SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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Preliminary Proxy
Statement
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Soliciting Material Under Rule
14a-12
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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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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)(4) and
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Title of each class of
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Aggregate number of
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act
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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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Amount previously
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Form, Schedule or Registration
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Filing Party:
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Date Filed:
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ALLIANCE FIBER OPTIC PRODUCTS,
INC.
275 GIBRALTAR
DRIVE
SUNNYVALE, CALIFORNIA
94089
(408) 736-6900
April 21, 2014
Dear Stockholder:
You are cordially invited to attend the
Annual Meeting of Stockholders of Alliance Fiber Optic Products, Inc. that will
be held on Monday, May 19, 2014, at 2:00 p.m., Pacific Daylight Time, at the
Companys principal executive office, 275 Gibraltar Drive, Sunnyvale, California
94089.
The formal notice of the Annual Meeting
and the Proxy Statement has been made a part of this invitation.
After reading the Proxy Statement, please
vote at your earliest convenience 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 Annual
Meeting in person.
Your vote is
important, so please vote promptly.
A copy of our 2013 Annual Report to
Stockholders is also enclosed.
We look forward to seeing you at the
meeting.
Sincerely yours,
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Peter C.
Chang
Chairman, President
and
Chief Executive Officer
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ALLIANCE FIBER OPTIC PRODUCTS,
INC.
__________________
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held May 19, 2014
__________________
To the Stockholders of Alliance
Fiber Optic Products, Inc.:
The Annual Meeting of Stockholders of
Alliance Fiber Optic Products, Inc., a Delaware corporation (the Company),
will be held at the Companys principal executive office, 275 Gibraltar Drive,
Sunnyvale, California 94089, on Monday, May 19, 2014, at 2:00 p.m., Pacific
Daylight Time, for the following purposes:
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1.
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To elect Mr. Ray Sun as
Class II director to serve until the 2017 Annual Meeting of Stockholders
or until his successor is duly elected and qualified;
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2.
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To approve, on a non-binding
advisory basis, the compensation of the Companys named executive
officers;
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3.
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To vote on the frequency, on
a non-binding advisory basis, of an advisory stockholder vote on the
compensation of the Companys named executive officers;
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4.
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To ratify the appointment of
Marcum LLP as the Companys independent registered public accountant for
2014; and
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5.
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To transact such other
business as may properly come before the Annual Meeting and any
adjournment or postponement of the Annual
Meeting.
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Stockholders of record as of the close of
business on March 24, 2014 are entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof. A list of stockholders
entitled to vote at the Annual Meeting will be available at the Secretarys
office, 275 Gibraltar Drive, Sunnyvale, California 94089, for ten days before
the meeting.
It is important that your shares
are represented at the Annual Meeting. Even if you plan to attend the meeting,
we hope that you will promptly vote.
By Order of the Board of
Directors
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Peter C.
Chang
Secretary
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April 21, 2014
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of
Stockholders to be
held on May 19, 2014.
The Proxy Statement and Annual
Report are available at
http://www.tscviewer.com/afop/
ALLIANCE FIBER OPTIC PRODUCTS,
INC.
275 Gibraltar Drive
Sunnyvale, California 94089
(408) 736-6900
__________________
PROXY STATEMENT
__________________
This Proxy Statement is furnished in
connection with the solicitation by the Board of Directors of Alliance Fiber
Optic Products, Inc., a Delaware corporation (the Company), of proxies in the
accompanying form to be used at the Annual Meeting of Stockholders of the
Company to be held at the Companys principal executive office, 275 Gibraltar
Drive, Sunnyvale, California, 94089, on Monday, May 19, 2014, at 2:00 p.m.,
Pacific Daylight Time, and any postponement or adjournment thereof (the Annual
Meeting).
Questions and Answers About the
Proxy Materials and the Annual Meeting
What proposals will be voted on
at the Annual Meeting?
Four proposals will be voted on at the
Annual Meeting:
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The election of Ray Sun as Class II
director;
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A non-binding advisory vote on the
compensation of our named executive officers;
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A non-binding advisory vote on the frequency
of a non-binding advisory stockholder vote on the compensation of our named
executive officers; and
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The ratification of the appointment of Marcum
LLP as our independent registered public accountant for 2014.
What are the Board's
recommendations?
Our Board recommends that you vote:
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"FOR" election of the nominated Class II
director;
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FOR approval, on a non-binding advisory
basis, of the compensation of our executive officers;
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For the EVERY YEAR option, on a non-binding
advisory basis, as the frequency of a non-binding advisory stockholder vote on
the compensation of our named executive officers; and
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"FOR" ratification of the appointment of
Marcum LLP as our independent registered public accountant for
2014.
Will there be any other items
of business on the agenda?
We do not expect any other items of
business because the deadline for stockholder proposals and nominations has
already passed. 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.
1
Who is entitled to vote?
Stockholders of record at the close of
business on March 24, 2014 (the "Record Date") may vote at the Annual 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 and proxy card have 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 using the voting
instruction form 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 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 Annual 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 Annual 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 Annual Meeting, we urge you to vote to ensure your vote is counted.
You may still attend the Annual Meeting and vote in person even if you have
already voted.
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To vote in person, come to the Annual 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
Annual 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 May 18, 2014 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 May 18, 2014 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.
2
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 mail 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 Annual 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 Annual 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 Annual 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 Annual 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 Annual
Meeting. If your shares are held in street name, to vote in person at the Annual
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?
In the election of director, you may vote
"FOR" the nominee or your vote may be "WITHHELD" with respect the nominee. For
each of Proposals 2 and 4, you may vote "FOR" or "AGAINST" or "ABSTAIN." If you
"ABSTAIN" as to any of these Proposals, the abstention has the same effect as a
vote "AGAINST."
For Proposal 3, you may vote for EVERY YEAR, EVERY TWO YEARS, EVERY
THREE YEARS, or ABSTAIN. If you provide specific instructions, your shares
will be voted as you instruct. If you sign your proxy card or voting instruction
form 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"
the nominee to the Board, FOR the approval of the compensation of our named
executive officers, for a frequency of EVERY YEAR for an advisory stockholder
vote on the compensation of our named executive officers and "FOR" ratification
of the appointment of our independent registered public accountant) 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?
In the election of director, the person
receiving the highest number of "FOR" votes at the Annual Meeting will be
elected. Proposals 2 and 4 require the affirmative "FOR" vote of a majority of
the shares present and voting at the Annual Meeting in person or by proxy.
Because your vote on Proposal 2 is advisory, it will not be binding on our board
of directors, the Executive Compensation Committee or the Company. For Proposal
3, the alternative that receives the greatest number of votes will be the
frequency of the stockholders advisory vote. Because your vote on Proposal 3 is
advisory, it will not be binding on our board of directors, the Executive
Compensation Committee or the Company. However, our board of directors will
review the voting results and take them into consideration when determining the
frequency of future non-binding advisory votes on compensation of our named
executive officers. 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 will not be
able to vote regarding the election of the director or with respect to Proposals
2 or 3, and will only be able to vote on Proposal 4,
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ratification of the appointment
of our independent registered public accountant.
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 Annual Meeting, assuming that a quorum is obtained. Abstentions
have the same effect as votes against the matter.
Is cumulative voting permitted
for the election of director?
Stockholders may not cumulate votes in
the election of directors, which means that each stockholder may vote no more
than the number of shares he or she owns for a single director
candidate.
What constitutes a quorum?
The presence at the Annual 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 18,428,461 shares of our Common Stock outstanding. Both
abstentions and broker non-votes are counted for the purpose of determining the
presence of a quorum.
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 April 21, 2014.
PROPOSAL 1
ELECTION OF DIRECTOR
Directors and Nominees
Pursuant to Article VI of the Companys
Restated Certificate of Incorporation, the Board of Directors is divided into
three classes, with each class elected for a 3-year term. The number of
directors is currently set at five. Class I and Class III consist of two
directors each, and Class II consists of one director. One Class II director
will be elected at the Annual Meeting and will serve until the 2017 Annual
Meeting, or until his successor is duly elected and qualified. The Class III
directors will continue to serve until the 2015 Annual Meeting and the Class I
directors will continue to serve until the 2016 Annual Meeting.
4
The Nominating and Corporate Governance
Committee of the Board of Directors has recommended, and the Board of Directors
has designated, Mr. Ray Sun as the nominee to fill the Class II director seat to
serve until the 2017 Annual Meeting. If Mr. Sun is unable or declines to serve
as a director at the time of the Annual Meeting, an event not now anticipated,
proxies will be voted for any nominees designated by the Board of Directors,
taking into account any recommendations of the Nominating and Corporate
Governance Committee, to fill the vacancy.
Biographical information concerning the
nominee is set forth below.
CLASS II
Ray Sun
, 62, has served as a director since November 2003. Mr.
Sun served as Managing Director, Business Development and Venture Investment
(greater China) of Applied Materials China, a semiconductor equipment company,
from November 2001 to February 2009. He has been retired since February 2009.
Mr. Sun served as a representative of the Silicon Valley office for a Taiwanese
venture firm, Global Investment Management Co. LTD., from October 1999 to
November 2001. Mr. Sun has more than 20 years of executive management experience
in the software, hardware and telecommunications industries. Mr. Sun received a
B.S. in Industrial Engineering from Chung Yuan Christian University in Taiwan,
and an M.S. in Industrial Engineering from Kansas State University. We believe
Mr. Suns qualifications to serve on our Board include his business development
and investment expertise and his experience in executive management for a broad
array of technology-based businesses.
Biographical information concerning the
remaining members of the Board of Directors is set forth below.
CLASS I
Peter C. Chang
, 56, has served as our Chairman of the Board, Chief
Executive Officer and President since our formation in December 1995. From 1990
to 1995, Mr. Chang was Division Manager at Hon Hai Holding, a fiber optics
company, and from 1988 to 1990 was a member of the technology staff at Lucent
Bell Labs. Mr. Chang received a B.S. in Mechanical Engineering from National
Taiwan University and an M.S. in Mechanical Engineering from Notre Dame
University. We believe Mr. Changs qualifications to serve on our Board include
his extensive industry expertise and his experience as our Chief Executive
Officer and President.
Richard Black
, 80, has served as a director since April 2003. Since
March 2002, Mr. Black has served as the President, Chief Executive Officer,
director and majority owner of ECRM, Inc., a worldwide supplier of electronic
laser imaging devices for the publishing and graphic arts industries. From
August 1983 to March 2002, Mr. Black served as the Chairman and director of
ECRM, Inc. He served as President of Oak Technology Inc., a semiconductor
company, from January 1998 to March 1999, as Vice Chairman from March 1999 to
August 2003 and as a director from 1988 to 2003. Until July 2010, Mr. Black
served as the Chairman of the Board of Directors of GSI Group Inc., a
manufacturer of laser systems and precision motion components, and he served on
the GSI Board since 1999. Mr. Black also serves on the board of Applied
Optoelectronics, Inc. (AAOI) and boards of several private and non-profit
companies. In addition, from 2002 to 2007, Mr. Black served on the board of
directors of Altigen Communications, Inc., a manufacturer of VoIP telephone
systems and unified communications systems. Mr. Black holds a B.S. in
Engineering from Texas A&M University and an M.B.A. from Harvard University.
We believe Mr. Blacks qualifications to serve on our Board include his
operational and management expertise, his experience as both a director and
chairman of the board of other public companies, and his finance skills.
CLASS III
Gwong-Yih Lee
, 59, has served as a director since August 2000. Since
July 2006, Mr. Lee has served as Chairman of CyberTAN Technology, Inc., a
networking company listed on the Taiwan Stock Market. From July 2006 to July
2013, Mr. Lee served as Chief Executive officer of CyberTan Technology,
5
Inc. From September 2005 to
December 2012, Mr. Lee has served as the Founder and President and Chief
Executive Officer of ApaceWave Technologies, Inc., a broadband wireless company.
From September 1999 to January 2004, Mr. Lee served as Senior Director and
General Manager at Cisco Systems, Inc. In March 1998, Mr. Lee established
TransMedia Communications, a communication equipment company, and served as its
President and Chief Executive Officer until September 1999, when TransMedia
Communications was acquired by Cisco. Mr. Lee received a B.S. in Control
Engineering from National Chiao-Tung University in Taiwan and an M.S. in
Electrical Engineering from New York University. We believe Mr. Lees
qualifications to serve on our Board include his experience running private
technology companies and his managerial experience at Cisco and CyberTAN
Technology.
James C. Yeh
, 57, has served as a director since our formation in
December 1995. Since April 2005, Mr. Yeh has served as Managing Director of
Blazee International, an imaging processing applications company. In addition,
since January 1991, Mr. Yeh has served as President of Matics Computer Systems,
Inc., a personal computer systems and peripherals company. Mr. Yeh holds a B.S.
in Mathematics from Tamkang University and an M.S. in Systems Science and
Mathematics from Washington University in Saint Louis, Missouri. We believe Mr.
Yehs qualifications to serve on our Board include his operational and
management experience with technology companies.
The Board of Directors
recommends a vote FOR the election of Mr. Ray Sun as the Class II Director.
Board Structure, Independence,
Meetings and Committees
Our Board believes that having a combined
Chairman of the Board and Chief Executive Officer is the most effective
leadership structure for our company at this time. The Board believes that Mr.
Chang is the director best situated to identify strategic opportunities and
focus the activities of the Board due to his full-time commitment to our
business and his company-specific experience. The Board also believes that the
combined role of Chairman and Chief Executive Officer promotes effective
execution of strategic imperatives and facilitates information flow between
management and the Board.
The Board of Directors held four meetings
during 2013. All directors except Mr. Lee attended at least 75% of the aggregate
number of meetings of the Board of Directors and of the committees on which each
such director serves. The independent directors meet in regularly scheduled
executive sessions at meetings of the Board without the participation of the
Chief Executive Officer or the other members of management. In 2013, one
director attended the annual meeting. We do not have a policy requiring
directors to attend our annual meetings.
The Board of Directors has determined
that, except for Mr. Chang, all of the members of the Board are independent
directors within the meaning of Rule 5605 of The NASDAQ Stock Market and the
rules of the Securities and Exchange Commission, or SEC. Mr. Chang is not
considered independent because he is employed by the Company as its President
and Chief Executive Officer. The nominee is a member of the Board standing for
reelection. For all of the non-employee directors, the Board considered their
relationship and transactions with the Company as directors and as
securityholders of the Company when determining their independence.
The Board is actively involved in the
oversight of risks that could affect our business and operations, while
management is responsible for day-to-day risk management. The Board administers
this oversight function directly through the Board as a whole, as well as
through the Audit and Nominating and Corporate Governance committees of the
Board.
The Board of Directors has appointed an
Executive Compensation Committee, an Audit
Committee and a Nominating and
Corporate Governance Committee. The Board has approved a charter for each of
these committees. Copies of the charters of the Audit Committee, Nominating and
Corporate Governance Committee and Executive Compensation Committee are
available through our website at
www.afop.com
. The Board has also
appointed a Non-Executive Compensation Committee.
6
Executive
Compensation
Committee
Number of Members:
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Three
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Members:
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Mr. Sun (Chairman)
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Mr. Black
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Mr. Lee
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Number of Meetings:
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Two
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Functions:
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The Executive Compensation
Committees primary functions are to assist the Board in meeting its
responsibilities with regard to oversight and determination of executive
compensation and to review and make recommendations to the Board with
respect to major compensation plans, policies and programs of the Company.
Other specific duties and responsibilities of the Executive Compensation
Committee are to review and approve the compensation for the Chief
Executive Officer and other executive officers of the Company, establish
and modify the terms and conditions of employment of the Chief Executive
Officer and other executive officers of the Company and administer the
Companys stock plans and other compensation plans.
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Audit
Committee
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Number
of Members:
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Three
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Members:
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Mr. Black (Chairman)
Mr.
Sun
Mr. Yeh
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Number
of Meetings:
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Four
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Functions:
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The Audit Committees
primary functions are to assist the Board of Directors in fulfilling its
oversight responsibilities relating to the Companys financial statements,
system of internal controls, and auditing, accounting and financial
reporting processes. Other specific duties and responsibilities of the
Audit Committee are to appoint, compensate, evaluate and, when
appropriate, replace the Companys independent auditors; review and
pre-approve audit and permissible non-audit services; review the scope of
the annual audit; monitor the independent auditors relationship with the
Company; and meet with the independent auditors and management to discuss
and review the Companys financial statements, internal controls, and
auditing, accounting and financial reporting processes. Mr. Black is the
Audit Committee financial expert.
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7
Nominating and
Corporate
Governance
Committee
Number of
Members:
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Three
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Members:
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Mr. Black (Chairman)
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Mr. Sun
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Mr. Yeh
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Number of
Meetings:
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One
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Functions:
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The Nominating and Corporate
Governance Committees primary functions are to identify qualified
individuals to become members of the Board of Directors and determine the
composition of the Board and its committees. Other specific duties and
responsibilities are to recommend nominees to fill vacancies on the Board,
review suggestions for candidates for membership on the Board, and monitor
compliance with Board and Board committee membership criteria.
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Non-Executive Compensation
Committee
Mr. Chang currently serves as the sole
member of the Non-Executive Compensation Committee. The Non-Executive
Compensation Committee is a secondary committee responsible for granting and
issuing awards under the 2000 Stock Incentive Plan, as amended and restated, to
eligible employees, other than to members of the Board of Directors, to
individuals designated by the Board of Directors as Section 16 officers, and
to employees who hold the title of Vice President or above.
Director
Nominations
The Board of Directors nominates a class
of directors for election at each annual meeting of stockholders and elects new
directors to fill vacancies when they arise. The Nominating and Corporate
Governance Committee has the responsibility to identify, evaluate, recruit and
recommend qualified candidates to the Board of Directors for nomination or
election.
The Board of Directors has an objective
that its membership is composed of experienced and dedicated individuals with
diversity of backgrounds, perspectives and skills. The Nominating and Corporate
Governance Committee will select candidates for director based on their
character, judgment, and diversity of experience, business acumen, and ability
to act on behalf of all stockholders. The Nominating and Corporate Governance
Committee believes that nominees for director should have experience, such as
experience in management or accounting and finance, or industry and technology
knowledge, that may be useful to the Company and the Board, high personal and
professional ethics, and the willingness and ability to devote sufficient time
to effectively carry out his or her duties as a director. While diversity is
among the qualifications that may be considered, the Committee does not have a
formal diversity policy. The Nominating and Corporate Governance Committee
believes it is appropriate for at least one, and, preferably, multiple, members
of the Board to meet the criteria for an audit committee financial expert as
defined by SEC rules, and for a majority of the members of the Board to meet the
definition of independent director under the rules of The NASDAQ Stock Market.
The Nominating and Corporate Governance Committee also believes it is
appropriate for certain key members of the Companys management to participate
as members of the Board.
Prior to each annual meeting of
stockholders, the Nominating and Corporate Governance Committee identifies
nominees first by evaluating the current directors whose term will expire at the
annual meeting and who are willing to continue in service. These candidates are
evaluated based on the criteria described above, including as demonstrated by
the candidates prior service as a director, and the needs of the Board with
respect to the particular talents and experience of its directors. In the event
that a
8
director does not wish to continue
in service, the Nominating and Corporate Governance Committee determines not to
re-nominate the director, or a vacancy is created on the Board as a result of a
resignation, an increase in the size of the Board or other event, the Committee
will consider various candidates for Board membership, including those suggested
by the Committee members, by other Board members, by any executive search firm
engaged by the Committee and by stockholders. A stockholder who wishes to
suggest a prospective nominee for the Board should notify the Secretary of the
Company or any member of the Committee in writing with any supporting material
the stockholder considers appropriate.
In addition, the Companys Bylaws contain
provisions that address the process by which a stockholder may nominate an
individual to stand for election to the Board of Directors at the Companys
Annual Meeting of Stockholders. In order to nominate a candidate for director, a
stockholder must give timely notice in writing to the Secretary of the Company
and otherwise comply with the provisions of the Companys Bylaws. To be timely,
the Companys Bylaws provide that the Company must have received the
stockholders notice no less than 60 days nor more than 90 days prior to the
scheduled date of the meeting. However, if notice or prior public disclosure of
the date of the annual meeting is given or made to stockholders less than 75
days prior to the meeting date, the Company must receive the stockholders
notice by the earlier of (i) the close of business on the 15th day after the
earlier of the day the Company mailed notice of the annual meeting date or
provided public disclosure of the meeting date and (ii) two days prior to the
scheduled date of the annual meeting. Information required by the Bylaws to be
in the notice include the name and contact information for the candidate and the
person making the nomination and other information about the nominee that must
be disclosed in proxy solicitations under Section 14 of the Securities Exchange
Act of 1934 and the related rules and regulations under that Section.
Stockholder nominations must be made in
accordance with the procedures outlined in, and include the information required
by, the Companys Bylaws and must be addressed to: Secretary, Alliance Fiber
Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. You can
obtain a copy of the Companys Bylaws by writing to the Secretary at this
address.
Stockholder Communications with
the Board of Directors
If you wish to communicate with the Board
of Directors, you may send your communication in writing to: Secretary, Alliance
Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089.
You must include your name and address in the written communication and indicate
whether you are a stockholder of the Company. The Secretary will review any
communication received from a stockholder, and all material communications from
stockholders will be forwarded to the appropriate director or directors or
committee of the Board based on the subject matter.
2013 Director
Compensation
The following table set forth cash
amounts and the value of other compensation earned by the Companys non-employee
directors during 2013:
|
|
Fees Earned
or
|
|
Option Awards
|
|
|
Name
|
|
Paid in Cash ($)
|
|
($)(1)(2)
|
|
Total ($)
|
Richard
Black
|
|
20,000
|
|
-
|
|
20,000
|
Gwong-Yih Lee
|
|
2,000
|
|
-
|
|
2,000
|
Ray
Sun
|
|
17,200
|
|
-
|
|
17,200
|
James Yeh
|
|
17,200
|
|
-
|
|
17,200
|
|
(1)
|
|
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
|
9
|
|
|
vesting dates and may be
higher or lower. No options were granted to our outside directors in 2013.
|
|
|
|
|
|
(2)
|
|
The following table sets forth the aggregate number
of shares of Common Stock underlying option awards outstanding at December
31, 2013:
|
Name
|
|
Number of Shares
|
Richard
Black
|
|
24,000
|
|
|
|
Gwong-Yih
Lee
|
|
12,000
|
|
|
|
Ray
Sun
|
|
24,000
|
|
|
|
James
Yeh
|
|
9,000
|
The Companys non-employee directors
receive $4,000 for each Board meeting attended (or $2,000 for attending
telephonically), $2,600 for each Audit Committee meeting attended (or $1,300 for
attending telephonically), $4,000 for the Chairman of Audit Committee for each
Audit Committee meeting attended (or $2,000 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 12,000 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 directors election to the Board, each non-employee director is entitled to
receive an option to purchase 12,000 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.
Certain Relationships and
Related Transactions
It is our policy that all employees,
officers and directors must avoid any activity that is or has the appearance of
conflicting with the interests of the Company. This policy is included in our
Code of Conduct and Business Ethics. We monitor related party transactions for
potential conflict of interest situations on an ongoing basis and all such
transactions relating to executive officers and directors must be approved by
the independent and disinterested members of our Board of Directors or an
independent and disinterested committee of the Board.
According to share ownership numbers
contained in a Schedule 13G filed with the SEC in 2002 and not subsequently
amended, Foxconn Holding Limited (Foxconn) and Hon Hai Precision Industry Co.,
Ltd. (Hon Hai) held 17.36% of our Common Stock based on the number of shares
outstanding on the Record Date. In the normal course of business, we sell
products to and purchase raw materials from Hon Hai, who is the parent company
of Foxconn. These transactions were made at prices and terms consistent with
transactions with unrelated third parties. For fiscal 2013, sales of products to
Hon Hai were $0.01 million, purchases of raw materials from Hon Hai were $1.5
million and $0.01 million were due from Hon Hai. As of December 31, 2013,
amounts due to Hon Hai were $0.3 million.
10
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain
information as of March 24, 2014, as to shares of our 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 18,428,461
shares of Common Stock outstanding as of March 24, 2014. In addition, shares
issuable pursuant to options which may be exercised and restricted stock units,
or RSUs, which vest within 60 days of March 24, 2014 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 individuals particular
circumstances.
|
|
|
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 Officers:
|
|
|
|
|
|
Peter C. Chang (2)
|
|
1,894,640
|
|
10.21%
|
|
Richard Black
(3)
|
|
43,998
|
|
*
|
|
Gwong-Yih Lee (4)
|
|
12,331
|
|
*
|
|
Ray Sun
(5)
|
|
23,833
|
|
*
|
|
James C. Yeh (6)
|
|
323,331
|
|
1.75
|
|
David A. Hubbard
(7)
|
|
67,954
|
|
*
|
|
Anita K. Ho (8)
|
|
33,594
|
|
*
|
5%
|
Stockholder:
|
|
|
|
|
|
Foxconn Holding Limited
(9)
|
|
3,200,000
|
|
17.36
|
All Directors and Executive Officers as a group (7 persons)
(10)
|
|
2,399,681
|
|
14.13
|
* Represents less than 1%.
(1)
|
|
To the Companys 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. Changs minor children, 1,558,640 shares held in the
name of the Chang Family LLC and 200,000 shares held in the name of the
Peter and Mary Chang foundation, of which Mr. Chang and his wife, Mary C.
Chen, are the Managing Members. Also includes 120,000 shares underlying
RSUs that vest within 60 days of March 24, 2014.
|
|
(3)
|
|
Includes options to purchase
19,998 shares of Common Stock exercisable within 60 days of March 24,
2014.
|
|
(4)
|
|
Includes 16,000 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 6,331 shares of Common Stock that
are exercisable within 60 days of March 24, 2014.
|
|
(5)
|
|
Includes options to purchase
18,331 shares of Common Stock that are exercisable within 60 days of March
24, 2014.
|
11
(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 3,331 shares of Common
Stock that are exercisable within 60 days of March 24, 2014.
|
|
(7)
|
|
Includes 33,000 shares
underlying RSUs that vest within 60 days of March 24, 2014.
|
|
(8)
|
|
Includes options to purchase
23,640 shares of Common Stock that are exercisable within 60 days of March
24, 2014 and 3,000 shares underlying RSUs that vest within 60 days of
March 24, 2014.
|
|
(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 options to purchase
71,631 shares of Common Stock that are exercisable within 60 days of March
24, 2014 and 156,000 shares underlying RSUs that vest on May 1,
2014.
|
PERFORMANCE GRAPH
The following information is not deemed
to be soliciting material or to be filed with the Securities and
Exchange Commission or subject to Regulation 14A or 14C under the Securities
Exchange Act of 1934 or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, and will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates it by
reference into such a filing.
The following graph shows the five-year
cumulative total stockholder return (change in stock price plus reinvested
dividends) assuming the investment of $100 on December 31, 2009 in each of the
Companys Common Stock, the Nasdaq Telecommunications Index, and the Nasdaq
Composite Index. The comparisons in the table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Companys Common Stock.
12
|
|
12/31/09
|
|
12/31/10
|
|
12/31/11
|
|
12/31/12
|
|
12/31/13
|
Alliance Fiber
Optic Products
|
|
$100.00
|
|
$261.28
|
|
$127.82
|
|
$223.68
|
|
$565.79
|
Nasdaq
Telecommunications
|
|
100.00
|
|
103.92
|
|
90.81
|
|
92.63
|
|
114.88
|
Nasdaq
Composite
|
|
100.00
|
|
116.91
|
|
114.81
|
|
133.07
|
|
184.06
|
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND
ANALYSIS
Compensation Philosophy
Our philosophy to provide compensation
that attracts and retains our named executive officers, and motivates our
executive officers to pursue our corporate objectives while encouraging the
creation of long-term value for our stockholders. The Committees goal is to
provide compensation to our executive officers that is competitive, rewards
achievement of our business objectives, and aligns executive and stockholder
interests through equity ownership. Compensation decisions for executive
officers other than our Chief Executive Officer take into account the
recommendations of our Chief Executive Officer because of his understanding of
the performance of those executive officers. The components of executive officer
compensation, base salary, bonus and equity-based compensation, are discussed
below. 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.
13
Elements of Executive
Compensation
Base
Salary.
Base salaries provide our named executive officers with a
fixed amount of consistent compensation and are an important motivating factor
in attracting and retaining these individuals. Base salaries are reviewed and
adjusted on a periodic basis. We do not apply specific formulas to determine
adjustments to base salary. Decisions on base salary adjustments for executive
officers other than the Chief Executive Officer are made with the Chief
Executive Officers involvement. When reviewing base salaries, the scope of the
named executive officers performance, individual contributions,
responsibilities, experience and prior base salary level are considered. Other
considerations include market information and the base salaries and other
incentives paid to executive officers of other companies within the
industry.
In January 2014, Mr. Hubbards salary was
increased from $189,800 to $199,800. Ms. Hos salary remained the same for 2013
and 2014. In making these adjustments, the factors described above were
considered.
Bonus.
Our philosophy is that a certain
portion of executive officer compensation should be contingent upon the
Companys performance and an individuals contribution to our success in meeting
business objectives. The bonus potential of each executive officer is considered
on a case-by-case basis, and takes into account recommendations the Chief
Executive Officer for executive officers other than the Chief Executive Officer.
Bonuses for 2013 were based on overall corporate performance and individual
performance. Other considerations include market information and the
compensation paid to executive officers of other companies within the industry.
Final decisions on bonuses for executive officers other than the Chief Executive
Officer are made with the Chief Executive Officers involvement.
In July 2013, Mr. Hubbard and Ms. Ho were
awarded bonuses of $30,000 and $3,000, respectively. In January 2014, Mr.
Hubbard and Ms. Ho were awarded bonuses of $70,000 and $10,000, respectively. In
making these awards, the factors described above were considered.
Equity-based
Compensation.
We provide
equity-based incentive compensation to our executive officers through the grant
of stock options and RSUs under our 2000 Stock Incentive Plan, which plan is
administered by the Executive Compensation Committee. We believe that stock
ownership by our executive officers aligns their interests with those of our
stockholders and provides the executive officers with substantial motivation to
manage our business in accordance with those interests. Accordingly, a
considerable portion of an executive officers compensation in any year may
consist of stock options and/or RSUs. Historically, we have not applied a
formula to determine the size of individual equity-based awards granted to our
named executive officers. When determining the size of an equity award to an
executive officer, the executive officers and the Companys performance, the
executive officers role and responsibilities within the Company, the executive
officers base salary and the size value, and vesting status of his or her
existing equity awards, as well as equity awards to executive officers in
similar positions throughout the industry are considered. For executive officers
other than the Chief Executive Officer, equity awards take into account the
recommendations of the Chief Executive Officer.
Based upon these factors, the size of
each equity award is set at a level we consider appropriate to create a
meaningful incentive.
In April 2013, Mr. Hubbard and Ms. Ho
were awarded 66,000 and 6,000 RSUs, respectively. The RSUs vest as to one-half
on each of May 1, 2014 and 2015. In making these awards, the factors described
above were considered.
Chief Executive Officer
Compensation
The compensation of the Chief Executive
Officer is determined using the same criteria as for the other executive
officers as discussed above. For 2013, Mr. Changs salary was set at $278,000,
and he was awarded a $50,000 bonus. In January 2014, Mr. Changs salary was
increased to $293,000 effective January 1, 2014, and he was awarded a $200,000
bonus.
14
In April 2013, Mr. Chang was awarded
120,000 RSUs. The RSUs vest in three annual installments on each of May 1, 2014,
2015 and 2016, and vest in full in the event of a change of control or
termination due to death or involuntary discharge.
Acceleration of Option Vesting
In August 2013, the Board of Directors
accelerated the vesting of options to purchase Common Stock previously granted
to the named executive officers to August 25, 2013. The options were granted on
July 23, 2010 and originally vested in four equal installments beginning on
August 25, 2011. The number of shares underlying previously unvested options for
which vesting was accelerated were as follows: Mr. Chang 40,000 shares; Mr.
Hubbard 12,000 shares; and Ms. Ho 4,000 shares.
Other
Compensation
Our executive officers are eligible to
participate in our 2000 Employee Stock Purchase Plan. Under the plan,
participants may purchase shares of our Common Stock at a discount to the market
price. The number of shares that may be purchased by each participant is limited
by the terms of the plan and applicable tax laws. In addition, our executive
officers may participate in our health programs, such as medical, dental and
vision care coverage, and our 401(k) and life and disability insurance
programs.
Tax Deductibility of
Compensation
Section 162(m) of the Internal Revenue
Code of 1986 places a limit of $1,000,000 on the amount of compensation that we
may deduct in any one year with respect to our Chief Executive Officer and each
of the next three most highly compensated executive officers (excluding the
chief financial officer). To maintain flexibility in compensating our executive
officers in a manner designed to promote varying corporate goals, the Executive
Compensation Committee has not adopted a policy requiring all executive
compensation to be deductible.
Executive Compensation
Committee Report
The following report of the Executive
Compensation Committee shall not be deemed to be soliciting material or
filed with the SEC or to be incorporated by reference into any other filing by
Alliance Fiber Optic Products, Inc. under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that we specifically
incorporate it by reference into a document filed under those
Acts.
The Executive Compensation Committee has
reviewed and discussed the Compensation Discussion and Analysis set forth above
with our management. Based on its review and those discussions, the Executive
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement and
incorporated by reference into our Annual Report on Form 10-K for the year ended
December 31, 2013.
Executive Compensation Committee
|
|
Ray Sun, Chairman
|
Richard Black
|
Gwong-Yih
Lee
|
15
Summary Compensation
Table
The following table sets forth
compensation information for the cash amounts and the value of other
compensation paid to our Chief Executive Officer and our two other most highly
compensated executive officers for the years indicated.
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
|
|
|
|
|
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
|
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
($)(1)
|
|
($)(2)(3)
|
|
($)(4)
|
|
Total
($)
|
Peter C. Chang
|
|
2013
|
|
279,538
|
|
250,000
|
|
1,130,400
|
|
2,290
|
|
1,662,228
|
President and Chief Executive
Officer
|
|
2012
|
|
260,000
|
|
130,000
|
|
|
|
1,690
|
|
391,690
|
|
|
2011
|
|
259,731
|
|
33,000
|
|
1,888,000
|
|
1,690
|
|
2,182,421
|
|
David A. Hubbard
|
|
2013
|
|
189,458
|
|
100,000
|
|
548,670
|
|
8,890
|
|
847,018
|
Executive Vice
President,
|
|
2012
|
|
175,000
|
|
40,000
|
|
|
|
8,890
|
|
223,890
|
Sales and Marketing
|
|
2011
|
|
174,788
|
|
10,000
|
|
283,200
|
|
8,890
|
|
476,878
|
|
Anita K. Ho
|
|
2013
|
|
123,644
|
|
12,000
|
|
71,130
|
|
4,505
|
|
211,279
|
Acting Chief Financial
Officer
|
|
2012
|
|
140,000
|
|
10,000
|
|
|
|
4,505
|
|
154,505
|
|
|
2011
|
|
138,362
|
|
3,000
|
|
37,760
|
|
4,502
|
|
183,624
|
|
(1)
|
|
Consists of amounts earned
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)
|
|
Includes the fair value of
unvested options for which vesting was accelerated to August 25,
2013.
|
|
|
|
(4)
|
|
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.
|
Grants of Plan-based Awards
2013
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards:
|
|
|
Number of
|
|
|
Exercise
or
|
|
Grant Date
|
|
|
|
|
|
Number of
|
|
|
Securities
|
|
|
Base
Price
|
|
Fair Value of
|
|
|
|
Grant
|
|
Shares of
|
|
|
Underlying
|
|
|
of
Option
|
|
Stock and Option
|
|
Name
|
|
Date
|
|
Stock or Units (#)
|
|
|
Options (#)(4)
|
|
|
Awards ($/Sh)
|
|
Awards($) (1)
|
|
Peter C.
Chang
|
|
04/19/13
|
|
|
120,000
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
838,200
|
|
|
|
|
07/23/10
|
|
|
|
|
|
|
|
40,000
|
|
(5)
|
|
|
159,200
|
|
|
|
292,200
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A.
Hubbard
|
|
04/19/13
|
|
|
66,000
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
461,010
|
|
|
|
|
07/23/10
|
|
|
|
|
|
|
|
12,000
|
|
(5)
|
|
|
47,760
|
|
|
|
87,660
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anita K.
Ho
|
|
04/19/13
|
|
|
6,000
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
41,910
|
|
|
|
|
07/23/10
|
|
|
|
|
|
|
|
4,000
|
|
(5)
|
|
|
15,920
|
|
|
|
29,220
|
|
(6)
|
|
(1)
|
|
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.
|
16
|
(2)
|
|
The RSUs were granted on
April 19, 2013 and vest over three years at a rate of one-third per year
on each of May 1, 2014, 2015 and 2016. The RSUs vest in full in the event
of a change of control or termination due to death or involuntary
discharge.
|
|
|
|
(3)
|
|
The RSUs were granted on
April 19, 2013 and vest over two years at a rate of 50 percent per year on
each of May 1. 2014 and 2015.
|
|
|
|
(4)
|
|
In August 2013, the Board of
Directors accelerated the vesting of options to purchase common stock
previously granted to the named executive officers to August 25, 2013. The
options were granted on July 23, 2010 and originally vested in four equal
installments beginning on August 25, 2011.
|
|
|
|
(5)
|
|
Represents the number of
previously unvested options for which vesting was accelerated to August
25, 2013.
|
|
|
|
(6)
|
|
Represents the fair value of
previously unvested options on the accelerated vesting
date.
|
Outstanding Equity Awards at
Fiscal Year-End
|
|
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 ($)
|
|
Date
|
|
Vested (#)
|
|
|
Vested ($)(1)
|
Peter C.
Chang
|
|
|
|
|
|
|
|
|
|
|
240,000
|
(2)
|
|
3,612,000
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
(3)
|
|
1,806,000
|
|
David A.
Hubbard
|
|
|
|
|
|
|
|
|
|
|
66,000
|
(4)
|
|
993,300
|
|
Anita K.
Ho
|
|
23,640
|
(5)
|
|
|
|
2.25
|
|
11/07/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(4)
|
|
90,300
|
|
(1)
|
|
Market value is based on the
closing price of our Common Stock on December 31, 2013.
|
|
|
|
(2)
|
|
The RSUs were granted on May
6, 2011 and vest over five years at a rate of 20 percent per year on each
of May 1, 2012, 2013, 2014, 2015 and 2016. The RSUs vest in full in the
event of a change of control or termination due to death or involuntary
discharge.
|
|
|
|
(3)
|
|
The RSUs were granted on
April 19, 2013 and vest over three years at a rate of one-third per year
on each of May 1, 2014, 2015 and 2016. The RSUs vest in full in the event
of a change of control or termination due to death or involuntary
discharge.
|
|
|
|
(4)
|
|
The RSUs were granted on
April 19, 2013 and vest over two years at a rate of 50 percent per year on
each of May 1, 2014 and 2015.
|
|
|
|
(5)
|
|
Option exercise price is the
closing price of our Common Stock on the date of grant. The option vests
in four equal installments beginning in November 2006. This option has a
term of ten years which expires in November
2015
|
17
Option Exercises and Stock
Vested - 2013
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
Shares
|
|
|
Value Realized
|
|
Number of
Shares
|
|
Value Realized
|
|
|
Acquired
on
|
|
|
on
|
|
Acquired
on
|
|
on
|
Name
|
|
Exercise (#)
|
|
|
Exercise ($)(1)
|
|
Vesting (#)
|
|
Vesting ($)(2)
|
Peter C.
Chang
|
|
620,000
|
(3)
|
|
6,202,490
|
|
80,000
|
|
650,800
|
David A. Hubbard
|
|
164,000
|
(4)
|
|
1,526,333
|
|
30,000
|
|
244,050
|
Anita K.
Ho
|
|
58,360
|
(5)
|
|
638,827
|
|
4,000
|
|
32,540
|
|
(1)
|
|
Value realized is based on
the fair market value of our Common Stock on the date of exercise minus
the exercise price and does not necessarily reflect proceeds actually
received by the individual.
|
|
|
|
|
|
(2)
|
|
Value realized is based on
the fair market value of our Common Stock on the date of
vesting.
|
|
|
|
(3)
|
|
Includes 40,000 shares for
which vesting was accelerated to August 25, 2013.
|
|
|
|
(4)
|
|
Includes 12,000 shares for
which vesting was accelerated to August 25, 2013.
|
|
|
|
(5)
|
|
Includes 4,000 shares for
which vesting was accelerated to August 25,
2013.
|
Compensation Risk Assessment
In connection with its review of employee
compensation and the compensation process, the Company has concluded that risks
arising from its compensation policies and practices are not reasonably likely
to have a material adverse effect on the Company.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates under a
written charter adopted by the Board of Directors in September 2000, and amended
by the Board of Directors in October 2005. All members of the Audit Committee
meet the independence standards established by The NASDAQ Stock
Market.
The Audit Committee oversees the
Companys financial reporting process on behalf of the Board of Directors and is
responsible for providing independent, objective oversight of the Companys
accounting functions and internal control over financial reporting. The Audit
Committee reviewed and discussed the audited financial statements contained in
the 2013 Annual Report on Form 10-K with the Companys management and its
independent registered public accountants. Management is responsible for the
financial statements and the reporting process, including the system of internal
control over financial reporting. The independent registered public accountants
are responsible for expressing an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States.
The Audit Committee met privately with
the independent registered public accountants, and has discussed issues deemed
significant by them, including those required by AICPA, Professional Standards,
Vol. 1. AU Section 380, as adopted by the Public Accounting Oversight Board in
Rule 3200T. In addition, the Audit Committee has received the written disclosure
and the letter from the independent registered public accountants required by
applicable requirements of the Public Company Accounting Oversight Board
regarding the independent registered public accounting firms communications
with the Audit Committee concerning independence, and has discussed with the
independent registered public accounting firm such firms independence.
18
In reliance on the reviews and
discussions outlined above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2013 for filing with
the Securities and Exchange Commission. The Audit Committee has appointed Marcum
LLP to serve as the Companys independent registered public accountant for the
2014 fiscal year.
Audit Committee
|
|
Richard Black,
Chairman
|
Ray Sun
|
James C.
Yeh
|
PROPOSAL 2
NON-BINDING ADVISORY VOTE ON
EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, or the Dodd-Frank Act, requires that we provide
our stockholders with the opportunity to vote to approve, on a nonbinding,
advisory basis, the compensation of our named executive officers as disclosed in
this Proxy Statement in accordance with the compensation disclosure rules of the
Securities and Exchange Commission.
As described under the heading Executive
Compensation Compensation Discussion and Analysis, our executive compensation
programs are designed to attract and retain our named executive officers, who
are critical to our success. Under these programs, our named executive officers
are rewarded for the achievement of near- and long-term corporate objectives,
and the creation of increased stockholder value. Please read the Compensation
Discussion and Analysis for additional details about our executive compensation
programs, including information about the 2013 compensation of our named
executive officers.
We are asking our stockholders to
indicate their support for our named executive officer compensation as described
in this Proxy Statement. This proposal, commonly known as a say-on-pay
proposal, gives our stockholders the opportunity to express their views on our
named executive officers compensation. This vote is advisory, which means that
the vote on executive compensation is not binding on us, our Board of Directors
or the Executive Compensation Committee of the Board of Directors. This vote is
not intended to address any specific item of compensation, but rather the vote
relates to the compensation of our named executive officers as a whole, as
described in this Proxy Statement in accordance with the compensation disclosure
rules of the Securities and Exchange Commission. Accordingly, we will ask our
stockholders to vote for the following resolution at the Annual
Meeting:
RESOLVED, that the Companys
stockholders approve, on a non-binding advisory basis, the compensation of the
named executive officers, as disclosed in the Companys Proxy Statement for the
2014 Annual Meeting of Stockholders pursuant to the compensation disclosure
rules of the Securities and Exchange Commission, including the Compensation
Discussion and Analysis, the Summary Compensation Table and the other related
tables and disclosure.
The Board of Directors recommends
a vote FOR approval, on a non-binding advisory basis, of the compensation of
the Companys named executive officers.
19
PROPOSAL 3
NON-BINDING ADVISORY VOTE ON THE
FREQUENCY OF A NON-BINDING ADVISORY
VOTE ON EXECUTIVE
COMPENSATION
The Dodd-Frank Act requires that we
provide our stockholders with the opportunity to vote, on a nonbinding, advisory
basis, for their preference as to how frequently to vote on future advisory
votes on the compensation of our named executive officers as disclosed in
accordance with the compensation disclosure rules of the Securities and Exchange
Commission.
Stockholders may indicate whether they
would prefer that we conduct future advisory votes on executive compensation
every year, every two years or every three years. Stockholders also may abstain
from casting a vote on this proposal.
The Board of Directors has determined
that a non-binding advisory vote on executive compensation that occurs annually
is the most appropriate alternative for us and, therefore, the Board of
Directors recommends that you vote for the option of every year for the advisory
vote on executive compensation. In determining to recommend that stockholders
vote for a frequency of every year, the Board of Directors was influenced by the
fact that the compensation of the Companys named executive officers is
evaluated, adjusted and approved on an annual basis. By providing an advisory
vote on executive compensation on an annual basis, our stockholders will be able
to indicate their approval of or dissatisfaction with respect to the Companys
compensation philosophy, policies and practices as disclosed in the Proxy
Statement every year.
This vote is advisory, which means that
it is not binding on the Company, the Board of Directors or the Executive
Compensation Committee of the Board of Directors. The Board of Directors and the
Executive Compensation Committee will take into account the outcome of the vote;
however, when considering the frequency of future advisory votes on executive
compensation, the Board of Directors may decide that it is in the best interests
of the stockholders and the Company to hold an advisory vote on executive
compensation more or less frequently than the frequency receiving the most votes
cast by our stockholders.
Stockholders have the opportunity to
choose among four options (holding the vote every year, every two years, every
three years, or abstaining from voting) and, therefore, stockholders will not be
voting to approve or disapprove the recommendation of the Board of Directors.
The Board of Directors recommends
a vote for the option of EVERY YEAR as the frequency for advisory votes on
executive compensation.
PROPOSAL 4
RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANT
The Audit Committee has appointed the
firm of Marcum LLP as the Companys independent registered public accountant for
the fiscal year ending December 31, 2014. Representatives of Marcum LLP are
expected to be present at the Annual Meeting. They will have an opportunity to
make a statement, if they desire to do so, and will be available to respond to
appropriate questions. Although stockholder ratification of the Companys
independent registered public accountants is not required by the Companys
Bylaws or otherwise, the Company is submitting the selection of Marcum LLP to
its stockholders for ratification to permit stockholders to participate in this
important corporate decision.
20
Principal Accountant Fees and
Services
The following table presents fees for
professional audit services rendered by Marcum LLP for the audit of our
financial statements for 2013 and 2012. No fees were billed for other
services.
|
|
Year
Ended December 31,
|
|
|
2013
|
|
2012
|
Audit
Fees
|
|
$374,543
|
|
$249,851
|
Audit-Related Fees
|
|
|
|
|
Tax
Fees
|
|
|
|
|
All Other Fees
|
|
|
|
|
Total
|
|
$374,543
|
|
$249,851
|
Pre-Approval Policies and
Procedures
It is the Companys policy that all audit
and non-audit services to be performed by the Companys registered public
accountants be approved in advance by the Audit Committee. The Audit Committee
pre-approved all audit fees incurred in the year ended December 31, 2013.
Required Vote
Ratification will require the affirmative
vote of a majority of the shares present and voting at the Annual Meeting in
person or by proxy. In the event ratification is not obtained, the Audit
Committee will review its future selection of the Companys independent
registered public accountant but will not be required to select different
independent registered public accountants for the Company. Even if the selection
is ratified, the Audit Committee in its discretion may appoint a different
independent registered public accounting firm at any time during the year if the
Audit Committee determines that such a change would be in the best interests of
our Company and our stockholders.
The Board of Directors
recommends a vote FOR ratification of Marcum LLP as the Companys independent
registered public accountants.
STOCKHOLDER PROPOSALS FOR THE
2015 ANNUAL MEETING
Proposals of stockholders of the Company
that are intended to be presented at the Companys 2015 Annual Meeting must be
received by the Secretary of the Company no later than December 20, 2014 in
order that they may be included in the Companys proxy statement and form of
proxy relating to that meeting.
A stockholder proposal not included in
the Companys proxy statement for the 2015 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
Companys Bylaws. To be timely, the Bylaws provide that the Company must have
received the stockholders 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
stockholders 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
21
and other employees of the Company
by personal interview, telephone or facsimile. No additional compensation will
be paid to such persons for such solicitation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation materials to beneficial owners of the Common Stock.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United
States, the Companys directors, executive officers and any persons holding more
than 10% of the Companys Common Stock are required to report their initial
ownership of the Companys Common Stock and any subsequent changes in that
ownership to the SEC. Specific due dates for these reports have been established
and the Company is required to identify in this Proxy Statement those persons
who failed to timely file these reports. To the Companys knowledge, based
solely on a review of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year ended
December 31, 2013, all Section 16(a) filing requirements applicable to its
executive officers and directors were made in a timely manner during fiscal year
2013. The Company has no information with respect Section 16(a) compliance by
Foxconn and Han Hai.
OTHER MATTERS
The Company knows of no other business
that will be presented at the Annual Meeting. If any other business is properly
brought before the Annual Meeting, the proxy holders will vote in accordance
with their judgment unless you instruct them otherwise.
Whether you intend to be present at the
Annual Meeting or not, we urge you to vote.
By Order of the Board of
Directors
|
|
|
Peter C.
Chang
Secretary
|
April 21,
2014
The Companys 2013 Annual
Report on Form 10-K has been mailed with this Proxy Statement. The Company will
provide copies of exhibits to the Annual Report on Form 10-K to any requesting
stockholder but will charge a reasonable fee per page. Any such request should
be addressed to the Company at 275 Gibraltar Drive, Sunnyvale, California 94089,
Attention: Investor Relations. The request must include a representation by the
stockholder that as of March 24, 2014, the stockholder was entitled to vote at
the Annual Meeting.
22
PROXY
ALLIANCE FIBER OPTIC PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby authorizes PETER
C. CHANG and ANITA K. HO, as Proxies with full power in each to act without the
other and with the power of substitution in each, to represent and to vote all
the shares of Common Stock the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Alliance Fiber Optic Products, Inc. (the Company)
to be held at the office of the Company, 275 Gibraltar Drive, Sunnyvale,
California, 94089 on May 19, 2014 at 2:00 p.m., and at any postponement or
adjournment thereof, and instructs said Proxies to vote as follows:
Shares represented by this proxy will
be voted as directed by the stockholder.
If no
such directions are indicated, the Proxies will be voted FOR the election of the
Class II director, FOR Proposals 2 and 4, for the EVERY YEAR option for Proposal
3, and in accordance with the discretion of the Proxies on any other matters as
may properly come before the Annual Meeting or any postponement or adjournment
thereof.
SEE REVERSE
SIDE
|
CONTINUED AND TO BE SIGNED ON
REVERSE SIDE
|
SEE REVERSE
SIDE
|
DETACH HERE
|
|
|
|
|
|
X
|
|
Please mark
votes as
in
this example.
|
|
The Board of Directors recommends a vote FOR the election of the
Class II director, FOR Proposals 2 and 4 and FOR the Every Year (1Yr)
option on Proposal 3.
|
1. To elect Mr. Ray Sun as Class II
director to serve until the 2017 Annual Meeting of Stockholders or until his
successor is duly elected and qualified.
FOR THE
NOMINEE
|
|
c
|
|
c
|
|
WITHHOLD
AUTHORITY
FOR THE
NOMINEE
|
2. To approve, on a non-binding advisory
basis, the compensation of the Companys named executive
officers
|
|
FOR
c
|
|
AGAINST
c
|
|
ABSTAIN
c
|
|
|
|
|
|
|
|
|
|
|
|
3. To vote the frequency, on a
on-binding advisory basis, of an advisory stockholder vote on the
compensation of the Companys named executive officers.
|
|
1 Yr
c
|
|
2 Yrs
c
|
|
3 Yrs
c
|
|
ABSTAIN
c
|
|
|
|
|
|
|
|
|
|
4. To ratify the appointment of
Marcum LLP as the Companys independent registered public accountant for
2014.
|
|
FOR
c
|
|
AGAINST
c
|
|
ABSTAIN
c
|
|
|
5. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
meeting or any postponement or adjournment thereof.
PLEASE MARK, SIGN, DATE, AND RETURN
THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
|
MARK HERE
FOR ADDRESS
CHANGE
AND
NOTE BELOW
|
|
c
|
Please sign where indicated below. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by an authorized officer. If a
partnership, please sign in full partnership name by an authorized person.
Signature:
|
|
Date:
|
|
|
|
(Signature if held
jointly)
|
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