in or attainment
of working capital levels]. Any Performance Measure utilized may
be expressed in absolute amounts, on a per share basis, as a
growth rate or change from preceding periods, or as a comparison
to the performance of specified companies or other external
measures, and may relate to one or any combination of corporate,
group, unit, division, Affiliate or individual performance.
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(y)
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Performance Units means the right to receive the
Fair Market Value of one Share upon the achievement of specified
levels of one or more Performance measures in accordance with an
Award made pursuant to Plan Section 11.
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(z)
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Plan means this 2008 Omnibus Stock Plan of FSI
International, Inc., as may be amended and in effect from time
to time.
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(aa)
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Restricted Stock means Shares issued in accordance
with an Award granted under Plan Section 7 so long as the
retention
and/or
vesting of such Shares remains subject to conditions or
restrictions.
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(bb)
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Share means a share of Stock.
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(cc)
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Stock means the common stock, no designated par
value, of the Company.
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(dd)
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Stock Appreciation Right means a right, the value of
which is determined in relation to the appreciation in value of
Shares pursuant to an Award granted under Plan Section 10.
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(ee)
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Subsidiary means a subsidiary
corporation, as that term is defined in Code
Section 424(f) or any successor provision.
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(ff)
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Successor with respect to a Participant means the
legal representative of an incompetent Participant, or if the
Participant is deceased, means the estate of the Participant or
the person or persons who may, by bequest or inheritance, or
pursuant to the terms of an Award, acquire the right to exercise
an Option or Stock Appreciation Right or to receive cash
and/or
Shares issuable in satisfaction of an Award in the event of the
Participants death.
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(gg)
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Transferee means any family member (as
defined by the general instructions to
Form S-8
under the Securities Act of 1933) of the Participant.
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2.2
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Gender and Number. Except when otherwise
indicated by the context, reference to the masculine gender will
include, when used, the feminine gender and any term used in the
singular will also include the plural.
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3. Administration and Indemnification.
3.1 Administration.
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(a)
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The Committee will administer the Plan. The Committee has
exclusive power to (i) make Awards, (ii) determine
when and to whom Awards will be granted, the form of each Award,
the amount of each Award (except as to the amount of the Initial
Non-Employee Director Option and the Annual
Non-Employee
Director Option, as provided in Plan Section 9.3), and any
other terms or conditions of each Award consistent with the
Plan, (iii) prescribe and amend the terms of Agreements
evidencing Awards, and (iv) determine whether, to what
extent and under what circumstances, Awards may be settled, paid
or exercised in cash, Shares or other Awards, or other property
or canceled, forfeited or suspended. Each Award will be subject
to an Agreement authorized by the Committee. A majority of the
members of the Committee shall constitute a quorum for any
meeting of the Committee, and acts of a majority of the members
present at any meeting at which a quorum is present or the acts
unanimously approved in writing by all members of the Committee
shall be the acts of the Committee. Notwithstanding the
foregoing, the Board has the sole and exclusive power to
administer the Plan with respect to Awards granted to
Non-Employee Directors.
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(b)
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Notwithstanding any provision of the Plan to the contrary, in
order to facilitate compliance with the tax, securities, foreign
exchange, probate or other applicable provisions of the laws in
other countries in which the Company or its Affiliates operate
or have key employees or non-employee directors, the Committee,
in its discretion, shall have the power and authority to
(i) determine which (if any) Employees, Directors,
and/or
Consultants rendering services or employed outside the
U.S. are eligible to participate in the Plan or to receive
any type of award hereunder; (ii) determine which
non-U.S.-based
Affiliates or operations (e.g., branches, representative
offices) participate in the Plan or any type of award hereunder;
(iii) modify the terms and conditions of any awards made to
such Employees, Directors,
and/or
Consultants, or with respect to such
non-U.S.-based
Affiliates or operations; and (iv) establish sub-plans,
modify methods of exercise, modify payment restrictions on sale
or transfer of shares and other terms and procedures to the
extent deemed necessary or desirable by the Committee to comply
with applicable laws of the
non-U.S. jurisdiction.
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(c)
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Solely for purposes of determining and administering Awards to
Participants who are not Insiders, the Committee may delegate
all or any portion of its authority under the Plan to one or
more persons who are not Non-Employee Directors.
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(d)
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To the extent within its discretion and subject to Plan
Sections 15 and 16, the Committee may amend the terms and
conditions of any outstanding Award.
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(e)
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It is the intent that the Plan and all Awards granted pursuant
to it (i) will be administered by the Committee so as to
permit the Plan and Awards to comply with Exchange Act
Rule 16b-3,
except in such instances as the Committee, in its discretion,
may so provide, and (ii) will not provide for the deferral
of compensation within the meaning of Section 409A of the
Code. If any provision of the Plan or of any Award would
otherwise frustrate or conflict with the intent expressed in
this Section 3.1(e), that provision to the extent possible
will be interpreted and deemed amended in the manner determined
by the Committee so as to avoid the conflict. To the extent of
any remaining irreconcilable conflict with this intent, the
provision will be deemed void, but only as applied to Insiders
with respect to compliance with Exchange Act
Rule 16b-3,
to the extent permitted by law and in the manner deemed
advisable by the Committee.
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(f)
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The Committees interpretation of the Plan and of any Award
or Agreement made under the Plan and all related decisions or
resolutions of the Board or Committee will be final and binding
on all parties with an interest therein. Consistent with its
terms, the Committee has the power to establish, amend or waive
regulations to administer the Plan. In carrying out any of its
responsibilities, the Committee has
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discretionary authority to construe the terms of the Plan and
any Award or Agreement made under the Plan.
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3.2
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Indemnification. Each person who is or has
been a member of the Committee, or of the Board, and any other
person to whom the Committee delegates authority under the Plan,
will be indemnified and held harmless by the Company, to the
extent permitted by law, against and from any loss, cost,
liability or expense that may be imposed upon or reasonably
incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be a
party or in which such person may be involved by reason of any
action taken or failure to act, made in good faith, under the
Plan and against and from any and all amounts paid by such
person in settlement thereof, with the Companys approval,
or paid by such person in satisfaction of any judgment in any
such action, suit or proceeding against such person, provided
such person gives the Company an opportunity, at the
Companys expense, to handle and defend the same before
such person undertakes to handle and defend it on such
persons own behalf. The foregoing right of indemnification
will not be exclusive of any other rights of indemnification to
which such person or persons may be entitled under the
Companys Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
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4. Shares Available Under the Plan.
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4.1
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Total Shares. Subject to adjustment pursuant
to Section 16, the number of Shares that may be granted
under the Plan shall not exceed 1,000,000, of which not more
than 200,000 Shares may be the subject of Awards other than
Options and Stock Appreciation Rights.
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4.2
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Awards Forfeited or Expired. Any Shares
subject to that portion of an Award which, for any reason, is
forfeited or expires or terminates unexercised or unearned may
again be used for future Awards.
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4.3
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Awards Settled in Cash. Any Shares subject to
an Award settled in cash or other property in lieu of Shares may
again be used for future Awards.
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4.4
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Computation of Shares Granted. For the
purposes of computing the total number of Shares granted under
the Plan, the following rules shall apply to Awards payable in
Shares where appropriate:
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(a)
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Each Award shall initially be deemed to involve the grant of the
maximum number of Shares in which the particular Award is
denominated.
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(b)
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If a Stock Appreciation Right has been exercised and settled in
Shares, the gross number of Shares with respect to which such
exercise occurred shall be deemed granted and may not again be
the subject of Awards under the Plan.
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(c)
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To the extent an Award is paid or settled in some other
security, it shall be deemed to have involved the grant of the
number of Shares in which that portion of the Award was
denominated.
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(d)
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Where the number of Shares available under the Award is variable
on the Grant Date, the number of Shares granted shall be deemed,
prior to the settlement of the Award, to be the maximum number
of Shares that could be received under that particular Award.
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(e)
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Where two or more types of Awards (all of which are payable in
Shares) are granted to a Participant in tandem with each other,
such that the exercise of one type of Award with respect to a
number of Shares cancels at least an equal number of Shares of
the other, such joint Awards shall be deemed to involve the
grant of the maximum number of Shares available under the
largest single Award.
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(f)
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Shares tendered or withheld in payment of an Option exercise
price or to satisfy any tax withholding obligation shall not be
added to the total number of Shares available for grant under
the Plan.
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(g)
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Shares that are repurchased by the Company with Option proceeds
shall not be added to the total number of Shares available for
grant under the Plan.
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4.5
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No Fractional Shares. No fractional Shares may
be issued under the Plan; however, cash shall be paid in lieu of
any fractional Share in settlement of an Award.
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6
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4.6
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Maximum Award Shares. The maximum number of
Shares that may be issued pursuant to Incentive Stock Options
shall be 1,000,000, which limit will be subject to adjustment
under Section 16 to the extent such adjustment is
consistent with adjustments permitted of a plan authorizing the
grant of incentive stock options under Code Section 422.
The maximum number of Shares that may be awarded to a
Participant in any calendar year in the form of Options is
100,000 and the maximum number of Shares that may be awarded to
a Participant in any calendar year in the form of Stock
Appreciation Rights is 100,000. The aggregate number of Shares
subject to Restricted Stock Awards granted during any calendar
year to any one Participant shall not exceed 25,000. The
foregoing limits shall be subject to adjustment under
Section 16, but only to the extent that such adjustment
will not affect the status of any Award intended to qualify as
performance-based compensation under Code Section 162(m).
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5.
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Eligibility. Participation in the Plan will be
limited to Employees and to individuals who are not Employees
but who provide services to the Company or an Affiliate,
including services provided in the capacity of a consultant,
advisor or director. The granting of Awards is solely at the
discretion of the Committee, except that Incentive Stock Options
may only be granted to Employees and Awards to Non-Employee
Directors are subject to the limits of Section 9.3(g).
References herein to employed,
employment or similar terms (except
Employee) will include the providing of services in
any capacity or as a director. Neither the transfer of
employment of a Participant between any of the Company or its
Affiliates, nor a leave of absence granted to such Participant
and approved by the Committee, nor any change in status from an
Employee to a consultant of the Company will be deemed a
termination of employment for purposes of the Plan.
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6.
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General Terms of Awards.
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6.1
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Amount and Conditions of Award. Each Award
will be evidenced by an Agreement setting forth the number of
Shares subject to the Award together with such other terms and
conditions applicable to the Award as determined by the
Committee acting in its sole discretion, which may include
conditions on vesting, exercisability, lapsing of restrictions
or payment that are tied to Performance Measures.
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6.2
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Vesting and Term. Each Agreement, other than
those relating solely to Awards of Shares without restrictions,
shall set forth the period until the applicable Award is
scheduled to expire, which shall not be more than ten years from
the Grant Date, and any applicable Performance Cycle. The
Committee may provide for such vesting conditions as it may
determine, subject to the following limitations:
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(1)
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an Award that is not subject to the satisfaction of Performance
Measures may not fully vest or become fully exercisable earlier
than three years from the Grant Date; and
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(2)
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the Performance Cycle of a Performance Unit or other Award
subject to Performance Measures may not be shorter than one year.
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The limitations in clauses (1) and (2) above will not,
however, apply in the following situations: (i) an Award
made to attract a key executive to join the Company;
(ii) upon an Event; (iii) termination of employment
due to death or Disability; (iv) Restricted Stock issued in
exchange for other compensation; (v) a substitute Award
granted pursuant to Section 19; and (vi) Awards issued
to Non-Employee Directors.
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6.3
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Transferability. Except as provided in this
Section, during the lifetime of a Participant to whom an Award
is granted, only that Participant (or that Participants
Successor) may exercise an Option or Stock Appreciation Right,
or receive payment with respect to Performance Units or any
other Award. No Award of Restricted Stock (before the expiration
of the restrictions), Options, Stock Appreciation Rights or
Performance Units or other Award may be sold, assigned,
transferred, exchanged or otherwise encumbered other than to a
Successor in the event of a Participants death or, except
in the case of an Incentive Stock Option, pursuant to a
qualified domestic relations order as defined in the Code or
Title 1 of the Employee Retirement Income Security Act of
1974, as amended (ERISA), or the rules thereunder;
any attempted transfer in violation of this Section 6.3
will be of no effect. Notwithstanding the immediately preceding
sentence, the Committee, in an Agreement or otherwise at its
discretion, may provide that the Award (other than Incentive
Stock Options) may be transferable to a Transferee if the
Participant does not receive any consideration for the transfer.
Any Award held by a Transferee will continue to be subject to
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7
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the same terms and conditions that were applicable to that Award
immediately before the transfer thereof to the Transferee. For
purposes of any provision of the Plan relating to notice to a
Participant or to acceleration or termination of an Award upon
the death, Disability or termination of employment of a
Participant, the references to Participant mean the
original grantee of an Award and not any Transferee.
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6.4
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Termination of Employment. Except as otherwise
determined by the Committee or provided by the Committee in an
Agreement, if a Participants employment with the Company
and all of its Affiliates terminates, the following provisions
will apply:
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(a)
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Options and Stock Appreciation Rights.
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(1)
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If a Participants employment terminates because of the
Participants death, then any Option or Stock Appreciation
Right that has not expired or been terminated will become
exercisable in full if the Participants employment with
the Company and its Affiliates has been continuous between the
date the Option or Stock Appreciation Right was granted and a
date not more than three months prior to such death, and may be
exercised by the Participants Successor at any time, or
from time to time, within one year after the date of the
Participants death.
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(2)
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If a Participants employment terminates because of the
Participants Disability, then any Option or Stock
Appreciation Right that has not expired or been terminated will
become exercisable in full if the Participants employment
with the Company and its Affiliates has been continuous between
the date the Option or Stock Appreciation Right was granted and
the date of such employment termination, and the Participant or
the Participants Successor may exercise such Option or
Stock Appreciation Right at any time, or from time to time,
within one year after the date of the Participants
termination of employment.
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(3)
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If a Participants employment is terminated for Cause, all
Awards to the Participant will terminate immediately upon such
termination.
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(4)
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If a Participants employment terminates for any reason
other than death, Disability or for Cause, then any Option or
Stock Appreciation Right that has not expired or been terminated
will, unless the Committee otherwise provides in the Agreement,
remain exercisable for three months after the Participants
employment terminates, but, unless otherwise provided in the
Agreement, only to the extent that such Option or Stock
Appreciation Right was exercisable immediately prior to such
employment termination; provided, however, that if the
Participant is a Non-Employee Director, the Option or Stock
Appreciation Right will remain exercisable until the scheduled
expiration date of such Award after such Non-Employee Director
ceases to be a director of the Company, but, unless otherwise
provided in the Agreement, only to the extent that such Option
or Stock Appreciation Right was exercisable immediately prior to
such Non-Employee Director ceasing to be a director.
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(5)
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Notwithstanding the foregoing Plan Sections 6.4(a)(1), (2),
(3) and (4), in no event will an Option or a Stock
Appreciation Right be exercisable after the scheduled expiration
date of such Award. Any Option or Stock Appreciation Right that
is not exercised within the periods set forth in Plan
Sections 6.4 (1), (2), (3) and (4) except as
otherwise provided by the Committee in the Agreement, will
terminate as of the end of the periods described in such
Sections.
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(b)
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Performance Units. If a Participants
employment with the Company and all of its Affiliates terminates
during a Performance Cycle because of the Participants
death or Disability, or under other circumstances provided by
the Committee in its discretion in the Agreement or otherwise,
the Participant, unless the Committee will otherwise provide in
the Agreement, will be entitled to a payment with respect to
Performance Units at the end of the Performance Cycle based upon
the extent to which achievement of Performance Measures was
satisfied at the end of the Performance Cycle and prorated for
the portion of the Performance Cycle during which the
Participant was employed by the Company or its Affiliates.
Except as provided in this Section 6.4(b) or in the
Agreement, if a Participant is no longer employed by the Company
and its Affiliates during a
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Performance Cycle, then such Participant will not be entitled to
any payment with respect to that Performance Cycle.
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(c)
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Restricted Stock Awards. If a
Participants employment with the Company and all of its
Affiliates terminates before the Participants Restricted
Stock Award is fully vested because of the Participants
death or Disability, or under other circumstances provided by
the Committee in its discretion in the Agreement or otherwise,
the Participant, unless the Committee otherwise provides in the
Agreement, will be entitled to have vest a number of Shares of
Restricted Stock under the Award that has been prorated for the
portion of the scheduled vesting period of the Award during
which the Participant was employed by the Company and its
Affiliates. Any portion of an Award of Restricted Stock which
does not vest under the preceding sentence or under the
Agreement will terminate at the date the Participant ceases to
be employed by the Company and its Affiliates and any Shares of
Restricted Stock will be forfeited to the Company.
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6.5
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Rights as Shareholder. Each Agreement will
provide that a Participant has no rights as a shareholder with
respect to any securities covered by an Award unless and until
the date the Participant becomes the holder of record of the
Stock, if any, to which the Award relates.
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6.6
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Performance-Based Awards. Any Award may be
granted as a performance-based Award if the Committee
establishes one or more Performance Measures upon which vesting,
the lapse of restrictions or settlement in cash or Shares is
contingent. With respect to any Award intended to be
Performance-Based Compensation, the Committee shall establish
and administer Performance Measures in the manner described in
Section 162(m) of the Code and the then current regulations
of the Secretary of the Treasury.
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7. |
Restricted Stock Awards.
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7.1
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Restrictions; Lapse of Restrictions. An Award
of Restricted Stock under the Plan will consist of Shares
subject to restrictions on transfer and conditions of
forfeiture, which restrictions and conditions will be included
in the applicable Agreement. The Committee may provide for the
vesting of such Shares and the corresponding lapse or waiver of
any such restrictions or conditions based on such factors or
criteria as the Committee, in its sole discretion, may
determine. The Agreement will describe the terms and conditions
by which the restrictions and conditions of forfeiture upon
awarded Restricted Stock will lapse. Upon the lapse of the
restrictions and conditions and the vesting of the Restricted
Stock, Shares free of such restrictions and conditions will be
issued to the Participant or a Successor or Transferee.
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7.2
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Restrictive Legend. Except as otherwise
provided in the applicable Agreement, Shares subject to an Award
of Restricted Stock will be evidenced by a book-entry in the
name of the Participant wit the Companys transfer agent or
by one or more stock certificates issued in the name of the
Participant. Any such stock certificate will either be deposited
with the Company or its designee, together with an assignment
separate from the certificate, in blank, signed by the
Participant, or bear such legends with respect to the restricted
nature of the Restricted Stock evidenced thereby as will be
provided for in the applicable Agreement. Any book-entry will be
accompanied by a similar legend.
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7.3
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Shareholder Rights. A Participant or a
Transferee with a Restricted Stock Award will have all the other
rights of a shareholder including, but not limited to, the right
to receive dividends and the right to vote the Shares of
Restricted Stock.
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8. |
Other Awards. The Committee may from time to
time grant Stock and other Awards under the Plan including,
without limitation, those Awards pursuant to which Shares are or
may in the future be acquired, Awards denominated in Stock
units, restricted stock units, securities convertible into Stock
and phantom securities. The Committee, in its sole discretion,
will determine the terms and conditions of such Awards, provided
that such Awards will not be inconsistent with the terms and
purposes of the Plan, including the intent expressed in
Section 3.1(e) that no award will provide for the deferral
of compensation within the meaning of Section 409A of the
Code. The Committee may, at its sole discretion, direct the
Company to issue Shares subject to restrictive legends
and/or stop
transfer instructions that are consistent with the terms and
conditions of the Award to which the Shares relate.
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9
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9.1
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Terms of All Options.
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(a)
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An Option will be granted pursuant to an Agreement as either an
Incentive Stock Option or a
Non-Statutory
Stock Option. The purchase price of each Share subject to an
Option will be determined by the Committee and set forth in the
Agreement, but will not be less than 100% of the Fair Market
Value of a Share as of the Option Grant Date (except as provided
in Plan Section 19).
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(b)
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The purchase price of the Shares with respect to which an Option
is exercised will be payable in full at the time of exercise,
provided that to the extent permitted by law (as determined by
the Committee), the Agreement may permit some or all
Participants to simultaneously exercise Options and sell the
Shares thereby acquired pursuant to a brokerage or similar
relationship and use the proceeds from the sale as payment of
the purchase price of the Shares. The purchase price may be
payable in cash or, if the Committee so permits, by withholding
Shares otherwise issuable to the Participant upon exercise of
the Option or by delivery to the Company of Shares (by actual
delivery or attestation) already owned by the Participant (in
each case, such Shares having a Fair Market Value as of the date
the Option is exercised equal to the purchase price of the
Shares being purchased), or a combination thereof, as determined
by the Committee, but no fractional Shares will be issued or
accepted. A Participant exercising an Option is not permitted,
however, to pay any portion of the purchase price with Shares
if, in the opinion of the Committee, payment in such manner
could have adverse financial accounting consequences for the
Company.
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(c)
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Each Option will be exercisable in whole or in part on the terms
provided in the Agreement. In no event will any Option be
exercisable at any time after its scheduled expiration. When an
Option is no longer exercisable, it will be deemed to have
lapsed or terminated.
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(d)
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Options will not be granted under the Plan in consideration for,
and the grant of Options will not be conditioned on, the
delivery of Shares to the Company in payment of the exercise
price and/or
tax withholding obligation under any other Option.
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9.2
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Incentive Stock Options.
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In addition to the other terms and conditions applicable to all
Options:
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(a)
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the purchase price of each Share subject to an Incentive Stock
Option will not be less than 100% of the Fair Market Value of a
Share as of the Grant Date of the Incentive Stock Option if this
limitation is necessary to qualify the Option as an Incentive
Stock Option (except as provided in Plan Section 19);
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(b)
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the aggregate Fair Market Value (determined as of the Grant Date
of the Option) of the Shares with respect to which Incentive
Stock Options held by an individual first become exercisable in
any calendar year (under the Plan and all other incentive stock
option plans of the Company and its Affiliates) will not exceed
$100,000 (or such other limit as may be required by the Code) if
this limitation is necessary to qualify the Option as an
Incentive Stock Option and to the extent an Option or Options
granted to a Participant exceed this limit the Option or Options
will be treated as a
Non-Statutory
Stock Option;
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(c)
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an Incentive Stock Option will not be exercisable more than
10 years after its Grant Date (or such other limit as may
be required by the Code) if this limitation is necessary to
qualify the Option as an Incentive Stock Option;
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(d)
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an Incentive Stock Option will not be exercisable more than one
year after the Participants employment with the Company
and its Affiliates terminates if such termination is due to the
Participants death or Disability, or more than three
months after the Participants employment terminates if
such termination is due to any other reason;
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(e)
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the Agreement covering an Incentive Stock Option will contain
such other terms and provisions that the Committee determines
necessary to qualify this Option as an Incentive Stock
Option; and
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10
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(f)
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notwithstanding any other provision of the Plan to the contrary,
no Participant may receive an Incentive Stock Option under the
Plan if, at the time the Award is granted, the Participant owns
(after application of the rules contained in Code
Section 424(d), or its successor provision), Shares
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or its Subsidiaries, unless
(i) the option price for that Incentive Stock Option is at
least 110% of the Fair Market Value of the Shares subject to
that Incentive Stock Option on the Grant Date and (ii) that
Option is not exercisable after the date five years from the
Grant Date of that Incentive Stock Option.
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9.3
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Terms and Conditions of Non-Employee Directors
Options.
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(a)
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Initial Non-Employee Directors
Options. Subject to the terms and conditions of
this Plan, any Non-Employee Director first elected or appointed
to the Board on or after the Companys January 2008 Annual
Shareholders Meeting shall receive, by virtue of serving as a
director of the Company, a single grant of a Non-Statutory Stock
Option to purchase 20,000 Shares (an Initial
Non-Employee Director Option) effective the date of such
election or appointment (the Grant Date).
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(b)
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Vesting of Initial Non-Employee Directors
Options. Subject to the provisions of the Plan
Section 9.3(f), Initial Non-Employee Directors
Options granted pursuant to this Plan shall vest and become
exercisable six moths after the date of grant. Each Initial
Non-Employee Directors Option, to the extent exercisable,
shall be exercisable in whole or in part.
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(c)
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Annual Non-Employee Director Option
Grants. For the Annual Meeting of Shareholders to
be held in January 2008 and for each Annual Meeting of
Shareholders thereafter during the term of this Plan, each
Non-Employee Director serving as a Non-Employee Director of the
Company immediately following the Annual Meeting shall be
granted, by virtue of serving as a Non-Employee Director of the
Company, a Non-Statutory Stock Option to purchase
7,500 Shares (an Annual Non-Employee Director
Option). Each Annual Non-Employee Director Option shall be
deemed to be granted to each Non-Employee Director immediately
after an Annual Meeting (the Grant Date) and shall
be granted regardless of whether or not a Non-Employee Director
previously received, or simultaneously receives, an Initial
Non-Employee Director Option. Initial Non-Employee Director
Options and Annual Non-Employee Director Options together are
sometimes referred to as Non-Employee Director
Options.
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(d)
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Vesting of Annual Director Options. Subject to
the provisions of Plan Section 9.3(f), Annual
Non-Employee
Director Options shall vest and become exercisable in full on
the January 1st following the Grant Date. Each Option,
to the extent exercisable, shall be exercisable in whole or in
part.
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(e)
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Exercise Price of Non-Employee Director
Options. The purchase price of each Share subject
to a Non-Employee Director Option will be 100% of the Fair
Market Value of a Share as of the Option Grant Date.
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(f)
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Termination of Non-Employee Director
Options. Each Non-Employee Director Option
granted pursuant to this Plan and all rights to purchase Shares
thereunder shall terminate on the earliest of:
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(1)
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ten years after the Grant Date of the Non-Employee Director
Option;
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(2)
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the expiration of the period specified in the Agreement after
the death or permanent disability of a Non-Employee
Director; or
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(3)
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ninety days after the date the Non-Employee Director ceases to
be a director of the Company, provided, however, that the option
shall be exercisable during this
90-day
period only to the extent the option was exercisable as of the
date the person ceases to be a Non-Employee Director unless the
cessation results from the directors death or permanent
disability. Notwithstanding the preceding sentence, if a
Non-Employee Director who resigns or whose term expires then
becomes a consultant or Employee of the Company within ninety
days of such resignation or term expiration, the Non-Employee
Director Options of such person shall continue in full force and
effect.
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11
In no event shall an Option be exercisable at any time after its
original expiration date. When an Option is no longer
exercisable, it shall be deemed to have lapsed or terminated and
will no longer be outstanding.
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(g)
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Allocation of Common Shares. If as of a date
on which an Option or Options are to be awarded pursuant to the
provisions of this Section 9.3, the number of Shares
available for issuance under the Plan as of this date are less
than the number of options to purchase Shares that otherwise
would be awarded, then the following formula shall determine how
the remaining number of Shares are to be allocated:
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(1)
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if only one Non-Employee Director is to receive an Option on the
date, then that Non-Employee Director shall receive an Option to
purchase Shares equal to the number of Shares remaining;
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(2)
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if two or more Non-Employee Directors are to receive Options on
the date
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(A)
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all Initial Non-Employee Director Options shall first be
awarded; if, however, the number of Shares available is less
than the number of options to purchase Shares that would
otherwise be awarded as Initial Non-Employee Director Options
then each Non-Employee Director eligible to receive an Initial
Non-Employee Director Option shall receive the number of Options
that results from the following equation: the whole number of
Shares available divided by the number of Non-Employee Directors
eligible to receive such an Option, provided, however, that no
fractional shares shall be awarded; and if such allocation
occurs, any remaining Shares shall not be awarded and shall be
deemed not subject to distribution for purposes of Plan
Section 4; and
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(B)
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if on that date all Initial Non-Employee Director Options to be
awarded are awarded in the full amount or if no Initial
Non-Employee Director Options are to be awarded, then each
Non-Employee Director eligible for an Annual Non-Employee
Director Option shall receive an Annual Non-Employee Director
Option to purchase Shares in the amount that results from the
following equation: the whole number of Shares available divided
by the number of Non-Employee Directors eligible for an Annual
Non-Employee Director Option, provided, however, that no
fractional shares shall be awarded; and any remaining Shares
shall not be awarded and shall be deemed not subject to
distribution for purposes of Plan Section 4.
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(h)
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Non-exclusivity of Section 9.3. The
provisions of this Section 9.3 are not intended to be exclusive;
however, the Committee, in its discretion, may grant Options or
other Awards to a Non-Employee Director, but only in
substitution for Non-Employee Director Options held by that
director.
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10. |
Stock Appreciation Rights. An Award of a Stock
Appreciation Right entitles the Participant (or a Successor or
Transferee), subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation
Right all or a portion of the excess of (i) the Fair Market
Value of a specified number of Shares as of the date of exercise
of the Stock Appreciation Right over (ii) a specified price
that will not be less than 100% of the Fair Market Value of such
Shares as of the Grant Date of the Stock Appreciation Right. A
Stock Appreciation Right may be granted in connection with part
or all of, in addition to, or completely independent of an
Option or any other Award under the Plan. If issued in
connection with a previously or contemporaneously granted
Option, the Committee may impose a condition that exercise of a
Stock Appreciation Right cancels a pro rata portion of the
Option with which it is connected and vice versa. Each Stock
Appreciation Right may be exercisable in whole or in part on the
terms provided in the Agreement. No Stock Appreciation Right
will be exercisable at any time after its scheduled expiration.
When a Stock Appreciation Right is no longer exercisable, it
will be deemed to have lapsed or terminated. Upon exercise of a
Stock Appreciation Right, payment to the Participant or a
Successor or Transferee will be made at such time or times as
will be provided in the Agreement in the form of cash, Shares or
a combination of cash and Shares as determined by the Committee.
The Agreement may provide for a limitation upon the amount or
percentage of the total appreciation on which payment (whether
in cash
and/or
Shares) may be made in the event of the exercise of a Stock
Appreciation Right.
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12
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(a)
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An Award of Performance Units under the Plan shall entitle the
Participant or a Successor or Transferee to future payments of
cash, Shares or a combination of cash and Shares, as determined
by the Committee and provided in the Agreement, based upon the
achievement of specified levels of one or more Performance
Measures. The Agreement may provide that a portion of a
Participants Award will be paid for performance that
exceeds the minimum target but falls below the maximum target
applicable to the Award. The Agreement shall also provide for
the timing of the payment.
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(b)
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Following the conclusion or acceleration of each Performance
Cycle, the Committee shall determine the extent to which
(i) Performance Measures have been attained, (ii) any
other terms and conditions with respect to an Award relating to
the Performance Cycle have been satisfied and (iii) payment
is due with respect to an Award of Performance Units.
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(c)
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No Participant may receive Awards of Performance Units relating
to more than 25,000 Shares in any year under this Plan.
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11.2
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Acceleration and Adjustment. The Agreement may
permit an acceleration of the Performance Cycle and an
adjustment of Performance Measures and payments with respect to
some or all of the Performance Units awarded to a Participant,
upon such terms and conditions as shall be set forth in the
Agreement, upon the occurrence of certain events, which may, but
need not, include an Event, a Fundamental Change, a
recapitalization, a change in the accounting practices of the
Company, a change in the Participants title or employment
responsibilities, the Participants death or Disability or,
with respect to payments in Shares with respect to Performance
Units, a reclassification, stock dividend, stock split or stock
combination as provided in Plan Section 16. The Agreement
also may provide for a limitation on the value of an Award of
Performance Units that a Participant may receive.
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12. |
Effective Date and Duration of the Plan.
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12.1
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Effective Date. The Plan will become effective
on the date it is approved by the requisite vote of the
Companys shareholders at its January 2008 Annual
Shareholders Meeting or any adjournment thereof.
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12.2
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Duration of the Plan. The Plan will remain in effect
until all Stock subject to it will be distributed, all Awards
have expired or lapsed, the Plan is terminated pursuant to Plan
Section 15.1, or the tenth anniversary of shareholder
approval of the Plan, whichever occurs first (the
Termination Date); provided, however, that Awards
made before the Termination Date may be exercised, vested or
otherwise effectuated beyond the Termination Date unless limited
in the Agreement or otherwise. No Award of an Incentive Stock
Option will be made more than 10 years after the Effective
Date (or such other limit as may be required by the Code) if
this limitation is necessary to qualify the Option as an
Incentive Stock Option.
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13. |
Plan Does Not Affect Employment Status.
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13.1
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No Commitment to Grant Awards. Status as an
eligible Employee will not be construed as a commitment that any
Award will be made under the Plan to that eligible Employee or
to eligible Employees generally.
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13.2
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No Right to Employment. Nothing in the Plan or
in any Agreement or related documents will confer upon any
Employee or Participant any right to continue in the employment
of the Company or any Affiliate or constitute any contract of
employment or affect any right that the Company or any Affiliate
may have to change such persons compensation, other
benefits, job responsibilities, or title, or to terminate the
employment of such person with or without cause.
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14. |
Tax Withholding. The Company has the right to
withhold from any cash payment under the Plan to a Participant
or other person (including a Successor or a Transferee) an
amount sufficient to cover any required withholding taxes. The
Company has the right to require a Participant or other person
receiving Shares under the Plan to pay the Company a cash amount
sufficient to cover any required withholding taxes before actual
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receipt of those Shares. In lieu of all or any part of a cash
payment from a person receiving Shares under the Plan, the
Committee may permit the individual to cover all or any part of
the required withholdings through a reduction of the number of
Shares delivered or delivery or tender to the Company of Shares
held by the Participant or other person, in each case valued in
the same manner as used in computing the withholding taxes under
applicable laws.
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15. |
Amendment, Modification and Termination of the Plan;
Amendments of Agreements.
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15.1
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Board and Committee Power to Terminate, Amend and Modify Plan
and Agreements. Subject to Plan Section 28,
the Board may at any time and from time to time terminate,
suspend or modify the Plan. Except as limited in Plan
Section 15.2 below, the Committee may at any time alter or
amend any or all Agreements under the Plan to the extent
permitted by law. The Company will submit any amendment of the
Plan to its shareholders for approval if the rules of The Nasdaq
Stock Market, Inc. or other applicable laws or regulations
require shareholder approval of such amendment.
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15.2
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Limitations. No termination, suspension, or
modification of the Plan will materially and adversely affect
any right acquired by any Participant or Successor or Transferee
under an Award granted before the date of termination,
suspension, or modification, unless otherwise agreed to by the
Participant in the Agreement or otherwise, or required as a
matter of law; but it will be conclusively presumed that any
adjustment for changes in capitalization provided for in Plan
Sections 11.2 or 16 does not adversely affect these rights.
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16.
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Adjustment for Changes in Capitalization. In
the event of any equity restructuring (within the meaning of
Statement of Financial Accounting Standards No. 123
(revised 2004), referred to as FAS 123R) that
causes the per Share value of Shares to change, such as a stock
dividend or stock split, the Committee shall cause there to be
made an equitable adjustment to the number and kind of Shares or
other securities issued or reserved for issuance pursuant to the
Plan and to outstanding Awards (including but not limited to the
number and kind of Shares to which such Awards are subject, and
the exercise or strike price of such Awards) to the extent such
other Awards would not otherwise automatically adjust in the
equity restructuring; provided, in each case, that with respect
to Incentive Stock Options, no such adjustment shall be
authorized to the extent that such adjustment would cause such
Incentive Stock Options to violate Section 422(b) of the
Code or any successor provision; provided further, that no such
adjustment shall be authorized under this Section to the extent
that such adjustment would cause an Award to be subject to
adverse tax consequences under Section 409A of the Code. In
the event of any other change in corporate capitalization, which
may include a merger, consolidation, any reorganization (whether
or not such reorganization comes within the definition of such
term in Section 368 of the Code), or any partial or
complete liquidation of the Company to the extent such events do
not constitute equity restructurings or business combinations
within the meaning of FAS No. 123R, such equitable
adjustments described in the foregoing sentence may be made as
determined to be appropriate and equitable by the Committee to
prevent dilution or enlargement of rights. In either case, any
such adjustment shall be conclusive and binding for all purposes
of the Plan. Unless otherwise determined by the Committee, the
number of Shares subject to an Award shall always be a whole
number.
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17.
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Fundamental Change. In the event of a proposed
Fundamental Change, the Committee may, but will not be obligated
to:
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(a)
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if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the
protection of the outstanding Options and Stock Appreciation
Rights by the substitution of options, stock appreciation rights
and appropriate voting common stock of the corporation surviving
any merger or consolidation or, if appropriate, the parent
corporation of the Company or such surviving corporation; or
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(b)
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at least ten days before the occurrence of the Fundamental
Change, declare, and provide written notice to each holder of an
Option or Stock Appreciation Right of the declaration, that each
outstanding Option and Stock Appreciation Right, whether or not
then exercisable, will be canceled at the time of, or
immediately before the occurrence of the Fundamental Change in
exchange for payment to each holder of an Option or Stock
Appreciation Right, within ten days after the
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14
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Fundamental Change, of cash equal to (i) for each Share
covered by the canceled Option, the amount, if any, by which the
Fair Market Value (as defined in this Section) per Share exceeds
the exercise price per Share covered by such Option or
(ii) for each Stock Appreciation Right, the price
determined pursuant to Section 10, except that Fair Market
Value of the Shares as of the date of exercise of the Stock
Appreciation Right, as used in clause (i) of Plan
Section 10, will be deemed to mean Fair Market Value for
each Share with respect to which the Stock Appreciation Right is
calculated determined in the manner hereinafter referred to in
this Section. At the time of the declaration provided for in the
immediately preceding sentence, each Stock Appreciation Right
and each Option will immediately become exercisable in full and
each person holding an Option or a Stock Appreciation Right will
have the right, during the period preceding the time of
cancellation of the Option or Stock Appreciation Right, to
exercise the Option as to all or any part of the Shares covered
thereby or the Stock Appreciation Right in whole or in part, as
the case may be. In the event of a declaration pursuant to Plan
Section 17(b), each outstanding Option and Stock Appreciation
Right granted pursuant to the Plan that has not been exercised
before the Fundamental Change will be canceled at the time of,
or immediately before, the Fundamental Change, as provided in
the declaration. Notwithstanding the foregoing, no person
holding an Option or a Stock Appreciation Right will be entitled
to the payment provided for in this Section 17(b) if such
Option or Stock Appreciation Right has terminated, expired or
been cancelled. For purposes of this Section only, Fair
Market Value per Share means the cash plus the fair market
value, as determined in good faith by the Committee, of the
non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the
Fundamental Change.
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18. |
Cancellation and Rescission of Awards.
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18.1
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Proscribed Conduct. Unless an Agreement
otherwise specifies, the Committee may cancel, rescind, suspend,
withhold or otherwise limit or restrict any unexpired, unvested,
unpaid or deferred Awards at any time if a Participant engages
in any of the following:
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(a)
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unauthorized competition with the Company or any Affiliate;
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(b)
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unauthorized disclosure of any material proprietary or
confidential information of the Company or any Affiliate;
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(c)
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a material violation of applicable business ethics policies of
the Company or any Affiliate;
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(d)
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activity that results in termination of the Participants
employment for Cause; or
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(e)
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any other conduct or act determined by the Committee to be
materially injurious, detrimental or prejudicial to any interest
of the Company or any Affiliate.
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18.2
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Recovery of Amounts Paid. If a Participant
engages in any of the conduct referenced in Plan
Section 18.1 within a twelve-month period before or after
the Participants termination of employment with the
Company and its Affiliates, then any exercise, payment or
delivery of cash or Shares pursuant to any Award that occurs
within that period may be rescinded by the Committee within
twelve months after such exercise, payment or delivery. If such
rescission occurs, the Participant shall return or forfeit to
the Company the cash
and/or
Shares received with respect to the rescinded transaction (or
the economic value thereof determined as of the date of the
exercise, payment or delivery) in such manner and on such terms
and conditions as may be required by the Committee, and the
Company shall be entitled to set-off against the amount of any
such return or forfeiture any amount owed to the Participant by
the Company.
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19.
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Corporate Mergers, Acquisitions, Etc. The
Committee may also grant Options, Stock Appreciation Rights,
Restricted Stock or other Awards under the Plan in substitution
for, or in connection with the assumption of, existing options,
stock appreciation rights, restricted stock or other awards
granted, awarded or issued by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to
or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a
Subsidiary is a party. The terms and conditions of the
substitute Awards may vary from the terms and conditions set
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15
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forth in the Plan to the extent as the Board at the time of the
grant may deem appropriate to conform, in whole or in part, to
the provisions of the awards in substitution for which they are
granted.
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20.
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Unfunded Plan. The Plan will be unfunded and
the Company will not be required to segregate any assets that
may at any time be represented by Awards under the Plan. Neither
the Company, its Affiliates, the Committee, nor the Board will
be deemed to be a trustee of any amounts to be paid under the
Plan nor will anything contained in the Plan or any action taken
pursuant to its provisions create or be construed to create a
fiduciary relationship between the Company
and/or its
Affiliates, and a Participant or Successor or Transferee. To the
extent any person acquires a right to receive an Award under the
Plan, this right will be no greater than the right of an
unsecured general creditor of the Company.
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21.
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Limits of Liability. Any liability of the
Company to any Participant with respect to an Award will be
based solely upon contractual obligations created by the Plan
and the Award Agreement. Except as may be required by law,
neither the Company nor any member of the Board or of the
Committee, nor any other person participating in any
determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, will
have any liability to any party for any action taken, or not
taken, in good faith under the Plan.
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22.
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Compliance with Applicable Legal
Requirements. No Shares distributable pursuant to
the Plan will be issued and delivered unless the issuance of the
Shares complies with all applicable legal requirements
including, without limitation, compliance with the provisions of
applicable state securities laws, the Securities Act of 1933, as
amended and in effect from time to time or any successor
statute, the Exchange Act and the requirements of the exchanges
on which the Companys Shares may, at the time, be listed.
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23.
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Deferrals and Settlements. The Committee may
require or permit Participants to elect to defer the issuance of
Shares or the settlement of Awards in cash under such rules and
procedures as it may establish under the Plan. It may also
provide that deferred settlements include the payment or
crediting of interest on the deferral amounts.
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24.
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Other Benefit and Compensation
Programs. Payments and other benefits received by
a Participant under an Award made pursuant to the Plan will not
be deemed a part of a Participants regular, recurring
compensation for purposes of the termination, indemnity or
severance pay laws of any country and will not be included in,
nor have any effect on, the determination of benefits under any
other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate unless expressly so
provided by such other plan, contract or arrangement, or unless
the Committee expressly determines that an Award or portion of
an Award should be included to accurately reflect competitive
compensation practices or to recognize that an Award has been
made in lieu of a portion of competitive cash compensation.
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25.
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Beneficiary Upon Participants Death. To
the extent that the transfer of a Participants Award at
death is permitted by this Plan or under an Agreement,
(i) a Participants Award shall be transferable to the
beneficiary, if any, designated on forms prescribed by and filed
with the Committee and (ii) upon the death of the
Participant, such beneficiary shall succeed to the rights of the
Participant to the extent permitted by law and this Plan. If no
such designation of a beneficiary has been made, the
Participants legal representative shall succeed to the
Awards, which shall be transferable by will or pursuant to laws
of descent and distribution to the extent permitted by this Plan
or under an Agreement.
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26.
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Event Payments
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(a)
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Notwithstanding the provisions of Plan Section 17 above,
and except as provided in Plan Section 26(c), if any Award,
either alone or together with other payments in the nature of
compensation to a Participant that are contingent on a change in
the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company
or otherwise, would result in any portion thereof being subject
to an excise tax imposed under Code Section 4999, or any
successor provision, or would not be deductible in whole or in
part by the Company, an affiliate of the Company (as defined in
Code Section 1504, or any successor provision), or other
person making such payments as a result of Code
Section 280G, or any successor provision, then such Award
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16
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and/or such
other benefits and payments shall be reduced (but not below
zero) to the largest aggregate amount as will result in no
portion thereof being subject to such an excise tax or being not
so deductible.
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(b)
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For purposes of Plan Section 26(a), (i) no portion of
payments the receipt or enjoyment of which a Participant shall
have effectively waived in writing prior to the date of
distribution of an Award shall be taken into account;
(ii) no portion of such Award, benefits and other payments
shall be taken into account that in the opinion of tax counsel
selected by the Companys independent auditors and
acceptable to the Participant does not constitute a
parachute payment within the meaning of Code Section
280G(b)(2), or any successor provision; and (iii) the value
of any non-cash benefit or any deferred payment or benefit
included in such payment shall be determined by the
Companys independent auditors in accordance with the
principles of Code Sections 280G(d)(3) and (4) or any
successor provisions.
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(c)
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If a Participant is subject to a separate agreement with the
Company or an Affiliate that expressly addresses the potential
application of Sections 280G or 4999 of the Code (including
that payments under such agreement or otherwise will
or will not be reduced, or will be grossed up for
tax purposes), then Plan Section 26(a) will not apply, and
any Award any portion of which would otherwise be subject to
Plan Section 26(a) will instead be treated as a
payment arising under such separate agreement.
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(d)
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Any Award not paid as a result of this Plan Section 26 or
reduced to zero as a result of the limitations imposed hereby,
shall remain outstanding in full force and effect in accordance
with the other terms and provisions of this Plan.
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27.
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Requirements of Law. To the extent that
federal laws do not otherwise control, the Plan and all
determinations made and actions taken pursuant to the Plan will
be governed by the laws of the State of Minnesota without regard
to its conflicts-of-law principles and will be construed
accordingly. If any provision of the Plan will be held illegal
or invalid for any reason, the illegality or invalidity will not
affect the remaining parts of the Plan, and the Plan will be
construed and enforced as if the illegal or invalid provision
had not been included.
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28.
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Repricing; Shareholder Approval. Except as
provided in Plan Section 16, in no event may any Option or
Stock Appreciation Right be amended to decrease the exercise
price per share thereof, or be cancelled in conjunction with the
grant of any new Option or Stock Appreciation Right with a lower
exercise price, or otherwise be subject to any action that would
be treated, for accounting purposes or under the rules of The
Nasdaq Stock Market, Inc., as a repricing of such
Option or Stock Appreciation Right, unless such amendment,
cancellation or action is approved by the Companys
shareholders in accordance with applicable law and rules of The
Nasdaq Stock Market, Inc.
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29.
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Dividends and Dividend Equivalents. An Award
may, if so determined by the Committee, provide the Participant
with the right to receive dividend payments or dividend
equivalent payments with respect to Shares subject to the Award
(both before and after the Shares subject to the Award are
earned, vested or acquired), which payments may be either made
currently or credited to an account for the Participant, and may
be settled in cash or Shares, as determined by the Committee.
Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in Shares, may be subject
to such conditions, restrictions and contingencies as the
Committee shall establish, including the reinvestment of such
credited amounts in Share equivalents.
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17
FSI International, Inc.
Annual Shareholders Meeting
Wednesday, January 16, 2008
3:30 p.m. CST
at FSI offices 3455 Lyman Boulevard, Chaska, Minnesota
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald S. Mitchell, Patricia M. Hollister and Benno G. Sand, and
each of them, as Proxies, each with the power to appoint his or her substitute, and hereby
authorizes such Proxies to represent and to vote, as designated on the reverse side, all of the
shares of common stock of FSI International, Inc. held of record by the undersigned on November 19,
2007, at the Annual Meeting of Shareholders to be held on January 16, 2008, or any adjournment
thereof.
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VOTE BY INTERNET - www.proxyvote.com |
FSI INTERNATIONAL, INC.
3455 LYMAN BLVD.
CHASKA, MN 55318-1034
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Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to
obtain your records and to create an electronic voting
instruction form. |
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ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS |
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If you would like to reduce the costs incurred by FSI
International, Inc. in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy
cards and annual reports electronically via e-mail or
the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree to
receive or access shareholder communications
electronically in future years. |
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VOTE BY MAIL |
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Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return
it to FSI International, Inc., c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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FSINT1
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FSI INTERNATIONAL, INC.
Vote On Proposals
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSALS: |
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For |
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Against |
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Abstain |
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1. |
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To elect two Class III directors to serve for the ensuing three years until the expiration of their term in 2011,
or until their successors are duly elected and qualified. |
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2. |
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To act upon a proposal to approve the FSI International, Inc. 2008 Omnibus Stock Plan. |
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o |
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3. |
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To approve an amendment to our Employees Stock Purchase Plan to increase the aggregate number of
shares of our Common Stock reserved for issuance under the Plan by 500,000. |
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o |
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4. |
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To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal
year ending August 30, 2008. |
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5. |
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To transact such other business as may properly come before the meeting. |
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o |
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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