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 [ ]
Check the appropriate box:
[x]
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Preliminary Proxy
Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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[ ]
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Soliciting Material Pursuant to
Rule 14a-12
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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)
Payment of Filing Fee (Check the appropriate box):
[ ]
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transaction
applies:
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(3)
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of
transaction:
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Fee paid previously with preliminary
materials:
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement
No.:
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2
ALLIANCE FIBER OPTIC PRODUCTS, INC.
275 GIBRALTAR DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 736-6900
April 19, 2010
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 14, 2010, at 2:00 p.m., Pacific Daylight Time, at the Company's
principal executive offices, 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, VOTE YOUR SHARES AS
DIRECTED BY YOUR BROKER OR ATTEND THE ANNUAL MEETING IN PERSON. Your vote is
important, so please vote promptly.
A copy of our 2009 Annual Report to Stockholders is also
enclosed.
We look forward to seeing you at the meeting.
Sincerely yours,
Peter C. Chang
Chairman, President and
Chief Executive Officer
3
ALLIANCE FIBER OPTIC PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 14, 2010
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 offices, 275 Gibraltar Drive, Sunnyvale,
California 94089, on Friday, May 14, 2010, at 2:00 p.m., Pacific Daylight
Time, for the following purposes:
1.
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To elect two Class I directors to serve until the 2013 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified;
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2.
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To ratify the appointment of Stonefield Josephson, Inc. as the
Company's independent registered public
accountants;
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3.
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To approve the adoption of the 2000 Stock Incentive Plan, as
amended and restated;
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4.
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To approve an amendment to the Amended and Restated
Certificate of Incorporation to decrease the number of shares of Common
Stock authorized for issuance from 250,000,000 shares to 80,000,000
shares;
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5.
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To transact such other business as may properly come before
the Annual Meeting and any adjournment or postponement of the Annual
Meeting.
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Stockholders of record as of the close of business on March 26,
2010 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.
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held on May 14, 2010.
The Proxy Statement and Annual Report are available at
http://www.afop.com/investors
It is important that your shares are represented at the Annual
Meeting. Even if you plan to attend the meeting, we hope that you will promptly
vote.
By Order of the Board of Directors
Peter C. Chang
Secretary
April 19, 2010
4
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 14, 2010, 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. If your shares are
held by a broker, bank or other stockholder of record, in nominee name or
otherwise, exercising fiduciary powers (typically referred to as being held in
"street name"), and you wish to vote at the Annual Meeting, you must obtain and
bring to the Annual Meeting a proxy card issued in your name from the broker,
bank or other nominee. On the matters coming before the Annual
Meeting for which a choice has been specified by a stockholder, 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 approval of the 2000 Stock Incentive Plan, as
amended and restated, the decrease in the number of shares of Common Stock
authorized for issuance and the ratification of the Company's independent
registered public accountants.
Who Can Vote
Stockholders of record at the close of business on March 26,
2010 (the "Record Date"), are entitled to vote at the Annual Meeting. As of the
Record Date, there were 42,518,162 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 nominees for director
who receive the most votes cast in their favor will be elected to serve as a
director. The other proposals 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 proposals. 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. Under the rules that govern brokers, brokers do not have
discretionary authority to vote on the election of directors, or on action with
respect to our Stock Incentive Plan or on our charter
amendment. Brokers do have discretionary authority to vote on the
ratification of our auditors.
5
How to Vote
If you are a stockholder with shares registered in your name, you
may vote by one of the following methods:
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Vote via the Internet
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Go to the web address
www.Proxyvote.com
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and follow the instructions for Internet voting
shown on the proxy card mailed to you. If you vote via the Internet, you
should be aware that there may be incidental costs associated with
electronic access, such as your usage charges from your Internet access
providers and telephone companies, for which you will be responsible.
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o
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Vote by proxy card mailed to you
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If you do not wish to vote by the Internet, please
complete, sign, date and mail the proxy in the envelope provided. If you
vote via the Internet, please do not mail your
proxy.
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If your shares are held in street name, you may receive a separate
voting instruction form with this Proxy Statement, or you may need to contact
your broker, bank or other stockholder of record to determine whether you will
be able to vote electronically via the Internet or by telephone.
This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about April 19, 2010.
IMPORTANT
Please vote electronically or 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.
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, with each class elected for a 3-year term. 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. Two Class
I directors will be elected at the Annual Meeting and will serve until the 2013
Annual Meeting. The Class II directors will continue to serve until the 2011
Annual Meeting and the Class III director will continue to serve until the 2012
Annual Meeting.
The Nominating and Corporate Governance Committee of the Board of
Directors has recommended, and the Board of Directors has designated, Mr. Peter
C. Chang and Mr. Richard Black as the nominees to fill the Class I director
seats to serve until the 2013 Annual Meeting. If either nominee is
unable or declines to serve as a director at the time of the Annual Meeting, an
event not now anticipated, proxies will be voted for any nominees designated by
the Board of Directors, taking into account any recommendations of the
Nominating and Corporate Governance Committee, to fill the
vacancies.
Biographical information concerning the nominees is set forth
below.
CLASS I
Peter C. Chang
, 52, 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. We believe Mr. Chang's
qualifications to serve on our Board include his extensive industry expertise
and his experience as our Chief Executive Officer and
President.
6
Richard
Black
, 76, 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 laser 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 is the Chairman of the board of
directors of GSI Group Inc., a manufacturer of laser systems and precision
motion components, and several private companies. In addition, from 2002 to
2007, Mr. Black served on the board of directors of Altigen Communications,
Inc., a manufacturer of VoIP telephone systems and unified communications
systems. Mr. Black holds a B.S. in Engineering from Texas A&M
University and an M.B.A. from Harvard University. We believe Mr.
Black's qualifications to server on Board include his operational and management
expertise, his experience as both a director and chairman of the board of other
public companies, and his finance skills.
Biographical information concerning the remaining members of the
Board of Directors is set forth below.
CLASS II
Ray
Sun
, 58, has served as a director since November 2003. Mr. Sun
served as Managing Director, Business Development and Venture Investment (Great
China) of Applied Materials China, a semiconductor equipment company, from
November 2001 to February 2009. He has been retired since February
2009. 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 more than 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. We believe Mr. Sun's qualifications to serve
on our Board include his business development and investment expertise and his
experience in executive management for a broad array of technology-based
businesses.
CLASS III
Gwong-Yih Lee
, 55, 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. In addition, 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. We believe Mr. Lee's qualifications to serve on our Board
include his experience running private technology companies and his managerial
experience at Cisco.
James C. Yeh
, 53, 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. In addition, since January 1991, Mr. Yeh has served as
President of Matics Computer Systems, Inc., a personal computer systems and
peripherals 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. We believe Mr. Yeh's
qualifications to serve on our Board include his operational and management
experience with technology companies.
The Board of Directors recommends a vote "FOR" the election of Mr.
Peter C. Chang and Mr. Richard Black as the Class I Directors of the
Company
.
Board Structure, Independence, Meetings and Committees
Our Board has believes that having a combined Chairman of the Board
and Chief Executive Officer is the most effective leadership structure for our
company at this time. The Board believes that Mr. Chang is the director best
situated to identify strategic opportunities and focus the activities of the
Board due to his full-time commitment to the business and his company-specific
experience. The Board also believes that the combined role of Chairman and Chief
Executive Officer promotes effective execution of strategic imperatives and
facilitates information flow between management and the Board.
7
The Board of Directors held four meetings during
2009. Mr. Black, Mr. Lee, and Mr. Yeh attended 100% of the aggregate
number of meetings of the Board of Directors and of the committees on which such
directors serve. Mr. Sun attended 100% of the aggregate number of
meetings of the Board of Directors and 75% of the audit committee
meetings. 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
2009, one director attended the annual meeting. We do not have a policy
requiring directors to attend our annual meetings.
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.
The Board of Directors has appointed an Executive Compensation
Committee, an Audit
Committee and a Nominating and Corporate Governance
Committee. The Board has approved a charter for each of these
committees. 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.
The Board is actively involved in the oversight of risks that could
affect our business and operations, while management is responsible for
day-to-day risk management. The Board administers this oversight function
directly through the Board as a whole, as well as through Audit and Nominating
and Corporate Governance committees of the Board, as disclosed in the
descriptions of each below and in their respective committee
charters.
Executive Compensation Committee
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Number of Members:
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Three
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Members:
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Mr. Sun (Chairman)
Mr. Black
Mr. Lee
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Number of Meetings:
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One
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Functions:
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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.
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8
Audit Committee
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Number of Members:
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Three
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Members:
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Mr. Black (Chairman)
Mr. Sun
Mr. Yeh
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Number of Meetings:
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Four
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Functions:
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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.
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Nominating and Corporate Governance Committee
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Number of Members:
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Three
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Members:
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Mr. Black (Chairman)
Mr. Sun
Mr. Yeh
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Number of Meetings:
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One
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Functions:
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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.
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Non-Executive Compensation Committee
Mr. Chang currently serves as the sole member of 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.
9
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. While
diversity is among the qualifications that may be considered, the Committee does
not have a formal diversity policy. 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.
10
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.
2009 Director Compensation
The following table set forth cash amounts and the value of other
compensation for the Company's non-employee directors during 2009:
Name
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Fees earned or
Paid in Cash
($)
|
|
Grant Date
Fair Value of
Option Awards
($)(1)(2)
|
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Total ($)
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Richard Black
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14,000
|
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4,500
|
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18,500
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Gwong-Yih Lee
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6,000
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3,000
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9,000
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Ray Sun
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9,000
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3,000
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12,000
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James Yeh
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10,000
|
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3,000
|
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13,000
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(1)
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Represents the aggregate fair value of options to
purchase our Common Stock computed as of the grant date of each option in
accordance with the Financial Accounting Standards Board Accounting
Codification Topic 718, or ASC 718, rather than amounts paid to or
realized by the named individual. 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, 2009 for the
assumptions made in determining ASC 718 values. 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 fair value as computed in accordance with ASC
718.
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(2)
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The following table sets forth the aggregate number of shares
of Common Stock underlying option awards
outstanding at December 31, 2009:
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Name
|
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Number of Shares
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Richard Black
|
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60,000
|
Gwong-Yih Lee
|
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130,000
|
Ray Sun
|
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90,000
|
James Yeh
|
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130,000
|
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 our employees do not receive
any fees for their service on our Board.
11
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 2009, we granted options to purchase 30,000 shares to
each of our four outside directors.
Certain Relationships and Related Transactions
It is our policy that all employees, officers and directors must
avoid any activity that is or has the appearance of conflicting with the
interests of the Company. This policy is included in our Code of Conduct
and Business Ethics. We conduct a review of all related party transactions for
potential conflict of interest situations on an ongoing basis and all such
transactions relating to executive officers and directors must be approved by
the independent and disinterested members of our board of directors or an
independent and disinterested committee of the board.
According to share ownership numbers contained in a Schedule 13G
filed in 2002 and not subsequently amended, of March 26, 2010, Foxconn Holding
Limited ("Foxconn") was a holder of 18.9% of our Common Stock. In the
normal course of business, we sell products to and purchase raw materials from
Hon Hai Precision Industry Co., Ltd. ("HonHai"), who is the parent company of
Foxconn. These transactions were made at prices and terms consistent
with transactions with unrelated third parties. For fiscal 2009,
sales of products to Hon Hai were $0.01 million, purchases of raw materials from
Hon Hai were $2.0 million and amount due from Hon Hai was not
material. As of December 31, 2009, amounts due to Hon Hai were $0.7
million. For fiscal 2008, sales of products to Hon Hai were $1.1
million, purchases of raw materials from Hon Hai were $3.9 million and amounts
due from Hon Hai were $0.01 million. As of December 31, 2008, amounts
due to Hon Hai were $0.3 million.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of
March 26, 2010, 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 42,518,162 shares of common stock outstanding as of
March 26, 2010. In addition, shares issuable pursuant to options
which may be exercised within 60 days of March 26, 2010 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
|
|
Percentage
of
Common
Stock
Beneficially Owned
|
Directors and Named Executive Officer:
|
|
|
|
|
Peter C.
Chang (2)
|
|
6,606,600
|
|
15%
|
Richard Black
(3)
|
|
70,000
|
|
*
|
Gwong-Yih Lee
(4)
|
|
125,833
|
|
*
|
Ray Sun
(5)
|
|
65,833
|
|
*
|
James C. Yeh
(6)
|
|
905,833
|
|
2.1
|
David A.
Hubbard (7)
|
|
821,163
|
|
1.9
|
Wei-Shin Tsay
(8)
|
|
873,482
|
|
2.0
|
5%
Stockholders:
|
|
|
|
|
Foxconn
Holding Limited (9)
|
|
8,000,000
|
|
18.9
|
Lloyd I.
Miller, III (10)
|
|
2,677,872
|
|
6.3
|
All Directors and Executive Officers as a group (8
persons) (11)
|
|
9,792,826
|
|
21.3
|
|
|
|
|
|
* 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 26,
2010.
|
(3)
|
Includes options to purchase 40,000 shares exercisable within
60 days of March 26, 2010.
|
(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 105,833 shares exercisable within
60 days of March 26,
2010.
|
(5)
|
Represents options exercisable within 60 days of March 26,
2010.
|
(6)
|
Includes 800,000 shares held in the name of Matics Computer
Systems, Inc., over which Mr. Yeh has voting power. Also
includes options to purchase 105,833 shares exercisable within
60 days of March 26, 2010.
|
13
(7)
|
Includes options to purchase 510,000 shares exercisable within
60 days of March 26, 2010.
|
(8)
|
Includes options to purchase 800,000 shares exercisable within
60 days of March 26, 2010.
|
(9)
|
According to a Schedule 13G filed jointly on January 4, 2002
for the year ended December 31, 2000 by Hon Hai and Foxconn, 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
and the ownership of the shares is as disclosed in the Schedule
13G. Foxconn is a subsidiary of Hon Hai. Hon Hai
disclaims beneficial ownership of these shares. The principal
business address for Hon Hai and Foxconn is 2 Tsu Yu Street, Tu Cheng
City, Taipei Hsien, Taiwan, R.O.C. The board of directors of
Foxconn has dispositive power for the shares and has delegated voting
power to Ms. Chiu-Lian Huang.
|
(10)
|
According to an amended Schedule 13G filed on
February 8, 2010, Lloyd I. Miller, III has sole voting and
dispositive power with respect to 1,233,810 shares as the manager of a
limited liability company that is the general partner of a certain limited
partnership, the trustee to a certain grantor retained annuity trust, and
an individual. In addition, Mr. Miller has shared voting and
dispositive power with respect to 1,434,062 shares of common stock as an
investment advisor to the trustee of a certain family trust, and as an
authorized person with respect to a custody account held by Mr. Miller's
sister. The principal address for Mr. Miller is 4550 Gordon
Drive, Naples, Florida 34102.
|
(11)
|
Includes 3,458,249 shares subject to options exercisable
within 60 days of March 26,
2010.
|
EXECUTIVE COMPENSATION
2009 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, 2009.
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($) (1)
|
|
Grant Date
Fair value
of Option
Awards ($) (2)
|
|
All Other
Compensation
($) (3)
|
|
Total ($)
|
Peter C. Chang
|
|
2009
|
|
218,077
|
|
39,000
|
|
-
|
|
1,717
|
|
258,794
|
Chief Executive Officer and President
|
|
2008
|
|
210,000
|
|
48,000
|
|
15,000
|
|
1,717
|
|
274,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Hubbard
|
|
2009
|
|
162,000
|
|
19,500
|
|
-
|
|
8,944
|
|
190,444
|
Vice President, Sale and Marketing
|
|
2008
|
|
160,000
|
|
30,000
|
|
6,000
|
|
8,667
|
|
204,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wei-Shin Tsay
|
|
2009
|
|
166,154
|
|
12,000
|
|
-
|
|
2,340
|
|
180,494
|
Senior Vice President, Product Development
|
|
2008
|
|
160,000
|
|
14,000
|
|
6,000
|
|
2,340
|
|
182,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consisted of amounts earned during the 2009 and 2008 fiscal
years and paid in the respective subsequent fiscal
year.
|
(2)
|
Options were granted in January 2008 as 2007
compensation. Amount represents grant date fair value computed
in accordance with ASC 718. 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, 2009 for the assumptions made in
determining ASC 718 values. 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 fair value
as computed in accordance with ASC
718.
|
14
(3)
|
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 options 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 stockholders 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 2009 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 2009
and 2008 and paid in fiscal year 2010 and 2009, respectively.
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 officer 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
2009, no stock options were granted to Mr. Chang. In January 2008,
the Executive Compensation Committee granted Mr. Chang an option as 2007
compensation, 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 January 2008, grants were made to the executive officers by the
Executive Compensation Committee as described in the Summary Compensation
Table. These options were fully vested on the grant
date.
Outstanding Equity Awards at Fiscal Year-End 2009
Name
|
|
Number of
Securities
Underlying
Unexecised
Options
Exercisable (#)
|
|
Number of
Securities
Underlying
Unexecised
Options
Unexercisable
(#)
|
|
Option
Exercise
Price ($) (1)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
Peter C. Chang
|
|
300,000
|
|
-
|
|
0.86
|
|
12/24/11
|
|
|
320,000
|
|
-
|
|
1.56
|
|
12/29/13
|
|
|
300,000
|
|
-
|
|
0.96
|
|
12/02/14
|
|
|
300,000
|
|
-
|
|
0.90
|
|
11/07/15
|
|
|
280,000
|
|
-
|
|
2.02
|
|
11/27/16
|
|
|
50,000
|
|
-
|
|
1.83
|
|
01/28/18
|
|
|
|
|
|
|
|
|
|
David A.
Hubbard
|
|
90,000
|
|
-
|
|
0.86
|
|
12/24/11
|
|
|
100,000
|
|
-
|
|
1.56
|
|
12/29/13
|
|
|
100,000
|
|
-
|
|
0.96
|
|
12/02/14
|
|
|
100,000
|
|
-
|
|
0.90
|
|
11/07/15
|
|
|
100,000
|
|
-
|
|
2.02
|
|
11/27/16
|
|
|
20,000
|
|
-
|
|
1.83
|
|
01/28/18
|
|
|
|
|
|
|
|
|
|
Wei-shin
Tsay
|
|
100,000
|
|
-
|
|
0.86
|
|
10/24/11
|
|
|
100,000
|
|
-
|
|
1.56
|
|
12/29/13
|
|
|
300,000
|
|
-
|
|
0.91
|
|
12/02/14
|
|
|
160,000
|
|
-
|
|
0.90
|
|
11/07/15
|
|
|
120,000
|
|
-
|
|
2.02
|
|
11/27/16
|
|
|
20,000
|
|
-
|
|
1.83
|
|
01/28/18
|
(1)
|
The option exercise price is equal to the fair market value on
the date of grant.
|
All of the options in the above table are fully vested and 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 control over financial reporting. The Audit Committee
reviewed and discussed the audited financial statements contained in the 2009
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 control over financial reporting. 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 has discussed issues deemed significant by them,
including those required by AICPA, Professional Standards, Vol. 1. AU
Section 380, as adopted by the Public Accounting Oversight Board in Rule
3200T. In addition, the Audit Committee has received the written
disclosure and the letter from the independent registered public accountants
required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent registered public accounting firm's
communications with the Audit Committee concerning independence, and has
discussed with the independent registered public accounting firm such firm's
independence.
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, 2009 for filing with the Securities and Exchange
Commission. The Audit Committee has appointed Stonefield Josephson,
Inc. to serve as our Company's independent registered public accounting firm for
the 2010 fiscal year.
Audit Committee
Richard Black, Chairman
Ray Sun
James C. Yeh
17
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, 2010. Stonefield Josephson has audited
the Company's financial statements since April 2005. Representatives
of Stonefield Josephson 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 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 for the audit of our financial statements for
2009 and 2008. No fees were billed by Stonefield Josephson for other
services rendered.
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
Audit Fees
|
|
$
318,032
|
|
$
268,964
|
Audit-Related Fees
|
|
-
|
|
-
|
Tax Fees
|
|
-
|
|
-
|
All Other Fees
|
|
-
|
|
-
|
Total
|
|
$ 318.032
|
|
$ 268,964
|
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,
2009.
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.
Approval
of the Alliance Fiber Optic Products, Inc. 2000 Stock Incentive Plan,
as
Amended
and Restated
In March 2010, the Board of Directors
amended and restated our 2000 Stock Incentive Plan, subject to the approval of
our stockholders at the Annual Meeting. The following summary of the principal
features of the Plan is qualified by reference to the terms of the Plan, a copy
of which is available without charge upon stockholder request to Secretary,
Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California
94089. The Plan has also been filed electronically with the Securities and
Exchange Commission together with this Proxy Statement, and can be accessed on
the SEC's web site at
http://www.sec.gov
.
Description of Amendments
Among other changes, the amended and restated Plan approved by the
Board of Directors and submitted for stockholder approval:
|
o
|
extends the term under which awards may be granted under the
Plan until March 17, 2020,
|
o
|
continues the existing formula for determining the number of
shares that may be added to the Plan each year during the extended term,
but eliminates the original ten (10) million share ceiling on the
aggregate number of shares that may be issued under the
Plan,
|
o
|
includes qualifying performance criteria
and annual limits on awards so that we may grant
awards that qualify as "performance-based compensation" under
the requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), as described
below.
|
We are also asking our stockholders to approve the material terms of
the Plan to preserve corporate income tax deductions that may otherwise be
disallowed pursuant to Section 162(m) of the Code. Section 162(m)
limits a corporation's income tax deduction for compensation paid to certain
executive officers who are "covered employees" within the meaning of
Section 162(m) to $1,000,000 per person per year unless the compensation
qualifies as "performance-based compensation." For a grant under the Plan to
qualify as "performance-based compensation," among other requirements, the Plan
must be approved by our public stockholders. The availability of the
exemption for awards of performance-based compensation therefore depends upon
obtaining approval of the Plan by our public stockholders.
If stockholder approval of the amended and restated Plan is not
obtained, no additional grants of stock options and no awards of stock
appreciation rights, restricted shares or stock units will be made to our
executive officers under the Plan following the Annual
Meeting.
The Plan was adopted prior to, but became effective upon, our
initial public offering in September 2000. The purpose of the Plan is to assist
management in the recruitment, retention and motivation of employees, outside
directors and consultants who are in a position to make material contributions
to our long-term success and the creation of stockholder value. The Plan offers
a significant incentive to encourage our employees, outside directors and
consultants by enabling those individuals to acquire shares of our Common Stock,
thereby increasing their proprietary interest in the growth and success of our
Company.
The Plan provides for the award or sale of shares of Common Stock
(including restricted stock), the award of stock units and stock appreciation
rights, and the grant of both incentive stock options to purchase Common Stock
intended to qualify for preferential tax treatment under Section 422 of the
Code and nonstatutory stock options to purchase Common Stock that do not qualify
for such treatment under the Code. All employees (including officers)
and directors of the Company or any subsidiary and any consultant who performs
services for the Company or a subsidiary are eligible for the grant of
restricted shares, stock units, nonstatutory options and stock appreciation
rights. Only employees are eligible to receive grants of incentive stock
options.
As of December 31, 2009, 870 officers and employees and 4
non-employee directors were eligible to be considered to purchase shares of
Common Stock and to receive awards under the Plan. As of December 31,
2009, 1,109,092 shares had been issued upon exercise of options
granted under the Plan, options to purchase 4,863,333 shares were
outstanding, and 4,053,241 shares remained available for future
grant.
The Plan is administered by the
Executive and Non-Executive Compensation Committees of our Board of
Directors. Subject to the limitations set forth in the Plan, these
Committees have the authority to determine, among other things, to whom awards
will be granted, the number of shares subject to awards, the term during which
an option or stock appreciation right may be exercised and the rate at which the
awards may vest, including any performance criteria to which vesting may be
subject. Generally the Executive Compensation Committee administers the Plan as
it related to directors, executive officers and employees who hold the title of
Vice President and above, and the Non-Executive Compensation Committee
administers the Plan with respect to our other employees. The
Executive Compensation Committee also has the authority to determine the
consideration and methodology of payment for awards.
Maximum Shares and Award Limits
Under the Plan, the maximum number of
shares of Common Stock authorized for issuance is 1,500,000 plus an annual
increase on January 1 of each year commencing in 2001, in an amount equal to the
lesser of (i) 1,700,000 shares, (ii) 5% of the fully diluted
outstanding shares of Common Stock of the Company on such date or (iii) a lesser
amount determined by the Board. All awards granted since our initial public
offering have been granted under the Plan.
If restricted shares are forfeited,
then such shares will become available for awards under the Plan. If stock
units, options, or stock appreciation rights are forfeited or terminate for any
other reason before being settled, exercised, or an award is settled in cash
without the delivery of shares to the holder, then the corresponding shares will
again become available for awards under the Plan. Shares tendered or
withheld to satisfy the tax withholding obligation pursuant to an award will
again become available for awards under the Plan.
No award recipient may be granted incentive stock options that are
exercisable for the first time in any calendar year for Common Stock having a
total fair market value (determined at the time of the option grant) in excess
of $100,000. In addition, no one award recipient may receive options, stock
appreciation rights, restricted shares or stock units under the Plan in any
calendar year that relate to more than 1,000,000 shares (or 2,000,000 in
the first year of employment) and the maximum aggregate amount of cash that may
be paid to an award recipient with respect to an award during any calendar year
will be $1,000,000.
The exercise price of each option will be set by the Executive
Compensation Committee, subject to the following limits. The exercise price of
an option cannot be less than 100% of the Common Stock's fair market value on
the date the option is granted, and in the event an award recipient is deemed to
be a 10% owner of our Company or one of our subsidiaries, the exercise price of
an incentive stock option cannot be less than 110% of the Common Stock's fair
market value on the date the option is granted. On March 26, 2010, the
closing price for our Common Stock on The NASDAQ Global Market was $1.50. The
maximum period in which an option may be exercised will be fixed by the
Executive Compensation Committee but cannot exceed ten years, and in the event
an award recipient is deemed to be a 10% owner of our Company or one of our
subsidiaries, the maximum period for an incentive stock option granted to such
award recipient cannot exceed five years.
These limitations, and the terms of outstanding awards, will be
adjusted as appropriate and equitable in the event of a stock dividend, stock
split, reclassification of stock or similar events.
The terms of any awards of stock options under the Plan will be set
forth in a stock option agreement to be entered into between the Company and the
recipient. The Executive Compensation Committee will determine the terms and
conditions of such option grants, which need not be identical. Stock options may
provide for the accelerated exercisability in the event of the award recipient's
death, disability, or retirement or other events and may provide for expiration
prior to the end of its term in the event of the termination of the award
recipient's service. The Executive Compensation Committee may modify, extend or
renew outstanding options or may accept the cancellation of outstanding options
in return for the grant of new options for the same or a different number of
shares and at the same or a different exercise price, or in return for the grant
of the same or a different number of shares. The option price may be paid in
cash or, to the extent that the stock option agreement so provides, by
surrendering shares of Common Stock, in consideration of services rendered to
the Company, by delivery of an irrevocable direction to a securities broker to
sell shares and to deliver all or part of the sale proceeds to the Company in
payment of the aggregate exercise price, by delivery of an irrevocable direction
to a securities broker or lender to pledge shares, as security for a loan, and
to deliver all or part of the loan proceeds to the Company in payment of the
aggregate exercise price, by delivering a full-recourse promissory note, or in
any other form that is consistent with applicable laws, regulations and rules.
Options generally will be nontransferable except in the event of the award
recipient's death, but the Executive Compensation Committee may allow the
transfer of non-qualified stock options through a gift or domestic relations
order to the award recipient's family members.
Stock options granted under the Plan generally must be exercised by
the optionee before the earlier of the expiration of such option or three
(3) months after termination of the optionee's employment, except upon
termination by reason of death or total permanent disability. Each stock option
agreement will set forth the extent to which the award recipient will have the
right to exercise the option following the termination of the recipient's
service with us, and the right to exercise the option of any executors or
administrators of the award recipient's estate or any person who has acquired
such options directly from the award recipient by bequest or
inheritance.
Options granted to non-employee directors generally must be
exercised before the earlier of the expiration of the option or 12 months
after termination of service as a director, and are subject to acceleration of
vesting in the event of a change in control.
Automatic Option Grants to Directors
Each non-employee director who first joins our Board of Directors on
or after the effective date of the Plan receives a nonstatutory option to
purchase 30,000 shares of our Common Stock on the date of election to the
board. The shares subject to the option become exercisable in thirty-six (36)
equal monthly installments on each of the first thirty-six (36) months after the
date of grant. In addition, on the first business day following the third
anniversary of the non-employee director's election to the Board of Directors,
each non-employee director who will continue to serve on the Board of Directors
thereafter receives an option to purchase 30,000 shares of Common Stock.
The shares subject to this option become exercisable in thirty-six (36) equal
monthly installments on each of the first thirty-six (36) months after the date
of grant. Options granted to non-employee directors will become fully vested if
a change in control occurs with respect to our Company during the director's
service.
The terms of any awards of restricted shares under the Plan will be
set forth in a restricted stock agreement to be entered into between the Company
and the recipient. The Executive Compensation Committee will determine the terms
and conditions of such restricted stock agreements, which need not be identical.
A restricted stock award may be subject to vesting requirements or transfer
restrictions or both. Award recipients who are granted restricted stock
generally have all of the rights of a stockholder with respect to such shares.
Restricted stock may be issued for consideration determined by the Executive
Compensation Committee, including cash, cash equivalents, full-recourse
promissory notes, past services and future services.
The terms of any awards of stock units under the Plan will be set
forth in a restricted stock unit agreement to be entered into between the
Company and the recipient. The Executive Compensation Committee will determine
the terms and conditions of such restricted stock unit agreements, which need
not be identical. Dividend equivalents may be credited in respect of
shares of our Common Stock covered by a restricted stock unit award. Restricted
stock unit awards may be subject to vesting in accordance with a vesting
schedule to be determined by our Executive Compensation Committee, as
applicable. Except as otherwise provided in the applicable restricted stock unit
award agreement, restricted stock units that have not vested will be forfeited
upon the participant's termination of continuous service for any reason.
Stock Appreciation Rights
The terms of any awards of stock appreciation rights under the Plan
will be set forth in an agreement to be entered into between the Company and the
recipient. The Executive Compensation Committee will determine the terms,
conditions and restrictions of any such agreements, which need not be identical.
A stock appreciation right generally entitles the award recipient to receive a
payment upon exercise equal to the amount by which the fair market value of a
share of Common Stock on the date of exercise exceeds the value of a share of
Common Stock on the date of grant. The amount payable upon the exercise of a
stock appreciation right may be settled in cash, shares of Common Stock, or a
combination of shares of Common Stock and cash, as the Executive Compensation
Committee will determine.
Qualifying Performance Criteria
The Plan sets forth performance criteria used in the case of an
award intended to qualify as "performance-based compensation" under
Section 162(m) of the Code. To qualify as a "performance-based
compensation," the number of shares or other benefits granted, issued,
retainable or vested under an award may be made subject to the attainment of
performance goals for a specified period of time relating to one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either us as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years' results or to
a designated comparison group or index, in each case as specified by the
Executive Compensation Committee in the award: (a) cash flow,
(b) earnings per share, (c) earnings before interest, taxes and
amortization, (d) return on equity, (e) total stockholder return,
(f) share price performance, (g) return on capital, (h) return on
assets or net assets, (i) revenue, (j) income or net income,
(k) operating income or net operating income, (l) operating profit or
net operating profit, (m) operating margin or profit margin,
(n) return on operating revenue, (o) return on invested capital, or
(p) market segment shares, (q) costs, (r) expenses, (s) regulatory body
approval for commercialization of a product, or (t) implementation or completion
of critical projects. The Executive Compensation Committee may appropriately
adjust any evaluation of performance under a qualifying performance criteria to
exclude any of the following events that occurs during a performance period:
(i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles
or other such laws or provisions affecting reported results, (iv) accruals
for reorganization and restructuring programs and (v) any extraordinary
nonrecurring items as described in Accounting Principles Board Opinion
No. 30 and/or in managements' discussion and analysis of financial
condition and results of operations appearing in our annual report to
stockholders for the applicable year. If applicable, the Executive Compensation
Committee shall determine the qualifying performance criteria not later than the
90th day of the performance period, and in no event after twenty-five (25)
percent of the period of service with respect to which the performance goals
relate has elapsed, and shall determine and certify in writing, for each award
recipient, the extent to which the qualifying performance criteria have been
met. The Executive Compensation Committee may not in any event increase the
amount of compensation payable under the Plan upon the attainment of a
pre-established performance goal to an award recipient who is a "covered
employee" within the meaning of Section 162(m).
Amendment and
Termination
No awards may be granted under the
Plan after March 17, 2020. The Board of Directors may amend or terminate
the Plan at any time, but an amendment will not become effective without the
approval of our stockholders to the extent required by applicable laws,
regulations or rules. No amendment of the Plan will materially impair an award
recipient's rights under outstanding awards without the award recipient's
consent.
Effect of Certain Corporate Events
In the event that there is a
specified type of change in our capital structure, such as a stock split or
stock dividend, the class and number of shares reserved under the Plan
(including share limits) and the class and number of shares and exercise price
or strike price, if applicable, of all outstanding stock awards will be
appropriately adjusted.
In the event of certain corporate
transactions, all outstanding stock awards under the 2000 Plan may be assumed,
continued or substituted for by any surviving entity. If the
surviving entity elects not to assume, continue or substitute for such awards,
the vesting or exercisability of such awards may be accelerated in full and then
terminated, if and to the extent not exercised at or prior to the effective time
of the corporate transaction, or we may terminate the stock awards upon payment
of their intrinsic value in cash or cash equivalents. Additionally, the vesting
of each option held by a non-employee director will be accelerated in
full.
U.S. Federal Income Tax Consequences
The information set forth below is a summary only and does not
purport to be complete. The information is based upon current federal income tax
rules and therefore is subject to change when those rules change. Because the
tax consequences to any recipient may depend on his or her particular situation,
each recipient should consult the recipient's tax adviser regarding the federal,
state, local, and other tax consequences of the grant or exercise of an award or
the disposition of stock acquired as a result of an award. The Plan is not
qualified under the provisions of Section 401(a) of the Code, and is not subject
to any of the provisions of the Employee Retirement Income Security Act of 1974.
Our ability to realize the benefit of any tax deductions described below depends
on our generation of taxable income.
Nonstatutory Stock Options
Generally, there is no taxation upon the grant of a nonstatutory
stock option where the option is granted with an exercise price equal to the
fair market value of the underlying stock on the grant date. On exercise, an
optionee will recognize ordinary income equal to the excess, if any, of the fair
market value on the date of exercise of the stock over the exercise price. If
the optionee is employed by us or one of our affiliates, that income will be
subject to withholding tax. The optionee's tax basis in those shares will be
equal to their fair market value on the date of exercise of the option, and the
optionee's capital gain holding period for those shares will begin on that
date.
Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation,
we will generally be entitled to a tax deduction equal to the taxable ordinary
income realized by the optionee.
Incentive Stock Options
The Plan provides for the grant of stock options that qualify as
"incentive stock options," as defined in Section 422 of the Code. Under the
Code, an optionee generally is not subject to ordinary income tax upon the grant
or exercise of an incentive stock option. If the optionee holds a share received
on exercise of an incentive stock option for more than two years from the date
the option was granted and more than one year from the date the option was
exercised, which is referred to as the required holding period, the difference,
if any, between the amount realized on a sale or other taxable disposition of
that share and the holder's tax basis in that share will be long-term capital
gain or loss.
If, however, an optionee disposes of a share acquired on exercise of
an incentive stock option before the end of the required holding period, which
is referred to as a disqualifying disposition, the optionee generally will
recognize ordinary income in the year of the disqualifying disposition equal to
the excess, if any, of the fair market value of the share on the date the
incentive stock option was exercised over the exercise price. However, if the
sales proceeds are less than the fair market value of the share on the date of
exercise of the option, the amount of ordinary income recognized by the optionee
will not exceed the gain, if any, realized on the sale. If the amount realized
on a disqualifying disposition exceeds the fair market value of the share on the
date of exercise of the option, that excess will be short-term or long-term
capital gain, depending on whether the holding period for the share exceeds one
year.
For purposes of the alternative minimum tax, the amount by which the
fair market value of a share of stock acquired on exercise of an incentive stock
option exceeds the exercise price of that option generally will be an adjustment
included in the optionee's alternative minimum taxable income for the year in
which the option is exercised. In computing alternative minimum taxable income,
the tax basis of a share acquired on exercise of an incentive stock option is
increased by the amount of the adjustment taken into account with respect to
that share for alternative minimum tax purposes in the year the option is
exercised.
We are not allowed an income tax deduction with respect to the grant
or exercise of an incentive stock option or the disposition of a share acquired
on exercise of an incentive stock option after the required holding period. If
there is a disqualifying disposition of a share, however, we are allowed a
deduction in an amount equal to the ordinary income includible in income by the
optionee, subject to Section 162(m) of the Code and provided that amount
constitutes an ordinary and necessary business expense for us and is reasonable
in amount, and either the employee includes that amount in income or we timely
satisfy our reporting requirements with respect to that amount.
Stock Appreciation Rights
Generally, there is no taxation upon the grant of a stock
appreciation right where the stock appreciation right is granted with an
exercise price not less than the fair market value of the underlying stock on
the grant date. On exercise, the recipient of a stock appreciation right will
recognize ordinary income equal to the amount of cash or the value of the shares
of Common Stock we distribute to the recipient. If the recipient is
employed by us or one of our affiliates, that income will be subject to
withholding tax. The recipient's tax basis in the shares received, if any, will
be equal to their fair market value on the date of exercise of the stock
appreciation right, and the recipient's capital gain holding period for those
shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of any tax reporting
obligations, we will generally be entitled to a tax deduction equal to the
taxable ordinary income realized by the recipient of the stock appreciation
right.
Restricted Stock Awards
Generally, the recipient of a restricted stock award will recognize
ordinary income at the time the stock is received equal to the excess, if any,
of the fair market value of the stock received over any amount paid by the
recipient in exchange for the stock. If, however, the stock is not vested when
it is received (for example, if the employee is required to work for a period of
time in order to have the right to sell the stock), the recipient generally will
not recognize income until the stock becomes vested, at which time the recipient
will recognize ordinary income equal to the excess, if any, of the fair market
value of the stock on the date it becomes vested over any amount paid by the
recipient in exchange for the stock. A recipient may, however, file an election
with the Internal Revenue Service, within 30 days of his or her receipt of the
stock award, to recognize ordinary income, as of the date the recipient receives
the award, equal to the excess, if any, of the fair market value of the stock on
the date the award is granted over any amount paid by the recipient in exchange
for the stock.
The recipient's basis for the determination of gain or loss upon the
subsequent disposition of shares acquired from stock awards will be the amount
paid for such shares plus any ordinary income recognized either when the stock
is received or when the stock becomes vested.
Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of any tax reporting
obligations, we will generally be entitled to a tax deduction equal to the
taxable ordinary income realized by the recipient of the stock
award.
Restricted Stock Units
Generally, the recipient of a stock unit structured to conform to
the requirements of Section 409A of the Code or an exception to Section 409A of
the Code will recognize ordinary income at the time the stock is delivered equal
to the excess, if any, of the fair market value of the shares of our Common
Stock received over any amount paid by the recipient in exchange for the shares
of our Common Stock.
The recipient's basis for the determination of gain or loss upon the
subsequent disposition of shares acquired from stock units, will be the amount,
if any, paid for such shares plus any ordinary income recognized when the stock
is delivered.
Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of any tax reporting
obligations, we will generally be entitled to a tax deduction equal to the
taxable ordinary income realized by the recipient of the stock
award.
Section 162 Limitations
Compensation of persons who are "covered employees" is subject to
the tax deduction limits of Section 162(m) of the Code. Awards that qualify as
"performance-based compensation" are exempt from Section 162(m), thereby
permitting us to claim the full federal tax deduction otherwise allowed for such
compensation. The Plan is intended to enable our Executive Compensation
Committee, as applicable, to grant awards that will be exempt from the deduction
limits of Section 162(m).
The Executive Compensation Committee has not made any determination
with respect to future awards under the Plan, and any allocation of such awards
will be made only in accordance with the provisions of the Plan, including the
additional shares of stock that the stockholders are being asked to approve.
Because awards under the Plan are subject to the discretion of the Executive
Compensation Committee, awards under the Plan for the current or any future year
are not determinable. Future option exercise prices under the Plan are not
determinable because they will be based upon the fair market value of our Common
Stock on the date of grant. No stock units, shares of restricted stock or stock
appreciation rights have been awarded under the Plan.
Our named executive officers did not receive option grants under the
Plan in 2009. Our non-employee directors received option grants under
the Plan as set forth in this Proxy Statement in the section entitled "2009
Director Compensation". The following table sets forth information with respect
to stock options granted under the Plan in 2009 to the
following:
Name and Position
|
|
Number of
Option (#) (1)
|
|
|
|
All current executive officers as a group (4
persons)
|
|
-
|
All current non-employee directors as a group (4
persons)
|
|
120,000
|
All employees and consultants, including current
officers who
|
|
-
|
are not executive officers, as a group
|
|
|
(1) All options were granted at an exercise price per
share equal to the fair market value on the date of grant.
Approval of the 2000 Stock Incentive Plan, as amended and restated,
requires the affirmative vote of a majority of the shares present and voting at
the Annual Meeting. Unless marked to the contrary, proxies received will be
voted "FOR" approval of the 2000 Stock Incentive Plan, as amended and
restated.
Your Board of Directors recommends a vote FOR approval of the 2000
Stock Incentive Plan, amended and restated.
PROPOSAL 4
PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
250,000,000 TO 80,000,000 SHARES
The Board of
Directors has adopted, subject to stockholder approval, an amendment to the
Company's Amended and Restated Certificate of Incorporation to decrease the
number of authorized shares of Common Stock from 250,000,000 to 80,000,000
shares. The Board of Directors recommends that the Company's stockholders
approve this amendment.
As of March 26, 2010
the Company had 42,518,162 shares of Common Stock outstanding. An additional
8,845,524 shares were reserved for future issuance under the Company's
stockholder approved equity compensation plans, of which 4,763,283 shares were
reserved for issuance upon exercise of outstanding options to purchase shares of
Common Stock and 4,082,241 shares were reserved and available for future grant
or purchase. In addition, as of March 26, 2010, 820,239 shares are
reserved for issuance under the employee stock purchase plan or
ESPP.
The Board of Directors believes that
it is advisable and in the best interests of the Company and our stockholders to
decrease the number of authorized shares of Common Stock. The Board of Directors
believes there are a sufficient number of shares of Common Stock authorized to
issue in the future under the 2000 Plan and ESPP, including under the evergreen
provisions of each, and a reduction in the number of authorized shares of Common
Stock will allow the Company to reduce the fees it pays annually to the State of
Delaware.
The Board of Directors believes that
following the reduction in authorized Common Stock, the Company will still have
sufficient authorized Common Stock remaining available to enable us to respond
to potential business opportunities and to pursue important objectives that may
present themselves from time to time. The Board of Directors also believes that
reducing the number of available Common shares will still provide us with the
flexibility to issue Common Stock for proper corporate purposes that may be
identified by the Board of Directors from time to time, such as strategic
business relationships, financings or acquisitions, as well as to continue to
attract and retain talented directors, officers, employees and consultants
through the grant of stock options and other stock-based
incentives.
The authorized shares of Common Stock
in excess of those issued, or reserved for issuance, continue to be available
for issuance at such times and for such corporate purposes as the Board of
Directors may deem advisable without further action by our stockholders, except
as may be required by applicable laws or the rules of any stock exchange or
stock market on which the securities may be listed or traded. Upon issuance,
such shares will have the same rights as the outstanding shares of Common Stock.
Holders of Common Stock do not have preemptive rights.
The text of Paragraph A of
Article IV of the Company's Amended and Restated Certificate of
Incorporation, as it is proposed to be amended pursuant to this proposal, is as
follows:
A.
Classes of Stock
.
The total number of shares of all
classes of capital stock which the corporation shall have authority to issue is
eighty-five million (85,000,000), of which eighty million (80,000,000) shares of
the par value of one tenth of one cent ($0.001) each shall be Common Stock (the
"Common Stock") and five million (5,000,000) shares of the par value of one
tenth of one cent ($0.001) each shall be Preferred Stock (the "Preferred
Stock"). The number of authorized shares of Common Stock or Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of
the then outstanding shares of Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such Preferred Stock holders is required pursuant to the provisions established
by the Board of Directors of this corporation (the "Board of Directors") in the
resolution or resolutions providing for the issue of such Preferred Stock, and
if such holders of such Preferred Stock are so entitled to vote thereon, then,
except as may otherwise be set forth in this Restated Certificate of
Incorporation, the only stockholder approval required shall be the affirmative
vote of a majority of the combined voting power of the Common Stock and the
Preferred Stock so entitled to vote.
The affirmative vote of the holders
of a majority of the shares of the Company's Common Stock outstanding as of the
Record Date is required to approve this proposal. If approved by the
stockholders, the proposed amendment to the Company's Amended and Restated
Certificate of Incorporation will become effective upon the filing of a
Certificate of Amendment with the Secretary of State of the State of Delaware,
which will occur as soon as reasonably practicable.
The Board of
Directors recommends a vote "FOR" the amendment to the Company's Amended and
Restated Certificate of Incorporation to decrease the number of authorized
shares of Common Stock
.
STOCKHOLDER PROPOSALS FOR THE 2011 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be
presented at the Company's 2011 Annual Meeting must be received by the Secretary
of the Company no later than December 17, 2010 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 2011 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, 2009, all
Section 16(a) filing requirements applicable to its officers, directors and
10% stockholders were met in a timely manner during fiscal year
2009.
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 19, 2010
The Company's 2009 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 26, 2010, the
stockholder was entitled to vote at the Annual Meeting.
PROXY
ALLIANCE FIBER OPTIC PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby authorizes PETER C. CHANG or ANITA K. HO, as
Proxies with full power in each to act without the other and with the power of
substitution in each, to represent and to vote all the shares of stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Alliance Fiber Optic Products, Inc. (the "Company" to be held at the office of
the Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale,
California, 94089 on May 14, 2010 at 2:00 p.m., or at any postponement or
adjournment thereof, and instructs said Proxies to vote as follows:
Shares represented by this
proxy will be voted as directed by the stockholder.
If no
such directions are indicated, the Proxies will have the authority to vote FOR
the election of directors, FOR Proposals 2, 3, and 4, and in accordance with the
discretion of the Proxies on any other matters as may properly come before the
Annual Meeting.
SEE REVERSE
SIDE
|
CONTINUED AND TO BE SIGNED ON REVERSE
SIDE
|
SEE REVERSE
SIDE
|
DETACH HERE
x
Please mark
The
Board of Directors recommends a vote FOR the election of directors and
FOR
votes as
in
Proposals 2, 3, and 4.
this example.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
given, this proxy will be voted "FOR" the election of directors and "FOR"
Proposals 2, 3, and 4.
1. To elect Mr. Peter C. Chang and Mr. Richard Black as Class I
directors to serve until the 2013 Annual Meeting of Stockholders or until their
successors are duly elected and qualified.
FOR
WITHHOLD
ALL
AUTHORITY
NOMINEES
o
o
to vote for all
nominees
Instruction: To withhold authority to vote for either individual
nominee, write that nominee¡¦s name below:
______________________________________
2. To
ratify the appointment
of
FOR AGAINST ABSTAIN
Stonefield Josephson,
Inc.
o o o
as the Company's independent
registered public accountants.
3. To approve adoption of
the
FOR AGAINST ABSTAIN
Company's 2000 Stock
Incentive
o
o o
Plan, as amended and restated.
4. To
approve an amendment
to
FOR AGAINST ABSTAIN
the Company's Amended
and
o o o
Restated Certificate of Incorporation
to decrease the number of shares of
Common Stock authorized for issuance from
250,000,000 shares to 80,000,000 shares.
5. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any postponement or
adjournment thereof.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
MARK
HERE
FOR
ADDRESS
CHANGE
AND
o
NOTE
BELOW
Please sign where indicated below. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by an
authorized officer. If a partnership, please sign in full partnership
name by an authorized person.
Signature: _______________________ Date: _________
______________________________________________
(Signature if held jointly)
ALLIANCE FIBER OPTIC PRODUCTS, INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on September 7,
2000,
and amended and restated by the Board of Directors on
March 18, 2010)
Table of Contents
Page
i
iv
ALLIANCE FIBER OPTIC PRODUCTS, INC.
2000 STOCK INCENTIVE PLAN
(As amended and restated on March 18, 2010)
SECTION 1.
|
ESTABLISHMENT AND
PURPOSE.
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The Plan was adopted by the Board of Directors effective September
7, 2000 (the "Effective Date"). The Plan was amended and restated on
March 18, 2010, as applicable to Awards granted on or after such date. The
purpose of the Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging Employees, Outside Directors
and Consultants to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and (c) linking Employees, Outside Directors and
Consultants directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for Awards in the form of
restricted shares, stock units, options (which may constitute incentive stock
options or nonstatutory stock options) or stock appreciation
rights.
(a)
"Affiliate".
shall mean any entity other than a Subsidiary, if the Company and/or
one or more Subsidiaries own not less than 50% of such
entity.
(b)
"Award".
shall mean any award of an Option, a SAR, a Restricted Share or a
Stock Unit under the Plan.
(c)
"Board of Directors".
shall mean the Board of Directors of the Company, as constituted
from time to time.
(d)
"Change in Control".
shall mean the occurrence of any of the following
events:
(i)
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A change in the composition of the Board of Directors occurs,
as a result of which fewer than one-half of the incumbent directors are
directors who either:
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(A)
Had been directors of the Company on the "look-back date" (as
defined below) (the "original directors");
or
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(B)
Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time
of the election or nomination and the directors whose election or
nomination was previously so approved (the "continuing directors");
or
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(ii)
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Any "person" (as defined below) who by the acquisition or
aggregation of securities, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company¡¦s then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote
at elections of directors (the "Base Capital Stock"); except that any
change in the relative beneficial ownership of the Company's securities by
any person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter in
such person's ownership of securities, shall be disregarded until such
person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company;
or
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1
(iii)
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The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such
merger, consolidation or other reorganization 50% or more of the voting
power of the outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity; or
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(iv)
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The sale, transfer or other disposition of all or
substantially all of the Company's
assets.
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For purposes of subsection (d)(i) above, the term "look-back" date
shall mean the later of (1) the Effective Date or (2) the date 24 months prior
to the date of the event that may constitute a Change in Control.
For purposes of subsection (d)(ii)) above, the term "person" shall
have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange
Act but shall exclude (1) a trustee or other fiduciary holding securities under
an employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the
Stock.
Any other provision of this Section 2(d) notwithstanding, a
transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction, and a Change in
Control shall not be deemed to occur if the Company files a registration
statement with the United States Securities and Exchange Commission for the
initial offering of Stock to the public.
(e)
"Code".
shall mean the Internal Revenue Code of 1986, as
amended.
(f)
"Committee".
shall mean the Compensation Committee as designated by the
Board of Directors, which is authorized to administer the Plan, as described in
Section 3 hereof.
(g)
"Company".
shall mean Alliance Fiber Optic Products, Inc., a Delaware
corporation.
(h)
"Consultant".
shall mean a consultant or advisor who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor (not including service as a member of the Board of
Directors) or a member of the board of directors of a Parent or a Subsidiary, in
each case who is not an Employee.
(i)
"Employee".
shall mean any individual who is a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate.
(j)
"Exchange Act".
shall mean the Securities Exchange Act of 1934, as
amended.
(k)
"Exercise Price".
shall mean, in the case of an Option, the amount for which one Share
may be purchased upon exercise of such Option, as specified in the applicable
Stock Option Agreement. "Exercise Price," in the case of a SAR, shall mean an
amount, as specified in the applicable SAR Agreement, which is subtracted from
the Fair Market Value of one Share in determining the amount payable upon
exercise of such SAR.
(l)
"Fair Market Value".
with respect to a Share, shall mean the market price of one
Share, determined by the Committee as follows:
(i)
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If the Stock was traded over-the-counter on the date in
question, then the Fair Market Value shall be equal to the last
transaction price quoted for such date by the OTC Bulletin Board or, if
not so quoted, shall be equal to the mean between the last reported
representative bid and asked prices quoted for such date by the principal
automated inter-dealer quotation system on which the Stock is quoted or,
if the Stock is not quoted on any such system, by the Pink Quote
system;
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(ii)
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If the Stock was traded on any established stock exchange
(such as the New York Stock Exchange, The Nasdaq Global Market or The
Nasdaq Global Select Market) or national market system on the date in
question, then the Fair Market Value shall be equal to the closing price
reported for such date by the applicable exchange or system;
and
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(iii)
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If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
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In all cases, the determination of Fair Market Value by the
Committee shall be conclusive and binding on all persons.
(m)
"ISO".
shall mean an employee incentive stock option described in
Section 422 of the Code.
(n)
"Nonstatutory Option".
or
"NSO"
shall mean an employee stock option that is not an
ISO.
(o)
"Offeree".
shall mean an individual to whom the Committee has offered the right
to acquire Shares under the Plan (other than upon exercise of an
Option).
(p)
"Option".
shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(q)
"Optionee".
shall mean an individual or estate who holds an Option or
SAR.
(r)
"Outside Director".
shall mean a member of the Board of Directors who is not a
common-law employee of, or paid consultant to, the Company, a Parent or a
Subsidiary.
(s)
"Parent".
shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be a Parent commencing as of such
date.
(t)
"Participant".
shall mean an individual or estate who holds an
Award.
(u)
"Plan".
shall mean this 2000 Stock Incentive Plan of Alliance Fiber Optic
Products, Inc., as amended from time to time.
(v)
"Purchase Price".
shall mean the consideration for which one Share may be
acquired under the Plan (other than upon exercise of an Option), as specified by
the Committee.
(w)
"Restricted Share".
shall mean a Share awarded under the Plan.
(x)
"Restricted Share Agreement".
shall mean the agreement between the Company and the recipient
of a Restricted Share which contains the terms, conditions and restrictions
pertaining to such Restricted Shares.
(y)
"SAR".
shall mean a stock appreciation right granted under the
Plan.
(z)
"SAR Agreement".
shall mean the agreement between the Company and an Optionee
which contains the terms, conditions and restrictions pertaining to his or her
SAR.
(aa)
"Service".
shall mean service as an Employee, Consultant or Outside
Director, subject to such further limitations as may be set forth in the Plan or
the applicable Stock Option Agreement, SAR Agreement, Restricted Share Agreement
or Stock Unit Agreement. Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued Service crediting, or
when continued Service crediting is required by applicable
law. However, for purposes of determining whether an Option is
entitled to ISO status, an Employee's employment will be treated as terminating
90 days after such Employee went on leave, unless such Employee's right to
return to active work is guaranteed by law or by a contract. Service terminates
in any event when the approved leave ends, unless such Employee immediately
returns to active work. The Company determines which leaves of
absence count toward Service, and when Service terminates for all purposes under
the Plan.
(bb)
"Share".
shall mean one share of Stock, as adjusted in accordance with
Section 11 (if applicable).
(cc)
"Stock".
shall mean the Common Stock of the
Company.
(dd)
"Stock Option Agreement".
shall mean the agreement between the Company and an Optionee
that contains the terms, conditions and restrictions pertaining to such
Option.
(ee)
"Stock Unit".
shall mean a bookkeeping entry representing the Company's
obligation to deliver one Share (or distribute cash) on a future date in
accordance with the provisions of a Stock Unit Agreement.
(ff)
"Stock Unit Agreement".
shall mean the agreement between the Company and the recipient
of a Stock Unit which contains the terms, conditions and restrictions pertaining
to such Stock Unit.
(gg)
"Subsidiary".
shall mean any corporation, if the Company and/or one or more
other Subsidiaries own not less than 50% of the total combined voting power of
all classes of outstanding stock of such corporation. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
(hh)
"Total and Permanent Disability".
shall mean any permanent and total disability as
defined by section 22(e)(3) of the Code.
SECTION 3.
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ADMINISTRATION.
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(a)
Committee Composition.
The Plan shall be administered by the Board or a Committee appointed
by the Board. The Committee shall consist of two or more directors of the
Company. In addition, to the extent required by the Board, the composition of
the Committee shall satisfy (i) such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans intended to
qualify for exemption under Rule 16b-3 (or its successor) under the Exchange
Act; and (ii) such requirements as the Internal Revenue Service may establish
for outside directors acting under plans intended to qualify for exemption under
Section 162(m)(4)(C) of the Code.
(b)
Committee for Non-Officer Grants.
The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
satisfy the requirements of Section 3(a), who may administer the Plan with
respect to Employees who are not considered officers or directors of the Company
under Section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and may determine all terms of such grants. Within the limitations of
the preceding sentence, any reference in the Plan to the Committee shall include
such committee or committees appointed pursuant to the preceding sentence. To
the extent permitted by applicable laws, the Board of Directors may also
authorize one or more officers of the Company to designate Employees, other than
officers under Section 16 of the Exchange Act, to receive Awards and/or to
determine the number of such Awards to be received by such persons; provided,
however, that the Board of Directors shall specify the total number of Awards
that such officers may so award.
(c)
Committee Procedures.
The Board of Directors shall designate one of the members of the
Committee as chairman. The Committee may hold meetings at such times and places
as it shall determine. The acts of a majority of the Committee members present
at meetings at which a quorum exists, or acts reduced to or approved in writing
(including via email) by all Committee members, shall be valid acts of the
Committee.
(d)
Committee Responsibilities.
Subject to the provisions of the Plan, the Committee shall have full
authority and discretion to take the following actions:
(i)
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To interpret the Plan and to apply its
provisions;
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(ii)
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To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
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(iii)
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To adopt, amend or terminate sub-plans established for the
purpose of satisfying applicable foreign laws including qualifying for
preferred tax treatment under applicable foreign tax
laws;
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(iv)
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To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the
Plan;
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(v)
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To determine when Awards are to be granted under the
Plan;
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(vi)
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To select the Offerees and
Optionees;
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(vii)
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To determine the number of Shares to be made subject to each
Award;
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(viii)
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To prescribe the terms and conditions of each Award, including
(without limitation) the Exercise Price and Purchase Price, and the
vesting or duration of the Award (including accelerating the vesting of
Awards, either at the time of the Award or thereafter, without the consent
of the Participant), to determine whether an Option is to be classified as
an ISO or as a Nonstatutory Option, and to specify the provisions of the
agreement relating to such Award;
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(ix)
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To amend any outstanding Award agreement, subject to
applicable legal restrictions and to the consent of the Participant if the
Participant's rights or obligations would be materially
impaired;
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(x)
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To prescribe the consideration for the grant of each Award or
other right under the Plan and to determine the sufficiency of such
consideration;
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(xi)
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To determine the disposition of each Award or other right
under the Plan in the event of a Participant's divorce or dissolution of
marriage;
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(xii)
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To determine whether Awards under the Plan will be granted in
replacement of other grants under an incentive or other compensation plan
of an acquired business;
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(xiii)
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To correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award
agreement;
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(xiv)
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To establish or verify the extent of satisfaction of any
performance goals or other conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award;
and
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(xv)
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To take any other actions deemed necessary or advisable for
the administration of the Plan.
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Subject to the requirements of applicable law, the Committee may
designate persons other than members of the Committee to carry out its
responsibilities and may prescribe such conditions and limitations as it may
deem appropriate, except that the Committee may not delegate its authority with
regard to the selection for participation of or the granting of Options or other
rights under the Plan to persons subject to Section 16 of the Exchange Act. All
decisions, interpretations and other actions of the Committee shall be final and
binding on all Offerees, all Optionees, and all persons deriving their rights
from an Offeree or Optionee. No member of the Committee shall be liable for any
action that he has taken or has failed to take in good faith with respect to the
Plan, any Option, or any right to acquire Shares under the Plan.
(a)
General Rule.
Only common-law employees of the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. Only Employees, Consultants and Outside
Directors shall be eligible for the grant of Restricted Shares, Stock Units,
Nonstatutory Options or SARs.
(b)
Automatic Grants to Outside Directors.
(i)
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Each Outside Director who first joins the Board of Directors
on or after the Effective Date, and who was not previously an Employee,
shall receive a Nonstatutory Option, subject to approval of the Plan by
the Company's stockholders, to purchase 30,000 Shares (subject to
adjustment under Section 11) on the date of his or her election to the
Board of Directors. Each Option granted under this Section 4(b)(i) shall
become exercisable in thirty-six (36) equal monthly installments on each
of the first thirty-six (36) months after the date of grant.
Notwithstanding the foregoing, each Option shall become exercisable in
full in the event that a Change in Control occurs with respect to the
Company.
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(ii)
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On the first business day following the third anniversary
of the Outside Director's election to the Board of Directors,
each Outside Director who will continue serving as a member of the Board
of Directors thereafter shall receive an Option to purchase 30,000 Shares
(subject to adjustment under Section 11). Each Option granted under this
Section 4(b)(ii) shall become exercisable in thirty-six (36) equal monthly
installments on each of the first thirty-six (36) months after the date of
grant. Notwithstanding the foregoing, each Option shall become exercisable
in full in the event that a Change in Control occurs with respect to the
Company.
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(iii)
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The Exercise Price of all Nonstatutory Options granted to an
Outside Director under this Section 4(b) shall be equal to 100% of the
Fair Market Value of a Share on the date of grant, payable in one of the
forms described in Section 8(a), (b) or
(d).
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(iv)
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All Nonstatutory Options granted to an Outside Director under
this Section 4(b) shall terminate on the earlier of (A) the day before the
tenth anniversary of the date of grant of such Options or (B) the date
twelve months after the termination of such Outside Director's Service for
any reason; provided, however, that any such Options that are not vested
upon the termination of the Outside Director's Service as a member of the
Board of Directors for any reason shall terminate immediately and may not
be exercised.
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(c)
Ten-Percent Stockholders.
An Employee who owns more than 10% of the total combined voting
power of all classes of outstanding stock of the Company, a Parent or Subsidiary
shall not be eligible for the grant of an ISO unless such grant satisfies the
requirements of Section 422(c)(5) of the Code.
(d)
Attribution Rules.
For purposes of Section 4(c) above, in determining stock ownership,
an Employee shall be deemed to own the stock owned, directly or indirectly, by
or for such Employee's brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its stockholders, partners or beneficiaries.
(e)
Outstanding Stock.
For purposes of Section 4(c) above, "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant.
"Outstanding stock" shall not include shares authorized for issuance under
outstanding options held by the Employee or by any other
person.
SECTION 5.
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STOCK SUBJECT TO PLAN.
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(a)
Basic Limitation.
Shares offered under the Plan shall be authorized but unissued
Shares or treasury Shares. The aggregate number of Shares authorized for
issuance as Awards under the Plan shall not exceed 1,500,000 Shares, plus an
annual increase on January 1 of each year commencing in 2001, in an amount equal
to the lesser of (i) 1,700,000 Shares, (ii) 5% of the fully diluted outstanding
shares of Common Stock of the Corporation on such date or (iii) a lesser amount
determined by the Board. The limitations of this Section 5(a) shall be subject
to adjustment pursuant to Section 11. The number of Shares that are subject to
Options or other Awards outstanding at any time under the Plan shall not exceed
the number of Shares which then remain available for issuance under the Plan.
The Company, during the term of the Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the requirements of the
Plan.
(b)
Section 162(m) Award Limitation.
Notwithstanding any contrary provisions of the Plan, and subject to
the provisions of Section 11, no Participant may receive Options, SARs,
Restricted Shares or Stock Units under the Plan in any calendar year that relate
to an aggregate of more than 1,000,000 Shares, and no more than two times this
amount in the first year of employment, and the maximum aggregate amount of cash
that may be paid to any Participant during any calendar year with respect to
Awards payable in cash shall be $1,000,000.
(c)
Additional Shares.
If Restricted Shares or Shares issued upon the exercise of Options
are forfeited, then such Shares shall again become available for Awards under
the Plan. If Stock Units, Options or SARs are forfeited or terminate for any
reason before being exercised or settled, or an Award is settled in cash without
the delivery of Shares to the holder, then any Shares subject to the Award shall
again become available for Awards under the Plan. Only the number of
Shares (if any) actually issued in settlement of Awards shall reduce the number
available in Section 5(a) and the balance shall again become available for
Awards under the Plan. Any Shares tendered or withheld to satisfy the
grant or exercise price or tax withholding obligation pursuant to any Award
shall again become available for Awards under the
Plan. Notwithstanding the foregoing and, subject to adjustment as
provided in Section 11, the maximum number of Shares that may be issued upon the
exercise of ISOs will equal the aggregate Share number stated in Section 5(a),
plus, to the extent allowable under Section 422 of the Code and the Treasury
Regulations promulgated thereunder, any Shares that become available for
issuance under the Plan pursuant this Section 5(c).
SECTION 6.
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RESTRICTED SHARES.
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(a)
Restricted Stock Agreement.
Each grant of Restricted Shares under the Plan shall be
evidenced by a Restricted Stock Agreement between the recipient and the Company.
Such Restricted Shares shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Restricted Stock Agreements entered into under the
Plan need not be identical.
(b)
Payment for Awards.
Restricted Shares may be sold or awarded under the Plan for
such consideration as the Committee may determine, including (without
limitation) cash, cash equivalents, full-recourse promissory notes, past
services and future services.
(c)
Vesting.
Each Award of Restricted Shares may or may not be subject to
vesting. Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. A Restricted Stock
Agreement may provide for accelerated vesting in the event of the Participant's
death, disability or retirement or other events. The Committee may determine, at
the time of granting Restricted Shares of thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Change in Control
occurs with respect to the Company.
(d)
Voting and Dividend Rights.
The holders of Restricted Shares awarded under the Plan shall have
the same voting, dividend and other rights as the Company's other stockholders.
A Restricted Stock Agreement, however, may require that the holders of
Restricted Shares invest any cash dividends received in additional Restricted
Shares. Such additional Restricted Shares shall be subject to the same
conditions and restrictions as the Award with respect to which the dividends
were paid.
(e)
Restrictions on Transfer of Shares
. Restricted Shares shall be subject to such rights of repurchase,
rights of first refusal or other restrictions as the Committee may determine.
Such restrictions shall be set forth in the applicable Restricted Stock
Agreement and shall apply in addition to any general restrictions that may apply
to all holders of Shares.
SECTION 7.
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TERMS AND CONDITIONS OF
OPTIONS.
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(a)
Stock Option Agreement
. Each grant of an Option under the Plan shall be evidenced by a
Stock Option Agreement between the Optionee and the Company. Such Option shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Option Agreement.
The Stock Option Agreement shall specify whether the Option is an ISO or an NSO.
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical.
(b)
Number of Shares
. Each Stock Option Agreement shall specify the number of Shares
that are subject to the Option and shall provide for the adjustment of such
number in accordance with Section 11.
(c)
Exercise Price
. Each Stock Option Agreement shall specify the Exercise Price. The
Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of
a Share on the date of grant, except as otherwise provided in 4(c), and the
Exercise Price of an NSO shall not be less 100% of the Fair Market Value of a
Share on the date of grant. Notwithstanding the foregoing, Options
may be granted with an Exercise Price of less than 100% of the Fair Market Value
per Share on the date of grant pursuant to a transaction described in, and in a
manner consistent with, Section 424(a) of the Code. Subject to the
foregoing in this Section 7(c), the Exercise Price under any Option shall be
determined by the Committee in its sole discretion. The Exercise Price shall be
payable in one of the forms described in Section 8.
(d)
Withholding Taxes
. As a condition to the exercise of an Option, the Optionee shall
make such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with such exercise. The Optionee shall also make such arrangements as
the Committee may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e)
Exercisability and Term
. Each Stock Option Agreement shall specify the date when all or any
installment of the Option is to become exercisable. The Stock Option Agreement
shall also specify the term of the Option; provided that the term of an ISO
shall in no event exceed 10 years from the date of grant (five years for ISOs
granted to Employees described in Section 4(c)). A Stock Option Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability, or retirement or other events and may provide for expiration prior
to the end of its term in the event of the termination of the Optionee's
Service. Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are
forfeited. Subject to the foregoing in this Section 7(e), the Committee at its
sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire.
(f)
Exercise of Options
. Each Stock Option Agreement shall set forth the extent to which
the Optionee shall have the right to exercise the Option following termination
of the Optionee's Service with the Company and its Subsidiaries, and the right
to exercise the Option of any executors or administrators of the Optionee's
estate or any person who has acquired such Option(s) directly from the Optionee
by bequest or inheritance. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of Service.
(g)
Effect of Change in Control
. The Committee may determine, at the time of granting an Option or
thereafter, that such Option shall become exercisable as to all or part of the
Shares subject to such Option in the event that a Change in Control occurs with
respect to the Company.
(h)
No Rights as a Stockholder
. An Optionee, or a transferee of an Optionee, shall have no rights
as a stockholder with respect to any Shares covered by his Option until the date
of the issuance of a stock certificate for such Shares. No adjustments shall be
made, except as provided in Section 11.
(i)
Modification, Extension and Renewal of Options
. Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding options or may accept the cancellation of
outstanding options (to the extent not previously exercised), whether or not
granted hereunder, in return for the grant of new Options for the same or a
different number of Shares and at the same or a different Exercise Price, or in
return for the grant of the same or a different number of Shares. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, materially impair his or her rights or obligations under such
Option.
(j)
Restrictions on Transfer of Shares
. Any Shares issued upon exercise of an Option shall be subject to
such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option Agreement and
shall apply in addition to any general restrictions that may apply to all
holders of Shares.
(k)
Buyout Provisions
. The Committee may at any time (a) offer to buy out for a payment
in cash or cash equivalents an Option previously granted or (b) authorize an
Optionee to elect to cash out an Option previously granted, in either case at
such time and based upon such terms and conditions as the Committee shall
establish.
SECTION 8.
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PAYMENT FOR SHARES.
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(a)
General Rule
. The entire Exercise Price or Purchase Price of Shares issued under
the Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Section 8(b) through
Section 8(g) below.
(b)
Surrender of Stock
. To the extent that a Stock Option Agreement so provides, payment
may be made all or in part by surrendering, or attesting to the ownership of,
Shares which have already been owned by the Optionee or his representative. Such
Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan. The Optionee shall not surrender, or attest
to the ownership of, Shares in payment of the Exercise Price if such action
would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Option for financial reporting
purposes.
(c)
Services Rendered
. At the discretion of the Committee, Shares may be awarded under
the Plan in consideration of services rendered to the Company or a Subsidiary.
If Shares are awarded without the payment of a Purchase Price in cash, the
Committee shall make a determination (at the time of the Award) of the value of
the services rendered by the Offeree and the sufficiency of the consideration to
meet the requirements of Section 6(b).
(d)
Cashless Exercise
. To the extent that a Stock Option Agreement so provides, payment
may be made all or in part by delivery (on a form prescribed by the Committee)
of an irrevocable direction to a securities broker to sell Shares and to deliver
all or part of the sale proceeds to the Company in payment of the aggregate
Exercise Price.
(e)
Exercise/Pledge
. To the extent that a Stock Option Agreement so provides, payment
may be made all or in part by delivery (on a form prescribed by the Committee)
of an irrevocable direction to a securities broker or lender to pledge Shares,
as security for a loan, and to deliver all or part of the loan proceeds to the
Company in payment of the aggregate Exercise Price.
(f)
Promissory Note
. To the extent that a Stock Option Agreement or Restricted Stock
Agreement so provides, payment may be made all or in part by delivering (on a
form prescribed by the Company) a full-recourse promissory
note.
(g)
Other Forms of Payment
. To the extent that a Stock Option Agreement or Restricted Stock
Agreement so provides, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
(h)
Limitations under Applicable Law
. Notwithstanding anything herein or in a Stock Option Agreement or
Restricted Stock Agreement to the contrary, payment may not be made in any form
that is unlawful, as determined by the Committee in its sole
discretion.
SECTION 9.
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STOCK APPRECIATION
RIGHTS.
|
(a)
SAR Agreement
. Each grant of a SAR under the Plan shall be evidenced by a SAR
Agreement between the Optionee and the Company. Such SAR shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various SAR Agreements entered
into under the Plan need not be identical.
(b)
Number of Shares
. Each SAR Agreement shall specify the number of Shares to which the
SAR pertains and shall provide for the adjustment of such number in accordance
with Section 11.
(c)
Exercise Price
. Each SAR Agreement shall specify the Exercise
Price. The Exercise Price of a SAR shall not be less than 100% of the
Fair Market Value of a Share on the date of grant. Notwithstanding
the foregoing, SARs may be granted with an Exercise Price of less than 100% of
the Fair Market Value per Share on the date of grant pursuant to a transaction
described in, and in a manner consistent with, Section 424(a) of the
Code. Subject to the foregoing in this Section 9(c), the Exercise
Price under any SAR shall be determined by the Committee in its sole
discretion.
(d)
Exercisability and Term
. Each SAR Agreement shall specify the date when all or any
installment of the SAR is to become exercisable. The SAR Agreement shall also
specify the term of the SAR. A SAR Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. SARs may be awarded in
combination with Options, and such an Award may provide that the SARs will not
be exercisable unless the related Options are forfeited. A SAR may be included
in an ISO only at the time of grant but may be included in an NSO at the time of
grant or thereafter. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.
(e)
Effect of Change in Control
. The Committee may determine, at the time of granting a SAR or
thereafter, that such SAR shall become fully exercisable as to all Common Shares
subject to such SAR in the event that a Change in Control occurs with respect to
the Company.
(f)
Exercise of SARs
. Upon exercise of a SAR, the Optionee (or any person having the
right to exercise the SAR after his or her death) shall receive from the Company
(a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee
shall determine. The amount of cash and/or the Fair Market Value of Shares
received upon exercise of SARs shall, in the aggregate, be equal to the amount
by which the Fair Market Value (on the date of surrender) of the Shares subject
to the SARs exceeds the Exercise Price.
(g)
Modification or Assumption of SARs
. Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding SARs or may accept the cancellation of outstanding
SARs (whether granted by the Company or by another issuer) in return for the
grant of new SARs for the same or a different number of shares and at the same
or a different exercise price. The foregoing notwithstanding, no modification of
a SAR shall, without the consent of the holder, materially impair his or her
rights or obligations under such SAR.
(h)
Buyout Provisions
.
The Committee may at any time (a) offer to buy out for a payment in cash or cash
equivalents a SAR previously granted, or (b) authorize an Optionee to elect to
cash out a SAR previously granted, in either case at such time and based upon
such terms and conditions as the Committee shall establish.
(a)
Stock Unit Agreement
. Each grant of Stock Units under the Plan shall be evidenced by a
Stock Unit Agreement between the recipient and the Company. Such Stock Units
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various Stock Unit Agreements entered into under the Plan need not be
identical.
(b)
Payment for Awards
. To the extent that an Award is granted in the form of Stock Units,
no cash consideration shall be required of the Award
recipients.
(c)
Vesting Conditions
. Each Award of Stock Units may or may not be subject to vesting.
Vesting shall occur, in full or in installments, upon satisfaction of the
conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of granting Stock Units or thereafter, that all or part of such Stock Units
shall become vested in the event that a Change in Control occurs with respect to
the Company.
(d)
Voting and Dividend Rights
. The holders of Stock Units shall have no voting rights. Prior to
settlement or forfeiture, any Stock Unit awarded under the Plan may, at the
Committee's discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or in a
combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions (including
without limitation, any forfeiture conditions) as the Stock Units to which they
attach.
(e)
Form and Time of Settlement of Stock Units
. Settlement of vested Stock Units may be made in the form of (a)
cash, (b) Shares or (c) any combination of both, as determined by the Committee.
The actual number of Stock Units eligible for settlement may be larger or
smaller than the number included in the original Award, based on predetermined
performance factors. Methods of converting Stock Units into cash may include
(without limitation) a method based on the average Fair Market Value of Shares
over a series of trading days. A Stock Unit Agreement may provide that vested
Stock Units may be settled in a lump sum or in installments. A Stock Unit
Agreement may provide that the distribution may occur or commence when all
vesting conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend equivalents.
Until an Award of Stock Units is settled, the number of such Stock Units shall
be subject to adjustment pursuant to Section 11.
(f)
Death of Recipient
. Any Stock Units Award that becomes payable after the recipient's
death shall be distributed to the recipient's beneficiary or beneficiaries. Each
recipient of a Stock Units Award under the Plan shall designate one or more
beneficiaries for this purpose by filing the prescribed form with the Company. A
beneficiary designation may be changed by filing the prescribed form with the
Company at any time before the Award recipient's death. If no beneficiary was
designated or if no designated beneficiary survives the Award recipient, then
any Stock Units Award that becomes payable after the recipient's death shall be
distributed to the recipient's estate.
(g)
Creditors' Rights
. A holder of Stock Units shall have no rights other than those of a
general creditor of the Company. Stock Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Stock Unit Agreement.
SECTION 11.
|
ADJUSTMENT OF SHARES.
|
(a)
Adjustments
. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the price
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
appropriate and equitable adjustments in:
(i)
|
The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Section
5;
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(ii)
|
The limitations set forth in Sections 5(a) and
(b);
|
(iii)
|
The number of NSOs to be granted to Outside Directors under
Section 4(b);
|
(iv)
|
The number of Shares covered by each outstanding Option and
SAR;
|
(v)
|
The Exercise Price under each outstanding Option and SAR;
and
|
(vi)
|
The number of Stock Units included in any prior Award which
has not yet been settled.
|
(b)
Dissolution or Liquidation
. To the extent not previously exercised or settled, Options, SARs
and Stock Units shall terminate immediately prior to the dissolution or
liquidation of the Company.
(c)
Reorganizations
. In the event that the Company is a party to a merger or other
reorganization, outstanding Awards shall be subject to the agreement of merger
or reorganization. Subject to compliance with Section 409A of the Code, such
agreement shall provide for:
(i)
|
The continuation of the outstanding Awards by the Company, if
the Company is a surviving
corporation;
|
(ii)
|
The assumption of the outstanding Awards by the surviving
corporation or its parent or
subsidiary;
|
(iii)
|
The substitution by the surviving corporation or its parent or
subsidiary of its own awards for the outstanding
Awards;
|
(iv)
|
Full exercisability or vesting and accelerated expiration of
the outstanding Awards; or
|
(v)
|
Settlement of the intrinsic value of the outstanding Awards in
cash or cash equivalents followed by cancellation of such
Awards.
|
(d)
Reservation of Rights
. Except as provided in this Section 11, a Participant shall have no
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend or any other increase or decrease in the
number of shares of stock of any class. Any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of Shares subject to an Award. The
grant of an Award pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or
assets. In the event of any change affecting the Shares or the
Exercise Price of Shares subject to an Award, including a merger or other
reorganization, for reasons of administrative convenience, the Company in its
sole discretion may refuse to permit the exercise of any Award during a period
of up to thirty (30) days prior to the occurrence of such
event.
SECTION 12.
|
DEFERRAL OF AWARDS.
|
(a)
Committee Powers
. Subject to compliance with Section 409A of the Code, the Committee
(in its sole discretion) may permit or require a Participant
to:
(i)
|
Have cash that otherwise would be paid to such Participant as
a result of the exercise of a SAR or the settlement of Stock Units
credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's
books;
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(ii)
|
Have Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted into
an equal number of Stock Units; or
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(iii)
|
Have Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the
settlement of Stock Units converted into amounts credited to a deferred
compensation account established for such Participant by the Committee as
an entry on the Company's books. Such amounts shall be determined by
reference to the Fair Market Value of such Shares as of the date when they
otherwise would have been delivered to such
Participant.
|
(b)
General Rules
. A deferred compensation account established under this Section 12
may be credited with interest or other forms of investment return, as determined
by the Committee. A Participant for whom such an account is established shall
have no rights other than those of a general creditor of the Company. Such an
account shall represent an unfunded and unsecured obligation of the Company and
shall be subject to the terms and conditions of the applicable agreement between
such Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 12.
SECTION 13.
|
AWARDS UNDER OTHER
PLANS.
|
The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Shares issued under this Plan. Such Shares
shall be treated for all purposes under the Plan like Shares issued in
settlement of Stock Units and shall, when issued, reduce the number of Shares
available under Section 5.
SECTION 14.
|
PAYMENT OF DIRECTOR'S FEES IN
SECURITIES.
|
(a)
Effective Date
. No provision of this Section 14 shall be effective unless and
until the Board has determined to implement such provision.
(b)
Elections to Receive NSOs, Restricted Shares or Stock
Units
. An Outside Director may elect to receive his or her annual
retainer payments and/or meeting fees from the Company in the form of cash,
NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined
by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under
the Plan. An election under this Section 14 shall be filed with the Company on
the prescribed form.
(c)
Number and Terms of NSOs, Restricted Shares or Stock
Units
. The number of NSOs, Restricted Shares or Stock Units to be granted
to Outside Directors in lieu of annual retainers and meeting fees that would
otherwise be paid in cash shall be calculated in a manner determined by the
Board. The terms of such NSOs, Restricted Shares or Stock Units shall also be
determined by the Board.
SECTION 15.
|
LEGAL AND REGULATORY
REQUIREMENTS.
|
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable. The Company shall not be liable to a
Participant or other persons as to: (a) the non-issuance or sale of Shares as to
which the Company has not obtained from any regulatory body having jurisdiction
the authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares under the Plan; and (b) any tax consequences
expected, but not realized, by any Participant or other person due to the
receipt, exercise or settlement of any Award granted under the
Plan.
SECTION 16.
|
WITHHOLDING TAXES.
|
(a)
General
. To the extent required by applicable federal, state, local or
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b)
Share Withholding
. The Committee may permit a Participant to satisfy all or part of
his or her withholding or income tax obligations by having the Company withhold
all or a portion of any Shares that otherwise would be issued to him or her or
by surrendering all or a portion of any Shares that he or she previously
acquired. Such Shares shall be valued at their Fair Market Value on the date
when taxes otherwise would be withheld in cash. In no event may a Participant
have Shares withheld that would otherwise be issued to him or her in excess of
the number necessary to satisfy the minimum legally required tax
withholding.
SECTION 17.
|
OTHER PROVISIONS APPLICABLE TO
AWARDS.
|
(a)
Transferability
.
Unless the agreement evidencing an Award (or an amendment thereto authorized by
the Committee) expressly provides otherwise, no Award granted under this Plan,
nor any interest in such Award, may be sold, assigned, conveyed, gifted,
pledged, hypothecated or otherwise transferred in any manner (prior to the
vesting and lapse of any and all restrictions applicable to Shares issued under
such Award), other than by will or the laws of descent and distribution;
provided, however, that an ISO may be transferred or assigned only to the extent
consistent with Section 422 of the Code. Any purported assignment, transfer or
encumbrance in violation of this Section 17(a) shall be void and unenforceable
against the Company.
(b)
Substitution and Assumption of Awards
. The Committee may make Awards under the Plan by assumption,
substitution or replacement of stock options, stock appreciation rights, stock
units or similar awards granted by another entity (including a Parent or
Subsidiary), if such assumption, substitution or replacement is in connection
with an asset acquisition, stock acquisition, merger, consolidation or similar
transaction involving the Company (and/or its Parent or Subsidiary) and such
other entity (and/or its affiliate). Notwithstanding any provision of
the Plan (other than the maximum number of Shares that may be issued under the
Plan), the terms of such assumed, substituted or replaced Awards shall be as the
Committee, in its discretion, determines is appropriate.
(c)
Qualifying Performance Criteria
. The number of Shares or other benefits granted, issued, retainable
and/or vested under an Award may be made subject to the attainment of
performance goals. The Committee may utilize any performance criteria
selected by it in its sole discretion to establish performance goals; provided,
however, that where any Award is intended to qualify for exemption from the
deduction limitation of Section 162(m) of the Code as "qualified
performance-based compensation," the following conditions shall
apply:
(i)
The amount potentially available under an Award shall be subject to
the attainment of pre-established, objective performance goals relating to a
specified period of service based on one or more of the following performance
criteria: (a) cash flow, (b) earnings per share, (c) earnings before interest,
taxes and amortization, (d) return on equity, (e) total stockholder return, (f)
share price performance, (g) return on capital, (h) return on assets or net
assets, (i) revenue, (j) income or net income, (k) operating income or net
operating income, (l) operating profit or net operating profit, (m) operating
margin or profit margin, (n) return on operating revenue, (o) return on invested
capital, (p) market segment shares, (q) costs, (r) expenses, (s) regulatory body
approval for commercialization of a product, or (t) implementation or completion
of critical projects ("Qualifying Performance Criteria"), any of which may be
measured either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group or index, in each case as specified by the Committee in the
Award;
(ii)
The Committee may appropriately adjust any evaluation of performance
under a Qualifying Performance Criteria to exclude any of the following events
that occurs during a performance period: (i) asset write-downs, (ii) litigation
or claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs and (v) any
extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in managements' discussion and analysis of financial
condition and results of operations appearing in the Company's annual report to
stockholders for the applicable year, in each case within the time prescribed
by, and otherwise in compliance with, Section 162(m) of the
Code;
(iii)
The Committee shall establish the applicable performance goals
in writing and an objective method for determining the Award earned by a
Participant if the goals are attained, while the outcome is substantially
uncertain and not later than the 90
th
day
of the performance period (but in no event after 25% of the period of service
with respect to which the performance goals relate has elapsed), and shall
determine and certify in writing, for each Participant, the extent to which the
performance goals have been met prior to payment or vesting of the Award;
and
(iv)
The Committee may not in any event increase the amount of
compensation payable under the Plan upon the attainment of the pre-established
performance goals to a Participant who is a "covered employee" within the
meaning of Section 162(m) of the Code.
SECTION 18.
|
NO EMPLOYMENT RIGHTS.
|
No provision of the Plan, nor any Award granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee or Consultant. The Company and its Subsidiaries reserve
the right to terminate any person's Service at any time and for any reason, with
or without notice.
SECTION 19.
|
DURATION AND
AMENDMENTS.
|
(a)
Term of the Plan
. The Plan, as set forth herein, shall terminate automatically on
March 17, 2020 and may be terminated on any earlier date pursuant to Subsection
(b) below.
(b)
Right to Amend or Terminate the Plan
. The Board of Directors may amend or terminate the Plan at any time
and from time to time. Rights and obligations under any Award granted before
amendment of the Plan shall not be materially impaired by such amendment, except
with consent of the Participant. An amendment of the Plan shall be subject to
the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules.
(c)
Effect of Termination
. No Awards shall be granted under the Plan after the termination
thereof. The termination of the Plan shall not affect Awards previously granted
under the Plan.
[Remainder of this page intentionally left blank]
To record the adoption of the Plan, as amended and restated, by the
Board of Directors, the Company has caused its authorized officer to execute the
same.
ALLIANCE FIBER OPTIC PRODUCTS, INC.
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By /s/ Peter C. Chang
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|
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Name Peter C. Chang
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Title CEO
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