def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
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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 |
þ |
Definitive Proxy Statement |
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Definitive Additional Materials |
o |
Soliciting Material Pursuant to
§240.14a-11(c) or
§240.14a-12 |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
MKS Instruments, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each
class of securities to which transaction applies:
2) Aggregate
number of securities to which transaction 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):
4) Proposed
maximum aggregate value of transaction:
5) Total fee paid:
o Fee paid previously
with preliminary materials.
o Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee
was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount
Previously Paid:
2) Form, Schedule
or Registration Statement No.:
3) Filing Party:
4) Date Filed:
TABLE OF CONTENTS
MKS INSTRUMENTS, INC.
90 Industrial Way
Wilmington, Massachusetts 01887
March 20, 2006
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of MKS Instruments, Inc. (MKS or the
Company) to be held on Monday, May 8, 2006, at
10:00 a.m. at the Andover Country Club, 60 Canterbury
Street, Andover, Massachusetts 01810.
The enclosed notice of Annual Meeting and proxy statement
describe the business to be transacted at the Annual Meeting and
provide additional information about the Company that you should
know when voting your shares. The principal business at the
Annual Meeting will be to elect Class I Directors and
ratify the selection of independent auditors for fiscal 2006.
Whether or not you plan to attend the Annual Meeting, please
complete, date, sign and return your Proxy Card promptly in the
enclosed envelope, which requires no postage if mailed in the
United States. If you attend the Annual Meeting, you may vote in
person if you wish, even if you have previously returned your
Proxy Card.
On behalf of the Company, I would like to express our
appreciation for your continued interest in the Company.
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Sincerely, |
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Leo Berlinghieri
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Chief Executive Officer and President |
MKS INSTRUMENTS, INC.
90 Industrial Way
Wilmington, Massachusetts 01887
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 8, 2006
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of
Shareholders of MKS INSTRUMENTS, INC. (the Company),
a Massachusetts corporation, will be held on Monday, May 8,
2006 at 10:00 a.m. at the Andover Country Club,
60 Canterbury Street, Andover, Massachusetts 01810. At the
meeting, shareholders will consider and vote on the following
matters:
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1. To elect three Class I
Directors, each for a three year term; and |
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2. |
To ratify the selection of PricewaterhouseCoopers LLP as the
Companys independent auditors for the year ending
December 31, 2006. |
The Shareholders will also act on any other business as may
properly come before the meeting.
The Board of Directors has fixed the close of business on
March 2, 2006 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the Annual
Meeting and any adjournment or adjournments thereof. The stock
transfer books of the Company will remain open for the purchase
and sale of the Companys Common Stock.
A copy of the Companys Annual Report to Shareholders for
the year ended December 31, 2005, which contains
consolidated financial statements and other information of
interest to shareholders, accompanies this Notice and the
enclosed Proxy Statement.
If you would like to attend the Annual Meeting and your shares
are held by a broker, bank or other nominee, you must bring to
the Annual Meeting a letter from the nominee confirming your
beneficial ownership of such shares. You must also bring a form
of personal identification. In order to vote your shares at the
Annual Meeting, you must obtain from the nominee a proxy issued
in your name.
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By Order of the Board of Directors, |
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Richard S. Chute
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Secretary |
Wilmington, Massachusetts
March 20, 2006
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE PROMPTLY SIGN, DATE, AND RETURN THE ENCLOSED
PROXY. PROMPTLY SIGNING, DATING, AND RETURNING THE PROXY WILL
SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. AN ADDRESSED ENVELOPE FOR WHICH NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT
PURPOSE. SENDING IN YOUR PROXY WILL NOT PREVENT YOU FROM VOTING
YOUR STOCK AT THE ANNUAL MEETING IF YOU DESIRE TO DO SO, AS YOUR
PROXY IS REVOCABLE AT YOUR OPTION.
MKS INSTRUMENTS, INC.
90 Industrial Way
Wilmington, Massachusetts 01887
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of MKS
Instruments, Inc. (the Company or MKS),
a Massachusetts corporation, for use at the 2006 Annual Meeting
of Shareholders to be held on May 8, 2006, at
10:00 a.m. at the Andover Country Club, 60 Canterbury
Street, Andover, Massachusetts 01810, and at any adjournment or
postponement thereof (the Annual Meeting).
All proxies will be voted in accordance with the
shareholders instructions. If no choice is specified in
the proxy, the shares will be voted in favor of the matters set
forth in the accompanying Notice of 2006 Annual Meeting of
Shareholders. Any proxy may be revoked by a shareholder at any
time before its exercise by delivery of written revocation to
the Secretary of the Company. Attendance at the Annual Meeting
will not in itself be deemed to revoke a Proxy unless the
shareholder gives affirmative notice at the Annual Meeting that
the shareholder intends to revoke the proxy and vote in person.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on March 2, 2006, the record date
for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting, there were issued and outstanding
and entitled to vote 54,809,526 shares of common stock, no
par value per share, of the Company (the Common
Stock). Each share entitles the record holder to one vote
on each matter submitted at the Annual Meeting.
Under the Companys Amended and Restated By-Laws (the
By-Laws), the holders of a majority of the shares of
Common Stock issued and outstanding and entitled to vote at the
Annual Meeting shall constitute a quorum for the transaction of
business at the Annual Meeting. Shares of Common Stock present
in person or represented by proxy (including broker
non-votes and shares that abstain or do not vote with
respect to a particular proposal to be voted upon) will be
counted for purposes of determining whether a quorum exists at
the Annual Meeting.
The affirmative vote of the holders of a plurality of the shares
of Common Stock voting on the matter is required for the
election of Directors. The ratification of
PricewaterhouseCoopers LLP (PwC) requires the
approval of the holders of a majority of the shares of Common
Stock present or represented by proxy at the Annual Meeting and
voting on the matter.
Shares held by shareholders who abstain from voting as to a
particular matter, and broker non-votes, which are
shares held in street name by banks, brokers or
nominees, who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter,
and also will not be counted as shares voting on such matter.
Accordingly, abstentions and broker non-votes will have no
effect on the voting on a matter that requires the affirmative
vote of a certain percentage of the shares voting on the matter.
If the shares you own are held in street name by a bank or
brokerage firm, your bank or brokerage firm, as the record
holder of your shares, is required to vote your shares according
to your instructions. In order to vote your shares, you will
need to follow the directions your bank or brokerage firm
provides you.
THE NOTICE OF ANNUAL MEETING, THIS PROXY STATEMENT AND THE
COMPANYS ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 2005 ARE BEING MAILED TO SHAREHOLDERS ON OR
ABOUT MARCH 27, 2006. A COPY OF THE COMPANYS ANNUAL
REPORT ON
FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2005 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION (THE COMMISSION), EXCLUDING
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER
UPON WRITTEN REQUEST TO: INVESTOR RELATIONS DEPARTMENT, MKS
INSTRUMENTS, INC., 90 INDUSTRIAL WAY, WILMINGTON, MA 01887.
EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN
APPROPRIATE PROCESSING FEE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect
to the beneficial ownership of Common Stock by (i) each
current director of the Company; (ii) the executive
officers named in the Summary Compensation Table below;
(iii) each shareholder known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of
Common Stock; and (iv) all directors and executive officers
of the Company as a group. Unless otherwise indicated in the
footnotes to the table, (i) all information set forth in
the table is as of January 31, 2006; and (ii) the
address for each director and executive officer of the Company
is: c/o MKS Instruments, Inc., 90 Industrial Way,
Wilmington, Massachusetts 01887.
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Percentage of |
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Number of Shares |
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Common Stock |
Name of Beneficial Owners |
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Beneficially Owned(1) |
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Beneficially Owned |
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Named Executive Officers
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John R. Bertucci
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9,124,666 |
(2) |
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16.73 |
% |
Leo Berlinghieri
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403,828 |
(3) |
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Gerald G. Colella
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273,290 |
(4) |
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* |
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John A. Smith
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140,855 |
(5) |
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* |
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William D. Stewart
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315,335 |
(6) |
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* |
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Ronald C. Weigner
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390,374 |
(3) |
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* |
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Directors Not Included Above
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Robert R. Anderson
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101,572 |
(7) |
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James G. Berges
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0 |
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* |
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Richard S. Chute
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67,092 |
(3) |
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* |
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Hans-Jochen Kahl
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50,069 |
(8) |
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Owen W. Robbins
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67,092 |
(3) |
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Louis P. Valente
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58,500 |
(3) |
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Other 5% shareholders
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Dimensional Fund Advisors, Inc.
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2,801,346 |
(9) |
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5.14 |
% |
1299 Ocean Avenue, 11th Floor
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Santa Monica, CA 90401
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Emerson Electric Co.
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9,891,801 |
(10) |
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18.14 |
% |
8000 West Florissant Avenue
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St. Louis, MO 63136
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FMR Corp.
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6,968,044 |
(11) |
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12.78 |
% |
82 Devonshire Street
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Boston, MA 02109
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T. Rowe Price Associates, Inc.
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3,311,113 |
(12) |
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6.07 |
% |
100 East Pratt Street
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Baltimore, MD 21202
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All directors and officers as a group (15 persons)
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11,374,899 |
(13) |
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20.09 |
% |
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* |
Represents less than 1% of the outstanding Common Stock. |
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(1) |
The Company believes that each shareholder has sole voting and
investment power with respect to the shares listed, except as
otherwise noted. The number of shares beneficially owned by each
shareholder is determined under rules of the Commission, and the
information is not necessarily indicative of ownership for any
other purpose. Under such rules, beneficial ownership includes
any shares as to which the person has sole or shared voting
power or investment power and also any shares that the
individual has the right to acquire within 60 days of
January 31, 2006 through the exercise of any stock option
or other right. The inclusion herein of any shares of Common
Stock deemed beneficially owned does not constitute an admission
by such shareholder of beneficial ownership of those shares of
Common Stock. |
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Shares of Common Stock which an individual or entity has a right
to acquire within the
60-day period following
January 31, 2006 pursuant to the exercise of options or
warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or entity,
but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person or entity
shown in the table. Exercisable options include those options
that were accelerated by the Company on January 7, 2006. |
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(2) |
Consists of 4,411,580 shares held directly by
Mr. Bertucci, 4,546,784 shares held directly by
Mr. Bertuccis wife, 150,000 shares held by a
limited partnership and 16,302 shares subject to options
exercisable within 60 days of January 31, 2006.
Mr. Bertucci disclaims beneficial ownership of 148,587 of
the shares held by the limited partnership. |
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(3) |
Consists solely of options exercisable within 60 days of
January 31, 2006. |
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(4) |
Consists of 24 shares held directly by Mr. Colella and
273,266 shares subject to options exercisable within
60 days of January 31, 2006. |
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(5) |
Consists of 2,058 shares held directly by Mr. Smith
and 138,797 shares subject to options exercisable within
60 days of January 31, 2006. |
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(6) |
Consists of 663 shares held directly by Mr. Stewart
and 314,672 shares subject to options exercisable within
60 days of January 31, 2006. |
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(7) |
Consists of 40,000 shares held directly by
Mr. Anderson, 11,503 shares held in trust and other
accounts and 50,069 shares subject to options exercisable
within 60 days of January 31, 2006. |
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(8) |
Consists of 9,374 shares held directly by Mr. Kahl and
40,695 shares subject to options exercisable within
60 days of January 31, 2006. |
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(9) |
Based on information set forth in Schedule 13G filed by
Dimensional Fund Advisors, Inc. on February 6, 2006,
reporting the above stock ownership as of December 31,
2005, in which Dimensional Fund Advisors, Inc. disclaims
beneficial ownership of such securities. |
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(10) |
Includes 1,065,182 shares held directly by Emerson Electric
Co. (Emerson), 8,463,389 shares held by a
wholly-owned subsidiary of Emerson and 363,230 shares held
by Emerson Charitable Trust. Emerson disclaims beneficial
ownership of the shares held by Emerson Charitable Trust.
Excludes an aggregate of 9,124,666 shares held by
Mr. Bertucci, Mrs. Bertucci and a limited partnership
(the Bertucci Shares), which shares are subject to a
Voting Agreement with Emerson which requires the holders of the
Bertucci Shares to vote such shares in accordance with such
agreement in relation to certain board representation matters. |
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(11) |
Based on information set forth in Schedule 13G/ A filed by
FMR Corp. with the Commission on February 14, 2006,
reporting the above stock ownership as of December 31, 2005. |
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(12) |
Based on information set forth in Schedule 13G/ A filed by
T. Rowe Price Associates, Inc. (Price Associates)
with the Commission on February 14, 2006, reporting the
above stock ownership as of December 31, 2005. Price
Associates expressly disclaims beneficial ownership of such
securities. |
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(13) |
Consists of 9,126,890 outstanding shares beneficially held by
such persons, 2,086,506 shares subject to options
exercisable within 60 days of January 31, 2006, and an
aggregate of 161,503 shares held in a limited partnership
and trust as described above. |
To the knowledge of the Company, there are no voting trusts or
similar arrangements among any of the foregoing persons or
entities with respect to the voting of shares of Common Stock of
the Company, except as set forth above.
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PROPOSAL ONE
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors that
is divided into three classes. The term of the Class I
Directors expires at the 2006 Annual Meeting, the term of the
Class II Directors expires at the 2007 Annual Meeting, and
the term of the Class III Directors expires at the 2008
Annual Meeting. Leo Berlinghieri, Hans-Jochen Kahl and Louis P.
Valente are currently proposed for election to serve as
Class I Directors. Each nominee has consented to being
named herein, and, if elected, to serve as a director until his
successor is duly elected and qualified.
Shares represented by all proxies received by the Board of
Directors and not so marked as to withhold authority to vote for
an individual director will be voted (unless one or more
nominees are unable or unwilling to serve) for the election of
the nominees named below. The Board of Directors expects that
each of the nominees named below will be available for election,
but if any of them is not a candidate at the time the election
occurs, it is intended that such proxies will be voted for the
election of a substitute nominee to be designated by the Board
of Directors.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE ELECTION
OF LEO BERLINGHIERI, HANS-JOCHEN KAHL AND LOUIS P. VALENTE TO
SERVE AS CLASS I DIRECTORS IS IN THE BEST INTERESTS OF MKS
AND ITS SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE
FOR THIS PROPOSAL.
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DIRECTORS
Set forth below are the names and ages of each member of the
Board of Directors (including those who are nominees for
election as Class I Directors) and the positions and
offices held, principal occupation and business experience
during the past five years, the names of other publicly held
companies of which the individual serves as a director and the
year of commencement of the term as director of MKS. Information
with respect to the number of shares of Common Stock
beneficially owned by each director, directly or indirectly, as
of January 31, 2006, appears in this proxy statement under
the heading Security Ownership of Certain Beneficial
Owners and Management.
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Class to Which |
Name |
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Age |
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Position |
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Director Belongs |
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John R. Bertucci
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65 |
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Director, Executive Chairman |
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III |
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Robert R. Anderson(1)(3)
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68 |
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Director |
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III |
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James G. Berges(2)
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58 |
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Director |
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II |
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*Leo Berlinghieri
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52 |
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Director, Chief Executive Officer and President |
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Richard S. Chute(2)
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67 |
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Director, Secretary |
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II |
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*Hans-Jochen Kahl(3)
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66 |
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Director |
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Owen W. Robbins(1)(2)
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76 |
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Director |
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II |
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*Louis P. Valente(1)(3)
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75 |
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Director |
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(1) |
Member of Audit Committee |
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Member of Nominating and Corporate Governance Committee |
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Member of Compensation Committee |
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Nominee for election at this meeting |
Mr. Bertucci has served as a director of MKS since 1974 and
was Chairman of the Board of Directors from November 1995 until
July 2005, when he began serving as Executive Chairman.
Mr. Bertucci served as Chief Executive Officer of MKS from
November 1995 to July 2005 and served as President from 1974 to
May 1999 and again from November 2001 to April 2004. From 1970
to 1974, he was Vice President and General Manager of MKS.
Mr. Bertucci has an M.S. in Industrial Administration and a
B.S. in Metallurgical Engineering from Carnegie-Mellon
University. Mr. Bertucci is a member of the Board of
Trustees of Carnegie-Mellon University and is Chairman of the
Executive Board of The Massachusetts High Technology Council.
Mr. Anderson has served as a director of MKS since January
2001. Mr. Anderson is a private investor. From October 1998
to October 2000, Mr. Anderson served as Chairman of Yield
Dynamics, Inc., a private semiconductor control software company
and presently serves as one of its directors. He also served as
CEO of Yield Dynamics from October 1998 to April 2000.
Mr. Anderson also served as CEO of Silicon Valley Research,
Inc., a semiconductor design automation software company, from
December 1996 to August 1998 and as Chairman from January 1994
to January 2001. Mr. Anderson currently serves as a
director and Chairman of Aviza Technology, Inc., a manufacturer
of semiconductor process equipment, and Aehr Test Systems, Inc.,
a manufacturer of semiconductor test and burn-in equipment. He
also serves as a director of two other private companies.
Mr. Berges has served as a director of MKS since February
2002. Mr. Berges served as President of Emerson Electric
Co. from 1999 until November 2005. He is currently a director of
PPG Industries, Inc.
Mr. Berlinghieri has served as a director of MKS and as
Chief Executive Officer and President since July 2005. He
previously served as President and Chief Operating Officer from
April 2004 to July 2005, and as Vice President and Chief
Operating Officer from July 2003 until April 2004. From November
1995 to July 2003, he served as Vice President, Global Sales and
Service. From 1980 to November 1995, he served in
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various management positions of MKS, including Manufacturing
Manager, Production and Inventory Control Manager, and Director
of Customer Support Operations.
Mr. Chute has served as a director of MKS since 1974.
Mr. Chute was a member of the law firm of Hill &
Barlow, a Professional Corporation, from 1971 to January 2003,
and is currently an attorney in private practice. Mr. Chute
serves as a director of two non-profit corporations.
Mr. Kahl has served as a director of MKS since January
2001. From June 1994 through September 1996, Mr. Kahl
served as a consultant to Ebara, a Japanese manufacturer of
industrial water pumps and vacuum process equipment for the
semiconductor industry. Mr. Kahl was employed by Leybold
AG, formerly Leybold-Heraeus GmbH, a leading international
manufacturer of vacuum pumps and other vacuum process equipment
for the semiconductor industry, from July 1983 to March 1992,
where he served as a managing director and was primarily
responsible for sales, marketing and strategic planning. From
September 1995 to November 2000, he was a director of Applied
Science and Technology, Inc. (ASTeX) which was acquired by MKS.
Since November 1996, he has served as a director of Solid State
Management, a privately held manufacturer of high precision
measurement tools.
Mr. Robbins has served as a director of MKS since February
1996. Mr. Robbins has been an independent investor since
July 1997. Mr. Robbins was Executive Vice President of
Teradyne, Inc., a manufacturer of electronic test systems and
backplane connection systems used in the electronics and
telecommunications industries, from March 1992 to May 1997, and
its Chief Financial Officer from February 1980 to May 1997.
Mr. Robbins is also a director of two privately held
companies.
Mr. Valente has served as a director of MKS since February
1996. Mr. Valente is Chairman of Palomar Medical
Technologies, Inc., a company which designs, manufactures and
markets cosmetic lasers, since September 1997. He has been a
director of Palomar Medical Technologies, Inc. since February
1997 and was its President and Chief Executive Officer from May
1997 to May 2002. Mr. Valente is also a director of
Surgilight, Inc., Medical Information Technology, Inc. and a
privately held medical company.
Agreements as to Nomination
Mr. Bertuccis employment agreement provides that if
Mr. Bertucci resigns from his employment, then, subject to
applicable law, the Companys by-laws and articles of
organization and the directors fiduciary duties, the Board
of Directors shall nominate Mr. Bertucci for election as a
Class III director and consider Mr. Bertucci for
appointment as Chairman of the Board, subject to eligibility
requirements.
Director Compensation
Directors of MKS are reimbursed for expenses incurred in
connection with their attendance at Board of Directors and
committee meetings. Directors who are not employees of MKS are
paid an annual fee of $20,000 and a fee of $2,000 for each Board
of Directors meeting they attend. In addition, the Chairman of
the Audit Committee is paid $2,500, and the other members of the
Audit Committee are paid $1,500, for each meeting of the Audit
Committee that they attend. The Chairman of each of the
Compensation and Nominating and Corporate Governance Committees
is paid $1,500, and the other members of such committees are
paid $750, for each meeting of such committees that they attend.
Mr. Berges elected not to receive compensation for serving
as a director until November 2005, and has received standard
director compensation for his services performed thereafter.
The Second Amended and Restated 1997 Director Stock Option
Plan (the 1997 Director Plan) authorizes the
issuance of up to an aggregate of 750,000 shares of Common
Stock. The 1997 Director Plan is administered by MKSs
Board of Directors. Options are granted under the
1997 Director Plan only to directors of MKS who are not
employees of MKS. Under the 1997 Director Plan,
non-employee directors receive an option to
purchase 20,000 shares of Common Stock upon their
initial election to the Board of Directors. Each initial option
vests over a three-year period in 12 equal quarterly
installments following the date of grant. On the date of each
annual meeting of shareholders, options are automatically
granted to each eligible director who has been in office for at
least six months prior to the date of the annual meeting of
shareholders. Each
6
annual option entitles the holder to
purchase 12,000 shares of Common Stock. Each annual
option will generally become exercisable on the day prior to the
first annual meeting of shareholders following the date of
grant, or if no such meeting is held within 13 months after
the date of grant, on the
13-month anniversary of
the date of grant. The exercise price of all options granted
under the 1997 Director Plan is equal to the fair market
value of the Common Stock on the date of grant. Options granted
under the 1997 Director Plan terminate upon the earlier of
(i) 10 years after the grant date and (ii) with
respect to options granted prior to May 17, 2000, three
months after the optionee ceases to be a director of MKS, or,
with respect to options granted on or after May 17, 2000,
three years after the optionee ceases to be a director of MKS.
In the event of a change in control of MKS, the vesting of all
options then outstanding would be accelerated in full and any
restrictions on exercising outstanding options would terminate.
The Companys 1996 Amended and Restated Director Stock
Option Plan (the 1996 Director Plan), under
which options have been granted to, and may still be exercised
by, three non-employee directors of MKS, has been terminated,
and no further grants may be made under such plan.
Messrs. Chute, Robbins and Valente have each been granted
options to purchase 8,592 shares of Common Stock at a
weighted average exercise price of $4.81 per share under
the 1996 Director Plan, and options to
purchase 70,500 shares of Common Stock at a weighted
average exercise price of $21.87 per share under the
1997 Director Plan. Mr. Anderson and Mr. Kahl
have each been granted options to
purchase 53,250 shares of Common Stock at a weighted
average exercise price of $20.50 per share under the
1997 Director Plan.
Board of Directors Meetings and Committees of the Board of
Directors
The Board of Directors has determined that all of the members of
the Board, other than Mr. Bertucci and
Mr. Berlinghieri, are independent as defined under the
rules of the NASDAQ Stock Market.
The Board of Directors held six meetings in 2005. Each director
attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of
meetings of all committees of the Board on which he served.
Pursuant to a resolution adopted by the Board of Directors,
directors are encouraged to attend annual meetings of
shareholders. Messrs. Bertucci, Berges, Chute, Kahl,
Robbins and Valente attended the 2005 annual meeting of
shareholders. Mr. Berlinghieri, who became a director in
July 2005, also attended.
The Board of Directors has established three standing
committees Audit, Compensation, and Nominating and
Corporate Governance each of which operates under a
charter that has been approved by the Board. Each
committees current charter is posted in the Investors link
on the Companys website, www.mksinstruments.com, under the
heading Corporate Governance.
The Compensation Committee consists of Messrs. Anderson,
Kahl (Chairman) and Valente. The Compensation Committees
responsibilities include:
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determining the CEOs compensation; |
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reviewing and approving, or making recommendations to the Board
of Directors with respect to, the compensation of the
Companys other executive officers; |
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annually reviewing and approving the Companys management
incentive bonus plan; |
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overseeing and administering the Companys equity incentive
plans; and |
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reviewing and making recommendations to the Board of Directors
with respect to director compensation. |
The Compensation Committee held two meetings in 2005.
7
The Audit Committee consists of Messrs. Anderson
(Chairman), Robbins and Valente. The Audit Committees
responsibilities include:
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appointing, approving the fees of, and assessing the
independence of, the Companys independent auditors; |
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overseeing the work of the Companys independent auditors,
including through the receipt and consideration of certain
reports from the independent auditors; |
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reviewing and discussing the Companys annual and quarterly
financial statements and related disclosures with management and
the independent auditors; |
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coordinating oversight of the Companys internal control
over financial reporting, disclosure controls and procedures and
code of business conduct and ethics; |
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overseeing the Companys internal audit function; |
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establishing procedures for the receipt and retention of
accounting related complaints and concerns; |
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meeting independently with the Companys internal auditing
staff, independent auditors and management; and |
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preparing the Audit Committee report required by Commission
rules (which is included on page 14 of this proxy
statement). |
The Audit Committee held twelve meetings in 2005.
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Nominating and Corporate Governance Committee |
The Nominating and Corporate Governance Committee consists of
Messrs. Berges, Chute (Chairman) and Robbins. The
Nominating and Corporate Governance Committees
responsibilities include:
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identifying individuals qualified to become members of the Board
of Directors; |
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recommending to the Board of Directors the persons to be
nominated for election as directors and to each of the
Boards committees; and |
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developing and recommending corporate governance principles to
the Board of Directors. |
The Nominating and Corporate Governance Committee held three
meetings in 2005.
For information relating to the nomination of directors, see
Director Candidates below.
Audit Committee Financial Expert
The Board of Directors has determined that each of the three
members of the Audit Committee is an audit committee
financial expert as defined in Item 401(h) of
Regulation S-K.
Director Candidates
The Nominating and Corporate Governance Committee recommended to
the Board of Directors that the director nominees be nominated
by the Board of Directors for election as Class I
directors. The process to be followed by the Nominating and
Corporate Governance Committee to identify and evaluate director
candidates includes requests to Board members and others for
recommendations, meetings from time to time to evaluate
biographical information and background material relating to
potential candidates and interviews of selected candidates by
members of the Committee and the Board of Directors.
In considering whether to recommend any particular candidate for
inclusion in the Board of Directors slate of recommended
director nominees, the Nominating and Corporate Governance
Committee applies the criteria attached to the Committees
charter. These criteria include the candidates integrity,
business acumen,
8
knowledge of the Companys business and industry, age,
experience, diligence, conflicts of interest and the ability to
act in the interests of all shareholders. The Committee does not
assign specific weights to particular criteria and no particular
criterion is a prerequisite for each prospective nominee. The
Company believes that the backgrounds and qualifications of its
directors, considered as a group, should provide a composite mix
of experience, knowledge and abilities that will allow the Board
of Directors to fulfill its responsibilities.
Shareholders may recommend individuals to the Nominating and
Corporate Governance Committee for consideration as potential
director candidates by submitting their names, together with
appropriate biographical information and background materials
and a statement as to whether the shareholder or group of
shareholders making the recommendation has beneficially owned
more than 5% of the Companys Common Stock for at least a
year as of the date such recommendation is made, to the
Nominating and Corporate Governance Committee, in care of
Kathleen F. Burke, Esq., General Counsel, MKS
Instruments, Inc., 90 Industrial Way, Wilmington, MA 01887.
Assuming that appropriate biographical and background material
has been provided on a timely basis, the Nominating and
Corporate Governance Committee will evaluate
shareholder-recommended candidates by following substantially
the same process, and applying the same criteria, as it does in
considering other candidates.
Shareholders also have the right under the Companys
By-Laws to directly nominate director candidates, without any
action or recommendation on the part of the Nominating and
Corporate Governance Committee or the Board of Directors, by
following the procedures set forth under the heading
Deadline for Submission of Shareholder Proposals for the
2007 Annual Meeting below.
Communications from Shareholders
The Board of Directors will give appropriate attention to
written communications that are submitted by shareholders, and
will respond if and as appropriate.
The Chairman of the Nominating and Corporate Governance
Committee, with the assistance of the Companys General
Counsel, is primarily responsible for monitoring communications
from shareholders and for providing copies or summaries to the
other directors as he considers appropriate.
Communications are forwarded to all directors if they relate to
important substantive matters and include suggestions or
comments that the Chairman of the Nominating and Corporate
Governance Committee considers to be important for the directors
to know. In general, communications relating to corporate
governance and long-term corporate strategy are more likely to
be forwarded than communications relating to ordinary business
affairs, personal grievances and matters as to which the Company
tends to receive repetitive or duplicative communications.
Shareholders who wish to send communications on any topic to the
Board of Directors should address such communications to the
Board of Directors in care of Kathleen F. Burke, Esq.,
General Counsel, MKS Instruments, Inc., 90 Industrial
Way, Wilmington, MA 01887.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Companys executive compensation program is
administered by the Compensation Committee of the Board of
Directors. The Compensation Committee (for purposes of this
report only, the Committee) is comprised of three
non-employee directors, Messrs. Anderson, Kahl and Valente.
The Committee is responsible for determining the salaries of,
establishing bonus programs for, and granting stock options and
restricted stock to, the Companys executive officers.
The Committee believes that the primary objectives of the
Companys compensation policies are to attract, retain,
motivate, and reward a management team that can effectively
implement and execute the Companys strategic business plan
and lead the Company in achieving its long-term growth and
earnings goals. These compensation policies include an overall
management compensation program that: (i) is competitive
with management compensation programs at companies of similar
size and in a similar industry; (ii) recognizes individual
initiative, leadership and achievement; (iii) provides
short-term bonus incentives for
9
management to meet the Companys net income performance
goals; and (iv) provides long-term incentive compensation
in the form of stock options and restricted stock to encourage
management to continue to focus on shareholder return.
The Committees goal is to use compensation policies to
closely align the interests of the Companys management
with the interests of shareholders so that the Companys
management has incentives to achieve short-term performance
goals while building long-term value for the Companys
shareholders. In establishing base salaries for executive
officers, the Committee considers numerous factors such as the
executives responsibilities, the executives
importance to the Company, the executives performance,
historical salary levels of the executive, and the salaries of
executives at certain other companies whose business is similar
to that of the Company. The Committee will review its
compensation policies from time to time in order to determine
the reasonableness of the Companys compensation programs
and to take into account factors that are unique to the Company.
The Company has entered into employment agreements with its
executive officers and certain other senior officers of the
Company. The Committee believes that the salaries and benefits
provided to these senior officers reflect appropriate base
salaries and benefits as compared to senior officers of other
companies of similar size. These agreements provide for
termination for cause as well as termination without cause and
for certain severance benefits and restrict the officers
ability to compete with the Company.
Bonus Plan
To further provide incentives for management to continue to
improve operating results, the Committee oversees the
administration of the Management Incentive Bonus Plan
(Bonus Plan). The amounts to be distributed pursuant
to the Bonus Plan are generally determined by the financial
results of the Company, and, in some instances, are also
partially based on the performance of a particular product
group. The Committee believes that the Bonus Plan provides
significant incentive to the executive officers of the Company
to exceed the Companys financial goals.
Long-Term Incentive Compensation
Long-term incentive compensation, in the form of stock options
or restricted stock, allows the executive officers to share in
any appreciation in the value of the Companys Common
Stock. The Committee believes that equity-based compensation
aligns executive officers interests with those of the
shareholders. In addition, the Committee believes that awarding
grants to executive officers helps to balance the short-term
focus of annual incentive compensation with a longer term view
and may help to retain key executive officers. Moreover, because
options and restricted stock granted to executive officers
generally become exercisable over a three or four-year period
and terminate upon or shortly after the termination of the
executives employment with the Company, these grants serve
as a means of retaining these executives.
In January 2005, the Committee accelerated the vesting of
unvested options awarded to the Companys employees,
including officers, which options had an exercise price of
$23.00 or greater. The closing sale price of MKS stock on the
NASDAQ National Market on the date of acceleration was $16.03.
As a result of this action, options to purchase approximately
1.6 million shares of Common Stock became exercisable on
January 7, 2005. Under the recently issued Financial
Accounting Standards Board Statement No. 123R,
Share-Based Payment (FAS 123R), the
Company will be required to apply the expense recognition
provisions under FAS 123R beginning the first quarter of
fiscal 2006. The Company believes that accelerating the vesting
of the identified stock options will reduce the Companys
compensation charge in periods subsequent to December 31,
2005, when the provisions of FAS 123R are adopted.
When establishing stock option and restricted stock grant
levels, the Committee considers general corporate performance,
the Chief Executive Officers recommendations, level of
seniority and experience, the dilutive impact, previous grants,
vesting schedules of outstanding equity-based grants and the
current stock price.
10
It is the practice of the Company to make an initial
equity-based grant to all executive officers at the time they
commence employment that is consistent with those granted to
executive officers in the industry at similar levels of
seniority. In addition, the Committee may also make grants of
equity-based compensation throughout the year. In making such
grants, the Committee considers individual contributions to the
Companys financial, operational and strategic objectives.
Senior management also participates in Company-wide employee
benefit plans, including the Companys 401(k) Plan.
Benefits under these plans are not dependent upon individual
performance.
In addition, the Company provides supplemental retirement
benefits and, in some instances, retiree medical benefits, to
certain executive officers and their spouses. The benefits are
contingent upon the executive officer remaining employed with
the Company until a specified retirement age. The Company
believes that these retirement benefits serve as a significant
incentive to retain these executives.
Compensation of Chief Executive Officer
Mr. Berlinghieris compensation was based upon a
careful analysis of other comparable companies Chief
Executive Officers compensation and
Mr. Berlinghieris efforts and success in improving
the Companys operating results, establishing strategic
goals and objectives for long-term growth of the Company, and
advancing the Company in obtaining its strategic goals and
objectives.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), generally disallows a tax
deduction to public companies for certain compensation in excess
of $1.0 million paid to such companys chief executive
officer or any of the four other most highly compensated
executive officers. Certain compensation, including qualified
performance-based compensation, will not be subject to the
deduction limit if certain requirements are met.
The Committee reviews the potential effect of
Section 162(m) periodically and generally seeks to
structure the long-term incentive compensation granted to its
executive officers through option issuances under its stock
option plans in a manner that is intended to avoid disallowance
of deductions under Section 162(m). Nevertheless, there can
be no assurances that compensation attributable to awards
granted under the Companys stock option plans will be
treated as qualified performance-based compensation under
Section 162(m). Because the Companys Bonus Plan is
not operated in a manner designed to qualify as
performance-based compensation under Section 162(m), it is
possible that a portion of any bonus payable to
Mr. Berlinghieri and certain other executives under the
Bonus Plan will not be deductible for federal income tax
purposes. The Committee reserves the right to use its judgment
to authorize compensation payments which may be in excess of the
Section 162(m) limit when the Committee believes such
payments are appropriate, after taking into consideration
changing business conditions or the officers performance,
and are in the best interests of the shareholders.
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Hans-Jochen Kahl, Chairman |
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Robert R. Anderson |
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Louis P. Valente |
Compensation Committee Interlocks and Insider
Participation
In 2005, the Compensation Committee comprised
Messrs. Anderson, Kahl and Valente. None of the members
were, at any time, officers or employees of MKS or any
subsidiary of MKS, and none of them had any relationship with
MKS requiring disclosure under Item 404 of
Regulation S-K
under the Securities Exchange Act of 1934, as amended (the
Exchange Act). No executive officer of MKS serves,
or has served, as a member of the board of directors or
compensation committee (or other committee serving an equivalent
function) of any other entity which has one or more executive
officers serving as a member of MKSs Board of Directors or
Compensation Committee.
11
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Companys Board of Directors is
currently composed of three members and acts under a written
charter adopted and approved on February 4, 2004. The
members of the Audit Committee are independent directors, as
defined by its charter and the rules of the NADSAQ Stock Market,
and possess the financial sophistication required by such
charter and rules. The Audit Committee held twelve meetings
during the fiscal year ended December 31, 2005.
Management is responsible for the Companys internal
controls and the financial reporting process. The Companys
independent auditors, PwC, are responsible for performing an
independent audit of the Companys financial statements and
the Companys internal control over financial reporting in
accordance with the standards of the Public Company Accounting
Oversight Board (United States), and issue a report on those
financial statements. The Audit Committee is responsible for
monitoring and overseeing these processes. As appropriate, the
Audit Committee reviews and evaluates, and discusses with the
Companys management, internal accounting, financial and
internal auditing personnel and the independent auditors, the
following:
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the plan for, and the independent auditors report on,
audits of the Companys financial statements; |
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the Companys financial disclosure documents, including all
financial statements and reports filed with the Commission or
sent to shareholders; |
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managements selection, application and disclosure of
critical accounting policies; |
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major changes in the Companys significant accounting
practices, principles, controls or methodologies; |
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significant developments or changes in accounting rules
applicable to the Company; and |
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the adequacy of the Companys internal controls and
accounting, financial and internal auditing personnel. |
The Audit Committee reviewed the Companys audited
financial statements for the fiscal year ended December 31,
2005, and discussed these financial statements with the
Companys management. Management represented to the Audit
Committee that the Companys financial statements had been
prepared in accordance with accounting principles generally
accepted in the United States. The Audit Committee also reviewed
and discussed the audited financial statements and the matters
required by Statement on Auditing Standards No. 61
Communication with Audit Committees, as amended
(SAS 61), with PwC, the Companys independent
auditors. SAS 61 requires the Companys independent
auditors to discuss with the Companys Audit Committee,
among other things, the following:
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methods to account for significant unusual transactions; |
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the effect of significant accounting policies in controversial
or emerging areas for which there is a lack of authoritative
guidance or consensus; |
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the process used by management in formulating particularly
sensitive accounting estimates and the basis for the
auditors conclusions regarding the reasonableness of those
estimates; and |
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disagreements with management over the application of accounting
principles, the basis for managements accounting estimates
and the disclosures in the financial statements. |
The Companys independent auditors also provided the Audit
Committee with written disclosures and a letter required by
Independence Standards Board Standard No. 1
Independence Discussions with Audit Committees.
Independence Standards Board Standard No. 1 requires
auditors annually to disclose in writing all relationships that
in the auditors professional opinion may reasonably be
thought to bear on independence, confirm their perceived
independence and engage in a discussion of independence. In
addition, the Audit Committee discussed with the independent
auditors their independence from the Company. The Audit
Committee also considered whether the independent auditors
provision of the other, non-audit related, services to the
Company, which are referred to below, is compatible with
maintaining such auditors independence.
12
Based on its discussions with management and the independent
auditors, and its review of the representations and information
provided by management and the independent auditors, the Audit
Committee recommended to the Companys Board of Directors
that the audited financial statements of the Company be included
in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2005.
By the Audit Committee of the Board of Directors of MKS
Instruments, Inc.
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Robert R. Anderson, Chairman |
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Owen W. Robbins |
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Louis P. Valente |
13
EXECUTIVE OFFICERS
The following is a brief summary of the background of each
executive officer of MKS, other than Mr. Bertucci and
Mr. Berlinghieri, whose backgrounds are described under the
heading Directors above:
Gerald G. Colella, Vice President and Chief Business Officer,
Age 49
Mr. Colella has served as Vice President and Chief Business
Officer since April 2005, and served as Vice President, Global
Business and Service Operations from October 1997 to April 2005.
From March 1996 to October 1997, he served as Director of
Materials Planning and Logistics, and from February 1994 to
March 1996, he served as Materials Planning and Logistics
Manager. Mr. Colella joined MKS in April 1983 as Purchase
Contract Administrator. He holds an M.B.A. from Southern New
Hampshire University, Manchester, New Hampshire, as well as a
B.A. in Secondary Education from the University of Lowell,
Lowell, Massachusetts.
Ron Hadar, Vice President and General Manager, CIT Products,
Age 44
Mr. Hadar has served as Vice President and General Manager,
CIT Products since September 2004. He served as General Manager
of Tenta Products, which later became CIT Products, from April
2002 through September 2004. In 1999, Mr. Hadar co-founded
and became CEO of Tenta Technology, Ltd., which MKS acquired in
March 2002. Mr. Hadar was employed by Applied Materials
Israel from 1993 through 1998, most recently as
U.S. Operations Manager of the electronic department.
Mr. Hadar has a Project Administration certificate from the
Recanati School of Business Administration of Tel Aviv
University, an Associate Engineer degree from the Technical
College of Tel Aviv University and a Communication Systems
Technician certificate from the Israeli Air Force Technical
College.
Robert L. Klimm, Vice President and General Manager, Power
and Reactive Gas Products Group, Age 55
Mr. Klimm has served as Vice President and General Manager,
Power and Reactive Gas Products Group, since September 2002.
Prior to this position, he served as Vice President and General
Manager of the ASTeX Products Group from August 2001 to
September 2002, and of the Materials Delivery and Analysis
Products Group from December 1999 to August 2001. Before joining
MKS, Mr. Klimm was Vice President and General Manager of
the Factory Automation Division of PRI Automation from 1997 to
September 1999. Mr. Klimm has an M.B.A. from the Sloan
School at MIT, an M.A. in electrical engineering from
Northeastern University and a B.S. in electrical engineering
from Lehigh University.
John A. Smith, Vice President and Chief Technology Officer,
Age 55
Dr. Smith has served as Vice President and Chief Technology
Officer since January 2005. From December 2002 to January 2005,
Dr. Smith served as Vice President of Technology and
General Manager of the Instruments and Control Systems Product
Group, which comprises Pressure Measurement and Control,
Materials Delivery, Gas Composition and Analysis, and Control
and Information Technology products. Prior to this position,
Dr. Smith served as Vice President and General Manager of
Materials Delivery Products and Advanced Process Control, from
February 2002 to December 2002. From July 1994 until February
2002, he was Managing Director of MKS Instruments, UK. Ltd.
Dr. Smith has a Ph.D. in electronic engineering from the
University of Manchester, U.K.
Frank W. Schneider, Vice President and General Manager, Ion
Systems, Age 64
Mr. Schneider has served as Vice President and General
Manager, Ion Systems since January 2006. From October 2003 to
January 2006, he was President and Chief Executive Officer of
Ion Systems, Inc. From January 2002 to February 2003, he was
Vice President and General Manager of the RF Power Group for
Advanced Power Tech, Inc. and from August 1997 to January 2002,
he was President and Chief Executive Officer of GHZ Technology,
Inc. Mr. Schneider has an MBA from Northwestern University,
Kellogg School of Management, and a BSEE from West Virginia
University.
14
William D. Stewart, Vice President and General Manager,
Vacuum Products Group, Age 61
Mr. Stewart has served as Vice President and General
Manager, Vacuum Products Group since November 1997. From October
1986 to November 1997, he was President of HPS Products, which
MKS acquired in 1986. Mr. Stewart co-founded HPS in 1976.
Mr. Stewart has an M.B.A. from Northwestern University and
a B.S. in Business Administration from the University of
Colorado. Mr. Stewart also serves on the Board of Directors
of the Janus Fund.
Ronald C. Weigner, Vice President and Chief Financial
Officer, Age 60
Mr. Weigner has served as Vice President and Chief
Financial Officer of MKS since November 1995. From September
1993 until November 1995, he served as Vice President and
Corporate Controller, and from 1980 to 1993, he served as
Corporate Controller. Mr. Weigner is a certified public
accountant and has a B.S. in Business Administration from Boston
University.
Executive officers of MKS are elected by the Board of Directors
on an annual basis and serve until their successors are duly
elected and qualified. There are no family relationships among
any of the executive officers or directors of MKS.
Executive Compensation
The following table sets forth information with respect to the
compensation of Leo Berlinghieri, MKSs Chief Executive
Officer, John R. Bertucci, who served as Chief Executive Officer
until July 2005, and each of the four other most highly
compensated executive officers (collectively, the Named
Executive Officers) in 2005. Data is provided for the
years ended December 31, 2005, 2004 and 2003.
Summary Compensation Table
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Long-Term |
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Compensation Awards |
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Annual Compensation |
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Restricted |
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Securities |
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Other Annual |
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Stock |
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Underlying |
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All Other |
Name and Principal Position |
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Year |
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Salary |
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Bonus |
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Compensation |
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Awards |
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Options(#) |
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Compensation(1) |
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John R. Bertucci
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2005 |
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$ |
474,711 |
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$ |
136,901 |
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$ |
6,300 |
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Executive Chairman |
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2004 |
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$ |
443,154 |
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$ |
351,373 |
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$ |
6,150 |
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(former Chief Executive Officer) |
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2003 |
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$ |
391,430 |
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$ |
25,438 |
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965 |
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$ |
6,000 |
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Leo Berlinghieri
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2005 |
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$ |
395,583 |
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$ |
113,873 |
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37,500 |
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Chief Executive |
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2004 |
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$ |
336,023 |
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$ |
216,220 |
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65,000 |
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Officer and President |
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2003 |
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$ |
233,599 |
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|
$ |
8,189 |
|
|
|
|
|
|
|
|
|
|
|
85,857 |
|
|
|
|
|
Gerald G. Colella
|
|
|
2005 |
|
|
$ |
281,046 |
|
|
$ |
67,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,300 |
|
|
Vice President and |
|
|
2004 |
|
|
$ |
244,289 |
|
|
$ |
132,445 |
|
|
|
|
|
|
|
|
|
|
|
42,000 |
|
|
$ |
6,150 |
|
|
Chief Business Officer |
|
|
2003 |
|
|
$ |
193,132 |
|
|
$ |
6,797 |
|
|
|
|
|
|
|
|
|
|
|
35,107 |
|
|
$ |
6,000 |
|
John A. Smith
|
|
|
2005 |
|
|
$ |
250,718 |
|
|
$ |
60,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,988 |
|
|
Vice President |
|
|
2004 |
|
|
$ |
244,325 |
|
|
$ |
132,462 |
|
|
|
|
|
|
|
|
|
|
|
41,000 |
|
|
$ |
5,033 |
|
|
and Chief Technology Officer |
|
|
2003 |
|
|
$ |
196,248 |
|
|
$ |
6,904 |
|
|
|
|
|
|
|
|
|
|
|
24,836 |
|
|
$ |
4,450 |
|
William D. Stewart
|
|
|
2005 |
|
|
$ |
234,796 |
|
|
$ |
45,141 |
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
$ |
6,300 |
|
|
Vice President & |
|
|
2004 |
|
|
$ |
225,775 |
|
|
$ |
96,775 |
|
|
|
|
|
|
|
|
|
|
|
36,000 |
|
|
$ |
6,150 |
|
|
General Manager, Vacuum Products Group |
|
|
2003 |
|
|
$ |
194,541 |
|
|
$ |
6,709 |
|
|
|
|
|
|
|
|
|
|
|
24,871 |
|
|
$ |
5,851 |
|
Ronald C. Weigner
|
|
|
2005 |
|
|
$ |
240,538 |
|
|
$ |
46,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,300 |
|
|
Vice President and |
|
|
2004 |
|
|
$ |
229,794 |
|
|
$ |
99,960 |
|
|
|
|
|
|
|
|
|
|
|
36,000 |
|
|
$ |
6,150 |
|
|
Chief Financial Officer |
|
|
2003 |
|
|
$ |
202,846 |
|
|
$ |
7,080 |
|
|
|
|
|
|
|
|
|
|
|
24,895 |
|
|
$ |
6,000 |
|
|
|
(1) |
Represents amounts paid by MKS into a 401(k) plan. Other
compensation in the form of perquisites and other personal
benefits, securities or property has been omitted in those
instances where the aggregate amount of such compensation
constituted less than the lesser of $50,000 or 10 percent
of the total annual salary and bonus for the respective Named
Executive Officer for such year. |
15
Stock Option Grants
Option Grants in Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
|
|
Potential Realizable Value at |
|
|
Number of |
|
% of Total |
|
|
|
Assumed Annual Rates of Stock |
|
|
Securities |
|
Options |
|
Exercise |
|
|
|
Price Appreciation for Option |
|
|
Underlying |
|
Granted to |
|
Price Per |
|
|
|
Term(3) |
|
|
Options |
|
Employees in |
|
Share |
|
Expiration |
|
|
Name |
|
Granted |
|
Fiscal Year(1) |
|
($/Sh) |
|
Date(2) |
|
5% |
|
10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Bertucci
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo Berlinghieri
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald G. Colella
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John A. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William D. Stewart
|
|
|
37,500 |
(4) |
|
|
|
|
|
$ |
17.74 |
|
|
|
2/14/2015 |
|
|
$ |
418,372 |
|
|
$ |
1,060,237 |
|
|
|
|
37,500 |
(5) |
|
|
29.24 |
% |
|
$ |
17.74 |
|
|
|
2/14/2015 |
|
|
$ |
418,372 |
|
|
$ |
1,060,237 |
|
Ronald C. Weigner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In the fiscal year ended December 31, 2005, options to
purchase a total of 256,500 shares of Common Stock were
granted to employees of MKS, including officers. |
|
(2) |
The options are subject to earlier termination upon certain
events related to termination of employment. |
|
(3) |
The dollar gains under these columns result from calculations
discussing hypothetical growth rates as set by the Commission
and are not intended to forecast future price appreciation of
the Common Stock. |
|
(4) |
Options will become exercisable as follows: 25% of the shares
become exercisable on the first anniversary of the date of
issue. An additional 6.25% of the initial grant of options vests
on each successive quarter. |
|
(5) |
Vested upon issuance. |
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Value of Unexercised |
|
|
|
|
|
|
Underlying Unexercised |
|
In-the-Money Options |
|
|
Shares |
|
|
|
Options at Fiscal Year End |
|
at Fiscal Year End(2) |
|
|
Acquired on |
|
Value |
|
|
|
|
Name |
|
Exercise(#) |
|
Realized(1) |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Bertucci
|
|
|
13,804 |
|
|
$ |
42,378 |
|
|
|
16,302 |
|
|
|
0 |
|
|
$ |
38,446 |
|
|
$ |
0 |
|
Leo Berlinghieri
|
|
|
20,000 |
|
|
|
253,280 |
|
|
|
394,453 |
|
|
|
63,750 |
|
|
|
1,044,493 |
|
|
|
122,888 |
|
Gerald G. Colella
|
|
|
7,000 |
|
|
|
69,472 |
|
|
|
268,828 |
|
|
|
33,813 |
|
|
|
75,448 |
|
|
|
83,855 |
|
John A. Smith
|
|
|
|
|
|
|
|
|
|
|
157,734 |
|
|
|
31,563 |
|
|
|
154,084 |
|
|
|
83,855 |
|
William D. Stewart
|
|
|
|
|
|
|
|
|
|
|
306,234 |
|
|
|
51,563 |
|
|
|
79,489 |
|
|
|
76,472 |
|
Ronald C. Weigner
|
|
|
52,200 |
|
|
|
633,693 |
|
|
|
386,623 |
|
|
|
28,125 |
|
|
|
1,627,716 |
|
|
|
72,956 |
|
|
|
(1) |
Value realized represents the difference between the closing
price per share of Common Stock on the date of exercise and the
exercise price per share multiplied by the number of shares
acquired upon exercise. |
|
(2) |
Total value of
in-the-money
unexercised options is based on the difference between the last
sales price of the Companys Common Stock on the NASDAQ
Stock Market on December 30, 2005, the last trading day of
the fiscal year 2005 ($17.89 per share) and the exercise
price of
in-the-money
options, multiplied by the number of shares subject to such
options. |
Retirement Benefits
MKS provides supplemental retirement benefits to certain
officers, including Messrs. Berlinghieri, Weigner and
Colella. Benefits become fully vested when the officer
(i) has 25 years of service with MKS, and
(ii) retires at Normal Retirement Age (set forth in the
table below), with partial vesting at specified ages
16
prior to Normal Retirement Age, as indicated below. When fully
vested, the benefits provide for annual payments equal to 50% of
the employees final average compensation (defined below)
for life, with 50% of such amount payable to his spouse for life
after the employees death, or a lump sum payment of an
aggregate amount calculated in accordance with actuarial tables.
Final annual compensation is equal to the average of
officers three highest years of compensation (salary plus
bonus) during the 10 years prior to the officers
retirement (or other qualifying termination). The benefits
listed above are not subject to any deduction for social
security or other offset amounts.
The above-named officers have been credited with the following
years of service and have the following Normal Retirement Age
pursuant to the supplemental retirement benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Annual Benefit |
|
|
Years of Service Credited |
|
Normal Retirement Age |
|
Payable upon Retirement at |
|
|
(as of 12/31/05) |
|
(fully vested) |
|
Normal Retirement Age(1) |
|
|
|
|
|
|
|
Leo Berlinghieri
|
|
|
25 |
|
|
|
62(2) |
|
|
$ |
302,530 |
|
Gerald G. Colella
|
|
|
22 |
|
|
|
62(2) |
|
|
$ |
204,335 |
|
Ronald C. Weigner
|
|
|
25 |
|
|
|
65(3) |
|
|
$ |
171,604 |
|
|
|
(1) |
These estimated annual benefits assume that each
participants salary plus bonus would remain unchanged from
his 2005 levels until retirement. |
|
(2) |
When fully vested, the amount payable to each of
Messrs. Berlinghieri and Colella is equal to 50% of the
average of his three years of highest compensation (salary plus
bonus) during the 10 years prior to his retirement (or
other qualifying termination). At age 61, this benefit
becomes 90% vested; and at age 60, this benefit becomes 80%
vested. |
|
(3) |
When fully vested, the amount payable to Mr. Weigner is
equal to 50% of the average of his three years of highest
compensation (salary plus bonus) during the 10 years prior
to his retirement (or other qualifying termination). At
age 64, this benefit becomes 90% vested; at age 63,
this benefit becomes 80% vested; at age 62, this benefit
becomes 60% vested; at age 61, this benefit becomes 40%
vested. Because Mr. Weigner is currently age 60, this
benefit is currently 20% vested. |
In addition, the Company provides Mr. Smith a retirement
benefit, as described below under Employment
Agreements.
Certain Relationships and Related Transactions
Mr. Bertucci, the Executive Chairman and a director of the
Company, holds a 50% interest in a partnership that leases space
to the Company in Santa Clara, California. In 2005, MKS
paid the partnership approximately $95,000 for lease payments.
This lease arrangement will be terminated effective
March 15, 2006.
Mr. Chute, a director of MKS and MKSs secretary,
provides legal services to MKS. In 2005, MKS paid him a retainer
of $60,000 for these services.
Mr. Schneider, MKSs Vice President and General
Manager, Ion Systems, was the President and Chief Executive
Officer of Ion Systems, Inc., which was acquired by MKS on
January 3, 2006. In connection with the acquisition,
Mr. Schneider was entitled to receive payment out of the
purchase price proceeds for a management incentive bonus
arrangement that was in effect between him and Ion Systems, Inc.
and for his stock options. Accordingly, he received $1,269,414
at the closing, and is entitled to receive up to an additional
$1,751,136, payable out of escrow accounts, subject to certain
indemnification obligations and employment conditions.
Mr. Stewart, MKSs Vice President and General Manager
of the Vacuum Products Group, is the general partner of Aspen
Industrial Park Partnership, LLLP and 5330 Sterling Drive LLC
(collectively, Aspen). MKS leases from Aspen certain
facilities occupied by MKSs Vacuum Products Group in
Boulder, Colorado. MKS paid Aspen approximately $835,000 in 2005
to lease such facilities.
17
Emerson Electric Co. is the beneficial owner of approximately
18% of the outstanding shares of Common Stock. During 2005, MKS
purchased materials and administrative services from Emerson and
its subsidiaries totaling approximately $800,000.
Equity Compensation Plan Information
The following table provides information about the securities
authorized for issuance under MKSs equity compensation
plans as of December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
Number of Securities |
|
|
|
|
Exercise Price of |
|
Remaining Available for |
|
|
Number of Securities to |
|
Outstanding |
|
Future Issuance Under |
|
|
be Issued Upon Exercise |
|
Options, |
|
Equity Compensation Plans |
|
|
of Outstanding Options, |
|
Warrants and |
|
(Excluding Securities |
Plan Category |
|
Warrants and Rights(1) |
|
Rights |
|
Reflected in Column (a)) |
|
|
|
|
|
|
|
|
|
(a) |
|
(b) |
|
(c) |
Equity compensation plans approved by security holders
|
|
|
9,459,271 |
|
|
$ |
20.36 |
|
|
|
3,745,998 |
(2)(3) |
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,459,271 |
|
|
$ |
20.36 |
|
|
|
3,745,998 |
(2)(3) |
|
|
(1) |
Excludes an aggregate of 58,281 shares issuable upon
exercise of outstanding options assumed by the Company in
connection with an acquisition. The weighted average exercise
price of the excluded options is $32.45. |
|
(2) |
Securities available for future issuance under the 2004 Stock
Incentive Plan increase on January 1 of each year by 5% of the
issued and outstanding shares as of December 31 of the
prior year up to the amount authorized by the shareholders. |
|
(3) |
Includes 592,087 shares issuable under the Companys
Second Restated 1999 Employee Stock Purchase Plan and
138,456 shares issuable under the Companys Restated
International Employee Stock Purchase Plan as of
December 31, 2005. |
Employment Agreements
MKS has entered into employment agreements with each of
Messrs. Bertucci, Berlinghieri, Colella, Smith, Stewart and
Weigner. The terms of such employment agreements are included in
the summary below.
Each agreement sets the base salary for each employee which is
reviewed annually. Each employee is also entitled to standard
benefits, including participation in a profit sharing and
retirement savings plan, vacation days, insurance and
medical/dental insurance.
Mr. Bertuccis agreement provides that if
Mr. Bertucci resigns from his employment, then, subject to
applicable law, the Companys by-laws and articles of
organization and the directors fiduciary duties, the Board
of Directors shall nominate Mr. Bertucci for election as a
Class III director and consider Mr. Bertucci for
appointment as Chairman of the Board, subject to eligibility
requirements. Mr. Bertuccis employment term shall
continue until terminated by either party, or by death or
disability. If Mr. Bertuccis employment is terminated
by the Company without cause (as defined in the
agreement), or by Mr. Bertucci for good reason,
Mr. Bertucci shall continue to receive salary and bonus for
36 months after the date of such termination (which
payments shall be in a lump sum and grossed up for applicable
taxes if such termination occurs within 2 years of a change
in control of the Company), and additional employment benefits
for his lifetime. If Mr. Bertucci otherwise terminates his
employment, in exchange for his agreement to provide consulting
services for the Company, he shall continue to receive salary
and bonus for 18 months after the date
18
of such termination and additional employment benefits for his
lifetime. All such termination payments shall be grossed up to
cover any applicable excise tax. Mr. Bertucci and his
spouse are also eligible to receive retiree medical for their
lifetimes, upon meeting specified criteria. Retiree medical
benefits are not available if Mr. Bertucci is terminated by
the Company for cause.
All of the other employees employment terms are month to
month, with termination upon death, disability, or at the
election of MKS if the employee fails to perform his duties or
commits any act not in MKSs best interest.
With respect to Mr. Berlinghieri, if his employment is
terminated by the Company (other than for failure or refusal to
perform his obligations, commitment of acts not in the
Companys interest, commission of a felony or willful
misconduct), Mr. Berlinghieri shall continue to receive
salary and certain benefits for 12 months after the date of
such termination; and, if Mr. Berlinghieris
employment is terminated by the Company without
cause or by Mr. Berlinghieri for good
reason (each as defined in the agreement), within two
years after a change in control of the Company, and certain
other criteria are met, Mr. Berlinghieri shall continue to
receive salary and certain benefits for 36 months after the
date of such termination.
|
|
|
Non-Competition and Non-Solicitation |
Each of the employment agreements contains a non-competition
provision. With respect to Messrs. Colella, Smith, Stewart
and Weigner, such employees may not during the term of their
employment and for the period of one year after termination of
employment (or, in the case of Messrs. Stewart and Weigner,
two years if employment was terminated by such employee other
than for good reason (as defined in the agreement)):
|
|
|
|
|
engage in any competitive business or activity; |
|
|
|
work for, employ, become a partner with, or cause to be
employed, any employee, officer or agent of MKS; |
|
|
|
give, sell or lease any competitive services or goods to any
customer of MKS; or |
|
|
|
have any material financial interest in or be a director,
officer, partner, employee or consultant to or exceed specified
shareholding limitations in, any competitor of MKS. |
With respect to Mr. Berlinghieris agreement, during
the term of employment and for a period of one year thereafter
(or two years, if employment was terminated by
Mr. Berlinghieri other than for good reason),
Mr. Berlinghieri may not (i) engage in any competitive
business or activity, (ii) work for or become a partner
with any employee, officer or agent of the Company, or
(iii) have any financial interest in or be a director,
officer, 1% shareholder, partner, employee or consultant to any
competitor of the Company.
With respect to Mr. Bertuccis agreement, during the
term of employment and for a period of one year thereafter (or
two years, if employment was terminated by Mr. Bertucci
other than for good reason, as defined in the
agreement), Mr. Bertucci may not (i) manage or
participate in a competing business or (ii) maintain an
ownership of more than 1% in any competing business.
All of the employment agreements contain non-solicitation
provisions. During the term of employment and for a period of
two years after termination of employment (one year for
Messrs. Colella and Smith, and one to two years for
Mr. Bertucci), the employees may not (i) solicit any
customer to become a customer, distributor or supplier of any
other person or entity or to cease doing business with the
Company or (ii) solicit or hire any employee or agent of
the Company to terminate such persons employment or
engagement with the Company or to work for a third party.
19
|
|
|
Supplemental Retirement Benefits |
The employment agreements for each of Messrs. Berlinghieri,
Weigner and Colella provide for supplemental retirement
benefits. The benefits:
|
|
|
|
|
vest upon the employee reaching both (i) specified ages and
(ii) 25 years of service with the Company, in each
case while employed with the Company, or upon the
employees earlier death, disability, termination without
cause (as defined in the agreement) or a qualifying termination
in connection with a change in control (as defined in the
agreement); |
|
|
|
are forfeited in the event of termination for cause; and |
|
|
|
provide for, upon retirement in accordance with the terms of the
plan, annual payments equal to 50% of the employees final
average pay (as defined in the agreement) for life, with 50% of
such amount payable to his spouse for life after the
employees death, or a lump sum payment of such aggregate
amount, in accordance with actuarial tables. |
Mr. Smiths agreement provides for supplemental
retirement benefits. These benefits:
|
|
|
|
|
vest upon his reaching specified ages while employed with the
Company, or upon his earlier death, disability, termination
without cause (as defined in the agreement) or a qualifying
termination in connection with a change in control (as defined
in the agreement); |
|
|
|
are forfeited in the event of termination for cause or upon
Mr. Smiths voluntary termination for any reason other
than retirement; |
|
|
|
provide for a payment to Mr. Smith, upon his retirement in
accordance with the terms of his agreement, of an amount equal
to the aggregate of 15% of Mr. Smiths annual
compensation for each year during the period beginning 2004
until termination of employment, as if such amount were invested
in investment instruments previously specified by
Mr. Smith; and |
|
|
|
provide that the Company may make additional discretionary
contributions to Mr. Smiths retirement plan, and
Mr. Smith may contribute up to 25% of his current salary
and up to 100% of his bonus to the retirement plan. |
In addition, the Company also provides retiree medical benefits
to Messrs. Weigner and Stewart and their respective
spouses, for their lifetimes, upon meeting specified criteria.
Retiree medical benefits are not available if the employee
terminates his employment with the Company prior to age 62
(unless such termination is for good reason, as defined in the
employment agreement) or is terminated by the Company for cause.
Upon receipt of the benefits, Messrs. Weigner and Stewart
will each be responsible for paying $1,500 in costs annually,
and, until they reach age 65, an additional portion of the
costs.
|
|
|
Management Incentive Bonus Plan |
In addition to the rights set forth in the employment
agreements, each of the employees described above is entitled,
under the Companys Management Incentive Bonus Plan, to a
bonus equal to a specified percentage of his base salary,
ranging from 75% for Mr. Berlinghieri, to 40% for other
participants. The amounts to be distributed pursuant to the plan
are generally determined by the pro-forma pre-tax earnings per
share target for the Company, and in some instances, are also
partially based on the performance of a particular product group.
20
CODE OF ETHICS
Pursuant to Section 406 of the Sarbanes Oxley Act of 2002,
MKS has adopted a written code of business conduct and ethics
that applies to all of the Companys directors, officers
and employees (including the principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions), which is
posted in the Investors link on the Companys website,
www.mksinstruments.com, under the heading Corporate Governance.
MKS intends to disclose any amendments to, or waivers from, the
Companys code of business conduct and ethics on MKSs
website.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
(Section 16(a)) requires executive officers,
directors, and shareholders who beneficially own more than ten
percent (10%) of the Companys stock to file initial
reports of ownership on Form 3 and reports of changes in
ownership on Form 4 with the Commission and any national
securities exchange on which the Companys securities are
registered. Executive officers, directors and greater than ten
percent (10%) beneficial owners are required by the
Commissions regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished
to the Company and written representations from the executive
officers and directors, pursuant to Item 405 of
Regulation S-K,
the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten percent (10%) shareholders were complied with, except
that Mr. Stewart failed to timely report a grant of an
option to purchase 37,500 shares of Common Stock on
his Form 4 that was filed on February 16, 2005. This
grant was subsequently reported on an amendment to the original
filing.
21
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total shareholder
return (assuming reinvestment of dividends) from investing $100
on December 31, 2000, and plotted at the last trading day
of each of the fiscal years ended December 31, 2001, 2002,
2003, 2004 and 2005, in each of (i) the Companys
Common Stock; (ii) a Peer Group Index of semiconductor
equipment/material manufacturers (the Hemscott Industry
Group, which index was formerly known as the Coredata
Group Index), compiled by Hemscott, Inc. (Hemscott);
and (iii) the NASDAQ Market Index of companies (the
NASDAQ Market Index). The graph was compiled by
Hemscott. The stock price performance on the graph below is not
necessarily indicative of future price performance. The
Companys Common Stock is listed on the NASDAQ National
Market under the ticker symbol MKSI.
Performance Graph
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS,
INDUSTRY INDEXES AND/OR BROAD MARKETS
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2001 | |
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2002 | |
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2003 | |
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2004 | |
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2005 | |
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MKS Instruments, Inc.
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$ |
174.39 |
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$ |
106.00 |
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$ |
187.10 |
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$ |
119.68 |
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$ |
115.42 |
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Hemscott Group Index
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$ |
109.48 |
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$ |
65.50 |
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$ |
118.84 |
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$ |
93.26 |
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$ |
98.06 |
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NASDAQ Market Index
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$ |
79.71 |
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$ |
55.60 |
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$ |
83.60 |
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$ |
90.63 |
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$ |
92.62 |
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22
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On February 2, 2006, the Audit Committee appointed PwC as
the Companys independent auditors for the fiscal year
ending December 31, 2006. PwC was the Companys
independent auditors for the fiscal year ended December 31,
2005.
Representatives of PwC are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if
they so desire and will be available to respond to appropriate
questions from shareholders. In the event that the ratification
of the appointment of PwC as the independent auditors for the
Company is not obtained at the Annual Meeting, the Board of
Directors will reconsider its appointment.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO
RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2006 IS IN THE BEST INTERESTS OF MKS AND ITS
SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE FOR
THIS PROPOSAL.
OTHER MATTERS
The Board of Directors does not know of any other matters which
may come before the meeting. However, if any other matters are
properly presented to the meeting, it is the intention of the
persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the
Company. In addition to solicitations by mail, the
Companys directors, officers and regular employees,
without additional remuneration, may solicit proxies by
telephone and personal interviews and the Company reserves the
right to retain outside agencies for the purpose of soliciting
proxies. Brokers, custodians and fiduciaries will be requested
to forward proxy soliciting material to the owners of stock held
in their names, and the Company will reimburse them for their
reasonable
out-of-pocket expenses
incurred in connection with the distribution of proxy materials.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
For the years ended December 31, 2005 and 2004, aggregate
fees for professional services rendered by the Companys
independent auditors, PwC, in the following categories were as
follows:
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2005 | |
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2004(1) | |
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Audit Fees
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$ |
2,054,400 |
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$ |
2,309,000 |
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Audit-Related Fees
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67,000 |
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Tax Fees
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456,820 |
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391,174 |
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All Other Fees
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4,200 |
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Total
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$ |
2,515,420 |
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$ |
2,767,174 |
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(1) |
2004 Tax Fees and Total have been adjusted from previously
disclosed amounts to include fees incurred in 2004 which were
paid in 2005. |
Audit Fees for the years ended December 31, 2005 and 2004
were for professional services provided for the audit of the
Companys consolidated financial statements and of the
Companys internal control over financial reporting,
statutory and subsidiary audits, consents and assistance with
review of documents filed with the Commission.
Audit-Related Fees for the year ended December 31, 2004
were for advice related to accounting and reporting standards.
23
Tax Fees for the year ended December 31, 2005 were for
services related to tax compliance, including the preparation of
tax returns; and tax planning and tax advice, including
assistance with acquisitions, mergers and foreign operations.
Tax Fees for the year ended December 31, 2004 were for
services related to tax compliance, including the preparation of
tax returns and claims for refund; and tax planning and tax
advice, including assistance with acquisitions, foreign sales
and foreign subsidiaries.
All Other Fees for the year ended December 31, 2005 were
for research software and a study on fringe related costs.
In 2005, $2,700 (or 0.1% of total 2005 fees) of all Other Fees
were provided under the de minimis exception to the audit
committee pre-approval requirements. In 2004, no fees were
provided under the de-minimus exception.
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Pre-Approval Policy and Procedures |
The Audit Committee has adopted policies and procedures relating
to the approval of all audit and non-audit services that are to
be performed by the Companys independent auditors. This
policy generally provides that the Company will not engage its
independent auditors to provide audit or non-audit services
unless the service is specifically approved in advance by the
Audit Committee or the engagement is entered into pursuant to
one of the pre-approval procedures described below.
From time to time, the Audit Committee may pre-approve specified
types of services that are expected to be provided to the
Company by its independent auditors during the next
12 months. Any such pre-approval is detailed as to the
particular service or type of service to be provided and is also
generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the chairman of the
Audit Committee the authority to approve any audit or non-audit
services to be provided to the Company by its independent
auditors. Any approval of services by the Chairman of the Audit
Committee pursuant to this delegated authority is reported on at
the next meeting of the Audit Committee.
The Audit Committee has considered and determined that the
provision of the non-audit services noted in the foregoing table
is compatible with maintaining PwCs independence.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR THE 2007 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 2007
Annual Meeting of Shareholders must be received by the Company
at its principal office in Wilmington, Massachusetts not later
than November 21, 2006, for inclusion in the proxy
statement for that meeting.
In addition, the Companys By-Laws (which are on file with
the Commission) require that MKS be given advance notice of
matters that shareholders wish to present for action at an
Annual Meeting of shareholders (other than matters included in
MKSs proxy statement in accordance with
Rule 14a-8 of the
Exchange Act). The required written notice must be delivered to
the Secretary of the Company at the principal offices of the
Company at least 60 days prior to the Annual Meeting, but
no more than 90 days prior to such meeting or it will be
considered untimely. However, if less than 40 days notice
of the Annual Meeting is provided to the shareholders, the
written notice of the shareholder must be received by the
Secretary of the Company no later than 10 days after the
notice of the Annual Meeting was mailed or publicly disclosed.
The advance notice provisions of the Companys By-Laws
contain the requirements of the written notice of shareholders
and supersede the notice requirement contained in
Rule 14a-4(c)(1)
under the Exchange Act.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER
DOCUMENTS
Some banks, brokers and other nominee record holders are already
householding proxy statements and annual reports.
This means that only one copy of the Companys proxy
statement or annual report may have been sent to multiple
shareholders in your household. We will promptly deliver a
separate copy of either
24
document to you if you call or write us at the following address
or phone number: MKS Instruments, Inc., 90 Industrial
Way, Wilmington, Massachusetts 01887,
(978) 284-4000,
Attn: Investor Relations. If you want to receive separate
copies of the annual report and proxy statement in the future,
or if you are receiving multiple copies and would like to
receive only one copy for your household, you should contact
your bank, broker, or other nominee record holder, or you may
contact us at the above address and phone number.
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By Order of the Board of Directors |
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Richard S. Chute |
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Secretary |
March 20, 2006
THE BOARD OF DIRECTORS ENCOURAGES SHAREHOLDERS TO ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. SHAREHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR
STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
25
APPENDIX A
ANNUAL MEETING OF SHAREHOLDERS OF
MKS INSTRUMENTS, INC.
MAY 8, 2006
Please detach and mail in the envelope provided.
MKS INSTRUMENTS, INC.
2006 ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of MKS Instruments, Inc., a Massachusetts corporation (the Company),
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement,
each dated March 20, 2006, and hereby appoints Leo Berlinghieri, Richard S. Chute and Ronald C.
Weigner, and each of them acting singly, 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
2006 Annual Meeting of Shareholders of the Company to be held on May 8, 2006, at 10:00 a.m. at the
Andover Country Club, 60 Canterbury Street, Andover, Massachusetts 01810, and at any adjournment(s)
thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth on the reverse side, and, in their
discretion, upon any other matters which may properly come before the meeting.
This proxy, when properly executed, will be voted as directed on the reverse side, or, if no
contrary direction is indicated, will be voted FOR the election of the three (3) nominees listed on
the reverse side as Class I Directors of the Company, FOR proposal 2 and as said proxies deem
advisable on such matters as may properly come before the meeting.
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Address Changes/Comments:
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse
side.) |
MKS INSTRUMENTS, INC.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
Vote on Directors
1. |
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To elect three (3) Class I Directors for a term of three (3) years. |
Nominees:
01) Leo Berlinghieri
02) Hans-Jochen Kahl
03) Louis P. Valente
o FOR ALL
o WITHHOLD FOR ALL
o FOR ALL EXCEPT
To withhold authority to vote for any individual nominee(s), mark For All Except and write the
nominees number on the line below.
Vote on Proposals
2. |
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To ratify the selection of PricewaterhouseCoopers LLP as the Companys independent auditors
for the year ending December 31, 2006. |
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FOR
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AGAINST
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ABSTAIN |
o
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o |
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE THIS PROXY AND
RETURN IT AS PROMPTLY AS POSSIBLE.
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
For address changes and/or comments, please check this box and write them on the back where
indicated. o
Please indicate if you plan to attend this meeting. o Yes No o
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Signature [PLEASE SIGN WITHIN BOX]
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Date: |
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Signature (Joint Owners)
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Date: |
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