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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
STOCKERYALE, INC.
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(Name of Registrant as Specified In Its Charter)
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Registrant)
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and 0-11.
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STOCKERYALE, INC.
32 HAMPSHIRE ROAD
SALEM, NEW HAMPSHIRE 03079
NOTICE OF SPECIAL MEETING IN LIEU OF AN ANNUAL MEETING OF STOCKHOLDERS
The Special Meeting in lieu of an Annual Meeting of Stockholders (the
"Meeting") of StockerYale, Inc. (the "Company"), a Massachusetts corporation,
will be held at the Company's headquarters, 32 Hampshire Road, Salem, New
Hampshire 03079, on Thursday, May 24, 2001 at 10:00 a.m., local time, for the
following purposes:
1. to elect seven directors to serve until the next annual meeting and
until their successors are duly elected and qualified;
2. to amend the Company's Amended and Restated Articles of Organization to
increase the number of shares of common stock, par value $.001 per share,
authorized for issuance by the Company from 20,000,000 shares of common
stock to 100,000,000 shares of common stock;
3. to approve an amendment to the Company's 2000 Stock Option and Incentive
Plan to increase the number of shares of common stock authorized for
issuance thereunder to 2,800,000;
4. to ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants; and
5. to transact such other business as may properly come before the Meeting
and any adjournments or postponements thereof as well as on matters
related to the conduct of the Meeting.
Accompanying this notice of meeting is a proxy statement and a proxy card,
together with the 2000 Annual Report of the Company and the audited consolidated
financial statements for the year ended December 31, 2000.
Stockholders of record at the close of business on April 13, 2001 are
entitled to notice of, and to vote at the Meeting and any adjournments or
postponements thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE ASKED TO
COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY. A PROXY MAY NOT BE
EFFECTIVE UNLESS IT IS RECEIVED AT THE OFFICE OF THE COMPANY'S TRANSFER AGENT
AND REGISTRAR, PROXY SERVICES, BOSTON EQUISERVE, P.O. BOX 9398, BOSTON, MA
02205-9398 NOT LESS THAN 48 HOURS BEFORE THE TIME FIXED FOR THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Gary B. Godin, Clerk
April 18, 2001
STOCKERYALE, INC.
------------------------
PROXY STATEMENT
AS OF APRIL 18, 2001
------------------------
SOLICITATION OF PROXIES
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE MANAGEMENT OF STOCKERYALE, INC. (THE "COMPANY"), A MASSACHUSETTS
CORPORATION, FOR USE AT THE SPECIAL MEETING IN LIEU OF AN ANNUAL MEETING OF
STOCKHOLDERS (THE "MEETING") OF THE COMPANY TO BE HELD AT 10:00 A.M., LOCAL
TIME, ON THURSDAY, MAY 24, 2001, AT THE COMPANY'S HEADQUARTERS LOCATED AT
32 HAMPSHIRE ROAD, SALEM, NEW HAMPSHIRE, 03079 FOR THE PURPOSES SET FORTH IN THE
NOTICE OF SPECIAL MEETING IN LIEU OF AN ANNUAL MEETING OF STOCKHOLDERS. THIS
PROXY STATEMENT AND PROXY CARD ARE FIRST BEING SENT TO STOCKHOLDERS ON OR ABOUT
APRIL 18, 2001.
APPOINTMENT OF PROXYHOLDERS
The persons named in the accompanying proxy card are designated as
proxyholders by management of the Company.
TO BE VALID, THE COMPLETED, SIGNED, AND DATED PROXY CARD SHOULD BE RECEIVED
AT THE OFFICE OF THE COMPANY'S TRANSFER AGENT AND REGISTRAR, PROXY SERVICES,
BOSTON EQUISERVE, P.O. BOX 9398, BOSTON, MA 02205-9398 NOT LESS THAN 48 HOURS
BEFORE THE TIME FIXED FOR THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, HOLDERS OF COMMON STOCK ARE
REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
VOTING AND PROXIES
The shares of the Company's common stock, par value $.001 per share,
represented by a properly executed and deposited proxy will be voted on any
matter to properly come before the Meeting or any adjournments or postponements
thereof that may be called for or required by law and, if the stockholder
specifies a choice with respect to any matter to be acted upon, such shares of
common stock will be voted accordingly at the Meeting or any adjournments or
postponements thereof. If a choice with respect to such matters is not clearly
specified, the persons designated by management in the form of proxy will vote
the shares represented by the proxy (i) "FOR" the election to the Board of
Directors of the nominees; (ii) "FOR" the amendment to the Company's Amended and
Restated Articles of Organization to increase the number of authorized shares
from 20,000,000 shares of common stock to 100,000,000 shares of common stock;
(iii) "FOR" the amendment to the Company's 2000 Stock Option and Incentive Plan;
(iv) "FOR" the ratification of the appointment of Arthur Anderson LLP as the
Company's independent public accountants, and (v) in the discretion of the
persons named as proxies, upon such other matters as may properly come before
the Meeting or any adjournment or postponement thereof, as well as on matters
related to the conduct of the Meeting.
THE PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE NAMED PROXYHOLDER WITH
RESPECT TO AMENDMENTS TO OR VARIATIONS IN MATTERS IDENTIFIED IN THE ACCOMPANYING
NOTICE OF MEETING AND OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING,
AS WELL AS ON MATTERS RELATED TO THE CONDUCT OF THE MEETING. As of the date of
this proxy statement, management is not aware of any amendment, variations or
other matters. If such should occur, the persons designated as proxies by
management will vote thereon in accordance with their best judgment, exercising
discretionary authority.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of common stock issued and outstanding and
entitled to vote is necessary to constitute a quorum
for the transaction of business at the Meeting. Abstentions, votes withheld from
Director nominees and "broker non-votes" (i.e., shares represented at the
Meeting which are held by a broker or other nominee as to which (i) voting
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and (ii) the broker does not have discretionary
authority to vote such shares) shall be treated as shares that are present and
entitled to vote for purposes of determining whether a quorum is present. With
respect to the election of Directors, the By-Laws of the Company provide that
such election shall be determined by a plurality of the votes cast by the
stockholders. Therefore, abstentions and broker non-votes will have no effect on
the outcome of the election of Directors.
With respect to the proposal to amend the Company's Amended and Restated
Articles of Organization to increase the number of authorized shares,
Section 70 of the Massachusetts Business Corporation Law provides that such
matters shall be determined by a majority of the shares outstanding and entitled
to vote thereon. Therefore, a failure to vote, a vote to abstain or a broker
non-vote on this proposal will have the same effect as a vote against the
proposal.
With respect to the proposal to approve an amendment to the Company's 2000
Stock Option and Incentive Plan, the By-Laws of the Company provide that such
matters shall be determined by a majority of the shares voting on such proposal.
Therefore, abstentions and broker non-votes will have no effect on the outcome
of this proposal.
REVOCATION OF PROXIES
A stockholder who has given a proxy may revoke it as to any matter on which
a vote has not already been cast pursuant to the authority conferred on the
proxy, by delivering a later-dated proxy, by delivering to the Clerk of the
Company a written revocation of such proxy, or by appearing and voting in person
at the Meeting.
ANNUAL REPORT
All holders of record are being sent herewith a copy of the Company's 2000
Annual Report (the "Annual Report"), which contains audited financial statements
of the Company for the fiscal year ended December 31, 2000. The Annual Report,
however, is not part of the proxy soliciting material.
PRINCIPAL EXECUTIVE OFFICE
The Company's principal executive office is located at 32 Hampshire Road,
Salem, New Hampshire 03079, and its telephone number is (603) 893-8778.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The voting securities of the Company consist of its common stock. As of
March 30, 2001, there were 8,704,411 shares of common stock issued and
outstanding, each share carrying the right to one vote. The Directors of the
Company have fixed April 13, 2001 as the record date (the "Record Date") for
determining stockholders entitled to receive notice of, to attend and to vote at
the Meeting or any adjournment or postponement thereof. Transferees of common
stock after the Record Date will not be entitled to notice of, or to vote at,
the Meeting.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, to the best knowledge of the Company,
certain information regarding the beneficial ownership of the Company's common
stock, as of March 30, 2001, by each person known to the Company to be the
beneficial owner of more than 5% of any class of the voting
2
stock of the Company, each Director of the Company, executive officers named in
the Summary Compensation Table below and all of the Company's Directors and
executive officers as a group.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) PERCENTAGE OF CLASS
- ------------------- --------------------- -------------------
Mark W. Blodgett.......................... 4,372,209(3) 48.4%
Alain Beauregard.......................... 585,320(4) 6.3%
Luc Many.................................. 153,878(5) 1.8%
George A. Fryburg......................... 81,294 *
Gary B. Godin............................. 80,377 *
John M. Nelson............................ 44,800 *
Steven E. Karol........................... 43,600 *
Lawrence W. Blodgett...................... 38,800(6) *
Clifford L. Abbey......................... 29,800 *
Dr. Herbert Cordt......................... 4,000 *
Raymond J. Oglethorpe..................... 1,000 *
Directors and Executive Officers as a
Group (11 persons)...................... 5,435,078 55.1%
- ------------------------
* Less than one percent.
(1) Unless otherwise stated, the address for the named party is c/o
StockerYale, Inc., 32 Hampshire Road Salem, NH 03079.
(2) Includes shares which may be acquired upon the exercise of stock options
that are currently exercisable or that will be exercisable within 60 days of
March 30, 2001 in the following amounts: Mr. Mark W. Blodgett, 320,000
shares of common stock, Mr. Beauregard, 36,000 shares of common stock,
Mr. Many, 28,000 shares of common stock, Mr. Fryburg, 56,800 shares of
common stock, Mr. Godin, 80,000 shares of common stock, Mr. Nelson 24,800
shares of common stock, Mr. Karol, 13,600 shares of common stock,
Mr. Lawrence W. Blodgett, 12,000 shares of common stock, Mr. Abbey, 24,800
shares of common stock, and all Directors and executive officers as a group,
596,000 shares of common stock.
(3) Includes 66,500 shares owned by the Helen W. Blodgett Trust, of which
Mr. Blodgett is a Trustee and 100,439 shares owned by the HW Blodgett TR
U/A/D 1/22/86 Trust, of which Mr. Blodgett is a Trustee. Total excludes
266,814 shares owned by the Blodgett 1989 Family Trust, of which Mark W.
Blodgett is the settlor. Mr. Blodgett disclaims beneficial ownership of the
shares held by the Blodgett 1989 Family Trust, the Helen W. Blodgett Trust
and the HW Blodgett TR U/A/D 1/2/86 Trust.
(4) Includes 506,320 shares of stock of Lasiris Holdings, Inc., which are
convertible into shares of common stock on a one-for-one basis.
(5) Includes 57,738 shares of Lasiris Holdings, Inc., which are convertible into
shares of common stock on a one-for-one basis.
(6) Includes 22,200 shares owned indirectly through the Lawrence W. Blodgett
Trust, of which Lawrence W. Blodgett is a Trustee.
3
MATTERS TO BE ACTED UPON
ITEM 1--ELECTION OF DIRECTORS
Management proposes the persons named in the following table for election as
Directors of the Company. Each Director elected will hold office until the next
annual meeting of stockholders and until his successor, if any, is elected and
qualified, unless he resigns or becomes disqualified to act as a Director. Each
nominee is currently serving as a Director of the Company. Although the Company
has been managed by an eight member board of directors, there are seven
nominees, because the vacancy left by the resignation of John M. Nelson is not
being filled. Stockholders may vote for no more than seven nominees for
Director.
The affirmative vote of a plurality of the shares present and voting in
person or by proxy at the Meeting is necessary to elect each of these
individuals as Directors. The Company believes that each of the nominees will
stand for election and, if elected, will serve as a Director. However, if any
nominee fails to stand for election, the proxies will be voted for the election
of such other person(s) as the Board of Directors may nominate and recommend.
The following information concerning the respective nominees has been confirmed
by each of them as of March 30, 2001:
PROPOSED NOMINEE AND PRINCIPAL OCCUPATION
PROPOSED NOMINEE AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
- ----------------------------------------- -------- --------------
MARK W. BLODGETT ........................................... 44 1989
Chairman of the Board and Chief Executive Officer
ALAIN BEAUREGARD ........................................... 40 1998
President and Chief Technology Officer
LAWRENCE W. BLODGETT ....................................... 66 1998
Consultant
CLIFFORD L. ABBEY .......................................... 55 1994
Chief Executive Officer of San Francisco 415 Corporation
STEVEN E. KAROL ............................................ 46 1997
President of HMK Enterprises, Inc.
DR. HERBERT CORDT .......................................... 54 2000
Managing Director of Cordt & Partner
RAYMOND J. OGLETHORPE ...................................... 56 2000
President of America Online, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES NAMED ABOVE.
Unless otherwise specified in the enclosed proxy, the persons named in the
enclosed proxy intend to vote the shares of common stock represented by each
properly executed proxy "FOR" each of the nominees named above.
4
INFORMATION REGARDING DIRECTORS
The principal occupation and business experience of each director, none of
whom holds a directorship in any other company, is set forth below:
MARK W. BLODGETT purchased a majority of the shares of the common stock of
the Company in 1989 and since then he has maintained overall responsibility for
daily operations and strategic planning. Prior to joining the Company in 1989,
Mr. Blodgett worked for a private merchant bank (1988-1989); was a corporate
vice president at Drexel Burnham Lambert, Inc. in New York (1980-1988); and was
a merger and acquisition associate for European American Bank in New York
(1979-1980). Mr. Blodgett is actively involved in the Young Presidents
Organization. Mark W. Blodgett is the son of Lawrence W. Blodgett, a Director of
the Company.
ALAIN BEAUREGARD is President and Chief Technology Officer of the Company.
Mr. Beauregard was President of the Company's Lasiris subsidiary (now
StockerYale Canada), a Canadian manufacturer of industrial lasers for the
machine vision and industrial inspection industries, prior to becoming President
of the Company on February 1, 2000. Mr. Beauregard co-founded Lasiris in 1985
and became its President in 1987. Mr. Beauregard has been a Director since 1998.
LAWRENCE W. BLODGETT was the Vice President of Operations for The Andrew
Jergens Company prior to becoming a consultant in improving processes and
practices in factory performance, engineering solutions and systems
implementation for North American & Western European companies. Before The
Andrew Jergens Company, Mr. Blodgett served as a Vice President of Manufacturing
for Chesebrough-Pond in their Greenwich, Connecticut facilities. Lawrence W.
Blodgett is the father of Mark W. Blodgett. Mr. Blodgett has been a Director of
the Company since 1998.
CLIFFORD L. ABBEY is the Chief Executive Officer and principal shareholder
of San Francisco 415 Corporation, a manufacturer and distributor of designer
jeans. Mr. Abbey has an established reputation as a successful entrepreneur,
having founded, operated and ultimately sold a number of small and middle-market
businesses. Mr. Abbey has been a Director of the Company since 1994.
STEVEN E. KAROL is President and Chief Executive Officer of HMK
Enterprises, Inc., a diversified manufacturing group that includes a steel
mini-mill/integrated mill. Mr. Karol received his Bachelor of Science degree at
Tufts University, and he is a graduate of the President's Program on Leadership
(PPL) at the Harvard University Graduate School of Business Administration.
Mr. Karol has been a Director of the Company since 1997.
DR. HERBERT CORDT is managing director of Cordt & Partner, International
Business Consultants, based in Vienna, Austria. He also consults for major
Austrian and international companies and represents Salomon Smith Barney in
Austria. Dr. Cordt was formerly Vice-Governor of Osterreichische Postsparkasse
(Postal Savings Bank) and a member of the managing board of Landerbank, now Bank
Austria. Dr. Cordt holds a doctorate in law from the University of Vienna and a
master's degree (MSFS) from Georgetown University where he majored in
international economics. Dr. Cordt is also an alumnus of the Diplomatic Academy
of Vienna and has served on numerous corporate boards in Europe. Dr. Cordt has
been a Director of the Company since March 2000.
RAYMOND J. OGLETHORPE is President of America Online, Inc. and serves on the
boards of Merrill Lynch Direct Markets External Advisory Board and Hewlett
Packard Global Advisory Board. Prior to joining America Online in 1994,
Mr. Oglethorpe directed Redgate Communications Corporation's (a subsidiary of
America Online) domestic and international sales, marketing, and client service
organization. Mr. Oglethorpe received his Bachelor of Science degree from the
University of Arizona and his MBA from George Washington University.
Mr. Oglethorpe has been a director since July 2000.
5
BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. The Company was managed in 2000 by an eight member
Board of Directors. The Board met in person or by telephone on four occasions
and executed consent votes in lieu of a meeting three times during fiscal 2000.
Each of the Directors attended at least 75% of the total number of meetings of
the Board of Directors and of meetings of the committees of the Board of
Directors of which he was a member that occurred during the time that such
individual was a Director.
AUDIT COMMITTEE. The Board has established an Audit Committee consisting of
Steven E. Karol, who serves as Chairman of the Audit Committee, Clifford L.
Abbey and Dr. Herbert Cordt. The Board of Directors has determined that the
members of the Audit Committee are "independent" under the rules of the Nasdaq
Stock Market. The Audit Committee meets with the Company's independent auditors
to review the adequacy of the Company's internal control systems and financial
reporting procedures; review the general scope of the Company's annual audit and
the fees charged by the independent auditors; and perform such other functions
as may be required by any stock exchange or over-the-counter market upon which
the Company's securities may be listed or quoted. The Audit Committee did not
meet during fiscal 2000 and met twice in 2001 to discuss the audited
consolidated financial statements for the fiscal year ended December 31, 2000.
The responsibilities of the Audit Committee are set forth in a written charter
adopted by the Board of Directors, a copy of which is attached hereto as
APPENDIX A.
COMPENSATION COMMITTEE. The Company's Board of Directors has established a
Compensation Committee to determine the compensation of the Company's executive
officers and to grant options and stock awards under the Company's stock option
and incentive plans. The Compensation Committee, which consisted of John M.
Nelson and Clifford L. Abbey, met once during fiscal 2000. The Board of
Directors has named Raymond J. Oglethorpe to fill the vacancy left on the
Compensation Committee by the resignation of John M. Nelson.
The Board of Directors does not have a standing nominating committee or a
committee performing such functions. The full Board of Directors performs the
function of such a committee.
AUDIT COMMITTEE REPORT
Report of the Audit Committee
To the Board of Directors of StockerYale, Inc.:
We have reviewed and discussed with management the Company's audited
consolidated financial statements as of and for the fiscal year ended
December 31, 2000. We have discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61. We have
received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No. 1, as may be modified
or amended, and have discussed with the auditors their independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the consolidated financial statements referred to above
be included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2000.
Audit Committee
Steven E. Karol
Clifford L. Abbey
Dr. Herbert Cordt
6
COMPENSATION OF DIRECTORS
Under the 2000 Stock Option and Incentive Plan, each Director who is not an
officer or employee of the Company (an "Independent Director") will receive an
annual stock option grant to purchase 4,000 shares of common stock, beginning
with the annual meeting following such Director's initial election to the Board.
Unless earlier terminated, all options granted to Independent Directors under
the 2000 Stock Option and Incentive Plan vest in full on the second anniversary
of the grant of such options.
In February 2000 the Board of Directors granted options to purchase 4,000
shares of common stock to each of Lawrence W. Blodgett, Steven Karol, Clifford
L. Abbey and John M. Nelson. Upon being named to the Board of Directors in 2000,
Dr. Herbert Cordt and Raymond J. Oglethorpe received options to purchase 8,000
and 24,000 shares, respectively, of the Company's common stock. The option grant
to Dr. Cordt was in lieu of an automatic grant Dr. Cordt would have received
pursuant to the Company's 1996 Stock Option Plan. The option grant
Mr. Oglethorpe received was in lieu of the automatic grant Mr. Oglethorpe would
have received pursuant to the Company's 2000 Stock Option and Incentive Plan.
EXECUTIVE OFFICERS
The names and ages of all current executive officers of the Company and
their principal occupation and business experience during the last five years
are as set forth below.
NAME AGE POSITION
- ---- -------- --------
Mark W. Blodgett(1)............ 44 Chief Executive Officer and Chairman of the Board of
Directors
Alain Beauregard(1)............ 40 President, Chief Technology Officer and Director
Gary B. Godin.................. 44 Executive Vice President, Chief Financial Officer and
Treasurer
George A. Fryburg.............. 49 Executive Vice President and Chief Operating Officer
- ------------------------
(1) For descriptions of business experience, please refer to "Information
Regarding Directors" above.
GARY B. GODIN is Executive Vice President and Chief Financial Officer and is
responsible for all aspects of financial management, including accounting and
treasury functions, corporate compliance and human resources. Prior to joining
the Company in February 1999, Mr. Godin was employed by Data Translation, Inc.,
as a Vice President and Chief Financial Officer from September 1996 to
February 1999, as Corporate Controller from 1992 to 1996 and as Corporate
Accounting Manager from 1987 to 1992.
GEORGE A. FRYBURG is Executive Vice President and Chief Operating Officer,
responsible for plant operations including manufacturing, procurement,
fulfillment, and distribution. Mr. Fryburg has twenty years of manufacturing
experience. He previously held plant manager and operations manager positions
with Norton Company (1986-1997) and engineering and manufacturing management
positions with GTE Sylvania (1977-1986). Mr. Fryburg joined the Company in May
of 1997.
7
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION INFORMATION
The table below sets forth summary compensation information for the last
three completed fiscal years ended December 31, 2000, 1999 and 1998, with
respect to the Chief Executive Officer and the other four most highly
compensated executive officers (the "Named Executive Officers").
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ---------------------------------------
----------------------------------------------- RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING OTHER
NAME AND POSITION YEAR SALARY(1) BONUS COMPENSATION AWARDS OPTIONS(2) COMPENSATION
- ----------------- -------- --------- -------- ------------- ---------- ---------- -------------
Mark W. Blodgett................ 2000 $381,456 $ -- -- -- 360,000 $ 2,295(8)
Chairman and Chief 1999 $201,073 $ -- -- -- 320,000(3) $ 1,350(8)
Executive Officer 1998 $276,790 $ -- -- -- 70,000 $108,992
Alain Beauregard(4)............. 2000 $177,808 $ -- -- -- 76,000 $ --
President, Chief Technology 1999 $103,860 $15,390 -- -- 36,000 $ --
Officer and Director 1998 $ 69,719 $11,725 -- -- -- $ --
Luc Many(5)..................... 2000 $161,830 $ -- -- -- 48,000 $ --
Senior Vice President-- 1999 $103,860 $15,390 -- -- 28,000 $ --
Sales and Marketing 1998 $ 69,719 $11,725 -- -- -- $ --
Illumination Products Group
George A. Fryburg............... 2000 $142,734 $ -- -- -- 84,800 $ 2,551(8)
Executive Vice President and 1999 $108,627 $ 500 -- -- 40,800(6) $ 1,853(8)
Chief Operating Officer 1998 $108,625 $ -- -- -- 32,000 $ 479
Gary B. Godin(7)................ 2000 $141,674 $ -- -- -- 100,000 $ 2,275(8)
Executive Vice President, 1999 $110,577 $12,500 -- -- 80,000 $ 613(8)
Chief Financial Officer 1998 $ -- $ -- -- -- -- $ --
and Treasurer
- ------------------------------
(1) Salary includes amounts, if any, deferred pursuant to the Company's 401(k)
Plan.
(2) All amounts shown are adjusted for the two-for-one stock split on July 31,
2000.
(3) On December 11, 1999, the Company terminated options granting Mr. Blodgett
the right to purchase (i) 42,534 shares of the Company's common stock,
originally granted on May 11, 1994 at an exercise price of $7.25 per share,
(ii) 20,000 shares of the Company's common stock, originally granted on
April 1, 1996 at an exercise price of $6.00 per share, (iii) 20,000 shares
of the Company's common stock, originally granted on April 1, 1997 at an
exercise price of $5.38 per share and (iv) 35,000 shares of the Company's
common stock, originally granted on May 5, 1998 at an exercise price of
$3.56 per share.
(4) Alain Beauregard became an employee of the Company on May 14, 1998.
(5) Luc Many became an employee of the Company on May 14, 1998. Before
October 2000, Mr. Many served as General Manager of the Company's Lasiris
Division.
(6) On December 11, 1999, the Company terminated options granting Mr. Fryburg
the right to purchase (i) 5,000 shares of the Company's common stock,
originally granted on May 19, 1997 at an exercise price of $5.25 per share
and (ii) 8,000 shares of the Company's common stock, originally granted on
May 5, 1998 at an exercise price of $3.56 per share.
(7) Mr. Godin became an employee of the Company on February 8, 1999.
(8) Amounts reported represent Company contributions to a defined contribution
plan.
8
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth grants of options to purchase shares of common
stock pursuant to the 1996 Stock Option Plan made during the last completed
fiscal year to the Named Executive Officers:
PERCENT OF
TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE EXPIRATION
NAME UNDERLYING OPTIONS EMPLOYEES PRICE DATE
- ---- -------------------- ------------- -------- ----------
Mark W. Blodgett............................ 40,000 7.1% $4.159 2/1/2010
Alain Beauregard............................ 40,000 7.1% $3.781 2/1/2010
Gary B. Godin............................... 28,000 4.9% $3.781 2/1/2010
George A. Fryburg........................... 20,000 3.5% $3.781 2/1/2010
Luc Many.................................... 20,000 3.5% $3.781 2/1/2010
OPTION EXERCISES AND YEAR-END OPTION VALUES
The table below sets forth the number of unexercised options held at
December 31, 2000 and the value of the unexercised in-the-money options held as
of such date for each of the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Mark W. Blodgett............................... -- 360,000 -- $4,004,000
Alain Beauregard............................... -- 76,000 -- $ 760,000
Gary B. Godin.................................. -- 100,000 -- $1,108,000
George A. Fryburg.............................. 16,000 68,800 $184,000 $ 712,000
Luc Many....................................... -- 48,000 -- $ 496,000
- ------------------------
(1) These values have been calculated based upon the closing sale price of the
Company's common stock reported on the Nasdaq National Market on
December 29, 2000.
CONTRACTS WITH EXECUTIVE OFFICERS
The Company has no plan or arrangement with respect to the compensation of
its executive officers that would be payable upon the resignation, retirement or
any other termination of any executive officer's employment with the Company or
its subsidiaries or in connection with a change of control of the Company or any
subsidiary of the Company or a change in the executive officer's
responsibilities following a change in control, other than as described below.
Under the 1996 Stock Option Plan, in the event of a change of control, as
defined in that plan, the Board of Directors, in its discretion, may provide for
substitution or adjustments of outstanding options granted under that plan, or
may terminate all unexercised options granted under that plan with or without
payment of cash consideration. In addition, certain options granted to outside
Directors of the Company vest in full upon such a change of control. Under the
2000 Stock Option and Incentive Plan, upon a sale event, as defined in that
plan, all options not previously exercisable become fully exercisable as of the
effective time of the sale event.
Alain Beauregard and the Company are party to an employment agreement dated
May 13, 1998 providing for the employment of Mr. Beauregard as President and
Chief Executive Officer of StockerYale Canada (formerly Lasiris, Inc.) The
initial term of the agreement is three years, with automatic one-year extensions
thereafter. If the Company elects not to renew the agreement at any
9
time, Mr. Beauregard will become entitled to receive a lump-sum payment equal to
his annual salary then in effect.
While employed by StockerYale Canada, Mr. Beauregard is entitled to a
salary, an annual bonus, all regular benefits provided to employees of
StockerYale Canada, and certain other benefits set forth in the agreement. If
Mr. Beauregard is terminated without cause at any time, he will become entitled
to a lump-sum severance payment equal to the greater of (a) his remaining salary
under the term of the agreement and (b) his annualized salary in effect at the
time of termination. Also upon such termination without cause, Mr. Beauregard is
entitled to receive all regular medical and dental benefits then in effect for a
period of one year following termination. Mr. Beauregard has also agreed to
certain confidentiality and non-competition and non-solicitation provisions,
which apply during the term of his employment and for a minimum of one year
thereafter.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mark W. Blodgett, Chairman of the Board of Directors and Chief Executive
Officer of the Company, is the son of Lawrence W. Blodgett, a Director of the
Company.
In January 1999, Mark W. Blodgett loaned the Company $200,000. In exchange
for the cancellation of this debt, the Company issued 123,077 shares of its
common stock to Mr. Blodgett (such number of shares being determined based on
the fair market value of the common stock on the date of the loan).
On February 11, 1999, Mark W. Blodgett guaranteed a loan of $3,500,000 made
by Wells Fargo (formerly Norwest Business Credit, Inc.) to the Company. As
compensation for the guarantee of indebtedness, the Company issued 100,908
shares of its common stock to Mr. Blodgett.
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who are beneficial owners of more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company, and written representations that no other reports were required, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were satisfied, except that new
directors Dr. Herbert Cordt and Raymond J. Oglethorpe filed Form 5s to report
holdings that should have been reported on Form 3 and Clifford L. Abbey,
Lawrence W. Blodgett, Steven E. Karol and John M. Nelson did not file timely
Form 5s to report stock options granted to them in 1999.
ITEM 2--AMEND THE COMPANY'S AMENDED AND RESTATED ARTICLES OF ORGANIZATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES
The Board of Directors has recommended that the stockholders vote to amend
the Company's Articles of Organization to increase the total number of shares of
common stock authorized for issuance by the Company from 20,000,000 shares of
common stock to 100,000,000 shares of common stock. The additional authorized
shares will benefit the Company by providing flexibility to the Board of
Directors without further action or authorization by stockholders (except as
required by law), in responding to business needs and opportunities as they
arise, and for other corporate purposes. These corporate purposes might include
raising additional capital through a public offering or a private placement of
common stock or through the issuance of other securities convertible into shares
of common stock or issuing common stock in connection with the acquisition of
businesses, technologies or other assets.
10
The voting securities of the Company consist of its common stock, which is
presently listed on the Nasdaq National Market. As of March 30, 2001 the Company
had 8,704,411 shares of common stock issued and outstanding and 20,000,000
shares of common stock authorized. In addition to its issued and outstanding
common stock, the Company has reserved, in the aggregate, 819,957 shares of
common stock for issuance upon exercise of outstanding options and warrants.
Accordingly, of the 20,000,000 shares authorized, only 10,475,632 shares remain
available for issuance.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
"FOR" THE PROPOSAL TO AMEND THE ARTICLES OF ORGANIZATION OF THE COMPANY TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE FROM
20,000,000 SHARES OF COMMON STOCK TO 100,000,000 SHARES OF COMMON STOCK.
DESCRIPTION OF CAPITAL STOCK
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Accordingly, holders
of a majority of the shares of common stock entitled to vote in any election of
Directors of the Company may elect all of the Directors standing for election.
Holders of common stock will be entitled to receive ratably any dividends if, as
and when declared by the Board of Directors and upon dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, or any other
distribution of assets of the Company among its stockholders for the purpose of
winding up its affairs and to receive the remaining property and assets of the
Company legally available for distribution to holders of common stock. Holders
of common stock have no cumulative voting rights nor any pre-emptive,
subscription, redemption or conversion rights. All outstanding shares of common
stock are validly issued, fully paid and non-assessable.
ELIMINATION OF MONETARY LIABILITY FOR OFFICERS AND DIRECTORS
The Company's Articles of Organization also incorporate certain provisions
permitted under the Massachusetts General Laws relating to the liability of
Directors. The provisions eliminate a Director's liability for monetary damages
for a breach of fiduciary duty except in circumstances involving certain
wrongful acts, such as the breach of a Director's duty of loyalty or acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or authorization of distributions in violation of the Articles
of Organization or of loans to officers or Directors of the Company or any
transaction from which the Director derived personal benefit. These provisions
do not eliminate a Director's duty of care. Moreover, the provisions do not
apply to claims against a Director for violations of certain laws, including
federal securities laws. The Company's Articles of Organization and By-laws also
contain provisions to indemnify Directors, officers, employees or other agents
to the fullest extent permitted by the Massachusetts General Laws. The Company
believes that these provisions will assist the Company in attracting or
retaining qualified individuals to serve as Directors or officers.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Organization also contain provisions to indemnify
its Directors, officers, employees or other agents to the fullest extent
permitted by the Massachusetts General Laws. These provisions may have the
practical effect in certain cases of eliminating the ability of the stockholders
to collect monetary damages from Directors. The Company believes that these
provisions will assist the Company in attracting or retaining qualified
individuals to serve as Directors or officers.
ITEM 3--APPROVAL OF AMENDMENT TO THE 2000 STOCK OPTION AND GRANT PLAN
In March 2001, the Board of Directors voted to amend the StockerYale, Inc.
2000 Stock Option and Incentive Plan (the "2000 Option Plan") effective as of
the date the amendment is approved by the stockholders at the Meeting.
11
The amendment to the 2000 Option Plan would authorize the Company to issue
up to an additional 2,000,000 shares of common stock pursuant to various stock
incentive awards under the 2000 Option Plan, bringing the total reserved shares
authorized to be issued under the 2000 Option Plan (including shares issuable
under outstanding options) from 800,000 shares of common stock to 2,800,000. No
more than 200,000 shares of common stock will be available for grants in the
form of restricted stock, unrestricted stock or performance share awards. The
number of shares of common stock reserved for issuance under the 2000 Option
Plan is subject to adjustment for stock splits, stock dividends and similar
events.
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code") generally would disallow a federal income
tax deduction to the Company for compensation in excess of $1 million paid in
any year to any of those executive officers included in the summary compensation
table who are employed by the Company on the last day of the taxable year
("Covered Employees"). However, this limitation on compensation expense does not
apply to payments of "performance-based compensation," the material terms of
which have been approved by stockholders. To satisfy the requirements of
Section 162(m) of the Code, stock options and stock appreciation rights with
respect to no more than 200,000 shares of common stock (subject to adjustment
for stock splits and similar events) may be granted to any one individual during
any one-calendar-year period.
Based solely on the closing sale price of common stock as reported on the
Nasdaq National Market on March 30, 2001 of $12.75 per share, the maximum
aggregate market value of the additional 2,000,000 shares of common stock
reserved for issuance under the 2000 Option Plan would be $25,500,000.
The amendment to the 2000 Option Plan will become effective only if Item 3
is approved by the stockholders.
REASONS FOR AMENDMENT
The Board of Directors believes that stock options and other stock-based
awards play an important role in the success of the Company and that this role
must increase if the Company is to continue to attract, motivate and retain the
caliber of directors, officers and other employees necessary for its future
growth and success. The Board of Directors believes that amending the 2000
Option Plan is necessary to provide an adequate number of shares of common stock
available for grant under the 2000 Option Plan. The Board of Directors believes
that adding more shares of common stock to the 2000 Option Plan will help the
Company achieve its goals by keeping the Company's incentive compensation
program competitive with those of other companies. Accordingly, the Board of
Directors has voted, subject to stockholder approval, to increase the number of
shares of common stock available under the 2000 Option Plan by 2,000,000 shares.
SUMMARY OF THE 2000 OPTION PLAN
The following description of material terms of the 2000 Option Plan is
intended to be a summary only. This summary is qualified in its entirety by the
full text of the 2000 Option Plan, which is attached to this proxy statement as
APPENDIX B.
2000 OPTION PLAN ADMINISTRATION. The 2000 Option Plan provides for
administration by the Board of Directors or a committee of not fewer than two
Independent Directors (the "Administrator"), as appointed by the Board of
Directors from time to time.
The Administrator has full power to select, from among the employees
eligible for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms and
conditions of each award, subject to the provisions of the 2000 Option
12
Plan. The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event. The Administrator may permit common stock, and other amounts
payable pursuant to an award, to be deferred. In such instances, the
Administrator may permit interest, dividend or deemed dividends to be credited
to the amount of deferrals.
ELIGIBILITY AND LIMITATIONS ON GRANTS. All officers, employees and
directors of the Company are eligible to participate in the 2000 Option Plan,
subject to the discretion of the Administrator. In no event may any one
participant receive Stock Options or Stock Appreciation Rights with respect to
more than 200,000 shares of common stock (subject to adjustment for stock splits
and similar events) during any one-calendar-year period, as stated above. In
addition, as stated above, the maximum award of restricted stock, performance
shares or deferred stock (or combination thereof) for any one individual that is
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code will not exceed 200,000 shares of common stock (subject to adjustment
for stock splits and similar events) for any performance cycle.
STOCK OPTIONS. Options granted under the 2000 Option Plan may be either
Incentive Stock Options ("Incentive Options") (within the definition of
Section 422 of the Code) or Non-Qualified Stock Options ("Non-Qualified
Options"). Options granted under the 2000 Option Plan will be Non-Qualified
Options if they (i) fail to meet such definition of Incentive Options, (ii) are
granted to a person not eligible to receive Incentive Options under the Code, or
(iii) otherwise so provide. Incentive Options may be granted only to officers or
other employees of the Company. Non-Qualified Options may be granted to persons
eligible to receive Incentive Options and to non-employee directors and other
key persons.
OTHER OPTION TERMS. The Administrator has authority to determine the terms
of options granted under the 2000 Option Plan. The option exercise price of each
option will be determined y the Administrator but may not be less than 100% of
the fair market value of the common stock on the date of grant in the case of
Incentive Options, and may not be less than 85% of the fair market value on the
date of grant in the case of Non-Qualified Options. The 2000 Option Plan
provides that such fair market value will be determined by reference to market
quotations.
The term of each option will be fixed by the Administrator and may not
exceed ten years from date of grant. The Administrator will determine at what
time or times each option may be exercised and, subject to the provisions of the
2000 Option Plan, the period of time, if any, after retirement, death,
disability or termination of employment during which options may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Administrator. In general, unless otherwise
permitted by the Administrator, no option granted under the 2000 Option Plan is
transferable by the optionee other than by will or by the laws of descent and
distribution, and options may be exercised during the optionee's lifetime only
by the optionee, or by the optionee's legal representative or guardian in the
case of the optionee's incapacity.
Options granted under the 2000 Option Plan may be exercised for cash or, if
permitted by the Administrator, by transfer to the Company (either actually or
by attestation) of shares of common stock which are not then subject to
restrictions under any company stock plan, which have been held by the optionee
for at least six months or were purchased on the open market, and which have a
fair market value equivalent to the option exercise price of the shares being
purchased, or by compliance with certain provisions pursuant to which a
securities broker delivers the purchase price for the shares to the Company.
At the discretion of the Administrator, stock options granted under the 2000
Option Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of shares
13
of common stock would automatically be granted an additional stock option (with
an exercise price equal to the fair market value of the common stock on the date
the additional stock option is granted) to purchase that number of shares of
common stock equal to the number delivered to exercise the original stock
option. The purpose of this feature is to enable participants to maintain any
equity interest in the Company without dilution.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and a
shorter term and higher minimum exercise price in the case of certain large
stockholders.
STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. The 2000 Option Plan
provides for the automatic grant of Non-Qualified Options to non-employee
directors. Each non-employee director who is serving as a director of the
Company on the fifth business day after each annual meeting of stockholders,
commencing with the annual meeting in 2000, will automatically be granted on
such day a Non-Qualified Option to acquire 4,000 shares of common stock. Except
as stated above, the exercise price of each such Non-Qualified Option is the
fair market value of common stock on the date of grant. Each such Non-Qualified
Option is exercisable with respect to all of the underlying shares on the second
anniversary of the grant date. Such Non-Qualified Options will expire ten years
from the date of grant. The Administrator may also make discretionary grants of
Non-Qualified Options to non-employee directors.
TAX WITHHOLDING. Participants under the 2000 Option Plan are responsible
for the payment of any federal, state or local taxes which we are required by
law to withhold upon any option exercise or vesting of other awards.
Participants may elect to have the minimum tax withholding obligations satisfied
either by authorizing us to withhold shares of common stock to be issued
pursuant to an option exercise or other award, or by transferring to the Company
shares of common stock having a value equal to the amount of such taxes.
STOCK APPRECIATION RIGHTS. The Administrator may award a stock appreciation
right "SAR" either as a freestanding award or in tandem with a stock option.
Upon exercise of the SAR, the holder will be entitled to receive an amount equal
to the excess of the fair market value on the date of exercise of one share of
common stock over the exercise price per share specified in the related stock
option (or, in the case of freestanding SAR, the price per share specified in
such right, which price may not be less than 85% of the fair market value of the
common stock on the date of grant) times the number of shares of common stock
with respect to which the SAR is exercised. This amount may be paid in cash,
common stock, or a combination thereof, as determined by The Administrator. If
the SAR is granted in tandem with a stock option, exercise of the SAR cancels
the related option to the extent of such exercise.
RESTRICTED STOCK AWARDS. The Administrator may grant shares (or sell at par
value or for a higher purchase price determined by the Administrator) of common
stock to any participant subject to such conditions and restrictions as the
Administrator may determine. These conditions and restrictions may include the
achievement of pre-established performance goals and/or continued employment
with the Company through a specified vesting period. The vesting period shall be
determined by the Administrator, and the purchase price, if any, of shares of
restricted stock will be determined by the Administrator. If the applicable
performance goals and other restrictions are not attained, the participant will
forfeit his or her award of restricted stock.
UNRESTRICTED STOCK AWARDS. The Administrator may also grant shares (or sell
at par value or for a higher purchase price determined by the Administrator) of
common stock which are free from any restrictions under the 2000 Option Plan.
Unrestricted stock may be granted to any participant in
14
recognition of past services or other valid consideration, and may be issued in
lieu of cash compensation due to such participant.
DIVIDEND EQUIVALENT RIGHTS. The Administrator may grant dividend equivalent
rights which entitle the recipient to receive credits for dividends that would
be paid if the recipient had held specified shares of common stock. Dividend
equivalent rights may be granted as a component of another award or as a
freestanding award. Dividend equivalent rights credited under the 2000 Option
Plan may be paid currently or be deemed to be reinvested in additional shares of
common stock, which may thereafter accrue additional dividend equivalent rights
at fair market value at the time of deemed reinvestment or on the terms then
governing the reinvestment of dividends under our dividend reinvestment 2000
Option Plan, if any. Dividend equivalent rights may be settled in cash, shares
of common stock or a combination thereof, in a single installment or
installments, as specified in the award.
DEFERRED STOCK AWARDS. The Administrator may also award phantom stock units
as deferred stock awards to participants. The deferred stock awards are
ultimately payable in the form of shares of common stock and may be subject to
such conditions and restrictions as the Administrator may determine. These
conditions and restrictions may include the achievement of certain performance
goals and/or continued employment with The Company through a specified vesting
period. During the deferral period, subject to terms and conditions imposed by
the Administrator, the deferred stock awards may be credited with dividend
equivalent rights. Subject to the consent of the Administrator, a participant
may make an advance election to receive a portion of his or her compensation or
restricted stock award otherwise due in the form of a deferred stock award.
PERFORMANCE SHARE AWARDS. The Administrator may grant performance share
awards to any participant which entitle the recipient to receive shares of
common stock upon the achievement of individual or company performance goals and
such other conditions as the Administrator shall determine.
CHANGE OF CONTROL PROVISIONS. The 2000 Option Plan provides that in the
event of a "change of control" as defined in the 2000 Option Plan, all stock
options and stock appreciation rights will automatically become fully
exercisable, unless otherwise provided in the award agreement. The restrictions
and conditions on all other awards will automatically be deemed waived, unless
otherwise provided in the award agreement.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, ETC. The 2000 Option Plan
authorizes the Administrator to make appropriate adjustments to the number of
shares of common stock that are subject to the 2000 Option Plan and to any
outstanding stock options to reflect stock dividends, stock splits and similar
events. In the event of certain transactions, such as a merger, consolidation,
dissolution or liquidation of the Company, the Board of Directors in its
discretion may provide for appropriate substitutions or adjustments of
outstanding stock options or awards. Alternatively, outstanding stock options
and awards will automatically be fully exercisable.
AMENDMENTS AND TERMINATION. The Board of Directors may at any time amend or
discontinue the 2000 Option Plan and the Administrator may at any time amend or
cancel any outstanding award for the purpose of satisfying changes in law or for
any other lawful purpose, but no such action shall adversely affect the rights
under any outstanding awards without the holder's consent. To the extent
required by the Code to ensure that options granted under the amended and
restated 2000 Option Plan qualify as Incentive Options or that compensation
earned under stock options granted under the 2000 Option Plan qualify as
performance-based compensation under the Code, 2000 Option Plan amendments shall
be subject to approval by our stockholders.
15
NEW 2000 OPTION PLAN BENEFITS
No grants have been made with respect to the additional shares of common
stock reserved for issuance under the 2000 Option Plan. The number of shares of
common stock that may be granted to executive officers and non-executive
officers is indeterminable at this time, as such grants are subject to the
discretion of the Administrator.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal federal income tax consequences
of transactions under the 2000 Option Plan. It does not describe all federal tax
consequences under the 2000 Option Plan, nor does it describe state or local tax
consequences.
INCENTIVE OPTIONS. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of common stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to the
optionee as a long-term capital gain, and any loss sustained will be a long-term
capital loss, and (iii) there will be no deduction for the Company for federal
income tax purposes. The exercise of an Incentive Option will give rise to an
item of tax preference that may result in alternative minimum tax liability for
the optionee.
If shares of common stock acquired upon the exercise of an Incentive Option
are disposed of prior to the expiration of the two-year and one-year holding
periods described above (a "disqualifying disposition"), generally (i) the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares of common
stock at exercise (or, if less, the amount realized on a sale of such shares of
common stock) over the option price thereof, and (ii) the Company will be
entitled to deduct such amount. Special rules will apply where all or a portion
of the exercise price of the Incentive Option is paid by tendering shares of
common stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment scribed above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.
NON-QUALIFIED OPTIONS. With respect to Non-Qualified Options under the 2000
Option Plan, no income is realized by the optionee at the time the option is
granted. Generally (i) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares of common stock on the date of exercise, and the
Company receives a tax deduction for the same amount, and (ii) at disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss, depending on how long the shares
of common stock have been held. Special rules will apply where all or a portion
of the exercise price of the Non-Qualified Option is paid by tendering shares of
common stock.
PARACHUTE PAYMENTS. The vesting of any portion of any option or other award
that is accelerated due to the occurrence of a change of control may cause a
portion of the payments with respect to such accelerated awards to be treated as
"parachute payments" as defined in the Code. Any such parachute payments may be
non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% federal excise tax on all or a portion of such
payment (in addition to other taxes ordinarily payable).
16
LIMITATIONS ON THE COMPANY'S DEDUCTIONS. As a result of Section 162(m) of
the code, the Company's deduction for certain awards under the 2000 Option Plan
may be limited to the extent that a Covered Employee receives compensation in
excess of $1,000,000 in such taxable year of the Company (other than
performance-based compensation that otherwise meets the requirements of
Section 162(m) of the Code).
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
"FOR" THE AMENDMENT TO THE COMPANY'S 2000 STOCK OPTION AND INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER
TO 2,800,000.
ITEM 4--RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Independent Public Accountants, and its predecessors
have been the auditor of the Company for the past twenty-five years. Management
of the Company has appointed Arthur Andersen LLP as auditor of the Company until
the next Annual Meeting of Stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors engaged Arthur Andersen LLP, Independent Public
Accountants, to serve as the Company's independent public accountants for the
fiscal year ended December 31, 2000. A representative of Arthur Andersen LLP is
expected to be present at the Meeting, will have an opportunity to make a
statement if he or she desires to do so, and will be available to answer
appropriate questions.
AUDIT FEES
The Company estimates that the aggregate fees billed by its independent
auditors for professional services rendered in connection with (i) the audit of
the Company's annual financial statements set forth in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2000, and (ii) the review
of the Company's quarterly financial statements set forth in the Company's
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000, were approximately $123,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Arthur Andersen LLP provided no professional services of this nature to the
Company in fiscal 2000.
ALL OTHER FEES
The Company estimates that the aggregate fees for all other services
rendered by its independent auditors for the Company's most recent fiscal year
equal approximately $34,000. These fees include work performed by the
independent auditors with respect to tax compliance and advisory services, and
financial accounting advisory services.
The Audit Committee has advised the Company that it has determined that the
non-audit services rendered by the Company's independent auditors during the
Company's most recent fiscal year are compatible with maintaining the
independence of such auditors.
ITEM 5--OTHER MATTERS
Management does not know of any other matters to come before the Meeting
other than as set forth in the Notice of Special Meeting in Lieu of an Annual
Meeting of Stockholders and this proxy statement. If other matters are
presented, proxies will be voted in accordance with the best judgment of the
proxy holder.
17
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
For a proposal of a stockholder (including Director nominations) submitted
pursuant to Exchange Act Rule 14a-8 to be included in the Company's proxy
statement and proxy card for the Company's 2002 Annual Meeting of Stockholders,
it must be received at the principal offices of the Company on or before
December 19, 2001. Such a proposal must also comply with the requirements as to
form and substance established by the SEC for such a proposal to be included in
the proxy statement. Proxies solicited by the Board of Directors will confer
discretionary voting authority with respect to stockholder proposals, other than
proposals to be considered for inclusion in the Company's proxy Statement
described above, that the Company receives at its principal offices after
December 19, 2001. These proxies will also confer discretionary voting authority
with respect to stockholder proposals, other than proposals to be considered for
inclusion in the Company's proxy Statement described above, that the Company
receives on or before December 19, 2001, subject to SEC rules governing the
exercise of this authority.
EXPENSE OF SOLICITATION
The Company will bear the expense of this solicitation. It is expected that
the solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom shall receive any extra
compensation for their activities) may also solicit proxies by telephone,
facsimile, or other form of electronic communication and in person and arrange
for intermediaries to send this proxy statement and proxy card to their
principals at the expense of the Company.
DIRECTORS' APPROVAL
The contents of this proxy statement have been approved and its mailing has
been authorized by the Directors of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Gary B. Godin, Clerk
April 18, 2001
18
APPENDIX A
STOCKERYALE, INC.
AUDIT COMMITTEE CHARTER
I. GENERAL STATEMENT OF PURPOSE
The Audit Committee of the Board of Directors (the "Audit Committee") of
StockerYale, Inc. (the "Company") assists the Board of Directors (the "Board")
in general oversight and monitoring of management's and the independent
auditor's participation in the Company's financial reporting process and of the
Company's procedures for compliance with legal and regulatory requirements. The
primary objective of the Audit Committee in fulfilling these responsibilities is
to promote and preserve the integrity of the Company's financial statements and
the independence and performance of the Company's external independent auditor.
II. AUDIT COMMITTEE COMPOSITION
The Audit Committee shall consist of at least three members who shall be
appointed annually by the Board and shall satisfy the qualification requirements
set forth in Rule 4310 of the Marketplace Rules of the National Association of
Securities Dealers, Inc. The Board shall designate one member of the Audit
Committee to be Chairman of the committee.
III. MEETINGS
The Audit Committee generally is to meet two times per year in person or by
telephone conference call, with any additional meetings as deemed necessary by
the Audit Committee.
IV. AUDIT COMMITTEE ACTIVITIES
The principal activities of the Audit Committee will generally include the
following:
A. REVIEW OF CHARTER
- Review and reassess the adequacy of this Charter annually and submit it
to the Board for approval.
B. AUDITED FINANCIAL STATEMENTS AND ANNUAL AUDIT
- Review the overall audit plan (both external and internal) with the
independent auditor and the members of management who are responsible
for maintaining the Company's accounts and preparing the Company's
financial statements, including the Company's Chief Financial Officer
and/or principal accounting officer or principal financial officer (the
Chief Financial Officer and such other officer or officers are referred
to herein collectively as the "Senior Accounting Executive").
- Review and discuss with management (including the Company's Senior
Accounting Executive) and with the independent auditor:
(i) the Company's annual audited financial statements, including
any significant financial reporting issues which have arisen in
connection with the preparation of such audited financial
statements;
(ii) the adequacy of the Company's internal financial reporting
controls that could significantly affect the integrity of the
Company's financial statements;
A-1
(iii) major changes in and other questions regarding accounting and
auditing principles and procedures; and
(iv) the effectiveness of the Company's internal audit process
(including evaluations of its Senior Accounting Executive and
any other relevant personnel).
- Review and discuss with the independent auditor (outside of the
presence of management) how the independent auditor plans to handle its
responsibilities under the Private Securities Litigation Reform Act of
1995, and receive assurance from the auditor that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been
implicated.
- Review and discuss with the independent auditor (outside of the
presence of management) any problems or difficulties that the auditor
may have encountered with management or others and any management
letter provided by the auditor and the Company's response to that
letter. This review shall include considering:
(i) any difficulties encountered by the auditor in the course of
performing its audit work, including any restrictions on the
scope of its activities or its access to information; and
(ii) any changes required by the auditor in the scope or
performance of the Company's internal audit.
- Review and discuss major changes to the Company's auditing and
accounting principles and practices as may be suggested by the
independent auditor or management.
- Discuss with the independent auditor such issues as may be brought to
the Audit Committee's attention by the independent auditor pursuant to
Statement on Auditing Standards No. 61 ("SAS 61").
- Based on the Audit Committee's review and discussions (1) with
management of the audited financial statements, (2) with the
independent auditor of the matters required to be discussed by SAS 61,
and (3) with the independent auditor's concerning the independent
auditor's independence, make a recommendation to the Board as to
whether the Company's audited financial statements should be included
in the Company's annual Report on Form 10-K.
- Request that the independent auditor provide the Audit Committee with
the written disclosures and the letter required by Independence
Standards Board Standard No. 1, and review and discuss with the
independent auditor the independent auditor's independence.
- Prepare the Audit Committee report required by Item 306 of
Regulation S-K of the Securities Exchange Act of 1934 (or any successor
provision) to be included in the Company's annual proxy statement.
C. UNAUDITED QUARTERLY FINANCIAL STATEMENTS
- Review and discuss with management and the independent auditor such
issues as may be brought to the Chairman's or Audit Committee's
attention by the independent auditor pursuant to Statement on Auditing
Standards No. 71.
D. MATTERS RELATING TO SELECTION, PERFORMANCE AND INDEPENDENCE OF
INDEPENDENT AUDITOR
- Recommend to the Board the appointment of the independent auditor.
- Instruct the independent auditor that the independent auditor's
ultimate accountability is to the Board and the Audit Committee as
representatives of the Company's shareholders.
A-2
- Evaluate on an annual basis the performance of the independent auditor
and, if necessary in the judgement of the Audit Committee, recommend
that the Board replace the independent auditor.
- Recommend to the Board on an annual basis the fees to be paid to the
independent auditor.
- Require that the independent auditor provide the Audit Committee with
periodic reports regarding the auditor's independence, which reports
shall include but not be limited to a formal written statement setting
forth all relationships between the independent auditor and the Company
or any of its officers or directors. The Audit Committee shall discuss
such reports with the independent auditor, and if necessary in the
judgment of the Audit Committee, the committee shall recommend that the
Board take appropriate action to ensure the independence of the auditor
or replace the auditor.
E. MATTERS RELATING TO THE INDEPENDENCE OF THE AUDIT COMMITTEE
- Periodically review the independence of each member of the Audit
Committee and promptly bring to the attention of management and the
Board any relationships or other matters that may in any way compromise
or adversely affect the independence of any member of the Audit
Committee or any member's ability to assist the Audit Committee in
fulfilling its responsibilities under this Charter, including any such
relationship or other matter that may have caused or may in the future
cause the Company to fail to comply with the requirements set forth in
Rule 4310 of the Marketplace Rules of the National Association of
Securities Dealers, Inc.
F. GENERAL
- The Audit Committee may be requested by the Board to review or
investigate on behalf of the Board activities of the Company or of its
employees, including compliance with laws, regulations or Company
policies.
- Perform such other oversight functions as may be requested by the
Board.
- In performing its responsibilities, the Audit Committee shall be
entitled to rely upon advice and information that it receives in its
discussions and communications with management and the independent
auditor. The Audit Committee shall have the authority to retain special
legal, accounting or other professionals to render advice to the
committee. The Audit Committee shall have the authority to request that
any officer or employee of the Company, the Company's outside legal
counsel, the Company's independent auditor or any other professional
retained by the Company to render advice to the Company attend a
meeting of the Audit Committee or meet with any members of or advisors
to the Audit Committee.
- Notwithstanding the responsibilities and powers of the Audit Committee
set forth in this Charter, the Audit Committee does not have the
responsibility of planning or conducting audits of the Company's
financial statements or determining whether or not the Company's
financial statements are complete, accurate and in accordance with
generally accepted accounting principles. Such responsibilities are the
duty of management and, to the extent of the independent auditor's
audit responsibilities, the independent auditor. It also is not the
duty of the Audit Committee to resolve disagreements, if any, between
management and the independent auditor or to ensure compliance with
laws, regulations or Company policies.
A-3
APPENDIX B
STOCKERYALE, INC.
2000 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the StockerYale 2000 Stock Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, Independent Directors and other key persons
(including consultants) of StockerYale, Inc. (the "Company") and its
Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts
on the Company's behalf and strengthening their desire to remain with the
Company.
The following terms shall be defined as set forth below:
"ACT" means the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"ADMINISTRATOR" is defined in Section 2(a).
"AWARD" or "AWARDS," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted
Stock Awards, Unrestricted Stock Awards, Performance Share Awards and
Dividend Equivalent Rights.
"BOARD" means the Board of Directors of the Company.
"CHANGE OF CONTROL" is defined in Section 17.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"COMMITTEE" means the Committee of the Board referred to in Section
2.
"COVERED EMPLOYEE" means an employee who is a "Covered Employee"
within the meaning of Section 162(m) of the Code.
1
APPENDIX B
"DEFERRED STOCK AWARD" means Awards granted pursuant to Section 8.
"DIVIDEND EQUIVALENT RIGHT" means Awards granted pursuant to Section
12.
"EFFECTIVE DATE" means the date on which the Plan is approved by
stockholders as set forth in Section 19.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"FAIR MARKET VALUE" of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Administrator;
provided, however, that if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"),
NASDAQ National System, NASDAQ Over the Counter Market or a national
securities exchange, the determination shall be made by reference to market
quotations. If there are no market quotations for such date, the
determination shall be made by reference to the last date preceding such date
for which there are market quotations.
"INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"INDEPENDENT DIRECTOR" means a member of the Board who is not also
an employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
"OPTION" or "STOCK OPTION" means any option to purchase shares of
Stock granted pursuant to Section 5.
"PERFORMANCE SHARE AWARD" means Awards granted pursuant to Section
10.
"PERFORMANCE CYCLE" means one or more periods of time, which may be
of varying and overlapping durations, as the Administrator may select, over
which the attainment of one or more performance criteria will be measured for
the purpose of determining a grantee's right to and the payment of a
Performance Share Award, Restricted Stock Award or Deferred Stock Award.
"RESTRICTED STOCK AWARD" means Awards granted pursuant to Section 7.
"STOCK" means the Common Stock, par value $.001 per share, of the
Company, subject to adjustments pursuant to Section 3.
2
APPENDIX B
"STOCK APPRECIATION RIGHT" means any Award granted pursuant to
Section 6.
"SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning
with the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
"UNRESTRICTED STOCK AWARD" means any Award granted pursuant to
Section 9.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO
SELECT GRANTEES AND DETERMINE AWARDS
(a) COMMITTEE. The Plan shall be administered by either the Board or
a committee of not less than two Independent Directors (in either case, the
"Administrator").
(b) POWERS OF ADMINISTRATOR. The Administrator shall have the power
and authority to grant Awards consistent with the terms of the Plan,
including the power and authority:
(i) to select the individuals to whom Awards may from time to
time be granted;
(ii) to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Deferred Stock Awards,
Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights, or any combination of the foregoing, granted to any
one or more grantees;
(iii) to determine the number of shares of Stock to be covered
by any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of
the Plan, of any Award, which terms and conditions may differ among
individual Awards and grantees, and to approve the form of written
instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of
all or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend
at any time the period in which Stock Options may be exercised;
3
APPENDIX B
(vii) to determine at any time whether, to what extent, and
under what circumstances distribution or the receipt of Stock and other
amounts payable with respect to an Award shall be deferred either
automatically or at the election of the grantee and whether and to what
extent the Company shall pay or credit amounts constituting interest
(at rates determined by the Administrator) or dividends or deemed
dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules,
guidelines and practices for administration of the Plan and for its own
acts and proceedings as it shall deem advisable; to interpret the terms
and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration
of the Plan.
All decisions and interpretations of the Administrator shall be
binding on all persons, including the Company and Plan grantees.
(c) DELEGATION OF AUTHORITY TO GRANT AWARDS. The Administrator, in
its discretion, may delegate to the Chief Executive Officer of the Company
all or part of the Administrator's authority and duties with respect to the
granting of Awards at Fair Market Value, to individuals who are not subject
to the reporting and other provisions of Section 16 of the Exchange Act or
"covered employees" within the meaning of Section 162(m) of the Code. Any
such delegation by the Administrator shall include a limitation as to the
amount of Awards that may be granted during the period of the delegation and
shall contain guidelines as to the determination of the exercise price of any
Stock Option or Stock Appreciation Right, the conversion ratio or price of
other Awards and the vesting criteria. The Administrator may revoke or amend
the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Administrator's delegate or delegates that were
consistent with the terms of the Plan.
(d) INDEMNIFICATION. Neither the Board nor the Committee, nor any
member of either or any delegatee thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith in
connection with the Plan, and the members of the Board and the Committee (and
any delegatee thereof) shall be entitled in all cases to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, reasonable attorneys' fees) arising or
resulting therefrom to the fullest extent permitted by law and/or under any
directors' and officers' liability insurance coverage which may be in effect
from time to time.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) STOCK ISSUABLE. The maximum number of shares of Stock reserved
and available for issuance under the Plan shall be 800,000 shares, subject to
adjustment as provided in
4
APPENDIX B
Section 3(b); provided that not more than 200,000 shares shall be issued in
the form of Unrestricted Stock Awards, Restricted Stock Awards, or
Performance Share Awards except to the extent such Awards are granted in lieu
of cash compensation or fees. For purposes of this limitation, the shares of
Stock underlying any Awards under this Plan or the Company's 1996 Stock
Option and Incentive Plan which are forfeited, canceled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated
(other than by exercise) shall be added back to the shares of Stock available
for issuance under this Plan. Subject to such overall limitation, shares of
Stock may be issued up to such maximum number pursuant to any type or types
of Award; provided, however, that Stock Options or Stock Appreciation Rights
with respect to no more than 200,000 shares of Stock may be granted to any
one individual grantee during any one calendar year period. The shares
available for issuance under the Plan may be authorized but unissued shares
of Stock or shares of Stock reacquired by the Company and held in its
treasury.
(b) CHANGES IN STOCK. Subject to Section 3(c) hereof, if, as a
result of any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in the
Company's capital stock, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different shares or
other securities of the Company or other non-cash assets are distributed with
respect to such shares of Stock or other securities, or, if, as a result of
any merger or consolidation, sale of all or substantially all of the assets
of the Company, the outstanding shares of Stock are converted into or
exchanged for a different number or kind of securities of the Company or any
successor entity (or a parent or subsidiary thereof), the Administrator shall
make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, including the maximum number of
shares that may be issued in the form of Unrestricted Stock Awards,
Restricted Stock Awards or Performance Share Awards, (ii) the number of Stock
Options or Stock Appreciation Rights that can be granted to any one
individual grantee and the maximum number of shares that may be granted under
a Performance-based Award, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, (iv) the
repurchase price per share subject to each outstanding Restricted Stock
Award, and (v) the price for each share subject to any then outstanding Stock
Options and Stock Appreciation Rights under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number
of Stock Options and Stock Appreciation Rights) as to which such Stock
Options and Stock Appreciation Rights remain exercisable. The adjustment by
the Administrator shall be final, binding and conclusive. No fractional
shares of Stock shall be issued under the Plan resulting from any such
adjustment, but the Administrator in its discretion may make a cash payment
in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards
to take into consideration material changes in accounting practices or
principles, extraordinary dividends, acquisitions or dispositions of stock or
property or any other event if it is determined by the Administrator
5
APPENDIX B
that such adjustment is appropriate to avoid distortion in the operation of
the Plan, provided that no such adjustment shall be made in the case of an
Incentive Stock Option, without the consent of the grantee, if it would
constitute a modification, extension or renewal of the Option within the
meaning of Section 424(h) of the Code.
(c) MERGERS AND OTHER TRANSACTIONS. In the case of and subject to
the consummation of (i) the dissolution or liquidation of the Company, (ii)
the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger,
reorganization or consolidation in which the outstanding shares of Stock are
converted into or exchanged for a different kind of securities of the
successor entity and the holders of the Company's outstanding voting power
immediately prior to such transaction do not own a majority of the
outstanding voting power of the successor entity immediately upon completion
of such transaction, or (iv) the sale of all of the Stock of the Company to
an unrelated person or entity (in each case, a "Sale Event"), all Options and
Stock Appreciation Rights that are not exercisable immediately prior to the
effective time of the Sale Event shall become fully exercisable as of the
effective time of the Sale Event and all other Awards with conditions and
restrictions relating solely to the passage of time and continued employment
shall become fully vested and nonforfeitable as of the effective time of the
Sale Event, except as the Administrator may otherwise specify with respect to
particular Awards. Upon the effective time of the Sale Event, the Plan and
all outstanding Awards granted hereunder shall terminate, unless provision is
made in connection with the Sale Event in the sole discretion of the parties
thereto for the assumption or continuation of Awards theretofore granted by
the successor entity, or the substitution of such Awards with new Awards of
the successor entity or parent thereof, with appropriate adjustment as to the
number and kind of shares and, if appropriate, the per share exercise prices,
as such parties shall agree (after taking into account any acceleration
hereunder). In the event of such termination, each grantee shall be
permitted, within a specified period of time prior to the consummation of the
Sale Event as determined by the Administrator, to exercise all outstanding
Options and Stock Appreciation Rights held by such grantee, including those
that will become exercisable upon the consummation of the Sale Event;
provided, however, that the exercise of Options and Stock Appreciation Rights
not exercisable prior to the Sale Event shall be subject to the consummation
of the Sale Event.
Notwithstanding anything to the contrary in this Section 3.2(c), in
the event of a Sale Event pursuant to which holders of the Stock of the
Company will receive upon consummation thereof a cash payment for each share
surrendered in the Sale Event, the Company shall have the right, but not the
obligation, to make or provide for a cash payment to the grantees holding
Options and Stock Appreciation Rights, in exchange for the cancellation
thereof, in an amount equal to the difference between (A) the value as
determined by the Administrator of the consideration payable per share of
Stock pursuant to the Sale Event (the "Sale Price") times the number of
shares of Stock subject to outstanding Options and Stock Appreciation Rights
(to the extent then exercisable at prices not in excess of the Sale Price)
and (B) the aggregate exercise price of all such outstanding Options and
Stock Appreciation Rights.
6
APPENDIX B
(d) SUBSTITUTE AWARDS. The Administrator may grant Awards under the
Plan in substitution for stock and stock based awards held by employees,
directors or other key persons of another corporation in connection with the
merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the
Administrator considers appropriate in the circumstances. Any substitute
Awards granted under the Plan shall not count against the share limitation
set forth in Section 3(a).
SECTION 4. ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and
other employees, Independent Directors and key persons (including consultants
and prospective employees) of the Company and its Subsidiaries as are
selected from time to time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non- Qualified Stock Options. Incentive Stock Options may be
granted only to employees of the Company or any Subsidiary that is a
"subsidiary corporation" within the meaning of Section 424(f) of the Code. To
the extent that any Option does not qualify as an Incentive Stock Option, it
shall be deemed a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after May
31, 2010.
(a) STOCK OPTIONS GRANTED TO EMPLOYEES AND KEY PERSONS. The
Administrator in its discretion may grant Stock Options to eligible employees
and key persons of the Company or any Subsidiary. Stock Options granted
pursuant to this Section 5(a) shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable. If the Administrator so determines, Stock Options may be granted
in lieu of cash compensation at the optionee's election, subject to such
terms and conditions as the Administrator may establish.
(i) EXERCISE PRICE. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall
be determined by the Administrator at the time of grant but shall not
be less than 100 percent of the Fair Market Value on the date of grant
in the case of Incentive Stock Options, or 85 percent of the Fair
Market Value on the date of grant, in the case of Non-Qualified Stock
Options (other than options granted in lieu of cash compensation). If
an employee
7
APPENDIX B
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10 percent of the combined voting power
of all classes of stock of the Company or any parent or subsidiary
corporation and an Incentive Stock Option is granted to such employee,
the option price of such Incentive Stock Option shall be not less than
110 percent of the Fair Market Value on the grant date.
(ii) OPTION TERM. The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more
than 10 years after the date the Stock Option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such
employee, the term of such Stock Option shall be no more than five
years from the date of grant.
(iii) EXERCISABILITY; RIGHTS OF A STOCKHOLDER. Stock Options
shall become exercisable at such time or times, whether or not in
installments, as shall be determined by the Administrator at or after
the grant date. The Administrator may at any time accelerate the
exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a stockholder only as to shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.
(iv) METHOD OF EXERCISE. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods to
the extent provided in the Option Award agreement:
(A) In cash, by certified or bank check or other
instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the
ownership) of shares of Stock that have been purchased by the
optionee on the open market or that have been beneficially
owned by the optionee for at least six months and are not then
subject to restrictions under any Company plan. Such
surrendered shares shall be valued at Fair Market Value on the
exercise date; or
(C) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure.
8
APPENDIX B
(D) By the optionee delivering to the Company a
promissory note if the Board has expressly authorized the loan
of funds to the optionee for the purpose of enabling or
assisting the optionee to effect the exercise of his Stock
Option; provided that at least so much of the exercise price
as represents the par value of the Stock shall be paid other
than with a promissory note if otherwise required by state
law.
Payment instruments will be received subject to collection. The
delivery of certificates representing the shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent
upon receipt from the optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of
the full purchase price for such shares and the fulfillment of any
other requirements contained in the Option Award agreement or
applicable provisions of laws. In the event an optionee chooses to pay
the purchase price by previously-owned shares of Stock through the
attestation method, the number of shares of Stock transferred to the
optionee upon the exercise of the Stock Option shall be net of the
number of shares attested to.
(v) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
required for "incentive stock option" treatment under Section 422 of
the Code, the aggregate Fair Market Value (determined as of the time of
grant) of the shares of Stock with respect to which Incentive Stock
Options granted under this Plan and any other plan of the Company or
its parent and subsidiary corporations become exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000.
To the extent that any Stock Option exceeds this limit, it shall
constitute a Non-Qualified Stock Option.
(b) RELOAD OPTIONS. At the discretion of the Administrator, Options
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock
in accordance with Section 5(a)(iv)(B) hereof would automatically be granted
an additional Option (with an exercise price equal to the Fair Market Value
of the Stock on the date the additional Option is granted and with such other
terms as the Administrator may provide) to purchase that number of shares of
Stock equal to the sum of (i) the number delivered to exercise the original
Option and (ii) the number withheld to satisfy tax liabilities, with an
Option term equal to the remainder of the original Option term unless the
Administrator otherwise determines in the Award agreement for the original
Option grant.
(c) STOCK OPTIONS GRANTED TO INDEPENDENT DIRECTORS.
(i) AUTOMATIC GRANT OF OPTIONS.
(A) Each Independent Director who is serving as
Director of the Company on the fifth business day after each
annual meeting of shareholders,
9
APPENDIX B
beginning with the 2000 annual meeting, shall automatically be
granted on such day a Non-Qualified Stock Option to acquire
4,000 shares of Stock.
(B) The exercise price per share for the Stock
covered by a Stock Option granted under this Section 5(c)
shall be equal to the Fair Market Value of the Stock on the
date the Stock Option is granted.
(C) The Administrator, in its discretion, may grant
additional Non- Qualified Stock Options to Independent
Directors. Any such grant may vary among individual
Independent Directors.
(D) Any automatic grant of Options to an Independent
Director under this Section 5(c) shall be made in lieu of any
automatic grant options to such Independent Director under the
Company's 1996 Stock Option and Incentive Plan.
(ii) EXERCISE; TERMINATION.
(A) Unless otherwise determined by the Administrator,
an Option granted under Section 5(c) shall be exercisable
after the second anniversary of the grant date. An Option
issued under this Section 5(c) shall not be exercisable after
the expiration of ten years from the date of grant.
(B) Options granted under this Section 5(c) may be
exercised only by written notice to the Company specifying the
number of shares to be purchased. Payment of the full purchase
price of the shares to be purchased may be made by one or more
of the methods specified in Section 5(a)(iv). An optionee
shall have the rights of a stockholder only as to shares
acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(d) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee, or by the optionee's legal
representative or guardian in the event of the optionee's incapacity.
Notwithstanding the foregoing, the Administrator, in its sole discretion, may
provide in the Award agreement regarding a given Option that the optionee may
transfer his Non-Qualified Stock Options to members of his immediate family,
to trusts for the benefit of such family members, or to partnerships in which
such family members are the only partners, provided that the transferee
agrees in writing with the Company to be bound by all of the terms and
conditions of this Plan and the applicable Option.
10
APPENDIX B
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
is an Award entitling the recipient to receive an amount in cash or shares of
Stock or a combination thereof having a value equal to the excess of the Fair
Market Value of the Stock on the date of exercise over the exercise price
Stock Appreciation Right, which price shall not be less than 85 percent of
the Fair Market Value of the Stock on the date of grant (or more than the
option exercise price per share, if the Stock Appreciation Right was granted
in tandem with a Stock Option) multiplied by the number of shares of Stock
with respect to which the Stock Appreciation Right shall have been exercised,
with the Administrator having the right to determine the form of payment.
(b) GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS. Stock
Appreciation Rights may be granted by the Administrator in tandem with, or
independently of, any Stock Option granted pursuant to Section 5 of the Plan.
In the case of a Stock Appreciation Right granted in tandem with a
Non-Qualified Stock Option, such Stock Appreciation Right may be granted
either at or after the time of the grant of such Option. In the case of a
Stock Appreciation Right granted in tandem with an Incentive Stock Option,
such Stock Appreciation Right may be granted only at the time of the grant of
the Option.
A Stock Appreciation Right or applicable portion thereof granted in
tandem with a Stock Option shall terminate and no longer be exercisable upon
the termination or exercise of the related Option.
(c) TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Administrator, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options
shall be exercisable at such time or times and to the extent that the
related Stock Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the
applicable portion of any related Option shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable
during the grantee's lifetime only by the grantee or the grantee's
legal representative.
SECTION 7. RESTRICTED STOCK AWARDS
(a) NATURE OF RESTRICTED STOCK AWARDS. A Restricted Stock Award is
an Award entitling the recipient to acquire, at such purchase price as
determined by the Administrator, shares of Stock subject to such restrictions
and conditions as the Administrator may determine
11
APPENDIX B
at the time of grant ("Restricted Stock"). Conditions may be based on
continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Restricted
Stock Award is contingent on the grantee executing the Restricted Stock Award
agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ
among individual Awards and grantees.
(b) RIGHTS AS A STOCKHOLDER. Upon execution of a written instrument
setting forth the Restricted Stock Award and payment of any applicable
purchase price, a grantee shall have the rights of a stockholder with respect
to the voting of the Restricted Stock, subject to such conditions contained
in the written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the
Restricted Stock shall remain in the possession of the Company until such
Restricted Stock is vested as provided in Section 7(d) below, and the grantee
shall be required, as a condition of the grant, to deliver to the Company a
stock power endorsed in blank.
(c) RESTRICTIONS. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. If a
grantee's employment (or other service relationship) with the Company and its
Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the grantee or the grantee's legal
representative.
(d) VESTING OF RESTRICTED STOCK. The Administrator at the time of
grant shall specify the date or dates and/or the attainment of
pre-established performance goals, objectives and other conditions on which
the non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and
other conditions, the shares on which all restrictions have lapsed shall no
longer be Restricted Stock and shall be deemed "vested." Except as may
otherwise be provided by the Administrator either in the Award agreement or,
subject to Section 15 below, in writing after the Award agreement is issued,
a grantee's rights in any shares of Restricted Stock that have not vested
shall automatically terminate upon the grantee's termination of employment
(or other service relationship) with the Company and its Subsidiaries and
such shares shall be subject to the Company's right of repurchase as provided
in Section 7(c) above.
(e) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The Restricted
Stock Award agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.
12
APPENDIX B
SECTION 8. DEFERRED STOCK AWARDS
(a) NATURE OF DEFERRED STOCK AWARDS. A Deferred Stock Award is an
Award of phantom stock units to a grantee, subject to restrictions and
conditions as the Administrator may determine at the time of grant.
Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the grantee
executing the Deferred Stock Award agreement. The terms and conditions of
each such agreement shall be determined by the Administrator, and such terms
and conditions may differ among individual Awards and grantees. At the end of
the deferral period, the Deferred Stock Award, to the extent vested, shall be
paid to the grantee in the form of shares of Stock.
(b) ELECTION TO RECEIVE DEFERRED STOCK AWARDS IN LIEU OF
COMPENSATION. The Administrator may, in its sole discretion, permit a grantee
to elect to receive a portion of the cash compensation or Restricted Stock
Award otherwise due to such grantee in the form of a Deferred Stock Award.
Any such election shall be made in writing and shall be delivered to the
Company no later than the date specified by the Administrator and in
accordance with rules and procedures established by the Administrator. The
Administrator shall have the sole right to determine whether and under what
circumstances to permit such elections and to impose such limitations and
other terms and conditions thereon as the Administrator deems appropriate.
(c) RIGHTS AS A STOCKHOLDER. During the deferral period, a grantee
shall have no rights as a stockholder; provided, however, that the grantee
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Administrator may determine.
(d) RESTRICTIONS. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the
deferral period.
(e) TERMINATION. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below,
in writing after the Award agreement is issued, a grantee's right in all
Deferred Stock Awards that have not vested shall automatically terminate upon
the grantee's termination of employment (or cessation of service
relationship) with the Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
GRANT OR SALE OF UNRESTRICTED STOCK. The Administrator may, in its
sole discretion, grant (or sell at par value or such higher purchase price
determined by the Administrator) an Unrestricted Stock Award to any grantee
pursuant to which such grantee may receive shares of Stock free of any
restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock
13
APPENDIX B
Awards may be granted in respect of past services or other valid
consideration, or in lieu of cash compensation due to such grantee.
SECTION 10. PERFORMANCE SHARE AWARDS
(a) NATURE OF PERFORMANCE SHARE AWARDS. A Performance Share Award is
an Award entitling the recipient to acquire shares of Stock upon the
attainment of specified performance goals. The Administrator may make
Performance Share Awards independent of or in connection with the granting of
any other Award under the Plan. The Administrator in its sole discretion
shall determine whether and to whom Performance Share Awards shall be made,
the performance goals, the periods during which performance is to be
measured, and all other limitations and conditions.
(b) RIGHTS AS A STOCKHOLDER. A grantee receiving a Performance Share
Award shall have the rights of a stockholder only as to shares actually
received by the grantee under the Plan and not with respect to shares subject
to the Award but not actually received by the grantee. A grantee shall be
entitled to receive a stock certificate evidencing the acquisition of shares
of Stock under a Performance Share Award only upon satisfaction of all
conditions specified in the Performance Share Award agreement (or in a
performance plan adopted by the Administrator).
(c) TERMINATION. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below,
in writing after the Award agreement is issued, a grantee's rights in all
Performance Share Awards shall automatically terminate upon the grantee's
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.
(d) ACCELERATION, WAIVER, ETC. At any time prior to the grantee's
termination of employment (or other service relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate,
waive or, subject to Section 15, amend any or all of the goals, restrictions
or conditions applicable to a Performance Share Award.
SECTION 11. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award
granted to a Covered Employee is intended to qualify as "Performance-based
Compensation" under Section 162(m) of the Code and the regulations
promulgated thereunder (a "Performance-based Award"), such Award shall comply
with the provisions set forth below:
(a) PERFORMANCE CRITERIA. The performance criteria used in
performance goals governing Performance-based Awards granted to Covered
Employees may include any or all of the following: (i) the Company's return
on equity, assets, capital or investment, (ii) pre-tax or
14
APPENDIX B
after-tax profit levels of the Company or any Subsidiary, a division, an
operating unit or a business segment of the Company, or any combination of
the foregoing; (iii) cash flow, funds from operations or similar measure;
(iv) total shareholder return; (v) changes in the market price of the Stock;
(vi) sales or market share; or (vii) earnings per share.
(b) GRANT OF PERFORMANCE-BASED AWARDS. With respect to each
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter,
within the maximum period allowed under Section 162(m) of the Code) the
performance criteria for such grant, and the achievement targets with respect
to each performance criterion (including a threshold level of performance
below which no amount will become payable with respect to such Award). Each
Performance-based Award will specify the amount payable, or the formula for
determining the amount payable, upon achievement of the various applicable
performance targets. The performance criteria established by the Committee
may be (but need not be) different for each Performance Cycle and different
goals may be applicable to Performance-based Awards to different Covered
Employees.
(c) PAYMENT OF PERFORMANCE-BASED AWARDS. Following the completion of
a Performance Cycle, the Committee shall meet to review and certify in
writing whether, and to what extent, the performance criteria for the
Performance Cycle have been achieved and, if so, to also calculate and
certify in writing the amount of the Performance-based Awards earned for the
Performance Cycle. The Committee shall then determine the actual size of each
Covered Employee's Performance-based Award, and, in doing so, may reduce or
eliminate the amount of the Performance-based Award for a Covered Employee
if, in its sole judgment, such reduction or elimination is appropriate.
(d) MAXIMUM AWARD PAYABLE. The maximum Performance-based Award
payable to any one Covered Employee under the Plan for a Performance Cycle is
200,000 Shares (subject to adjustment as provided in Section 3(b) hereof).
SECTION 12. DIVIDEND EQUIVALENT RIGHTS
(a) DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent Right is an
Award entitling the grantee to receive credits based on cash dividends that
would have been paid on the shares of Stock specified in the Dividend
Equivalent Right (or other award to which it relates) if such shares had been
issued to and held by the grantee. A Dividend Equivalent Right may be granted
hereunder to any grantee as a component of another Award or as a freestanding
award. The terms and conditions of Dividend Equivalent Rights shall be
specified in the Award agreement. Dividend equivalents credited to the holder
of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue
additional equivalents. Any such reinvestment shall be at Fair Market Value
on the date of reinvestment or such other price as may then apply under a
dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be
15
APPENDIX B
settled in cash or shares of Stock or a combination thereof, in a single
installment or installments. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right
shall be settled upon exercise, settlement, or payment of, or lapse of
restrictions on, such other award, and that such Dividend Equivalent Right
shall expire or be forfeited or annulled under the same conditions as such
other award. A Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such other award.
(b) INTEREST EQUIVALENTS. Any Award under this Plan that is settled
in whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment.
Interest equivalents may be compounded and shall be paid upon such terms and
conditions as may be specified by the grant.
(c) TERMINATION. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below,
in writing after the Award agreement is issued, a grantee's rights in all
Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the grantee's termination of employment (or cessation of
service relationship) with the Company and its Subsidiaries for any reason.
SECTION 13. TAX WITHHOLDING
(a) PAYMENT BY GRANTEE. Each grantee shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the grantee for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state,
or local taxes of any kind required by law to be withheld with respect to
such income. The Company and its Subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the grantee. The Company's obligation to deliver stock
certificates to any grantee is subject to and conditioned on tax obligations
being satisfied by the grantee.
(b) PAYMENT IN STOCK. Subject to approval by the Administrator, a
grantee may elect to have the minimum required tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold
from shares of Stock to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring
to the Company shares of Stock owned by the grantee with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy
the withholding amount due.
SECTION 14. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
16
APPENDIX B
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 15. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to
be required by the Code to ensure that Incentive Stock Options granted under
the Plan are qualified under Section 422 of the Code or to ensure that
compensation earned under Awards qualifies as performance-based compensation
under Section 162(m) of the Code, if and to the extent intended to so
qualify, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a meeting of stockholders. Nothing in this
Section 15 shall limit the Administrator's authority to take any action
permitted pursuant to Section 3(c).
SECTION 16. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised
and any payments in cash, Stock or other consideration not received by a
grantee, a grantee shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Administrator may authorize the creation of trusts or other arrangements to
meet the Company's obligations to deliver Stock or make payments with respect
to Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 17. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this
Section 17:
(a) Except as otherwise provided in the applicable Award agreement,
each outstanding Stock Option and Stock Appreciation Right shall
automatically become fully exercisable.
(b) Except as otherwise provided in the applicable Award Agreement,
conditions and restrictions on each outstanding Restricted Stock Award,
Deferred Stock Award and Performance Share Award which relate solely to the
passage of time and continued
17
APPENDIX B
employment will be removed. Performance or other conditions (other than
conditions and restrictions relating solely to the passage of time and
continued employment) will continue to apply unless otherwise provided in the
applicable Award agreement.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "Person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its Subsidiaries, or
any trustee, fiduciary or other person or entity holding securities
under any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 25 percent or more of the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities") (in
such case other than as a result of an acquisition of securities
directly from the Company); or
(ii) persons who, as of the Effective Date, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Company subsequent to the Effective Date shall be considered an
Incumbent Director if such person's election was approved by or such
person was nominated for election by either (A) a vote of at least a
majority of the Incumbent Directors or (B) a vote of at least a
majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; but
provided further, that any such person whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the election of members of the Board of Directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board, including by reason of
agreement intended to avoid or settle any such actual or threatened
contest or solicitation, shall not be considered an Incumbent Director;
or
(iii) the approval by the stockholders of the Company of a
consolidation, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a "Corporate
Transaction") or if consummation of such Corporate Transaction is
subject, at the time of such approval by stockholders, to the consent
of any government or governmental agency, obtaining of such consent
(either explicitly or implicitly by consummation); excluding , however,
a Corporate Transaction in which the stockholders of the Company
immediately prior to the Corporate Transaction, would, immediately
after the Corporate Transaction,
18
APPENDIX B
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate more than
80 percent of the voting shares of the corporation issuing cash or
securities in the Corporate Transaction (or of its ultimate parent
corporation, if any); or
(iv) the approval by the stockholders of any plan or proposal
for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as
the result of an acquisition of securities by the Company which, by reducing
the number of shares of Voting Securities outstanding, increases the
proportionate number of shares of Voting Securities beneficially owned by any
person to 25 percent or more of the combined voting power of all then
outstanding Voting Securities; PROVIDED, HOWEVER, that if any person referred
to in this sentence shall thereafter become the beneficial owner of any
additional shares of Voting Securities (other than pursuant to a stock split,
stock dividend, or similar transaction or as a result of an acquisition of
securities directly from the Company) and immediately thereafter beneficially
owns 25 percent or more of the combined voting power of all then outstanding
Voting Securities, then a "Change of Control" shall be deemed to have
occurred for purposes of the foregoing clause (i).
SECTION 18. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The
Administrator may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing
of such stop-orders and restrictive legends on certificates for Stock and
Awards as it deems appropriate.
(b) DELIVERY OF STOCK CERTIFICATES. Stock certificates to grantees
under this Plan shall be deemed delivered for all purposes when the Company
or a stock transfer agent of the Company shall have mailed such certificates
in the United States mail, addressed to the grantee, at the grantee's last
known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such arrangements
may be either generally applicable or applicable only in specific cases. The
adoption of this Plan and the grant of Awards do not
19
APPENDIX B
confer upon any employee any right to continued employment with the Company
or any Subsidiary.
(d) TRADING POLICY RESTRICTIONS. Option exercises and other Awards
under the Plan shall be subject to such Company's insider trading policy, as
in effect from time to time.
(e) LOANS TO GRANTEES. The Company shall have the authority to make
loans to grantees of Awards hereunder (including to facilitate the purchase
of shares) and shall further have the authority to issue shares for
promissory notes hereunder.
(f) DESIGNATION OF BENEFICIARY. Each grantee to whom an Award has
been made under the Plan may designate a beneficiary or beneficiaries to
exercise any Award or receive any payment under any Award payable on or after
the grantee's death. Any such designation shall be on a form provided for
that purpose by the Administrator and shall not be effective until received
by the Administrator. If no beneficiary has been designated by a deceased
grantee, or if the designated beneficiaries have predeceased the grantee, the
beneficiary shall be the grantee's estate.
SECTION 19. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of stockholders at which a quorum is
present. Subject to such approval by the stockholders and to the requirement
that no Stock may be issued hereunder prior to such approval, Stock Options
and other Awards may be granted hereunder on and after adoption of this Plan
by the Board.
SECTION 20. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be
governed by, and construed in accordance with, the laws of the Commonwealth
of Massachusetts, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: April 2000
DATE APPROVED BY STOCKHOLDERS: May 30, 2000
20
PROXY
STOCKERYALE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of StockerYale, Inc. (the "Company") hereby
appoints MARK W. BLODGETT, and GARY B. GODIN, and each of them singly, as proxy
holder for and on behalf of the undersigned, with full power of substitution, to
attend, act and vote all of the shares of Common Stock, par value $0.001 per
share, held of record by the undersigned as of the close of business on April
13, 2001 for and on behalf of the undersigned as directed and permitted herein,
in respect of all matters that may properly come before the Special Meeting in
Lieu of an Annual Meeting of Stockholders of the Company (the "Meeting") to be
held at 10:00 a.m., local time, on Thursday, May 24, 2001 at the offices of the
Company located at 32 Hampshire Road, Salem, New Hampshire or at any adjournment
or postponement thereof, to the same extent and with the same powers as if the
undersigned were present at the meeting or any adjournment or postponement
thereof.
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of Special Meeting in Lieu of an Annual Meeting of
Stockholders and the Proxy Statement with respect thereto and hereby revokes any
proxy or proxies heretofore given. This proxy may be revoked at any time before
it is exercised.
Subject to the discretion of the Chairman of the Meeting, to be effective
this proxy form must be received at Proxy Services, Boston EquiServe, P.O. Box
9398, Boston, MA 02205-9398 no later than 48 hours prior to the time of the
Meeting.
- --------------------------------------------------------------------------------
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
- --------------------------------------------------------------------------------
Dear Shareholder,
You are cordially invited to attend the annual shareholders meeting of
StockerYale, Inc. scheduled for May 24, 2001 at 10:00 a.m. the meeting will be
held at our corporate headquarters located at 32 Hampshire Road, Salem, New
Hampshire.
For directions you can visit our website at: WWW.STOCKERYALE.COM
If you have any questions regarding the annual meeting or directions to our
headquarters, please E-mail: Fred Pilon at fpilon@stockeryale.com.
Sincerely,
StockerYale, Inc.
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS SET FORTH
BELOW.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SET FORTH
BELOW, AND THE PROXIES ARE EACH AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF AS WELL AS ON MATTERS INCIDENT TO THE CONDUCT OF THE
MEETING.
1 Election of Directors
NOMINEES: (01) Mark W. Blodgett, (02) Alain Beauregard, (03)
Clifford L. Abbey, (04) Lawrence W. Blodgett,
(05)Steven E. Karol, (06) Dr. Herbert Cordt and (07)
Raymond J. Oglethorpe
For Withheld
all / / / / for
Nominees all Nominees
/ / --------------------------------------------------
For all nominees except as noted above
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2 Amending the Articles of Organization to increase the authorized shares
from 20,000,000 to 100,000,000.
/ / For / / Against / / Abstain
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3. Amending the Company's 2000 Stock Option and Incentive Plan to increase
the shares reserved for issuance thereunder from 800,000 to 2,800,000.
/ / For / / Against / / Abstain
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4. Ratifying the appointment of Arthur Andersen LLP as the Company's
independent public accountants.
/ / For / / Against / / Abstain
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This proxy form is not valid unless it is signed and dated. If someone other
than the registered stockholder of the Company signs this proxy on the
stockholders behalf, authorizing documentation acceptable to the Chairman of
the Meeting must be deposited with the proxy form.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please mark, date and sign as your name appears hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If shares are
held jointly each shareholder named should sign.
Note: Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in corporation name by President or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
Signature
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Date
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Signature
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Date
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