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
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Proxy Statement
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2) | Form, Schedule or Registration Statement No.: | |
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3) | Filing Party: | |
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4) | Date Filed: | |
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April 16, 2004
Very truly yours, | ||
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/s/ David N. Ruckert
David N. Ruckert President and Chief Executive Officer |
BY ORDER OF THE BOARD OF DIRECTORS | ||
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/s/ David N. Ruckert
David N. Ruckert President and Chief Executive Officer |
1 | ||
2 | ||
The Companys Bylaws provide that the number of directors of the Company shall be no less than five and no more than nine, with the exact number within such range to be fixed by amendment of the Bylaws adopted by the shareholders or by the Board of Directors. The number of directors is currently fixed at eight. One of the current directors, Theodore L. Eliot, Jr., will retire from the Board of Directors effective at the time of the Annual Meeting at which time the number of authorized directors will be fixed at seven. The Nominating and Corporate Governance Committee has recommended, and the Board of Directors has designated, the seven nominees listed below. Biographical information concerning each nominee is set forth below:
Name |
Age |
Director Since |
Background |
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David
N. Ruckert |
66 |
1987 |
Mr.
Ruckert joined the Company in November 1987 as President, Chief Operating Officer and a director. He has served as Chief Executive
Officer of the Company since October 1988 and served as Secretary of the Company from February 1990 to February 1994. From June
1985 to October 1987, he was Executive Vice President of Greybridge, a toy company which he co-founded that was later acquired
by Worlds of Wonder in 1987. Prior to that time, he was Executive Vice President of Atari from October 1982 to June 1984 and
was a Manager/Vice President of Bristol-Myers Company in New York from October 1966 to October 1982.
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John
B. Stuppin |
70 |
1993 |
Mr.
Stuppin was elected Chairman of the Board in May 1995. Since September 1987, Mr. Stuppin has served in various executive capacities
with Neurobiological Technologies, Inc. (NTI), a biomedical development company he co-founded, and he currently
serves as a director of NTI. Mr. Stuppin also has been an investment banker and a venture capitalist, with over 25 years of
experience in the founding and management of companies active in emerging technologies.
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Jeffrey
H. Brite. |
56 |
2003 |
Mr.
Brite joined the board of Fiberstars in July 2003. From January 2002 to the present he has served as Director of Product Development
for Gensler, a leading global design, planning and strategic consulting firm. From 1996 to 2002, prior to joining Gensler, Mr.
Brite was partner and Chief Executive Officer of NeoRay, a lighting company which was sold to Cooper Lighting. Prior to joining
NeoRay, Mr. Brite founded a lighting distribution business and a real estate firm.
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3 | ||
Name |
Age |
Director Since |
Background |
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Wayne
R. Hellman |
59 |
1997 |
Mr.
Hellman became a director of the Company in September 1997. Since May 1995, Mr. Hellman has been Chairman of the Board of Directors
and Chief Executive Officer of Advanced Lighting Technologies, Inc. (ADLT), a firm that holds 24% of the outstanding
shares of Fiberstars Common Stock as of the Record Date. From 1983 until May 1995, Mr. Hellman founded a total of seventeen
affiliated companies that specialize in the production and distribution of metal halide lighting systems, all of which were eventually
acquired by ADLT. From 1968 until 1983, Mr. Hellman served in various capacities at General Electric Company (GE),
including Manager of Strategy Analysis for the GE Lighting Business Group, Manager of Engineering for the Photographic Lamp Department,
and Manager of Metal Halide Product Engineering.
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Sabu
Krishnan |
45 |
2004 |
Mr.
Krishnan joined the Board in April 2003. He has been Chief Operating Officer of ADLT since February 2003. From 1998 to 2003, he
served as Vice President of Indian Operations of ADLT. From 1992 to 1998, Mr. Krishnan was Vice President of South Asian Operations
for Lighting Resources International, Inc., a lighting services company located in Ohio. From 1988 to 1995 he was with K&M
International, Inc, in the machine parts and lamp division, serving most recently as Vice President. From 1981 to 1988, Mr. Krishnan
was an engineering manager at Hindustan Machine Tools in India.
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David
Traversi |
44 |
2002 |
Mr.
Traversi became a Board member in October 2002. He is currently a Managing Director of 2020 Growth Partners, LLC, a strategic
advisory services firm. From 2000 to 2002, Mr. Traversi was co-founder and Chief Executive Officer of PRE Solutions, Inc., which
founded and built the nations largest electronc processor of prepaid telecom products. From 1997 to 1999, he was President of
Sirrom Capital Corporation, an NYSE-listed financial services and investment firm. From 1989 to 1996, Mr. Traversi was a General
Partner and Managing Director at Montgomery Securities (now Bank of America Securities, LLC).
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Philip
Wolfson |
60 |
1987 |
Dr.
Wolfson joined the board in January 1986. Since 1998, Dr. Wolfson has served as Chief Executive Officer of Phytos, Inc., an herbal
medicine development company. He has been Assistant Clinical Professor at the University of California School of Medicine in San
Francisco since 1986 and has maintained a private practice in psychiatric medicine since 1982. Dr. Wolfson also served as a director
and a consultant to NTI from 1989 to 1992. |
4 | ||
The Board of Directors held a total of seven meetings during the fiscal year ended December 31, 2003. All directors attended at least 75% of the aggregate number of meetings of the Board of Directors and of the committees on which such directors serve. In 2003, all directors then serving on the Board attended the annual meeting. The Board of Directors has appointed a Compensation Committee, an Audit and Finance Committee and a Nominating and Corporate Governance Committee. The Board has determined that each director who serves on these committees is independent, as that term is defined by applicable listing standards of The Nasdaq Stock Market and SEC rules. The Board has approved a charter for each of these committees which can be obtained by writing the Company at Fiberstars, Inc., 44259 Nobel Drive, Fremont, CA 94538. A copy of the Nominating and Corporate Governance Committee Charter is attached as Appendix A to this Proxy Statement, and the Audit and Finance Committee Charter is attached as Appendix B.
The Compensation Committees primary functions are to discharge the responsibilities of the Board of Directors relating to compensation of the Companys executive officers and to produce an annual report on executive compensation for inclusion in the Companys annual proxy statement. Other specific duties and responsibilities of the Compensation Committee are to: review and recommend to the Board corporate goals and objectives relevant to compensation of the chief executive officer, evaluate his performance in light of such goals and objectives and set his compensation level based on this evaluation; develop and monitor compensation arrangements for executive officers of the Company, including review and approval of individual compensation; recommend to the Board guidelines for the review of the performance and establishment of compensation and benefit policies for all other employees; make recommendations regarding compensation plans and policies; administer the Companys stock option plans and other compensation plans; and make recommendations to the Board regarding compensation of the Board of Directors.
The Audit and Finance Committees primary functions are to assist the Board of Directors in its oversight of the integrity of the Companys financial statements and other financial information, the Companys compliance with legal and regulatory requirements, the qualifications, independence and performance of the Companys independent auditors and the performance of the Companys internal audit function. Other specific duties and responsibilities of the Audit and Finance Committee are to: appoint, compensate, evaluate and, when appropriate, replace the Companys independent auditors; review and pre-approve audit and permissible non-audit services; review the scope of the annual audit; monitor the independent auditors relationship with the Company; and meet with the independent auditors and management to discuss and review the Companys financial statements, internal controls, and auditing, accounting and financial reporting processes.
The Nominating and Corporate Governance Committees primary functions are to seek, evaluate and recommend
nominees for election to the Board of Directors and to oversee matters of corporate governance. Other specific duties and responsibilities
of the Nominating and Corporate Governance Committee are to: determine the composition of the committees of the Board; make recommendations
regarding candidates for director proposed by stockholders; consider and plan for executive officer succession as well as review management
development and succession programs; review on an annual basis the performance of the Board and of management; and consider and make
recommendations on matters related to the practices, policies and procedures of the Board.
The Board of Directors nominates directors for election at each annual meeting of stockholders and elects new directors to fill vacancies when they arise. The Nominating and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the Board of Directors for nomination or election.
5 | ||
Prior to each annual meeting of stockholders, the Nominating and Corporate Governance Committee identifies nominees first by evaluating the current directors whose term will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, including as demonstrated by the candidates prior service as a director, and the needs of the Board with respect to the particular talents and experience of its directors. In the event that a director does not wish to continue in service, the Nominating and Corporate Governance Committee determines not to re-nominate the Director, or a vacancy is created on the Board as a result of a resignation, an increase in the size of the board or other event, the Committee will consider various candidates for Board membership, including those suggested by the Committee members, by other Board members, by any executive search firm engaged by the Committee and by stockholders. A stockholder who wishes to suggest a prospective nominee for the Board should notify the Secretary of the Company or any member of the Committee in writing, with any supporting material the stockholder considers appropriate, at the following address: Fiberstars, Inc., 44259 Nobel Drive, Fremont, California 94538.
6 | ||
Shares Beneficially Owned(1) | |||||
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Name and Address | Number | Percent of Outstanding Common Stock(2) |
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5% Shareholders: | |||||
ADLT Class 7 Liquidating Trust | |||||
Bridge Associates, LLC, Trustee | |||||
747 Third Avenue, Suite 32A | |||||
New York, New York 10017(3) | 541,011 | 7.7 | % | ||
Valor Capital Management LP | |||||
137 Rowayton Avenue | |||||
Rowayton, CT 06853(4) | 360,900 | 5.6 | % | ||
Glenn Doshay | |||||
6279 Via Campo Verde | |||||
Rancho Santa Fe, CA 92067(5) | 450,000 | 6.9 | % | ||
Entities affiliated with Trigran Investments, Inc. | |||||
3201 Old Glenview Road, Suite 235 | |||||
Wilmette, IL 60091(6) | 655,645 | 10.0 | % | ||
Directors and Named Executive Officers: | |||||
David N. Ruckert (7) | 416,573 | 6.2 | % | ||
John B. Stuppin (8) | 214,575 | 3.3 | % | ||
Wayne R. Hellman (9) | 160,000 | 2.0 | % | ||
Sabu Krishnan (10) | 135,000 | 2.4 | % | ||
Jeffrey H. Brite (11) | 9,167 | * | |||
David Traversi (12) | 15,000 | * | |||
Philip Wolfson (13) | 153,342 | 2.4 | % | ||
Barry R. Greenwald (14) | 67,000 | 2.5 | % | ||
John Davenport (15) | 67,500 | 1.0 | % | ||
J. Steven Keplinger (16) | 66,560 | 1.0 | % | ||
Robert Connors (17) | 83,396 | 1.3 | % | ||
Roger Buelow (18) | 7,000 | * | |||
Theodore L. Eliot, Jr. (19) | 51,000 | 0.8 | % | ||
All executive officers and directors as a group | |||||
(13 persons) (20) | 1,368,113 | 18.5 | % | ||
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*Less than one percent |
7 | ||
(1 | ) | To Fiberstars knowledge, the persons named in the table have sole voting and investment power with respect to |
all shares of Common Stock shown as beneficially owned by them, subject to community property laws, where | ||
applicable, and the information contained in the footnotes to this table. | ||
(2 | ) | Based on 6,478,318 shares outstanding as of April 12, 2004. In addition, shares issuable pursuant to options and |
warrants which may be exercised within 60 days of April 12, 2004 are deemed to be issued and outstanding and | ||
have been treated as outstanding in calculating the percentage ownership of those individuals possessing such | ||
interest, but not for any other individuals. Thus, the number of shares considered to be outstanding for the | ||
purposes of this table may vary depending on the individuals particular circumstances. | ||
(3 | ) | According to an amended Schedule 13D, filed by the ADLT Class 7 Liquidating Trust with the Securities and |
Exchange Commission on April 5, 2004, 541,011 shares are held of which 518,000 are subject to warrants | ||
exercisable within 60 days of April 12, 2004 and 23,011 are voting shares. | ||
(4 | ) | Includes 25,592 shares subject to warrants that are exercisable within 60 days of April 12, 2004. |
(5 | ) | Includes 92,308 shares subject to warrants that are exercisable within 60 days of April 12, 2004. |
(6 | ) | According to a Form 4 filed by Trigram Investments L.P. with the Securities and Exchange Commission on March 11, 2004, Trigram Investments, L.P. holds 597,183 shares and 58,462 shares issuable upon exercise of warrants that are immediately exercisable. According to an amended Schedule 13G filed jointly by Trigran Investments L.P., Trigran Investments, Inc., Douglas Granat and Lawrence A. Oberman with the Securities and Exchange Commission on February 11, 2004, Trigran Investments L.P., Trigran Investments, Inc., Douglas Granat and Lawrence A. Oberman have shared voting and dispositive power for all shares. Trigran Investments, Inc. is the general partner of Trigran Investments L.P. Douglas Granat and Lawrence A. Oberman are the controlling shareholders and sole directors of Trigran Investments Inc. |
(7 | ) | Includes 257,500 shares subject to options exercisable within 60 days of April 12, 2004. |
(8 | ) | Includes 45,000 shares subject to options that are exercisable within 60 days of April 12, 2004 and 8,060 shares |
subject to warrants that are exercisable within 60 days of April 12, 2004. | ||
(9 | ) | Includes 120,000 shares subject to warrants that are exercisable within 60 days of April 12, 2004 held by |
Advanced Lighting Technologies, Inc., of which Mr. Hellman is Chairman of the Board of Directors and Chief | ||
Executive Officer and as to which Mr. Hellman disclaims beneficial ownership except to the extent of his | ||
pecuniary interest therein. Also, includes 40,000 shares subject to outstanding stock options exercisable within 60 | ||
days of April 12, 2004. | ||
(10 | ) | Includes of 120,000 warrants that are exercisable within 60 days of April 12, 2004 held by Advanced Lighting |
Technologies, Inc., of which Mr. Krishnan is Chief Operating Officer and as to which Mr. Krishnan disclaims | ||
beneficial ownership except to the extent of his pecuniary interest therein. Also, includes 15,000 shares subject to | ||
outstanding stock options exercisable within 60 days of April 12, 2004. | ||
(11 | ) | Consists of 9,167 shares subject to options exercisable within 60 days of April 12, 2004. |
(12 | ) | Consists of 15,000 shares subject to options exercisable within 60 days of April 12, 2004. |
(13 | ) | Includes 40,000 shares subject to options exercisable within 60 days of April 12, 2004. |
(14 | ) | Includes 67,000 shares subject to options exercisable within 60 days of April 12, 2004. |
(15 | ) | Includes 112,500 shares subject to options exercisable within 60 days of April 12, 2004. |
(16 | ) | Includes 62,166 shares subject to options exercisable within 60 days of April 12, 2004. |
(17 | ) | Includes 79,396 shares subject to options exercisable within 60 days of April 12, 2004. |
(18 | ) | Consists of 7,000 shares subject to options exercisable within 60 days of April 12, 2004. |
(19 | ) | Consists of 1,000 owned by the Eliot Trust, of which Mr. Eliot is a beneficiary, and 50,000 shares subject to |
outstanding stock options exercisable within 60 days of April 12, 2004. | ||
(20 | ) | Includes 920,789 shares subject to options and warrants that are exercisable within 60 days of April 12, 2004, of |
which 120,000 shares are subject to warrants beneficially owned by ADLT, a company of which Mr. Hellman, a | ||
director of the Company, is Chairman of the Board of Directors and Chief Executive Officer and Mr. Sabu | ||
Krishnan is Chief Operating Officer. |
8 | ||
9 | ||
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Long-Term Compensation |
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Annual
Compensation |
Awards | |
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Name
and Principal Position |
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Fiscal Year |
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Salary($) |
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Bonus($) |
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Securities Underlying Options(#) |
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All
Other Compensation(1) |
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David
N. Ruckert |
2003 |
$207,923 |
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25,000 |
$11,125 |
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President
and Chief |
2002 |
221,384 |
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10,331 |
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Executive
Officer |
2001 |
221,384 |
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9,830 |
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Barry
R. Greenwald |
2003 |
185,823 |
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1,603 |
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Senior
Vice President, Pool |
2002 |
78,180 |
$96,000 |
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1,473 |
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&
Spa Division |
2001 |
100,500 |
96,000 |
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1,342 |
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John
Davenport |
2003 |
187,500 |
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20,000 |
773 |
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Chief
Operating Officer/ |
2002 |
178,000 |
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100,000 |
773 |
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Chief
Technology Officer |
2001 |
156,000 |
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773 |
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J.
Steven Keplinger |
2003 |
148,720 |
--- |
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742 |
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Senior
Vice President, |
2002 |
144,159 |
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679 |
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Operations
and Retail |
2001 |
156,756 |
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545 |
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Robert
A. Connors |
2003 |
156,000 |
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15,000 |
715 |
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Vice
President, Finance |
2002 |
166,000 |
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620 |
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Chief
Financial Officer |
2001 |
166,000 |
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620 |
(1) | Represents premiums paid on life insurance policies for the officers benefit. |
10 | ||
Option Grants in Fiscal Year 2003
Individual Grants | |||||||||||||||||
Name | Number of Securities Underlying Options Granted(#) (1) |
% of Total Options Granted to Employees in Fiscal Year (2) |
Exercise or Base Price ($/Share) (3) |
Expiration Date (4) |
Grant Date Value (5) |
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David N. Ruckert | 25,000 | 6.8 | % | $ | 7.23 | 12/04/2013 | $ | 49,444 | |||||||||
David N. Ruckert | 50,000 | (6) | 13.6 | 5.50 | 1/28/2013 | 81,888 | |||||||||||
John Davenport | 20,000 | 5.4 | 7.23 | 12/04/2013 | 65,510 | ||||||||||||
Barry Greenwald | 30,000 | (7) | 8.1 | 5.50 | 2/28/2013 | 29,667 | |||||||||||
Steve Keplinger | 29,000 | (8) | 8.1 | 5.50 | 2/28/2013 | 29,667 | |||||||||||
Robert Connors | 29,000 | 7.9 | 7.23 | 12/04/2013 | 49,133 | ||||||||||||
Robert Connors | 50,000 | (9) | 13.6 | 4.00 | 9/02/2013 | 89,485 | |||||||||||
(1) |
Such stock options vest as to 25% of the shares covered by the respective options on each anniversary of the grant date, becoming fully vested on the fourth anniversary of the date of grant. Under the
terms of the Companys 1994 Stock Option Plan, the Board of Directors or a duly appointed committee of the Board retains the discretion, subject to certain limitations within the Option Plan, to modify, extend, or renew outstanding options and
to reprice outstanding options, and to accelerate the vesting of options in the event of any merger, consolidation, or reorganization in which the Company is not the surviving corporation. Options may be repriced by canceling outstanding options and
reissuing new options with an exercise price equal to the fair market value on the date of reissue which may be lower than the original exercise price of such canceled options. |
(2) |
Based on 368,916 options granted to employees in Fiscal 2003. |
(3) |
The exercise price on the date of grant was equal to 100% of the fair market value on the date of grant. |
(4) |
Subject to earlier termination upon certain events related to termination of employment. |
(5) |
The grant date present value is based on a Black-Scholes calculation using the following assumptions: time of exercise: 5 years; risk-free interest rate: 3%; volatility: 48%; dividend yield:
none. |
(6) |
The Board elected to grant 50,000 options as a result of previously granted options having
lapsed. |
(7) |
The Board elected to grant 30,000 options as a result of previously granted options having
lapsed. |
(8) |
The Board elected to grant 30,000 options as a result of previously granted options having
lapsed. |
(9) |
The Board elected to grant 50,000 options as a result of previously granted options having
lapsed. |
11 |
Option Exercises and Fiscal 2003 Year-End Value
The following table provides certain information concerning exercises of options to purchase the Companys Common Stock in the fiscal year ended December 31, 2003, and unexercised options held as of December 31, 2003, by the individuals named in the Summary Compensation Table.
Aggregate Options Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Name | Shares Acquired on Exercise (#) |
Value |
Number of Securities Underlying Unexercised Options at Fiscal Year End (#) Exercisable / Unexercisable |
Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(1) Exercisable / Unexercisable |
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David N. Ruckert | | | 232,500 / 55,000 | $485,925 / $58,300 | |||
Barry R. Greenwald | 4,998 | | 98,000 / 10,000 | 309,680 / 23,00 | |||
John Davenport | | | 112,500 / 117,500 | 186,750 / 229125 | |||
J. Steven Keplinger | 5,343 | | 102,166 / 10,000 | 220,679 / 23,000 | |||
Robert A. Connors | | | 82,750 / 32,250 | 179,733 / 17,834 | |||
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(1) | Based upon the closing price of the Companys Common Stock on the Nasdaq National Market on the last trading day of fiscal 2003, which was $6.80. |
Plan category |
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) |
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) |
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c) |
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Equity compensation plans approved by security holders |
1,387,000 |
$4.87 |
55,000(1) |
Equity compensation plans not approved by security holders |
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Total |
1,387,000 |
$4.87 |
55,000(2) |
(1) | Includes the number of shares reserved for issuance under the Companys 1994 Employee Stock Option Plan and under the 1994 Directors Stock Option Plan. |
(2) | Includes 18,000 shares available for sale pursuant to the Companys 1994 Employee Stock Purchase Plan. Shares of common stock will be purchased at a price equal to 85% of the fair market value per share of common stock on either the first day preceding the offering period or the last date of the offering period, whichever is less. |
12 |
13 | ||
14 | ||
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12/31/1998 |
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12/31/1999 |
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12/31/2000 |
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12/31/2001 |
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12/31/2002 |
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12/31/2003 |
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Fiberstars, Inc. |
100.00 |
143.75 |
185.94 |
77.50 |
88.25 |
170.00 |
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Russell 2000 Index |
100.00 |
119.62 |
114.59 |
115.77 |
90.79 |
131.98 |
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Peer Group |
100.00 |
99.44 |
95.83 |
101.76 |
104.91 |
158.47 |
15 | ||
As of December 31, 2003, ADLT was a holder of approximately 20% of the Companys outstanding Common Stock. In January 2000 as part of the acquisition of certain assets and liabilities of Unison Fiber Optic Lighting Systems, LLC, a wholly owned subsidiary of ADLT (Unison), the Company executed a Supply Agreement with ADLT under which the Company buys certain lamps and components for its illuminators and through which the Company sells its finished products to ADLT. The terms of this agreement provide for specified pricing on products purchased from and sold to ADLT. The Company has purchased, and continues to purchase, components from ADLT under the terms of the Supply Agreement. Also, in January 2000, the Company entered into a Development Agreement with Unison, under which the Company provided development services for which it received $2 million in fees from October 1999 through January 2001. In exchange, the Company pays royalties on the sales of products these technologies produce at a rate of 3% for the first five years, 2% for the next two years and 1% for the next three years, after which the Company assumes exclusive royalty-free rights to these products. The Company had sales to ADLT under terms of the Supply Agreement of $156,000 during 2003. Purchases made from ADLT under the Supply Agreement along with royalties paid under the Development Agreement amounted to $657,000 in 2003. Accounts receivable from ADLT was $39,000 at December 31, 2003. Accounts payable due to ADLT was $117,000 at December 31, 2003. Wayne R. Hellman, Chairman of the Board and Chief Executive Officer of ADLT, and Sabu Krishnan, Chief Operating Officer of ADLT, currently serve on the Companys Board of Directors and are nominees to the Board of Directors.
In connection with a Second Amended and Restated Investor Agreement dated March 18, 2004 (the Investor Agreement) among the Company, ADLT, the ADLT Class 7 Liquidating Trust, u/a/d January, 2004 (the Trust), and Unison, ADLT transferred 1,023,011 shares and warrants to purchase 518,000 shares of the Companys Common Stock to the Trust in accordance with the plan of reorganization of ADLT. According to an amended Schedule 13D filed by ADLT on March 24, 2004, pursuant to the terms of the Trust and the ADLT plan of reorganization, ADLT has no interest in the Trust, other than the right to reimbursement of certain expenses, and does not have or share investment or voting power over the assets of the Trust. As a result, according to the amended Schedule 13D, ADLT no longer has any interest in shares of the Companys Common Stock, other than warrants to purchase 407,000 shares.
Pursuant to the Investor Agreement, all of ADLTs rights to nominate persons to the Companys Board of Directors terminated, and the Trust acknowledged that it does not and will not receive any right to nominate persons to the Board. Other provisions of the Investor Agreement include: ADLTs and the Trusts agreement not to solicit proxies with respect to the election or removal of any of the Companys directors; ADLTs and the Trusts agreement not to deposit the shares of the Companys Common Stock in a voting trust or to join a group or otherwise act in concert with a third person for the purpose of acquiring, holding, voting or disposing of the shares of the Companys Common Stock; the Trusts agreement to notify the Companys management if it plans to acquire or dispose of the Companys Common Stock (but only so long as the Trust holds at least 7.5% of the Companys Common Stock); the Trusts agreement to vote the shares of the Companys Common Stock with the Companys management on all matters (other than the election of directors) in not less than the same proportion as the votes cast by the other Company shareholders (but only so long as the Trust holds at least 7.5% of the Companys Common Stock); and certain restrictions in the Trusts ability to dispose of the shares of the Companys Common Stock (but only so long as the Trust holds at least 7.5% of the Companys Common Stock). Under the terms of the Investor Agreement, upon transfer of voting securities, any registration rights that may have existed prior to the transfer terminate, but the Company has agreed to certain S-3 registration rights conditioned upon the transferee agreeing to be bound by certain provisions of the Investor Agreement and Exhibit A thereto. According to an amended Schedule 13D filed by the Trust on April 5, 2004, on March 29, 2004, the Trust sold 1,000,000 shares of the Companys Common Stock to private equity investors pursuant to a stock purchase agreement dated March 19, 2004, and as a result of this transaction, the Trust beneficially owns 541,011 shares of the Companys Common Stock.
In addition, pursuant to the Investor Agreement, ADLT divided and assigned portions of a warrant to acquire up to an aggregate of 42,000 shares of the Companys Common Stock to two former Unison employees in satisfaction of certain of ADLTs commitments to them: specifically, the right to acquire up to 28,000 shares to John Davenport, and the right to acquire up to 14,000 shares to Roger Buelow. Also pursuant to the Investor Agreement, ADLT divided and assigned portions of warrants to acquire up to an aggregate of 7.5% of the remaining shares of the Companys Common Stock remaining under those warrants to two former Unison employees in satisfaction of certain of ADLTs commitments to them: specifically, the right to acquire up to 22,000 shares to John Davenport, and the right to acquire up to 11,000 shares to Roger Buelow. Under the Investor Agreement, the Company agreed to grant its consent to these divisions and assignments. Mr. Davenport is currently the Companys Chief Operating Officer and Chief Technology Officer. Mr. Davenport joined the Company in November 1999 as Vice President, Chief Technology Officer and was appointed Chief Operating Officer in July 2003. Prior to joining the Company, Mr. Davenport served as President of Unison from 1998 to 1999. Mr Buelow has served as the Companys Vice President of Engineering since February 2003. Prior to joining Fiberstars in 1999, he served as Director of Engineering for Unison from 1998 to 1999.
16 | ||
On June 17, 2003, the Company entered into a Securities Purchase Agreement with private investors to invest up to approximately $4,388,250 in a private placement of the Companys Common Stock and warrants to purchase shares of Common Stock. The private placement closed in two stages on June 17, 2003 and August 18, 2003. The purchase price of the shares of Common Stock issued under the Securities Purchase Agreement was $3.25 per share. The warrants issued pursuant to the Securities Purchase Agreement have an exercise price of $4.50 per share. Each warrant has a term of five years and was not exercisable for 183 days from the date of the closing in which the warrant was issued. Entities affiliated with Trigran Investments, Inc. (Trigran), beneficial owners of more than 5% of the Companys Common Stock, participated in the private placement, and the Company issued to Trigran 61,539 shares and warrants to purchase 18,462 shares of Common Stock for an aggregate purchase price of $200,000.
17 | ||
A total of 500,000 shares of Common Stock have been reserved for issuance under the 2004 Plan. If any option granted under the 2004 Plan expires or terminates for any reason without having been exercised in full, then the unpurchased shares subject to that option will once again be available for additional awards. If the 2004 Plan is approved, no additional option grants will be made under either the 1994 Plan or the Directors Plan, and the shares remaining available for future grant under both the 1994 Plan and the Directors Plan will be added to the share reserve available for issuance under the 2004 Plan. Options outstanding under the 1994 Plan and the Directors Plan will remain outstanding until exercised or until they terminate or expire by their terms. If any outstanding option under either the 1994 Plan or the Directors Plan expires or terminates for any reason without having been exercised in full, then the unpurchased shares subject to that option will be available for additional awards under the 2004 Plan.
|
Shares
Subject to Outstanding Options |
Range
of Exercise Prices |
Weighted-Average
Per Share Price |
Number
of Shares Issued Upon Exercise |
Number
of Shares Available for Further Grant |
1994
Plan and Directors Plan |
1,387,000 |
$2.957.23 |
$4.76 |
508,000 |
55,000 |
Name |
Number
of Shares |
|
|
|
|
David
N. Ruckert |
287,500 |
|
Barry
R. Greenwald |
99,668 |
|
John
Davenport |
230,000 |
|
J.
Steven Keplinger |
101,334 |
|
Roger Buelow | 60,000 | |
Robert
A. Connors |
115,000 |
|
All
current executive officers as a group (6 persons) |
893,502 |
|
All
employees, including all current officers who are not executive officers |
2,393,000 |
18 | ||
Name |
Number
of Shares |
|
|
John
B. Stuppin |
80,000 |
Jeffey
H. Brite |
10,000 |
Wayne
R. Hellman |
40,000 |
Sabu
Krishnan |
15,000 |
David
Traversi |
15,000 |
Philip
Wolfson |
60,000 |
19 | ||
20 | ||
In the case of an exercise of a stock appreciation right or an award of stock units, the recipient will generally recognize ordinary income in an amount equal to any cash received and the fair market value of any shares received on the date of payment or delivery.
Fiberstars is generally entitled to a deduction for Federal income tax purposes equal to the amount of ordinary compensation income recognized by the recipient of an award at the time such income is recognized.
21 | ||
|
Year
Ended December 31, |
|||||||||
|
||||||||||
|
2003 |
2002 |
||||||||
|
|
|||||||||
|
|
|
Paid
to Grant Thornton LLP |
|
|
Paid
to PWC |
|
|
Paid
to PWC |
|
Audit
Fees |
$ | 92,428 |
$ |
41,400 |
$ |
133,480 | ||||
Audit-Related
Fees(1) |
26,200 |
| |
|
||||||
All
Other Fees(2) |
|
25,450 |
|
|||||||
|
|
|
||||||||
Total |
$ | 118,628 | $
|
66,850 |
$ |
133,480 |
||||
|
|
|
(1) | Audit-Related Fees paid to Grant Thornton in 2003 consisted of audit fees for audit services for (a) the National Institute of Standards and Technology, or NIST, award under which the Company received $2,000,000 for research and development work during the years 2000-2003 and (b) audit services provided for the Companys 401k Plan. |
(2) | All Other Fees paid to PWC consisted of review of the Companys S-3 filing filed in August 2003. |
22 | ||
| ||
23 | ||
PURPOSE
A-1 | ||
A-3 | ||
A-4 | ||
A-5 | ||
B-1 | ||
B-2 | ||
B-3 | ||
B-4 | ||
APPENDIX C
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
(Adopted by the Board on February 26, 2004)
Table of Contents
Page | ||
|
||
SECTION 1. | ESTABLISHMENT AND PURPOSE | 1 |
SECTION 2. | DEFINITIONS | 1 |
(a) | Affiliate | 1 |
(b) | Award | 1 |
(c) | Board of Directors | 1 |
(d) | Change in Control | 1 |
(e) | Code | 2 |
(f) | Committee | 3 |
(g) | Company | 3 |
(h) | Consultant | 3 |
(i) | Employee | 3 |
(j) | Exchange Act | 3 |
(k) | Exercise Price | 3 |
(l) | Fair Market Value | 3 |
(m) | ISO | 4 |
(n) | Nonstatutory Option or NSO | 4 |
(o) | Offeree | 4 |
(p) | Option | 4 |
(q) | Optionee | 4 |
(r) | Outside Director | 4 |
(s) | Parent | 4 |
(t) | Participant | 5 |
(u) | Plan | 5 |
(v) | Purchase Price | 5 |
(w) | Restricted Share | 5 |
(x) | Restricted Share Agreement | 5 |
(y) | SAR | 5 |
(z) | SAR Agreement | 5 |
(aa) | Service | 5 |
(bb) | Share | 5 |
(cc) | Stock | 5 |
(dd) | Stock Option Agreement | 6 |
(ee) | Stock Unit | 6 |
(ff) | Stock Unit Agreement | 6 |
(gg) | Subsidiary | 6 |
(hh) | Total and Permanent Disability | 6 |
SECTION 3. | ADMINISTRATION | 6 |
(a) | Committee Composition | 6 |
(b) | Committee for Non-Officer Grants | 6 |
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
-i-
(c) | Committee Procedures | 7 |
(d) | Committee Responsibilities | 7 |
SECTION 4. | ELIGIBILITY | 8 |
(a) | General Rule | 8 |
(b) | Automatic Grants to Outside Directors | 9 |
(c) | Ten-Percent Stockholders | 10 |
(d) | Attribution Rules | 10 |
(e) | Outstanding Stock | 10 |
SECTION 5. | STOCK SUBJECT TO PLAN | 10 |
(a) | Basic Limitation | 10 |
(b) | Option/SAR Limitation | 10 |
(c) | Additional Shares | 11 |
SECTION 6. | RESTRICTED SHARES | 11 |
(a) | Restricted Stock Agreement | 11 |
(b) | Payment for Awards | 11 |
(c) | Vesting | 11 |
(d) | Voting and Dividend Rights | 12 |
(e) | Restrictions on Transfer of Shares | 12 |
SECTION 7. | TERMS AND CONDITIONS OF OPTIONS | 12 |
(a) | Stock Option Agreement | 12 |
(b) | Number of Shares | 12 |
(c) | Exercise Price | 12 |
(d) | Withholding Taxes | 13 |
(e) | Exercisability and Term | 13 |
(f) | Exercise of Options Upon Termination of Service | 13 |
(g) | Effect of Change in Control | 13 |
(h) | Leaves of Absence | 13 |
(i) | No Rights as a Stockholder | 14 |
(j) | Modification, Extension and Renewal of Options | 14 |
(k) | Restrictions on Transfer of Shares | 14 |
SECTION 8. | PAYMENT FOR SHARES | 14 |
(a) | General Rule | 14 |
(b) | Surrender of Stock | 15 |
(c) | Services Rendered | 15 |
(d) | Cashless Exercise | 15 |
(e) | Exercise/Pledge | 15 |
(f) | Promissory Note | 15 |
(g) | Other Forms of Payment | 15 |
(h) | Limitations under Applicable Law | 15 |
FIBERSTARS,
INC.
2004 STOCK INCENTIVE PLAN
-ii-
SECTION 9. | STOCK APPRECIATION RIGHTS | 16 |
(a) | SAR Agreement | 16 |
(b) | Number of Shares | 16 |
(c) | Exercise Price | 16 |
(d) | Exercisability and Term | 16 |
(e) | Effect of Change in Control | 16 |
(f) | Exercise of SARs | 16 |
(g) | Modification or Assumption of SARs | 17 |
SECTION 10. | STOCK UNITS | 17 |
(a) | Stock Unit Agreement | 17 |
(b) | Payment for Awards | 17 |
(c) | Vesting Conditions | 17 |
(d) | Voting and Dividend Rights | 17 |
(e) | Form and Time of Settlement of Stock Units | 18 |
(f) | Death of Recipient | 18 |
(g) | Creditors Rights | 18 |
SECTION 11. | ADJUSTMENT OF SHARES | 18 |
(a) | Adjustments | 18 |
(b) | Dissolution or Liquidation | 19 |
(c) | Reorganizations | 19 |
(d) | Reservation of Rights | 20 |
SECTION 12. | DEFERRAL OF AWARDS | 20 |
SECTION 13. | AWARDS UNDER OTHER PLANS | 21 |
SECTION 14. | PAYMENT OF DIRECTORS FEES IN SECURITIES | 21 |
(a) | Effective Date | 21 |
(b) | Elections to Receive NSOs, Restricted Shares or Stock Units | 21 |
(c) | Number and Terms of NSOs, Restricted Shares or Stock Units | 21 |
SECTION 15. | LEGAL AND REGULATORY REQUIREMENTS | 21 |
SECTION 16. | WITHHOLDING TAXES | 22 |
(a) | General | 22 |
(b) | Share Withholding | 22 |
SECTION 17. | LIMITATION ON PARACHUTE PAYMENTS | 22 |
(a) | Scope of Limitation | 22 |
(b) | Basic Rule | 22 |
(c) | Reduction of Payments | 23 |
(d) | Related Corporations | 23 |
SECTION 18. | NO EMPLOYMENT RIGHTS | 23 |
SECTION 19. DURATION AND AMENDMENTS | 23 | |
(a) | Term of the Plan | 23 |
(b) | Right to Amend or Terminate the Plan | 24 |
(c) | Effect of Amendment or Termination | 24 |
SECTION 20. EXECUTION | 25 |
FIBERSTARS,
INC.
2004 STOCK INCENTIVE PLAN
-iii-
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board of Directors on February 26, 2004 (the Effective Date) and recently amended and restated on April 6, 2004, subject to stockholder approval. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of restricted shares, stock units, options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights.
SECTION 2. DEFINITIONS.
(a) Affiliate shall mean any entity other than a Subsidiary, if the Company and/or one of more Subsidiaries own not less than 50% of such entity.
(b) Award shall mean any award of an Option, a SAR, a Restricted Share or a Stock Unit under the Plan.
(c) Board of Directors shall mean the Board of Directors of the Company, as constituted from time to time.
(d) Change in Control shall mean the occurrence of any of the following events:
(i) A change in the composition of the Board of Directors occurs, as a result of which fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company on the look-back date (as defined below) (the original directors); or
(B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved (the continuing directors); or
(ii) Any person (as defined below) who by the acquisition or aggregation of securities, is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Companys then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-1
Base Capital Stock); except that any change in the relative beneficial ownership of the Companys securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such persons ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such persons beneficial ownership of any securities of the Company; or
(iii) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing or surviving entity; or
(iv) The sale, transfer or other disposition of all or substantially all of the Companys assets.
For purposes of subsection (d)(i) above, the term look-back date shall mean the later of (1) the Effective Date or (2) the date 24 months prior to the date of the event that may constitute a Change in Control.
For purposes of subsection (d)(ii) above, the term person shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.
Any other provision of this Section 2(d) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Companys incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Companys securities immediately before such transaction, and a Change in Control shall not be deemed to occur if the Company files a registration statement with the Securities and Exchange Commission for the initial offering of Stock to the public.
(e) Code shall mean the Internal Revenue Code of 1986, as amended.
(f) Committee shall mean the Compensation Committee as designated by the Board of Directors, which is authorized to administer the Plan, as described in Section 3 hereof.
(g) Company shall mean Fiberstars, Inc., a California corporation.
(h) Consultant shall mean a consultant or advisor who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor or a member of the board of directors of a Parent or a Subsidiary who is not an Employee. Service as a Consultant shall be considered Service for all purposes of the Plan.
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-2
(i) Employee shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.
(j) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(k) Exercise Price shall mean, in the case of an Option, the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. Exercise Price, in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR.
(l) Fair Market Value with respect to a Share, shall mean the market price of one Share of Stock, determined by the Committee as follows:
(i) If the Stock was traded over-the-counter on the date in question but was not traded on The Nasdaq Stock Market, then the Fair Market Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the Pink Sheets published by the National Quotation Bureau, Inc.;
(ii) If the Stock was traded on The Nasdaq Stock Market, then the Fair Market Value shall be equal to the last reported sale price quoted for such date by The Nasdaq Stock Market;
(iii) If the Stock was traded on a United States stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported for such date by the applicable composite-transactions report; and
(iv) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.
(m) ISO shall mean an employee incentive stock option described in Section 422 of the Code.
(n) Nonstatutory Option or NSO shall mean an employee stock option that is not an ISO.
(o) Offeree shall mean an individual to whom the Committee has offered the right to acquire Shares under the Plan (other than upon exercise of an Option).
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-3
(p) Option shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.
(q) Optionee shall mean an individual or estate who holds an Option or SAR.
(r) Outside Director shall mean a member of the Board of Directors who is not a common-law employee of, or paid consultant to, the Company, a Parent or a Subsidiary. Service as an Outside Director shall be considered Service for all purposes of the Plan, except as provided in Section 4(a).
(s) Parent shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a Parent commencing as of such date.
(t) Participant shall mean an individual or estate who holds an Award.
(u) Plan shall mean this 2004 Stock Incentive Plan of Fiberstars, Inc., as amended from time to time.
(v) Purchase Price shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Committee.
(w) Restricted Share shall mean a Share awarded under the Plan.
(x) Restricted Share Agreement shall mean the agreement between the Company and the recipient of a Restricted Share which contains the terms, conditions and restrictions pertaining to such Restricted Shares.
(y) SAR shall mean a stock appreciation right granted under the Plan.
(z) SAR Agreement shall mean the agreement between the Company and an Optionee which contains the terms, conditions and restrictions pertaining to his or her SAR.
(aa) Service shall mean service as an Employee, Consultant or Outside Director.
(bb) Share shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).
(cc) Stock shall mean the Common Stock of the Company.
(dd) Stock Option Agreement shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his Option.
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-4
(ee) Stock Unit shall mean a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan.
(ff) Stock Unit Agreement shall mean the agreement between the Company and the recipient of a Stock Unit which contains the terms, conditions and restrictions pertaining to such Stock Unit.
(gg) Subsidiary shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less than 50% of the total combined voting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
(hh) Total and Permanent Disability shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted, or can be expected to last, for a continuous period of not less than 12 months.
SECTION 3. ADMINISTRATION.
(a) Committee Composition. The Plan shall be administered by the Committee. The Committee shall consist of two or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy (i) such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and (ii) such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code.
(b) Committee for Non-Officer Grants. The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan with respect to Employees who are not considered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and may determine all terms of such grants. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee or committees appointed pursuant to the preceding sentence. The Board of Directors may also authorize one or more officers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the number of such Awards to be received by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officers may so award.
(c) Committee Procedures. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing by all Committee members, shall be valid acts of the Committee.
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-5
(d) Committee Responsibilities. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the following actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan;
(iii) To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of Shares, including (without limitation) the Purchase Price, the vesting of the award (including accelerating the vesting of awards, either at the time of the award or sale or thereafter, without the consent of the Offeree or Optionee) and to specify the provisions of the Restricted Stock Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including (without limitation) the Exercise Price, the vesting or duration of the Option (including accelerating the vesting of the Option), to determine whether such Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the Stock Option Agreement relating to such Option;
(ix) To amend any outstanding Restricted Stock Agreement or Stock Option Agreement, subject to applicable legal restrictions and to the consent of the Offeree or Optionee who entered into such agreement if the Offerees or Optionees rights or obligations would be adversely affected;
(x) To prescribe the consideration for the grant of each Option or other right under the Plan and to determine the sufficiency of such consideration;
(xi) To determine the disposition of each Option or other right under the Plan in the event of an Optionees or Offerees divorce or dissolution of marriage;
(xii) To determine whether Options or other rights under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business;
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
C-6
(xiii) To correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Stock Option Agreement or any Restricted Stock Agreement; and
(xiv) To take any other actions deemed necessary or advisable for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Options or other rights under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Offerees, all Optionees, and all persons deriving their rights from an Offeree or Optionee. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan, any Option, or any right to acquire Shares under the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rule. Only Employees shall be eligible for the grant of ISOs. Only Employees, Consultants and Outside Directors shall be eligible for the grant of Restricted Shares, Stock Units, Nonstatutory Options or SARs.
(b) Automatic Grants to Outside Directors.
(i) Each Outside Director who first joins the Board of Directors after the Effective Date, and who was not previously an Employee, shall receive a Nonstatutory Option to purchase 10,000 Shares (subject to adjustment under Section 11) on the first business day after his or her election to the Board of Directors. Each Option granted under this Section 4(b)(i) shall vest and become exercisable monthly over the 12-month period beginning on the day which is one month after the date of grant, and shall be fully vested and exercisable on the first anniversary of the date of grant. Notwithstanding the foregoing, each such Option shall become vested if a Change in Control occurs with respect to the Company during the Optionees Service.
(ii) On the first business day following the conclusion of each regular annual meeting of the Companys stockholders, commencing with the annual meeting occurring after the adoption of the Plan, each Outside Director who was not elected to the Board for the first time at such meeting and who will continue serving as a member of the Board of Directors thereafter shall receive an Option to purchase 7,000 Shares (subject to adjustment under Section 11), provided that such Outside Director has served on the Board of Directors for at least three months. Each Option granted under this Section 4(b)(ii) shall vest and become exercisable monthly over the 12-month period beginning on the day which is one month after the date of grant, and shall be fully vested and exercisable on the first anniversary of the date of grant. Notwithstanding the foregoing, each Option granted under this Section 4(b)(ii) shall become vested if a Change in Control occurs with respect to the Company during the Optionees Service.
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(iii) On the first business day following the conclusion of each regular annual meeting of the Companys stockholders, commencing with the annual meeting occurring after the adoption of the Plan, each Outside Director who will serve as Chairman of the Board or Chairperson of the Audit and Finance Committee of the Board of Directors thereafter shall receive an Option to purchase 3,000 Shares (subject to adjustment under Section 11), provided that such Outside Director has served on the Board of Directors for at least three months. Each Option granted under this Section 4(b)(iii) shall vest and become exercisable monthly over the 12-month period beginning on the day which is one month after the date of grant, and shall be fully vested and exercisable on the first anniversary of the date of grant. Notwithstanding the foregoing, each Option granted under this Section 4(b)(iii) shall become vested if a Change in Control occurs with respect to the Company during the Optionees Service.
(iv) The Exercise Price of all Nonstatutory Options granted to an Outside Director under this Section 4(b) shall be equal to 100% of the Fair Market Value of a Share on the date of grant, payable in one of the forms described in Section 8(a), (b) or (d).
(v) All Nonstatutory Options granted to an Outside Director under this Section 4(b) shall terminate on the earlier of (A) the day before the tenth anniversary of the date of grant of such Options or (B) the date twelve months after the termination of such Outside Directors Service for any reason; provided, however, that any such Options that are not vested upon the termination of the Outside Directors Service for any reason shall terminate immediately and may not be exercised.
(c) Ten-Percent Stockholders. An Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.
(d) Attribution Rules. For purposes of Section 4(c) above, in determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for such Employees brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its stockholders, partners or beneficiaries.
(e) Outstanding Stock. For purposes of Section 4(c) above, outstanding stock shall include all stock actually issued and outstanding immediately after the grant. Outstanding stock shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The maximum aggregate number of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed 500,000 Shares, plus any Shares remaining available for grant of awards under the Companys 1994 Stock Option Plan and 1994
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Directors Stock Option Plan upon the termination of those plans in 2004, prior to the Effective Date of this Plan (including Shares subject to outstanding options under the Companys 1994 Stock Option Plan or 1994 Directors Stock Option Plan on the Effective Date of this Plan that are subsequently forfeited or terminate for any other reason before being exercised and unvested Shares that are forfeited pursuant to such plan after the Effective Date of this Plan). The limitations of this Section 5(a) shall be subject to adjustment pursuant to Section 11. The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.
(b) Option/SAR Limitation. Subject to the provisions of Section 11, no Participant may receive Options or SARs under the Plan in any calendar year that relate to more than 500,000 Shares.
(c) Additional Shares. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any other reason before being exercised, then the corresponding Shares shall again become available for Awards under the Plan. If Stock Units are settled, then only the number of Shares (if any) actually issued in settlement of such Stock Units shall reduce the number available under Section 5(a) and the balance shall again become available for Awards under the Plan. If SARs are exercised, then only the number of Shares (if any) actually issued in settlement of such SARs shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the Plan.
SECTION 6. RESTRICTED SHARES.
(a) Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical.
(b) Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents, or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine.
(c) Vesting. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting
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in the event of the Participants death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares of thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Companys other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.
(e) Restrictions on Transfer of Shares. Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or other restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Restricted Stock Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the Optionees other compensation.
(b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 11.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, except as otherwise provided in Section 4(c), and the Exercise Price of an NSO shall not be less 85% of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, a Stock Option Agreement may specify that the exercise price of an NSO may vary in accordance with a predetermined formula. Subject to the foregoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee at its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.
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(e) Exercisability and Term. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant (five years for Employees described in Section 4(c)). A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionees death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionees Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire.
(f) Exercise of Options Upon Termination of Service. The Optionee may exercise his or her Option during the three (3) month period following termination of the Optionees Service with the Company and its Subsidiaries (or such other period of time, not to exceed 12 months, as determined by the Committee at the time of granting the Option or thereafter). Subject to the foregoing, each Stock Option Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionees Service, and the right to exercise the Option of any executors or administrators of the Optionees estate or any person who has acquired such Option(s) directly from the Optionee by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reason for termination of Service.
(g) Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.
(h) Leaves of Absence. An Employees Service shall cease when such Employee ceases to be actively employed by, or a Consultant to, the Company (or any subsidiary) as determined in the sole discretion of the Board of Directors. For purposes of Options, Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to ISO status, an Employees Service will be treated as terminating 90 days after such Employee went on leave, unless such Employees right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan.
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(i) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 11.
(j) Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Committee may modify, extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares and at the same or a different exercise price, or in return for the grant of the same or a different number of Shares. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, adversely affect his or her rights or obligations under such Option.
(k) Restrictions on Transfer of Shares. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(g) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by surrendering, or attesting to the ownership of, Shares which have already been owned by the Optionee or his representative. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary prior to the award. If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of the award) of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(b).
(d) Cashless Exercise. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.
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(e) Exercise/Pledge. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a full-recourse promissory note. However, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents.
(g) Other Forms of Payment. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules.
(h) Limitations under Applicable Law. Notwithstanding anything herein or in a Stock Option Agreement or Restricted Stock Agreement to the contrary, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.
SECTION 9. STOCK APPRECIATION RIGHTS.
(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionees other compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Section 11.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding.
(d) Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. A SAR Agreement may provide for accelerated exercisability in the event of the Optionees death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionees service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.
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(e) Effect of Change in Control. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company.
(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price.
(g) Modification or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, may alter or impair his or her rights or obligations under such SAR.
SECTION 10. STOCK UNITS.
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipients other compensation.
(b) Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participants death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committees discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the
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Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach.
(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or in installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11.
(f) Death of Recipient. Any Stock Units Award that becomes payable after the recipients death shall be distributed to the recipients beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipients death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipients death shall be distributed to the recipients estate.
(g) Creditors Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.
SECTION 11. ADJUSTMENT OF SHARES.
(a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of:
(i) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section 5;
(ii) The limitations set forth in Section 5(a) and (b);
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(iii) The number of NSOs to be granted to Outside Directors under Section 4(b);
(iv) The number of Shares covered by each outstanding Option and SAR;
(v) The Exercise Price under each outstanding Option and SAR; or
(vi) The number of Stock Units included in any prior Award which has not yet been settled.
Except as provided in this Section 11, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class.
(b) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.
(c) Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.
(d) Reservation of Rights. Except as provided in this Section 11, an Optionee or Offeree shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
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SECTION 12. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a Participant to:
(a) Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Companys books;
(b) Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or
(c) Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Companys books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been delivered to such Participant.
A deferred compensation account established under this Section 12 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 12.
SECTION 13. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5.
SECTION 14. PAYMENT OF DIRECTORS FEES IN SECURITIES.
(a) Effective Date. No provision of this Section 14 shall be effective unless and until the Board has determined to implement such provision.
(b) Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 14 shall be filed with the Company on the prescribed form.
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(c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, Restricted Shares or Stock Units shall also be determined by the Board.
SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the Companys securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable.
SECTION 16. WITHHOLDING TAXES.
(a) General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the legally required minimum tax withholding.
SECTION 17. LIMITATION ON PARACHUTE PAYMENTS.
(a) Scope of Limitation. This Section 17 shall apply to an Award only if the independent auditors most recently selected by the Board (the Auditors) determine that the after-tax value of such Award to the Optionee or Offeree, taking into account the effect of all federal, state and local income taxes, employment taxes and excise taxes applicable to the Optionee or Offeree (including the excise tax under section 4999 of the Code), will be greater after the application of this Section 17 than it was before application of this Section 17.
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(b) Basic Rule. In the event that the Auditors determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a Payment) would be nondeductible by the Company for federal income tax purposes because of the provisions concerning excess parachute payments in Section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Section 17, the Reduced Amount shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code.
(c) Reduction of Payments. If the Auditors determine that any Payment would be nondeductible by the Company because of Section 280G of the Code, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall advise the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant within such 10-day period, then the Company may elect which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Section 17, present value shall be determined in accordance with Section 280G(d)(4) of the Code. All determinations made by the Auditors under this Section 17 shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan.
(d) Related Corporations. For purposes of this Section 17, the term Company shall include affiliated corporations to the extent determined by the Auditors in accordance with Section 280G(d)(5) of the Code.
SECTION 18. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee. The Company and its Subsidiaries reserve the right to terminate any persons Service at any time and for any reason, with or without notice.
SECTION 19. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall terminate automatically ten (10) years after its adoption by the Board. The Plan may be terminated on any earlier date pursuant to Subsection (b) below.
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
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(b) Right to Amend or Terminate the Plan. The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Option granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of the person to whom the Option was granted. An amendment of the Plan shall be subject to the approval of the Companys stockholders only to the extent required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan.
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FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
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SECTION 20. EXECUTION.
To record the adoption of the Plan by the Board of Directors on April 6, 2004, the Company has caused its authorized officer to execute the same.
FIBERSTARS, INC. | ||
By | /s/ David N. Ruckert | |
Name | David N. Ruckert | |
Title | President and Chief Executive Officer | |
FIBERSTARS, INC.
2004 STOCK INCENTIVE PLAN
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| ||
Please mark your choices like this | x | |
The shares represented hereby will be voted as specified. If no specification is made, such shares will be voted FOR the nominees listed below, FOR proposals 2 and 3 and in accordance with the discretion of the proxies on any other matters as may properly come before the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3. |
FOR | WITHHOLD AUTHORITY |
FOR | AGAINST | ABSTAIN | ||
1. To elect the following individuals: | o | o | 2. To approve the Companys 2004 Stock Incentive Plan. | o | o | o |
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEES NAME IN THE LIST BELOW.) |
3. To ratify the appointment of Grant Thornton LLP as the Companys independent auditors for the year ending December 31, 2004. | o | o | o | ||
David N.
Ruckert
John B.
Stuppin
Jeffrey
H. Brite |
Wayne R. Hellman
David
Traversi
Sabu
Krishnan |
Philip
Wolfson
|
4. In their discretion, upon such other business as may properly come before the meeting or any adjournment or postponement thereof. |
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. PLEASE MARK, DATE, SIGN AND RETURN THE PROXY PROMPTLY IN THE ENCLOSED, STAMPED ENVELOPE. | |||
Yes
o No o
I
plan to attend the meeting: (Please print address change (if any) on label to the left.) |
||
SIGNATURE(S) |
DATED: ,
2004 |
|
Print or type shareholders name. |
(Be sure to date Proxy) |
|
FOLD AND DETACH HERE |