SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
|X| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NANOMETRICS INCORPORATED
----------------------------------------------------------
(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):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
NANOMETRICS INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Nanometrics Incorporated, a California corporation (the "Company"), will be held
on Wednesday, May 14, 2003 at 1:30 p.m., local time, at the principal offices of
the Company located at 1550 Buckeye Drive, Milpitas, California 95035, for the
following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31,
2003.
3. To approve the adoption of the Company's 2003 Employee Stock
Purchase Plan and the reservation of 750,000 shares of common stock
for issuance thereunder.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 1, 2003 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy.
Sincerely,
Vincent J. Coates
Secretary
Milpitas, California
April 17, 2003
NANOMETRICS INCORPORATED
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Nanometrics Incorporated (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on Wednesday, May
14, 2003 at 1:30 p.m., local time, or at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal offices of the
Company located at 1550 Buckeye Drive, Milpitas, California 95035. The Company's
telephone number at that address is (408) 435-9600.
These proxy solicitation materials were mailed on or about April 17, 2003
to all shareholders entitled to vote at the meeting. A copy of the Company's
2002 Annual Report on Form 10-K accompanies this Proxy Statement. The Company's
2002 Annual Report on Form 10-K is also available on the Security and Exchange
Commission's website at www.sec.gov.
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 1, 2003 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 12,006,641 shares of common stock of the Company, no par value (the
"Common Stock"), were issued and outstanding. For information concerning
security ownership of management and beneficial owners of more than 5% of the
outstanding Common Stock, see "Security Ownership of Management and Certain
Beneficial Owners" below.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by (i) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or (ii) attending the meeting and voting in person.
Voting and Solicitation
The candidates receiving the five highest vote totals will be elected to
serve as directors. Every shareholder voting for the election of directors may
(i) cumulate such shareholder's votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of
shares that such shareholder holds or (ii) distribute such shareholder's votes
on the same principle among as many candidates as the shareholder may select,
provided that votes cannot be cast for more than five candidates. However, no
shareholder shall be entitled to cumulate votes for a candidate unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the intention to cumulate votes. On all other matters, each share
of Common Stock outstanding has one vote.
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone.
Quorum; Abstentions: Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
("Votes Cast") with respect to such matter.
1
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against a proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to a proposal.
Deadline for Receipt of Shareholder Proposals
The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the 2003 Annual Meeting. Shareholders are
entitled to present proposals for action at the 2004 Annual Meeting if such
proposals comply with the requirements of the proxy rules. Proposals of
shareholders of the Company which are intended to be presented by such
shareholders at the Company's 2004 Annual Meeting must be received by the
Company no later than December 19, 2003 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
If a shareholder intends to submit a proposal at the 2004 Annual Meeting
that is not intended to be included in the proxy statement and proxy, the
shareholder must do so no later than March 3, 2004. The proxy holders will not
be allowed to use their discretionary authority to vote on any proposals
received after this date when such proposals are raised at the 2004 Annual
Meeting.
Matters Not Required to be Submitted to Security Holders
The Company is submitting to the shareholders the proposal to approve the
appointment of Deloitte & Touche LLP as independent auditors of the Company for
the fiscal year ending December 31, 2003. Although the Company is not required
to submit such proposal to a vote of the shareholders, the Company has done so
in order to obtain shareholder ratification of the proposal. If the shareholders
do not vote in favor of the appointment of Deloitte & Touche LLP, the Company
will consider the selection of other auditors.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
A board of five directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's five nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. The proxy holders intend to vote all proxies
received by them in such a manner and in accordance with cumulative voting as
will ensure the election of as many of the nominees listed below as possible
and, in such event, the specific nominees to be voted for will be determined by
the proxy holders. The Company is not aware of any nominee who will be unable or
will decline to serve as a director. The term of office of each person elected
as a director will continue until the next Annual Meeting of Shareholders or
until such director's successor has been elected and qualified.
The names of the nominees and certain information about them are set forth
below:
Name of Nominee Age Director Since
--------------- --- --------------
Vincent J. Coates ................. 78 1975
Nathaniel Brenner ................. 76 1986
John D. Heaton .................... 43 1995
Edmond R. Ward .................... 63 1999
William G. Oldham ................. 64 2000
Vincent J. Coates has been Chairman of the Board since the Company was
founded in 1975. He has been the Company's Secretary since February 1989. He has
also served as Chief Executive Officer through April 1998 and President from the
founding through May 1996, except for the period January 1986 through February
1987 when he served exclusively as Chief Executive Officer. Mr. Coates has also
served as Chairman of the Board of Nanometrics Japan Ltd., a subsidiary of the
Company, since its inception in November 1984. Prior to his employment at
Nanometrics, Mr. Coates co-founded Coates and Welter Instrument Corporation, a
designer of electron microscopes, the assets of which were subsequently acquired
by Nanometrics. Mr. Coates also spent over twenty years working in engineering,
sales and international operations for the Perkin-Elmer Corporation, a
manufacturer of analytical instruments. In 1995, he received an award which
recognized his contribution to the industry from Semiconductor and Equipment and
Materials International, an industry trade organization.
Nathaniel Brenner has served as a director of the Company since June 1986.
In 1992, Mr. Brenner retired from Beckman Instruments, Inc., a provider of
laboratory instrument systems, where, since 1976, he held the positions of
Program Manager, Marketing Manager (Instruments) and General Manager
(Spectroscopy).
John D. Heaton has served as a director of the Company since July 1995.
Since April 1998, he has been Chief Executive Officer of the Company. From May
1996 to April 1998, he served as the Company's President and Chief Operating
Officer. Mr. Heaton has also served as President of Nanometrics Japan Ltd., a
subsidiary of the Company, since January 1998. Beginning in 1978, Mr. Heaton
served in various technical positions at National Semiconductor, a semiconductor
manufacturer, prior to joining the Company in 1990.
Edmond R. Ward has served as a director of the Company since July 1999.
Beginning in January 2002, Mr. Ward has served as Chief Technical Officer of
Unity Semiconductor, a semiconductor design and manufacturing company. Since
April 1999, Mr. Ward has been a General Partner of Virtual Founders, a venture
capital firm. From April 1992 to June 1997, Mr. Ward was the Vice President of
Technology at Silicon Valley Group, Inc., a supplier of wafer processing
equipment.
3
William G. Oldham has served as a director of the Company since June 2000.
Since 1964, Mr. Oldham has been a faculty member at the University of
California, Berkeley, where he researches EUV and Maskless Lithography and,
since 1996, has been the Director of the DARPA/SRC Research Network for Advanced
Lithography. He has served as a consultant in various intellectual property
matters and serves on the board of directors of Cymer, Inc., a supplier of light
sources for deep ultraviolet (DUV) photolithography systems used in the
manufacturing of semiconductors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE NOMINEES SET FORTH HEREIN.
4
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth beneficial ownership of Common Stock of the
Company as of April 1, 2003, by each director or nominee, by each of the Named
Officers (as defined below), by all directors and Named Officers as a group, and
by all persons known to the Company to be the beneficial owners of more than 5%
of the Company's Common Stock. Unless otherwise indicated, the address of each
beneficial owner of 5% of the Company's Common Stock is 1550 Buckeye Drive,
Milpitas, California 95035.
Number of Shares of
Common Stock Percent of
Name of Beneficial Owner Beneficially Owned(1) Total
------------------------ --------------------- ----------
Vincent J. Coates(2) ................................................ 3,376,274 28.1%
Wasatch Advisors, Inc.(3) ........................................... 1,627,217 13.6
150 Social Hall Avenue
Salt Lake City, UT 84111
FMR Corp.(4) ........................................................ 1,186,400 9.9
82 Devonshire Street
Boston, MA 02109
Capital Group International, Inc.(5) ................................ 1,110,780 9.3
11100 Santa Monica Blvd.
Los Angeles, CA 90025
John D. Heaton(6) ................................................... 193,335 1.6
Nathaniel Brenner(7) ................................................ 65,299 *
Edmond R. Ward(8) ................................................... 31,999 *
Roger Ingalls, Jr. (9) .............................................. 24,000 *
William Oldham(10) .................................................. 17,665 *
Paul B. Nolan(11) ................................................... 11,666 *
Papken Der Torossian(12) ............................................ 18,333 *
All Named Officers and directors as a group (8 persons)(13) ......... 3,738,571 30.5
------------
* Represents less than 1% of outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission (the "SEC"). The number of
shares beneficially owned by a person includes shares of common
stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of April 1, 2003. Such
shares issuable pursuant to such options are deemed outstanding for
computing the percentage ownership of the person holding such
options but are not deemed outstanding for the purposes of computing
the percentage ownership of each other person.
(2) Includes 3,376,154 shares of common stock held of record by the
Vincent J. Coates Separate Property Trust, U/D/T dated August 7,
1981, for which Mr. Coates acts as trustee.
(3) According to a Schedule 13G/A filed with the SEC on February 13,
2003, Wasatch Advisors, Inc. may be deemed to be the beneficial
owner of 1,627,217 shares of common stock.
(4) According to a Schedule 13G/A filed with the SEC on February 14,
2003, FMR Corp. ("FMR") may be deemed to be the beneficial owner of
1,186,400 shares of common stock.
(5) According to a Schedule 13G/A filed with the SEC on February 11,
2003, Capital Group International, Inc. may be deemed to be the
beneficial owner of 1,110,780 shares of common stock.
(6) Includes 150,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
(7) Includes 35,300 shares of common stock held of record by The N and J
Brenner Living Trust Dated March 19, 1990, for which Mr. Brenner and
his wife act as trustees, and 29,999 shares of common stock issuable
upon exercise of outstanding options exercisable within 60 days of
April 1, 2003.
(8) Includes 29,999 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
5
(9) Includes 19,000 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
(10) Includes 16,665 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
(11) Includes 6,666 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
(12) Includes 15,000 shares of common stock held of record by UBS Paine
Webber on behalf of the Papken S. Der Torossian and Clara E. Der
Torossian, Family Revocable Living Trust Dated April 24, 1992 and
3,333 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of April 1, 2003. Mr. Der
Torossian resigned from the Board of Directors in March of 2003.
(13) Includes 255,662 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of April 1, 2003.
Board Meetings and Committees
The Board of Directors held meetings (or acted by written consent) a total
of five times during fiscal 2002. During fiscal 2002, no incumbent directors
attended less than 75% of the aggregate of (i) the total number of meetings of
the Board of Directors and (ii) the total number of meetings of committees, if
any, upon which such directors served. The Company maintains standing committees
overseeing audits, compensation and stock option grants. The Company does not
have a standing nominating committee.
Audit Committee. The Audit Committee of the Board of Directors reviews and
monitors the corporate financial reporting as well as the internal and external
audits of the Company, including among other things, the Company's internal
audit and control functions, the results and scope of the annual audit and other
services provided by the Company's independent auditors, and the Company's
compliance with legal matters that may have a significant impact on the
Company's financial reports. In addition, the Audit Committee has the
responsibility to consider and recommend the employment of, and to review fee
arrangements with, the Company's independent auditors. The Audit Committee also
monitors transactions between the Company and its officers, directors and
employees for any potential conflicts of interest. The Board of Directors
adopted a written charter for the Audit Committee on March 27, 2001. The Audit
Committee met (or acted by written consent) four times during fiscal 2002.
The members of the Audit Committee during fiscal 2002 were Papken S. Der
Torossian, Nathaniel Brenner and Edmond R. Ward. Mr. Der Torossian was elected
to replace William Oldham on the Audit Committee on February 27, 2002. At that
time, he was elected to be the Chairman of the Audit Committee and served in
that capacity until February 26, 2003. Mr. Der Torossian resigned from the Audit
Committee in March 2003. The Company is actively seeking a third Audit Committee
member to fill the vacancy left by Mr. Der Torossian. Currently, Mr. Ward is the
Chairman of the Audit Committee. Messrs. Brenner and Ward are "independent
directors" as that term is defined under the applicable National Association of
Securities Dealers' ("NASD") listing standards.
Compensation/Stock Option Committee. On May 15, 2002, the Compensation
Committee and Stock Option Committee were combined into the Compensation/Stock
Option Committee of the Board of Directors. The Compensation/Stock Option
Committee now performs the functions of the formerly separate Compensation
Committee and Stock Option Committee.
The Compensation Committee, now the Compensation/Stock Option Committee,
reviews and makes recommendations to the Board of Directors regarding the
Company's compensation policy and all forms of compensation to be provided to
certain of the executive officers of the Company. Prior to May 15, 2002, the
members of the Compensation Committee were Nathaniel Brenner and Papken S. Der
Torossian. The Compensation Committee did not meet as a separate committee in
2002 prior to May 15, 2002.
The Stock Option Committee, now the Compensation/Stock Option Committee,
is responsible for approving the grant of stock options to the Company's
employees under the Company's 2000 Employee Stock Option Plan and 2002
Nonstatutory Stock Option Plan. Prior to May 15, 2002, the members of the
6
Stock Option Committee were Edmond Ward and Nathaniel Brenner. The Stock Option
Committee met (or acted by written consent) as a separate committee four times
prior to May 15, 2002.
As of May 15, 2002, the current members of the combined Compensation/Stock
Option Committee were Nathaniel Brenner, Edmond Ward and Papken S. Der
Torossian. Mr. Der Torossian resigned from the Compensation/Stock Option
Committee in March 2003. Mr. Brenner is the Chairman of the committee. The
combined Compensation/Stock Option Committee met (or acted by written consent)
eight times during fiscal 2002.
Compensation/Stock Option Committee Interlocks and Insider Participation
No member of the Compensation/Stock Option Committee of the Company's
Board of Directors serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation/Stock Option
Committee.
Board Compensation
Directors who are not also employees of the Company receive an annual
retainer fee of $5,000 plus $1,000 for each Board of Directors and committee
meeting attended (unless the Board of Directors and committee meetings take
place on the same day, in which case such directors receive a $1,000 fee) and
are eligible to participate in the Company's 2000 Directors' Stock Option Plan.
Equity Compensation Plan Information
The following table summarizes information regarding the various
stock-based compensation plans under which the Company was authorized to issue
equity securities as of December 31, 2002.
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column (a))
Plan category (a) (b) (c)
------------- -------------------------- ------------------------- -------------------------
Equity compensation plans approved
by security holders(1) .............. 1,410,594 $ 14.27 2,044,969(2)
Equity compensation plans not
approved by security holders(3) ..... -- -- 1,200,000
--------- ------- ---------
Total ............................... 1,410,594 $ 14.27 3,244,969
========= ======= =========
------------
(1) Consists of the 1991 Stock Option Plan, as amended, the 1991 Directors'
Stock Option Plan, the 2000 Stock Option Plan, as amended, and the 2000
Directors' Stock Option Plan. The Company no longer issues options under
the 1991 Stock Option Plan, as amended, or the 1991 Directors' Stock
Option Plan.
(2) No shares remain available for future issuance under the 1986 Employee
Stock Purchase Plan, as amended. The Board of Directors terminated the
plan effective September 28, 2002.
(3) Consists of the Company's 2002 Nonstatutory Stock Option Plan. Pursuant to
the plan, the Company may grant options to acquire up to 1,200,000 shares
of common stock to employees and consultants at prices determined by the
administrator at the date of grant. These options generally expire seven
years from the date of grant, or a shorter term as provided in their
respective stock option agreements, and become exercisable in accordance
with the vesting set forth in their respective stock option agreements.
The Company did not issue any options pursuant to the 2002 Nonstatutory
Stock Option Plan in fiscal 2002.
7
Compensation of Executive Officers
The following table sets forth the compensation paid by the Company during
the past three fiscal years to (i) the Chief Executive Officer of the Company
during the last fiscal year, (ii) each of the four most highly compensated
executive officers (or such lesser number of executive officers as the Company
may have) of the Company not serving as Chief Executive Officer and (iii) up to
an additional two individuals that would have been included under item (ii) but
for the fact that the individuals were not serving as executive officers at the
end of the last completed fiscal year (collectively, the "Named Officers"):
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
---------------------------------------- ------------------
Securities
Underlying
Name Fiscal Year Salary Bonus Options (#)
------------------------------------------- ------------- ------------ --------- ------------------
John D. Heaton ............................ 2002 $ 343,800 $ -- 275,000(1)
President and Chief Executive Officer 2001 344,299 46,551 --
2000 303,146 70,385 250,000
Vincent J. Coates ......................... 2002 $ 204,800 $ -- --
Chairman of the Board and Secretary 2001 204,800 -- --
2000 204,800 -- --
Roger Ingalls Jr. ......................... 2002 $ 201,834 $ -- 25,000(1)
Vice President of Sales 2001 234,089 19,802 --
2000 225,779 38,982 10,000
Paul B. Nolan ............................. 2002 $ 162,234 $ -- 50,000
Vice President and Chief Financial Officer 2001 152,561 18,480 --
2000 137,619 35,023 10,000
------------
(1) The stock options were cancelled on December 16, 2002 in connection with
the Company's offer to exchange certain outstanding options to purchase
shares of the Company's common stock for new options. The Company expects
to grant such new options on or about June 17, 2003 at the then-current
market price of the Company's common stock at such time.
Stock Options Granted in the Fiscal Year Ended December 31, 2002
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 2002 to each of the Named
Officers. All options were granted under the Company's 2000 Stock Option Plan.
8
The potential realizable value amounts in the last two columns of the
following chart represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed 5%
and 10% annual rates of stock price appreciation from the date of grant to the
end of the option term are provided in accordance with rules of the SEC and do
not represent the Company's estimate or projection of the future common stock
price. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock, overall market conditions and the option
holder's continued employment through the vesting period.
Option Grants in Last Fiscal Year
Individual Grants
---------------------------------------------------------
Number of % of Total Potential Realized Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees Exercise Option Term
Granted in Fiscal Price Expiration -----------------------------
Name (#)(1) Year(2) ($/Sh) Date 5% ($) 10% ($)
--------------------------- ------------ ------------ ------------ ------------ ------------- -------------
John D. Heaton ............ 200,000 22.1% $ 19.69 5/15/09 $1,603,161 $3,736,048
John D. Heaton ............ 75,000 8.3 5.72 8/14/09 174,646 407,000
Vincent J. Coates ......... -- -- -- -- -- --
Roger Ingalls Jr. ......... 25,000 2.8 6.33 8/12/09 64,424 150,134
Paul B. Nolan ............. 10,000 1.1 14.75 6/10/09 60,047 139,936
Paul B. Nolan ............. 40,000 4.4 6.33 8/12/09 103,078 240,215
------------
(1) All options granted to the Named Officers in fiscal 2002 were granted at
exercise prices equal to the fair market value of the Company's common
stock on the dates of grant. Historically, options granted become
exercisable at the rate of 33% on the first anniversary date of the option
grant and 33% of the option shares become exercisable each full year
thereafter, such that full vesting occurs three years after the date of
grant. Options lapse after 7 years or 90 days after termination of
employment.
(2) Based on 907,100 options granted during the fiscal year ended December 31,
2002.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named Officers
at December 31, 2002. None of the Named Officers exercised stock options during
fiscal 2002.
Number of Securities
Underlying Unexercisable Value of Unexercised In-
Options at Fiscal the-Money Options at
Shares Value Year-End (#) Fiscal Year-End ($)(2)(3)
Acquired on Realized ------------------------------ -----------------------------
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
--------------------------- -------------- ---------- ------------- --------------- ------------- --------------
John D. Heaton ............ -- $ -- 150,000 0 $ -- $ --
Vincent J. Coates ......... -- -- -- -- -- --
Roger Ingalls Jr. ......... -- -- 19,000 0 -- --
Paul B. Nolan ............. -- -- 6,666 53,334 -- --
------------
(1) The value realized upon exercise is (i) the fair market value of the
Company's common stock on the date of exercise, less the option exercise
price per share, multiplied by (ii) the number of shares underlying the
options exercised.
(2) The value of unexercised options is (i) the fair market value of the
Company's common stock on December 31, 2002 ($4.19 per share), less the
option exercise price of in-the-money options, multiplied by (ii) the
number of shares underlying such options.
(3) None of the individuals listed held unexercised in-the-money options at
the end of fiscal 2002.
9
Certain Transactions
Pursuant to the terms of an agreement dated May 1, 1985 between the
Company and Vincent J. Coates, the Chairman of the Board of the Company, the
terms of which were then amended and restated in August 1996 and again effective
April 1998, the Company is obligated, in the event Mr. Coates is required to
resign as Chairman of the Board under certain circumstances, including a change
of control, to continue to pay Mr. Coates his salary and benefits for five years
from the date of such resignation.
In April 1998, the Company entered into an agreement with John D. Heaton
under which the Company agreed to pay Mr. Heaton his usual annual salary
(excluding bonuses) for a period of one year from the date that he is required
or requested for any reason not involving good cause, including a change of
control, to involuntarily relinquish his positions with the Company as Chief
Executive Officer, President and Director. If Mr. Heaton leaves the Company
voluntarily or if he is asked to leave under certain circumstances, no such
severance payment is required.
On October 1, 2001, Mr. Heaton issued a promissory note to the Company in
the principal amount of approximately $301,000 in a transaction designed to
provide Mr. Heaton with funds to meet personal needs. The note bears interest at
a rate of 6% and shall become due and payable upon the earlier of (i) 90 days
after the termination of Mr. Heaton's employment with the Company or (ii)
October 1, 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the SEC and the NASDAQ
National Market. Executive officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms that they file. Based solely on its review of the
copies of such forms received by it or written representations from certain
reporting persons, the Company believes that during fiscal 2002, its executive
officers, directors and greater than ten percent shareholders complied with all
applicable filing requirements.
10
Report of the Audit Committee of the Board of Directors
The following is the report of the Audit Committee of the Board of
Directors describing its review of materials and determinations with respect to
the Company's auditors and financial statements for the fiscal year ended
December 31, 2002. The information contained in this report shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During 2002, the
Audit Committee met (or acted by written consent) four times, and the Audit
Committee chairman, as representative of the committee, discussed the interim
financial information contained in quarterly earnings announcements with the
Chief Financial Officer and independent auditors prior to public release.
The Audit Committee received from the Company's independent auditors a
formal written statement, consistent with Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," which describes all
relationships between the auditors and the Company that, in the auditors'
professional opinion, might reasonably be thought to bear on the auditors'
independence. The Audit Committee discussed with the auditors these
relationships and satisfied itself as to the auditors' independence.
The Audit Committee also discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the Company's financial statements.
Additionally, the Audit Committee reviewed the audited financial
statements of the Company as of and for the fiscal year ended December 31, 2002
with management and the independent auditors. Management has the responsibility
for the preparation of the Company's financial statements and the independent
auditors have the responsibility for the examination of those statements.
Based on the foregoing review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended December 31, 2002 for filing with the Securities
and Exchange Commission. The Audit Committee also recommended the reappointment,
subject to shareholder approval, of the independent auditors and the Board
concurred in such recommendation.
Nathaniel Brenner
Edmond R. Ward
11
Report of the Compensation/Stock Option Committee of the Board of Directors
The following is the report of the Compensation/Stock Option Committee of
the Board of Directors describing compensation policies and rationales
applicable to certain of the Company's executive officers with respect to the
compensation paid to such executive officers for the fiscal year ended December
31, 2002. The information contained in such report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
General. The Compensation/Stock Option Committee is responsible for making
recommendations to the Board of Directors with respect to cash compensation
levels for certain of the Company's executive officers. During 2002, the
Compensation/Stock Option Committee also was responsible for determining levels
of equity-based compensation for the Company's employees.
Compensation Philosophy. The Compensation/Stock Option Committee makes
recommendations as to the salaries of certain of the executive officers by
considering (i) the salaries of executive officers in similar positions at
comparably-sized peer companies, (ii) the Company's financial performance over
the past year based upon revenues and operating results and (iii) the
achievement of individual performance goals related to each executive officer's
duties and areas of responsibility. The Compensation/Stock Option Committee
makes recommendations as to the levels of cash bonuses awarded to certain of the
Company's executive officers and views such bonuses as being an integral part of
its performance based compensation program. Such bonuses are based on Company
profits and are determined as a percentage of the officer's salaries.
Equity-Based Compensation. The Compensation/Stock Option Committee views
stock options as an important part of its long-term, performance-based
compensation program. The Compensation/Stock Option Committee grants stock
options to all employees of the Company under the Company's 2000 Stock Option
Plan and 2002 Nonstatutory Stock Option Plan based upon the committee's
estimation of each employee's contribution to the long-term growth and
profitability of the Company. The 2000 Stock Option Plan is intended to provide
additional incentives to the executive officers to maximize shareholder value.
Options are granted under the 2000 Stock Option Plan and the 2002 Nonstatutory
Stock Option Plan at the then-current market price and are generally subject to
three-year vesting periods to encourage key employees to remain with the
Company.
Compensation of the President and Chief Executive Officer. The
compensation of the Company's President and Chief Executive Officer was based
upon the same criteria described above. Due to economic conditions, the
Compensation/Stock Option Committee felt that an increase to the base salary of
the President and CEO would not be appropriate. Additionally, no management
bonuses, which are based on profits, were paid in 2003.
Nathaniel Brenner
Edmond R. Ward
12
Performance Graph
Set forth below are two line graphs; one comparing the annual percentage
change in the cumulative return to the shareholders of the Company's Common
Stock with the cumulative return of the NASDAQ Stock Market Index and the RDG
Technology Composite Index for the period commencing on January 1, 1998 and
ending on December 31, 2002 and the other comparing the annual percentage change
in the cumulative return to the shareholders of the Company's Common Stock with
the cumulative return of the NASDAQ Stock Market Index and the J.P. Morgan H&Q
Technology Index (the "H&Q Index") for the period commencing on January 1, 1997
and ending on December 31, 2001. In each case, the results are shown based on a
$100 investment in the stock or index with any dividends reinvested. The H&Q
Index, which we presented in our 2001 Proxy Statement, was discontinued in 2002.
As a result, we have included both graphs in the interest of additional
disclosure.
The information contained in the performance graph shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG NANOMETRICS INCORPORATED, NASDAQ STOCK MARKET (U.S.) INDEX
AND THE RDG TECHNOLOGY COMPOSITE INDEX
[The following table was depicted as a line chart in the printed material]
Cumulative Total Return
-------------------------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
----------- ---------- ----------- ----------- ----------- ----------
NANOMETRICS INCORPORATED ........... 100.00 95.42 245.80 168.71 236.95 51.18
NASDAQ STOCK MARKET (U.S.) ......... 100.00 140.99 261.48 157.40 124.87 86.38
RDG TECHNOLOGY COMPOSITE ........... 100.00 176.28 348.72 215.64 157.63 93.01
13
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG NANOMETRICS INCORPORATED,
THE NASDAQ STOCK MARKET (U.S.) INDEX, THE J.P. MORGAN
H&Q TECHNOLOGY INDEX, AND THE RDG TECHNOLOGY COMPOSITE INDEX
[The following table was depicted as a line chart in the printed material]
Cumulative Total Return
---------------------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
----------- ----------- ----------- ----------- ----------- -----------
NANOMETRICS INCORPORATED ........ 100.00 172.37 164.47 423.68 290.80 408.42
NASDAQ STOCK MARKET (U.S.) ...... 100.00 122.49 172.70 320.28 192.80 152.96
J.P. MORGAN H&Q TECH. INDEX ..... 100.00 117.24 182.36 407.27 263.28 181.99
RDG TECHNOLOGY COMPOSITE ........ 100.00 128.12 225.86 446.80 276.29 201.96
14
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board has appointed Deloitte & Touche LLP, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending December 31, 2003. Deloitte & Touche LLP has audited the Company's
financial statements since fiscal 1991.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte & Touche") for professional services rendered for the audit of the
Company's annual consolidated financial statements for the year ended December
31, 2002 and for reviews of the consolidated financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year were $264,239.
Financial Information Systems Design and Implementation Fees
The Company did not engage Deloitte & Touche for professional services
relating to financial information systems design and implementation for the
fiscal year ended December 31, 2002.
All Other Fees
The aggregate fees billed by Deloitte & Touche for services rendered to
the Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the fiscal
year ended December 31, 2002 were $222,255 and included tax compliance and tax
consulting services.
The Audit Committee has considered the fees received by Deloitte & Touche
for the provision of financial information systems design and implementation
services and other services are compatible with maintaining the accountant's
independence before recommending Deloitte & Touche as the independent auditor
for the next fiscal year.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003.
15
PROPOSAL NO. 3
ADOPTION OF THE COMPANY'S 2003 EMPLOYEE STOCK PURCHASE PLAN
AND THE RESERVATION OF 750,000 SHARES OF THE COMPANY'S
COMMON STOCK FOR ISSUANCE THEREUNDER
As of April 1, 2003, the Board of Directors of the Company (the "Board")
adopted the 2003 Employee Stock Purchase Plan (the "Purchase Plan"), subject to
the approval of the Company's shareholders. The Purchase Plan is intended to
replace the Company's 1986 Employee Stock Purchase Plan, as amended through
March 1998 (the "1986 Purchase Plan"), which was terminated by the Board
effective September 28, 2002. Shareholders are being asked to approve the
adoption of the Purchase Plan and the reservation of 750,000 shares thereunder.
The fair market value of the Common Stock as of April 8, 2003 was $3.99 per
share.
The Board believes that the Purchase Plan has been important to the
Company's efforts to encourage employee equity participation and increase worker
retention by aligning employee interests with those of the shareholders. The
Board is pleased with the success of the 1986 Purchase Plan in increasing the
level of employee interest in the Company's stock price, and believes that the
offer of equity incentives to all employees has been a key factor in the
Company's overall financial performance. As of December 31, 2002, no shares of
Common Stock were available for issuance under the Company's 1986 Purchase Plan.
The following is a summary description of the Purchase Plan under which no
shares have yet been granted. However, this summary is not a complete
description of all the provisions of the Purchase Plan, and is qualified in its
entirety by the specific language of the Purchase Plan.
Summary of the Purchase Plan
General. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll deductions.
Administration. The Purchase Plan may be administered by the Board or a
committee appointed by the Board (the "Administrator"). All questions of
interpretation or application of the Purchase Plan are determined by the
Administrator, and its decisions are final, conclusive and binding upon all
participants.
Eligibility. Each employee of the Company (including officers), whose
customary employment with the Company is at least twenty (20) hours per week and
more than five (5) months in any calendar year, is eligible to participate in
the Purchase Plan; provided, however, that no employee shall be granted an
option under the Purchase Plan (i) to the extent that, immediately after the
grant, such employee would own 5% of either the voting power or value of the
stock of the Company, or (ii) to the extent that his or her rights to purchase
stock under all employee stock purchase plans of the Company accrues at a rate
which exceeds $25,000 worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year. As of
December 31, 2002, the Company had 305 employees, all of whom were eligible to
participate in the Purchase Plan.
Offering Period. The Purchase Plan is implemented by consecutive offering
periods lasting approximately six months in duration with a new offering period
commencing on the first trading day (as defined in the Purchase Plan) on or
after the last day of the Company's first and third fiscal quarters of each
year. To participate in the Purchase Plan, each eligible employee must authorize
payroll deductions pursuant to the Purchase Plan. Such payroll deductions may
not exceed 10% of a participant's compensation. Compensation is defined as
regular straight time gross earnings, but exclusive of commissions, overtime,
shift premium, incentive compensation, incentive payments, bonuses and other
compensation. Once an employee becomes a participant in the Purchase Plan,
Common Stock will automatically be purchased under the Purchase Plan at the end
of each offering period, unless the participant withdraws or terminates
employment earlier, and the employee will automatically participate in each
successive offering period until such time as the employee withdraws from the
Purchase Plan or the employee's employment with the Company terminates.
Purchase Price. The purchase price per share at which shares will be sold
in an offering under the Purchase Plan is the lower of (i) 85% of the fair
market value of a share of Common Stock on the first
16
day of the offering period or (ii) 85% of the fair market value of a share of
Common Stock on the last day of the offering period. The fair market value of
the Common Stock on a given date is generally the closing sale price of the
Common Stock as reported on the Nasdaq National Market for such date.
Payment of Purchase Price; Payroll Deductions. Payment for the shares is
accumulated by payroll deductions throughout the offering period. The number of
shares of Common Stock a participant may purchase in each offering period is
determined by dividing the total amount of payroll deductions withheld from the
participant's compensation during that offering period by the purchase price.
However, a participant may not purchase during an offering period more than
5,000 shares during any offering period. During the offering period, a
participant may discontinue his or her participation in the Purchase Plan, and
may decrease or increase the rate of payroll deductions in an offering period
within limits set by the Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan, are withheld in whole percentages
only and are included with the general funds of the Company. Funds received by
the Company pursuant to exercises under the Purchase Plan are also used for
general corporate purposes. A participant may not make any additional payments
into his or her account other than through payroll deductions.
Withdrawal. A participant may terminate his or her participation in the
Purchase Plan at any time by giving the Company a written notice of withdrawal.
In such event, the payroll deductions credited to the participant's account will
be returned, without interest, to such participant. Payroll deductions will not
resume unless a new subscription agreement is delivered in connection with a
subsequent offering period.
Termination of Employment. Termination of a participant's employment for
any reason, including death, cancels his or her participation in the Purchase
Plan immediately. In such event the payroll deductions credited to the
participant's account will be returned without interest to such participant, his
or her designated beneficiaries or the executors or administrators of his or her
estate.
Adjustments Upon Changes in Capitalization. In the event of any changes in
the capitalization of the Company effected without receipt of consideration by
the Company, such as a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, appropriate adjustments
will be made by the Administrator in the shares subject to purchase and in the
price per share under the Purchase Plan. In the event of liquidation or
dissolution of the Company, the offering periods then in progress will be
shortened, a new exercise date will be set and the offering period will
terminate immediately prior to the consummation of such event unless otherwise
provided by the Administrator.
In the event of a sale of all or substantially all of the assets of the
Company, the merger of the Company with or into another corporation, or other
change of control of the Company, the successor corporation will assume or
substitute for each outstanding option. In the event the successor corporation
refuses to assume or substitute for the options, the offering period then in
progress will be shortened and a new exercise date will be set. In such event,
the Administrator shall notify each participant at least ten (10) business days
prior to the new exercise date.
Amendment and Termination. The Administrator may at any time and for any
reason amend or terminate the Purchase Plan, except that no such termination
shall affect options previously granted and no amendment shall make any change
in an option granted prior thereto which adversely affects the rights of any
participant. Shareholder approval for amendments to the Purchase Plan shall be
obtained in such a manner and to such a degree as required to comply with all
applicable laws or regulations. The Purchase Plan will continue in effect until
terminated by the Administrator in accordance with the Purchase Plan.
Certain Federal Income Tax Information. The following brief summary of the
effect of federal income taxation upon the participant and the Company with
respect to the shares purchased under the Purchase Plan. This summary is not
exhaustive and does not discuss the tax consequences of a participant's death or
the income tax laws of any state or foreign country in which the participant may
reside.
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed
17
of. Upon sale or other disposition of the shares, the participant will generally
be subject to tax in an amount that depends upon the holding period for the
shares. If the shares are sold or otherwise disposed of more than two (2) years
from the first day of the applicable offering period and more than one (1) year
from the applicable date of purchase, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an amount equal to 15% of the fair market value of the shares as of the first
day of the applicable offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of these holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term capital
gain or loss, depending on the holding period for the shares. The Company
generally is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income recognized
by participants upon a sale or disposition of shares prior to the expiration of
the holding periods described above.
Participation in the Purchase Plan
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Non-employee directors are not eligible to
participate in the Purchase Plan. Accordingly, future purchases under the
Purchase Plan are not determinable. However, purchases were made under the 1986
Employee Stock Purchase Plan, as amended through March 1998 (the "1986 ESPP"),
in fiscal 2002.
The following table sets forth certain information regarding shares
purchased under the 1986 ESPP during fiscal 2002 for each of the executive
officers named in the Summary Compensation Table, for all current executive
officers as a group and for all other employees who participated in the Purchase
Plan as a group:
New Plan Benefits
2003 Employee Stock Purchase Plan
Name Dollar Value ($) Number of Units
----------------------------------------------------------------------- ------------------ ----------------
John D. Heaton
President and Chief Executive Officer ................................ $ 0 0
Vincent J. Coates
Chairman of the Board and Secretary .................................. 0 0
Roger Ingalls Jr.
Vice President of Sales .............................................. 0 0
Paul B. Nolan
Vice President and Chief Financial Officer ........................... 0 0
All current executive officers as a group (4 persons)(1) .............. 0 0
All other employees (excluding executive officers) as a group ......... 568,076 125,403
------------
(1) Executive officers were eligible to participate in the 1986 Employee Stock
Purchase Plan, as amended; however, none of the Named Officers elected to
do so in fiscal 2002.
Vote Required
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to vote
will be required to approve the adoption of the Purchase Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ADOPTION OF THE 2003 EMPLOYEE STOCK PURCHASE PLAN AND THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER.
18
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 17, 2003
19
--------------------------------------------------------------------------------
PROXY NANOMETRICS INCORPORATED
This Proxy is Solicited on Behalf of the Board of Directors
2003 Annual Meeting of Shareholders
May 14, 2003
The undersigned shareholder(s) of Nanometrics Incorporated, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 17, 2003, and hereby appoints
Vincent J. Coates and Paul B. Nolan, and each of them, Proxies and
Attorneys-in-Fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2003 Annual Meeting
of Shareholders of Nanometrics Incorporated to be held on Wednesday, May 14,
2003 at 1:30 p.m., local time, at the principal offices of the Company located
at 1550 Buckeye Drive, Milpitas, California, 95035 and at any adjournments
thereof, and to vote all shares of Common Stock which the undersigned is
entitled to vote on the matters set forth below:
ITEM 1. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as indicated) to vote for all nominees listed below
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Vincent J. Coates Nathaniel Brenner John D. Heaton
Edmond R. Ward William G. Oldham
ITEM 2. Proposal to Ratify the Appointment of Deloitte & Touche LLP as
Indpendent Auditors of the Company for the 2003 Fiscal Year.
|_| FOR |_| AGAINST |_| ABSTAIN
(Continued and to be signed, on reverse side)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Continued from other side)
ITEM 3. Proposal to Adopt the Company's 2003 Employee Stock Purchase Plan and
Approve the Reservation of 750,000 Shares of Common Stock for Issuance
under the Plan:
|_| FOR |_| AGAINST |_| ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NAMED HEREIN, "FOR"
EACH PROPOSAL LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING.
Typed or Printed Name(s)
_______________________________________
Signature
_______________________________________
Signature
_______________________________________
Title, if applicable
_______________________________________
Type and number of shares owned
Dated: __________________________, 2003
This proxy should be marked, dated,
signed by the shareholder(s) exactly as
his or her name appears hereon and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so indicate.
If shares are held by joint tenants or
as community property, both should
sign.
--------------------------------------------------------------------------------