<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Focal, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No Fee Required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
FOCAL, INC.
FOUR MAGUIRE ROAD
LEXINGTON, MASSACHUSETTS 02421
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
The Annual Meeting of Stockholders of Focal, Inc. (the "Company") will be
held on Wednesday, May 26, 1999, at 8:00 a.m., local time, at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, to consider and act
upon the following matters:
1. To elect three Class II directors of the Company for the ensuing three
years.
2. To approve the Company's 1999 Stock Incentive Plan (the "Plan") and
authorize 875,000 shares of the Company's Common Stock to be reserved for
issuance under the Plan.
3. To ratify the selection by the Company of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1999.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on April 1, 1999 are
entitled to notice of, and to vote at, the Annual Meeting and are cordially
invited to attend the meeting. The stock transfer books of the Company will
remain open for the purchase and sale of the Company's Common Stock.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
DAVID M. CLAPPER
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Lexington, Massachusetts
April 23, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE
NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
FOCAL, INC.
FOUR MAGUIRE ROAD
LEXINGTON, MASSACHUSETTS 02421
PROXY STATEMENT FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Focal, Inc. ("Focal" or the "Company") for
use at the 1999 Annual Meeting of Stockholders to be held on May 26, 1999 and at
any adjournment or adjournments of that meeting. All proxies will be voted in
accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any
time before it is exercised by delivery of written revocation to the Secretary
of the Company.
The Company's Annual Report for the year ended December 31, 1998 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on or
about April 23, 1999.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT
FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO INVESTOR RELATIONS, FOCAL, INC., FOUR MAGUIRE ROAD, LEXINGTON,
MASSACHUSETTS 02421.
VOTING SECURITIES AND VOTES REQUIRED
On April 1, 1999, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 13,399,628 shares of Common Stock of the
Company, $.01 par value per share ("Common Stock"). Each share is entitled to
one vote.
Under the Company's Bylaws, the holders of a majority of the shares of
Common Stock issued, outstanding and entitled to vote on any matter shall
constitute a quorum with respect to that matter at the Annual Meeting. Shares of
Common Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present.
The affirmative vote of the holders of a majority of the shares of Common
Stock voting on the matter is required for the election of directors, the
approval of the Company's 1999 Stock Incentive Plan, the ratification of the
appointment of Ernst & Young LLP as the independent auditors of the Company for
the fiscal year ending December 31, 1999 and the approval of each of the other
matters to be voted upon.
Shares which abstain from voting as to a particular matter and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter will not be counted as votes in favor of such matter and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" on a matter that requires the affirmative vote of a
certain percentage of the votes cast or shares voting on a matter, such as the
election of directors and the approval of the Company's 1999 Stock Incentive
Plan, have no effect on the voting of such matter.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of January 31, 1999
or such later date as is noted, with respect to the beneficial ownership of the
Company's Common Stock by: (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock;
1
<PAGE>
(ii) each director and nominee for director; (iii) each executive officer named
below in the Summary Compensation Table under the heading "Compensation of
Executive Officers"; and (iv) all directors and executive officers of the
Company as a group.
The number of shares of the Company's Common Stock beneficially owned by
each director or executive officer is determined under the rules of the
Securities and Exchange Commission (the "Commission"), and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting or investment power and also any shares which the
individual has the right to acquire within 60 days after January 31, 1999
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power (or shares such
power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of those shares.
<TABLE>
<CAPTION>
SHARES
OF COMMON STOCK APPROXIMATE PERCENT
BENEFICIALLY OF COMMON STOCK
NAME AND ADDRESS OWNED(1) OWNED
- ----------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Entities affiliated with Patricof & Co. Ventures(2).................... 1,591,513 11.89%
2100 Geng Road, Suite 150
Palo Alto, CA 94303
Entities affiliated with Mayfield Fund(3).............................. 1,010,334 7.55%
2800 Sand Hill Rd., Suite 250
Menlo Park, CA 94025
General Electric Pension Trust......................................... 1,011,088 7.55%
3000 Summer Street
Stanford, CT 06904
Fidelity Management and Research....................................... 870,000 6.50%
82 Devonshire Street, 33rd Floor
Boston, MA 02109
David M. Clapper(4)(5)................................................. 307,760 2.30%
David J. Enscore, Ph.D.(4)(6).......................................... 83,599 *
Stephen J. Herman(4)(7)................................................ 77,473 *
Glenn M. Kazo(4)(8).................................................... 63,172 *
Arthur J. Coury, Ph.D.(4)(9)........................................... 109,734 *
Henry Brem, M.D.(4)(10)................................................ 110,272 *
Janet Effland(4)(11)................................................... 1,603,066 11.96%
Robert Langer, Ph.D.(4)(12)............................................ 203,734 1.52%
Mark J. Levin(4)(13)................................................... 57,707 *
Michael J. Levinthal(14)............................................... 1,021,887 7.63%
Jesse I. Treu, Ph.D.(15)............................................... 952,474 7.11%
All directors and executive officers as a group
(14 persons)(16)................................................... 4,696,549 34.85%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than one percent of the Common
Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons
2
<PAGE>
named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them. The
number of shares of Common Stock outstanding used in calculating the
percentage for each listed person was 13,389,945 and the shares of Common
Stock underlying options or warrants held by such person that are
exercisable within 60 days of January 31, 1999, but excludes shares of
Common Stock underlying options or warrants held by any other person.
(2) Consists of 1,072,834 shares beneficially owned by APA Excelsior IV, L.P.,
309,461 shares beneficially owned by The P/A Fund, 189,324 shares
beneficially owned by APA Excelsior IV/ Offshore, L.P. and 19,894 shares
beneficially owned by Patricof Private Investment Club, L.P. (the "Patricof
Funds").
(3) Consists of 467,992 shares beneficially owned by Mayfield VI Investment
Partners, 382,567 shares beneficially owned by Mayfield VII, 67,162 shares
beneficially owned by Mayfield Medical Partners, 48,675 shares beneficially
owned by Mayfield Medical Partners (1992), 23,130 shares beneficially owned
by Mayfield Associates and 20,808 shares beneficially owned by Mayfield
Associates Fund II (the "Mayfield Funds").
(4) Includes shares issued pursuant to an early stock option exercise program.
The unvested portion of such shares are subject to a repurchase option in
favor of the Company at cost in the event of the termination of such
individual's employment or consultant relationship with the Company prior to
vesting. See "Certain Transactions."
(5) Includes 200 shares owned by Mr. Clapper's spouse. Also includes 11,298
shares issuable upon the exercise of options exercisable within 60 days of
January 31, 1999.
(6) Includes 3,429 shares issuable upon the exercise of options exercisable
within 60 days of January 31, 1999.
(7) Includes 4,490 shares issuable upon the exercise of options exercisable
within 60 days of January 31, 1999.
(8) Mr. Kazo resigned from the Company in February 1999. Includes 3,203 shares
held jointly by Mr. Kazo and his spouse. Also includes 1,634 shares issuable
upon the exercise of options exercisable within 60 days of January 31, 1999.
(9) Includes 3,429 shares issuable upon the exercise of options exercisable
within 60 days of January 31, 1999.
(10) Includes 1,041 shares issuable upon the exercise of options exercisable
within 60 days of January 31, 1999.
(11) Includes 1,591,513 shares beneficially owned by the Patricof Funds. Ms.
Effland disclaims beneficial ownership of the shares beneficially owned by
the Patricof Funds except to the extent of her proportional partnership
interest therein. Also includes 11,553 shares issuable upon the exercise of
options exercisable within 60 days of January 31, 1999.
(12) Includes 2,000 shares beneficially owned by each of three irrevocable
trusts for the benefit of each of Dr. Langer's three minor children, for
which Dr. Langer disclaims beneficial ownership. Also includes 1,041 shares
issuable upon the exercise of options exercisable within 60 days of January
31, 1999.
(13) Includes 11,553 shares issuable upon the exercise of options exercisable
within 60 days of January 31, 1999.
(14) Includes 1,010,334 shares beneficially owned by the Mayfield Funds. Mr.
Levinthal disclaims beneficial ownership of the shares beneficially owned by
the Mayfield Funds except to the extent
3
<PAGE>
of his proportional partnership interest therein. Also includes 11,553
shares issuable upon the exercise of options exercisable within 60 days of
January 31, 1999 held by Mr. Levinthal.
(15) Includes 585,854 shares beneficially owned by Domain Partners II, L.P. Dr.
Treu is a general partner of One Palmer Square Associates II, L.P., the
general partner of Domain Partners II, L.P. and has indirect beneficial
ownership of these shares. Also includes 357,248 shares owned by
Biotechnology Investments Limited ("BIL"). Pursuant to a contractual
agreement, Domain Associates, L.L.C., of which Dr. Treu is a Managing
Member, is the U.S. venture capital advisor to BIL. Domain Associates,
L.L.C. has no voting or investment power over BIL's shares and Dr. Treu
disclaims beneficial ownership of BIL's shares. Includes 9,372 shares
issuable upon the exercise of options exercisable within 60 days of January
31, 1999.
(16) Includes an aggregate of 85,675 shares of Common Stock of the Company
issuable upon exercise of stock options held by all officers and directors
as a group which are exercisable within 60 days of January 31, 1999.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven persons,
divided into three classes serving staggered terms of three years. Currently
there is one director in Class I, three directors in Class II and three
directors in Class III. Three Class II directors are to be elected at the Annual
Meeting. Each of the three Class II directors elected at the Annual Meeting will
hold office until the Annual Meeting of Stockholders in 2002 or until his or her
successor has been duly elected and qualified. The Class III and Class I
directors will be elected at the Company's Annual Meetings of Stockholders in
2000 and 2001, respectively. A vacancy exists for a Class I Director. In
accordance with the Company's Restated Certificate of Incorporation and Bylaws,
this vacancy may be filled prior to the Company's Annual Meeting in 2001 only by
a majority vote of the remaining directors.
In the event that any nominee for Class II director becomes unavailable or
declines to serve as a director at the time of the Annual Meeting, the proxy
holders will vote the proxies in their discretion for any nominee who is
designated by the current Board of Directors to fill the vacancy. It is not
expected that any of the nominees will be unavailable to serve.
Set forth below are the name and age of each member of the Board of
Directors (including the nominees for election as Class II directors), and the
positions and offices held by him or her, his or her principal occupation and
business experience during the past five years, the names of other publicly held
companies of which he or she serves as a director and the year of the
commencement of his or her term as a director of the Company. Information with
respect to the number of shares of Common Stock beneficially owned by each
director, directly or indirectly, as of January 31, 1999, appears above under
the heading "Stock Ownership of Certain Beneficial Owners and Management."
NOMINEES FOR TERMS EXPIRING IN 2002 (CLASS II DIRECTORS)
HENRY BREM, M.D., age 46, has served as a director of the Company since
1991. Since 1984, Dr. Brem has served as Director of the Brain Tumor Research
Center and Professor of Neurosurgery, Ophthalmology and Oncology at The Johns
Hopkins University. Dr. Brem is a Scientific Founder of the Company. Dr. Brem
holds an M.D. from Harvard University.
JANET EFFLAND, age 50, has served as a director of the Company since 1996.
Since January 1998, Ms. Effland has been a Managing Director of Patricof & Co.
Ventures, Inc., a venture capital firm ("Patricof"). From August 1988 through
December 1997, Ms. Effland was Vice President of Patricof. She also serves on
the Board of Directors of Urologix, Inc., a publicly traded company. Ms. Effland
holds a J.D. from Arizona State University.
4
<PAGE>
JESSE I. TREU, PH.D., age 52, was a member of the Company's Board of
Directors from March 1993 until April 1995 and has been a director of the
Company from March 1996 to the present. Since 1986, he has been a Managing
Member of Domain Associates, L.L.C., a venture capital management firm. From
1982 through 1985, Dr. Treu was a principal in the management group Channing,
Weinberg and Co., Inc. and its spin-off CW Ventures Capital. Dr. Treu also
serves on the Board of Directors of GelTex Pharmaceuticals, Inc. and Trimeris,
Inc., both of which are publicly traded. He received his B.S. from Rensselaer
Polytechnic Institute, and holds an M.A. and Ph.D. in Physics from Princeton
University.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS III DIRECTORS)
MARK J. LEVIN, age 46, has served as a director of the Company since 1991.
Since 1993, Mr. Levin has served as President, Chief Executive Officer and a
Director of Millennium Pharmaceuticals, Inc., a publicly traded genomics company
("Millennium"). Mr. Levin was the founding Chief Executive Officer of Focal,
Inc., as well as Cell Genesys, Inc., CytoTherapeutics, Inc., Tularik, Inc. and
Millennium. Mr. Levin was previously a General Partner of several venture
capital funds affiliated with Mayfield Fund, a venture capital firm. Mr. Levin
is a member of the Board of Directors of CytoTherapeutics, Inc., a publicly
traded company. Mr. Levin holds a B.S. and M.S. in Chemical Engineering from
Washington University.
ROBERT LANGER, PH.D., age 50, has served as a director of the Company since
1996. Dr. Langer has been the Kenneth J. Germeshausen Professor of Chemical and
Biomedical Engineering at the Massachusetts Institute of Technology since 1992.
He is also a member of the National Academy of Sciences, National Academy of
Engineering and the Institute of Medicine. He also serves on the Board of
Directors of Alkermes, Inc., a publicly traded company. Dr. Langer holds a Sc.D.
from the Massachusetts Institute of Technology in Chemical Engineering.
MICHAEL J. LEVINTHAL, age 44, has served as a director of the Company since
1992. Since 1984, Mr. Levinthal has been a General Partner of several venture
capital funds affiliated with Mayfield Fund, a venture capital firm. He also
serves on the Board of Directors of Concur Technologies, Inc. and Symphonic
Devices, Inc., both of which are publicly traded. Mr. Levinthal holds an M.B.A.
and a B.S. in Engineering from Stanford University.
DIRECTOR WHOSE TERM EXPIRES IN 2001 (CLASS I DIRECTOR)
DAVID M. CLAPPER, age 47, has served as President, Chief Executive Officer
and a Director of Focal since joining the Company in July 1993. Before joining
Focal, Mr. Clapper was employed at Johnson & Johnson, a pharmaceutical company,
from 1977 until 1993. He served as Vice President and a Board member at the
Critikon, Inc. division of Johnson & Johnson, from July 1992 to July 1993. From
1977 to July 1992, Mr. Clapper held a variety of positions, including Vice
President of Sales & Marketing and a Board Member of Ethicon Endo-Surgery, and
Vice President of Product Management and a Board Member at Ethicon Inc., both of
which are subsidiaries of Johnson & Johnson. Mr. Clapper holds a B.S. in
Marketing from Bowling Green State University.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held six meetings during the fiscal
year ended December 31, 1998. Each director except Dr. Langer and Mr. Levin
attended at least 75% of the total number of such meetings. Directors Langer and
Levin each attended four of such meetings.
The Board of Directors has an Audit Committee, a Compensation Committee and
a Nominating Committee. From time to time, during 1998, the Board created
various ad hoc committees for special purposes.
5
<PAGE>
The Audit Committee consists of directors Effland and Treu. The Audit
Committee is responsible for reviewing the results and scope of the audit and
other services provided by the Company's independent auditors. The Audit
Committee held one meeting in the last fiscal year.
The Compensation Committee consists of directors Brem, Levin, Levinthal and
Treu. The Compensation Committee reviews and makes recommendations to the Board
concerning salaries and incentive compensation for executive officers and
certain employees of the Company. The Compensation Committee held one meeting
during the last fiscal year.
The Nominating Committee consists of directors Levinthal and Treu. The
Nominating Committee will review and recommend candidates for election to the
Company's Board of Directors.
COMPENSATION FOR DIRECTORS
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. The Company does not provide additional compensation for
committee participation or special assignments of the Board of Directors. From
time to time, certain of the directors of the Company have received grants of
options to purchase shares of the Company's Common Stock pursuant to the 1992
Incentive Stock Plan (the "Stock Plan").
Under the 1997 Non-Employee Director Option Plan (the "Director Option
Plan"), each Director of the Company who is not also an employee of the Company
(each, an "Outside Director") will receive (provided that such Outside Director
has been a director for at least six months prior to such grant), on the date of
each year's Annual Meeting of Stockholders, an automatic grant of an option to
purchase up to 5,000 shares of Common Stock. Such options will have an exercise
price equal to the closing price of the Company's Common Stock on the Nasdaq
National Market on the day prior to the date of grant and will vest as to 1/48
of the shares subject to the option on a monthly basis, subject to the
director's continued relationship with the Company. Each option granted under
the Director Option Plan has a term of ten years. On May 27, 1998, the following
Outside Directors each received an option to purchase 5,000 shares of Common
Stock under the Director Option Plan, at an exercise price of $12.875 per share
(the closing price of the Company's Common Stock on the Nasdaq National Market
on May 26, 1998): Drs. Brem, Langer and Treu, Messrs. Levin and Levinthal, and
Ms. Effland.
For a description of certain agreements between the Company and Drs. Brem
and Langer, see "Certain Relationships and Related Transactions."
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
three fiscal years of the Company's President and Chief Executive Officer and
the Company's four most highly compensated executive officers whose total annual
salary and bonus for 1998 exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS OF ALL OTHER
FISCAL ------------------------ OPTIONS (# OF COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SHARES)(1) ($)
- ----------------------------------------------------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
David M. Clapper..................................... 1998 $ 265,000 $ 75,525 50,000 $ 2,500(2)
President and 1997 246,000 25,000 23,077
Chief Executive Officer 1996 230,000 -- 299,293
Stephen J. Herman.................................... 1998 $ 206,662 $ 34,099 30,000 $ 1,639(2)
Vice President, Operations 1997 194,964 5,000 7,384 --
1996 184,800 -- 49,402
David J. Enscore, Ph.D............................... 1998 $ 169,260 $ 29,621 20,000 $ 2,077(2)
Vice President, Research, 1997 159,679 5,000 6,154 --
Development and 1996 152,075 -- 60,965 9,904(3)
Drug Delivery
Arthur J. Coury, Ph.D................................ 1998 $ 188,580 $ 31,116 20,000 $ 2,029(2)
Chief Scientific Officer and 1997 179,597 5,000 6,154 --
Vice President 1996 171,045 -- 66,636 --
Glenn M. Kazo(4)..................................... 1998 $ 178,080 $ 20,479 -- $ 1,702(2)
Vice President, Corporate 1997 169,600 5,000 4,615 4,152(3)
Development 1996 160,000 -- 81,537 18,456(3)
</TABLE>
- ------------------------
(1) Options are exercisable as to 1/48th of the total number of shares subject
to the option at the end of the first month after the date of grant and as
to an additional 1/48th of the total number of shares subject to the option
at the end of each month thereafter, subject to the optionees' continued
relationship with the Company, except for the options granted to Dr. Enscore
and Mr. Kazo in 1996, which are exercisable as to 12/48th of the total
number of shares subject to the option on the first anniversary of the date
of grant and as to an additional 1/48th of the total number of shares
subject to the option at the end of each month thereafter, subject to the
optionees' continued relationship with the Company.
(2) Consists of 401(k) Plan matching payments made by the Company.
(3) Consists of reimbursement for relocation expenses.
(4) Mr. Kazo resigned from the Company in February 1999.
OPTION GRANT TABLE. The following table sets forth certain information
regarding options granted during the year ended December 31, 1998 by the Company
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING % OF TOTAL OPTIONS OPTION TERM(3)
OPTIONS GRANTED TO EMPLOYEES EXERCISE OR --------------------
NAME GRANTED(1)(#) IN 1998(2) BASE PRICE ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- ----------------------------- --------------- ----------------------- ------------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David M. Clapper............. 50,000 13.6% $ 8.25 11/30/08 $ 259,419 $ 657,419
Stephen J. Herman............ 30,000 8.1% $ 8.25 11/30/08 $ 155,651 $ 394,451
David J. Enscore, Ph.D....... 20,000 5.4% $ 8.25 11/30/08 $ 103,768 $ 262,968
Arthur J. Coury, Ph.D........ 20,000 5.4% $ 8.25 11/30/08 $ 103,768 $ 262,968
Glenn M. Kazo................ -- -- -- -- -- --
</TABLE>
7
<PAGE>
- ------------------------
(1) These options are intended to qualify as incentive stock options and are
exercisable as to 1/48 of the total number of shares subject to the option
at the end of the first month after the date of grant, and as to an
additional 1/48th of the total number of shares subject to the option at the
end of each month thereafter, subject to the optionees' continued
relationship with the Company.
(2) Based on an aggregate of 394,778 options granted by the Company in the year
ended December 31, 1998 to officers, employees, directors, consultants and
advisors of the Company, including the Named Executive Officers.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Company's Common Stock on the date of grant appreciates
at the indicated annual rate compounded annually for the term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated stock price. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price growth.
YEAR-END OPTION TABLE. The following table sets forth certain information
regarding stock options held as of December 31, 1998 by the Named Executive
Officers. None of the Named Executive Officers exercised any stock options
during the year ended December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-
OPTIONS AT DECEMBER 31, THE-MONEY OPTIONS AT
SHARES VALUE 1998 DECEMBER 31, 1998(1)
ACQUIRED ON REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME EXERCISE (#) ($) (#) ($)
- ------------------------------------------ ------------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
David M. Clapper.......................... -- $ -- 6,730 / 66,347 $ 13,359 /$101,199
Stephen J. Herman......................... -- $ -- 2,153 / 35,231 $ 4,274 / $51,634
David J. Enscore, Ph.D.................... -- $ -- 1,794 / 24,360 $ 3,561 / $36,155
Arthur J. Coury, Ph.D..................... -- $ -- 1,794 / 24,360 $ 3,561 / $36,155
Glenn M. Kazo............................. -- $ -- 1,346 / 3,269 $ 2,672 / $6,489
</TABLE>
- ------------------------
(1) Value is based on the closing sales price of a share of the Company's Common
Stock on December 31, 1998 ($9.125), the last trading day of the Company's
1998 fiscal year, less the applicable option exercise price.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by all officers and
directors of the Company who are persons required to file reports ("Reporting
Persons") pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or written representations from certain Reporting
Persons, the Company believes that during fiscal 1998 all filings required to be
made by the Reporting Persons were timely made in accordance with the
requirements of the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for the administration of the Company's compensation programs. These
programs include base salary for executive officers and both short-term and
long-term incentive compensation programs. The Company's compensation programs
are designed to provide a competitive level of total compensation and include
8
<PAGE>
incentive and equity ownership opportunities linked to the Company's performance
and shareholder return.
COMPENSATION PHILOSOPHY
The design and implementation of the Company's executive compensation
programs are based on a series of guiding principles derived from the Company's
values, business strategy and management requirements. These principles may be
summarized as follows:
- Align the financial interests of the management team with the Company and
its stockholders;
- Attract, motivate and retain high-caliber individuals necessary to
increase total return to stockholders;
- Provide a total compensation program where a significant portion of pay is
linked to individual achievement and short-term and long-term Company
performance; and
- Emphasize reward for performance at the individual, team and Company
levels.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), generally disallows a
tax deduction to public companies for compensation over $1.0 million paid to the
corporation's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Company
generally intends to structure the stock options granted to its executive
officers in a manner that complies with the statute to mitigate any disallowance
of deductions under Section 162(m). However, the Committee reserves the right to
use its judgement to authorize compensation payments which may be in excess of
the limit when the Committee believes such payment is appropriate, after taking
into consideration changing business conditions or the officer's performance,
and is in the best interests of the stockholders.
COMPENSATION PROGRAM
The Company's executive compensation program has three major components, all
of which are intended to attract, retain and motivate executive officers
consistent with the principles set forth above. The Committee considers these
components of compensation individually as well as collectively in determining
total compensation for executive officers.
BASE SALARY. Each fiscal year the Committee establishes base salaries for
individual executive officers based upon (i) industry and peer group surveys,
(ii) responsibilities, scope and complexity of each position and (iii)
performance judgments as to each individual's past and expected future
contributions. The Committee reviews with the Chief Executive Officer and
approves, with appropriate modifications, an annual base salary plan for the
Company's executive officers other than the Chief Executive Officer. The
Committee reviews and fixes the base salary of the Chief Executive Officer based
on similar competitive compensation data and the Committee's assessment of his
past performance and its expectations as to his future contributions in leading
the Company.
CASH (SHORT-TERM) INCENTIVES. The Committee approved a cash bonus plan for
fiscal 1998 and recipients of bonus awards under this program included certain
executive officers. See "Executive Compensation--Summary Compensation Table."
Bonus awards under this program were based on the achievement of corporate
goals, individual goals or a combination thereof.
EQUITY BASED (LONG-TERM) INCENTIVES. Long-term incentives for the Company's
employees are provided under the Company's stock option plans. Each fiscal year,
the Committee considers the desirability of granting to executive officers
long-term incentives in the form of stock options. These option grants are
intended to motivate the executive officers to manage the business to improve
9
<PAGE>
long-term Company performance and align the financial interests of the
management team with the Company and its stockholders. The Committee established
the grants of stock options to executive officers (other than the Chief
Executive Officer) in the last fiscal year, based upon a review with the Chief
Executive Officer of proposed individual awards, taking into account each
officer's scope of responsibility and specific assignments, strategic and
operational goals applicable to the officer, anticipated performance
requirements and contributions of the officer and competitive data for similar
positions.
MR. CLAPPER'S 1998 COMPENSATION
Mr. Clapper's salary was increased in 1998 to $265,000 from $246,000 in
1997. In addition, in November 1998, Mr. Clapper received a cash bonus of
$75,525 and a stock option to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $8.25 per share (the closing price of a share of
the Company's Common Stock on the Nasdaq National Market on the date of grant).
In determining Mr. Clapper's 1998 compensation, cash bonus and stock option
award, the Committee considered Mr. Clapper's individual goals and the goals
achieved by the Company during the year including clinical, regulatory, product
development and business development milestones achieved by the Company, as well
as Mr. Clapper's role in leading the Company toward these acheivements.
Compensation Committee
Michael J. Levinthal
Jesse I. Treu, Ph.D.
Henry Brem, M.D.
Mark J. Levin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Levinthal,
Treu, Brem and Levin, each of whom served on the Compensation Committee of the
Board of Directors during 1998. Other than Mr. Levin, who served as Chief
Executive Officer of the Company from June 1991 to July 1993, no member of the
Compensation Committee was at any time during 1998, or formerly, an officer or
employee of the Company or any subsidiary of the Company, and, except as
provided below, no member of the Compensation Committee had any relationship
with the Company requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act.
No executive officer of the Company has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of the Company.
For a description of a consulting agreement between Dr. Brem and the
Company, see "Certain Relationships and Related Transactions."
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total return to stockholders of
the Company's Common Stock for the period from December 11, 1997, the date of
the Company's initial public offering, through December 31, 1998 with the
cumulative total return over such period of (i) the Russell 2000 Index and (ii)
the Hambrecht & Quist "Healthcare, Excluding Biotechnology" index. The graph
assumes the investment of $100 in the Company's Common Stock (at the initial
public offering
10
<PAGE>
price) on each of such indices (and the reinvestment of all dividends). The
performance shown is not necessarily indicative of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
<S> <C> <C> <C>
HEALTH CARE
FOCAL, INC. RUSSELL 2000 INDEX
DECEMBER 11, 1997 (IPO) $100.00 $100.00 $100.00
DECEMBER 31, 1997 $106.30 $103.50 $103.21
DECEMBER 31, 1998 $96.25 $101.18 $130.76
*TOTAL RETURN BASED ON $100 INITIAL INVESTMENT
& REINVESTMENT OF DIVIDENDS
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1997, the Company implemented a program under which directors,
executive officers and certain other key employees were permitted to exercise
their outstanding options as to both vested and unvested shares, with unvested
shares being subject to a right of repurchase at cost in favor of the Company in
the event of termination of employment prior to vesting of all then-unvested
shares. Under this program, the participants paid the exercise price for their
outstanding options pursuant to full recourse promissory notes. The notes bear
interest at 6.0% per annum and are due and payable on December 31, 2000. The
principal amounts of each note payable by a director or executive officer are
set forth below:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE AS
OF
DIRECTOR OR EXECUTIVE OFFICER ORIGINAL NOTE AMOUNT DECEMBER 31, 1998
- -------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
David M. Clapper.................................................... $ 448,993 $ 137,172
Arthur J. Coury, Ph.D............................................... $ 113,733 $ 110,158
David J. Enscore, Ph.D.............................................. $ 106,612 $ 94,587
Stephen J. Herman................................................... $ 70,897 $ 70,897
Glenn M. Kazo....................................................... $ 98,050 $ 74,000
Mary Lou Mooney..................................................... $ 54,218 $ 30,156
Ronald S. Rudowsky.................................................. $ 92,223 $ 33,301
W. Bradford Smith................................................... $ 102,341 $ 42,203
Henry Brem, M.D..................................................... $ 51,800 $ 51,800
Robert Langer, Ph.D................................................. $ 88,800 $ 88,800
Mark J. Levin....................................................... $ 33,000 $ 33,000
</TABLE>
11
<PAGE>
The Company has a consulting agreement with Dr. Brem under which it pays Dr.
Brem $30,000 per annum for scientific advisory and consulting services provided
by Dr. Brem. Dr. Brem is a founder and director of the Company and has, from
time to time, been granted options to purchase Common Stock of the Company.
The Company has a consulting agreement with Dr. Langer under which it pays
Dr. Langer $60,000 per annum for scientific advisory and consulting services
provided by Dr. Langer. Dr. Langer is a founder and director of the Company and
has, from time to time, been granted options to purchase Common Stock of the
Company.
The Company has entered into indemnification agreements with its officers
and directors. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance.
APPROVAL OF 1999 STOCK INCENTIVE PLAN
On February 24, 1999, the Board of Directors of the Company adopted, subject
to stockholder approval, the 1999 Stock Incentive Plan (the "1999 Plan"). Up to
875,000 shares of Common Stock (subject to adjustment in the event of stock
splits and other similar events) may be issued pursuant to options or restricted
stock awards granted under the 1999 Plan.
The 1999 Plan is intended to supplement the Company's 1992 Incentive Stock
Plan, which expires in 2002 and under which only 166,431 shares remained
available for new option grants as of December 31, 1998.
The Board of Directors believes that the future success of the Company
depends, in large part, upon the ability of the Company to maintain a
competitive position in attracting, retaining and motivating key personnel. The
Board of Directors believes that stock awards have been, and will continue to
be, an important element in attracting and retaining key personnel who are
expected to contribute to the Company's growth and success.
The principal provisions of the 1999 Plan are summarized below. The summary
is qualified in its entirety by reference to the 1999 Plan, a copy of which is
attached to the electronic copy of this Proxy Statement filed with the
Commission and may be accessed from the Commission's home page (www.sec.gov.).
In addition, a copy of the 1999 Plan may be obtained by making a written request
to the Secretary of the Company.
DESCRIPTION OF AWARDS
The 1999 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory stock options, restricted stock awards and other
stock-based awards, including the grant of shares based upon certain conditions,
the grant of securities convertible into Common Stock and the grant of stock
appreciation rights (collectively "Awards").
INCENTIVE STOCK OPTIONS AND NONSTATUTORY STOCK OPTIONS. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Common Stock on the date of grant. Under present law, however,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at an exercise
price less than the fair market value of the Common Stock on the date of grant
12
<PAGE>
(or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power of the
Company). Options may not be granted for a term in excess of ten years. The 1999
Plan permits the Board to determine the manner of payment of the exercise price
of options, including through payment by cash, check or in connection with a
"cashless exercise" through a broker, by surrender to the Company of shares of
Common Stock, by delivery to the Company of a promissory note, or by any other
lawful means.
RESTRICTED STOCK AWARDS. Restricted Stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
OTHER STOCK-BASED AWARDS. Under the 1999 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
any future subsidiaries are eligible to be granted Awards under the 1999 Plan.
Under present law, however, incentive stock options may only be granted to
employees. The maximum number of shares with respect to which an Award may be
granted to any participant under the 1999 Plan may not exceed 300,000 shares per
calendar year.
As of December 31, 1998, approximately 107 persons were eligible to receive
Awards under the 1999 Plan, including the Company's eight executive officers and
six non-employee directors. The granting of Awards under the 1999 Plan is
discretionary, and the Company cannot now determine the number or type of Awards
to be granted in the future to any particular person or group.
On January 31, 1999, the last reported sale price of the Company Common
Stock on the Nasdaq National Market was $12.19.
ADMINISTRATION
The 1999 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1999 Plan and to interpret the provisions of the 1999
Plan. Pursuant to the terms of the 1999 Plan, the Board of Directors may
delegate authority under the 1999 Plan to one or more committees of the Board,
and subject to certain limitations, to one or more executive officers of the
Company. The Board has authorized the Compensation Committee to administer
certain aspects of the 1999 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 1999 Plan, the
Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1999 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1999 Plan), the Board
of Directors is authorized to provide for outstanding options or other
stock-based Awards to be assumed
13
<PAGE>
or substituted for, by the acquiring or succeeding corporation. If the acquiring
or succeeding corporation does not agree to assume, or substitute for, such
options, then the Board of Directors shall provide that all unexercised options
will become exercisable in full prior to the Acquisition Event and will
terminate immediately prior to the Acquisition Event if not exercised; provided
that, if holders of the Company's Common Stock receive a cash payment for each
share of Common Stock surrendered pursuant to the Acquisition Event, then the
Board may provide that all outstanding options shall terminate upon such
Acquisition Event and that each participant shall receive, in exchange therefor,
a cash payment.
If any Award expires or is terminated, surrendered, canceled or forfeited,
the unused shares of Common Stock covered by such Award will again be available
for grant under the 1999 Plan.
AMENDMENT OR TERMINATION
No Award may be made under the 1999 Plan after February 24, 2009, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 1999 Plan, except that after the date
of such amendment no Award intended to comply with Section 162(m) of the Code
shall become exercisable, realizable or vested unless and until such amendment
shall have been approved by the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1999 Plan and with respect to the sale of Common Stock acquired under the 1999
Plan.
INCENTIVE STOCK OPTIONS. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the exercise of the
option ("ISO Stock"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the
14
<PAGE>
Common Stock acquired through the exercise of the option ("NSO Stock") on the
Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO Stock
for more than one year prior to the date of the sale.
RESTRICTED STOCK AWARDS. A participant will not recognize taxable income
upon the grant of a restricted stock Award, unless the participant makes an
election under Section 83(b) of the Code (a "Section 83(b) Election"). If the
participant makes a Section 83(b) Election within 30 days of the date of the
grant, then the participant will recognize ordinary compensation income, for the
year in which the Award is granted, in an amount equal to the difference between
the fair market value of the Common Stock at the time the Award is granted and
the purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
OTHER STOCK-BASED AWARDS. The tax consequences associated with any other
stock-based Award granted under the 1999 Plan will vary depending on the
specific terms of such Award, including whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award, the applicable holding period
and the participant's tax basis.
TAX CONSEQUENCES TO THE COMPANY
The grant of an Award under the 1999 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1999 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1999 Plan, including as a result of
the exercise of a nonstatutory stock option, a Disqualifying Disposition or a
Section 83(d) Election. Any such deduction will be subject to the limitations of
Section 162(m) of the Code.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE 1999 STOCK
INCENTIVE PLAN IS IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND
THEREFORE IT RECOMMENDS A VOTE FOR THIS PROPOSAL.
15
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the year ending December
31, 1999. Ernst & Young LLP has audited the financial statements of the Company
for each fiscal year since the Company's inception. The affirmative vote of
holders of a majority of the shares of Common Stock represented at the meeting
is necessary to appoint Ernst & Young LLP as the Company's independent auditors
and the Board of Directors recommends that the stockholders vote FOR
confirmation of such selection. In the event of a negative vote, the Board of
Directors will reconsider its selection. Representatives of Ernst & Young LLP
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, must be received by the Company no later than December 24,
1999 in order that they may be included in the proxy statement and form of proxy
relating to that meeting.
In addition, the Company's Bylaws require that the Company be given advance
notice of stockholder nominations for election to the Company's Board of
Directors and of other business which stockholders wish to present for action at
an annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must be made
in writing delivered to or mailed and received at the principal executive
offices of the Company not less than 120 calendar days in advance of the date
specified for the annual meeting in the Company's proxy statement released to
stockholders in connection with such previous year's annual meeting of
stockholders. In the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than 30 days from the
date contemplated at the time of the previous year's proxy statement, notice by
the stockholder to be timely must be received a reasonable time before the
solicitation is made.
By Order of the Board of
Directors,
DAVID M. CLAPPER
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
April 23, 1999
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
16
<PAGE>
Appendix A
FOCAL, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
MAY 26, 1999
8:00 A.M. EASTERN STANDARD TIME
- --------------------------------------------------------------------------------
FOCAL, INC.
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS, MAY 26, 1999
The undersigned hereby appoints David M. Clapper and W. Bradford Smith,
or either of them ("Appointed Proxies"), with power of substitution to each, as
proxies to act and vote all shares of the undersigned at the 1999 Annual Meeting
of Stockholders ("Meeting") of Focal, Inc. to be held on Wednesday, May 26, 1999
at 8:00 a.m. EST, or at any adjournment thereof.
THIS PROXY, SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WILL BE
VOTED AS DIRECTED. IF NO DIRECTION TO THE CONTRARY IS INDICATED, THE APPOINTED
PROXIES SHALL VOTE "FOR" PROPOSALS I, II AND III.
PLEASE COMPLETE, DATE SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
<PAGE>
Focal, Inc.
PLEASE DETACH HERE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
I. ELECTION OF DIRECTORS: / / FOR electing the following nominees as / / WITHHOLD AUTHORITY to vote for the
Class II Directors: (01) Henry Brem, M.D., following nominees as Class II Directors:
(02) Janet Effland and (03) Jesse I. Treu, Ph.D. (01) Henry Brem, M.D., (02) Janet Effland
each for a three-year term. and (03) Jesse I. Treu, Ph.D.
NOTE: To withhold authority to vote for any individual nominee, mark the "FOR" / /
box and write the number(s) of such nominee(s) in the box to the right. Your / /
shares will be voted for the remaining nominees. / /
</TABLE>
<TABLE>
<S> <C> <C> <C>
II. TO APPROVE THE COMPANY'S
1999 STOCK INCENTIVE PLAN: / / FOR / / AGAINST / / ABSTAIN
III. TO RATIFY THE SELECTION OF
ERNST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1999: / / FOR / / AGAINST / / ABSTAIN
</TABLE>
If any other business is properly brought before the Meeting or any
adjournment(s) thereof, this Proxy will be voted in the discretion of the
Appointed Proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING EACH OF THE DIRECTOR
NOMINEES AND FOR PROPOSALS II AND III.
The undersigned ratifies all that the Appointed Proxies, or their substitutes,
may lawfully do by virtue hereof, and revokes any proxies previously given to
vote at the Meeting or adjournment(s).
Address Change? Mark Box / / Indicate changes below: Dated:_______________
/ /
/ /
/ /
Signature(s) in Box
Please sign exactly as name(s) appear to the left.
When signing in fiduciary or representative
capacity, please add your full title. If shares are
registered in more than one name, all holders
must sign. If signature is for a corporation, the
handwritten signature and title of an authorized
officer are required, together with the full
corporate name.
<PAGE>
Appendix B
FOCAL, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Focal,
Inc., a Delaware corporation (the "Company"), is to advance the interests of the
Company's stockholders by enhancing the Company's ability to attract, retain and
motivate persons who make (or are expected to make) important contributions to
the Company by providing such persons with equity ownership opportunities and
performance-based incentives and thereby better aligning the interests of such
persons with those of the Company's stockholders. Except where the context
otherwise requires, the term "Company" shall include any of the Company's
present or future subsidiary corporations of as defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the "Code") and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has
a significant interest, as determined by the Board of Directors of the Company
(the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered
by the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
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(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 8, Awards may
be made under the Plan for up to 850,000 shares of common stock, $.01 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any Participant
under the Plan shall be 300,000 per calendar year. The per-Participant limit
described in this Section 4(b) shall be construed and applied consistently with
Section 162(m) of the Code.
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
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(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that no Option will be granted
for a term in excess of 10 years.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange
Act, by delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole
discretion by (i) delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of
payment.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
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(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation
or dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) ACQUISITION EVENTS
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(1) DEFINITION. An "Acquisition Event" shall mean: (a) any
merger or consolidation of the Company with or into another entity as a result
of which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of the
Company for cash, securities or other property pursuant to a statutory share
exchange transaction.
(2) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the Option confers the right to
purchase, for each share of Common Stock subject to the Option immediately prior
to the consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate thereof), the
Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to
consist solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of Common Stock as a
result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Options, then the Board shall, upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified time prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants before the consummation of such Acquisition
Event; provided, however, that in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each share of Common Stock surrendered pursuant to such
Acquisition Event (the "Acquisition Price"), then the Board may instead provide
that all outstanding Options shall terminate upon consummation of such
Acquisition Event and that each Participant shall receive, in exchange therefor,
a cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options.
(3) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED STOCK
AWARDS. Upon the occurrence of an Acquisition Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall inure
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to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Acquisition Event in the same manner and to the
same extent as they applied to the Common Stock subject to such Restricted Stock
Award.
(4) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS. The
Board shall specify the effect of an Acquisition Event on any other Award
granted under the Plan at the time of the grant of such Award.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written
instrument in such form as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
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Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of restrictions in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
10. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
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(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated by the Board as subject to Section 162(m) of the Code by
the Board shall become exercisable, vested or realizable, as applicable to such
Award, unless and until the Plan has been approved by the Company's stockholders
to the extent stockholder approval is required by Section 162(m) in the manner
required under Section 162(m) (including the vote required under Section
162(m)). No Awards shall be granted under the Plan after the completion of ten
years from the earlier of (i) the date on which the Plan was adopted by the
Board or (ii) the date the Plan was approved by the Company's stockholders, but
Awards previously granted may extend beyond that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted to a Participant designated as
subject to Section 162(m) by the Board after the date of such amendment shall
become exercisable, realizable or vested, as applicable to such Award (to the
extent that such amendment to the Plan was required to grant such Award to a
particular Participant), unless and until such amendment shall have been
approved by the Company's stockholders as required by Section 162(m) (including
the vote required under Section 162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
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FOCAL, INC.
Incentive Stock Option Agreement
GRANTED UNDER 1999 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Focal, Inc., a Delaware
corporation (the "Company"), on _______ , _____ (the "Grant Date") to [_____]
, an employee of the Company (the "Participant"), of an option to purchase,
in whole or in part, on the terms provided herein and in the Company's 1999
Stock Incentive Plan (the "Plan"), a total of [_____] shares (the "Shares")
of common stock, $.01 par value per share, of the Company ("Common Stock") at
$[_____] per Share. Unless earlier terminated, this option shall expire on
[_____] (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code"). Except
as otherwise indicated by the context, the term "Participant", as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2. VESTING SCHEDULE.
This option will become exercisable ("vest") as to [_____] % of the
original number of Shares on the [_____] anniversary of the Grant Date and as
to an additional [_____] % of the original number of Shares at the end of
each successive full [_____] period following the first anniversary of the
Grant Date until the [_____]anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. EXERCISE OF OPTION.
(a) FORM OF EXERCISE. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to,
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the Company or any parent or subsidiary of the Company as defined in Section
424(e) or (f) of the Code (an "Eligible Participant")
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
thirty days after such cessation (but in no event after the Final Exercise
Date), PROVIDED THAT this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant by the
Participant, PROVIDED THAT this option shall be exercisable only to the extent
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon the effective
date of such discharge. "Cause" shall mean willful misconduct by the Participant
or willful failure by the Participant to perform his or her responsibilities to
the Company (including, without limitation, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the
Company), as determined by the Company, which determination shall be conclusive.
The Participant shall be considered to have been discharged for "Cause" if the
Company determines, within 30 days after the Participant's resignation, that
discharge for cause was warranted.
4. WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
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5. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation of
law, except by will or the laws of descent and distribution, and, during the
lifetime of the Participant, this option shall be exercisable only by the
Participant.
6. DISQUALIFYING DISPOSITION.
If the Participant disposes of Shares acquired upon exercise of this
option within two years from the Grant Date or one year after such Shares were
acquired pursuant to exercise of this option, the Participant shall notify the
Company in writing of such disposition.
7. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
FOCAL, INC.
Dated: _________ By:____________________________________
Name:
Title:
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PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
____________________________
Address:____________________
____________________
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NOTICE OF STOCK OPTION EXERCISE
Date: ____________
_____________________
_____________________
_____________________
Attention: Treasurer
Dear Sir or Madam:
I am the holder of an Incentive Stock Option granted to me under the Focal, Inc.
(the "Company") 1999 Stock Incentive Plan on __________ for the purchase of
__________ shares of Common Stock of the Company at a purchase price of
$__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
Very truly yours,
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(Signature)
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FOCAL, INC.
Nonstatutory Stock Option Agreement
GRANTED UNDER 1999 STOCK INCENTIVE PLAN
1. GRANT OF OPTION.
This agreement evidences the grant by Focal, Inc., a Delaware
corporation (the "Company"), on ______, _____ (the "Grant Date") to [_____],
a[n][employee] [consultant] [director] of the Company (the "Participant"), of
an option to purchase, in whole or in part, on the terms provided herein and
in the Company's 1999 Stock Incentive Plan (the "Plan"), a total of [_____]
shares (the "Shares") of common stock, $.01 par value per share, of the
Company ("Common Stock") at [_____] per Share. Unless earlier terminated,
this option shall expire on [_____] (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be
an incentive stock option as defined in Section 422 of the Internal Revenue Code
of 1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. VESTING SCHEDULE.
This option will become exercisable ("vest") as to _____% of the
original number of Shares on the [______] anniversary of the Grant Date and
as to an additional _____% of the original number of Shares at the end of
each successive full [_______________] period following the first anniversary
of the Grant Date until the [_______] anniversary of the Grant Date. This
option shall expire upon, and will not be exercisable after, the Final
Exercise Date.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. EXERCISE OF OPTION.
(a) FORM OF EXERCISE. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
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(b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Participant
ceased to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
thirty days after such cessation (but in no event after the Final Exercise
Date), PROVIDED THAT this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant, by the
Participant, PROVIDED THAT this option shall be exercisable only to the extent
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon the effective
date of such discharge. "Cause" shall mean willful misconduct by the Participant
or willful failure by the Participant to perform his or her responsibilities to
the Company (including, without limitation, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the
Company), as determined by the Company, which determination shall be conclusive.
The Participant shall be considered to have been discharged for "Cause" if the
Company determines, within 30 days after the Participant's resignation, that
discharge for cause was warranted.
4. WITHHOLDING.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
-2-
<PAGE>
5. NONTRANSFERABILITY OF OPTION.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation of
law, except by will or the laws of descent and distribution, and, during the
lifetime of the Participant, this option shall be exercisable only by the
Participant.
6. PROVISIONS OF THE PLAN.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
FOCAL, INC.
Dated: _________ By:________________________________________
Name:
Title:
-3-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
_____________________________
Address:______________________
______________________
-4-
<PAGE>
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
_____________________
_____________________
_____________________
Attention: Treasurer
Dear Sir or Madam:
I am the holder of a Nonstatutory Stock Option granted to me under the Focal,
Inc. (the "Company") 1999 Stock Incentive Plan on __________ for the purchase of
__________ shares of Common Stock of the Company at a purchase price of
$__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
Very truly yours,
- -----------------------------
(Signature)
<PAGE>
FOCAL, INC.
Restricted Stock Agreement
GRANTED UNDER 1999 STOCK INCENTIVE PLAN
AGREEMENT made this ____ day of _____________, ____, between Focal,
Inc., a Delaware corporation (the "Company"), and ________________________ (the
"Participant").
For valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:
1. PURCHASE OF SHARES.
The Company shall issue and sell to the Participant, and the
Participant shall purchase from the Company, subject to the terms and conditions
set forth in this Agreement and in the Company's 1999 Stock Incentive Plan (the
"Plan") ______ shares (the "Shares") of common stock, $.01 par value, of the
Company ("Common Stock"), at a purchase price of $[ ] per share. The aggregate
purchase price for the Shares shall be paid by the Participant by check payable
to the order of the Company or such other method as may be acceptable to the
Company. Upon receipt by the Company of payment for the Shares, the Company
shall issue to the Participant one or more certificates in the name of the
Participant for that number of Shares purchased by the Participant. The
Participant agrees that the Shares shall be subject to the Purchase Option set
forth in Sections 2 and 5 of this Agreement and the restrictions on transfer set
forth in Section 4 of this Agreement.
2. PURCHASE OPTION.
(a) In the event that the Participant ceases to be employed by the
Company for any reason or no reason, with or without cause, prior to _______,
_____, the Company shall have the right and option (the "Purchase Option") to
purchase from the Participant, for a sum of $[ ] per share (the "Option Price"),
some or all of the Unvested Shares (as defined below).
"Unvested Shares" means the total number of Shares multiplied by the
Applicable Percentage at the time the Purchase Option becomes exercisable by the
Company. The "Applicable Percentage" shall be (i) [ ]% during the 12-month
period ending ____________, 199_, (ii) [ ]% less [ ]% for each full three months
of employment completed by the Participant with the Company from and after
_________, 199_, and (iii) zero on or after ________, 200__.
(b) In the event that the Participant's employment with the Company is
terminated by reason of death or disability, the number of the Shares for which
the Purchase Option becomes exercisable shall be __________ percent (__%) of the
number of Unvested Shares for which the Purchase Option would otherwise become
exercisable. For this purpose, "disability" shall mean the inability of the
Participant,
<PAGE>
due to a medical reason, to carry out his duties as an employee of the Company
for a period of six consecutive months.
(c) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
3. EXERCISE OF PURCHASE OPTION AND CLOSING.
(a) The Company may exercise the Purchase Option by delivering or
mailing to the Participant (or his estate), within 60 days after the termination
of the employment of the Participant with the Company, a written notice of
exercise of the Purchase Option. Such notice shall specify the number of Shares
to be purchased. If and to the extent the Purchase Option is not so exercised by
the giving of such a notice within such 60-day period, the Purchase Option shall
automatically expire and terminate effective upon the expiration of such 60-day
period.
(b) Within 10 days after delivery to the Participant of the Company's
notice of the exercise of the Purchase Option pursuant to subsection (a) above,
the Participant (or his estate) shall, pursuant to the provisions of the Joint
Escrow Instructions referred to in Section 8, tender to the Company at its
principal offices the certificate or certificates representing the Shares which
the Company has elected to purchase in accordance with the terms of this
Agreement, duly endorsed in blank or with duly endorsed stock powers attached
thereto, all in form suitable for the transfer of such Shares to the Company.
Promptly following its receipt of such certificate or certificates, the Company
shall pay to the Participant the aggregate Option Price for such Shares
(provided that any delay in making such payment shall not invalidate the
Company's exercise of the Purchase Option with respect to such Shares).
(c) After the time at which any Shares are required to be delivered to
the Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Participant on account of such Shares
or permit the Participant to exercise any of the privileges or rights of a
stockholder with respect to such Shares, but shall, in so far as permitted by
law, treat the Company as the owner of such Shares.
(d) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any outstanding indebtedness of the
Participant to the Company or in cash (by check) or both.
(e) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from a
computation made pursuant to Section 2 of this Agreement shall be rounded to the
nearest whole Share (with any one-half Share being rounded upward).
(f) The Company may assign its Purchase Option to one or more persons
or entities.
-2-
<PAGE>
4. RESTRICTIONS ON TRANSFER.
The Participant shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer"):
(a) any Shares, or any interest therein, that are subject to the
Purchase Option, except that the Participant may transfer such Shares to or for
the benefit of any spouse, child or grandchild, or to a trust for their benefit,
PROVIDED that such Shares shall remain subject to this Agreement (including
without limitation the restrictions on transfer set forth in this Section 4, the
Purchase Option and the right of first refusal set forth in Section 5) and such
permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound by
all of the terms and conditions of this Agreement; or
(b) any Shares, or any interest therein, that are no longer subject to
the Purchase Option, except in accordance with Section 5 below.
5. EFFECT OF PROHIBITED TRANSFER.
The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
6. ESCROW.
The Participant shall, upon the execution of this Agreement, execute
Joint Escrow Instructions in the form attached to this Agreement as Exhibit A.
The Joint Escrow Instructions shall be delivered to the [Secretary] of the
Company, as escrow agent thereunder. The Participant shall deliver to such
escrow agent a stock assignment duly endorsed in blank and hereby instructs the
Company to deliver to such escrow agent, on behalf of the Participant, the
certificate(s) evidencing the Shares issued hereunder. Such materials shall be
held by such escrow agent pursuant to the terms of such Joint Escrow
Instructions.
7. RESTRICTIVE LEGEND.
All certificates representing Shares shall have affixed thereto a
legend in substantially the following form, in addition to any other legends
that may be required under federal or state securities laws:
"The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to purchase
set forth in a certain Restricted Stock Agreement between the
corporation and the registered owner of these shares (or his
predecessor in interest), and such Agreement is
-3-
<PAGE>
available for inspection without charge at the office of the
Secretary of the corporation."
8. PROVISIONS OF THE PLAN.
This Agreement is subject to the provisions of the Plan, a copy of
which is furnished to the Participant with this Agreement.
9. WITHHOLDING TAXES; SECTION 83(b) ELECTION.
(a) The Participant acknowledges and agrees that the Company has the
right to deduct from payments of any kind otherwise due to the Participant any
federal, state or local taxes of any kind required by law to be withheld with
respect to the purchase of the Shares by the Participant or the lapse of the
Purchase Option.
(b) The Participant acknowledges that he has been informed of the
availability of making an election in accordance with Section 83(b) of the
Internal Revenue Code of 1986, as amended; that such election must be filed with
the Internal Revenue Service within 30 days of the transfer of shares to the
Participant; and that the Participant is solely responsible for making such
election.
10. SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, and each other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
11. WAIVER.
Any provision for the benefit of the Company contained in this
Agreement may be waived, either generally or in any particular instance, by the
Board of Directors of the Company.
12. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
Company and the Participant and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Sections 4 and 5 of this Agreement.
13. NOTICE.
All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery or five days after deposit in
the United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
respective signature to this
-4-
<PAGE>
Agreement, or at such other address or addresses as either party shall designate
to the other in accordance with this Section 16.
14. PRONOUNS.
Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
15. ENTIRE AGREEMENT.
This Agreement and the Plan constitutes the entire agreement between
the parties, and supersedes all prior agreements and understandings, relating to
the subject matter of this Agreement.
16. AMENDMENT.
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Participant.
17. GOVERNING LAW.
This Agreement shall be construed, interpreted and enforced in
accordance with the internal laws of the State of Delaware without regard to any
applicable conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FOCAL, INC.
By:
______________________________
Name:
Title:
Address:
______________________________
______________________________
______________________________
[Name of Participant]
Address:
______________________________
______________________________
-5-
<PAGE>
Exhibit A
FOCAL, INC.
JOINT ESCROW INSTRUCTIONS
---------, -----
- ---------------------
[SECRETARY]
Focal, Inc.
- ---------------------
- ---------------------
Dear Sir:
As Escrow Agent for Focal, Inc., a Delaware corporation (the
"Company"), and the undersigned person ("Holder"), you are hereby authorized and
directed to hold the documents delivered to you pursuant to the terms of that
certain Restricted Stock Agreement (the "Agreement") of even date herewith, to
which a copy of these Joint Escrow Instructions is attached, in accordance with
the following instructions:
1. APPOINTMENT. Holder irrevocably authorizes the Company to deposit
with you any certificates evidencing Shares (as defined in the
Agreement) to be held by you hereunder and any additions and
substitutions to said Shares. Holder does hereby irrevocably constitute
and appoint you as his attorney-in-fact and agent for the term of this
escrow to execute with respect to such Shares all documents necessary
or appropriate to make such Shares negotiable and to complete any
transaction herein contemplated. Subject to the provisions of this
paragraph 1 and the terms of the Agreement, Holder shall exercise all
rights and privileges of a stockholder of the Company while the Shares
are held by you.
2. CLOSING OF PURCHASE.
a. Upon any purchase by the Company of the Shares pursuant to the
Agreement, the Company shall give to Holder and you a written notice specifying
the purchase price for the Shares, as determined pursuant to the Agreement, and
the time for a closing hereunder (the "Closing") at the principal office of the
Company. Holder and the Company hereby irrevocably authorize and direct you to
close the transaction contemplated by such notice in accordance with the terms
of said notice.
A-1
<PAGE>
b. At the Closing, you are directed (a) to date the stock assignment
form or forms necessary for the transfer of the Shares, (b) to fill in on such
form or forms the number of Shares being transferred, and (c) to deliver same,
together with the certificate or certificates evidencing the Shares to be
transferred, to the Company against the simultaneous delivery to you of the
purchase price for the Shares being purchased pursuant to the Agreement.
3. WITHDRAWAL. The Holder shall have the right to withdraw from this
escrow any Shares as to which the Purchase Option (as defined in the
Agreement) has terminated or expired.
4. DUTIES OF ESCROW AGENT.
a. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
b. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact of Holder while acting in good faith and in
the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
c. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or Company,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or Company by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
d. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
e. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel.
f. Your rights and responsibilities as Escrow Agent hereunder shall
terminate if (i) you cease to be Secretary of the Company or (ii) you resign by
written notice to each party. In the event of a termination under clause (i),
your successor as Secretary shall become Escrow Agent hereunder; in the event of
a termination under clause (ii), the Company shall appoint a successor Escrow
Agent hereunder.
A-2
<PAGE>
g. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
h. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such dispute shall have been settled either by mutual written agreement of
the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
i. These Joint Escrow Instructions set forth your sole duties with
respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into these Joint Escrow Instructions against you.
j. The Company shall indemnify you and hold you harmless against any
and all damages, losses, liabilities, costs, and expenses, including attorneys'
fees and disbursements, for anything done or omitted to be done by you as Escrow
Agent in connection with this Agreement or the performance of your duties
hereunder, except such as shall result from your gross negligence or willful
misconduct.
5. NOTICE. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States Post Office, by registered or
certified mail with postage and fees prepaid, addressed to each of the
other parties thereunto entitled at the following addresses, or at such
other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto.
COMPANY: 4 Maguire Road
Lexington, MA 02173
HOLDER: Notices to Holder shall be sent to the
address set forth below Holder's signature below.
ESCROW AGENT: ________________
________________
________________
6. MISCELLANEOUS.
a. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions, and you do not
become a party to the Agreement.
A-3
<PAGE>
b. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Very truly yours,
FOCAL, INC.
By:____________________________
Title:_________________________
HOLDER:
_______________________________
(Signature)
_______________________________
Print Name
Address:
_______________________________
_______________________________
Date Signed:___________________
ESCROW AGENT:
- --------------------------
A-4
<PAGE>
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
- ---------------------
- ---------------------
- ---------------------
Attention: Treasurer
Dear Sir or Madam:
I am the holder of a Restricted Stock Award granted to me under the Focal, Inc.
(the "Company") 1999 Stock Incentive Plan on __________ for the purchase of
__________ shares of Common Stock of the Company at a purchase price of
$__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
Very truly yours,
- -----------------------------
(Signature)
