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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:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IRIDEX CORPORATION
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(Name of Registrant as Specified in its Charter)
IRIDEX CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) 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) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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IRIDEX CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2001
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IRIDEX
Corporation, a Delaware corporation ("the Company"), will be held on June 6,
2001 at 2:00 p.m., Pacific Daylight Savings Time, at the Company's principal
offices located at 1212 Terra Bella Avenue, Mountain View, California 94043 for
the following purposes:
1. To elect seven (7) directors to serve for the ensuing year or
until their successors are elected and qualified (Proposal 1);
2. To approve the amendment of the Company's 1998 Stock Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder by 290,000 shares, from 640,000 shares to
930,000 shares (Proposal 2);
3. To approve the amendment of the Company's 1995 Employee Stock
Purchase Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 40,000 shares, from 300,000
shares to 340,000 shares (Proposal 3);
4. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year ending
December 29, 2001 (Proposal 4); and
5. To transact such other business as may properly be brought before
the meeting and any adjournment(s) thereof.
Stockholders of record at the close of business on April 13, 2001 shall
be entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting. However,
to assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
Sincerely,
Mountain View, California Theodore A. Boutacoff
May 4, 2001 President and Chief Executive Officer
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YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR USING THE INTERNET AS INSTRUCTED ON
THE ENCLOSED PROXY CARD.
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IRIDEX CORPORATION
1212 TERRA BELLA AVENUE
MOUNTAIN VIEW, CA 94043
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of IRIDEX Corporation, a Delaware corporation (the "Company" or
"IRIDEX"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the principal offices of the Company located at 1212 Terra Bella
Avenue, Mountain View, California 94043 on Wednesday, June 6, 2001 at 2:00 p.m.,
Pacific Daylight Savings Time, and at any adjournment(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Company's telephone number is (650) 940-4700.
These proxy solicitation materials and the Annual Report on Form 10-K
for the fiscal year ended December 30, 2000, including financial statements,
were mailed on or about May 4, 2001 to all stockholders entitled to vote at the
meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on April 13, 2001 (the
"Record Date") are entitled to notice of and to vote at the meeting and at any
adjournment(s) thereof. At the Record Date, 6,730,626 shares of the Company's
Common Stock, $.01 par value, were issued and outstanding and held of record by
approximately 86 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by (a) delivering to the Company at
its principal offices to the attention of Robert Kamenski a written notice of
revocation or a duly executed proxy bearing a later date or (b) attending the
meeting and voting in person.
VOTING
Each stockholder is entitled to one vote for each share held.
SOLICITATION OF PROXIES
The cost of this solicitation will be borne by the Company. The Company
has retained the services of Skinner & Co., Inc. (the "Agent") to perform a
search of brokers, bank nominees and other institutional owners and to solicit
proxies. The Company estimates that it will pay the Agent a fee of $3,500 for
its services and out-of-pocket expenses. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such
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beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the Inspector of Elections (the "Inspector"). The Inspector will also
determine whether or not a quorum is present. Except in certain specific
circumstances, the affirmative vote of a majority of shares present in person or
represented by proxy at a duly held meeting at which a quorum is present is
required under Delaware law and the Company's Bylaws for approval of proposals
presented to stockholders. In general, Delaware law also provides that a quorum
consists of a majority of shares entitled to vote and present or represented by
proxy at the meeting.
When proxies are properly dated, executed and returned, the shares
represented by such proxies will be voted at the Annual Meeting in accordance
with the instructions of the stockholder. If no specific instructions are given,
the shares will be voted for (i) the election of the nominees for directors set
forth herein; (ii) the approval of an amendment to the Company's 1998 Stock Plan
to increase the number of shares reserved for issuance thereunder by 290,000
shares; (iii) the approval of an amendment to the Company's 1995 Employee Stock
Purchase Plan to increase the number of shares reserved for issuance thereunder
by 40,000 shares; (iv) the ratification of PricewaterhouseCoopers, LLP as
independent auditors of the Company for the fiscal year ending December 29,
2001; and (v) upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Pursuant to Delaware law, the Inspector will treat shares that are voted
"WITHHELD" or "ABSTAIN" as being present and entitled to vote for purposes of
determining the presence of a quorum and as entitled to vote (the "Votes Cast")
on the subject matter at the Annual Meeting with respect to such matter. With
respect to broker non-votes, in a 1988 Delaware case, Berlin v. Emerald
Partners, the Delaware Supreme Court held that, although broker non-votes may be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for purposes of
determining the number of Votes Cast with respect to the particular proposal on
which the broker has expressly not voted. Broker non-votes with respect to
proposals set forth in this Proxy Statement will therefore not be considered
"Votes Cast" and, accordingly, will not affect the determination as to whether
the requisite majority of Votes Cast has been obtained with respect to a
particular matter.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented at the 2002 Annual Meeting of Stockholders must be received by the
Company no later than January 4, 2002 and must otherwise be in compliance with
applicable laws and regulations in order to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
In addition, the Company's Bylaws establish an advance notice procedure
with regard to certain matters, including stockholder proposals not included in
the Company's proxy statement, to be brought before an annual meeting of
stockholders. To be properly brought before an annual meeting of stockholders,
notice of nominations for the election of directors or other business proposals
must be delivered in writing to the secretary of the Company at the principal
executive offices of the Company no earlier than January 4, 2002 and no later
than March 20, 2002. However, in the event the date of the 2002 Annual Meeting
of Stockholders is more than 30 days before or after (other than as a result of
adjournment) the one year anniversary of the Annual Meeting, notice by the
stockholder to be timely must be delivered in writing at the close of business
on the later of (i) 60 days before the 2002 Annual Meeting of Stockholders, or
(ii) 10 days after the day on which a public announcement of the date of such
meeting is first made.
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The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2002 Annual Meeting of Stockholders which is
not eligible for inclusion in the proxy statement relating to the meeting, and
the stockholder fails to give the Company notice in accordance with the
requirements set forth in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), no later than March 20, 2002, then the proxy holders will be
allowed to use their discretionary authority when and if the proposal is raised
at the Company's Annual Meeting in 2002.
STOCKHOLDER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 30, 2000, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, IS ENCLOSED
WITH THESE PROXY SOLICITATION MATERIALS. IN COMPLIANCE WITH RULE 14A-3
PROMULGATED UNDER THE EXCHANGE ACT, THE COMPANY HEREBY UNDERTAKES TO PROVIDE
WITHOUT CHARGE TO EACH PERSON UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 30, 2000, INCLUDING THE
FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES THERETO. REQUESTS FOR SUCH COPIES
SHOULD BE DIRECTED TO IRIDEX CORPORATION, 1212 TERRA BELLA AVENUE, MOUNTAIN
VIEW, CALIFORNIA 94043, ATTENTION: INVESTOR RELATIONS.
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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of seven directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the election of the seven nominees named below, all of whom are
presently directors of the Company. Each nominee has consented to be named a
nominee in this Proxy Statement and to continue to serve as a director if
elected. Should any nominee become unable or decline to serve as a director or
should additional persons be nominated at the Annual Meeting, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many nominees listed below as possible (or, if new nominees have
been designated by the Board of Directors, in such a manner as to elect such
nominees) and the specific nominees to be voted for will be determined by the
proxy holders. The Company is not aware of any reason that any nominee will be
unable or will decline to serve as a director. Each director elected at the
Annual Meeting will serve until the next Annual Meeting of Stockholders or until
such director's successor has been elected and qualified. There are no
arrangements or understandings between any director or executive officer and any
other person pursuant to which he is or was to be selected as a director or
officer of the Company. There is no family relationship between any director or
executive officer of the Company.
The names of the nominees and certain information about them, are set
forth below:
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
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Theodore A. Boutacoff......................... 54 President, Chief Executive Officer and 1989
Director of the Company
James L. Donovan.............................. 63 Vice President, Corporate Business 1989
Development and Director of the Company
John M. Nehra (1)............................. 52 Chairman of the Board of the Company and 1989
Special Partner, New Enterprise Associates
William Boeger, III (1)(2).................... 51 Director of the Company and President of 1989
Chronix Biomedical Corporation
Donald L. Hammond, D.Sc. (2).................. 74 Director of the Company 1990
Joshua Makower, M.D. (3)...................... 37 Director of the Company and Chairman of the 1997
Board and Chief Technical Officer of
TransVascular, Inc.
Robert K. Anderson (1)......................... 65 Director of the Company 1999
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Compensation Committee since February 2001.
Theodore A. Boutacoff has served as President, Chief Executive Officer
and a director of the Company since February 1989. He received a B.S. in Civil
Engineering from Stanford University.
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James L. Donovan has been a director of the Company since 1989 and has
served as the Company's Vice President, Corporate Business Development since
October 1997. Mr. Donovan also served as Chief Financial Officer of the Company
from February 1989 to October 1997, except during the period from June 1996 to
November 1996. Mr. Donovan received a B.S. in Business Administration from
Southern Oregon University.
John M. Nehra has served as a director of the Company since 1989 and
Chairman of the Board since 1992. From January 1993 to present, Mr. Nehra has
been with New Enterprise Associates, a venture capital firm, first as a General
Partner and, since September 2000, as a Special Partner. Since November 1989,
Mr. Nehra has also served as Managing General Partner of Catalyst Ventures, a
venture capital firm. Mr. Nehra currently serves on the Board of Directors of
Celeris Corporation, a clinical research services company, DaVita, Inc., a
provider of dialysis services, and eBenX, Inc., a health and welfare benefits
services company. He received a B.A. in Economics from University of Michigan.
William Boeger, III, has served as a director of the Company since 1989.
Mr. Boeger has also served as Managing General Partner of Quest Ventures since
1985. Since 1999, Mr. Boeger has been the President of Chronix Biomedical
Corporation, a genomic research and development company. From January 1994 to
June 2000, Mr. Boeger also served as Chairman of the Board of Calypte Biomedical
Corporation, a health-care testing company, as well as President and Chief
Executive Officer from September 1997 to October 1999. He currently serves on
the Board of Directors of Calypte Biomedical Corporation and Cell Pathways,
Inc., a pharmaceutical company for cancer treatment and prevention. Mr. Boeger
received a B.S. from Williams College and an M.B.A. from Harvard University.
Donald L. Hammond, D.Sc., has served as a director of the Company since
1990. Mr. Hammond has been retired since 1989. From 1959 to 1989, Mr. Hammond
was the Director of Hewlett-Packard Laboratories, a computer and instrument
company. Mr. Hammond received a B.S., an M.S. and a D.Sc. in Physics from
Colorado State University.
Joshua Makower, M.D., has served as a director of the Company since
1997. Since September 1995, Dr. Makower has served as Chief Executive Officer of
ExploraMed, Inc., a medical device company for the treatment of incontinence and
gastro-esophageal reflux. Dr. Makower also served as Chief Executive Officer of
TransVascular, Inc., a medical device company for the treatment of vascular and
other diseases, from March 1996 until April 2000, at which time he assumed the
title of Chairman of the Board and Chief Technical Officer. He received an M.D.
from New York University School of Medicine and an M.B.A. from Columbia Business
School.
Robert K. Anderson has served as a director of the Company since 1999.
Mr. Anderson co-founded Valleylab, Inc., a manufacturer of surgical equipment,
in 1969 and served as its Chairman and Chief Executive Officer until 1986. In
1983, Valleylab, Inc. was acquired by Pfizer, Inc. and Mr. Anderson remained as
Chairman until 1996. Mr. Anderson has been retired since 1996. Mr. Anderson
received a B.E.E. in Electrical Engineering from University of Minnesota.
VOTE REQUIRED
Directors will be elected by a plurality vote of the shares of the
Company's Common Stock present or represented and entitled to vote on this
matter at the meeting. Accordingly, the seven candidates receiving the highest
number of affirmative votes of shares represented and voting on this proposal at
the meeting will be elected directors of the Company. Votes withheld from a
nominee and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but because directors are elected by a plurality
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vote, will have no impact once a quorum is present. See "Information Concerning
Solicitation and Voting -- Quorum; Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES LISTED ABOVE
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings
during the fiscal year ended December 30, 2000. No director serving during the
fiscal year attended fewer than 75% of the aggregate of all meetings of the
Board of Directors and the committees of the Board upon which such director
served. The Board of Directors has two committees, the Audit Committee and the
Compensation Committee.
The Audit Committee of the Board of Directors consisted of Messrs.
Anderson, Boeger and Nehra, each of whom is independent as defined under the
National Association of Securities Dealers listing standards, during the fiscal
year ended December 30, 2000. The Audit Committee held two meetings during the
last fiscal year. The Audit Committee reviews and advises the Board of Directors
regarding the Company's accounting matters and is responsible for reviewing and
recommending the annual appointment of the independent public accountants,
reviewing the services to be performed by them, and reviewing and evaluating the
accounting principles being applied to the Company's financial reports. A copy
of the Audit Committee Charter is attached to this Proxy Statement as Appendix
A.
The Compensation Committee of the Board of Directors, which consisted of
Messrs. Boeger and Hammond during the fiscal year ended December 30, 2000, held
four meetings during the last fiscal year. The Compensation Committee reviews
and advises the Board of Directors regarding all forms of compensation to be
provided to the officers, employees, directors and consultants of the Company.
The Board of Directors has no nominating committee or any committee
performing such functions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Messrs. Boeger and Hammond
during the fiscal year ended December 30, 2000. Mr. Boutacoff also participates
in discussions regarding salaries and incentive compensation for all employees
(including officers) and consultants to the Company, except that Mr. Boutacoff
is excluded from discussions regarding his own salary and incentive
compensation. Except as set forth above, none of the members of the Compensation
Committee is currently or has been, at any time since the formation of the
Company, an officer or employee of the Company. No member of the Compensation
Committee or executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
DIRECTOR COMPENSATION
Directors are not paid any cash compensation from the Company for their
services as members of the Board or any committee thereof, although they are
reimbursed for reasonable out-of-pocket expenses incurred by them in attending
such meetings.
The Company's 1995 Director Option Plan (the "Director Plan") was
adopted by the Board in October 1995 and approved by the stockholders in January
1996. A total of 180,000 shares of Common Stock are reserved for issuance
thereunder. The Director Plan provides for the automatic and
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nondiscretionary grant of a nonstatutory stock option to purchase 11,250 shares
of the Company's Common Stock to each non-employee director on the date on which
such person becomes a director (the "First Option"). The First Option becomes
exercisable as to one-twelfth (1/12) of the shares subject to the option each
quarter and vests over a three-year period. Thereafter, each non-employee
director is automatically granted an option to purchase 3,750 shares of Common
Stock on July 1 of each year, if on such date he or she has served on the Board
for at least six months (the "Subsequent Option"). The Subsequent Option becomes
exercisable as to one-fourth (1/4) of the shares subject to the option for each
quarter, commencing one quarter after the First Option and any previously
granted Subsequent Option have become fully exercisable. The Director Plan
provides that the exercise price shall be equal to the fair market value of the
Company's Common Stock as of the date of grant.
Messrs. Boeger, Nehra and Hammond were each granted initial options to
purchase 11,250 shares of Common Stock at an exercise price of $2.00 per share
on the effective date of the Director Plan. These directors were each granted
subsequent options to purchase 3,750 shares of Common Stock on July 1, 1996,
July 1, 1997, July 1, 1998, July 1, 1999 and July 1, 2000 with a per share
exercise price of $14.875, $9.125, $8.00, $4.875 and $12.75 respectively. Dr.
Makower was granted an initial option to purchase 11,250 shares of Common Stock
at an exercise price of $8.75 on August 22, 1997, the date he was elected a
director by the Board. Dr. Makower was granted subsequent options to purchase
3,750 shares of Common Stock on July 1, 1998, July 1, 1999 and July 1, 2000 with
a per share exercise price of $8.00, $4.875 and $12.75 respectively. Mr.
Anderson was granted an initial option to purchase 11,250 shares of Common Stock
at an exercise price of $4.875 on April 28, 1999, the date he was elected as
director by the Board. Mr. Anderson was granted a subsequent option to purchase
3,750 shares of Common Stock on July 1, 2000 with a per share exercise price of
$12.75. On July 1, 2001, Messrs. Boeger, Nehra, Hammond, Makower and Anderson
will each automatically be granted options to purchase 3,750 shares of Common
Stock at an exercise price equal to the fair market value on the date of grant
provided that each is a director at such time.
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PROPOSAL TWO
AMENDMENT OF THE 1998 STOCK PLAN
INTRODUCTION
The 1998 Stock Plan (the "1998 Plan") was adopted by the Board of
Directors in February 1998 and was approved by the stockholders in June 1998.
The 1998 Plan provides for the grant of options and stock purchase rights to
purchase shares of the Company's Common Stock to employees and consultants of
the Company. A total of 250,000 shares of Common Stock were initially reserved
for issuance under the 1998 Plan. In April 1999 the Board of Directors amended
the 1998 Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 150,000 shares, from 250,000 shares to 400,000 shares.
This amendment to increase the number of shares reserved under the 1998 Plan was
approved by the Company's stockholders at the 1999 Annual Meeting of
Stockholders in June 1999. In February 2000, the Board of Directors authorized
an amendment to the 1998 Plan, subject to stockholder approval, to increase the
number of shares of Common Stock reserved for issuance thereunder by 240,000
shares, from 400,000 shares to an aggregate of 640,000 shares. This amendment to
increase the number of shares reserved under the 1998 Plan was approved by the
Company's stockholders at the 2000 Annual Meeting of Stockholders in June 2000.
In April 2001, the Board of Directors authorized an amendment to the 1998 Plan,
subject to stockholder approval, to increase the number of shares of Common
Stock reserved for issuance thereunder by 290,000 shares, from 640,000 shares to
an aggregate of 930,000 shares. The stockholders are being asked to approve this
amendment to increase the number of shares reserved under the 1998 Plan from
640,000 shares to an aggregate of 930,000 shares at the Annual Meeting. As of
the Record Date, options to purchase an aggregate of 531,232 shares of Common
Stock were outstanding under the 1998 Plan with a weighted average exercise
price of $7.28 per share, options to purchase an aggregate of 10,498 shares of
Common Stock had been exercised and options to purchase an aggregate of 98,270
shares of Common Stock were available for grant. As of the Record Date, the
market value of the Common Stock was $3.50.
The 1998 Plan is structured to allow the Board of Directors broad
discretion in creating equity incentives in order to assist the Company in
attracting, retaining and motivating the best available personnel for the
successful conduct of the Company's business. The Company believes that linking
employee compensation to corporate performance motivates employees to improve
stockholder value. The Company has, therefore, consistently included equity
incentives as a significant component of compensation for its employees. This
practice has enabled the Company to attract and retain the talent that it
continues to require. In order to attract the service of valuable employees as
the Company continues to grow, it will be necessary to continue to offer these
equity incentives, particularly in the extremely competitive job market in
Silicon Valley. In addition, in order to retain the services of the Company's
current employees, it will be necessary to grant additional options to these
employees as older options become fully vested.
Management believes it is critical to the Company's success to maintain
competitive employee compensation programs. The Board believes that the number
of shares reserved under the 1998 Plan will be inadequate to satisfy the other
equity needs of the Company and that the proposed increase in the number of
shares of Common Stock reserved under the 1998 Plan would be in the best
interests of the Company and its stockholders.
The material features of the 1998 Plan are outlined below.
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SUMMARY OF THE 1998 PLAN
General. The 1998 Plan provides for the grant of options to purchase
shares of the Company's Common Stock to employees (including officers and
employee directors) ("Employees") and consultants. Options granted under the
Plan may either be "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986 (the "Code"), or nonstatutory stock options, as
determined by the Administrator at the time of grant. The administrator of the
1998 Plan also has the discretion to grant stock purchase rights to Employees
and consultants.
Purpose. The purposes of the 1998 Plan are to attract and retain the
best available personnel and to provide incentive to key Employees and
consultants to promote the success of the Company's business.
Administration. The 1998 Plan is administered by the Board of Directors
or one or more committees designated by the Board, as may be necessary to comply
with the applicable rules, including rules governing plans intended to qualify
plans under Rule 16b-3 or to qualify options as "performance-based compensation"
under Section 162(m) of the Internal Revenue Code of 1986 (the "Code) (the
"Administrator"). The Administrator has complete authority to construe,
interpret, and administer the provisions of the 1998 Plan and the provisions of
the agreements governing awards granted thereunder. The Administrator will have
the authority to prescribe, amend and rescind rules and regulations pertaining
to the 1998 Plan and to make all other determinations necessary or deemed
advisable in the administration of the 1998 Plan. The determinations and
interpretations made by the Administrator are final and binding.
Grant Limitation. The 1998 Plan provides that no optionee may be granted
options and stock purchase rights to purchase more than 150,000 shares of Common
Stock in any fiscal year, except that in connection with an optionee's initial
service, an optionee may be granted options to purchase an additional 100,000
shares, a total limitation of 250,000 shares.
Eligibility. Nonstatutory options may be granted to Employees and
consultants of the Company and its subsidiaries or successor corporation.
Incentive stock options may be granted only to Employees of the Company and its
subsidiaries. The Administrator selects the Employees and consultants who will
be granted options and determines the number of shares to be subject to each
option. In making such determination, the Administrator takes into account the
duties and responsibilities of the Employee or consultant, the value of the
services of such Employee or consultant, his or her present and potential
contributions to the success of the Company, the anticipated years of future
service of an Employee and other relevant factors. As of December 30, 2000,
approximately 124 Employees were eligible to receive options under the 1998
Plan. The Company does not typically grant options under the 1998 Plan to
consultants, although such grants are permitted under the 1998 Plan. The
Administrator shall determine which eligible persons shall be granted options
and stock purchase rights.
Exercise of Options and Stock Purchase Rights. Options and stock
purchase rights become exercisable at such times as are determined by the
Administrator and set forth in the individual agreements. Generally, options
vest as to one forty-eighth (1/48) of the shares for each full month of service;
however, typically the options will not be exercisable until at least twelve
months of service has been completed. In the case of stock purchase rights, the
Company has a repurchase option exercisable upon the termination of the
purchaser's employment, unless the Administrator determines otherwise at the
time of grant. The Company's repurchase option lapses at a rate determined by
the Administrator. The purchase price for the shares so repurchased is the
original price paid by the purchaser.
An option or stock purchase right is exercised by giving written notice
to the Company specifying the number of full shares of Common Stock to be
purchased and tendering payment of the purchase price to the
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Company. The form of consideration for exercising an option or stock purchase
right, including the method of payment, is determined by the Administrator.
Exercise Price. The exercise price of options and stock purchase rights
granted under the 1998 Plan is determined by the Administrator and must not be
less than 100% of the fair market value of the Company's Common Stock at the
time of grant; provided, however, that incentive stock options or stock purchase
rights granted to stockholders owning more than 10% of the voting stock of the
Company, if any, are subject to the additional restriction that the exercise
price per share of each option must be at least 110% of the fair market value
per share on the date of grant. The exercise price of nonstatutory options is
determined by the Administrator and, in order to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, must not be less
than 100% of the fair market value of the Common Stock on the date of grant.
Termination. The 1998 Plan gives the Administrator authority to vary the
terms of the individual option agreements. However, generally, if the optionee
ceases to be an employee or consultant, the optionee shall have the right to
exercise the vested portion of an unexercised option within thirty (30) days
after the date of termination, unless otherwise specified in the option
agreement. If such termination is due to death or disability within the meaning
of Section 422(c) of the Code, the optionee (or the optionee's legal
representative) shall have the right to exercise the vested portion of an
unexercised option at any time within twelve (12) months of the termination
date, unless otherwise specified in the option agreement. In no event shall an
option be exercisable beyond its term.
Term of Options. Options granted under the 1998 Plan expire as
determined by the Administrator, but in no event later than ten (10) years after
the date of grant. However, incentive stock options granted to stockholders
owning more then 10% of the Company's outstanding voting stock may not have a
term of more than five years. Stock purchase rights granted under the 1998 Plan
also expire as determined by the Administrator, but in no event later than
ninety (90) days after the date of grant. No option or stock purchase right may
be exercised by any person after its expiration.
Non-Transferability of Options. Unless determined otherwise by the
Administrator, options and stock purchase rights are non-transferable by the
optionee other than by will or the laws of descent and distribution, and stock
purchase rights are exercisable during the lifetime of the optionee or grantee
of the stock purchase right only by such optionee or grantee, or in the event of
the optionee's or grantee's death, by a person who acquires the right by bequest
or inheritance or by reason of the death of the optionee or grantee.
Adjustments Upon Change in Capitalization. The number of shares covered
by each outstanding option, and the exercise price thereof, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares resulting from a change in the Company's capitalization, such as a stock
dividend, stock split, reverse stock split, combination, reclassification, or
like change in the capital structure of the Company.
Transfer of Control. In the event the Company is a participant in any
merger or consolidation, each outstanding, unexercised option or stock purchase
right shall be assumed or substituted by the surviving corporation. If such
options or stock purchase rights are not assumed, they become fully exercisable
or the repurchase right applicable to them fully lapses, respectively, for a
period of fifteen (15) days following the Administrator's notice that such
option has become fully exercisable or that the repurchase option with respect
to a stock purchase right has fully lapsed, respectively. Any options that are
neither assumed nor exercised within 15 days of written notice from the Company
terminate upon the expiration of such period.
-10-
13
Dissolution or Liquidation. In the event of a dissolution or liquidation
of the Company, any outstanding option or stock purchase right shall terminate.
However, the Administrator may provide that any option be fully exercisable
until ten (10) days prior to such event. In addition, the Administrator may
provide that the Company's repurchase option with respect to any stock purchase
right shall fully lapse prior to such event.
Amendment or Termination of the 1998 Plan. The Administrator may at any
time amend, alter, suspend or terminate the 1998 Plan; provided that no
amendment, alteration, suspension or termination may impair the rights of any
optionee, unless mutually agreed otherwise. Options may be granted under the
1998 Plan during the period expiring February 2008.
UNITED STATES TAX INFORMATION
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after the date of
grant and one year after exercising the option, any gain or loss will be treated
as long-term capital gain or loss. If these holding periods are not satisfied,
the optionee will recognize ordinary income at the time of sale or exchange
equal to the difference between the exercise price and the lower of (i) the fair
market value of the shares on the date of the option exercise or (ii) the sale
price of the shares. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director or
10% stockholder of the Company. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain or
loss recognized on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
All other options that do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time a nonstatutory option is granted. However, upon its exercise,
the optionee will recognize taxable income generally measured as the excess of
the then fair market value of the shares exercised over the exercise price. A
different rule may apply if the optionee is a director, officer or 10%
stockholder. Any taxable income recognized in connection with an option exercise
by an optionee who is also an employee of the Company will be subject to tax
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. Upon resale of such shares by the optionee, any difference
between the sales price and the optionee's exercise price, to the extent not
recognized as taxable income as described above, will be treated as long-term or
short-term capital gain or loss, depending on the holding period. The Company
will be entitled to a tax deduction in the same amount as the ordinary income
recognized by the optionee with respect to shares acquired upon exercise of a
nonstatutory option.
THE FOREGOING SUMMARY OF THE EFFECT OF THE UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE OPTIONEE AND THE COMPANY IN CONNECTION WITH THE 1998 PLAN
DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE APPLICABLE
PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY
IN WHICH THE PARTICIPANT MAY RESIDE.
AMENDED AND NEW PLAN BENEFITS
The grant of options under the 1998 Plan to directors and executive
officers, including the officers named in the Summary Compensation Table below,
is subject to the discretion of the Administrator. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards
-11-
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under the 1998 Plan. Accordingly, future awards are not determinable. The table
of option grants under "Executive Compensation and Other Matters--Option Grants
in Last Fiscal Year" provides information with respect to the grant of options
to the named executive officers identified in that table during fiscal 2000.
During fiscal 2000, no current executive officers were granted any options
pursuant to the 1998 Plan, and all other employees as a group were granted
options to purchase 365,950 shares pursuant to the 1998 Plan.
As of the Record Date, options to purchase an aggregate of 531,232
shares of Common Stock were outstanding under the 1998 Plan with a weighted
average exercise price of $7.28 per share, options to purchase an aggregate of
10,221 shares of Common Stock had been exercised and options to purchase an
aggregate of 98,270 shares of Common Stock were available for grant. As of the
Record Date, the market value of the Common Stock was $3.50.
REQUIRED VOTE
If a quorum is present, the affirmative vote of a majority of the Votes
Cast will be required to approve the amendment of the 1998 Plan. A broker
non-vote will not be treated as entitled to vote on this subject matter at the
Annual Meeting. See "Information Concerning Solicitation and Voting -- Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE AMENDMENT OF THE 1998 STOCK PLAN
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PROPOSAL THREE
AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors in November 1995 and was approved by the
stockholders in January 1996. The Purchase Plan provides employees of the
Company the opportunity to purchase Common Stock through accumulated payroll
deductions at below market prices. A total of 50,000 shares of Common Stock were
initially reserved for issuance under the Purchase Plan. In January 1997, the
Board of Directors amended the Purchase Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 50,000 shares to an aggregate
of 100,000 shares. The amendment to increase the number of shares reserved under
the Purchase Plan from 50,000 to 100,000 shares was approved by the stockholders
at the 1997 Annual Meeting of Stockholders in April 1997. In February 1998, the
Board of Directors amended the Purchase Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 75,000 shares, from 100,000
shares to an aggregate of 175,000 shares. The amendment to increase the number
of shares reserved under the Purchase Plan from 100,000 shares to 175,000 shares
was approved by the stockholders at the 1998 Annual Meeting of Stockholders in
June 1998. In April 1999, the Board of Directors amended the Purchase Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 75,000 shares, from 175,000 shares to an aggregate of 250,000 shares. The
amendment to increase the number of shares reserved under the Purchase Plan from
175,000 shares to an aggregate of 250,000 shares was approved by the
stockholders at the 1999 Annual Meeting of Stockholders in June 1999. In
February 2000, the Board of Directors authorized an amendment to the Purchase
Plan, subject to stockholder approval, to increase the number of shares reserved
under the Purchase Plan by 50,000 shares, from 250,000 shares to an aggregate of
300,000 shares. The amendment to increase the number of shares reserved under
the Purchase Plan from 250,000 shares to 300,000 shares was approved by the
stockholders at the 2000 Annual Meeting of Stockholders in June 2000. In April
2001, the Board of Directors amended the Purchase Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 40,000 shares, from
300,000 shares to an aggregate of 340,000 shares. The stockholders are being
asked to approve this amendment to increase the number of shares reserved under
the Purchase Plan from 300,000 shares to an aggregate of 340,000 shares at the
Annual Meeting. As of the Record Date, 75,878 shares were available for purchase
under the Purchase Plan. As of the Record Date, the market value of the Common
Stock was $3.50.
The Board of Directors believes that the Purchase Plan is an important
factor in creating equity incentives to assist the Company in attracting,
retaining and motivating the best available personnel for the successful conduct
of the Company's business. The Company believes that linking employee
compensation to corporate performance motivates employees to improve stockholder
value. The Company has, therefore, consistently included equity incentives as
significant component of compensation for its employees. This practice has
enabled the Company to attract and retain the talent that it continues to
require. In order to attract and retain the service of valuable employees as the
Company continues to grow, it will be necessary to continue to provide for these
equity incentives, particularly in the extremely competitive job market in
Silicon Valley.
Management believes it is critical to the Company's success to maintain
competitive employee compensation programs. The Board believes that the number
of shares reserved under the Purchase Plan and the other plans described above
will be inadequate to satisfy the other equity needs of the Company and that the
proposed increase in the number of shares of Common Stock reserved under the
Purchase Plan would be in the best interests of the Company and its
stockholders.
-13-
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The material features of the Purchase Plan are outlined below.
SUMMARY OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company with an opportunity to purchase Common Stock through accumulated payroll
deductions.
Administration. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, is administered by the Board of Directors or a
committee designated by the Board, as may be necessary to comply with the rules
governing plans intended to qualify as discretionary grant plans under Rule
16b-3 (the "Administrator"). All questions of interpretation or application of
the Purchase Plan are determined by the Administrator, and its decisions are
final, conclusive and binding upon all participants.
Eligibility and Participation; Withdrawal. Employees of the Company and
its designated subsidiaries who are employed on a given enrollment date are
eligible to participate in the Purchase Plan if they are customarily employed
for at least 20 hours per week and more than five months per year, and do not
own or hold options to purchase as a result of such participation, five percent
or more of the total combined voting power or value of all classes of stock of
the Company. Notwithstanding the foregoing, no employee may be granted the right
to purchase more than $25,000 worth or more than 1,000 shares of Common Stock
annually. Eligible employees become participants in the Purchase Plan by
completing a subscription agreement authorizing payroll deductions of up to 10%
of the employee's compensation, and filing it with the Company's Personnel
Department not later than the day before an enrollment date. An employee may
withdraw from the Purchase Plan at any time by giving written notice to the
Company. In such a case, all payroll deductions credited to the employee's
account and not yet used to purchase stock are refunded. Approximately 70
employees are currently participating in the Purchase Plan.
Offering Periods. The Purchase Plan is implemented by consecutive
six-month offering periods. Offering periods commence on the first trading day
on or after September 1 and March 1 and terminate on the last trading day of the
sixth month following such commencement date. The Administrator may change the
commencement date and duration of the offering periods without stockholder
approval.
Purchase Price. The purchase price per share at which shares may be sold
to employees under the Purchase Plan is 85% of the lower of the fair market
value of the Company's Common Stock (a) on the date of commencement of the
offering period or (b) on the last trading day of the six-month offering period.
The fair market value of the Company's Common Stock on a given date is the
closing sale price on the Nasdaq National Market. In the event the Company's
Common Stock is quoted on the Nasdaq system but not on the National Market
thereof, the fair market value is the mean of the closing bid and asked prices
for the Company's Common Stock on the date of determination. In the absence of
an established market for the Common Stock, the fair market value is established
by the Board of Directors.
Adjustments on Changes in Capitalization. In the event any change is
made in the Company's capitalization, such as a stock split or stock dividend,
which results in an increase or decrease in the number of outstanding shares of
the Company's Common Stock without receipt of consideration by the Company, the
number of shares remaining subject to the Purchase Plan and the purchase price
per share shall be appropriately adjusted. In the event of a proposed
dissolution or liquidation of the Company, the offering periods will terminate
immediately prior to such dissolution or liquidation, unless the Board provides
otherwise. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Purchase Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary
-14-
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of such successor corporation, unless the Board determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, to shorten
the offering period then in progress by setting a new exercise date.
Transferability. No rights or accumulated payroll deductions of a
participant may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will or the laws of descent and distribution).
Amendment and Termination of the Purchase Plan. The Board of Directors
may at any time and for any reason amend or terminate the Purchase Plan, except
that (i) such termination shall not affect any purchase rights previously
granted (except as permitted under the terms of the Purchase Plan), and (ii) no
amendment may adversely affect a purchase right previously granted under the
Purchase Plan (except to the extent permitted by the terms of the Purchase Plan
or as may be necessary to qualify the Purchase Plan as an employee stock
purchase plan pursuant to Section 423 of the Code or to obtain qualification or
registration of the shares under applicable foreign, federal or state securities
laws). The Purchase Plan shall continue in effect for a term of ten years unless
terminated earlier by the Board or until all of the shares reserved for issuance
thereunder have been issued.
UNITED STATES TAX INFORMATION
The Purchase Plan and the rights of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon the sale or other disposition of the shares, the participant
will generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the offering period and one year from the date the
shares are purchased, the participant will recognize ordinary income measured as
the lesser of (i) the excess of the fair market value of the shares on the date
of such sale or disposition over the purchase price, or (ii) an amount equal to
15% of the fair market value of the shares as of the first day of the offering
period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant except to the extent of
ordinary income recognized by participants upon a sale or disposition of shares
prior to the expiration of the holding periods described above.
THE FOREGOING SUMMARY OF THE EFFECT OF THE UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE PARTICIPANT AND THE COMPANY IN CONNECTION WITH THE
PURCHASE PLAN DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO
THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT
DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
AMENDED AND NEW PLAN BENEFITS
The Company cannot now determine the number of shares to be issued in
the future pursuant to the Purchase Plan to the Company's executive officers and
employees. In 2000, 37,428 shares of the Company's Common Stock were issued to
all employees (excluding executive officers) and 2,903 shares of the Company's
Common Stock were issued to the executive officers as a group.
-15-
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REQUIRED VOTE
If a quorum is present, the affirmative vote of a majority of the Votes
Cast will be required to approve the amendment of the Purchase Plan. A broker
non-vote will not be treated as entitled to vote on this subject matter at the
Annual Meeting. See "Information Concerning Solicitation and Voting -- Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
-16-
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PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
INTRODUCTION
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending December 29, 2001, and recommends that stockholders vote
for ratification of such appointment. Representatives of PricewaterhouseCoopers
LLP are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
Although action by stockholders is not required by law, the Board of
Directors has determined that it is desirable to request approval of this
selection by the stockholders. Notwithstanding the selection, the Board of
Directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the Board of Directors feels that such
a change would be in the best interest of the Company and its stockholders. In
the event of a negative vote on ratification, the Board of Directors will
reconsider its selection.
FEES BILLED TO COMPANY BY PRICEWATERHOUSECOOPERS, LLP DURING FISCAL 2000
Audit Fees
Audit fees billed to the Company by PricewaterhouseCoopers, LLP during
the Company's 2000 fiscal year for review of the Company's annual financial
statements and those financial statements included in the Company's quarterly
reports on Form 10-Q totaled $74,750.
Financial Information Systems Design and Implementation Fees
The Company did not engage PricewaterhouseCoopers, LLP to provide advice
to the Company regarding financial information systems design and implementation
during the fiscal year ended December 30, 2000.
All Other Fees
Fees billed to the Company by PricewaterhouseCoopers, LLP during the
Company's 2000 fiscal year for all other non-audit services rendered to the
Company, including accounting advice services, totaled $33,960.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date by (i)
each person (or group of affiliated persons) known to the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director and nominee for director, (iii) each of the Company's executive
officers named in the Summary Compensation Table appearing herein, and (iv) all
of the Company's directors and executive officers as a group.
BENEFICIAL OWNERSHIP(1)
--------------------------------------
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF TOTAL
---------------- ---------------- ----------------
Wellington Management Company LLP........................................ 628,000 9.33%
75 State Street
Boston, MA 02109 (2)
Special Situations Fund III, L.P......................................... 462,570 6.87%
MGP Advisors Limited Partnership
153 E 53rd Street, 51st Floor
New York, NY 10022 (3)
Special Situations Cayman Fund, L.P...................................... 116,900 1.74%
AWM Investment Company, Inc.
153 E 53rd Street, 51st Floor
New York, NY 10022 (3)
Dimensional Fund Advisors Inc............................................ 370,600 5.51%
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401(4)
Milton Chang............................................................. 367,020 5.45%
26228 Scarff Way
Los Altos Hills, CA 94022 (5)
William Boeger, III (6).................................................. 307,685 4.55%
Theodore A. Boutacoff (7)................................................ 299,958 4.40%
Eduardo Arias (8)........................................................ 275,408 4.06%
Robert K. Anderson (9)................................................... 159,216 2.36%
John M. Nehra (10)....................................................... 158,858 2.35%
James Donovan (11)....................................................... 93,664 1.38%
Donald L. Hammond (12)................................................... 69,485 1.03%
Robert Kamenski (13)..................................................... 61,543 *
Timothy S. Powers (14)................................................... 59,388 *
Joshua Makower (15)...................................................... 12,765 *
All directors and executive officers as a group (10 persons) (16)........ 1,497,970 20.95%
* Represents beneficial ownership of less than 1%.
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(1) Applicable percentage ownership is based on 6,730,626 shares of Common
Stock outstanding as of the Record Date together with applicable options
for such stockholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission (the "Commission"), and
includes voting and investment power with respect to shares. Shares of
Common Stock subject to options currently exercisable or exercisable within
60 days after the Record Date are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. Except as
noted in the footnotes to this table, and subject to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of the Company's Common Stock
shown as beneficially owned by them.
(2) Based solely on information provided pursuant to Schedules 13G and 13G/A
filed with the Securities and Exchange Commission for calendar year 200. In
its role as investment advisor, Wellington Management Company LLP may be
deemed to beneficially own 628,000 shares by reason of its shared voting
power with respect to 518,000 shares and shared dispositive power with
respect to 628,000 shares.
(3) Based solely on information provided pursuant to Schedules 13G and 13G/A
filed with the Securities and Exchange Commission for calendar year 2000.
Austin Marxe and David Greenhouse exercise shared voting and dispositive
power with respect to these shares and are deemed to beneficially own these
shares by virtue of being executive officers of MGP Advisors Limited
Partnership and AWM Investment Company, Inc., the general partners of
Special Situations Fund III, L.P., and Special Situations Cayman Fund,
L.P., respectively.
(4) Based solely on information provided pursuant to Schedules 13G and 13G/A
filed with the Securities and Exchange Commission for calendar year 2000.
In its role as investment advisor or manager, Dimensional Fund Advisors,
Inc. exercises sole voting and dispositive power with respect to 370,600
shares, but disclaims beneficial ownership of all 370,600 shares.
(5) Based solely on information provided pursuant to Schedule 13G and 13G/A
filed with the Securities and Exchange Commission for calendar year 2000.
(6) Includes 157,640 shares held by Quest Ventures II and 107,748 shares held
by Quest Ventures International, as to which shares Mr. Boeger disclaims
beneficial ownership. Mr. Boeger is general partner of Quest Ventures II
and Quest Ventures International. Includes 38,078 shares subject to stock
options held by Mr. Boeger that are exercisable within 60 days of the
Record Date.
(7) Includes 20,000 shares held by Mr. Boutacoff as custodian for his daughter
under the Uniform Transfers to Minors Act and 83,958 shares subject to
stock options held by Mr. Boutacoff that are exercisable within 60 days of
the Record Date.
(8) Includes 163,742 shares held by the Arias Trust, dated October 19, 1994,
over which Mr. Arias exercises voting and dispositive power and 59,166
shares subject to stock options held by Mr. Arias that are exercisable
within 60 days of the Record Date.
(9) Includes 7,716 shares subject to stock options held by Mr. Anderson that
are exercisable within 60 days of the Record Date.
(10) Includes 27,348 shares held by Mr. Nehra's spouse as separate property, as
to which shares Mr. Nehra disclaims beneficial ownership. Also includes
28,078 shares subject to stock options held by Mr. Nehra that are
exercisable within 60 days of the Record Date.
(11) Includes 59,913 shares held by the Donovan Trust dated March 14, 1978, over
which Mr. Donovan exercises investment and voting control, and 33,751
shares subject to stock options that are exercisable within 60 days of the
Record Date.
(12) Includes 12,500 shares held by the Hammond Marital Trust UA 8/30/95 and
12,500 shares held by the Hammond Survivors Trust UA 8/30/95, over which
Mr. Hammond exercises voting and dispositive power. Also includes 43,078
shares subject to stock options held by Mr. Hammond that are exercisable
within 60 days of the Record Date.
(13) Includes 61,543 shares subject to stock options held by Mr. Kamenski that
are exercisable within 60 days of the Record Date.
(14) Includes 56,458 shares subject to stock options held by Mr. Powers that are
exercisable within 60 days of the Record Date.
(15) Includes 12,765 shares subject to stock options held by Dr. Makower that
are exercisable within 60 days of the Record Date.
(16) Includes 419,591 shares subject to stock options that are exercisable
within 60 days of the Record Date. See footnotes (6) through (15) above.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table shows, as to the Company's Chief Executive Officer
and each of its other three most highly compensated executive officers earning
more than $100,000 in salary and bonus (the "Named Officers"), information
concerning compensation awarded to, earned by or paid for their services to the
Company in all capacities during 2000, 1999 and 1998. The entries under the
column heading "Other Compensation" in the table represent the cost of term life
insurance for each Named Officer, except as otherwise noted.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ------------
SECURITIES ALL OTHER
NAME AND OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(3) BONUS($) COMPENSATION ($) OPTIONS (#) ($)
------------------ ---- ------------ -------- ---------------- ------------ ------------
Theodore A. Boutacoff 2000 $216,654 -- -- -- $1,275
President and Chief 1999 187,442 50,000(1) -- -- 403
Executive Officer 1998 182,692 -- -- 40,000 395
Eduardo Arias 2000 153,933 -- -- -- 668
Senior Vice President 1999 147,871 42,356(2) -- -- 318
Worldwide Sales 1998 155,642 -- -- 25,000 336
Robert Kamenski 2000 150,300 -- -- -- 1,039
Vice President, 1999 141,423 5,401(1) -- -- 305
Administration and 1998 141,615 -- -- 20,000 306
Chief Financial Officer
Timothy S. Powers 2000 153,093 -- -- -- 1,136
Vice President, Operations 1999 142,814 5,489(1) -- -- 307
1998 139,039 -- -- 28,000 300
------------------
(1) Represents bonuses earned in fiscal year 1999 and paid out in February
2000.
(2) Represents sales incentives earned in fiscal year 1999 and paid out in
March 2000.
(3) There were 26 pay periods during fiscal year 1999 and fiscal year 2000,
compared to 27 pay periods during fiscal year 1998.
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STOCK OPTION GRANTS AND EXERCISES DURING LAST FISCAL YEAR
No stock options were granted to the Named Officers named in the Summary
Compensation Table above during the fiscal year ended December 30, 2000.
OPTION GRANTS IN FISCAL 2000
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL OF ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
NAME AND OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
PRINCIPAL POSITION GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------------------ ---------- ------------ -------- ---------- ----------- -----------
Theodore A. Boutacoff -- -- -- -- -- --
President and Chief
Executive Officer
Eduardo Arias -- -- -- -- -- --
Senior Vice President
Worldwide Sales
Robert Kamenski -- -- -- -- -- --
Vice President,
Administration and
Chief Financial Officer
Timothy S. Powers -- -- -- -- -- --
Vice President, Operations
------------------------------
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table shows, as to the individuals named in the Summary
Compensation Table above, the number of options exercisable and unexercisable at
December 30, 2000, information concerning stock options exercised during the
fiscal year ended December 30, 2000 and the value of unexercised options at such
date.
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND
FISCAL 2000 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 30, 2000 (#) DECEMBER 30, 2000 ($)(2)
NAME AND ACQUIRED ON VALUE REALIZED ------------------------------ -----------------------------
PRINCIPAL POSITION EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ------------ -------------- -------------- ------------- ------------- -------------
Theodore A. Boutacoff -- -- 77,709 17,291 $ 86,250 $ 8,750
President and Chief
Executive Officer
Eduardo Arias -- -- 54,792 11,666 70,337 6,563
Senior Vice President
Worldwide Sales
Robert Kamenski 2,000 $9,625 56,021 11,979 4,813 6,563
Vice President,
Administration and
Chief Financial Officer
Timothy S. Powers -- -- 48,855 29,145 10,938 10,938
Vice President,
Operations
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the options at year-end ($4.875 per share) and
the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has no employment contracts with any of its officers and has
no compensatory plans or arrangements that are activated upon resignation,
termination or retirement of any such officer upon a change in control of the
Company. The 1998 Plan and the Director Plan provide for the accelerated vesting
of all outstanding options upon a change in control, but, in the case of the
1998 Plan, only if the option is not assumed or substituted. In addition,
because competition for talented employees is intense, the Company may in the
future consider entering into severance agreements with certain of its key
employees.
OTHER EMPLOYEE BENEFIT PLANS
401(k) Plan
The Company sponsors a 401(k) Plan under which eligible employees may
contribute, on a pre-tax basis, up to 15% of the employee's total annual income
from the Company, excluding bonuses, subject to certain IRS limitations. The
Company matches 50% of the employee's contribution up to a maximum amount. The
maximum Company match in fiscal year 2000 was $750 per employee and in fiscal
year 2001 is $1,000 per employee. All full-time employees who have attained age
18 are eligible to participate in the plan.
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All contributions are allocated to the employee's individual account and, at the
employee's election, are invested in one or more investment funds available
under the plan. Contributions are fully vested and nonforfeitable.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
GENERAL
The Compensation Committee (the "Committee") of the Board of Directors
establishes the overall executive compensation strategies of the Company and
approves compensation elements for the Company's Chief Executive Officer and
other executive officers. The Committee is comprised of two independent,
nonemployee members of the Board of Directors, neither of who has interlocking
relationships as defined by the Securities and Exchange Commission. The
Committee has available to it such external compensation advice and data as the
Committee deems appropriate to obtain.
The compensation philosophy of the Committee is to provide a
comprehensive compensation package for each executive officer that is
competitive with those offered by companies of similar type and size, in the
same geographical area and whose executives perform similar skills to those
performed by the executives of the Company. Accordingly, the Committee follows a
compensation strategy that has used vesting terms to incentivize and reward
executives as the Company addresses the challenges associated with growth. As
the Committee applies this compensation philosophy in determining appropriate
executive compensation levels and other compensation factors, the Committee
reaches its decisions with a view towards the Company's overall financial
performance. The Committee strives to structure each officer's overall
compensation package to enable the Company to attract, retain and reward
personnel who contribute to the success of the Company.
EXECUTIVE OFFICER COMPENSATION
The objectives of the executive officer compensation program are to
attract, retain, motivate and reward key personnel who possess necessary
leadership and management skills through competitive base salary, annual cash
bonus incentives, long-term incentive compensation in the form of stock options,
and various benefits generally available to employees of the Company.
Base Salary. Base salary levels for the Company's executive officers are
generally targeted to be competitive with companies in the same stage of
development and in the same industry and geographic area. In determining
salaries, the Committee also takes into account the Chief Executive Officer's
recommendations, individual experience, contributions to corporate goals and the
Company's performance.
Incentive Bonuses. The Committee believes that a cash incentive bonus
plan can serve to motivate the Company's executive officers and management to
address annual performance goals, using more immediate measures for performance
than those reflected in the appreciation in value of stock options. In 2000, the
Company's goals were targeted toward longer-term objectives for corporate
development. As a consequence, the Company did not have an incentive bonus plan
for executive officers in fiscal 2000.
Stock Option Grants. Stock options are granted to executive officers and
other employees under the Company's Option Plans. Stock option grants are
intended to focus the recipient on the Company's long-term performance to
improve stockholder value and to retain the services of executive officers in a
competitive job market by providing significant long-term earning potential. To
this end, stock options generally vest over a four-year period, based on
continued employment. Factors considered in granting stock
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options to executive officers of the Company are the duties and responsibilities
of each individual, such individual's contributions to the success of the
Company and other relevant factors. The Company views stock options as an
important component of long-term compensation for executive officers since
options motive executive officers to manage the Company in a manner that is
consistent with the interests of stockholders.
CEO COMPENSATION
Compensation for the Chief Executive Officer is consistent with the
philosophies and practices described above for executive officers in general.
Mr. Boutacoff's salary was increased in 2000 commensurate with market
conditions. Mr. Boutacoff was not granted any options in fiscal year 2000.
COMPENSATION COMMITTEE
William Boeger, III
Donald L. Hammond
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the report of the audit committee of the Board of
Directors. The audit committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 30, 2000 with
management. In addition, the audit committee has discussed with
PricewaterhouseCoopers, LLP, the Company's independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committee). The audit committee also has received the
written disclosures and the letter from PricewaterhouseCoopers, LLP as required
by the Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees) and the audit committee has discussed the independence of
PricewaterhouseCoopers, LLP with that firm.
Based on the audit committee's review of the matters noted above and its
discussions with the Company's independent auditors and the Company's
management, the audit committee recommended to the Board of Directors that the
financial statements be included in the Company's Annual Report on Form 10-K.
This report has been provided by Robert K. Anderson, William Boeger, III and
John M. Nehra, the members of the Audit Committee.
Respectfully Submitted by:
Robert K. Anderson
William Boeger, III
John M. Nehra
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COMPANY STOCK PRICE PERFORMANCE
The following graph demonstrates a comparison of cumulative total
stockholder returns, calculated on a dividend reinvestment basis and based upon
an initial investment of $100 in the Company's Common Stock as compared with the
Russell 2000 Index and the Standard and Poors 500 Index. No dividends have been
declared or paid on the Company's Common Stock during such period. The stock
price performance shown on the graph below is not necessarily indicative of
future price performance. The Company's Common Stock began trading on the Nasdaq
National Market on February 15, 1996. The graph reflects the Company's stock
price performance from the initial public offering through the end of fiscal
year 2000.
IRIDEX CORPORATION
COMPANY STOCK PRICE PERFORMANCE
2/16/96 3/29/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- ------- -------- ------- ------- ------- --------
IRIDEX Corporation 100.000 113.889 166.667 91.667 83.333 75.000 101.389 131.944 84.722
Standard & Poors 500 100.000 99.617 103.495 106.073 114.315 116.843 136.600 146.190 149.762
Russell 2000 100.000 102.855 107.780 107.712 112.755 106.521 123.256 141.118 135.897
3/31/98 7/2/98 10/2/98 12/31/98 4/1/99 7/2/99 10/1/99 12/31/99
------- ------ ------- -------- ------- ------ ------- --------
IRIDEX Corporation 92.367 87.500 41.667 47.222 47.222 50.000 47.222 95.833
Standard & Poors 500 170.028 176.922 154.727 189.702 199.654 214.701 197.971 226.743
Russell 2000 149.470 142.514 108.744 131.211 123.990 141.954 131.699 156.955
3/31/00 7/1/00 9/30/00 12/30/00
------- ------ ------- --------
IRIDEX Corporation 130.556 141.667 121.533 54.167
Standard & Poors 500 231.269 224.482 221.690 203.753
Russell 2000 167.633 160.835 162.123 150.356
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of the Company's last fiscal year, there has not
been nor is there currently proposed any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than 5% of the Common Stock of the Company or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest, other than indemnification agreements between the Company and
each of its directors and officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and the
National Association of Securities Dealers, Inc. Such executive officers,
directors and greater than 10% stockholders are also required by SEC rules to
furnish the Company with copies of all forms that they file pursuant to Section
16(a). Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no filings were
required for such persons, the Company believes that during fiscal 2000 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: May 4, 2001
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APPENDIX A
AMENDED AND RESTATED
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
IRIDEX CORPORATION
PURPOSE:
The purpose of the Audit Committee of the Board of Directors of IRIDEX
Corporation (the "Company") shall be:
- to provide oversight and monitoring of Company management and the
independent auditors and their activities with respect to the
Company's financial reporting process;
- to provide the Company's Board of Directors with the results of its
monitoring and recommendations derived therefrom;
- to nominate to the Board of Directors independent auditors to audit
the Company's financial statements and oversee the activities and
independence of the auditors; and
- to provide to the Board of Directors such additional information and
materials as it may deem necessary to make the Board of Directors
aware of significant financial matters that require the attention of
the Board of Directors.
The Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors. On or before June 14, 2001, the members will meet the
following criteria:
1. Each member will be an independent director, in accordance with
the Nasdaq National Market Audit Committee requirements;
2. Each member will be able to read and understand fundamental
financial statements, in accordance with the Nasdaq National
Market Audit Committee requirements; and
3. At least one member will have past employment experience in
finance or accounting, requisite professional certification in
accounting, or other comparable experience or
30
background, including a current or past position as a chief
executive or financial officer or other senior officer with
financial oversight responsibilities.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
- Providing oversight and monitoring of Company management and the
independent auditors and their activities with respect to the
Company's financial reporting process;
- Recommending the selection and, where appropriate, replacement of
the independent auditors to the Board of Directors;
- Reviewing fee arrangements with the independent auditors;
- Reviewing the independent auditors' proposed audit scope, approach
and independence;
- Reviewing the performance of the independent auditors, who shall be
accountable to the Board of Directors and the Audit Committee;
- Requesting from the independent auditors of a formal written
statement delineating all relationships between the auditor and the
Company, consistent with Independent Standards Board Standard No. 1,
and engaging in a dialogue with the auditors with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the auditors;
- Directing the Company's independent auditors to review before filing
with the SEC the Company's interim financial statements included in
Quarterly Reports on Form 10-Q, using professional standards and
procedures for conducting such reviews;
- Discussing with the Company's independent auditors the matters
required to be discussed by Statement on Accounting Standard No. 61,
as it may be modified or supplemented;
- Reviewing with management, before release, the audited financial
statements and Management's Discussion and Analysis in the Company's
Annual Report on Form 10-K;
- Providing a report in the Company's proxy statement in accordance
with the requirements of Item 306 of Regulation S-K and Item 7(e)
(3) of Schedule 14A;
- Reviewing the Audit Committee's own structure, processes and
membership requirements; and
- Performing such other duties as may be requested by the Board of
Directors.
MEETINGS:
The Audit Committee will meet at least quarterly. The Audit Committee
may establish its own schedule, which it will provide to the Board of Directors
in advance.
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The Audit Committee will meet separately with the independent auditors
as well as members of the Company's management as it deems appropriate in order
to review the financial controls of the Company.
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
REPORTS:
Apart from the report prepared pursuant to Item 306 of Regulation S-K
and Item 7(e) (3) of Schedule 14A, the Audit Committee will summarize its
examinations and recommendations to the Board from time to time as may be
appropriate, consistent with the Committee's charter.
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APPENDIX B
IRIDEX CORPORATION
1998 STOCK PLAN
(As amended April 24, 2001)
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means IRIDEX Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity and
any person designated as a key medical advisor by the Company.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase
Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise
price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1998 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted
Stock Purchase Agreement is subject to the terms and conditions of the Plan
and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
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(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 930,000 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines
it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and
in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise
price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture
3
35
restrictions, and any restriction or limitation regarding any Option or
Stock Purchase Right or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator, in its sole discretion,
shall determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having
a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase
Right previously granted by the Administrator; and
(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 150,000 Shares.
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36
(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional 100,000 Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated
as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that (i) in the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such shorter term as
may be provided in the Option Agreement and (ii) in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.
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37
(c) Form of Consideration. The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for thirty (30) days following the Optionee's termination. If, on the date of
termination, the Optionee is not
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vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Issuance of Shares. After payment, the Shares purchased shall be duly
issued; provided, however, that the Administrator may require that the purchaser
make adequate provision for any federal and state withholding obligations of the
Company as a condition to the purchaser purchasing such Shares.
(c) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
(e) Rights as a Stockholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon
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39
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have the right to
exercise his or her Option until ten (10) days prior to such transaction as to
all of the Optioned Stock covered thereby, including Shares as to which the
Option would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares purchased
upon exercise of an Option or Stock Purchase Right shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation or a Parent or Subsidiary of the successor corporation refuses to
assume or substitute for the Option or Stock Purchase Right, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or
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40
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option or
Stock Purchase Right, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option
or Stock Purchase Right, the Company may require the person exercising such
Option or Stock Purchase Right to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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IRIDEX CORPORATION
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
------------------------------------------
Date of Grant
------------------------------------------
Vesting Commencement Date
------------------------------------------
Exercise Price per Share $ ---------------------------------------
Total Number of Shares Granted
------------------------------------------
Total Exercise Price $ ---------------------------------------
Type of Option:
--------- Incentive Stock Option
--------- Nonstatutory Stock Option
Term/Expiration Date:
------------------------------------------
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
1/8 the Shares subject to the Option shall vest six months after the Vesting
Commencement Date, and 1/48 of the Shares subject to the Option shall vest each
month thereafter, subject to the Optionee continuing to be a Service Provider on
such dates.
Termination Period:
This Option may be exercised for thirty (30) days after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee") an option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price"), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section 15(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").
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2. Exercise of Option
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised (the "Exercised Shares"),
and such other representations and agreements as may be required by the
Company pursuant to the provisions of the Plan. The Exercise Notice shall
be completed by the Optionee and delivered to the Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be deemed to
be exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than
six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in
the amount of the aggregate Exercise Price of the Exercised Shares together
with the execution and delivery by the Optionee of the Security Agreement
attached hereto as Exhibit B. The Note shall bear interest at the
"applicable federal rate" prescribed under the Code and its regulations at
time of purchase, and shall be secured by a pledge of the Shares purchased
by the Note pursuant to the Security Agreement.
4. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
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(a) Exercising the Option
(i) Nonstatutory Stock Option. The Optionee may incur regular federal
income tax liability upon exercise of a NSO. The Optionee will be treated
as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is an Employee or a former Employee, the Company
will be required to withhold from his or her compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO, the
Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise
Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee ceases
to be an Employee but remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to qualify as
an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option on the date three (3) months and one (1) day
following such change of status.
(b) Disposition of Shares
(i) NSO. If the Optionee holds NSO Shares for at least one year, any
gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year after
exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain
realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of
the lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise Price,
or (B) the difference between the sale price of such Shares and the
aggregate Exercise Price. Any additional gain will be taxed as capital
gain, short-term or long-term depending on the period that the ISO Shares
were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE
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AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR
THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH
OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS
A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: IRIDEX CORPORATION
----------------------------------------------------- -----------------------------------------------------
Signature By
----------------------------------------------------- -----------------------------------------------------
Print Name Title
-----------------------------------------------------
Residence Address
-----------------------------------------------------
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
--------------------------------------
Spouse of Optionee
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EXHIBIT A
IRIDEX CORPORATION 1998 STOCK PLAN
EXERCISE NOTICE
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, , 199 , the
undersigned ("Purchaser") hereby elects to purchase shares (the
"Shares") of the Common Stock of IRIDEX Corporation (the "Company") under and
pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option Agreement
dated , 19 (the "Option Agreement"). The purchase price for
the Shares shall be $ , as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
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Submitted by: Accepted by:
IRIDEX CORPORATION
PURCHASER: -----------------------------------------------------
----------------------------------------------------- By
Signature -----------------------------------------------------
----------------------------------------------------- Its
Print Name -----------------------------------------------------
----------------------------------------------------- Address:
Address:
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
-----------------------------------------------------
Date Received
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EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of , 19 between IRIDEX
Corporation, a Delaware corporation ("Pledgee"), and ("Pledgor").
RECITALS
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated (the "Option"), between Pledgor and Pledgee under
Pledgee's 1998 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased shares of Pledgee's Common Stock (the "Shares") at a price of
$ per share, for a total purchase price of $ . The Note and the
obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant
to the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number
, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter into
this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares
without the prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is now
or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part
207 of Title 12 of the Code of Federal Regulations ("Regulation G"),
Pledgor agrees to cooperate with Pledgee in making any amendments to the
Note or providing any additional collateral as may be necessary to comply
with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
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5. Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days
after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the
enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" --------------------------------------------------------
Signature
--------------------------------------------------------
Print Name
--------------------------------------------------------
Address
--------------------------------------------------------
IRIDEX Corporation,
"PLEDGEE" a Delaware corporation
--------------------------------------------------------
Signature
--------------------------------------------------------
Print Name
--------------------------------------------------------
--------------------------------------------------------
Title
--------------------------------------------------------
"PLEDGEHOLDER" Secretary of
IRIDEX Corporation
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EXHIBIT C
NOTE
$ Mountain View, California
, 19
FOR VALUE RECEIVED, promises to pay to IRIDEX Corporation, a
Delaware corporation (the "Company"), or order, the principal sum of
($ ), together with interest on the unpaid principal
hereof from the date hereof at the rate of percent ( %) per
annum, compounded semiannually.
Principal and interest shall be due and payable on , 19 .
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
--------------------------------------
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1998 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number ---------------------------------------------------
Date of Grant ---------------------------------------------------
$ ------------------------------------------------
Price Per Share
Total Number of Shares Subject
to This Stock Purchase Right ---------------------------------------------------
Expiration Date: ---------------------------------------------------
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1998 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: IRIDEX CORPORATION
----------------------------------------------------- -----------------------------------------------------
Signature By
----------------------------------------------------- -----------------------------------------------------
Print Name Title
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EXHIBIT A-1
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be paid
by delivery to the Company at the time of execution of this Agreement of cash, a
check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for any or
no reason (including death or disability) before all of the Shares are released
from the Company's Repurchase Option (see Section 4), the Company shall, upon
the date of such termination (as reasonably fixed and determined by the Company)
have an irrevocable, exclusive option (the "Repurchase Option") for a period of
sixty (60) days from such date to repurchase up to that number of shares which
constitute the Unreleased Shares (as defined in Section 4) at the original
purchase price per share (the "Repurchase Price"). The Repurchase Option shall
be exercised by the Company by delivering written notice to the Purchaser or the
Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by cancelling an amount
of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase
Price, or (iii) by a combination of (i) and (ii) so that the combined payment
and cancellation of indebtedness equals the aggregate Repurchase Price. Upon
delivery of such notice and the payment of the aggregate Repurchase Price, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares to
be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a) percent ( %) of the Shares shall be released from
the Company's Repurchase Option [one year] after the Date of Grant and
percent ( %) of the Shares [at the end of
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each month thereafter], provided that the Purchaser does not cease to be a
Service Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the Repurchase
Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option shall be
delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6 or
the transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's Unreleased
Shares upon repurchase by the Company pursuant to the Repurchase Option, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the stock
assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or omit to
do with respect to holding the Unreleased Shares in escrow while acting in good
faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires unexercised or
a portion of the Shares has been released from the Repurchase Option, upon
request the Escrow Holder shall promptly cause a new certificate to be issued
for the released Shares and shall deliver the certificate to the Company or the
Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the rights of
a shareholder with respect to the Shares while they are held in escrow,
including without limitation, the right to vote the Shares and to receive any
cash dividends declared thereon. If, from time to time during the term of the
Repurchase Option, there is (i) any stock dividend, stock split or other change
in the Shares, or (ii) any merger or sale of all or substantially all of the
assets or other acquisition of the Company, any and all new, substituted or
additional securities to which the Purchaser is entitled by reason of the
Purchaser's ownership of the Shares shall be immediately subject to this escrow,
deposited with the Escrow Holder and included thereafter as "Shares" for
purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
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9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of the transactions contemplated by this Agreement.
The Purchaser understands that Section 83 of the Internal Revenue Code of 1986,
as amended (the "Code"), taxes as ordinary income the difference between the
purchase price for the Shares and the Fair Market Value of the Shares as of the
date any restrictions on the Shares lapse. In this context, "restriction"
includes the right of the Company to buy back the Shares pursuant to the
Repurchase Option. The Purchaser understands that the Purchaser may elect to be
taxed at the time the Shares are purchased rather than when and as the
Repurchase Option expires by filing an election under Section 83(b) of the Code
with the IRS within 30 days from the date of purchase. The form for making this
election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive laws, but
not the choice of law rules of California. This Agreement, subject to the terms
and conditions of the Plan and the Notice of Grant, represents the entire
agreement between the parties with respect to the purchase of the Shares by the
Purchaser. Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of the Plan shall prevail. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be transferable to
any one or more persons or entities, and all covenants and agreements hereunder
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of the Purchaser under this Agreement
may only be assigned with the prior written consent of the Company.
(d) Either party's failure to enforce any provision of this Agreement shall
not in any way be construed as a waiver of any such provision, nor prevent that
party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING
SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT
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CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
Dated:
----------------------------------------------
PURCHASER: IRIDEX CORPORATION
----------------------------------------------------- -----------------------------------------------------
Signature By
----------------------------------------------------- -----------------------------------------------------
Print Name Title
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EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, , hereby sell, assign and
transfer unto ( ) shares of the Common Stock of
IRIDEX Corporation standing in my name of the books of said corporation
represented by Certificate No. herewith and do hereby irrevocably
constitute and appoint to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between and the
undersigned dated , 19 .
Dated: , 19
Signature:
--------------------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
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EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
, 19
Corporate Secretary
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
Dear :
As Escrow Agent for both IRIDEX Corporation, a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for
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Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
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COMPANY: IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
PURCHASER:
---------------------------------------------
---------------------------------------------
---------------------------------------------
ESCROW AGENT: Corporate Secretary
IRIDEX Corporation
1212 Terra Bella
Mountain View, CA 94043
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the internal substantive laws, but not the choice
of law rules, of California.
Very truly yours,
IRIDEX CORPORATION
--------------------------------------
By
--------------------------------------
Title
PURCHASER:
--------------------------------------
Signature
--------------------------------------
Print Name
ESCROW AGENT:
--------------------------------------
Corporate Secretary
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EXHIBIT A-4
CONSENT OF SPOUSE
I, , spouse of , have read and approve the
foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of IRIDEX Corporation, as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: , 19
--------------------------------------
Signature of Spouse
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EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: shares (the "Shares") of the Common Stock of IRIDEX
Corporation (the "Company").
3. The date on which the property was transferred is: ,
19 .
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over
time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is:
$ .
6. The amount (if any) paid for such property is:
$ .
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: , 19
------------------------------------------------------
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: , 19
------------------------------------------------------
Spouse of Taxpayer
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APPENDIX C
IRIDEX CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED APRIL 24, 2001)
The following constitute the provisions of the 1995 Employee Stock Purchase
Plan of Iridex Corporation (the "Company")
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Iridex Corporation, a Delaware corporation, and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings and
sales commissions, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, but exclusive of other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship will be deemed to have terminated on the 91st day of
such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") Stock Market, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or
the exchange with the greatest volume of trading in Common Stock) or system
on the date of such determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the Nasdaq System (but not on the
Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the Common
Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
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(3) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
(4) For purposes of the Enrollment Date of the first Offering Period
under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final Prospectus included within the
Registration Statement filed with the Securities and Exchange Commission
for the initial public offering of the Company's Common Stock.
(k) "Offering Period" shall mean a period of approximately six (6) months,
commencing on an Enrollment Date and terminating on an Exercise Date. The first
Offering Period shall commence on the effective date of the Company's initial
public offering of its Common Stock that is registered with the Securities and
Exchange Commission (the "Effective Date") and shall terminate on the last
Trading Day of the month which is six months from the Effective Date.
Thereafter, Offering Periods shall commence on the first Trading Day following
termination of the prior Offering Period and shall terminate on the last Trading
Day of the sixth month following commencement of such Offering Period.
(l) "Plan" shall mean this 1995 Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges and
the NASDAQ System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be employed by the
Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) to the extent, immediately after
the grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) to the
extent his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods. The first Offering Period shall commence on the Effective Date and
shall terminate on the last Trading Day of the month that is six months from the
Effective Date. Thereafter, Offering Periods shall commence on the first Trading
Day following Exercise Date of the prior Offering Period and shall terminate on
the last Trading Day of the sixth month following commencement of such Offering
Period. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected thereafter.
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5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the Company's Personnel Department office not
later than one day prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day during an
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, but may not otherwise increase or decrease the
rate of his or her payroll deductions during the Offering Period. A
participant's subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be decreased to 0% at such time during any Offering Period which
is scheduled to end during the current calendar year (the "Current Offering
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Offering Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such participant's subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price. In no event shall an Employee be
permitted to purchase on the Exercise Date of any Offering Period a number of
shares greater than, as of the first day of the Offering Period, two times the
Employee's initial payroll deduction amount times the number of payroll periods
in the Offering Period divided by the per share Fair Market Value. Moreover, no
Employee shall be permitted to purchase more than 1,000 shares in any
twelve-month period. All such purchases shall also be subject to the limitations
set forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof, and shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the
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65
maximum number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased; any
payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be carried over in the participant's
account into the next Offering Period. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him or
her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the shares shall be credited to an account in the
participant's name with a brokerage firm selected by the Plan Committee to hold
the shares in its street name.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time up to two weeks prior to any Exercise Date
by giving written notice to the Company in the form of Exhibit B to this Plan.
All of the participant's payroll deductions credited to his or her account will
be paid to such participant promptly after receipt of notice of withdrawal, such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offering Period. If a participant withdraws from an Offering Period, payroll
deductions will not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in Section
2(g) hereof) for any reason, he or she will be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such participant's
account during the Offering Period but not yet used to exercise the option will
be returned to such participant or, in the case of his or her death, to the
person or persons entitled thereto under Section 14 hereof, and such
participant's option will be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
(c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be three hundred and forty
thousand (340,000) shares, subject to adjustment upon changes in capitalization
of the Company as provided in Section 18 hereof. If on a given Exercise Date the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in shares covered
by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
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(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period shall terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date") or to cancel each outstanding right to
purchase and refund all sums collected from participants during the Offering
Period then in progress. If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, the Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for his
option has been changed to the New Exercise Date and that his option will be
exercised automatically on the New Exercise Date, unless prior to such date he
has withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase or receive, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason amend or terminate the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted. Except as provided in
Section 18 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or regulation), the
Company shall obtain shareholder approval in such a manner and to such a degree
as required.
(b) Without shareholder consent, the Board (or its committee) shall be
entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars (with
respect to participants who are not United States residents), permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections (provided, however, that the Company may not withhold more
than the aggregate amount of payroll deductions designated to be withheld by a
participant in any Offering Period), establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.
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20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
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EXHIBIT A
IRIDEX CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
[ ] Original Application
Enrollment Date:
[ ] Change in Payroll Deduction Rate
[ ] Change of Beneficiary(ies)
1. hereby elects to participate in the Iridex Corporation
1995 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of % of my Compensation (not to exceed 10%) on each payday during
each Offering Period, in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically purchase
such Shares.
4. I have received a copy of the complete "Employee Stock Purchase Plan." I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse Only):
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for federal income tax purposes as having received ordinary income at
the time of such disposition in an amount equal to the excess of the
fair market value of the shares at the time such shares were purchased
by me over the price which I paid for the shares. I hereby agree to
notify the Company in writing within 30 days after the date of any
disposition of shares and I will make adequate provision for Federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding
necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
2-year holding period, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only
to the extent of an amount equal to the lesser of (1) the excess of the
fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
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8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
-------------------------------------------------
(First) (Middle) (Last)
---------------- ---------------------------------------------------
Relationship
----------------------------------------------------
(Address)
NAME: (Please print)
--------------------------------------------------
(First) (Middle) (Last)
---------------- ----------------------------------------------------
Relationship
----------------------------------------------------
(Address)
Employee's Social
Security Number:
--------------------------------------------------
Employee's Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
----------------------------------
Signature of Employee
----------------------------------
Spouse's Signature
(If beneficiary other than spouse)
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EXHIBIT B
IRIDEX CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Iridex
Corporation 1995 Employee Stock Purchase Plan which began on 19
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period, and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
--------------------------------------
--------------------------------------
--------------------------------------
Signature:
--------------------------------------
Date:
--------------------------------------
-3-
72
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
IRIDEX CORPORATION
2001 ANNUAL MEETING OF STOCKHOLDERS
JUNE 6, 2001
The undersigned stockholder of IRIDEX Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, and hereby appoints Theodore A. Boutacoff and
Robert Kamenski, or either of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 2001 Annual Meeting of Stockholders of IRIDEX
Corporation to be held on June 6, 2001, at 2:00 p.m., Pacific Daylight Savings
Time, at the principal offices of the Company located at 1212 Terra Bella
Avenue, Mountain View, California 94043, and at any adjournment(s) thereof and
to vote all shares of Common Stock which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth on the
reverse side of this Proxy.
----------------------- ----------------------
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE SEE REVERSE SIDE
----------------------- ----------------------
73
-------------------- -------------------
VOTE BY TELEPHONE VOTE BY INTERNET
-------------------- -------------------
It's fast, convenient, and immediate! It's fast, convenient, and your
Call Toll-Free on a Touch-Tone Phone vote is immediately
1-877-PRX-VOTE (1-877-779-8683). confirmed and posted.
---------------------------------------------------------- -----------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD. 1. READ THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). HTTP://WWW.EPROXYVOTE.COM/IRIX
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME. LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
---------------------------------------------------------- -----------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
CALL 1-877-PRX-VOTE ANYTIME! GO TO HTTY://WWW.EPROXYVOTE.COM/IRIX ANYTIME!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
74
DETACH HERE
Please mark
[X] votes as in this
example.
This proxy will be voted as directed or, if no contrary direction is indicated, will be voted FOR the Company's nominees for
election to the board of directors, FOR approval of the amendment of the 1998 Stock Plan, FOR approval of the amendment of the 1995
Employee Stock Purchase Plan, FOR ratification of the appointment of the Company's independent accountants, and as said proxies deem
advisable on such other matters as may come before the meeting and any adjournment(s) thereof.
1. Election of Directors
FOR AGAINST ABSTAIN
Nominees: (01) Theodore A. Boutacoff, 2. Proposal to approve the amendment of the [ ] [ ] [ ]
(02) James L. Donovan, 1998 Stock Plan to increase the number of
(03) Joshua Makower, shares reserved for issuance thereunder by
(04) Donald L. Hammond, 290,000 shares, from 640,000 shares to
(05) William Boeger, III, 930,000 shares;
(06) John M. Nehra,
(07) Robert K. Anderson;
FOR ALL NOMINEES [ ] [ ] WITHHOLD AUTHORITY 3. Proposal to approve the amendment of the [ ] [ ] [ ]
LISTED ABOVE TO VOTE FOR ALL 1995 Employee Stock Purchase Plan to
(EXCEPT AS NOMINEES LISTED increase the number of shares reserved for
INDICATED) ABOVE issuance thereunder by 40,000 shares, from
300,000 shares to 340,000 shares;
4. Proposal to ratify the appointment of [ ] [ ] [ ]
[ ] _________________________________ PricewaterhouseCoopers LLP as independent
For all nominees except as noted above accountants;
And, in their discretion, upon such other
matters which may properly come before the
meeting and any adjournment(s) thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
This Proxy should be marked, dated, signed by the
stockholder(s) exactly as his or her name appears hereon,
and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property,
both should sign.
Signature ______________________ Date _________ Signature _____________________________ Date ___________