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:
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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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[x]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule
14a-12
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Alliance Fiber Optic Products, Inc.
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(Name of Registrant as Specified In Its
Charter)
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(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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[x]
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No fee required.
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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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(5)
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Total fee paid:
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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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Filing Party:
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(4)
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Date
Filed:
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ALLIANCE FIBER OPTIC PRODUCTS,
INC.
275 GIBRALTAR
DRIVE
SUNNYVALE, CALIFORNIA 94089
(408)
736-6900
September 12, 2013
Dear Stockholder:
You are
cordially invited to attend the Special Meeting of Stockholders of Alliance
Fiber Optic Products, Inc. that will be held on Monday, October 21, 2013, at
2:00 p.m., Pacific Daylight Time, at the Company’s principal executive office at
275 Gibraltar Drive, Sunnyvale, California 94089.
The formal notice of the Special 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 by telephone or on the Internet, vote your shares as directed by
your broker, or attend the Special Meeting in person.
Your vote is important, so please return your proxy promptly.
We look forward to seeing you at the meeting.
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Sincerely yours,
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Peter C. Chang
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Chairman, President
and
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Chief Executive
Officer
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ALLIANCE FIBER OPTIC PRODUCTS, INC.
__________________
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held October 21, 2013
__________________
To the Stockholders of Alliance Fiber
Optic Products, Inc.:
The Special Meeting of Stockholders of
Alliance Fiber Optic Products, Inc., a Delaware corporation (the “Company”),
will be held at the Company’s principal executive office at 275 Gibraltar Drive,
Sunnyvale, California 94089, on Monday, October 21, 2013 at 2:00 p.m., Pacific
Daylight Time, for the following purposes:
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1.
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To approve an amendment to the
Company’s Amended and Restated Certificate of Incorporation to increase
the number of shares of Common Stock authorized for issuance from
20,000,000 shares to 100,000,000 shares;
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2.
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To approve an amendment to the
Company’s 2000 Stock Incentive Plan, as amended and restated, to increase
by 900,000 the number of shares of Common Stock available for issuance
thereunder.
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3.
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To consider and vote upon a
proposal to adjourn the Special Meeting, if necessary, to solicit
additional proxies in the event there are insufficient votes at the time
of such adjournment to amend the Company's Amended and Restated
Certificate of Incorporation to increase the number of shares of Common
Stock authorized for issuance or to increase the number of shares of
Common Stock available for issuance under the 2000 Stock Incentive
Plan.
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4.
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To transact such other business
as may properly come before the Special Meeting and any adjournment or
postponement of the Special Meeting.
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Stockholders of record as of the close
of business on September 5, 2013 are entitled to notice of and to vote at the
Special Meeting and any adjournment or postponement thereof. A complete list of
stockholders entitled to vote at the Special Meeting will be available at the
Secretary’s office, 275 Gibraltar Drive, Sunnyvale, California 94089, for ten
days before the meeting.
It is important that your shares are
represented at the meeting. Even if you plan to attend the meeting, we hope that
you will promptly vote.
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By Order of the Board of
Directors
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Peter C. Chang
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Secretary
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September 12, 2013
Important Notice Regarding the Availability
of Proxy Materials for the Special Meeting of
Stockholders to be held on
October 21, 2013.
The Proxy Statement is available at http://investors.afop.com
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 Special
Meeting of Stockholders of the Company to be held at the Company’s principal
executive office at 275 Gibraltar Drive, Sunnyvale, California, 94089, on
Monday, October 21, 2013 at 2:00 p.m., Pacific Daylight Time, and any
postponement or adjournment thereof (the “Special Meeting”).
Questions and Answers About the Proxy
Materials and the Special Meeting
What proposals will be voted on at
the Special Meeting?
Three
proposals will be voted on at the Special Meeting:
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To approve an amendment to the
Amended and Restated Certificate of Incorporation to increase the number of
shares of Common Stock authorized for issuance from 20,000,000 shares to
100,000,000 shares;
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To approve an amendment to the
Company’s 2000 Stock Incentive Plan, as amended and restated, to increase by
900,000 the number of shares of Common Stock available for issuance
thereunder; and
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To consider and vote upon a proposal
to adjourn the Special Meeting, if necessary, to solicit additional proxies in
the event there are insufficient votes at the time of such adjournment to
amend the Company's Amended and Restated Certificate of Incorporation to
increase the number of shares of Common Stock authorized for issuance or to
increase the number of shares of Common Stock available for issuance under the
2000 Stock Incentive Plan.
What are the Board's
recommendations?
Our Board recommends that you vote:
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"FOR" the approval of an amendment to
the Company's Amended and Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 20,000,000 shares to
100,000,000 shares;
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"FOR" approval of an amendment to the
2000 Stock Incentive Plan, as amended and restated, to increase by 900,000 the
number of shares of Common Stock available for issuance thereunder;
and
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"FOR" approval of the adjournment of
the Special Meeting, if necessary, to solicit additional proxies in the event
there are insufficient votes at the time of such adjournment to amend the
Company's Amended and Restated Certificate of Incorporation to increase the
number of shares of Common Stock authorized for issuance or to increase the
number of shares of Common Stock available for issuance under the 2000 Stock
Incentive Plan.
1
Will there be any other items of
business on the agenda?
We do not expect any other items of
business to be considered at the Special Meeting. Nonetheless, in case there is
an unforeseen need, the accompanying proxy gives discretionary authority to the
persons named on the proxy with respect to any other matters that might be
brought before the meeting. Those persons intend to vote that proxy in
accordance with their best judgment.
Who is entitled to vote?
Stockholders of record at the close of
business on September 5, 2013 (the "Record Date") may vote at the Special
Meeting. Each stockholder is entitled to one vote for each share of the
Company's common stock held as of the Record Date.
What is the difference between
holding shares as a stockholder of record and as a beneficial owner?
Stockholder
of Record.
If your shares are registered
directly in your name with our transfer agent, American Stock Transfer &
Trust Company, LLC, you are considered, with respect to those shares, the
stockholder of record. The Proxy Statement and proxy card have been sent
directly to you by the Company.
Beneficial Owner.
If your shares
are held in a brokerage account or by a bank or other nominee, you are
considered the beneficial owner of shares held in street name. The Proxy
Statement has been forwarded to you by your broker, bank or nominee who is
considered, with respect to those shares, the stockholder of record. As the
beneficial owner, you have the right to direct your broker, bank or nominee how
to vote your shares by following the voting instruction included in the mailing
with your proxy materials. If you hold shares beneficially in street name and do
not provide your broker or nominee with voting instructions, your shares may
constitute "broker non-votes." Generally, broker non-votes occur on a matter
when a broker is not permitted to vote on that matter without instructions from
the beneficial owner and instructions are not given. In tabulating the voting
results for any particular proposal, shares that constitute broker non-votes are
not considered entitled to vote on that proposal. Thus, broker non-votes will
not affect the outcome of any matter being voted on at the Special Meeting,
assuming that a quorum is obtained.
How do I vote?
Stockholder of Record
If you are a stockholder of record, you
may vote in person at the Special Meeting, vote by proxy using the enclosed
proxy card, vote by telephone or vote by the Internet. Whether or not you plan
to attend the Special Meeting, we urge you to vote to ensure your vote is
counted. You may still attend the Special Meeting and vote in person even if you
have already voted.
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To vote in person, come to the
Special Meeting and we will give you a ballot when you arrive.
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To vote using the proxy card,
complete, sign and date the enclosed proxy card and return it promptly in the
postage-prepaid envelope provided. If you return your signed proxy card to us
before the Special Meeting, we will vote your shares as you direct.
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To vote by telephone, follow the
telephone voting instructions on the enclosed proxy card. You will be asked to
provide the company number and control number from the proxy card. Your vote
must be received by 11:59 p.m., Eastern Time, on October 18, 2013 to be
counted.
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To vote by the Internet,
go to www.Proxyvote.com
and
follow the Internet voting instructions on the enclosed proxy card. You
will be asked to provide the company number and control number from the proxy
card. Your vote must be received by 11:59 p.m., Eastern Time, on October 18,
2013 to be counted. Please be aware that you must bear
any costs associated with your Internet access, such as usage charges from
Internet access providers and telephone companies.
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Beneficial Owner
If you are a beneficial owner of shares
registered in the name of your broker, bank, or other nominee, you should have
received voting instructions with these proxy materials from that organization
rather than from us. To ensure that your vote is counted, complete and return
the voting form to your broker. Alternatively, you may vote by telephone or over
the Internet as instructed by your broker, bank or other nominee. To vote in
person at the Special Meeting, you must obtain a valid proxy from your broker,
bank or other nominee. Follow the instructions from your broker, bank or other
nominee included with these proxy materials, or contact your broker, bank or
other nominee to request a proxy.
Can I change my vote or revoke my
proxy?
You may change your vote or revoke your
proxy at any time prior to the vote at the Special Meeting. If you submitted
your proxy by mail, you must file with the Secretary of the Company a written
notice of revocation or deliver, prior to the vote at the Special Meeting, a
valid, later-dated proxy. If you voted by telephone or by the Internet, you may
change your vote or revoke your proxy with a later telephone or Internet proxy,
as the case may be. Attendance at the Special Meeting will not have the effect
of revoking a proxy unless you give written notice of revocation to the
Secretary before the proxy is exercised or you vote by written ballot at the
Special Meeting.
If your shares are held in street name,
to vote in person at the Special Meeting, you must obtain a valid proxy from
your broker, bank or other nominee. Follow the instructions from your broker,
bank or other nominee included with these proxy materials, or contact your
broker, bank or other nominee to request a proxy.
How are votes counted?
For Proposals 1, 2 and 3, you may vote
"FOR" or "AGAINST" or "ABSTAIN." Abstention has the same effect as a vote
"AGAINST." If you provide specific instructions, your shares will be voted as
you instruct. If you sign your proxy card with no further instructions and you
are a stockholder of record, your shares will be voted in accordance with the
recommendations of the Board ("FOR" each of the Proposals) and in the discretion
of the proxy holders on any other matters that properly come before the meeting.
If you hold your shares in street name, please see the next section for
important information regarding voting of your shares.
What vote is required to approve
each item?
Proposal 1 requires the affirmative
vote of 66
2/3
% of
the shares of Common Stock outstanding and entitled to vote at the Special
Meeting. Each of Proposals 2 and 3 require the affirmative vote of a majority of
the shares present and voting at the Special Meeting in person or by proxy. If
you hold shares beneficially in street name and do not provide your broker or
nominee with voting instructions, your shares may constitute "broker non-votes."
Generally, broker non-votes occur on a matter when a broker is not permitted to
vote on that matter without instructions from the beneficial owner and
instructions are not given.
In the event you
do not vote, your broker may not be able to vote regarding the Proposals.
In tabulating the voting result for any
particular proposal, shares that constitute broker non-votes are not considered
entitled to vote on that proposal. Thus, broker non-votes will not affect the
outcome of any matter being voted on at the Special Meeting, assuming that a
quorum is obtained. Abstentions have the same effect as votes against the
Proposals.
What constitutes a quorum?
The presence at the Special Meeting, in
person or by proxy, of the holders of a majority of common stock outstanding on
the Record Date will constitute a quorum. As of the close of business on the
Record Date, there were 9,061,568 shares of our common stock
outstanding. Both abstentions and broker non-votes are counted for the purpose
of determining the presence of a quorum.
3
How are proxies solicited?
Our employees, officers and directors
may solicit proxies. We will bear the cost of soliciting proxies and will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and solicitation
material to the owners of our common stock.
IMPORTANT
Please promptly vote by signing,
dating and returning the enclosed proxy card or voting instructions in the
postage-prepaid return envelope provided, or by telephone or the Internet, so
that your shares can be voted.
This Proxy Statement and the
accompanying form of proxy are being mailed to stockholders on or about
September 12, 2013.
PROPOSAL 1
APPROVAL OF AN AMENDMENT TO THE
COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF
COMMON
STOCK FROM 20,000,000 TO 100,000,000 SHARES
Our board of directors has adopted,
subject to stockholder approval, an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the number of shares of Common
Stock authorized for issuance from 20,000,000 to 100,000,000 shares. Our board
of directors recommends that the stockholders approve this amendment.
As of September 5, 2013, 9,061,568 shares of Common Stock were outstanding. An additional 932,957 shares were
reserved for future issuance under the Company's stockholder approved equity compensation plans, of which
696,243 shares were reserved for issuance upon vesting of RSU awards or upon exercise of outstanding options to
purchase shares of Common Stock, 56,824 shares were reserved and available for future option and RSU awards,
and 179,890 shares were reserved for issuance under the Employee Stock Purchase Plan. The board of directors is
also seeking stockholder approval at the Special Meeting to increase the number of shares of Common Stock
available for issuance under the 2000 Stock Incentive Plan, as amended and restated, by 900,000 shares (after giving
effect to the stock dividend as defined below).
On August 15, 2013, we announced that our board of directors had declared a 2-for-1 split of the Common Stock in
the form of a stock dividend (the “Stock Dividend”). The dividend will be distributed on September 16, 2013 to
stockholders of record at the close of business on August 30, 2013. Pursuant to the Stock Dividend, each
stockholder of record on August 30, 2013 will be entitled to receive one additional share of Common Stock for each
outstanding share of Common Stock held at the close of business on that date. As a result of the Stock Dividend,
each unexercised option to purchase Common Stock and each unvested RSU will be proportionately adjusted to
reflect the Stock Dividend. In addition, the numbers of shares remaining available for issuance under the 2000
Stock Incentive Plan and under the Employee Stock Purchase Plan will be proportionately adjusted to reflect the
Stock Dividend. All references in the below discussion have been adjusted to give effect to the Stock Dividend.
Following the payment of the stock dividend, there will be 18,123,136 shares of Common Stock outstanding and an
additional 1,392,486 shares of Common Stock issuable upon the exercise of outstanding stock options and RSU
awards, 113,648 shares available for issuance under the 2000 Incentive Stock Plan and 359,780 shares available for
issuance under the Employee Stock Purchase Plan, and an additional 12,950 shares of Common Stock available for
future issuance.
4
The board of directors believes that it
is advisable and in the best interests of the Company and our stockholders to
increase the number of authorized shares of Common Stock. We have no current
plans to issue the additional shares of Common Stock that would be authorized by
this proposed amendment. The board of directors, however, believes that
following the increase in authorized Common Stock, the Company will have
sufficient number of shares of Common Stock authorized to issue in the future
under the 2000 Stock Incentive Plan, including under the evergreen provision
thereunder, and under our Employee Stock Purchase Plan, and will 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
increasing the number of available common shares will 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 allow the Company
the flexibility to continue to attract and retain talented directors, officers,
employees and consultants through the grant of stock options, RSUs and other
stock-based incentives. We do not currently have any agreements with respect to
future acquisitions or investments; however, we from time to time review
acquisition or investment opportunities with respect to complementary
businesses, products or technologies. The issuance of additional shares of
Common Stock may have a dilutive effect on earnings per share and, for a person
who does not purchase additional shares to maintain his or her pro rata
interest, on a stockholder's percentage voting power.
The authorized shares of Common Stock
in excess of those issued, or reserved for issuance, will 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 on which our Common Stock 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 if stockholders approve 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 one hundred five million
(105,000,000), of which one hundred million (100,000,000) 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 proposed Certificate of Amendment
is attached hereto as Annex A. The proposed Certificate of Amendment has also
been filed electronically with the Securities and Exchange Commission together
with this proxy statement and can be accessed at the SEC’s web site at
http://www.sec.gov
.
The affirmative vote of the holders of
66
2/3
% of the
shares of the Company's Common Stock outstanding as of the Record Date and
entitled to vote at the Special Meeting 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 following such
approval.
5
The Board of Directors recommends
a vote FOR the amendment to the Company's Amended and
Restated
Certificate of Incorporation to increase the number of
authorized shares of Common Stock authorized for
issuance
.
PROPOSAL 2
APPROVAL OF THE 2000 STOCK INCENTIVE
PLAN, AS AMENDED AND RESTATED, TO
INCREASE BY 900,000 THE NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR
ISSUANCE
THEREUNDER
In March 2010, our board of directors
amended and restated our 2000 Stock Incentive Plan, and on August 23, 2013, our
board approved an amendment to our 2000 Stock Incentive Plan to increase by
900,000 the number of shares of Common Stock available for issuance thereunder.
The amendment is subject to the approval of our stockholders at the Special
Meeting. The following summary of the principal features of the 2000 Stock
Incentive Plan, as amended and restated (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 as proposed to be
amended has been filed electronically with the SEC together with this proxy
statement, and can be accessed on the SEC’s web site at
http://www.sec.gov
.
Description of
Amendment
The amendment to Plan approved by the board of directors and submitted for stockholder approval consists of an
increase in the number of shares available for issuance thereunder by 900,000 shares to 1,013,648 shares. Except
where otherwise indicated, all references in this discussion have been adjusted to give effect to the Stock Dividend.
The proposed increase in the number of
shares available for issuance under the Plan is needed to allow us to continue
to provide effective and appropriate equity incentives to our employees,
consultants and directors. Our board of directors and compensation committee of
the board believes that stock option grants provide the best method of
equity-based compensation for a company in our stage of development, align
compensation incentives with stockholder interests, provide at-risk compensation
for management by providing them with a strong incentive to improve our
company's performance, and provide employees with the opportunity to benefit
significantly from the success of our company. Beginning in May 2011, our board
also began awarding RSUs to our executive officers and certain employees. We
have found that attractive and competitive equity awards to certain candidates
are often an important inducement for the high-performing, entrepreneurial
individuals who we believe are key to our success. As we recruit to fill new
positions, the amount of shares required for initial awards to certain new
hires, together with the amount required for awards to existing employees, in
each case consistent with our historical practices, increases.
We do not believe the proposed 900,000 share increase will be unduly dilutive to stockholders. A common measure
of potential dilution from outstanding equity awards is "overhang," generally defined as equity awards outstanding
but not exercised, plus equity awards available to be granted (together referred to as potential equity award shares),
divided by the sum of total common shares outstanding plus potential equity award shares. As of September 5, 2013,
our overhang was 7.7% and would be 11.7% if this Proposal 2 is approved by the stockholders. Our overhang
including shares available for issuance under the ESPP would be 9.3%, and 13.2% if this Proposal 2 is approved.
The Plan
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.
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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 August 31, 2013, 1,509 officers and employees and four non-employee directors were eligible to be
considered to receive awards under the Plan. As of September 5, 2013, 4,082,460 shares had been issued upon
exercise of options granted and 494,802 shares had been issued pursuant to RSU awards under the Plan. As of
September 5, 2013, options to purchase 810,486 shares and 582,000 shares issuable pursuant to RSUs were
outstanding, and 113,648 shares remained available for future grant. If Proposal 2 is approved by the stockholders,
an aggregate of 1,013,648 shares would be available for future grant under the Plan.
Administration
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, assuming Proposal 2 is approved,
would be 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) 680,000 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 September
5, 2013, the closing price of our Common Stock on The NASDAQ Capital Market was
$38.16. 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.
7
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.
Stock Options
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 12,000 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 12,000 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.
Restricted Shares
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.
8
Restricted Stock
Units
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).
9
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.
10
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.
11
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).
Plan Benefits
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 shares
of restricted stock or stock appreciation rights have been awarded under the
Plan.
Our named executive officers received
RSU awards under the Plan in 2013. Our non-employee directors did not receive
awards under the Plan in 2013. The following table sets forth information with
respect to awards under the Plan in 2013:
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
Name and Position
|
|
|
|
RSUs (#) (1)
|
|
Options (#) (1)
|
|
|
|
All current executive officers as a group (3
persons)
|
|
|
192,000
|
|
-
|
|
|
|
All current non-employee directors as a group (4 persons)
|
|
|
-
|
|
-
|
|
|
|
All employees including current officers who
are not
|
|
|
|
|
|
|
|
|
executive officers, as a group
|
|
|
150,000
|
|
212,800
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All RSUs and
options were granted at a price or exercise price per share equal to the
fair market value on the date of the award. RSUs and options are subject
to vesting.
|
12
Equity Compensation Plan Information
Set forth in the table below is certain information regarding the Company’s equity compensation plans as of
December 31, 2013. The information in this section is historical and does not give effect to the Stock Dividend.
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
|
|
Number of securities to
|
|
Weighted-average
|
|
future issuance under
|
|
|
|
be issued upon exercise
|
|
exercise price of
|
|
equity compensation
|
|
|
|
of outstanding options,
|
|
outstanding options,
|
|
plans (excluding securities
|
|
|
|
warrants and rights
|
|
warrants and rights
|
|
reflected in column (a))
|
|
Plan category
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans
|
|
|
|
|
|
|
|
|
|
|
approved by security holders
|
|
914,680
|
(1)
|
|
$
|
7.83
|
|
554,131
|
(2)
|
|
Equity compensation plans not
|
|
|
|
|
|
|
|
|
|
|
approved by security holders
|
|
-
|
|
|
|
-
|
|
-
|
|
|
Total
|
|
914,680
|
|
|
$
|
7.83
|
|
554,131
|
|
(1) Includes 718,180 shares to be issued upon exercise of outstanding options and 196,500 shares of unvested RSUs
granted under the 2000 Stock Incentive Plan.
(2) Includes:
(i) 308,625 shares reserved for issuance under the Plan. The number of shares reserved for issuance under
the Plan will be increased on the first day of the Company’s fiscal year by the lesser of 340,000 shares, 5% of the
fully diluted outstanding shares of the Company’s common stock on that date or a lesser amount determined by the
Company’s Board of Directors. There was no increase on January 1, 2012 because the Board determined there were
enough shares available for issuance in 2012 pursuant to the Plan. Stock options, restricted stock, restricted stock
units or stock appreciation rights may be awarded under the Plan.
(ii) 245,506 shares reserved for issuance under the Company’s ESPP. On April 29, 2011 the stockholders
approved an increase by 300,000 the number of shares of common stock available for issuance under the ESPP. The
ESPP permits eligible employees to contribute up to 20% of cash compensation up to 500 shares maximum toward
the semi-annual purchase of the Company’s common stock. The purchase price per share is 85% of the fair market
value on the last trading day prior to the beginning of the six-month period at which an eligible employee is
enrolled; or the fair market value on the last trading day of the month in which the six-month period expired,
whichever is lower.
Required Vote
Approval of the amendment of the 2000
Stock Incentive Plan requires the affirmative vote of a majority of the shares
present and voting at the Special Meeting.
The Board of Directors recommends
a vote FOR the amendment to the Company’s 2000 Stock Incentive
Plan
to increase the number of shares of Common Stock available for
issuance.
13
PROPOSAL 3
ADJOURNMENT OF THE SPECIAL MEETING
Our management may move to adjourn the
Special Meeting, if necessary, to solicit additional proxies in the event there
are insufficient votes at the time of such adjournment to approve either or both
of Proposals 1 or 2. In that event, you will be asked to vote only upon the
adjournment, and not on any other proposal.
In this proposal, we are asking you to
authorize the holder of any proxy solicited by our board of directors to vote in
favor of adjourning the Special Meeting and any later adjournments. If our
stockholders approve this adjournment proposal, we could adjourn the Special
Meeting, and any adjourned session of the Special Meeting, and use the
additional time to solicit additional proxies in favor of Proposal 1 and/or
Proposal 2. Additionally, we may seek to adjourn the Special Meeting if a quorum
is not present at the Special Meeting.
No proxy that is specifically marked
AGAINST Proposal 1 and Proposal 2 will be voted in favor of the adjournment
proposal unless it is specifically marked FOR the proposal to adjourn the
Special Meeting.
The Board of Directors recommends
a vote FOR the adjournment of the Special Meeting, if necessary,
to
solicit additional proxies in the event there are insufficient votes at
the time of such adjournment to approve
either or both of Proposals 1
or 2
.
EXECUTIVE COMPENSATION
The information in this Executive
Compensation section has not been adjusted to reflect the Stock Dividend.
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 years indicated.
|
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
Total ($)
|
|
Peter C. Chang
|
|
2012
|
|
260,000
|
|
163,000
|
|
-
|
|
1,690
|
|
424,690
|
|
Chief Executive Officer
and President
|
|
2011
|
|
259,731
|
|
33,000
|
|
1,888,000
|
|
1,690
|
|
2,182,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Hubbard
|
|
2012
|
|
175,000
|
|
65,000
|
|
-
|
|
8,890
|
|
248,890
|
|
Executive Vice
President,
|
|
2011
|
|
174,788
|
|
10,000
|
|
283,200
|
|
8,890
|
|
476,878
|
|
Sales and
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anita K. Ho
|
|
2012
|
|
140,000
|
|
13,000
|
|
-
|
|
4,505
|
|
157,505
|
|
Acting Chief Financial
Officer
|
|
2011
|
|
138,362
|
|
3,000
|
|
37,760
|
|
4,502
|
|
183,624
|
|
|
(1)
|
Consists of amounts paid in the
fiscal year.
|
|
|
|
|
|
(2)
|
Amount represents grant date fair
value computed in accordance with ASC 718. The actual value recognized by
the individual is based on the market price of our Common Stock on the
vesting dates and may be higher or lower.
|
|
|
|
|
|
(3)
|
Consisted of Company
contributions to the 401(k) of each individual, a monthly automobile
allowance for Mr. Hubbard, and the value of insurance premiums paid by the
Company.
|
We do not
enter into employment or severance agreements with our executive officers as we
do not believe these types of arrangements facilitate our compensation goals and
objectives. 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.
14
We generally intend to qualify
executive compensation for deductibility without limitation under Section 162(m)
of the Internal Revenue Code of 1986, as amended. Section 162(m) places a limit
of $1 million on the amount of compensation we may deduct in any one year with
respect to our Chief Executive Officer and each of the
next three most highly compensated executive officers other than our Chief
Financial Officer. None of the non-exempt compensation we paid to any of our
executive officers for 2012 as calculated for purposes of Section 162(m)
exceeded the $1 million limit.
Bonus
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 considers the bonus potential
of each executive officer on a case-by-case basis. Final decisions on bonuses
for executive officers other than the Chief Executive Officer are made with the
Chief Executive Officer’s involvement.
Stock Incentive Plan
We provide incentive compensation to our executive officers and employees through the grant of stock options
and RSUs. The 2000 Stock Incentive Plan was adopted by the board on September 7, 2000. The Plan was amended
and restated in 2010 to, among other things, extend the term under which awards may be granted under the Plan
until March 17, 2020, eliminate a 10 million share ceiling on the aggregate number of shares of Common Stock that
be issued under the Plan, and include certain qualifying performance criteria and annual award limits so that awards
granted under the Plan qualify as “performance-based compensation” under the requirements of Section 162(m) of
the Internal Revenue Code. The 2000 Stock Incentive Plan, as amended and restated, was approved by the
stockholders on May 14, 2010. An amendment to the Plan that would increase by 900,000 (after giving effect to the
Stock Dividend) the number of shares available for issuance under the Plan is being submitted to the stockholders
for approval at this Special Meeting. (See Proposal 2). 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 and RSU
awards. The Executive Compensation Committee believes that stock ownership by our executive officers aligns
their interests with those of our stockholders and provides our executive officers with substantial motivation to
manage the Company in accordance with those interests. Accordingly, a considerable portion of our executive
officers’ compensation in any year may consist of stock options and/or RSUs. When determining the size of an
option or RSU grant to an executive officer other than the Chief 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 and RSU 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. In May 2011, the Executive Compensation Committee
awarded Mr. Hubbard and Ms. Ho 30,000 and 4,000 RSUs, respectively, which vest annually over two years. No
options were granted to Mr. Hubbard or Ms. Ho in 2011 or 2012.
The option and RSU grants to the Chief
Executive Officer are determined using the same criteria as for the other
executive officers. In May 2011, the Executive Compensation Committee granted
Mr. Chang 200,000 RSUs which vest annually over five years. No options were
granted to Mr. Chang in 2011 or 2012.
15
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Number of
|
|
|
Market Value
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares or
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
Option
|
|
Option
|
|
Stock that
|
|
|
Stock that
|
|
|
|
Options
|
|
Options
|
|
|
Exercise
|
|
Expiration
|
|
have not
|
|
|
have not
|
|
Name
|
|
Exercisable (#)
|
|
Unexercisable (#)
|
|
|
Price ($)(1)
|
|
Date
|
|
Vested (#)
|
|
|
Vested ($)(2)
|
|
Peter C. Chang
|
|
34,000
|
|
-
|
|
|
7.80
|
|
12/29/13
|
|
|
|
|
|
|
|
|
40,000
|
|
-
|
|
|
4.80
|
|
12/02/14
|
|
|
|
|
|
|
|
|
60,000
|
|
-
|
|
|
4.50
|
|
11/07/15
|
|
|
|
|
|
|
|
|
56,000
|
|
-
|
|
|
10.10
|
|
11/27/16
|
|
|
|
|
|
|
|
|
10,000
|
|
-
|
|
|
9.15
|
|
01/28/18
|
|
|
|
|
|
|
|
|
40,000
|
|
40,000
|
(3)
|
|
7.95
|
|
07/23/20
|
|
|
|
|
|
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
160,000
|
(4)
|
|
1,923,200
|
|
|
|
David A. Hubbard
|
|
20,000
|
|
-
|
|
|
10.10
|
|
11/27/16
|
|
|
|
|
|
|
|
|
4,000
|
|
-
|
|
|
9.15
|
|
01/28/18
|
|
|
|
|
|
|
|
|
12,000
|
|
12,000
|
(3)
|
|
7.95
|
|
07/23/20
|
|
|
|
|
|
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
15,000
|
(5)
|
|
180,300
|
|
|
|
Anita K. Ho
|
|
8,000
|
|
-
|
|
|
4.80
|
|
12/02/14
|
|
|
|
|
|
|
|
|
16,000
|
|
-
|
|
|
4.50
|
|
11/07/15
|
|
|
|
|
|
|
|
|
8,000
|
|
-
|
|
|
10.10
|
|
11/27/16
|
|
|
|
|
|
|
|
|
1,000
|
|
-
|
|
|
9.15
|
|
01/28/18
|
|
|
|
|
|
|
|
|
4,000
|
|
4,000
|
(3)
|
|
7.95
|
|
07/23/20
|
|
|
|
|
|
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
2,000
|
(5)
|
|
24,040
|
|
|
(1)
|
The option exercise price
is the closing price of our common stock on the date of
grant.
|
|
|
|
|
|
(2)
|
Market value is based on
the closing price of our common stock on December 31, 2012.
|
|
|
|
|
|
(3)
|
The options were granted
on July 23, 2010 and vest at a rate of 25% per year.
|
|
|
|
|
|
(4)
|
The RSU were granted on
May 6, 2011 and vest over five years at a rate of 20 percent per year
beginning May 1, 2012 and vest in full in the event of a change of control
or termination due to death or involuntary discharge.
|
|
|
|
|
|
(5)
|
The RSU were granted on
May 6, 2011 and vest over two years at a rate of 50 percent per year
beginning May 1, 2012.
|
All of the options in the above table have a term of ten
years, subject to earlier termination in certain events related to termination
of employment.
16
2012 Director
Compensation
The following table set forth cash
amounts and the value of other compensation for the Company’s non-employee
directors during 2012:
|
|
|
Fees Earned or
|
|
Option Awards
|
|
|
|
Name
|
|
Paid in Cash ($)
|
|
($)(1)(2)
|
|
Total ($)
|
|
Richard Black
|
|
16,000
|
|
52,560
|
|
68,560
|
|
|
|
|
|
|
|
|
|
Gwong-Yih Lee
|
|
6,000
|
|
57,600
|
|
63,600
|
|
|
|
|
|
|
|
|
|
Ray Sun
|
|
8,600
|
|
57,600
|
|
66,200
|
|
|
|
James Yeh
|
|
13,200
|
|
57,600
|
|
70,800
|
|
(1)
|
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. 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.
|
|
|
|
|
(2)
|
The following table sets forth
the aggregate number of shares of Common Stock underlying option awards
outstanding at December 31, 2012:
|
|
Name
|
|
Number of Shares
|
|
Richard Black
|
|
12,000
|
|
|
|
|
|
Gwong-Yih Lee
|
|
12,000
|
|
|
|
|
|
Ray
Sun
|
|
12,000
|
|
|
|
|
|
James
Yeh
|
|
12,000
|
The Company’s non-employee directors
received $4,000 cash compensation for each Board meeting attended (or $2,000
cash compensation for attending telephonically), $2,600 cash compensation for
each Audit Committee meeting attended (or $1,300 cash compensation for attending
telephonically), $4,000 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.
Directors who are not employees receive
an initial grant of an option to purchase 6,000 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 a director’s election to the Board, each non-employee director is entitled to
receive an option to purchase 6,000 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 2012, we granted options to
purchase 6,000 shares of Common Stock to each of our four outside
directors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain
information as of September 5, 2013, 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 18,119,136 shares of Common Stock
outstanding as of September 5, 2013, and also gives effect to the Stock
Dividend. In addition, shares issuable pursuant to options which may be
exercised and restricted stock units, or RSUs, which vest of September 5, 2013
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 purposes of this table may vary depending on
the individual’s particular circumstances. The information in the table has been
adjusted to reflect the Stock Dividend.
17
|
|
|
Number of Shares
|
|
Percentage of
|
|
|
|
of Common Stock
|
|
Common Stock
|
|
Name and Address of
Beneficial Owner
|
|
Beneficially Owned
(1)
|
|
Beneficially
Owned
|
|
Directors and Named Executive
Officer:
|
|
|
|
|
|
|
Peter C. Chang (2)
|
|
2,582,640
|
|
13.9
|
%
|
|
Richard
Black (3)
|
|
41,334
|
|
*
|
|
|
Gwong-Yih Lee (4)
|
|
35,332
|
|
*
|
|
|
Ray Sun
(5)
|
|
24,332
|
|
*
|
|
|
James C. Yeh (6)
|
|
323,332
|
|
1.8
|
|
|
David A.
Hubbard (7)
|
|
120,954
|
|
*
|
|
|
Anita K. Ho (8)
|
|
80,454
|
|
*
|
|
|
5%Stockholders:
|
|
|
|
|
|
|
Foxconn Holding Limited
(9)
|
|
3,200,000
|
|
17.7
|
|
|
All Directors and Executive Officers as a
group (7 persons) (10)
|
|
3,208,378
|
|
17.1
|
|
* 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 16,000 shares held in the name of Mr. Chang’s
minor children and 1,558,640 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 80,000 shares exercisable of
September 50, 2013 and 360,000 shares underlying RSUs that vest on May 1,
2016.
|
|
|
|
(3)
|
Includes options to purchase 17,334 shares exercisable
on September 5, 2013.
|
|
|
|
(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 15,332 shares exercisable on September 5, 2013.
|
|
|
|
(5)
|
Includes options to purchase 15,332 shares exercisable
on September 5, 2013.
|
|
|
|
(6)
|
Includes 320,000 shares held in the name of Matics
Computer Systems, Inc., over which Mr. Yeh has voting power. Also includes
options to purchase 3,332 shares exercisable on September 5,
2013.
|
|
|
|
(7)
|
Includes options to purchase 20,000 shares exercisable
on September 5, 2013 and 66,000 shares underlying RSUs that vest on May 1,
2015.
|
|
|
|
(8)
|
Includes options to purchase 52,000 shares exercisable
on September 5, 2013 and 6,000 shares underlying RSUs that vest on May 1,
2015.
|
|
|
|
(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 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. According to
information provided by Hon Hai, the board of directors of Foxconn has
dispositive power for the shares and has delegated voting power to Ms.
Chiu-Lian Huang.
|
|
|
|
|
(10)
|
Includes 163,330 shares subject
to options exercisable on September 5, 2013 and 472,000 shares underlying
RSUs that vest from May 1, 2015 to May 1, 2016.
|
18
STOCKHOLDER PROPOSALS FOR THE 2014
ANNUAL MEETING
Proposals of stockholders of the
Company that are intended to be presented at the Company’s 2014 Annual Meeting
must be received by the Secretary of the Company no later than December 20, 2013
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 2014 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.
OTHER MATTERS
The Company knows of no other business
that will be presented at the Special Meeting. If any other business is properly
brought before the Special Meeting, the proxy holders will vote in accordance
with their judgment unless you instruct them otherwise.
Whether you intend to be present at the
Special Meeting or not, we urge you to vote promptly.
|
By order of the Board of
Directors
|
|
|
|
Peter C. Chang
|
|
Secretary
|
September 12, 2013
19
Annex A
CERTIFICATE OF
AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
OF ALLIANCE FIBER OPTIC PRODUCTS,
INC.
Alliance Fiber
Optic Products, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Alliance Fiber Optic Products, Inc.
SECOND: At a meeting of the Board of Directors of Alliance Fiber Optic
Products, Inc., resolutions were duly adopted declaring the advisability of the
amendment to the Amended and Restated Certificate of Incorporation of the
corporation to amend and restate Paragraph A of Article IV of such Amended and
Restated Certificate of Incorporation to read in its entirety 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 one hundred five million
(105,000,000), of which one hundred million (100,000,000) 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.”
THIRD: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of said corporation was duly called and held, upon
notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware, at which meeting the necessary number of shares as required
by statute were voted in favor of the amendment.
FOURTH: This Certificate of Amendment of the Amended and Restated
Certificate of Incorporation was duly adopted at said meeting of the
stockholders in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Alliance Fiber Optic Products, Inc. has caused this
Certificate of Amendment to be signed by its President and Chief Executive
Officer as of _______ 2013.
|
ALLIANCE FIBER OPTIC PRODUCTS, INC.
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Peter C. Chang
|
|
|
|
President and Chief Executive Officer
|
|
20
ALLIANCE FIBER OPTIC PRODUCTS,
INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on
September 7, 2000,
amended and restated by the
Board of Directors on March 18, 2010
and
as amended by the Board of
Directors on August 23, 2013)
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
Table of Contents
|
|
|
|
|
Page
|
|
SECTION 1.
|
|
ESTABLISHMENT AND
PURPOSE.
|
1
|
|
SECTION 2.
|
|
DEFINITIONS.
|
1
|
|
|
(a)
|
|
“Affiliate”
|
1
|
|
|
(b)
|
|
“Award”
|
1
|
|
|
(c)
|
|
“Board of Directors”
|
1
|
|
|
(d)
|
|
“Change in
Control”
|
1
|
|
|
(e)
|
|
“Code”
|
3
|
|
|
(f)
|
|
“Committee”
|
3
|
|
|
(g)
|
|
“Company”
|
3
|
|
|
(h)
|
|
“Consultant”
|
3
|
|
|
(i)
|
|
“Employee”
|
3
|
|
|
(j)
|
|
“Exchange
Act”
|
3
|
|
|
(k)
|
|
“Exercise Price”
|
3
|
|
|
(l)
|
|
“Fair Market
Value”
|
3
|
|
|
(m)
|
|
“ISO”
|
4
|
|
|
(n)
|
|
“Nonstatutory Option”
or
“NSO”
|
4
|
|
|
(o)
|
|
“Offeree”
|
4
|
|
|
(p)
|
|
“Option”
|
4
|
|
|
(q)
|
|
“Optionee”
|
4
|
|
|
(r)
|
|
“Outside
Director”
|
4
|
|
|
(s)
|
|
“Parent”
|
4
|
|
|
(t)
|
|
“Participant”
|
4
|
|
|
(u)
|
|
“Plan”
|
4
|
|
|
(v)
|
|
“Purchase
Price”
|
4
|
|
|
(w)
|
|
“Restricted Share”
|
4
|
|
|
(x)
|
|
“Restricted Share
Agreement”
|
4
|
|
|
(y)
|
|
“SAR”
|
4
|
|
|
(z)
|
|
“SAR
Agreement”
|
4
|
|
|
(aa)
|
|
“Service”
|
4
|
|
|
(bb)
|
|
“Share”
|
5
|
|
|
(cc)
|
|
“Stock”
|
5
|
|
|
(dd)
|
|
“Stock Option
Agreement”
|
5
|
|
|
(ee)
|
|
“Stock Unit”
|
5
|
|
|
(ff)
|
|
“Stock Unit
Agreement”
|
5
|
|
|
(gg)
|
|
“Subsidiary”
|
5
|
|
|
(hh)
|
|
“Total and Permanent
Disability”
|
5
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- i -
|
SECTION 3.
|
|
ADMINISTRATION.
|
5
|
|
|
|
(a)
|
|
Committee
Composition
|
5
|
|
|
|
(b)
|
|
Committee for Non-Officer Grants
|
5
|
|
|
|
(c)
|
|
Committee
Procedures
|
6
|
|
|
|
(d)
|
|
Committee Responsibilities
|
6
|
|
|
SECTION 4.
|
|
ELIGIBILITY.
|
7
|
|
|
|
(a)
|
|
General Rule
|
7
|
|
|
|
(b)
|
|
Automatic Grants to
Outside Directors
|
7
|
|
|
|
(c)
|
|
Ten-Percent Stockholders
|
8
|
|
|
|
(d)
|
|
Attribution
Rules
|
8
|
|
|
|
(e)
|
|
Outstanding Stock
|
8
|
|
|
SECTION 5.
|
|
STOCK SUBJECT TO PLAN.
|
8
|
|
|
|
(a)
|
|
Basic Limitation
|
8
|
|
|
|
(b)
|
|
Section 162(m) Award
Limitation
|
9
|
|
|
|
(c)
|
|
Additional Shares
|
9
|
|
|
SECTION 6.
|
|
RESTRICTED SHARES.
|
9
|
|
|
|
(a)
|
|
Restricted Stock Agreement
|
9
|
|
|
|
(b)
|
|
Payment for
Awards
|
9
|
|
|
|
(c)
|
|
Vesting
|
9
|
|
|
|
(d)
|
|
Voting and Dividend
Rights
|
10
|
|
|
|
(e)
|
|
Restrictions on Transfer of Shares
|
10
|
|
|
SECTION 7.
|
|
TERMS AND CONDITIONS OF OPTIONS.
|
10
|
|
|
|
(a)
|
|
Stock Option Agreement
|
10
|
|
|
|
(b)
|
|
Number of
Shares
|
10
|
|
|
|
(c)
|
|
Exercise Price
|
10
|
|
|
|
(d)
|
|
Withholding
Taxes
|
10
|
|
|
|
(e)
|
|
Exercisability and Term
|
11
|
|
|
|
(f)
|
|
Exercise of
Options
|
11
|
|
|
|
(g)
|
|
Effect of Change in Control
|
11
|
|
|
|
(h)
|
|
No Rights as a
Stockholder
|
11
|
|
|
|
(i)
|
|
Modification, Extension and Renewal of
Options
|
11
|
|
|
|
(j)
|
|
Restrictions on
Transfer of Shares
|
11
|
|
|
|
(k)
|
|
Buyout Provisions
|
12
|
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- ii -
|
SECTION 8.
|
|
PAYMENT FOR SHARES.
|
12
|
|
|
(a)
|
|
General Rule
|
12
|
|
|
(b)
|
|
Surrender of Stock
|
12
|
|
|
(c)
|
|
Services Rendered
|
12
|
|
|
(d)
|
|
Cashless Exercise
|
12
|
|
|
(e)
|
|
Exercise/Pledge
|
12
|
|
|
(f)
|
|
Promissory Note
|
12
|
|
|
(g)
|
|
Other Forms of Payment
|
12
|
|
|
(h)
|
|
Limitations under Applicable
Law
|
13
|
|
SECTION 9.
|
|
STOCK APPRECIATION RIGHTS.
|
13
|
|
|
(a)
|
|
SAR Agreement
|
13
|
|
|
(b)
|
|
Number of Shares
|
13
|
|
|
(c)
|
|
Exercise Price
|
13
|
|
|
(d)
|
|
Exercisability and Term
|
13
|
|
|
(e)
|
|
Effect of Change in Control
|
13
|
|
|
(f)
|
|
Exercise of SARs
|
13
|
|
|
(g)
|
|
Modification or Assumption of
SARs
|
13
|
|
|
(h)
|
|
Buyout Provisions
|
14
|
|
SECTION 10.
|
|
STOCK UNITS.
|
14
|
|
|
(a)
|
|
Stock Unit Agreement
|
14
|
|
|
(b)
|
|
Payment for Awards
|
14
|
|
|
(c)
|
|
Vesting Conditions
|
14
|
|
|
(d)
|
|
Voting and Dividend Rights
|
14
|
|
|
(e)
|
|
Form and Time of Settlement of Stock Units
|
14
|
|
|
(f)
|
|
Death of Recipient
|
15
|
|
|
(g)
|
|
Creditors’ Rights
|
15
|
|
SECTION 11.
|
|
ADJUSTMENT OF SHARES.
|
15
|
|
|
(a)
|
|
Adjustments
|
15
|
|
|
(b)
|
|
Dissolution or Liquidation
|
15
|
|
|
(c)
|
|
Reorganizations
|
16
|
|
|
(d)
|
|
Reservation of Rights
|
16
|
|
SECTION 12.
|
|
DEFERRAL OF AWARDS.
|
16
|
|
|
(a)
|
|
Committee Powers
|
16
|
|
|
(b)
|
|
General Rules
|
17
|
|
SECTION 13.
|
|
AWARDS UNDER OTHER PLANS.
|
17
|
|
SECTION 14.
|
|
PAYMENT OF DIRECTOR’S FEES IN
SECURITIES.
|
17
|
|
|
(a)
|
|
Effective Date
|
17
|
|
|
(b)
|
|
Elections to Receive NSOs, Restricted Shares or Stock
Units
|
17
|
|
|
(c)
|
|
Number and Terms of NSOs, Restricted Shares
or Stock Units
|
17
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- iii -
|
SECTION 15.
|
|
LEGAL AND REGULATORY
REQUIREMENTS.
|
17
|
|
SECTION 16.
|
|
WITHHOLDING TAXES.
|
18
|
|
|
(a)
|
|
General
|
18
|
|
|
(b)
|
|
Share Withholding
|
18
|
|
SECTION 17.
|
|
OTHER PROVISIONS APPLICABLE TO
AWARDS.
|
18
|
|
|
(a)
|
|
Transferability
|
18
|
|
|
(b)
|
|
Substitution and Assumption of
Awards
|
18
|
|
|
(c)
|
|
Qualifying Performance Criteria
|
19
|
|
SECTION 18.
|
|
NO EMPLOYMENT RIGHTS.
|
20
|
|
SECTION 19.
|
|
DURATION AND AMENDMENTS.
|
20
|
|
|
(a)
|
|
Term of the Plan
|
20
|
|
|
(b)
|
|
Right to Amend or Terminate the Plan
|
20
|
|
|
(c)
|
|
Effect of Termination
|
20
|
|
SECTION 20.
|
|
EXECUTION.
|
21
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- iv -
ALLIANCE FIBER OPTIC PRODUCTS,
INC.
2000 STOCK INCENTIVE
PLAN
(As amended and restated on March 18,
2010 and as amended on August 23, 2013)
SECTION 1.
ESTABLISHMENT AND
PURPOSE.
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 Plan was subsequently amended on
August 23, 2013. 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.
All share references in the Plan give effect to the 1-for-5 reverse split
effective on August 27, 2010, and to the 2-for-1 stock split in the form of a
stock dividend to be issued on September 16, 2013.
SECTION 2.
DEFINITIONS.
(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)
|
|
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:
|
|
|
|
|
|
|
|
(A)
Had been directors of
the Company on the “look-back date” (as defined below) (the “original
directors”); or
|
|
|
|
|
|
|
|
(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
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 1 -
|
|
(ii)
|
|
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
|
|
|
|
|
|
(iii)
|
|
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
|
|
|
|
|
|
(iv)
|
|
The sale, transfer or other disposition of all or
substantially all of the Company’s assets.
|
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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 2 -
(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)
|
|
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;
|
|
|
|
|
|
(ii)
|
|
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
|
|
|
|
|
|
(iii)
|
|
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.
|
In all cases, the determination of Fair
Market Value by the Committee shall be conclusive and binding on all
persons.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 3 -
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 4 -
(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.
ADMINISTRATION.
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 5 -
(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)
|
|
To interpret the Plan and to
apply its provisions;
|
|
|
|
|
|
(ii)
|
|
To adopt, amend or rescind rules,
procedures and forms relating to the Plan;
|
|
|
|
|
|
(iii)
|
|
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;
|
|
|
|
|
|
(iv)
|
|
To authorize any person to
execute, on behalf of the Company, any instrument required to carry out
the purposes of the Plan;
|
|
|
|
|
|
(v)
|
|
To determine when Awards are to
be granted under the Plan;
|
|
|
|
|
|
(vi)
|
|
To select the Offerees and
Optionees;
|
|
|
|
|
|
(vii)
|
|
To determine the number of Shares
to be made subject to each Award;
|
|
|
|
|
|
(viii)
|
|
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;
|
|
|
|
|
|
(ix)
|
|
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;
|
|
|
|
|
|
(x)
|
|
To prescribe the consideration
for the grant of each Award or other right under the Plan and to determine
the sufficiency of such consideration;
|
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 6 -
|
|
(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.
SECTION 4.
ELIGIBILITY.
(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
.
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(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 12,000 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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Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 7 -
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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 12,000 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.
STOCK SUBJECT TO
PLAN.
(a)
Basic Limitation
.
1
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
2
Shares,
plus an annual increase on January 1 of each year commencing in 2001, in an
amount equal to the lesser of (i) 680,000 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.
____________________
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1
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All share references in
this section reflect the 1-for-5 reverse split effected on August 27, 2010
and the 2-for-1 stock split in the form of a stock dividend to be issued
on September 16, 2013.
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2
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Also reflects the
increase by 900,000 shares to be voted upon at the special
meeting.
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Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 8 -
(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.
RESTRICTED
SHARES.
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 9 -
(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.
TERMS AND CONDITIONS OF
OPTIONS.
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 10 -
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 11 -
(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.
PAYMENT FOR
SHARES.
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 12 -
(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.
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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 13 -
(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.
SECTION 10.
STOCK
UNITS.
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 14 -
(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:
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(i)
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The number of Options, SARs,
Restricted Shares and Stock Units available for future Awards under
Section 5;
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(ii)
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The limitations set forth in
Sections 5(a) and (b);
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(iii)
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The number of NSOs to be granted
to Outside Directors under Section 4(b);
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(iv)
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The number of Shares covered by
each outstanding Option and SAR;
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(v)
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The Exercise Price under each
outstanding Option and SAR; and
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(vi)
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The number of Stock Units
included in any prior Award which has not yet been
settled.
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(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 15 -
(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:
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(i)
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The continuation of the outstanding Awards by the
Company, if the Company is a surviving corporation;
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(ii)
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The assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary;
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(iii)
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The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding
Awards;
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(iv)
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Full exercisability or vesting and accelerated
expiration of the outstanding Awards; or
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(v)
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Settlement of the intrinsic value of the outstanding
Awards in cash or cash equivalents followed by cancellation of such
Awards.
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(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:
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(i)
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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)
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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)
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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.
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Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 16 -
(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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 17 -
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.
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 18 -
(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:
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(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;
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(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;
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(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
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(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.
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Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 19 -
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.
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left blank]
Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 20 -
SECTION 20.
EXECUTION.
To record the
adoption of the Plan, as amended, by the Board of Directors, the Company has
caused its authorized officer to execute the same.
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ALLIANCE FIBER OPTIC
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PRODUCTS, INC.
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By
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Name
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Title
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Alliance Fiber Optic Products,
Inc.
2000 Stock Incentive Plan
- 21 -
ALLIANCE FIBER OPTIC PRODUCTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
For Special Meeting – October 21,
2013
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 full power of substitution in each, to represent and to vote all the
shares of common stock the undersigned is entitled to vote at the Special
Meeting of Stockholders of Alliance Fiber Optic Products, Inc. (the “Company”)
to be held at the Company’s headquarters, 275 Gibraltar Drive, Sunnyvale,
California, 94089 on October 21, 2013 at 2 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 intend to vote FOR Proposals 1, 2 and 3 and in accordance
with the discretion of the Proxies on any other matters as may properly come
before the Special Meeting.
SEE REVERSE
SIDE
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CONTINUED AND TO BE SIGNED ON
REVERSE SIDE
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SEE
REVERSE
SIDE
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DETACH HERE
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X
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Please mark
votes as in
this
example.
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The Board of Directors recommends a vote FOR Proposals 1, 2 and
3
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This proxy when property executed will be voted in
the manner directed herein by the undersigned stockholder. If no direction is
given, this proxy will be voted “FOR” Proposals 1, 2 and 3.
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1. To approve an amendment to the Company’s
Amended and Restated Certificate of Incorporation to increase the number
of shares of Common Stock authorized for issuance from 20,000,000 shares
to 100,000,000 shares.
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FOR
c
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AGAINST
c
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ABSTAIN
c
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2. To approve an amendment to the Company’s
2000 Stock Incentive Plan, as amended and restated, to increase by 900,000
the number of shares of Common Stock available for issuance thereunder.
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FOR
c
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AGAINST
c
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ABSTAIN
c
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3. To consider and vote upon a proposal to
adjourn the Special Meeting, if necessary, to solicit additional proxies
in the event there are insufficient votes at the time of such adjournment
to approve either or both of Proposals 1 and 2.
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FOR
c
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AGAINST
c
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ABSTAIN
c
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4. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
Special Meeting or any postponement or adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
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.
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Signature:
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Date:
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(Signature if held
jointly)
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