def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant þ
Filed by a party other than the Registrant o
Check the appropriate box:
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Preliminary proxy statement. |
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Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)). |
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Definitive proxy statement. |
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Definitive additional materials. |
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Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12. |
FORMFACTOR, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the form or schedule
and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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FORMFACTOR, INC.
7005 Southfront Road
Livermore, California 94551
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2005
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of
Stockholders of FormFactor, Inc. will be held at our offices
located at 7005 Southfront Road, Livermore, California, on
Thursday, May 19, 2005, at 3:00 p.m., Pacific Daylight
Time, for the following purposes:
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1. To elect two Class II directors to our Board of
Directors, each to serve on our Board of Directors until his or
her successor has been elected and qualified or until his or her
earlier death, resignation or removal. The director nominees are: |
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Dr. Homa Bahrami |
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G. Carl Everett, Jr. |
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2. To ratify the selection of PricewaterhouseCoopers LLP as
FormFactors independent auditor for the fiscal year ending
December 31, 2005. |
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3. To act upon such other matters as may properly come
before the Annual Meeting or any adjournment or postponement
thereof. |
The foregoing items of business are more fully described in the
Proxy Statement for 2005 Annual Meeting of Stockholders
accompanying this Notice. The record date for determining those
stockholders of our company who will be entitled to notice of,
and to vote at, the Annual Meeting and at any adjournment or
postponement thereof is March 31, 2005. The stock transfer
books will not be closed between the record date and the date of
the Annual Meeting. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection at
FormFactors principal executive offices.
Your vote is important. Whether or not you plan to attend
the Annual Meeting, please vote as soon as possible. You may
vote by completing, dating, signing and promptly returning the
accompanying proxy in the enclosed postage-paid envelope (to
which no postage need be affixed if mailed in the United States)
so that your shares may be represented at the Annual Meeting.
Returning the accompanying proxy does not deprive you of your
right to attend the Annual Meeting and to vote your shares in
person. You may revoke a previously delivered proxy at any time
prior to the Annual Meeting. If you decide to attend the Annual
Meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the meeting.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Stuart L. Merkadeau |
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Secretary |
Livermore, California
April 25, 2005
FORMFACTOR, INC.
7005 Southfront Road
Livermore, California 94551
April 25, 2005
2005 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
You are cordially invited to attend the 2005 Annual Meeting of
Stockholders of FormFactor, Inc., which will be held at our
offices located at 7005 Southfront Road, Livermore, California,
on Thursday, May 19, 2005, at 3:00 p.m., Pacific
Daylight Time.
The agenda for the Annual Meeting is described in detail in the
attached Notice of Annual Meeting of Stockholders and the
attached Proxy Statement. We urge you to carefully review the
attached proxy materials.
Your vote is important. Whether or not you plan to attend
the Annual Meeting, please vote as soon as possible. You may
vote by completing, dating, signing and promptly returning the
accompanying proxy in the enclosed postage-paid envelope (to
which no postage need be affixed if mailed in the United States)
so that your shares may be represented at the Annual Meeting.
Returning the accompanying proxy does not deprive you of your
right to attend the Annual Meeting and to vote your shares in
person. You may revoke a previously delivered proxy at any time
prior to the Annual Meeting. If you decide to attend the Annual
Meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the meeting.
We thank you for your support and look forward to seeing you at
the Annual Meeting.
With best regards,
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Dr. Igor Y. Khandros
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Joseph R. Bronson |
Chief Executive Officer
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President |
Livermore, California
April 25, 2005
TABLE OF CONTENTS
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A-1 |
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The information in the Report of the Audit Committee, the
Report of the Compensation Committee and the Stock Price
Performance Graph contained in this Proxy Statement shall not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that we specifically incorporate this
information by reference into such filings. In addition, this
information shall not otherwise be deemed to be soliciting
material or to be filed under those Acts.
FORMFACTOR, INC.
7005 Southfront Road
Livermore, California 94551
PROXY STATEMENT
FOR
2005 ANNUAL MEETING OF STOCKHOLDERS
April 25, 2005
GENERAL
These proxy materials are provided in connection with the
solicitation of proxies by the Board of Directors of FormFactor,
Inc., a Delaware corporation, with respect to the 2005 Annual
Meeting of Stockholders to be held at our offices located at
7005 Southfront Road, Livermore, California, on Thursday,
May 19, 2005, at 3:00 p.m., Pacific Daylight Time, and
at any adjournment or postponement of the Annual Meeting.
This Proxy Statement and the accompanying proxy card were first
mailed to our stockholders on or about April 25, 2005. Our
Annual Report on Form 10-K for the fiscal year ended
December 25, 2004 was enclosed with this Proxy Statement in
such mailing.
Purpose of Annual Meeting
The specific proposals to be considered and acted upon at the
Annual Meeting are summarized in the accompanying Notice of
Annual Meeting of Stockholders. Each proposal is described in
more detail in this Proxy Statement.
Voting and Solicitation
Record Date. Only stockholders of record of our common
stock at the close of business on March 31, 2005, which is
the record date, are entitled to notice of, and to vote at, the
Annual Meeting. At the close of business on the record date, we
had 39,197,061 shares of FormFactor common stock
outstanding and entitled to vote, which were held by 163
stockholders of record.
Voting Rights. Holders of our common stock are entitled
to one vote for each share held as of the record date. All
proxies will be voted in accordance with the instructions
contained therein and, if no choice is specified, the proxies
will be voted in favor of the nominees for director and the
selection of PricewaterhouseCoopers as our independent auditor,
all as presented in the accompanying Notice of Annual Meeting of
Stockholders and this Proxy Statement. Please note that if your
shares of our common stock are held of record by a broker, bank
or other nominee and you wish to vote at the Annual Meeting, you
must obtain from the record holder a proxy issued in your name.
Quorum. A quorum is required for our stockholders to
conduct business at the Annual Meeting. The holders of a
majority of the shares of our common stock entitled to vote on
the record date, present in person or represented by proxy, will
constitute a quorum for the transaction of business at the
Annual Meeting.
Vote Required to Approve Proposals. With respect to
Proposal No. 1, directors will be elected by a
plurality of the votes of the shares of our common stock present
in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. Stockholders may
not cumulate votes in the election of directors. Approval and
adoption of Proposal No. 2 requires the affirmative
vote of a majority of the shares of our common stock entitled to
vote on the proposal that are present in person or represented
by proxy
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at the Annual Meeting. The effectiveness of any of the proposals
is not conditioned upon the approval by our stockholders of any
other proposal by the stockholders.
Effect of Abstentions and Broker Non-Votes. Abstentions
will have no effect with regard to the election of directors,
since approval of a percentage of shares present or outstanding
is not required for this proposal, but will have the same effect
as negative votes with regard to all other matters. Brokers who
hold shares for the accounts of their clients may vote such
shares either as directed by their clients or, in the absence of
such direction, in their own discretion if permitted by the
stock exchange or other organization of which they are members.
Brokers that are members of certain exchanges are permitted to
vote their clients proxies in their own discretion as to
certain routine proposals, such as all of the
proposals to be voted on at the Annual Meeting. If a broker
votes shares that are not voted by its clients for or against a
proposal, those shares are considered present and entitled to
vote at the Annual Meeting, and will be counted towards
determining whether or not a quorum is present. Those shares
will also be taken into account in determining the outcome of
all of the proposals. Although all of the proposals to be voted
on at the meeting are considered routine, where a
proposal is not routine, a broker who has received
no instructions from its clients generally does not have
discretion to vote its clients unvoted shares on that
proposal. When a broker indicates on a proxy that it does not
have discretionary authority to vote certain shares on a
particular proposal, the missing votes are referred to as
broker non-votes. Those shares would be considered
present for purposes of determining whether or not a quorum is
present, but would not be considered entitled to vote on the
proposal or counted as affirmative votes with respect to its
approval.
Recommendations of our Board of Directors
Proposal No. 1. Our Board of Directors
recommends a vote FOR the election of Dr. Homa Bahrami
and G. Carl Everett, Jr. to our Board of Directors as
Class II directors.
Proposal No. 2. Our Board of Directors
recommends a vote FOR the ratification of the selection of
PricewaterhouseCoopers LLP as our independent auditor for the
fiscal year ending December 31, 2005.
How to Vote
Voting by Mail. By completing, dating, signing and
returning the proxy accompanying this Proxy Statement in the
enclosed postage-paid envelope (to which no postage need be
affixed if mailed in the United States), you are authorizing the
individuals named on the proxy, who are officers of FormFactor
and are known as proxy holders, to vote your shares at the
Annual Meeting in the manner that you indicate. We encourage you
to sign and return the proxy even if you plan to attend the
Annual Meeting. In this way, your shares will be voted if you
are unable to attend the Annual Meeting. If you received more
than one proxy card, it is an indication that your shares are
held in multiple accounts. Please complete, date, sign and
return all proxies to ensure that all of your shares of our
common stock are voted at the Annual Meeting.
Voting in Person. If you plan to attend the Annual
Meeting and vote in person, we will provide you with a ballot at
the meeting. If your shares are registered directly in your
name, you are considered the stockholder of record and you have
the right to vote in person at the meeting. If your shares are
held in the name of your broker, bank or other nominee, you are
considered the beneficial owner of shares held in street name.
As a beneficial owner, if you wish to vote at the Annual
Meeting, you must bring to the Annual Meeting a letter from the
broker, bank or other nominee confirming your beneficial
ownership of such shares.
Revocability of Proxies
Any person signing a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to the Annual
Meeting, or at the Annual Meeting prior to the commencement of
voting at the Annual Meeting. A proxy may be revoked by any of
the following methods:
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a written instrument delivered to us stating that the proxy is
revoked; |
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a subsequent proxy that is signed by the person who signed the
earlier proxy and is presented at the Annual Meeting; or |
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attendance at the Annual Meeting and voting in person. |
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Adjournment of Annual Meeting
In the event that sufficient votes in favor of the proposals are
not received by the date of the Annual Meeting, the persons
named as proxies may propose one or more adjournments of the
Annual Meeting to permit further solicitations of proxies. Any
such adjournment would require the affirmative vote of the
majority of the shares of common stock present in person or
represented by proxy at the Annual Meeting.
Expenses of Soliciting Proxies; Solicitation
We will pay the entire cost of soliciting proxies to be voted at
the Annual Meeting, including the preparation, assembly,
printing and mailing of these proxy materials. Copies of these
proxy materials will be provided to brokerage firms, fiduciaries
and custodians holding shares in their names that are
beneficially owned by others so that they may forward the
solicitation material to such beneficial owners. In these cases,
we may reimburse the record holders for their reasonable
expenses for forwarding proxy materials to, and obtaining
authority to execute proxies from, such beneficial owners.
Following the original mailing of these proxy materials, our
directors, officers and employees may also solicit proxies by
mail, telephone or in person. We will not pay any compensation
to these individuals for their proxy solicitation efforts, but
we may reimburse them for reasonable out-of pocket expenses in
connection with any solicitation. In addition, we may engage a
proxy solicitor to assist in the solicitation of proxies from
our stockholders. If we engage a proxy solicitor, we expect that
the fees we would pay to the proxy solicitor would not exceed
$10,000, plus reasonable out-of-pocket expenses.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The first proposal is to elect two Class II directors to
our Board of Directors. The Class II nominees are
Dr. Homa Bahrami and G. Carl Everett, Jr., who are
current directors of FormFactor. These nominees have been duly
recommended by our Governance Committee and nominated by our
Board of Directors, and have elected to stand for reelection.
The proxy holders intend to vote all proxies received by them
for Dr. Bahrami and Mr. Everett, unless otherwise
instructed. Proxies may not be voted for more than two
directors. Stockholders may not cumulate votes in the election
of directors. In the event any nominee is unable or declines to
serve as a director at the time of the Annual Meeting, the
proxies may be voted for a nominee designated by our Board of
Directors to fill the vacancy. As of the date of this Proxy
Statement, our Board of Directors is not aware that any nominee
is unable or will decline to serve as a director of our company.
Our Board of Directors recommends a vote FOR the
election of Dr. Homa Bahrami and G. Carl Everett, Jr.
to our Board of Directors as Class II directors.
Board of Directors
Our Board of Directors consists of seven members and is divided
into three classes, which we have designated as
Classes I, II and III. Each director is elected for a
three-year term of office, with one class of directors being
elected at each annual meeting of stockholders. Each director
holds office until his or her successor is duly elected and
qualified or until his or her earlier death, resignation or
removal. Our Board of Directors has determined that each of our
directors, other than Dr. Khandros, who is our Chief
Executive Officer, and Mr. Bronson, who is our President,
is independent within the meaning of the rules of the Nasdaq
National Market. Accordingly, more than a majority of the
members of our Board are independent.
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The names, positions with FormFactor and other information
regarding our directors, including the Class II nominees,
are set forth in the table below.
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Name of Director |
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Dr. Homa Bahrami(3)
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50 |
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II |
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Director |
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December 2004 |
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Joseph R. Bronson
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56 |
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III |
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President and Director |
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April 2002 |
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Dr. William H. Davidow(2),(3)
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70 |
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Chairman of the Board of Directors |
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April 1995 |
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G. Carl Everett, Jr.(1),(2),(3)
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54 |
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II |
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Director |
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June 2001 |
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Dr. Igor Y. Khandros
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50 |
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Chief Executive Officer and Director |
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April 1993 |
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James A. Prestridge(1),(2)
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III |
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Director |
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April 2002 |
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Harvey A. Wagner(1)
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III |
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Director |
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February 2005 |
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Current member of the Audit Committee. |
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Current member of the Compensation Committee. |
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Current member of the Governance Committee. |
Dr. Homa Bahrami has served as a Director since
December 2004. Dr. Bahrami is a Senior Lecturer at the Haas
School of Business, University of California at Berkeley.
Dr. Bahrami has been on the Haas School faculty since 1986
and is widely published on organizational design and
organizational development challenges and trends in the high
technology sector. Dr. Bahrami holds a Ph.D. in
organizational behavior from Aston University, U.K.
Joseph R. Bronson has served as our President and a
member of the Office of the Chief Executive since November 2004.
Mr. Bronson has also served as a Director since April 2002.
He was an executive Vice President of Applied Materials, Inc., a
manufacturer of semiconductor wafer fabrication equipment, from
December 2000 to October 2004 and a member of the Office of the
President and the Chief Financial Officer of Applied Materials
from January 1998 to October 2004. Mr. Bronson served as a
Senior Vice President and as the Chief Administrative Officer of
Applied Materials from January 1998 to December 2002 and as a
Group Vice President of Applied Materials from April 1994 to
January 1998. Mr. Bronson serves on the Board of Directors
of two publicly traded companies, Jacob Engineering Group Inc.
and Advanced Energy Industries, Inc. Mr. Bronson is a
Certified Public Accountant and holds a B.S. in accounting from
Fairfield University and an M.B.A. from the University of
Connecticut.
Dr. William H. Davidow has served as a Director
since April 1995 and as Chairman of the Board of Directors since
June 1996. Since 1985, Dr. Davidow has been a general
partner of Mohr, Davidow Ventures, a venture capital firm.
Dr. Davidow serves as Director Emeritus of the Board of
Directors of one publicly traded company, Rambus Inc.
Dr. Davidow holds an A.B. and a M.S. in electrical
engineering from Dartmouth College, a M.S. in electrical
engineering from the California Institute of Technology and a
Ph.D. in electrical engineering from Stanford University.
G. Carl Everett, Jr. has served as a Director
since June 2001. Mr. Everett founded GCE Ventures, a
venture advisement firm, in April 2001. Mr. Everett is also
a partner at Accel Partners, an early stage venture capital firm
located in Palo Alto, California. From February 1998 to April
2001, Mr. Everett served as Senior Vice President, Personal
Systems Group of Dell Computer Corporation. During 1997,
Mr. Everett was on a personal sabbatical. From 1978 to
December 1996, Mr. Everett held several management
positions with Intel Corporation, including Senior Vice
President and General Manager of the Microprocessor Products
Group and Senior Vice President and General Manager of the
Desktop Products Group. Mr. Everett holds a B.A. in
business administration from New Mexico State University.
Dr. Igor Y. Khandros founded FormFactor in April
1993 and has served as the Companys Chief Executive
Officer and as a Director since that time. He also served as
President from April 1993 to November 2004. From 1990 to 1992,
Dr. Khandros served as the Vice President of Development of
Tessera,
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Inc., a provider of chip scale packaging technology that he
co-founded. From 1986 to 1990, he was employed at the Yorktown
Research Center of IBM Corporation as a member of the technical
staff and a manager. From 1979 to 1985, Dr. Khandros was
employed at ABEX Corporation, a casting foundry and composite
parts producer, as a research metallurgist and a manager, and he
was an engineer from 1977 to 1978 at the Institute of Casting
Research in Kiev, Russia. Dr. Khandros holds an M.S.
equivalent degree in metallurgical engineering from Kiev
Polytechnic Institute in Kiev, Russia, and a Ph.D. in metallurgy
from Stevens Institute of Technology.
James A. Prestridge has served as a Director since April
2002. Mr. Prestridge served as a Director of Teradyne Inc.,
a manufacturer of automated test equipment, from May 1992 until
May 2000. Mr. Prestridge was Vice Chairman of Teradyne from
January 1996 until May 2000 and served as Executive Vice
President of Teradyne from 1992 until May 2000.
Mr. Prestridge holds a B.S. in general engineering from the
U.S. Naval Academy and an M.B.A. from Harvard University.
Mr. Prestridge served as a Captain in the U.S. Marine
Corps.
Harvey A. Wagner has served as a Director since February
2005. Mr. Wagner has been President and Chief Executive
Officer of Quovadx, Inc., a Nasdaq-listed global software and
services firm based in Englewood, Colorado, since October 2004
and a member of the Board of Directors of Quovadx since April
2004. From May 2004 through October 2004, Mr. Wagner also
served as acting President and Chief Executive Officer of
Quovadx. Prior to joining Quovadx, he served as Executive Vice
President and Chief Financial Officer of Mirant Corporation. In
addition to Quovadx and FormFactor, Mr. Wagner also serves
on the Board of Directors of Cree, Inc., a publicly traded
company where he is Chairman of the Audit Committee and a member
of the Compensation Committee and the Nominating and Governance
Committee, as well as Proficient Systems, Inc., a privately held
company. Mr. Wagner has business experience in both Fortune
500 companies and in emerging, multi-national
high-technology companies. He has served as CFO for four New
York Stock Exchange and two Nasdaq-listed companies in the
software, computer hardware, energy, and telecommunications
industries. Mr. Wagner holds a B.B.A. in Accounting from
the University of Miami in Coral Gables, Florida.
Board and Committee Meetings
During our fiscal year ended December 25, 2004, our Board
of Directors held eleven meetings. All of our directors attended
or participated in all of the meetings of the Board of Directors
held during fiscal 2004 with the exception of Dr. Thomas
J. Campbell, who participated in more than 75% of such
meetings and in all of the meetings of the committees on which
he served prior to his resignation from his position as a
Director of the Company effective December 1, 2004.
The independent members of our Board of Directors meet regularly
in executive sessions outside of the presence of management.
Committees of the Board of Directors
Our Board of Directors has established three standing
committees: the Audit Committee, the Compensation Committee and
the Governance Committee.
Audit Committee. The Audit Committee oversees our
companys accounting and financial reporting processes and
the audits of our financial statements, including oversight of
our systems of internal controls and disclosure controls and
procedures, compliance with legal and regulatory requirements,
our internal audit function and the selection, compensation and
evaluation of our independent auditor. During fiscal 2004, the
Audit Committee met seventeen times and was comprised of
Mr. Bronson, who served as chairperson, Mr. Everett
and Mr. Prestridge, except during November and December
2004, for which period the Committee was comprised of
Messrs. Everett and Prestridge, with Mr. Everett
serving as interim chairperson. Mr. Everett continued to
serve as interim chairperson until Mr. Wagner, who joined
our Board of Directors in February 2005, assumed the chairperson
role effective March 1, 2005. The current members of our
Audit Committee are Messrs. Everett, Prestridge and Wagner.
Our Board of Directors has determined that each member of the
Audit Committee is independent within the meaning of the rules
of the Securities and Exchange Commission and the Nasdaq
National Market and is able to read and understand fundamental
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financial statements as contemplated by such rules. Our Board of
Directors has also determined that Mr. Wagner is an audit
committee financial expert within the meaning of the rules of
the Securities and Exchange Commission and is financially
sophisticated within the meaning of the rules of the Nasdaq
National Market. Our Board of Directors and the Audit Committee
have adopted a charter for the Audit Committee, a copy of which
is attached to this Proxy Statement as Appendix A.
Compensation Committee. The Compensation Committee
oversees our companys compensation policies and programs,
determines the compensation of our executive officers and Board
of Directors, and administers our equity and benefit plans.
During fiscal 2004, the Compensation Committee met four times
and was comprised of Dr. Davidow and Messrs. Bronson
and Everett, except during November and December 2004, for which
period the Committee was comprised of Dr. Davidow and
Messrs. Everett and Prestridge. The current members of our
Compensation Committee are Dr. Davidow and
Messrs. Everett and Prestridge. Mr. Prestridge is the
chairperson of this committee. Our Board of Directors has
determined that each member of the Compensation Committee is
independent within the meaning of the rules of the Nasdaq
National Market, a non-employee director within the meaning of
Section 16 of the Securities Exchange Act of 1934, and an
outside director within the meaning of Section 162(m) of
the Internal Revenue Code. Our Board of Directors and the
Compensation Committee have adopted a charter for the
Compensation Committee, a copy of which was filed as
Appendix B to our Proxy Statement for 2004 Annual Meeting
of Stockholders.
Governance Committee. The Governance Committee oversees
our companys corporate governance practices and our
process for identifying, evaluating and recommending for
nomination by our Board of Directors individuals for service on
the Board and its committees. During fiscal 2004, the Governance
Committee met two times and was comprised of Dr. Davidow
and Messrs. Campbell and Prestridge, except during December
2004, for which period the Committee was comprised of
Drs. Bahrami and Davidow and Mr. Prestridge. The
current members of the Governance Committee are
Drs. Bahrami and Davidow and Mr. Everett.
Dr. Bahrami is the chairperson of this committee. Our Board
of Directors has determined that each member of the Governance
Committee is independent within the meaning of the rules of the
Nasdaq National Market. Our Board of Directors and the
Governance Committee have adopted a charter for the Governance
Committee. The charter of this committee is not available on our
company website; however a copy of this charter was filed as
Appendix C to our Proxy Statement for 2004 Annual Meeting
of Stockholders.
Director Compensation
For fiscal 2004, our independent directors received annual
compensation of $12,500, compensation of $1,000 for each Board
meeting attended, and compensation of $500 for each Board
committee meeting attended. For fiscal 2005, our independent
directors will receive annual compensation of $20,000,
compensation of $2,000 for each Board meeting attended, $1,000
for meetings attended telephonically, and compensation of $1,000
for each Board committee meeting attended. Additionally, we will
pay additional annual compensation of $5,000 to each committee
chair and $15,000 to the Chairman of the Board. Our
non-independent directors do not receive cash compensation for
their services as directors. All of our directors are reimbursed
for their reasonable expenses in attending Board and Board
committee meetings.
Each of our directors is eligible to participate in our 2002
Equity Incentive Plan. Under this plan, option grants to
directors who are our employees, or employees of a parent or
subsidiary of ours, are made at the discretion of the
Compensation Committee, and option grants to directors who are
not our employees, or employees of a parent or subsidiary of
ours, are automatic and non-discretionary. Each non-employee
director who becomes a member of our Board of Directors is
granted an option to purchase 12,500 shares of our
common stock as of the date that director joins the Board. In
addition, immediately after each annual meeting of our
stockholders, each non-employee director is automatically
granted an additional option to purchase 12,500 shares
of our common stock, as long as the non-employee director is a
member of our Board on that date and has served continuously as
a member of our Board for at least 12 months since the last
option grant to that non-employee director. If less than
12 months has passed, then the number of shares subject to
the option granted after the annual meeting is 12,500 multiplied
by a fraction, the numerator of which is the
6
number of days that have elapsed since the last option grant to
that director and the denominator of which is 365 days.
Each option granted to a director under our 2002 Equity
Incentive Plan will have an exercise price equal to the fair
market value of our common stock on the date of grant. The
options will have ten-year terms and will terminate three months
after the date the director ceases to be a director or
consultant or 12 months if the termination is due to death
or disability. All options granted to non-employee directors who
first became members of our Board of Directors after our initial
public offering will vest over a one-year period at a rate of
1/12th of the total shares granted at the end of each full
succeeding month, so long as the non-employee director
continuously remains our director or consultant. All succeeding
option grants to non-employee directors who were members of our
Board of Directors prior to our initial public offering will
vest as to 1/12th of the total shares granted at the end of each
full succeeding month from the later of the date of grant or the
date when all outstanding stock options and all outstanding
shares issued upon exercise of any stock options granted to the
non-employee director prior to the grant of such succeeding
grant have fully vested. In the event of our dissolution or
liquidation or a change in control transaction, options granted
to our non-employee directors under the plan will become 100%
vested and exercisable in full.
In connection with Dr. Bahramis appointment to the
Board, in December 2004 we granted Dr. Bahrami an option
under the 2002 Equity Incentive Plan to
purchase 12,500 shares of our common stock at an
exercise price of $25.65 per share, with other terms as
specified above.
Compensation Committee Interlocks and Insider
Participation
None of the members of our Compensation Committee has at any
time since our incorporation been one of our officers or
employees. None of our executive officers serves or in the past
has served as a member of the board of directors or compensation
committee of any entity that has one or more of its executive
officers serving on our Board of Directors or our Compensation
Committee.
Consideration of Director Nominees
Our Governance Committee identifies, evaluates and recommends
individuals for nomination by our Board of Directors for
election as directors of our Board. The committee generally
identifies nominees based upon recommendations by our directors
and management. In addition, our Governance Committee also
considers recommendations properly submitted by our
stockholders. The committee may retain recruiting professionals
to assist in the identification and evaluation of candidates for
director nominees. To date, we have not paid any third parties
to assist us in this process.
In selecting nominees for our Board of Directors, the Governance
Committee considers candidates based on the need to satisfy the
applicable rules and regulations of the Securities and Exchange
Commission and the rules of the Nasdaq National Market,
including the requirements for independent directors and an
audit committee financial expert. Our Governance Committee also
evaluates candidates in accordance with its charter, assessing a
number of factors, including the extent to which the candidate
contributes to the range of talent, skill and expertise
appropriate for our Board generally and the candidates
integrity, business acumen, understanding of our companys
business and industry, diversity, availability, commitments to
serve on other boards, independence of thought, and overall
ability to represent the interests of all stockholders of our
company. The Governance Committee uses the same standards to
evaluate nominees proposed by our directors, management and
stockholders.
Stockholders can recommend qualified candidates for our Board of
Directors by writing to our Corporate Secretary at FormFactor,
Inc., 7005 Southfront Road, Livermore, California 94551. When
making recommendations, a stockholder should submit
recommendations for individuals that meet at least the criteria
outlined above. Such recommendations should be accompanied by
the information required by our bylaws and Regulation 14A
under the Securities Exchange Act of 1934, which includes
evidence of the nominating stockholders ownership of
FormFactor common stock, biographical information regarding the
candidate, and the candidates written consent to serve as
a director if elected. We require that any such recommendations
for inclusion in our proxy materials for our 2006 Annual Meeting
of Stockholders be made no later than
7
December 15, 2005 to ensure adequate time for meaningful
consideration by the Governance Committee. See Proposals
for Our 2006 Annual Meeting of Stockholders for additional
information regarding deadlines for submitting proposals.
Properly submitted recommendations will be forwarded to our
Governance Committee for review and consideration. The committee
may consider in the future whether our company should adopt a
more formal policy regarding stockholder nominations.
After evaluating Dr. Bahrami and Mr. Everett, our
Governance Committee recommended to our Board of Directors in
accordance with its charter, and our Board approved, the
nomination of these current directors for election to our Board
at our Annual Meeting.
Stockholder Communication with Our Board
Our stockholders may communicate with our Board of Directors or
any of our individual directors by submitting correspondence by
mail to our Corporate Secretary at FormFactor, Inc., 7005
Southfront Road, Livermore, California 94551, or by electronic
mail at corporatesecretary@formfactor.com. Our Corporate
Secretary or his or her designee will review such correspondence
and provide such correspondence and/or summaries thereof, as
appropriate, to our Board of Directors. Our Corporate Secretary
or his or her designee will handle correspondence relating to
accounting, internal controls or auditing matters in accordance
with our Statement of Policy Regarding Corporate Code Violations
(Complaints and Concerns and WhistleBlowers), which Statement is
available on our company website at
http://www.formfactor.com. Please note that information
on our company website is not incorporated by reference in this
Proxy Statement. Our Governance Committee will periodically
review our process for stockholders to communicate with our
Board of Directors to ensure effective communications.
Board Attendance at Annual Meetings
We encourage the members of our Board of Directors to attend our
annual meeting of stockholders. We do not have a formal policy
regarding attendance of annual meetings by the members of our
Board. We may consider in the future whether our company should
adopt a more formal policy regarding director attendance at
annual meetings. All of our directors attended last years
annual meeting.
Corporate Codes
We have adopted a Statement of Corporate Code of Business
Conduct that applies to our directors, officers and employees.
We have also adopted a Statement of Financial Code of Ethics
that applies to our chief executive officer, chief financial
officer, principal accounting officer and the employees of our
finance department. In addition, we have adopted a Statement of
Policy Regarding Corporate Code Violations (Complaints and
Concerns and WhistleBlowers) that is designed to ensure that all
of our directors, officers and employees observe high standards
of personal and business ethics consistent with the Code of
Business Conduct and the Code of Ethics, and to provide a forum
to which our directors, officers and employees may report
violations or suspected violations of our codes of conduct
without fear of harassment, retaliation or adverse employment
consequence. These corporate statements are posted on our
company website at http://www.formfactor.com. Please note
that information on our company website is not incorporated by
reference in this Proxy Statement.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The second proposal is to ratify the selection of
PricewaterhouseCoopers LLP as FormFactors independent
auditor for the fiscal year ending December 31, 2005. The
Audit Committee of our Board of Directors has appointed
PricewaterhouseCoopers as the independent auditor to perform the
audit of our financial statements for the fiscal year ending
December 31, 2005, and our stockholders are being asked to
ratify such selection. Representatives of PricewaterhouseCoopers
are expected to be present at the Annual
8
Meeting, will have the opportunity to make a statement at the
Annual Meeting if they desire to do so and are expected to be
available to respond to appropriate questions.
Ratification by our stockholders of the selection of
PricewaterhouseCoopers as our independent auditor is not
required by applicable law, our certificate of incorporation,
our bylaws or otherwise. However, our Board of Directors is
submitting the selection of PricewaterhouseCoopers to our
stockholders for ratification as a matter of good corporate
practice. If our stockholders fail to ratify this selection, our
Audit Committee will reconsider whether to retain that firm.
Even if the selection is ratified, our Audit Committee in its
discretion may direct the selection of a different independent
accounting firm at any time during the year if it determines
that such a change would be in the best interests of our company
and stockholders.
Our Board of Directors recommends a vote FOR the
ratification of the selection of PricewaterhouseCoopers LLP as
our independent auditor for the fiscal year ending
December 31, 2005.
Principal Auditor Fees and Services
The following is a summary of the fees billed to our company by
PricewaterhouseCoopers for professional services rendered during
the fiscal years ended December 25, 2004, and
December 27, 2003.
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
Audit Fees
|
|
$ |
1,014,000 |
|
|
$ |
420,000 |
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
82,000 |
|
|
|
97,000 |
|
All Other Fees
|
|
|
|
|
|
|
|
|
Audit Fees. Consists of fees billed for professional
services rendered for the audit of our annual consolidated
financial statements, the audits of managements assessment
of our internal control over financial reporting and the
effectiveness of our internal control over financial reporting,
review of our consolidated financial statements included in our
Form 10-Q quarterly reports and services that are normally
provided by the independent registered public accounting firm in
connection with statutory and regulatory filings or engagements
for those fiscal years.
Audit-Related Fees. Consists of fees billed for assurance
and related services that are traditionally performed by the
independent accountant and generally are overseen by a licensed
accountant and are not reported under Audit Fees.
Tax Fees. Consists of fees billed for professional
services for tax compliance, tax preparation, tax advice and tax
planning. These services consist of assistance regarding
federal, state and international tax compliance, assistance with
the preparation of various tax returns, research and design tax
study and international compliance.
All Other Fees. Consists of fees for products and
services other than the services reported above.
The Audit Committee has determined that the provision of the
services covered by fees paid to our independent auditor during
fiscal 2004 is compatible with maintaining the independence of
such auditor.
Pre-Approval of Audit and Non-Audit Services of Independent
Auditor
Our Audit Committees policy is to pre-approve all audit
and permissible non-audit services provided by our independent
auditor. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or
category of services and is generally subject to a specific
budget. Our independent auditor and management are required to
periodically report to our Audit Committee regarding the extent
of services provided by our independent auditor in accordance
with this pre-approval, and the fees for the services performed
to date. Our Audit Committee may also pre-approve particular
services on a case-by-case basis.
9
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in fulfilling
its responsibility for oversight of the integrity of the
Companys financial statements, the effectiveness of the
Companys internal control over financial reporting, the
qualifications, independence and performance of the
Companys independent accountants, the performance of the
Companys internal audit function, and compliance by the
Company with legal and regulatory requirements and by employees
and officers with the Companys Statement of Corporate Code
of Business Conduct. Management has the primary responsibility
for the financial statements and the reporting process,
including the Companys system of internal control over
financial reporting. In discharging its oversight responsibility
as to the audit process, the Audit Committee reviewed and
discussed with management the audited financial statements of
the Company as of and for the year ended December 25, 2004,
including a discussion of the quality and the acceptability of
the Companys financial reporting and controls and internal
control over financial reporting, as well as the selection,
application and disclosure of critical accounting policies.
The Audit Committee obtained from the Companys independent
accountants, PricewaterhouseCoopers LLP, the letter required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and
discussed with the accountants any relationships that may impact
their objectivity and independence and satisfied itself as to
the accountants independence. The Audit Committee
considered and determined that such accountants provision
of non-audit services to the Company is compatible with
maintaining the accountants independence. The Committee
reviewed various matters with the accountants, who are
responsible for expressing an opinion on the Companys
financial statements as of and for the year ended
December 25, 2004, for expressing an opinion on the
Companys internal control over financial reporting and for
attesting to managements report on internal control over
financial reporting, based on their audit. The Committee met
with the accountants, with and without management present, and
discussed the matters required to be discussed by Statement on
Auditing Standards No. 61 as amended, Communication
with Audit Committees, including their judgment as to the
quality and the acceptability of the Companys financial
reporting, internal control over financial reporting and such
other matters as are required to be discussed with the Committee
under generally accepted auditing standards. The Committee also
discussed with the accountants various control deficiencies,
including a material weakness, identified in the Companys
internal control over financial reporting and the remediation
steps management has taken and proposes to take to address them.
Based on the above-mentioned reviews and discussions with
management and the independent accountants, the Audit Committee
recommended to the Board of Directors that the Companys
financial statements as of and for the year ended
December 25, 2004 be included in its Annual Report on
Form 10-K for the year ended December 25, 2004 for
filing with the Securities and Exchange Commission. The Audit
Committee also reappointed, and is presenting for stockholder
ratification at the Companys 2005 Annual Meeting of
Stockholders, PricewaterhouseCoopers LLP as the Companys
independent accountants.
|
|
|
Submitted by the Audit Committee |
|
|
Harvey A. Wagner, Chairman |
|
G. Carl Everett, Jr. |
|
James A. Prestridge |
The information contained in this Report of the Audit Committee
shall not be deemed to be soliciting material or
filed or incorporated by reference in future filings
with the Securities and Exchange Commission, or subject to the
liabilities of Section 18 of the Securities Exchange Act of
1934, whether made before or after the date hereof and
irrespective of any general incorporation language in any
filing, except to the extent that FormFactor specifically
incorporates it by reference into a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership of our Securities
The following table presents information regarding the
beneficial ownership of our common stock as of March 26,
2005 for:
|
|
|
|
|
each person or entity known by us to own beneficially more than
5% of our common stock; |
|
|
|
each of our current directors; |
|
|
|
our Chief Executive Officer, President, and each of our four
other most highly compensated executive officers; and |
|
|
|
all of our current directors and executive officers as a group. |
The percentage of beneficial ownership for the following table
is based on 39,197,061 shares of our common stock
outstanding as of March 26, 2005. Beneficial ownership is
determined under the rules and regulations of the Securities and
Exchange Commission and does not necessarily indicate beneficial
ownership for any other purpose. Under these rules, beneficial
ownership includes those shares of common stock over which the
stockholder has sole or shared voting or investment power. It
also includes shares of common stock that the stockholder has a
right to acquire within 60 days of March 26, 2005
through the exercise of any option, warrant or other right, and
restricted shares of our common stock, which are subject to a
lapsing right of repurchase at their initial purchase price,
purchased by some of our officers who exercised immediately
exercisable options. The percentage ownership of the outstanding
common stock, however, is based on the assumption, expressly
required by the rules and regulations of the Securities and
Exchange Commission, that only the person or entity whose
ownership is being reported has exercised options or warrants
into shares of our common stock.
To our knowledge, except under community property laws or as
otherwise noted, the persons named in the table have sole voting
and sole investment power with respect to all shares
beneficially owned. Unless otherwise indicated, each director,
officer and 5% stockholder listed below maintains a mailing
address of c/o FormFactor, Inc., 7005 Southfront Road,
Livermore, California 94551.
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Percentage of | |
|
|
Shares | |
|
Shares | |
|
|
Beneficially | |
|
Beneficially | |
Beneficial Owner |
|
Owned | |
|
Owned | |
|
|
| |
|
| |
Dr. Igor Y. Khandros(1)
|
|
|
3,525,658 |
|
|
|
9.0 |
% |
Dr. William H. Davidow(2)
|
|
|
282,376 |
|
|
|
* |
|
Entities affiliated with FMR Corp(3)
|
|
|
4,983,387 |
|
|
|
12.7 |
|
Benjamin N. Eldridge(4)
|
|
|
457,588 |
|
|
|
1.2 |
|
Jens Meyerhoff(5)
|
|
|
381,965 |
|
|
|
1.0 |
|
Yoshikazu Hatsukano(6)
|
|
|
304,005 |
|
|
|
* |
|
Peter B. Mathews(7)
|
|
|
162,450 |
|
|
|
* |
|
G. Carl Everett, Jr.(8)
|
|
|
84,618 |
|
|
|
* |
|
James A. Prestridge(9)
|
|
|
76,248 |
|
|
|
* |
|
Joseph R. Bronson(10)
|
|
|
62,500 |
|
|
|
* |
|
Dr. Homa Bahrami(11)
|
|
|
15,500 |
|
|
|
* |
|
Harvey A. Wagner(12)
|
|
|
12,500 |
|
|
|
* |
|
All current executive officers and directors as a group
(15 persons)(13)
|
|
|
5,560,503 |
|
|
|
13.7 |
|
11
|
|
|
|
* |
Represents beneficial ownership of less than 1%. |
|
|
(1) |
Includes 104,228 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
all of which are vested. Also includes 1,300,000 shares
held by Susan Bloch, Dr. Khandros spouse. |
|
(2) |
Includes 29,707 shares held by the Davidow Family Trust.
Also includes 18,750 unvested shares that are, as of
March 26, 2005, subject to our lapsing right of repurchase
at the initial purchase price for these shares. Also includes
12,500 shares issuable upon exercise of options that are
exercisable within 60 days of March 26, 2005, all of
which will be unvested. |
|
(3) |
Includes 4,275,945 shares held by Fidelity
Management & Research Company, 285,140 shares held
by Fidelity International Limited and 422,302 shares held
by Fidelity Management Trust Company as reported in the
Schedule 13G of FMR Corp. and related persons filed on
February 14, 2005 with the Securities Exchange Commission.
The address of FMR Corp. and related persons is 82 Devonshire
Street, Boston, Massachusetts 02109. |
|
(4) |
Includes 122,070 shares held by the Benjamin N. Eldridge
and Carol McKenzie-Wilson TTEES Benjamin Eldridge and Carol
McKenzie-Wilson Living Trust U/ A/ D 4/21/03. Also includes
333,508 shares issuable upon exercise of options that are
exercisable within 60 days of March 26, 2005, of which
214,007 shares will be vested and 119,501 shares will
be unvested. |
|
(5) |
Includes 378,394 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
of which 191,518 shares will be vested and
186,876 shares will be unvested. |
|
(6) |
Includes 185,270 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
of which 129,270 shares will be vested and
56,000 shares will be unvested. |
|
(7) |
Includes 162,450 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
of which 99,200 shares will be vested and
63,250 shares will be unvested. |
|
(8) |
Includes 22,118 shares held by the Everett Family Revocable
Trust. Also includes 62,500 shares issuable upon exercise
of options that are exercisable within 60 days of
March 26, 2005, of which 48,958 shares will be vested
and 13,542 shares will be unvested. |
|
(9) |
Includes 13,748 shares held by the Prestridge 1989
Family Trust. Also includes 62,500 shares issuable upon
exercise of options that are exercisable within 60 days of
March 26, 2005, of which 39,583 shares will be vested
and 22,917 shares will be unvested. |
|
|
(10) |
Includes 5,000 shares held by a revocable trust, of which
Mr. Bronson is a trustee. Also includes 2,000 shares
held jointly by Mr. Bronson and his two children. Also
includes 5,500 unvested shares that are, as of March 26,
2005, subject to our lapsing right of repurchase at the initial
purchase price for these shares. Also includes
19,500 shares issuable upon exercise of options that are
exercisable within 60 days of March 26, 2005, all of
which will be unvested. |
|
(11) |
Includes 12,500 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
of which 4,166 shares will be vested and 8,334 shares
will be unvested. |
|
(12) |
Represents 12,500 shares issuable upon exercise of options
that are exercisable within 60 days of March 26, 2005,
of which 2,083 shares will be vested and 10,417 shares
will be unvested. |
|
(13) |
Includes 24,250 unvested shares that are, as of March 26,
2005, subject to our lapsing right of repurchase at the initial
purchase price for these shares, and 1,532,512 shares
issuable upon exercise of options that are exercisable within
60 days of March 26, 2005, of which
932,888 shares will be vested and 599,624 shares will
be unvested. Also includes 170,824 shares beneficially
owned by Stuart L. Merkadeau, which include 163,442 shares
issuable upon exercise of options that are exercisable within
60 days of March 26, 2005, of which 81,775 shares
will be vested and 81,667 shares will be unvested. Also
includes 16,093 shares beneficially owned by Hank Feir,
which include 16,041 shares issuable upon exercise of
options that are exercisable within 60 days of
March, 26, 2005, all of which will be vested. Also includes
8,178 shares beneficially owned by Richard Mittermaier,
which include 7,179 shares issuable upon exercise of
options that are exercisable within 60 days of
March 26, 2005, of which 2,059 shares will be vested
and 5,120 shares will be unvested. Mr. Mittermaier,
who was our Principal |
12
|
|
|
Accounting Officer at the close of our last financial year,
stepped down from that position on March 15, 2005, and
continues in his role as our Director of Accounting. Does not
include 110,000 unvested options to purchase shares that are not
exercisable within 60 days of March 26, 2005, granted
to Ronald C. Foster on March 2, 2005. |
Equity Compensation Plans
The following table sets forth certain information, as of
December 25, 2004, concerning securities authorized for
issuance under all equity compensation plans of FormFactor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities Remaining | |
|
|
Number of Securities to | |
|
|
|
Available for Future Issuance | |
|
|
be Issued Upon Exercise | |
|
Weighted-Average Price of | |
|
Under Equity Compensation Plans | |
|
|
of Outstanding Options, | |
|
Outstanding Options, | |
|
(Excluding Securities Reflected in | |
Plan Category |
|
Warrants and Rights | |
|
Warrants and Rights | |
|
Column (a)) | |
|
|
| |
|
| |
|
| |
|
|
(a) | |
|
(b) | |
|
(c) | |
Equity compensation plans approved by the stockholders(1)
|
|
|
5,929,509 |
|
|
$ |
11.88 |
|
|
|
1,580,864 |
|
Equity compensation plans not approved by the stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
5,929,509 |
|
|
$ |
11.88 |
|
|
|
1,580,864 |
|
|
|
(1) |
Includes our 2002 Equity Incentive Plan, 2002 Employee Stock
Purchase Plan, Incentive Option Plan, Management Incentive Plan,
1996 Stock Option Plan and 1995 Option Plan. Since the
effectiveness of our 2002 Equity Incentive Plan in connection
with our initial public offering, we do not grant any options
under our Incentive Option Plan, Management Incentive Plan, 1996
Stock Option Plan and 1995 Option Plan. |
[Remainder of page intentionally blank]
13
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Executive Compensation
The following table presents information regarding the
compensation received during fiscal 2004, 2003 and 2002 by our
chief executive officer, our president and each of our four
other most highly compensated executive officers. The
compensation table excludes other compensation in the form of
perquisites and other personal benefits to a named executive
officer where that compensation constituted less than the lesser
of $50,000 or 10% of his total annual salary and bonus for such
fiscal year.
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Long-Term Compensation Awards | |
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Annual Compensation | |
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| |
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| |
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Restricted Stock | |
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Securities | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus | |
|
Awards | |
|
Underlying Options | |
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| |
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| |
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| |
|
| |
|
| |
Dr. Igor Y. Khandros
|
|
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2004 |
|
|
$ |
300,097 |
|
|
$ |
194,911 |
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
2003 |
|
|
|
276,963 |
|
|
|
210,319 |
|
|
|
|
|
|
|
234,228 |
|
|
|
|
|
2002 |
|
|
|
252,756 |
|
|
|
115,800 |
|
|
|
|
|
|
|
|
|
Joseph R. Bronson
|
|
|
2004 |
|
|
|
67,525 |
(1) |
|
|
20,000 |
|
|
$ |
1,000,001 |
(2) |
|
|
212,500 |
(3) |
|
President and Member of the Office of the |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive
|
|
|
2002 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benjamin N. Eldridge
|
|
|
2004 |
|
|
|
225,000 |
|
|
|
113,560 |
|
|
|
|
|
|
|
|
|
|
Senior Vice President of Development and |
|
|
2003 |
|
|
|
200,915 |
|
|
|
156,280 |
|
|
|
|
|
|
|
53,703 |
|
|
Chief Technical Officer
|
|
|
2002 |
|
|
|
201,387 |
|
|
|
77,760 |
|
|
|
|
|
|
|
94,500 |
|
Yoshikazu Hatsukano
|
|
|
2004 |
|
|
|
318,240 |
(4) |
|
|
173,301 |
|
|
|
|
|
|
|
|
|
|
Senior Vice President of Asia-Pacific |
|
|
2003 |
|
|
|
271,967 |
(5) |
|
|
127,316 |
|
|
|
|
|
|
|
44,850 |
|
|
Operations and President of FormFactor K.K. |
|
|
2002 |
|
|
|
237,815 |
(6) |
|
|
89,115 |
(6) |
|
|
|
|
|
|
31,500 |
|
Jens Meyerhoff
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|
|
2004 |
|
|
|
273,846 |
|
|
|
181,284 |
|
|
|
|
|
|
|
60,000 |
|
|
Chief Operating Officer |
|
|
2003 |
|
|
|
231,819 |
|
|
|
137,844 |
|
|
|
|
|
|
|
200,852 |
|
|
|
|
|
2002 |
|
|
|
209,849 |
|
|
|
77,760 |
|
|
|
|
|
|
|
142,500 |
|
Peter B. Mathews
|
|
|
2004 |
|
|
|
414,325 |
(7) |
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Senior Vice President of Worldwide Sales |
|
|
2003 |
|
|
|
303,147 |
(8) |
|
|
|
|
|
|
|
|
|
|
52,200 |
|
|
|
|
|
2002 |
|
|
|
251,179 |
(9) |
|
|
|
|
|
|
|
|
|
|
58,500 |
|
|
|
(1) |
Includes $34,000 which Mr. Bronson received as a director
prior to his employment as our President on November 17,
2004. |
|
(2) |
Represents the value of 38,432 restricted stock units granted to
Mr. Bronson on November 17, 2004, based on the closing
market price of our common stock on the grant date. These
restricted stock units, which carry no dividend rights, will
vest and be converted into shares of our common stock in four
equal installments on each January 1 of 2006, 2007, 2008
and 2009. On December 23, 2004, the last trading day prior
to the Companys fiscal year end of December 25, 2004,
the restricted stock units had a value of $1,032,284. |
|
(3) |
Includes 12,500 shares of our common stock which
Mr. Bronson was given an option to purchase in his capacity
as a director prior to his employment as our President on
November 17, 2004. |
|
(4) |
The U.S. dollar equivalent of the salary, which is paid to
Mr. Hatsukano in Japanese Yen, is calculated using the
exchange rate at December 25, 2004 of one U.S. dollar
to 104.17 Japanese Yen. |
|
(5) |
The U.S. dollar equivalent of the salary, which is paid to
Mr. Hatsukano in Japanese Yen, is calculated using the
exchange rate at December 26, 2003 of one U.S. dollar
to 107.55 Japanese Yen. |
14
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|
(6) |
The U.S. dollar equivalent of the salary and bonus, which
are paid to Mr. Hatsukano in Japanese Yen, is calculated
using the exchange rate at December 27, 2002 of one
U.S. dollar to 119.92 Japanese Yen. |
|
(7) |
Includes $223,069 in sales commissions. |
|
(8) |
Includes $132,780 in sales commissions. |
|
(9) |
Includes $88,099 in sales commissions. |
Option Grants in Fiscal 2004
The following table presents information regarding grants of
stock options during fiscal 2004 to the executive officers named
in the executive compensation table above. We granted these
options to the named executive officers under our 2002 Equity
Incentive Plan. All of the options listed on the following table
expire ten years from the date of grant and were granted at an
exercise price equal to the fair market value of our common
stock as determined by our Board of Directors on the date of
grant. The percentage of total options granted to employees in
fiscal 2004 is based on grants of options to purchase a total of
1,230,200 shares of our common stock made to all of our
employees and named executive officers in fiscal 2004.
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|
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Individual Grants | |
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| |
|
Potential Realizable Value at | |
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|
Number of | |
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% of Total | |
|
|
|
Assumed Annual Rates of | |
|
|
Securities | |
|
Options | |
|
|
|
Stock Price Appreciation for | |
|
|
Underlying | |
|
Granted to | |
|
Exercise | |
|
|
|
Option Term | |
|
|
Options | |
|
Employees in | |
|
Price per | |
|
Expiration | |
|
| |
Name |
|
Granted | |
|
Fiscal Year | |
|
Share | |
|
Date | |
|
5% | |
|
10% | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Joseph R. Bronson
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|
|
12,500 |
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|
|
1.0 |
% |
|
$ |
19.20 |
|
|
|
5/13/2014 |
|
|
$ |
50,935 |
|
|
$ |
82,498 |
|
|
|
|
200,000 |
|
|
|
16.3 |
|
|
|
26.02 |
|
|
|
11/17/2014 |
|
|
|
3,272,768 |
|
|
|
8,293,836 |
|
Jens Meyerhoff
|
|
|
60,000 |
|
|
|
4.9 |
|
|
|
19.20 |
|
|
|
5/13/2014 |
|
|
|
724,487 |
|
|
|
1,835,991 |
|
Potential realizable values are calculated by:
|
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|
|
multiplying the number of shares of our common stock subject to
a given option by the price per share of our common stock at the
time of the grant; |
|
|
|
assuming that the aggregate stock value derived from that
calculation compounds at the annual 5% or 10% rates shown in the
table for the entire ten-year term of the option; and |
|
|
|
subtracting from that result the total option exercise price. |
The 5% and 10% assumed annual rates of stock price appreciation
are required by the rules of the Securities and Exchange
Commission and do not represent our estimate or projection of
future stock price growth. Actual gains, if any, on stock option
exercises will be dependent on the future performance of our
common stock.
The option for 12,500 shares of our common stock was
granted to Mr. Bronson in his capacity as a director, prior
to his employment as our President in November, 2004. The option
vests in 12 equal monthly increments beginning on May 13,
2004. The option for 200,000 shares of our common stock
granted to Mr. Bronson vests with respect to 25% of the
shares on November 17, 2005 and the remaining shares
subject to the option vest in 36 equal monthly increments
thereafter.
The option for 60,000 shares of our common stock granted to
Mr. Meyerhoff vests in 48 equal monthly increments.
Except for the option for 12,500 shares of our common stock
granted to Mr. Bronson in his capacity as a director, all
of the options listed in the above table provide that in the
event the officers employment is terminated without cause
within the 12 months following a change in control
transaction, the officer will receive credit for an additional
12 months of service for purposes of calculating the number
of shares of our common stock that are vested under such option.
15
Aggregate Option Exercises in Fiscal 2004
The following table presents information concerning the exercise
of options during fiscal 2004 held by the executive officers
named in the executive compensation table above and the
unexercised options held by them at December 25, 2004. The
value realized represents the difference between the aggregate
closing price of the shares on the date of exercise less the
aggregate exercise price paid. The value of the unexercised
options that are in-the-money is calculated based on the
difference between $26.86, the closing price per share of our
common stock on December 23, 2004, the last trading day
prior to our fiscal year end of December 25, 2004, and the
exercise price for the shares underlying the option, multiplied
by the number of shares. The values of the unexercised options
have not been, and may never be, realized.
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|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised | |
|
In-the Money Options at | |
|
|
Shares | |
|
|
|
Options at Fiscal Year-End | |
|
Fiscal Year-End | |
|
|
Acquired on | |
|
Value | |
|
| |
|
| |
Name |
|
Exercise | |
|
Realized | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Dr. Igor Y. Khandros
|
|
|
|
|
|
|
|
|
|
|
104,228 |
|
|
|
130,000 |
|
|
$ |
1,340,372 |
|
|
$ |
956,800 |
|
Joseph R. Bronson
|
|
|
28,000 |
|
|
$ |
376,000 |
|
|
|
19,500 |
|
|
|
200,000 |
|
|
|
238,270 |
|
|
|
168,000 |
|
Benjamin N. Eldridge
|
|
|
|
|
|
|
|
|
|
|
333,508 |
|
|
|
36,800 |
|
|
|
7,080,950 |
|
|
|
270,848 |
|
Yoshikazu Hatsukano
|
|
|
10,000 |
|
|
|
214,500 |
|
|
|
185,270 |
|
|
|
44,850 |
|
|
|
4,039,597 |
|
|
|
330,096 |
|
Jens Meyerhoff
|
|
|
107,000 |
|
|
|
1,628,351 |
|
|
|
372,144 |
|
|
|
118,000 |
|
|
|
6,738,318 |
|
|
|
883,480 |
|
Peter B. Mathews
|
|
|
5,000 |
|
|
|
125,855 |
|
|
|
174,666 |
|
|
|
45,534 |
|
|
|
3,628,792 |
|
|
|
335,130 |
|
Certain Employee Benefit Plans
Key Management Bonus Plan. Our Board of Directors has
adopted a Key Employee Bonus Plan which provides awards to our
chief executive officer, president, senior vice presidents, vice
presidents and other employees based upon the percentage
achievement of corporate objectives and personal objectives for
these individuals. Bonus target percentages for these awards for
each participant level are established for each fiscal year.
Corporate objectives are also established for each fiscal year.
In fiscal 2004, the corporate objectives were based upon
bookings, net sales and operating profit. Personal objectives
are determined by the management of the Company and/ or the
immediate supervisor(s) of the participant in consultation with
the participant. These objectives are generally critical to the
success of the participant in our company and relate to the
overall business priorities of our company. For each
participant, percentage participation rates are based upon the
level of that individuals responsibility and the scope of
that individuals work in our organization. This plan is
administered by the Compensation Committee.
Sales Incentive Plan. The Company has adopted a Sales
Incentive Plan that provides incentive commissions to each
member of our sales force who is a senior vice president, vice
president, director, account manager or regional manager. These
commissions are based upon bookings for the region in which the
sales member participates and upon personal objectives
determined by the management of the Company and/ or the
immediate supervisor of the sales member in consultation with
the sales member. The commissions of each participating member
of our sales force are calculated based upon a percentage of
that members base salary with the commission allocated
between the bookings targets and the members personal
objectives. These incentive commissions are paid on a
semi-annual basis. This plan is administered by the management
of the Company.
Employee Stock Purchase Plan. Employees of FormFactor,
including our executive officers, members of our board of
directors, who are employees of FormFactor, or any parent or
subsidiary of FormFactor and who own our common stock or hold
options to purchase our common stock in an amount less than 5%
of our total outstanding shares, are eligible to participate in
our 2002 Employee Stock Purchase Plan. The 2002 Employee Stock
Purchase Plan is designed to enable eligible employees to
purchase shares of our common stock at a discount on a periodic
basis through payroll deductions of between 1% and 15% of their
cash compensation. Each offering period under this plan is for
two years and consists of four six-month purchase periods. The
purchase price for shares of our common stock purchased under
this plan will be 85% of the lesser of the fair market value of
our common stock on the first day of the applicable offering
period or the last day of each purchase period. No participant
will be able to purchase shares having a fair market value of
more
16
than $25,000, determined as of the first day of the applicable
offering period, for each calendar year in which the employee
participates in this plan.
401(k) Plan. Members of our board of directors, who are
employees of FormFactor, or any parent or subsidiary of
FormFactor, are also eligible to participate in our other
employee benefit plans, including our 401(k) Plan, and if
applicable based on their position with FormFactor, or any
parent or subsidiary of FormFactor, in our Key Employee Bonus
Plan and Sales Incentive Plan.
Change of Control, Severance, Employment and Indemnification
Agreements
Under our Key Employee Bonus Plan, if a change in control of our
company occurs, all bonus awards will be deemed to have been
earned at 100% of the bonus target percentage for the current
plan year and will be paid to the participants at that time.
This plan is administered by the Compensation Committee.
Our current stock option agreements under our stock option plans
for our officers, including our 2002 Equity Incentive Plan,
provide that in the event the officers employment is
terminated without cause within the 12 months following a
change in control transaction, the officer will receive credit
for an additional 12 months of service for purposes of
calculating the number of shares of our common stock that are
vested under such option.
We have entered into an agreement with Mr. Hatsukano, our
Senior Vice President of Asia-Pacific Operations and the
President of FormFactor K.K., that provides that if his
employment is terminated, he will receive a severance payment
equal to one months base salary for each year of service
to us, with partial years being prorated. If
Mr. Hatsukanos employment is terminated for reasons
other than cause, he will receive an additional lump sum payment
equal to one months base salary.
Additionally, we have entered into change of control severance
agreements with each of our named executive officers and certain
other executives. We adopted these agreements as part of our
review of compensation and benefits of the Company. Each change
of control severance agreement provides for the executive to
receive the following severance benefits upon a qualifying
termination of employment within one year following a change of
control of the Company, subject to the executive signing a
release of claims against the Company:
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|
|
A lump sum severance payment equal to one year of base salary
and bonus; |
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|
|
Health benefits continuation for one year (subject to the
participating executives compliance with a confidentiality
agreement and an agreement not to solicit employees of the
Company for one year after termination); and |
|
|
|
Fully accelerated vesting of options or other equity awards. |
Terminations of employment that entitle the executive to receive
severance benefits under the change of control severance
agreement consist of either termination by the Company without
cause or by resignation of the executive for good reason (as
each of these terms is defined in the agreement) within one year
following a change of control.
The change of control severance agreements provide that if
payments to an executive are subject to the excise tax imposed
by Section 280G of the Internal Revenue Code, the severance
benefits will be reduced to the extent that such reduction would
increase the benefits received by the executive on an after-tax
basis.
A change of control for purposes of the change of
control severance agreements means:
|
|
|
|
|
The consummation of a merger or consolidation of the Company
resulting in a change in ownership of more than 40% of the total
voting securities of the Company; |
|
|
|
Any approval by the shareholders of the Company of a plan of
complete liquidation of the Company, other than as a result of
insolvency; |
|
|
|
The sale or disposition of all or substantially all of the
Companys assets; |
17
|
|
|
|
|
An acquisition of 40% or more of the Companys voting
securities; or |
|
|
|
During any period of two consecutive years, the current
directors (or their successors approved by the Board of
Directors) ceasing to constitute a majority of the Board of
Directors. |
The change of control severance agreements do not alter the
at-will employment of the executives who have entered into them.
In February 2005 we entered into a letter agreement with Ronald
C. Foster providing for his employment as Chief Financial
Officer of the Company. The letter agreement provides that
Mr. Foster will be paid a salary of $275,000 per year,
is eligible to receive a bonus targeted at 70% of his base
salary and may also receive certain equity awards. Additionally,
pursuant to the letter agreement, Mr. Foster was paid a
sign-on bonus of $50,000. Pursuant to the letter agreement,
Mr. Foster was granted, as of his effective hire date,
options to purchase 110,000 shares of FormFactor stock
with an exercise price of $22.83 per share. These options
vest over 4 years, with 25% vesting on the first
anniversary of Mr. Fosters effective hire date and
the remainder vesting monthly over the following 3 years.
Mr. Foster has also entered into a change of control
severance agreement with terms as described above.
We have entered into indemnification agreements with each of our
current directors and executive officers. These agreements
require us to indemnify these individuals to the fullest extent
permitted under Delaware law against liabilities that may arise
by reason of their service to our company, and to advance
expenses incurred as a result of any proceeding against them as
to which they could be indemnified. We also intend to enter into
indemnification agreements with our future directors and
executive officers.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of
FormFactor determines the salaries, bonuses and other
compensation of the companys executive officers. The
Compensation Committee is composed of the three directors named
below. Each member of the Compensation Committee is independent
within the meaning of the rules of the Nasdaq National Market, a
non-employee director within the meaning of Section 16 of
the Securities Exchange Act of 1934, and an outside director
within the meaning of Section 162(m) of the Internal
Revenue Code. The Compensation Committee operates under a
written charter adopted by FormFactors Board of Directors
and by the Compensation Committee that is reviewed annually.
Compensation Policy. The Compensation Committee believes
that the compensation programs for the executive officers of
FormFactor should be designed to attract, motivate, reward and
retain talented executives, who are critical to the success of
the company. The Compensation Committee also believes that such
compensation programs should relate compensation to corporate
performance and increases in stockholder value, while providing
a total compensation package that is competitive and that
enables FormFactor to attract, motivate, reward and retain key
executive officers. Within this overall philosophy, the
committees objectives are to:
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|
|
|
|
offer a total compensation package that is competitive with
total compensation packages in effect at technology companies
that are of comparable size to FormFactor, that engage in
similar or complementary industries, and with which FormFactor
competes for executive personnel; |
|
|
|
provide annual incentive awards, such as cash bonuses and
stock-based incentive awards, that take into
account FormFactors overall financial performance in
terms of designated corporate objectives, as well as individual
contributions; and |
|
|
|
align the interests of FormFactors executive officers with
those of the companys stockholders by providing
significant equity-based, long-term incentive awards. |
Base Salary. Base salaries for executive officers for the
fiscal year ended December 25, 2004 were generally
determined on an individual basis by evaluating each executive
officers scope of responsibility, performance, prior
experience and salary history, as well as the salaries for
similar positions at comparable companies.
18
Annual Incentive Awards. In the past, FormFactor has
included performance-based bonuses, payable in cash and/or
stock-based incentive awards, as part of each executive
officers annual compensation plan. Annual
performance-based bonuses are based on mutually agreed upon
goals and objectives. This practice is expected to continue and
each executive officers annual performance will be
measured by the achievement of established goals and objectives.
Long-Term Incentive Awards. The Compensation Committee
believes that equity-based compensation in the form of stock
options links the interests of FormFactors executive
officers with the long-term interests of the companys
stockholders and encourages the companys executive
officers to continue to work for FormFactor. Stock options
generally have value for executive officers only if the price of
common stock increases above the fair market value on the grant
date and the officer continues in the employment of the company
for the period required for the shares to vest.
The Compensation Committee grants stock options to its executive
officers in accordance with the 2002 Equity Incentive Plan. In
the fiscal year ended December 25, 2004, stock options were
granted to an executive officer to recognize his increased
responsibilities. Stock options have been granted to executive
officers when the officer first joins the Company, in connection
with a significant change in responsibilities and, occasionally,
to achieve equity within a peer group. The Compensation
Committee may, however, grant additional stock options to
executives for other reasons. The number of shares subject to
each stock option granted is within the discretion of the
Compensation Committee and for each officer, it is primarily
based on the officers anticipated future contribution and
ability to impact the results, past performance and consistency
within the officers peer group. In the fiscal year ended
December 25, 2004, the Compensation Committee considered
these and other factors, including the number of stock options
held by executive officers as of the date of the grant that
remained unvested. In February 2005 the Compensation Committee
granted stock options to various executive officers consistent
with the foregoing philosophies; these grants included
recognition for performance in the fiscal year ended
December 25, 2004. The vesting for stock options is
designed to further ensure the retention of the companys
officers. The stock options are granted at a price that is equal
to the fair market value of FormFactors common stock on
the date of grant.
Chief Executive Officer Compensation. The base salary,
annual incentive awards and long-term incentive awards of
Dr. Igor Y. Khandros, the chief executive officer of
FormFactor, for the fiscal year ended December 25, 2004 as
described in this Proxy Statement under the heading
Executive Compensation and Related Information were
determined by the Compensation Committee in a manner consistent
with the factors described above for all of the companys
executive officers. For fiscal 2005, the Compensation Committee
will evaluate the compensation of FormFactors chief
executive officer consistent with the factors described above
for all executive officers.
Effect of Internal Revenue Code Section 162(m).
Section 162(m) of the Internal Revenue Code limits the tax
deduction of a publicly held company in any taxable year to
$1,000,000 for compensation paid to the chief executive officer
and the four other most highly compensated executive officers.
Having considered the requirements of Section 162(m), the
Compensation Committee believes that grants made pursuant to the
2002 Equity Incentive Plan meet the requirements that such
grants be performance based and are, therefore,
exempt from the limitations on deductibility. Historically, the
combined salary and bonus of each executive officer has been
below the $1,000,000 limit. The Compensation Committees
present intention is to comply with Section 162(m),
although the committee may award compensation that does not
comply with Section 162(m) depending upon the specific
circumstances if in the best interests of FormFactor and its
stockholders.
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Submitted by the Compensation Committee |
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Dr. William H. Davidow, Chairman |
|
G. Carl Everett, Jr. |
|
James A. Prestridge |
19
The information contained in this Report of the Compensation
Committee shall not be deemed to be soliciting
material or filed or incorporated by reference
in future filings with the Securities and Exchange Commission,
or subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934, whether made before or after
the date hereof and irrespective of any general incorporation
language in any filing, except to the extent that FormFactor
specifically incorporates it by reference into a document filed
under the Securities Act of 1933 or the Securities Exchange Act
of 1934.
[Remainder of page intentionally blank]
20
STOCK PRICE PERFORMANCE GRAPH
The following graph shows the total stockholder return of an
investment of $100 in cash on June 12, 2003, the date our
common stock began to trade on the Nasdaq National Market,
through December 25, 2004, the last date of trading of our
fiscal 2004 for (1) our common stock, (2) the S&P
500 Index and (3) the RDG Semiconductor Composite Index.
All values assume reinvestment of the full amount of all
dividends. No cash dividends have been declared on shares of our
common stock. Stockholder returns over the indicated period are
based on historical data and are not necessarily indicative of
future stockholder returns.
COMPARISON OF 18 MONTH CUMULATIVE TOTAL RETURN*
AMONG FORMFACTOR, INC., THE S & P 500 INDEX
AND THE RDG SEMICONDUCTOR COMPOSITE INDEX
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Cumulative Total Return | |
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6/03 | |
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6/03 | |
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7/03 | |
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8/03 | |
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9/03 | |
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10/03 | |
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11/03 | |
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12/03 | |
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1/04 | |
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2/04 | |
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3/04 | |
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4/04 | |
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5/04 | |
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6/04 | |
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7/04 | |
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8/04 | |
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9/04 | |
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10/04 | |
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11/04 | |
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12/04 | |
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FORMFACTOR, INC.
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100.00 |
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126.43 |
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133.14 |
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139.93 |
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154.21 |
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178.07 |
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182.14 |
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141.43 |
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132.79 |
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144.64 |
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149.21 |
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125.71 |
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134.43 |
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160.36 |
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143.43 |
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125.00 |
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138.36 |
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167.50 |
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172.21 |
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193.86 |
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S & P 500
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100.00 |
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101.28 |
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103.06 |
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105.07 |
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103.96 |
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109.84 |
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110.80 |
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116.61 |
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118.75 |
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120.41 |
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118.59 |
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116.73 |
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118.33 |
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120.63 |
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116.64 |
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117.11 |
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118.38 |
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120.18 |
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125.05 |
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129.30 |
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RDG SEMICONDUCTOR COMPOSITE
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100.00 |
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97.56 |
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110.60 |
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128.44 |
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120.57 |
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144.23 |
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149.93 |
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143.32 |
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144.90 |
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142.05 |
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135.41 |
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123.23 |
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135.58 |
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131.32 |
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113.18 |
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101.94 |
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104.21 |
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111.40 |
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114.34 |
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116.49 |
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* |
$100 invested on 6/12/03 in stock or on 5/31/03 in
index-including reinvestment of dividends. Fiscal year ending
December 31. |
Copyright © 2002, Standard & Poors, a
division of The McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/ S&P.htm
The information contained above shall not be deemed to be
soliciting material or filed or
incorporated by reference in future filings with the Securities
and Exchange Commission, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934, whether
made before or after the date hereof and irrespective of any
general incorporation language in any filing, except to the
extent that we specifically incorporate it by reference into a
document filed under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the compensation arrangements that are described
above in Director Compensation, the option grants
and exercises, stock purchases and other arrangements that are
described in Executive Compensation and Related
Information, and the transactions described below, since
December 28, 2002, we have not been a party to, and we have
no plans to be a party to, any transaction or series of similar
transactions in which the amount involved exceeded or will
exceed $60,000 and in which any current director, executive
officer, holder of more than 5% of our common stock or entities
affiliated with them had or will have an interest.
Registration Rights
Certain of our common stockholders, who own shares of our common
stock that were issued upon the automatic conversion of their
preferred stock upon the closing of our initial public offering,
have registration rights under various agreements to which we
are a party. These stockholders include Dr. Igor Y.
Khandros, who is our chief executive officer and a director,
Dr. Khandros spouse, and Benjamin N. Eldridge, who is
our senior vice president of development and chief technical
officer.
Loans to Executive Officers
We made no loans to our executive officers in fiscal 2004, and
we have no outstanding loans to our executive officers and
directors.
PROPOSALS FOR OUR 2006 ANNUAL MEETING OF STOCKHOLDERS
Requirements for Stockholder Proposals to be Considered for
Inclusion in Our Proxy Materials. Our stockholders may
submit proposals on matters appropriate for stockholder action
at our annual meetings of stockholders, including director
nominations, in accordance with Rule 14a-8 promulgated
under the Securities Exchange Act of 1934. For such proposals to
be included in our proxy materials relating to our 2006 Annual
Meeting of Stockholders, all applicable requirements of
Rule 14a-8 must be satisfied, the information required by
Rule 14a-8 and our bylaws must be timely submitted to us
and such proposals must be received by us no later than
December 15, 2005. Such proposals should be delivered or
mailed to the attention of our corporate secretary at our
principal executive offices, which are FormFactor, Inc., 7005
Southfront Road, Livermore, California 94551, and we also
encourage you to send a copy via e-mail to
corporatesecretary@formfactor.com.
Requirements for Stockholder Proposals to be Brought Before
the Annual Meeting. Our bylaws provide that, except in the
case of proposals made in accordance with Rule 14a-8, the
stockholder must have given timely notice thereof in writing to
the corporate secretary not less than 75 nor more than
105 days prior to the anniversary of the date of the
immediately preceding annual meeting of stockholders. To be
timely for the 2006 Annual Meeting of Stockholders, a
stockholders notice must be delivered to or mailed and
received by the corporate secretary at our principal executive
offices between January 25, 2006 and February 27,
2006. In no event will the public announcement of an adjournment
or a postponement of our annual meeting of stockholders commence
a new time period for the giving of a stockholders notice
as provided above. A stockholders notice to the corporate
secretary must set forth as to each matter the stockholder
proposes to bring before the annual meeting the information
required by our bylaws and applicable law.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own more than 10% of our common stock to file reports of
ownership and reports of changes in ownership with the
Securities and Exchange Commission. These persons are required
by the rules and regulations of the Securities and Exchange
Commission to furnish us with copies of all Section 16(a)
forms that they file.
22
Based solely on our review of these forms furnished to us and
written representations from our executive officers and
directors, we believe that all Section 16(a) filing
requirements for the year ended December 25, 2004 were met,
except that Mr. Meyerhoff, who is an executive officer of
our company, did not timely file a Form 4 for stock options
granted to him by the Compensation Committee in May 2004. A
Form 4 was filed in 2004 with the Securities and Exchange
Commission to reflect these stock option grants.
OTHER BUSINESS
Our Board of Directors does not presently intend to bring any
other business before the Annual Meeting, and, so far as is
known to the Board, no matters are to be brought before the
Annual Meeting except as specified in the accompanying Notice of
Annual Meeting of Stockholders. As to any business that may
properly come before the Annual Meeting, however, it is intended
that the proxies will be voted in respect thereof in accordance
with the judgment of the designated proxy holders.
Whether or not you expect to attend the Annual Meeting, please
complete, date, sign and promptly return the accompanying proxy
in the enclosed postage-paid envelope (to which no postage need
be affixed if mailed in the United States) so that your shares
of FormFactor common stock may be represented at the meeting.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Stuart L. Merkadeau |
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Secretary |
April 25, 2005
23
Appendix A
Charter of the
Audit Committee of the Board of Directors
The purpose of the Audit Committee (the
Committee) of the Board of Directors
(the Board) of FormFactor, Inc. (the
Company) is to oversee the
Companys accounting and financial reporting processes and
the audits of the Companys financial statements, including
oversight of the Companys systems of internal controls and
disclosure controls and procedures, compliance with legal and
regulatory requirements, internal audit function and the
appointment, compensation and evaluation of the Companys
independent auditors.
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II. |
Organizational Matters |
All members of the Committee will be appointed at least annually
by the Board, based on the recommendations of the Companys
Governance Committee. The members of the Committee shall serve
at the discretion of the Board. The Committee shall consist of
at least three members of the Board, with the exact number being
determined by the Board. Each member of the Committee shall meet
the following criteria (in each case to the extent that such
requirement is effective from time to time):
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1. Each member will be an independent member of the Board
as defined by the rules of The Nasdaq Stock Market, as they may
be amended from time to time (the
Rules); |
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2. Each member will meet the independence requirements for
audit committee members specified by the rules and regulations
of the Securities and Exchange Commission
(SEC); |
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3. Each member will meet such other qualifications for
membership on an audit committee as the Nasdaq may promulgate
from time to time, including being able to read and understand
fundamental financial statements at the time of appointment; |
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4. At least one member will have past employment experience
in finance or accounting, requisite professional certification
in accounting, or other comparable experience or background that
results in the individuals financial sophistication,
including being or having been a chief executive officer, chief
financial officer or other senior officer with financial
oversight responsibilities in accordance with applicable Nasdaq
rules; |
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5. At least one member will be an audit committee
financial expert as defined by applicable SEC
rules; and |
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6. No member will have participated in the preparation of
the financial statements of the Company or any current
subsidiary at any time during the most recent three years. |
Unless the Board designates a chair, the members of the
Committee may designate a chair by majority vote of the
Committee membership. A majority of the members of the Committee
will constitute a quorum for the transaction of the business of
the Committee.
The Company shall provide appropriate funding, as determined by
the Committee, for payment of compensation to (i) the
Companys independent auditors for the purpose of rendering
or issuing an audit
A-1
report or preparing any other audit, review or attest services
for the Company, and (ii) any outside advisors employed by
the Committee pursuant to this charter. The Company shall pay
the ordinary administrative expenses of the Committee that are
necessary or appropriate for carrying out its duties.
Members of the Committee shall receive such fees for their
services as Committee members as may be determined by the Board.
Members of the Committee may not receive any compensation from
the Company except the fees that they receive for services as a
member of the Board or any committee thereof.
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D. |
Investigations, Studies and Outside Advisors |
The Committee shall have unrestricted access to Company
personnel and documents, shall have authority to direct and
supervise an investigation into any matters within the scope of
its duties, and shall have authority to engage and determine
funding for independent counsel, experts and other advisors as
it determines to be necessary or appropriate to carry out its
responsibilities and duties.
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E. |
Delegation of Authority |
The Committee may, to the extent permitted under applicable law
and regulations and the Companys certificate of
incorporation and bylaws, delegate to one or more designated
members of the Committee the authority to perform specific
duties and responsibilities of the Committee.
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III. |
Meetings and Reports |
The Committee will hold such regular or special meetings as its
members or the chair shall deem necessary or appropriate, and in
all events meet at least once each quarter. The Committee shall
meet at least once each quarter with the independent auditors
out of the presence of management about internal controls, the
fullness and accuracy of the Companys financial statements
and any other matters that the Committee or these groups believe
should be discussed privately with the Committee. The Committee
members, or the Chair of the Committee on behalf of all of the
Committee members, shall communicate with management and the
independent auditors at least once per quarter in connection
with their review of the Companys financial statements.
The Committee shall establish in advance a calendar for all
then-contemplated meetings for the fiscal year. Meetings may be
held telephonically. In lieu of a meeting, the Committee may
also act by unanimous written consent.
The Committee will maintain written minutes of its meetings,
which minutes (and any action by written consent) will be filed
with the minutes of the meetings of the Board.
The Committee shall report regularly (orally or in writing) to
the Board (or the independent directors of the Board, as
applicable) regarding matters for which the Committee has
responsibility and any other issue that the Committee believes
should be brought to the attention of the Board.
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IV. |
Authority, Responsibilities and Duties |
The Committee has the authority to undertake the specific
responsibilities and duties listed below and such other specific
duties as the Committee deems necessary to fulfill its purpose
and as the Board may from time to time prescribe.
A-2
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A. |
Processes, Controls and Risk Management |
Specific responsibilities of the Committee in connection with
processes, controls and risk management shall include those
listed below.
1. Meeting periodically with management, the individuals or
entities performing the internal audit functions, and the
Companys independent auditors to discuss the adequacy and
effectiveness of the Companys disclosure controls and
procedures and its internal processes and controls over
financial reporting, the completeness and accuracy of the
Companys financial statements and such other matters as
the Committee wishes to discuss.
2. Reviewing reports prepared by management assessing the
adequacy and effectiveness of the Companys disclosure
controls and procedures and internal controls over financial
reporting, prior to the inclusion of such reports in the
Companys annual report and related disclosures in the
Companys quarterly reports.
3. Discussing with management the Companys policies
with respect to risk assessment and risk management.
4. Reviewing on at least a quarterly basis the status of
any legal matters, pending or threatened, that could have a
significant impact on the Companys financial statements.
5. Reviewing the status of any inquiries or investigations
by law enforcement or regulatory agencies.
6. Reviewing on at least an annual basis the Companys
compliance with and changes to laws and regulations pertaining
to taxes, export control, OSHA, workers compensation, and
similar matters.
7. Reviewing and approving the Companys disaster
recovery and business continuity plan.
8. Overseeing the Companys asset management policies,
including an annual review of the Companys investment
policies and performance for cash and investments.
9. Establishing and monitoring the procedures for the
receipt, retention, review and treatment of complaints received
by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential and anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
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B. |
SEC Reports and Other Disclosures |
Specific responsibilities of the Committee in connection with
SEC reports and other disclosures shall include those listed
below.
1. Reviewing with management and the Companys
independent auditors as appropriate, before release and filing
with the SEC:
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a. the Companys quarterly and annual financial
statements, including any report or opinion by the independent
auditors; |
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b. the Companys earnings announcements; |
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c. the Managements Discussion and Analysis of
Financial Condition and Results of Operations section of the
Companys Forms 10-Q and 10-K, and in the
Companys registration statements under the Securities Act
of 1933; and |
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d. The results of the independent auditors audit of
the Companys annual financial statements and the
independent auditors review of the Companys interim
financial statements. |
2. Recommending to the Board whether to include the
Companys audited financial statements in the annual report
on Form 10-K.
3. Preparing annually a report for inclusion in the proxy
statement for the Companys annual meeting of stockholders,
in accordance with then-applicable SEC rules and regulations.
A-3
Specific responsibilities of the Committee in connection with
the independent auditors shall include those listed below.
1. Appointing, determining the compensation and funding for
and overseeing the work of any registered public accounting firm
engaged to render an audit or perform other audit, review or
attest services for the Company. Reviewing the independence,
performance, experience and qualifications of the independent
auditors. The Committee shall have sole authority to approve the
hiring and firing of any such independent auditors and the
independent auditors shall report directly to the Committee.
2. Obtaining and reviewing, on at least an annual basis, a
letter from the independent auditors describing all
relationships between the independent auditors and the Company
required to be disclosed by Independence Standards Board
Standard No. 1, reviewing the nature and proposed audit
scope, setting the compensation and fees, and evaluating,
discussing with the auditors and terminating, as necessary, any
relationships or services that the Committee believes could
compromise the objectivity and independence of the independent
auditors.
3. Pre-approving all audit and permissible non-audit
services to be provided to the Company by the independent
auditors (or subsequently approving non-audit services in those
circumstances where a subsequent approval is permissible) in
accordance with applicable laws, and establishing pre-approval
policies and procedures, as permitted by applicable law and the
rules and regulations of the SEC, for the engagement of
independent auditors to render services to the Company.
4. Discussing with the Companys independent auditors
the independent auditors annual audit plan, including the
scope of audit activities, staffing of the audit and any other
matters required to be discussed in accordance with Statement of
Accounting Standard No. 61, as then applicable.
5. Obtaining and reviewing at least annually a report from
the independent auditors addressing:
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a. all critical accounting policies and practices to be
used; |
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b. all alternative treatments within generally accepted
accounting principles of material items that have been discussed
with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditors; |
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c. other material written communications between the
independent auditors and management, such as any management
letter or schedule of unadjusted differences; |
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d. any comments or recommendations of the independent
auditors outlined in their annual management letter; and |
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e. the adequacy of the Companys accounting and
financial reporting processes and systems of internal control,
including the adequacy of the systems of reporting to the
Committee by each group. |
6. Reviewing with management and the independent auditors
the results of the annual audit of the Company, discussing
significant issues, events and transactions, the independent
auditors judgments about the quality and appropriateness
of the Companys accounting principles, the reasonableness
of significant judgments, the clarity of the disclosures in the
Companys financial statements and any significant
difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to
required information, and resolving any disagreements among
management and the independent auditors regarding financial
reporting.
7. Discussing any comments or recommendations outlined in
the annual report of the independent auditors, and establishing
a schedule for implementing any recommended changes and
monitoring the implementation.
8. Communicating with the Companys independent
auditors about the Companys expectations regarding its
relationship with the auditors, including the independent
auditors ultimate accountability to the Committee, as
representatives of the Companys stockholders.
A-4
9. Monitoring and periodically considering the rotation of
partners of the independent auditors on the Companys
independent audit engagement team as required by applicable law.
|
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D. |
Other Duties and Responsibilities |
Specific responsibilities of the Committee in connection with
other matters related to its activities shall include those
listed below.
1. Consulting with the independent auditors and the
Director of Internal Audit at least once each quarter out of the
presence of management about internal controls, the fullness and
accuracy of the Companys financial statements and any
other matters that the Committee or these groups believe should
be discussed privately with the Committee.
2. Reassessing on an annual basis the scope of the internal
audit department, including staffing, funding, audit plan and
any necessary changes to relevant processes. Reviewing the
results of internal audits, including high-risk deficiencies,
recommended corrective actions and whether the Companys
management has implemented the recommendations.
3. Reviewing and reassessing the adequacy of the
Committees charter on at least an annual basis. Submitting
the charter to the Companys Board for review and approval
and including a copy of the charter as an appendix to the
Companys proxy statement as required by the
then-applicable rules and regulations of the SEC (currently,
once every three years).
4. Reviewing developments in accounting principles,
auditing standards, independence standards and reporting
standards.
5. Performing any other activities required by applicable
law, rules or regulations, including the rules of the SEC and
any stock exchange or market on which the Companys Common
Stock is listed, and perform other activities that are
consistent with this charter, the Companys Bylaws and
governing laws, as the Committee or the Board deems necessary or
appropriate.
A-5
[FFRCM
FORM FACTOR, INC.] [FILE NAME:
ZFFR62.ELX] [VERSION (2)] [04/12/05]
[orig. 02/23/05]
DETACH HERE
PROXY
FORMFACTOR, INC.
PROXY
FOR 2005 ANNUAL MEETING OF STOCKHOLDERS
(This
proxy is solicited on behalf of the Board of Directors of FormFactor,
Inc.)
P
R
O
X
Y
The
undersigned stockholder of FormFactor, Inc. hereby revokes all prior
proxies, acknowledges receipt of the Notice of Annual Meeting of
Stockholders to be held May 19, 2005, appoints Stuart L.
Merkadeau and Richard Mittermaier, or either of them, as proxies,
each with full power of substitution, and authorizes them to
represent and to vote, as designated on the reverse side, all shares
of common stock, par value $0.001 per share, of FormFactor, Inc. held
of record by the undersigned stockholder at the close of business on
March 31, 2005, at the 2005 Annual Meeting of Stockholders to be
held at our offices, located at 7005 Southfront Road in
Livermore, California, on Thursday, May 19, 2005 at
3:00 p.m., Pacific Time, and at any adjournment or postponement
thereof, with the same force and effect as the undersigned
stockholder might or could do if personally present thereat.
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED. IF NO VOTING CHOICE IS SPECIFIED ON THE REVERSE SIDE OF THIS PROXY, THEN
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE CLASS II
NOMINEES TO THE BOARD OF DIRECTORS LISTED ON THE REVERSE SIDE AND FOR
PROPOSAL NO. 2.
IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
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HAS YOUR ADDRESS CHANGED? |
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DO YOU HAVE ANY COMMENTS? |
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(CONTINUED
AND TO
BE SIGNED ON REVERSE SIDE)
FORMFACTOR, INC.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
[FFRCM - FORM FACTOR, INC.]
[FILE NAME: ZFFR61.ELX] [VERSION - (3)] [04/19/05]
[orig. 02/23/05]
DETACH AND RETURN THIS PORTION ONLY
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x |
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Please mark votes as in this example. |
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#FFR |
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FORMFACTOR,
INC. |
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Your vote
is important. Whether or not you plan to attend the 2005 Annual
Meeting of Stockholders of FormFactor, Inc. in person, we urge you to
complete, date, sign and promptly mail this proxy in the enclosed
postage-paid envelope (to which no postage need be affixed if mailed
in the United States) so that your shares of our common stock may be
represented at the Annual Meeting. |
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THE BOARD
OF DIRECTORS OF FORMFACTOR RECOMMENDS A VOTE FOR THE
ELECTION OF THE CLASS II NOMINEES LISTED BELOW TO THE BOARD OF
DIRECTORS AND FOR PROPOSAL NO. 2. |
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To elect as Class II directors
the following nominees: |
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FOR |
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AGAINST |
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ABSTAIN |
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(01) G. Carl Everett, Jr.,
(02) Dr. Homa Bahrami |
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To ratify the selection of
PricewaterhouseCoopers LLP as independent auditor of FormFactor, Inc.
for the fiscal year ending December 31, 2005. |
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FOR ALL NOMINEES |
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WITHHELD FROM
ALL NOMINEES |
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For
all nominees except as written above |
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Mark box at right if
you plan to attend the Annual Meeting. |
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Mark box at right if
an address change or comment has been noted on the reverse side of
this card. |
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This proxy must be
signed for your instructions to be executed. Each joint owner should
sign. Signature should correspond with names printed on this proxy.
Attorneys, executors, administrators, guardians, trustees, corporate
officers or other signing in a representative capacity should give
full title. |
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Please complete, date,
sign and promptly mail this proxy whether you plan to attend the
Annual Meeting or not. If you do attend the Annual Meeting, you
may vote in person if your desire. |
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Signature: |
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Date: |
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Signature: |
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Date: |
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