DATA I/O CORPORATION
NOTICE OF 2003
ANNUAL MEETING
and
PROXY STATEMENT
DATA I/O CORPORATION
March 28, 2003
To Our Shareholders:
You are cordially invited to attend the 2003 Annual Meeting of Data I/O
Corporation, which will be held at the Company's headquarters at 10525 Willows
Road N.E., Redmond, Washington 98052. The meeting will begin at 2:00 p.m.
Pacific Daylight Time on Tuesday, May 20, 2003. Following the meeting there will
be an opportunity to see some of the Company's exciting new products.
Officers of the Company will be attending and would be pleased to respond to
questions either during or after the meeting. We will review the business
operations of the Company for 2002 and the first quarter of 2003 and report on
the Company's strategic plan for the future. Formal business will include the
election of directors, consideration of a proposal to amend the Company's 1982
Employee Stock Purchase Plan, and ratification of the continued appointment of
Grant Thornton LLP as the Company's independent auditors.
Please read the proxy materials carefully. Your vote is important. The Company
appreciates you considering and acting on the proposals presented. I am looking
forward to seeing you on May 20th.
Sincerely,
Frederick R. Hume
President and Chief Executive Officer
DATA I/O LOCATION MAP
(Provide copy to printer)
DATA I/O CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - May 20, 2003
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To the Shareholders of Data I/O Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Data I/O
Corporation (the "Company") will be held at 2:00 p.m. Pacific Daylight Time, on
Tuesday, May 20, 2003, at the Company's principal offices, 10525 Willows Road
N.E., Redmond, Washington 98052, for the following purposes:
(1) Election of Directors:
To elect six directors, each to serve until the next annual meeting of
shareholders or until his or her successor is elected and qualified or
until such director's earlier death, resignation, removal.
(2) 1982 Employee Stock Purchase Plan:
To consider and vote on a proposal to amend the Data I/O Corporation 1982
Employee Stock Purchase Plan (the "1982 Plan") to increase the number of
shares reserved for issuance under the 1982 Plan by an additional 300,000
shares of common stock.
(3) Ratification of Independent Auditors:
To ratify the continued appointment of Grant Thornton LLP as the Company's
independent auditors for the calendar year ended December 31, 2003.
(4) Other Business:
To consider and vote upon such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 21, 2003, as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the 2003 Annual Meeting and any adjournment or postponement thereof.
By Order of the Board of Directors
Frederick R. Hume
President and Chief Executive Officer
Redmond, Washington
March 28, 2003
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YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting in person, we urge you to sign,
date and return the accompanying proxy card at your earliest convenience. This
will ensure the presence of a quorum at the meeting. Promptly returning a signed
and dated proxy card will save the Company the extra expense of additional
solicitation. Your proxy is revocable at your request any time before it is
voted. If you attend the meeting, you may vote in person if you wish even if you
have previously returned your proxy card. An addressed, postage-paid envelope is
provided in order to make certain that your shares will be represented at the
Annual Meeting.
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DATA I/O CORPORATION
10525 Willows Road N.E.
Redmond, Washington 98052
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 20, 2003
INFORMATION REGARDING PROXY
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors ("Board of
Directors") of Data I/O Corporation (the "Company") for use at the Annual
Meeting of Shareholders to be held on Tuesday, May 20, 2003, at 2:00 p.m.
Pacific Daylight Time at the Company's principal offices, 10525 Willows Road
N.E., Redmond, Washington 98052, and at any adjournment thereof (the "Annual
Meeting"). Shareholders of record at the close of business on March 21, 2003
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and a copy of the Company's 2002 Annual Report to
Shareholders are being mailed to shareholders on or about March 31, 2003.
A proxy card is enclosed for your use. You are requested on behalf of the Board
of Directors to sign, date, and return the proxy card in the accompanying
envelope, which is postage-paid if mailed in the United States or Canada.
A proxy in the accompanying form, which is properly signed, dated and returned
and not revoked will be voted in accordance with the instructions contained
therein. To vote on the election of directors, check the appropriate box under
Item No. 1 on your proxy card. You may (a) vote for all of the director nominees
as a group, (b) withhold authority to vote for all director nominees as a group,
or (c) vote for all director nominees as a group except those nominees indicated
to the contrary. To vote on the approval of the amendment to the Data I/O
Corporation 1982 Employee Stock Purchase Plan (the "1982 Plan"), check the
appropriate box under Item No. 2 on your proxy card. You may (a) vote "FOR"
approval of the amendment to the 1982 Plan, (b) vote "AGAINST" approval of the
amendment to the 1982 Plan, or (c) "ABSTAIN" from voting on the approval of the
amendment to the 1982 Plan. To vote on the proposal to ratify Grant Thornton LLP
as the Company's independent auditors for the calendar year ended December 31,
2003, check the appropriate box under Item No. 3 on your proxy card. You may (a)
vote "FOR" approval of the ratification of Grant Thornton LLP as the Company's
independent auditors, (b) vote "AGAINST" approval of the ratification of Grant
Thornton LLP as the Company's independent auditors, or (c) "ABSTAIN" from voting
on the ratification of Grant Thornton LLP as the Company's independent auditors.
Proxies which are returned to the Company without instructions will be voted as
recommended by the Board of Directors. Any shareholder who returns a proxy may
revoke it at any time prior to the voting thereof on any matter (without,
however, affecting any vote taken prior to such revocation) by (i) delivering
written notice of revocation to the Secretary of the Company at the Company's
principal offices, (ii) executing and delivering to the Company another proxy
dated as of a later date, or (iii) voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only outstanding voting securities of the Company are shares of common stock
(the "Common Stock"). As of the Record Date, there were 7,883,188 shares of
Common Stock issued and outstanding, and each such share is entitled to one vote
at the Annual Meeting. The presence in person or by proxy of holders of record
of a majority of the outstanding shares of Common Stock is required to
constitute a quorum for the transaction of business at the Annual Meeting.
Shares of Common Stock underlying abstentions will be considered present at the
Annual Meeting for the purpose of calculating a quorum. Under Washington law and
the Company's charter documents, if a quorum is present, the six nominees for
election to the Board of Directors who receive the greatest number of
affirmative votes cast at the Annual Meeting shall be elected directors.
Abstentions will have no effect on the election of directors because they are
not cast in favor of any particular candidate. There can be no broker non-votes
on the election of directors because brokers who hold shares for the accounts of
their clients have discretionary authority to vote such shares with respect to
the election of directors. The proposals to approve the amendment to the 1982
Plan and to ratify the continued appointment of Grant Thornton as the Company's
independent auditors will be approved, if a quorum is present, if the number of
votes cast in favor of the proposals exceeds the number of votes cast against
the proposals. Abstentions and broker non-votes on the proposals will have no
effect because approval of the proposals is based solely on the votes cast.
Proxies and ballots will be received and tabulated by Mellon Investor Services,
an independent business entity not affiliated with the Company.
The Common Stock is traded on the NASDAQ SmallCap Stock Market under the symbol
"DAIO". Effective December 31, 2002, the Common Stock transferred from the
NASDAQ National Market to the NASDAQ SmallCap Market. The last sale price for
the Common Stock, as reported by the NASDAQ SmallCap Stock Market on March 21,
2003, was $1.15 per share.
The following table sets forth information with respect to all shareholders
known by the Company to be the beneficial owners of more than five percent of
its outstanding Common Stock as of March 21, 2003. Except as noted below, each
person or entity has sole voting and investment powers with respect to the
shares shown.
Amount and Nature
of Beneficial Percent of Shares
Name and Address Ownership Outstanding
Glen F. Ceiley 1,489,058(1) 18.9%
Bisco Industries Inc.
1500 N. Lakeview Ave.
Anaheim, CA 92807
Dimensional Fund Advisors, Inc. 462,500(2) 5.7%
1299 Ocean Avenue - 11th Floor
Santa Monica, CA 90401
John W. Stanton & Theresa E. Gillespie 546,600(3) 6.9%
3650 - 131st Ave. SE
Bellevue, WA 98006
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(1) The holding shown is as of January 31, 2003, as reported to the Company by
Glen F. Ceiley on behalf of himself, Matthew Ceiley, Zachary Ceiley, Bisco
Industries, Inc. ("Bisco"), and Bisco Industries, Inc. Profit Sharing and
Savings Plan (the "Bisco Plan"). Mr. Glen Ceiley reported that he holds
sole voting and dispositive power with respect to 3,557 shares, Matthew
Ceiley holds sole voting and dispositive power with respect to 700 shares,
Zachary Ceiley holds sole voting and dispositive power with respect to 800
shares, Bisco holds sole voting and dispositive power with respect to
999,101 shares, and the Bisco Plan holds sole voting and dispositive power
with respect to 463,025 shares. Mr. Glen Ceiley is the President, director,
and sole shareholder of Bisco and is also the sole trustee of the Bisco
Plan. In addition to the shares reported above, Mr. Ceiley's share
ownership also includes options to purchase 21,875 shares exercisable
within 60 days.
(2) The holding shown is as of February 10, 2003, as reported by Dimensional
Fund Advisors Inc., a registered investment advisor ("Dimensional"), on a
Schedule 13G filed pursuant to Rule 13d-1(b) or 13d-2(b) under the
Securities Exchange Act of 1934. The Schedule 13G indicates that one or
more affiliates of Dimensional holds sole voting and dispositive power with
respect to 462,500 shares. Dimensional disclaims beneficial ownership of
all of these shares.
(3) The holding shown is as of January 30, 2002, as reported by John W. Stanton
and Theresa E. Gillespie, husband and wife, on a Schedule 13G filed
pursuant to Rule 13d-1 of the Securities Exchange Act of 1934. The Schedule
13G indicates that Mr. Stanton and Ms. Gillespie share voting and
dispositive power with respect to 546,600 shares, which they own as
tenants-in-common.
Directors' and Officers' Share Ownership
The following table indicates ownership of the Company's Common Stock by each
director of the Company, each executive officer named in the compensation tables
appearing later in this Proxy Statement, and by all directors and executive
officers as a group, all as of March 21, 2003. The Company is not aware of any
family relationships between any director, director nominee or executive officer
of the Company.
Amount and Nature of Percent of Shares
Name Beneficial Ownership Outstanding
Glen F. Ceiley 1,489,058 (1) 18.9%
Frederick R. Hume 235,257 (2) 3.0%
Joel S. Hatlen 165,697 (3) 2.1%
Paul A. Gary 129,032 (4) 1.6%
Edward D. Lazowska 36,098 (5) (6)
Daniel A. DiLeo 26,875 (7) (6)
Steven M. Quist 11,250 (8) (6)
All current directors and
executive officers
as a group (7 persons) 2,093,267 (9) 26.6%
-------------------------------
(1) See a description of Mr. Ceiley's ownership and beneficial ownership on Page
3.
(2) Includes options to purchase 212,500 shares exercisable within 60 days.
(3) Includes options to purchase 95,125 shares exercisable within 60 days.
(4) Includes options to purchase 26,875 shares exercisable within 60 days.
(5) Includes options to purchase 26,875 shares exercisable within 60 days.
(6) Less than 1 percent each.
(7) Includes options to purchase 21,875 shares exercisable within 60 days.
(8) Includes options to purchase 11,250 shares exercisable within 60 days.
(9) Includes options to purchase 416,375 shares exercisable within 60 days.
The Company is not aware of any arrangement the operation of which may at a
subsequent date result in a change of control of the Company.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will vote on the election of six
directors to serve until the next Annual Meeting or until his or her successor
has been qualified and elected or such director's earlier death, resignation or
removal. The Board of Directors has approved the six nominees named below, all
of whom are currently members of the Board of Directors. Each of the nominees
has indicated that they are willing and able to serve as directors. However,
should one or more of the nominees not accept the nomination, or otherwise be
unwilling or unable to serve, it is intended that the proxies will be voted for
the election of a substitute nominee or nominees designated by the Board of
Directors.
Recommendation: The Board of Directors recommends a vote FOR each of the
director nominees.
Glen F. Ceiley, age 57, has been a director of the Company since February 1999
when he was appointed to the Board of Directors pursuant to a Standstill
Agreement dated February 10, 1999 which expired on February 10, 2000. Since
1973, Mr. Ceiley has been the President and Chief Executive Officer of Bisco
Industries, a distributor of fasteners and electronic components, which, as part
of a group, owns approximately 18.9% of the stock of the Company. Mr. Ceiley is
also Chairman of the Board of Family Steak Houses of Florida, Inc. In May 1998,
the Securities and Exchange Commission issued a cease and desist order against
Bisco in connection with Bisco's purchase of certain shares of Family Steak
Houses while its tender offer for shares of Family Steak Houses was outstanding
in violation of Rule 10b-13 of the Exchange Act. Bisco consented to the entry of
the order without admitting or denying the findings set forth in the order.
Daniel A. DiLeo, age 55, has been a director of the Company since May 2000. Mr.
DiLeo has more than 25 years experience in both the system and semiconductor
divisions of Lucent Technologies and AT&T Companies. In March 2003, Mr. DiLeo
retired as the Executive Vice President of Optoelectronics at Agere Systems,
Inc., a former Lucent subsidiary, where he had served in such capacity since
February 2001. From June 1998 through February 2001, Mr. DiLeo was the
President, Optoelectronics Division at Lucent Technologies, Microelectronics
Group. From January 1996 to June 1998, Mr. DiLeo was the Vice President,
Wireless Business Unit at Lucent Technologies Inc. Mr. DiLeo is also a director
of RF Micro Devices.
Paul A. Gary, age 62, has been a director of the Company since March 1998 and
was named Chairman of the Board in May 1999. From 1987 until his retirement in
1996, Mr. Gary worked for Lucent Microelectronics (now Agere Systems, Inc.) as
Vice President of the High Performance IC and NETCOM business units. From 1981
to 1987 he held various leadership positions with (the former) Western Electric
Company, including Director of Engineering and Manufacturing and General
Manager. From 1967 to 1981, Mr. Gary worked for Bell Laboratories, finishing
there as Laboratory Director. Mr. Gary is also a director of TriQuint
Semiconductors Inc.
Frederick R. Hume, age 60, became President and Chief Executive Officer of the
Company on February 23, 1999. He has been a director of the Company since
January 1999. From 1988 until his retirement in 1998, Mr. Hume was Vice
President and General Manager of Keithley Instruments in Cleveland, Ohio. From
1972 to 1988, he held various management positions at John Fluke Manufacturing,
including Group Vice President for Manufacturing and Research and Development.
Edward D. Lazowska, age 52, has been a director of the Company since August
1996. Since 1977, Dr. Lazowska has been a member of the faculty of the
University of Washington's Department of Computer Science and Engineering. From
1993 to September 2001, he held the position of Professor and Department Chair.
He currently holds the Bill and Melinda Gates Endowed Chair. Mr. Lazowska is
also a director of Lguide.
Steven M. Quist, age 57, was appointed to the Board of Directors of the Company
on March 12, 2001. Since January 2003, Mr. Quist has been the Acting General
Manager of CyberOptics Semiconductor, Inc, a subsidiary of CyberOptics
Corporation. From February 1998 to December 2002, he was the President and Chief
Executive Officer of CyberOptics Corporation. He has served on CyberOptic's
Board of Directors since 1991. From 1992 to February 1998, Mr. Quist was the
President of Rosemount Inc., a subsidiary of Emerson Electric Company, St.
Louis, Missouri. Mr. Quist is also a director of Rimage Corporation.
Board and Committee Meetings
The Board of Directors has three standing Committees: the Audit Committee, the
Compensation Committee, and the Nominating Committee. The Audit Committee
consisted of Messrs. Lazowska, DiLeo, and Quist throughout 2002. The
Compensation Committee consisted of Messrs. Gary, Ceiley, and DiLeo throughout
2002. The Nominating Committee consisted of Messrs. Lazowska and Gary throughout
2002. Mr. Quist was added to the Nominating Committee in January 2003.
The Audit Committee considers and recommends to the Board of Directors the
engagement of independent certified public accountants for the ensuing year and
the terms of such engagement; reviews the scope of the audit; periodically
reviews the Company's program of internal control and audit functions; receives
and reviews the reports of the independent accountants; and reviews the annual
financial report to the directors and shareholders of the Company. Each member
of the Audit Committee is an independent director, as defined by Rule
4200(a)(15) of the National Association of Securities Dealers listing standards.
On May 19, 2000, the Audit Committee recommended and the Board of Directors
adopted a written charter for the Audit Committee. The Audit Committee met five
times during fiscal 2002.
The Compensation Committee makes recommendations to the Board of Directors
concerning the compensation of the Company's executive officers. The committee
administers the Company's management incentive compensation program and its
stock option, stock purchase and stock appreciation rights plans. The
Compensation Committee reviews all employee benefit programs and approves
significant changes in major programs and all new programs. The Compensation
Committee met three times during fiscal 2002.
The Nominating Committee seeks qualified candidates to serve on the Board of
Directors, recommends them for the Board of Director's consideration for
election as directors at the Annual Meeting of Shareholders and proposes
candidates to fill vacancies on the Board of Directors. The Nominating Committee
also recommends nominees for the various committees of the Board of Directors.
The Nominating Committee will consider written proposals from shareholders for
director nominees which are submitted to the Secretary of the Company in
accordance with the procedures described below under the caption, "Shareholder
Nominations and Proposals for the 2003 Annual Meeting of Shareholders". The
Nominating Committee did not meet during fiscal 2002.
During the fiscal year ended December 31, 2002, there were five meetings of the
Board of Directors. Each of the incumbent directors who were on the Board of
Directors during fiscal 2002 attended at least 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings
held by all committees of the Board of Directors on which he served during his
term of service on the Board of Directors.
Compensation Committee Interlocks and Insider Participation
For the fiscal year ended December 31, 2002, the Compensation Committee of the
Board of Directors consisted of Messrs. Gary, DiLeo, and Ceiley. None of these
individuals has served at any time as an officer or employee of the Company or
as a member of the board of directors or compensation committee of any entity
that has had one or more executive officers which served as a member of the
Board of Directors or the Compensation Committee.
Board Compensation
Employee directors (Fred Hume) do not receive additional compensation for
serving on the Board of Directors. Non-employee directors received a cash
retainer for fiscal year 2002 of $3,750 for each quarter of service plus $1,000
for each full Board of Directors meeting attended and $500 for each
teleconference Board of Directors meeting attended. Additional quarterly
compensation was paid to the non-employee directors for serving as Chairman of
the Board of Directors or as a committee chair; $2,500 for Chairman of the Board
of Directors and $750 for the Audit, Compensation, and Nominating Committee
chairs. In addition, each non-employee Board of Directors member as of May 15,
2002, was granted 7,500 stock options. The stock options were granted under the
provisions and terms of the Company's 2000 Stock Incentive Compensation Plan.
The Company also reimburses non-employee directors for actual travel and
out-of-pocket expenses incurred in connection with service to the Company.
The following table shows compensation paid by the Company to non-employee
directors during fiscal year 2002.
Cash Compensation Stock Option Grants
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Chairman of the Board/
Board Committee Chairman Number of
Name Retainer ($) Retainer ($) Meeting Fees ($) Options (#)(1)
---- ------------ ------------ ---------------- --------------
Glen F. Ceiley $15,000 $3,000 $4,500 7,500
Daniel A. DiLeo $15,000 $3,000 $4,500 7,500
Paul A. Gary $15,000 $10,000 $4,500 7,500
Edward D. Lazowska $15,000 $3,000 $4,500 7,500
Steven M. Quist $15,000 $0 $4,500 7,500
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(1) Stock Options were granted to the directors in May 2002 at an exercise price
of $1.251 per share. The options granted vest quarterly over three years
and expire at the end of six years.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons who own more than ten percent (10%) of
the Company's Common Stock ("Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Reporting Persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) reports.
To the Company's knowledge, based solely on its review of copies of such reports
furnished to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers and
directors were complied with during 2002.
AUDITOR INDEPENDENCE
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
consolidated financial statements and the reporting process including the
systems of internal controls. In fulfilling its oversight responsibilities, the
Committee reviewed the audited consolidated financial statements in the Annual
Report (Form 10-K) with management including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements.
The Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited consolidated financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed by
SAS 61 with the Committee under generally accepted auditing standards. In
addition, the Committee has discussed with the independent auditors the
auditors' independence from management and the Company including the matters in
the written disclosures and the letter required by the Independence Standards
Board and considered the compatibility of nonaudit services with the auditors'
independence.
The Committee discusses with the Company's independent auditors the overall
scope and plans for their respective audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Committee held five meetings during fiscal year 2002.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited consolidated financial statements be included in the Company's Annual
Report (Form 10-K) for the year ended December 31, 2002 for filing with the
Securities and Exchange Commission. The Committee has selected Grant Thornton
LLP as the Company's auditors for the current year.
Audit Fees: The aggregate fees billed by Grant Thornton LLP for professional
services rendered for the audit of the Company's financial statements for the
fiscal year ended December 31, 2002, and for review of the financial statements
included in each of the Company's Form 10-Q, including audit related fees were
approximately $135,300.00.
Financial Information Systems Designs and Implementation Fees: Grant Thornton
LLP did not bill for any professional services for financial information systems
design or implementation as described in Paragraph (c)(4)(ii) or Rule 2-01 of
Regulation S-X for the fiscal year ended December 31, 2002.
All Other Fees: Aggregate fees billed for all other services rendered by Grant
Thornton LLP, other than the services covered in the two previous paragraphs,
for the fiscal year ended December 31, 2002 were approximately $4,200.00.
The Committee has considered whether the services provided by Grant Thornton LLP
are compatible with maintaining the independence of Grant Thornton LLP and has
concluded that the independence of Grant Thornton LLP is maintained and is not
compromised by the services provided.
Respectfully submitted,
AUDIT COMMITTEE
Daniel A. DiLeo
Edward D. Lazowska
Steven M. Quist
March 28, 2003
EXECUTIVE COMPENSATION
Report of Compensation Committee on Annual Compensation
The Compensation Committee of the Board of Directors ("the Committee") is
composed entirely of independent outside directors. The Committee is responsible
for setting and administering the policies which govern all of the compensation
programs of the Company.
The Committee has established a compensation plan for executive officers with
three components: annual base salary, annual management incentive compensation
and long-term stock options. Each of these components is described below. This
executive officer compensation plan is evaluated annually by the Committee by
reviewing the Company's overall financial performance, individual executive
officer performance, and executive officer total compensation compared with
other companies within the electronics industry.
Annual Base Salary Structure. The Committee establishes a base salary structure
for each executive officer position. This structure defines the minimum,
mid-point and maximum salary levels and the relationship of salary to total cash
compensation. The Committee reviews the salary structure periodically based on
surveys of compensation paid to executives performing similar duties with
electronic manufacturing and software companies of approximately the same size
as the Company, located primarily in the United States. This group was selected
as it is believed to be representative of the companies with which the Company
competes for key employees.
The Committee's objective is to maintain a salary structure which, when combined
with annual incentive compensation, provides the Company's executive officers
with total cash compensation which is near the market median for executives with
similar responsibilities, experience and ability. In light of the current
economic situation, management has continued to freeze base salaries at the 2001
level and deferred consideration of normal annual adjustments as part of the
Company's short-term cost control efforts. Due to the salary freeze, no new
surveys were obtained; however in 2001, the executive officer group as a whole
received cash compensation which, according to survey data, was within the 25th
to 75th percentile of the aggregate median cash compensation paid to officers in
similar positions at similar-sized electronics companies. Management Incentive
Compensation Plan ("MICP"). The MICP offers each executive officer a
performance-based opportunity to earn additional annual cash compensation in an
amount tied to a percentage of the executive officer's base salary. The
Committee's objective in setting executive MICP percentages and the formulas for
MICP payout is to pay above industry average total compensation for better than
expected or industry average historical financial performance and below industry
average compensation for worse than expected or industry average financial
historical performance. The percentages of base salary targeted for MICP payout
("the guidelines") for executives for a given year are established by the
Committee early in the year. The 2002 MICP guidelines for executive officers
ranged from 25% to 40% of base salary.
The actual MICP payout to an executive officer, in relation to his guideline for
2002 was a function of the Company's net income compared to predetermined
targets. The Committee believes that these targets and metrics were measures of
key activities for the Company during 2002 which will affect near-term and
long-term shareholder value. Guideline MICP or incentive payouts is to be paid
to an executive officer if the Company and the officer achieves a combined
result versus targets and objectives of 100%. A greater or lesser percentage of
guideline is to be paid if a combined result of greater or less than 100% is
achieved.
The MICP for 2002 provided that MICP payouts would be based on the achievement
of a certain level of the combined objectives described above. In some cases,
not all officers would receive an MICP payout. The maximum payout to executive
officers under MICP cannot exceed 150% of guideline. For 2002, the net income
targets were not achieved. No executive officers received an MICP payout for
2002. See "Summary Annual Compensation Table."
Stock Option Plan. The Committee approves grants under the Data I/O Corporation
1986 Employee Stock Option Plan, as amended and restated (the "1986 Plan") and
the 2000 Plan (collectively "the Plans"). These are the Company's only long-term
incentive plans. The primary purpose of the Plans is to make a significant
element of executive pay a reward for taking actions which maximize shareholder
value over time. The Committee grants options based primarily on its perception
of the executive's ability to affect future shareholder value and secondarily on
the competitive conditions in the market for exceptionally talented executives
who typically command compensation packages which include a significant equity
incentive. All options granted to the President and Chief Executive Officer and
any other executive officer in 2002 were based on these criteria.
In the electronics industry, stock options represent a key compensation element
which attracts, retains and motivates exceptional executives. Accordingly, total
outstanding options as a percentage of outstanding shares tends to be higher in
electronics than in other industries. As of the Record Date, the Company's
outstanding options represented approximately 14.2% of outstanding shares, which
the Company believes is slightly below the average within the electronics
industry.
Historically, all options granted by the Company have been granted with an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant and, accordingly, will only have value if the Company's stock
price increases. All officer options granted during 2002 become exercisable at a
rate of 6.25% per quarter. 50,000 options granted to Mr. Hume under the 1986
Plan during 2000 are subject to 4-year cliff vesting and become exercisable at
the end of the 4-year period with acceleration provisions included for earlier
vesting if predetermined revenue and profit targets are achieved. The
acceleration provisions provided for 25,000 of the options to vest at the end of
2000 if predetermined profit and revenue targets were achieved. The targets were
not achieved for 2000; therefore, no options vested under the acceleration
provisions. If at the end of 2001, a predetermined earnings per share (EPS)
target was achieved, 25,000 of the options would vest at that time. The targets
were not achieved for 2001; therefore, no options vested under the acceleration
provisions. If any remaining options are unvested at the end of 2001, 25,000
vest if the revenue and profit are 120% or more of the April 26, 2000 forecast
for 2000. If any remaining shares are unvested at the end of 2002, 25,000 vest
if EPS is equal to or more than the predetermined target for 2002. The targets
were not achieved for 2002; therefore, no options vested under the acceleration
provisions. If any remaining shares are unvested at the end of 2002, 25,000 vest
if the revenue and profit are 144% or more of the April 26, 2000 forecast for
2000. If any remaining shares are unvested at the end of 2003, 25,000 vest if
EPS is equal to or more than the predetermined target for 2003. If any remaining
shares are unvested at the end of 2003, 25,000 vest if the revenue and profit
are 173% or more of the April 26, 2000 forecast for 2000.
Options granted during 2000 under the 2000 Plan become exercisable at a rate of
6.25% per quarter. All options granted during 1999, except those granted in
January 1999, become exercisable at a rate of 25% per year. Options granted in
January 1999 become exercisable at a rate of 12.5% per quarter. All 1998 options
granted during and after August 1998 become exercisable at a rate of 12.5% per
quarter. All outstanding options granted prior to August 1998 become exercisable
at a rate of 25% per year.
In January 2000, the Board of Directors approved a modification to Mr. Hume's
outstanding 1999 granted options providing that if the Company performed at 125%
of a predetermined profit target in 2000, 50% of Mr. Hume's outstanding unvested
options would vest at December 31, 2000 with the remaining unvested options
vesting as originally scheduled. The targets were not achieved for 2001;
therefore, no options vested under these acceleration provisions.
All grants are subject to acceleration of vesting in connection with certain
events leading to a change in control of the Company or at any other time at the
discretion of the Committee. All options granted to executive officers are
issued in tandem with limited stock appreciation rights ("SARs"), which become
exercisable only in the event of a change in control of the Company. See "Change
in Control Arrangements."
For additional information concerning the number of new options granted in
fiscal 2002 to the Chief Executive Officer and other executive officers, see
"Option/SAR Grants in the Last Fiscal Year."
Performance Evaluation. The base salary of each executive officer is reviewed
annually by the President and Chief Executive Officer. This is done on the basis
of a formal review written by the President and Chief Executive Officer,
evaluating the executive's prior year performance against documented job
responsibilities and specific predetermined annual objectives. In developing
executive compensation packages to recommend to the Committee, the President and
Chief Executive Officer considers, in addition to each executive's prior year
performance, the executive's long-term value to the Company, the executive's pay
relative to that for comparable surveyed jobs, the executive's experience and
ability relative to executives in similar positions, and the current year
increases in executive compensation projected in industry surveys.
The Committee then reviews the President and Chief Executive Officer's
recommendations for executive officers' total compensation and makes final
decisions on pay for each executive officer based on the President and Chief
Executive Officer's summary of the performance evaluations and on the other
criteria and survey data described above. In this process, the Committee
consults extensively with the Company's President and Chief Executive Officer.
The Committee meets annually without the President and Chief Executive Officer
to evaluate his performance and to develop a recommendation for his compensation
for the coming year. In addition to reviewing the Company's financial
performance for the prior year, the Committee reviews compensation surveys for
chief executive officers in similar companies and the President and Chief
Executive Officer's individual performance, including development and execution
of short- and long-term strategic objectives, Company revenue and profitability,
and employee morale, the achievement of which is expected to increase
shareholder value. The Committee then approves base salary and MICP percentage
changes for all executive officers. In light of the current economic situation,
management has continued to freeze base salaries at the 2001 level and deferred
consideration of normal annual adjustments as part of the Company's short-term
cost control efforts.
The Compensation Committee determined the compensation package, including
salary, bonus, stock option grants, and other benefits for Frederick R. Hume,
President and Chief Executive Officer, based on the Committee's perception of
his qualifications for the position, his ability to affect future shareholder
value, compensation surveys (as noted above under "Annual Base Salary
Structure"), and the competitive conditions in the market.
The Company has entered into agreements (the "Severance Agreements") with
certain executive officers whereby such individuals will be entitled to receive
payments if they are terminated without cause or resign with good reason within
specified periods following the occurrence of certain events deemed to involve a
change in control of the Company. See "Change in Control Arrangements." Under
the Omnibus Budget Reconciliation Act of 1993, the federal income tax deduction
for certain types of compensation paid to the chief executive officer and the
four other most highly compensated executive officers of publicly held companies
is limited to $1 million per officer per fiscal year unless such compensation
meets certain requirements. The Committee is aware of this limitation and
believes that no compensation paid by the Company during 2002 will exceed the $1
million limitation, except possibly a portion of the sums payable pursuant to
the Severance Agreements, if paid.
Respectfully submitted,
COMPENSATION COMMITTEE
Glen F. Ceiley
Daniel A. DiLeo
Paul A. Gary
March 28, 2003
SUMMARY COMPENSATION TABLE
The following table shows compensation paid by the Company for services rendered
during fiscal years 2002, 2001 and 2000 to all persons who served as the Chief
Executive Officer in 2002 and the other most highly compensated executive
officer of the Company at December 31, 2002, whose salary and bonus exceeded
$100,000 in 2002.
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------------------------------
Securities
Name Underlying All
and Options/ Other
Principal Salary Bonus SARs Compensation
Position Year ($) ($) (1) (#) (2) ($) (3)
----------------------------------------------------------------------------------------------------------
Frederick R. Hume 2002 250,000 0 50,000 10,322
President/ 2001 250,000 0 0 8,622
Chief Executive Officer 2000 250,000 0 50,000 1,806
Joel S. Hatlen 2002 157,500 0 25,000 7,315
Vice President / 2001 157,500 0 0 6,711
Chief Financial Officer/ 2000 150,000 7,313 10,000 12,027 (4)
Secretary/Treasurer
-------------------------------
(1) Represents amounts earned under the Management Incentive Compensation Plan.
(2) All options granted to executive officers are granted in tandem with an
equal number of SARs. SARs are only exercisable upon the occurrence of
certain events leading to a change in the control of the Company. See
"Change in Control and Severance Arrangements."
(3) These amounts represent the Company's contributions to the Company's 401k
Plan and its payment of term life insurance premiums on behalf of the
executive. The amounts also include vacation payouts, and stock option
exercises, as noted in subsequent footnotes.
(4) Includes a payout of excess vacation accrued of $2,022 and a stock option
exercise of $3,203.
OPTION/SAR GRANTS TABLE
Option/SAR Grants in the Last Fiscal Year
The following table sets forth certain information regarding stock option grants
to the Company's Chief Executive Officer and the Company's other most highly
compensated executive officer during the year ended December 31, 2002.
Number of Percent Potential Realizable Value
Securities of Total at Assumed Annual Rates of
Underlying Options/SARs Exercise Stock Price Appreciation
Options/SARs Granted to or for Option Term (4)
-----------------------------
Granted Employees Base Price Expiration 0% 5% 10%
Name (#) (1) in Fiscal ($/Sh) (2)(3) Date ($) ($) ($)
Year
----------------------------------------------------------------------------------------------------------------
Frederick R. Hume 50,000 (5) 15.24% 1.33 04/25/08 0 22,616 51,309
Joel S. Hatlen 25,000 (5) 7.62% 1.33 04/25/08 0 11,308 25,654
-------------------------------
(1) An equal number of SARs are granted in tandem with options granted to
executive officers. SARs are exercisable only upon the occurrence of
certain events leading to a change in the control of the Company. See
"Change in Control and Severance Arrangements."
(2) Under the terms of the 1986 Plan and the 2000 Plan, the Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of and reprice outstanding options.
(3) The exercise price may be paid by delivery of already owned shares, subject
to certain conditions.
(4) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the option term. These
numbers are calculated based on SEC requirements and do not reflect the
Company's estimate of future stock price growth.
(5) All new options granted in 2002 become exercisable commencing three months
after grant date, with 6.25% of the shares becoming exercisable at that
time and an additional 6.25% of the shares becoming exercisable on each
successive quarter after the grant date, with full vesting occurring on the
fourth anniversary of such date. Options which have been outstanding for at
least six months will become exercisable in full upon the occurrence of
certain events leading to a change in control of the Company. See "Change
in Control and Severance Arrangements". Options expire six years from the
date of grant, subject to earlier termination if the optionee's employment
is terminated.
OPTIONS/SAR EXERCISES AND YEAR-END OPTION VALUES TABLE
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
The following table sets forth certain information regarding option exercises
and fiscal year-end option values for the Company's Chief Executive Officer and
the Company's other most highly compensated officer during the year ended
December 31, 2002.
# of Securities Underlying Value of Unexercised
Shares Options/SARs at In-the-Money Options/SARs
Acquired on Value December 31, 2002 at December 31, 2002
Exercise Realized (#) (2) ($) (3)
---------------------------------------------------------------
Name (#) ($) (1) Exercisable / Unexercisable Exercisable / Unexercisable
------------------------------------------------------------------------------------------------------------------------
Frederick R. Hume 0 0 106,250 / 193,750 0 / 0
Joel S. Hatlen 0 0 91,375 / 32,625 0 / 0
-------------------------------
(1) Market value of underlying securities at exercise date, minus the exercise
or base price of in-the-money options/SARs.
(2) Future exercisability is subject to vesting and the optionee remaining in
the employment of the Company. In addition, all options are granted in
tandem with an equal number of SARs. SARs are only exercisable upon the
occurrence of certain events leading to a change in the control of the
Company. See "Change in Control and Severance Arrangements."
(3) This value is calculated by multiplying the market value of the Common
Stock at December 31, 2002, which was $0.91 as quoted on the NASDAQ
National Market, less the exercise or base price by the number of
in-the-money options/SARs held. If the number is zero, the aggregate value
of the options are out-of-the-money.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about the Company's Common Stock that may
be issued upon the exercise of options and rights under all of the Company's
existing equity compensation plans as of December 31, 2002.
(a) Number of (b) remaining available for securities to be issued
(c) Number of securities
(c) Number of securities
(a) Number of securities (b) Weighted- remaining available for
to be issued upon the average exercise price future issuance under
exercise of outstanding of outstanding equity compensation plans
options, warrants and options, warrants (excluding securities
rights and rights reflected in column (a)
------------------------- ----------------------- ----------------------------
Equity compensation plans
approved by the security holders
(1) (3) 1,247,000 $2.35 678,070
Equity compensation plans not
approved by the security holders
(2) 10,000 $5.19 0
-----------------------------------
(1) Represents shares of Data I/O's Common Stock issuable pursuant to our 2000
Stock Incentive Compensation Plan, 1986 Stock Option Plan, 1992 Employee
Stock Purchase Plan, and Director Fee Plan.
(2) Director option grant represents a one-time option grant to Directors in
May 1998 prior to shareholder approval of an option plan covering
Directors.
(3) Stock Appreciation Rights Plan ("SAR") provides that directors, executive
officers or holders of 10% or more of Data I/O's Common Stock have a SAR
with respect to each exercisable option. While the plan has been approved
by the security holders, no amounts are included in columns a, b or c
relating to the SAR.
Shareholder Return Performance Graph
Shown below is a line-graph comparing cumulative total shareholder return on
Data I/O Common Stock for each of the last five years against the cumulative
total return for the Russell 2000 Index, the S & P High Tech Composite, and the
S&P Information Technology Sector. This cumulative return includes the
reinvestment of cash dividends.
COMPARATIVE FIVE-YEAR TOTAL RETURNS (1)
Data I/O Corporation, Russell 2000, S & P High
Tech Composite, S & P Information Technology
Sector(2) (Performance results as of year
end through December 31, 2002)
------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
DAIO $100 $ 28 $ 45 $ 33 $ 25 $15
Russell 2000 $100 $ 97 $115 $113 $114 $90
S & P High Tech Composite $100 $172 $301 $181 $139
S & P Information Technology Sector $100 $178 $318 $188 $139 $87
--------------------------------------------------------------------------------
(1) Assumes $100 invested at the close of trading on December 31, 1997 in Data
I/O Common Stock, in the Russell 2000 Index, in the S & P High Tech
Composite, and in the S & P Information Technology Sector. Cumulative total
return assumes reinvestment of dividends.
(2) Standard and Poors is no longer publishing the S & P High Tech Composite
index. The classifications have been changed to business sectors. Because
the index is no longer being published, the Company has chosen the S & P
Information Technology Sector as the appropriate comparison for the
Company.
Change in Control and Severance Arrangements
Options reported in the Option/SAR compensatory tables appearing above have been
granted pursuant to the Plans. Historically, most options granted under the
Plans have been granted subject to a vesting schedule of either 25% per year,
12.5% per quarter, or 6.25% per quarter. However, the Plans provide that options
which have been outstanding for at least six months will become exercisable in
full for the periods indicated: (i) for a period of 45 days beginning on the day
on which any person or group (with certain exceptions) becomes the beneficial
owner of 25% or more of the combined voting power of the Company's outstanding
securities, unless such accumulation is previously approved by a disinterested
majority of the plan's administrators; (ii) beginning on the date that a tender
or exchange offer by any person (with certain exceptions) is first published or
sent or given, and continuing for so long as such offer remains open, unless,
upon consummation thereof, such person would be the beneficial owner of less
than 30% of the shares of Common Stock then outstanding, unless such tender
offer is approved by a disinterested majority of the Board of Directors; or
(iii) immediately prior to consummation of (a) any merger, consolidation,
reorganization or other transaction pursuant to which persons who hold the
outstanding Common Stock immediately prior to the transaction have less than 40%
of the combined voting power of the surviving entity; or (b) any sale, lease,
exchange or other transfer not in the ordinary course of all or substantially
all of the Company's assets. With any of the foregoing transactions, the Company
will give each option holder notice 20 days prior to the proposed consummation
date and each option holder will then be entitled to exercise their options in
full or part at any time prior to consummation of such transaction. A holder's
exercise of those options that become vested only as a result of such
acceleration will be contingent upon consummation of such transaction.
In 1983, the Company adopted a Stock Appreciation Rights ("SARs") Plan which
allows the Board of Directors to grant to each director, executive officer or
holder of 10% or more of the stock of the Company a SAR with respect to certain
options granted to these parties. A SAR has been granted in tandem with each
option granted to an officer of the Company. SARs granted which have been held
for at least six months are exercisable for a period of 20 days following the
occurrence of either of the following events: (i) the close of business on the
day that a tender or exchange offer by any person (with certain exceptions) is
first published or sent or given if, upon consummation thereof, such person
would be the beneficial owner of 30% or more of the shares of Common Stock then
outstanding; or (ii) approval by the shareholders of the Company (or, if later,
approval by the shareholders of a third party) of any merger, consolidation,
reorganization or other transaction providing for the conversion or exchange of
more than 50% of the outstanding shares of the Company's Common Stock into
securities of a third party, or cash, or property, or a combination of any of
the foregoing.
The Company entered into severance agreements (the "Severance Agreements") with
each of the following executive officers on the following dates: Joel S. Hatlen,
Vice President Finance, Chief Financial Officer, Secretary and Treasurer in July
1998 and Frederick R. Hume, President and Chief Executive Officer in February
1999, the term of these agreements were extended on January 31, 2002 for a
period of 2 years from that date. The respective agreements with Messrs. Hatlen
and Hume provide for a lump sum payment to the officer upon termination of the
officer's employment by the Company without cause or by the officer for "good
reason" (as defined in the Severance Agreements) 90 days prior and within one
year following a change of control of the Company. The amount of the lump sum
payment is equal to a multiple of the officer's base salary at the time of
termination, plus the average bonus received during the last three full fiscal
years the officer served in his or her present position (the "base"). The
guideline for the multiple for each of the officers is one times the base. The
size of the multiple declines on a straight-line basis throughout the specified
period, following a change in control, except that the multiple is never less
than one-half. The amount payable under the Severance Agreements for Messrs.
Hatlen and Hume is subject to reduction if the aggregate present value of all
payments received in connection with a change in control would exceed three
times the officer's "annualized includible compensation," as defined in Section
280G of the Internal Revenue Code, for the officer's most recent five taxable
years.
In connection with execution of the Severance Agreements, the Company required
Messrs. Hatlen and Hume to sign a confidentiality and non-competition agreement,
which includes, among other things, a restriction against competing with the
Company or soliciting employees from the Company for a one-year period following
termination if the officer receives a payment under a Severance Agreement. The
Board of Directors believes that the terms and conditions of the Severance
Agreements are in the best interest of the Company because the Severance
Agreements will enable the executive officers to continue to focus on activities
providing for the maximum long-term value to the Company's shareholders, even
when faced with the possible change of control of the Company or termination of
their employment. In addition, each of the executive officers named in the
Summary Compensation Table have signed the Company's form of offer letter and
have entered into a Confidentiality and Intellectual Property Assignment
Agreement (the "Confidentiality Agreement") with the Company. These offer
letters specify the terms of employment, including annual base pay, MICP
participation, stock options provided, if any, and that employment is at will.
The Confidentiality Agreements also provide that employment is at will. The
Confidentiality Agreements also provide that executive officers shall keep
certain information confidential during and after employment and shall not
solicit employees of the Company for one year following termination of their
employment.
PROPOSAL 2: AMENDMENT TO 1982 EMPLOYEE STOCK PURCHASE PLAN
At the annual meeting, the shareholders of the Company will be asked to approve
an amendment to the Company's 1982 Employee Stock Purchase Plan, as amended (the
"Purchase Plan"), which, if approved, will increase the number of shares of
Common Stock available for purchase under the Purchase Plan by 300,000 shares to
an aggregate of 2,150,000 shares. The Board of Directors believes that the
Purchase Plan has contributed to strengthening the incentive of participating
employees to achieve the objectives of the Company and its shareholders by
encouraging employees to acquire a greater proprietary interest in the Company.
Since its inception, a total of 1,796,443 shares of Common Stock have been
purchased under the Purchase Plan, and a total of 53,557 shares remained
available for purchase thereunder as of the Record Date.
The proposed increase in the number of shares available for purchase under the
Purchase Plan will simply enable the Company to continue the Purchase Plan and
is not required or intended to supply or "cover" outstanding awards to Purchase
Plan participants. As such, no "New Plan Benefits" have been granted to date and
future awards under the Purchase Plan are not yet determinable.
The affirmative vote of at least a majority of the shares of Common Stock
present in person or represented by proxy at the 2003 Annual Meeting and
entitled to vote on the proposal is required for approval of the amendment to
the Purchase Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE PROPOSED AMENDMENT TO THE PURCHASE PLAN. Unless instructed
otherwise, it is the intention of the persons named in the accompanying form of
proxy to vote shares represented by properly executed proxies in favor of the
above-referenced amendment to the Purchase Plan.
Description of the 1982 Stock Purchase Plan
The following description of the Purchase Plan is qualified in its entirety by
reference to the full text of such Plan, a copy of which is attached to this
proxy statement as Appendix A. The Purchase Plan, which is intended to qualify
under Section 423 of the Internal Revenue Code ("the Code"), was adopted by the
Board of Directors in February 1982 and approved by its shareholders in May
1982. The Purchase Plan was amended by the Company's shareholders in May 1991 to
increase the number of shares of Common Stock available for purchase from
500,000 to 750,000, was amended by the Company's shareholders in May 1993 to
increase the number of shares available for purchase from 750,000 to 1,150,000,
was amended by the Company's shareholders in May 1996 to increase the number of
shares available for purchase from 1,150,000 to 1,550,000, and was again amended
in May 2001 to increase the number of shares available for purchase from
1,550,000 to 1,850,000.
General. Employees are eligible to participate, with certain exceptions, if they
are employed by the Company or its subsidiaries for at least 20 hours per week.
As of the Record Date the number of eligible participants was approximately 120.
Employees who own five percent or more of the voting stock of the Company or its
subsidiaries are not eligible to participate in the Purchase Plan. Each
participant agrees to a payroll deduction for each semi-annual six-month plan
period (a "Payment Period"), which periods commence on August 1 and February 1
of each year and terminate on January 31 and July 31, respectively. Aggregate
deductions may not be greater than 10% of an employee's base pay in any Payment
Period. No employee shall be granted options which permit his or her rights to
purchase Common Stock under the Purchase Plan and any other option plan of the
Company or any subsidiary corporations to accrue at a rate which exceeds $25,000
in fair market value of such stock (determined at date of grant) for each
calendar year in which such options are at any time outstanding.
Participants in the plan receive an option to purchase, generally on the last
day of a Payment Period, at a price determined as described below (the "Purchase
Price"), the number of full shares of Common Stock of the Company which the
participant's accumulated payroll deductions on the last day of such Payment
Period will purchase at the Purchase Price. The Purchase Price for each Payment
Period is the lesser of 85% of the fair market value of the Common Stock on the
first business day of the Payment Period or 85% of the fair market value of the
Common Stock on the last business day of the Payment Period. The Company has
determined the "fair market value" on any given day to be the last sale price of
the Common Stock as reported by NASDAQ National Market System or, if the Common
Stock is not quoted in the National Market System, the mean between the closing
bid and asked prices of the Common Stock as quoted by NASDAQ on such day. A
participant may withdraw from participation in the Purchase Plan by delivering
written notice at any time prior to the last business day of any Payment Period,
in which event the Company will promptly refund the entire balance of the
participant's account. Termination of employment cancels the participant's right
to continue in the Purchase Plan and results in a refund of the participant's
account. Purchase rights granted under the Plan are not assignable or
transferable. The Board of Directors may at any time amend, modify or terminate
the Purchase Plan with the exception that, without prior approval of the
shareholders of the Company, the Board of Directors may not increase the number
of shares which may be issued pursuant to the Purchase Plan.
Federal Income Tax Consequences. This description of the federal income tax
consequences of participation in the Purchase Plan is intended merely to provide
basic information with respect to the tax treatment applied to the Purchase
Plan. Although the Company believes the following statements are correct based
on existing provisions of the Code and its legislative history, Treasury
regulations promulgated thereunder and administrative or judicial
interpretations thereof, the Company cannot assure that legislative,
administrative or judicial changes or interpretations will not occur which would
modify such statements. In connection with their particular income tax
liability, participants in the Purchase Plan are urged to obtain professional
advice regarding the applicability of federal, state and local tax laws.
Under Section 423(a) of the Code, the transfer of a share of stock to a
participant pursuant to the Purchase Plan is entitled to the benefits of Section
421(a) of the Code. Under that Section, a participant will not be required to
recognize income at the time the option is granted or at the time the option is
exercised. As the option price under the Purchase Plan is less than the fair
market value of the stock on the date of grant, Section 423(c) of the Code
requires, in general, that, provided the holding periods described below are
met, when the shares of stock received pursuant to the Purchase Plan are sold or
otherwise disposed of in a taxable transaction the participant will recognize
compensation income (taxed as ordinary income) in an amount equal to the lesser
of either the excess of the fair market value of the Common Stock at the time of
such disposition over the amount paid for the stock or 15% of the stock's fair
market value at the date the option was granted. The Company will not be
entitled to any expense deduction with respect to the Purchase Plan, except in
connection with a disqualifying disposition as discussed below. Any additional
gain or loss resulting from the disposition, measured by the difference between
the amount paid for the shares and the amount realized (less the amount
recognized as a compensation income described above), will be recognized to the
participant as long-term capital gain or loss. No portion of the amount received
pursuant to such a disposition will be subject to withholding for federal income
taxes or be subject to FICA or FUTA taxes.
Under current law, net capital gains are subject to tax at a maximum rate of
20%, whereas ordinary income will generally be taxed at up to a maximum rate of
38.6%. The deductibility of capital losses is limited to an amount equal to
capital gains for the tax year, plus $3,000 ($1,500 for married taxpayers filing
separate returns).
In order for a participant to receive the favorable tax treatment provided by
Section 421(a) of the Code, Section 423(a) requires that the participant make no
disposition of the shares within two years from the date the option was granted
nor within one year from the date such option was exercised and the shares were
transferred to him or her. In addition, the participant must, with certain
exceptions with respect to death or disability, be an employee of the
corporation granting the option (or of a parent or subsidiary of such
corporation, as defined in Section 424(e) and (f) of the Code, or a corporation,
or parent or subsidiary thereof, issuing or assuming the option in a transaction
to which Section 424(a) applies) at all times within the period beginning on the
date of the grant of the option and ending on a date within three months before
the date of the exercise.
If a participant disposes of the stock before the expiration of the holding
period requirements set forth above, the participant will realize, at the time
of the disposition, ordinary income to the extent the fair market value of the
stock on the date the shares were purchased exceeds the purchase price. The
amount of ordinary income recognized on such a disposition is added to the
participant's basis in the shares. The difference between the amount realized on
such a disposition and the participant's basis in the shares shall be treated as
a capital gain or loss. Income recognized as a result of such a disposition may
be subject to the income tax withholding requirements of the Code as well as the
FUTA and FICA taxes. The participant is required to reimburse the Company for
all withholding taxes (e.g. Federal income tax and FICA) the Company is required
to pay on behalf of the participant. At the time of the disposition, the Company
will be allowed a corresponding business expense deduction under Section 162 of
the Code to the extent of the amount of the participant's ordinary income,
provided such amount, when added to any other compensation paid to the
participant, is reasonable. The Purchase Plan is not generally subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and is not qualified under Section 401 of the Code.
PROPOSAL 3: RATIFICTION OF THE CONTINUED APPOINTMENT OF AUDITORS
The Board of Directors requests that the shareholders ratify the continued
appointment of Grant Thornton LLP to serve as the Company's independent auditors
for calendar year 2003. Grant Thornton LLP examined the consolidated financial
statements of the Company for the year ended December 31, 2002. Representatives
of Grant Thornton LLP will be present at the Annual Meeting to make a statement
if they desire to do so and to respond to questions by shareholders.
The Company's previous independent auditors, Ernst & Young, LLP, were dismissed
by the Board of Directors on November 14, 2001. The Company filed with the SEC a
Form 8-K and Form 8-K/A on November 21, 2001 and November 28, 2001,
respectively, which announced that the Board of Directors, based on a
recommendation from the Audit Committee, approved an action on November 14, 2001
to no longer engage Ernst & Young, LLP as its independent auditors. The Audit
Committee and the Board of Directors approved another independent accounting
firm, Grant Thornton LLP, as the Company's new independent auditors. Grant
Thornton LLP accepted this appointment on November 27, 2001.
The reports of Ernst & Young, LLP on the Company's financial statements for the
past two fiscal years did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles, except that the Independent Auditor's Report on the
consolidated financial statements of the Company for the fiscal year ended
December 28, 2000 contained an explanatory paragraph regarding the Company's
change in its method of accounting for revenue recognition.
In connection with the audits of the Company's financial statements for each of
the two fiscal years ended December 28, 2000 and December 30, 1999, and in the
subsequent interim period, there were no disagreements with Ernst & Young, LLP
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedure which, if not resolved to the
satisfaction of Ernst & Young, LLP would have caused Ernst & Young, LLP to make
reference to the matter in their report.
OTHER BUSINESS
As of the date of this Proxy Statement, the Company is not aware of any other
business to be acted upon at the Annual Meeting. If any other business calling
for a vote of the shareholders is properly presented at the meeting, the holders
of the proxies will vote or refrain from voting in accordance with their best
judgment.
SHAREHOLDER NOMINATIONS AND PROPOSALS FOR THE
2004 ANNUAL MEETING OF SHAREHOLDERS
The Company's Bylaws provide that advance notice of nominations for the election
of directors at a meeting of shareholders must be delivered to or mailed and
received by the Company 90 days prior to the date one year from the date
immediately preceding the Annual Meeting of Shareholders or, in the case of a
special meeting of shareholders to elect directors, the close of business on the
10th day following the date on which notice of such meeting is first given to
shareholders. The Bylaws also provide that advance notice of proposals to be
brought before an Annual Meeting by a shareholder must be submitted in writing
and delivered to or mailed and received by the Company not later than 90 days
prior to the date one year from the date immediately preceding the Annual
Meeting of Shareholders.
To qualify as an "eligible" shareholder, a shareholder must have been a record
or beneficial owner of at least one percent (1%) of the Company's outstanding
Common Stock, or shares of Common Stock having a market value of at least
$2,000, for a period of at least one (1) year prior to submitting the proposal,
and the shareholder must continue to hold the shares through the date on which
the meeting is held.
Each notice of a nomination or proposal of business must contain, among other
things: (i) the name and address of the shareholder who intends to make the
nomination or proposal; (ii) a representation that the shareholder is a holder
of record of stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice or to vote at the meeting for the proposal; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder and any material interest of such shareholder in any proposal to be
submitted to the meeting; (iv) such other information regarding each nominee or
proposal as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission; and (v) with
respect to the nominations, the consent of each nominee to serve as a director
of the Company if elected.
A copy of the full text of the provisions of the Company's Bylaws dealing with
shareholder nominations and proposals is available to shareholders from the
Secretary of the Company upon written request.
Securities and Exchange Commission (the "SEC") rules establish a deadline for
submission of shareholder proposals that are not intended to be included in the
Company's proxy statement with respect to discretionary voting (the
"Discretionary Vote Deadline"). The Discretionary Vote Deadline for the 2004
Annual Meeting is February 19, 2004. If a shareholder gives notice of such a
proposal after the Discretionary Vote Deadline, the Company's proxy holders will
be allowed to use their discretionary voting authority to vote against the
shareholder proposal when and if the proposal is raised at the 2004 Annual
Meeting.
Shareholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the 2004 Annual Meeting must
submit the proposal to the Company no later than December 2, 2003. Shareholders
who intend to present a proposal at the 2004 Annual Meeting without inclusion of
such proposal in the Company's proxy materials are required to provide notice of
such proposal to the Company no later than February 19, 2004. The Company
reserves the right to reject, rule out of order, or take appropriate action with
respect to any proposal that does not comply with these and other applicable
requirements, but only after the Company has notified the shareholder(s) who
have submitted the proposal of the problem and such shareholder(s) have failed
to correct it. This obligation to notify the appropriate shareholder(s) does not
apply to the failure to submit such proposal prior to the deadlines discussed
above.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors. Proxies may be solicited by officers, directors and regular
supervisory and executive employees of the Company, none of whom will receive
any additional compensation for their services. In addition, the Company may
engage an outside proxy solicitation firm to render proxy solicitation services
and, if so, will pay a fee for such services. Solicitations of proxies may be
made personally, or by mail, telephone, telegraph or messenger. The Company will
pay persons holding shares of Common Stock in their names or in the names of
nominees, but not owning such shares beneficially, such as brokerage houses,
banks and other fiduciaries, for the expense of forwarding soliciting materials
to their principals. All costs of solicitation of proxies will be paid by the
Company.
By Order of the Board of Directors
/s/Frederick R. Hume
Frederick R. Hume
President and Chief Executive Officer
Redmond, Washington
March 28, 2003
DATA I/O CORPORATION
1982 EMPLOYEE STOCK PURCHASE PLAN
AMENDED AND RESTATED FEBRUARY 8, 2001
1.1 Purpose
This 1982 Employee Stock Purchase Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by all eligible employees of Data I/O
Corporation (the "Company") and participating subsidiaries so that they may
share in the fortunes of the Company by acquiring or increasing their
proprietary interest in the Company. The Plan is designed to encourage eligible
employees to remain in the employ of the Company. It is intended that options
issued pursuant to this Plan shall constitute options issued pursuant to an
"employee stock purchase plan" within the meaning of Section 423 of the 1986
Internal Revenue Code as amended (the "Code").
1.2 Eligible Employees
All regular, full-time employees of the Company or any of its participating
subsidiaries shall be eligible to receive options under this Plan to purchase
the Company's common stock, no par value (the "Common Stock") (except employees
in countries whose laws make participating impractical). For purposes of this
Plan, the term employee shall include all employees of the Company or any of its
participating subsidiaries other than persons whose customary employment is
twenty (20) hours or less per week or not more than five (5) months per year.
Persons who are employees on the August 1 next following the date that this Plan
is approved by the stockholders of the Company shall receive their options as of
such August 1. Persons who become eligible to participate in the Plan after the
date on which the initial options are granted hereunder shall be granted options
on the next date on which options are granted to all eligible employees. In no
event may an employee participate in this Plan if such employee, immediately
after the option is granted, owns stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of its parent corporation or subsidiary corporation, as the terms "parent
corporation" and "subsidiary corporation" are defined in Section 425 (e) and (f)
of the Code. For purposes of determining stock ownership under this paragraph,
the rules of Section 425(d) of the Code shall apply and stock which the employee
may purchase under outstanding options shall be treated as stock owned by the
employee.
1.3 Stock Subject to the Plan
The stock subject to the options shall be shares of the Company's
authorized but unissued Common Stock or shares of Common Stock reacquired by the
Company including shares purchased in the open market. The aggregate number of
shares which may be issued pursuant to the Plan is one million eight hundred
fifty thousand (1,850,000), subject to increase or decrease by reason of stock
split-ups, reclassifications, stock dividends, changes in par value and the
like.
1.4 Payment Periods and Stock Options
The period during which payroll deductions will accumulate under the Plan
shall be six (6) months (the "Payment Period") and there shall be two (2) such
Payment Periods in each calendar year, commencing August 1 and February 1 and
terminating on January 31 and July 31 of each year, respectively. Each Payment
Period includes only regular pay days falling within it.
On the first business day of each Payment Period, the Company will grant to
each eligible employee who is then a participant in the Plan an option to
purchase on the last day of such Payment Period at the option price hereinafter
provided such number of full shares of the Common Stock of the Company, reserved
for the purpose of the Plan, as his or her accumulated payroll deductions on the
last day of such Payment Period will pay for at such option price; provided and
on condition that such employee remains eligible to participate in the Plan
throughout such Payment Period; and provided further, that the maximum number of
shares granted to any eligible employee hereunder in any Payment Period shall
not exceed two (2) times the number of full shares of Common Stock as such
employee's accumulated payroll deductions would pay for on the exercise date
assuming an exercise price equal to eighty-five percent (85%) of the fair market
value of the Company's Common Stock on the first day of such Payment Period. The
option price for each Payment Period shall be the lesser of (i) eighty five
percent (85%) of the fair market value of the Company's Common Stock on the
first business day of the Payment Period; or (ii) eighty five percent (85%) of
the fair market value of the Company's Common Stock on the last business day of
the Payment Period, in either case rounded up to avoid fractions other than
1/32, 1/16, 1/8, 1/4, 1/2 and 3/4 (the "Option Price"). In the event of an
increase or decrease in the number of outstanding shares of Common Stock of the
Company through stock split-ups, reclassifications, stock dividends, changes in
par value and the like, an appropriate adjustment shall be made in the number of
shares and Option Price per share provided for under the Plan, either by a
proportionate increase in the number of shares and a proportionate decrease in
the Option Price per share, or by a proportionate decrease in the number of
shares and a proportionate increase in the Option Price per share, as may be
required to enable an eligible employee who is then a participant in the Plan as
to whom an option is exercised on the last day of any then current Payment
Period to acquire such number of full shares as his accumulated payroll
deductions on such date will pay for at the adjusted Option Price.
For purposes of this Plan the term "fair market value" on any given day
means: (i) if the Common Stock is listed on a national securities exchange, the
average of the high and low prices of the Common Stock of the Company on such
exchange or such other national securities exchange as shall be designated by
the Board of Directors; or (ii) if the Common Stock is traded in the
over-the-counter securities market, the last sale price of the Common Stock as
quoted by NASDAQ National Market System or, if the Common Stock is not quoted in
the National Market System, the mean between the closing bid and asked prices of
the Common Stock as quoted by NASDAQ.
For purposes of this Plan the term "business day" as used herein means a
day on which there is trading on any national securities exchange as shall be
designated by the Board of Directors pursuant to the preceding paragraph.
No employee shall be granted an option which permits his or her rights to
purchase Common Stock under the Plan and any similar plans of the Company or any
parent or subsidiary corporations to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such option is granted) for each calendar year which such option is
outstanding at any time. The purpose of the limitation in the preceding sentence
is to comply with Section 423(b)(8) of the Code.
1.5 Exercise of Option
Each eligible employee who continues to be a participant in the Plan on the
last business day of a Payment Period shall be deemed to have exercised his or
her option on such date and shall be deemed to have purchased from the Company
such number of full shares of Common Stock reserved for the purpose of the Plan
as his or her accumulated payroll deductions on such date will pay for at such
Option Price. If a participant is not an employee on the last business day of a
Payment Period, such participant shall not be entitled to exercise his or her
option.
1.6 Unused Payroll Deductions
Only full shares of Common Stock may be purchased. Any balance remaining in
an employee's account after a purchase will be reported to the employee and will
be carried forward to the next Payment Period.
1.7 Authorization for Entering Plan
An employee may enter the Plan by filling out, signing and delivering to
the Corporate Secretary's office an authorization (the "Authorization"):
(a) specifying the exact payroll deduction;
(b) authorizing the purchase of stock in each Payment Period in accordance
with the terms of the Plan; and
(c) specifying the exact name in which stock purchased is to be issued as
provided under 1.11 hereof.
Such Authorization must be received by the Corporate Secretary's office at
least ten (10) days before the beginning date of such next succeeding Payment
Period.
Unless an employee files a new Authorization or withdraws from the Plan,
his deductions and purchases under the Authorization on file will continue so
long as the Plan remains in effect.
All payroll deductions made for an employee shall be deposited in the
Company's general corporate account and shall not bear interest. An employee may
not make any separate cash payment into such account and may reduce the amount
of the deduction once during the Payment Period (see Section 1.9). The Company
will maintain complete records showing the amount of payroll deductions of each
employee.
1.8 Maximum Amount of Payroll Deductions
An employee may authorize payroll deductions in any whole dollar amount up
to but not more than ten percent (10%) of his or her regular base pay, provided,
however, that the minimum deduction in respect of any payroll period shall be
five dollars ($5.00) (or such lesser amount as the Committee shall establish).
The base pay of each Participant for each payroll period is the regular
straight time compensation earned during such payroll period, before any
deductions or withholdings, but excluding overtime, bonuses, amount paid as
reimbursement of expenses and other additional compensation.
1.9 Change in Payroll Deductions
Deductions may be decreased only once in a Payment Period. A new
Authorization will be required and must be received in the Corporate Secretary's
office no later than six (6) days prior to the individual's pay date.
1.10 Withdrawal from the Plan
An employee may withdraw from the Plan, in whole but not in part, at any
time prior to the last business day of each Payment Period by delivering a
Withdrawal Notice to the Corporate Secretary's office, in which event the
Company will refund the entire balance of his or her deductions not theretofore
used to purchase stock under the Plan within thirty (30) days following receipt
of the Withdrawal Notice.
An employee who withdraws from the Plan will be treated like an employee
who has never entered the Plan. To re-enter, an employee must file a new
Authorization at least ten (10) days before the beginning date of the next
Payment Period which cannot, however, become effective before the beginning of
the next Payment Period following withdrawal.
1.11 Issuance of Stock
Certificates for stock issued to participants, or to a broker for benefit
of participants, will be delivered as soon as practicable after each Payment
Period.
Stock purchased under the Plan will be issued only in the name of the
employee, or if the Authorization so specifies, in the name of the employee and
another person of legal age as joint tenants with rights of survivorship.
In order to obtain the tax treatment provided by the Code for employee
stock purchase plans within the meaning of Section 423 of the Code, the shares
of stock received after the end of each Payment Period may not be sold by the
employee until after a date which is the later of two (2) years from the date
that the option to purchase such shares is granted (pursuant to Section 1.4
hereof) and one (1) year from the date that the shares are transferred to the
employee. Sale or other disposition of such shares prior to such date may give
rise to federal income tax and Federal Insurance Contribution Act ("FICA")
withholding obligations on the part of the Company. Accordingly, if certificates
representing shares are issued to employees upon exercise of options granted
hereunder, they will bear a legend restricting transfer prior to such date,
unless the employee shall have reimbursed the Company for any federal income tax
and FICA withholding obligations arising out of the transaction.
1.12 No Transfer or Assignment of Employee's Rights
An employee's rights under the Plan are the employee's alone and may not be
transferred or assigned to, or availed of by, any other person. Any option
granted to an employee may be exercised only by such employee.
1.13 Termination of Employee's Rights
An employee's rights under the Plan will terminate when he ceases to be an
employee because of resignation, retirement, lay-off, discharge, or change of
status. A Withdrawal Notice will be considered as having been received from the
employee on the day his or her employment ceases, and all payroll deductions not
used will be refunded.
If an employee's employment shall be terminated by reason of death or
disability prior to the end of the current Payment Period, the employee (his or
her designated beneficiary, in the event of his death, or if none, his or her
legal representative) shall have the right, within ninety (90) days thereafter,
to elect to have the balance in his or her account either refunded in cash or
applied at the end of the current Payment Period toward the purchase of Common
Stock.
1.14 Termination and Amendments to Plan
The Plan may be terminated at any time by the Company's Board of Directors.
It will terminate in any case when all or substantially all of the unissued
shares of Common Stock reserved for the purpose of the Plan have been purchased.
If at any time shares of stock reserved for the purposes of the Plan remain
available for purchase but not in sufficient number to satisfy all then unfilled
purchase requirements, the available shares shall be apportioned among
participants in proportion to their options and the Plan shall terminate. Upon
such termination or any other termination of the Plan, all payroll deductions
not used to purchase stock will be refunded.
The Board of Directors also reserves the right to amend the Plan from time
to time, in any respect, provided, however, that no amendment shall be effective
without prior approval of the stockholders, which would (a) except as provided
in Paragraphs 1.3 and 1.4, increase the number of shares of Common Stock to be
offered above or (b) change the class of employees eligible to receive options
under the Plan.
1.15 Limitations on Sale of Stock Purchased Under the Plan
The Plan is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his own affairs. An employee may, therefore, sell
stock purchased under the Plan at any time, provided, however, that because of
certain Federal tax requirements, each employee will agree by signing the
Authorization to promptly give the Company notice of any such stock disposed of
within one (1) year after the date of the last day of the Payment Period during
which the stock was purchased indicating the number of such shares disposed. The
employee assumes the risk of any market fluctuations in the price of such stock.
1.16 Company's Payment of Expenses Related to the Plan
The Company will bear all costs of administering and carrying out the Plan.
1.17 Participating Subsidiaries
The term "participating subsidiaries" shall mean any subsidiary of the
Company which is designated by the Board of Directors to participate in the
Plan. The Board of Directors shall have the power to make such designation
before or after the Plan is approved by the stockholders.
1.18 Administration of the Plan
The Plan shall be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than three (3) members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board of Directors. The Committee shall select one of its members as Chairman,
and shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. No member of the Committee shall be eligible to participate in the
Plan while serving as a member of the Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best. No
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any option
granted under it.
1.19 Optionees Not Stockholders
Until such time as the applicable Common Stock is actually purchased by and
issued to an employee pursuant to the Plan, no employee shall be considered a
shareholder or have shareholder rights merely by reason of tendering to the
Company an Authorization and, therefore, instituting payroll deductions and
related actions.
1.20 Application of Funds
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
1.21 Governmental Regulation
The Company's obligation to sell and deliver shares of the Company's Common
Stock under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such Common
Stock.
1.22 Withholding of Additional Federal Income Tax
In accordance with Section 3402(a) of the Code and the regulations and
rulings promulgated thereunder, the Company will withhold from the wages of
participating employees, in all payroll periods following and in the same
calendar year as the date on which compensation is deemed received by the
employee, additional income taxes in respect of amounts deemed compensation to
be included as includible gross income reported by the employee.
1.23 Approval of Stockholders
The Plan shall not take effect until approved by the holders of a majority
of the outstanding shares of Common Stock of the Company, which approval must
occur within the period beginning twelve (12) months before and ending twelve
(12) months after the date the Plan is adopted by the Board of Directors.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
DATA I/O CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Same As Above
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which 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:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Proxy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Data I/O CORPORATION
The undersigned hereby appoints Frederick R. Hume, and Joel S. Hatlen, and each
of them as proxies, each with full power of substitution, to represent and vote
for and on behalf of the undersigned, as designated below, the number of shares
of common stock of Data I/O Corporation that the undersigned would be entitled
to vote if personally present at the annual meeting of shareholders to be held
on May 20, 2003, or at any adjournment thereof. The undersigned directs that
this proxy be voted as indicated on the reverse side hereof:
--------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: Please mark comments/address change box on reverse
side.
--------------------------------------------------------------------------------
(Continued, and to be marked, dated and signed on reverse side)
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your votes as indicated in this example [x]
This proxy, when properly executed, will be voted in the manner directed on this
proxy card. The Board of Directors recommends a vote FOR all nominees, FOR the
proposal to approve the amendment to the Data I/O Corporation 1982 Employee
Stock Purchase Plan, and FOR Ratification of the selection of Grant Thornton LLP
as the Company's independent auditors. If no specification is made, all shares
represented by this proxy will be voted FOR all of said nominees, FOR the
proposed amendment to the Data I/O Corporation 1982 Employee Stock Purchase
Plan, and FOR Ratification of the selection of Grant Thornton LLP as the
Company's independent auditors, and will be voted in accordance with the
discretion of the proxies on all other matters which may come before the meeting
or any adjournment thereof.
1. Election of Directors
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Glen F. Ceiley
Daniel A. DiLeo
Paul A. Gary
Frederick R. Hume
Edward D. Lazowska
Steven M. Quist
FOR all nominees listed at left (except as marked to the contrary at left). [__]
WITHHOLD ALL AUTHORITY to vote for all nominees listed at left. [__]
2. Proposal to approve the amendment to the Data I/O Corporation 1982 Employee
Stock Purchase Plan as described in the Proxy Statement for the 2003 Annual
Meeting.
FOR [__] AGAINST [__] ABSTAIN [__]
3. Proposal to ratify the selection of Grant Thornton LLP as the Company's
independent auditors.
FOR [__] AGAINST [__] ABSTAIN [__]
4. In their discretion, the holders of this proxy are authorized to vote upon
such other business as may properly come before the meeting or any
adjournment thereof.
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written
Comments/address change on the reverse side. [__]
The undersigned hereby revokes any proxy or proxies heretofore given for such
shares and ratifies all that said proxies or their substitutes may lawfully do
by virtue thereof.
Signature(s)_______________________________________ Date_____________________
NOTE: Please sign exactly as name appears on this proxy. If block is held
jointly, both persons should sign. Persons signing in a representative capacity
should give their title.
FOLD AND DETACH HERE