<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 240.14a-11(c) or 240.14a-12
OCULAR SCIENCES, 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)(4) 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
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> 2
[OCULAR SCIENCES' LETTERHEAD]
April 26, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Ocular Sciences, Inc. to be held at The Embassy Suites, 250 Gateway
Boulevard, South San Francisco, California on Tuesday, May 25, 1999 at 9:00 a.m.
Pacific Time.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the affairs
of your Company by voting on the business to come before this meeting. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you at the meeting.
Sincerely,
John D. Fruth
Chief Executive Officer and
Chairman of the Board of Directors
<PAGE> 3
OCULAR SCIENCES, INC.
475 ECCLES AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Ocular
Sciences, Inc. (the "Company") will be held at The Embassy Suites, 250 Gateway
Boulevard, South San Francisco, California on Tuesday, May 25, 1999 at 9:00 a.m.
Pacific Time for the following purposes:
1. To elect seven directors of the Company, each to serve until the next
Annual Meeting of Stockholders and until his successor has been elected
and qualified or until his earlier resignation or removal. The Company's
Board of Directors has nominated the following persons for election as
directors:
<TABLE>
<S> <C>
John D. Fruth William R. Grant
Daniel J. Kunst Edgar J. Cummins
Norwick B. H. Goodspeed Francis R. Tunney, Jr.
Terence M. Fruth
</TABLE>
2. To amend the Company's 1997 Equity Incentive Plan to increase the number
of shares of Common Stock available under the plan by 1,000,000 shares
(from 2,000,000 shares to 3,000,000 shares).
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on April 15, 1999 are entitled to notice of and to vote at the meeting
or any adjournment thereof.
By Order of the Board of Directors
John D. Fruth
Chief Executive Officer and
Chairman of the Board of Directors
South San Francisco, California
April 26, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE> 4
OCULAR SCIENCES, INC.
475 ECCLES AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
------------------------
PROXY STATEMENT
------------------------
APRIL 26, 1999
The accompanying proxy is solicited on behalf of the Board of Directors of
Ocular Sciences, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders of the Company to be held on May 25, 1999 at 9:00
a.m. Pacific Time (the "Annual Meeting"). The Annual Meeting will be held at The
Embassy Suites, 250 Gateway Boulevard, South San Francisco, California. This
Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about April 26, 1999. A copy of the Company's Annual Report
for the year ended December 31, 1998 is enclosed with this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of
business on April 15, 1999 (the "Record Date") will be entitled to vote at the
Annual Meeting. At the close of business on the Record Date, the Company had
22,675,131 shares of Common Stock outstanding and entitled to vote. The
presence, in person or by proxy, of the holders of a majority of the shares of
Common Stock outstanding on the Record Date will constitute a quorum for the
transaction of business at the Annual Meeting.
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. Shares of Common Stock may not be voted
cumulatively. In the event that a broker, bank, custodian, nominee or other
record holder of the Company's Common Stock indicates on a proxy that it does
not have discretionary authority to vote certain shares on a particular matter
(a "broker non-vote"), those shares will not be considered present and entitled
to vote with respect to that matter, although they will be counted in
determining the presence of a quorum.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. Approval of Proposal No. 2
requires the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting that are voted
"FOR" or "AGAINST" such proposal. Neither abstentions nor a broker non-vote will
be counted as a vote "FOR" or "AGAINST" Proposal No. 2. All votes will be
tabulated by the inspector of elections appointed for the Annual Meeting.
Unless otherwise instructed, each valid returned Proxy in the form
accompanying this Proxy Statement that is not revoked will be voted in the
election of directors "FOR" the nominees of the Board of Directors and "FOR" the
increase in the 1997 Equity Incentive Plan, and at the Proxy holder's direction,
on such other matters, if any, that may come before the Annual Meeting
(including any proposal to adjourn the Annual Meeting).
The expenses of soliciting proxies in the form accompanying this Proxy
Statement will be paid by the Company. Following the original mailing of the
proxies and other soliciting materials, certain of the Company's directors,
officers, employees and agents may also solicit proxies, without additional
compensation, by mail, telephone, telegraph or in person. Following the original
mailing of the proxies and other soliciting materials, the Company will request
that brokers, custodians, nominees and other record holders of the Company's
Common Stock forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of Common Stock and request authority for the
exercise of proxies. In such cases, the Company, upon the request of the record
holders, will reimburse such holders for their reasonable expenses.
2
<PAGE> 5
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by a written
instrument delivered to the Company stating that the proxy is revoked, by a
subsequent proxy that is signed by the person who signed the earlier proxy and
is presented at the Annual Meeting or by attendance at the Annual Meeting and
voting in person. Please note, however, that if a stockholder's shares are held
of record by a broker, bank or other nominee and that stockholder wishes to vote
at the Annual Meeting, the stockholder must bring to the Annual Meeting a letter
from the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
3
<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, stockholders will elect directors to hold office
until the next Annual Meeting of Stockholders and until their respective
successors have been elected and qualified or until such directors' earlier
resignation or removal. The size of the Company's Board of Directors (the
"Board") is currently set at seven members. Accordingly, seven persons will be
elected at the Annual Meeting to be the directors of the Company. In the
election of directors, each stockholder is entitled to one vote for each share
of Common Stock held. The Board has nominated for election as the directors of
the Company the seven persons identified under "Directors/Nominees" below. Each
share represented by the accompanying proxy will be voted for the election of
the seven persons nominated by the Board unless the proxy is marked in such a
manner as to withhold authority so to vote. If any nominee for any reason is
unable to serve, or declines to serve, as a director at the time of the Annual
Meeting, the proxies may be voted for such substitute nominee as the proxy
holder may determine. The Company is not aware of any nominee who will be unable
to, or intends to decline to, serve as a director.
DIRECTORS/NOMINEES
The names of the Board's nominees for election as directors, and certain
information about them as of April 15, 1999, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
John D. Fruth...................... 55 Chief Executive Officer and 1985
Chairman of the Board of Directors
of the Company
Norwick B.H. Goodspeed............. 49 President and Chief Operating 1997
Officer of the Company
Daniel J. Kunst.................... 46 Vice President, Sales and Marketing 1987
of the Company
Edgar J. Cummins(1)................ 55 Healthcare consultant 1992
Terence M. Fruth................... 60 Partner of the law firm of Fruth & 1992
Anthony, P.A.
William R. Grant(1)................ 74 Chairman of Galen Associates 1992
Francis R. Tunney, Jr.(1).......... 51 Corporate Vice President- 1996
Administration, General Counsel and
Corporate Secretary of Allergan,
Inc.
</TABLE>
- ---------------
(1) Member of the Audit Committee and the Compensation Committee
JOHN D. FRUTH founded the Company in 1985 and has been the Chief Executive
Officer and Chairman of the Board since its inception. He was also President of
the Company from 1985 to October 1997. Prior to joining the Company, Mr. Fruth
worked in the regulatory affairs department, and served as President, contact
lens division, of CooperVision, Inc., a contact lens manufacturer, from 1976 to
1983. From 1972 to 1976, Mr. Fruth worked in sales and marketing management
positions at Bausch & Lomb, Inc., a company that manufactures and markets
health-care products, including contact lenses. John D. Fruth is the brother of
Terence M. Fruth.
NORWICK B.H. GOODSPEED has been President and Chief Operating Officer of
the Company and a member of the Board since October 1997. From 1993 to October
1997, Mr. Goodspeed was the President and Chief Executive Officer of McGaw,
Inc., a manufacturer of intravenous solutions and related equipment and a
subsidiary of IVAX Corp. From 1991 to 1993, Mr. Goodspeed was Senior Vice
President, Sales and Marketing of McGaw, Inc. From 1988 to 1991, he was the
President and Chief Executive Officer of Vical, Inc., a gene therapy company.
DANIEL J. KUNST has been Vice President, Sales and Marketing, of the
Company since August 1995. Mr. Kunst has also been a member of the Board since
October 1987 and served as Executive Vice President
4
<PAGE> 7
and Chief Operating Officer of the Company from 1987 to February 1992. From
November 1994 to May 1995, Mr. Kunst served as Chief Executive Officer of
NeoLens, Inc., an optical products company. From January 1993 to October 1994,
Mr. Kunst was President, Chief Executive Officer and a director of Cymed, Inc.,
a manufacturer and marketer of medical devices. From March 1992 to January 1993,
he worked as an independent consultant to ophthalmic companies. Additionally,
from 1990 to 1995, Mr. Kunst was a member of the board of directors of VISX,
Inc., a manufacturer of ophthalmic lasers. From 1979 to 1987, Mr. Kunst held
various management positions with CooperVision, Inc., including President,
Professional Resources Division; Senior Vice President, Ophthalmic Products
Division; and Vice President, Sales and Marketing, Revo Sunglass Division.
EDGAR J. CUMMINS has been a member of the Board since October 1992. Mr.
Cummins is currently principally occupied as an independent healthcare
consultant. From May 1995 to January 1998, Mr. Cummins served as Chief Financial
Officer of Chiron Vision Corporation, an ophthalmic surgical company. Chiron
Vision Corporation was acquired by Bausch & Lomb, Inc. in December 1997. From
1986 to May 1995, he was Chief Financial Officer of Allergan, Inc. ("Allergan").
Prior to his service with Allergan, Mr. Cummins held various senior financial
positions with American Hospital Supply Corporation, a health-care and medical
products company, and Baxter Travenol Laboratories, Inc., a medical products
company, over a period of seven years. Prior to that, he spent five years as a
financial consultant for Arthur Young & Company, a certified public accounting
firm.
TERENCE M. FRUTH has been Corporate Secretary and a member of the Board
since August 1992. Since 1985, Mr. Fruth has been a partner, Vice President and
Corporate Secretary of Fruth & Anthony, P.A., a Minneapolis-based law firm
specializing in commercial litigation. Mr. Fruth has been practicing law for 30
years. Mr. Fruth is a member of both the Minnesota State and American Bar
Associations. Terence M. Fruth is the brother of John D. Fruth.
WILLIAM R. GRANT has been a member of the Board since October 1992. Since
1989, he has been the Chairman of Galen Associates, a venture capital firm
specializing in emerging health-care companies. From 1987 to 1989, Mr. Grant
served as Chairman of New York Life International Investment, and from 1979 to
1987, he was the Chairman and President of MacKay-Shields Financial Corporation.
Prior to 1979, Mr. Grant had 25 years' experience with Smith Barney, Harris
Upham & Co., Inc., where he served as President and from 1976 to 1978, Vice
Chairman. Mr. Grant currently serves as Vice Chairman of SmithKline Beecham plc
and serves on the boards of directors of Allergan, Inc.; MiniMed, Inc., a
company that specializes in drug delivery devices and systems; Seagull Energy
Corporation, an oil and gas company; and Witco Corporation, a specialty
chemicals company.
FRANCIS R. TUNNEY, JR. has been a member of the Board since October 1996.
Mr. Tunney has been Corporate Vice President-Administration, General Counsel and
Corporate Secretary of Allergan since February 1991. Mr. Tunney is also the
current acting Chief Financial Officer of Allergan. From 1989 to 1991, Mr.
Tunney was Senior Vice President, General Counsel and Corporate Secretary of
Allergan. Mr. Tunney joined Allergan in 1985 as Associate General Counsel and
from 1986 to 1989 served as Allergan's General Counsel. From 1979 to 1985, Mr.
Tunney held several positions at SmithKline Beecham plc, including counsel for
its Medical Device and Diagnostics Division, acting general manager for its
Medical Ultrasound Division and senior international attorney within its
corporate law department.
Directors are elected at each annual meeting of stockholders to serve until
the next annual meeting of stockholders, or until their successors are duly
elected and qualified or until their earlier resignation, removal or death.
Executive officers are chosen by, and serve at the discretion of, the Board.
The Company incorporated under the name O.S.I. Corporation in California in
1985, and was reincorporated in Delaware in July 1997. Unless the context
otherwise requires, references herein to the Company include its California
predecessor.
5
<PAGE> 8
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board met seven times, and acted by unanimous written consent once,
during the year ended December 31, 1998. No director attended fewer than 75% of
the aggregate of the total number of meetings of the Board and of all committees
of the Board on which such director served.
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
The Audit Committee is composed of Edgar J. Cummins, William R. Grant and
Francis R. Tunney, Jr. The Audit Committee: (1) nominates the independent
auditors of the Company to be approved by the Board of Directors; (2) meets with
the independent auditors to review the annual audit and as appropriate at other
times during the year; (3) assists the full Board in evaluating the auditors'
performance; and (4) reviews internal control procedures, related party
transactions and, where appropriate, potential conflict of interest situations.
The Audit Committee met two times in the year ended December 31, 1998.
The Company's Compensation Committee is composed of Edgar J. Cummins,
William R. Grant and Francis R. Tunney, Jr. The Compensation Committee reviews
and approves the compensation and benefits for the Company's executive officers,
administers the Company's 1997 Equity Incentive Plan and makes recommendations
to the Board regarding such matters. The Compensation Committee met one time in
the year ended December 31, 1998.
DIRECTOR COMPENSATION
The Company does not pay cash compensation to its directors, other than
reimbursement for reasonable expenses in attending meetings of the Board. The
non-employee members of the Board are compensated under the Company's 1997
Directors Stock Option Plan (the "Directors Plan").
In June 1997, the Board adopted and the stockholders approved the Directors
Plan and reserved a total of 300,000 shares of the Company's Common Stock for
issuance thereunder. Only members of the Board who are not employees of the
Company, or any parent, subsidiary or affiliate of the Company, are eligible to
participate in the Directors Plan. On August 4, 1997, the effective date of the
Company's initial public offering, each eligible director (Terence M. Fruth,
William R. Grant, Francis R. Tunney and Edgar J. Cummins) was granted an option
to purchase 30,000 shares at an exercise price of $16.50 per share. Each
eligible director who thereafter becomes a member of the Board is automatically
granted an option to purchase 30,000 shares upon joining the Board. In addition,
each eligible director is automatically granted an option to purchase 15,000
shares on each anniversary date of such director's initial option grant under
the Directors Plan if such director has served continuously as a member of the
Board since the date such director was first granted an option under the
Directors Plan. On August 4, 1998, each non-employee Director was granted an
option to purchase 15,000 shares of the Company's Common Stock at an exercise
prices of $28.75 per share. As of December 31, 1998, options to purchase a total
of 180,000 shares of Common Stock have been granted under the Directors Plan.
All options granted under the Directors Plan vest as to 1/36 of the shares
subject to the option per month commencing the month following the month of the
date of grant, for so long as the optionee continues as a member of the Board or
as a consultant to the Company. The exercise price of all options granted under
the Directors Plan is and will be the fair market value of the Common Stock on
the date of grant.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
6
<PAGE> 9
PROPOSAL NO. 2 -- AMENDMENT TO 1997 EQUITY INCENTIVE PLAN
TO ADD 1,000,000 AUTHORIZED SHARES
The stockholders are being asked to approve an amendment to the Company's
1997 Equity Incentive Plan (the "1997 Plan") to increase the number of shares of
Common Stock that are authorized and reserved for issuance under the Plan by
1,000,000 shares (from 2,000,000 shares to 3,000,000 shares).
The 1997 Plan is an important part of the Company's compensation program
and is essential to the Company's ability to attract and retain highly qualified
employees in an extremely competitive environment in which employees view equity
incentives as an increasingly important component of their compensation. The
proposed amendment to the 1997 Plan is necessary to enable the Company to
continue providing stock-based compensation to new and current employees. The
Board believes that the additional reserve of shares with respect to which
equity incentives under the 1997 Plan may be granted will provide the Company
with adequate flexibility to ensure that the Company can continue to meet those
goals and facilitate expansion and retention of the Company's employee base.
VOTE REQUIRED FOR APPROVAL
Approval of this amendment to the 1997 Plan requires the affirmative vote
of a majority of shares of Common Stock that are voted for or against the
Proposal. The Board approved the proposed amendment on March 25, 1999, to be
effective upon stockholder approval. Below is a summary of the principal
provisions of the 1997 Plan, assuming stockholder approval of the amendment. The
summary is not necessarily complete, and reference is made to the full text of
the 1997 Plan.
1997 INCENTIVE PLAN HISTORY
In June 1997, the Board adopted the 1997 Plan, under which an aggregate of
1,000,000 shares of Common Stock were reserved for issuance. In July 1997 the
1997 Plan was amended to reflect a two-for-one stock split of the Company's
Common Stock. In July 1997 the Company's stockholders approved the 1997 Plan.
The 1997 Plan became effective on August 4, 1997, the effective date of the
Company's initial public offering. The 1997 Plan authorizes the award of
options, opportunities to purchase restricted stock and stock bonuses (each an
"Award"). The purpose of the 1997 Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company by offering such persons an
opportunity to participate in the Company's future performance through grants of
Awards.
From inception of the 1997 Plan in August, 1997 to December 31, 1998,
options to purchase an aggregate of 1,950,200 shares of the Company's Common
Stock were granted under the 1997 Plan. Of these, options were granted to the
following Named Executive Officers of the Company: John D. Fruth, 220,000 shares
(also a director and principal stockholder); Norwick B.H. Goodspeed, 300,000
shares (also a director); Daniel J. Kunst, 36,000 shares (also a director);
Gregory E. Lichtwardt, 66,000 shares; and John Lilley, 30,000 shares. During the
same period, the Company's executive officers as of December 31, 1998 as a group
(5 persons) had been granted options to purchase a total of 652,000 shares. No
options were granted during the period under the 1997 Plan to any outside
director of the Company, as such outside directors are compensated under the
Directors Plan (for a description of the Directors Plan see under the heading
"Director Compensation"). No options were granted during this same period under
the 1997 Plan to any associate of any executive officer or director of the
Company, and no persons, except John Fruth and Norwick Goodspeed, received 5% or
more of such options. During the same period, all other employees, excluding
executive officers, as of December 31, 1998, had been granted options to
purchase a total of 1,298,200 shares.
SHARES SUBJECT TO THE INCENTIVE PLAN
The stock subject to issuance under the 1997 Plan consists of shares of the
Company's authorized but unissued Common Stock. In addition, any shares
remaining unissued under the Company's 1989 Stock Option Plan (the "Prior Plan")
on the effective date of the 1997 Plan, including any shares issuable upon
exercise of
7
<PAGE> 10
options granted pursuant to the Prior Plan that expire or become unexercisable
for any reason without having been exercised in full, are no longer available
for distribution under the Prior Plan but are available for distribution under
the 1997 Plan. As of December 31, 1998, 333,422 shares from the Prior Plan were
available for future grant and issuance under the 1997 Plan. Shares subject to
an option granted pursuant to the 1997 Plan that expires or terminates for any
reason without being exercised or shares subject to a restricted stock award
granted pursuant to the 1997 Plan that is forfeited or is repurchased by the
Company at the original issue price or that otherwise terminates without shares
being issued, will again become available for grant and issuance pursuant to
Awards under the 1997 Plan. This number of shares is subject to proportional
adjustment to reflect stock splits, stock dividends and other similar events.
ELIGIBILITY
Employees, officers, directors, consultants, independent contractors and
advisors of the Company (and of any subsidiaries and affiliates) are eligible to
receive Awards under the 1997 Plan (the "Participants"). No Participant is
eligible to receive more than 1,200,000 shares of Common Stock in any calendar
year under the 1997 Plan, other than new employees of the Company (including
directors and officers who are also new employees) who are eligible to receive
up to a maximum of 1,600,000 shares of Common Stock issuable upon exercise of
stock options in the calendar year in which they commence their employment with
the Company. As of December 31, 1998, approximately 288 persons were eligible to
participate in the 1997 Plan, 1,600 shares had been issued upon exercise of
options, 1,829,550 shares were subject to outstanding options and no shares had
been issued pursuant to restricted stock and stock bonus awards. As of that
date, 502,272 shares were available for future grant pursuant to the 1997 Plan,
after taking into account the shares originally reserved for issuance under the
Prior Plan that were subject to Awards that have become available for
distribution under the 1997 Plan (but without taking into account the proposed
amendment to the 1997 Plan). The closing price of the Company's Common Stock on
the Nasdaq National Market was $28.75 per share on April 14, 1999, the last
trading day before the Record Date.
ADMINISTRATION
The 1997 Plan is administered by the Compensation Committee (the
"Committee"), the members of which are appointed by the Board. The Committee
currently consists of Messrs. Cummins, Grant and Tunney, each of whom are
"non-employee directors," as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside
directors," as defined pursuant to Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code").
Subject to the terms of the 1997 Plan, the Committee determines the persons
who are to receive Awards, the number of shares subject to each Award and the
terms and conditions of Awards. The Committee also has the authority to construe
and interpret any of the provisions of the 1997 Plan and any agreement or Award
granted thereunder, to grant Awards and establish the terms of any Awards, as
well as to make all other determinations necessary or advisable for the
administration of the 1997 Plan. The Committee has delegated to the Chief
Executive Officer or the President, or Chief Financial Officer the authority to
grant ordinary course stock options to non-officer employees, subject to certain
restrictions.
STOCK OPTIONS
The 1997 Plan provides for the grant of both incentive stock options
("ISOs") that qualify under Section 422 of the Internal Revenue Code of 1986, as
amended, and nonqualified stock options ("NQSOs"). ISOs may be granted only to
employees of the Company or of a parent or subsidiary of the Company. NQSOs may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or of any parent or subsidiary of the
Company, provided such consultants, independent contractors and advisors render
bona fide services not in connection with the offer and sale of securities in a
capital-raising transaction ("Eligible Service Providers"). The exercise price
of ISOs must be at least equal to the fair market value of the Company's Common
Stock on the date of grant (110% of that value in the case of ISOs issued to 10%
stockholders). The exercise price of NQSOs must be at least equal to 85% of that
value. The maximum term of options granted under the 1997 Plan is ten years.
Options granted under the 1997 Plan may
8
<PAGE> 11
not be transferred in any manner other than by will or by the laws of descent
and distribution and may be exercised during the lifetime of the optionee only
by the optionee. Options granted under the 1997 Plan generally expire 90 days
after the termination of the optionee's service to the Company or to a parent or
subsidiary of the Company, except in the case of death or disability, in which
case the options may be exercised up to 12 months following the date of death or
termination of service. Options terminate on the date of notice of termination
of employment for certain causes.
The exercise price of options granted under the 1997 Plan may be paid as
approved by the Committee at the time of grant or in limited circumstances at
the time of exercise: (1) in cash (by check); (2) by cancellation of
indebtedness of the Company to the Participant; (3) by surrender of shares of
the Company's Common Stock owned by the Participant for at least six months and
having a fair market value on the date of surrender equal to the aggregate
exercise price of the option; (4) by tender of a full recourse promissory note;
(5) by waiver of compensation due to or accrued by the Participant for services
rendered; (6) by a "same-day sale" commitment from the Participant and a
National Association of Securities Dealers, Inc. ("NASD") broker; (7) by a
"margin" commitment from the Participant and an NASD broker; or (8) by any
combination of the foregoing.
RESTRICTED STOCK AWARDS
The Committee may grant Participants restricted stock awards to purchase
stock either in addition to, or in tandem with, other Awards under the 1997
Plan, under such terms, conditions and restrictions as the Committee may
determine. During 1998, the Company did not grant any restricted stock awards.
STOCK BONUS AWARDS
The Committee may grant Participants stock bonus awards either in addition
to, or in tandem with, other awards under the 1997 Plan, under such terms,
conditions and restrictions as the Committee may determine. During 1998, the
Committee did not grant any stock bonus awards.
CERTAIN CORPORATE TRANSACTIONS
In the event of a merger, consolidation, dissolution, liquidation, or sale
of all or substantially all of the assets of the Company or certain other
similar corporate transactions, any or all outstanding Awards may be assumed or
replaced by the successor corporation. In the alternative, the successor
corporation may substitute equivalent Awards or provide consideration to Award
recipients which is substantially similar to that provided to stockholders in
such transactions. If the successor does not assume or substitute Awards,
outstanding Awards will expire upon consummation of the transaction, provided
that the Board in its sole discretion may provide that the vesting of any or all
Awards will accelerate prior to such consummation.
AMENDMENT OF THE INCENTIVE PLAN
The Board may at any time terminate or amend the 1997 Plan, including
amending any form of Award agreement or instrument to be executed pursuant to
the 1997 Plan. However, the Board may not amend the 1997 Plan in any manner that
requires stockholder approval pursuant to the Code or the regulations
promulgated thereunder.
TERM OF THE 1997 PLAN
Unless terminated earlier as provided in the 1997 Plan, the 1997 Plan will
expire in June 2007, ten years after the date the Board adopted the 1997 Plan.
FEDERAL INCOME TAX INFORMATION
The following is a general summary as of the date of this proxy statement
of the federal income tax consequences to the Company and participants under the
1997 Plan. Federal tax laws may change and the federal, state and local tax
consequences for any participant will depend upon his or her individual
9
<PAGE> 12
circumstances. Each participant has been and is encouraged to seek the advice of
a qualified tax advisor regarding the tax consequences of participation in the
1997 Plan.
Incentive Stock Options. A Participant will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the Participant is subject to
the alternative minimum tax ("AMT") as described below). If the Participant
holds shares acquired upon exercise of an ISO (the "ISO Shares") for more than
one year after the date the option was exercised and for more than two years
after the date the option was granted, the Participant generally will realize
capital gain or loss (rather than ordinary income or loss) upon disposition of
the ISO Shares. This gain or loss will be equal to the difference between the
amount realized upon such disposition and the amount paid for the ISO Shares.
If the Participant disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized upon
such disposition, up to the difference between the fair market value of the ISO
Shares on the date of exercise (or, if less, the amount realized on a sale of
such shares) and the option exercise price, will be treated as ordinary income.
Any additional gain will be capital gain, taxed at a rate that depends upon the
amount of time the ISO Shares were held by the Participant.
Alternative Minimum Tax. The difference between the fair market value of
the ISO Shares on the date of exercise and the exercise price is an adjustment
to income for purposes of AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is 26% of an individual taxpayer's alternative minimum
taxable income (28% in the case of alternative minimum taxable income in excess
of $175,000). A maximum 20% AMT rate applies to the portion of alternative
minimum taxable income that would otherwise be taxable as net capital gain.
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference items
(including the difference between the fair market value of the ISO Shares on the
date of exercise and the exercise price), and reducing this amount by the
applicable exemption amount ($45,000 in case of a joint return, subject to
reduction under certain circumstances). If a disqualifying disposition of the
ISO Shares occurs in the same calendar year as exercise of the ISO, there is no
AMT adjustment with respect to those ISO Shares. Also, upon a sale of ISO Shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the ISO
Shares at exercise over the amount paid for the ISO Shares.
Nonqualified Stock Options. A Participant will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO, the
Participant must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the Participant's exercise price. The included amount must be treated as
ordinary income by the Participant and may be subject to withholding by the
Company (either by payment in cash or withholding out of the Participant's
salary). Upon resale of the shares by the Participant, any subsequent
appreciation or depreciation in the value of the shares will be treated as
capital gain or loss.
Restricted Stock and Stock Bonus Awards. Restricted stock and stock bonus
awards will generally be subject to tax at the time of receipt, unless there are
restrictions that enable the Participant to defer tax. At the time the tax is
incurred, the tax treatment will be similar to that discussed above for NQSOs.
Maximum Tax Rates. The maximum tax rate applicable to ordinary income is
39.6%. Long-term capital gain is taxed at a maximum rate of 20%. To receive
long-term capital gain treatment, the stock must be held for more than one year.
Capital gains may be offset by capital losses and up to $3,000 of capital losses
may be offset annually against ordinary income.
Tax Treatment of the Company. The Company generally will be entitled to a
deduction in connection with the exercise of an NQSO by a Participant or the
receipt of restricted stock or stock bonuses by a Participant to the extent that
the Participant recognizes ordinary income, provided that the Company timely
reports such income to the Internal Revenue Service. The Company will be
entitled to a deduction in connection with the disposition of ISO Shares only to
the extent that the Participant recognizes ordinary income on a disqualifying
disposition of the ISO Shares.
ERISA. The 1997 Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
10
<PAGE> 13
NEW PLAN BENEFITS
The amounts of future Award grants under the 1997 Plan are not determinable
because under the terms of the 1997 Plan, such grants are made in the discretion
of the Committee and, in certain limited instances described above, in the
discretion of the Chief Executive Officer, President or Chief Financial Officer.
Future stock option exercise prices are not determinable because they are based
upon the fair market value of the Company's Common Stock on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN.
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 15, 1999,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director and nominee, (iii) the Chief
Executive Officer of the Company and each of the Company's four most highly
compensated executive officers (other than the Chief Executive Officer) who were
serving as executive officers at the end of fiscal 1998 (together, the "Named
Executive Officers") and (iv) all current directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
5% STOCKHOLDERS, DIRECTORS AND BENEFICIALLY OUTSTANDING
NAMED EXECUTIVE OFFICERS OWNED(1) COMMON STOCK(1)
------------------------------ ------------ ---------------
<S> <C> <C>
John D. Fruth(2)................................. 5,044,000 22.2%
William R. Grant(3).............................. 1,985,122 8.7%
Galen Partners, L.P. and affiliates(4)........... 1,963,873 8.6%
The TCW Group, Inc.(5)........................... 1,747,148 7.7%
Dresdner RCM Global Investors LLC(6)............. 1,661,450 7.3%
Francis R. Tunney, Jr.(7)........................ 31,435 *
Gregory E. Lichtwardt(8)......................... 125,680 *
Terence M. Fruth(9).............................. 126,219 *
Daniel J. Kunst(10).............................. 67,925 *
John Lilley(11).................................. 45,000 *
Edgar J. Cummins(12)............................. 32,697 *
Norwick B.H. Goodspeed(13)....................... 60,000 *
All directors and executive officers as a group
(9 persons)(14)................................ 7,518,078 32.7%
</TABLE>
- ---------------
* Less than 1% of the Company's outstanding Common Stock
(1) Percentage ownership is based on 22,675,131 shares outstanding as of April
15, 1999. Unless otherwise indicated below, the persons and entities named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Shares of Common Stock subject to options that are currently
exercisable or will become exercisable within 60 days of April 15, 1999,
are deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Represents 5,000,000 shares held of record by Mr. Fruth and 44,000 shares
of Common Stock that may be acquired by Mr. Fruth upon exercise of stock
options that are currently exercisable or will become exercisable within 60
days of April 15, 1999. The address for Mr. Fruth is c/o Ocular Sciences,
Inc., 475 Eccles Ave., South San Francisco, California 94080.
(3) Shares owned represent 1,963,873 shares held of record by Galen Partners,
L.P. and its affiliates and 21,249 shares of Common Stock that may be
acquired upon exercise of stock options that are currently exercisable or
will become exercisable within 60 days of April 15, 1999.
(4) Shares owned represent 1,770,564 shares held of record by Galen Partners,
L.P., 182,299 shares held of record by Galen Partners International, L.P.
and 11,010 shares held of record by Galen Associates, but do not include
21,249 shares of Common Stock that may be acquired by William R. Grant (a
director of the Company) upon exercise of stock options that are currently
exercisable or will become exercisable within 60 days of April 15, 1999.
Mr. Grant, Bruce F. Wesson and Rebound Investments, Inc. are the general
partners of BGW Partners, L.P., the general partner of Galen Partners, L.P.
and Galen Partners International, L.P. and thus may be deemed to have
voting and investment power with respect to these
12
<PAGE> 15
shares. The address for these individuals and entities is c/o Galen
Associates, 610 Fifth Avenue, New York, New York 10020.
(5) Information regarding The TCW Group, Inc. ("TCW") is derived from Schedule
13G filed by TCW with the Commission on February 12, 1999. The shares
reported as beneficially owned by TCW are beneficially owned by certain
subsidiaries of TCW. Robert Day, an individual who may be deemed to control
TCW, may be deemed to beneficially own the shares reported as beneficially
owned by TCW. TCW's address is 856 South Figueroa Street, Los Angeles,
California 90017. Mr. Day's address is 200 Park Avenue, New York, New York
10166.
(6) Information regarding Dresdner RCM Global Investors LLC ("Dresdner") is
derived from the Schedule 13G filed by Dresdner with the Commission on
February 16, 1999. Of the shares reported as beneficially owned by
Dresdner, 1,647,950 shares may be deemed beneficially owned by Dresdner RCM
Global Investors US Holdings LLC and Dresdner Bank AG and 13,500 shares may
be deemed beneficially owned by certain affiliates of Dresdner. Dresdner
RCM Global Investors LLC ("Dresdner RCM") is a registered investment
adviser, and in such capacity Dresdner RCM may have discretionary authority
to dispose of or to vote securities that are under its management, and as a
result may be deemed to have beneficial ownership of such securities. In
addition, other wholly-owned subsidiaries of Dresdner held 13,500 shares of
the Corporation's Common Stock, with sole voting power and sole dispositive
power with respect to such shares. Of the 1,647,950 shares reported as
beneficially owned by Dresdner, it has sole voting power with respect to
1,061,950 of such shares, no voting power with respect to 586,000 of such
shares, sole dispositive power with respect to 1,633,950 of such shares,
and shared dispositive power with respect to 14,000 of such shares.
Dresdner's address is Four Embarcadero Center, San Francisco, California
94111.
(7) Represents 186 shares held of record by Mr. Tunney, Jr. and 31,249 shares
of Common Stock that may be acquired by Mr. Tunney upon exercise of stock
options that are currently exercisable or will become exercisable within 60
days of April 15, 1999.
(8) Represents 108,886 shares held of record by Mr. Lichtwardt and 16,794
shares of Common Stock that may be acquired by Mr. Lichtwardt upon exercise
of stock options that are currently exercisable or will become exercisable
within 60 days of April 15, 1999.
(9) Represents 104,970 shares of record held by Mr. Fruth and 21,249 shares of
Common Stock that may be acquired by Mr. Fruth upon exercise of stock
options that are currently exercisable or will become exercisable within 60
days of April 15, 1999.
(10) Represents 40,000 shares held of record by Mr. Kunst, 700 shares held in
Mr. Kunst's IRA, 25 shares held in an IRA for Mr. Kunst's wife which are
deemed beneficially owned by Mr. Kunst and 27,200 shares of Common Stock
that may be acquired by Mr. Kunst upon exercise of stock options that are
currently exercisable or will become exercisable within 60 days of April
15, 1999.
(11) Represents 1,000 shares held of record by Mr. Lilley and 44,000 shares of
Common Stock that may be acquired upon exercise of stock options that are
currently exercisable or will become exercisable within 60 days of April
15, 1999.
(12) Represents 11,448 shares of record held by Mr. Cummins and 21,249 shares of
Common Stock that may be acquired by Mr. Cummins upon exercise of stock
options that are currently exercisable or will become exercisable within 60
days of April 15, 1999.
(13) Represents 60,000 shares of Common Stock that may be acquired by Mr.
Goodspeed upon exercise of stock options that are currently exercisable or
will become exercisable within 60 days of April 15, 1999.
(14) Includes the shares described in notes (2), (3), (7), (8), (9), (10), (11),
(12) and (13).
13
<PAGE> 16
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of April 15, 1999,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Chief Executive Officer and Chairman of the Board of
John D. Fruth............ 55 Directors
Norwick B.H. Goodspeed... 49 President, Chief Operating Officer, and Director
Daniel J. Kunst.......... 46 Vice President, Sales and Marketing and Director
Vice President, Finance, Chief Financial Officer and
Gregory E. Lichtwardt.... 44 Treasurer
John Lilley.............. 52 Vice President, Manufacturing
</TABLE>
For information regarding the positions and offices with the Company held
by Messrs. Fruth, Goodspeed and Kunst, please refer to the discussion regarding
nominees for election as directors in "Directors/ Nominees" under Proposal No. 1
above.
GREGORY E. LICHTWARDT has been Vice President, Finance, and Chief Financial
Officer of the Company since April 1993 and Treasurer since May 1997. Prior to
joining the Company, from November 1990 to February 1993, Mr. Lichtwardt was
Vice President, Finance, of the Humphrey Instruments Division of Allergan, a
health-care company focused on specialty pharmaceutical products. From February
1989 to November 1990, he served as Director of Operations, Accounting and
Planning, of Allergan's Optical Division. From December 1986 to January 1989, he
was Corporate Controller of AST Research, Inc., a personal computer
manufacturing company, and from June 1980 to December 1986, Mr. Lichtwardt held
financial positions within several different divisions of American Hospital
Supply Corporation, a health-care and medical products company.
JOHN LILLEY has been Vice President, Manufacturing, of the Company since
June 1996. From 1990 to June 1996, Dr. Lilley served as Manufacturing Director
of Bespak plc, an English company that manufactures precision plastic
injection-molded components for the pharmaceutical industry. From 1989 to 1990,
he was Operations Director of Birkby Plastics, a division of the Plessey
Plastics Group, which manufactures plastic injection-molded components for the
automotive and computer industries.
14
<PAGE> 17
EXECUTIVE COMPENSATION
COMPENSATION OF NAMED OFFICERS
The following table sets forth compensation awarded to or earned for
services rendered in all capacities to the Company by the Company's Named
Executive Officers during fiscal 1997 and 1998. This information includes the
dollar values of base salaries and bonus awards, the number of shares subject to
stock options granted and certain other compensation, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($) OPTIONS(#)
--------------------------- ------ ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
John D. Fruth................. 1998 395,000 227,125 7,023(3) 220,000
Chief Executive Officer 1997 357,462 192,500 3,939(3) --
Norwick B.H. Goodspeed........ 1998 300,000 207,000 156,947(4) --
President and Chief Operating 1997 49,615 111,250(4) 300,000
Officer(8)
Gregory E. Lichtwardt......... 1998 204,000 97,110 261,982(5) 66,000
Vice President, Finance, 1997 190,513 97,428 235(5) --
Chief Financial Officer and
Treasurer
Daniel J. Kunst............... 1998 200,000 95,500 1,855(6) 36,000
Vice President, Sales and..... 1997 186,406 82,829 426(6) --
Marketing
John Lilley................... 1998 195,417 104,835 257,317(7) 30,000
Vice President,
Manufacturing(9)............ 1997 169,000 73,811 63,415(7) --
</TABLE>
- ---------------
(1) For Fiscal Year 1998, represents salaries earned in 1998 regardless of when
paid. For Fiscal Year 1997, represents salaries earned in 1997 regardless of
when paid.
(2) For Fiscal Year 1998, represents bonuses earned in 1998 regardless of when
paid. For Fiscal Year 1997, represents bonuses earned in 1997 regardless of
when paid.
(3) For Fiscal Year 1998, represents premiums paid by the Company with respect
to term life insurance for Mr. Fruth's benefit in the amount of $2,250,
automobile expenses paid by the Company for his benefit in the amount of
$2,038 and the Company's 401K contribution match in the amount of $2,735.
For Fiscal Year 1997, represents premiums paid by the Company with respect
to term life insurance for Mr. Fruth's benefit in the amount of $864 and
automobile expenses paid by the Company for his benefit in the amount of
$3,075.
(4) For Fiscal Year 1998, represents premiums paid by the Company with respect
to term life insurance for Mr. Goodspeed's benefit in the amount of $870,
$4,001 of additional relocation costs paid, $150,000 amortization of the
portion of certain loans to Mr. Goodspeed and the Company's 401K
contribution match in the amount of $2,076. For Fiscal Year 1997, includes
$80,000 of accrued relocation costs and $31,250 amortization of the portion
of certain loans to Mr. Goodspeed. See "-- Employment Agreements."
(5) For Fiscal Year 1998, represents premiums paid by the Company with respect
to term life insurance for Mr. Lichtwardt's benefit in the amount of $257, a
gain on Company options exercised in the amount of $260,313 and the
Company's 401K contribution match in the amount of $1,412. For Fiscal Year
1997, represents premiums paid by the Company with respect to life insurance
for the benefit of Mr. Lichtwardt.
(6) For Fiscal Year 1998, represents premiums paid by the Company with respect
to term life insurance for Mr. Kunst's benefit in the amount of $470 and the
Company's 401K contribution match in the amount of
15
<PAGE> 18
$1,385. For Fiscal Year 1997, represents premiums paid by the Company with
respect to life insurance for the benefit of Mr. Kunst.
(7) For Fiscal Year 1998, represents a $48,854 contribution by the Company to a
pension plan for the benefit of Dr. Lilley, a $8,439 reimbursement for
automobile expenses, $12,789 paid by the Company for insurance for the
benefit of Dr. Lilley and gains on Company options exercised in the amount
of $182,700. For Fiscal Year 1997, represents premiums paid by the Company
with respect to life insurance for the benefit of Mr. Lilley.
(8) Mr. Goodspeed joined the Company as President and Chief Operating Officer in
October 1997, and serves in those capacities under the terms of an
employment agreement. His current annual salary is $320,000. See
"-- Employment Agreements."
(9) Dr. Lilley serves as the Company's Vice President, Manufacturing under the
terms of an employment agreement. See "-- Employment Agreements."
16
<PAGE> 19
OPTION GRANTS IN FISCAL 1998
The following table sets forth information regarding option grants during
1998 to each of the Named Executive Officers. In accordance with the rules of
the Securities and Exchange Commission, the table sets forth the hypothetical
gains or "option spreads" that would exist for the options at the end of their
respective six-year terms. These gains are based on assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted to the end of the option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
% OF ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN OPTION TERM(4)
OPTIONS FISCAL EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) YEAR(2) PER SHARE(3) DATE 5% 10%
---- ------------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John D. Fruth............ 201,045 12.1% $26.375 1/28/08 $3,334,753 $8,450,918
18,955 1.14% $29.0125 1/28/03 $ 88,130 $ 255,224
Norwick B.H. Goodspeed... -- -- -- -- -- --
Gregory E. Lichtwardt.... 66,000 3.96% $26.375 1/28/08 $1,094,748 $2,774,308
Daniel J. Kunst.......... 36,000 2.16% $26.375 1/28/08 $ 597,136 $1,513,258
John Lilley.............. 30,000 1.80% $26.375 1/28/08 $ 497,613 $1,261,049
</TABLE>
- ---------------
(1) The options granted vest over a five-year period, with 20% of the options
vesting upon the completion of each year of service.
(2) The Company granted options to purchase 1,667,200 shares of Common Stock to
employees during 1998.
(3) The exercise price may be paid in cash, in shares of the Company's common
stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares.
(4) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
AGGREGATED OPTION EXERCISES IN 1998 AND FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding the exercise of stock
options by the Named Executive Officers during 1998 and stock options held as of
December 31, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END(#) AT FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISES(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Fruth.............. -- -- -- 220,000 -- $ 75,392
Norwick B.H. Goodspeed..... -- -- 60,000 240,000 $150,000 $ 600,000
Gregory E. Lichtwardt...... 90,480 $2,366,617 28,406 66,000 $718,138 $ 24,750
Daniel J. Kunst............ 40,000 $ 983,600 20,000 76,000 $474,300 $ 962,100
John Lilley................ 10,000 $ 182,700 22,000 78,000 $477,840 $1,053,810
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock at December 31,
1998 ($26.75 per share) less the exercise price payable for such shares.
EMPLOYEE BENEFIT PLANS
1989 Stock Option Plan. ("1989 Plan") Under the 1989 Plan, options to
purchase 895,374 shares of Common Stock were outstanding as December 31, 1998.
The 1989 Plan was terminated on August 4, 1997,
17
<PAGE> 20
the effective date of the Company's initial public offering, at which time the
Company's 1997 Plan became effective. As a result, no options have been granted
under the 1989 Plan since the Company's initial public offering. However,
termination does not affect any outstanding options, all of which will remain
outstanding until exercised or until they terminate or expire in accordance with
their terms. The terms of options granted under the 1989 Plan and the
administration of the plan are substantially the same as those that pertain to
the 1997 Plan, except that the vesting of options granted prior to March 1, 1995
under the 1989 Plan accelerates upon certain acquisitions of the Company unless
the options are assumed or substituted by the acquiring corporation.
1997 Equity Incentive Plan. For a description of the 1997 Plan see under
the heading "Proposal No. 2 -- Amendment to 1997 Equity Incentive Plan To Add
1,000,000 Authorized Shares."
1997 Employee Stock Purchase Plan. In June 1997, the Board adopted and the
stockholders approved the 1997 Employee Stock Purchase Plan (the "Purchase
Plan") and reserved a total of 400,000 shares of the Company's Common Stock for
issuance thereunder. The Purchase Plan has yet to become effective, and as of
April 15, 1999 no shares of Common Stock had been purchased under the Purchase
Plan. If and when the Purchase Plan becomes effective, it will permit eligible
employees to acquire shares of the Company's Common Stock through payroll
deductions. Eligible employees may select a rate of payroll deduction between 2%
and 10% of their compensation and are subject to certain maximum purchase
limitations described in the Purchase Plan. Except for the first offering, each
offering under the Purchase Plan will be for a period of 24 months (the
"Offering Period") and will consist of four six-month purchase periods (each a
"Purchase Period"). The purchase price for the Company's Common Stock purchased
under the Purchase Plan is 85% of the lesser of the fair market value of the
Company's Common Stock on the first day of the applicable Offering Period and
the last day of the applicable Purchase Period. The Board has the authority to
determine the date on which the first Offering Period will begin and the length
of such Offering Period. The Board has the power to change the duration of
Offering Periods and Purchase Periods. The Purchase Plan is intended to qualify
as an "employee stock purchase plan" under Section 423 of the Code.
EMPLOYMENT AGREEMENTS
In October 1997, Norwick B.H. Goodspeed joined the Company as its President
and Chief Operating Officer pursuant to the terms of an employment agreement
dated October 15, 1997. Under the employment agreement, the Company agreed to
employ Mr. Goodspeed as its President and Chief Operating Officer at an initial
annual base salary of $300,000. Mr. Goodspeed was paid a bonus of $207,000 for
1998, and is eligible to receive a bonus of up to 50% of his annual salary for
each year thereafter. In addition, Mr. Goodspeed has received an option to
purchase 300,000 shares of the Company's Common Stock at an exercise price of
$24.25 per share, vesting 20% per year over five years so long as Mr. Goodspeed
is employed by the Company. The Company has also agreed to pay certain
relocation costs and other costs associated with the sale of Mr. Goodspeed's
prior residence in southern California, up to a maximum of $159,000. To date,
the Company has paid $84,000 of such relocation costs. The employment agreement
further provides that Mr. Goodspeed's employment will continue for a term of
three years unless and until terminated by either the Company or Mr. Goodspeed.
Under Mr. Goodspeed's employment agreement, the Company extended a $450,000
loan to Mr. Goodspeed in January 1998 in connection with his purchase of a new
residence in the San Francisco area (the "Loan"). The Loan is interest free and
is secured by a purchase money second deed of trust on the new residence and by
a security interest in certain stock options granted to Mr. Goodspeed to
purchase 300,000 shares of the Company's Common Stock and any securities
issuable upon exercise of such options. The Loan is due and payable in full on
the earlier of (i) October 15, 2002; (ii) six months after Mr. Goodspeed's
voluntary resignation or termination by the Company for Cause (as defined in Mr.
Goodspeed's employment agreement); or (iii) Mr. Goodspeed's agreement to sell,
convey, transfer, dispose of, or further encumber the new residence. Under the
terms of the employment agreement, the Company has agreed to forgive the Loan in
its entirety (and return any payments received in connection therewith), in the
event that Mr. Goodspeed remains continuously employed with the Company from
18
<PAGE> 21
October 15, 1997 through October 15, 2000. The Company has also agreed to
forgive 50% of the Loan in the event that Mr. Goodspeed is terminated by the
Company without Cause.
Pursuant to the terms of an employment agreement dated March 1996, the
Company employed Dr. John Lilley as its Vice President, Manufacturing at an
initial annual salary of L95,000. Under the employment agreement, Dr. Lilley is
eligible to receive a bonus of up to 40% of his annual salary at the discretion
of the Company based on the achievement of manufacturing goals and objectives
established by the Company at the start of each fiscal year. In 1996, Dr. Lilley
also received an option to purchase 80,000 shares of the Company's Common Stock
at an exercise price of $5.03 per share. Under Dr. Lilley's employment
agreement, his employment will continue unless and until either the Company or
Dr. Lilley serves on the other 12 months' notice of termination, provided that
the Company has the right to terminate his employment upon his 65th birthday.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Cummins, Grant and Tunney.
No interlocking relationship exists between the Board or Compensation Committee
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past. For a description of
transactions between the Company and members of the Compensation Committee and
entities affiliated with such members, see the discussion under "Certain
Relationships and Related Transactions" below.
19
<PAGE> 22
OCULAR SCIENCES, INC.
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the Securities and
Exchange Commission and shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
To the Board of Directors:
Final decisions regarding compensation and stock option grants to executive
officers are made by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of three independent non-employee
Directors, none of whom have any interlocking relationships as defined by the
SEC.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company. The Committee reviews base salary levels and
target bonuses for the Chief Executive Officer ("CEO") and other executive
officers of the Company at or about the beginning of each year. The Committee
also administers the Company's 1997 Equity Incentive Plan (the "1997 Plan") and
reviews the equity compensation of the CEO and other executive officers at or
about the beginning of each year.
The Committee's philosophy in compensating executive officers, including
the CEO, is to relate compensation to corporate and individual performance.
Consistent with this philosophy, annual salary adjustments and the incentive
component of executive officer compensation is determined after a review of the
Company's and individual's performance for the previous year. The evaluation of
Company performance is based in significant part on an evaluation of the
Company's financial performance compared to plan. Long-term equity incentives
for executive officers are effected through the granting of stock options under
the 1997 Plan. Stock options generally have value for the executive only if the
price of the Company's stock increases above the fair market value on the grant
date and the executive remains in the Company's employ for the period required
for the shares to vest.
The base salaries, incentive compensation and stock option grants of
executive officers are also determined in part by the Committee reviewing data
on prevailing compensation practices of companies with whom the Company competes
for executive talent. To this end, in late 1997 the Committee retained Coopers &
Lybrand L.L.P. to perform a comprehensive study (the "C&L Study") of the
compensation practices of comparable companies to determine base salary, target
bonuses and stock option awards for executive officers. The Committee used the
C&L Study, as well as other information on comparable companies, in setting
compensation in 1998.
In preparing the performance graph for this Proxy Statement, the Company
used the Standard & Poor's Medical Products & Supplies Index as its published
line of business index. The C&L Study included some of the companies in the
Medical Products and Supplies Index, as well as other companies that were
believed to be competitive with the Company for executive talent.
FISCAL 1998 EXECUTIVE COMPENSATION
Base Compensation. In early 1998, the Company established the base salary
for each executive officer for 1998 based on the performance of the Company and
each executive officer in 1997, and the C&L Study. In January 1999, the
Committee again evaluated the performance of the Company and its executive
officers and reviewed the C&L Study and other information on comparable
companies. The Committee also considered the substantial competition for
executive talent in the San Francisco Bay Area, where the Company is
headquartered. Based on such analysis the Committee increased the base salary
for each executive officer an average of 6.1% for 1999.
20
<PAGE> 23
Incentive Compensation. The Committee also used the information described
above as the basis for determining incentive compensation for the Company's
executive officers. The target amount of bonus for each individual was
established by the Company prior to the beginning of 1998. The actual amount of
bonus paid was based on the Committee's evaluation of the Company's and
individual's performance in 1998. In evaluating Company performance, the
Compensation Committee placed substantial emphasis on the Company's sales and
income growth and market share gains. Bonuses for executive officers for 1998
were generally 115% of the target bonus.
Stock Options. In January 1998, based in part on the C&L Study, the
Compensation Committee decided to begin granting options to executive officers
on a more regular, annual basis, as opposed to the more ad hoc basis that had
been used before the Company went public. The number of shares subject to each
stock option granted is within the discretion of the Committee and is based on
anticipated future contribution and ability to impact corporate results, past
performance, consistency within the executive's peer group and competitive
conditions. The Committee retains the discretion to grant options more or less
frequently, if it deems such appropriate. In January 1998 all executive officers
(other than Mr. Goodspeed, who had just recently joined the Company) were
granted options. Executive officers who had not received an option for a number
of years were generally granted larger options than executive officers who had
received options more recently. The options granted to executive officers who
had not recently received options were generally larger than the Committee
expects to grant to such persons on an annual basis in the future. Stock options
generally become exercisable over a five-year period and are granted at a price
that is equal to the fair market value of the Company's Common Stock on the date
of grant.
Company Performance and CEO Compensation. Mr. Fruth received a bonus of
$227,125 for 1998. Mr. Fruth's bonus represents 115% of the target bonus
established by the Committee prior to the beginning of the year. Mr. Fruth's
salary was set at $395,000 for 1998 and Mr. Fruth was granted an option to
purchase 220,000 shares. The Committee based Mr. Fruth's bonus, salary and
option primarily on (i) the Company's achievement of financial performance goals
as compared to plan, (ii) the C&L Study and (iii) Mr. Fruth's leadership in the
Company's first year as a public company, including his work on developing a
strategic plan for the Company.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986. The 1997 Plan is already in compliance with
Section 162(m) by limiting stock awards to named executive officers. The Company
does not expect cash compensation for 1999 for any executive officer to exceed
$1,000,000.
COMPENSATION COMMITTEE
EDGAR J. CUMMINS
WILLIAM R. GRANT
FRANCIS R. TUNNEY, JR.
21
<PAGE> 24
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company with the cumulative total return on the Nasdaq Stock
Market and the Standard & Poor's Medical Products & Supplies Index from the
first date the Company's Common Stock was publicly traded (August 5, 1997) to
the last trading day in each subsequent month through December 31, 1998
(assuming the investment of $100 in the Company's Common Stock and in each of
the indexes on the date of the Company's initial public offering, and
reinvestment of all dividends).
The comparisons in the graph below are based on historical data and are not
intended to forecast the possible future performance of the Company's Common
Stock.
<TABLE>
<CAPTION>
S&P HEALTH CARE
OCULAR SCIENCES, NASDAQ STOCK (MEDICAL PRODUCTS
INC. MARKET (U.S.) & SUPPLIES)
---------------- ------------- -----------------
<S> <C> <C> <C>
8/5/97 100 100 100
9/97 140.15 105.74 95.86
12/97 159.09 99.03 97.28
3/98 193.18 115.9 111.64
6/98 196.97 119.12 123.31
9/98 127.27 107.85 115.65
12/98 162.12 139.55 140.22
</TABLE>
The graph set forth above is required by the Securities and Exchange
Commission and shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
22
<PAGE> 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the Company's Fiscal Year ending December 31, 1998 and through the
present, there has not been, nor is there currently proposed, any transaction or
series of similar transactions to which the Company or any of its subsidiaries
was or is to be a party in which the amount involved exceeds $60,000 and in
which any director, executive officer, holder of more than 5% of the Common
Stock of the Company or any member of the immediate family of any of the
foregoing persons had or will have a direct or indirect material interest other
than (i) compensation agreements and related loans, which are described under
the caption "Management-Employment Agreements," and (ii) the transactions
described below.
PAYMENTS TO DIRECTOR
Fruth & Anthony, a law firm in which Terence M. Fruth, a director of the
Company and the brother of John D. Fruth, the Chief Executive Officer of the
Company, is a partner, has provided legal services to the Company since its
formation. The Company made payments of $27,000 in 1998 to Fruth & Anthony for
such legal services.
1998 SECONDARY PUBLIC OFFERING
In March 1998, the Company completed its secondary offering in which
5,343,381 shares of its Common Stock were sold to the public at a price of
$27.50 per share (including shares sold pursuant to the underwriters'
over-allotment option). The shares sold consisted of 30,000 shares sold by the
Company and 5,313,381 shares sold by selling stockholders. The Company incurred
aggregate expenses of $645,000 in connection with the secondary offering
(excluding underwriting discounts and commissions paid by the Company and the
selling stockholders).
LOANS TO OFFICERS AND DIRECTORS
On April 12 and 13, 1999, the Company loaned $399,000 and $751,000 to Dan
Kunst and Greg Lichtwardt, respectively. Mr. Kunst is the Company's Vice
President of Sales and Marketing and a director of the Company and Mr.
Lichtwardt is the Company's Vice President of Finance, Chief Financial Officer
and Treasurer. The loans bear interest of 8% per year and are due on December 1,
1999, or earlier in certain circumstances. No payments of principal or accrued
interest have been made under either loan.
INDEPENDENT AUDITORS
KPMG LLP, the Company's independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended December 31, 1998.
Representatives of KPMG LLP are expected to be present at the Annual Meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions. The Board of Directors selects
the Company's independent auditors.
STOCKHOLDER PROPOSALS AND REPORT ON FORM 10-K
Proposals of Stockholders intended to be presented at the Company's 2000
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices no later than the close of business on December 28, 1999, in
addition to other applicable requirements, in order to be included in the
Company's Proxy Statement and form of proxy relating to the meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1998 WILL BE
PROVIDED WITHOUT CHARGE ON WRITTEN REQUEST. REQUESTS SHOULD BE DIRECTED TO THE
COMPANY'S INVESTOR RELATIONS DEPARTMENT AT 475 ECCLES AVENUE, SOUTH SAN
FRANCISCO, CALIFORNIA 94080
23
<PAGE> 26
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership on a Form 3 and
reports of changes in ownership on a Form 4 or Form 5. Such persons are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
that they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% Stockholders were met during fiscal
1998, except that Daniel J. Kunst, a director and officer of the Company, did
not report in a timely manner the sale, by his son, of 275 shares of the
Company's Common Stock, such shares may be deemed beneficially owned by Mr.
Kunst and that John Lilley, an officer of the Company, did not report in a
timely manner the purchase of 1,000 shares of the Company's Common Stock.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board does not presently intend
to bring any other business before the Annual Meeting, and, so far as is known
to the Board, no matters are to be brought before the Annual Meeting except as
specified in the Notice of the Meeting. As to any business that may properly
come before the Annual Meeting, or any adjournment thereof, however, it is
intended that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
Pursuant to the Company's Bylaws, only such business shall be conducted at
an annual meeting of stockholders as is properly brought before the meeting. For
business to be properly brought before an annual meeting by a stockholder, in
addition to any other applicable requirements, timely notice of the matter must
be first given to the Secretary of the Company. To be timely, written notice
must be delivered to the Secretary at the executive offices of the Company not
later than the close of business on the sixtieth day nor earlier than the close
of business on the ninetieth day prior to the first anniversary of the preceding
year's annual meeting, provided, however, that in the event that the date of the
annual meeting is more than thirty days before or more than sixty days after
such anniversary date, notice by the stockholder, to be timely, must be so
delivered not earlier than the close of business on the ninetieth day prior to
such annual meeting and not later than the close of business on the later of the
sixtieth day prior to such annual meeting or the close of business on the tenth
day following the day on which public announcement of the date of such meeting
is first made by the Company. Such stockholder notice must set forth certain
information specified by the Company's Bylaws. A copy of the Company's Bylaws is
available upon request from the Company's Investor Relations Department at 475
Eccles Avenue, South San Francisco, California 94080.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE
PAID ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
24
<PAGE> 27
APPENDIX
OCULAR SCIENCES, INC.
1997 EQUITY INCENTIVE PLAN
As Adopted June 2, 1997 and
Amended July 14, 1997 and March 25, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options, Restricted Stock and Stock Bonuses. Capitalized terms
not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 3,000,000 Shares. Subject to Sections 2.2 and 18, Shares that:
(a) are subject to issuance upon exercise of an Option but cease to be subject
to such Option for any reason other than exercise of such Option; (b) are
subject to an Award granted hereunder but are forfeited or are repurchased by
the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued, will again be available for
grant and issuance in connection with future Awards under this Plan. Any
authorized shares not issued or subject to outstanding grants under the
Company's 1989 Stock Option Plan (the "PRIOR PLAN") on the Effective Date (as
defined below) and any shares that are issuable upon exercise of options granted
pursuant to the Prior Plan that expire or become unexercisable for any reason
without having been exercised in full, will no longer be available for grant and
issuance under the Prior Plan, but will be available for grant and issuance
under this Plan. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan. The sum of (a) Restricted Stock Awards,
(b) Stock Bonus Awards, or (c) Options with a Purchase Price or Exercise Price,
as the case may be, below Fair Market Value issued under this Plan may not
exceed 20% of the total number of Shares reserved for grant and issuance
pursuant to this Plan as of any date.
2.2 Adjustment of Shares. In the event that the number of outstanding
Shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 1,200,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company) who are eligible to receive
up to a maximum of 1,600,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
<PAGE> 28
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating
to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK Option Agreement"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock
-2-
<PAGE> 29
Option Agreement and a copy of this Plan will be delivered to the Participant
within a reasonable time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times or
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason except death
or Disability, then the Participant may exercise such Participant's Options only
to the extent that such Options would have been exercisable upon the Termination
Date no later than three (3) months after the Termination Date (or such shorter
or longer time period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the Termination Date
deemed to be an NQSO), but in any event, no later than the expiration date of
the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three (3) months after a
Termination other than because of Participant's death or disability), then
Participant's Options may be exercised only to the extent that such Options
would have been exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination Date (or such
shorter or longer time period not exceeding five (5) years as may be determined
by the Committee, with any such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12) months after the
Termination Date when the Termination is for Participant's death or Disability,
deemed to be an NQSO), but in any event no later than the expiration date of the
Options.
(c) If a Participant is determined by the Board to have
committed an act of theft, embezzlement, fraud, dishonesty or a breach of
fiduciary duty to the Company or Subsidiary, neither the Participant, the
Participant's estate nor such other person who may
-3-
<PAGE> 30
then hold the Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or not after
termination of service the Participant may receive payment from the Company or
Subsidiary for vacation pay, for services rendered prior to termination, for
services rendered for the day on which termination occurs, for salary in lieu of
notice, or for any other benefits. In making such determination, the Board shall
give the Participant an opportunity to present to the Board evidence on his
behalf. For the purpose of this paragraph, termination of service shall be
deemed to occur on the date when the Company dispatches notice or advice to the
Participant that his service is terminated.
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000. If the Fair Market Value of Shares on
the date of grant with respect to which ISO are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then the Options for
the first $100,000 worth of Shares to become exercisable in such calendar year
will be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Committee.
-4-
<PAGE> 31
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall
be subject to such restrictions as the Committee may impose. These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number
of Shares to be awarded to the Participant. If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant. Prior
to the payment of any Stock Bonus, the Committee shall determine the extent to
which such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
-5-
<PAGE> 32
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
shares); or (2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274 of the
Code; provided, however, that Participants who are not employees or directors of
the Company will not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant
for services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from the Participant and
a NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
-6-
<PAGE> 33
9.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have any of the rights
of a stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.
10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as determined by the Committee and
set forth in the Award Agreement with respect to Awards that are not ISOs.
During the lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award may be made only by the
Participant unless otherwise determined by the Committee and set forth in the
Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
-7-
<PAGE> 34
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the event of
(a) a dissolution or liquidation of the Company, (b) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 18.1,
such Awards will expire on
-8-
<PAGE> 35
such transaction at such time and on such conditions as the Board will
determine, provided, however, that the Board may, in its sole discretion,
provide that the vesting of any or all Awards granted pursuant to this Plan will
accelerate. If the Board exercises such discretion with respect to Options, such
Options will become exercisable in full prior to the consummation of such event
at such times and on such conditions as the Board determines, and if such
Options are not exercised prior to the consummation of the corporate
transaction, they shall terminate in accordance with the provisions of this
Plan.
18.2 Other Treatment of Awards. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 18, in the event
of the occurrence of any transaction described in Section 18.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on
the date on which the registration statement filed by the Company with the SEC
under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective Date").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Board may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; and (c) in the event that stockholder approval of such increase is not
obtained within the time period provided herein, all Awards granted hereunder
will be canceled, any Shares issued pursuant to any Award will be canceled, and
any purchase of Shares hereunder will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, without the approval of the
stockholders of the Company, amend this Plan in any manner that requires such
stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
-9-
<PAGE> 36
23. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"AWARD" means any award under this Plan, including any Option, Restricted
Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer this
Plan, or if no such committee is appointed, the Board.
"COMPANY" means Ocular Sciences, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent, partial or
total, within the meaning of Section 22(e)(3) of the Code, as determined by the
Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal;
(d) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially offered for
sale to the public by the Company's underwriters in the initial public offering
of the Company's Common Stock pursuant to a registration statement filed with
the SEC under the Securities Act; or
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"INSIDER" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16 of
the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
-10-
<PAGE> 37
"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this Plan.
"PERFORMANCE FACTORS" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or earnings
before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Ocular Sciences, Inc. 1997 Equity Incentive Plan, as
amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for issuance
under this Plan, as adjusted pursuant to Sections 2 and 18, and any successor
security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares, pursuant
to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken
-11-
<PAGE> 38
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan with respect
to a Participant, that the Participant has for any reason ceased to provide
services as an employee, officer, director, consultant, independent contractor,
or advisor to the Company or a Parent or Subsidiary of the Company. An employee
will not be deemed to have ceased to provide services in the case of (i) sick
leave, (ii) military leave, or (iii) any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than 90 days,
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute or unless provided otherwise pursuant to formal policy adopted from
time to time by the Company and issued and promulgated to employees in writing.
In the case of any employee on an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the Award while on
leave from the employ of the Company or a Subsidiary as it may deem appropriate,
except that in no event may an Option be exercised after the expiration of the
term set forth in the Option agreement. The Committee will have sole discretion
to determine whether a Participant has ceased to provide services and the
effective date on which the Participant ceased to provide services (the
"TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award Agreement.
-12-
<PAGE> 39
OCULAR SCIENCES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints John D. Fruth and Gregory E. Lichtwardt, or
either of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock, $0.001 par value, of Ocular Sciences, Inc. (the "Company"), held
of record by the undersigned on April 15, 1999, at the Annual Meeting of
Stockholders of the Company to be held at The Embassy Suites, 250 Gateway
Boulevard, South San Francisco, California, on Tuesday, May 25, 1999, at 9:00
a.m. Pacific Daylight Time, and at any adjournments or postponements thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLDING AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: John D. Fruth, Daniel J. Kunst, Norwick B.H. Goodspeed,
Terence M. Fruth, William R. Grant, Edgar J. Cummins and
Francis R. Tunney, Jr.
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
The Board of Directors recommends that you vote FOR the election of all
nominees listed in this Proposal 1.
2. APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1997 EQUITY INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK
AVAILABLE FOR ISSUANCE THEREUNDER FROM 2,000,000 SHARES TO 3,000,000
SHARES.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Board of Directors recommends that you vote FOR this Proposal 2.
3. THE TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS OF THE ANNUAL
MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 40
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1 AND
FOR PROPOSAL 2. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly come before the meeting or any
adjournments or postponements thereof to the extent authorized by Rule 14a-4(c)
promulgated under the Securities Exchange Act of 1934, as amended.
-----------------------------------------------------
(Print Stockholder(s) name)
-----------------------------------------------------
(Signature(s) of Stockholder or Authorized Signatory)
-----------------------------------------------------
(Title of Authorized Signatory)
Dated: _____________, 1999
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
