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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEW FOCUS, INC.
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(Name of Registrant as Specified In Its Charter)
NEW FOCUS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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FOCUS LOGO
NEW FOCUS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2001
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of NEW FOCUS, INC., a Delaware corporation (the "Company"), will be
held on Thursday, May 31, 2001, at 10:00 a.m. local time, at the Company's
principal executive offices located at 5215 Hellyer Avenue, San Jose, California
95138 for the following purposes:
1. To elect two (2) Class I directors to serve until the 2004 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 30, 2001.
3. To transact such other business as may properly come before the
Annual Meeting or before any adjournments thereof, including any motion to
adjourn to a later date to permit further solicitation of proxies if
necessary.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only stockholders of record at the close of
business on April 9, 2001 are entitled to notice of and to vote at the Annual
Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed Proxy Card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose or you may vote by
telephone or using the Internet as instructed on the enclosed Proxy Card. Any
stockholder attending the Annual Meeting may vote in person even if he or she
has returned a proxy.
Sincerely,
/s/ KENNETH E. WESTRICK
Kenneth E. Westrick
President and Chief Executive Officer
San Jose, California
May 1, 2001
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENCLOSED ENVELOPE.
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TABLE OF CONTENTS
PAGE
----
Information Concerning Solicitation and Voting.............. 1
Security Ownership of Certain Beneficial Owners and
Management................................................ 4
Proposal One -- Election of Directors....................... 6
Nominees.................................................... 6
Board of Directors Meetings and Committees.................. 8
Proposal Two -- Ratification of Appointment of Independent
Auditors.................................................. 8
Fees Billed to Company by Ernst & Young LLP During Fiscal
2000...................................................... 9
Executive Officers.......................................... 10
Executive Compensation and Other Matters.................... 11
Summary Compensation Table.................................. 11
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values.................................... 12
Directors' Compensation..................................... 13
Report of the Compensation Committee on Executive
Compensation.............................................. 14
Report of the Audit Committee of the Board of Directors..... 15
Performance Graph........................................... 17
Certain Relationships and Related Transactions.............. 18
Other Matters............................................... 20
Appendix A: Charter of the Audit Committee of the Board of
Directors................................................. A-1
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NEW FOCUS, INC.
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PROXY STATEMENT FOR 2001
ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of New Focus, Inc., a Delaware corporation (the "Company" or "New
Focus"), for use at the Annual Meeting of Stockholders (the "Annual Meeting") to
be held Thursday, May 31, 2001, at 10:00 a.m. local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the Company's
principal executive offices located at 5215 Hellyer Avenue, San Jose, California
95138. The telephone number at that location is (408) 284-4700.
These proxy solicitation materials and the Annual Report on Form 10-K for
the year ended December 31, 2000, including consolidated financial statements,
were first mailed on or about May 1, 2001 to all stockholders entitled to vote
at the meeting.
THE COMPANY SHALL PROVIDE, WITHOUT CHARGE, TO EACH STOCKHOLDER SOLICITED BY
THESE PROXY SOLICITATION MATERIALS, A COPY OF THE ANNUAL REPORT ON FORM 10-K
TOGETHER WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES REQUIRED TO BE FILED WITH THE ANNUAL REPORT UPON REQUEST OF THE
STOCKHOLDER MADE IN WRITING TO NEW FOCUS, INC., 5215 HELLYER AVENUE, SAN JOSE,
CALIFORNIA 95138, ATTN: WILLIAM L. POTTS, JR., CHIEF FINANCIAL OFFICER AND
SECRETARY.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on April 9, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
The Company has one series of shares outstanding, designated Common Stock, $.001
par value per share. As of the Record Date, 75,878,042 shares of the Company's
Common Stock were issued and outstanding and held of record by approximately 481
stockholders. As of the Record Date, no shares of the Company's preferred stock
were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by (a) delivering to the Company
(Attention: William L. Potts, Jr., Chief Financial Officer and Secretary) a
written notice of revocation or a duly executed proxy bearing a later date or
(b) attending the meeting and voting in person.
VOTING
Each stockholder is entitled to one vote for each share held.
VOTING ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE
Stockholders whose shares are registered directly with Equiserve may vote
either via the Internet or by calling Equiserve. Specific instructions for
voting via Internet or by telephone are set forth on the enclosed proxy card.
The Internet and telephone voting procedures are designed to authenticate the
stockholder's identity and to allow stockholders to vote their shares and
confirm that their instructions have been properly recorded.
If your shares are registered in the name of a bank or brokerage, you may
be eligible to vote your shares electronically via the Internet or by telephone.
A large number of banks and brokerage firms are participating in the ADP
Investor Communication Services online program. This program provides eligible
stockholders
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who receive a paper copy of the Annual Report and Proxy Statement the
opportunity to vote via the Internet or by telephone. If your bank or brokerage
firm is participating in ADP's program, your voting form will provide
instructions. If your voting form does not reference Internet or telephone
information, please complete and return the paper proxy card in the
self-addressed, postage paid envelope provided.
SOLICITATION OF PROXIES
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Proxies
may also be solicited by certain of the Company's directors, officers and
regular employees, without additional compensation, in person or by telephone or
facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") who will be William L. Potts, Jr.,
the Chief Financial Officer and Secretary of New Focus, Inc. The Inspector will
also determine whether or not a quorum is present. Except in certain specific
circumstances, including the election of directors, the affirmative vote of a
majority of shares present in person or represented by proxy at a duly held
meeting at which a quorum is present and entitled to vote on the subject matter
is required under Delaware law and the Company's Bylaws for approval of
proposals presented to stockholders. In general, Delaware law and the Company's
Bylaws also provide that a quorum consists of a majority of shares entitled to
vote and present or represented by proxy at the meeting.
When proxies are properly dated, executed and returned, the shares
represented by such proxies will be voted at the Annual Meeting in accordance
with the instructions of the stockholder. If no specific instructions are given,
the shares will be voted for (i) the election of the nominees for directors set
forth herein; (ii) the ratification of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 30, 2001; and (iii) upon such
other business as may properly come before the Annual Meeting or any adjournment
thereof.
Pursuant to Delaware law, the Inspector will treat shares that are voted
"WITHHELD" or "ABSTAIN" as being present and entitled to vote for purposes of
determining the presence of a quorum and entitled to vote ("Votes Cast"), but
will not be treated as votes in favor of approving the matter for which the
proxy is voted "WITHHELD" or "ABSTAIN." If a broker indicates on the enclosed
proxy or its substitute that such broker does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will be
considered "Broker Non-Votes". With respect to Broker Non-Votes, in a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme Court held that,
although Broker Non-Votes may be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, Broker Non-
Votes should not be counted for purposes of determining the number of Votes Cast
with respect to the particular proposal on which the broker has expressly not
voted. Broker Non-Votes with respect to proposals set forth in this Proxy
Statement will therefore not be considered "Votes Cast" and, accordingly, will
not affect the determination as to whether the requisite majority of Votes Cast
has been obtained with respect to a particular matter. The Company believes that
these tabulation procedures to be followed by the Inspector are consistent with
the general statutory requirements in Delaware concerning voting of shares and
determination of a quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules established by
the Securities and Exchange Commission. Proposals of stockholders of the Company
that are intended to be presented by such stockholders at the Company's 2002
Annual Meeting of Stockholders must be received by the Company no later than
December 23, 2001, in order that they may be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
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The attached Proxy Card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2002 Annual Meeting of Stockholders which is
not eligible for inclusion in the proxy statement relating to the meeting, and
the stockholder fails to give the Company notice in accordance with the
requirements set forth in the Securities Exchange Act of 1934, as amended, no
later than March 9, 2002, then the proxy holders will be allowed to use their
discretionary authority when and if the proposal is raised at the Company's
Annual Meeting in 2002.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of common stock of the Company as of April 9, 2001 as to (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of common stock, (ii) each director and nominee for director
of the Company, (iii) each of the executive officers named in the Summary
Compensation Table below and (iv) all directors and executive officers of the
Company as a group. Unless otherwise indicated, the address of each listed
stockholder is c/o New Focus, Inc., 5215 Hellyer Avenue, San Jose, California
95138.
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
------------------------------------ --------------------- ---------------------
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Kenneth E. Westrick(2)................................. 2,343,477 3.1%
William L. Potts, Jr.(3)............................... 566,169 *
Dr. Timothy Day(4)..................................... 910,648 1.2%
Nicola Pignati(5)...................................... 409,099 *
Paul G. Smith(6)....................................... 675,000 *
Dr. Milton Chang(7).................................... 10,261,856 13.5%
John Dexheimer(8)...................................... 231,639 *
Dr. Winston S. Fu(9)................................... 3,454,894 4.6%
R. Clark Harris(10).................................... 68,667 *
Robert Pavey(11)....................................... 4,404,614 5.8%
Dr. David L. Lee(12)................................... 5,417 *
All executive officers and directors as a group (12
persons)(13)......................................... 23,541,480 31.0%
5% STOCKHOLDERS
Dr. Milton Chang(7).................................... 10,261,856 13.5%
Entities associated with Morgenthaler Venture
Partners(11)......................................... 4,404,614 5.8%
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* Less than one percent of the outstanding common stock.
(1) Applicable percentage ownership is based on 75,878,042 shares of common
stock outstanding as of April 9, 2001, together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission (the "Commission"), and
includes voting and investment power with respect to shares. Shares of
common stock subject to options currently exercisable or exercisable within
60 days after April 9, 2001, are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. Except as
noted in the footnotes to this table, and subject to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of the Company's common stock
shown as beneficially owned by them.
(2) Includes 863,333 shares subject to the Company's right of repurchase, which
lapses over time. Also includes 21,080 shares held by Mr. Westrick as
custodian for his minor daughter and 22,600 shares held by Mr. Westrick as
custodian for his minor son.
(3) Includes 460,000 shares subject to the Company's right of repurchase, which
lapses over time.
(4) Includes 319,000 shares subject to the Company's right of repurchase, which
lapses over time.
(5) Includes 408,000 shares subject to an option exercisable within 60 days of
April 9, 2001, and 400,000 shares subject to the Company's right of
repurchase, which lapses over time.
(6) Includes 366,667 shares subject to the Company's right of repurchase, which
lapses over time. Mr. Smith resigned from the Company effective April 20,
2001, and the Company has repurchased these unvested shares.
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(7) Includes 800,000 shares held by Chang Partners, a California limited
partnership of which Dr. Chang is a general partner. Also includes
2,061,391 shares held by the Milton and Rosalind Family Trust Dated 7/25/94
and 100,000 shares held by the Rosalind and Milton Chang Foundation.
(8) Includes 42,667 shares subject to an option exercisable within 60 days of
April 9, 2001.
(9) Includes 5,109 shares directly held by Dr. Fu. Also includes 3,171,338
shares held by U.S. Venture Partners VI, L.P., 121,259 shares held by USVP
VI Entrepreneurs Partners, L.P., 103,699 shares held by USVP VI Affiliates
Fund, L.P., 53,049 shares held by 2180 Associates Fund VI, L.P. and 440
shares held by Presidio Management Group VI, LLC. Dr. Fu is a non-managing
member of Presidio Management Group VI, LLC, the general partner of U.S.
Venture Partners entities. Dr. Fu disclaims beneficial ownership of shares
held by these entities, except to the extent of his pecuniary interest in
these entities.
(10) Includes 7,334 shares subject to an option exercisable within 60 days of
April 9, 2001.
(11) Includes 4,384,614 shares held by Morgenthaler Ventures Partners V, L.P.
and 20,000 shares held by Morgenthaler Management Partners V, LLC. Mr.
Pavey is a partner at Morgenthaler Ventures. Mr. Pavey disclaims beneficial
ownership of shares held by this entity, except to the extent of his
pecuniary interest in this entity.
(12) Includes 5,417 shares subject to an option exercisable within 60 days of
April 9, 2001.
(13) Includes an aggregate of 673,418 shares subject to options exercisable
within 60 days of April 9, 2001, and 2,619,000 shares subject to the
Company's right of repurchase, which lapses over time.
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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Company has a classified board of directors currently consisting of two
(2) Class I directors, Dr. Winston S. Fu and R. Clark Harris, three (3) Class II
directors, John Dexheimer, Dr. David L. Lee and Robert Pavey, and two (2) Class
III directors, Dr. Milton Chang and Kenneth E. Westrick, who will serve until
the annual meetings of stockholders to be held in 2001, 2002 and 2003,
respectively, or until their respective successors are duly elected and
qualified. At each annual meeting of stockholders, directors are elected for a
term of three years to succeed those directors whose terms expire on the annual
meeting dates.
The nominees for election at the Annual Meeting to Class I of the board of
directors are Dr. Winston S. Fu and R. Clark Harris. If elected, Dr. Fu and Mr.
Harris will each serve as a director until the annual meeting in 2004, or until
their respective successors are elected and qualified or until their earlier
resignation or removal. The proxy holders may not vote the proxies for a greater
number of persons than the number of nominees named. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's two nominees. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
board of directors to fill the vacancy. The Company is not aware of any nominee
who will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders.
VOTE REQUIRED
If a quorum is present and voting, the two nominees receiving the highest
number of votes will be elected to the board of directors. Abstentions and
"broker non-votes" are not counted in the election of directors.
DIRECTORS AND NOMINEES
The following table sets forth certain information regarding the Company's
directors and nominees as of April 9, 2001:
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
Class I nominees to be elected at the
Annual Meeting:
Dr. Winston S. Fu(1)............... 34 Director 1999
R. Clark Harris(1)(2).............. 63 Director 1998
Class II directors whose terms expire
at the 2002 annual meeting of
stockholders:
John Dexheimer(1).................. 46 Director 1998
Dr. David L. Lee................... 51 Director 2000
Robert Pavey(2).................... 58 Director 1999
Class III directors whose terms
expire at the 2003 annual meeting of
stockholders:
Dr. Milton Chang................... 58 Chairman of the Board of Directors 1990
Kenneth E. Westrick................ 43 President and Chief Executive 1997
Officer, Director
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(1) Member of the audit committee.
(2) Member of the compensation committee.
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There is no family relationship between any director or executive officer
of the Company.
Dr. Winston S. Fu has served as one of our directors since June 1999. Dr.
Fu is the non-managing member of Presidio Management Group VI, LLC, the general
partner of U.S. Venture Partners, a venture capital firm. Prior to joining U.S.
Venture Partners in August 1997, Dr. Fu was enrolled in the M.B.A. program at
Northwestern University. Prior to that, Dr. Fu served as the director of product
marketing and in various other positions at Vixel Corporation. Dr. Fu holds a
B.S. in physics from Massachusetts Institute of Technology, an M.B.A. from
Northwestern University and a Ph.D. in applied physics from Stanford University.
R. Clark Harris has served as one of our directors since December 1998. Mr.
Harris is a partner in NorthEast Ventures, a venture capital firm. Prior to
joining NorthEast Ventures in June 1998, Mr. Harris served as the president of a
major division of Uniphase, now JDS Uniphase, from May 1995 to May 1998. Before
joining JDS Uniphase in 1995, Mr. Harris spent 19 years at United Technologies
Corporation in various operating positions, including Senior Vice President of
Sikorsky Aircraft Division. Mr. Harris received a B.A. in engineering from
Georgia Tech and holds an M.B.A. from Massachusetts Institute of Technology.
John Dexheimer has served as one of our directors since July 1998. Since
January 1999, he has served as President of Lightwave Advisors, Inc., a venture
capital and business development advisor to optical communications, software and
Internet companies. From March 1990 through December 1998, Mr. Dexheimer was a
managing director and partner at C.E. Unterberg Towbin, an investment banking
and venture capital firm, and its predecessor, Unterberg Harris. Mr. Dexheimer
holds a B.S. from the University of Minnesota Institute of Technology and an
M.B.A. from Harvard University.
Dr. David L. Lee has served as one of our directors since April 2000. Since
July 2000, Dr. Lee has served as a managing general partner at Clarity Partners
LP, a private equity firm. He has also been a managing director of Pacific
Capital Group since 1989. Dr. Lee was President and Chief Operating Officer of
Global Crossing Ltd. from its inception in March 1997 until June 2000, and
currently sits on its board of directors. Prior to joining Pacific Capital
Group, Dr. Lee was Group Vice President of Finance and Acquisitions at TRW
Information Systems Group. Dr. Lee is a graduate of McGill University and holds
a Ph.D. in Physics and a Ph.D. in Economics from the California Institute of
Technology. Dr. Lee is a Certified Public Accountant.
Robert D. Pavey has served as one of our directors since June 1999. Mr.
Pavey is a partner at Morgenthaler Venture Partners, a venture capital firm,
which he joined in 1969. Mr. Pavey also sits on the board of directors of
BlueGill Technologies, Inc., Endgate Corporation, LightChip, Inc., Lightwave
Microsystems Corporation, and Think & Do Software, Inc. Mr. Pavey is also a
Trustee of the Commonfund, an educational firm for non-profit endowments. Mr.
Pavey holds a B.S. in physics from The College of William & Mary, an M.S. in
metallurgy from Columbia University, and an M.B.A. from Harvard University.
Dr. Milton Chang is one of our co-founders. Dr. Chang has served as one of
our directors since our inception in April 1990, and became the chairman of our
board of directors in May 1996. From 1990 to 1997, Dr. Chang served as our
President and Chief Executive Officer and continues to perform research and
marketing activities for us. Dr. Chang is currently a managing director of
iNCUBiC LLP. From 1996 to 1998, Dr. Chang served on the Visiting Committee for
Advanced Technology of the National Institute of Standards and Technology. He
has also served in various positions at Newport Corporation, including as its
President and Chief Executive Officer. Currently, Dr. Chang is a member of the
board of directors for Acturus Engineering, Gadzoox Networks, Inc., Lightwave
Electronics, Inc., OEpic, Inc. and OpVista. Dr. Chang holds a B.S. in electrical
engineering from the University of Illinois and a M.S. and Ph.D. both in
electrical engineering from the California Institute of Technology.
Kenneth E. Westrick has served as the Company's President and Chief
Executive Officer since November 1997. Prior to joining New Focus, Mr. Westrick
spent nine years at Cornerstone Imaging, Inc where he held positions such as
Senior Vice President, General Manager Display Division and Managing Director,
Europe. Mr. Westrick has 20 years of experience managing different aspects of
technology start-up companies,
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generally in the computer industry. Mr. Westrick holds a B.S. in economics from
Northwestern University and an M.B.A. from Stanford University.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The board of directors held a total of eleven meetings (including six
regularly scheduled meetings) during the fiscal year ended December 31, 2000.
Except for Dr. David Lee, no director attended fewer than 75% of the meetings of
the Board and committees thereof held during the fiscal year ended December 31,
2000, if any, upon which such director served.
The Company's board of directors currently has two committees: an audit
committee and a compensation committee. The audit committee consists of John
Dexheimer, Dr. Winston S. Fu, and R. Clark Harris, each of whom is independent
as defined under the National Association of Securities Dealers listing
standards. The audit committee held a total of two meetings during fiscal 2000.
The audit committee makes recommendations to the board of directors regarding
the selection of independent auditors, reviews the results and scope of audit
and other services provided by the Company's independent auditors and reviews
the accounting principles and auditing practices and procedures to be used for
the Company's financial statements. A copy of the audit committee charter is
attached to this Proxy Statement as Appendix A.
The compensation committee consists of R. Clark Harris and Robert Pavey.
The compensation committee did not hold any formal meetings during fiscal 2000,
but acted in several instances on various matters by unanimous written consent.
The compensation committee approves stock compensation for the Company's
executive officers and makes recommendations to the board of directors regarding
stock plans and the compensation of other officers and managerial employees. The
board of directors has no nominating committee or any committee performing such
function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee currently consists of Mr. Harris and Mr. Pavey.
During fiscal 2000, none of the members of the compensation committee was an
officer or employee of the Company. During fiscal 2000 no member of the
compensation committee served as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's board of directors or compensation
committee.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP, independent auditors, to audit
the financial statements of the Company for the fiscal year ending December 30,
2001, and recommends that stockholders vote for ratification of such
appointment. Although action by stockholders is not required by law, the board
of directors has determined that it is desirable to request approval of this
selection by the stockholders. Notwithstanding the selection, the board of
directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the board of directors feels that such
a change would be in the best interest of the Company and its stockholders. In
the event of a negative vote on ratification, the board of directors will
reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements annually
since 1990. Representatives of Ernst & Young LLP are expected to be present at
the meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
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FEES BILLED TO COMPANY BY ERNST & YOUNG LLP DURING FISCAL 2000
AUDIT FEES
Fees billed to the Company by Ernst & Young LLP during the Company's fiscal
year ended December 31, 2000 for the audit of the Company's annual financial
statements included in its Form 10-K and the review of the financial statements
included in the Company's June and September quarterly reports on Form 10-Q
totaled $226,000.
AUDIT RELATED FEES
Fees billed to the Company by Ernst & Young LLP during the Company's fiscal
year ended December 31, 2000 for other audit related services, including SEC
registration statements, comfort letters, consents and consultation on
accounting standards and transactions totaled $550,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Ernst & Young LLP to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended December 31, 2000.
ALL OTHER FEES
Fees billed to the Company by Ernst & Young LLP during the Company's fiscal
year ended December 31, 2000 for all other non-audit services, including
accounting advice and tax services totaled $70,000.
The audit committee of the board of directors has determined that the
accounting advice and tax services provided by Ernst & Young LLP are compatible
with maintaining Ernst & Young LLP's independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING DECEMBER 30, 2001.
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EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
current executive officers, including their ages as of April 9, 2001.
NAME AGE POSITION
---- --- --------
Kenneth E. Westrick.................. 43 President and Chief Executive Officer, Director
William L. Potts, Jr................. 54 Chief Financial Officer and Secretary
Dr. Timothy Day...................... 37 Vice President, Chief Technology Officer
Nicola Pignati....................... 51 Chief Operating Officer
Elaine Fortier....................... 54 Vice President, Human Resources
Kenneth E. Westrick has served as our President, Chief Executive Officer
and director since November 1997. Prior to joining us, Mr. Westrick spent nine
years at Cornerstone Imaging, Inc. where he held positions such as Senior Vice
President, General Manager Display Division and Managing Director Europe. Mr.
Westrick has nearly 20 years of experience managing different aspects of
technology start-up companies, generally in the computer industry. Mr. Westrick
holds a B.S. in economics from Northwestern University and an M.B.A. from
Stanford University.
William L. Potts, Jr. has served as our Chief Financial Officer since
February 2000 and as our Secretary since February 2001. Prior to joining us, Mr.
Potts worked at Komag, Incorporated from July 1987 to February 2000. For ten
years he served as Komag's chief financial officer and most recently held the
position of Executive Vice President, Chief Financial Officer and Secretary.
Prior to joining Komag in 1987, Mr. Potts held financial management positions in
the computer, medical and entertainment industries. Early in his career he
served on the consulting staff of Arthur Andersen & Co. Mr. Potts holds a B.S.
in industrial engineering from Lehigh University and an M.B.A. from Stanford
University.
Dr. Timothy Day is one of our co-founders and has served as our Vice
President, Chief Technology Officer since July 1990. Since our founding, Dr. Day
has served us in various other positions, including acting Vice President,
Engineering, acting General Manager, acting Vice President, Operations and as
the former Vice President, Focused Research. Dr. Day received both a B.S. and an
M.S. in physics from San Diego State University and a Ph.D. in electrical
engineering from Stanford University. Dr. Day is a member of IEEE Lasers and
Electro-Optics Society, Optical Society of America and the Society of
Photo-Instrumentation Engineers.
Nicola Pignati joined us in April 2000 as our Chief Operating Officer.
Prior to joining us, Mr. Pignati was President, Chief Executive Officer, and
Founder of MMC Technology, Incorporated beginning in April 1996. From September
1994 to April 1996, Mr. Pignati was Vice President of Operations at Conner
Peripherals, which was subsequently acquired by Seagate Technology,
Incorporated. Mr. Pignati received both a B.S. and an M.S. in mechanical
engineering from San Jose State University.
Elaine Fortier joined us in November 2000 as our Vice President, Human
Resources. Prior to joining us, Ms. Fortier was a senior partner with Gardner
Consulting Group beginning in June 1999. From January 1998 to May 1999, Ms.
Fortier was a senior partner with The Innovative Edge, and from October 1992 to
January 1998 she was Director of Corporate Talent at Synopsys, Inc. Ms. Fortier
received a B.S. in English and a teaching credential from the University of
Massachusetts.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth certain information
regarding the compensation of the President and Chief Executive Officer of the
Company and the other four most highly compensated executive officers of the
Company (the "Named Executive Officers") for services rendered in all capacities
to the Company in the fiscal year ended December 31, 2000.
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER(1)
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ----------- --------- -------- ------------------- ---------------
Kenneth E. Westrick...... 2000 $187,200 $ -- 300,000 $77,672
President and Chief
Executive Officer
William L. Potts, Jr. ... 2000 150,096 25,000 600,000 41,754
Chief Financial Officer
and Secretary
Dr. Timothy Day.......... 2000 173,671 161,600 300,000 36,518
Vice President, Chief
Technology Officer
Nicola Pignati........... 2000 118,038 -- 500,000 418
Chief Operating Officer
Paul G. Smith(2)......... 2000 176,000 -- 100,000 28,593
Vice President, General
Manager, Telecom
- ---------------
(1) Other compensation represents group term life insurance premiums, 401(k)
matching payments and imputed interest on loans to purchase shares of the
Company's common stock.
(2) Mr. Smith resigned from the Company effective April 20, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information for each grant of
options to purchase the Company's common stock during fiscal 2000 to each of the
Named Executive Officers. Each of these options granted by the Company was
granted under the 1999 Stock Plan, as amended (the "Plan"). Each option has a
term of 10 years, subject to earlier termination in the event the optionee's
services to the Company cease. In accordance with the rules of the Commission,
also shown below is the potential realizable value over the term of the option
(the period from the grant date to the expiration date) based on assumed rates
of stock appreciation of 5% and 10%, compounded annually. These amounts are
mandated by the Commission and do not represent the Company's estimate of future
stock price. Actual gains, if any, on stock option exercises will depend on the
future performance of the Company's Common Stock.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER OPTION TERM(5)
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------------------
NAME GRANTED(1)(6) FISCAL 2000(2) ($/SHARE)(3) DATE(4) 5% 10%
---- ------------- -------------- ------------ ---------- ---------- ----------
Kenneth E. Westrick..... 300,000 4.06% $1.25 02/08/10 $ 235,835 $ 597,653
William L. Potts,
Jr. .................. 600,000 8.12% 1.25 02/08/10 471,671 1,195,307
Dr. Timothy Day......... 300,000 4.06% 1.25 02/08/10 235,835 597,653
Nicola Pignati.......... 500,000 6.77% 5.00 04/18/10 1,572,237 3,984,356
Paul G. Smith........... 100,000 1.35% 1.25 02/08/10 78,612 199,218
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- ---------------
(1) The options for each of the Named Executive Officers vest at the rate of 20%
after the first year, and then 1/60 of the shares subject to the option per
month thereafter. Under the Plan, the Board of Directors retains the
discretion to modify the terms, including the price, of outstanding options.
(2) Based on an aggregate of 7,389,000 options granted to employees and
consultants, including the Named Executive Officers, in fiscal 2000.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's common stock, as determined by reference to the closing price
reported on the Nasdaq National Market on the date of grant, or as
determined by the board of directors prior to the Company's securities being
traded on the Nasdaq National Market.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee is terminated or upon the optionee's death or disability.
(5) The potential realizable value is net of exercise price before taxes and
calculated assuming that the fair market value of the common stock on the
date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option (ten years) and that the option is
exercised and sold on the last day of its term for the appreciated stock
price.
(6) Upon the involuntary termination of the officer's employment or consulting
relationship within 18 months of a change of control, 50% of the unvested
portion of each stock option held by each Named Executive Officer will
automatically accelerate.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning exercisable and unexercisable options held as of
December 31, 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 2000 AT DECEMBER 31, 2000(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE ($)EXERCISABLE ($)UNEXERCISABLE
---- ----------- ---------- ----------- ------------- -------------- ----------------
Kenneth E. Westrick.... 2,300,000 $ 325,000 -- -- $ -- $ --
William L. Potts,
Jr................... 600,000 -- -- -- -- --
Dr. Timothy Day........ 980,000 278,750 -- -- -- --
Nicola Pignati......... 50,000 1,651,250 50,000 400,000 1,487,500 11,900,000
Paul G. Smith.......... 700,000 -- -- -- -- --
- ---------------
(1) Fair market value of the Company's common stock at the exercise date minus
the per share exercise price.
(2) Based on a value of $34.75 per share, the fair market value of the Company's
Common Stock as of December 31, 2000, minus the per share exercise price.
CHANGE OF CONTROL, SEVERANCE AND CONSULTING ARRANGEMENTS
From time to time, the Company has entered into employment agreements with
its executive officers, including the Named Executive Officers listed in the
"Summary Compensation Table."
The Company's stock option agreements with its executive officers give
these officers the right to purchase both vested and unvested shares and to pay
for the shares with a promissory note. In addition, the agreements provide that
if the employment or consulting relationship of these officers is terminated
involuntarily within 18 months of a change of control then 50% of their unvested
options shall vest.
In February 2000, the Company hired William L. Potts, Jr. and pursuant to
the terms of his employment granted him an option to purchase 600,000 shares of
the Company's common stock and to pay for the shares
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with a promissory note. The option vests in accordance with the Company's
standard 5-year vesting schedule, except that 120,000 of the shares subject to
the option vested on November 13, 2000.
In April 2000, the Company hired Nicola Pignati and pursuant to the terms
of his employment granted him an option to purchase 500,000 shares of the
Company's common stock and to pay for the shares with a promissory note. The
option vests in accordance with the Company's standard 5-year vesting schedule,
except that 100,000 of the shares subject to the option vested on November 13,
2000. In addition, in the event Mr. Pignati is terminated without cause,
provided he signs a full waiver and release of claims, he will receive a
severance pay amount equal to 12 months' salary plus any scheduled bonuses.
In November 2000, the Company hired Elaine Fortier and pursuant to the
terms of her employment granted her an option to purchase 175,000 shares of the
Company's common stock and to pay for the shares with a promissory note. In
addition, in November 2000, the Company granted Ms. Fortier an option to
purchase an additional 35,000 shares. The options vest in accordance with the
Company's standard 5-year vesting schedule.
DIRECTORS' COMPENSATION
Directors currently do not receive any cash compensation from the Company
for their services as members of the board of directors. The Company's
non-employee directors are reimbursed for expenses incurred in connection with
attending board of directors and committee meetings. The Company grants non-
employee directors options to purchase the Company's common stock pursuant to
the terms of the Company's 2000 Director Option Plan. See "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Relationships and Related
Transactions -- Transactions with Directors."
The 2000 Director Option Plan was adopted by the Company's board of
directors in February 2000 and approved by the stockholders in April 2000. A
total of 200,000 shares of the Company's common stock have been reserved for
issuance under the 2000 Director Option Plan. As of April 9, 2001, no shares had
been issued from the Director Option Plan.
Option Grants. The 2000 Director Option Plan generally provides for an
automatic initial grant of an option to purchase 25,000 shares of the Company's
common stock to each non-employee director on the date when the person first
becomes a non-employee director, whether through election by the stockholders or
appointment by the Company's board of directors to fill a vacancy. After the
initial grant, each non-employee director will automatically be granted
subsequent options to purchase 5,000 shares of the Company's common stock each
year on the date of the Company's annual stockholders' meeting, if on that date
he or she has served on the Company's board of directors for at least six
months. Each initial option grant and each subsequent option grant shall have a
term of 10 years. Each initial option grant will vest as to 25% of the shares
subject to the option on the anniversary of its date of grant and 1/36 of the
shares shall vest each month thereafter, provided the individual remains a
non-employee director on this date. Each subsequent option grant will fully vest
on the anniversary of its date of grant. The exercise price of all options will
be 100% of the fair market value per share of the Company's common stock on the
date of grant. Options granted under the 2000 Director Option Plan must be
exercised within three months of the end of the optionee's tenure as a director
of the Company, or within 12 months after the director's termination by death or
disability, but in no event later than the expiration of the option's 10 year
term.
Transferability of Options. No option granted under the 2000 Director
Option Plan is transferable by the optionee other than by will or the laws of
descent and distribution, and each option is exercisable, during the lifetime of
the optionee, only by the optionee.
Merger, Asset Sale and Change of Control. The 2000 Director Option Plan
provides that in the event of the Company's merger with or into another
corporation or a sale of substantially all of its assets, the successor
corporation shall assume each option or substitute an equivalent option. If
outstanding options are not assumed or substituted for by the successor
corporation, each option will become fully exercisable for a period of thirty
days from the date the Company's board of directors notifies the optionee of the
option's full
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exercisability, after which period the option shall terminate. In the event of a
change of control each outstanding option will become fully vested and
exercisable.
Amendment and Termination of the 2000 Director Option Plan. The
administrator will have the authority to amend, suspend or terminate the 2000
Director Option Plan, so long as no action affects any shares of common stock
previously issued and sold or any option previously granted under the 2000
Director Option Plan. Unless terminated sooner, the 2000 Director Option Plan
will terminate automatically 10 years from the effective date of the plan.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following is the report of the compensation committee with respect to
the compensation paid to the Company's executive officers during fiscal 2000.
Actual compensation earned during fiscal 2000 by the Named Executive Officers is
shown in the Summary Compensation Table.
Compensation Philosophy
The Company operates in the extremely competitive and rapidly changing high
technology industry. The Committee believes that the compensation programs for
its executive officers should be designed to attract, motivate and retain
talented executives responsible for the success of the Company and should be
determined within a competitive framework and based on the achievement of
designated business objectives, individual contribution, customer satisfaction
and financial performance. Within this overall philosophy, the committee's
objectives are to:
- provide a competitive total compensation package that takes into
consideration the compensation practices of companies with which the
Company competes for executive talent; and
- align the financial interests of executive officers with those of
stockholders by providing executives with an equity stake in the Company.
Components of Executive Compensation
The compensation program for the Company's executive officers consists of
the following components:
- base salary;
- long-term stock option incentives; and
- incentive bonus.
Base Salary
The compensation committee reviewed and approved fiscal 2000 salaries for
the Chief Executive Officer and other Named Executive Officers at the beginning
of the fiscal year, prior to the Company's initial public offering. Base
salaries were established by the committee based upon competitive compensation
data for similar non-public companies, an executive's job responsibilities,
level of experience, individual performance and contribution to the business. In
making base salary decisions, the committee exercised its discretion and
judgment based upon these factors. No specific formula was applied to determine
the weight of each factor. The committee based its determination of Mr.
Westrick's salary on both his individual performance and the salaries paid to
chief executive officers of peer companies.
Long-Term Stock Option Incentives
The compensation committee provides the Company's executive officers with
long-term incentive compensation through grants of options to purchase the
Company's common stock. The goal of the long-term stock option incentive program
is to align the interests of executive officers with those of the Company's
stockholders and to provide each executive officer with a significant incentive
to manage the Company from the perspective of an owner with an equity stake in
the business. It is the belief of the committee that stock
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options directly motivate an executive to maximize long-term stockholder value.
The options also utilize vesting periods that encourage key executives to
continue in employ of the Company. The committee considers the grant of each
option subjectively, reviewing factors such as the individual performance, the
anticipated future contribution toward the attainment of the Company's long-term
strategic performance goals and the number of unvested options held by each
individual at the time of the new grant. On February 9, 2000, the board of
directors granted to Mr. Westrick, based upon the recommendations of the
compensation committee, an option to purchase 300,000 shares of common stock at
a purchase price of $1.25 per share and based their decision to grant such
option on competitive compensation data, Mr. Westrick's job responsibilities,
anticipated future contribution toward the attainment of the Company's strategic
goals, the number of unvested options held at the time of the new grant and
other factors. No specific formula was applied to determine the weight of each
factor considered.
Incentive Bonus
The compensation committee reviewed and approved the Company's Management
Bonus Plan for the Chief Executive Officer, Named Executive Officers, and other
management level employees. The goal of the incentive bonus plan is to tie a
portion of the compensation of each employee in the plan to the performance of
the Company, and to the individual contribution of each employee in the plan. To
carry out this philosophy, the Company's bonus plan establishes a target bonus
calculated as a percentage of the employee's base salary. The bonus amounts then
are determined by specific Company-based performance goals, as well as to
individual performance goals, measured at the end of the fiscal year.
Respectfully submitted by:
R. Clark Harris
Robert D. Pavey
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
In accordance with the written charter adopted by the board of directors,
the Audit Committee of the Board (the "Committee") reviews and evaluates the
Company's accounting principles and its system of internal accounting controls.
It also recommends the appointment of the Company's independent auditors and
approves the services performed by the auditors. The members of the Committee
have been determined to be independent pursuant to Rule 4200(a)(15) of the
National Association of Securities Dealers listing standards.
The Committee has received from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussion with Audit Committees," and has
discussed with the auditors any relationships that may impact their objectivity
and independence, and satisfied itself as to the auditors' independence. The
Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls. The Committee also
reviewed with the independent auditors their audit plans, audit scope and
identification of audit risks.
The Committee has discussed and reviewed with the independent auditors all
communications required by generally accepted accounting standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Committee has reviewed and discussed the audited financial statements
of the Company as of and for the fiscal year ended December 31, 2000, with
management and the independent auditors. Management has the responsibility for
the preparation of the Company's financial statements and the independent
auditors have the responsibility for the examination of those statements.
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Based on the above review and discussions with management and the
independent auditors, the Committee recommended to the board of directors that
the Company's audited financial statements be included in its Annual Report on
Form 10-K for the last fiscal year for filing with the Securities and Exchange
Commission. The Committee also recommended the reappointment, subject to
stockholder approval, of the independent auditors, and the Board concurred in
such recommendation.
Submitted by the Audit Committee of
the Company's Board of Directors.
John Dexheimer
Dr. Winston S. Fu
R. Clark Harris
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's common stock with the
cumulative return of the Nasdaq Stock Market (U.S.) Index and of the Nasdaq
Telecommunications Index for the period commencing May 18, 2000 and ending on
December 31, 2000. The past performance of the Company's common stock is no
indication of future performance.
COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN*
[PERFORMANCE GRAPH]
* $100 INVESTED ON 5/18/00 IN STOCK OR ON 4/30/00 IN INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
Returns for the indices are weighted based on market capitalization at the
beginning of each measurement point. The graph assumes that $100 was invested on
May 18, 2000 in the Company's common stock, the Nasdaq Stock Market (U.S.) Index
and the Nasdaq Telecommunications Index and that all dividends were reinvested.
No dividends have been declared or paid on the Company's common stock.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns. The graph was plotted using the
following data:
Prices indexed to
an initial Cumulative Total Return
investment of $100 5/18/00 5/00 6/00 7/00 8/00 9/00 10/00 11/00 12/00
NEW FOCUS, INC. 100.00 126.72 161.03 196.81 270.71 155.03 124.51 39.83 68.14
NASDAQ STOCK MARKET
(U.S.) 100.00 87.94 103.37 97.77 109.32 95.11 87.28 67.29 63.68
NASDAQ
TELECOMMUNICATIONS 100.00 83.63 96.80 86.27 87.76 77.53 67.71 49.33 49.65
- --------------------------------------------------------------------------------------------------------------
The information contained above under the captions "Report of the
Compensation Committee on Executive Compensation," "Report of the Audit
Committee of the Board of Directors" and "Performance Graph" shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Commission and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent stockholders are required by
Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file. Two late filings on Form 4 were filed in August 2000, one with
respect to a transfer of securities by Dr. Robert Marsland in May 2000, and the
second with respect to a transfer of securities by William L. Potts, Jr. in May
2000. In August 2000, each of Subrata Dey, John S. Dunbar, Peter Hansen, Yonglin
Huang and Ping Xie were made Vice Presidents of the Company, and in each case
the reports on Form 3 for these individuals were filed on the 11th day following
their appointment, rather than by the 10th day, as required. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that during fiscal 2000,
all executive officers and directors of the Company complied with all applicable
filing requirements, other than the exceptions described in this paragraph.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of the Company's last fiscal year, there has not been
nor is there currently proposed any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than 5% of the common stock of the Company or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest other than (1) compensation agreements and other arrangements,
which are described where required in "Change of Control, Severance and
Consulting Arrangements" and (2) the transactions described below.
LOANS TO EXECUTIVE OFFICERS
On January 12, 2000, the Company loaned $1,044,208 to Kenneth E. Westrick,
the Company's President and Chief Executive Officer, secured by a stock pledge,
in connection with the purchase of 2,000,000 shares of the Company's common
stock pursuant to the exercise of a stock option granted to him on September 30,
1997 at $.4625 per share, and associated costs. The note is interest-free and is
due and payable on January 11, 2005. As of April 1, 2001, $959,098 principal
amount on this note remains outstanding. In addition, on February 9, 2000, the
Company loaned $375,000 to Mr. Westrick, secured by a stock pledge, in
connection with the purchase of 300,000 shares of the Company's common stock
pursuant to the exercise of a stock option granted to him on February 9, 2000 at
$1.25 per share. The note is interest-free and is due and payable on February 8,
2005. As of April 1, 2001, the entire principal amount on this note remains
outstanding.
On January 12, 2000, the Company loaned $255,483 to Dr. Timothy Day, the
Company's Vice President, Chief Technology Officer, secured by a stock pledge,
in connection with the purchase of 400,000 shares of the Company's common stock
pursuant to the exercise of a stock option granted to him on July 29, 1990 at
$.0025 per share, 100,000 shares of the Company's common stock pursuant to the
exercise of a stock option granted to him on November 21, 1996 at $.4625 per
share, 120,000 shares of the Company's common stock pursuant to the exercise of
a stock option granted to him on January 28, 1998 at $.5125 per share and 70,000
shares of the Company's common stock pursuant to the exercise of a stock option
granted to him on October 8, 1998 at $.625 per share, and associated costs. The
note is interest-free and is due and payable on January 11, 2005. In addition,
on February 9, 2000, the Company loaned $375,000 to Dr. Day, secured by a stock
pledge, in connection with the purchase of 300,000 shares of the Company's
common stock pursuant to the exercise of a stock option granted to him on
February 9, 2000 at $1.25 per share. The note is interest-free and is due and
payable on February 8, 2005. As of April 1, 2001, the entire principal amount on
each of these notes remains outstanding.
On January 12, 2000, the Company loaned $375,000 to Paul G. Smith, the
Company's Vice President, General Manager, Telecom from May 1998 to April 2001,
secured by a stock pledge, in connection with the purchase of 400,000 shares of
the Company's common stock pursuant to the exercise of a stock option granted
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to him on May 4, 1998 at $.625 per share and the purchase on the same date of
200,000 shares of the Company's common stock pursuant to the exercise of a stock
option granted to him on January 11, 2000 at $.625 per share. The note is
interest-free and is due and payable on January 11, 2005. As of April 1, 2001,
$359,375 principal amount on this note remains outstanding. In addition, on
February 18, 2000, the Company loaned $125,000 to Mr. Smith, secured by a stock
pledge, in connection with the purchase of 100,000 shares of the Company's
common stock pursuant to the exercise of a stock option granted to him on
February 9, 2000, at $1.25 per share. The note is interest-free and is due and
payable on February 17, 2005. As of April 1, 2001, the entire principal amount
on this note remains outstanding. Mr. Smith resigned from the Company effective
April 20, 2001. The Company repurchased all 366,667 unvested shares by canceling
the related notes and loan amount of $277,084 and issuing an Amended and
Restated Note for the vested shares in the amount of $206,591. This entire
balance is due no later than June 19, 2001.
On February 9, 2000, the Company loaned $750,000 to William L. Potts, Jr.,
the Company's Chief Financial Officer and Secretary secured by a stock pledge,
in connection with the purchase of 600,000 shares of the Company's common stock
pursuant to the exercise of a stock option granted to him on February 9, 2000 at
$1.25 per share.
TRANSACTIONS WITH DIRECTORS
On April 19, 2000, the Company granted to Dr. David L. Lee an option to
purchase 25,000 shares at an exercise price of $5.00 per share, in accordance
with the provisions of the 2000 Director Option Plan set forth under the heading
"Executive Compensation and Other Matters -- Directors' Compensation."
Since 1997, we have employed Dr. Milton Chang in a research and marketing
capacity. In the fiscal year ended December 31, 2000, Dr. Chang received
compensation of $116,265.
INDEMNIFICATION
The Company has entered into indemnification agreements with each of its
directors and officers. Such indemnification agreements require the Company to
indemnify its directors and officers to the fullest extent permitted by Delaware
law.
CONFLICT OF INTEREST POLICY
The Company believes that all transactions with affiliates described above
were made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. The Company's policy is to require
that a majority of the independent and disinterested outside directors on the
board of directors approve all transactions between the Company and its
officers, directors, principal stockholders and their affiliates. Such
transactions will continue to be on terms no less favorable to the Company than
it could obtain from unaffiliated third parties.
All transactions, including loans, between the Company and its officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested outside directors, or, if required by law, a majority of
disinterested shareholders and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
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23
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the board of directors may recommend.
THE BOARD OF DIRECTORS
Dated: May 1, 2001
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APPENDIX A
NEW FOCUS, INC.
A DELAWARE CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSES
The purpose of the Audit Committee of the Board of Directors of New Focus,
Inc., a Delaware corporation (the "Company"), shall be to make such examinations
as are necessary to monitor the Company's system of internal controls, to
provide the Company's Board of Directors with the results of its examinations
and recommendations derived therefrom, to outline to the Board of Directors
improvements made, or to be made, in internal accounting controls, to nominate
independent auditors and to provide to the Board of Directors such additional
information and materials as it may deem necessary to make the Board of
Directors aware of significant financial matters which require the Board of
Director's attention.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
MEMBERSHIP
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors, each of whom:
1. Will be an independent director;
2. Will be able to read and understand fundamental financial
statements, in accordance with the NASDAQ National Market Audit Committee
requirements; and
3. At least one of whom will have past employment experience in
finance or accounting, requisite professional certification in accounting,
or other comparable experience or background, including a current or past
position as a chief executive or financial officer with financial oversight
responsibilities.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Reviewing on a continuing basis the adequacy of the Company's
system of internal controls;
2. Reviewing on a continuing basis the activities, organizational
structure and qualifications of the Company's internal audit function;
3. Reviewing the independent auditors' proposed audit scope, approach
and independence;
4. Conducting a post-audit review of the financial statements and
audit findings, including any significant suggestions for improvements
provided to management by the independent auditors;
5. Reviewing the performance of the independent auditors, who shall be
accountable to the Board of Directors and the Audit Committee;
6. Recommending the appointment of independent auditors to the Board
of Directors;
7. Reviewing fee arrangements with the independent auditors;
8. Reviewing before release the audited financial statements and
Management's Discussion and Analysis in the Company's annual report on Form
10-K;
A-1
25
9. Reviewing before release the unaudited quarterly operating results
in the Company's quarterly earnings release;
10. Overseeing compliance with the requirements of the Securities and
Exchange Commission for disclosure of independent auditor's services and
audit committee members and activities;
11. Overseeing of compliance with the Company's Standards of Business
Conduct and with the Foreign Corrupt Practices Act;
12. Reviewing, in conjunction with counsel, any legal matters that
could have a significant impact on the Company's financial statements;
13. Providing oversight and review of the Company's asset management
policies, including an annual review of the Company's investment policies
and performance for cash and short-term investments;
14. If necessary, instituting special investigations and, if
appropriate, hiring special counsel or experts to assist;
15. Reviewing related party transactions for potential conflicts of
interest;
16. Providing a report in the Company's proxy statement in accordance
with the requirements of Item 306 of Regulations S-K and S-B and Item
7(e)(3) of Schedule 14A; and
17. Performing other oversight functions as requested by the full
Board of Directors.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board of Directors may delegate to it and
will report, at least annually, to the Board of Directors regarding the
Committee's examinations and recommendations.
MEETINGS
The Audit Committee will meet at least two times each year. The Audit
Committee may establish its own schedule and shall provide such schedule to the
Board of Directors in advance.
The Audit Committee will meet separately with the Company's president and
separately with the Company's chief financial officer at least annually to
review the financial controls of the Company. The Audit Committee will meet with
the independent auditors of the Company at such times as it deems appropriate to
review the independent auditor's examination and management report.
MINUTES
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
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26
DETACH HERE
PROXY
NEW FOCUS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY 31, 2001
(SEE PROXY STATEMENT FOR DISCUSSION OF ITEMS)
The undersigned hereby appoints Kenneth E. Westrick and William L. Potts,
Jr., jointly and severally, as proxies, with power of substitution, to vote all
shares of New Focus, Inc. Common Stock which the undersigned is entitled to
vote on all matters which may properly come before the 2001 Annual Meeting of
Stockholders of New Focus, Inc., or any adjournment thereof.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
27
NEW FOCUS, INC.
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
VOTE BY TELEPHONE
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT!
CALL 1-877-PRX-VOTE anytime!
- --------------------------------------------------------------------------
VOTE BY INTERNET
It's fast, convenient, and your vote is immediately confirmed and posted.
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website http://www.eproxyvote.com/nufo
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the instructions provided.
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/nufo anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1,2 AND 3.
- -------------------------------------------------------------------------------
1. Election of two directors for a three-year term.
NOMINEE: (01) Dr. Winston S. Fu and (02) R. Clark Harris
[ ] FOR BOTH NOMINEES
[ ] WITHHELD FROM BOTH NOMINEES
[ ]
--------------------------------------
For all nominees except as noted above
2. The Appointment of Ernst & Young LLP as Independent Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AS SPECIFIED ABOVE, BUT
IF NO SPECIFICATION IS MADE THEY WILL BE VOTED FOR ITEMS 1 AND 2 AND AT THE
DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
give full name and title as such.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
Signature: Date: Signature: Date:
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