def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
|
|
|
o
|
|
Preliminary Proxy Statement |
o
|
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ
|
|
Definitive Proxy Statement |
o
|
|
Definitive Additional Materials |
o
|
|
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 |
ABAXIS, INC.
(Name of Registrant as Specified In Its Charter)
|
|
|
Payment of Filing Fee (Check the appropriate box): |
þ
|
|
No Fee required. |
o
|
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
|
|
|
|
|
|
|
|
|
|
1 |
) |
|
Title of each class of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
) |
|
Aggregate number of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
) |
|
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fees is calculated and
state how it was determined): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o
|
|
Fee paid previously with preliminary materials. |
|
|
|
o
|
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 25, 2005
TO THE SHAREHOLDERS:
Please take notice that the Annual Meeting of the Shareholders
of Abaxis, Inc., a California corporation (us,
we or our), will be held on Tuesday,
October 25, 2005, at 10:00 a.m. local time at our
offices, located at 3240 Whipple Road, Union City, California,
for the following purposes:
|
|
|
1. To elect six directors to hold office for the ensuing
year; |
|
|
2. To ratify the appointment of Burr, Pilger &
Mayer LLP as our independent registered public accounting firm
for the fiscal year ending March 31, 2006; |
|
|
3. To consider and approve the amendment and restatement of
our 1998 Stock Option Plan as the 2005 Equity Incentive
Plan; and |
|
|
4. To transact such other business as may properly come
before the meeting. |
Shareholders of record at the close of business on
August 31, 2005, are entitled to notice of, and to vote at,
this meeting and any adjournment or postponement. For ten days
prior to the meeting, a complete list of shareholders entitled
to vote at the meeting will be available for examination by any
shareholder, for any purpose relating to the meeting, during
ordinary business hours at our offices located at 3240 Whipple
Road, Union City, California.
Please note that each shareholder who attends the annual
meeting may be asked to present valid picture identification,
such as a drivers license or passport. Shareholders
holding stock in brokerage accounts (street name holders) will
need to bring a copy of a brokerage statement reflecting stock
ownership as of the record date. Cameras, recording devices and
other electronic devices will not be permitted at the
meeting.
|
|
|
By order of the Board of Directors |
|
|
|
|
|
ZARA Z. THOMAS |
|
Secretary |
Union City, California
September 19, 2005
YOUR VOTE IS IMPORTANT.
Whether or not you expect to attend the annual meeting in
person, we urge you to vote your shares by phone, via the
internet or by signing, dating and returning the enclosed proxy
card at your earliest convenience. Please see your proxy card
for specific instructions on how to vote. Proxies are revocable,
and any shareholder may withdraw his or her proxy prior to the
time it is voted, or by attending the meeting and voting in
person.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
1 |
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
2 |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
5 |
|
|
|
|
|
5 |
|
|
|
|
15 |
|
|
|
|
|
15 |
|
|
|
|
|
17 |
|
|
|
|
|
19 |
|
|
|
|
22 |
|
|
|
|
|
22 |
|
|
|
|
|
22 |
|
|
|
|
|
23 |
|
|
|
|
|
23 |
|
|
|
|
|
24 |
|
|
|
|
|
24 |
|
|
|
|
|
24 |
|
|
|
|
|
25 |
|
|
|
|
|
25 |
|
|
|
|
25 |
|
|
|
|
27 |
|
|
|
|
29 |
|
|
|
|
30 |
|
|
|
|
30 |
|
i
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited by the Board of Directors of
Abaxis, Inc., a California corporation (Abaxis or
us or we), for use at our annual meeting
of shareholders to be held on Tuesday, October 25, 2005
(the Annual Meeting), or any adjournment or
postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The date
of this Proxy Statement is September 19, 2005, the
approximate date on which this Proxy Statement and the
accompanying form of proxy were first sent or given to
shareholders.
GENERAL INFORMATION
Expenses and Solicitation of Proxies. We will bear the
entire cost of solicitation, including the preparation,
assembly, printing and mailing of the proxy materials and any
additional solicitation materials furnished to the stockholders.
We will furnish copies of proxy materials and any other
additional solicitation materials to brokerage houses,
fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward the
proxy solicitation materials to such beneficial owners. In
addition, we may reimburse such persons for their costs in
forwarding the proxy solicitation materials to such beneficial
owners. We may supplement the original solicitation of proxies
by mail or by solicitation by telephone, telegram, facsimile or
other means by our directors, officers or employees. No
additional compensation will be paid to these individuals for
any such services. We also have retained the services of The
Altman Group to aid in the solicitation of proxies from brokers,
bank nominees and other institutional owners. We estimate that
we will pay a fee of approximately $18,000 for The Altman
Groups services and will reimburse it for certain
out-of-pocket expenses that are usual and proper.
Record Date. The record date for our 2005 Annual Meeting
of Shareholders was August 31, 2005. Only shareholders as
of that date are eligible to cast votes at the 2005 Annual
Meeting of Shareholders.
Voting Securities. As of the record date, there were
19,923,496 shares of our common stock outstanding and we
had 189 shareholders of record, such number excluding
shareholders who hold our shares in electronic form through the
Depository Trust Company at brokerage houses. All shares of our
common stock are entitled to vote with respect to all matters to
be acted upon at the Annual Meeting. Except with respect to the
election of directors, the procedure for which is described
below, each share of common stock is entitled to one vote.
Quorum. Our Bylaws provide that a majority of all of the
shares of the common stock entitled to vote, whether present in
person or represented by proxy, shall constitute a quorum for
the transaction of business at the Annual Meeting. Votes for and
against, abstentions and broker non-votes will each
be counted as present for purposes of determining the presence
of a quorum. A broker non-vote occurs when a
nominee, such as a broker or bank, holding shares for a
beneficial owner, such as a brokerage account holder, does not
vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. For certain
specified types of proposals, Nasdaq rules permit nominees to
vote on behalf of beneficial holders without consultation of the
beneficial holder and in these limited circumstances, broker
non-votes accordingly do not occur.
Cumulative Voting. In the election of directors, each
common stock shareholder has cumulative voting rights and may be
entitled to as many votes as is equal to the number of shares of
common stock multiplied by the number of directors to be elected
(i.e., six), which votes may be cast for a single candidate or
distributed among any or all of the candidates. However, no
shareholder is entitled to cumulate votes with respect to a
candidate unless the candidates name has been placed in
nomination prior to the voting and the shareholder has given
notice, at the meeting and prior to the voting, of his or her
intention to cumulate his or her votes. If any one shareholder
has given such notice, all shareholders may cumulate their votes.
Vote Required for Each Proposal.
|
|
|
|
|
Proposal #1 Election of Directors. A plurality of
the votes duly cast at a meeting at which a quorum is present is
required for the election of directors. A plurality of the votes
duly cast means that only affirmative votes will affect the
outcome of the election. Therefore, neither abstentions nor
broker |
1
|
|
|
|
|
non-votes will have any impact on the election of
directors and the six candidates for election as directors at
the annual meeting who receive the highest number of affirmative
votes will be elected. |
|
|
|
Proposals #2 and #3: Ratification of Appointment of
Independent Registered Public Accounting Firm; and
Proposal #3: Approval of the Amendment and Restatement of
Abaxis, Inc. 1998 Stock Option Plan as the 2005 Equity Incentive
Plan. In order for proposals #2 and #3 to pass,
the vote of a majority of the shares represented in person or by
proxy and voting at a duly held meeting at which a quorum is
present must be obtained, provided that the votes in favor of
each of proposals #2 and #3 are a majority of the
votes that constitute the required quorum. Although abstentions
and broker non-votes are counted as present for
purposes of a quorum, they are not counted as affirmative votes
for the proposals. In other words, the votes in favor of each of
proposals #2 and #3 must exceed the sum of
(i) the votes against, (ii) abstentions, and
(iii) the broker non-votes for the respective proposal. |
Voting and Revocability of Proxies. The persons
authorized to vote shares represented by executed proxies (if
authority to vote for the election of directors is not withheld)
will have full discretion and authority to vote cumulatively and
to allocate votes among any and all nominees as they may
determine or, if authority to vote for a specified candidate or
candidates has been withheld, among those candidates for whom
authority to vote has not been withheld. If an executed proxy is
submitted without any instruction for the voting of such proxy,
the proxy will be voted in favor of the proposals described, but
votes may be cumulated for less than all of the nominees for
director.
All valid proxies received before the Annual Meeting will be
exercised. A shareholder giving a proxy has the power to revoke
his or her proxy at any time before the time it is exercised by
delivering to the Secretary of Abaxis a written instrument
revoking the proxy or a duly executed proxy with a later date,
or by attending the Annual Meeting and voting in person.
VOTING BY TELEPHONE OR VIA THE INTERNET
|
|
|
If you hold Your Shares Directly Registered in |
|
If You Hold Your Shares in an Account with |
Your Name with Computershare, Formerly Known as |
|
a Broker or a Bank that Participates in the |
Equiserve Trust Company, N.A |
|
ADP Investor Communications Services. |
|
|
|
To vote by phone:
|
|
To vote by telephone or via the Internet: |
1-877-PRX-VOTE (1-877-779-8683)
|
|
Your voting form from your broker or bank will show the
telephone number to call or Internet website to visit. |
To vote via the Internet:
|
|
|
http://www.eproxyvote.com/abax
|
|
|
For Shares Directly Registered in the Name of the
Stockholder. Shareholders with shares registered directly
with Computershare , formerly known as Equiserve Trust Company,
N.A., may vote those shares telephonically by calling
Computershare at 1-877-PRX-VOTE, (1-877-779-8683) or via the
Internet at http://www.eproxyvote.com/abax.
For Shares Registered in the Name of a Broker or a Bank.
A number of brokers and banks are participating in a program
provided through ADP Investor Communication Services that offers
telephone and Internet voting options. This program is different
from the program provided by Computershare for shares registered
directly in the name of the shareholder. If your shares are held
in an account with a broker or a bank participating in the ADP
Investor Communication Services program, you may vote those
shares telephonically or via the Internet by calling the
telephone number, or visiting the Internet website, shown on the
voting form received from your broker or bank.
General Information for All Shares Voted Via the Internet or
By Telephone. Votes submitted via the Internet or by
telephone must be received by 12:00 midnight Eastern Time on
October 24, 2005. Submitting your proxy via the Internet or
by telephone will not affect your right to vote in person should
you decide to attend the annual meeting.
2
The telephone and Internet voting procedures are designed to
authenticate shareholders identities, to allow
shareholders to give their voting instructions and to confirm
that shareholders instructions have been recorded
properly. Our outside counsel has advised Abaxis that the
Internet voting procedures that have been made available through
Computershare are consistent with the requirements of applicable
law. Shareholders voting via the Internet should understand that
there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone
companies, which must be borne by the shareholder.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Bylaws of Abaxis authorize a Board of Directors consisting
of six directors. All six of our directors are to be elected for
the ensuing year and until their successors are elected and
qualified. Proxies cannot be voted for a greater number of
persons than the number of nominees named.
If elected, each nominee will hold office until our next annual
meeting of shareholders or until his successor is elected and
qualified unless he shall resign or his office becomes vacant by
death, removal, or other cause in accordance with our Bylaws.
The persons named in the accompanying form of proxy will vote
the shares represented thereby for the following nominees, but
may cumulate the votes for less than all of the nominees, as
permitted by the laws of the State of California, unless
otherwise instructed.
The nominees for election to the Board of Directors at the
Annual Meeting are Clinton H. Severson, Richard J.
Bastiani, Ph.D., Henk J. Evenhuis, Brenton G.A. Hanlon,
Prithipal Singh, Ph.D. and Ernest S.
Tucker, III, M.D. Please see Information about
Abaxis Director Nominees below for information
concerning the nominees.
Vote Required and Recommendation of the Board of Directors
If a quorum is present and voting, the six nominees receiving
the highest number of votes will be elected.
Although abstentions and broker non-votes will each
be counted as present for purposes of determining a quorum,
neither abstentions nor broker non-votes will have
any impact on the election of directors and the six candidates
for election as directors at the annual meeting who receive the
highest number of affirmative votes will be elected.
If the nominees decline to serve or become unavailable for any
reason, or if a vacancy occurs before the
election (although management knows of no reason to
anticipate that this will occur), the proxies may be voted for
substitute nominees as the Board of Directors may designate. In
the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received
by them in such a manner in accordance with cumulative voting as
will ensure the election of as many of the nominees listed below
as possible, and, in such event, the specific nominees to be
voted for will be determined by the proxy holders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE NOMINEES NAMED ABOVE.
PROPOSAL NUMBER TWO
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On August 25, 2005, the Audit Committee of the Board of
Directors dismissed Deloitte & Touche LLP as our
independent registered public accounting firm and selected Burr,
Pilger & Mayer LLP as our new independent registered
public accounting firm for the fiscal year ending March 31,
2006. Prior to August 25, 2005, Deloitte & Touche
LLP acted as our independent registered public accounting firm
since its appointment in the fiscal year ended March 31,
1996. A representative of Burr, Pilger & Mayer LLP is
3
expected to be present at the Annual Meeting, with the
opportunity to make a statement if the representative desires to
do so, and is expected to be available to respond to appropriate
questions.
The aggregate fees billed by Deloitte & Touche LLP for
audit and non-audit services provided to Abaxis in fiscal years
2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit Fees(1)
|
|
$ |
740,000 |
|
|
$ |
241,000 |
|
Audit-Related Fees(2)
|
|
|
|
|
|
|
9,000 |
|
Tax Fees(3)
|
|
|
11,000 |
|
|
|
86,000 |
|
All Other Fees(4)
|
|
|
1,000 |
|
|
|
8,000 |
|
|
|
|
|
|
|
|
Total All Fees
|
|
$ |
752,000 |
|
|
$ |
344,000 |
|
|
|
(1) |
Audit fees represent fees for professional services provided in
connection with the audit of our financial statements and review
of our quarterly financial statements. In fiscal 2005, audit
fees also included attestation services related to
Section 404 of the Sarbanes-Oxley Act of 2002. |
|
(2) |
Audit-related fees billed during fiscal 2004 were for services
related to accounting consultation and review of documents filed
with the Securities and Exchange Commission. |
|
(3) |
Tax fees consist of fees billed for professional services
rendered for tax compliance and tax advice. In fiscal 2004, this
category also included professional services rendered for
preparation and review of income tax returns. |
|
(4) |
All other fees consist of fees for products and services other
than the services reported above. In fiscal 2005, this category
consisted of a subscription to accounting and financial
disclosure literature. In fiscal 2004, this category consisted
fees related to an informational workshop on internal controls. |
Independent Auditors
On August 25, 2005, the Audit Committee of the Board of
Directors dismissed Deloitte & Touche LLP as our
independent registered public accounting firm, and engaged Burr,
Pilger & Mayer LLP as our new independent registered
public accounting firm for the fiscal year ending March 31,
2006.
During the two fiscal years ended March 31, 2005, and
through the subsequent interim period ended August 25,
2005, there were no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of
Deloitte & Touche LLP, would have caused
Deloitte & Touche LLP to make reference to the subject
matter of the disagreements in connection with its audit report.
Furthermore, Deloitte & Touche LLPs reports
related to the audits of our financial statements for the fiscal
years ended March 31, 2005 and 2004 did not contain any
adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with Deloitte &
Touche LLPs report related to the audit of the
effectiveness of Abaxis internal control over financial
reporting as of March 31, 2005, based on the criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission, Deloitte & Touche LLP expressed an
adverse opinion in its report dated June 13, 2005 on the
effectiveness of the Companys internal control over
financial reporting due to a material weakness in the
Companys controls relating to the determination and
reporting of the provision for income taxes. There were no
reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K, except that on June 13, 2005,
Deloitte & Touche LLP advised the Audit Committee of a
material weakness in internal control over financial reporting
related to provision for income taxes as disclosed in the
Abaxis Form 10-K for the fiscal year ended
March 31, 2005.
Abaxis has provided a copy of the above disclosures to
Deloitte & Touche LLP and asked Deloitte &
Touche LLP to provide Abaxis with a letter addressed to the SEC
stating whether or not Deloitte & Touche
4
LLP agrees with our statements. A copy of that letter, dated
August 29, 2005, was filed as Exhibit 16.1 to our
report on Form 8-K filed with the SEC on August 31,
2005.
Prior to engaging Burr, Pilger & Mayer LLP, Abaxis did
not consult Burr, Pilger & Mayer LLP with respect to
the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit
opinion that might be rendered on Abaxis financial
statements, as well as any other matters or reportable events
described under Item 304(a)(2)(i) and (ii) of
Regulation S-K.
Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
The Audit Committees policy is to pre-approve all audit
and permissible non-audit services provided by our independent
auditors. These services may include audit services,
audit-related services, tax services and other services. The
independent auditor and management are required to periodically
report to the Audit Committee regarding the extent of services
provided by the independent auditor in accordance with this
pre-approval. The Chair of the Audit Committee is also
authorized, pursuant to delegated authority, to pre-approve
additional services on a case-by-case basis, and such approvals
are communicated to the full Audit Committee at its next
meeting. During fiscal year 2005, all Audit-Related Fees and Tax
Fees were pre-approved by the Audit Committee, except for All
Other Fees representing less than 1% of the total fees were
subject to the de minimus exception established by the SEC.
Vote Required and Board of Directors Recommendation
If a quorum is present and voting, the vote of a majority of
the shares both (a) represented in person or by proxy and
(b) voting is required for approval of this proposal. In
addition, the votes in favor of this proposal must be a majority
of the quorum present.
Although abstentions and broker non-votes are
counted as present for purposes of a quorum, they are not
counted as affirmative votes for the proposals. In other words,
the vote in favor of each of this proposal must exceed the sum
of (i) the votes against, (ii) abstentions and
(iii) the broker non-votes for this proposal.
However, because under Nasdaq rules this proposal is deemed to
be routine and thus individual nominees, such as
brokers, may vote on behalf of beneficial holders, we do not
anticipate receiving any broker non-votes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF BURR,
PILGER & MAYER LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR ABAXIS, INC. FOR THE FISCAL YEAR ENDING
MARCH 31, 2006.
PROPOSAL NUMBER THREE
APPROVAL OF AMENDMENT AND RESTATEMENT OF
THE ABAXIS, INC. 1998 STOCK OPTION PLAN AS
THE 2005 EQUITY INCENTIVE PLAN
At the Annual Meeting, the shareholders will be asked to approve
the amendment and restatement of the 1998 Stock Option Plan (the
Prior Plan) as the 2005 Equity Incentive Plan (the
2005 Plan), including the reservation of an
additional 500,000 shares for issuance thereunder. The
Board of Directors adopted the terms of 2005 Plan on
July 21, 2005, subject to its approval by shareholders. The
2005 Plan is intended to replace the Prior Plan. If the
shareholders approve the 2005 Plan, its terms will become
effective on the day of the Annual Meeting.
We operate in a challenging marketplace in which our success
depends to a great extent on our ability to attract and retain
employees of the highest caliber. Our Board of Directors
believes that the company must offer a competitive equity
incentive program if it is to successfully attract and retain
the best possible candidates for positions of responsibility.
The 2005 Plan provides the Boards Compensation Committee
with a
5
range of incentive tools and sufficient flexibility to permit it
to make the most effective use of the shares our shareholders
authorize for incentive purposes.
The 2005 Plan is also designed to preserve our ability to deduct
in full, for federal income tax purposes, the compensation
recognized by certain executive officers in connection with
certain awards granted under the 2005 Plan. Section 162(m)
of the Internal Revenue Code generally denies a corporate tax
deduction for annual compensation exceeding $1 million paid
by a publicly held company to its chief executive officer or to
any of its four other most highly compensated officers. However,
compensation that is deemed to be performance-based
under Section 162(m) is generally excluded from this limit.
To enable compensation received in connection with stock
options, stock appreciation rights, certain stock awards and
restricted stock unit awards, performance share and performance
unit awards, and certain other stock-based or cash-based awards
granted under the 2005 Plan to qualify as
performance-based within the meaning of
Section 162(m), the shareholders are being asked to approve
certain material terms of the 2005 Plan. By approving the 2005
Plan, the shareholders will be approving, among other things:
|
|
|
|
|
the eligibility requirements for participation in the 2005 Plan; |
|
|
|
the performance measures upon which the grant or vesting of
awards of performance shares, performance units and certain
stock award, restricted stock unit, other stock-based or
cash-based awards may be based; |
|
|
|
the maximum numbers of shares for which stock options, stock
appreciation rights, stock awards, restricted stock unit awards,
performance share awards, performance unit awards and other
stock-based awards intended to qualify as a performance-based
award may be granted to an employee in any fiscal year; and |
|
|
|
the maximum dollar amount for which a performance unit or
cash-based award intended to qualify as a performance-based
award may be granted to an employee in any fiscal year. |
While we believe that compensation in connection with such
awards under the 2005 Plan generally will be deductible by
Abaxis for federal income tax purposes, under certain
circumstances, such as a change in control of Abaxis,
compensation paid in settlement of certain awards may not
qualify as performance-based.
The Board of Directors believes that the 2005 Plan will serve a
critical role in attracting and retaining the high caliber
employees, directors and consultants essential to our success
and in motivating these individuals to strive to meet our goals.
Therefore, our Board urges you to vote to approve the adoption
of the 2005 Plan.
Summary of the 2005 Plan
The following summary of the 2005 Plan is qualified in its
entirety by the specific language of the 2005 Plan, a copy of
which is available to any shareholder upon request. The 2005
Plan may also be viewed on the website of the Securities and
Exchange Commission at www.sec.gov.
General. The purpose of the 2005 Plan is to advance the
interests of Abaxis by providing a means through which the
company may attract and retain able employees, directors and
consultants upon whom responsibility for the success of Abaxis
rests and to provide them with a proprietary interest in the
development and financial success of Abaxis that will encourage
them to devote their best efforts to the business of Abaxis.
These incentives may be provided under the 2005 Plan through the
grant of stock options, stock appreciation rights, stock awards
(stock purchase rights and stock bonuses), restricted stock
units, performance shares, performance units, other stock-based
awards and cash-based awards.
Authorized Shares. If the 2005 Plan is approved by the
shareholders, the Prior Plan will be terminated, and the maximum
aggregate total of shares of stock that may be issued under the
2005 Plan will be equal to 4,886,000 shares, which equals
(1) the Prior Plans authorized pool of
4,386,000 shares plus (2) 500,000 shares. As of
August 31, 2005, options to
purchase 2,680,362 shares of common stock were
outstanding under the Prior Plan, options to
purchase 1,394,855 shares of common stock granted
pursuant to the Prior Plan had been exercised and there were
310,783 shares of common stock available for future grants
6
under the Prior Plan, without taking the proposed increase into
account. Shares issued under the 2005 Plan may be authorized but
unissued or reacquired shares of common stock of Abaxis.
Share Accounting and Adjustments. If any award granted
under the Prior Plan or the 2005 Plan expires or otherwise
terminates for any reason without having been exercised or
settled in full, or if shares subject to forfeiture or
repurchase for not more that the participants original
purchase price are forfeited or repurchased by the company, any
such shares reacquired or subject to a terminated award will
again become available for issuance under the 2005 Plan. Shares
will not be treated as having been issued under the 2005 Plan
and will therefore not reduce the number of shares available for
grant to the extent an award other than an option or stock
appreciation right is settled in cash. Shares withheld or
reacquired by the company in satisfaction of a tax withholding
obligation will not again become available under the 2005 Plan.
The number of shares available under the 2005 Plan will be
reduced upon the exercise of a stock appreciation right by the
gross number of shares for which the award is exercised. If
shares are tendered in payment of the exercise price of an
option, or the option is exercised by means of a net-exercise
procedure, the number of shares available under the 2005 Plan
will be reduced by the gross number of shares for which the
option is exercised. The Compensation Committee of the Board of
Directors, in its discretion and to prevent dilution or
enlargement of participants rights under the 2005 Plan,
will adjust the number of shares authorized under the 2005 Plan,
the numerical limits on awards described below, the maximum
numbers of shares for which nonemployee director options may be
granted and the number and kind of shares and exercise price
subject to outstanding awards in the event of any change in our
common stock through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares or similar
change in our capital structure, or if we make a distribution to
our shareholders in a form other than common stock (excluding
normal cash dividends) that has a material effect on the fair
market value of our common stock. In such circumstances, the
Compensation Committee also has the discretion under the 2005
Plan to adjust the terms of outstanding awards as it deems
appropriate. Without affecting the number of shares available
for grant under the 2005 Plan, the Compensation Committee may
authorize the issuance or assumption of benefits under the 2005
Plan in connection with any merger, consolidation or similar
transaction on such terms and conditions as it deems appropriate.
Certain Award Limits. In addition to the limitation
described above on the total number of shares of our common
stock that will be authorized for issuance under the 2005 Plan,
the 2005 Plan limits the numbers of shares that may be issued
under each type of award, subject to adjustment as described
under Share Accounting and Adjustments above. No
more than 4,886,000 shares may be issued upon the exercise
of incentive stock options granted under the 2005 Plan. No more
than 500,000 shares in the aggregate may be issued pursuant
to full value awards, which are stock purchase,
stock bonus or other stock-based awards under which shares are
acquired for less than their fair market value, restricted stock
units and performance share awards granted under the 2005 Plan.
In addition, no more than 5% of the maximum aggregate number of
shares authorized under the 2005 Plan may be issued pursuant to
such full value awards that provide for vesting more rapidly
than over a period of three years if vesting is based upon
continued service alone or that have a performance period of
less than 12 months if vesting is based on the attainment
of performance goals. To enable compensation in connection with
certain types of awards to qualify as
performance-based within the meaning of
Section 162(m), the 2005 Plan establishes limits on the
maximum aggregate number of shares or dollar amount for which
any such award may be granted to an employee in any fiscal year.
The limits for awards intended to qualify as performance-based
are as follows:
|
|
|
|
|
Stock options and stock appreciation rights: No more than
100,000 shares. |
|
|
|
Stock purchase rights, stock bonuses and restricted stock
unit awards: No more than 500,000 shares. |
|
|
|
Performance share and performance unit awards: No more
than 500,000 shares, or 500,000 units, for each fiscal
year contained in the performance period of the award. |
|
|
|
Cash-based awards and other stock-based awards: No more
than 50,000 shares. |
Administration. The 2005 Plan will be administered by the
Compensation Committee of the Board of Directors or another
committee of the Board of Directors appointed to administer the
2005 Plan, or, in the
7
absence of such committee, by the Board. (For purposes of this
summary, the term Committee refers to either such
committee or the Board of Directors.) Subject to the provisions
of the 2005 Plan, the Committee will determine in its discretion
the persons to whom and the times at which awards are granted,
the types and sizes of awards, and all of their terms and
conditions. The Committee may, subject to certain limitations on
the exercise of its discretion required by Section 162(m),
amend or cancel any award, waive any restrictions or conditions
applicable to any award, and accelerate, extend or defer the
vesting of any award. The Committee may delegate to one or more
of its members or one or more officers of Abaxis the authority
to grant awards under the 2005 Plan. The 2005 Plan provides,
subject to certain limitations, for indemnification by the
company of any director or officer against all reasonable
expenses, including attorneys fees, incurred in connection
with any legal action arising from such persons action or
failure to act in administering the 2005 Plan. All awards
granted under the 2005 Plan will be evidenced by a written or
electronic agreement between Abaxis and the participant
specifying the terms and conditions of the award, consistent
with the requirements of the 2005 Plan. The Committee will
interpret the 2005 Plan and awards granted thereunder, and all
determinations of the Committee will be final and binding on all
persons having an interest in the 2005 Plan or any award.
Prohibition of Option and SAR Repricing. The 2005 Plan
expressly provides that, without the approval of a majority of
the votes cast in person or by proxy at a meeting of our
shareholders, the Committee may not provide for either the
cancellation of outstanding options or stock appreciation rights
in exchange for the grant of new options or stock appreciation
rights at a lower exercise price or the amendment of outstanding
options or stock appreciation rights to reduce the exercise
price.
Eligibility. Awards may be granted to employees,
consultants and directors of Abaxis or any affiliate of Abaxis.
Incentive stock options may be granted only to employees. As of
August 31, 2005, we had approximately 202 employees,
including six executive officers in addition to five
non-employee directors who would be eligible to receive awards
under the 2005 Plan.
Stock Options. The Committee may grant incentive stock
options within the meaning of Section 422 of the Internal
Revenue Code, nonstatutory stock options or any combination of
these. The Committee establishes the exercise price of options,
provided that all options must have an exercise price that is
not less than the fair market value of a share of our common
stock on the date of grant, except that options granted pursuant
to an assumption or substitution of another option in a manner
that would qualify under Section 424(a) of the Internal
Revenue Code may have an exercise price less than such minimum
price. Any incentive stock option granted to a person who at the
time of grant owns stock possessing more than 10% of the total
combined voting power of all classes of stock of Abaxis or any
parent or subsidiary of Abaxis (a 10% Shareholder)
must have an exercise price equal to at least 110% of the fair
market value of a share of common stock on the date of grant.
The closing price of our common stock as reported on the NASDAQ
National Market on August 31, 2005 was $11.47 per
share.
The 2005 Plan provides that the option exercise price may be
paid in cash or its equivalent, by tender of shares of common
stock owned by the participant having a fair market value not
less than the exercise price, by means of a net-exercise
procedure, by means of a broker-assisted cashless exercise or by
other consideration as approved by the Committee from time to
time.
Options will become vested and exercisable at such times and
subject to such conditions and restrictions as may be specified
by the Committee. The maximum term of an option granted under
the 2005 Plan is 10 years, provided that an incentive stock
option granted to a 10% Shareholder must have a term not
exceeding five years. Options will remain exercisable for such
period of time following a participants termination of
service as determined by the Committee and provided in the
participants award agreement, provided that in no case may
an option be exercised after its expiration date. Options will
become exercisable in full upon a participants death.
Incentive stock options are not transferable by the participant
other than by will or by the laws of descent and distribution,
and are exercisable during the participants lifetime only
by the participant.
8
Stock Appreciation Rights. The Committee may grant stock
appreciation rights either in tandem with a related option (a
Tandem SAR) or independently of any option (a
Freestanding SAR). A Tandem SAR requires the option
holder to elect between the exercise of the underlying option
for shares of common stock or the surrender of the option and
the exercise of the related stock appreciation right. A Tandem
SAR is exercisable only at the time and only to the extent that
the related stock option is exercisable, while a Freestanding
SAR is exercisable at such times and subject to such terms,
conditions, performance criteria or restrictions as specified by
the Committee. The exercise price of a Tandem SAR will be the
same as the exercise price of the related option, and the
exercise price of a Freestanding SAR may not be less than the
fair market value of a share of our common stock on the date of
grant.
Upon the exercise of any stock appreciation right, the
participant is entitled to receive an amount equal to the excess
of the fair market value of the underlying shares of common
stock as to which the right is exercised over the aggregate
exercise price for such shares. Payment of this amount upon the
exercise of a Tandem SAR may be made only in shares of common
stock whose fair market value on the exercise date equals the
payment amount. At the Committees discretion, payment of
this amount upon the exercise of a Freestanding SAR may be made
in cash or shares of common stock and may be paid in a lump sum
or on a deferred basis in accordance with the terms of the
participants award agreement. The maximum term of any
stock appreciation right granted under the 2005 Plan is ten
years.
Stock appreciation rights are generally nontransferable by the
participant other than by will or by the laws of descent and
distribution, and are generally exercisable during the
participants lifetime only by the participant. Other terms
of stock appreciation rights are generally similar to the terms
of comparable stock options.
Stock Awards. The Committee may grant stock awards under
the 2005 Plan either in the form of a stock purchase right,
giving a participant an immediate right to purchase common
stock, or in the form of a stock bonus, for which the
participant furnishes consideration in the form of services to
the company. The Committee determines the purchase price payable
under stock purchase awards, which may be less than the then
current fair market value of our common stock. Stock awards may
be subject to vesting conditions based on service or the
achievement of such performance criteria as the Committee
specifies, including the attainment of one or more performance
goals similar to those described below in connection with
performance awards. Unless otherwise provided by the Committee,
a participant will forfeit any shares of stock as to which
vesting conditions have not been satisfied prior to the
participants termination of service. Unless otherwise
determined by the Committee, participants holding stock awards
subject to vesting conditions will have the right to vote the
shares and to receive any dividends paid, except that dividends
or other distributions paid in shares will be subject to the
same restrictions as the original award.
Restricted Stock Units. The Committee may grant
restricted stock units under the 2005 Plan, which represents
rights to receive shares of our common stock at a future date
determined in accordance with the participants award
agreement. No monetary payment is required for receipt of
restricted stock units or the shares issued in settlement of the
award, the consideration for which is furnished in the form of
the participants services to Abaxis. The Committee may
grant restricted stock unit awards subject to the attainment of
one or more performance goals similar to those described below
in connection with performance awards, or may make the awards
subject to vesting conditions similar to those applicable to
stock awards. Unless otherwise provided by the Committee, a
participant will forfeit any restricted stock units which have
not vested prior to the participants termination of
service. Participants have no voting rights or rights to receive
cash dividends with respect to restricted stock unit awards
until shares of common stock are issued in settlement of such
awards. However, the Committee may grant restricted stock units
that entitle their holders to dividend equivalent rights, which
are rights to receive additional restricted stock units for a
number of shares whose value is equal to any cash dividends we
pay.
Performance Awards. The Committee may grant performance
awards subject to such conditions and the attainment of such
performance goals over such periods as the Committee determines
in writing and sets forth in a written agreement between the
company and the participant. These awards may be designated as
performance shares or performance units. Performance shares and
performance units are unfunded bookkeep-
9
ing entries generally having initial values, respectively, equal
to the fair market value determined on the grant date of a share
of common stock and a monetary value established by the
Committee at the time of grant. Performance awards will specify
a predetermined amount of performance shares or performance
units that may be earned by the participant to the extent that
one or more predetermined performance goals are attained within
a predetermined performance period. To the extent earned,
performance awards may be settled in cash, shares of common
stock or any combination of these.
Prior to the beginning of the applicable performance period or
such later date as permitted under Section 162(m) of the
Internal Revenue Code, the Committee will establish one or more
performance goals applicable to the award. Performance goals
will be based on the attainment of specified target levels with
respect to one or more measures of business or financial
performance of the company and/or any affiliate of Abaxis, or
any of their business units as may be selected by the Committee.
The Committee, in its discretion, may base performance goals on
one or more of the following such measures:
|
|
|
revenue; sales; expenses; operating income; gross margin;
operating margin; earnings before any one or more of:
stock-based compensation expense, interest, taxes, depreciation
and amortization; pre-tax profit; net operating income; net
income; economic value added; free cash flow; operating cash
flow; stock price; earnings per share; return on shareholder
equity; return on capital; return on assets; return on
investment; employee satisfaction; employee retention; balance
of cash, cash equivalents and marketable securities; market
share; daily average revenue trades; asset gathering metrics;
number of customers; customer satisfaction; product development;
completion of a joint venture or other corporate transaction;
completion of identified special project; and overall
effectiveness of management. |
The target levels with respect to these performance measures may
be expressed on an absolute basis or relative to a standard
specified by the Committee. The degree of attainment of
performance measures will be calculated in accordance with
generally accepted accounting principles, but prior to the
accrual or payment of any performance award for the same
performance period, and, according to criteria established by
the Committee, excluding the effect (whether positive or
negative) of changes in accounting standards or any
extraordinary, unusual or nonrecurring item occurring after the
establishment of the performance goals applicable to a
performance award.
Following completion of the applicable performance period, the
Committee will certify in writing the extent to which the
applicable performance goals have been attained and the
resulting value to be paid to the participant. The Committee
retains the discretion to eliminate or reduce, but not increase,
the amount that would otherwise be payable on the basis of the
performance goals attained to a participant who is a
covered employee within the meaning of
Section 162(m) of the Internal Revenue Code. However, no
such reduction may increase the amount paid to any other
participant. The Committee may make positive or negative
adjustments to performance award payments to participants other
than covered employees to reflect the participants
individual job performance or other factors determined by the
Committee. In its discretion, the Committee may provide a
participant awarded performance shares with dividend equivalent
rights with respect to cash dividends paid on the companys
common stock. The Committee may provide for performance award
payments in a lump sum or installments pursuant to a schedule
elected by the participant.
Unless otherwise provided by the Committee, if a
participants service terminates due to the
participants death or disability prior to completion of
the applicable performance period, the final award value will be
determined at the end of the performance period on the basis of
the performance goals attained during the entire performance
period but will be prorated for the number of months of the
participants service during the performance period. If a
participants service terminates prior to completion of the
applicable performance period for any other reason, the 2005
Plan provides that, unless otherwise determined by the
Committee, the performance award will be forfeited. No
performance award may be sold or transferred other than by will
or the laws of descent and distribution prior to the end of the
applicable performance period.
Deferred Compensation Awards. The 2005 Plan authorizes
the Committee to establish a deferred compensation award
program. If and when implemented, participants designated by the
Committee who are officers, directors or members of a select
group of highly compensated employees may elect to receive, in
lieu of compensation otherwise payable in cash an award of a
stock bonus or deferred stock units or in lieu of cash
10
or shares of common stock issuable upon the exercise or
settlement of stock options, stock appreciation rights or
performance share or performance unit awards, an award of
deferred stock units. Each such stock unit represents a right to
receive one share of our common stock at a future date
determined in accordance with the participants award
agreement. Deferred stock units will be settled by distribution
to the participant of a number of whole shares of common stock
equal to the number of stock units subject to the award as soon
as practicable following the earlier of the date on which the
participants service terminates or a settlement date
elected by the participant at the time of his or her election to
receive the deferred stock unit award. Participants are not
required to pay any additional consideration in connection with
the payment of a stock bonus or the settlement of deferred stock
units. A holder of deferred stock units has no voting rights or
other rights as a shareholder until shares of common stock are
issued to the participant in settlement of the deferred stock
units. However, participants holding deferred stock units will
be entitled to receive dividend equivalents with respect to any
payment of cash dividends on an equivalent number of shares of
common stock. Such dividend equivalents will be credited in the
form of additional whole and fractional stock units determined
in accordance with a method specified by the Committee in the
participants award agreement. Prior to settlement,
deferred stock units may not be assigned or transferred other
than by will or the laws of descent and distribution.
Cash-Based Awards and Other Stock-Based Awards. The
Committee may grant cash-based awards or other stock-based
awards in such amounts and subject to such terms and conditions
as the Committee determines. Cash-based awards will specify a
monetary payment or range of payments, while other stock-based
awards will specify a number of shares or units based on shares
or other equity-related awards. Such awards may be subject to
the attainment of one or more performance goals similar to those
described above in connection with performance awards.
Settlement of cash-based awards or other stock-based awards may
be in cash or shares of common stock, as determined by the
Committee. A participant will have no voting rights with respect
to any such award unless and until shares are issued pursuant to
the award. The committee may grant dividend equivalent rights
with respect to other stock-based awards. The effect on such
awards of the participants termination of service will be
determined by the Committee and set forth in the
participants award agreement.
Change in Control. In the event of a change in
control, as such term is defined by the 2005 Plan, the
surviving, continuing, successor or purchasing entity or its
parent may, without the consent of any participant, either
assume or continue in effect any or all outstanding options and
stock appreciation rights or substitute substantially equivalent
options or rights for its stock. Any options or stock
appreciation rights which are not assumed or continued in
connection with a change in control or exercised prior to the
change in control will terminate effective as of the time of the
change in control. The Committee may provide for the
acceleration of vesting of any or all outstanding options or
stock appreciation rights upon such terms and to such extent as
it determines. The 2005 Plan also authorizes the Committee, in
its discretion and without the consent of any participant, to
cancel each or any outstanding option or stock appreciation
right upon a change in control in exchange for a payment to the
participant with respect to each vested share (and each unvested
share if so determined by the Committee) subject to the
cancelled award of an amount equal to the excess of the
consideration to be paid per share of common stock in the change
in control transaction over the exercise price per share under
the award. The Committee, in its discretion, may provide in the
event of a change in control for the acceleration of vesting
and/or settlement of any stock award, restricted stock unit
award, performance share or performance unit, cash-based award
or other stock-based award held by a participant upon such
conditions and to such extent as determined by the Committee. It
is currently anticipated that awards granted to executive
officers will accelerate fully on a change of control. The
vesting of non-employee director awards automatically will
accelerate in full upon a change in control.
Termination or Amendment. The 2005 Plan will continue in
effect until its termination by the Committee provided that all
awards shall be granted within 10 years from the effective
date of its adoption upon approval by the shareholders. The
Committee may terminate or amend the 2005 Plan at any time,
provided that no amendment may be made without shareholder
approval that would increase the maximum aggregate number of
shares of stock authorized for issuance under the 2005 Plan,
change the class of persons eligible to receive incentive stock
options or would require shareholder approval under any
applicable law,
11
regulation or rule. No termination or amendment may affect any
outstanding award unless expressly provided by the Committee,
and, in any event, may not adversely affect an outstanding award
without the consent of the participant unless necessary to
comply with any applicable law, including, but not limited to,
Section 409A of the Internal Revenue Code, providing rules
regarding the taxation of nonqualified deferred compensation
plans.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the
U.S. federal income tax consequences of participation in
the 2005 Plan and does not attempt to describe all possible
federal or other tax consequences of such participation or tax
consequences based on particular circumstances.
Incentive Stock Options. A participant recognizes no
taxable income for regular income tax purposes as a result of
the grant or exercise of an incentive stock option. Participants
who neither dispose of their shares within two years following
the date the option was granted nor within one year following
the exercise of the option will normally recognize a capital
gain or loss equal to the difference, if any, between the sale
price and the purchase price of the shares. In such event, we
will not be entitled to any corresponding deduction for federal
income tax purposes. In the event of the participants
disposition of shares before both of these holding periods have
been satisfied (a disqualifying disposition), the
participant will recognize ordinary income equal to the spread
between the option exercise price and the fair market value of
the shares on the date of exercise, but in most cases not to
exceed the gain realized on the sale, if lower. Any gain in
excess of that amount will be a capital gain. If a loss is
recognized, there will be no ordinary income, and such loss will
be a capital loss. Any ordinary income recognized by the
participant upon the disqualifying disposition of the shares
generally should be deductible by Abaxis for federal income tax
purposes, except to the extent such deduction is limited by
applicable provisions of the Internal Revenue Code.
In general, the difference between the option exercise price and
the fair market value of the shares on the date when an
incentive stock option is exercised is treated as an adjustment
in computing income that may be subject to the alternative
minimum tax, which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition,
certain basis adjustments for purposes of computing the
alternative minimum taxable income on a subsequent sale of the
shares and certain tax credits which may arise with respect to
participants subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or
qualifying as incentive stock options are nonstatutory stock
options having no special tax status. A participant generally
recognizes no taxable income upon receipt of such an option.
Upon exercising a nonstatutory stock option, the participant
normally recognizes ordinary income equal to the difference
between the exercise price paid and the fair market value of the
shares on the date when the option is exercised. If the
participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the
sale of stock acquired by the exercise of a nonstatutory stock
option, any gain or loss, based on the difference between the
sale price and the fair market value of the shares on the
exercise date, will be taxed as capital gain or loss. Abaxis
generally should be entitled to a tax deduction equal to the
amount of ordinary income recognized by the participant as a
result of the exercise of a nonstatutory stock option, except to
the extent such deduction is limited by applicable provisions of
the Internal Revenue Code.
Stock Appreciation Rights. A Participant recognizes no
taxable income upon the receipt of a stock appreciation right.
Upon the exercise of a stock appreciation right, the participant
generally will recognize ordinary income in an amount equal to
the excess of the fair market value of the underlying shares of
common stock on the exercise date over the exercise price. If
the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. We
generally should be entitled to a deduction equal to the amount
of ordinary income recognized by the participant in connection
with the exercise of the stock appreciation right, except to the
extent such deduction is limited by applicable provisions of the
Code.
12
Stock Awards. A participant acquiring stock by means of a
stock purchase right or stock bonus generally will recognize
ordinary income equal to the excess of the fair market value of
the shares on the determination date over the price
paid, if any, for such shares. The determination
date is the date on which the participant acquires the
shares unless the shares are subject to a substantial risk of
forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which
the shares become transferable or (ii) the date on which
the shares are no longer subject to a substantial risk of
forfeiture. If the determination date is after the date on which
the participant acquires the shares, the participant may elect,
pursuant to Section 83(b) of the Code, to have the date of
acquisition be the determination date by filing an election with
the Internal Revenue Service no later than 30 days after
the date on which the shares are acquired. If the participant is
an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of
shares acquired pursuant to a stock award, any gain or loss,
based on the difference between the sale price and the fair
market value on the determination date, will be taxed as capital
gain or loss. We generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the
participant on the determination date, except to the extent such
deduction is limited by applicable provisions of the Code.
Performance Awards, Restricted Stock Unit Awards, Cash-Based
Awards and Other Stock-Based Awards. A participant generally
will recognize no income upon the grant of a performance share,
performance unit, restricted stock unit, cash-based or other
stock-based award. Upon the settlement of such awards,
participants normally will recognize ordinary income in the year
of settlement in an amount equal to the cash received and the
fair market value of any unrestricted shares of stock received.
If the participant is an employee, such ordinary income
generally is subject to withholding of income and employment
taxes. If the participant receives shares of restricted stock,
the participant generally will be taxed in the same manner as
described above under Stock Awards. Upon the sale of
any shares received, any gain or loss, based on the difference
between the sale price and the fair market value on the
determination date (as defined above under Stock
Awards), will be taxed as capital gain or loss. Abaxis
generally should be entitled to a deduction equal to the amount
of ordinary income recognized by the participant on the
determination date, except to the extent such deduction is
limited by applicable provisions of the Internal Revenue Code.
13
New 2005 Plan Benefits
No awards will be granted under the 2005 Plan prior to its
approval by the shareholders of Abaxis. With the exception of
stock options that will be granted automatically under the terms
of the 2005 Plan to nonemployee directors, all awards under the
2005 Plan will be granted at the discretion of the Committee,
and, accordingly, are not yet determinable. The table below sets
forth the awards that will be received under the 2005 Plan
during the fiscal year ending March 31, 2006 by certain
individuals and groups. This table is furnished pursuant to the
rules of the Securities and Exchange Commission.
NEW PLAN BENEFITS
|
|
|
|
|
Name and Position |
|
Shares | |
|
|
| |
Clinton H. Severson
|
|
|
-0- |
|
Chairman of the Board, President and Chief Executive
Officer
|
|
|
|
|
Alberto R. Santa Ines
|
|
|
-0- |
|
Chief Financial Officer and Vice President of Finance
|
|
|
|
|
Robert B. Milder
|
|
|
-0- |
|
Chief Operations Officer
|
|
|
|
|
Kenneth P. Aron, Ph.D.
|
|
|
-0- |
|
Vice President of Research and Development
|
|
|
|
|
Vladimir E. Ostoich, Ph.D.
|
|
|
-0- |
|
Vice President of Government Affairs and Vice President of
Marketing for the Pacific Rim
|
|
|
|
|
Lucien Ramondetta
|
|
|
-0- |
|
Vice President of Marketing and Sales for the Domestic
Market
|
|
|
|
|
All Current Executive Officers, as a Group
|
|
|
-0- |
|
All Current Directors Who Are not Executive Officers, as a Group
(5 persons)
|
|
|
-0- |
|
All Employees, Including all Current Officers Who Are not
Executive Officers, as a Group
|
|
|
-0- |
|
In fiscal year 2006, Abaxis anticipates making an initial grant
of performance accelerated restricted stock, subject to approval
of this proposal. However, at this time, the specific size of
these grants has not been determined. These grants will be made
to our executives, in conjunction with reduced grants of stock
options as compared to previous years. We believe Abaxis has
historically been conservative, and will continue to be
conservative, when granting equity as compared to industry peers
of similar sized companies. The intent is to make an annual
grant to executives consisting of a mix of stock options and
performance accelerated restricted stock going forward. Vesting
of restricted shares can only accelerate if performance criteria
during the performance period are exceeded. It is likely our
performance period will range from two to four years and we will
use revenue growth and an earnings-based growth metric. The
program is designed so that acceleration can only occur when
Abaxis significantly surpasses its performance expectations
(e.g., four year service based vesting could result to
full vesting of shares in two or three years if aggressive goals
are met). This ongoing program, in conjunction with grants of
stock options, is designed to focus executives on both the
achievement of sustained superior operating results as well as
increases in stockholder value through stock price appreciation.
Required Vote and Board of Directors Recommendation
Approval of this proposal requires the affirmative vote of a
majority of the shares present or represented by proxy and
entitled to vote on this proposal. If you hold your shares in
your own name and abstain from voting on this matter, your
abstention will have the same effect as a negative vote. If you
hold your shares through a broker and you do not instruct the
broker on how to vote on this proposal, your broker will not
have authority to vote your shares. Broker non-votes will have
no effect on the outcome of this vote. Abstentions and broker
non-votes will each be counted as present for purposes of
determining the presence of a quorum.
14
The Board of Directors believes that the adoption of the 2005
Plan is in the best interests of Abaxis and its shareholders for
the reasons stated above. Therefore, the Board of Directors
unanimously recommends a vote FOR approval of the
2005 Plan.
INFORMATION ABOUT ABAXIS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
To our knowledge, the following table sets forth certain
information with respect to the beneficial ownership of our
common stock as of August 31, 2005 by (i) the persons
named in the Summary Compensation Table; (ii) each of our
directors, (iii) all of our executive officers and
directors as a group and (iv) one holder of 10.8% of our
common stock. The persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community
property laws where applicable and to the information contained
in the footnotes to this table.
|
|
|
|
|
|
|
|
|
|
|
Shares | |
|
Percent of Abaxis | |
|
|
Beneficially | |
|
Common Stock | |
Name and Address of Beneficial Owner |
|
Owned | |
|
Outstanding(2) | |
|
|
| |
|
| |
Five percent holder
|
|
|
|
|
|
|
|
|
Wasatch Advisors, Inc.(3)
|
|
|
2,157,682 |
|
|
|
10.8 |
% |
Executive Officers(1)
|
|
|
|
|
|
|
|
|
Clinton H. Severson(4)
|
|
|
884,010 |
|
|
|
4.4 |
% |
Vladimir E. Ostoich, Ph.D.(5)
|
|
|
476,589 |
|
|
|
2.4 |
% |
Robert B. Milder(6)
|
|
|
280,878 |
|
|
|
1.4 |
% |
Kenneth P. Aron, Ph.D.(7)
|
|
|
213,759 |
|
|
|
1.0 |
% |
Alberto R. Santa Ines(8)
|
|
|
137,563 |
|
|
|
* |
|
Outside Directors(1)
|
|
|
|
|
|
|
|
|
Richard J. Bastiani, Ph.D.(9)
|
|
|
70,000 |
|
|
|
* |
|
Henk J. Evenhuis(10)
|
|
|
17,667 |
|
|
|
* |
|
Brenton G. A. Hanlon(11)
|
|
|
38,667 |
|
|
|
* |
|
Prithipal Singh, Ph.D.(12)
|
|
|
36,000 |
|
|
|
* |
|
Ernest S. Tucker, III, M.D.(13)
|
|
|
40,000 |
|
|
|
* |
|
Executive officers and directors as a group (10 persons)
(14)
|
|
|
2,195,133 |
|
|
|
11.0 |
% |
|
|
|
|
(1) |
The business address of the beneficial owners listed is
c/o Abaxis, Inc., 3240 Whipple Road, Union City, CA 94587. |
|
|
(2) |
The percentages shown in this column are calculated from the
19,923,496 shares of common stock outstanding on
August 31, 2005 and includes the exercise of warrants and
options held by that person that are currently exercisable or
which are exercisable within sixty calendar days of
August 31, 2005, and are deemed outstanding in accordance
with the rules of the Securities and Exchange Commission. |
|
|
(3) |
Based on information set forth in a Schedule 13G filed with
the Securities and Exchange Commission on February 10, 2005
by Wasatch Advisors, Inc., reporting sole power to vote and
dispose of 2,157,682 shares. The business address for
Wasatch Advisors, Inc. is 150 Social Hall Avenue, Salt Lake
City, UT 84111. |
|
|
(4) |
Includes: |
|
|
|
|
|
170,010 shares; and |
|
|
|
714,000 shares subject to stock options exercisable by
Mr. Severson within sixty days of August 31, 2005. |
15
|
|
|
|
|
51,161 shares; |
|
|
|
31,500 shares held by Dr. Ostoichs IRA; |
|
|
|
29,500 shares held by Mrs. Ostoichs IRA; |
|
|
|
117,328 shares held by the Vladimir Ostoich and Liliana
Ostoich Trust Fund, for the benefit of Dr. Ostoich and
his wife; |
|
|
|
7,600 shares issuable upon the exercise of
warrants; and |
|
|
|
239,500 shares subject to stock options exercisable by
Dr. Ostoich within sixty days of August 31, 2005. |
|
|
|
|
|
51,878 shares; and |
|
|
|
229,000 shares subject to stock options exercisable by
Mr. Milder within sixty days of August 31, 2005. |
|
|
|
|
|
9,259 shares; and |
|
|
|
204,500 shares subject to stock options exercisable by
Dr. Aron within sixty days of August 31, 2005. |
|
|
|
|
|
17,938 shares; and |
|
|
|
119,625 shares subject to stock options exercisable by
Mr. Santa Ines within sixty days of August 31, 2005. |
|
|
|
|
|
42,000 shares; and |
|
|
|
28,000 shares subject to stock options exercisable by
Dr. Bastiani within sixty days of August 31, 2005. |
|
|
(10) |
Includes 17,667 shares subject to stock options exercisable
by Mr. Evenhuis within sixty days of August 31, 2005. |
|
(11) |
Includes: |
|
|
|
|
|
11,000 shares; and |
|
|
|
27,667 shares subject to stock options exercisable by
Mr. Hanlon within sixty days of August 31, 2005. |
|
|
|
|
|
10,000 shares; and |
|
|
|
26,000 shares subject to stock options exercisable by
Dr. Singh within sixty days of August 31, 2005. |
|
|
(13) |
Includes 40,000 shares subject to stock options exercisable
by Dr. Tucker within sixty days of August 31, 2005. |
|
(14) |
Includes: |
|
|
|
|
|
541,574 shares; |
|
|
|
7,600 shares issuable upon the exercise of warrants held
individually; and |
|
|
|
1,645,959 shares subject to options exercisable within
sixty days of August 31, 2005. |
16
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning
our directors and executive officers:
|
|
|
|
|
|
|
Name |
|
Age | |
|
Title |
|
|
| |
|
|
Clinton H. Severson
|
|
|
57 |
|
|
Chairman of the Board, President and
Chief Executive Officer |
Richard J. Bastiani, Ph.D.(1)(2)(3)
|
|
|
62 |
|
|
Director |
Henk J. Evenhuis(1)(3)
|
|
|
62 |
|
|
Director |
Brenton G. A. Hanlon(1)(2)(3)
|
|
|
59 |
|
|
Director |
Prithipal Singh, Ph.D.(1)(3)
|
|
|
66 |
|
|
Director |
Ernest S. Tucker, III, M.D.(1)(3)
|
|
|
72 |
|
|
Director |
Alberto R. Santa Ines
|
|
|
58 |
|
|
Chief Financial Officer and Vice President of Finance |
Robert B. Milder
|
|
|
55 |
|
|
Chief Operations Officer |
Kenneth P. Aron, Ph.D.
|
|
|
52 |
|
|
Vice President of Research and Development |
Vladimir E. Ostoich, Ph.D.
|
|
|
59 |
|
|
Vice President of Government Affairs and
Vice President of Marketing for the Pacific Rim, Founder |
Lucien Ramondetta
|
|
|
44 |
|
|
Vice President of Marketing and Sales for the Domestic Medical
Market |
|
|
(1) |
Member of the Audit Committee |
|
(2) |
Member of the Compensation Committee |
|
(3) |
Member of the Nominating and Corporate Governance Committee |
Clinton H. Severson has served as our President, Chief
Executive Officer and one of our directors since June 1996. He
was appointed Chairman of the Board in May 1998. From February
1989 to May 1996, Mr. Severson served as President and
Chief Executive Officer of MAST Immunosystems, Inc., a privately
held medical diagnostic company.
Richard J. Bastiani, Ph.D. joined our Board of
Directors in September 1995. Since August 1998,
Dr. Bastiani has served as Chairman of the Board of
Directors of ID Biomedical Corporation (NASDAQ: IDBE), after he
was appointed to the Board of Directors of ID Biomedical
Corporation in October 1996. Dr. Bastiani was President of
Dendreon (NASDAQ: DNDN), a biotechnology company from September
1995 to September 1998. From 1971 until 1995, Dr. Bastiani
held a number of positions with Syva Company, a diagnostic
company, including as President from 1991 until Syva was
acquired by a subsidiary of Hoechst AG of Germany in 1995.
Dr. Bastiani is also a member of the board of directors of
two privately held companies.
Henk J. Evenhuis joined our Board of Directors in
November 2002. Mr. Evenhuis currently serves as a Director
of Credence Systems Corporation (NASDAQ: CMOS), a semiconductor
equipment manufacturer. Mr. Evenhuis served as Chief
Financial Officer of Fair Isaac Corporation (NYSE: FIC), a
global provider of analytic software products to the financial
services, insurance and health care industries from October 1999
to October 2002. From 1987 to 1998, he was Executive Vice
President and Chief Financial Officer of Lam Research
Corporation (NASDAQ: LRCX), a semiconductor equipment
manufacturer.
Brenton G. A. Hanlon joined our Board of Directors in
November 1996. Since January 2001, Mr. Hanlon has been
President and Chief Executive Officer of Hitachi Chemical
Diagnostics, a manufacturer of in vitro allergy diagnostic
products. Concurrently, from December 1996 until the present,
Mr. Hanlon has served as President and Chief Operating
Officer of Tri-Continent Scientific, a subsidiary of Hitachi
Chemical. From 1989 to December 1996, Mr. Hanlon was Vice
President and General Manager of Tri-Continent Scientific.
Mr. Hanlon serves on the board of directors of two
privately held companies.
17
Prithipal Singh, Ph.D. joined our Board of Directors
in June 1992. He has been the Founder, Chairman and Chief
Executive Officer of ChemTrak Inc. (Pink Sheets: CMTR) from 1988
to 1998. Prior to this, he was an Executive Vice President of
Idetec Corporation from 1985 to 1988 and a Vice President of
Syva Corporation from 1977 to 1985. Dr. Singh is also on
the board of a privately held company.
Ernest S. Tucker, III, M.D. joined our Board of
Directors in September 1995. Dr. Tucker currently serves as
a self-employed healthcare consultant after having retired as
Chief Compliance Officer for Scripps Health in San Diego in
September 2000, a position which he assumed in April 1998.
Dr. Tucker was Chairman of Pathology at Scripps Clinic and
Research Foundation from 1992 to 1998 and Chair of Pathology at
California Pacific Medical Center in San Francisco from
1989 to 1992.
Alberto R. Santa Ines has served as our Chief Financial
Officer and Vice President of Finance since April 2002.
Mr. Santa Ines joined us in February 2000 as Finance
Manager. In April 2001, Mr. Santa Ines was promoted to
Interim Chief Financial Officer and Director of Finance, and in
April 2002 he was promoted to his current position. From March
1998 to January 2000, Mr. Santa Ines was a self-employed
consultant to several companies. From August 1997 to March 1998,
Mr. Santa Ines was the Controller of Unisil (Pink Sheets:
USIL), a semiconductor company. From April 1994 to August 1997,
he was a Senior Finance Manager at Lam Research Corporation
(NASDAQ: LRCX), a semiconductor equipment manufacturer.
Robert B. Milder has served as our Chief Operations
Officer since April 2000. Mr. Milder joined us in May 1998
as Vice President of Operations. From December 1996 to May 1998,
Mr. Milder was the Vice President of Manufacturing for
Nidek, Inc., a manufacturer of opthalmic and surgical lasers.
From March 1992 to January 1996, Mr. Milder was Vice
President of Operations for Heraeus Surgical, Inc., a surgical
capital equipment manufacturer.
Kenneth P. Aron, Ph.D. joined us in February 2000 as
Vice President of Research and Development. From April 1998 to
November 1999, Dr. Aron was Vice President of Engineering
and Technology of Incyte Pharmaceuticals (NASDAQ: INCY), a
genomic information company. From April 1996 to April 1998,
Dr. Aron was Vice President, Research, Development and
Engineering for Cardiogenesis Corporation (NASDAQ: CGCP), a
manufacturer of laser-based cardiology surgical products.
Vladimir E. Ostoich, Ph.D., one of our co-founders,
is currently our Vice President of Government Affairs and Vice
President of Marketing for the Pacific Rim. Dr. Ostoich has
served as Vice President in various capacities at Abaxis since
our inception, including as Vice President of Research and
Development, Senior Vice President of Research and Development,
Vice President of Engineering and Instrument Manufacturing and
Vice President of Marketing and Sales for the United States and
Canada.
Lucien Ramondetta joined us in April 2005 as Vice
President of Marketing and Sales for the Domestic Medical
Market. From December 2002 to March 2005, Mr. Ramondetta
was the Vice President of Sales and Marketing for the Medical
Systems Division of Philips Electronics, Ltd., a manufacturer of
medical imaging equipment and appliances. From July 2001 to
December 2002, Mr. Ramondetta was the Director of Global
Sales and Marketing of the Optoelectronics Division of Perkin
Elmer Corporation, responsible for managing medical, specialty
electronics and laser products. From February 1994 to July 2001,
Mr. Ramondetta served in various positions at General
Electric including Global Channel Manager at GE Plastics and
Zone Manager at GE Medical Systems responsible for managing the
Service Sales organization.
Term and Number of Directors
All directors hold office until our next annual meeting of
shareholders and until their successors have been elected and
qualified. Our Bylaws authorize the Board of Directors to fix
the number of directors at not less than four or no more than
seven. The authorized number of our directors is currently six.
Each officer serves at the discretion of the Board of Directors.
18
Identification of Audit Committee and Financial Expert
The Audit Committee of the Board of Directors oversees
Abaxis corporate accounting and financial reporting
process. The outside directors comprise the Audit Committee:
Messrs. Bastiani, Evenhuis, Hanlon, Singh and Tucker.
Mr. Evenhuis serves as Chairman of the Audit Committee.
The Board of Directors annually reviews the Nasdaq National
Market listing standards definition of independence for Audit
Committee members and has determined that all members of our
Audit Committee are independent (as independence is currently
defined in Rule 4350(d)(2)(A)(i) and (ii) of the
Nasdaq National Market listing standards). Securities and
Exchange Commission, or SEC, regulations require Abaxis to
disclose whether a director qualifying as an audit
committee financial expert serves on the Audit Committee.
The Board of Directors has determined that Mr. Evenhuis
qualifies as an audit committee financial expert, as
defined in applicable SEC rules. The Board of Directors made a
qualitative assessment of Mr. Evenhuiss level of
knowledge and experience based on a number of factors, including
his formal education and experience as a chief financial officer
for public reporting companies.
Code of Business Conduct and Ethics
Abaxis has adopted a Code of Business Conduct and Ethics that
applies to all our executive officers, directors and employees.
The Code of Business Conduct and Ethics is available on our
website at www.abaxis.com. If we make any
amendments to the Code of Business Conduct and Ethics or grant
any waiver from a provision of the code to any executive officer
or director, we will promptly disclose the nature of the
amendment or waiver on our website.
Corporate Governance and Committees
|
|
|
Meetings and Related Governance Matters |
The Board of Directors has determined that, other than
Mr. Clinton H. Severson who is our President and Chief
Executive Officer, each of the members of the Board is an
independent director for purposes of the Nasdaq listing rules.
There are no family relationships among any of our directors or
officers.
During the fiscal year ended March 31, 2005, our Board of
Directors held six meetings and no director attended fewer than
75% of the total meetings of the Board. The Board has three
standing committees, namely the Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee.
The members of the Audit Committee during the fiscal year ended
March 31, 2005 were its Chairman, Mr. Evenhuis, and
Dr. Bastiani, Mr. Hanlon, Dr. Singh and
Mr. Tucker. The Audit Committee reviews and monitors our
corporate financial reporting and our external audits,
including, among other things, our control functions, the
results and scope of the annual audit and other services
provided by our independent public accountants and our
compliance with legal matters that have a significant impact on
our financial reports. The Audit Committee also consults with
the management and our independent public accountants prior to
the presentation of financial statements to shareholders and, as
appropriate, initiates inquiries into aspects of our financial
affairs. In addition, the Audit Committee has the responsibility
to consider and recommend the appointment of, and to review fee
arrangements with, our independent public accountants. The Audit
Committee held four formal meetings during the fiscal year ended
March 31, 2005 with Deloitte & Touche LLP at which
members of the Audit Committee discussed the quarterly results,
reviewed the annual financial statements and discussed matters
involving internal controls with Deloitte & Touche LLP.
Members of the Audit Committee also discussed matters involving
internal controls for the year ended March 31, 2005
throughout the course of the fiscal year. As discussed above, on
August 25, 2005 the Audit Committee dismissed
Deloitte & Touche LLP as our independent registered
public accounting firm and selected Burr, Pilger &
Mayer LLP as our new independent registered public accounting
firm for the fiscal year ending March 31, 2006. For
additional information about the Audit Committee, see
Report of the Audit Committee below.
19
The members of the Compensation Committee during the fiscal year
ended March 31, 2005 were Messrs. Bastiani and Hanlon.
The Compensation Committee reviews and makes recommendations to
the Board of Directors regarding our compensation policies and
all forms of compensation to be provided to our executive
officers and directors, including among other things, annual
salaries and bonuses and stock option incentive arrangements.
The Compensation Committee held one meeting during the fiscal
year ended March 31, 2005, which was attended by both
Messrs. Bastiani and Hanlon. For additional information
about the Compensation Committee, see Report Of The
Compensation Committee On Executive Compensation, and
Executive Compensation and Other Matters below.
|
|
|
Nominating and Corporate Governance Committee |
The members of the nominating and governance committee are
Dr. Bastiani, Mr. Evenhuis, Mr. Hanlon,
Dr. Singh and Mr. Tucker. Each of the members of the
Nominating and Corporate Governance Committee is independent for
purposes of the Nasdaq rules. The Nominating and Corporate
Governance Committee did not hold any meetings during the fiscal
year ended March 31, 2005.
The Nominating and Corporate Governance Committee will review
annually the results of the evaluation of the Board and its
committees, and the needs of the Board for various skills,
experience, expected contributions and other characteristics,
and the optimal size of the Board in light of these needs, in
determining the director candidates to be nominated at the
annual meeting. The Nominating and Corporate Governance
Committee will evaluate candidates for directors, including
incumbent directors and candidates proposed by directors,
shareholders or management, in light of the Committees
views of the current needs of the Board for certain skills,
experience or other characteristics, the candidates
background, skills, experience, other characteristics and
expected contributions and the qualification standards, if any,
established by the Nominating and Corporate Governance
Committee. If the Nominating and Corporate Governance Committee
believes that the Board requires additional candidates for
nomination, the Committee may poll existing directors or
management for suggestions for candidates and may engage, as
appropriate, a third party search firm to assist in identifying
qualified candidates. The process may also include interviews
and additional background and reference checks for non-incumbent
nominees, at the discretion of the Nominating and Corporate
Governance Committee. In making the determinations regarding
nominations of directors, the Nominating and Corporate
Governance Committee may take into account the benefits of
diverse viewpoints as well as the benefits of a constructive
working relationship among directors. The Nominating and
Corporate Governance Committee will consider director
nominations made by shareholders in accordance with the
requirements of Abaxis bylaws consistent with these
procedures.
The charter for the Nominating and Corporate Governance
committee can be accessed electronically in the Investor
Center section of our webpage at www.abaxis.com
or by writing to us at Abaxis, Inc., 3240 Whipple Road,
Union City, CA 94587, Attention: Ms. Zara Thomas,
Compliance Officer.
Pursuant to our bylaws, any shareholder entitled to vote in the
election of Directors generally may nominate one or more persons
for election as directors at a meeting only if timely notice of
such shareholders intent to make such nomination or
nominations has been given in writing to the secretary of
Abaxis. To be timely, a shareholder nomination for a director to
be elected at an annual meeting shall be received at
Abaxis principal executive offices not less than 120
calendar days in advance of the date that Abaxis proxy
statement was released to shareholders in connection with the
previous years annual meeting of shareholders, except that
if no annual meeting was held in the previous year or the date
of the annual meeting has been changed by more than 30 calendar
days from the date contemplated at the time of the previous
years proxy statement, or in the event of a nomination for
director to be elected at a special meeting, notice by the
shareholders to be timely must be received not later than the
close of business on the tenth day following the day on which
such notice of the date of the special meeting was mailed or
such public disclosure was made. Each such notice shall set
forth: (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the shareholder is
a holder of record of stock of Abaxis entitled to vote for the
election of Directors on the date of such notice and intends to
appear in person
20
or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission, had
the nominee been nominated, or intended to be nominated, by the
board of directors; and (e) the consent of each nominee to
serve as a director of Abaxis if so elected. Other than the
foregoing, there are no stated minimum criteria for director
nominees, although the Nominating and Corporate Governance
Committee may also consider such other factors as it may deem to
be in the best interests of Abaxis and its shareholders.
|
|
|
Communications with Directors |
Shareholders may communicate with any and all company directors
by transmitting correspondence by mail, facsimile or email,
addressed as follows:
|
|
|
Chairman of the Board |
|
or Board of Directors |
|
or any individual director |
|
c/o Ms. Zara Thomas, Compliance Officer |
|
3240 Whipple Road |
|
Union City, CA 94587 |
|
Fax: 510-441-6151 or |
|
Email Address: ComplianceOfficer@abaxis.com |
The Compliance Officer shall maintain a log of such
communications and transmit as soon as practicable such
communications to the identified director addressee(s), unless
there are safety or security concerns that mitigate against
further transmission of the communication, as determined by the
Compliance Officer in consultation with Abaxis counsel.
The Board of Directors or individual directors so addressed
shall be advised of any communication withheld for safety or
security reasons as soon as practicable. The Compliance Officer
shall relay all communications to directors absent safety or
security issues.
|
|
|
Committee Charters and Other Corporate Governance
Materials |
The Board has adopted a charter for the Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee, as described above. A copy of our committee charters
can be accessed electronically in the Investor
Center section of our webpage at
www.abaxis.com, or provided at no cost by writing
to us at Abaxis, Inc., 3240 Whipple Road, Union City, CA 94587,
Attention: Ms. Zara Thomas, Compliance Officer.
|
|
|
Director Attendance at Annual Meetings |
Abaxis will make every effort to schedule its annual meeting of
shareholders at a time and date to maximize attendance by
directors taking into account the directors schedules. All
directors are strongly encouraged shall make every effort to
attend our annual meeting of shareholders, but are not required
to attend. Last year, all of our directors attended the annual
meeting of shareholders.
21
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the
compensation during the fiscal years ended March 31, 2005,
2004 and 2003 of our Chief Executive Officer and our four other
most highly compensated executive officers whose total salary
and bonus exceeded $100,000, for services in all capacities to
us, during our fiscal year ended March 31, 2005.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term | |
|
|
|
|
|
|
|
|
Compensation | |
|
|
|
|
|
|
|
|
Awards | |
|
|
|
|
|
|
| |
|
|
|
|
Annual Compensation ($) | |
|
Securities | |
|
|
Fiscal | |
|
| |
|
Underlying | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus(1) | |
|
Options (#) | |
|
|
| |
|
| |
|
| |
|
| |
Clinton H. Severson
|
|
|
2005 |
|
|
$ |
300,000 |
|
|
$ |
245,000 |
|
|
|
50,000 |
|
|
President, Chief Executive Officer and
|
|
|
2004 |
|
|
|
285,000 |
|
|
|
461,000 |
|
|
|
50,000 |
|
|
Chairman of the Board |
|
|
2003 |
|
|
|
265,000 |
|
|
|
187,000 |
|
|
|
|
|
Alberto R. Santa Ines
|
|
|
2005 |
|
|
$ |
160,000 |
|
|
$ |
158,000 |
|
|
|
40,000 |
|
|
Chief Financial Officer and Vice President |
|
|
2004 |
|
|
|
150,000 |
|
|
|
406,000 |
(2) |
|
|
40,000 |
|
|
of Finance
|
|
|
2003 |
|
|
|
131,000 |
|
|
|
125,000 |
|
|
|
50,000 |
|
Robert B. Milder
|
|
|
2005 |
|
|
$ |
185,000 |
|
|
$ |
189,000 |
|
|
|
40,000 |
|
|
Chief Operations Officer
|
|
|
2004 |
|
|
|
175,000 |
|
|
|
360,000 |
|
|
|
40,000 |
|
|
|
|
|
2003 |
|
|
|
165,000 |
|
|
|
149,000 |
|
|
|
|
|
Kenneth P. Aron, Ph.D.
|
|
|
2005 |
|
|
$ |
170,000 |
|
|
$ |
158,000 |
|
|
|
40,000 |
|
|
Vice President of Research and |
|
|
2004 |
|
|
|
160,000 |
|
|
|
302,000 |
|
|
|
40,000 |
|
|
Development
|
|
|
2003 |
|
|
|
150,000 |
|
|
|
125,000 |
|
|
|
|
|
Vladimir E. Ostoich, Ph.D.
|
|
|
2005 |
|
|
$ |
180,000 |
|
|
$ |
158,000 |
|
|
|
40,000 |
|
|
Vice President of Government Affairs and |
|
|
2004 |
|
|
|
170,000 |
|
|
|
302,000 |
|
|
|
40,000 |
|
|
Vice President of Marketing for the |
|
|
2003 |
|
|
|
160,000 |
|
|
|
125,000 |
|
|
|
|
|
|
Pacific Rim
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents bonuses earned during the fiscal year. |
|
(2) |
Includes $113,000 in connection with an Employee Retention
Incentive Agreement. |
Stock Option Grants in Fiscal 2005
The following table provides the specified information
concerning grants of options to purchase our common stock made
during the fiscal year ended March 31, 2005, made to the
persons named in the Summary Compensation Table.
Option Grants in Fiscal 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
Potential Realizable | |
|
|
| |
|
Value at Assumed | |
|
|
|
|
% of Total | |
|
|
|
Annual Rates | |
|
|
Number of | |
|
Options | |
|
|
|
of Stock Price | |
|
|
Securities | |
|
Granted to | |
|
|
|
Appreciation for | |
|
|
Underlying | |
|
Employees in | |
|
Exercise | |
|
|
|
Option Term(3) | |
|
|
Options | |
|
Fiscal Year | |
|
Base Price | |
|
Expiration | |
|
| |
Name |
|
Granted (#)(1) | |
|
2005 | |
|
($/Sh)(2) | |
|
Date | |
|
5% ($) | |
|
10% ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Clinton H. Severson
|
|
|
50,000 |
|
|
|
10.5 |
% |
|
$ |
21.65 |
|
|
|
4/20/2014 |
|
|
$ |
680,778 |
|
|
$ |
1,725,226 |
|
Alberto R. Santa Ines
|
|
|
40,000 |
|
|
|
8.4 |
% |
|
$ |
21.65 |
|
|
|
4/20/2014 |
|
|
$ |
544,623 |
|
|
$ |
1,380,181 |
|
Robert B. Milder
|
|
|
40,000 |
|
|
|
8.4 |
% |
|
$ |
21.65 |
|
|
|
4/20/2014 |
|
|
$ |
544,623 |
|
|
$ |
1,380,181 |
|
Kenneth P. Aron, Ph.D.
|
|
|
40,000 |
|
|
|
8.4 |
% |
|
$ |
21.65 |
|
|
|
4/20/2014 |
|
|
$ |
544,623 |
|
|
$ |
1,380,181 |
|
Vladimir E. Ostoich, Ph.D.
|
|
|
40,000 |
|
|
|
8.4 |
% |
|
$ |
21.65 |
|
|
|
4/20/2014 |
|
|
$ |
544,623 |
|
|
$ |
1,380,181 |
|
22
|
|
(1) |
All options granted in fiscal 2005 were granted pursuant to our
1998 Stock Option Plan. The options vest and become exercisable
at the rate of one-fourth on the first anniversary of the date
of grant and
1/48 per
month thereafter for each full month of the optionees
continuous employment by us. Under our 1998 Stock Option Plan,
the Board retains discretion to modify the terms, including the
price, of outstanding options. For additional information
regarding options, see Change of Control
Arrangements. |
|
(2) |
All options were granted at market value on the date of grant. |
|
(3) |
Potential gains are net of exercise price, but before taxes
associated with exercise. These amounts represent certain
assumed rates of appreciation only, based on the Securities and
Exchange Commission rules. Actual gains, if any, on stock option
exercise are dependent on the future performance of the common
stock, overall market conditions and the option holders
continued employment through the vesting period. The amounts
reflected in this table may not necessarily be achieved. |
Stock Option Exercises in Fiscal 2005
The following table provides the specified information
concerning exercises of stock options to purchase our common
stock in the fiscal year ended March 31, 2005, and
unexercised stock options held as of March 31, 2005, by the
persons named in the Summary Compensation Table.
Option Exercises in Fiscal 2005 and Option Values at
March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised | |
|
|
|
|
|
|
Number of Unexercised | |
|
In-the-Money | |
|
|
Shares | |
|
|
|
Options at | |
|
Options at | |
|
|
Acquired on | |
|
Value | |
|
March 31, 2005 (#)(2) | |
|
March 31, 2005 ($)(3) | |
|
|
Exercise | |
|
Realized | |
|
| |
|
| |
Name |
|
(#) | |
|
($)(1) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Clinton H. Severson
|
|
|
|
|
|
|
|
|
|
|
684,833 |
|
|
|
79,167 |
|
|
$ |
3,426,673 |
|
|
$ |
142,648 |
|
Alberto R. Santa Ines
|
|
|
|
|
|
|
|
|
|
|
91,083 |
|
|
|
77,917 |
|
|
$ |
383,108 |
|
|
$ |
203,326 |
|
Robert B. Milder
|
|
|
|
|
|
|
|
|
|
|
207,125 |
|
|
|
61,875 |
|
|
$ |
878,312 |
|
|
$ |
108,312 |
|
Kenneth P. Aron, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
182,625 |
|
|
|
61,875 |
|
|
$ |
510,148 |
|
|
$ |
108,312 |
|
Vladimir E. Ostoich, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
217,625 |
|
|
|
61,875 |
|
|
$ |
858,673 |
|
|
$ |
108,312 |
|
|
|
(1) |
Amounts shown under the column Value Realized are
based on the fair market value of our common stock on the
exercise date as reported on the Nasdaq National Market less the
aggregate exercise price. |
|
(2) |
Options to purchase our common stock generally vest as to
one-fourth of the option grant on the first anniversary of the
date of grant and
1/48 per
month thereafter for each full month of the optionees
continuous employment with Abaxis. All options are exercisable
only to the extent vested. |
|
(3) |
The value of the unexercised in-the-money options is based on
the closing price of our common stock ($8.85 per share) on
the Nasdaq National Market on March 31, 2005, the last
trading day in our fiscal year ended March 31, 2005, and is
net of the exercise price of such options. |
Compensation of Directors
In fiscal 2005, all of our non-employee directors received
compensation in the amount of $2,258 per each quarterly
Board meeting they attended plus reimbursement of reasonable
travel expenses incurred. In fiscal 2005, each of our
non-employee directors also received an automatic annual grant
of options to purchase 4,000 shares of our common
stock under our 1998 Stock Option Plan.
In fiscal 2005, all of our directors in the Audit Committee
received compensation in the amount of $750 per each
quarterly Audit Committee meeting they attended.
In January 2005, upon review of the duties and responsibilities
of the non-employee directors and after consultation with an
independent compensation consultant, the Board of Directors
approved a change in the annual retainer and attendance fees
paid to non-employee directors. Beginning with the fiscal year
2006, non-employee directors receive an annual retainer of
$12,000. In addition, beginning with the fiscal year 2006, the
23
Chairman of the Audit Committee receives an annual supplement of
$5,000 and the Chairman of the Compensation Committee receives
an annual supplement of $2,000 for their service in such
capacities.
Commencing in fiscal 2006, all non-employee directors receive
$1,250 for attendance at each meeting of the Board of Directors.
In addition, beginning with fiscal year 2006, members of the
Audit Committee and Compensation Committee receive $1,000 for
their attendance at the committee meetings. Non-employee
directors also receive reimbursement for travel and expenses for
such meetings.
Change of Control Arrangements
Our 1998 Stock Option Plan and 1992 Outside Directors Stock
Option Plan provide that, in the event of a transfer of control
of Abaxis, the surviving, continuing, successor or purchasing
corporation or a parent corporation thereof, as the case may be,
which is referred to as the acquiring corporation, shall either
assume our rights and obligations under stock option agreements
outstanding under our option plans or substitute options for the
acquiring corporations stock for such outstanding options.
In the event the acquiring corporation elects not to assume or
substitute for such outstanding options in connection with a
merger constituting a transfer of control, our Board shall
provide that any unexercisable and/or unvested portion of the
outstanding options shall be immediately exercisable and vested
as of a date prior to the transfer of control, as our Board so
determines. Any options which are neither assumed by the
acquiring corporation, nor exercised as of the date of the
transfer of control, shall terminate effective as of the date of
the transfer of control. Options which are assumed by the
acquiring corporation shall become exercisable and vested as
provided under the relevant stock option agreements under the
option plans, unless the acquiring corporation terminates the
option holder under certain circumstances defined in the option
plans. Under such circumstances, the holders options shall
become immediately exercisable and vested as of the date of
termination. For additional information on change of control
arrangements, please refer to the discussion Change in
Control within proposal number three, above.
Certain Relationships and Related Party Transactions
During the fiscal year ended March 31, 2005, there was not,
nor is there any currently proposed transaction or series of
similar transactions to which Abaxis was or is to be a party in
which the amount involved exceeds $60,000 and in which any
executive officer, director or holder of more than 5% of any
class of voting securities of Abaxis and members of that
persons immediate family had or will have a direct or
indirect material interest.
We entered into indemnification agreements with each of the
executive officers and directors. Such indemnification
agreements require us to indemnify these individuals to the
fullest extent permitted by law.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers, directors and persons who
beneficially own more than 10% of our common stock to file
initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (SEC).
Such persons are required by SEC regulations to furnish us with
copies of all Section 16(a) forms filed by such persons.
Based solely on our review of the copies of Forms 3, 4 and
5 and amendments thereto received by us, we believe that during
the period from April 1, 2004 through March 31, 2005,
our officers and directors complied with all applicable filing
requirements except with respect to one late filing by
Mr. Brenton G.A. Hanlon covering one transaction.
Employment Agreements
In August 2005, we entered into an employment agreement with
Clinton H. Severson, our President, Chief Executive Officer, and
Chairman of our Board of Directors, which provides
Mr. Severson with two years of salary, bonus and benefits
if his employment with us is terminated for other than cause.
Mr. Seversons employment agreement provides for an
annual salary of $312,000 and a bonus base of $385,000. The bonus
24
base is adjusted accordingly upon meeting certain performance
criteria and thus, Mr. Severson has the potential to earn a
bonus of up to $770,000. These salary and bonus payments are
subject to applicable withholding, in accordance with
Abaxis normal payroll procedures. Mr. Seversons
employment agreement was filed with the SEC as an exhibit to our
Form 10-Q for the period ended June 30, 2005.
Securities Authorized for Issuance Under Equity Compensation
Plans
Abaxis has two equity incentive plans under which our equity
securities have been authorized for issuance to our employees or
directors: the 1989 Stock Option Plan, which was amended and
restated as the 1998 Stock Option Plan and the 1992 Outside
Directors Stock Option Plan. Both the 1998 Stock Option
Plan and the 1992 Outside Directors Stock Option Plan have
been approved by our shareholders. In June 2002, the time period
for granting options under the Directors Plan expired in
accordance with the terms of the plan and consequently, option
grants to our outside directors are made from our 1998 Stock
Option Plan. In addition, from time to time we issue warrants to
purchase shares of our common stock to non-employees, such as
service providers and purchasers of our preferred stock.
The following table provides aggregate information through
March 31, 2005 regarding (i) grants under both of our
equity incentive plans and (ii) outstanding warrants to
purchase our common stock.
Equity Compensation Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Weighted-Average | |
|
Number of Securities | |
|
|
to be Issued Upon | |
|
Exercise Price of | |
|
Remaining Available | |
|
|
Exercise of | |
|
Outstanding | |
|
for Future Issuance | |
|
|
Outstanding Options, | |
|
Options, Warrants | |
|
Under Equity | |
Plan Category |
|
Warrants and Rights | |
|
and Rights | |
|
Compensation Plans | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by our shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1998 Stock Option Plan
|
|
|
2,690,327 |
|
|
$ |
6.82 |
|
|
|
326,743 |
|
|
1992 Outside Directors Stock Option Plan
|
|
|
73,000 |
|
|
$ |
4.54 |
|
|
|
|
|
Equity securities not approved by our shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants to purchase our common stock(1)
|
|
|
287,235 |
|
|
$ |
6.67 |
|
|
|
|
|
Total:
|
|
|
3,050,562 |
|
|
$ |
6.75 |
|
|
|
326,743 |
|
|
|
(1) |
Consists of warrants expiring through May 2007. All warrants
were issued to service providers, except for warrants to
purchase an aggregate of 23,850 and 110,000 shares of our
common stock at a per share exercise price of $7.00 issued to
purchasers of our Series D and Series E convertible
preferred stock, respectively. |
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is
comprised of Dr. Richard J. Bastiani and Mr. Brenton
G.A. Hanlon. Each of these individuals is a non-employee member
of Abaxis Board of Directors. The Compensation Committee
is responsible for approving all compensation recommended by the
President for executive officers and provides recommendations to
the Board of Directors for approval of all compensation for the
President and Chief Executive Officer of Abaxis. The goal of
Abaxis compensation policy for executive officers is to
attract, retain and reward executive officers who contribute to
Abaxis success and to motivate these executives to achieve
our business objectives. Abaxis uses salary, stock option grants
and bonus compensation to meet these goals.
Compensation Policies. Salaries initially are set for
each executive officer according to a range of salaries for
similar positions in comparable companies in Abaxis
industry and geographic area. Salaries are reviewed annually
based on individual past performance, financial results of
Abaxis and survey information
25
from compensation consulting firms. Adjustments are made if
necessary to maintain competitiveness within the industry.
Compensation Components. The Compensation Committee
strongly believes that executive compensation should be based in
part on Abaxis performance and has used stock option
grants and bonus compensation to accomplish this goal.
Accordingly, the Compensation Committee establishes both
financial and operational based objectives and goals in
determining executive officer bonuses, including among other
things, Abaxis aggregate annual revenues and net income.
If the requirements are met, then bonuses are declared for work
performed during the quarter. During fiscal year 2005, Abaxis
paid bonuses during three quarters as conditions were met.
The Board of Directors strongly believes that equity ownership
by executive officers provides incentives to build shareholder
value and aligns the interests of executive officers with those
of the shareholders. The size of an initial option grant to an
executive officer generally has been determined with reference
to comparable companies in Abaxis industry and
geographical area, the responsibilities and future contributions
of the executive officer, as well as recruitment and retention
considerations. Additional option grants to an executive officer
are generally based on Abaxis performance and individual
performance. During the fiscal year ended March 31, 2005,
the Compensation Committee approved stock option grants to five
executive officers. See Option Grants in Fiscal Year
2005. Stock options are granted at the current market
price and will only have value if our stock price increases over
the exercise price. Other elements of executive compensation
include participation in company-wide medical and dental
benefits and the ability to defer compensation pursuant to a
401(k) plan.
New Proposed Long-term Incentive Plans for Fiscal Year 2006
and Beyond. In light of mandatory stock option expensing,
Abaxis has decided to develop a long-term incentive program that
is better aligned to its needs and the changing regulatory
environment. We plan on continuing to use stock options on a
limited basis and a large portion of our long-term plans will
employ performance based restricted stock. These plans will help
ensure executive retention and more directly link executive pay
to company financial performance. We have retained an
independent compensation consultant to assist in developing the
proposed equity incentive plan.
Stock Options. Grants of stock options under Abaxis
stock plans are designed to provide executive officers with an
opportunity to share, along with stockholders, in the long-term
performance of the company. It is anticipated that stock options
will be granted annually to executive officers, with additional
grants being made following a significant change in job
responsibility, or in recognition of a significant achievement.
Stock options granted under the new plan will have a three-,
four- or five-year vesting schedule depending upon the type (new
hire or ongoing) and size of the grant, and generally expire
seven years from the date of grant (this will help reduce the
FAS 123 expense). The exercise price of options granted
under the stock plans is 100% of the fair market value of the
underlying stock on the date of grant.
Performance Accelerated Restricted Stock. In fiscal year
2006, Abaxis anticipates making an initial grant of performance
accelerated restricted stock, subject to approval of proxy
proposal three. These grants will be made to our executives, in
conjunction with reduced grants of stock options (as compared to
previous years). We believe Abaxis has historically been
conservative, and will continue to be conservative, when
granting equity as compared to industry peers of similar sized
companies. The intent is to make an annual grant to executives
consisting of a mix of stock options and performance accelerated
restricted stock going forward. Vesting of restricted shares can
only accelerate if performance criteria during the performance
period are exceeded. It is likely our performance period will
range from two to four years and we will use revenue growth and
an earnings-based growth metric. The program is designed so that
acceleration can only occur when Abaxis significantly surpasses
its performance expectations (e.g., four year service
based vesting could result to full vesting of shares in two or
three years if aggressive goals are met). This ongoing program,
in conjunction with grants of stock options, is designed to
focus executives on both the achievement of sustained superior
operating results as well as increases in stockholder value
through stock price appreciation.
Chief Executive Officer Compensation. The Compensation
Committee annually reviews the performance and compensation of
Clinton H. Severson, the President and Chief Executive Officer
of Abaxis. During
26
the fiscal year ended March 31, 2005,
Mr. Seversons compensation consisted of salary, an
incentive stock option grant and performance-based bonus
compensation. During the annual review performed after the close
of the fiscal year ended March 31, 2005, the Compensation
Committee adjusted upwards Mr. Seversons salary to be
competitive with what comparable companies within Abaxis
industry and geographic area, based on compensation information
obtained by Abaxis. For the fiscal year ending March 31,
2006, Mr. Seversons base salary is $312,000 with a
bonus base of $385,000. The bonus base is adjusted accordingly
upon meeting certain performance criteria and thus,
Mr. Severson has the potential to earn a bonus of up to
$770,000.
Deductibility of Executive Compensation. Abaxis has
considered the provisions of Section 162(m) of the Internal
Revenue Code and related Treasury Department regulations which
restrict deductibility of executive compensation paid to
Abaxis Chief Executive Officer and each of the four other
most highly compensated executive officers holding office at the
end of any year to the extent such compensation exceeds
$1,000,000 for any of such officers in any year and does not
qualify for an exception under the statute or regulations.
Income from options granted under the 1998 Plan should qualify
for an exemption from these restrictions. The Compensation
Committee does not believe that in general other components of
Abaxis compensation will be likely to exceed $1,000,000
for any executive officer in the foreseeable future and
therefore concluded that no further action with respect to
qualifying such compensation for deductibility was necessary at
this time. In the future, the Compensation Committee will
continue to evaluate the advisability of qualifying its
executive compensation for deductibility under applicable tax
laws as applicable.
|
|
|
COMPENSATION COMMITTEE |
|
|
Richard J. Bastiani, Ph.D. |
|
Brenton G.A. Hanlon |
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees Abaxis financial reporting
process on behalf of the Board of Directors. Management has the
primary responsibility for the financial statements and the
reporting process, including internal control systems. In the
year ended March 31, 2005, Deloitte & Touche LLP
was responsible for expressing an opinion as to the conformity
of our audited financial statements with generally accepted
accounting principles. On August 25, 2005, the Audit
Committee engaged Burr, Pilger & Mayer LLP as our
independent registered public accounting firm for the fiscal
year ending March 31, 2006. Accordingly, in fiscal year
2006, Burr, Pilger & Mayer LLP will be responsible for
expressing an opinion as to the conformity of Abaxis
audited financial statements with generally accepted accounting
principles.
The Audit Committee consists of five directors, each of whom, in
the judgment of the Board, is an independent
director as defined in the listing standards for the
Nasdaq Stock Market and is chaired by Mr. Evenhuis, who is
considered an audit committee financial expert as
defined in the applicable Securities and Exchange Commission
rules. The Audit Committee acts pursuant to a written charter
that has been adopted by the Board of Directors.
The Audit Committee has discussed and reviewed with the auditors
all matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The
Audit Committee has met with Deloitte & Touche LLP,
with and without management present, to discuss the overall
scope and results of Deloitte & Touches audit and
review procedures, and the overall quality of its financial
reporting.
The Audit Committee has adopted a policy for the pre-approval of
all audit and non-audit services to be performed for Abaxis by
its independent auditor. The Audit Committee has considered the
historical role of Deloitte & Touche LLP, and the role
to be performed by Burr, Pilger & Mayer LLP in fiscal
year 2006, in providing audit, audit-related and tax services to
Abaxis and has concluded that such services are compatible with
Deloitte & Touches and Burr, Pilger &
Mayers role as Abaxis independent auditor.
27
The Audit Committee has received from the auditors a formal
written statement describing all relationships between the
auditors and Abaxis that might bear on the auditors
independence consistent with Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees), discussed with the auditors any relationships that
may impact their objectivity and independence, and satisfied
itself as to the auditors independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that
Abaxis audited financial statements be included in
Abaxis Annual Report on Form 10-K for the fiscal year
ended March 31, 2005.
|
|
|
THE AUDIT COMMITTEE |
|
|
Henk J. Evenhuis, Chairman |
|
Richard J. Bastiani, Ph.D. |
|
Brenton G.A. Hanlon |
|
Prithipal Singh, Ph.D. |
|
Ernest S. Tucker, III, M.D. |
PURSUANT TO ITEM 7(e)(3), THE ABOVE INFORMATION SHALL NOT BE
DEEMED TO BE SOLICITING MATERIAL OR TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
NOR SHALL SUCH INFORMATION BE INCORPORATED BY REFERENCE INTO ANY
FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT ABAXIS SPECIFICALLY INCORPORATES IT BY REFERENCE IN
SUCH FILING.
28
COMPARISON OF SHAREHOLDER RETURN
Our common stock is quoted on the Nasdaq National Market using
the trading symbol ABAX. The per share price of our common stock
as of the close of trading on August 31, 2005 was $11.47.
Set forth below is a line graph comparing the annual percentage
change in the cumulative total return on Abaxis common
stock with the cumulative total returns for the past five years
of the:
|
|
|
|
|
the Russell 2000 Index; and |
|
|
|
the Nasdaq Medical Equipment Securities Index. |
No cash dividends have been declared on our common stock.
Shareholder returns over the indicated period should not be
considered indicative of future shareholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ABAXIS, INC., THE RUSSELL 2000 INDEX,
AND THE NASDAQ MEDICAL EQUIPMENT SECURITIES INDEX
|
|
* |
$100 invested on 3/31/00 in stock or index including
reinvestment of dividends. Fiscal year ending March 31. |
The following chart references the annual portfolio value as of
March 31 in each of the following years, were an investor
to have invested $100.00 on March 31, 2000 in each of our
common stock, the Russell 2000 Index and the Nasdaq Medical
Equipment Securities Index:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
2000 |
|
|
2001 |
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Abaxis, Inc.
|
|
|
$ |
100.00 |
|
|
|
$ |
60.07 |
|
|
|
$ |
76.42 |
|
|
|
$ |
45.49 |
|
|
|
$ |
242.63 |
|
|
|
$ |
105.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell 2000 Index
|
|
|
|
100.00 |
|
|
|
|
84.67 |
|
|
|
|
96.51 |
|
|
|
|
70.49 |
|
|
|
|
115.48 |
|
|
|
|
121.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nasdaq Medical Equipment Securities Index
|
|
|
|
100.00 |
|
|
|
|
88.19 |
|
|
|
|
105.56 |
|
|
|
|
93.36 |
|
|
|
|
140.90 |
|
|
|
|
146.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL
MEETING
Proposals of shareholders intended to be presented at the next
annual meeting of our shareholders must be received by us at our
offices at 3240 Whipple Road, Union City, California 94587, no
later than May 22, 2006, the date not less than one hundred
twenty (120) days prior to one year anniversary of our
mailing to shareholders of this Proxy Statement for the 2005
Annual Meeting of Shareholders. Any such shareholder proposals
must satisfy the conditions established by the Securities and
Exchange Commission for inclusion in our proxy statement for
that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the Board of Directors
knows of no other business that will be conducted at the Annual
Meeting other than as described in this Proxy Statement. If any
other matter or matters are properly brought before the Annual
Meeting, or any adjournment or postponement thereof, it is the
intention of the persons named in the accompanying form of proxy
to vote the proxy on such matters in accordance with their best
judgment.
|
|
|
By order of the Board of Directors |
|
|
|
|
|
ZARA Z. THOMAS |
|
Secretary |
30
Abaxis, Inc.
2005 Equity Incentive Plan
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
1 |
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
8 |
|
|
|
|
9 |
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
13 |
|
|
|
|
13 |
|
|
|
|
14 |
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
15 |
|
|
|
|
15 |
|
|
|
|
15 |
|
|
|
|
15 |
|
i
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
Page |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
17 |
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
17 |
|
|
|
|
17 |
|
|
|
|
18 |
|
|
|
|
19 |
|
|
|
|
19 |
|
|
|
|
20 |
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
21 |
|
|
|
|
21 |
|
|
|
|
21 |
|
|
|
|
22 |
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
25 |
|
|
|
|
25 |
|
|
|
|
25 |
|
|
|
|
25 |
|
ii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
Page |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
27 |
|
|
|
|
27 |
|
|
|
|
27 |
|
|
|
|
27 |
|
|
|
|
27 |
|
|
|
|
28 |
|
|
|
|
28 |
|
|
|
|
28 |
|
iii
Abaxis, Inc.
2005 Equity Incentive Plan
1. Establishment, Purpose and Term of Plan.
1.1 Establishment. The Abaxis, Inc. 2005 Equity Incentive Plan (the Plan) is hereby
established effective as of its approval by the shareholders of the Company (the Effective Date).
The Plan is the successor to the Companys 1998 Stock Option Plan and its share reserve.
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract and retain the best qualified
personnel to perform services for the Participating Company Group, by motivating such persons to
contribute to the growth and profitability of the Participating Company Group, by aligning their
interests with interests of the Companys shareholders, and by rewarding such persons for their
services by tying a significant portion of their total compensation package to the success of the
Company. The Plan seeks to achieve this purpose by providing for Awards in the form of Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Shares, Performance Units,
Restricted Stock Units, Deferred Compensation Awards and other Stock-Based Awards as described
below.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.
2. Definitions and Construction.
2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) Affiliate means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term control (including the term
controlled by) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.
(b) Award means any Option, SAR, Restricted Stock Award, Performance Share, Performance
Unit, Restricted Stock Unit or Deferred Compensation Award or other Stock-Based Award granted under
the Plan.
1
(c) Award Agreement means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant.
(d) Board means the Board of Directors of the Company.
(e) Change in Control means, unless otherwise defined by the Participants Award Agreement
or contract of employment or service, an Ownership Change Event or a series of related Ownership
Change Events (collectively, the Transaction) wherein the shareholders of the Company immediately
before the Transaction do not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Companys voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the corporation or
corporations to which the assets of the Company were transferred (the Transferee Corporation(s)),
as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.
The Board shall have the right to determine whether multiple sales or exchanges of the voting
stock of the Company or multiple Ownership Change Events are related, and its determination shall
be final, binding and conclusive.
(f) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(g) Committee means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. If no
committee of the Board has been appointed to administer the Plan, the Board shall exercise all of
the powers of the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.
(h) Company means Abaxis, Inc., a California corporation, or any successor corporation
thereto.
(i) Consultant means a person engaged to provide consulting or advisory services (other than
as an Employee or a member of the Board) to a Participating Company, provided that the identity of
such person, the nature of such services or the entity to which such services are provided would
not preclude the Company from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the Securities Act.
(j) Deferred Compensation Award means an award of Stock Units granted to a Participant
pursuant to Section 11 of the Plan.
(k) Director means a member of the Board.
2
(l) Disability means the permanent and total disability of the Participant, within the
meaning of Section 22(e)(3) of the Code.
(m) Dividend Equivalent means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an Award held by such
Participant.
(n) Employee means any person treated as an employee (including an Officer or a member of
the Board who is also treated as an employee) in the records of a Participating Company and, with
respect to any Incentive Stock Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a member of the Board nor
payment of a directors fee shall be sufficient to constitute employment for purposes of the Plan.
The Company shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of such individuals
employment or termination of employment, as the case may be. For purposes of an individuals
rights, if any, under the Plan as of the time of the Companys determination, all such
determinations by the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary determination.
(o) Exchange Act means the Securities Exchange Act of 1934, as amended.
(p) Fair Market Value means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market Value of a share of
Stock shall be the closing price of a share of Stock as quoted on the New York Stock Exchange or
such other national or regional securities exchange or market system constituting the primary
market for the Stock, as reported in The Wall Street Journal or such other source as the Company
deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant date, or such other
appropriate day as shall be determined by the Committee, in its discretion.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair
Market Value on the basis of the opening, closing, high, low or average sale price of a share of
Stock or the actual sale price of a share of Stock received by a Participant, on such date, the
preceding trading day, the next succeeding trading day or an average determined over a period of
trading days. The Committee may vary its method of determination of the Fair Market Value as
provided in this Section for different purposes under the Plan.
3
(iii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee
in good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.
(q) Incentive Stock Option means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.
(r) Insider means an Officer, a Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.
(s) Net-Exercise means a procedure by which the Participant will be issued a number of
shares of Stock determined in accordance with the following formula:
X = Y(A-B)/A, where
X = the number of shares of Stock to be issued to the Participant upon exercise of the Option;
Y = the total number of shares with respect to which the Participant has elected to exercise
the Option;
A
= the Fair Market Value of one (1) share of Stock;
B = the exercise price per share (as defined in the Participants Award Agreement).
(t) Nonemployee Director means a Director who is not an Employee.
(u) Nonstatutory Stock Option means an Option not intended to be (as set forth in the
Award Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.
(v) Officer means any person designated by the Board as an officer of the Company.
(w) Option means the right to purchase Stock at a stated price for a specified period of
time granted to a Participant pursuant to Section 6 of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.
(x) Option Expiration Date means the date of expiration of the Options term as set forth in
the Award Agreement.
(y) Ownership Change Event shall be deemed to have occurred if any of the following occurs
with respect to the Company:
(i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;
(ii) a merger or consolidation in which the Company is a party;
4
(iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or
(iv) a liquidation or dissolution of the Company.
(z) Parent Corporation means any present or future parent corporation of the Company, as
defined in Section 424(e) of the Code.
(aa) Participant means any eligible person who has been granted one or more Awards.
(bb) Participating Company means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.
(cc) Participating Company Group means, at any point in time, all entities collectively
which are then Participating Companies.
(dd) Performance Award means an Award of Performance Shares or Performance Units.
(ee) Performance Award Formula means, for any Performance Award, a formula or table
established by the Committee pursuant to Section 9.3 of the Plan which provides the basis for
computing the value of a Performance Award at one or more threshold levels of attainment of the
applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(ff) Performance Goal means a performance goal established by the Committee pursuant to
Section 9.3 of the Plan.
(gg) Performance Period means a period established by the Committee pursuant to Section 9.3
of the Plan at the end of which one or more Performance Goals are to be measured.
(hh) Performance Share means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Share, as determined by the Committee, based on performance.
(ii) Performance Unit means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Unit, as determined by the Committee, based upon performance.
(jj) Restricted Stock Award means an Award of Restricted Stock.
(kk) Restricted Stock Unit or Stock Unit means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 10 or Section 11 of the Plan, respectively, to receive
a share of Stock on a date determined in accordance with the provisions of Section 10 or Section
11, as applicable, and the Participants Award Agreement.
5
(ll) Restriction Period means the period established in accordance with Section 8.4 of the
Plan during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.
(mm) Retirement means termination as an Employee of a Participating Company at age 55 or
older, provided that the Participant was an Employee for at least five consecutive years prior to
the date of such termination.
(nn) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
(oo) SAR or Stock Appreciation Right means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the
Plan to receive payment in any combination of shares of Stock or cash of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.
(pp) Section 162(m) means Section 162(m) of the Code.
(qq) Securities Act means the Securities Act of 1933, as amended.
(rr) Service means a Participants employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. A Participants Service
shall not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders such Service or a change in the Participating Company for which the Participant
renders such Service, provided that there is no interruption or termination of the Participants
Service. Furthermore, a Participants Service shall not be deemed to have terminated if the
Participant takes any military leave, sick leave, or other bona fide leave of absence approved by
the Company. However, if any such leave taken by a Participant exceeds ninety (90) days, then on
the one hundred eighty-first (181st) day following the commencement of such leave any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and
instead shall be treated thereafter as a Nonstatutory Stock Option, unless the Participants right
to return to Service with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as Service for purposes of determining vesting under the
Participants Award Agreement. A Participants Service shall be deemed to have terminated either
upon an actual termination of Service or upon the entity for which the Participant performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participants Service has terminated and the effective date of such
termination.
(ss) Stock means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2 of the Plan.
(tt) Stock-Based Awards means any award that is valued in whole or in part by reference to,
or is otherwise based on, the Stock, including dividends on the Stock, but not limited to those
Awards described in Sections 6 through 11 of the Plan.
6
(uu) Subsidiary Corporation means any present or future subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
(vv) Ten Percent Owner means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.
(ww) Vesting Conditions mean those conditions established in accordance with Section 8.4 or
Section 10.2 of the Plan prior to the satisfaction of which shares subject to a Restricted Stock
Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture or a repurchase
option in favor of the Company upon the Participants termination of Service.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term or is not intended to be exclusive, unless the context clearly requires
otherwise.
3. Administration.
3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final and binding upon all persons having an interest in the Plan or
such Award.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election. In addition,
to the extent specified in a resolution adopted by the Board, the Chief Executive Officer of the
Company shall have the authority to grant Awards to an Employee who is not an Insider and who is
receiving a salary below the level which requires approval by the Committee; provided that the
terms of such Awards conform to guidelines established by the Committee and provided further that
at the time of making such Awards the Chief Executive Officer also is a Director.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.
3.4 Committee Complying with Section 162(m). While the Company is a publicly held
corporation within the meaning of Section 162(m), the Board may establish a Committee of outside
directors within the meaning of Section 162(m) to approve the grant of any Award which might
reasonably be anticipated to result in the payment of employee
7
remuneration that would otherwise exceed the limit on employee remuneration deductible for
income tax purposes pursuant to Section 162(m).
3.5 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock or units to be subject to each Award;
(b) to determine the type of Award granted and to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares purchased pursuant to any Award, (ii) the method of payment
for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the withholding or delivery
of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any
Award or any shares acquired pursuant thereto, (v) the Performance Award Formula and Performance
Goals applicable to any Award and the extent to which such Performance Goals have been attained,
(vi) the time of the expiration of any Award, (vii) the effect of the Participants termination of
Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable
to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any
shares acquired pursuant thereto, including with respect to the period following a Participants
termination of Service;
(i) without the consent of the affected Participant and notwithstanding the provisions of any
Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding Option, provided
that such Stock Appreciation Right covers the same number of shares of Stock and provides for the
same exercise price (subject in each case to adjustment in accordance with Section 4.2) as the
replaced Option and otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Committee;
8
(j) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards;
(k) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law; and
(l) to delegate to the Chief Executive Officer or the Senior Vice President of Human Resources
the authority with respect to ministerial matters regarding the Plan and Awards made under the
Plan.
3.6 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the
shares of Stock cast in person or by proxy at a meeting of the shareholders of the Company at which
a quorum representing a majority of all outstanding shares of Stock is present or represented by
proxy, the Board shall not approve a program providing for either (a) the cancellation of
outstanding Options or SARs and the grant in substitution therefore of new Options or SARs having a
lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the exercise
price thereof. This paragraph shall not be construed to apply to issuing or assuming a stock
option in a transaction to which section 424(a) applies, within the meaning of Section 424 of the
Code.
3.7 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad
faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
4. Shares Subject to Plan.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be four million
eight hundred eighty-six thousand (4,886,000) and shall
9
consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
If an outstanding Award for any reason expires or is terminated or canceled without having been
exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to
forfeiture or repurchase are forfeited or repurchased by the Company, the shares of Stock allocable
to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall
again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been
issued pursuant to the Plan (a) with respect to any portion of an Award that is settled in cash or
(b) to the extent such shares are withheld or reacquired by the Company in satisfaction of tax
withholding obligations pursuant to Section 15.2. Upon payment in shares of Stock pursuant to the
exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced
only by the number of shares actually issued in such payment. If the exercise price of an Option
is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the
Participant, or by means of a Net-Exercise, the number of shares available for issuance under the
Plan shall be reduced only by the net number of shares for which the Option is exercised.
4.2 Adjustments for Changes in Capital Structure. Subject to any required action by the
shareholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the shareholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards,
in the Award limits set forth in Section 5.4, and in the exercise or purchase price per share under
any outstanding Award in order to prevent dilution or enlargement of Participants rights under the
Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall
not be treated as effected without receipt of consideration by the Company. Any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number. The Committee in its sole discretion, may also make such adjustments in the terms of
any Award to reflect, or related to, such changes in the capital structure of the Company or
distributions as it deems appropriate, including modification of Performance Goals, Performance
Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to
this Section 4.2 shall be final, binding and conclusive.
5. Eligibility and Award Limitations.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and
Directors. For purposes of the foregoing sentence, Employees, Consultantsand Directors shall
include prospective Employees, prospective Consultants and prospective Directors to whom Awards are
granted in connection with written offers of an employment or other service relationship with the
Participating Company Group; provided, however, that no Stock subject to any such Award shall vest,
become exercisable or be issued prior to the date on which such person commences Service. A
Nonemployee Director Award may be granted only to a person who, at the time of grant, is a
Nonemployee Director.
10
5.2 Participation. Awards other than Nonemployee Director Awards are granted
solely at the discretion of the Committee. Eligible persons may be granted more than one Award.
However, excepting Nonemployee Director Awards, eligibility in accordance with this
Section shall not entitle any person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.
5.3 Incentive Stock Option Limitations.
(a) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary
Corporation (each being an ISO-Qualifying Corporation). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation
shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying
Corporation, with an exercise price determined as of such date in accordance with Section 6.1.
(b) Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by a Participant for the first time during any calendar year for stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of
such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section, options designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of stock shall be determined as
of the time the option with respect to such stock is granted. If the Code is amended to provide
for a limitation different from that set forth in this Section, such different limitation shall be
deemed incorporated herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the Participant is exercising.
In the absence of such designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such
portion shall be separately identified.
5.4 Award Limits.
(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed four
million eight hundred eighty-six thousand (4,886,000) shares. The maximum aggregate number of
shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock
Options shall be the number of shares determined in accordance with Section 4.1, subject to
adjustment as provided in Section 4.2 and further subject to the limitation set forth in Section
5.4(b) below.
11
(b) Aggregate Limit on Full Value Awards. Subject to adjustment as provided in Section 4.2,
in no event shall more than five hundred thousand (500,000) shares in the aggregate be issued under
the Plan pursuant to the exercise or settlement of Restricted Stock Awards, Restricted Stock Unit
Awards and Performance Awards (Full Value Awards). Except with respect to a maximum of five
percent (5%) of the shares of Stock authorized in this Section 5.4(b), any Full Value Awards which
vest on the basis of the Participants continued Service shall not provide for vesting which is
any more rapid than annual pro rata vesting over a three (3) year period and any Full Value Awards
which vest upon the attainment of Performance Goals shall provide for a Performance Period of at
least twelve (12) months.
(c) Section 162(m) Award Limits. The following limits shall apply to the grant of any Award
if, at the time of grant, the Company is a publicly held corporation within the meaning of
Section 162(m).
(i) Options and SARs. Subject to adjustment as provided in Section 4.2, no Employee shall be
granted within any fiscal year of the Company one or more Options or Freestanding SARs which in the
aggregate are for more than 100,000 shares.
(ii) Restricted Stock and Restricted Stock Unit Awards. Subject to adjustment as provided in
Section 4.2, no Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting Conditions based on the
attainment of Performance Goals, for more than 500,000 shares.
(iii) Performance Awards. Subject to adjustment as provided in Section 4.2, no Employee shall
be granted (1) Performance Shares which could result in such Employee receiving more than 500,000
shares for each full fiscal year of the Company contained in the Performance Period for such Award,
or (2) Performance Units which could result in such Employee receiving value equal to more than
500,000 shares for each full fiscal year of the Company contained in the Performance Period for
such Award. No Participant may be granted more than one Performance Award for the same Performance
Period.
(iv) Stock-Based Awards. Subject to adjustment as provided in Section 4.2, no Employee may be
granted Stock-Based Awards which could result in the Employee receiving more than 50,000 shares (or
equivalent value) in any fiscal year of the Company.
6. Terms and Conditions of Options.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be
12
not less than the Fair Market Value of a share of Stock on the effective date of grant of the
Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise
price lower than the minimum exercise price set forth above if such Option is granted pursuant to
an assumption or substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, and (c) no Option granted to a prospective
Employee, prospective Consultant or prospective Director may become exercisable prior to the date
on which such person commences Service. Subject to the foregoing, unless otherwise specified by
the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10)
years after the effective date of grant of the Option, unless earlier terminated in accordance with
its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than
the exercise price, (iii) by delivery of a properly executed notice of exercise together with
irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of
a sale or loan with respect to some or all of the shares being acquired upon the exercise of the
Option (including, without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a Cashless Exercise), (iv) by delivery of a properly executed notice of exercise
electing a Net-Exercise, (v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Companys stock.
13
(ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Companys sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise, including with respect
to one or more Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee, an Option shall be exercisable after a
Participants termination of Service only during the applicable time periods provided in the Award
Agreement.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, unless the
Committee provides otherwise in the Award Agreement, if the exercise of an Option within the
applicable time periods is prevented by the provisions of Section 14 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined by the Committee,
in its discretion) after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
(c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, if a
sale within the applicable time periods of shares acquired upon the exercise of the Option would
subject the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a
sale of such shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participants termination of Service, or (iii) the
Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior
to the issuance of shares of Stock upon the exercise of an Option, the Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary,
except transfer by will or by the laws of descent and distribution.
7. Terms and Conditions of Stock Appreciation Rights.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No SAR or purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs may incorporate
all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a
related Option (a Tandem SAR) or may be granted independently of any Option (a Freestanding
SAR). A Tandem SAR may be granted either concurrently with the
14
grant of the related Option or at any time thereafter prior to the complete exercise,
termination, expiration or cancellation of such related Option.
7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of
the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR
shall be the exercise price per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the SAR.
7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and
only to the extent, that the related Option is exercisable, subject to such provisions as the
Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option.
(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR;
provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.
7.4 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.
7.5 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise
provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth
in the Award Agreement, an SAR shall be exercisable after a Participants termination of Service
only as provided in the Award Agreement.
7.6 Nontransferability of SARs. During the lifetime of the Participant, an SAR shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior
to the exercise of an SAR, the SAR shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participants beneficiary, except transfer by will or by the laws of descent and
distribution.
8. Terms and Conditions of Restricted Stock Awards.
Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to time establish. No
Restricted Stock Award or purported Restricted Stock Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award Agreements evidencing
Restricted Stock Awards may incorporate all or any
15
of the terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may or may not
require the payment of cash compensation for the stock. Restricted Stock Awards may be granted
upon such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Award or the lapsing of the Restriction Period is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 9.3 through 9.5(a).
8.2 Purchase Price. The purchase price, if any, for shares of Stock issuable under each
Restricted Stock Award and the means of payment shall be established by the Committee in its
discretion.
8.3 Purchase Period. A Restricted Stock Award requiring the payment of cash consideration
shall be exercisable within a period established by the Committee; provided, however, that no
Restricted Stock Award granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences Service.
8.4 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock
Award may or may not be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria, including, without
limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee
and set forth in the Award Agreement evidencing such Award. During any Restriction Period in which
shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such
shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other
than as provided in the Award Agreement or as provided in Section 8.7. Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer restrictions prior
to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement on such certificates
of appropriate legends evidencing any such transfer restrictions.
8.5 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section
8.4 and any Award Agreement, during the Restriction Period applicable to shares subject to a
Restricted Stock Award, the Participant shall have all of the rights of a shareholder of the
Company holding shares of Stock, including the right to vote such shares and to receive all
dividends and other distributions paid with respect to such shares. However, in the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2, any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which the Participant
is entitled by reason of the Participants Restricted Stock Award shall be immediately subject to
the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.
16
8.6 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Restricted Stock Award and set forth in the Award Agreement, if a Participants Service
terminates for any reason, whether voluntary or involuntary (including the Participants death or
disability), then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting Conditions as of
the date of the Participants termination of Service in exchange for the payment of the purchase
price, if any, paid by the Participant. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.
8.7 Nontransferability of Restricted Stock Award Rights. Prior to the issuance of shares of
Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance
or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participants guardian or legal representative.
9. Terms and Conditions of Performance Awards.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall
from time to time establish. No Performance Award or purported Performance Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:
9.1 Types of Performance Awards Authorized. Performance Awards may be in the form of either
Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall
specify the number of Performance Shares or Performance Units subject thereto, the Performance
Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.
9.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial value
equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.2, on the effective date of grant of the Performance Share. Each Performance Unit shall
have an initial value determined by the Committee. The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable Performance Award
Formula will depend on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.
9.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In
granting each Performance Award, the Committee shall
17
establish in writing the applicable Performance Period, Performance Award Formula and one or
more Performance Goals which, when measured at the end of the Performance Period, shall determine
on the basis of the Performance Award Formula the final value of the Performance Award to be paid
to the Participant. To the extent compliance with the requirements under Section 162(m) with
respect to performance-based compensation is desired, the Committee shall establish the
Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later
than the earlier of (a) the date ninety (90) days after the commencement of the applicable
Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any
event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula shall not be changed during the
Performance Period. The Company shall notify each Participant granted a Performance Award of the
terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award
Formula.
9.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee
on the basis of targets to be attained
(Performance Targets) with respect to one or more measures
of business or financial performance (each, a
Performance Measure), subject to the following:
(a) Performance Measures. Performance Measures shall have the same meanings as used in the
Companys financial statements, or, if such terms are not used in the Companys financial
statements, they shall have the meaning applied pursuant to generally accepted accounting
principles, or as used generally in the Companys industry. Performance Measures shall be
calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for
financial reporting purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award
shall be calculated in accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and excluding the
effect (whether positive or negative) of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of
the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be
made solely for the purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participants rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Committee: revenue; sales; expenses; operating income;
gross margin; operating margin; earnings before any one or more of: stock-based compensation
expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net
income; economic value added; free cash flow; operating cash flow; stock price; earnings per share;
return on shareholder equity; return on capital; return on assets; return on investment; employee
satisfaction; employee retention; balance of cash, cash equivalents and marketable securities;
market share; daily average revenue trades; asset gathering metrics; number of customers; customer
satisfaction; product development; completion of a joint venture or other corporate transaction;
completion of identified special project; and overall effectiveness of management; or such other
measures as determined by the Committee consistent with this Section 9.4(a).
18
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to a standard selected by the Committee.
9.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall certify in writing the
extent to which the applicable Performance Goals have been attained and the resulting final value
of the Award earned by the Participant and to be paid upon its settlement in accordance with the
applicable Performance Award Formula.
(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for the positive or
negative adjustment of the Performance Award Formula applicable to a Performance Award that is not
intended to constitute qualified performance based compensation to a covered employee within
the meaning of Section 162(m) (a Covered
Employee) to reflect such Participants individual
performance in his or her position with the Company or such other factors as the Committee may
determine. With respect to a Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion to reduce some or all
of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the resulting value of the
Performance Award determined in accordance with the Performance Award Formula.
(c) Payment in Settlement of Performance Awards. As soon as practicable following the
Committees determination and certification in accordance with Sections 9.5(a) and (b), payment
shall be made to each eligible Participant (or such Participants legal representative or other
person who acquired the right to receive such payment by reason of the Participants death) of the
final value of the Participants Performance Award. Payment of such amount shall be made in cash,
shares of Stock, or a combination thereof as determined by the Committee.
9.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which the Performance Shares are
settled or forfeited. Such Dividend Equivalents, if any, shall be credited to the Participant in
the form of additional whole Performance Shares as of the date of payment of such cash dividends on
Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the
19
number of shares of Stock represented by the Performance Shares previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalents
may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and
may be paid on the same basis as settlement of the related Performance Share as provided in Section
9.5. Dividend Equivalents shall not be paid with respect to Performance Units. In the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made
in the Participants Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of Stock
issuable upon settlement of the Performance Share Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same Performance Goals
as are applicable to the Award.
9.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Performance Award and set forth in the Award Agreement, the effect of a Participants
termination of Service on the Performance Award shall be as follows:
(a) Death or Disability. If the Participants Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period applicable to the
Performance Award, the final value of the Participants Performance Award shall be determined by
the extent to which the applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the Participants Service
during the Performance Period. Payment shall be made following the end of the Performance Period
in any manner permitted by Section 9.5.
(b) Other Termination of Service. If the Participants Service terminates for any reason
except death or Disability before the completion of the Performance Period applicable to the
Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the
event of an involuntary termination of the Participants Service, the Committee, in its sole
discretion, may waive the automatic forfeiture of all or any portion of any such Award.
9.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participants beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participants guardian or legal representative.
10. Terms and Conditions of Restricted Stock Unit Awards.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the
20
Committee shall from time to time establish. No Restricted Stock Unit Award or purported
Restricted Stock Unit Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Restricted Stock Units may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
10.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
10.2 Vesting. Restricted Stock Units may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award.
10.3 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on
Stock having a record date prior to the date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid by crediting the
Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the Restricted Stock Units
previously credited to the Participant by (b) the Fair Market Value per share of Stock on such
date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter as practicable) as
the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of
a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in
the capital structure of the Company as described in Section 4.2, appropriate adjustments shall be
made in the Participants Restricted Stock Unit Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of Stock
issuable upon settlement of the Award, and all such new, substituted or additional securities or
other property shall be immediately subject to the same Vesting Conditions as are applicable to the
Award.
10.4 Effect of Termination of Service. Unless otherwise provided by the Committee in the
grant of a Restricted Stock Unit Award and set forth in the Award Agreement,
21
if a Participants Service terminates for any reason, whether voluntary or involuntary
(including the Participants death or disability), then the Participant shall forfeit to the
Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions
as of the date of the Participants termination of Service.
10.5 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participants Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 10.3) for each Restricted Stock
Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes. Notwithstanding the foregoing, if permitted by the Committee and set forth in
the Award Agreement, the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or other property otherwise
issuable to the Participant pursuant to this Section.
10.6 Nontransferability of Restricted Stock Unit Awards. Prior to the issuance of shares of
Stock in settlement of a Restricted Stock Unit Award, the Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or by the laws of descent and distribution. All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participants guardian or legal representative.
11. Deferred Compensation Awards.
11.1 Establishment of Deferred Compensation Award Programs. This Section 11 shall not be
effective unless and until the Committee determines to establish a program pursuant to this
Section. The Committee, in its discretion and upon such terms and conditions as it may determine,
may establish one or more programs pursuant to the Plan under which:
(a) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to reduce such Participants compensation otherwise payable in cash (subject to any
minimum or maximum reductions imposed by the Committee) and to be granted automatically at such
time or times as specified by the Committee one or more Awards of Stock Units with respect to such
numbers of shares of Stock as determined in accordance with the rules of the program established by
the Committee and having such other terms and conditions as established by the Committee.
(b) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to be granted automatically an Award of Stock Units with respect to such number of
shares of Stock and upon such other terms and conditions as established by the Committee in lieu
of:
22
(i) shares of Stock otherwise issuable to such Participant upon the exercise of an Option;
(ii) cash or shares of Stock otherwise issuable to such Participant upon the exercise of an
SAR; or
(iii) cash or shares of Stock otherwise issuable to such Participant upon the settlement of a
Performance Award or Performance Unit.
11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation Awards
granted pursuant to this Section 11 shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. No such Deferred Compensation Award or purported
Deferred Compensation Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Deferred Compensation Awards may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
(a) Vesting Conditions. Deferred Compensation Awards shall not be subject to any vesting
conditions.
(b) Terms and Conditions of Stock Units.
(i) Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company). However, a Participant shall be entitled to
receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a record
date prior to date on which Stock Units held by such Participant are settled. Such Dividend
Equivalents shall be paid by crediting the Participant with additional whole and/or fractional
Stock Units as of the date of payment of such cash dividends on Stock. The method of determining
the number of additional Stock Units to be so credited shall be specified by the Committee and set
forth in the Award Agreement. Such additional Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time (or as soon thereafter as
practicable) as the Stock Units originally subject to the Stock Unit Award. In the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made
in the Participants Stock Unit Award so that it represent the right to receive upon settlement any
and all new, substituted or additional securities or other property (other than normal cash
dividends) to which the Participant would be entitled by reason of the shares of Stock issuable
upon settlement of the Award.
(ii) Settlement of Stock Unit Awards. A Participant electing to receive an Award of Stock
Units pursuant to this Section 11, shall specify at the time of such election a settlement date
with respect to such Award. The Company shall issue to the Participant as soon as practicable
following the earlier of the settlement date elected by the
23
Participant or the date of termination of the Participants Service, a number of whole shares
of Stock equal to the number of whole Stock Units subject to the Stock Unit Award. Such shares of
Stock shall be fully vested, and the Participant shall not be required to pay any additional
consideration (other than applicable tax withholding) to acquire such shares. Any fractional Stock
Unit subject to the Stock Unit Award shall be settled by the Company by payment in cash of an
amount equal to the Fair Market Value as of the payment date of such fractional share.
(iii) Nontransferability of Stock Unit Awards. Prior to their settlement in accordance with
the provision of the Plan, no Stock Unit Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participants beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Stock Unit Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participants guardian or legal representative.
12. Other Stock-Based Awards.
In addition to the Awards set forth in Sections 6 through 11 above, the Committee, in its sole
discretion, may carry out the purpose of this Plan by awarding Stock-Based Awards as it determines
to be in the best interests of the Company and subject to such other terms and conditions as it
deems necessary and appropriate.
13. Change in Control.
Notwithstanding any other provision of the Plan, any unexercisable or unvested portion of each
outstanding Award held by a Nonemployee Director or an officer and any shares acquired upon the
exercise thereof shall be immediately exercisable and vested in full as of the date ten (10) days
prior to the date of a Change in Control but conditioned upon the consummation of the Change in
Control.
13.1 Effect of Change in Control on Options and SARs.
(a) Accelerated Vesting. Notwithstanding any other provision of the Plan to the contrary
except as provided in this Section 13, the Committee, in its sole discretion, may provide in any
Award Agreement or, in the event of a Change in Control, may take such actions as it deems
appropriate to provide for the acceleration of the exercisability and vesting in connection with
such Change in Control of any or all outstanding Options and SARs and shares acquired upon the
exercise of such Options and SARs upon such conditions and to such extent as the Committee shall
determine.
(b) Assumption or Substitution. In the event of a Change in Control, the surviving,
continuing, successor, or purchasing entity or parent thereof, as the case may be (the Acquiror),
may, without the consent of any Participant, either assume the Companys rights and obligations
under outstanding Options and SARs or substitute for outstanding Options and SARs substantially
equivalent options and SARs (as the case may be) for the Acquirors stock. Any Options or SARs
which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of
the time of consummation of the Change in Control shall
24
terminate and cease to be outstanding effective as of the time of consummation of the Change
in Control.
(c) Cash-Out of Options. The Committee may, in its sole discretion and without the consent of
any Participant, determine that, upon the occurrence of a Change in Control, each or any Option or
SAR outstanding immediately prior to the Change in Control shall be canceled in exchange for a
payment with respect to each vested share of Stock subject to such canceled Option or SAR in (i)
cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change
in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair
Market Value equal to the excess of the Fair Market Value of the consideration to be paid per share
of Stock in the Change in Control over the exercise price per share under such Option or SAR (the
Spread). In the event such determination is made by the Committee, the Spread (reduced by
applicable withholding taxes, if any) shall be paid to Participants in respect of their canceled
Options and SARs as soon as practicable following the date of the Change in Control.
13.2 Effect of Change in Control on Restricted Stock Awards. The Committee may, in its
discretion, provide in any Award Agreement evidencing a Restricted Stock Award that, in the event
of a Change in Control, the lapsing of the Restriction Period applicable to the shares subject to
the Restricted Stock Award held by a Participant whose Service has not terminated prior to the
Change in Control shall be accelerated effective immediately prior to the consummation of the
Change in Control to such extent as specified in such Award Agreement. Any acceleration of the
lapsing of the Restriction Period that was permissible solely by reason of this Section 13.2 and
the provisions of such Award Agreement shall be conditioned upon the consummation of the Change in
Control.
13.3 Effect of Change in Control on Performance Awards. The Committee may, in its discretion,
provide in any Award Agreement evidencing a Performance Award that, in the event of a Change in
Control, the Performance Award held by a Participant whose Service has not terminated prior to the
Change in Control or whose Service terminated by reason of the Participants death or Disability
shall become payable effective as of the date of the Change in Control to such extent as specified
in such Award Agreement.
13.4 Effect of Change in Control on Restricted Stock Unit Awards. The Committee may, in its
discretion, provide in any Award Agreement evidencing a Restricted Stock Unit Award that, in the
event of a Change in Control, the Restricted Stock Unit Award held by a Participant whose Service
has not terminated prior to such date shall be settled effective as of the date of the Change in
Control to such extent as specified in such Award Agreement.
13.5 Effect of Change in Control on Deferred Compensation and Other Stock-Based Awards. The
Committee may, in its discretion, provide in any Award Agreement evidencing a Deferred Compensation
Award or other Stock-Based Award that, in the event of a Change in Control, the amounts payable
pursuant to such Award shall be settled effective as of the date of the Change in Control to such
extent as specified in such Award Agreement.
25
14. Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
15. Tax Withholding.
15.1 Tax Withholding in General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise or Net Exercise of an Option, to
make adequate provision for, the federal, state, local and foreign taxes, if any, required by law
to be withheld by the Participating Company Group with respect to an Award or the shares acquired
pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release
shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment
in cash under the Plan until the Participating Company Groups tax withholding obligations have
been satisfied by the Participant.
15.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.
16. Amendment or Termination of Plan.
The Board or the Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Companys shareholders, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive
Stock Options, and (c) no other amendment of the Plan that would require approval of the Companys
shareholders under any applicable law, regulation or rule. No
26
amendment, suspension or termination of the Plan shall affect any then outstanding Award
unless expressly provided by the Board or the Committee. In any event, no amendment, suspension or
termination of the Plan may adversely affect any then outstanding Award without the consent of the
Participant unless necessary to comply with any applicable law, regulation or rule, including
Section 409A of the Code.
17. Miscellaneous Provisions.
17.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.
17.2 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Companys
common shareholders.
17.3 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director or interfere with
or limit in any way any right of a Participating Company to terminate the Participants Service at
any time. To the extent that an Employee of a Participating Company other than the Company
receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean
that the Company is the Employees employer or that the Employee has an employment relationship
with the Company.
17.4 Rights as a Shareholder. A Participant shall have no rights as a shareholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.2 or another provision of the Plan.
17.5 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.
17.6 Severability. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.
27
17.7 Beneficiary Designation. Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participants death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participants lifetime. If a
married Participant designates a beneficiary other than the Participants spouse, the effectiveness
of such designation may be subject to the consent of the Participants spouse. If a Participant
dies without an effective designation of a beneficiary who is living at the time of the
Participants death, the Company will pay any remaining unpaid benefits to the Participants legal
representative.
17.8 Unfunded Obligation. Participants shall have the status of general unsecured creditors
of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and
unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participants creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan. Each Participating Company shall be responsible for making benefit payments
pursuant to the Plan on behalf of its Participants or for reimbursing the Company for the cost of
such payments, as determined by the Company in its sole discretion. In the event the respective
Participating Company fails to make such payment or reimbursement, a Participants (or other
individuals) sole recourse shall be against the respective Participating Company, and not against
the Company. A Participants acceptance of an Award pursuant to the Plan shall constitute
agreement with this provision.
17.9 Choice of Law. Except to the extent governed by applicable federal law, the validity,
interpretation, construction and performance of the Plan and each Award Agreement shall be governed
by the laws of the State of California, without regard to its conflict of law rules.
28
PROXY
ABAXIS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 25, 2005
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Clinton H. Severson and Alberto R. Santa Ines, and each of
them, with full power of substitution, to represent the undersigned and to vote all of the shares
of stock in Abaxis, Inc., a California corporation, which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of Abaxis to be held at the principal offices of Abaxis at 3240
Whipple Road, Union City, California, 94587 on Tuesday, October 25, 2005, at 10:00 a.m. local time,
and at any adjournment or postponement thereof (1) as hereinafter specified upon the proposals
listed on the reverse side and as more particularly described in the Proxy Statement for the 2005
Annual Meeting of Abaxis Shareholders (the Proxy Statement), receipt of which is hereby
acknowledged, and (2) in their discretion upon such other matters as may properly come before the
meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, SUCH
SHARES SHALL BE VOTED FOR ALL NOMINEES UNDER PROPOSAL 1, AND FOR PROPOSALS 2 AND 3.
|
|
|
HAS YOUR ADDRESS CHANGED? |
|
DO YOU HAVE ANY COMMENTS? |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABAXIS, INC.
C/O COMPUTERSHARE
P.O. BOX 8694
EDISON, NJ 08818-8694
Your vote is important. Please vote immediately.
|
|
|
|
|
|
|
Vote-by-Internet |
|
(COMPUTER LOGO) |
|
Vote-by-Telephone |
|
(TELEPHONE LOGO) |
OR |
Log on to the Internet and go to |
|
|
|
Call toll-free |
|
|
http://www.eproxyvote.com/abax |
|
|
|
1-877-PRX-VOTE (1-877-779-8683) |
|
|
If you vote over the Internet or by telephone, please do not mail your card.
DETACH HERE
ZABXC1
|
|
|
|
|
|
|
þ |
|
Please mark votes as in this example. |
|
o |
|
#ABX |
A vote FOR the following proposals is recommended by the Board of Directors:
1. |
|
To elect the following six (6) directors of Abaxis to serve until the 2006 Annual Meeting of
Shareholders or until their respective successors are elected and qualified: |
|
|
|
Nominees: (01) Clinton H. Severson, (02) Richard J. Bastiani, Ph.D., (03) Henk J. Evenhuis, (04)
Brenton G.A. Hanlon, (05) Prithipal Singh, Ph.D., and (06) Ernest S. Tucker, III, M.D. |
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR ALL NOMINEES |
|
o |
|
o |
|
WITHHELD FROM ALL NOMINEES |
|
|
|
|
|
o |
|
|
|
|
|
|
|
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominees name on the line above.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
2. |
|
To ratify the appointment of
Burr, Pilger & Mayer LLP as
Abaxis, Inc.s independent
registered public accounting
firm for the fiscal year ending
March 31, 2006.
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
3. |
|
To consider and approve the
amendment and restatement of
Abaxis, Inc. 1998 Stock Option
Plan as the 2005 Equity
Incentive Plan. |
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
|
|
Mark box at right if you plan to attend the Annual Meeting. |
|
|
|
|
|
o |
|
|
|
|
|
|
|
|
|
|
|
Mark box at right if an address change or comment has been noted on the reverse side of this card. |
|
|
|
|
|
o |
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN AND PROMPTLY MAIL
THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
Please sign here exactly as your name(s) appears on your stock certificate. If shares of stock are
held jointly, both or all of such persons should sign. Corporate or partnership proxies should be
signed in full corporate or partnership name by an authorized person. Persons signing in a
fiduciary capacity should indicate their full titles in such capacity. Please date the Proxy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature: |
|
|
|
Date: |
|
|
|
Signature: |
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|