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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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February 28, 2006 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Finisar Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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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 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
1308 Moffett Park Drive
Sunnyvale, California 94089
September 15, 2005
Dear Stockholder:
You are cordially invited to attend the annual meeting of
stockholders on October 14, 2005, at 10:00 a.m. local
time, at the offices of DLA Piper Rudnick Gray Cary US LLP, 2000
University Avenue, East Palo Alto, California 94303.
The Notice of Annual Meeting of Stockholders and a proxy
statement, which describe the formal business to be conducted at
the meeting, follow this letter. We urge you to read the proxy
statement carefully in its entirety before you vote.
Your vote is very important regardless of the number of shares
that you own. You may vote by mailing a completed proxy card, by
telephone or over the Internet. Voting by any of these methods
will ensure your representation at the meeting. We request that
you vote promptly even if you plan to attend the meeting.
A copy of our Annual Report for the fiscal year ended
April 30, 2005 is also enclosed for your information. At
the annual meeting we will review our activities over the past
year and our plans for the future. The Board of Directors and
Management look forward to seeing you at the annual meeting.
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Very truly yours, |
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Jerry S. Rawls
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President and Chief Executive Officer |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 14, 2005
To the Stockholders:
Please take notice that the 2005 annual meeting of stockholders
of Finisar Corporation, a Delaware corporation, will be held on
Friday, October 14, 2005, at 10:00 a.m. local time, at
the offices of DLA Piper Rudnick Gray Cary US LLP, 2000
University Avenue, East Palo Alto, California, for the following
purposes:
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1. To elect two Class III directors to hold office for
a three-year term and until their respective successors are
elected and qualified; |
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2. To consider and vote upon an amendment and restatement
of the 1999 Stock Option Plan; |
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3. To consider, approve and ratify the appointment of
Ernst & Young LLP as our independent auditors for the
fiscal year ending April 30, 2006; and |
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4. To transact such other business as may properly come
before the meeting or any adjournment or postponement of the
meeting. |
These items of business are described in the attached proxy
statement, which is being mailed beginning on or about
September 15, 2005. Stockholders of record at the close of
business on September 2, 2005 are entitled to notice of,
and to vote at, the meeting and any adjournment or postponement.
As of that date, there were 286,012,595 shares of Finisar
common stock outstanding. Each share of Finisar common stock is
entitled to one vote on each matter properly brought before the
meeting. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be available
for examination by any stockholder, for any purpose relating to
the meeting, during ordinary business hours at our principal
offices located at 1308 Moffett Park Drive, Sunnyvale,
California 94089.
Your vote is very important, regardless of the number of shares
that you own. Please vote as soon as possible to make sure that
your shares are represented at the meeting. To vote your shares,
you may complete and return the enclosed proxy card or you may
be able to submit your proxy or voting instructions by telephone
or the Internet. If you are a holder of record, you may also
cast your vote in person at the annual meeting. If your shares
are held in an account at a brokerage firm or bank, you must
instruct them on how to vote your shares.
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By order of the Board of Directors, |
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Stephen K. Workman
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Secretary |
Sunnyvale, California
September 15, 2005
IMPORTANT: Please fill in, date, sign and promptly mail the
enclosed proxy card in the accompanying postage-paid envelope to
assure that your shares are represented at the meeting. If you
attend the meeting, you may choose to vote in person even if you
have previously sent in your proxy card.
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE ANNUAL MEETING
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Why am I receiving these materials? |
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This proxy statement is being sent to all stockholders of record
as of the close of business on September 2, 2005 for
delivery beginning on or about September 15, 2005, in
connection with the solicitation of proxies on behalf of our
board of directors for use at our annual meeting of
stockholders, which will take place on October 14, 2005.
Stockholders are invited to attend the annual meeting and are
requested to vote on the proposals described in this proxy
statement. |
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What information is contained in these materials? |
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The information included in this proxy statement relates to the
proposals to be voted on at the annual meeting, the voting
process, the compensation of directors and our most highly paid
officers, and certain other required information. Our Annual
Report for the fiscal year ended April 30, 2005, a proxy
card and a return envelope are also enclosed. |
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What proposals will be voted on at the Annual Meeting? |
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There are two proposals scheduled to be voted on at the annual
meeting: |
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the election of two Class III directors to hold
office for a three-year term and until their respective
successors are elected and qualified; |
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the approval of an amendment and restatement of the
1999 Stock Option Plan; and |
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the ratification of the appointment of
Ernst & Young LLP as our independent auditors for the
fiscal year ending April 30, 2006. |
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How does Finisars board of directors recommend that I
vote? |
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Our board of directors recommends that you vote your shares
FOR the election of the nominees to the board
of directors, FOR approval of the amendment
and restatement of the 1999 Stock Option Plan and
FOR the ratification of the appointment of
Ernst & Young LLP as our independent auditors. |
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What is the voting requirement to approve each of the
proposals? |
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In the election of directors, the two persons receiving the
highest number of FOR votes will be elected.
The proposals regarding the amendment and restatement of the
1999 Stock Option Plan and the ratification of the independent
auditors requires the affirmative FOR vote of
a majority of those shares present and entitled to vote at the
annual meeting. |
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Why is the 1999 Stock Option Plan being amended? |
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Our board of directors believes that in order to successfully
attract and retain the best possible employees, we must continue
to offer competitive equity incentive programs. The proposed
amendment and restatement of the 1999 Stock Option Plan will
provide us with more flexibility in designing equity incentives
in an environment where many companies have moved from
traditional option grants to other stock or stock-based awards.
With the amended and restated plan, we will have a broader array
of equity incentives to utilize for purposes of attracting and
retaining the services of key employees. |
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What shares can be voted? |
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All shares that you own as of the close of business on
September 2, 2005 (the Record Date) may be
voted by you. You may cast one vote per share of common stock
that you held on the Record Date. These shares include shares
that are: (1) held directly in your name as the stockholder
of record and (2) held for you as the beneficial owner
through a stockbroker, bank or other nominee. |
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What is the difference between holding shares as a
stockholder of record and as a beneficial owner? |
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Most of our stockholders hold their shares through a broker,
bank or other nominee rather than directly in their own name. As
summarized below, there are some distinctions between shares
held as stockholder of record and those owned beneficially. |
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Stockholders of Record |
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If your shares are registered directly in your name with our
transfer agent, American Stock Transfer & Trust
Company, you are considered, with respect to those shares, the
stockholder of record, and these proxy materials are being sent
directly to you by Finisar. As the stockholder of record, you
have the right to grant your voting proxy directly to Finisar or
to vote in person at the annual meeting. We have enclosed a
proxy card for you to use. |
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Beneficial Owners |
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If your shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name, and these proxy materials are
being forwarded to you by your broker or nominee who is
considered, with respect to those shares, the stockholder of
record. As the beneficial owner, you have the right to direct
your broker on how to vote and are also invited to attend the
annual meeting. However, since you are not the stockholder of
record, you may not vote these shares in person at the annual
meeting. Your broker or nominee has enclosed a voting
instruction card for you to use in directing the broker or
nominee regarding how to vote your shares. You may also vote by
telephone as described below under How can I vote my
shares without attending the annual meeting? If you are a
beneficial owner and do not provide the stockholder of record
with voting instructions, your shares may constitute broker
non-votes, as described in the section entitled The Annual
Meeting of Finisar Stockholders Voting of Proxies;
Abstentions; and Broker Non-Votes. |
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How can I vote my shares in person at the annual meeting? |
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Shares held directly in your name as the stockholder of record
may be voted in person at the annual meeting. If you choose to
do so, please bring the enclosed proxy card or proof of
identification. Even if you plan to attend the annual meeting,
we recommend that you vote your shares in advance as described
below so that your vote will be counted if you later decide not
to attend the annual meeting. Shares held in street name may be
voted in person by you only if you obtain a signed proxy from
the record holder giving you the right to vote the shares. |
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How can I vote my shares without attending the annual
meeting? |
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Whether you hold shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without
attending the annual meeting by telephone or completing and
mailing your proxy card or voting instruction card in the
enclosed pre-paid envelope. You may also be able to direct your
vote via the Internet. Please refer to the enclosed materials
for details. |
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Can I change my vote? |
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You may change your proxy instructions at any time prior to the
vote at the annual meeting. You may accomplish this by signing
and delivering a new proxy card or voting instruction card
bearing a later date (which automatically revokes your earlier
proxy instructions) or, if you are a stockholder of record, by
attending the annual meeting and voting in person. Attendance at
the annual meeting will not cause your previously granted proxy
to be revoked unless you specifically so request. |
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How are votes counted? |
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In the election of directors, you may vote
FOR each nominee or your vote may be
WITHHELD with respect to each nominee. You
may vote FOR, AGAINST or
ABSTAIN for each of the other proposals. If
you ABSTAIN from the vote on any of the other
proposals, it will have no effect on the outcome of the
proposal. If you sign your proxy card or broker voting
instruction card with no further instructions, your shares will
be voted in accordance with the recommendations of the board. |
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What does it mean if I receive more than one proxy or voting
instruction card? |
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It means your shares are registered differently or are in more
than one account. Please provide voting instructions for all
proxy and voting instruction cards you receive. |
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Where can I find the voting results of the annual meeting? |
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We will announce preliminary voting results at the annual
meeting and publish final results in our Quarterly Report on
Form 10-Q for the second quarter of fiscal 2006 (ending
October 31, 2005). |
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have any questions about how to submit your proxy card,
or if you need additional copies of this proxy statement or the
enclosed proxy card or voting instructions, you should contact:
Finisar Corporation
1308 Moffett Park Drive
Sunnyvale, CA 94089
Attn: Investor Relations
(408) 542-5050
Email: Investor.relations@finisar.com
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885 (toll-free)
Email: proxy@mackenziepartners.com
3
THE ANNUAL MEETING OF FINISAR STOCKHOLDERS
General
We are furnishing this proxy statement to holders of our common
stock in connection with the solicitation of proxies by the
board of directors for use at the annual meeting of stockholders
to be held on October 14, 2005, and at any adjournment,
postponement or continuation thereof. This proxy statement is
first being furnished to stockholders on or about
September 15, 2005.
Date, Time and Place
The annual meeting of stockholders will be held on
October 14, 2005, at 10:00 a.m. local time, at the
offices of DLA Piper Rudnick Gray Cary US LLP, 2000 University
Avenue, East Palo Alto, California 94303.
Matters to be Considered at the Annual Meeting
At the annual meeting, we are asking holders of our common stock
to: (1) elect two Class III directors to hold office
for a three-year term and until their respective successors are
elected and qualified; (2) approve an amendment and
restatement of our 1999 Stock Option Plan; and (3) ratify
the appointment of Ernst & Young LLP as
Finisars independent auditors for the fiscal year ending
April 30, 2006.
Record Date
We have fixed the close of business on September 2, 2005 as
the record date for determination of stockholders entitled to
notice of and to attend and vote at the annual meeting.
Vote Required
As of the close of business on September 2, 2005, there
were 286,012,595 shares of Finisar common stock outstanding
and entitled to vote. A quorum of stockholders is necessary to
hold a valid meeting. A quorum will be present at the annual
meeting if shares representing a majority of the votes entitled
to be cast are represented in person or by proxy. If a quorum is
not present at the annual meeting, we expect that the meeting
will be adjourned or postponed to solicit additional proxies.
Votes for and against, abstentions and broker
non-votes will each count as being present to establish a
quorum. A broker non-vote occurs when a broker is
not permitted to vote because the broker does not have
instructions from the beneficial owner of the shares.
The approval of the amendment and restatement of the 1999 Stock
Option Plan and the ratification of the appointment of
Ernst & Young LLP as our independent auditors for the
fiscal year ending April 30, 2006 requires the affirmative
vote of holders of shares representing a majority of the shares
of our common stock represented in person or by proxy and
entitled to vote at the annual meeting. For the election of
directors, the two persons receiving the highest number of votes
will be elected.
Voting of Proxies; Abstentions; and Broker Non-Votes
All shares of Finisar common stock represented by properly
executed proxies received before or at the annual meeting will,
unless the proxies are revoked, be voted in accordance with the
instructions indicated on those proxies. If no instructions are
indicated on a properly executed proxy card, the shares will be
voted FOR the election of managements
nominees for membership on our board of directors and
FOR the other proposals discussed in this
proxy statement. You are urged to mark the box on the card to
indicate how to vote your shares.
If your shares are held in an account at a brokerage firm or
bank, that brokerage firm or bank will not be permitted to vote
your shares with respect to any of the proposals unless you
provide instructions as to how to vote your shares. If an
executed proxy card is returned by a broker or bank holding
shares which indicates that the broker or bank has not received
voting instructions and does not have discretionary authority to
vote on the proposals, the shares will be considered present at
the meeting for purposes of determining the presence of a
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quorum, but will not be considered to have been voted in favor
of the proposals. Your broker or bank will vote your shares on
those proposals only if you provide instructions on how to vote
by following the information provided to you by your broker.
Please note that if your shares are held of record by a broker,
bank or nominee and you wish to vote at the meeting, you will
not be permitted to vote in person unless you first obtain a
proxy issued in your name from the record holder.
A properly executed proxy marked abstain, although
counted for purposes of determining whether there is a quorum
and for purposes of determining the aggregate voting power and
number of shares represented and entitled to vote at the
stockholders meeting, will not be voted. Accordingly,
because the affirmative vote of holders of a majority of the
shares of Finisar common stock issued and outstanding as of the
record date is required for approval of the amendment of our
Certificate of Incorporation, a proxy marked abstain, as
well as a failure to vote or a broker non-vote, will have the
effect of a vote against that proposal at the annual meeting.
A stockholder may revoke his or her proxy at any time before it
is voted by:
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notifying in writing the Secretary of Finisar at 1308 Moffet
Park Drive, Sunnyvale, California 94089, that you wish to revoke
your proxy; |
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granting a subsequently dated proxy; or |
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appearing in person and voting at the annual meeting if you are
a holder of record. |
Attendance at the annual meeting will not in and of itself
constitute revocation of a proxy.
Voting By Telephone or Via the Internet
If you hold your shares directly registered in your name with
American Stock Transfer & Trust Company, you may vote
by telephone or via the Internet. To vote by telephone, call
1-800-PROXIES. Instructions for voting via the Internet are set
forth on the enclosed proxy card if you hold your shares
directly registered in your name with American Stock
Transfer & Trust Company. Many banks and brokerage
firms have a process for their beneficial owners to provide
instructions over the telephone or via the Internet. Your voting
form from your broker or bank will contain instructions for
voting.
Votes submitted by telephone or via the Internet must be
received by 11:59 p.m. Eastern Time on October 13,
2005. Submitting your proxy by telephone or via the Internet
will not affect your right to vote in person should you decide
to attend the annual meeting.
Solicitation of Proxies
Finisar will bear the cost of soliciting proxies. In addition to
soliciting stockholders by mail, we will request banks and
brokers, and other custodians, nominees and fiduciaries, to
solicit their customers who hold our stock registered in the
names of such persons and will reimburse them for their
reasonable, out-of-pocket costs. We may use the services of our
officers, directors and others to solicit proxies, personally or
by telephone, without additional compensation.
We have retained MacKenzie Partners, Inc. to assist in the
solicitation of proxies. We will pay MacKenzie Partners
approximately $5,000 for its services, in addition to
reimbursement for its out-of-pocket expenses.
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PROPOSAL 1:
ELECTION OF DIRECTORS
General
Our board of directors is currently composed of eight directors.
Our Certificate of Incorporation provides that the terms of
office of the members of the board of directors will be divided
into three classes: Class I, whose term will expire at the
annual meeting of stockholders to be held in 2006,
Class II, whose term will expire at the annual meeting of
stockholders to be held in 2007, and Class III, whose term
will expire at this annual meeting of stockholders. At each
annual meeting of stockholders, the successors to directors
whose term will then expire will be elected to serve from the
time of election and qualification until the third annual
meeting following their election.
Nominees and Directors
The following table sets forth for our current directors,
including the nominees for the Class III directors to be
elected at this meeting, information concerning their age and
background as of August 31, 2005.
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Class III directors nominated for election at this
Meeting:
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Jerry S. Rawls
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Director, President and
Chief Executive Officer |
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60 |
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1989 |
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Dominique Trempont
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Director |
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51 |
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2005 |
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Class III director who is not standing for
re-election:
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Michael C. Child
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Director |
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50 |
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1998 |
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Class I directors whose terms expire at the 2006 Annual
Meeting of Stockholders:
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Roger C. Ferguson
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Director |
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62 |
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1999 |
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Larry D. Mitchell
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Director |
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62 |
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1999 |
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Class II directors whose terms expire at the 2007 Annual
Meeting of Stockholders:
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Frank H. Levinson
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Chairman of the Board and Chief Technical Officer |
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52 |
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1988 |
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David C. Fries
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Director |
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60 |
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2005 |
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Robert N. Stephens
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Director |
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59 |
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2005 |
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Nominees for Election for a Three Year Term expiring at
the 2008 Annual Meeting of Stockholders |
Jerry S. Rawls has served as a member of our board of
directors since March 1989 and as our Chief Executive Officer
since August 1999. Mr. Rawls has also served as our
President since April 2003 and previously held that title from
April 1989 to September 2002. From September 1968 to February
1989, Mr. Rawls was employed by Raychem Corporation, a
materials science and engineering company, where he held various
management positions including Division General Manager of the
Aerospace Products Division and Interconnection Systems
Division. Mr. Rawls holds a B.S. in Mechanical Engineering
from Texas Tech University and an M.S. in Industrial
Administration from Purdue University.
Dominique Trempont has served as a member of our board of
directors since August 2005. Mr. Trempont has been a CEO in
residence at Battery Ventures since August 2003. Prior to
joining Battery Ventures, Mr. Trempont was Chairman,
President and Chief Executive Officer of Kanisa, Inc., a
software company
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focused on enterprise self-service applications, from November
1999 to November 2002. Mr. Trempont was President and Chief
Executive Officer of Gemplus Corporation, a smart card company,
from May 1997 to June 1999. Prior to Gemplus, Mr. Trempont
served as Chief Financial Officer and later Chief Operating
Officer at NeXT Software. Mr. Trempont began his career at
Raychem Corporation, a high-tech material science company
focused on telecommunications, electronics, automotive and other
industries. Mr. Trempont received an undergraduate degree
in Economics from College Saint Louis (Belgium), a B.A. in
Business Administration and Computer Sciences from the
University of Louvain (Belgium) and a masters in Business
Administration from INSEAD (France).
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Directors Continuing in Office until the 2006 Annual
Meeting of Stockholders |
Roger C. Ferguson has served as a member of our board of
directors since August 1999. From June 1999 to December 2001,
Mr. Ferguson served as Chief Executive Officer of Semio
Corp., an early stage software company. Mr. Ferguson has
served as a principal in VenCraft, LLC, a venture capital
partnership, since July 1997. From August 1993 to July 1997,
Mr. Ferguson was Chief Executive Officer of DataTools,
Inc., a database software company. From 1987 to 1993,
Mr. Ferguson served as Chief Operating Officer for Network
General Inc., a network analysis company. Mr. Ferguson also
serves as the Chairman of the Board of Directors of Semio Corp.
Mr. Ferguson holds a B.A. in Psychology from Dartmouth
College and an M.B.A. from the Amos Tuck School at Dartmouth.
Larry D. Mitchell has served as a member of our board of
directors since October 1999. Mr. Mitchell has been retired
since October 1997. From October 1994 to October 1997, he served
as a site General Manager in Roseville, California for
Hewlett-Packard. Mr. Mitchell also serves on the Board of
Directors of Placer Sierra Bancshares and its wholly-owned
subsidiary, Placer Sierra Bank. Mr. Mitchell holds a B.A.
in Engineering Science from Dartmouth College and an M.B.A. from
the Stanford Graduate School of Business.
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Directors Continuing in Office until the 2007 Annual
Meeting of Stockholders |
Frank H. Levinson founded Finisar in April 1987 and has
served as a member of our board of directors since February 1988
and as our Chairman of the Board and Chief Technical Officer
since August 1999. Dr. Levinson also served as our Chief
Executive Officer from February 1988 to August 1999. From
September 1980 to December 1983, Dr. Levinson was a member
of Technical Staff at AT&T Bell Laboratories. From January
1984 to July 1984, he was a Member of Technical Staff at
Bellcore, a provider of services and products to the
communications industry. From April 1985 to December 1985,
Dr. Levinson was the principal optical scientist at Raychem
Corporation, and from January 1986 to February 1988, he was
Optical Department Manager at Raynet, Inc., a fiber optic
systems company. Dr. Levinson serves as a director of
Fabrinet, Inc., a privately held contract manufacturing company.
Dr. Levinson holds a B.S. in Mathematics/ Physics from
Butler University and an M.S. and Ph. D. in Astronomy from the
University of Virginia.
David C. Fries has served as a member of our board of
directors since June 2005. Dr. Fries has been employed by
VantagePoint Venture Partners, a venture capital investment
firm, since August 2001 where he currently serves as a Managing
Director and Co-Head of the Semiconductor and Components
Practice. Prior to joining VantagePoint, he was the Chief
Executive Officer of Productivity Solutions, Inc., a
Florida-based developer of automated checkout technologies for
food and discount retailers, from 1995 to 1999. For seven years
prior to that, he was a general partner of Canaan Partners, a
venture capital firm. Dr. Fries served 17 years in
numerous executive roles in engineering, manufacturing, senior
management and finance at General Electric Company, including
directing GE Venture Capitals California operation, which
later became Canaan Partners. Dr. Fries holds a B.S. in
Chemistry from Florida Atlantic University and a Ph.D. in
Physical Chemistry from Case Western Reserve University. See
Certain Relationships and Related Transactions for
information concerning an agreement between Finisar and
VantagePoint Venture Partners regarding the appointment of a
representative of VantagePoint Venture Partners to our board of
directors.
Robert N. Stephens has served as a member of our board of
directors since August 2005. Mr. Stephens served as the
Chief Executive Officer since April 1999 and President since
October 1998 of Adaptec, Inc., a storage solutions provider,
until his retirement in May 2005. Mr. Stephens joined
Adaptec in November 1995
7
as Chief Operating Officer. Before joining Adaptec,
Mr. Stephens was the founder and chief executive officer of
Power I/ O, a company that developed serial interface solutions
and silicon expertise for high-speed data networking, that was
acquired by Adaptec in 1995. Prior to founding Power I/ O,
Mr. Stephens was President and CEO of Emulex Corporation,
which designs, develops and supplies Fibre Channel host bus
adapters. Before joining Emulex, Mr. Stephens was senior
vice president, general manger, and founder of the Microcomputer
Products Group at Western Digital Corporation. He began his
career at IBM, where he served over 15 years in a variety
of management positions. Mr. Stephens holds bachelors
and masters degrees from San Jose State University.
Michael C. Child has served as a member of our board of
directors since November 1998. Mr. Child is a
Class III director and has announced his decision not to
stand for re-election at this meeting. Mr. Child has been
employed by TA Associates, Inc., a venture capital investment
firm, since July 1982 where he currently serves as a Managing
Director. Mr. Child holds a B.S. in Electrical Engineering
from the University of California at Davis and an M.B.A. from
the Stanford Graduate School of Business.
Independence of Directors
Our board has determined that, except for Mr. Rawls, our
President and Chief Executive Officer, and Mr. Levinson,
our Chairman and Chief Technical Officer, each of the current
members of our board of directors is independent in
accordance with the applicable listing standards of Nasdaq as
currently in effect.
Meetings of the Board of Directors
During the fiscal year ended April 30, 2005, our board of
directors held 23 meetings. During that period, the Audit
Committee of the board held 23 meetings, the Compensation
Committee of the board held two meetings and the Nominating and
Corporate Governance Committee of the board held three meetings.
No director attended fewer than 75% of the total number of
meetings of the board and all of the committees of the board on
which such director served during that period.
Corporate Governance and Board Committees
Our board of directors has adopted a Code of Business Conduct
and Ethics (the Code) that outlines the
principles of legal and ethical business conduct under which
Finisar does business. The Code, which is applicable to all
directors, employees and officers of the Company, is available
at http://investor.finisar.com/corpgov.cfm. Any
substantive amendment or waiver of the Code may be made only by
the board of directors upon a recommendation of the Audit
Committee, and will be disclosed on our website. In addition,
disclosure of any waiver of the Code for directors and executive
officers will also be made by the filing of a Form 8-K with
the SEC.
The board has also adopted a written charter for each of the
Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee. Each charter is available on the
Companys website at
http://investor.finisar.com/corpgov.cfm.
The members of the Audit Committee during fiscal 2005 were
Messrs. Child, Ferguson and Mitchell. Mr. Trempont was
appointed to the Audit Committee in August 2005. The functions
of the Audit Committee include overseeing the quality of our
financial reports and other financial information and our
compliance with legal and regulatory requirements; appointing
and evaluating our independent auditors, including reviewing
their independence, qualifications and performance and reviewing
and approving the terms of their engagement for audit services
and non-audit services; and establishing and observing complaint
procedures regarding accounting, internal auditing controls and
auditing matters. Our board has determined that each member of
the Audit Committee meets the independence criteria set forth in
the applicable rules of Nasdaq and the SEC for audit committee
membership. The board has also determined that all members of
the Audit Committee possess the level of financial literacy
required by applicable Nasdaq and SEC rules and that at least
two members of the Audit Committee, Mr. Ferguson and
Mr. Trempont, are qualified as audit committee
8
financial experts as defined by the SEC. For additional
information about the Audit Committee, see Report of the
Audit Committee below.
The members of the Compensation Committee during fiscal 2005
were Messrs. Child, Ferguson and Mitchell. Dr. Fries
was appointed to the Compensation Committee in June 2005 and
Mr. Stephens was appointed to the Compensation Committee in
August 2005. The Compensation Committee reviews and approves the
compensation and benefits of our executive officers and
establishes and reviews general policies relating to
compensation and benefits of our employees. Each of the members
of the Compensation Committee is independent for purposes of the
Nasdaq rules. For additional information about the Compensation
Committee, see Report of the Compensation Committee on
Executive Compensation and Executive Compensation
and Related Matters below.
The Nominating and Corporate Governance Committee was
established in June 2004. During fiscal 2005, the members of the
Nominating and Corporate Governance Committee were
Messrs. Child, Ferguson and Mitchell. Dr. Fries was
appointed to the Nominating and Corporate Governance Committee
in June 2005 and Mr. Stephens was appointed to the
Nominating and Corporate Governance Committee in August 2005.
Each of the members of the Nominating and Corporate Governance
Committee is independent for purposes of the Nasdaq rules. The
Nominating and Corporate Governance Committee considers
qualified candidates for appointment and nomination for election
to the board of directors and makes recommendations concerning
such candidates, develops corporate governance principles for
recommendation to the board of directors and oversees the
regular evaluation of our directors and management.
Director Nominations
Nominations of candidates for election as directors may be made
by the board of directors or by stockholders. The Nominating and
Corporate Governance Committee is responsible for, among other
things, the selection and recommendation to the board of
directors of nominees for election as directors.
When considering the nomination of directors for election at an
annual meeting, the Nominating and Corporate Governance
Committee reviews the needs of the board of directors for
various skills, background, experience and expected
contributions and the qualification standards established from
time to time by the Nominating and Corporate Governance
Committee. When reviewing potential nominees, including
incumbents, the Nominating and Corporate Governance Committee
considers the perceived needs of the board of directors, the
candidates relevant background, experience and skills and
expected contributions to the board of directors. The Nominating
and Corporate Governance Committee also seeks appropriate input
from the Chief Executive Officer in assessing the needs of the
board of directors for relevant background, experience and
skills of its members.
The Nominating and Corporate Governance Committees goal is
to assemble a board of directors that brings to Finisar a
diversity of experience at policy-making levels in business and
technology, and in areas that are relevant to Finisars
global activities. Directors should possess the highest personal
and professional ethics, integrity and values and be committed
to representing the long-term interests of our stockholders.
They must have an inquisitive and objective outlook and mature
judgment. They must also have experience in positions with a
high degree of responsibility and be leaders in the companies or
institutions with which they are affiliated. Director candidates
must have sufficient time available in the judgment of the
Nominating and Corporate Governance Committee to perform all
board and committee responsibilities that will be expected of
them. Members of the board of directors are expected to
rigorously prepare for, attend and participate in all meetings
of the board of directors and applicable committees. Other than
the foregoing, there are no specific minimum criteria for
director nominees, although the Nominating and Corporate
Governance Committee believes that it is preferable that a
majority of the board of directors meet the definition of
independent director set forth in Nasdaq and SEC
rules. The Nominating and Corporate Governance Committee also
believes it appropriate for one or more key members of the
Companys management, including the Chief Executive
Officer, to serve on the board of directors.
The Nominating and Corporate Governance Committee will consider
candidates for directors proposed by directors or management,
and will evaluate any such candidates against the criteria and
pursuant to the
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policies and procedures set forth above. If the Nominating and
Corporate Governance Committee believes that the board of
directors requires additional candidates for nomination, the
Nominating and Corporate Governance Committee may engage, as
appropriate, a third party search firm to assist in identifying
qualified candidates. All incumbent directors and nominees will
be required to submit a completed directors and
officers questionnaire as part of the nominating process.
The process may also include interviews and additional
background and reference checks for non-incumbent nominees, at
the discretion of the Nominating and Corporate Governance
Committee.
The Nominating and Corporate Governance Committee will also
consider candidates for directors recommenced by a stockholder,
provided that any such recommendation is sent in writing to the
board of directors, c/o Corporate Secretary, 1308 Moffett
Park Drive, Sunnyvale, California 94089-1113;
Fax: (408) 745-6097; Email address:
corporate.secretary@finisar.com, at least 120 days prior to
the anniversary of the date definitive proxy materials were
mailed to stockholders in connection with the prior years
annual meeting of stockholders and contains the following
information:
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the candidates name, age, contact information and present
principal occupation or employment; and |
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a description of the candidates qualifications, skills,
background and business experience during at least the last five
years, including his or her principal occupation and employment
and the name and principal business of any company or other
organization where the candidate has been employed or has served
as a director. |
The Nominating and Corporate Governance Committee will evaluate
any candidates recommended by stockholders against the same
criteria and pursuant to the same policies and procedures
applicable to the evaluation of candidates proposed by directors
or management.
In addition, stockholders may make direct nominations of
directors for election at an annual meeting, provided the
advance notice requirements set forth in our bylaws have been
met. Under our bylaws, written notice of such nomination,
including certain information and representations specified in
the bylaws, must be delivered to our principal executive
offices, addressed to the Corporate Secretary, at least
120 days prior to the anniversary of the date definitive
proxy materials were mailed to stockholders in connection with
the prior years annual meeting of the stockholders, except
that if no annual meeting was held in the previous year or the
date of the annual meeting has been advanced by more than
30 days from the date contemplated at the time of the
previous years proxy statement, such notice must be
received not later than the close of business on the
10th day following the day on which the public announcement
of the date of such meeting is first made.
In April 2005, we entered into an agreement with VantagePoint
Venture Partners under which we agreed to use our reasonable
best efforts to elect a nominee of VantagePoint to our board of
directors, provided that the nominee was reasonably acceptable
to the boards Nominating and Corporate Governance
Committee as well as our full board of directors. See
Certain Relationships and Related Transactions
below. VantagePoint nominated Dr. Fries for election to our
board of directors. The members of the Nominating and Corporate
Governance Committee met with Dr. Fries and evaluated his
qualifications using the criteria described above. Following
interviews and discussions regarding his candidacy, the
Nominating and Corporate Governance Committee recommended to the
entire board that Dr. Fries be elected to our board of
directors. On June 7, 2005, Mr. Fries was unanimously
elected to our board of directors.
Following the meeting of our board of directors in June 2005,
the Nominating and Corporate Governance Committee continued a
search for additional qualified director candidates. The members
of our Nominating and Corporate Governance Committee considered
a number of potential candidates. They met with
Messrs. Stephens and Trempont and evaluated their
qualifications using the criteria described above. Following
interviews and discussions regarding their qualifications, the
Nominating and Corporate Governance Committee recommended that
Messrs. Stephens and Trempont be elected to our board of
directors. On July 28, 2005, Messrs. Stephens and
Trempont were unanimously elected to our board of directors,
with such election to be effective on August 31, 2005.
10
Communications by Stockholders with Directors
Stockholders may communicate with the board of directors, or any
individual director, by transmitting correspondence by mail,
facsimile or email, addressed as follows: Board of Directors or
individual director, c/o Corporate Secretary, 1308 Moffett
Park Drive, Sunnyvale, California 94089-1113; Fax:
(408) 745-6097; Email Address:
corporate.secretary@finisar.com. The Corporate Secretary will
maintain a log of such communications and will transmit as soon
as practicable such communications to the board of directors or
to the identified director(s), although communications that are
abusive, in bad taste or that present safety or security
concerns may be handled differently, as determined by the
Corporate Secretary.
Director Attendance at Annual Meetings
We will make every effort to schedule our annual meeting of
stockholders at a time and date to accommodate attendance by
directors taking into account the directors schedules. All
directors are encouraged to attend the Companys annual
meeting of stockholders. Four directors attended the
Companys annual meeting of stockholders held on
May 6, 2005.
Vote Required and Recommendation of the Board of Directors
The term of the Class III directors will expire on the
date of the upcoming annual meeting. Accordingly, two persons
are to be elected to serve as Class III members of the
board of directors at the meeting. Managements nominees
for election by the stockholders are the two continuing
Class III members of the board of directors: Jerry S. Rawls
and Dominique Trempont. Please see Nominees and
Directors above for information concerning the nominees.
If elected, each nominee will serve as a director until our
annual meeting of stockholders in 2008 and until their
respective successors are elected and qualified. If a nominee
declines to serve or becomes unavailable for any reason, or if a
vacancy occurs before the election (although we know of no
reason to anticipate that this will occur), the proxies may be
voted for such substitute nominee as we may designate. The
proxies cannot be voted for more than two persons.
If a quorum is present and voting, the two nominees for
Class III director receiving the highest number of votes
will be elected as Class III directors. Abstentions and
broker non-votes have no effect on the vote.
The board of directors recommends a vote FOR the
nominees named above.
PROPOSAL 2:
APPROVAL OF AMENDMENT AND RESTATEMENT OF 1999 STOCK OPTION
PLAN
General
The stockholders are being asked to approve an amendment and
restatement of the 1999 Stock Option Plan which will be renamed
the 2005 Stock Incentive Plan (the Plan).
We believe that equity-based incentives have played a pivotal
role in our efforts to attract and retain key personnel
essential to our long-term growth and financial success. The
proposed amendment and restatement of the Plan will provide us
with more flexibility in designing equity incentives in an
environment where a number of companies have moved from
traditional option grants to other stock or stock-based awards
such as stock appreciation rights, restricted stock and
restricted stock units. Accordingly, with the restated Plan, we
will have a broader array of equity incentives to utilize for
purposes of attracting and retaining the services of key
individuals. We will continue to rely significantly on equity
incentives because we believe that such incentives are necessary
for us to remain competitive in the marketplace for executive
talent and other key employees.
11
The proposed amendment and restatement will effect the following
principal changes to the Plan and its operation:
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(i) Expand the types of stock-based awards available under
the Plan so as to include stock appreciation rights, restricted
stock units and other stock-based awards which vest upon the
attainment of designated performance goals or the satisfaction
of specified service requirements or, in the case of certain
restricted stock units or other stock-based awards, become
payable upon the expiration of a designated time period
following such vesting events, including (without limitation) a
deferred distribution date following the termination of the
individuals service with us; |
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(ii) Establish a net counting procedure so that the share
reserve is reduced only by the actual number of shares issued
under the Plan, and not by the gross number of shares subject to
the awards made thereunder; |
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(iii) Eliminate the ability of individuals to exercise
their options or otherwise acquire shares under the Plan by
delivering promissory notes; |
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(iv) Effect various technical revisions to facilitate Plan
administration and maintain its compliance with applicable laws
and regulations; and |
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(v) Extend the term of the Plan to August 30, 2015. |
Our board of directors adopted the amendment and restatement of
the Plan on September 8, 2005, subject to approval by our
stockholders at the Annual Meeting.
In addition to the Plan, we also maintain the 2001 Nonstatutory
Stock Option Plan, or 2001 Plan, which was adopted by our board
on February 16, 2001 and pursuant to which 5,850,000
additional shares of our common stock have been reserved for
option grants to eligible individuals in our service or the
service of our subsidiaries. Such eligible individuals include
our continuing employees (other than executive officers) and
independent consultants. In addition, newly-hired employees
(including newly-hired executive officers) may receive an award
under the 2001 Plan in connection with their commencement of
employment with us. Option grants under the 2001 Plan will have
an exercise price not less than 85% of the fair market value of
our common stock on the award date. No option grants will have a
maximum term in excess of ten (10) years, and each option
grant will generally vest over one or more years of service.
Some of the options that have been granted under the 2001 Plan
will accelerate in full upon a change in control of Finisar. The
remaining provisions of the options granted under the 2001 Plan
are substantially the same as those summarized below for option
grants under the Plan. As of August 31, 2005, options to
purchase 3,307,047 shares of our common stock were
outstanding under the 2001 Plan and 2,184,084 shares
remained available for future option grants.
We also maintain the 1989 Stock Option Plan, or 1989 Plan, which
was adopted by our board of directors and stockholders in April
1989. This plan expired in April 1999 and no further option
grants have been made under the 1989 Plan since that time.
Options granted under the 1989 Plan had an exercise price not
less than 85% of the fair market value of our common stock on
the award date. No options granted under the 1989 Plan had a
maximum term in excess of ten (10) years, and each option
generally vested over one ore more years of service. As of
August 31, 2005, options to purchase 1,110,620 shares of
common stock were outstanding and subject to the provisions of
the 1989 Plan.
Summary Plan Description
The principal terms and provisions of the Plan are summarized
below. The summary, however, is not intended to be a complete
description of all the terms of the Plan and is qualified in its
entirety by reference to the complete text of the Plan. A copy
of the Plan is available on the SECs website at
http://www.sec.gov.
Administration. The Compensation Committee of our board
of directors will have the exclusive authority to administer the
Plan with respect to grants and awards made to our executive
officers and will also have the authority to make grants and
awards to all other eligible individuals. The term plan
administrator, as used in this summary, will mean our
Compensation Committee to the extent such entity is acting
within the scope of its administrative authority under the Plan.
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Eligibility. Officers and employees, non-employee members
of the board and independent consultants of Finisar or our
parent or subsidiary companies (whether now existing or
subsequently established) will be eligible to participate in the
Plan. As of August 31, 2005, approximately 2,725 persons
(including 6 executive officers) and 6 non-employee board
members were eligible to participate in the Plan.
Securities Subject to Plan. A total of
21,000,000 shares were initially reserved for issuance
under the Plan. The share reserve automatically increases on
May 1 each calendar year over the term of the Plan
(commencing May 1, 2001) by an amount equal to 5% of the
total number of shares of our common stock outstanding on the
immediately preceding April 30. However, the maximum number
of shares that may be issued pursuant to the exercise of
incentive stock options under the federal tax laws will not
exceed 21,000,000 increased on May 1 each year commencing
May 1, 2001 and ending with the increase on May 1,
2008 by that portion of the annual share reserve increase on
each such date which does not exceed 7,500,000 shares. As
of August 31, 2005, options for 41,744,947 shares of
our common stock were outstanding under the Plan, and
25,235,267 shares remained available for future awards.
No participant in the Plan may receive option grants,
stand-alone stock appreciation rights, direct stock issuances
(whether vested or unvested) or other stock-based awards for
more than 12,000,000 shares of our common stock in any
single fiscal year, subject to adjustment for subsequent stock
splits, stock dividends and similar transactions. Stockholder
approval of this proposal will also constitute reapproval of the
12,000,000-share limitation for purposes of Internal Revenue
Code Section 162(m). This limitation will assure that any
deductions to which we would otherwise be entitled upon the
exercise of options or stock appreciation rights granted under
the Plan with an exercise price (or base price) per share equal
to the fair market value per share of our common stock on the
grant date will not be subject to the $1 million limitation
on the income tax deductibility of compensation paid per covered
executive officer imposed under Section 162(m).
The shares of common stock issuable under the Plan may be drawn
from shares of our authorized but unissued common stock or from
shares of our common stock that we acquire, including shares
purchased on the open market or in private transactions.
Shares subject to any outstanding options or other awards under
the Plan that expire or otherwise terminate prior to the
issuance of the shares subject to those option or awards will be
available for subsequent issuance under the Plan. Any unvested
shares issued under the Plan that we subsequently purchase, at a
price not greater than the original issue price paid per share,
pursuant to our repurchase rights under the Plan will be added
back to the number of shares reserved for issuance under the
Plan and will accordingly be available for subsequent issuance.
The following additional share counting provisions will be in
effect under the Plan:
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Should the exercise price of an option be paid in shares of our
common stock, then the number of shares reserved for issuance
under the Plan will be reduced only by the net number of shares
issued under the exercised option. |
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Should shares of common stock otherwise issuable under the Plan
be withheld by us in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or stock
appreciation right or the issuance of fully-vested shares, then
the number of shares of common stock available for issuance
under the Plan will be reduced only by the net number of shares
issued under the exercised option or stock appreciation right or
the net number of fully-vested shares issued. Such withholding
will in effect constitute a cash bonus under the Plan, payable
directly to the applicable taxing authorities on behalf of the
individual concerned, in an amount equal to the fair market
value of the withheld shares, and will not be treated as an
issuance and immediate repurchase of those shares. |
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Upon the exercise of any stock appreciation right granted under
the Plan, the share reserve will only be reduced by the net
number of shares actually issued upon such exercise, and not by
the gross number of shares as to which such stock appreciation
right is exercised. |
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Options and Stock Appreciation Rights. Under the Plan,
eligible persons may be granted options to purchase shares of
our common stock or stock appreciation rights tied to the value
of our common stock. The plan administrator will have complete
discretion to determine which eligible individuals are to
receive option grants or stock appreciation rights, the time or
times when those options or stock appreciation rights are to be
granted, the number of shares subject to each such grant, the
vesting schedule (if any) to be in effect for the grant, the
maximum term for which the granted option or stock appreciation
right is to remain outstanding and the status of any granted
option as either an incentive stock option or a non-statutory
option under the federal tax laws.
Each granted option will have an exercise price per share
determined by the plan administrator, but the exercise price
will not be less than one hundred percent of the fair market
value of the option shares on the grant date for incentive stock
options under the federal tax laws. No granted option will have
a term in excess of ten years. The shares subject to each option
will generally vest in one or more installments over a specified
period of service measured from the grant date.
Upon cessation of service, the optionee will have a limited
period of time in which to exercise his or her outstanding
options to the extent exercisable for vested shares. The plan
administrator will have complete discretion to extend the period
following the optionees cessation of service during which
his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in
whole or in part.
The Plan will allow the issuance of two types of stock
appreciation rights:
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Tandem stock appreciation rights provide the holders with the
right to surrender their options for an appreciation
distribution from us in an amount equal to the excess of
(i) the fair market value of the vested shares of our
common stock subject to the surrendered option over
(ii) the aggregate exercise price payable for those shares. |
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Stand-alone stock appreciation rights allow the holders to
exercise those rights as to a specific number of shares of our
common stock and receive in exchange an appreciation
distribution from us in an amount equal to the excess of
(i) the fair market value of the shares of common stock as
to which those rights are exercised over (ii) the aggregate
base price in effect for those shares. The base price per share
will be determined by the plan administrator on the date the
stand-alone stock appreciation right is granted, and the right
may not have a term in excess of ten years. |
The appreciation distribution on any exercised tandem or
stand-alone stock appreciation right may, at the discretion of
the plan administrator, be made in cash or in shares of our
common stock. Upon cessation of service with us, the holder of a
stock appreciation right will have a limited period of time in
which to exercise that right to the extent exercisable. The plan
administrator will have complete discretion to extend the period
following the holders cessation of service during which
his or her outstanding stock appreciation rights may be
exercised and/or to accelerate the exercisability or vesting of
those stock appreciation rights in whole or in part.
Repricing. The plan administrator has the authority to
effect the cancellation of any or all outstanding options or
stock appreciation rights under the Plan and to grant in
exchange one or more of the following: (i) new options or
stock appreciation rights covering the same or a different
number of shares of common stock but with an exercise or base
price per share based on the fair market value per share of
common stock on the new grant date or (ii) cash or shares
of common stock, whether vested or unvested, equal in value to
the value of the cancelled options or stock appreciation rights.
The plan administrator also has the authority to reduce the
exercise or base price of one or more outstanding options or
stock appreciation rights or to issue options or stock
appreciation rights with a lower exercise or base price in
immediate cancellation of outstanding options or stock
appreciation rights with a higher exercise or base price.
Direct Stock Issuances and Restricted Stock Units. Shares
may be issued under the Plan for cash or other valid
consideration under Delaware law. The shares issued may be fully
and immediately vested upon issuance or may vest upon the
completion of a designated service period or the attainment of
pre-established performance goals. Shares may also be issued as
a bonus for past services without any cash outlay required of
the recipient. Shares of our common stock may also be issued
pursuant to share right awards or restricted stock units which
entitle the recipients to receive those shares upon the
attainment of designated performance
14
goals or the completion of a prescribed service period or upon
the expiration of a designated time period following the vesting
of those awards or units, including (without limitation), a
deferred distribution date following the termination of the
recipients service with us.
The plan administrator will have complete discretion to
determine which eligible individuals are to receive such stock
issuances or stock-based awards, the time or times when those
issuances or awards are to be made, the number of shares subject
to each such issuance or award and the vesting schedule to be in
effect for the issuance or award. The plan administrator will
have the discretionary authority at any time to accelerate the
vesting of any and all shares of restricted stock or other
unvested shares outstanding under the Plan.
Outstanding restricted stock units or other stock-based awards
will automatically terminate, and no shares of our common stock
will actually be issued in satisfaction of those units or
awards, if the performance goals or service requirements
established for such units or awards are not attained. The plan
administrator, however, will have the discretionary authority to
issue shares of our common stock in satisfaction of one or more
outstanding restricted stock units or other stock-based right
awards as to which the designated performance goals or service
requirements are not attained.
Change in Control. In the event we should experience a
change in control, the following special vesting acceleration
provisions will be in effect for all options, stock appreciation
rights and other awards granted or made under the Plan:
|
|
|
(i) Each outstanding option or stock appreciation right
will automatically accelerate in full upon a change in control,
if the successor corporation does not assume the rights and
obligations under such options and stock appreciation rights or
substitute substantially equivalent options and stock
appreciation rights for such corporations stock. |
|
|
(ii) All unvested shares outstanding under the Plan will
immediately vest upon a change in control, except to the extent
our repurchase rights with respect to those shares are to be
assigned to the successor corporation or otherwise continued in
effect. Each outstanding restricted stock unit or other
stock-based award will vest as to the number of shares of our
common stock subject to such unit or award upon the occurrence
of a change in control, unless the successor corporation assumes
the rights and obligations under such units or awards or
substitutes substantially equivalent units or awards for such
corporations stock. |
|
|
(iii) The plan administrator will have complete discretion
to grant one or more options or stock appreciation rights which
will become exercisable for all the shares in the event the
individuals service with us or the successor entity is
terminated (actually or constructively) within a designated
period following a change in control transaction in which those
options or stock appreciation rights are assumed or otherwise
continued in effect. The vesting of outstanding shares and the
vesting and issuance of the shares of common stock subject to
outstanding restricted stock units or other stock-based awards
may also be structured to accelerate upon similar terms and
conditions. All outstanding options will accelerate upon the
optionees involuntary termination (including for good
reason) within 12 months following a change in control. |
|
|
(iv) The plan administrator will have the discretion to
structure one or more option grants or stock appreciation rights
so that those options or stock appreciation rights will
immediately vest upon a change in control, whether or not the
options or stock appreciation rights are to be assumed or
otherwise continued in effect. The plan administrator may also
structure unvested stock issuances or restricted stock units or
other share rights awards so that those issuances or awards will
immediately vest upon a change in control. |
|
|
(v) A change in control under the Plan is any of the
following events as a result of which our stockholders
immediately before the event do not retain immediately after the
event, direct or indirect beneficial ownership of a majority of
the total combined voting power of our voting securities, its
successor or the corporation to which our assets were
transferred: (i) a sale or exchange by the stockholders in
a single or series of related transactions of more than 50% of
our voting stock; (ii) a |
15
|
|
|
merger or consolidation in which Finisar is a party;
(iii) the sale, exchange or transfer of all or
substantially all of the assets of Finisar; or (iv) a
liquidation or dissolution of Finisar. |
The acceleration of vesting in the event of a change in the
ownership or control may be seen as an anti-takeover provision
and may have the effect of discouraging a merger proposal, a
takeover attempt or other efforts to gain control of us.
Changes in Capitalization. In the event any change is
made to the outstanding shares of our common stock by reason of
any recapitalization, stock dividend, stock split, combination,
reclassification or similar change in corporate structure,
appropriate adjustments will be made to: (i) the maximum
number and/or class of securities issuable under the Plan;
(ii) the maximum number and/or class of securities for
which shares may be issued upon exercise of incentive stock
options; (iii) the maximum number and/or class of
securities for which any one person may be granted options,
stand-alone stock appreciation rights, direct stock issuances
(whether vested or unvested) and other stock based awards under
the Plan per fiscal year; (iv) the number and/or class of
securities and the exercise price or base price per share in
effect under each outstanding option or stock appreciation right
and (v) the number and/or class of securities subject to
each outstanding restricted stock unit or other stock based
award and the issue price (if any) payable per share. Such
adjustments will be designed to preclude any dilution or
enlargement of benefits under the Plan or the outstanding awards
thereunder.
Valuation. The fair market value per share of our common
stock on any relevant date under the Plan will be deemed to be
equal to the closing selling price per share on that date on the
Nasdaq National Market. On September 2, 2005, the fair
market value per share of our common stock determined on such
basis was $1.17.
Stockholder Rights and Transferability. No optionee will
have any stockholder rights with respect to the option shares
until such optionee has exercised the option and paid the
exercise price for the purchased shares. The holder of a stock
appreciation right will not have any stockholder rights with
respect to the shares subject to that right unless and until
such person exercises the right and becomes the holder of record
of any shares of our common stock distributed upon such
exercise. Options are not assignable or transferable other than
by will or the laws of inheritance following optionees
death, and during the optionees lifetime, the option may
only be exercised by the optionee. However, the plan
administrator may permit non-statutory options to be
transferable during the optionees lifetime to the extent
provided in the option agreement. Stand alone stock appreciation
rights will be subject to the same transferability restrictions
applicable to non-statutory options.
A participant will have full stockholder rights with respect to
any shares of common stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. A
participant will not have any stockholder rights with respect to
the shares of common stock subject to a restricted stock unit or
other share right award until that unit or award vests and the
shares of common stock are actually issued thereunder. However,
dividend-equivalent units may be paid or credited, either in
cash or in actual or phantom shares of common stock, on
outstanding restricted stock units or other share-right awards,
subject to such terms and conditions as the plan administrator
may deem appropriate.
Special Tax Election. The plan administrator may provide
one or more holders of options, stock appreciation rights,
vested or unvested stock issuances, restricted stock units or
any other stock-based awards under the Plan with the right to
have us withhold a portion of the shares otherwise issuable to
such individuals in satisfaction of the withholding taxes to
which they become subject in connection with the exercise of
those options or stock appreciation rights, the issuance of
vested shares or the vesting of unvested shares issued to them.
Alternatively, the plan administrator may allow such individuals
to deliver previously acquired shares of our common stock in
payment of such withholding tax liability.
Acquisition of Other Entities. The share reserve under
the Plan may, in the plan administrators sole discretion,
be used to fund the exercise of (i) any options granted by
a corporation or other entity which we assume in connection with
our acquisition of that entity or (ii) any options granted
under the Plan in substitution for those options of the acquired
entity. We may effect the assumption or substitution even if the
exercise price per share of our common stock under the assumed
or substituted options will be less than the fair market value
of our common stock at that time, provided the aggregate spread
on each such option
16
immediately after the assumption or substitution (the excess of
the fair market value of the option shares over the aggregate
exercise price payable for those shares) is not greater than the
aggregate option spread immediately prior to the assumption or
substitution and certain other requirement are satisfied to
assure that the option holder does not receive any additional
benefits as a result of the assumption or substitution.
Amendment and Termination. Our board of directors may
amend or modify the Plan at any time, subject to any stockholder
approval requirements under applicable law or regulation or
pursuant to the listing standards of the stock exchange (or the
Nasdaq National Market) on which our shares of common stock are
at the time primarily traded. Unless sooner terminated by our
board of directors, the Plan will terminate on the earliest of
(i) August 30, 2015, (ii) the date on which all
shares available for issuance under the Plan have been issued as
fully-vested shares or (iii) the termination of all
outstanding options or stock appreciation rights, restricted
stock units or other shares right awards in connection with
certain changes in control or ownership.
Stock Awards
The following table sets forth, as to our Chief Executive
Officer, our four other most highly compensated executive
officers (with base salary and bonus in excess of $100,000 for
the fiscal year ended April 30, 2005) and the other
individuals and groups indicated, the number of shares of our
common stock subject to option grants made under the Plan from
May 1, 2004 through August 31, 2005, together with the
weighted average exercise price per share in effect for such
option grants.
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
Weighted Average | |
|
|
Underlying | |
|
Exercise Price | |
Name and Position |
|
Options Granted | |
|
per Share | |
|
|
| |
|
| |
Jerry S. Rawls,
|
|
|
900,000 |
|
|
$ |
1.53 |
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
Dave Buse
|
|
|
400,000 |
|
|
$ |
1.57 |
|
|
Senior Vice President and General Manager,
Network Tools Group |
|
|
|
|
|
|
|
|
Kevin Cornell
|
|
|
200,000 |
|
|
$ |
1.92 |
|
|
Senior Vice President and General Manager,
Network Tools Division |
|
|
|
|
|
|
|
|
Anders Olsson
|
|
|
400,000 |
|
|
$ |
1.57 |
|
|
Senior Vice President, Engineering |
|
|
|
|
|
|
|
|
Stephen K. Workman
|
|
|
200,000 |
|
|
$ |
1.92 |
|
|
Senior Vice President, Finance, Chief Financial Officer and
Secretary |
|
|
|
|
|
|
|
|
All current executive officers as a group (6 persons)
|
|
|
2,900,000 |
|
|
$ |
1.59 |
|
All current non-employee directors as a group (6 persons)
|
|
|
150,000 |
|
|
$ |
1.24 |
|
All employees, including current officers who are not executive
officers, as a group
|
|
|
13,757,398 |
|
|
$ |
1.24 |
|
New Plan Benefits
No awards have been made based on the amended and restated Plan.
Summary of Federal Income Tax Consequences of Options Granted
under the Plan
The following is a summary of the United States Federal income
taxation treatment applicable to us and the participants who
receive awards under the Plan.
Option Grants. Options granted under the Plan may be
either incentive stock options which satisfy the requirements of
Section 422 of the Internal Revenue Code or non-statutory
options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options
differs as follows:
17
Incentive Stock Options. No taxable income is recognized
by the optionee at the time of the option grant, and no taxable
income is recognized for regular tax purposes at the time the
option is exercised, although taxable income may arise at that
time for alternative minimum tax purposes. The optionee will
recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of certain other
dispositions. For Federal tax purposes, dispositions are divided
into two categories: (i) qualifying, and
(ii) disqualifying. A qualifying disposition occurs if the
sale or other disposition is made more than two (2) years
after the date the option for the shares involved in such sale
or disposition is granted and more than one (1) year after
the date the option is exercised for those shares. If the sale
or disposition occurs before these two periods are satisfied,
then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize
long-term capital gain in an amount equal to the excess of
(i) the amount realized upon the sale or other disposition
of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of
those shares on the exercise date or (if less) the amount
realized upon such sale or disposition over (ii) the
exercise price paid for the shares will be taxable as ordinary
income to the optionee. Any additional gain recognized upon the
disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the
purchased shares, then we will be entitled to an income tax
deduction, for the taxable year in which such disposition
occurs, equal to the amount of ordinary income recognized by the
optionee as a result of the disposition. We will not be entitled
to any income tax deduction if the optionee makes a qualifying
disposition of the shares.
Non-Statutory Options. No taxable income is recognized by
an optionee upon the grant of a non-statutory option. The
optionee will in general recognize ordinary income in the year
in which the option is exercised, equal to the excess of the
fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee
will be required to satisfy the tax withholding requirements
applicable to such income.
If the shares acquired upon exercise of the non-statutory option
are unvested and subject to repurchase by us in the event of the
optionees termination of service prior to vesting in those
shares, then the optionee will not recognize any taxable income
at the time of exercise but will have to report as ordinary
income, as and when our repurchase right lapses, an amount equal
to the excess of (i) the fair market value of the shares on
the date the repurchase right lapses over (ii) the exercise
price paid for the shares. The optionee may, however, elect
under Section 83(b) of the Internal Revenue Code to include
as ordinary income in the year of exercise of the option an
amount equal to the excess of (i) the fair market value of
the purchased shares on the exercise date over (ii) the
exercise price paid for such shares. If the Section 83(b)
election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
We will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with
respect to the exercised non-statutory option. The deduction
will in general be allowed for our taxable year in which such
ordinary income is recognized by the optionee.
Stock Appreciation Rights. No taxable income is
recognized upon receipt of a stock appreciation right. The
holder will recognize ordinary income in the year in which the
stock appreciation right is exercised, in an amount equal to the
excess of the fair market value of the underlying shares of
common stock on the exercise date over the base price in effect
for the exercised right, and the holder will be required to
satisfy the tax withholding requirements applicable to such
income.
We will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the holder in connection
with the exercise of the stock appreciation right. The deduction
will be allowed for the taxable year in which such ordinary
income is recognized.
Direct Stock Issuances. The tax principles applicable to
direct stock issuances under the Plan will be substantially the
same as those summarized above for the exercise of non-statutory
option grants.
Restricted Stock Units. No taxable income is recognized
upon receipt of a restricted stock unit. The holder will
recognize ordinary income in the year in which the shares
subject to that unit are actually issued to
18
the holder. The amount of that income will be equal to the fair
market value of the shares on the date of issuance, and the
holder will be required to satisfy the tax withholding
requirements applicable to such income.
We will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the holder at the time
the shares are issued. The deduction will be allowed for the
taxable year in which such ordinary income is recognized.
Deductibility of Executive Compensation. We anticipate
that any compensation deemed paid by us in connection with the
disqualifying disposition of incentive stock option shares or
the exercise of non-statutory options or stock appreciation
rights will in most instances qualify as performance-based
compensation for purposes of Internal Revenue Code
Section 162(m) and will not have to be taken into account
for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to
certain of our executive officers.
Accordingly, the compensation deemed paid with respect to most
options and stock appreciation rights granted under the Plan
will remain deductible by us without limitation under
Section 162(m). However, any compensation deemed paid by us
in connection with shares issued pursuant to direct stock
issuances, restricted stock units or other stock-based awards
will be subject to the $1 million limitation.
Accounting Treatment. Under the accounting principles
currently in effect, option grants with exercise prices not less
than the fair market value of the underlying shares of our
common stock on the grant date will not result in any direct
charge to our reported earnings. However, the fair value of
those options is required to be disclosed in the notes to our
financial statements, and we must also disclose, in footnotes to
our financial statements, the pro-forma impact those options
would have upon our reported earnings were the fair value of
those options at the time of grant treated as a compensation
expense.
Option grants made under the Plan with exercise prices less than
the fair market value of the underlying shares on the grant date
will result in a direct compensation expense in an amount equal
to the excess of such fair market value over the exercise price.
The expense must be amortized against our earnings over the
period the option shares are to vest.
Option grants made to non-employee consultants under the Plan
will result in a direct charge to our reported earnings based
upon the fair value of the option measured initially as of the
grant date and then subsequently on the vesting date of each
installment of the underlying option shares. Such charge will
accordingly include the appreciation in the value of the option
shares over the period between the grant date of the option and
the vesting date of each installment of the option shares.
The number of outstanding options will be a factor in
determining our earnings per share on a fully-diluted basis.
Should one or more individuals be granted tandem or stand-alone
stock appreciation rights under the Plan, then such rights would
result in a compensation expense to be charged against our
reported earnings. Accordingly, at the end of each fiscal
quarter, the amount, if any, by which the fair market value of
the shares of common stock subject to such outstanding stock
appreciation rights has increased from the prior quarter-end
would be accrued as compensation expense, to the extent such
fair market value is in excess of the aggregate exercise price
in effect for those rights.
Direct stock issuances under the Plan will result in a direct
charge to our reported earnings equal to the excess of the fair
market value of the shares on the issuance date over the cash
consideration (if any) paid for such shares. If the shares are
unvested at the time of issuance, then any charge to our
reported earnings will be amortized over the vesting period.
However, if the vesting of the shares is tied solely to
performance milestones, then the issuance of those shares will
be subject to mark to market accounting, and we will have to
accrue compensation expense not only for the value of the shares
on the date of issuance but also for all subsequent appreciation
in the value of those which occurs prior to the vesting date.
The accounting treatment for any restricted stock units issued
under the Plan will be substantially similar to that in effect
for the direct stock issuances.
19
In December 2004, the Financial Accounting Standards Board
(FASB) released Statement of Financial Accounting
Standards No. 123R (revised 2004). The accounting standards
established by that statement will require the expensing of
options, commencing with our fiscal quarter which begins
May 1, 2006, and will also change the accounting treatment
of stock appreciation rights settled in stock. Accordingly, the
foregoing summary of the applicable accounting treatment for
options and stock appreciation rights will change, effective
with our May 1, 2006 fiscal quarter, and the options and
stock appreciation rights payable in stock which we grant to our
employees and non-employee board members will have to be valued
as of the grant date under an appropriate valuation formula, and
that value will then have to be charged as a direct compensation
expense against our reported earnings over the designated
vesting period of the award. Similar option expensing will be
required for any unvested options on the May 1, 2006
effective date, with the grant date fair value of those unvested
options to be expensed against our earnings over the remaining
vesting period. For shares issuable upon the vesting of
restricted stock units awarded under the Plan, we would continue
to accrue a compensation cost equal to the excess of the fair
market value of the shares on the date of the restricted stock
unit award over the cash consideration (if any) paid for such
shares. If shares subject to a direct issuance under the Plan
are unvested at the time of such direct issuance, then the fair
market value of those shares at the time of issuance will
continue to be treated as a charge to our reported earnings to
be amortized ratably over the vesting period. However, such
accounting treatment for the restricted stock units and direct
stock issuances would be applicable whether vesting were tied to
service periods or performance goals.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote
on this proposal is required for approval of the amendment and
restatement of the Plan. Abstentions and broker non-votes will
each be counted as present for purposes of determining the
presence of a quorum. Broker non-votes will have no effect on
the outcome of this vote. Should stockholder approval not be
obtained, then none of the amendments to the Plan will be
implemented and the Plan will continue in full force and effect
in accordance with its existing terms, and option grants may
continue to be made under the Plan until the share reserve under
the Plan is exhausted.
The board of directors believes that it is in our best interests
and in the best interests of our stockholders to approve the
amendment and restatement of the Plan. Therefore, the board
of directors unanimously recommends a vote FOR the
approval of the amendment and restatement of the Plan.
PROPOSAL 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of Finisars board of directors has
selected Ernst & Young LLP to serve as independent
auditors to audit the consolidated financial statements of
Finisar for the fiscal year ending April 30, 2006.
Ernst & Young LLP has acted in such capacity since its
appointment in fiscal 1999. A representative of Ernst &
Young LLP is expected to be present at the annual meeting, with
the opportunity to make a statement if the representative
desires to do so, and is expected to be available to respond to
appropriate questions.
20
The following table sets forth the aggregate fees billed to
Finisar for the fiscal years ended April 30, 2005 and
April 30, 2004 by Finisars principal accounting firm,
Ernst & Young LLP:
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
Year Ended | |
|
|
April 30, | |
|
April 30, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit fees(1)
|
|
$ |
3,252,894 |
|
|
$ |
1,094,545 |
|
Audit-related fees(2)
|
|
|
428,767 |
|
|
|
146,744 |
|
Tax fees(3)
|
|
|
129,478 |
|
|
|
193,446 |
|
All other fees(4)
|
|
|
|
|
|
|
32,210 |
|
|
|
|
|
|
|
|
Total Fees
|
|
$ |
3,811,139 |
|
|
$ |
1,466,945 |
|
|
|
(1) |
Audit fees consist of fees billed for professional services
rendered for the audit of Finisars consolidated annual
financial statements, internal control over financial reporting
and the review of the interim consolidated financial statements
included in quarterly reports and services that are normally
provided by Ernst & Young LLP in connection with
statutory and regulatory filings or engagements, and attest
services. |
|
(2) |
Audit-related fees consist of fees billed for assurance and
related services that are reasonably related to the performance
of the audit or review of the Companys consolidated
financial statements and are not reported under Audit
Fees. This category includes fees related to employee
benefit plan audits and consultations in connection with
acquisitions, including the acquisition of certain assets of the
Infineon fiber optics business, and consultations concerning
financial reporting. |
|
(3) |
Tax fees consist of fees billed for professional services
rendered for tax compliance, tax advice and tax planning
(domestic and international). These services include assistance
regarding federal, state and international tax compliance,
acquisitions and international tax planning. |
|
(4) |
All other fees consist of fees for products and services other
than the services described above. In fiscal 2004, this category
included fees related to the closure of a subsidiary and
expatriate advisory services. |
The Audit Committee has determined that all services performed
by Ernst & Young LLP are compatible with maintaining
the independence of Ernst & Young LLP. The Audit
Committees policy is to pre-approve all audit and
permissible non-audit services provided by our independent
auditors. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or
category of services. The independent auditor and management are
required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditor in
accordance with this pre-approval.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority of the votes cast
affirmatively or negatively at the annual meeting of
stockholders at which a quorum representing a majority of all
outstanding shares of our common stock is present and voting,
either in person or by proxy, is required for approval of this
proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum.
Neither abstentions nor broker non-votes will have any effect on
the outcome of the proposal.
If the stockholders do not approve the ratification of the
appointment of Ernst & Young LLP as our auditors, the
Audit Committee will re-consider its selection. The board of
directors unanimously recommends a vote FOR the
ratification of the appointment of Ernst & Young LLP as
our independent auditors for the fiscal year ending
April 30, 2006.
21
PRINCIPAL STOCKHOLDERS AND SHARE OWNERSHIP
BY MANAGEMENT
The following table sets forth information known to us regarding
the beneficial ownership of our common stock as of
August 31, 2005 by:
|
|
|
|
|
each stockholder who is known by us to beneficially own more
than 5% of our common stock; |
|
|
|
each of our executive officers listed on the Summary
Compensation Table under Executive Compensation and
Related Matters below: |
|
|
|
each of our directors; and |
|
|
|
all of our executive officers and directors as a group: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock | |
|
|
Beneficially Owned(1) | |
|
|
| |
Name of Beneficial Owner(1) |
|
Number | |
|
Percentage | |
|
|
| |
|
| |
5% Stockholders:
|
|
|
|
|
|
|
|
|
VantagePoint Venture Partners(2)
|
|
|
34,000,000 |
|
|
|
11.9 |
% |
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1001 Bayhill Drive, Suite 300
San Bruno, CA 94066 |
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FMR Corp.(3)
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22,488,192 |
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7.9 |
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82 Devonshire Street
Boston, MA 02109 |
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Pioneer Global Asset Management S.p.A.(4)
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22,455,884 |
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7.9 |
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Galleria San Carlo 6
20122 Milan, Italy |
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Executive Officers and Directors:
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Frank H. Levinson(5)
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28,871,319 |
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10.1 |
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Jerry S. Rawls(6)
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6,309,392 |
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2.2 |
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Stephen K. Workman(7)
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887,082 |
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* |
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Kevin Cornell(8)
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* |
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Anders Olsson(9)
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150,000 |
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* |
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Larry D. Mitchell(10)
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144,500 |
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* |
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Roger C. Ferguson(11)
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122,000 |
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* |
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Dave Buse(12)
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120,000 |
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* |
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Michael C. Child(13)
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69,836 |
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* |
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David C. Fries(14)
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* |
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Robert N. Stephens
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* |
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Dominique Trempont
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* |
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All executive officers and directors as a group (12 persons)(15)
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36,764,129 |
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12.7 |
% |
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(1) |
Unless otherwise indicated, the address of each of the named
individuals is: c/o Finisar Corporation, 1308 Moffett Park
Drive, Sunnyvale, CA 94089. Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. All
shares of common stock subject to options exercisable within
60 days following August 31, 2005 are deemed to be
outstanding and beneficially owned by the person holding those
options for the purpose of computing the number of shares
beneficially owned and the percentage of ownership of that
person. They are not, however, deemed to be outstanding and
beneficially owned for the purpose of computing the percentage
ownership of any other person. Accordingly, percent ownership is
based on 286,012,595 shares of common stock outstanding as
of August 31, 2005 plus any shares issuable |
22
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pursuant to options held by the person or group in question
which may be exercised within 60 days following
August 31, 2005. Except as indicated in the other footnotes
to the table and subject to applicable community property laws,
based on information provided by the persons named in the table,
these persons have sole voting and investment power with respect
to all shares of the common stock shown as beneficially owned by
them. |
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(2) |
An aggregate of 34,000,000 shares of common stock were
acquired by VantagePoint Venture Partners III (Q), L.P.
(VP III (Q) LP), VantagePoint Venture
Partners III, L.P. (VP III LP),
VantagePoint Venture Partners IV (Q), L.P. (VP IV
(Q) LP), VantagePoint Venture Partners IV
Principals Fund, L.P. (VP Fund LP) and
VantagePoint Venture Partners IV, L.P. (VP Partners
LP) (collectively, the Funds) on
April 15, 2005. VantagePoint Venture Associates III,
L.L.C. (VP III LLC) is the general partner of
VP III (Q) LP and VP III LP. VantagePoint Venture
Associates IV, L.L.C. (VP IV LLC) is the general
partner of VP IV (Q) LP, VP Fund LP and VP Partners
LP. VP III LLC and VP IV LLC may be deemed to beneficially
own, and share the power to vote and power to dispose of, the
34,000,000 shares held by the Funds. James D. Marver and
Alan E. Salzman are managing members of VP III LLC and VP
IV LLC, and may be deemed to be the beneficial owner of, and
share the power to vote and power to dispose of, the
34,000,000 shares of common stock held by the Funds. Each
of Mr. Marver and Mr. Salzman disclaims ownership of
the shares held by the Funds, other than shares in which they
have a pecuniary interest. |
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(3) |
Based on information contained in a Schedule 13G dated
February 14, 2005, filed with the Securities and Exchange
Commission. Includes 21,629,792 shares beneficially owned
by Fidelity Management & Research Company
(Fidelity) as a result of acting as investment
adviser to various investment companies and 858,400 shares
beneficially owned by Fidelity Management Trust Company as a
result of serving as investment manager of its institutional
account(s). The number of shares of Finisar common stock owned
by the investment companies at December 31, 2004 included
1,213,268 shares of common stock resulting from the assumed
conversion of $6,703,000 principal amount of Finisars
5.25% Convertible Subordinated Notes Due 2008. Fidelity and
Fidelity Management Trust Company are both wholly-owned
subsidiaries of FMR Corp. Fidelity is registered under
Section 203 of the Investment Advisers Act of 1940 as an
investment advisor to various investment companies. Fidelity
Management Trust Company is a bank as defined in
Section 3(a)(6) of the Securities Exchange Act and serves
as investment manager of institutional account(s). Edward C.
Johnson 3rd, Chairman of FMR Corp., FMR Corp., through its
control of Fidelity, and the funds each has sole power to
dispose of the 21,629,792 shares owned by the funds.
Neither FMR Corp. nor Mr. Johnson 3rd has the sole
power to vote or direct the voting of the shares owned directly
by the Fidelity funds, which power resides with the funds
boards of trustees. Fidelity carries out the voting of the
shares under written guidelines established by the funds
boards of trustees. Mr. Johnson 3rd and FMR Corp.,
through its control of Fidelity Management Trust Company, each
has sole dispositive power over and sole power to vote or to
direct the voting of 858,400 shares owned by the
institutional accounts reported above. Members of the Edward C.
Johnson 3rd family are the predominant owners of
Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp.
Mr. Johnson 3rd owns 12.0% and Abigail P. Johnson owns
24.5% of the aggregate outstanding voting stock of
FMR Corp. Mr. Johnson 3rd is the Chairman and
Ms. Johnson is a director of FMR Corp. The Johnson family
group and all other Class B shareholders have entered into
a shareholders voting agreement under which all
Class B shares will be voted in accordance with the
majority vote of Class B shares. Accordingly, through their
ownership of voting common stock and the execution of the
shareholders voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940,
to form a controlling group with respect to FMR Corp. The
address of FMR Corp., Fidelity, Fidelity Management Trust
Company, Edward C. Johnson 3rd and Abigail P. Johnson is 82
Devonshire Street, Boston, Massachusetts 02109. |
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(4) |
Based on information contained in a Schedule 13G dated
February 10, 2005, filed with the Securities and Exchange
Commission. |
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(5) |
Based on information contained in a Schedule 13G/ A dated
February 23, 2005, filed with the Securities and Exchange
Commission. Includes 21,626,319 shares held by the Frank H.
Levinson Revocable |
23
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Living Trust and 6,485,000 shares held by Seti Trading Co.,
Inc., (Seti), a company owned 50% by the Frank H.
Levinson Revocable Living Trust and 50% by the Wynette M.
LaBrosse Trust, for which Mr. Levinsons ex-wife
serves as sole trustee. Includes 760,000 shares issuable
upon exercise of options exercisable within 60 days
following August 31, 2005. Mr. Levinson is the sole
trustee of the Frank H. Levinson Revocable Living Trust and
exercises sole voting and dispositive power over the shares held
by the trust. Mr. Levinson and Wynnette M. LaBrosse are the
sole directors of Seti and, consequently, the affirmative vote
or consent of each of Mr. Levinson and Ms. LaBrosse is
required for any sale or other disposition of the shares held by
Seti. However, pursuant to a shareholders agreement, each
of Mr. Levinson and Ms. LaBrosse maintain the right to
direct Seti to vote 50% of the shares held by Seti in
accordance with written instructions from Mr. Levinson or
Ms. LaBrosse. Accordingly, each of Mr. Levinson and
Ms. LaBrosse share dispositive power with respect to all
6,485,000 shares held by Seti and sole voting power with
respect to 3,242,500 shares held by Seti. Ms. LaBrosse
is the sole trustee of the Wynnette M. LaBrosse Trust and
exercises sole voting and dispositive power over
6,211,860 shares held by the trust. Mr. Levinson and
Ms. LaBrosse disclaim the existence of a group under
Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as
amended, with respect to the shares held by Seti. |
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(6) |
Includes 2,673,189 shares held by The Rawls Family, L.P.
Mr. Rawls is the president of the Rawls Management
Corporation, the general partner of The Rawls Family, L.P.
Includes 760,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(7) |
Includes 335,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(8) |
Mr. Cornell resigned from Finisar in July 2005. |
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(9) |
Includes 140,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(10) |
Includes 112,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(11) |
Includes 22,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(12) |
Includes 120,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(13) |
Includes 22,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
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(14) |
Does not include shares held by the Funds described in note
(2) above managed by VantagePoint Venture Partners, of
which Dr. Fries is a managing director. Dr. Fries
disclaims beneficial ownership of all shares held by the Funds,
except to the extent of his pecuniary interest in the Funds. |
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(15) |
Includes 2,351,000 shares issuable upon exercise of options
exercisable within 60 days following August 31, 2005. |
24
EXECUTIVE COMPENSATION AND RELATED MATTERS
Executive Compensation
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Summary Compensation Information |
The following table sets forth information concerning the
compensation of our Chief Executive Officer and our four other
most highly compensated executive officers, as of April 30,
2005, during the fiscal years ended April 30, 2005, 2004
and 2003.
Summary Compensation Table
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Long Term | |
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Compensation | |
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Awards | |
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Annual Compensation | |
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Securities | |
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Other Annual | |
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Underlying | |
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All Other | |
Name and Principal Position |
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Year | |
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Salary | |
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Bonus | |
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Compensation | |
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Options | |
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Compensation | |
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Jerry S. Rawls
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2005 |
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$ |
224,135 |
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$ |
6,724 |
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400,000 |
(1) |
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President and Chief |
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2004 |
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202,500 |
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6,075 |
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200,000 |
(1) |
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Executive Officer |
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2003 |
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218,077 |
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5,340 |
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1,000,000 |
(1) |
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Dave Buse(2)
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2005 |
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200,000 |
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5,615 |
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200,000 |
(1) |
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Senior Vice President and |
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2004 |
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73,077 |
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2,077 |
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400,000 |
(1) |
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General Manager, Network Tools Group |
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Kevin Cornell(3)
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2005 |
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222,142 |
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2,350 |
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200,000 |
(1) |
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Senior Vice President and |
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2004 |
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217,854 |
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500 |
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General Manager |
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2003 |
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40,312 |
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$ |
44,727 |
(4) |
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400,000 |
(1) |
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Network Tools Division |
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Anders Olsson(5)
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2005 |
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217,350 |
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70,370 |
(6) |
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200,000 |
(1) |
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Senior Vice President, |
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2004 |
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56,250 |
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5,159 |
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500,000 |
(1) |
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Engineering |
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Stephen K. Workman
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2005 |
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215,000 |
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6,202 |
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200,000 |
(1) |
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Senior Vice President, |
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2004 |
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185,385 |
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2,031 |
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440,000 |
(1) |
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Finance, Chief Financial |
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2003 |
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193,846 |
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1,685 |
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Officer and Secretary |
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(1) |
Option vests at the rate of 20% per year over a period of
five years. |
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(2) |
Mr. Buse became Senior Vice President, Sales and Marketing,
in December 2003. He became Senior Vice President and General
Manager, Network Tools Group, in June 2005. |
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(3) |
Mr. Cornell became Senior Vice President and General
Manager, Network Tools Division, in July 2003. He resigned from
Finisar in July 2005. |
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(4) |
Signing bonus. |
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(5) |
Mr. Olsson became Senior Vice President, Engineering, in
January 2004. |
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(6) |
Includes a moving allowance of $64,120. |
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Stock Options Granted in Fiscal 2005 |
The following table sets forth information regarding grants of
stock options to the executive officers named in the Summary
Compensation Table above during the fiscal year ended
April 30, 2005. All of these options were granted under our
1999 Stock Option Plan. The percentage of total options set
forth below is based on an aggregate of 14,797,398 options
granted during the fiscal year. All options were granted at the
fair market value of our common stock, as determined by the
board of directors on the date of grant. Potential realizable
values are net of exercise price, but before taxes associated
with exercise. Amounts represent hypothetical gains that could
be achieved for the options if exercised at the end of the
option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with rules of the SEC
and do not represent Finisars estimate or projection of
the future common stock price.
Options Granted in Fiscal Year Ended April 30, 2005
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Individual Grants | |
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Potential Realizable | |
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Value at Assumed Annual | |
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Number of | |
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% of Total | |
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Deemed | |
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Rates of Stock Price | |
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Securities | |
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Options | |
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Value per | |
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Appreciation for | |
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Underlying | |
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Granted to | |
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Exercise | |
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Share at | |
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Option Term | |
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Options | |
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Employees in | |
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Price | |
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Expiration | |
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Date of | |
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Name |
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Granted(1) | |
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Fiscal Year | |
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($/Share) | |
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Date | |
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Grant | |
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5% | |
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10% | |
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Jerry S. Rawls
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400,000 |
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2.70 |
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$ |
1.92 |
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6/2/14 |
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$ |
1.92 |
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$ |
482,991 |
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$ |
1,223,994 |
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Dave Buse
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200,000 |
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1.35 |
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1.92 |
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6/2/14 |
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1.92 |
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241,496 |
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611,997 |
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Kevin Cornell
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200,000 |
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1.35 |
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1.92 |
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6/2/14 |
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1.92 |
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241,496 |
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611,997 |
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Anders Olsson
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200,000 |
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1.35 |
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1.92 |
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6/2/14 |
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1.92 |
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241,496 |
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611,997 |
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Stephen K. Workman
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200,000 |
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1.35 |
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1.92 |
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6/2/14 |
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1.92 |
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241,496 |
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611,997 |
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(1) |
These options vest at the rate of 20% per year over a
period of five years. |
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Option Exercises and Fiscal 2005 Year-End
Values |
The following table provides the specified information
concerning exercises of options to purchase our common stock
during the fiscal year ended April 30, 2005, and
unexercised options held as of April 30, 2005, by the
executive officers named in the Summary Compensation Table above.
Aggregate Option Exercises In Fiscal 2005 and Values at
April 30, 2005
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Number of Securities | |
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Value of Unexercised | |
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Underlying Unexercised | |
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In-the Money Options at | |
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Shares | |
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Options at Fiscal Year End | |
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Fiscal Year End(1) | |
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Acquired on | |
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Value | |
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Name |
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Exercise | |
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Realized | |
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Exercisable(2) | |
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Unexercisable(2) | |
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Exercisable(2) | |
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Unexercisable(2) | |
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Jerry S. Rawls
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440,000 |
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1,160,000 |
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Dave Buse
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80,000 |
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520,000 |
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Kevin Cornell
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160,000 |
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240,000 |
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$ |
201,600 |
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$ |
302,400 |
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Anders Olsson
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100,000 |
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600,000 |
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Stephen K. Workman
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207,000 |
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433,000 |
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(1) |
Based on a fair market value of $1.26, the closing price of our
common stock on April 29, 2005, as reported by the Nasdaq
National Market. |
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(2) |
Stock options granted under the 1999 Stock Option Plan are
generally not immediately exercisable at the date of grant and
vest at the rate of 20% per year over a period of five
years. |
Employment Contracts and Termination of Employment and
Change-In-Control Arrangements
Jerry S. Rawls, Frank H. Levinson, David Buse, Anders Olsson,
Stephen K. Workman and Joseph A. Young are eligible to
participate in the Finisar Executive Retention and Severance
Plan. This plan provides that in the event of a qualifying
termination each of the participating executives will be
entitled to receive (i) a
26
lump sum payment equal to two years base salary (excluding
bonus) and (ii) medical, dental and insurance coverage for
two years, or reimbursement of premiums for COBRA continuation
coverage during such period. A qualifying termination is defined
as an involuntary termination other than for cause or a
voluntary termination for good reason upon or within
18 months following a change in control, as such terms are
defined in the executive severance plan. In addition, the plan
provides that the vesting of stock options held by eligible
officers will be accelerated as follows: (i) one year of
accelerated vesting upon a change of control, if the options are
assumed by a successor corporation, (ii) 100% accelerated
vesting if the options are not assumed by a successor
corporation, and (iii) 100% accelerated vesting upon a
qualifying termination.
Additionally, pursuant to the 1999 Stock Option Plan, upon a
change in control, as defined therein, the vesting of options
not assumed or substituted by the surviving corporation will
accelerate and the options will become immediately exercisable
and vested in full.
Compensation of Directors
Non-employee directors receive an annual retainer of $17,500,
$1,500 for attendance in person at each meeting of the board of
directors or committee meeting (with meetings of the board of
directors and all committees held within any 24 hour period
considered to be a single meeting) and $500 for attendance at
such meetings via telephone. In addition, members of the Audit
Committee receive an annual retainer of $5,000, and the Chairman
of the Audit Committee receives $2,500 for annual service in
such capacity. Non-employee directors are also eligible to
receive stock options. We reimburse directors for their
reasonable expenses incurred in attending meetings of the board
of directors.
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
The Compensation Committee during fiscal 2005 was composed of
Michael C. Child, Roger C. Ferguson and Larry D. Mitchell. David
C. Fries was appointed to the Compensation Committee in June
2005. No member of our Compensation Committee 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 our board of directors or Compensation Committee.
Certain Relationships and Related Transactions
In March 1999, we granted Mr. Workman an option to purchase
an aggregate of 200,000 shares of common stock, with an
exercise price of $1.31 per share. Mr. Workman
exercised this option in full in April 1999. The exercise price
was paid by Mr. Workman by delivery of a promissory note in
the principal amount of $252,000 bearing interest at the rate of
6% per annum, which was collateralized by shares of our
common stock owned by Mr. Workman. This promissory note was
paid in full in May 2004.
Frank H. Levinson, our Chairman of the Board and Chief Technical
Officer, is a member of the board of directors of Fabrinet, Inc.
In June 2000, we entered into a volume supply agreement with
Fabrinet under which Fabrinet serves as a contract manufacturer
for us. In addition, Fabrinet purchases certain products from
us. During the fiscal year ended April 30, 2005, we made
payments of approximately $54.3 million to Fabrinet and
Fabrinet made payments of approximately $9.1 million to us.
In connection with the acquisition by VantagePoint Venture
Partners in April 2005 of the 34 million shares of our
common stock held by Infineon Technologies AG that we had
previously issued to Infineon in connection with our acquisition
of Infineons optical transceiver product lines, we entered
into an agreement with VantagePoint under which we agreed to use
our reasonable best efforts to elect a nominee of VantagePoint
to our board of directors, provided that the nominee was
reasonably acceptable to the boards Nominating and
Corporate Governance Committee as well as the full board of
directors. In June 2006, David C. Fries, a Managing Director of
VantagePoint, was elected to our board of directors pursuant to
that agreement. We also agreed to file a registration statement
to provide for the resale of the shares held by VantagePoint and
certain distributees of VantagePoint.
27
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires our executive
officers, directors and persons who beneficially own more than
10% of our common stock to file initial reports of ownership and
reports of changes in ownership with the SEC. Such persons are
required by SEC regulations to furnish Finisar with copies of
all Section 16(a) forms filed by such person.
Based solely on our review of such forms furnished to us and
written representations from certain reporting persons, during
the fiscal year ended April 30, 2005 we believe that all
filing requirements applicable to our executive officers,
directors and more than 10% stockholders were complied with,
except that one statement of changes in beneficial ownership for
Michael C. Child, reporting one transaction, was filed late.
EQUITY COMPENSATION PLAN INFORMATION
We currently maintain five compensation plans that provide for
the issuance of our common stock to officers, directors, other
employees or consultants. These consist of the 1989 Stock Option
Plan, the 1999 Stock Option Plan, the Employee Stock Purchase
Plan and the International Employee Stock Purchase Plan, which
have been approved by our stockholders, and the 2001
Nonstatutory Stock Option Plan (the 2001 Plan),
which has not been approved by our stockholders. The following
table sets forth information regarding outstanding options and
shares reserved for future issuance under the foregoing plans as
of April 30, 2005:
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|
|
|
|
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|
|
Number of Shares | |
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|
Remaining | |
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|
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|
|
Available for | |
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|
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|
|
Future Issuance | |
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Number of Shares | |
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|
|
Under Equity | |
|
|
to be Issued Upon | |
|
Weighted-Average | |
|
Compensation | |
|
|
Exercise of | |
|
Exercise Price of | |
|
Plans (Excluding | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
Shares Reflected | |
|
|
Warrants and Rights | |
|
Warrants and Rights | |
|
in Column (a)) | |
|
|
| |
|
| |
|
| |
Plan Category(1) |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by stockholders
|
|
|
45,106,010 |
|
|
$ |
2.24 |
|
|
|
10,423,664 |
(2) |
Equity compensation plan not approved by stockholders(3)
|
|
|
3,567,864 |
|
|
$ |
3.36 |
|
|
|
1,893,627 |
|
|
|
(1) |
The information presented in this table excludes options assumed
by Finisar in connection with acquisitions of other companies.
As of April 30, 2005, 92,867 shares of our common
stock were issuable upon exercise of these assumed options, at a
weighted average exercise price of $2.54 per share. |
|
(2) |
Includes 149,371 shares that were reserved for issuance
under the Employee Stock Purchase Plan as of April 30,
2005. At a meeting of stockholders held on May 6, 2005, the
stockholders approved an increase in the aggregate number of
shares reserved under the Employee Stock Purchase Plan and the
International Employee Stock Purchase Plan (which was adopted at
the meeting) to 13,750,000 shares. In accordance with the
terms of the Employee Stock Purchase Plan, the number of shares
available for issuance under the Employee Stock Purchase Plan
and the International Stock Purchase Plan will increase by
1,000,000 shares on May 1 of each year commencing on
May 1, 2005 and ending May 1, 2010. In accordance with
the terms of the 1999 Stock Option Plan, the number of shares of
our common stock available for issuance under the 1999 Stock
Option Plan will increase on May 1 of each calendar year by
an amount equal to five percent (5%) of the number of shares of
our common stock outstanding as of the preceding April 30. |
|
(3) |
A total of 5,850,000 shares of our common stock have been
reserved for issuance under the 2001 Plan. The material terms of
the 2001 Plan are described in Proposal 2 above. |
28
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
Compensation Philosophy
The goals of our compensation policy are to attract, retain and
reward executive officers who contribute to our overall success
by offering compensation that is competitive in the networking
industry, to motivate executives to achieve our business
objectives and to align the interests of officers with the
long-term interests of stockholders. We currently use salary,
bonuses and stock options to meet these goals.
Forms of Compensation
We provide our executive officers with a compensation package
consisting of base salary, incentive bonuses and participation
in benefit plans generally available to other employees. In
setting total compensation, the Compensation Committee considers
individual and company performance, as well as market
information regarding compensation paid by other companies in
our industry.
Base Salary. Salaries for our executive officers are
initially set based on negotiation with individual executive
officers at the time of recruitment and with reference to
salaries for comparable positions in the networking industry for
individuals of similar education and background to the executive
officers being recruited. We also give consideration to the
individuals experience, reputation in his or her industry
and expected contributions to Finisar. Salaries are generally
reviewed annually by the Compensation Committee and are subject
to increases based on (i) the Compensation Committees
determination that the individuals level of contribution
to Finisar has increased since his or her salary had last been
reviewed and (ii) increases in competitive pay levels.
Bonuses. It is our policy that a substantial component of
each officers potential annual compensation take the form
of a performance-based bonus. Bonus payments to officers other
than the Chief Executive Officer are determined by the
Compensation Committee, in consultation with the Chief Executive
Officer, based on our financial performance and the achievement
of the officers individual performance objectives. The
Chief Executive Officers bonus is determined by the
Compensation Committee, without participation by the Chief
Executive Officer, based on the same factors.
Long-Term Incentives. Longer term incentives are provided
through stock options, which reward executives and other
employees through the growth in value of our stock. The
Compensation Committee believes that employee equity ownership
is highly motivating, provides a major incentive for employees
to build stockholder value and serves to align the interests of
employees with those of stockholders. Grants of stock options to
executive officers are based upon each officers relative
position, responsibilities, historical and expected
contributions to Finisar, and the officers existing stock
ownership and previous option grants, with primary weight given
to the executive officers relative rank and
responsibilities. Initial stock option grants designed to
recruit an executive officer to join Finisar may be based on
negotiations with the officer and with reference to historical
option grants to existing officers. Stock options are granted at
an exercise price equal to the market price of our common stock
on the date of grant and will provide value to the executive
officers only when the price of our common stock increases over
the exercise price.
Compliance with Internal Revenue Code
Section 162(m). Section 162(m) of the Internal
Revenue Code restricts deductibility of executive compensation
paid to our Chief Executive Officer and each of the four other
most highly compensated executive officers holding office at the
end of any year to the extent such compensation exceeds
$1,000,000 for any of such officers in any year and does not
qualify for an exception under Section 162(m) or related
regulations. The Committees policy is to qualify its
executive compensation for deductibility under applicable tax
laws to the extent practicable. Income related to stock options
granted under the 1999 Stock Option Plan generally qualifies for
an exemption from these restrictions imposed by
Section 162(m). In the future, the Committee will continue
to evaluate the advisability of qualifying its executive
compensation for full deductibility.
2005 Compensation
Compensation for our Chief Executive Officer and other executive
officers for fiscal 2005 was set according to the established
compensation policy described above. At the end of fiscal 2005,
we determined that no performance bonuses would be paid to our
executive officers; however, we approved salary increases for
the Chief Executive Officer and certain other executive
officers, effective as of June 1, 2005.
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COMPENSATION COMMITTEE |
|
|
Michael C. Child |
|
Roger C. Ferguson |
|
Larry D. Mitchell |
29
REPORT OF THE AUDIT COMMITTEE
The Audit Committee consists of directors, each of whom, in the
judgment of the Board, is independent as defined
under the listing standards for Nasdaq. The Audit Committee acts
pursuant to a written charter that has been adopted by the Board
of Directors. A copy of the charter is available on the
Companys website at
http://investor.finisar.com/corpgov.cfm.
The primary purpose of the Audit Committee is to assist the
Board in fulfilling its oversight responsibilities by reviewing
and reporting to the Board on the integrity of the financial
reports and other financial information provided by Finisar to
any governmental body or to the public, and on Finisars
compliance with legal and regulatory requirements. Consistent
with these functions, the Audit Committee encourages continuous
improvement of, and fosters adherence to, Finisars
financial policies, procedures and practices at all levels.
The Audit Committee is responsible for retaining Finisars
independent public accountants, evaluating their independence,
qualifications and performance and approving in advance the
engagement of the independent public accounting firm for all
audit and non-audit services. Management is responsible for the
financial reporting process, the preparation of consolidated
financial statements in accordance with generally accepted
accounting principles, the system of internal controls, and
procedures designed to insure compliance with applicable laws
and regulations. Finisars independent public accountants
are responsible for auditing the financial statements. The Audit
Committee meets with such independent public accountants and
management to review the scope and the results of the annual
audit, Finisars audited financial statements and other
related matters as set forth in the charter. However, the
members of the Audit Committee are not professionally engaged in
the practice of accounting or auditing and the Audit
Committees role does not include providing to
stockholders, or others, special assurances regarding such
matters.
The Audit Committee has received from the auditors a formal
written statement describing all relationships between the
auditors and Finisar that might bear on the auditors
independence consistent with Independence Standards Board
Standard No. 1, which relates to the auditors
independence from Finisar and its related entities, discussed
with the auditors any relationship that may impact their
objectivity and independence, and satisfied itself as to the
auditors independence.
The Audit Committee has reviewed and discussed Finisars
audited financial statements with management. The Audit
Committee has discussed with Ernst & Young LLP,
Finisars independent auditors, the matters required to be
discussed by SAS 61 (Codification of Statements on Accounting
Standards) which include, among other items, matters related to
the conduct of the audit of Finisars financial statements.
In addition, the Audit Committee has met with Ernst &
Young LLP, with and without management present, to discuss the
overall scope of Ernst & Young LLPs audit, the
result of their examinations, their evaluations of
Finisars internal controls and the overall quality of
Finisars financial reporting.
Based on the review and discussions referred to above, the Audit
Committee recommended to Finisars Board of Directors that
Finisars audited financial statements be included in
Finisars Annual Report on Form 10-K for the fiscal
year ended April 30, 2005.
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AUDIT COMMITTEE |
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Michael C. Child |
|
Roger C. Ferguson |
|
Larry D. Mitchell |
The foregoing Audit Committee Report shall not be deemed
to be incorporated by reference into any filing of Finisar under
the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that Finisar specifically
incorporates such information by reference.
30
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage
change in the cumulative total return on our common stock with
the cumulative total returns of the CRSP Total Return Index for
the Nasdaq Stock Market and the Amex Networking Index for the
period commencing on April 28, 2000 and ending on
April 29, 2005.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
APRIL 28, 2000 THROUGH APRIL 29, 2005(1):
FINISAR, NASDAQ INDEX AND AMEX NETWORKING INDEX
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April 28, |
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April 30, |
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April 30, |
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April 30, |
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April 30, |
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April 29, |
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2000 |
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2001 |
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2002 |
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2003 |
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2004 |
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2005 |
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Finisar
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$ |
100.00 |
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$ |
40.07 |
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$ |
17.13 |
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$ |
2.49 |
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$ |
4.74 |
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$ |
3.38 |
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Nasdaq Index
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$ |
100.00 |
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$ |
54.70 |
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$ |
43.98 |
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$ |
38.41 |
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$ |
50.25 |
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$ |
50.41 |
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NWX
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$ |
100.00 |
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$ |
43.80 |
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$ |
21.01 |
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$ |
15.79 |
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$ |
23.06 |
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$ |
19.14 |
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(1) |
Assumes that $100.00 was invested on April 28, 2000, at the
market price of our stock on such date, in our common stock and
each index. No cash dividends have been declared on our common
stock. Stockholder returns over the indicated period should not
be considered indicative of future stockholder returns. |
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
We have an advance notice provision under our bylaws for
stockholder business to be presented at meetings of
stockholders. Such provision states that in order for
stockholder business to be properly brought before a meeting by
a stockholder, such stockholder must have given timely notice
thereof in writing to our Secretary. To be timely, a stockholder
proposal must be received at our principal executive offices not
less than 120 calendar days in advance of the one year
anniversary of the date our proxy statement was released to
stockholders in connection with the previous years annual
meeting of stockholders; except that (i) if no annual
meeting was held in the previous year, (ii) if the date of
the annual meeting has been changed by more than 30 calendar
days from the date contemplated at the time of the previous
years proxy statement or (iii) in the event of a
special meeting, then notice must be received not later than the
close of business on the tenth
31
day following the day on which notice of the date of the meeting
was mailed or public disclosure of the meeting date was made.
Proposals of stockholders intended to be presented at the next
annual meeting of stockholders must be received by us at our
offices at 1308 Moffett Park Drive, Sunnyvale, California 94089,
no later than May 18, 2006 and satisfy the conditions
established by the Securities and Exchange Commission for
stockholder proposals to be included in our proxy statement for
that meeting.
OTHER MATTERS
At the date of this proxy statement, the board of directors
knows of no other business that will be conducted at the annual
meeting of stockholders of Finisar other than as described in
this proxy statement. If any other matter or matters are
properly brought before the meeting, or any adjournment or
postponement of the meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on
such matters in accordance with their best judgment.
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By Order of the Board of Directors |
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Stephen K. Workman
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Secretary |
September 15, 2005
32
Appendix A
FINISAR CORPORATION
2005 STOCK INCENTIVE PLAN
(As Amended and Restated Effective September 8, 2005)
1. Establishment, Purpose and Term of Plan.
1.1 Establishment. The Finisar Corporation 1999 Stock Option Plan (the Plan) was
established effective as of April 20, 1999. The Plan is hereby amended and restated and renamed
the 2005 Stock Incentive Plan effective as of September 8, 2005.
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating Company Group.
1.3 Term of Plan. The Plan shall continue in effect until the earliest of (i) August 30, 2015
or its earlier termination by the Board, (ii) the date on which all of the shares of Stock
available for issuance under the Plan have been issued as fully-vested shares or (iii) the
termination of all outstanding options, stock appreciation rights, restricted stock units and other
share right awards in connection with a Change in Control. Should the Plan terminate on August 30,
2015, then all option grants, stock appreciation rights, unvested stock issuances,
restricted stock units and other share right awards outstanding at that time shall continue to have
force and effect in accordance with the provisions of the documents evidencing such grants,
issuances or awards.
2. Definitions and Construction.
2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) Award means an Option, stock appreciation right, stock, restricted stock, restricted
stock unit or other stock based award under the Plan.
(b) Award Agreement means an agreement evidencing an Award under the Plan.
(c) Board means the Board of Directors of the Company. If one or more Committees have been
appointed by the Board to administer the Plan, Board also means such Committee(s).
(d) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(e) Committee means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be
A - 1
specified by the Board. Unless
the powers of the Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(f) Company means Finisar Corporation, a Delaware corporation, or any successor corporation
thereto.
(g) Consultant means a person engaged to provide consulting or advisory services (other than
as an Employee or a Director) to a Participating Company, provided that the identity of such
person, the nature of such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the Securities Act.
(h) Director means a member of the Board or of the board of directors of any other
Participating Company.
(i) Disability means the inability of the Optionee, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Optionees position with the
Participating Company Group because of the sickness or injury of the Optionee.
(j) Employee means any person treated as an employee (including an officer or a Director who
is also treated as an employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a directors fee
shall be sufficient to constitute employment for purposes of the Plan.
(k) Exchange Act means the Securities Exchange Act of 1934, as amended.
(l) Fair Market Value means, as of any date, the value of a share of Stock or other property
as determined by the Board, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be the closing price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other
national or regional securities exchange or market system constituting the primary market for the
Stock, as reported in The Wall Street Journal or such
other source as the Company deems reliable. If the relevant date does not fall on a day on
which the Stock has traded on such securities exchange or market system, the date on which the Fair
A - 2
Market Value shall be established shall be the last day on which the Stock was so traded prior to
the relevant date, or such other appropriate day as shall be determined by the Board, in its
discretion.
(ii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Board in
good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.
(m) Incentive Stock Option means an Option intended to be (as set forth in the Option
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.
(n) Insider means an officer or a Director of the Company or any other person whose
transactions in Stock are subject to Section 16 of the Exchange Act.
(o) Nonstatutory Stock Option means an Option not intended to be (as set forth in the Option
Agreement) or which does not qualify as an Incentive Stock Option.
(p) Option means a right to purchase Stock (subject to adjustment as provided in Section
4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.
(q) Option Agreement means a written agreement between the Company and an Optionee setting
forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares
acquired upon the exercise thereof. An Option Agreement may consist of a form of Notice of Grant
of Stock Option and a form of Stock Option Agreement incorporated therein by reference, or such
other form or forms as the Board may approve from time to time.
(r) Optionee means a person who has been granted one or more Options.
(s) Parent Corporation means any present or future parent corporation of the Company, as
defined in Section 424(e) of the Code.
(t) Participant means a person who has been issued shares of Stock or restricted stock units
or other stock-based awards under Section 9.
(u) Participating Company means the Company or any Parent Corporation or Subsidiary
Corporation.
(v) Participating Company Group means, at any point in time, all corporations collectively
which are then Participating Companies.
A - 3
(w) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or any
successor rule or regulation.
(x) Section 162(m) means Section 162(m) of the Code.
(y) Securities Act means the Securities Act of 1933, as amended.
(z) Service means a persons employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. A persons Service shall not
be deemed to have terminated merely because of a change in the capacity in which the person renders
Service to the Participating Company Group or a change in the Participating Company for which the
person renders such Service, provided that there is no interruption or termination of the persons
Service. Furthermore, a persons Service with the Participating Company Group shall not be deemed
to have terminated if the person takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave exceeds three (3) months
and the Optionees right to return to Service with the Participating Company Group is not
guaranteed by statute or contract, any Incentive Stock Option held by the person and not exercised
within the six (6)-month period measured from the start date of such leave shall cease to be
treated as an Incentive Stock Option and instead shall be treated thereafter as a Nonstatutory
Stock Option. Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes of determining
vesting under any Award. The persons Service shall be deemed to have terminated either upon an
actual termination of Service or upon the corporation for which the person performs Service ceasing
to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall
determine whether the persons Service has terminated and the effective date of such termination.
(aa) Stock means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.
(bb) Stock Issuance Agreement means a written agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the issuance of Stock or the
grant of other Awards to the Participant pursuant to Section 9.
(cc) Subsidiary Corporation means any present or future subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
(dd) Ten Percent Owner Optionee means an Optionee who, at the time an Option is granted to
the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall
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include the singular.
Use of the term or is not intended to be exclusive, unless the context clearly requires
otherwise.
3. Administration.
3.1 Administration by the Board. The Plan shall be administered by the Board. All questions
of interpretation of the Plan or of any Award shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in the Plan or such
Award.
3.2 Authority of Officers. Any officer of a Participating Company shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation, determination or
election.
3.3 Powers of the Board. In addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Board shall have the full and final power and authority, in its
discretion:
(a) to determine, with respect to the grant of Options or stock appreciation rights, which
eligible persons are to receive such grants, the time or times when those grants are to be made,
the number of shares to be covered by each such grant, the status of a granted option as either an
Incentive Stock Option or a Nonstatutory Option, the exercise or base price of each such grant, the
method of payment of the exercise price of a granted option, the time or times when each option or
stock appreciation right is to become exercisable, the vesting schedule (if any) applicable to the
grant, the maximum term for which the grant is to remain outstanding, the method for satisfaction
of any tax withholding obligation arising in connection with the Option or stock appreciation right
or the shares acquired thereunder (including by the withholding or delivery of shares of stock),
the effect of the persons termination of Service with the Participating Company Group on any
outstanding Option or stock appreciation right and all other terms, conditions and restrictions
applicable to the Option or stock appreciation right not inconsistent with the terms of the Plan;
(b) to designate, with respect to direct stock issuances or other stock-based awards, which
eligible persons are to receive such issuances or awards, the time or times when the issuances or
awards are to be made, the number of shares subject to each such issuance or award, the vesting
schedule (if any) applicable to the shares subject to such issuance or award and the consideration
for such shares, the method for satisfaction of any tax withholding obligation arising in
connection with the award or such shares (including by the withholding or delivery of shares of
stock), the effect of the persons termination of Service with the Participating
Company Group on any outstanding award or shares and all other terms, conditions and
restrictions applicable to the award or shares not inconsistent with the terms of the Plan;
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(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to approve one or more forms of Award Agreement;
(e) to amend, modify, extend, cancel or renew any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise thereof;
(f) to accelerate, continue, extend or defer the exercisability or vesting of any Award or the
vesting of any shares acquired thereunder, including with respect to the period following a
persons termination of Service with the Participating Company Group;
(g) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or
custom of, foreign jurisdictions whose citizens may be granted Awards; and
(h) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.4 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.
3.5 Committee Complying with Section 162(m). If the Company is a publicly held corporation
within the meaning of Section 162(m), the Board may establish a Committee of outside directors
within the meaning of Section 162(m) to approve the grant of any Award which might reasonably be
anticipated to result in the payment of employee remuneration that would otherwise exceed the limit
on employee remuneration deductible for income tax purposes pursuant to Section 162(m).
3.6 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or officers or employees of the Participating Company Group, members of the
Board and any officers or employees of the Participating Company Group to whom authority to act for
the Board or the Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal therein, to which they
or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan, or any right granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in satisfaction of a
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judgment in
any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged
in such action, suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
4. Shares Subject to Plan.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be twenty-one
million (21,000,000), cumulatively increased on May 1, 2001 and each May 1 thereafter by a number
of shares (the Annual Increase) equal to five percent (5%) of the number of shares of Stock
issued and outstanding on the immediately preceding April 30, and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof. Notwithstanding the foregoing,
except as adjusted pursuant to Section 4.2, the maximum aggregate number of shares of Stock that
may be issued pursuant to the exercise of Incentive Stock Options (the ISO Share Limit) shall not
exceed twenty-one million (21,000,000), cumulatively increased on May 1, 2001 and each May 1
thereafter until and including May 1, 2008 by that portion of the Annual Increase effective on such
date which does not exceed 7,500,000 shares. Shares of Stock subject to outstanding Awards made
under the Plan shall be available for subsequent issuance under the Plan to the extent (i) those
Awards expire or terminate for any reason prior to the issuance of the shares of Stock subject to
those Awards or (ii) the awards are cancelled in accordance with the cancellation-regrant
provisions of Section 8. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Company at the original exercise or issue price paid per share pursuant to the
Companys repurchase rights under the Plan shall be added back to the number of shares of Stock
reserved for issuance under the Plan and shall accordingly be available for subsequent reissuance
under the Plan. In addition, should the exercise price of an Option under the Plan be paid with
shares of Stock, the authorized reserve of Stock under the Plan shall be reduced only by the net
number of shares issued under the exercised Option. Should shares of Stock otherwise issuable
under the Plan be withheld by the Company in satisfaction of the withholding taxes incurred in
connection with the exercise of an Option or stock appreciation right or the issuance of
fully-vested shares, the number of shares of Stock available for issuance under the Plan shall be
reduced only by the net number of shares issued under the exercised Option or stock appreciation
right or the net number of fully-vested shares issued under the Plan. Such withholding shall in
effect constitute a cash bonus under the Plan, payable directly to the applicable taxing
authorities on behalf of the individual concerned, in an amount equal to the Fair Market Value of
the withheld shares, and shall not be treated as an issuance and immediate repurchase of those
shares.
4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification or similar change in
the capital structure of the Company, appropriate adjustments shall be (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities which may be issued pursuant to the exercise of Incentive Stock Options,
(iii) the maximum number and/or class of securities for which any one person may be
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granted
Options, stand-alone stock appreciation rights, direct stock issuances and other stock-based awards
under the Plan per fiscal year, (iv) the number and/or class of securities and the exercise or base
price per share in effect under each outstanding Option or stock appreciation right under the Plan
and (v) the number and/or class of securities subject to each outstanding restricted stock unit or
other stock-based award under the Plan and the consideration (if any) payable per share thereunder.
If a majority of the shares which are of the same class as the shares that are subject to
outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change Event, as defined in Section 10.1) shares of another corporation (the New
Shares), the Board may unilaterally amend the outstanding Awards to provide that New Shares will
be issued upon the exercise or vesting of the Awards. In the event of any such amendment, the
number of shares subject to, and the purchase price per share of, the outstanding Awards shall be
adjusted in a fair and equitable manner as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise
price of any Option be decreased to an amount less than the par value, if any, of the stock subject
to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.
4.3 Section 162(m) Grant Limit. Subject to adjustment as provided in Section 4.2, no Employee
shall be granted within any fiscal year of the Company one or more Options, stand-alone stock
appreciation rights, direct stock issuances (whether vested or unvested) and other stock-based
awards which in the aggregate are for more than twelve million (12,000,000) shares.
5. Eligibility.
Persons Eligible for Awards. Awards may be granted only to Employees, Consultants, and
Directors. Eligible persons may be granted more than one (1) Award.
6. Terms and Conditions of Options.
Options shall be evidenced by Option Agreements specifying the number of shares of Stock
covered thereby, in such form as the Board shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and conditions:
6.1 Option Grant Restrictions. Any person who is not an Employee on the effective date of the
grant of an Option to such person may be granted only a Nonstatutory Stock Option.
6.2 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Board; provided, however, that (a) the exercise price per share for an Incentive Stock
Option shall be not less than the Fair Market Value of a share of Stock on the
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effective date of
grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall
have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value
of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing,
an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.3 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing
such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option and (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years
after the effective date of grant of such Option. Subject to the foregoing, unless otherwise
specified by the Board in the grant of an Option, any Option granted hereunder shall terminate ten
(10) years after the effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.
6.4 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as determined by
the Company without regard to any restrictions on transferability applicable to such stock by
reason of federal or state securities laws or agreements with an underwriter for the Company) on
the Option exercise date not less than the exercise price, (iii) by delivery of a properly executed
notice together with irrevocable instructions to a broker providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired
upon the exercise of the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a Cashless Exercise), (iv) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable law, or (v) by any
combination thereof. The Board may at any time or from time to time, by approval of or by
amendment to the standard forms of Option Agreement described in Section 6.9, or by other means,
grant Options which do not permit all of the foregoing forms of consideration to be used in payment
of the exercise price or which otherwise restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of
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any law, regulation or agreement
restricting the redemption of the Companys stock. Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of
Stock unless such shares either have been owned by the Optionee for more than six (6) months (or
such other period necessary to award a charge to the Companys earnings for financial reporting
purposes) or were not acquired, directly or indirectly, from the Company.
(ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Companys sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise.
6.5 Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by an Optionee for the first time during any calendar year for stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portions of
such options which exceed such amount shall be treated as Nonstatutory Stock Options. To the
extent the Optionee holds two (2) or more options designated as Incentive Stock Options which
become exercisable for the first time in the same calendar year, then for purposes of this Section
6.5, such options shall be taken into account in the order in which they were granted except to the
extent otherwise provided under applicable law or regulation, and the Fair Market Value of stock
shall be determined as of the time the option with respect to such stock is granted. If the Code
is amended to provide for a different limitation from that set forth in this Section 6.5, such
different limitation shall be deemed incorporated herein effective as of the date and with respect
to such Options as required or permitted by such amendment to the Code. If an Option is treated as
an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 6.5, the Optionee may designate which portion of such Option
the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to
have exercised the Incentive Stock Option portion of the Option first. Separate certificates
representing each such portion shall be issued upon the exercise of the Option.
6.6 Repurchase Rights. Shares issued under the Plan may be subject to a right of first
refusal, one or more repurchase options, or other conditions and restrictions as determined by the
Board in its discretion at the time the Option is granted. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company. Upon request by the Company, each
Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of
shares of Stock hereunder and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
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6.7 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Board in the grant of an Option and set forth in the
Option Agreement, an Option shall be exercisable after an Optionees termination of Service only
during the applicable time period determined in accordance with this Section 6.7 and thereafter
shall terminate:
(i) Disability. If the Optionees Service with the Participating Company Group terminates
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionees Service terminated, may be exercised by the Optionee (or the
Optionees guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Optionees Service terminated, but in any event no later than
the date of expiration of the Options term as set forth in the Option Agreement evidencing such
Option (the Option Expiration Date).
(ii) Death. If the Optionees Service with the Participating Company Group terminates because
of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionees Service terminated, may be exercised by the Optionees legal representative or
other person who acquired the right to exercise the Option by reason of the Optionees death at any
time prior to the expiration of twelve (12) months after the date on which the Optionees Service
terminated, but in any event no later than the Option Expiration Date. The Optionees Service
shall be deemed to have terminated on account of death if the Optionee dies within thirty (30) days
(or such longer period of time as determined by the Board, in its discretion) after the Optionees
termination of Service.
(iii) Termination After Change in Control. The Board may, in its discretion, provide in any
Option Agreement that if the Optionees Service with the Participating Company Group ceases as a
result of Termination After Change in Control (as defined in such Option Agreement), then (1) the
Option, to the extent unexercised and exercisable on the date on which the Optionees Service
terminated, may be exercised by the Optionee (or the Optionees guardian or legal representative)
at any time prior to the expiration of six (6) months (or such longer period of time as determined
by the Board, in its discretion) after the date on which the Optionees Service terminated, but in
any event no later than the Option Expiration Date, and (2) the exercisability and vesting of the
Option and any shares acquired upon the exercise thereof shall be accelerated effective as of the
date on which the Optionees Service terminated to such extent, if any, as shall have been
determined by the Board, in its discretion, and set forth in the Option Agreement
(iv) Other Termination of Service. If the Optionees Service with the Participating Company
Group terminates for any reason, except Disability, death or Termination After Change in Control,
the Option, to the extent unexercised and exercisable by the Optionee on the date on which the
Optionees Service terminated, may be exercised by the Optionee at any time prior to the expiration
of sixty (60) days (or such longer period of time as
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determined by the Board, in its discretion) after the date on which the Optionees Service
terminated, but in any event no later than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
an Option within the applicable time periods set forth in Section 6.7(a) is prevented by the
provisions of Section 12 below, the Option shall remain exercisable until thirty (30) days (or such
longer period of time as determined by the Board, in its discretion) after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no later than the Option
Expiration Date.
(c) Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 6.7(a) of shares acquired upon the exercise
of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be subject to such suit,
(ii) the one hundred and ninetieth (190th) day after the Optionees termination of Service, or
(iii) the Option Expiration Date.
6.8 Transferability of Options. During the lifetime of the Optionee, an Option shall be
exercisable only by the Optionee or the Optionees guardian or legal representative. No Option
shall be assignable or transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory Stock
Option shall be assignable or transferable subject to the applicable limitations, if any, described
in the General Instructions to the Form S-8 Registration Statement under the Securities Act.
6.9 Option Agreement. Unless otherwise provided by the Board at the time the Option is
granted, an Option shall comply with and be subject to the terms and conditions set forth in the
appropriate form of Option Agreement approved by the Board concurrently with its adoption of the
Plan and as amended from time to time.
6.10 Authority to Vary Terms. The Board shall have the authority from time to time to vary
the terms of any standard form of Option Agreement described in Section 6.9 either in connection
with the grant or amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not inconsistent with the terms
of the Plan.
7. Terms and Conditions of Stock Appreciation Rights.
7.1 Types. Two types of stock appreciation rights shall be authorized for issuance under this
Section 7: (i) tandem stock appreciation rights (Tandem Rights) and (ii) stand-alone stock
appreciation rights (Stand-alone Rights).
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7.2 . Tandem Rights. The following terms and conditions shall govern the grant and exercise
of Tandem Rights:
(a) One or more Optionees may be granted a Tandem Right, exercisable upon such terms and
conditions as the Board may establish, to elect between the exercise of the underlying stock option
for shares of Stock or the surrender of that option in exchange for a distribution from the Company
in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the
number of shares in which the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.
(b) No such option surrender shall be effective unless it is approved by the Board, either at
the time of the actual option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall accordingly become entitled under this Section
7.2 may be made in shares of Stock valued at Fair Market Value on the option surrender date, in
cash, or partly in shares and partly in cash, as the Board shall in its sole discretion deem
appropriate.
(c) If the surrender of an option is not approved by the Plan Administrator, then the Optionee
shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at any time prior to the later
of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on
which the option is otherwise exercisable in accordance with the terms of the instrument evidencing
such option, but in no event may such rights be exercised more than ten (10) years after the date
of the option grant.
7.3 Stand-Alone Rights. The following terms and conditions shall govern the grant and
exercise of Stand-alone Rights:
(a) One or more individuals eligible to participate in the Plan may be granted a Stand-alone
Right not tied to any underlying Option. The Stand-alone Right shall relate to a specified number
of shares of Stock and shall be exercisable upon such terms and conditions as the Board may
establish. In no event, however, may the Stand-alone Right have a maximum term in excess of ten
(10) years measured from the grant date. Upon exercise of the Stand-alone Right, the holder shall
be entitled to receive a distribution from the Company in an amount equal to the excess of (i) the
aggregate Fair Market Value (on the exercise date) of the shares of Stock underlying the exercised
right over (ii) the aggregate base price in effect for those shares.
(b) The number of shares of Stock underlying each Stand-alone Right and the base price in
effect for those shares shall be determined by the Board in its sole discretion at the time the
Stand-alone Right is granted.
(c) Stand-alone Rights shall be subject to the same transferability restrictions applicable to
Nonstatutory Options.
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(d) The distribution with respect to an exercised Stand-alone Right may be made in shares of
Stock valued at Fair Market Value on the exercise date, in cash, or partly in shares and partly in
cash, as the Board shall in its sole discretion deem appropriate.
(e) The holder of a Stand-alone Right shall have no shareholder rights with respect to the
shares subject to the Stand-alone Right unless and until such person shall have exercised the
Stand-alone Right and become a holder of record of shares of Stock issued upon the exercise of such
Stand-alone Right.
7.4 Post-Service Exercise. The provisions governing the exercise of Tandem and Stand-alone
Rights following the cessation of the recipients Service shall be substantially the same as those
set forth in Section 6.7 for the Options granted under the Plan.
8. Exchange/Repricing Programs.
(a) The Board shall have the authority to effect, at any time and from time to time, with the
consent of the affected holders, the cancellation of any or all outstanding Options or stock
appreciation rights under the Plan and to grant in exchange one or more of the following: (i) new
options or stock appreciation rights covering the same or a different number of shares of Stock but
with an exercise or base price per share based on the Fair Market Value per share of Stock on the
new grant date or (ii) cash or shares of Stock, whether vested or unvested, equal in value to the
value of the cancelled options or stock appreciation rights.
(b) The Board shall also have the authority, exercisable at any time and from time to time,
with the consent of the affected holders, to reduce the exercise or base price of one or more
outstanding stock options or stock appreciation rights or issue new stock options or stock
appreciation rights with a lower exercise or base price in immediate cancellation of outstanding
stock options or stock appreciation rights with a higher exercise or base price.
9. Terms and Conditions of Stock Issuances.
9.1 Issuances. Shares of Stock may be issued under the Plan through direct and immediate
issuances without any intervening option grants. Shares of Stock may also be issued under the Plan
pursuant to share right awards or restricted stock units that entitle the recipients to receive the
shares underlying those awards or units upon the attainment of designated performance goals or the
satisfaction of specified Service requirements or upon the expiration of a designated time period
following the vesting of those awards or units. Each such stock issuance, share right award or
restricted stock unit shall be evidenced by a Stock Issuance Agreement that complies with the terms
specified below.
9.2 Consideration.
(a) Shares of Stock may be issued under this Section 9 for any of the following items of
consideration that the Board may deem appropriate in each individual instance:
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(i) cash or check made payable to the Company;
(ii) past services rendered to a Participating Company; or
(iii) any other valid form of consideration permissible under the Delaware General Corporation
Law at the time such shares are issued.
9.3 Vesting Provisions.
(a) Shares of Stock issued under this Section 9 may, in the discretion of the Board, be fully
and immediately vested upon issuance or may vest in one or more installments over the Participants
period of Service or upon attainment of specified performance objectives. Shares of Stock may also
be issued under this Section 9 pursuant to share right awards or restricted stock units that
entitle the recipients to receive the shares underlying those awards or units upon the attainment
of designated performance goals or the satisfaction of specified Service requirements or upon the
expiration of a designated time period following the vesting of those awards or units, including
(without limitation) a deferred distribution date following the termination of the Participants
Service. The elements of the vesting schedule applicable to any unvested shares of Stock issued
hereunder or share right award or restricted stock units granted hereunder shall be determined by
the Board and incorporated into the Stock Issuance Agreement.
(b) Any new, substituted or additional securities or other property (including money paid
other than as a regular cash dividend) that the Participant may have the right to receive with
respect to the Participants unvested shares of Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Stock as a class without the Companys receipt of consideration shall be issued subject
to (i) the same vesting requirements applicable to the Participants unvested shares of Stock and
(ii) such escrow arrangements as the Board shall deem appropriate.
(c) The Participant shall have full shareholder rights with respect to any shares of Stock
issued to the Participant under this Section 9, whether or not the Participants interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. The Participant shall not have any
shareholder rights with respect to the shares of Stock subject to a restricted stock unit or share
right award until that award vests and the shares of Stock are actually issued thereunder.
However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom
shares of Stock, on outstanding restricted stock unit or share right awards, subject to such terms
and conditions as the Board may deem appropriate.
(d) Should the Participant cease to remain in Service while holding one or more unvested
shares of Stock issued under this Section 9 or should the performance objectives not be attained
with respect to one or more such unvested shares of Stock, then those shares shall be immediately
surrendered to the Company for cancellation, and the Participant
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shall have no further shareholder
rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash, cash
equivalent or otherwise, the Company shall repay to the Participant the same form of consideration
as the Participant paid for the surrendered shares.
(e) The Board may in its discretion waive the surrender and cancellation of one or more
unvested shares of Stock that would otherwise occur upon the cessation of the Participants Service
or the non-attainment of the performance objectives applicable to those shares. Any such waiver
shall result in the immediate vesting of the Participants interest in the shares of Stock as to
which the waiver applies. Such waiver may be effected at any time, whether before or after the
Participants cessation of Service or the attainment or non-attainment of the applicable
performance objectives.
(f) Outstanding share right awards or restricted stock units under this Section 9 shall
automatically terminate, and no shares of Stock shall actually be issued in satisfaction of those
awards or units, if the performance goals or Service requirements established for such awards or
units are not attained or satisfied. The Board, however, shall have the discretionary authority to
issue vested shares of Stock under one or more outstanding share right awards or restricted stock
units as to which the designated performance goals or Service requirements have not been attained
or satisfied.
10. Change in Control.
10.1 Definitions.
(a) An Ownership Change Event shall be deemed to have occurred if any of the following
occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A Change in Control shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, a Transaction) wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Companys voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
Transferee Corporation(s)), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction, own the Company or
the Transferee Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the
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Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.
10.2 Effect of Change in Control on Options and Stock Appreciation Rights. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the Acquiring Corporation), may either assume the
Companys rights and obligations under outstanding Options and stock appreciation rights or
substitute for outstanding Options and stock appreciation rights substantially equivalent options
or stock appreciation rights for the Acquiring Corporations stock. In the event the Acquiring
Corporation elects not to assume or substitute for outstanding Options and stock appreciation
rights in connection with a Change in Control, any unexercisable or unvested portions of
outstanding Options and stock appreciation rights (and any shares acquired upon the exercise
thereof) granted to persons whose Service has not terminated prior to such date shall be
immediately exercisable and vested in full as of the date ten (10) days prior to the date of the
Change in Control. The exercise or vesting of any Option or stock appreciation right and any
shares acquired upon the exercise thereof that was permissible solely by reason of this Section
10.2 shall be conditioned upon the consummation of the Change in Control. Any Options or stock
appreciation rights which are neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change in Control shall
terminate and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option or stock appreciation
right prior to the Change in Control and any consideration received pursuant to the Change in
Control with respect to such shares shall continue to be subject to all applicable provisions of
the Award Agreement evidencing such Option or stock appreciation right except as otherwise provided
in such Award Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock
of which is subject to the outstanding Options and stock appreciation rights immediately prior to
an Ownership Change Event described in Section 10.1(a)(i) constituting a Change in Control is the
surviving or continuing corporation and immediately after such Ownership Change Event less than
fifty percent (50%) of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options and stock appreciation rights shall not terminate unless the Board otherwise
provides in its discretion.
10.3 Effect of Change in Control on Stock Issuances, Restricted Stock Units and Share Rights
Awards.
(a) All of the Companys outstanding repurchase rights under Section 9 shall terminate
automatically, and all the shares of Stock subject to those terminated rights shall immediately
vest in full, in the event of any Change in Control, except to the extent those repurchase rights
are to be assigned to the Acquiring Corporation or otherwise continued in full force and effect.
(b) In the event the Acquiring Corporation assumes the Companys rights and obligations with
respect to outstanding restricted stock units or share right awards assumed in connection with a
Change in Control, then such units and awards shall be adjusted
A - 17
immediately after the consummation
of that Change in Control to apply to the number and class of securities into which the shares of
Stock subject to the unit or award immediately prior to the
Change in Control would have been converted in consummation of such Change in Control had
those shares actually been outstanding at that time, and appropriate adjustments shall also be made
to the consideration (if any) payable per share thereunder, provided the aggregate amount of such
consideration shall remain the same. If any such restricted stock unit or share right award is not
so assumed or substituted with a substantially equivalent award for the Acquiring Corporations
stock, then such unit or award shall vest, and the shares of Stock subject to that unit or award
shall be issued as fully-vested shares, immediately prior to the consummation of the Change in
Control.
(c) The Board shall have the discretionary authority to structure one or more unvested stock
issuances or one or more restricted stock unit or other share right awards so that the shares of
Stock subject to those issuances or awards shall automatically vest (or vest and become issuable)
in whole or in part immediately upon the occurrence of a Change in Control or upon the subsequent
Termination after Change in Control (as defined in Stock Issuance Agreement).
11. Tax Withholding.
The Companys obligation to deliver shares of Stock upon the exercise of Options or stock
appreciation rights or the issuance or vesting of shares under the Plan shall be subject to the
satisfaction of all applicable federal, state, local and foreign tax and other withholding
requirements (Withholding Taxes). The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable upon the exercise of an Option or stock appreciation right
or upon the issuance of fully-vested shares, or to accept from the holder of he Award the tender
of, a number of whole shares of Stock, having a Fair Market Value, as determined by the Company,
equal to all or any part of the Withholding Taxes. Alternatively or in addition, in its
discretion, the Company shall have the right to require the holder of the Award, through payroll
withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such Withholding Taxes. The Fair Market Value of any shares of Stock withheld or
tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by
the applicable minimum statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established pursuant to any
Award until the Participating Company Groups tax withholding obligations have been satisfied.
12. Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock thereunder shall be subject to
compliance with all applicable requirements of federal, state and foreign law with respect to such
securities. Options and stock appreciation rights may not be exercised if the issuance of shares
of Stock upon such exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, no
A - 18
shares of Stock may be
issued under the Plan unless (a) a registration statement under the Securities Act shall be in
effect at the time of such issuances with respect to shares issuable under the Plan or
(b) in the opinion of legal counsel to the Company, the shares issuable under the Plan may be
issued in accordance with the terms of an applicable exemption from the registration requirements
of the Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Companys legal 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. As a condition to the issuance of shares pursuant to any Award, the Company
may require the holder to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.
13. Termination or Amendment of Plan.
The Board may terminate or amend the Plan at any time. However, subject to changes in
applicable law, regulations or rules that would permit otherwise, stockholder approval will be
required for any amendment to the Plan that (i) materially increases the number of shares of Stock
available for issuance under the Plan, (ii) materially expands the class of individuals eligible to
receive option grants or other awards under the Plan, (iii) materially increases the benefits
accruing to the participants under the Plan or materially reduces the price at which shares of
Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan or
(v) expands the types of awards available for issuance under the Plan. No termination or amendment
of the Plan shall affect any then outstanding Award unless expressly provided by the Board. In any
event, no termination or amendment of the Plan may adversely affect any then outstanding Award
without the consent of the holder, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is
necessary to comply with any applicable law, regulation or rule.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets
forth the Finisar Corporation 2005 Stock Incentive Plan as duly adopted by the Board on April 20,
1999 and amended and restated through September 8, 2005.
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ANNUAL MEETING OF STOCKHOLDERS OF
FINISAR CORPORATION
October 14, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â Please detach along perforated line and mail in the envelope provided. â
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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To elect two Class III directors to hold office for
a three-year term and until his or her successor is
elected and qualified: |
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NOMINEES: |
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FOR ALL NOMINEES
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Jerry S. Rawls
Dominique Trempont |
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WITHHOLD AUTHORITY
FOR ALL NOMINEES |
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FOR ALL EXCEPT
(See instructions below) |
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INSTRUCTION: |
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To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in
the circle next to each nominee you wish to withhold, as
shown here: l |
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To change the address on your account, please check
the box at right and indicate your new address in
the address space above. Please note that changes
to the registered name(s) on the account may not be
submitted via this method.
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To consider and vote upon an amendment and restatement of the
1999 Stock Option Plan;
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To consider, approve and ratify the appointment of Ernst &
Young LLP as our independent auditors for the fiscal year
ending April 30, 2006; and
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To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting. |
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE
URGED TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE,
OR VOTE BY USING THE TELEPHONE OR INTERNET, SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
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Signature of Stockholder |
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Signature of Stockholder |
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Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person. |
FINISAR CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
October 14, 2005
The undersigned hereby appoints Jerry S. Rawls and Stephen K. Workman, or either of them, as
proxies and attorneys-in-fact, each with full power of substitution, to represent the undersigned
at the Annual Meeting of Stockholders of Finisar Corporation (the Company) to be held at the
offices of DLA Piper Rudnick Gray Cary US LLP, 2000 University Avenue, East Palo Alto, California
on October 14, 2005 at 10:00 a.m., and any adjournments or postponements thereof, and to vote the
number of shares the undersigned would be entitled to vote if personally present at the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR NAMED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH. In their discretion the proxies are authorized to vote upon such other business as may
properly come before the meeting or any adjournment thereof to the extent authorized by Rule
14a-4(c) promulgated by the Securities and Exchange Commission.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
FINISAR CORPORATION
October 14, 2005
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PROXY VOTING INSTRUCTIONS |
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MAIL - Date, sign and mail your proxy card in the envelope
provided as soon as possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and follow the
instructions. Have your proxy card available when you call.
- OR -
INTERNET - Access www.voteproxy.com and follow the
on-screen instructions. Have your proxy card available when
you access the web page.
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COMPANY NUMBER
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You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until
11:59 PM Eastern Time the day before the cut-off or meeting date.
â Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. â
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
1. |
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To elect two Class III directors to hold office for
a three-year term and until his or her successor is
elected and qualified: |
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NOMINEES: |
o
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FOR ALL NOMINEES
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¡
¡
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Jerry S. Rawls
Dominique Trempont |
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WITHHOLD AUTHORITY
FOR ALL NOMINEES |
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FOR ALL EXCEPT
(See instructions below) |
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INSTRUCTION: |
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To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in
the circle next to each nominee you wish to withhold, as
shown here: l |
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To change the address on your account, please check
the box at right and indicate your new address in
the address space above. Please note that changes
to the registered name(s) on the account may not be
submitted via this method.
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FOR
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AGAINST
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To consider and vote upon an amendment and restatement of the
1999 Stock Option Plan;
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3. |
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To consider, approve and ratify the appointment of Ernst &
Young LLP as our independent auditors for the fiscal year
ending April 30, 2006; and
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4. |
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To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting. |
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE
URGED TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE,
OR VOTE BY USING THE TELEPHONE OR INTERNET, SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person. |