-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CMTgIKGTRmaBkhdihP7Vd1yGW2oqVqBow3J8MsES2nnMFilQkMkM2Lxk2GHT9qN7 r1ogt4OzL/dY7kJXfUqtFQ== 0000912057-96-010487.txt : 19960522 0000912057-96-010487.hdr.sgml : 19960522 ACCESSION NUMBER: 0000912057-96-010487 CONFORMED SUBMISSION TYPE: 10-Q CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960521 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GASONICS INTERNATIONAL CORP CENTRAL INDEX KEY: 0000918647 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942159729 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23372 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 2540 JUNCTION AVENUE CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4083251200 MAIL ADDRESS: STREET 1: 2730 JUNCTION AVE CITY: SAN JOSE STATE: CA ZIP: 95134 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996. --------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________________ to __________________________ Commission file number: 0-23372 ------- GASONICS INTERNATIONAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 94-2159729 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2450 Junction Avenue, San Jose, California 95134 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (408) 325-1200 ------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At March 31, 1996, there were 13,337,120 shares of the Registrant's Common Stock, $0.001 par value per share, outstanding. GASONICS INTERNATIONAL CORPORATION FORM 10-Q INDEX PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1996 and September 30, 1995 3 Condensed Consolidated Statements of Operations for the three and six month periods ended March 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the six month periods ended March 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Securityholders 19 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 Exhibit Index 22 Page 2 PART I . FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GASONICS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MAR. 31, Sept. 30, ASSETS 1996 1995 ------------ ------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 6,038 $ 7,595 Marketable securities 15,984 29,004 Trade accounts receivable, net 33,433 16,974 Inventories 25,796 19,123 Prepaid expenses & other current assets 5,277 3,992 ------------ ------------ Total current assets 86,528 76,688 Property & equipment, net 9,420 7,935 Other assets 1,038 744 ------------ ------------ Total assets $ 96,986 $ 85,367 ------------ ------------ ------------ ------------ LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Note payable $ 2,791 $ 2,894 Accounts payable 10,850 7,343 Accrued expenses 11,284 11,321 ------------ ------------ Total current liabilities 24,925 21,558 ------------ ------------ Long-term liabilities 587 621 ------------ ------------ Stockholders' equity: Common stock & additional paid-in capital 30,389 29,468 Unrealized gain on investment 1,067 2,376 Note receivable from stockholder (115) (165) Retained earnings 40,133 31,509 ------------ ------------ Total stockholders' equity 71,474 63,188 ------------ ------------ Total liabilities & stockholders' equity $ 96,986 $ 85,367 ------------ ------------ ------------ ------------
See accompanying notes. Page 3 GASONICS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, ------------------------ ------------------------ 1996 1995 1996 1995 --------- --------- --------- --------- Net sales $ 36,997 $ 23,679 $ 70,779 $ 44,021 Cost of sales 17,024 10,256 32,301 18,675 --------- --------- --------- --------- Gross margin 19,973 13,423 38,478 25,346 --------- --------- --------- --------- Operating expenses: Research & development 4,618 2,985 8,787 5,623 Selling, general & administrative 8,971 5,832 16,889 10,874 --------- --------- --------- --------- Total operating expenses 13,589 8,817 25,676 16,497 --------- --------- --------- --------- Operating income 6,384 4,606 12,802 8,849 Other income (expense) Interest expense (21) - (47) - Interest and other income (expense), net 206 210 513 265 --------- --------- --------- --------- Income before provision for income taxes 6,569 4,816 13,268 9,114 --------- --------- --------- --------- Provision for income taxes 2,299 1,760 4,644 3,307 --------- --------- --------- --------- Net income $ 4,270 $ 3,056 $ 8,624 $ 5,807 ========= ========= ========= ========= Net income per share $ 0.32 $ 0.24 $ 0.64 $ 0.46 ========= ========= ========= ========= Weighted average common & common equivalent shares 13,512 12,716 13,618 12,582 ========= ========= ========= =========
See accompanying notes. Page 4 GASONICS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED MARCH 31, -------------------------- 1996 1995 ----------- --------- Cash flows from operating activities: Net cash used for operating activities $ (10,443) $ (735) ----------- --------- Cash flows from investing activities: Purchases of property & equipment & leasehold improvements (3,746) (1,644) Decrease (increase) in marketable securities 11,710 (13,861) ----------- --------- Net cash provided by (used for) investing activities 7,964 (15,505) ----------- --------- Cash flows from financing activities: Principal payments under capital lease obligations - (22) Proceeds from issuance of common stock 922 12,828 ----------- --------- Net cash provided by financing activities 922 12,806 ----------- --------- Net decrease in cash and cash equivalents (1,557) (3,434) Cash & cash equivalents at beginning of period 7,595 13,131 ----------- --------- Cash & cash equivalents at end of period $ 6,038 $ 9,697 ----------- --------- ----------- ---------
See accompanying notes. Page 5 GASONICS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements have been prepared by the Company without audit and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and the results of operations of the Company for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles. The results of operations for the six months ended March 31, 1996 are not necessarily indicative of the operating results to be expected for the full fiscal year. Such financial statements should be read in conjunction with the information contained herein, including Risk Factors, and in the Company's Annual Report on Form 10-K for the year ended September 30, 1995 and the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995. Any party interested in receiving a copy of these Annual and Quarterly Reports should request a copy from the Chief Financial Officer of the Company. 2. INVENTORIES Inventories consist of the following (in thousands): March 31, 1996 September 30, 1995 ------------------ ---------------------- (unaudited) Raw Materials $12,094 $7,492 Work in Process 9,221 7,656 Finished Goods 4,481 3,975 ------- ------- $25,796 $19,123 ======= ======= 3. NET INCOME PER SHARE Net income per share data has been computed using the weighted average number of shares of common stock and dilutive common equivalent shares from stock options (using the treasury stock method). Page 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements which involve numerous risks and uncertainties. The Company's actual results could differ materially from those anticipated in any such forward-looking statements as a result of certain factors, including those set forth under "Additional Risk Factors". RESULTS OF OPERATIONS NET SALES for the second quarter and six month period ended March 31, 1996 increased 56% to $37.0 million and 61% to $70.8 million, respectively, compared to net sales for the comparable two periods in fiscal 1995. This growth in revenue was principally due to increased demand for the Company's stand alone, 8-inch downstream plasma photoresist removal products. The Company also began shipping for revenue in the quarter ended March 31, 1996, its new performance enhancing platform product (the "PEP") and its flat panel display equipment from the Company's LCD division in Japan (formerly called Tekisco) which was acquired in August 1995. Sales of spare parts, service and support also increased as a result of retrofits to older systems and from maintenance revenues resulting from a larger number of systems in the Company's installed base. International sales, which are predominantly to customers in Europe and Asia Pacific, accounted for approximately 51% of net sales for the six month period ended March 31, 1996 compared to approximately 40% for the same period ended March 31, 1995. GROSS MARGIN as a percentage of net sales for both the second quarter and six month period of fiscal 1996 was 54% compared to 57% and 58% for the same quarter and six month period, respectively, of fiscal 1995. The decrease in gross margin for both periods of the current fiscal year is attributable to several factors, including a less favorable product sales mix which is, in part, due to the sale of flat panel display equipment from the Company's LCD division in Japan which has significantly lower gross margins than the Company's photoresist removal systems, and an increase in material costs as well as additional inventory reserves primarily associated with new products. Additionally, gross margins have been negatively impacted by an increase in field service costs related to the building of an international direct service capability worldwide and new product support capability. The Company's gross margin as a percentage of net sales has been, and will continue to be, affected by a variety of factors, including the mix and average selling prices of products sold and the costs to manufacture, service and support new product introductions and enhancements. Gross margins for new systems are typically lower than those of mature products due to, in part, the inefficiencies associated with the startup of manufacturing operations. The Company does not expect its gross margin to remain at the level attained during fiscal 1995 due, in part, to inefficiencies associated with new product introductions, sales of flat panel display equipment products from the Company's LCD division in Japan, competitive pricing pressures, changes in product mix and other factors including those referred to above.. RESEARCH AND DEVELOPMENT expenditures for the second quarter of fiscal 1996 were $4.6 million or 12.5% of net sales compared to $3.0 million or 12.6% of net sales for the second quarter of fiscal 1995. For the six month period of fiscal 1996 and fiscal 1995, research and development Page 7 expenses were $8.8 million or 12.4% of net sales and $5.6 million or 12.8% of net sales, respectively. The increase in overall spending in both periods from that of the comparable periods last fiscal year primarily reflects expenses associated with additional headcount, an increase in services performed by consultants, including customer specification and customization of current products and new product development, including the PEP product development program. Additionally, the current periods of fiscal 1996 include research and development expenses associated with the Company's LCD division in Japan which was acquired in August 1995. The Company anticipates that the current level of research and development spending will continue and may increase in absolute dollars throughout fiscal 1996 due, in part, to the anticipated significant continued investment in new product development. SELLING, GENERAL AND ADMINISTRATIVE expenses increased to $9.0 million in the second quarter of fiscal 1996 and increased to $16.9 million for the six month period of fiscal 1996 from $5.8 million and $10.9 million for the second quarter and six month period, respectively, of fiscal 1995. As a percentage of net sales, selling, general and administrative expenses decreased in the second quarter and six month period of fiscal 1996 to 24.2% and 23.9%, respectively, from 24.6% and 24.7% for the second quarter and six month period, respectively, of fiscal 1995. The increase in absolute dollars in both periods when compared to the comparable periods last fiscal year is principally due to additional headcount, primarily in sales and marketing, third party commissions in connection with higher international sales volume, and expenses associated with the operations of the LCD division in Japan. The Company anticipates that the current level of selling, general and administrative spending will continue and may increase in absolute dollars throughout fiscal 1996 due, in part, to additional staffing and other costs associated with anticipated increases in operating activities. OTHER INCOME (EXPENSE) consisting primarily of interest income was $185,000 for the second quarter and $466,000 for six month period of fiscal 1996 compared to $210,000 and $265,000 for second quarter and six month period of fiscal 1995, respectively. The increase in the six month period of fiscal 1996 from the same period of fiscal 1995 is primarily the result of a $144,000 reserve established against an impairment in value of one of the Company's investments in the first quarter of fiscal 1995. This reserve was subsequently reversed in the third quarter of fiscal 1995 when this investment was recovered in full. INCOME TAXES for the first six months of fiscal 1996 were accrued at 35% of income before income taxes compared to 36.3% for the same period last year. The reduction in the effective tax rate was primarily attributable to a projected increase in international sales as a percentage of total sales that may result in a greater tax benefit derived from the Company's foreign sales corporation. LIQUIDITY AND CAPITAL RESOURCES Operating activities of the Company used cash of $10.4 million for the six month period ended March 31, 1996 compared to $0.7 million for the same period of fiscal 1995. This increased use of cash from operating activities was principally due to an increase in accounts receivable resulting from higher sales and a disproportionately higher percentage of sales occurring in the last month of the March 1996 quarter, and an increase in inventory, primarily attributable to the Page 8 production of the new PEP products and the flat panel display products from the Company's LCD division in Japan. Financing activities provided $.9 million and $12.8 million for the periods ended March 31, 1996 and 1995, respectively, primarily from the issuance of stock in connection with the Company's employee stock purchase plan and, for the period ended March 31, 1995, the issuance of stock in connection with the Company's secondary public offering. The Company's investing activities for the first six months of fiscal 1996 provided cash of $11.7 million from marketable securities to fund operating activities and used cash of $3.7 million for the purchase of equipment and leasehold improvements. For the same period last fiscal year, the Company invested cash of $13.9 million in marketable securities and used $1.6 million to purchase equipment and leasehold improvements. At March 31, 1996, the Company had working capital of $61.6 million compared to $55.1 at September 30, 1995. Accounts receivable and inventories at March 31, 1996 were $33.4 million and $25.8 million, respectively. Accounts receivable at March 31, 1996 increased $16.5 million primarily due to a disproportionately higher percentage of sales late in the quarter. Inventory increased by $6.7 million from September 30, 1995 to March 31, 1996 principally from the purchase of materials needed to ramp production of the PEP system for current demand, a build-up in the LCD division inventory for orders scheduled to ship later this fiscal year and, to a lesser extent, an increase in spare parts inventory to support the newly established part depot located in Singapore and to support sales levels. The Company expects future inventory levels to fluctuate from period to period, and believes that because of the relatively long manufacturing cycle of its products, its investment in inventories will continue to represent a significant portion of working capital. As a result of such investment in inventories, the Company may be subject to an increasing risk of inventory obsolescence, which could materially adversely affect the Company's operating results. The Company's principal sources of liquidity at March 31, 1996 consisted of approximately $6.0 million in cash and cash equivalents, $16.0 million in marketable securities and a $15 million unsecured line of credit with Union Bank which was entered into on March 4, 1996. A commercial letter of credit provision of $.5 million and a foreign exchange contract provision of $1.0 million is also provided under the credit line. Available borrowing under the credit line is reduced by the amount of outstanding letters of credit. As of March 31, 1996, $69,193 was outstanding under the letter of credit provision. This line of credit contains certain covenants, including covenants relating to financial ratios and tangible net worth which must be maintained by the Company. As of March 31, 1996, except for the amount outstanding under the letter of credit provision, there were no borrowings outstanding under this line, and the Company was in compliance with its bank covenants. This line of credit agreement expires February 28, 1997. The Company believes anticipated cash flows from operations, funds available under its existing revolving line of credit facility and existing cash, cash equivalents and marketable securities will be sufficient to meet the Company's cash requirements during the next twelve months. Beyond the next twelve months, the Company may require additional equity or debt financing to achieve its working capital or capital equipment needs. Page 9 ADDITIONAL RISK FACTORS SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS The Company's operating results have fluctuated significantly in the past and may fluctuate significantly in the future. The Company anticipates that factors affecting its future operating results will include the cyclicality of the semiconductor industry and the markets served by the Company's customers, the timing of significant orders, patterns of capital spending by customers, the proportion of direct sales and sales through distributors, the proportion of international sales to net sales, changes in pricing by the Company, its competitors, customers or suppliers, market acceptance of new and enhanced versions of the Company's products, the mix of products sold, financial systems, procedures and controls, discounts, the timing of new product announcements and releases by the Company or its competitors, delays, cancellations or rescheduling of orders due to customer financial difficulties or otherwise, the Company's ability to produce systems in volume and meet customer requirements, changes in overhead absorption levels due to changes in the number of systems manufactured, political and economic instability and lengthy sales cycles. Gross margins have varied and may vary materially based on a variety of factors including the mix and average selling prices of systems sales, the mix of revenues, including service and support revenues, and the costs associated with new product introductions and enhancements and the customization of systems. Furthermore, announcements by the Company or its competitors of new products and technologies could cause customers to defer purchases of the Company's existing systems, which would also materially adversely affect the Company's business, financial condition and results of operations. The Company expects to continue to expend significant resources with respect to the development, any ramp up of production and commercial shipments of three new products, the Strata, a high selectivity etch system, the VHP, a vertical high pressure furnace system, and the PEP and does not expect its gross margin to remain at the level attained during fiscal 1995 due, in part, to start-up inefficiencies associated with these introductions, competitive pricing pressures, changes in product mix, including the products sold by the Company's LCD division in Japan, and other factors. Although the Company has significantly increased its expense levels to support its recent growth, the Company does not expect that its rate of growth, if any, will equal or exceed the levels achieved to date. LIMITED SYSTEM SALES; BACKLOG The Company derives a substantial portion of its sales from the sale of a relatively small number of systems which typically range in purchase price from approximately $150,000 to $600,000 for its photoresist removal systems and up to approximately $1.5 million for its other products. As a result, the timing of recognition of revenue for a single transaction could have a material adverse effect on the Company's sales and operating results. The Company's backlog at the beginning of a quarter typically does not include all sales required to achieve the Company's sales objectives for that quarter. Moreover, all customer purchase orders are subject to cancellation or rescheduling by the customer with limited or no penalties and, therefore, backlog at any particular date is not necessarily representative of actual sales for any succeeding period. The Company's net sales and operating results for a quarter may depend upon the Company obtaining orders for systems to be shipped in the same quarter that the order is received. The Company's business and financial Page 10 results for a particular period could be materially adversely affected if an anticipated order for even one system is not received in time to permit shipment during such period. Furthermore, a significant portion of the Company's net sales have recently been realized near the end of the quarter. A delay in a shipment near the end of a particular quarter, due, for example, to an unanticipated shipment rescheduling, to cancellations or deferrals by customers, to unexpected manufacturing difficulties experienced by the Company or to supply shortages, may cause net sales in a particular quarter to fall significantly below the Company's expectations and may materially adversely affect the Company's operating results for such quarter. In addition, continued significant investments in research and development, capital equipment and customer service and support capability worldwide will result in significant fixed costs which the Company will not be able to reduce rapidly if sales goals for a particular period are not met. Because the Company builds its systems according to forecast, a reduction in customer orders or backlog could present further difficulties regarding the Company's ability to plan production and inventory levels, which could adversely impact operating results. The impact of these and other factors on the Company's operating results in any future period cannot be forecasted accurately. CYCLICALITY OF SEMICONDUCTOR INDUSTRY The Company's business depends in significant part upon capital expenditures by manufacturers of semiconductor devices, including manufacturers that are opening new or expanding existing fabrication facilities, which, in turn, depend upon the current and and anticipated market demand for such devices and products utilizing such devices. The semiconductor industry is highly cyclical and historically has experienced periods of oversupply, resulting in significantly reduced demand for capital equipment, including systems manufactured and marketed by the Company. The semiconductor industry has experienced significant growth in recent years which has resulted in significant growth in the capital equipment industry. There can be no assurance that such growth can be sustained or that, in the event such growth continues, the Company can be competitive in the semiconductor capital equipment industry. The Company anticipates that a significant portion of new orders will depend upon demand from IC manufacturers building or expanding large fabrication facilities, and there can be no assurance that such demand will exist. Moreover, the Company's sales and operating results will be materially adversely affected if unanticipated downturns or slowdowns in the semiconductor market recur in the future. HIGHLY COMPETITIVE INDUSTRY The semiconductor capital equipment industry is intensely competitive. A substantial investment is required by customers to install and integrate capital equipment into a semiconductor production line. As a result, once a semiconductor manufacturer has selected a particular vendor's capital equipment, the Company believes that the manufacturer generally relies upon that equipment for the specific production line application and frequently will attempt to consolidate its other capital equipment requirements with the same vendor. Accordingly, the Company expects to experience difficulty in selling to a particular customer for a significant period of time if that customer selects a competitor's capital equipment. The Company currently has only one principal product line and experiences intense competition worldwide from a number of foreign and domestic manufacturers, including Alcantech, Applied Materials, Inc., Fusion Systems Corporation, Lam Research Corporation, Matrix Semiconductor Systems, Inc., Mattson Technology, Inc., Plasma Systems and Ramco, many of which have substantially greater installed bases and greater financial, marketing, technical and other resources than the Company. Certain of the Company's competitors have recently announced the introduction of, or have introduced, competitive products that offer other technologies and improvements. Applied Materials and Lam Research have introduced modules to their products which remove photoresist using dry chemical processing and, therefore, compete with the Company's products. The Company expects its competitors to continue to develop enhancements to and future generations of competitive products that may offer improved price or performance features. New product introductions and enhancements by the Company's competitors could cause a significant decline in sales or loss of market acceptance of the Company's systems in addition to intense price competition or otherwise make the Company's systems or technology obsolete or noncompetitive. In addition, by virtue of its reliance on sales of advanced dry chemistry processing equipment, the Company could be at a disadvantage compared to certain competitors that offer more diversified product lines. The Company believes that it will continue to face competition from current and new vendors employing other technologies, such as wet chemistry, traditional dry chemistry and other ashing techniques, as such competitors attempt to extend the capabilities of their existing products. Increased competitive pressure could lead to reduced demand and lower prices for the Company's Page 11 products, thereby materially adversely affecting the Company's operating results. There can be no assurance that the Company will be able to compete successfully in the future. Competitors of the Company's LCD division in Japan include Japan-based companies and Japan-based joint ventures such as Applied Komatsu and Koyo Lindbergh. These competitors manufacture alternative technology systems and they could, at any time, enter the Company's markets with improved technology or with systems that are directly competitive with those of the Company's LCD division. DEPENDENCE ON KEY CUSTOMERS Historically, the Company has sold a significant proportion of its systems in any particular period to a limited number of customers. Sales to the Company's ten largest customers in fiscal 1993, 1994, 1995 and the six month period of fiscal 1996 ended March 31, 1996 accounted for approximately 74%, 71%, 68% and 63% of net sales, respectively. The Company expects that sales of its products to relatively few customers, particularly Advanced Micro Devices, IBM, Intel, Motorola, Samsung, SGS Thomson and Siemens will continue to account for a high percentage of net sales in the foreseeable future. None of the Company's customers has entered into a long-term agreement requiring it to purchase the Company's products. Moreover, the Company believes that sales to certain of its customers will decrease in the near future as those customers complete current purchasing requirements for new or expanded fabrication facilities. Although the composition of the group comprising the Company's largest customers has varied from year to year, the loss of a significant customer or any reduction in orders from any significant customer, including departures from recent buying patterns, market, economic or competitive conditions in the semiconductor industry or in the industries that manufacture products utilizing integrated circuits, could materially adversely affect the Company's business, financial condition and results of operations. The Company's ability to increase its sales in the future will depend in part upon its ability to obtain orders from new customers as well as the financial condition and success of its customers and the general economy, of which there can be no assurance. EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH The Company is currently undergoing a period of rapid growth. Since 1993, the Company has significantly increased the scale of its operations to support increased sales levels and has expanded its operations to address critical infrastructure requirements, including the hiring of additional personnel, commencement of independent operations in the United Kingdom, Korea, Japan, Singapore and Taiwan and significant investments in research and development to support product development. The Company's expansion has resulted in significantly higher operating expenses, and the Company expects that its operating expenses will continue to increase significantly. If the Company is unable to achieve significantly increased sales or its sales fall below expectations, the Company's operating results will be materially adversely affected. Any failure to expand these areas in an efficient manner could have a material adverse effect on the Company's operating results. Moreover, there can be no assurance that net sales will increase or remain at or above recent levels. Page 12 The recent growth in the Company's sales and expansion in the scope of its operations has placed a considerable strain on its management, financial and other resources and has required the Company to initiate an extensive reevaluation of its operating and financial systems, procedures and controls. In this regard, in connection with their examination of the fiscal 1995 financial statements, the Company's auditors noted that the Company's current systems had a number of limitations and identified a significant deficiency in the Company's internal control structure due to the absence of a comprehensive set of written policies and procedures. Although the Company is engaged in defining and implementing new management information, manufacturing and cost accounting systems, these systems are not currently expected to be fully operational until late fiscal 1996 at the earliest. While the Company continues to devote resources to the improvement of its systems and the expansion of its financial staff, additional personnel will need to be hired to fully implement new systems and procedures. There can be no assurance that the Company can successfully add such personnel in a timely fashion or that any existing or new systems, procedures or controls will be adequate to support the Company's operations or that its new systems will be designed and implemented in a cost effective and timely manner. RAPID TECHNOLOGICAL CHANGE; IMPORTANCE OF TIMELY PRODUCT INTRODUCTION The semiconductor manufacturing industry is subject to rapid technological change and new product introductions and enhancements. The Company's ability to be competitive will depend in part upon its ability to develop new and enhanced systems and to introduce these systems at competitive prices and in a timely and cost effective manner to enable customers to integrate the systems into their operations either prior to or upon commencement of volume product manufacturing. In addition, new product introductions or enhancements by the Company's competitors could cause a decline in sales or loss of market acceptance of the Company's existing products. Increased competitive pressure could also lead to intensified price-based competition resulting in lower prices and margins, which would materially adversely affect the Company's business, financial condition and results of operations. Any success of the Company in developing, introducing and selling new and enhanced systems depends upon a variety of factors including product selection, timely and efficient completion of product design and development, timely and efficient implementation of manufacturing and assembly processes, effective sales and marketing and product performance in the field. In particular, the Company's future performance will depend in part upon the successful commercialization of the Strata, the VHP and the PEP. There can be no assurance that any such product will achieve any significant revenues or contribute to the profitability of the Company. Because new product development commitments must be made well in advance of sales, new product decisions must anticipate both the future demand for the type of integrated circuits ("ICs") under development by leading IC manufacturers and the equipment required to produce such ICs. There can be no assurance that the Company will be successful in selecting, developing, manufacturing and marketing new products or in enhancing existing products. Because of the large number of components in, and the complexity of, the Company's systems, significant delays can occur between a system's initial introduction and the commencement of volume production. As is typical in the semiconductor capital equipment market, the Company has experienced delays from time to time in the introduction of, and certain technical and manufacturing difficulties with, certain of its systems and enhancements and may experience delays and technical and manufacturing difficulties in future introductions or volume production Page 13 of new systems or enhancements. The Company's inability to complete the development or meet the technical specifications of any of its new systems, including the Strata, the VHP and the PEP or enhancements or to manufacture and ship these systems or enhancements in volume and in a timely manner would materially adversely affect the Company's business, financial condition and results of operations as well as its customer relationships. In addition, the Company may incur substantial unanticipated costs to ensure the functionality and reliability of its future product introductions early in the product's life cycle. If new products have reliability or quality problems, reduced orders or higher manufacturing costs, delays in collecting accounts receivable and additional service and warranty expenses may result, which events could materially adversely affect the Company's business, financial condition and results of operations. LENGTHY SALES CYCLE Sales of the Company's systems depend, in significant part, upon the decision of a prospective customer to increase manufacturing capacity through the expansion of existing fabrication facilities or the opening of new facilities, which typically involves a significant capital commitment. The Company often experiences delays in finalizing system sales following initial system qualification while the customer evaluates and receives approvals for the purchase of the Company's systems and completes a new or expanded facility. Due to these and other factors, the Company's systems typically have a lengthy sales cycle during which the Company may expend substantial funds and management effort. The Company believes that the length of the sales cycle will continue to increase as certain of its customers centralize purchasing decisions into one decision making entity, which is expected to intensify the evaluation process and require additional sales and marketing expenditures by the Company. RISKS ASSOCIATED WITH THE JAPANESE MARKET The Company believes that increased penetration of the Asia Pacific market, particularly Japan, will be essential to its future financial performance. The Company has sold a relatively small number of systems to Japanese semiconductor manufacturers. To date, the Company has not fully developed a customer service and support capability in Japan and remains at a disadvantage in selling, servicing and supporting products locally. The Japanese semiconductor market (including fabrication plants operated outside of Japan by Japanese semiconductor manufacturers) represents a substantial percentage of the worldwide semiconductor manufacturing capacity, and has been difficult for non-Japanese companies to penetrate. Furthermore, the licensing of products and process technologies by Japanese semiconductor manufacturers to non-Japanese semiconductor manufacturers could result in a recommendation to use certain semiconductor capital equipment manufactured by Japanese companies. Late in fiscal 1995, the Company acquired a local company in Japan, but there can be no assurance that this company will enable the Company to penetrate Japan. In addressing this market, the Company is at a distinct competitive disadvantage compared to leading Japanese suppliers, many of which have long-standing collaborative relationships with Japanese semiconductor manufacturers. In addition, since 1992, Japanese semiconductor manufacturers have substantially reduced their levels of capital spending on new fabrication facilities and equipment, thereby increasing competitive pressures in the Japanese market. Although the Company is investing significant resources in Page 14 Japan which has significantly increased operating expenses, there can be no assurance that the Company will be able to achieve significant sales to the Japanese semiconductor market. INTERNATIONAL SALES International sales accounted for 42%, 41%, 40% and 51% of net sales in fiscal years 1993, 1994, 1995 and for the six month period ended March 31, 1996 of fiscal 1996, respectively. The Company has established independent operations in the United Kingdom, Korea, Japan, Singapore and Taiwan and acquired a company in Japan. The Company anticipates that international sales will continue to account for a significant portion of net sales. International sales are subject to certain risks, including unexpected changes in regulatory requirements, exchange rates, foreign currency fluctuations, tariffs and other barriers, political and economic instability, potentially adverse tax consequences, natural disasters, outbreaks of hostilities, difficulties in accounts receivable collection, extended payment terms, difficulties in managing distributors or representatives and difficulties in staffing and managing foreign subsidiary and branch operations. The Company is also subject to the risks associated with the imposition of legislation and import and export regulations. The Company cannot predict whether tariffs, quotas, duties, taxes or other charges or restrictions will be implemented by the United States, Japan or any other country upon the importation or exportation of the Company's products in the future. There can be no assurance that these factors will not have a material adverse effect on the Company's business, financial condition and results of operations. INTELLECTUAL PROPERTY RIGHTS Although the Company attempts to protect its intellectual property rights through patents, copyrights, trade secrets and other measures, it believes that its financial performance will depend more upon the innovation, technological expertise and marketing abilities of its employees than upon such protection. There can be no assurance that any of the Company's pending patent applications will be issued or that foreign intellectual property laws will protect the Company's intellectual property rights. There can be no assurance that any patent issued to the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate the Company's products or, if patents are issued to the Company, design around the patents issued to the Company. As is typical in the semiconductor industry, the Company has received notices from time to time from third parties alleging infringement claims. Although there are currently no pending claims or lawsuits against the Company regarding any possible infringement claims, there can be no assurance that infringement claims by third parties or claims for indemnification resulting from infringement claims will not be asserted in the future or that such assertions, if proven to have merit, will not materially adversely affect the Company's business, financial condition and results of operations. If any such claims are asserted against the Company, the Company may seek to obtain a license under the third party's intellectual property rights. There can be no assurance that a license will be available on reasonable terms or at all. The Company could decide, in the alternative, to resort to litigation to challenge such claims. Such challenges could be extremely Page 15 expensive and time consuming and could materially adversely affect the Company's business, financial condition and results of operations. SOLE OR LIMITED SOURCES OF SUPPLY; RELIANCE ON SUBCONTRACTORS; COMPLEXITY IN MANUFACTURING PROCESS Certain components, subassemblies and services necessary for the manufacture of the Company's systems are obtained from a sole supplier or a limited group of suppliers. Specifically, the Company relies on two companies for supply of the robotics used in its products and two other companies for microwave power supplies used in all of its ashing systems. The Company does not maintain any long-term supply agreements with any of its suppliers. The Company is relying increasingly on outside vendors to manufacture certain components and subassemblies. The Company's reliance on sole or a limited group of suppliers and the Company's increasing reliance on subcontractors involve several risks, including a potential inability to obtain an adequate supply of required components and reduced control over pricing and timely delivery of components and subassemblies. Because the manufacture of certain of these components and subassemblies is an extremely complex process and requires long lead times, there can be no assurance that delays or shortages caused by suppliers will not occur in the future. Certain of the Company's suppliers have relatively limited financial and other resources. Any inability to obtain adequate deliveries or any other circumstance that would require the Company to seek alternative sources of supply or to manufacture such components internally could delay the Company's ability to ship its products, which could damage relationships with current and prospective customers and could have a material adverse effect on the Company's business, financial condition and results of operations. The Company's LCD division in Japan, is heavily dependent on one key supplier for quartz and ceramic fabrication and is seeking alternative sources. FUTURE ACQUISITIONS In August 1995, the Company acquired its flat panel display equipment (LCD) division in Japan (formerly called Tekisco). In the future, the Company may pursue acquisitions of additional product lines, technologies or businesses. Future acquisitions by the Company may result in potentially dilutive issuances of equity securities, incurrence of debt and amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's financial condition and results of operations. In addition, acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies and products of the acquired companies, the diversion of management's attention from other business concerns, risks of entering markets in which the Company has no or limited direct prior experience, and the potential loss of key employees of the acquired company. From time to time, the Company has engaged in preliminary discussions with third parties concerning potential acquisitions of product lines, technologies and businesses; however, there are currently no negotiations, commitments or agreements with respect to any acquisition. In the event that such an acquisition does occur, there can be no assurance as to the effect thereof on the Company's business, financial condition or operating results. Page 16 DEPENDENCE ON KEY PERSONNEL The Company's financial performance will depend in significant part upon the continued contributions of its officers and key personnel, many of whom would be difficult to replace. No employee has an employment or noncompetition agreement with the Company. The loss of any key person could have a material adverse effect on the business, financial condition and results of operations of the Company. In addition, the Company's future operating results depend in part upon its ability to attract and retain other qualified management, engineering, financial and accounting, technical, marketing and sales and support personnel for its operations. Competition for such personnel is intense, and there can be no assurance that the Company will be successful in attracting or retaining such personnel. The failure to attract or retain such persons could materially adversely affect the Company's business, financial condition and results of operations. ENVIRONMENTAL REGULATIONS The Company is subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances used to manufacture the Company's products. The Company believes that it is currently in compliance in all material respects with such regulations and that it has obtained all necessary environmental permits to conduct its business. Nevertheless, the failure to comply with current or future regulations could result in substantial fines being imposed on the Company, suspension of production, alteration of its manufacturing process or cessation of operations. Such regulations could require the Company to acquire expensive remediation equipment or to incur substantial expenses to comply with environmental regulations. Any failure by the Company to control the use, disposal or storage of, or adequately restrict the discharge of, hazardous or toxic substances could subject the Company to significant liabilities. EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS As of March 31, 1996, the Company's officers, directors and members of their families that may be deemed affiliates of such persons owned approximately 28.1% of the Company's outstanding shares of common stock. Accordingly, these stockholders will be able to significantly influence the election of the Company's directors and the outcome of corporate actions requiring stockholder approval, such as mergers and acquisitions, regardless of how other stockholders of the Company may vote. Such a high level of ownership by such persons or entities may have a significant effect in delaying, deferring or preventing a change in control of the Company and may adversely affect the voting and other rights of other holders of common stock. Certain provisions of the Company's Certificate of Incorporation, 1994 Stock Option/Stock Issuance Plan, Bylaws and Delaware law may also discourage certain transactions involving a change in control of the Company. In addition to the foregoing, the ability of the Company's Board of Directors to issue preferred stock without further stockholder approval could have the effect of delaying, deferring or preventing a change in control of the Company. Page 17 VOLATILITY OF STOCK PRICE The Company believes that factors such as announcements of developments related to the Company's business, fluctuations in the Company's operating results, sales of the Company's common stock into the market place, failure to meet or changes in analysts' expectations, natural disasters, outbreaks of hostilities, general conditions in the semiconductor industry or the worldwide economy, announcements of technological innovations or new products or enhancements by the Company or its competitors, developments in patents or other intellectual property rights and developments in the Company's relationships with its customers and suppliers could cause the price of the Company's common stock to fluctuate, perhaps substantially. In addition, in recent years the stock market in general, and the market for shares of small capitalization stocks in particular, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. Many companies in the semiconductor equipment industry, including the Company, have recently approached or experienced historical highs in the market prices of their common stock. There can be no assurance that the market price of the Company's common stock will not experience significant fluctuations in the future, including fluctuations that are unrelated to the Company's performance. Page 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. The following proposals were voted upon by the Company's stockholders at the Annual Meeting of Stockholders held on February 13, 1996. 1. The following four directors nominated to serve until the next Annual Meeting, or until their successors are elected and qualified were elected by the stockholders. BROKER VOTES FOR VOTES ABSTENTIONS NON- WITHHELD VOTES ----------------------------------------------- Monte M. Toole 10,021,710 139,438 - - Dave Toole 10,020,960 140,188 - - Kenneth Schroeder 10,021,975 139,173 - - F. Joseph Van Poppelen 10,022,275 138,873 - - 2. An amendment to the Company's 1994 Stock Option/Stock Issuance Plan (the "1994 Option Plan") which will increase a) the number of shares of common stock authorized for issuance over the term of the 1994 Option Plan by an additional 750,000 shares and b) the number of shares of common stock subject to the automatic option grants made to the new and continuing non-employee Board members under the 1994 Option Plan was approved by the vote of 6,828,347 shares for the proposal, 1,726,776 shares voting against, 18,672 shares abstained from voting and 1,587,353 were broker non-votes. 3. An amendment to the Company's Employee Stock Purchase Plan the "Purchase Plan") which will a) increase the number of shares of common stock authorized for issuance over the term of the Purchase Plan by an additional 400,000 shares and b) allow eligible employees to join the Purchase Plan on any semi-annual entry date within an offering period was approved by the vote of 7,507,117 shares for the proposal, 1,122,427 shares voting against, 10,589 shares abstained from voting and 1,521,015 were broker non-votes. Page 19 4. A proposal to ratify the appointment of Arthur Andersen LLP as independent auditors of the Company for the fiscal year ending September 30, 1996 was approved by the vote of 10,051,441 shares voting for the proposal, 82,665 shares voting against, 27,042 shares abstained from voting and -0- broker non-votes. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith: Exhibit 10.2 Amended and restated 1994 Stock Option/Stock Issuance Plan Exhibit 10.20 Loan agreement dated March 4, 1996 between Registrant and Union Bank, a California banking corporation. Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the three month period ended March 31, 1996 Page 20 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GASONICS INTERNATIONAL CORPORATION (Registrant) \s\ Jerald P. Shaevitz ---------------------------------- Date: May 14, 1996 By: Jerald P. Shaevitz Vice President, Finance Chief Financial Officer Page 21 INDEX TO EXHIBITS Sequentially Exhibit Number Description Numbered Page 10.2 Amended and restated 1994 Stock Option/Stock Issuance Plan 10.20 Loan Agreement dated March 4, 1996 between Registrant and Union Bank 27 Financial Data Schedule Page 22 EX-10.2 2 EXHIBIT 10.2 GASONICS INTERNATIONAL CORPORATION 1994 STOCK OPTION/STOCK ISSUANCE PLAN (AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1996) ARTICLE ONE GENERAL I. PURPOSE OF THE PLAN A. This 1994 Stock Option/Stock Issuance Plan (the "Plan") is intended to promote the interests of GaSonics International Corporation, a Delaware corporation or any successor corporation (the "Corporation") adopting the Plan, by providing (i) key employees (including officers) of the Corporation (or its parent or subsidiary corporations) who are responsible for the management, growth and financial success of the Corporation (or its parent or subsidiary corporations), (ii) the non-employee members of the Board and (iii) consultants and other independent contractors who provide valuable services to the Corporation (or its parent or subsidiary corporations) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the Service of the Corporation (or its parent or subsidiary corporations). B. The Plan became effective upon adoption by the Board of Directors of Gasonics International Corporation, a California corporation ("Gasonics California") on January 27, 1994, and such date shall accordingly constitute the Effective Date of the Plan. The Plan was subsequently assumed by the Corporation in connection with the merger (the "Merger") of Gasonics California into the Corporation in February, 1994. II. DEFINITIONS A. For purposes of the Plan, the following definitions shall be in effect: BOARD: the Corporation's Board of Directors. CHANGE IN CONTROL: a change in ownership or control of the Corporation effected through either of the following transactions: a. the direct or indirect acquisition by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept; or b. a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (i) have been Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. CODE: the Internal Revenue Code of 1986, as amended. COMMON STOCK: shares of the Corporation's common stock, par value $0.001 per share. CORPORATE TRANSACTION: any of the following stockholder-approved transactions to which the Corporation is a party: a. a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated, b. the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or c. any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such merger. EMPLOYEE: an individual who performs services while in the employ of the Corporation or one or more parent or subsidiary corporations, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance. EXERCISE DATE: the date on which the Corporation shall have received written notice of the option exercise. 2. FAIR MARKET VALUE: the Fair Market Value per share of Common Stock determined in accordance with the following provisions: a. If the Common Stock is not at the time listed or admitted to trading on any national securities exchange but is traded on the Nasdaq National Market, the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no reported closing selling price for the Common Stock on the date in question, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value. b. If the Common Stock is at the time listed or admitted to trading on any national securities exchange, then the Fair Market Value shall be the closing selling price per share on the date in question on the securities exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. c. If the Common Stock is on the date in question neither listed nor admitted to trading on any national securities exchange nor traded on the Nasdaq National Market, then the Fair Market Value of the Common Stock on such date shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate. HOSTILE TAKE-OVER: a change in ownership of the Corporation effected through the following transaction: a. the direct or indirect acquisition by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept, AND b. the acceptance of more than fifty percent (50%) of the securities so acquired in such tender or exchange offer from holders other than the officers and directors of the Corporation subject to the short- swing profit restrictions of Section 16 of the 1934 Act. 3. INCENTIVE OPTION: a stock option which satisfies the requirements of Code Section 422. 1934 ACT: the Securities and Exchange Act of 1934, as amended from time to time. NON-STATUTORY OPTION: a stock option not intended to meet the requirements of Code Section 422. OPTIONEE: any person to whom an option is granted under the Discretionary Option Grant or Automatic Option Grant Program in effect under the Plan. PARTICIPANT: any person who receives a direct issuance of Common Stock under the Stock Issuance Program in effect under the Plan. PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. PLAN ADMINISTRATOR: shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. PRIMARY COMMITTEE: shall mean the committee of two (2) or more non- employee Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. SERVICE: the performance of services on a periodic basis to the Corporation (or any parent or subsidiary corporation) in the capacity of an Employee, a non-employee member of the board of directors or an independent consultant or advisor, except to the extent otherwise specifically provided in the applicable stock option or stock issuance agreement. SECONDARY COMMITTEE: shall mean a committee of one (1) or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders. SECTION 12(G) REGISTRATION DATE: the date on which the initial registration of the Common Stock under Section 12(g) of the 1934 Act becomes effective. 4. TAKE-OVER PRICE: the GREATER of (a) the Fair Market Value per share of Common Stock on the date the particular option to purchase such stock is surrendered to the Corporation in connection with a Hostile Take-Over or (b) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (a) price per share. B. The following provisions shall be applicable in determining the parent and subsidiary corporations of the Corporation: Any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation shall be considered to be a PARENT of the Corporation, provided each such corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation shall be considered to be a SUBSIDIARY of the Corporation, provided each such corporation in the unbroken chain (other than the last corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. III. STRUCTURE OF THE PLAN A. STOCK PROGRAMS. The Plan shall be divided into three (3) separate components: the Discretionary Option Grant Program specified in Article Two, the Automatic Option Grant Program specified in Article Three and the Stock Issuance Program specified in Article Four. Under the Discretionary Option Grant Program, eligible individuals may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock in accordance with the provisions of Article Two. Under the Automatic Option Grant Program, non-employee members of the Board will receive special option grants at periodic intervals to purchase shares of Common Stock in accordance with the provisions of Article Three. Under the Stock Issuance Program, eligible individuals may be issued shares of Common Stock directly, either through the immediate purchase of such shares at a price not less than eighty-five percent (85%) of the Fair Market Value of the shares at the time of issuance or as a bonus tied to the performance of services or the Corporation's attainment of financial objectives. B. GENERAL PROVISIONS. Unless the context clearly indicates otherwise, the provisions of Articles One and Five shall apply to the Discretionary Option Grant Program, the Automatic Option Grant Program and the Stock Issuance Program and shall accordingly govern the interests of all individuals under the Plan. 5. IV. ADMINISTRATION OF THE PLAN A. The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. No non-employee Board member shall be eligible to serve on the Primary Committee if such individual has, during the twelve (12)-month period immediately preceding the date of his or her appointment to the Primary Committee or (if shorter) the period commencing with the Section 12(g) Registration Date and ending with the date of his or her appointment to the Primary Committee, received an option grant or direct stock issuance under the Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary), other than pursuant to the Automatic Option Grant Program. B. Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. The member or members of the Secondary Committee may be comprised of one or more Board members who are Employees eligible to receive discretionary option grants or direct stock issuances under the Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary). C. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. D. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant or Stock Issuance Program under its jurisdiction or any stock option or stock issuance thereunder. E. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. 6. F. Administration of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that program, and no Plan Administrator shall exercise any discretionary functions with respect to option grants made thereunder. V. STOCK SUBJECT TO THE PLAN A. Shares of Common Stock shall be available for issuance under the Plan and shall be drawn from either the Corporation's authorized but unissued shares of Common Stock or from reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 2,200,000 shares,(1) subject to adjustment from time to time in accordance with the provisions of this Section VI. Such share reserve includes the 750,000-share increase(1) authorized by the Board on November 6, 1995, subject to stockholder approval at the 1996 Annual Stockholders Meeting. B. In no event shall the aggregate number of shares of Common Stock for which any one individual participating in the Plan may be granted stock options and direct stock issuances exceed 825,000 shares(1) over the term of the Plan. C. Should one or more outstanding options under this Plan expire or terminate for any reason prior to exercise in full (including any option cancelled in accordance with the cancellation-regrant provisions of Section IV of Article Two of the Plan), then the shares subject to the portion of each option not so exercised shall be available for subsequent issuance under the Plan. Shares subject to any option or portion thereof surrendered in accordance with Section V of Article Two or Section III of Article Three and all share issuances under the Plan, whether or not the shares are subsequently repurchased by the Corporation pursuant to its repurchase rights under the Plan, shall reduce on a share-for-share basis the number of shares of Common Stock available for subsequent issuance the Plan. In addition, should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan or the vesting of a direct share issuance made under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the share issuance, and not by the net number of shares of Common Stock actually issued to the holder of such option or share issuance. - -------------------- (4) Each number reflects the 3-for-2 split of the Common Stock effected by the Corporation on November 20, 1995. In no event, however, may more than 2,152,483 shares of Common Stock be issued under the Plan after December 31, 1995, including the shares subject to options outstanding under the Plan on that date. 7. D. Should any change be made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, then appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one individual participating in the Plan may be granted stock options and direct stock issuances in the aggregate over the term of the Plan, (iii) the number and/or class of securities for which automatic option grants are to be subsequently made per newly-elected or continuing non-employee Board member under the Automatic Option Grant Program and (iv) the number and/or class of securities and price per share in effect under each option outstanding under the Discretionary Option Grant or Automatic Option Grant Program. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 8. ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM VI. TERMS AND CONDITIONS OF OPTIONS Options granted pursuant to the Discretionary Option Grant Program shall be authorized by action of the Plan Administrator and may, at the Plan Administrator's discretion, be either Incentive Options or Non-Statutory Options. Individuals who are not Employees of the Corporation or its parent or subsidiary corporations may only be granted Non-Statutory Options. Each granted option shall be evidenced by one or more instruments in the form approved by the Plan Administrator; PROVIDED, however, that each such instrument shall comply with the terms and conditions specified below. Each instrument evidencing an Incentive Option shall, in addition, be subject to the applicable provisions of Section II of this Article Two. A. EXERCISE PRICE. 1. The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions: a. The exercise price per share of the Common Stock subject to an Incentive Option shall in no event be less than one hundred percent (100%) of the Fair Market Value of such Common Stock on the grant date. b. The exercise price per share of the Common Stock subject to a Non-Statutory Option shall in no event be less than eighty- five percent (85%) of the Fair Market Value of such Common Stock on the grant date. 2. The exercise price shall become immediately due upon exercise of the option and, subject to the provisions of Section I of Article Five and the instrument evidencing the grant, shall be payable in one of the alternative forms specified below: a. full payment in cash or check made payable to the Corporation's order; b. full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; c. full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's 9. earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date and cash or check made payable to the Corporation's order; or d. to the extent the option is exercised for vested shares, full payment through a broker-dealer sale and remittance procedure pursuant to which the Optionee shall provide concurrent irrevocable written instructions (i) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation in connection with such purchase and (ii) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. Except to the extent the sale and remittance procedure is utilized in connection with the exercise of the option, payment of the exercise price for the purchased shares must accompany such notice. B. TERM AND EXERCISE OF OPTIONS. Each option granted under this Discretionary Option Grant Program shall be exercisable at such time or times and during such period as is determined by the Plan Administrator and set forth in the instrument evidencing the grant. No such option, however, shall have a maximum term in excess of ten (10) years measured from the grant date. During the lifetime of the Optionee, the option, together with any stock appreciation rights pertaining to such option, shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee except for a transfer of the option effected by will or by the laws of descent and distribution following the Optionee's death. C. TERMINATION OF SERVICE. 1. The following provisions shall govern the exercise period applicable to any outstanding options held by the Optionee at the time of cessation of Service or death. a. Should an Optionee cease Service for any reason (including death or Permanent Disability) while holding one or more outstanding options under this Article Two, then none of those options shall (except to the extent otherwise provided pursuant to subparagraph 3 below) remain exercisable for more than a thirty-six (36)-month period (or such shorter period determined by the Plan Administrator and set forth in the instrument evidencing the grant) measured from the date of such cessation of Service. b. Any option held by the Optionee under this Article Two and exercisable in whole or in part on the date of his or her death may be subsequently exercised by the personal representative of the Optionee's estate or by the 10. person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. However, the right to exercise such option shall lapse upon the EARLIER of (i) the third anniversary of the date of the Optionee's death (or such shorter period determined by the Plan Administrator and set forth in the instrument evidencing the grant) or (ii) the specified expiration date of the option term. Accordingly, upon the occurrence of the earlier event, the option shall terminate and cease to remain outstanding.a) c. Under no circumstances shall any such option be exercisable after the specified expiration date of the option term. d. During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares (if any) in which the Optionee is vested at the time of his or her cessation of Service. Upon the expiration of the limited post-Service exercise period or (if earlier) upon the specified expiration date of the option term, each such option shall terminate and cease to remain outstanding with respect to any vested shares for which the option has not otherwise been exercised. However, each outstanding option shall immediately terminate and cease to remain outstanding, at the time of the Optionee's cessation of Service, with respect to any shares for which the option is not otherwise at that time exercisable or in which the Optionee is not otherwise vested. e. Should (i) the Optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (ii) the Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Corporation or its parent or subsidiary corporations, then in any such event all outstanding options held by the Optionee under this Article Two shall terminate immediately and cease to remain outstanding. 2. The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to permit one or more options held by the Optionee under this Article Two to be exercised, during the limited post-Service exercise period applicable under this paragraph C., not only with respect to the number of vested shares of Common Stock for which each such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more subsequent installments of vested shares for which the option would otherwise have become exercisable had such cessation of Service not occurred. 3. The Plan Administrator shall also have full power and authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to extend the period of time for which the option is to remain exercisable following the Optionee's cessation of Service or death from the limited period in effect under subparagraph 1. above to such 11. greater period of time as the Plan Administrator shall deem appropriate. In no event, however, shall such option be exercisable after the specified expiration date of the option term. D. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights with respect to any shares covered by the option until such individual shall have exercised the option and paid the exercise price for the purchased shares. E. REPURCHASE RIGHTS. The shares of Common Stock acquired upon the exercise of any Article Two option grant may be subject to repurchase by the Corporation in accordance with the following provisions: 1. The Plan Administrator shall have the discretion to authorize the issuance of unvested shares of Common Stock under this Article Two. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase any or all of those unvested shares at the exercise price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right. 2. All of the Corporation's outstanding repurchase rights under this Article Two shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of a Corporate Transaction, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such termination is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 3. The Plan Administrator shall have the discretionary authority, exercisable either before or after the Optionee's cessation of Service, to cancel the Corporation's outstanding repurchase rights with respect to one or more shares purchased or purchasable by the Optionee under this Discretionary Option Grant Program and thereby accelerate the vesting of such shares in whole or in part at any time. VII. INCENTIVE OPTIONS The terms and conditions specified below shall be applicable to all Incentive Options granted under this Article Two. Incentive Options may only be granted to individuals who are Employees. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to such terms and conditions. A. DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more options granted to any Employee under this Plan (or any other option plan of the Corporation or its parent or subsidiary 12. corporations) may for the first time become exercisable as incentive stock options under the Federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. Should the number of shares of Common Stock for which any Incentive Option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, then that option may nevertheless be exercised in such calendar year for the excess number of shares as a non-statutory option under the Federal tax laws. B. 10% STOCKHOLDER. If any individual to whom an Incentive Option is granted is the owner of stock (as determined under Section 424(d) of the Code) possessing ten percent (10%) or more of the total combined voting power of all classes of stock of the Corporation or any one of its parent or subsidiary corporations, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the grant date, and the option term shall not exceed five (5) years, measured from the grant date. Except as modified by the preceding provisions of this Section II, the provisions of Articles One, Two and Five of the Plan shall apply to all Incentive Options granted hereunder. VIII. CORPORATE TRANSACTION/CHANGE IN CONTROL A. In the event of any Corporate Transaction, each option which is at the time outstanding under this Article Two shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares. However, an outstanding option under this Article Two shall NOT so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof, (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive. B. Immediately following the consummation of the Corporate Transaction, all outstanding options under this Article Two shall terminate and cease to remain outstanding, except to the extent assumed by the successor corporation or parent company. 13. C. Each outstanding option under this Article Two which is assumed in connection with the Corporate Transaction or is otherwise to continue in effect shall be appropriately adjusted, immediately after such Corporate Transaction, to apply and pertain to the number and class of securities which would have been issued to the option holder, in consummation of such Corporate Transaction, had such person exercised the option immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the exercise price payable per share, PROVIDED the aggregate exercise price payable for such securities shall remain the same. In addition, the class and number of securities available for issuance under the Plan following the consummation of the Corporate Transaction shall be appropriately adjusted. D. The Plan Administrator shall have the discretion, exercisable either in advance of any actually-anticipated Corporate Transaction or at the time of an actual Corporate Transaction, to provide (upon such terms as it may deem appropriate) for (i) the automatic acceleration of one or more outstanding options granted under the Plan which are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time and/or (ii) the subsequent termination of one or more of the Corporation's outstanding repurchase rights which are assigned in connection with the Corporate Transaction and do not otherwise terminate at that time, in the event Optionee's Service should subsequently terminate within a designated period following such Corporate Transaction. E. The Plan Administrator shall have the discretionary authority, exercisable either in advance of any actually-anticipated Change in Control or at the time of an actual Change in Control, to provide for the automatic acceleration of one or more outstanding options under this Article Two (and the immediate termination of one or more of the Corporation's outstanding repurchase rights under this Article Two) upon the occurrence of the Change in Control. The Plan Administrator shall also have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the Optionee's Service within a specified period following the Change in Control. F. Any options accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term. G. The grant of options under this Article Two shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. H. The portion of any Incentive Option accelerated under this Section III in connection with a Corporate Transaction or Change in Control shall remain exercisable as an incentive stock option under the Federal tax laws only to the extent the dollar limitation of Section II of this Article Two is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a non-statutory option under the Federal tax laws. IX. CANCELLATION AND REGRANT OF OPTIONS 14. The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected Optionees, the cancellation of any or all outstanding options under this Article Two and to grant in substitution new options under the Plan covering the same or different numbers of shares of Common Stock but with an exercise price per share not less than (i) eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the new grant date or (ii) one hundred percent (100%) of such Fair Market Value in the case of an Incentive Option. X. STOCK APPRECIATION RIGHTS A. Provided and only if the Plan Administrator determines in its discretion to implement the stock appreciation right provisions of this Section V, one or more Optionees may be granted the right, exercisable upon such terms and conditions as the Plan Administrator may establish, to surrender all or part of an unexercised option under this Article Two in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares. B. No surrender of an option shall be effective hereunder unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled under this Section V may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. C. If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the LATER of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant. D. One or more officers of the Corporation subject to the short- swing profit restrictions of the Federal securities laws may, in the Plan Administrator's sole discretion, be granted limited stock appreciation rights in tandem with their outstanding options under this Article Two. Upon the occurrence of a Hostile Take-Over, the officer shall have a thirty (30)-day period in which he or she may surrender any outstanding options with such a limited stock appreciation right in effect for at least six (6) months to the Corporation, to the extent such option is at the time exercisable for fully vested shares of Common Stock. The officer shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the vested shares of Common Stock at the time subject to each surrendered option (or surrendered portion of such option) over (ii) the aggregate exercise price payable for such shares. The cash distribution shall be made within five (5) days following the date the option is surrendered to the Corporation, and neither the approval of the Plan Administrator nor the consent of the Board shall be required in connection with 15. the option surrender and cash distribution. Any unsurrendered portion of the option shall continue to remain outstanding and become exercisable in accordance with the terms of the instrument evidencing such grant. E. The shares of Common Stock subject to any option surrendered for an appreciation distribution pursuant to this Section V shall NOT be available for subsequent issuance under the Plan. 16. ARTICLE THREE AUTOMATIC OPTION GRANT PROGRAM XI. ELIGIBILITY A. ELIGIBLE DIRECTORS. The individuals eligible to receive automatic option grants pursuant to the July 19, 1995 restated provisions of this Article Three program shall be limited to (i) those individuals who are continuing to serve as non-employee Board members on July 19, 1995 and (ii) those individuals who are first elected or appointed as non-employee Board members on or after July 19, 1995. A non-employee Board member who has previously been in the employ of the Corporation (or any parent or subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but such individual shall be eligible to receive periodic option grants under the Automatic Option Grant Program upon his or her continued service as a non- employee Board member. Any non-employee Board member eligible to participate in the Automatic Option Grant Program pursuant to the foregoing criteria shall be designated an Eligible Director for purposes of this Article Three. B. LIMITATION. Except for the option grants to be made pursuant to the provisions of this Automatic Option Grant Program, an Eligible Director shall not be entitled to receive any additional option grants or stock issuances under this Plan or any other stock plan of the Corporation (or any parent or subsidiary) during his or her period of Board service. XII. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS A. GRANT DATES. Option grants shall be made pursuant to the July 19, 1995 restated provisions of this Article Three on the dates specified below: INITIAL GRANT. Each individual who first becomes an Eligible Director on or after July 19, 1995, whether through election by the stockholders or appointment by the Board, shall automatically be granted, at the time of such initial election or appointment (the "Initial Grant Date"), a Non-Statutory Option to purchase 30,000 shares(1) of Common Stock upon the terms and conditions of this Article Three. ANNUAL GRANT. Each Eligible Director who receives an initial 30,000-share option grant shall automatically be granted, on each successive anniversary of the Initial Grant Date on which he or she continues to serve as an Eligible Director, beginning with the fourth anniversary of such Initial Grant Date, a Non-Statutory Option to purchase an additional 7,500 - -------------------- (5) This number reflects the 3-for-2 split of the Common Stock effected by the Corporation on November 20, 1995. 17. shares(1) of Common Stock upon the terms and conditions of this Article Three. In addition, each individual who is an Eligible Director on July 19, 1995 but who is not otherwise to receive an initial 30,000-share grant on such date shall automatically be granted, on July 19, 1995 and each subsequent anniversary of that grant date on which he or she continues to serve as an Eligible Director, a Non-Statutory Option to purchase an additional 7,500 shares of Common Stock upon the terms and conditions of this Article Three. Any Eligible Director previously in the Corporation's employ shall receive his or her initial 7,500- share option grant under this Article Three at the first Annual Stockholders Meeting at which he or she is elected as a non-employee Board member and shall automatically be granted, on the date of each succeeding Annual Stockholders Meeting at which he or she is re-elected as a non-employee Board member, a Non- Statutory Option to purchase an additional 7,500 shares of Common Stock upon the terms and conditions of this Article Three. There shall be no limit on the number of such 7,500-share option grants any one Eligible Director may receive over his or her period of Board service. The number of shares for which the automatic option grants are to be made to each newly-elected or continuing Eligible Director shall be subject to periodic adjustment pursuant to the applicable provisions of Section VI.C. Of Article One. B. EXERCISE PRICE. The exercise price per share of Common Stock subject to each automatic option grant made under this Article Three shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the automatic grant date. C. PAYMENT. The exercise price shall be payable in one of the alternative forms specified below: 1. full payment in cash or check made payable to the Corporation's order; 2. full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; 3. full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date and cash or check made payable to the Corporation's order; or 4. full payment through a sale and remittance procedure pursuant to which the non-employee Board member shall provide concurrent irrevocable written - -------------------- (6) This number reflects the 3-for-2 split of the Common Stock effected by the Corporation on November 20, 1995. 18. instructions (i) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares and (ii) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. D. OPTION TERM. Each automatic grant under this Article Three shall have a maximum term of ten (10) years measured from the automatic grant date. E. EXERCISABILITY. Option grants made under this Article Three shall become exercisable as specified below: INITIAL GRANT. Each initial 30,000-share automatic grant shall become exercisable in four (4) successive equal annual installments upon the Optionee's completion of each year of Board service over the four (4)- year period measured from the Initial Grant Date. ANNUAL GRANT. Each annual 7,500-share automatic grant shall become exercisable upon the Optionee's completion of one (1) year of Board service measured from the grant date. Each option granted under this Article Three shall automatically accelerate and become fully exercisable for all of the shares of Common Stock at the time subject to the option: - should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, or - should there occur an acceleration event specified in Section III of this Article Three. F. NON-TRANSFERABILITY. During the lifetime of the Optionee, each automatic option grant, together with the limited stock appreciation right pertaining to such option, shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee other than a transfer of the option effected by will or by the laws of descent and distribution following the Optionee's death. G. TERMINATION OF BOARD SERVICE. 1. Should the Optionee cease to serve as a Board member for any reason other than death or Permanent Disability while holding one or more automatic option grants under this Article Three, then each of those options may, during the twelve (12)-month period measured from the date of such cessation of Board service (the "Post-Service Exercise Period"), be exercised in accordance with the following parameters: 19. INITIAL 30,000-SHARE GRANT a. Should the Optionee cease Board service prior to the fourth anniversary of the Initial Grant Date, then the Optionee may, at any time during the Post-Service Exercise Period, exercise the option for any or all of the option shares for which the option is exercisable at the time of such cessation of Board service. In addition, the option shall become exercisable for an additional twenty-five percent (25%) of the option shares on the next anniversary of the Initial Grant Date following the Optionee's cessation of Board service and shall remain so exercisable until the expiration date of the Post-Service Exercise Period. b. If the Optionee ceases Board service on or after the fourth anniversary of the Initial Grant Date, then the Optionee may, at any time during the Post-Service Exercise Period, exercise the option for any or all of the option shares for which the option is exercisable at the time of such cessation of Board service. c. However, the option shall, immediately upon the Optionee's cessation of Board service, terminate and cease to be outstanding with respect to any and all option shares for which the option is not otherwise at that time exercisable or for which it is not otherwise to become exercisable in accordance with clause a. above. ANNUAL 7,500-SHARE GRANT a. The option shall become exercisable for all of the option shares on the first anniversary of the grant date, whether or not the Optionee continues in Board service, and shall remain so exercisable for any or all of those shares until the expiration date of the Post-Service Exercise Period. b. Should the Optionee die after his or her cessation of Board service but while holding one or more automatic option grants under this Article Three, then the personal representative of the Optionee's estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution shall have the remainder of the applicable Post-Service Exercise Period in which to exercise each such option in accordance with the parameters established for the Optionee in Paragraph 1. c. Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability while holding one or more automatic option grants under this Article Three, then such individual (or the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution) shall have a twelve (12)-month period following the date of such cessation 20. of Board service in which to exercise each such option for any or all of the option shares at the time subject to the option, whether or not the option would otherwise at that time be exercisable for those shares. 2. In no event shall any automatic grant under this Article Three remain exercisable after the expiration date of the ten (10)-year option term. H. STOCKHOLDER RIGHTS. The holder of an automatic option grant under this Article Three shall have none of the rights of a stockholder with respect to any shares subject to such option until such individual shall have exercised the option and paid the exercise price for the purchased shares. I. REMAINING TERMS. The remaining terms and conditions of each automatic option grant shall be as set forth in the form Automatic Stock Option Agreement attached as Exhibit A. XIII. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any Corporate Transaction, each Article III option, to the extent outstanding at the time but not otherwise fully exercisable, shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares as fully- vested shares. Immediately following the consummation of the Corporate Transaction, all automatic option grants under this Article Three shall terminate and cease to be outstanding, except to the extent assumed by the acquiring company (or parent thereof). B. In connection with any Change in Control of the Corporation, each Article III option, to the extent outstanding at the time but not otherwise fully exercisable, shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares as fully-vested shares. Each such option shall remain so exercisable for all the option shares following the Change in Control, until the expiration or sooner termination of the option term. C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each Article III option held by him or her for a period of at least six (6) months. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. 21. Neither the approval of the Plan Administrator nor the consent of the Board shall be required in connection with such option surrender and cash distribution. The shares of Common Stock subject to each option surrendered in connection with the Hostile Take-Over shall NOT be available for subsequent issuance under the Plan. D. The automatic option grants outstanding under this Article Three shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. XIV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS The provisions of this Automatic Option Grant Program, together with the automatic option grants outstanding under this Article Three, may not be amended at intervals more frequently than once every six (6) months, other than to the extent necessary to comply with applicable Federal income tax laws and regulations. 22. ARTICLE FOUR STOCK ISSUANCE PROGRAM XV. TERMS AND CONDITIONS OF STOCK ISSUANCES Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate purchases without any intervening stock option grants. The issued shares shall be evidenced by a Stock Issuance Agreement ("Issuance Agreement") that complies with the terms and conditions of this Article Four. A. CONSIDERATION. 1. Shares of Common Stock drawn from the Corporation's authorized but unissued shares of Common Stock ("Newly Issued Shares") shall be issued under the Stock Issuance Program for one or more of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: a. full payment in cash or check made payable to the Corporation's order; b. a promissory note payable to the Corporation's order in one or more installments, which may be subject to cancellation in whole or in part upon terms and conditions established by the Plan Administrator; or c. past services rendered to the Corporation or any parent or subsidiary corporation. 2. Newly Issued Shares may, in the absolute discretion of the Plan Administrator, be issued for consideration with a value less than one hundred percent (100%) of the Fair Market Value of such shares at the time of issuance, but in no event less than eighty-five percent (85%) of such Fair Market Value. 3. Shares of Common Stock reacquired by the Corporation and held as treasury shares ("Treasury Shares") may be issued under the Stock Issuance Program for such consideration (including one or more of the items of consideration specified in subparagraph 1 above) as the Plan Administrator may deem appropriate, whether such consideration is in an amount less than, equal to or greater than the Fair Market Value of the Treasury Shares at the time of issuance. Treasury Shares may, in lieu of any cash consideration, be issued subject to such vesting requirements tied to the Participant's period of future Service or the Corporation's attainment of specified performance objectives as the Plan Administrator may establish at the time of issuance. 23. B. VESTING PROVISIONS. 1. Shares of Common Stock issued under the Stock Issuance Program may, in the absolute discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant's period of Service. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely: a. the Service period to be completed by the Participant or the performance objectives to be achieved by the Corporation, b. the number of installments in which the shares are to vest, c. the interval or intervals (if any) which are to lapse between installments, and d. the effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule, shall be determined by the Plan Administrator and incorporated into the Issuance Agreement executed by the Corporation and the Participant at the time such unvested shares are issued. 2. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to him or her under the Plan, whether or not his or her interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. Any new, additional or different shares of stock or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration or by reason of any Corporate Transaction shall be issued, subject to (i) the same vesting requirements applicable to his or her unvested shares and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 3. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock under the Stock Issuance Program, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant's purchase-money promissory note), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares. The surrendered 24. shares may, at the Plan Administrator's discretion, be retained by the Corporation as Treasury Shares or may be retired to authorized but unissued share status. 4. The Plan Administrator may in its discretion elect to waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non- completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service or the attainment or non-attainment of the applicable performance objectives. XVI. CORPORATE TRANSACTION/CHANGE IN CONTROL A. Upon the occurrence of any Corporate Transaction, all unvested shares of Common Stock at the time outstanding under this Stock Issuance Program shall immediately vest in full and the Corporation's repurchase rights shall terminate, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such termination is precluded by other limitations imposed in the Issuance Agreement. B. The Plan Administrator shall have the discretionary authority, exercisable either in advance of any actually-anticipated Change in Control or at the time of an actual Change in Control, to provide for the automatic vesting of one or more unvested shares outstanding under the Stock Issuance Program (and the immediate termination of the Corporation's repurchase rights with respect to those shares) at the time of such Change in Control. The Plan Administrator shall also have full power and authority to condition any such accelerated vesting upon the subsequent termination of the Participant's Service within a specified period following the Change in Control. XVII. TRANSFER RESTRICTIONS/SHARE ESCROW A. Unvested shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing such unvested shares. To the extent an escrow arrangement is utilized, the unvested shares and any securities or other assets distributed with respect to such shares (other than regular cash dividends) shall be delivered in escrow to the Corporation to be held until the Participant's interest in such shares (or the distributed securities or assets) vests. If the unvested shares are issued directly to the Participant, the restrictive legend on the certificates for such shares shall read substantially as follows: 25. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED , 199 , A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION." B. The Participant shall have no right to transfer any unvested shares of Common Stock issued to him or her under the Stock Issuance Program. For purposes of this restriction, the term "transfer" shall include (without limitation) any sale, pledge, assignment, encumbrance, gift or other disposition of such shares, whether voluntary or involuntary. Upon any such attempted transfer, the unvested shares shall immediately be cancelled in accordance with substantially the same procedure in effect under Section I.B.3 of this Article Four, and neither the Participant nor the proposed transferee shall have any rights with respect to such cancelled shares. However, the Participant shall have the right to make a gift of unvested shares acquired under the Stock Issuance Program to his or her spouse or issue, including adopted children, or to a trust established for such spouse or issue, provided the donee of such shares delivers to the Corporation a written agreement to be bound by all the provisions of the Stock Issuance Program and the Issuance Agreement applicable to the gifted shares. 26. ARTICLE FIVE MISCELLANEOUS XVIII. LOANS OR INSTALLMENT PAYMENTS A. The Plan Administrator may, in its discretion, assist any Optionee or Participant, to the extent such Optionee or Participant is an Employee (including an Optionee or Participant who is an officer of the Corporation), in the exercise of one or more options granted to such Optionee under the Discretionary Option Grant Program or the purchase of one or more shares issued to such Participant under the Stock Issuance Program, including the satisfaction of any Federal, state and local income and employment tax obligations arising therefrom, by (i) authorizing the extension of a loan from the Corporation to such Optionee or Participant or (ii) permitting the Optionee or Participant to pay the exercise price or purchase price for the purchased shares in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) shall be upon such terms as the Plan Administrator specifies in the applicable option or issuance agreement or otherwise deems appropriate under the circumstances. Loans or installment payments may be authorized with or without security or collateral. However, the maximum credit available to the Optionee or Participant may not exceed the exercise or purchase price of the acquired shares (less the par value of such shares) plus any Federal, state and local income and employment tax liability incurred by the Optionee or Participant in connection with the acquisition of such shares. B. The Plan Administrator may, in its absolute discretion, determine that one or more loans extended under this financial assistance program shall be subject to forgiveness by the Corporation in whole or in part upon such terms and conditions as the Plan Administrator may deem appropriate. XIX. AMENDMENT OF THE PLAN AND AWARDS A. The Board has complete and exclusive power and authority to amend or modify the Plan (or any component thereof) in any or all respects whatsoever. However, (i) no such amendment or modification shall adversely affect rights and obligations with respect to options at the time outstanding under the Plan, nor adversely affect the rights of any Participant with respect to Common Stock issued under the Stock Issuance Program prior to such action, unless the Optionee or Participant consents to such amendment, and (ii) any amendment made to the Automatic Option Grant Program (or any options outstanding thereunder) shall be in compliance with the limitation of Section IV of Article Three. In addition, the Board may not, without the approval of the Corporation's stockholders, amend the Plan to (i) materially increase the maximum number of shares issuable under the Plan or the number of shares for which options may be granted to newly- elected or continuing Eligible Directors under Article Three of the Plan or the maximum number of shares for which any one individual participating in the Plan may be granted stock options and direct stock issuances in the 27. aggregate over the term of the Plan,, except for permissible adjustments under Section VI.C. of Article One, (ii) materially modify the eligibility requirements for plan participation or (iii) materially increase the benefits accruing to plan participants. B. (i) Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant Program and (ii) shares of Common Stock may be issued under the Stock Issuance Program, which are in both instances in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under the Discretionary Option Grant Program or the Stock Issuance Program are held in escrow until stockholder approval is obtained for a sufficient increase in the number of shares available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess option grants or excess share issuances are made, then (i) any unexercised excess options shall terminate and cease to be exercisable and (ii) the Corporation shall promptly refund the purchase price paid for any excess shares actually issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow. XX. TAX WITHHOLDING A. The Corporation's obligation to deliver shares of Common Stock upon the exercise of stock options for such shares or the vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. B. The Plan Administrator may, in its discretion and in accordance with the provisions of this Section III and such supplemental rules as the Plan Administrator may from time to time adopt (including the applicable safe-harbor provisions of Securities and Exchange Commission Rule 16b-3), provide any or all holders of Non-Statutory Options (other than the automatic option grants made pursuant to Article Three of the Plan) or unvested shares under the Plan with the right to use shares of the Corporation's Common Stock in satisfaction of all or part of the Federal, state and local income and employment tax liabilities incurred by such holders in connection with the exercise of their options or the vesting of their shares (the "Taxes"). Such right may be provided to any such holder in either or both of the following formats: STOCK WITHHOLDING: The holder of the Non-Statutory Option or unvested shares may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value to exceed one hundred percent (100%) of the applicable Taxes. STOCK DELIVERY: The Plan Administrator may, in its discretion, provide the holder of the Non-Statutory Option or the unvested shares with the election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with 28. the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value not to exceed one hundred percent (100%) of the Taxes incurred in connection with such option exercise or share vesting. XXI. EFFECTIVE DATE AND TERM OF PLAN A. This Plan became effective immediately upon adoption by the Board of Directors of Gasonics California. This Plan was subsequently assumed by the Corporation in connection with the Merger. Stock options and share issuances may be made under Articles Two and Four of the Plan from and after the Effective Date. B. The Plan was amended by the Board on September 21, 1994 to (i) increase the number of shares of Common Stock issuable under the Plan by an additional 500,000 shares(1) and (ii) increase the maximum number of shares of Common Stock for which any one individual may be granted stock options and direct stock issuances under the Plan by an additional 250,000 shares(1) (the "1994 Amendment"). The stockholders approved the 1994 Amendment at the 1995 Annual Meeting which was held on February 14, 1995. The Plan was subsequently restated by the Board on July 19, 1995 to revise the provisions of the Automatic Option Grant Program in effect under Article III (the "June 1995 Restatement"). The June 1995 Restatement became effective when adopted by the Board. However, no automatic option grants made pursuant to the restated provisions of the Automatic Option Grant Program shall become exercisable in whole or in part unless and until the June 1995 Restatement is approved by the stockholders. Should such stockholder approval not be obtained at the 1996 Annual Meeting, then each automatic option grant made pursuant to the June 1995 Restatement shall terminate and cease to remain outstanding, to the extent of the increased number of shares subject to that grant as a result of the provisions of the June 1995 Restatement, and the balance of each such option shall continue in full force and effect. No further automatic option grants shall be made on the basis of the June 1995 Restatement. However, the provisions of the Automatic Option Grant Program as in effect immediately prior to the June 1995 Restatement shall automatically be reinstated, and automatic option grants may thereafter continue to be made pursuant to the reinstated provisions of the Automatic Option Grant Program. All automatic option grants made prior to the June 1995 Restatement shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options, nothing in the 1995 Restatement shall be deemed to modify or in any way affect those outstanding options. On November 6, 1995, the Board authorized an additional increase to the number of shares of Common Stock available for issuance under the Plan. Such share increase, as adjusted for the 3-for-2 split of the Common Stock effected on November 20, 1995, has made an additional 750,000 shares available for issuance under the Plan. However, no option granted on the basis of such increase shall become exercisable, in whole or in part, unless and until the stockholders approve the increase. If such stockholder approval is not obtained at the 1996 Annual - -------------------- (7) The numbers DO NOT reflect the 3-for-2 split of the Common Stock effected by the Corporation on November 20, 1995. 29. Meeting, then any options previously granted on the basis of the 750,000-share increase shall terminate, and no further options based on such increase shall be granted. All outstanding options under the Plan which have NOT been granted on the basis of the 750,000-share increase shall remain outstanding in accordance with the terms and provisions of the agreements evidencing those grants, whether or not stockholder approval of the share increase is obtained. Subject to the foregoing limitations, the Plan Administrator may grant options under the plan at any time before the date fixed herein for the termination of the Plan. C. The Plan was amended on February 1, 1996 to authorize the appointment of the Secondary Committee for purposes of administering the Discretionary Option Grant and Stock Issuance Programs with respect to individuals who are non Section 16 insiders. The Primary Committee shall also retain separate but concurrent authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to such individuals. D. The Plan shall terminate upon the EARLIER of (i) December 31, 2003 or (ii) the date on which all shares available for issuance under the Plan shall have been issued or cancelled pursuant to the exercise, surrender or cash- out of the options granted under the Plan or the issuance of shares (whether vested or unvested) under the Stock Issuance Program. If the date of termination is determined under clause (i) above, then all option grants and unvested share issuances outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such grants or issuances. XXII. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares pursuant to option grants or share issuances under the Plan shall be used for general corporate purposes. XXIII. REGULATORY APPROVALS A. The implementation of the Plan, the granting of any stock option or stock appreciation right under the Plan, the issuance of any shares under the Stock Issuance Program and the issuance of Common Stock upon the exercise of the stock options or stock appreciation rights granted hereunder shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options and stock appreciation rights granted under it and the Common Stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which the Common Stock is then listed for trading. XXIV. NO EMPLOYMENT/SERVICE RIGHTS 30. Neither the action of the Corporation in establishing the Plan, nor any action taken by the Plan Administrator hereunder, nor any provision of the Plan shall be construed so as to grant any individual the right to remain in the Service of the Corporation (or any parent or subsidiary corporation) for any period of specific duration, and the Corporation (or any parent or subsidiary corporation retaining the services of such individual) may terminate such individual's Service at any time and for any reason, with or without cause. XXV. MISCELLANEOUS PROVISIONS A. Except to the extent otherwise expressly provided in the Plan, the right to acquire Common Stock or other assets under the Plan may not be assigned, encumbered or otherwise transferred by any Optionee or Participant. B. The provisions of the Plan relating to the exercise of options and the vesting of shares shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules, as such laws are applied to contracts entered into and performed in such State. C. The provisions of the Plan shall inure to the benefit of, and be binding upon, the Corporation and its successors or assigns, whether by Corporate Transaction or otherwise, and the Participants and Optionees, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees. 31. EX-10.20 3 EXHIBIT 10.20 [LOGO] LOAN AGREEMENT THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and entered into as of March 4, 1996 by and between GaSonics International Corporation, a California corporation ("Borrower") and UNION BANK, a California banking corporation ("Bank"). This Agreement amends and restates in its entirety that certain loan agreement dated April 19, 1995 between Bank and Borrower. SECTION 1. THE LOAN 1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an amount not to exceed Fifteen Million Dollars ($15,000,000) outstanding in the aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay and reborrow all or part of the Revolving Loan in amounts not less than Twenty Five Thousand Dollars ($25,000) in accordance with the terms of the Revolving Note; provided, however, that for at least thirty (30) consecutive days during each twelve (12)- month period, the principal amount outstanding under the Revolving Loan must be zero (0). All borrowings of the Revolving Loan must be made before February 28, 1997, at which time all unpaid principal and interest of the Revolving Loan shall be due and payable. The Revolving Loan shall be evidenced by a promissory note (the "Revolving Note") on the standard form used by Bank for commercial loans. Bank shall enter each amount borrowed and repaid in Bank's records and such entries shall be deemed to be the amount of the Revolving Loan outstanding. Omission of Bank to make any such entries shall not discharge Borrower of its obligation to repay in full with interest all amounts borrowed. 1.1.1.1 THE STANDBY L/C SUBLIMIT. As a sublimit to the Revolving Loan, Bank shall issue, for the account of Borrower, one or more irrevocable, standby letters of credit (individually, an "L/C" and collectively, the "L/Cs"). All such standby L/Cs shall be drawn on such terms and conditions as are acceptable to Bank. The aggregate amount available to be drawn under all outstanding L/Cs and the aggregate amount of unpaid reimbursement obligations under drawn L/Cs shall not exceed Five Hundred Thousand Dollars ($500,000) and shall reduce, dollar for dollar, the maximum amount available under the Revolving Loan. No standby L/C shall have an expiry date more than twelve (12) months from its date of issuance and each L/C shall be governed by the terms of (and Borrower agrees to execute) Bank's standard form for standby L/C applications and reimbursement agreements. No L/C shall expire after February 28, 1997. - 1 - 1.2 TERMINOLOGY. As used herein the word "Loan" shall mean, collectively, all the credit facilities described above. As used herein the word "Note" shall mean, collectively, all the promissory notes described above. As used herein, the words "Loan Documents" shall mean all documents executed in connection with this Agreement. 1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be used for general working capital purposes. 1.4 INTEREST. The unpaid principal balance of the Revolving Loan shall bear interest at the rate or rates provided in the Revolving Note and selected by Borrower. The Revolving Loan may be prepaid in full or in part only in accordance with the terms of the Revolving Note and any such prepayment shall be subject to the prepayment fee provided for therein. 1.5 BALANCES. Borrower shall maintain its major depository accounts with Bank until the Note and all sums payable pursuant to this Agreement have been paid in full. 1.6 DISBURSEMENT. Upon execution hereof, Bank shall disburse the proceeds of the Loan as provided in Bank's standard form Authorization executed by Borrower. 1.7 CONTROLLING DOCUMENT. In the event of any inconsistency between the terms of this Agreement and any Note or any of the other Loan Documents, the terms of such Note or other Loan Documents will prevail over the terms of this Agreement. SECTION 2. CONDITIONS PRECEDENT Bank shall not be obligated to disburse all or any portion of the proceeds of the Loan unless at or prior to the time for the making of such disbursement, the following conditions have been fulfilled to Bank's satisfaction: 2.1 COMPLIANCE. Borrower shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or at the date of the making of such disbursement and shall have executed and delivered to Bank the Note and other documents deemed necessary by Bank. 2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with certified copies of resolutions duly adopted by the Board of Directors of Borrower, authorizing this Agreement and the Loan Documents. Such resolutions shall also designate the persons who are authorized to act on Borrower's behalf in connection with this Agreement and to do the things required of Borrower pursuant to this Agreement. 2.3 TERMINATION STATEMENTS. Borrower shall have provided Bank with UCC-2 termination statements executed by such secured creditors as may be required by Bank suitable for filing with the Secretary of State in each state designated by Bank. - 2 - 2.4 CONTINUING COMPLIANCE. At the time any disbursement is to be made, there shall not exist any event, condition or act which constitutes an event of default under Section 6 hereof or any event, condition or act which with notice, lapse of time or both would constitute such event of default; nor shall there be any such event, condition, or act immediately after the disbursement were it to be made. SECTION 3. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants that: 3.1 BUSINESS ACTIVITY. The principal business of Borrower is the design and manufacturing of semiconductor manufacturing equipment. 3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and subsidiaries (those entities in which Borrower has either a controlling interest or at least a 25% ownership interest) and their addresses, and the names of Borrower's principal shareholders, are as provided on a schedule delivered to Bank on or before the date of this Agreement. 3.3 AUTHORITY TO BORROW. The execution, delivery and performance of this Agreement, the Note and all other agreements and instruments required by Bank in connection with the Loan are not in contravention of any of the terms of any indenture, agreement or undertaking to which Borrower is a party or by which it or any of its property is bound or affected. 3.4 FINANCIAL STATEMENTS. The financial statements of Borrower, including both a balance sheet at September 30, 1995 together with supporting schedules, and an income statement for the twelve (12) months ended September 30, 1995, have heretofore been furnished to Bank, and are true and complete and fairly represent the financial condition of Borrower during the period covered thereby. Since September 30, 1995, there has been no material adverse change in the financial condition or operations of Borrower. 3.5 TITLE. Except for assets which may have been disposed of in the ordinary course of business, Borrower has good and marketable title to all of the property reflected in its financial statements delivered to Bank and to all property acquired by Borrower since the date of said financial statements, free and clear of all liens, encumbrances, security interests and adverse claims except those specifically referred to in said financial statements. 3.6 LITIGATION. There is no litigation or proceeding pending or threatened against Borrower or any of its property which is reasonably likely to affect the financial condition, property or business of Borrower in a materially adverse manner or result in liability in excess of Borrower's insurance coverage. 3.7 DEFAULT. Borrower is not now in default in the payment of any of its material obligations, and there exists no event, condition or act which constitutes an event of default under Section 6 hereof and no condition, event or act which with notice or lapse of time, or both, would constitute an event of default. 3.8 ORGANIZATION. Borrower is duly organized and existing under the laws of the state of its organization, and has the power and authority to carry on the business in which it is engaged and/or proposes to engage. 3.9 POWER. Borrower has the power and authority to enter into this Agreement and to execute and deliver the Note and all of the other Loan Documents. - 3 - 3.10 AUTHORIZATION. This Agreement and all things required by this Agreement have been duly authorized by all requisite action of Borrower. 3.11 QUALIFICATION. Borrower is duly qualified and in good standing in any jurisdiction where such qualification is required. 3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with respect to any applicable laws, rules, ordinances or regulations which materially affect the operations or financial condition of Borrower. 3.13 ERISA. Any defined benefit pension plans as defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet, as of the date hereof, the minimum funding standards of Section 302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in ERISA has occurred with respect to any such plan. 3.14 REGULATION U. No action has been taken or is currently planned by Borrower, or any agent acting on its behalf, which would cause this Agreement or the Note to violate Regulation U or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities and Exchange Act of 1934, in each case as in effect now or as the same may hereafter be in effect. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock as one of its important activities and none of the proceeds of the Loan will be used directly or indirectly for such purpose. 3.15 CONTINUING REPRESENTATIONS. These representations shall be considered to have been made again at and as of the date of each disbursement of the Loan and shall be true and correct as of such date or dates. SECTION 4. AFFIRMATIVE COVENANTS Until the Note and all sums payable pursuant to this Agreement or any other of the Loan Documents have been paid in full, unless Bank waives compliance in writing, Borrower agrees that: 4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan only as provided in subsection 1.3 above. 4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge promptly all taxes, assessments and other governmental charges and claims levied or imposed upon it or its property, or any part thereof, provided, however, that Borrower shall have the right in good faith to contest any such taxes, assessments, charges or claims and, pending the outcome of such contest, to delay or refuse payment thereof provided that adequately funded reserves are established by it to pay and discharge any such taxes, assessments, charges and claims. 4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve its existence and assets and all rights, franchises, licenses and other authority necessary for the conduct of its business and will maintain and preserve its property, equipment and facilities in good order, condition and repair. Bank may, at reasonable times, visit and inspect any of the properties of Borrower. 4.4 RECORDS. Borrower will keep and maintain full and accurate accounts and records of its operations according to generally accepted accounting principles and will permit Bank to have access thereto, to make examination and photocopies thereof, and to make audits during regular business hours. Costs for such audits shall be paid by Borrower. - 4 - 4.5 INFORMATION FURNISHED. Borrower will furnish to Bank: (a) Within Fifty (50) days after the close of each fiscal quarter, except for the final quarter of each fiscal year, its unaudited balance sheet as of the close of such fiscal quarter, its unaudited income and expense statement with supportive schedules and statement of retained earnings for that fiscal quarter, prepared in accordance with generally accepted accounting principles; (b) Within One Hundred Twenty (120) days after the close of each fiscal year, a copy of its statement of financial condition including at least its balance sheet as of the close of such fiscal year, its income and expense statement and retained earnings statement for such fiscal year, examined and prepared on an audited basis by independent certified public accountants selected by Borrower and reasonably satisfactory to Bank, in accordance with generally accepted accounting principles applied on a basis consistent with that of the previous year; (c) Such other financial statements and information as Bank may reasonably request from time to time; (d) In connection with each fiscal year-end statement required hereunder, any management letter of Borrower's certified public accountants; (e) Within Fifty (50) days after each fiscal quarter, a certification of compliance with all covenants under this Agreement, executed by Borrower's chief financial officer or other duly authorized officer of Borrower, in form acceptable to Bank; (f) Prompt written notice to Bank of all events of default under any of the terms or provisions of this Agreement or of any other agreement, contract, document or instrument entered, or to be entered into with Bank; and of any litigation which, if decided adversely to Borrower, would have a material adverse effect on Borrower's financial condition; and of any other matter which has resulted in, or is likely to result in, a material adverse change in its financial condition or operations; and (g) Prior written notice to Bank of any changes in Borrower's officers and other senior management; Borrower's name; and location of Borrower's assets, principal place of business or chief executive office. 4.6 CURRENT RATIO. Borrower will at all times maintain a ratio of current assets to current liabilities of at least 2.0:1.0, as such terms are defined by generally accepted accounting principles. 4.7 TANGIBLE NET WORTH. Borrower will at all times maintain Tangible Net Worth of not less than Fifty Eight Million Dollars ($58,000,000). "Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower subordinated to Bank and decreased by patents, licenses, trademarks, trade names, goodwill and other similar intangible assets, organizational expenses, and monies due from affiliates (including officers, shareholders and directors). 4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times maintain a ratio of total liabilities to tangible net worth of not greater than 1.0 :1.0. 4.9 PROFITABILITY. Borrower will maintain a net profit, after provision for income taxes, of any positive amount for any consecutive twelve month period, as reported at the end of each fiscal quarter. 4.10 INSURANCE. Borrower will keep all of its insurable property, real, personal or mixed, insured by good and responsible companies against fire and such other risks as are customarily insured against by companies conducting similar business with respect to like properties. Borrower will maintain adequate worker's compensation insurance and adequate insurance against liability for damages to persons and property. - 5 - 4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand by Bank, take such further action and execute all such additional documents and instruments in connection with this Agreement as Bank in its reasonable discretion deems necessary, and promptly supply Bank with such other information concerning its affairs as Bank may request from time to time. 4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to Bank upon demand, reasonable attorneys' fees (including but not limited to the reasonable estimate of the allocated costs and expenses of in-house legal counsel and legal staff) and all costs and other expenses paid or incurred by Bank in collecting, modifying or compromising the Loan or in enforcing or exercising its rights or remedies created by, connected with or provided for in this Agreement or any of the Loan Documents, whether or not an arbitration, judicial action or other proceeding is commenced. If such proceeding is commenced, only the prevailing party shall be entitled to attorneys' fees and court costs. 4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all costs, expenses and fees incurred by Bank in preparing and documenting this Agreement and the Loan, and all amendments and modifications thereof, including but not limited to all filing and recording fees, costs of appraisals, insurance and attorneys' fees, including the reasonable estimate of the allocated costs and expenses of in-house legal counsel and legal staff. 4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank, as soon as possible and in any event within 15 days after Borrower knows or has reason to know that any event or condition with respect to any defined benefit pension plans of Borrower described in Section 3 above has occurred, a statement of an authorized officer of Borrower describing such event or condition and the action, if any, which Borrower proposes to take with respect thereto. SECTION 5. NEGATIVE COVENANTS Until the Note and all other sums payable pursuant to this Agreement or any other of the Loan Documents have been paid in full, unless Bank waives compliance in writing, Borrower agrees that: 5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or suffer to exist any mortgage, pledge, security interest, encumbrance, or lien (other than for taxes not delinquent and for taxes and other items being contested in good faith) on property of any kind, whether real, personal or mixed, now owned or hereafter acquired, or upon the income or profits thereof, except to Bank and except for minor encumbrances and easements on real property which do not affect its market value, and except for existing liens on Borrower's personal property and future purchase money security interests encumbering only the personal property purchased. 5.2 BORROWINGS. Borrower will not sell, discount or otherwise transfer any account receivable or any note, draft or other evidence of indebtedness, except to Bank or except to a financial institution at face value for deposit or collection purposes only and without any fee other than fees normally charged by the financial institution for deposit or collection services. Borrower will not borrow any money, become contingently liable to borrow money, nor enter any agreement to directly or indirectly obtain borrowed money, except pursuant to agreements made with Bank. 5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither liquidate nor dissolve nor enter into any consolidation, merger, partnership or other combination, nor convey, nor sell, nor lease all or the greater part of its assets or business, nor purchase or lease all or the greater part of the assets or business of another; provided, however, Borrower may acquire, merge or consolidate with another corporation if Borrower is the surviving corporation and the aggregate value of the assets so transferred does not exceed Ten Million Dollars ($10,000,000) in any fiscal year and such assets will not be subject to any lien or encumbrance following the effective date of such combination. - 6 - 5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in the ordinary course of business as currently conducted, make any loans or advances, become a guarantor or surety, pledge its credit or properties in any manner or extend credit, with the exception of loans, advances, and guaranties of up to Ten Million Dollars ($10,000,000) in aggregate to support Borrower's Japanese subsidiary. 5.5 INVESTMENTS. Borrower will not purchase the debt or equity of another person or entity except for savings accounts and certificates of deposit of Bank, direct U.S. Government obligations and commercial paper issued by corporations with the top ratings of Moody's or Standard & Poor's, provided all such permitted investments shall mature within one year of purchase. 5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any dividends, other than a dividend payable in its own common stock, or authorize or make any other distribution with respect to any of its stock now or hereafter outstanding. 5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire any share of its capital stock for value. 5.8 PARENT AND SUBSIDIARY PROPERTY. Borrower will not transfer any property to its parent or any affiliate of its parent, except for value received in the normal course of business as business would be conducted with an unrelated or unaffiliated entity. In no event shall management fees or fees for services be paid by Borrower to any such direct or indirect affiliate without Bank's prior written approval. SECTION 6. EVENTS OF DEFAULT The occurrence of any of the following events ("Events of Default") shall terminate any obligation on the part of Bank to make or continue the Loan and automatically, unless otherwise provided under the Note, shall make all sums of interest and principal and any other amounts owing under the Loan immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or any other notices or demands: 6.1 Borrower shall default in the due and punctual payment of the principal of or the interest on the Note or any of the other Loan Documents; or 6.2 Any default shall occur under the Note; or 6.3 Borrower shall default in the due performance or observance of any covenant or condition of the Loan Documents; 6.4 Any guaranty or subordination agreement required hereunder is breached or becomes ineffective, or any Guarantor or subordinating creditor dies, disavows or attempts to revoke or terminate such guaranty or subordination agreement; or 6.5 There is a change in ownership or control of ten percent (10%) or more of the issued and outstanding stock of Borrower or any Guarantor, or (if Borrower is a partnership) there is a change in ownership or control of any general partner's interest. - 7 - SECTION 7. MISCELLANEOUS PROVISIONS 7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank hereunder shall be cumulative and not alternative and shall be in addition to all rights, powers and remedies given to Bank by law against Borrower or any other person, including but not limited to Bank's rights of setoff or banker's lien. 7.2 NONWAIVER. Any forbearance or failure or delay by Bank in exercising any right, power or remedy hereunder shall not be deemed a waiver thereof and any single or partial exercise of any right, power or remedy shall not preclude the further exercise thereof. No waiver shall be effective unless it is in writing and signed by an officer of Bank. 7.3 INUREMENT. The benefits of this Agreement shall inure to the successors and assigns of Bank and the permitted successors and assignees of Borrower, and any assignment of Borrower without Bank's consent shall be null and void. 7.4 APPLICABLE LAW. This Agreement and all other agreements and instruments required by Bank in connection therewith shall be governed by and construed according to the laws of the State of California. 7.5 SEVERABILITY. Should any one or more provisions of this Agreement be determined to be illegal or unenforceable, all other provisions nevertheless shall be effective. 7.6 INTEGRATION CLAUSE. Except for documents and instruments specifically referenced herein, this Agreement constitutes the entire agreement between Bank and Borrower regarding the Loan and all prior communications verbal or written between Borrower and Bank shall be of no further effect or evidentiary value. 7.7 CONSTRUCTION. The section and subsection headings herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 7.8 AMENDMENTS. This Agreement may be amended only in writing signed by all parties hereto. 7.9 COUNTERPARTS. Borrower and Bank may execute one or more counterparts to this Agreement, each of which shall be deemed an original. SECTION 8. SERVICE OF NOTICES 8.1 Any notices or other communications provided for or allowed hereunder shall be effective only when given by one of the following methods and addressed to the respective party at its address given with the signatures at the end of this Agreement and shall be considered to have been validly given: (a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first class postage prepaid, with the United States Postal Service; (c) on the next business day, if sent by overnight courier service of recognized standing; and (d) upon telephoned confirmation of receipt, if telecopied. 8.2 The addresses to which notices or demands are to be given may be changed from time to time by notice delivered as provided above. - 8 - THIS AGREEMENT is executed on behalf of the parties by duly authorized officers as of the date first above written. UNION BANK /s/ Mark P. Gilles By: Mark P. Gilles Title Vice President /s/ Kelly D. Takahashi By: Kelly D. Takahashi Title Vice President Address: 350 California Street, 10th floor San Francisco, CA 94104-1402 Attention: Kelly D. Takahashi Telecopier: (415) 705-7111 Telephone: (415) 705-7098 GASONICS INTERNATIONAL CORPORATION /s/ Jerald P. Shaevitz By: Jerald P. Shaevitz Title Chief Financial Officer /s/ Dave Toole By: Dave Toole Title President Address: 2730 Junction Avenue San Jose, CA 95134 Attention: Jerald P. Shaevitz Telecopier: (408) 325-6691 Telephone: (408) 325-1222 - 9 - EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 6,038 15,984 33,984 551 25,796 86,528 12,126 2,706 96,986 24,925 0 0 0 604 70,870 96,986 70,779 70,779 32,301 32,301 0 180 47 13,268 4,644 8,624 0 0 0 8,624 .64 .64
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