SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(
a
) OF
THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO.___)
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Check the appropriate box:
[ ] 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-12
Alliance Fiber Optic
Products, Inc.
|
(Name of
Registrant as Specified In Its Charter)
|
|
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
|
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[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
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[LOGO]
ALLIANCE FIBER OPTIC PRODUCTS, INC.
275 GIBRALTAR DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 736-6900
April 18, 2008
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Alliance Fiber
Optic Products, Inc. that will be held on Friday, May 16, 2008, at 2:00 p.m., Pacific
Daylight Time, at the Company's principal executive office, 275 Gibraltar Drive, Sunnyvale,
California 94089.
The formal notice of the Annual Meeting and the Proxy Statement has been made a part of
this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at your earliest
convenience, the enclosed proxy in the enclosed prepaid envelope, to ensure that your
shares will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN
THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN PERSON. Your vote is important, so
please return your proxy promptly.
A copy of our 2007 Annual Report to Stockholders is also enclosed.
We look forward to seeing you at the meeting.
Sincerely yours,
/s/Peter C. Chang
Peter C. Chang
Chairman, President and
Chief Executive Officer
ALLIANCE FIBER OPTIC PRODUCTS, INC.
------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 16, 2008
------------------------------------------
To the Stockholders of Alliance Fiber Optic Products, Inc.:
The Annual Meeting of Stockholders of Alliance Fiber Optic Products, Inc., a Delaware
corporation (the "Company"), will be held at the Company's principal executive office, 275
Gibraltar Drive, Sunnyvale, California 94089, on Friday, May 16, 2008, at 2:00 p.m.,
Pacific Daylight Time, for the following purposes:
1. To elect one Class II director to serve until the 2011
Annual Meeting of Stockholders or until his successor is duly elected and qualified;
2. To ratify the appointment of Stonefield Josephson, Inc. as
the Company's independent registered public accountants;
3.
To transact such other business as may properly come before the Annual Meeting and any
adjournment or postponement of the Annual Meeting.
Stockholders of record as of the close of business on March 24, 2008 are entitled to
notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. A
complete list of stockholders entitled to vote at the Annual Meeting will be available at
the Secretary's office, 275 Gibraltar Drive, Sunnyvale, California 94089, for ten days
before the meeting.
It is important that your shares are represented at the meeting. Even if you plan to
attend the meeting, we hope that you will promptly mark, sign, date and return the enclosed
proxy. This will not limit your right to attend or vote at the meeting.
By Order of the Board of Directors
/s/Peter C. Chang
Peter C. Chang
Secretary
April 18, 2008
ALLIANCE FIBER OPTIC PRODUCTS, INC.
275 Gibraltar Drive
Sunnyvale, California 94089
(408) 736-6900
-------------------------------
PROXY STATEMENT
--------------------------------
This Proxy Statement is furnished in connection with the solicitation by the Board of
Directors of Alliance Fiber Optic Products, Inc., a Delaware corporation (the "Company"),
of proxies in the accompanying form to be used at the Annual Meeting of Stockholders of the
Company to be held at the Company's principal executive offices, 275 Gibraltar Drive,
Sunnyvale, California, 94089, on Friday, May 16, 2008, at 2:00 p.m., Pacific Daylight Time,
and any postponement or adjournment thereof (the "Annual Meeting").
Revocation of Proxies
The shares represented by the proxies received in response to this solicitation and not
properly revoked will be voted at the Annual Meeting in accordance with the instructions
therein. A stockholder who has given a proxy may revoke it at any time before it is
exercised by filing with the Secretary of the Company a written revocation, by submitting a
duly executed proxy bearing a later date, or by voting in person at the Annual Meeting. On
the matters coming before the Annual Meeting for which a choice has been specified by a
stockholder on the proxy card, the shares will be voted accordingly. If no choice is
specified, the shares will be voted
"FOR"
the election of the nominees for director
listed in this Proxy Statement, and
"FOR"
the ratification of the Company's
independent registered public accountants.
Who Can Vote
Stockholders of record at the close of business on March 24, 2008 (the "Record Date"),
are entitled to vote at the Annual Meeting. As of the Record Date, there were 41,428,420
shares of common stock, $0.001 par value (the "Common Stock"), outstanding. The presence in
person or by proxy of the holders of a majority of the outstanding Common Stock constitutes
a quorum for the transaction of business at the Annual Meeting. Each holder of Common Stock
is entitled to one vote for each share held as of the Record Date.
Required Vote
Directors are elected by a plurality vote. The nominee for director who receives the most
votes cast in his favor will be elected to serve as a director. The other proposal
submitted for stockholder approval at the Annual Meeting will be decided by the affirmative
vote of the majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on such proposal. Abstentions with respect to any proposal are
treated as shares present or represented and entitled to vote on that proposal and thus
have the same effect as negative votes. If a broker which is the record holder of shares
indicates on a proxy that it does not have discretionary authority to vote on a particular
proposal as to such shares, or if shares are not voted in other circumstances in which
proxy authority is defective or has been withheld with respect to a particular proposal,
these non-voted shares will be counted for quorum purposes, but are not deemed to be
present or represented for purposes of determining whether stockholder approval of that
proposal has been obtained.
This Proxy Statement and the accompanying form of proxy are being mailed to stockholders on
or about April 18, 2008.
IMPORTANT
Please mark, sign and date the enclosed proxy and return it at your earliest convenience
in the enclosed postage-prepaid return envelope so that, whether you intend to be present
at the Annual Meeting or not, your shares can be voted. This will not limit your rights to
attend or vote at the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Directors and Nominees
Pursuant to Article VI of the Company's Amended and Restated Certificate of
Incorporation, the Board of Directors is divided into three classes. The number of
directors is currently set at five. Class I and Class III consist of two directors each,
and Class II consists of one director. One Class II director will be elected at the Annual
Meeting and will serve until the 2011 Annual Meeting. The Class III directors will continue
to serve until the 2009 Annual Meeting and the Class I directors will continue to serve
until the 2010 Annual Meeting.
The Nominating and Corporate Governance Committee of the Board of Directors has
recommended, and the Board of Directors has designated, Mr. Ray Sun as the nominee to fill
the Class II director seat to serve until the 2011 Annual Meeting. If Mr. Sun is
unable or declines to serve as director at the time of the Annual Meeting, an event not now
anticipated, proxies will be voted for any nominee designated by the Board of Directors,
taking into account any recommendations of the Nominating and Corporate Governance
Committee, to fill the vacancy.
Biographical information concerning the nominee is set forth below.
CLASS II
Ray Sun
,
56, has served as a director since November 2003. Since November 2001, Mr. Sun has served
as Managing Director, Business Development and Venture Investment (Great China) of Applied
Materials China, a semiconductor equipment company. Mr. Sun served as a representative of
the Silicon Valley
office for a Taiwanese venture
firm, Global Investment Management Co. LTD. from October 1999 to November 2001. Mr. Sun has
20 years of executive management experience in the software, hardware and
telecommunications industries. Mr. Sun received a B.S. in Industrial Engineering from Chung
Yuan Christian University in Taiwan, and an M.S. in Industrial Engineering from Kansas
State University.
Biographical information concerning the remaining members of the Board of Directors is set
forth below.
CLASS III
Gwong-Yih Lee
, 53, has served as a director since August 2000. Since August 2006,
Mr. Lee has served as Chairman and Chief Executive Officer of CyberTAN Technology, Inc., a
networking company. Since September 2005, Mr. Lee has served as the Founder and President
and Chief Executive Officer of ApaceWave Technologies, Inc., a broadband wireless company.
From September 1999 to January 2004, Mr. Lee served as Senior Director and General
Manager at Cisco Systems, Inc. In March 1998, Mr. Lee established TransMedia
Communications, a communication equipment company, and served as its President and Chief
Executive Officer until September 1999. Mr. Lee received a B.S. in Control Engineering
from National Chiao-Tung University in Taiwan and an M.S. in Electrical Engineering from
New York University.
James C. Yeh
, 50, has served as a director since our formation in December
1995. Since April 2005, Mr. Yeh has served as Managing Director of Blazee International, an
imaging processing applications company. Since April 2002, Mr. Yeh has served as the Chief
Executive Officer of Onkey Technologies, Inc., a digital video recorder (DVR) company.
Since January 1991, Mr. Yeh has served as President of Matics Computer Systems, Inc.,
a personal computer systems and peripherals company. From January 1996 to January 2002,
Mr. Yeh served as Chairman of the Board of Advis, Inc., a video communication and
information appliance technologies development company. Mr. Yeh holds a B.S. in
Mathematics from Tamkang University and an M.S. in Systems Science and Mathematics from
Washington University in Saint Louis, Missouri.
CLASS I
Peter C. Chang
, 50, has served as our Chairman of the Board, Chief Executive
Officer and President since our formation in December 1995. From 1990 to 1995,
Mr. Chang was Division Manager at Hon Hai Holding, a fiber optics company and from
1988 to 1990 was a member of the technology staff at Lucent Bell Labs. Mr. Chang
received a B.S. in Mechanical Engineering from National Taiwan University and an M.S. in
Mechanical Engineering from Notre Dame University.
Richard Black
, 74, has served as a director since April 2003. Since March 2002, Mr.
Black has served as the President, Chief Executive Officer, director and a co-owner of
ECRM, Inc., a worldwide supplier of electronic imaging devices for the publishing and
graphic arts industries. From August 1983 to March 2002, Mr. Black served as the Chairman
and director of ECRM, Inc. He served as President of Oak Technology Inc., a semiconductor
company, from January 1998 to March 1999, as Vice Chairman from March 1999 to August 2003
and as a director from 1988 to 2003. Mr. Black also sits on the board of director of GSI
Group Inc. and several private companies. Mr. Black holds a B.S. in Engineering from Texas
A&M University and an M.B.A. from Harvard University.
The Board of Directors recommends a vote "FOR" the election of Mr.
Ray Sun
as the Class I
I
Director of the Company
.
Board Meetings and Committees
The Board of Directors held four meetings during 2007. All directors attended at least 75%
of the aggregate number of meetings of the Board of Directors and of the committees on
which such directors serve except Mr. Lee. The independent directors meet in regularly
scheduled executive sessions at in-person meetings of the Board without the participation
of the Chief Executive Officer or the other members of management. In 2007, none of the
five directors then serving on the Board attended the annual meeting. We do not have a
policy requiring directors to attend our annual meetings.
The Board of Directors has appointed an Executive Compensation Committee, an
Audi
t
Committee and
a
Nominating and Corporate Governance Committee. The Board has approved a charter
for each of these committees. The Executive Compensation Committee had been operating with
two members until November 2006. Copies of the charters of the Audit Committee, Nominating
and Corporate Governance Committee and Executive Compensation Committee are available
through our website at www.afop.com. The Board has also appointed a Non-Executive
Compensation Committee.
Executive Compensation Committee
|
|
Number of Members:
|
Three
|
Members:
|
Mr. Sun (Chairman)
Mr. Black
Mr. Lee
|
Number of Meetings:
|
One
|
Functions:
|
The Executive Compensation Committee's primary functions are to assist the
Board in meeting its responsibilities with regard to oversight and
determination of executive compensation and to review and make recommendations
to the Board with respect to major compensation plans, policies and programs of
the Company. Other specific duties and responsibilities of the Executive
Compensation Committee are to review, and make recommendations for approval by
the independent members of the Board regarding, the compensation for the Chief
Executive Officer and other executive officers of the Company, establish and
modify the terms and conditions of employment of the Chief Executive Officer
and other executive officers of the Company and administer the Company's stock
plans and other compensation plans.
|
Audit Committee
|
|
Number of Members:
|
Three
|
Members:
|
Mr. Black (Chairman)
Mr. Sun
Mr. Yeh
|
Number of Meetings:
|
Four
|
Functions:
|
The Audit Committee's primary functions are to assist the Board of Directors in
fulfilling its oversight responsibilities relating to the Company's financial
statements, system of internal controls, and auditing, accounting and financial
reporting processes. Other specific duties and responsibilities of the Audit
Committee are to appoint, compensate, evaluate and, when appropriate, replace
the Company's independent auditors; review and pre-approve audit and
permissible non-audit services; review the scope of the annual audit; monitor
the independent auditors' relationship with the Company; and meet with the
independent auditors and management to discuss and review the Company's
financial statements, internal controls, and auditing, accounting and financial
reporting processes. Mr. Black is the Audit Committee Financial Expert.
|
Nominating and Corporate Governance Committee
|
|
Number of Members:
|
Three
|
Members:
|
Mr. Black (Chairman)
Mr. Sun
Mr. Yeh
|
Number of Meetings:
|
One
|
Functions:
|
The Nominating and Corporate Governance Committee's primary functions are to
identify qualified individuals to become members of the Board of Directors and
determine the composition of the Board and its committees. Other specific
duties and responsibilities are to recommend nominees to fill vacancies on the
Board, investigate suggestions for candidates for membership on the Board, and
monitor compliance with Board and Board committee membership criteria.
|
Non-Executive Compensation Committee
Mr. Chang currently serves as the Non-Executive Compensation Committee. The Non-Executive
Compensation Committee is a secondary committee responsible for granting and issuing awards
of options and shares under the 2000 Stock Incentive Plan to eligible employees, other than
to members of the Board of Directors, to individuals designated by the Board of Directors
as "Section 16 officers," and to employees who hold the title of Vice President or
above.
Director Independence
The Board of Directors has determined that, except for Mr. Chang, all of the members of the
Board are "independent directors" within the meaning of Rule 4200 of The NASDAQ Stock
Market. Mr. Chang is not considered independent because he is employed by the Company as
its President and Chief Executive Officer. All of the nominees are members of the Board
standing for reelection. For all of the non-employee directors, the Board considered their
relationship and transactions with the Company as directors and as securityholders of the
Company.
Director Nominations
The Board of Directors nominates a class of directors for election at each annual meeting
of stockholders and elects new directors to fill vacancies when they arise. The Nominating
and Corporate Governance Committee has the responsibility to identify, evaluate, recruit
and recommend qualified candidates to the Board of Directors for nomination or
election.
The Board of Directors has an objective that its membership is composed of experienced and
dedicated individuals with diversity of backgrounds, perspectives and skills. The
Nominating and Corporate Governance Committee will select candidates for director based on
their character, judgment, and diversity of experience, business acumen, and ability to act
on behalf of all stockholders. The Nominating and Corporate Governance Committee believes
that nominees for director should have experience, such as experience in management or
accounting and finance, or industry and technology knowledge, that may be useful to the
Company and the Board, high personal and professional ethics, and the willingness and
ability to devote sufficient time to effectively carry out his or her duties as a director.
The Nominating and Corporate Governance Committee believes it is appropriate for at least
one, and, preferably, multiple, members of the Board to meet the criteria for an "audit
committee financial expert" as defined by SEC rules, and for a majority of the members of
the Board to meet the definition of "independent director" under the rules of The NASDAQ
Stock Market. The Nominating and Corporate Governance Committee also believes it is
appropriate for certain key members of the Company's management to participate as members
of the Board.
Prior to each annual meeting of stockholders, the Nominating and Corporate Governance
Committee identifies nominees first by evaluating the current directors whose term will
expire at the annual meeting and who are willing to continue in service. These candidates
are evaluated based on the criteria described above, including as demonstrated by the
candidate's prior service as a director, and the needs of the Board with respect to the
particular talents and experience of its directors. In the event that a director does not
wish to continue in service, the Nominating and Corporate Governance Committee determines
not to re-nominate the director, or a vacancy is created on the Board as a result of a
resignation, an increase in the size of the board or other event, the Committee will
consider various candidates for Board membership, including those suggested by the
Committee members, by other Board members, by any executive search firm engaged by the
Committee and by stockholders. A stockholder who wishes to suggest a prospective nominee
for the Board should notify the Secretary of the Company or any member of the Committee in
writing with any supporting material the stockholder considers appropriate.
In addition, the Company's Bylaws contain provisions that address the process by which a
stockholder may nominate an individual to stand for election to the Board of Directors at
the Company's Annual Meeting of Stockholders. In order to nominate a candidate for
director, a stockholder must give timely notice in writing to the Secretary of the Company
and otherwise comply with the provisions of the Company's Bylaws. To be timely, the
Company's Bylaws provide that the Company must have received the stockholder's notice no
less than 60 days nor more than 90 days prior to the scheduled date of the
meeting. However, if notice or prior public disclosure of the date of the annual meeting is
given or made to stockholders less than 75 days prior to the meeting date, the Company must
receive the stockholder's notice by the earlier of (i) the close of business on the
15th day after the earlier of the day the Company mailed notice of the annual meeting date
or provided public disclosure of the meeting date and (ii) two days prior to the
scheduled date of the annual meeting. Information required by the Bylaws to be in the
notice include the name and contact information for the candidate and the person making the
nomination and other information about the nominee that must be disclosed in proxy
solicitations under Section 14 of the Securities Exchange Act of 1934 and the related rules
and regulations under that Section.
Stockholder nominations must be made in accordance with the procedures outlined in, and
include the information required by, the Company's Bylaws and must be addressed to:
Secretary, Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California
94089. You can obtain a copy of the Company's Bylaws by writing to the Secretary at this
address.
Stockholder Communications with the Board of Directors
If you wish to communicate with the Board of
Directors, you may send your communication in writing to: Secretary, Alliance Fiber Optic
Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. You must include your
name and address in the written communication and indicate whether you are a stockholder of
the Company. The Secretary will review any communication received from a stockholder, and
all material communications from stockholders will be forwarded to the appropriate director
or directors or committee of the Board based on the subject matter.
200
7
Director Compensation
The following table set forth cash amounts and the value of other
compensation for the Company's non-employee directors during 200
7:
|
|
|
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Option
Awards ($)(1)(2)
|
Total ($)
|
|
|
|
|
Richard Black
|
7,500
|
7,036
|
14,536
|
Gwong-Yih Lee
|
1,500
|
3,560
|
5,060
|
Ray Sun
|
5,750
|
3,560
|
9,310
|
James Yeh
|
6,500
|
3,560
|
10,060
|
(1) Represents the compensation expense related to outstanding options recognized by us for
the year ended December 31, 2007 under Statement of Financial Accounting Standards
No. 123 (revised 2004) ("SFAS 123R") rather than amounts paid to or realized by the
named individual and includes expenses recognized by us in 2007 for option grants in prior
periods. Compensation expense is determined by computing the fair value of each option on
the grant date in accordance with SFAS 123R and recognizing that amount as expense ratably
over the option vesting term. See Note 2 of Notes to our Consolidated Financial
Statements set forth in our Annual Report on Form 10-K for the year ended December 31,
2007 for the assumptions made in determining SFAS 123R values. The SFAS 123R value of
an option as of the grant date is spread over the number of months in which the option is
subject to vesting and includes ratable amounts expensed for option grants in prior
years. There can be no assurance that options will be exercised (in which case no
value will be realized by the individual) or that the value on exercise will approximate
the compensation expense recognized by us.
(2) The following table set forth the aggregate number of shares of
common stock underlying option awards outstanding at December 31, 200
7:
|
|
|
|
|
Name
|
|
Number of Shares
|
|
|
|
|
|
Richard Black
|
|
60,000
|
|
Gwong-Yih Lee
|
|
100,000
|
|
Ray Sun
|
|
60,000
|
|
James Yeh
|
|
100,000
|
The Company's non-employee
directors receive $3,000 cash compensation for each Board meeting attended (or $1,500 cash
compensation for attending telephonically), $2,000 cash compensation for each Audit
Committee meeting attended (or $1,000 cash compensation for attending telephonically),
$3,000 cash compensation for the Chairman of Audit Committee for each Audit Committee
meeting attended (or $2,000 cash compensation for attending telephonically),and are
reimbursed for reasonable expenses in connection with attendance at meetings of the Board
of Directors and committee meetings.
Directors who are not employees receive an initial grant of an option to purchase 30,000
shares of Common Stock at the fair market value of the Common Stock on the date of grant,
which vests ratably over 36 months. This initial grant is made on the first business day
following election to the Board. On the first business day following the third anniversary
of the date of grant of the initial option, each non-employee director is entitled to
receive an option to purchase 30,000 shares of Common Stock at the fair market value of the
Common Stock on the date of grant, which option vests ratably over 36 months. The
options granted to our outside directors have a per share exercise price equal to 100% of
the fair market value of the underlying shares on the date of grant, have a term of 10
years and automatically become fully vested in the event of a change in control. In July
2007, Mr. Lee, Mr. Sun, and Mr. Yeh each received their anniversary grants of an option to
purchase 30,000 shares of our Common Stock with a grant date fair value of $72,300
each.
Certain Relationships and Related Transactions
According to share ownership numbers contained in a Schedule 13g filed in 2002 and not
subsequently amended, of March 24, 2008, Foxconn Holding Limited was a holder of 19.3% of
our Common Stock. In the normal course of business, we sell products to and purchase raw
materials from Hon Hai Precision Company Limited, who is the parent company of Foxconn
Holding Limited. These transactions were made at prices and terms consistent with
transactions with unrelated third parties. For fiscal 2007, sales of products to Hon Hai
were $1.1 million, purchases of raw materials from Hon Hai were $3.2 million and amounts
due from Hon Hai were $0.2 million. As of December 31, 2007, amounts due to Hon Hai were
$1.1 million. For fiscal 2006, sales of products to Hon Hai were $0.5 million, purchases of
raw materials from Hon Hai were $2.5 million and amounts due from Hon Hai were $0.1
million. As of December 31, 2006, amounts due to Hon Hai were $0.6 million.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 24, 2008 as to shares
of the Common Stock beneficially owned by: (1) each person who is known by the Company
to own beneficially more than 5% of its Common Stock, (2) each of our directors,
(3) each of our executive officers named in the Summary Compensation Table, and
(4) all of our directors and executive officers as a group. Ownership information is
based upon information furnished by the respective individuals or entities, as the case may
be. Unless otherwise noted below, the address of each beneficial owner is c/o Alliance
Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. The
percentage of common stock beneficially owned is based on 41,428,420 shares outstanding as
of March 24, 2008. In addition, shares issuable pursuant to options which may be
exercised within 60 days of March 24, 2008 are deemed to be issued and
outstanding and have been treated as outstanding in calculating the percentage ownership of
those individuals possessing such interest, but not for any other individuals. Thus, the
number of shares considered to be outstanding for the purposes of this table may vary
depending on the individual's particular circumstances.
Name and Address of
Beneficial Owner
|
Number of Shares
of Common Stock
Beneficially Owned (1)
|
Percentage of
Common Stock
Beneficially Owned
|
Directors and Named Executive
Officers:
|
|
|
|
|
|
|
|
|
Peter
C. Chang (2)
|
|
|
|
6,606,600
|
|
|
15
|
.4%
|
Richard
Black (3)
|
|
|
|
50,000
|
|
|
*
|
|
Gwong-Yih
Lee (4)
|
|
|
|
105,833
|
|
|
*
|
|
Ray
Sun (3)
|
|
|
|
30,000
|
|
|
*
|
|
James
C. Yeh (5)
|
|
|
|
885,833
|
|
|
2
|
.1%
|
David
A. Hubbard (6)
|
|
|
|
821,163
|
|
|
2
|
.0%
|
Wei-shin
Tsay (7)
|
|
|
|
873,482
|
|
|
2
|
.1%
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
Foxconn
Holding Limited (8)
|
|
|
|
8,000,000
|
|
|
19
|
.3%
|
FMR
LLC (9)
|
|
|
|
2,919,797
|
|
|
7
|
.1%
|
All Directors
and Executive Officers as a group (8 persons) (10)
|
|
|
|
9,594,156
|
|
|
21
|
.6%
|
* Represents less than 1%.
|
(1)
|
To the Company's knowledge, except as otherwise disclosed, the persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community property
laws where applicable and the information contained in the notes to this
table.
|
|
(2)
|
Includes 40,000 shares held in the name of Mr. Chang's minor children and
1,996,600 shares held in the name of the Chang Family LLC, of which Mr. Chang
and his wife, Mary C. Chen, are the Managing Members. Also includes options to
purchase 1,550,000 shares exercisable within 60 days of March 24, 2008.
|
|
(3)
|
Represents options exercisable within 60 days of March 24, 2008.
|
|
(4)
|
Includes 20,000 shares held in the name of the Lee Trust. Mr. Lee and his
wife, Angela Lee, as trustees, have dispositive and voting power for the shares
held by the Lee Trust. Also includes options to purchase 85,833 shares
exercisable within 60 days of March 24, 2008.
|
|
(5)
|
Includes 800,000 shares held in the name of Matics Computer Systems, Inc., over
which Mr. Yeh has sole voting and dispositive power. Also includes options to
purchase 85,833 shares exercisable within 60 days of March 24, 2008.
|
|
(6)
|
Includes options to purchase 510,000 shares exercisable within 60 days of
March 24, 2008.
|
|
(7)
|
Includes options to purchase 800,000 shares exercisable within 60 days of
March 24, 2008.
|
|
(8)
|
According to a Schedule 13G filed jointly on January 4, 2002 for the year ended
December 31, 2000 by Hon Hai Precision Industry Co., Ltd. ("Hon Hai") and
Foxconn Holding Limited, each entity has shared voting and dispositive power
over the 8,000,000 shares. As of the Record Date, no amendment to the Schedule
13G has been filed, and the information concerning the number of shares held is
as disclosed in the Schedule 13G. Foxconn Holding Limited is a subsidiary of
Hon Hai. Hon Hai disclaims beneficial ownership of these shares. The principal
business address for Hon Hai and Foxconn Holding Limited is 2 Tsu Yu Street, Tu
Cheng City, Taipei Hsien, Taiwan, R.O.C. The board of directors of Foxconn
Holding Limited has dispositive power for the shares and has delegated voting
power to Ms. Chiu-Lian Huang.
|
|
(9)
|
According to a Schedule 13G filed on February 14, 2008, Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940, is
the beneficial owner of 2,919,797 shares of the Common Stock of the Company as
a result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940. Fidelity
Small Cap Stock Fund holds these shares directly. Edward C. Johnson 3d and FMR
LLC, through its control of Fidelity, and the funds each has sole power to
dispose of the 2,919,797 shares owned by the Fidelity Small Cap Stock Fund.
|
|
(10)
|
Includes 3,408,249 shares subject to options exercisable within 60 days of
March 24, 2008.
|
executive compensation
200
7
Summary Compensation Table
The following table sets forth compensation information for the cash amounts and the value
of other compensation paid to our Chief Executive Officer and our two other most highly
compensated executive officers for the year ended December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
Grant Date
Fair value of
|
|
|
Name and Principal
Position
|
Year
|
Salary ($)
|
Bonus ($)(1)
|
Option
Awards ($)(2)
|
All Other
Compensation ($)(2)
|
Total ($)
|
|
|
|
|
|
|
|
Peter C. Chang
|
2007
|
200,000
|
15,000
|
--
|
1,450
|
216,450
|
Chief Executive Officer and
President
|
2006
|
200,000
|
--
|
--
|
1,450
|
201,450
|
|
|
|
|
|
|
|
David A. Hubbard
|
2007
|
150,000
|
10,000
|
--
|
8,650
|
168,650
|
Vice President, Sales and
Marketing
|
2006
|
150,000
|
--
|
--
|
1,450
|
151,450
|
|
|
|
|
|
|
|
Wei-shin Tsay
|
2007
|
150,000
|
15,000
|
--
|
2,290
|
167,290
|
Senior Vice President,
|
2006
|
150,000
|
--
|
--
|
2,290
|
152,290
|
Product Development
|
|
|
|
|
|
|
|
(1)
|
Consisted of amounts earned during the 2007 fiscal year and paid in the
subsequent fiscal year.
|
|
(2)
|
Options were granted in January 2008 as 2007 compensation. As a result, no
charge was incurred in 2007 under FAS123R. Mr. Chang received an option to
purchase 50,000 shares of common stock and Messrs Hubbard and Tsay each
received an option to purchase 20,000 shares of common stock. Such options
vested in full on the date of grant.
|
(2) Consisted of Company
contributions to the 401(k) of each individual, monthly automobile allowance for Mr.
Hubbard, and the value of insurance premiums paid by the Company.
We do not enter into
employment or severance contracts with our executive officers as we do not believe these
types of arrangements facilitate our compensation goals and objectives. All options granted
to executive officers in 2006 and all previously unvested option whose vesting was
accelerated in 2005 are subject to restrictions on transfer that lapse over time. Executive
officers may participate in our employee stock purchase plan and purchase shares of our
common stock at a discount to market prices. In addition, we match 50% of the first
$2,000 of an employee's contribution to our 401(k) plan. Company contributions vest
25% per year from the date of employment.
Section 162(m) of the Internal Revenue Code
provides that public companies cannot deduct non-performance based compensation paid to
certain named executive officers in excess of $1 million per year. These officers
include any employee who, as of the close of the taxable year, is the principal executive
officer, and any employee whose total compensation for the taxable year is required to be
reported to shareholders under the Securities Exchange Act of 1934 by reason of such
employee being among the
two
highest compensated officers for that taxable
year, other than the principal executive officer.
None of the non-exempt
compensation we paid to any of our executive officers for fiscal 2007 exceeded the
$1 million limit.
Bonus
In January 2001, the Executive Compensation Committee adopted an executive bonus plan. The
Executive Compensation Committee reviews bonuses recommended by the Chief Executive Officer
for executive officers other than the Chief Executive Officer. The Executive Compensation
Committee's philosophy is that a certain portion of executive officer compensation should
be contingent upon the Company's performance and an individual's contribution to our
success in meeting critical objectives. The Executive Compensation Committee sets the bonus
potential of each executive officer on a case-by-case basis. Final decisions on bonuses for
executives other than the Chief Executive Officer are made with the Chief Executive
Officer's involvement. The Executive Compensation Committee determined bonuses would be
accrued in fiscal year 2007 and paid in fiscal year 2008.
Stock Incentive Plan
We provide incentive compensation to our executive officers and employees through the grant
of stock options. The 2000 Stock Incentive Plan was adopted by the Board on September 7,
2000. The Executive Compensation Committee is responsible for administering our 2000 Stock
Incentive Plan for executive officers, under which it grants options to purchase our Common
Stock with an exercise price equal to the closing price of our common stock on the date of
grant. The Executive Compensation Committee believes that stock ownership by our executive
officers aligns their interests with those of our stockholders and provides its executive
officers with substantial motivation to manage the Company well. Accordingly, a
considerable portion of our executive officers' compensation consists of stock options.
When determining the size of an option grant to an executive officer, the Executive
Compensation Committee, after consulting with the Chief Executive Officer, considers the
executive officer's and the Company's performance, the executive officer's level and
responsibilities within the Company, the executive officer's base salary and the size of
option grants to executive officers in similar positions throughout the industry. Each
executive office is initially provided with an option grant when they join our Company
based upon their position with us. These initial grants generally vest over four years and
no shares vest before the one year anniversary of the option grant.
The option grant to the Chief Executive Officer is determined using the same criteria as
for the other executive officers. In fiscal year 2007, there was no stock option granted to
Mr. Chang. In January 2008, the Executive Compensation Committee granted Mr. Chang an
option, exercisable at the fair market value on the date of grant, to purchase 50,000
shares of the Company's Common Stock. The option was vested in full at the time of grant,
but the shares underlying the option are subject to resale restrictions.
In December 2005, the Board of Directors approved accelerating the vesting of all then
unvested stock options awarded to employees at the director level and above, including
executive officers. The unvested options to purchase up to approximately 1.9 million
additional shares became immediately exercisable as a result of the vesting acceleration.
The purpose of the accelerated vesting was to enable the Company to avoid recognizing in
its statement of operations non-cash compensation expense associated with these options in
future periods, upon the expected implementation of FASB Statement of Financial Accounting
Standards No. 123 (Revised 2004), "Share-Based Payment" in January 2006. As a result of the
acceleration, we expect to avoid recognition of up to approximately $1.5 million of
compensation expense over the course of the original vesting periods. Approximately $0.7
million and $0.4 million of such compensation expense were avoided in 2007 and 2006,
respectively.
Restrictions have been imposed upon the sale of any shares obtained through the exercise of
accelerated options, which restrictions prevent the sale of any shares received from the
exercise of an accelerated option prior to the original vesting date of the option. This
restriction does not affect the fair value of the options at the grant date.
In January 2008, grants were made to the executive officers by the Executive Compensation
Committee as described in the Summary Compensation Table. These option grants were fully
vested on the grant date.
Outstanding Equity Awards at Fiscal Year-End 200
7
|
|
|
|
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable (#)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
|
Option
Exercise
Price ($)(1)
|
Option
Expiration
Date
|
|
|
|
|
|
|
Peter C. Chang
|
300,000
|
|
--
|
0.86
|
12/24/11
|
|
320,000
|
(3)
|
--
|
1.56
|
12/29/13
|
|
300,000
|
(3)
|
--
|
0.96
|
12/02/14
|
|
300,000
|
(3)
|
--
|
0.90
|
11/07/15
|
|
280,000
|
(2)
|
--
|
2.02
|
11/27/16
|
|
|
|
|
|
|
David A.
Hubbard
|
90,000
|
|
--
|
0.86
|
12/24/11
|
|
100,000
|
(3)
|
--
|
1.56
|
12/29/13
|
|
100,000
|
(3)
|
--
|
0.96
|
12/02/14
|
|
100,000
|
(3)
|
--
|
0.90
|
11/07/15
|
|
100,000
|
(2)
|
--
|
2.02
|
11/27/16
|
|
|
|
|
|
|
Wei-shin Tsay
|
100,000
|
|
--
|
0.86
|
10/24/11
|
|
100,000
|
(3)
|
--
|
1.56
|
12/29/13
|
|
300,000
|
(3)
|
--
|
0.91
|
11/12/14
|
|
160,000
|
(3)
|
--
|
0.90
|
11/07/15
|
|
120,000
|
(2)
|
--
|
2.02
|
11/27/16
|
|
|
|
|
|
|
|
(1)
|
The option exercise price is equal to the fair market value on the date of
grant.
|
|
(2)
|
All options are fully vested, subject to resale restrictions as described
below.
|
|
(3)
|
In December 2005, the Board of Directors of the Company approved accelerating
the vesting of these stock options. These options are subject to resale
restrictions that prevent the sale of any shares received from the exercise of
these options and lapse as to 25% of the underlying shares on each anniversary
of the date of grant. The resale restrictions lapse in full in the event
of a charge of control.
|
All of the options in the above table have a term of ten years, subject to earlier
termination in certain events related to termination of employment.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates under a written charter adopted by the Board of Directors on
September 7, 2000, adopted by the Audit Committee on January 30, 2001 and amended
by the Board of Directors on October 24, 2005. All members of the Audit Committee meet the
independence standards established by The NASDAQ Stock Market.
The Audit Committee oversees the Company's financial reporting process on behalf of the
Board of Directors and is responsible for providing independent, objective oversight of the
Company's accounting functions and internal controls. The Audit Committee reviewed and
discussed the audited financial statements contained in the 2007 Annual Report on
Form 10-K with the Company's management and its independent registered public
accountants. Management is responsible for the financial statements and the reporting
process, including the system of internal controls. The independent registered public
accountants are responsible for expressing an opinion on the conformity of those financial
statements with accounting principles generally acceptable in the United States.
The Audit Committee met privately with the independent registered public accountants, and
discussed issues deemed significant by them, including those required by Statement on
Auditing Standards No. 61 (Codification of Statements on Auditing Standards), as
amended. In addition, the Audit Committee discussed with the independent registered public
accountants their independence from the Company and its management, including the matters
in the written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with the Audit Committees).
In reliance on the reviews and discussions outlined above, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2007 for
filing with the Securities and Exchange Commission. The Audit Committee has appointed
Stonefield Josephson, Inc. to serve as Alliance Fiber Optic Product's independent
registered public accounting firm for the 2008 fiscal year.
Audit Committee
Richard Black, Chairman
Ray Sun
James C. Yeh
PROPOSAL 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee has appointed the firm of Stonefield Josephson, Inc. as the Company's
independent registered public accountants for the fiscal year ending December 31,
2008. Stonefield Josephson, Inc. has audited the Company's financial statements since April
2005. Representatives of Stonefield Josephson, Inc. are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement, if they desire to do so,
and will be available to respond to appropriate questions. Although stockholder
ratification of the Company's independent registered public accountants is not required by
the Company's Bylaws or otherwise, the Company is submitting the selection of Stonefield
Josephson, Inc. to its stockholders for ratification to permit stockholders to participate
in this important corporate decision.
Principal Accountant Fees and Services
The following table presents
fees
for professional audit services rendered by Stonefield
Josephson, Inc. for the audit of our financial statements for 2007
and 2006. No fees were billed by Stonefield Josephson, Inc.
for other services rendered.
|
Years Ended December
31,
|
|
|
2007
|
|
2006
|
|
Audit Fees
|
$264,854
|
|
$230,924
|
|
Audit-Related Fees
|
--
|
|
--
|
|
Tax Fees
|
--
|
|
--
|
|
All Other Fees
|
--
|
|
--
|
|
Total
|
$264,854
|
|
$230,924
|
|
|
|
|
Pre-Approval Policies and Procedures
It is the Company's policy that all audit and
non-audit services to be performed by the Company's registered public accountants be
approved in advance by the Audit Committee. The Audit Committee
pre-approved all audit fees incurred in the
year ended December 31, 2007.
Required Vote
Ratification will require the affirmative vote of a majority of the shares present and
voting at the Annual Meeting in person or by proxy. In the event ratification is not
obtained, the Audit Committee will review its future selection of the Company's independent
registered public accountants but will not be required to select different independent
registered public accountants for the Company.
The Board of Directors recommends a vote "FOR" ratification of Stonefield Josephson,
Inc. as the Company's independent registered public accountants.
STOCKHOLDER PROPOSALS FOR THE 2009 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be presented at the Company's
2009 Annual Meeting must be received by the Secretary of the Company no later than
December 18, 2008 in order that they may be included in the Company's proxy statement
and form of proxy relating to that meeting.
A stockholder proposal not included in the Company's proxy statement for the 2009 Annual
Meeting will be ineligible for presentation at the meeting unless the stockholder gives
timely notice of the proposal in writing to the Secretary of the Company at the principal
executive offices of the Company and otherwise complies with the provisions of the
Company's Bylaws. To be timely, the Bylaws provide that the Company must have received the
stockholder's notice not less than 60 days nor more than 90 days prior to the
scheduled date of the meeting. However, if notice or prior public disclosure of the date of
the annual meeting is given or made to stockholders less than 75 days prior to the
meeting date, the Company must receive the stockholder's notice by the earlier of
(i) the close of business on the 15th day after the earlier of the day the
Company mailed notice of the annual meeting date or provided public disclosure of the
meeting date and (ii) two days prior to the scheduled date of the annual meeting.
PAYMENT OF COSTS
The expense of printing, mailing proxy materials and solicitation of proxies will be borne
by the Company. In addition to the solicitation of proxies by mail, solicitation may be
made by directors, officers and other employees of the Company by personal interview,
telephone or facsimile. No additional compensation will be paid to such persons for such
solicitation. The Company will reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation materials to beneficial owners of the Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, executive officers
and any persons holding more than 10% of the Company's Common Stock are required to report
their initial ownership of the Company's Common Stock and any subsequent changes in that
ownership to the Securities and Exchange Commission. Specific due dates for these reports
have been established and the Company is required to identify in this Proxy Statement those
persons who failed to timely file these reports. To the Company's knowledge, based solely
on a review of such reports furnished to the Company and written representations that no
other reports were required during the fiscal year ended December 31, 2007, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were met in a timely manner during fiscal year 2007.
OTHER MATTERS
The Company knows of no other business that will be presented at the Annual Meeting. If any
other business is properly brought before the Annual Meeting, it is intended that proxies
in the enclosed form will be voted in accordance with the judgment of the persons voting
the proxies.
Whether you intend to be present at the Annual Meeting or not, we urge you to return your
signed proxy promptly.
By order of the Board of Directors
/s/Peter C. Chang
Peter C. Chang
Secretary
April 18, 2008
The Company's 200
7
Annual Report on Form 10-K has been mailed with
this Proxy Statement. The Company will provide copies of exhibits to the Annual Report on
Form 10-K, but will charge a reasonable fee per page to any requesting stockholder.
Any such request should be addressed to the Company at 275 Gibraltar Drive, Sunnyvale,
California 94089, Attention: Investor Relations Department. The request must include a
representation by the stockholder that as of March 2
4
,
200
8
, the stockholder was entitled to vote at the Annual Meeting.
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