<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ROCKSHOX, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[ROCK SHOX LOGO]
401 Charcot Avenue
San Jose, California 95131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 20, 1998
To the Stockholders of ROCKSHOX, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of ROCKSHOX, INC., a Delaware corporation (the "Company"), will be
held on August 20, 1998, at 10:00 a.m. local time, at the Company's headquarters
located at 401 Charcot Avenue, San Jose, California 95131, for the following
purposes:
1. To elect seven directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualify.
2. To approve the ROCKSHOX, INC. 1998 Stock Option Plan (the "1998 Stock
Plan").
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the fiscal year ending March 31, 1999.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors of the Company has fixed the close of business on
June 22, 1998, as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ CHARLES E. NOREEN, JR.
Charles E. Noreen, Jr.
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
San Jose, California
July 13, 1998
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE-PREPAID
IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
ROCKSHOX, INC.
401 CHARCOT AVENUE
SAN JOSE, CALIFORNIA 95131
-------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
AUGUST 20, 1998
GENERAL
This Proxy Statement is furnished to stockholders of ROCKSHOX, INC., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies in the form enclosed herewith for use at the Annual Meeting of
Stockholders of the Company to be held on Thursday, August 20, 1998, at 10:00
a.m. at the Company's headquarters located at 401 Charcot Avenue, San Jose,
California 95131, and at any and all adjournments or postponements thereof (the
"Annual Meeting"), for the purposes set forth in the Notice of Annual Meeting.
This Proxy Statement and the enclosed form of proxy are being first mailed to
stockholders on or about July 13, 1998.
This solicitation is made by mail on behalf of the Board of Directors of
the Company (the "Board of Directors" or the "Board"). Costs of the solicitation
will be borne by the Company. In addition, the Company has engaged the services
of Corporate Investor Communications, Inc., a firm specializing in proxy
solicitation, to solicit proxies and to assist in the distribution and
collection of proxy material for a fee estimated at approximately $1,000, plus
reimbursement of out-of-pocket expenses. Further solicitation of proxies may be
made by telephone, telegraph, fax or personal interview by the directors,
officers and employees of the Company and its affiliates, who will not receive
additional compensation for the solicitation. The Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to stockholders.
Only holders of record of the Common Stock, par value $.01 per share, of
the Company (the "Common Stock") as of the close of business on the record date,
June 22, 1998 (the "Record Date"), are entitled to receive notice of, and to
vote at, the Annual Meeting. Each share of Common Stock entitles the holder
thereof to one vote. Stockholders are not permitted to cumulate their shares of
Common Stock for the purpose of electing directors or otherwise. At the close
of business on the Record Date, there were approximately 13,761,147 shares of
Common Stock issued and outstanding.
Shares represented by proxies in the form enclosed, if the proxies are
properly executed and returned and not revoked, will be voted as specified.
Where no specification is made on a properly executed and returned proxy, the
shares will be voted "FOR" the election of each nominee for director, "FOR"
approval of the ROCKSHOX, INC. 1998 Stock Option Plan (the "1998 Stock Plan")
3
<PAGE>
and "FOR" the ratification of the selection of Coopers & Lybrand L.L.P. to serve
as the Company's independent public accountants for the fiscal year ending March
31, 1999 (the "1999 Fiscal Year"). To be voted, proxies must be filed with the
Secretary of the Company prior to voting. Proxies may be revoked at any time
before voting by filing a notice of revocation with the Secretary of the
Company, by filing a later dated proxy with the Secretary of the Company or by
voting in person at the Annual Meeting. Shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee that are represented at the Annual Meeting, but with respect to which
such broker or nominee is not empowered to vote on a particular proposal) will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum.
The Board of Directors knows of no matters to come before the Annual
Meeting other than the matters referred to in this Proxy Statement. If,
however, any matters properly come before the Annual Meeting, it is the
intention of each of the persons named in the accompanying proxy to vote such
proxies in accordance with such person's discretionary authority to act in such
person's best judgment.
The principal executive offices of the Company are located at 401 Charcot
Avenue, San Jose, California 95131.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated Bylaws (the "Bylaws"), all
of the directors are elected at each annual meeting of stockholders. The Bylaws
currently authorize a Board of Directors consisting of not less than one nor
more than fifteen members, the exact number of which shall be fixed from time to
time by the Board of Directors. Currently, the number of directors has been so
fixed at seven directors, and there are no vacancies with respect thereto. Each
director will hold office until the next annual meeting of stockholders and
until such director's successor is duly elected and qualified, or until such
director's earlier resignation or removal.
Stockholders may withhold authority from the proxyholders to vote for the
entire slate as nominated or, by writing the name of an individual nominee in
the space provided on the proxy card, withhold the authority to vote for any
individual nominee. Instructions on the accompanying proxy card to withhold
authority to vote for one or more of the nominees will result in such nominees
receiving fewer votes. If any nominee should become unavailable for election as
a result of any unexpected occurrence, such shares will be voted for the
election of such substitute nominee as management may propose. Each person
nominated for election has agreed to serve if elected, and management has no
reason to believe that any nominee will be unavailable to serve.
The following seven persons have been selected by the Board of Directors as
nominees for election to the Board of Directors: Messrs. Stephen W. Simons, Paul
H. Turner, John W. Jordan II, Adam E. Max, Michael R. Gaulke, George Napier and
Edward T. Post. All of the nominees are incumbent directors. See "Board of
Directors and Executive Officers" for the experience and background of each of
the nominees.
4
<PAGE>
VOTE REQUIRED
The affirmative vote of a plurality of all of the votes cast at the Annual
Meeting is required for the election of a director. Under applicable Delaware
law, in tabulating the vote, broker non-votes and abstentions will be
disregarded and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE-NAMED
NOMINEES.
PROPOSAL NO. 2 - APPROVAL OF THE ROCKSHOX, INC. 1998 STOCK PLAN
The Board, subject to stockholder approval, has adopted the 1998 Stock
Plan, which provides for the grant of non-qualified stock options and incentive
stock options (collectively, "Stock Options") to employees, directors and
consultants of the Company. The purposes of the 1998 Stock Plan are to attract
and retain the best available personnel for positions within the Company;
provide additional incentives to the Company's employees, directors and
consultants who participate in the 1998 Stock Plan; and promote the success of
the Company's business.
The 1998 Stock Plan is designed to permit compliance with the
requirements for "qualified performance based compensation" under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the
conditions for exemption from the short-swing profit recovery rules under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The summary that follows is subject to the actual terms of
the 1998 Stock Plan, a copy of which is attached as Annex A hereto.
Capitalized terms used but not otherwise defined in the summary that follows
shall have the respective meanings ascribed to them in the 1998 Stock Plan.
SHARES SUBJECT TO THE 1998 STOCK PLAN
There are reserved for issuance under the 1998 Stock Plan 300,000
authorized but unissued shares of Common Stock. Up to 100% of such shares may
be subject to Stock Options granted to a single individual in any calendar year.
The 1998 Stock Plan provides for equitable adjustments with respect to
Stock Options if the outstanding shares are increased, decreased, changed
into or exchanged for a different number or kind of shares or securities of
the Company through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction.
ELIGIBILITY
Nonqualified stock options ("NSOs") may be granted to employees,
consultants and directors of the Company. Incentive stock options within the
meaning of Section 422 of the Code ("ISOs") may only be granted to employees.
5
<PAGE>
ADMINISTRATION
The 1998 Stock Plan is currently administered by the Board of Directors of
the Company, but may subsequently be administered by a committee of the Board of
Directors in accordance with Rule 16b-3 under the Exchange Act and Section
162(m) of the Code. References herein to the "Administrator" are to the Board or
the Committee, to the extent each may administer the 1998 Stock Plan. Board
members do not receive any remuneration in their capacity as Administrator of
the 1998 Stock Plan, which also provides that no Board member will be liable for
any action or determination taken or made in good faith with respect to the 1998
Stock Plan or any Stock Option granted thereunder.
Subject to the terms of the 1998 Stock Plan, the Administrator has the
authority to grant Stock Options to eligible recipients and to determine the
terms and conditions of the award agreements evidencing the grant of such
awards, including the vesting schedule and exercise price of Stock Options, and
the effect, if any, of a change in control of the Company.
AWARDS UNDER THE 1998 STOCK PLAN
ISOs and NSOs granted under the 1998 Stock Plan will have a term of no more
than ten years from the date of grant. The purchase price of ISOs will not be
less than 100% of the fair market value of the Common Stock on the date of
grant. The purchase price of NSOs may be less than the fair market value of the
Common Stock on the date of grant.
The aggregate fair market value (determined as of the date of grant) of the
shares subject to ISOs granted to any employee under the l998 Stock Plan or any
other option plan of the Company or its subsidiaries that may become exercisable
for the first time in any calendar year is limited to $100,000. This restriction
does not apply to NSOs.
The exercise price of an option may be paid in cash or, at the discretion
of the Administrator, by the surrender of shares of Common Stock having a fair
market value equal to the purchase price, a combination of cash and surrender of
shares of Common Stock, or such other consideration and method of payment as is
permitted under applicable law.
TERMINATION OF EMPLOYMENT -- DEATH -- DISABILITY. The Administrator will
provide in the award agreements whether and to what extent awards will be
exercisable upon termination of employment or service for any reason, including
upon death, disability or retirement of any participant in the 1998 Stock Plan.
ADDITIONAL PROVISIONS
PAYMENT OF TAXES. Participants are required, no later than the date as of
which the value of an award first becomes includible in the gross income of the
participant for Federal income tax purposes to pay to the Company or make
arrangements satisfactory to the Administrator regarding
6
<PAGE>
payment of, any Federal, state, or local taxes of any kind required by law to
be withheld with respect to the award. The obligations of the Company under
the 1998 Stock Plan are conditional on the making of such payments or
arrangements, and the Company has the right, to the extent permitted by law,
to deduct any such taxes from any payment of any kind otherwise due to the
participant.
AMENDMENT AND TERMINATION OF THE 1998 STOCK PLAN. The Board may at any
time amend, alter, suspend or discontinue the 1998 Stock Plan, except to the
extent that stockholder approval is required by Rule 16b-3 or any other
applicable law or regulation. Amendment or termination of the 1998 Stock Plan
may not, without the consent of any participant, adversely affect Stock Options
previously granted under the 1998 Stock Plan.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion is for general information only and is based on
the Federal income tax law now in effect, which is subject to change, possibly
retroactively. This summary does not discuss all aspects of Federal income
taxation which may be important to particular holders of the Common Stock in
light of their individual investment circumstances or to certain types of
holders subject to special tax rules, nor does it address specific state, local
or foreign tax consequences. This summary assumes that the Common Stock acquired
upon exercise of an option will be held as a "capital asset" (generally property
held for investment) under the Code.
NONQUALIFIED STOCK OPTIONS. A participant will generally not be subject to
Federal income tax upon the grant of an NSO. Rather, at the time of exercise of
such NSO, the participant will recognize ordinary income for Federal income tax
purposes in an amount equal to the excess of the fair market value of the shares
purchased over the exercise price. The Company will generally be entitled to a
tax deduction at such time and in the same amount as the participant recognizes
ordinary income.
A participant will recognize a capital gain or loss upon a sale or exchange
of stock acquired upon exercise of an NSO in an amount equal to the difference
between the fair market value of such stock on the date it was acquired and the
amount realized in the sale or exchange. Such gain or loss will be long-term if
the stock has been held for more than one year.
INCENTIVE STOCK OPTIONS. A participant will not be subject to tax upon the
grant of an ISO or upon its timely exercise. Exercise of an ISO will be timely
if made during its term and if the participant remains an employee of the
Company or a subsidiary at all times during the period beginning on the date of
grant of the ISO and ending on the date three months before the date of exercise
(or one year before the date of exercise in the case of a disabled employee).
Exercise of an ISO will also be timely if made by the legal representative of a
participant who dies (i) while in the employ of the Company or a subsidiary or
(ii) within three months after termination of employment (or one year in the
case of a disabled employee). The tax consequences of an untimely exercise of an
ISO will be determined in accordance with the rules applicable to NSOs. (See
"Certain Federal Income Tax Effects--Nonqualified Stock Options.")
7
<PAGE>
If stock acquired pursuant to a timely exercised ISO is later disposed of,
the participant will, except as noted below with respect to a "disqualifying
disposition," recognize long-term capital gain or loss equal to the difference
between the amount realized upon such sale and the option price. Under these
circumstances, the Company will not be entitled to any deduction for Federal
income tax purposes in connection with either the exercise of the ISO or the
sale of such stock by the participant.
If, however, a participant disposes of stock acquired pursuant to the
exercise of an ISO prior to the expiration of two years from the date of grant
of the ISO or within one year from the date such stock is transferred to him
upon exercise (a "disqualifying disposition"), generally (i) the participant
will realize ordinary income at the time of the disposition in an amount equal
to the excess, if any, of the fair market value of the stock at the time of
exercise (or, if less, the amount realized on such disqualifying disposition)
over the option exercise price, and (ii) any additional gain realized by the
participant will be subject to tax as short-term or long-term capital gain. In
such case, the Company may claim a deduction for Federal income tax purposes at
the time of such disqualifying disposition for the amount taxable to the
participant as ordinary income.
The amount by which the fair market value of the stock on the exercise date
of an ISO exceeds the option price will be an item of adjustment for purposes of
the "alternative minimum tax" imposed by Section 55 of the Code.
EXERCISE WITH SHARES. According to a published ruling of the Internal
Revenue Service, a participant who pays the option price upon exercise of an
NSO, in whole or in part, by delivering shares of stock already owned by the
participant will recognize no gain or loss for Federal income tax purposes on
the shares surrendered, but otherwise will be subject to tax according to the
rules described above for NSOs. (See "Certain Federal Income Tax
Effects--Nonqualified Stock Options.") With respect to shares acquired upon
exercise which are equal in number to the shares surrendered, (i) such shares
will be treated as exchanged for the shares surrendered in a non-taxable
transaction, (ii) the basis of such shares will be equal to the basis of the
shares surrendered, and (iii) the holding period of the shares acquired will
include the holding period of the shares surrendered. With respect to the
additional shares received upon exercise, (a) a participant will recognize
ordinary income in an amount equal to the fair market value of such shares on
the date of receipt, (b) the basis of such additional shares will be equal to
the amount of income recognized, and (c) the holding period for such additional
shares will commence on the date of receipt.
The Treasury Department has issued proposed regulations that, if adopted in
their current form, would appear to provide for the following rules with respect
to the exercise of an ISO by surrender of previously owned shares of stock. If
the shares surrendered in payment of the exercise price of an ISO are "statutory
option stock" (including stock acquired pursuant to the exercise of an ISO) and
if the surrender constitutes a "disqualifying disposition" (as would be the
case, for example, if, in satisfaction of the option exercise price, the Company
withholds shares which would otherwise be delivered to the participant), any
gain realized on such transfer will be taxable to the optionee, as discussed
above. Otherwise, when shares of stock are surrendered upon exercise of an
ISO,in
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<PAGE>
general, (i) no gain or loss will be recognized as a result of the exchange,
(ii) the number of shares received that is equal in number to the shares
surrendered will have a basis equal to the basis of the shares surrendered
and (except for purposes of determining whether a disposition will be a
disqualifying disposition) will have a holding period that includes the
holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins on
the date of the exchange. If any of the shares received are disposed of
within two years of the date of grant of the ISO or within one year after
exercise, the shares with the lowest basis will be deemed to be disposed of
first, and such disposition will be a disqualifying disposition giving rise
to ordinary income as discussed above.
REASON FOR AUTHORIZATION
The 1998 Stock Plan is being submitted for stockholder approval pursuant to
Sections 162(m) and 422 of the Code and the rules of the Nasdaq Stock Market. It
is intended that awards granted under the 1998 Stock Plan may constitute
"qualified performance based compensation" for purposes of Section 162(m) of the
Code.
NEW PLAN BENEFITS
It is not possible to determine at this time the awards that will be
granted in connection with the additional shares of the Company's Common Stock
reserved for issuance under the 1998 Stock Plan. The table below sets forth the
number of options to purchase shares of the Company's Common Stock granted under
the 1998 Stock Plan during the fiscal year ending March 31, 1998 (the "1998
Fiscal Year") to the Company's most senior executive officers, all current
executive officers as a group (the "Executive Group"), all current directors who
are not executive officers as a group (the "Non-Executive Director Group") and
all employees, including all current officers who are not executive officers, as
a group (the "Employee Group").
<TABLE>
<CAPTION>
1998 STOCK PLAN
Shares
Underlying
Name and Position Awards
----------------- ------
<S> <C>
George Napier
President, Chief Executive Officer and Director . . . . . 10,000(1)
1
Executive Group . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Non-Executive Director Group . . . . . . . . . . . . . . . . . 10,000(1)
Employee Group . . . . . . . . . . . . . . . . . . . . . . . . 26,000
</TABLE>
- ------------
(l) In February 1998, Messrs. Napier and Post were each granted an option to
purchase 10,000 shares of Common Stock, respectively, pursuant to the 1998
Stock Plan. Mr. Napier's option was granted in conjunction with Mr.
Napier's service as a director. Such option was granted as a replacement
for, and with the same terms and exercise price as Mr. Napier's option to
purchase 10,000 shares under the ROCKSHOX, INC. 1996 Stock Plan (the "1996
Stock Plan"). Mr. Post's option
9
<PAGE>
was granted in conjunction with his service as a director and has an
exercise price per share equal to the fair market value of one share of
Common Stock on the date of grant.
VOTE REQUIRED
The affirmative vote of a majority of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting is required to
approve and adopt the 1998 Stock Plan. Under applicable Delaware law, in
determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as a vote against Proposal No. 2. If stockholders do not
approve the 1998 Stock Plan, the Board will consider whether to adopt some
alternative incentive compensation arrangement based on its assessment of the
Company's needs.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
NO.2.
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANTS
The Audit Committee has selected, and the Board of Directors has approved,
Coopers & Lybrand L.L.P. as the Company's independent public accountants for the
1999 Fiscal Year, and the Board of Directors has further directed that
management submit the selection of independent public accountants for
ratification by the stockholders at the Annual Meeting. Coopers & Lybrand L.L.P.
has audited the Company's consolidated financial statements since 1993.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire,
and will be available to respond to appropriate questions.
VOTE REQUIRED
Stockholder ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent public accountants is not required by the Company's
Bylaws or otherwise. However, the Board of Directors is submitting the
selection of Coopers & Lybrand L.L.P. to the stockholders for ratification as a
matter of good corporate practice. If the stockholders fail to ratify the
selection, the Board of Directors will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board, in its discretion, may
direct the appointment of a different auditing firm at any time during the 1999
Fiscal Year if the Board of Directors determines that such a change would be in
the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
NO. 3.
10
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company as of the Record Date:
<TABLE>
<CAPTION>
Name Age Position
- ----- --- --------
<S> <C> <C>
Stephen W. Simons 43 Chairman of the Board, Chief Technical
Officer and Director
George Napier 45 Chief Executive Officer, President and
Director
Paul H. Turner 39 Vice President of Advanced Research and
Director
Charles E. Noreen, Jr. 37 Chief Financial Officer, Vice President and
Secretary
John W. Jordan, II 50 Director
Adam E. Max 39 Director
Michael R. Gaulke 52 Director
Edward T. Post 51 Director
</TABLE>
Mr. Simons is a co-founder of the Company and has served as a director of
the Company since its inception in 1989. Mr. Simons also served as President
from 1992 until November 1997, and has been Chairman of the Board of Directors
since l996 and Chief Technical Officer since November 1997. Prior to founding
the Company, Mr. Simons founded SIMONS, which developed suspension modifications
and complete motorcycle front forks. Recently, Mr. Simons and the Company
began discussions with respect to the possibility that he may leave full-time
employment, and enter into a consulting arrangement with the Company.
Mr. Napier has served as a director of the Company since January 1997 and
became Chief Executive Officer and President in November 1997. Mr. Napier
served as President and Chief Executive Officer of Meridian Sports Incorporated
from May 1992 to July 1996. Between March 1983 and January 1992, Mr. Napier
held various senior positions with Wilson Sporting Goods Co., including Chief
Operating Officer, President of Wilson USA and President of Wilson International
(subsidiaries of Wilson Sporting Goods Co.).
Mr. Turner is a co-founder of the Company and has served as a director of
the Company since its inception in 1989. Mr. Turner became Vice President of
Advanced Research in 1992, and in such capacity contributes to the Company's
research and development efforts. Mr. Turner has often represented the Company
at industry and public events. Prior to founding the Company, Mr. Turner worked
with Honda Motor Company and founded Paul Turner Racing. Effective July 31,
1998, Mr. Turner will cease to be an executive officer of the Company but
will remain a member of the Board of Directors.
11
<PAGE>
Mr. Jordan has served as a director of the Company since March l995, and
was Chairman of the Board of Directors until October l996. Mr. Jordan has been
the managing partner of The Jordan Company, a private merchant banking firm that
he founded, since February 1982. Mr. Jordan is also director of American Safety
Razor Company, AmeriKing Corporation, Apparel Ventures, Inc., Archibald Candy
Corporation, Carmike Cinemas, Inc., Gear for Sports, Inc., Jordan Industries,
Inc., Jordan Telecommunication Products, Inc., Motors & Gears, Inc., Welcome
Home, Inc., and other private companies.
Mr. Max has served as a director of the Company since March l 995, and was
a vice president from that time until October l996. Mr. Max is a principal of
The Jordan Company, which he joined in April 1986. Mr. Max is also a director
of Archibald Candy Corporation and Great American Cookie Company.
Mr. Gaulke has served as a director of the Company since January 1997. Mr.
Gaulke joined Exponent, Inc. (formerly named The Failure Group, Inc.) in
September 1992, as Executive Vice President and Chief Financial Officer, became
its President in March l993. In June 1996, Mr. Gaulke was named Chief Executive
Officer of Exponent, Inc., and has been a member of the board of directors of
Exponent, Inc. since January 1994. From November l988 to September 1992, Mr.
Gaulke served as Executive Vice President and Chief Financial Officer of Raynet
Corporation, a subsidiary of Raychem Corporation.
Mr. Post has served as a director of the Company since January 1998. Mr.
Post has served as President and Chief Operating Officer of Smith Sports Optics
since January 1994. Prior to such time, Mr. Post served as President of Scott
USA beginning in 1989.
Mr. Noreen has been the Chief Financial Officer of the Company since May
1996 and the Secretary of the Company since August 1996. In April 1998, Mr.
Noreen was named Vice President and Chief Financial Officer of the Company.
Prior to joining the Company, Mr. Noreen was an audit manager and then a partner
in the San Jose, California office of the accounting firm of Coopers & Lybrand
L.L.P., which he joined in 1983. Effective July 22, 1998, Mr. Noreen will cease
to be an executive officer of the Company and will become Vice President,
Business Development.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held three regular meetings and acted five times by
unanimous written consent during the 1998 Fiscal Year. During the 1998 Fiscal
Year, each member of the Board of Directors, except for Messrs. Turner and
Jordan, attended at least 75% of the aggregate number of meetings of the Board
of Directors and the committees of which he was a member. The Company has
standing Audit and Compensation Committees. The Company does not have a standing
Nominating Committee.
AUDIT COMMITTEE. The Audit Committee, which was established in January
1997, and consists of Messrs. George Napier, Michael R. Gaulke, Adam E. Max and
Edward T. Post (three of
12
<PAGE>
which are non-employee directors), held two meetings during the 1998 Fiscal
Year. The Audit Committee has the power and authority to (i) select the firm
of independent accountants to audit the financial statements of the Company
and its consolidated subsidiaries, subject to approval by the Board of
Directors, (ii) discuss with such independent public accountants and with the
management of the Company, the Company's financial accounting and reporting
principles, policies and practices, (iii) discuss with such independent
accountants, and with management of the Company and such management's staff,
the adequacy of the Company's accounting, financial and operating controls,
and (iv) report to the Board of Directors with respect to any and all of the
foregoing, at such times and in such manner as the Board of Directors shall
determine.
COMPENSATION COMMITTEE. The Compensation Committee, which was established
in January l997, and consists of Messrs. Stephen W. Simons, Adam E. Max, Michael
R. Gaulke and Edward T. Post (three of which are non-employee directors), held
two meetings during the l998 Fiscal Year. The Compensation Committee has the
power and authority to review and approve salary and other compensation
arrangements, including annual incentive awards (but excluding the granting of
stock options pursuant to the l996 Stock Plan, the 1998 Stock Plan, and any
future plans), for officers and employees of the Company.
COMPENSATION OF THE BOARD OF DIRECTORS
The Company currently pays each of its non-employee directors a quarterly
fee of $5,000. Non-employee directors also are eligible to receive options to
purchase Common Stock under the 1996 Stock Plan and the 1998 Stock Plan as
compensation for their services as directors. Each non-employee director is
reimbursed for reasonable expenses incurred to attend director and committee
meetings. Messrs. Max and Jordan, both non-employee directors, are affiliated
with a company that is party to a consulting arrangement with the Company. See
"Certain Relationships and Related Transactions--Consulting Agreement."
13
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock (the "Principal Stockholders"), (ii) each of the Company's
directors, (iii) each of the Named Executive Officers (as such term is defined
in the Summary Compensation Table under "Executive Compensation") and (iv) all
directors and Named Executive Officers as a group. This table is based on
information provided to the Company or filed with the Securities and Exchange
Commission by the Company's directors, executive officers and Principal
Stockholders. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect of
such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
OF SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) OWNED OWNED
- --------------------- ----------------- -------------
<S> <C> <C>
Stephen W. Simons (2) . . . . . . . . . 2,205,000 16.0%
Paul H. Turner (3) . . . . . . . . . . 2,202,500 16.0%
George Napier (4) . . . . . . . . . . . 2,500 *
John W. Jordan, II (5) . . . . . . . . 327,308 2.4%
Adam E. Max (6) . . . . . . . . . . . . 210,004 1.5%
Michael R. Gaulke (7) . . . . . . . . . 2,500 *
Edward T. Post . . . . . . . . . . . . 0 --
Robert Kaswen(8) . . . . . . . . . . . 88,112 *
Charles E. Noreen Jr.(9) . . . . . . . 34,082 *
MCIT PLC (10) . . . . . . . . . . . . . 2,100,042 15.3%
Franklin Resources, Inc.(11) . . . . . 1,389,400 10.1%
Charles B. Johnson(11) . . . . . . . . 1,389,400 10.1%
Rupert H. Johnson, Jr.(11) . . . . . . 1,389,400 10.1%
Franklin Advisers, Inc.(11) . . . . . . 1,024,400 7.4%
Wellington Management Company, LLP (12) 1,354,900 9.8%
All directors and Named Executive
Officers as a group
(9 persons) (13) . . . . . . . . . . . 5,072,006 36.5%
</TABLE>
- ---------------
* Less than 1%
14
<PAGE>
(1) Unless otherwise indicated, the business address of each beneficial owner
is c/o ROCKSHOX, INC., 401 Charcot Avenue, San Jose, California 95131.
(2) Includes (i) 2,053,312 shares held by The Simons Revocable Trust, of which
Mr. Simons and Debra W. Simons, Mr. Simons' wife, are trustees, (ii) 21,688
shares held by The Simons Children Irrevocable Trust, over which Mr. Simons
has no voting or investment power and (iii) 130,000 shares held by the
Wanda Bobowski Fund, the voting or investment power of which is shared with
Debra W. Simons. Mr. Simons disclaims beneficial ownership with respect to
all shares held by The Simons Children Irrevocable Trust and by the Wanda
Bobowski Fund.
(3) Includes 549,250 shares held by Turner Family LP, a Colorado limited
partnership (the "Turner Partnership"). Mr. Turner is the sole general
partner of the Turner Partnership, and a trust, the trustees of which are
persons other than Mr. Turner and the beneficiaries of which are certain
family members of Mr. Turner, is the sole limited partner of the Turner
Partnership holding a 40% interest in the Turner Partnership. Mr. Turner
disclaims beneficial ownership of the 219,700 shares representing the
trust's interest in the Turner Partnership. Also includes 134,500 shares
held by Bikes Aren't Bad Foundation, of which Mr. Turner is the sole
director. Mr. Turner disclaims beneficial ownership of all of such shares
held by Bikes Aren't Bad Foundation.
(4) Includes 2,500 shares with respect to which Mr. Napier has the right to
acquire beneficial ownership by virtue of currently exercisable stock
options and options that become exercisable within 60 days of the Record
Date.
(5) Includes 327,308 shares held by the John W. Jordan Il Revocable Trust
("JJT"), of which Mr. Jordan is trustee. Excludes 2,100,042 shares held by
MCIT PLC, which is advised by Jordan/Zalaznick Advisers, Inc., an entity
controlled by Mr. Jordan and certain other persons (see footnote 10 below).
Mr. Jordan is a partner of The Jordan Company, an entity with which Mr. Max
is affiliated. The business address for Mr. Jordan is c/o Jordan
Industries, Inc., 875 N. Michigan Avenue, Suite 4020, Chicago, Illinois
60611.
(6) Mr. Max is a principal of The Jordan Company, an entity with which Mr.
Jordan is also affiliated. Excludes 2,100,042 shares held by MCIT PLC, of
which Mr. Max is a stockholder. The business address for Mr. Max is c/o The
Jordan Company, 9 West 57th Street, Suite 4000, New York, New York 10019.
(7) Includes 2,500 shares with respect to which Mr. Gaulke has the right to
acquire beneficial ownership by virtue of currently exercisable stock
options and options that become exercisable within 60 days of the Record
Date.
(8) Includes 88,112 shares with respect to which Mr. Kaswen has the right to
acquire beneficial ownership by virtue of currently exercisable stock
options and options that become exercisable within 60 days of the Record
Date.
(9) Includes 34,082 shares with respect to which Mr. Noreen has the right to
acquire beneficial ownership by virtue of currently exercisable stock
options and options that become exercisable within 60 days of the Record
Date.
(10) MCIT PLC is advised by Jordan/Zalaznick Advisers, Inc., an entity
controlled by Mr. Jordan and certain other persons. JJT and certain
persons who have a controlling interest in Jordan/Zalaznick Advisers, Inc.,
are stockholders of MCIT PLC. See "Certain Relationships and Related
Transactions." The business address for MCIT PLC is c/o Jordan/Zalaznick
Advisors, Inc., 9 West 57th Street, Suite 4000, New York, New York 10019.
(11) Pursuant to the Schedule 13G (Amendment No. 1) filed as of April 7, 1998
with the Securities and Exchange Commission, certain investment companies
or other managed accounts that are advised by direct or indirect investment
advisory subsidiaries of Franklin Resources, Inc. ("FRI") own 1,389,400
shares, one of such advisors, Franklin Advisers, Inc. ("FAI"), has sole
voting and dispositive power with respect to, and may be deemed to
beneficially own, 1,024,400 of such shares. Each of FAI, Charles B.
Johnson and Rupert H. Johnson, Jr. (each of whom owns in excess of 10% of
the outstanding common stock of FRI) disclaims any economic interest or
beneficial ownership of any of the 1,389,400 shares. The business address
for each of these persons is 777 Mariners Island Boulevard, San Mateo,
California 94404.
(12) Pursuant to the Schedule 13G filed as of February 6, 1998 with the
Securities and Exchange Commission, Wellington Management Company LLP
("WMC"), in its capacity as an investment advisor, may be deemed to
beneficially own 1,354,900 shares which are held of record by clients of
WMC. Of that amount, WMC has shared voting power for 776,900 shares and
shared dispositive power for all of the shares. The business address for
WMC is 75 State Street, Boston, Massachusetts 02109.
15
<PAGE>
(13) Includes 127,194 shares with respect to which all directors and Named
Executive Officers have the right to acquire beneficial ownership by virtue
of currently exercisable stock options and options that become exercisable
within 60 days of the Record Date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Company's Common
Stock, to file reports of beneficial ownership of the Company's Common Stock
and changes in such ownership with the Securities and Exchange Commission,
The Nasdaq Stock Market and the Company. Specific due dates for these reports
have been established, and the Company is required to disclose in this Proxy
Statement any failure to file these reports on a timely basis. Based solely
on its review of the copies of these reports received or written
representations from these reporting persons that no Forms 5 were required
for such persons, the Company believes that, during the 1998 Fiscal Year, all
of such filing requirements under Section 16(a) were timely met except that
the filing by Mr. Post of one report on Form 3 relating to a single
transaction was late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following summarizes various transactions between the Company and
certain of its directors or executive officers or entities associated with such
persons. The Company believes that each such transaction was, and that any
future transaction will be, approved in accordance with the Delaware General
Corporation Law.
REGISTRATION RIGHTS AGREEMENT. Effective as of the closing of the initial
public offering of the Company's Common Stock (the "IPO"), which occurred on
October 2, l996, the Company entered into a registration rights agreement (the
"'Registration Rights Agreement") with, among others, certain trusts the
beneficiaries and/or trustees of which include Messrs. Simons, Turner and
Jordan, as well as Mr. Max (collectively, the "Insider Holders"). Pursuant to
the Registration Rights Agreement and subject to certain conditions, the Insider
Holders have demand registration rights to require the Company to register the
number of shares requested to be so registered until such time as such shares of
Common Stock (i) are effectively registered under the Securities Act of 1933, as
amended (the "Securities Act"), and disposed of in accordance with a
registration statement covering such shares, (ii) are saleable by the holders
thereof pursuant to Rule 144(k) under the Securities Act or (iii) are
distributed for resale pursuant to Rule 144 under the Securities Act
("Registrable Securities"). The Registration Rights Agreement provides that,
subject to certain conditions, the Insider Holders have incidental registration
rights if the Company proposes to file a registration statement under the
Securities Act with respect to an offering of Common Stock (other than a
registration statement or Form S-4 or Form S-8 or any successor form thereto or
filed solely in connection with an exchange offer or an offering made solely to
employees of the Company) to require the Company to include in each such
registration all Registrable Securities as each Insider Holder may request in
accordance with the terms of the Registration Rights Agreement. In the event
16
<PAGE>
of any registration thereunder, the Registration Rights Agreement contains
certain customary provisions relating to holdback and indemnification
arrangements. The Registration Rights Agreement also provides that all
reasonable fees and expenses incident to the performance thereof or
compliance therewith by the Company will be borne by the Company.
SUPPLIER CONSULTING AGREEMENT. Mr. Simons provides consulting services to
a supplier to the Company (the "Supplier") pursuant to a consulting agreement
(the "Supplier Consulting Agreement") in consideration of which the Supplier
pays Mr. Simons a fee equal to 3% of the Supplier's net sales (as defined
therein). The Supplier Consulting Agreement terminates on December 31, 2002;
PROVIDED, that the Supplier Consulting Agreement (i) will be automatically
renewed for two years, if the total of all consulting fees paid to Mr. Simons
pursuant to the Supplier Consulting Agreement is less than $1,000,000 on
December 31, 2002, (ii) will automatically terminate when the total of all
consulting fees paid to Mr. Simons pursuant to the Supplier Consulting Agreement
equals $1,700,000 and (iii) may be terminated by Mr. Simons at any time upon 30
days' written notice. During the 1998 Fiscal Year, the Supplier had paid Mr.
Simons an aggregate of $30,000 pursuant to the Supplier Consulting Agreement.
The Company purchased approximately $1.8 million of components from the Supplier
in the 1998 Fiscal Year.
CONSULTING AGREEMENT. On March 24, 1995, the Company entered into a
management consulting agreement (the "Consulting Agreement") with TJC
Management Corporation ("TJCMC"), an affiliate of The Jordan Company (with
which each of Messrs. Jordan and Max is affiliated), pursuant to which TJCMC
was retained to render consulting services to the Company. Pursuant to the
Consulting Agreement, TJCMC is entitled to (i) a quarterly fee of $62,500,
(ii) an investment banking and sponsorship fee of 2% of the aggregate
consideration paid (including non-competition and similar payments, but net
of transaction expenses) in connection with an initial public offering of
Common Stock, the sale of all or substantially all of the Common Stock or
substantially all of the assets of the Company to a company other than an
affiliate, or the purchase by the Company of all the equity or substantially
all of the assets of a company (other than an affiliate), and (iii) a
financial consulting fee of l % of the amount obtained or made available
pursuant to any financing. The fees payable under clauses (ii) and (iii) of
the preceding sentence are payable with respect to a transaction only if
TJCMC is retained to render services in connection therewith. The Consulting
Agreement also provides that if TJCMC renders services outside the ordinary
course of business, TJCMC is entitled to an additional amount equal to the
value of such services. Also pursuant to the Consulting Agreement, TJCMC and
certain of its affiliates are indemnified from certain liabilities related to
services performed pursuant to the Consulting Agreement and TJCMC is entitled
to reimbursement of reasonable out-of-pocket expenses. The term of the
Consulting Agreement generally continues until April l, 2000. During the
1998 Fiscal Year, the total amount paid pursuant to the Consulting Agreement
was $250,000.
NONCOMPETITION AGREEMENTS. Each of Stephen Simons, Debra Simons (Mr.
Simons' wife) and Paul Turner has entered into a noncompetition agreement, dated
March 24, 1995, pursuant to which each such person agreed, among other things,
that until March 24, l998, he or she will not directly or indirectly engage in,
assist or have any active interest in a business located anywhere in
17
<PAGE>
the contiguous United States that (i) competes with the Company or (ii) sells
to, supplies, provides goods or services to, purchases from or does business
in any manner with the Company. Each such person also agreed that until
three years from and after the date such person ceases to be employed by the
Company, he or she will not directly or indirectly (a) divert or attempt to
divert from the Company any business with any customer or account with which
he or she had any contact or association, which was under his or her
supervision, or the identity of which was learned by him or her as a result
of his or her employment with the Company, (b) solicit any person transacting
business with the Company to terminate its relationship or association with
the Company, or to represent, distribute or sell services or products in
competition with the services or products of the Company, or (c) solicit any
employee of the Company to leave its employ. Mrs. Simons resigned as an
officer of the Company on August 1, 1995, and, therefore, the provisions of
the preceding sentence will terminate on August 1, 1998, with respect to Mrs.
Simons.
TURNER AGREEMENT. During the 1998 Fiscal Year, the Company employed Peter
Turner, the brother of Paul Turner, as the Company's manager of product
development engineering, pursuant to an agreement entered into on November 10,
1995. Pursuant to such agreement, Peter Turner received $40,192 during such
fiscal year. Peter Turner resigned from the Company on August 8, 1997.
18
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, the compensation paid
by the Company during the last three completed fiscal years to its chief
executive officer and the four other most highly compensated executive
officers for services rendered to the Company (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ----------
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS OPTIONS(#) COMPENSATION
--------------------------- ------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
George Napier 1998 $123,846 - 410,000 $4,400(3)
Chief Executive Officer and President
Stephen W. Simons(4) 1998 250,000 - - 52(3)
Chairman and Chief Technical 1997 250,000 $3,915,089(2) - 3,812
Officer 1996 250,000 1,062,500(2) - 7,556
Paul Turner(5) 1998 250,000 - - 52(3)
Vice President of Advanced Research 1997 250,000 3,790,089(2) - 3,812
1996 250,000 1,062,500(2) - 7,556
Robert Kaswen(6) 1998 166,442 - - 1,986(3)
Executive Vice President of Operations 1997 149,038 110,500 146,853 410
1996 105,000 110,000 - 56
Charles E. Noreen, Jr.(7) 1998 153,846 - - 2,332(3)
Chief Financial Officer 1997 120,461 94,951 73,470 400
</TABLE>
- -------------------
(l) Information is for the Company's fiscal years ended March 31.
(2) Includes $3,665,089 in 1997 and $1,062,500 in 1996 for each of Mr. Simons
and Mr. Turner, which represent payments pursuant to employment agreements
that were terminated upon the completion of the Company's initial public
offering in October 1996.
(3) All Other Compensation includes the following contributions made by the
Company in the 1998 Fiscal Year to employee accounts under the Company's
401(k) plan: on behalf of Mr. Kaswen, $1,906 and Mr. Noreen $2,279. In
addition, All Other Compensation includes the following term life insurance
premiums paid in the 1998 Fiscal Year by the Company: on behalf of Mr.
Napier $3,000, which created a tax liability of $1,400, which was paid by
the Company; Mr. Simons, $52; Mr. Turner, $52; Mr. Kaswen, $52; and Mr.
Noreen, $52.
(4) Recently, Mr. Simons and the Company began discussions with respect to
the possibility that he may leave full time employment, and enter
into a consulting arrangement with the Company.
(5) Effective July 31, 1998, Mr. Turner will cease to be an executive
officer of the Company but will remain a member of the Board of
Directors.
(6) Effective April 1, 1998, Mr. Kaswen ceased to be an executive officer of
the Company.
(7) Effective July 22, 1998, Mr. Noreen will cease to be an executive officer
of the Company and will become Vice President, Business Development.
19
<PAGE>
OPTIONS GRANTS AND EXERCISES
The following table sets forth certain information regarding stock
options granted to and exercised by the Named Executive Officers during the
1998 Fiscal Year and the stock options held by them as of March 31, 1998.
OPTION GRANTS IN THE 1998 FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------
NUMBER OF PERCENT OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS GRANTED ASSUMED ANNUAL RATES OF STOCK PRICE
UNDERLYING TO EXERCISE OR APPRECIATION FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------------
NAME GRANTED(#) FISCAL YEAR(%) ($/SH) DATE 5%($) 10%($)
---- ----------- ---------------- ----------- ---------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
George Napier 400,000(1) 75.3% $7.125(3) 2/23/08 $1,792,349 $4,542,166
10,000(2) 1.9 14.93(3) 5/01/07 82,313 237,946
Stephen W. Simons 0 - - - - -
Paul H. Turner 0 - - - - -
Robert Kaswen 0 - - - - -
Charles E. Noreen, Jr. 0 - - - - -
</TABLE>
- -----------------
(1) The options were granted under the 1996 Stock Plan. Such options are
subject to a three-year vesting period such that one-third of such options
vest on November 1, 1998, 1999 and 2000, respectively. Mr. Napier's option
agreement provides that all of his unvested options will accelerate and
become exercisable upon the occurrence of certain change in control
transactions. To the extent permitted under applicable law, the options
granted are "incentive stock options" for purposes of Section 422 of the
Code, and otherwise are nonqualified stock options.
(2) The option was granted under the 1998 Stock Plan in conjunction with Mr.
Napier's service as a director. The option was granted as a replacement
for, and with the same terms and exercise price as, Mr. Napier's option to
purchase 10,000 shares under the 1996 Stock Plan. Such options vest and
become exercisable in equal 25% installments on each of January 30, 1998,
1999, 2000 and 2001. The option granted is a non-statutory stock option.
(3) The exercise price is equal to the fair market value of the Common Stock on
the original date of grant.
(4) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts shown
are for the assumed rates of appreciation only as required by the
Securities and Exchange Commission, do not constitute projections of future
stock price performance, and may not necessarily be realized. Actual gains,
if any, on stock option exercises depend on the future performance of the
Common Stock, continued employment of the optionee through the term of the
options, and other factors.
20
<PAGE>
The following table sets forth certain information regarding the value
of unexercised options to acquire Common Stock held by the Named Executive
Officers as of the end of the 1998 Fiscal Year. None of the Named Executive
Officers exercised any options to acquire Common Stock in the 1998 Fiscal
Year.
AGGREGATED OPTION EXERCISES IN THE 1998 FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES MARCH 31, 1998(#) MARCH 31, 1998(1)($)
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
George Napier 0 400,000 0 $187,200
2,500 7,500 0 0
Stephen W. Simons 0 0 0 0
Paul H. Turner 0 0 0 0
Robert Kaswen 88,112 58,741 $282,289 188,191
Charles E. Noreen, Jr. 10,000 $93,100 19,388 44,082 56,298 128,003
</TABLE>
- -----------------
(1) The value of unexercised in-the-money options is calculated by multiplying
(A) the number of securities underlying such options by (B) the difference
between (i) the closing price of the Common Stock on the Nasdaq at March
31, 1998 and (ii) the option exercise price.
EMPLOYMENT AGREEMENTS
George Napier entered into a three-year employment agreement with the
Company dated November 1, 1997. Pursuant to the agreement, Mr. Napier will
serve as Chief Executive Officer and President of the Company and receive an
annual base salary of $300,000. In addition, Mr. Napier received a one-time
$50,000 cash payment and is entitled to an annual bonus of $300,000, provided
he achieves certain objectives. The agreement provides that the Company will
maintain term life insurance with a face value of $2 million for Mr. Napier.
In addition, the Company granted Mr. Napier an option to purchase shares of
Common Stock as described above. If Mr. Napier is terminated by the Company
"without Cause" (as defined in the employment agreement), (a) he will receive
the benefits he would have otherwise received during the twelve-month period
preceding such termination and reimbursement of certain reasonable relocation
costs and (b) all outstanding equity incentive awards that would have become
vested during the Severance Period will immediately vest and remain
exercisable for a period of ninety days. For a period of one year following
termination of employment, Mr. Napier will act as a non-employee consultant
to the Company and will not engage in any activity competitive
21
<PAGE>
with the business of the Company. In consideration of such consulting and
non-competition obligations, Mr. Napier will receive an annual consulting fee
of $25,000.
On October 2, 1996, Stephen W. Simons and Paul H. Turner (the
"Executives") each entered into an amended and restated employment agreement
with the Company, with an initial one-year term and automatic renewal for
additional one-year terms, not to exceed four one-year renewal terms in
total, at the election of the Executives. Pursuant to the agreements, Messrs.
Simons and Turner (i) received initial payments of $2,820,000 and $1,880,000,
respectively, (ii) receive an annual salary of $250,000 and certain
perquisites and (iii) in consideration of termination of the Company's
performance based plan, each received a payment in the approximate amount of
$3.7 million. In addition, the agreement provides that for each fiscal year
during the term of the agreement in which the Executive has been an employee
of the Company for the entire fiscal year, the Company will pay to Messrs.
Simons and Turner a cash bonus in an amount not to exceed 100% and 50%,
respectively, of his annual salary based upon the Board of Directors'
evaluation of the performance of his individual duties, and in the case of
Mr. Simons, upon the performance of the Company during such fiscal year.
Recently, Mr. Simons and Company began discussions with respect to the
possibility that he may leave full-time employment, and enter into a
consulting arrangement with the Company. Effective July 31, 1998, Mr. Turner
will cease to be an executive officer of the Company but will remain a member
of the Board of Directors.
On May 7, l996, Charles E. Noreen, Jr. entered into a letter agreement
with the Company (the "Noreen Letter Agreement") pursuant to which Mr. Noreen
serves as the Company's Chief Financial Officer. The Noreen Letter Agreement
provides that Mr. Noreen is entitled to receive, among other things, (i) a
salary of $145,000 per year (which salary has subsequently been increased to
$155,000 per year), (ii) the right to participate in an annual bonus program,
(iii) an initial grant of options to purchase 73,470 shares of Common Stock
and (iv) certain other benefits. In addition, the Noreen Letter Agreement
provides that if, during the first 36 months of Mr. Noreen's employment with
the Company, (i) Mr. Noreen's employment is terminated due to a sale or
merger of the entire Company, for any reason other than his voluntary
separation or for cause, or (ii) the Company relocates out of the San
Francisco Bay Area, then, at the discretion of the Company, Mr. Noreen is
entitled to (A) 6 months notice during which time he is obligated to remain
employed by the Company until he finds other employment (B) be paid his
monthly salary on a month-by-month basis until he is employed elsewhere (not
to exceed 6 months from the date of such notice). Effective July 22, 1998,
Mr. Noreen will cease to be an executive officer of the Company and will
become Vice President, Business Development.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1998 Fiscal Year, the Compensation Committee of the Board of
Directors consisted of Messrs. Gaulke, Simons, Max and Post. However,
pursuant to certain requirements of Rule 16b-3 under the Securities Exchange
Act of l934, as amended, grants of stock options made to the Named Executive
Officers in the 1998 Fiscal Year were made by all of the members of the Board
of Directors. During the 1998 Fiscal Year, Mr. Simons was an officer of the
Company. In addition, during the 1998 Fiscal Year, the Company engaged in
certain transactions with certain of its directors and certain entities
affiliated with certain of such directors. See "Certain Relationships and
Related Transactions."
22
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the
compensation paid to executive officers. However, Mr. Napier, the Chief
Executive Officer and President of the Company, does not participate in
discussions regarding his own compensation. The following is the report of
the Compensation Committee to the Board of Directors describing compensation
policies and rationales applicable to the Company's executive officers with
respect to compensation paid to such executive officers for the 1998 Fiscal
Year.
COMPENSATION PHILOSOPHY:
The general philosophy of the Company's compensation program is to offer
executive officers competitive compensation based both on the Company's
performance and on the individual's contribution and performance. The
Company's compensation policies are intended to motivate, reward and retain
highly qualified executives for long-term strategic management and the
enhancement of stockholder value, to support a performance-oriented
environment that rewards achievement of specific internal Company goals and
to attract and retain executives whose abilities are critical to the
long-term success and competitiveness of the Company.
There are three main components in the Company's executive compensation
program:
-- Base Salary
-- Incentive Bonus
-- Stock Incentives
BASE SALARY:
The salaries of Messrs. Napier, Simons and Turner are fixed pursuant to
the terms of their employment agreements with the Company. The salaries of
the other executive officers are determined annually by the Compensation
Committee with reference to surveys of salaries paid to executives with
similar responsibilities at comparable companies, generally in both the
bicycle and manufacturing industries. The peer group for each executive
officer is composed of executives whose responsibilities are similar in scope
and content. The Company seeks to set executive compensation levels that are
competitive with the average levels of peer group compensation.
INCENTIVE BONUS:
Annual incentive bonuses for executive officers are intended to reflect
the Compensation Committee's belief that a significant portion of the annual
compensation of each executive officer should be contingent upon the
performance of the Company, as well as the individual contribution of each
officer.
STOCK INCENTIVES:
The Company utilizes stock options as long-term incentives to reward and
retain executive officers. The Board of Directors, which in the 1998 Fiscal
Year had responsibility for making option grants under the 1996 Stock Plan
and the 1998 Stock Plan, believes that stock option grants provide an
incentive which focuses the
23
<PAGE>
executives' attention on the Company from the perspective of an owner with an
equity stake in the business. Because options are typically granted with an
exercise price equal to the fair market value of the Common Stock on the date
of grant, the Company's stock will provide value to the recipient only when
the price of the Company's stock increases above the exercise price, that is,
only to the extent that stockholders as a whole have benefitted. Generally,
stock options vest over a three to five year period and optionees must be
employed by the Company at the time of vesting in order to exercise the
options.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES:
Mr. Napier's base salary is set at $300,000 per year pursuant to his
employment agreement. Salary increases for senior executives effected during
the 1998 Fiscal Year were based on individual performance, position, tenure,
leadership and competitive data in compensation surveys of comparable
companies.
In February 1998, the Board approved and granted Mr. Napier an option to
purchase 400,000 shares of Common Stock. Senior executives in the Company
also participate in the 1996 Stock Plan, and the Board granted such
executives options to purchase shares of Common Stock during the 1998 Fiscal
Year. In determining the number of shares to award to Mr. Napier and the
other executives, the Board considered several factors, including primarily
Mr. Napier's and such other executives' actual and potential contributions to
the Company's long-term success, and the size of awards provided to other
executives holding similar position in comparable companies.
Pursuant to their employment agreements with the Company, Mr. Napier and
the other Named Executive Officers may receive an annual bonus as determined
by the Board. In determining the amounts of such bonuses, the Board
considers certain criteria, including the individual performance of each
executive and the performance of the Company. The Board has determined that
no bonus amounts will be paid for the 1998 Fiscal Year based upon the
Company's performance.
SECTION 162(m) POLICY:
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally provides that publicly held companies may not deduct compensation
paid to certain of its top executive officers to the extent such compensation
exceeds $1 million per officer in any year. However, pursuant to regulations
issued by the Treasury Department, certain limited exemptions to Section
l62(m) apply with respect to "qualified performance-based compensation" and
to compensation paid in certain circumstances by companies in the first few
years following their initial public offering of stock. The Company granted
non-qualified stock options under the 1998 Stock Plan to Mr. Napier. Because
stockholders had not approved the 1998 Stock Plan, the grant does not qualify
as "performance-based compensation" under Section 162(m). However, the
Company has submitted the 1998 Stock Plan for stockholder approval in order
that future grants of awards under the 1998 Stock Plan may constitute as
qualified performance-based compensation, and the Company will continue to
monitor the applicability of Section 162(m) to its ongoing compensation
arrangements. Accordingly, the Company does not expect that amounts of
compensation paid to its executive officers will fail to be deductible on
account of Section 162(m).
24
<PAGE>
Respectfully submitted,
STEPHEN W. SIMONS*
PAUL H. TURNER*
JOHN W. JORDAN II*
ADAM E. MAX
MICHAEL R. GAULKE
GEORGE NAPIER
EDWARD T. POST
* With respect to that portion of the report entitled "Stock Incentives"
only.
THE COMPENSATION COMMITTEE REPORT WILL NOT BE DEEMED TO BE INCORPORATED
BY REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
- -----------------------
25
<PAGE>
PERFORMANCE GRAPH:
The following line graph compares the cumulative total stockholder
return for the Company's Common Stock with the NASDAQ U.S. Index, the NASDAQ
Non-Financial Index and a Peer Group (as defined below) for the period
commencing September 27, 1996 and ending March 31, 1998. The peer group (the
"Peer Group") is composed of the following companies: K2 Inc., Huffy Corp.,
Cannondale Corp., GT Bicycles Inc., Aldila Inc., Morrow Snowboards Inc. and
Ride Inc. The Company selected the Peer Group for this Proxy Statement
because the Company believes that the Peer Group, which consists of companies
within the bicycle industry or companies that manufacture and sell sporting
goods similar to that of the Company, is a better comparative index than the
NASDAQ Non-Financial Index. Accordingly, the Company has included the Peer
Group in this Proxy Statement and will use such Peer Group, rather than the
NASDAQ Non-Financial Index, for comparison in future Proxy Statements.
The graph assumes that $100 was invested on September 27, 1996, the date
of the commencement of public trading of the Common Stock, and that all
dividends are reinvested. Historical stock price performance should not be
considered indicative of future stock price performance.
INSERT PERFORMANCE ANALYSIS GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ROCKSHOX,
NASDAQ STOCK MARKET-US, NASDAQ NON-FINANCIAL INDEX AND SELECTED PEER GROUPS
<TABLE>
<CAPTION>
9/27/96 3/31/97 3/31/98
------- ------- -------
<S> <C> <C> <C>
NASDAQ U.S. 100 99 150
NASDAQ Non-Financial 100 96 145
Peer Group 100 76 68
RockShox 100 100 51
</TABLE>
THE STOCK PRICE PERFORMANCE GRAPH WILL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
26
<PAGE>
STOCKHOLDER PROPOSALS
Subject to Securities and Exchange Commission regulations, proposals of
stockholders that are intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received by the Company no later than March
15, 1999, in order to be included in the proxy statement and proxy relating
to that Annual Meeting.
By Order of the Board of Directors
Charles E. Noreen, Jr.
Vice President, Chief Financial Officer and Secretary
San Jose, California
July 13, 1998
27
<PAGE>
ANNEX A
ROCKSHOX, INC.
1998 STOCK OPTION PLAN
<PAGE>
ROCKSHOX, INC.
1998 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1 PURPOSE OF PLAN; DEFINITIONS . . . . . . . . . . . . . . . . . . . . A-1
SECTION 2 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
SECTION 3 STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . . . . . . A-4
SECTION 4 ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
SECTION 5 STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
SECTION 6 AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . A-7
SECTION 7 UNFUNDED STATUS OF PLAN. . . . . . . . . . . . . . . . . . . . . . . A-8
SECTION 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . A-8
SECTION 9 EFFECTIVE DATE OF PLAN . . . . . . . . . . . . . . . . . . . . . . . A-9
SECTION 10 TERM OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
</TABLE>
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ROCKSHOX, INC.
1998 STOCK OPTION PLAN
SECTION 1
PURPOSE OF PLAN; DEFINITIONS
1.1 PURPOSE. The purpose of the Plan is to reinforce the
long-term commitment to the Company's success of those officers (including
officers who are directors of the Company), other employees, independent
directors, consultants and advisors of the Company who are or will be
responsible for such success; to facilitate the ownership of the Company's
stock by such individuals, thereby reinforcing the identity of their
interests with those of the Company's stockholders; and to assist the Company
in attracting and retaining officers and other employees, directors,
consultants and advisors with experience and ability. The Plan was originally
approved by the Board in February 1998, and certain grants of Stock Options
were made at such time. However, the Company subsequently determined that it
was in the best interests of the Company, its employees, non-employee
directors and consultants to attain shareholder approval of the Plan so that
(i) the Plan would meet the requirements under Section 162(m) of the Code and
(ii) Incentive Stock Options may be granted under the Plan.
1.2 DEFINITIONS. Wherever the masculine gender is used it shall
include the feminine, and where a singular pronoun is used, it shall include the
plural, unless the context clearly indicates otherwise. For purposes of the
Plan, the following terms shall be defined as set forth below:
(a) "ADMINISTRATOR" means the Board, or if the Board does
not administer the Plan, the Committee in accordance with Section 2.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
(d) "COMMITTEE" means the Compensation Committee of the
Board other than directors who are not Non-Employee Directors, including such
additional individuals as the Board shall designate in order to fulfill the
Non-Employee Director requirement of Section 162(m) of the Code and Rule
16b-3 as promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934 (the "Act"), and as
such Section and Rule may be amended from time to time, or any successor
definition adopted by the Commission, or any other Committee the Board may
subsequently appoint to administer the Plan. The Committee shall be composed
entirely of individuals who are Non-Employee Directors.
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<PAGE>
If at any time the Board shall not administer the Plan, then the functions of
the Board specified in the Plan shall be exercised by the Committee.
(e) "COMPANY" means ROCKSHOX, INC., a Delaware corporation
(or any successor corporation).
(f) "EFFECTIVE DATE" shall mean the date provided pursuant
to Section 12.
(g) "ELIGIBLE PERSON" means any person eligible to
participate in the Plan pursuant to Section 4.
(h) "FAIR MARKET VALUE" means, as of any given date, with
respect to any awards granted hereunder (A) the closing price of a share of the
Company's Stock on the principal exchange on which shares of the Company's Stock
are then trading, if any, on the trading day previous to such date, or, if
shares were not traded on the trading day previous to such date, then on the
next preceding trading day during which a sale occurred; or (B) if such Stock is
not traded on an exchange but is quoted on Nasdaq or a successor quotation
system, (1) the last sales price (if the Company's Stock is then listed as a
National Market Issue under the Nasdaq National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other cases) for
the Company's Stock on the trading day previous to such date as reported by
Nasdaq or such successor quotation system; or (C) if such Stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation system,
the mean between the closing bid and asked prices for the Company's Stock, on
the day previous to such date, as determined in good faith by the Committee; or
(D) if the Company's Stock is not publicly traded, the fair market value
established by the Committee acting in good faith.
(i) "INCENTIVE STOCK OPTION" means any Stock Option
intended to be designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(j) "NON-EMPLOYEE DIRECTOR" shall have the meaning set
forth in Section 162(m) of the Code and Rule 16b-3 of the Act, and as such
Section and Rule may be amended from time to time, or any successor definition
adopted by the Commission.
(k) "NON-QUALIFIED STOCK OPTION" means any Stock Option
that is not an incentive stock option within the meaning of Section 422 of the
Code.
(l) "PARTICIPANT" means any Eligible Person selected by the
Administrator, pursuant to the Administrator's authority in Section 2 below, to
receive grants of Stock Options.
(m) "PLAN" means the ROCKSHOX, INC. 1998 Stock Option Plan.
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<PAGE>
(n) "STOCK" means the Common Stock of the Company, par
value $.01 per share.
(o) "STOCK OPTION" means any option to purchase shares of
Stock granted pursuant to Section 5.
SECTION 2
ADMINISTRATION
2.1 ADMINISTRATOR. The Plan shall be administered by the Board
or by the Committee, which shall be appointed by the Board and which shall serve
at the pleasure of the Board, in accordance with the requirements of Section
162(m) of the Code (but only to the extent necessary to maintain qualification
of the Plan under Section 162(m) of the Code) and, to the extent applicable,
Rule 16b-3 of the Act.
2.2 DUTIES AND POWERS OF ADMINISTRATOR. The Administrator shall
have the power and authority to grant Stock Options to Eligible Persons,
consultants and advisors to the Company, pursuant to the terms of the Plan.
In particular, the Administrator shall have the authority:
(a) to select those employees, advisors, consultants,
officers and directors of the Company who shall be Eligible Persons;
(b) to determine whether and to what extent Stock Options
are to be granted hereunder to Eligible Persons;
(c) to determine the number of shares to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(e) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written instruments
evidencing the Stock Options;
(f) to accelerate the date or dates of exercise of any
award granted hereunder;
(g) to reduce the exercise price of any Stock Option to the
then Fair Market Value, if the Fair Market Value of the Stock covered by such
Stock Option has declined since the date the Stock Option was granted; and
A-3
<PAGE>
(h) in its discretion, to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan.
2.3 MAJORITY RULE. The Committee shall act by a majority of its
members in attendance at a meeting at which a quorum is present or by a
memorandum or other written instrument signed by all members of the Committee.
2.4 INDEMNIFICATION. To the fullest extent permitted by law, each of
the members of the Board and the Committee and each of the directors, officers
and employees of the Company, shall be held harmless and be indemnified by the
Company for any liability, loss (including amounts paid in settlement), damages
or expenses (including reasonable attorneys' fees) suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act, in
connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.
SECTION 3
STOCK SUBJECT TO PLAN
3.1 NUMBER OF AND SOURCE OF SHARES. The total number of shares
of Stock reserved and available for issuance under the Plan shall be 300,000.
Such shares may consist, in whole or in part, of authorized and unissued shares
or treasury shares. The aggregate number of shares of Stock as to which Stock
Options may be granted to any individual during any calendar year may not,
subject to adjustment as provided in this Section 3, exceed 100% of the shares
of Stock reserved for the purposes of the Plan in accordance with the provisions
of this Section 3.
3.2 UNREALIZED AWARDS. To the extent that a Stock Option
expires or is otherwise terminated without being exercised such shares shall
again be available for issuance in connection with future awards under the
Plan. If any shares of Stock otherwise issuable under the Plan have been
pledged as collateral for indebtedness incurred by a Participant in
connection with the realization of any award hereunder, and such shares are
returned to the Company in satisfaction of such indebtedness, such shares
shall again be available for issuance in connection with future awards under
the Plan.
3.3 ADJUSTMENT OF AWARDS. In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend or other change
in corporate structure affecting the Stock, a substitution or adjustment shall
be made in (i) the kind and aggregate number of shares reserved for issuance
under the Plan and (ii) the kind, number and option price of shares subject to
outstanding Stock Options granted under the Plan, as may
A-4
<PAGE>
be determined by the Administrator, in its sole discretion. Such other
substitutions or adjustments shall be made respecting awards hereunder as may
be determined by the Administrator, in its sole discretion. In connection
with any event described in this paragraph, the Administrator may provide, in
its discretion, for the cancellation of any outstanding awards and payment in
cash or other property in exchange therefor.
SECTION 4
ELIGIBILITY
Officers (including officers who are directors of the Company),
other key employees of, independent directors, consultants and advisors to the
Company, who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company, shall be eligible to be granted
Stock Options. The Participants under the Plan shall be selected from time to
time by the Administrator, in its sole discretion, from among the Eligible
Persons recommended by the senior management of the Company, and the
Administrator shall determine, in its sole discretion, the number of shares
covered by each award.
SECTION 5
STOCK OPTIONS
5.1 OPTION AWARDS. Any Stock Option granted under the Plan
shall be in such form as the Administrator may from time to time approve, and
the provisions of Stock Option awards need not be the same with respect to each
optionee. Recipients of Stock Options shall enter into a subscription and/or
award agreement with the Company, in such form as the Administrator shall
determine, which agreement shall set forth, among other things, the exercise
price of the option, the term of award agreement and provisions regarding
exercisability of the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)
Non-Qualified Stock Options and (ii) Incentive Stock Options. More than one
option may be granted to the same optionee and be outstanding concurrently
hereunder.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions as the Administrator shall deem desirable:
5.2 The Administrator shall have the authority to grant any
officer or employee of the Company (including directors who are also officers
of the Company) Incentive Stock Options, or both types of Stock Options.
Directors who are not officers of the Company, consultants and advisors may
only be granted Non-Qualified Stock Options. To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. More than one option may be granted to
the same optionee and be outstanding concurrently hereunder.
A-5
<PAGE>
5.3 OPTION PRICE. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Administrator in its
sole discretion at the time of grant but shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock on such
date and shall not, in any event, be less than the par value (if any) of the
Stock. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company and an Incentive Stock
Option is granted to such employee, the option price of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
less than 110% of the Fair Market Value of the Stock on the date such Incentive
Stock Option is granted.
5.4 OPTION TERM. The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more than ten
years after the date such Stock Option is granted; PROVIDED, HOWEVER, that 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% of the combined voting power of all classes of
stock of the Company and an Incentive Stock Option is granted to such employee,
the term of such Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no more than five years from the date of grant.
5.5 EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion, including but not limited to in connection with any "change
in control" of the Company, as defined in any stock option agreement.
5.6 METHOD OF EXERCISE. Subject to Section 5.4 above, Stock
Options may be exercised in whole or in part at any time during the option
period, by giving written notice of exercise to the Company specifying the
number of shares to be purchased, accompanied by payment in full of the purchase
price in cash or its equivalent as determined by the Administrator. As
determined by the Administrator, in its sole discretion, payment in whole or in
part may also be made in the form of unrestricted Stock already owned by the
optionee having a Fair Market Value with an aggregate value on the date of
surrender equal to the purchase price of the shares as to which the Stock Option
shall be exercised. An optionee shall generally have the rights to dividends and
any other rights of a stockholder with respect to the Stock subject to the
option only after the optionee has given written notice of exercise and has paid
in full for such shares.
5.7 The Administrator may require the voluntary surrender of all
or a portion of any Stock Option granted under the Plan as a condition precedent
to the grant of a new Stock Option. Subject to the provisions of the Plan, such
new Stock Option shall be exercisable at the price, during such period and on
such other terms and conditions as are specified by the Administrator at the
time the new Stock Option is granted. Consistent with the provisions of Section
162(m), to the extent applicable, upon their surrender, Stock Options shall be
canceled and the shares previously subject to such canceled Stock Options shall
again be available for grants of Stock Options and other awards hereunder.
A-6
<PAGE>
5.8 NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined
by the Administrator, no Stock Option shall be transferable by the optionee, and
all Stock Options shall be exercisable, during the optionee's lifetime, only by
the optionee.
5.9 TERMINATION OF EMPLOYMENT OR SERVICE. If an optionee's
employment with or service as a director, consultant or advisor to the Company
terminates by reason of death, Disability or for any other reason, the Stock
Option may thereafter be exercised to the extent provided in the applicable
subscription or award agreement, or as otherwise determined by the
Administrator.
5.10 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
that the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of shares of Stock with respect to which Incentive
Stock Options granted to an Optionee under this Plan and all other option
plans of the Company become exercisable for the first time by the Optionee
during any calendar year exceeds $100,000, such Stock Options shall be
treated as Non-Qualified Stock Options. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Administrator in
its sole discretion at the time of grant.
SECTION 6
AMENDMENT AND TERMINATION
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of a Participant under any award theretofore granted without such
Participant's consent, or that without the approval of the stockholders (as
described below) would:
(i) except as provided in Section 3, increase the total number
of shares of Stock reserved for the purpose of the Plan;
(ii) change the class of directors, officers, employees,
consultants and advisors eligible to participate in the Plan; or
(iii) extend the maximum option period under paragraph (2) of
Section 5 of the Plan.
Notwithstanding the foregoing, stockholder approval under this
Section 8 shall only be required at such time and under such circumstances as
stockholder approval would be required under Section 162(m) of the Code or other
applicable law, rule or regulation with respect to any material amendment to any
employee benefit plan of the Company.
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The Administrator may amend the terms of any award theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his or her consent.
SECTION 7
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
SECTION 8
GENERAL PROVISIONS
8.1 The Administrator may require each person purchasing
shares pursuant to a Stock Option to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include any legend
which the Administrator deems appropriate to reflect any restrictions on
transfer.
All certificates for shares of Stock delivered under the Plan shall
be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
8.2 Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer upon any employee, consultant or advisor of the Company
any right to continued employment with the Company, as the case may be, nor
shall it interfere in any way with the right of the Company to terminate the
employment or service of any of its employees, consultants or advisors at any
time.
8.3 Each Participant shall, no later than the date as of which
the value of an award first becomes includible in the gross income of the
Participant 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 the award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the
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Company 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 Participant.
8.4 No member of the Board or the Administrator, nor any officer
or employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
SECTION 9
EFFECTIVE DATE OF PLAN
The Plan will become effective (the "Effective Date") on August 20,
1998, the date the Company's stockholders formally approve the Plan.
SECTION 10
TERM OF PLAN
No Stock Option shall be granted pursuant to the Plan on or after
the tenth anniversary of the Effective Date, but awards theretofore granted may
extend beyond that date.
A-9
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ROCKSHOX, INC.
Proxy For Annual Meeting Of Stockholders
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of ROCKSHOX, INC., a Delaware corporation
(the "Company"), hereby appoints George Napier as proxy for the undersigned,
with full power of substitution to attend the Annual Meeting of Stockholders
of the Company to be held on Thursday, August 20, 1998 at 10:00 a.m. local
time, at the Company's headquarters located at 401 Charcot Avenue, San Jose,
California 95131, and at any adjournment(s) or postponement(s) thereof, to
cast on behalf of the undersigned all votes that the undersigned is entitled
to cast at such meeting and otherwise to represent the undersigned at the
meeting, with the same effect as if the undersigned were present. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement and revokes any proxy
previously given with respect to such shares.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
1. To elect the following seven directors to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualify.
Nominees: Stephen W. Simons, Paul H. Turner, John W. Jordan II, Adam E.
Max, Michael R. Gaulke, George Napier and Edward Post
[ ] FOR ALL NOMINEES [ ] WITHHOLD AS TO ALL NOMINEES
FOR ALL NOMINEES(S) (Except as written below)
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2. To approve the ROCKSHOX, INC. 1998 Stock Option Plan (the " 1998 Stock
Plan").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the fiscal year ending March 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
[ ] CHECK HERE IF YOU PLAN TO ATTEND THE MEETING
<PAGE>
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN ACCORDANCE
WITH THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION
IS MADE, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST "FOR"
THE FOREGOING PROPOSALS AND OTHERWISE IN THE DISCRETION OF THE PROXIES AT THE
ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Signature___________ Signature if held jointly __________ Dated _______, 1998.
Please sign exactly as your name appears hereon and date. If the shares are
held jointly, each holder should sign. When signing as an attorney, executor,
administrator, trustee, guardian or as an officer, signing for a corporation or
other entity, please give full title under signature.
Fold and Detach Here
2
