SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
The
Securities Exchange Act of 1934
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
o
Check the
appropriate box
|
¨
|
Preliminary
Proxy Statement
|
|
¨
|
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
|
x
|
Definitive
Proxy Statement
|
|
¨
|
Definitive
Additional Materials
|
|
¨
|
Definitive
Material Pursuant to §240.14a-12
|
PHOTONIC
PRODUCTS GROUP, INC.
(Name of
Registrant as Specified In Its Certificate of Incorporation)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
|
¨
|
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 t to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
|
|
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
|
|
¨
|
Fee
paid previously with preliminary
materials.
|
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid:
|
|
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
|
PHOTONIC
PRODUCTS GROUP, INC.
181
Legrand Avenue
Northvale,
New Jersey 07647
Notice
of Annual Meeting of Shareholders
To
be held on Wednesday, June 2, 2010
To The
Shareholders of Photonic Products Group, Inc.:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders of PHOTONIC PRODUCTS GROUP,
INC. (the "Company") will be held at the offices of Lowenstein Sandler PC, 1251
Avenue of the Americas, 18
th
Floor,
New York, NY 10020, on Wednesday, June 2, 2010 at 10:00 a.m. for the following
purposes:
|
1.
|
To
amend the Company’s Restated Certificate of Incorporation to provide,
commencing with the Annual Meeting of Shareholders in 2010, for the
classification of the Board of Directors into three classes of directors
with staggered terms of office;
|
|
2.
|
To
elect six directors to hold office for staggered terms ranging from one to
three years if the first proposal is adopted or, in the alternative, to
elect six directors to hold office until the next Annual Meeting of
Shareholders and until their respective successors are elected and have
qualified;
|
|
3.
|
To
consider and vote to approve the Company’s 2010 Equity Compensation
Plan;
|
|
4.
|
To
ratify the appointment of Holtz Rubenstein Remnick, LLP as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2010; and
|
|
5.
|
To
transact such other business as may properly come before the meeting or
any adjournment thereof.
|
The Board
of Directors has fixed the close of business on April 8, 2010, as the date for
determining the shareholders of record entitled to receive notice of, and to
vote at, the Annual Meeting.
We
urge you to vote your shares over the Internet or through the mail at your
earliest convenience.
|
By
Order of the Board of Directors
|
|
|
|
|
|
/s/ William J. Foote
|
|
|
William
J. Foote, Secretary
|
|
Northvale,
New Jersey
|
|
|
April
30, 2010
|
|
|
PHOTONIC
PRODUCTS GROUP, INC.
181
Legrand Avenue
PROXY
STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
Wednesday,
June 2, 2010
This
proxy statement is being furnished in connection with the solicitation of
proxies by the Board of Directors (the “Board”) of PHOTONIC PRODUCTS GROUP,
INC., a New Jersey corporation with its principal offices at 181 Legrand Avenue,
Northvale, New Jersey 07647 (the "Company"), to be used at the Annual Meeting of
Shareholders of the Company to be held at the offices of Lowenstein Sandler PC,
1251 Avenue of the Americas, 18
th
Floor,
New York, NY 10020 on Wednesday, June 2, 2010 at 10:00 a.m. This
Proxy Statement and the enclosed form of proxy are first being sent to
shareholders on or about May 7, 2010.
Shareholders
Entitled to Vote
Only
shareholders of record at the close of business on April 8, 2010 the record date
fixed by the Board of Directors, will be entitled to notice of, and to vote at,
the Annual Meeting. At the close of business on the record date,
there were 11,556,729 shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), outstanding and entitled to vote at the
meeting. Each share is entitled to one vote. The presence in person
or by proxy of owners of a majority of the outstanding shares of the Company's
Common Stock will constitute a quorum for the transaction of business at the
Company's Annual Meeting.
For
purposes of determining the votes cast with respect to any matter presented for
consideration at the Annual Meeting, only those cast "for" are
included. Abstentions and broker non-votes are counted only for the
purpose of determining whether a quorum is present at the Annual
Meeting. Owners of Common Stock are not entitled to cumulative
voting in the election of directors. Owners of Common Stock will not
have any dissenters’ rights of appraisal in connection with any of the matters
to be voted on at the Company’s Annual Meeting.
Votes
Required to Approve Each Proposal
The
proposal to amend the Company’s Restated Certificate of Incorporation (the
“Certificate of Incorporation”) will require an affirmative vote for the
proposal by a majority of the votes cast at the Annual Meeting by the holders of
shares of Common Stock entitled to vote.
The
proposal to elect the six the director nominees will require an affirmative vote
for the proposal by a plurality of the Common Stock entitled to vote at the
Annual Meeting.
The
proposal to approve the Company’s 2010 Equity Compensation Program will require
an affirmative vote for the proposal by a majority of the votes cast at the
Annual Meeting by the holders of shares of Common Stock entitled to
vote.
The
proposal to ratify the appointment of Holtz Rubenstein Remnick, LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2010 will require an affirmative vote for the proposal by a
majority of the votes cast at the Annual Meeting by the holders of shares of
Common Stock entitled to vote.
Voting: Revocation
of Proxies
A form of
proxy is enclosed for use at the Annual Meeting if a shareholder is unable to
attend in person. Each proxy may be revoked at any time before it is
exercised by giving written notice of revocation to the Secretary of the
Company, by filing a later dated proxy with the Secretary at any time prior to
its exercise or by voting at the meeting. The presence at the meeting
of a stockholder who has given a proxy does not revoke the proxy unless the
stockholder files a notice of revocation or votes by written
ballot. All shares represented by valid proxies pursuant to this
solicitation (and not revoked before they are exercised) will be voted as
specified in the form of proxy. If no specification is given, the
shares will be voted in favor of the Board's nominees "for" director and "for"
the other proposals described in this Proxy Statement.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS OF PHOTONIC PRODUCTS GROUP, INC. TO BE HELD ON JUNE 2,
2010. THIS PROXY STATEMENT, THE ACCOMPANYING FORM OF PROXY CARD AND
OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009,
INCLUDING FINANCIAL STATEMENTS, ARE AVAILABLE AT
www.proxyvote.com
.
Under
new rules issued by the Securities and Exchange Commission (the “SEC”), we are
providing access to our proxy materials both by sending you this full set of
proxy materials and by notifying you of the availability of our proxy materials
on the internet.
Costs
of Solicitation
The
entire cost of soliciting these proxies will be borne by the
Company. In following up the original solicitation of proxies by
mail, the Company may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials to the
beneficial owners of the stock and may reimburse them for their expenses in so
doing. If necessary, the Company may also use its officers and their
assistants to solicit proxies from the shareholders, either personally or by
telephone or special letter.
PRINCIPAL
SHAREHOLDERS
The
following table presents certain information available to the Company at the
date hereof with respect to the security ownership of the Company’s Common Stock
by (i) each of the Company’s directors and their nominees, (ii) named
executive officers of the Company, (iii) all executive officers and directors as
group, and (iv) the security ownership of each person known by the Company to
beneficially own more than five percent (5%) of the Company's common stock
outstanding as of April 8, 2010. Percentages that include ownership
of options or convertible securities are calculated assuming exercise or
conversion by each individual or entity of the options (including
“out-of-the-money options”), or convertible securities owned by each individual
or entity separately without considering the dilutive effect of option exercises
and security conversions by any other individual or entity. The
address of each principal shareholder, unless otherwise indicated, is Photonic
Products Group Inc., 181 Legrand Avenue, Northvale, NJ 07647.
Beneficial Ownership of
Common Stock (1)
|
|
Amount and Nature of
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
Beneficial Ownership
|
|
|
Common Stock
|
|
Luke
P. LaValle, Jr.
|
|
|
12,213
|
(2)
|
|
|
*
|
|
Thomas
H. Lenagh
|
|
|
198,913
|
(3)
|
|
|
1.7
|
%
|
Dennis
G. Romano
|
|
|
—
|
|
|
|
—
|
|
N.E.
Rick Strandlund
|
|
|
—
|
|
|
|
—
|
|
Jan
M. Winston
|
|
|
50,127
|
(4)
|
|
|
*
|
|
William
D. Brucker
|
|
|
30,307
|
(5)
|
|
|
*
|
|
Miroslav
Dosoudil
|
|
|
44,380
|
(6)
|
|
|
*
|
|
William
J. Foote
|
|
|
16,315
|
(7)
|
|
|
*
|
|
Joseph
J. Rutherford
|
|
|
9,365
|
(8)
|
|
|
*
|
|
John
R. Ryan
|
|
|
5,279
|
(9)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All
Directors and Executive
|
|
|
366,899
|
(10)
|
|
|
3.1
|
%
|
Officers
as a group (10 persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clarex,
Ltd. & Welland Ltd.
|
|
|
9,504,414
|
(11)
|
|
|
56.1
|
%
|
Bay
Street and Rawson Square
|
|
|
|
|
|
|
|
|
P.O.
Box N 3016
|
|
|
|
|
|
|
|
|
Nassau,
Bahamas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brown
Advisory Holdings, Inc.
|
|
|
5,501,008
|
(12)
|
|
|
47.6
|
%
|
901
South Bond Street, Suite 400
|
|
|
|
|
|
|
|
|
Baltimore,
MD 21231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Nicklin
|
|
|
779,350
|
(13)
|
|
|
6.7
|
%
|
3
Rivers Edge
|
|
|
|
|
|
|
|
|
Newburgh,
NY 12550-1457
|
|
|
|
|
|
|
|
|
* Less
than 1%
(1)
|
Unless
otherwise indicated, each of the shareholders named in the table has sole
voting and investment power with respect to the shares beneficially owned,
subject to the information contained in the footnotes to the
table.
|
|
Including
10,546 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
125,546 shares issuable upon exercise of options exercisable within 60
days of April 18, 2010.
|
(4)
|
Including
41,860 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
29,724 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
42,804 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
14,911 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
8,013 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
1,916 shares issuable upon exercise of options exercisable within 60 days
of April 18, 2010.
|
|
Including
366,899 shares issuable upon exercise of options exercisable within 60
days of April 18, 2010.
|
|
Including
2,500,000 shares issuable upon conversion of convertible promissory notes
at a per share conversion price of $1.00, 1,012,500 shares issuable upon
conversion of accrued interest and warrants to purchase 1,875,000 shares
exercisable at $1.35 per
share.
|
|
Brown
Advisory Holdings Incorporated has shared investment power but no voting
power with respect to these 5,501,008
shares.
|
|
Including
15,000 shares over which Mr. Nicklin has shared investment power but no
voting power and 34,600 shares over which he has with sole investment
power but no voting power.
|
OTHER
MATTERS
At the
time this Proxy Statement was mailed to shareholders, management was not aware
that any other matter will be presented for action at the Annual
Meeting. If other matters properly come before the Meeting, it is
intended that the shares represented by proxies will be voted with respect to
those matters in accordance with the best judgment of the persons voting
them.
PROPOSAL
ONE
AMENDMENT
OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE CLASSIFICATION
OF THE BOARD OF DIRECTORS INTO THREE CLASSES WITH STAGGERED TERMS OF
OFFICE
The Board
of Directors has unanimously approved, and recommends that you approve, an
amendment to the Company’s Certificate of Incorporation providing for the
classification of the Company’s Board of Directors into three classes with
staggered three-year terms of office. The Board of Directors approved
an amendment to the Company’s Certificate of Incorporation which divides the
directors into three separate classes designated Class I, Class II, and Class
III. If the shareholders approve the amendment, at this Annual
Meeting two Class I directors will be elected for a one-year term of office, two
Class II directors will be elected for a two-year term of office, and two Class
III directors will be elected for a three-year term of office; when directors
are elected at all subsequent Annual Meetings of Shareholders, they would be
elected to three-year terms. See “Election of Directors” (Proposal
Two) as to the composition of each class of directors if this amendment is
adopted. The text of the Certificate of Incorporation provision is
annexed as Exhibit A to this Proxy Statement.
The
Company has used a staggered board of directors system in the
past. In 2008, however, the Board decided to transition to a
non-staggered board by phasing out the director classes by 2010. The
decision in 2008 to phase out the staggered board was reached by considering the
benefits and drawbacks of such a system. In terms of benefits, the
Board recognized that classified boards provide stability of board membership,
promote a longer-term perspective for board members and enhance a company’s
bargaining leverage with unsolicited bidders because of an inability by an
unsolicited bidder to replace the entire board in a single
election. In terms of drawbacks, the Board noted that classified
boards have the potential effect of eroding stockholder value by deterring
acquisition proposals and/or preventing stockholders who want to negotiate with
a potential acquirer from having the opportunity to do so and generally
facilitate the entrenchment of the board.
The Board
also noted in 2008 that there was a growing trend among larger companies to
elect directors on an annual basis and thus to allow stockholders to review and
express their opinions on the performance of all directors each
year.
In light
of current market conditions, the Board has decided to revisit its 2008 position
on classified boards. The Board now believes that the anti-takeover
implications of a staggered system would best preserve stockholder value by
making it more difficult for an unsolicited takeover attempt to succeed because
a possible acquirer would be unable to obtain majority control of the Company’s
Board of Directors for a period of at least two years. Further,
although the Board recognizes that there is a growing trend among larger
companies to elect directors on an annual basis, the Board notes that the
Company is small and it is easier for an unsolicited bid to be
financed.
The Board
of Directors believes that a staggered board would provide other important
benefits to the Company as well. A staggered board will help to
assure the continuity and stability of the Company’s business strategies and
policies and management of the Company’s business because a majority of the
Board of Directors at any given time will have prior experience as directors of
the Company.
|
The
Board of Directors recommends a vote FOR the adoption of an amendment to
the Certificate of Incorporation creating a staggered board of
directors.
|
PROPOSAL
TWO
ELECTION
OF DIRECTORS
If
Proposal One is adopted, the amendment to the Certificate of Incorporation will
be promptly filed with the New Jersey Department of the Treasury and the
staggered Board of Directors will thereby be created. In that event,
N. E. Rick Strandlund and Dennis G. Romano will be the nominees for election as
the Class I Directors for a one-year term expiring in 2011, Luke P. LaValle, Jr.
and Joseph J. Rutherford will be nominees for election as the Class II Directors
for a two-year term expiring in 2012, and Thomas H. Lenagh and Jan Winston will
be nominees for election as the Class III Directors for a three-year term
expiring in 2013.
If
Proposal One is not adopted, then all six incumbent directors shall be nominees
for election to the Board of Directors for a one-year term expiring in
2011
The
following table sets forth the name and age of the current members of the Board
of Directors, the principal occupation or employment of the director for the
past five or more years, the principal business of the organization in which
said occupation is or was carried on, the name of any other public corporation
for which each director has served as a Board member during the past five years,
and the period during which each director has served as a director of the
Company.
Nominated for Election to
Board of Directors:
Name and Age
|
|
Since
|
|
Positions; Business Experience
(1)(2)
|
|
|
|
|
|
Class
I Directors — Term Expires in 2011
|
|
|
|
|
|
Dennis
G. Romano, 67
|
|
2009
|
|
Director
of the Company (September 2009 - present)
|
|
|
|
|
Consultant
- Defense and Engineering/Construction Industry (2007 -
2009)
|
|
|
|
|
Senior
Vice President of Business Development, Defense Business Unit, Washington
Group International (2002 - 2007)
|
|
|
|
|
Vice
President, Business Strategy and Development, Northrop Grumman Corporation
(1999 - 2001)
|
|
|
|
|
Various
Senior and Executive Level Positions, Marketing, Business Development and
Strategy, Northrop Grumman Corporation (1995 - 1999)
|
|
|
|
|
Vice
President of Business Development, Grumman Aircraft Engineering
Corporation (1993 - 1995)
|
|
|
|
|
Marketing
and Business Development, Grumman Aircraft Engineering Corporation (1974 -
1993)
|
|
|
|
|
Aircrew
member, flight test organization, Grumman Aircraft Engineering Corporation
(1968 - 1974)
|
|
|
|
|
Avionics
Technician, Grumman Aircraft Engineering Corporation (1964 -
1968)
|
|
|
|
|
|
N.E.
Rick Strandlund, 66
|
|
2009
|
|
Director
of the Company (January 2009 - present)
|
|
|
|
|
Chairman,
President and CEO, Nanoproducts Corporation (2005 -
Present)
|
|
|
|
|
President
and CEO, Research Electro-Optics, Inc (2002 - 2004)
|
|
|
|
|
President
and COO, Research Electro-Optics Inc. (1997 - 2002)
|
|
|
|
|
Vice-President/General
Manager, Santa Rosa Division, Optical Coating Laboratory, Inc. (1993 -
1996)
|
|
|
|
|
Vice
President/General Manager, Commercial Products Division, Optical Coating
Laboratory, Inc. (1986 -
1993)
|
|
Class
II Directors — Term Expires in 2012
|
|
|
|
|
|
Luke
P. LaValle, Jr., 68
|
|
2005
|
|
Director
of the Company (2005 - present)
|
|
|
|
|
President
and Chief Executive Officer, American Capital Management Inc. (1980 -
present)
|
|
|
|
|
Senior
Investment Officer, United States Trust Company of NY (1967 -
1980)
|
|
|
|
|
Lt.
Colonel, US Army Reserve (Retired)
|
|
|
|
|
|
Joseph
J. Rutherford, 63
|
|
2009
|
|
Director
of the Company (January 2009 - present)
|
|
|
|
|
President
and Chief Executive Officer of the Company (January 2009 -
present)
|
|
|
|
|
Vice
President/General Manager, MRC Precision Metal Optics, subsidiary of PPGI
(July 2008 - December 2008)
|
|
|
|
|
Executive-in-Residence,
University of North Carolina, Charlotte, Defense Projects and Industrial
Relations
|
|
|
|
|
Vice
President/General Manager, Northrop Grumman Synoptics (1989 -
2006)
|
|
|
|
|
Vice
President, Marketing and Sales, Memtech Corp. (1987 -
1989)
|
|
|
|
|
|
Class
III Directors — Term Expires in 2013
|
|
|
|
|
|
Thomas
H. Lenagh, 85
|
|
1998
|
|
Director
of the Company (1998 - present)
|
|
|
|
|
Chairman
of the Board of Directors of the Company (May 2000 -August
2004)
|
|
|
|
|
Management
Consultant (1990 - present)
|
|
|
|
|
Past
Chairman and Chief Executive Officer, Systems Planning
Corporation
|
|
|
|
|
Treasurer
and Chief Investment Officer, The Ford Foundation
|
|
|
|
|
Captain,
US Navy Reserve (Retired)
|
|
|
|
|
|
Jan
M. Winston, 73
|
|
2000
|
|
Director
of the Company (2000 - present)
|
|
|
|
|
Chairman
of the Board of Directors of the Company (2009 -
present)
|
|
|
|
|
Management
Consultant (1997 - present)
|
|
|
|
|
Division
Director/General Manager IBM Corporation (1981 - 1997)
|
|
|
|
|
Executive
positions held in Development, Finance and
Marketing
|
The Board
believes that the above-mentioned experience, along with the other experience,
qualifications, attributes and skills of the Board members described in the
summary below, provide the Company with the perspectives and judgment necessary
to guide the Company’s strategies and monitor their execution:
Other
Experience, Qualification, Attributes and Skills of Board Members
The Board
considered the following attributes of its nominees in determining that each is
qualified to serve as a director of the Company.
Dennis G.
Romano
|
·
|
Global
business experience in business development as Chief Business Development
Officer for Washington Group International, a major engineering and
construction company
|
|
·
|
Over
20 years of experience in business and strategy development for U.S. and
International government clients
|
|
·
|
Senior
executive leadership for multiple business development organizations with
large international organizations
|
|
·
|
Operational
management experience and joint leadership with Company President, in a
$700 million business unit in the defense sector with Washington
Group
|
|
·
|
Extensive
background in business development, marketing and strategic development
and implementation
|
N.E. Rick
Strandlund
|
·
|
Global
business experience as former President and CEO of NanoProducts
Corporation and former VP and General Manager of Optical Coating
Laboratory, Inc.
|
|
·
|
Prior
board experience as Chairman of the Board of NanoProducts and as a former
director of Research Electro-Optics,
Inc.
|
|
·
|
Strategic
and business development leadership of two global high-tech, photonics
related manufacturing organizations
|
|
·
|
Prior
leadership experience in new product and new technology
development
|
|
·
|
MBA
in Management and Bachelor of Science in Aerospace
Engineering
|
Luke P.
LaValle, Jr.
|
·
|
Investment
professional with over 40 years of experience in analyzing, researching
and investing in smaller public growth companies with U.S. Trust Co and
American Capital Management, Inc. Senior analyst and membership
in NY Society of Security Analysts.
|
|
·
|
Extensive
board experience with V Band Corporation, a public company, from 1992 to
1995 and several private companies including Benmarl Wine Company, Ltd.
(1982-1992) and Westhampton Yacht Squadron, Ltd.
(1985-1995)
|
|
·
|
Military
experience with rank of Lieutenant Colonel, Military Intelligence, USAR
(retired) and previous assignments to Army Staff, Office of Operations,
Plans and Strategy, The Pentagon and Intelligence Officer, 101
st
Airborne Division
|
|
·
|
Business
and military experience includes analysis of tactical and strategic
issues, the formation of operational plans based upon situational
experience and the development and assessment of alternative courses of
action with practical application to planning, direction, guidance and
control of the operations of smaller sized organizations like Photonic
Products Group, Inc.
|
Joseph J.
Rutherford
|
·
|
Over
35 years experience in senior management and executive level positions in
laser industry in both operational level and CEO level roles in both
domestic and global manufacturing
|
|
·
|
Strong
understanding and extensive involvement in Research and Development,
business development and strategic planning activities in
Defense/Aeronautics and Commercial
sectors
|
|
·
|
Established
track record of developing strong team-based organizations with, high
performance culture
|
|
·
|
Proven
success in bringing focused approach on increasing shareholder value
through both organic growth and growth through
acquisition
|
Thomas H.
Lenagh
|
·
|
Chartered
Financial Analyst and Registered Attorney in
Connecticut
|
|
·
|
Experienced
investment professional, financial analyst and management
consultant
|
|
·
|
Former
President of New York Society of Security
Analysts
|
|
·
|
Former
President of Financial Analysts
Federation
|
|
·
|
Extensive
prior experience in role of director and board chairman for a number
of private and public
companies
|
Jan M.
Winston
|
·
|
Extensive
background in high technology sector and over 35 years with IBM in a
variety of managerial and executive positions primarily in the development
of new computer systems and new software products such as the personal
computer and speech recognition
software.
|
|
·
|
Diverse
experience gained through senior level roles in the areas of product
development, marketing, finance, planning and strategy, including general
management and profit and loss responsibilities in both the domestic and
international area
|
|
·
|
Education
background includes an undergraduate AB degree from Princeton University
and attendance at the Columbia Graduate School of Business
Administration
|
|
·
|
Experience
as a management consultant serving clients such as IBM, as well as smaller
manufacturing organizations, covering various projects such as product
management, strategic and financial planning, and management
systems.
|
|
·
|
Served
as Chairman of the Audit Committee, Chairman of the Compensation Committee
and is the current Chairman of the
Board
|
|
The
Board of Directors unanimously recommends that you vote FOR the election
of the Board’s nominees for director: Dennis G. Romano, N.E.
Rick Strandlund, Luke P. LaValle, Jr., Joseph J. Rutherford, Thomas H.
Lenagh and Jan M.
Winston.
|
PROPOSAL
THREE
APPROVAL
OF THE PPGI, INC.
2010
EQUITY COMPENSATION PROGRAM
The Board
of Directors of the Company (the "Board") adopted the PPGI, Inc. 2010 Equity
Compensation Program (the "Program"), subject to shareholder approval. The
Company currently maintains the 2000 Equity Compensation Program (the "2000
Program"), and it has reserved 6,000,000 shares of the Company's Common Stock
for issuance under the 2000 Program. As of March 31, 2010, there were 3,610,177
shares available for issuance under the 2000 Program, which will expire by its
terms on August 14, 2010. Approval of the Program is intended to ensure that the
Company has a new replacement equity compensation program under which it can
continue to provide stock options at levels determined appropriate by the
Compensation Committee of the Board. The following is a brief description of the
material features of the Program. Such description is qualified in its entirety
by reference to the Program, a copy of which is set forth as Exhibit B to this
Proxy Statement.
PURPOSE
The
purpose of the Program is to help attract and retain superior directors,
officers, employees and consultants of the Company and its subsidiaries and to
encourage them to devote their abilities and industry to the success of the
Company.
SHARES
AND INCENTIVES AVAILABLE UNDER THE PROGRAM
The
Program provides for grants of options, stock appreciation rights, and
restricted stock awards (collectively, the “Awards”). An aggregate of 4,000,000
shares of Common Stock are authorized for issuance under the Program, which
amount will be proportionately adjusted in the event of certain changes in the
Company's capitalization, a merger, or a similar transaction. If any of the
options (including incentive stock options) or stock appreciation rights granted
under the Program expire or terminate for any reason before they have been
exercised in full, the unissued shares subject to those expired or terminated
options and/or stock appreciation rights shall again be available for purposes
of the Program. If the conditions associated with the grant of any
restricted shares ore restricted stock units are not satisfied within the time
period required by the Award, the shares associated with such award shall again
be available for purposes of the Program. Such shares may be authorized and
unissued shares or treasury shares. As of April 16, 2010, the closing sale price
per share of the Common Stock on the OTC Bulletin Board was $1.04.
ELIGIBILITY
All
directors, officers, employees and consultants of the Company and its
subsidiaries are eligible to receive awards under the Program. The Company
estimates that as of March 31, 2010, there were approximately 80 individuals
eligible to participate in the Program.
DETERMINATION
OF ELIGIBILITY; ADMINISTRATION OF THE PROGRAM
The
Program will be administered by the Board or by a committee appointed by the
Board (the "Committee"), which to the extent required in order to satisfy the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), shall consist solely of "Outside Directors" (as defined). When
acting to administer the Program, the Board or the Committee is referred to as
the "Program Administrator." For purposes of the Program, the term "Outside
Director" shall mean a director who (a) is not a current employee of the Company
or its subsidiaries; (b) is not a former employee of the Company or its
subsidiaries who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the then current taxable year; (c)
has not been an officer of the Company or its subsidiaries; and (d) does not
receive remuneration (which shall be deemed to include any payment in exchange
for goods or services) from the Company or its subsidiaries, either directly or
indirectly, in any capacity other than as a director, except as otherwise
permitted under Code Section 162(m) and the regulations thereunder.
The
Program Administrator has full discretion and authority to: (a) interpret the
Program; (b) define its terms; (c) prescribe, amend and rescind rules and
regulations relating to the Program; (d) select eligible individuals to receive
the Awards; (e) determine when the Awards shall be granted under the Program;
(f) determine the type, number, and terms and conditions of the Awards to be
granted and the number of shares of stock to which Awards will relate; and (g)
make all other determinations that may be necessary or advisable for the
administration of the Program.
Any
action of the Program Administrator is final, conclusive and binding on all
participants in the Program and on their legal representatives, heirs and
beneficiaries. The Program provides that members of the Board or the Committee
acting as the Program Administrator will not be liable for any act or
determination taken or made in good faith in their capacities as such members
and will be fully indemnified by the Company with respect to such acts and
determinations.
TYPES
OF AWARDS
The
Program is comprised of four parts: (i) the Incentive Stock Option Plan
("Incentive Plan"), (ii) the Supplemental Stock Option Plan ("Supplemental
Plan"), (iii) the Stock Appreciation Rights Plan ("SAR Plan"), and (iv) the
Restricted Stock Award Plan.
INCENTIVE
PLAN. The Company intends that options granted pursuant to the provisions of the
Incentive Plan will qualify and will be identified as "incentive stock options"
("ISOs") within the meaning of Section 422 of the Code. The Program
Administrator may grant ISOs to purchase Common Stock to any employee of the
Company or its subsidiaries. These options shall expire on the date determined
by the Program Administrator, but they shall not expire later than 10 years from
the date the options are granted. Any ISO granted to any person who owns more
than 10% of the combined voting power of all classes of stock of the Company or
any of its subsidiaries shall expire no later than 5 years from the date it was
granted.
The
exercise price of ISOs may not be less than the fair market value of the
Company's Common Stock on the date of grant. However, the exercise price of an
ISO granted to a 10% or more stockholder may not be less than 110% of the fair
market value of the Company's Common Stock on the date of grant. The aggregate
fair market value, determined at the time of grant, of the shares of Common
Stock with respect to which ISOs are exercisable for the first time by an
optionee during any calendar year may not exceed $100,000.
SUPPLEMENTAL
PLAN. Options granted under this Supplemental Plan shall not be ISOs as defined
in Section 422 of the Code. The Program Administrator may grant supplemental
stock options to eligible participants in the Program. These options shall
expire on the date determined by the Program Administrator, but they shall not
expire later than 10 years from the date the options are granted. The exercise
price of supplemental stock options shall be determined by the Program
Administrator at the time of grant.
SAR PLAN.
The Program Administrator may grant stock appreciation rights ("SARs") to
eligible participants in the Program. These SARs may be granted either together
with supplemental stock options or ISOs ("Tandem Options") or as naked stock
appreciation rights ("Naked Rights"). Tandem Options entitle the holder to
receive from the Company an amount equal to the fair market value of the shares
of Common Stock which the recipient would have been entitled to purchase on that
date upon the surrender of the unexpired option, less the amount the recipient
would have been required to pay to purchase the shares upon the exercise of the
option. Naked Rights entitle the holder to receive the excess of fair market
value of those rights on the exercise date over the fair market value of those
rights when they are granted. Payments to recipients who exercise SARs may be
made, at the discretion of the Program Administrator, in cash or by Company
check, in shares of Common Stock with a fair market value equal to the amount of
payment, in a note in the payment amount, or any combination of these totaling
the payment amount.
RESTRICTED
STOCK AWARD PLAN. The Program Administrator may grant restricted shares of
Common Stock to eligible participants in the Program. In
addition, the Company may grant to eligible participants the right to receive
shares of Common Stock after certain vesting requirements are met (“restricted
stock units”). Each grant of restricted shares or restricted stock
units confers upon the recipient the right to receive a specified number of
shares of Common Stock of the Company contingent upon the achievement of
specified performance objectives within a specified period and/or the
recipient's continued employment with or service to the Company for a specified
period.
EXERCISE
Options
may be exercised by providing written notice to the Company, specifying the
number of shares to be purchased and accompanied by payment for such shares, and
otherwise in accordance with the applicable option agreement. Payment may be
made in cash, other shares of Common Stock or by a combination of cash and
shares. The Program Administrator may also permit cashless exercises pursuant to
procedures approved by the Program Administrator.
VESTING
OF OPTIONS
Unless
otherwise provided by the Program Administrator at the time of grant or
acceleration, stock options vest in 3 equal annual installments, with the
initial one-third vesting 12 months after the date of grant.
TRANSFERABILITY
OF AWARDS
Grants of
stock options and other awards are generally not transferable except by will or
by the laws of descent and distribution, except that the Program Administrator
may, in its discretion, permit transfers of supplemental stock options and/or
stock appreciation rights granted in tandem with such options for estate
planning or other purposes subject to any applicable restrictions under federal
securities laws. Common Stock which represents restricted shares or restricted
stock units prior to the satisfaction of the stated conditions may not be sold,
pledged, assigned or transferred in any manner.
AWARD
LIMITATIONS
The
maximum number of shares of Common Stock subject to options, separately
exercisable stock appreciation rights or other awards that an individual may
receive in any calendar year is 500,000.
ACCELERATION
OF VESTING; CHANGE IN CONTROL
The
Program Administrator may, in its discretion, accelerate the exercisability of
any option or stock appreciation right or provide that all restrictions,
performance objectives, performance objective periods and risks of forfeiture
pertaining to restricted shares and restricted stock units shall lapse upon the
occurrence of a "change in control" of the Company. Each of the following
constitutes a change in control under the Program: (i) the consummation of a
merger or consolidation where the Company is not the surviving Company or in
which the Company's shareholders before the transaction do not own 50% or more
of the common stock of the surviving corporation immediately after the
transaction; (ii) the sale or other disposition of all or substantially all of
the assets of the Company; (iii) shareholder approval for a complete liquidation
or dissolution of the Company; (iv) a purchase by a "person" within the meaning
of Sections 13(d) of the Securities Exchange Act of 1934, as amended, by a
corporation or by any other entity of any voting securities of the Company
pursuant to a tender offer or exchange offer, unless the Board previously
determined that such purchase would not be deemed a Change in Control for
purposes of the Program; (v) a purchase by a person, corporation or other entity
of beneficial ownership of at least 50% of the Company's voting securities,
unless the Board previously determined that such purchase would not be deemed a
Change in Control for purposes of the Program; or (vi) if the individuals who
were members of the Board when the Program was adopted (the "Original
Directors"), who are thereafter elected to the Board and whose election, or
nomination for election, to the Board was approved by the Original Directors
then still in office ("Additional Original Directors"), and who thereafter are
elected to the Board and whose election or nomination for election to the Board
was approved by the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.
If a
change in control occurs pursuant to a merger or consolidation or sale of assets
as described above, then each outstanding Award shall be assumed or an
equivalent benefit shall be substituted by the entity determined by the Board to
be the successor corporation unless the successor does not so agree at least 15
days prior to the merger, consolidation or sale of assets. In that instance,
each Award shall be deemed to be fully vested and exercisable and the
restrictions or conditions associated with each restricted stock award and
restricted stock unit award not so assumed or substituted shall immediately
lapse or be deemed satisfied immediately prior to the merger or consolidation or
sale of assets and the shares of Common Stock associated with such restricted
stock award or restricted stock unit award shall be issued and delivered to the
recipient of such Award.
SUBSTITUTE
OPTIONS
In the
event that the Company, directly or indirectly, acquires another entity, the
Program Administrator may authorize the issuance of stock options (“substitute
options”) to the individuals performing services for the acquired entity in
substitution of stock options previously granted to those individuals in
connection with their performance of services for such entity upon such terms
and conditions as the Program Administrator shall determine, taking into account
the conditions of Code Section 424(a), as from time to time amended or
superseded, in the case of a substitute option that is intended to be an
incentive stock option within the meaning of Section 422 of the
Code. Shares of Common Stock underlying substitute stock options
shall not constitute shares of Common Stock issued pursuant to the Plan for any
purpose.
TERMINATION,
RESCISSION AND RECAPTURE OF AWARDS
In the
event the recipient of an Award engages in certain specified activities, either
during employment or service with the Company or after service with the Company
terminates for any reason, the recipient is considered to have acted contrary to
the long-term interests of the Company, and the Company may terminate any
outstanding, unexercised, unexpired or unpaid Awards (“Termination”), rescind
any exercise, payment or delivery pursuant to the Award (“Rescission”), or
recapture any Common Stock (whether restricted or unrestricted) or proceeds from
the recipient’s sale of shares of Common Stock issued pursuant to the Award
(“Recapture”), if the recipient does not comply with certain
conditions. Such specified activities include, but are not limited
to, (i) disclosure by the recipient to anyone outside the Company of any
proprietary or confidential information or material, as those or other similar
terms are used in any applicable patent, confidentiality, inventions, secrecy,
or other agreement between the recipient and the Company with regard to any such
proprietary or confidential information or material; (ii) assisting any
organization that is or is working to become competitive with the Company; (iii)
solicitation of non-administrative employees of the Company to terminate
employment with the Company; (iv) engaging in activities which are materially
prejudicial to or in conflict with the interests of the Company.
RECOUPMENT
OF AWARDS
The
Program Administrator may require that each recipient agree to reimburse the
Company for all or any portion of any Awards granted under the Plan
(“Reimbursement”) if (i) the granting vesting or payment of such Award (or
portion thereof) was predicated upon the achievement of certain financial
results, (ii) the recipient either benefited from a calculation that later
proved to be materially inaccurate, or engaged in one or more material acts of
fraud or misconduct that caused or partially caused the need for a financial
restatement by the Company or any material Subsidiary; or (iii) a lower
granting, vesting, or payment of such Award would have occurred based upon the
conduct described in (ii) above. In each such instance, the Program
Administrator will require Reimbursement, Termination, or Rescission of, or
Reimbursement relating to, any such Award granted to a recipient, plus a
reasonable rate of interest.
EFFECT
OF TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR OR CONSULTANT
Except as
otherwise provided in any agreement evidencing an award or option:
(a) in
the event that a participant's employment or service with the Company is
terminated for "cause," any outstanding options and awards of such participant
shall terminate immediately;
(b) in
the event that a participant's employment or service with the Company terminates
due to death or disability (within the meaning of Section 22(e)(3) of the Code),
all options and stock appreciation rights of such participant (other than Naked
Rights) will lapse unless exercised, to the extent exercisable at the date of
termination, within one year following such date of termination, all restricted
share and restricted stock unit awards for which all conditions of the Award
have been satisfied (other than continued employment or status as a consultant)
shall be paid in full (any remaining awards of such participant will be
forfeited), and all Naked Rights shall be fully paid by the Company as of the
date of death or disability; and
(c) in
the event that a participant's employment or service with the Company terminates
for any other reason: (i) any outstanding options and awards (other than Naked
Rights) shall be exercisable, to the extent exercisable on the date of
termination, for a period of 90 days after the date of such termination if the
recipient resigned, and 12 months after the date of such termination if it was
an involuntary termination other than for cause; (ii) all Naked Rights not
payable on the date of termination shall terminate immediately; and (iii)
restricted share and restricted stock unit awards shall terminate immediately
unless the conditions of the Award have been satisfied.
AMENDMENT,
SUSPENSION OR TERMINATION OF THE PROGRAM
The
Program will terminate on the day preceding the tenth anniversary of its
adoption, unless sooner terminated by the Board. Prior to that date, the Program
Administrator may amend, modify, suspend or terminate the Program, provided,
however, that (a) stockholder approval is obtained when required by law, and (b)
no such amendment, modification, suspension or termination by the Program
Administrator shall adversely affect the rights of participants, without their
consent, under any outstanding Award.
FEDERAL
INCOME TAX CONSEQUENCES OF OPTIONS AND AWARDS
BECAUSE
OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE APPLICATION OF VARIOUS
STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX CONSEQUENCES IS GENERAL
IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX MATTERS. PARTICIPANTS OF THE
PROGRAM ARE ADVISED TO CONSULT THEIR OWN PERSONAL TAX ADVISORS. IN ADDITION, THE
FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS OF THE INTERNAL REVENUE CODE AS
CURRENTLY IN EFFECT, EXISTING LAWS, JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS,
REGULATIONS AND PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO
CHANGE.
NOTHING
CONTAINED IN THIS DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS IS
INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSES OF (I)
AVOIDING TAX-RELATED PENALTIES UNDER THE INTERNAL REVENUE CODE OR (II)
PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTIONS OR
TAX-RELATED MATTERS ADDRESSED HEREIN.
ISOs. In
general, an optionee granted an ISO will not recognize taxable income upon the
grant or the exercise of the ISO (assuming the ISO continues to qualify as such
at the time of exercise). The excess of the fair market value of shares of
Common Stock received upon exercise of the ISO over the exercise price is,
however, a tax preference item which can result in imposition of the alternative
minimum tax. The optionee's "tax basis" in the shares of Common Stock acquired
upon exercise of the ISO generally will be equal to the exercise price paid by
the optionee, except in the case in which the optionee pays the exercise price
by delivery of the shares of Common Stock otherwise owned by the optionee (as
discussed below).
If the
shares acquired upon the exercise of an ISO are held by the optionee for the
"ISO holding period" of at least two years after the date of grant and one year
after the date of exercise, the optionee will recognize long-term capital gain
or loss upon the sale of the ISO Shares equal to the amount realized upon such
sale minus the optionee’s tax basis in the shares, and such optionee will not
recognize any taxable ordinary income with respect to the ISO. As a general
rule, if an optionee disposes of the shares acquired upon exercise of an ISO
before satisfying both holding period requirements (a "disqualifying
disposition"), the gain recognized on the disposition will be taxed as ordinary
income equal to the lesser of (i) the fair market value of the shares at the
date of exercise of the ISO minus the optionee’s tax basis in the shares, or
(ii) the amount realized upon the disposition minus the optionee’s tax basis in
the shares. If the amount realized upon a disqualifying disposition is greater
than the amount treated as ordinary income, the excess amount will be treated as
capital gain for federal income tax purposes. Certain transactions are not
considered disqualifying dispositions including certain exchanges, transfers
resulting from the optionee’s death, and pledges and hypothecations of ISO
Shares.
In
general, if an optionee, in exercising an incentive stock option, tenders shares
of Common Stock in partial or full payment of the option price, no gain or loss
will be recognized on the tender. However, if the tendered shares
were previously acquired upon the exercise of another incentive stock option and
the tender is within two years from the date of grant or one year after the date
of exercise of the other option, the tender will be a disqualifying disposition
of the shares acquired upon exercise of the other option.
SUPPLEMENTAL
STOCK OPTION PLAN. No income will be recognized to the optionee at the time of
the grant of an option, nor will the Company be entitled to a tax deduction at
that time. Upon the exercise of a supplemental stock option, the optionee will
be subject to ordinary income tax equal to the excess of the fair market value
of the stock on the exercise date over the exercise price. The Company will be
entitled to a tax deduction in an amount equal to the ordinary income realized
by the optionee. If shares acquired upon such exercise are held for more than
one year before disposition, any gain on disposition of such shares will be
treated as long-term capital gain.
STOCK
APPRECIATION RIGHT. Neither the holder of a Tandem Option nor the holder of a
Naked SAR will be deemed to receive any income at the time a SAR is granted.
When any part of a SAR is exercised, the optionee will be deemed to have
received ordinary income on the exercise date in an amount equal to the sum of
the fair market value of shares and cash received. The Company will be entitled
to a corporate income tax deduction in an equal amount. Income recognized by an
optionee upon the exercise of a SAR will be subject to federal withholding
taxes.
RESTRICTED
STOCK AWARDS. Generally, absent an election to be taxed currently
under Section 83(b) of the Code (a "Section 83(b) Election"), there will be no
federal income tax consequences to either the recipient or our Company upon the
grant of a restricted stock award. At the expiration of the
restriction period and the satisfaction of any other restrictions applicable to
the restricted shares, the recipient will recognize ordinary income and our
Company generally will be entitled to a corresponding deduction equal to the
fair market value of the Common Stock at that time. If a Section
83(b) Election is made within 30 days after the date the restricted stock award
is granted, the recipient will recognize an amount of ordinary income at the
time of the receipt of the restricted shares, and our Company generally will be
entitled to a corresponding deduction, equal to the fair market value
(determined without regard to applicable restrictions) of the shares at such
time. If a Section 83(b) Election is made, no additional income will
be recognized by the recipient upon the lapse of restrictions on the shares (and
prior to the sale of such shares), but, if the shares are subsequently
forfeited, the recipient may not deduct the income that was recognized pursuant
to the Section 83(b) Election at the time of the receipt of the
shares.
RESTRICTED
STOCK UNIT AWARDS. The recipient of a restricted stock unit will
recognize ordinary income as and when the units vest. The amount of
the income will be equal to the fair market value of the shares of our Common
Stock issued at that time, and our Company will be entitled to a corresponding
deduction. The recipient of a restricted stock unit will not be
permitted to make a Section 83(b) Election with respect to such
award.
PERSONS
SUBJECT TO LIABILITY UNDER SECTION 16(b) OF THE EXCHANGE ACT. Special rules
apply under the Code which may delay the timing and alter the amount of income
recognized with respect to awards granted to persons subject to liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such persons include directors, "officers" (as defined under Section 16
of the Exchange Act) and holders of more than 10% of the Company's outstanding
Shares.
COMPENSATION
DEDUCTION LIMITATION. Code Section 162(m) generally disallows a public company's
tax deduction for compensation paid to the Chief Executive Officer, the Chief
Financial Officer or to any of the other three most highly compensated officers,
in excess of $1.0 million in any tax year. Compensation that qualifies as
"performance-based compensation" is excluded from the $1.0 million deductibility
cap, if various requirements are satisfied. The Company intends that options and
certain other awards granted to employees whom the Committee expects to be
covered employees at the time a deduction arises in connection with such awards,
qualify as "performance-based compensation," so that such awards will not be
subject to the deductibility cap.
WITHHOLDING.
If the Company determines that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law is required as a
condition of, or in any connection with, the exercise or delivery or purchase of
shares pursuant to the exercise of any option, stock appreciation right or
performance share under the Program, then the exercise of the option, stock
appreciation right or performance share shall not be effective unless the
withholding tax or other withholding liabilities shall have been satisfied in a
manner acceptable to the Company.
The
affirmative vote of a majority of the votes cast by the holders of shares
entitled to vote thereon is required for approval of Proposal Three. If the
stockholders do not vote for approval, since the 2000 Program will expire in
2010, no plan will be in place for an equity compensation program. Proxies will
be voted in accordance with the specifications marked thereon, and, if no
specification is made, will be voted "FOR" the approval of the
Program.
The
Board of Directors unanimously recommends that you vote FOR the proposal
to approve the Company’s 2010 Equity Compensation
Program.
|
PROPOSAL
FOUR
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Holtz Rubenstein Reminick, LLP served
as the Company’s independent registered public accounting firm during the fiscal
year ended December 31, 2009 and has been appointed by the Company’s Audit
Committee to serve as the Company’s independent registered accountants for the
current fiscal year.
The
Company’s Audit Committee has the responsibility to select, retain and oversee
the work of outside auditors and, when appropriate, to replace the outside
auditors. Stockholder ratification of the appointment of Holtz Rubenstein
Reminick, LLP as the Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2010 is not required by law or by the
Company’s Certificate of Incorporation or by-laws. However, the Board of
Directors is submitting the selection of Holtz Rubenstein Reminick, LLP to the
Company’s stockholders for ratification as a matter of good corporate governance
and practice. If the stockholders fail to ratify the appointment, the Company
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Company may appoint a different independent registered public
accounting firm during the year if the Audit Committee of the Board of Directors
determines that such a change would be in the best interests of the Company and
its stockholders.
A
representative of Holtz Rubenstein Reminick, LLP is expected to be present at
the Annual Meeting, will make such statements as Holtz Rubenstein Reminick, LLP
may desire and will be available to respond to appropriate questions from the
shareholders.
The
Board of Directors unanimously recommends that you vote FOR the proposal
to ratify the appointment of Holtz Rubenstein Reminick, LLP as the
Company’s independent registered public accounting firm during the fiscal
year ending December 31,
2010.
|
COMPENSATION
OF DIRECTORS
Compensation
for non-employee Directors’ consists of two components: cash (i.e. meeting
attendance fees, retainer and cash bonuses) and awards under the Company’s 2000
Equity Compensation Program. Under the 2000 Equity Compensation
Program, stock option grants and restricted stock unit grants may be made by the
Compensation Committee. Equity-based grants are intended to align the
interests of the Company’s directors with that of other
shareholders. The Company does not require its directors to own
stock.
Fees paid
to non-employee directors were $500 during fiscal year 2009 for each board or
committee meeting attended in person, and $250 for each meeting in which they
participated via telephone.
In
addition, each non-employee director is paid an annual retainer fee, in
quarterly installments. For 2009, the annual retainer was $15,000 for
the Chairman and $10,000 for each of the other outside Directors.
Directors,
who are also employees of the Company, do not receive any additional fees for
such services.
The table
that follows provides information on components of Director Compensation in
2009.
Director
Compensation in Fiscal Year 2009
Name
|
|
Fees earned or
paid in cash ($)
|
|
|
Stock Unit
Awards($)
(1)(2)
|
|
|
Option Awards ($)
(1)(3)
|
|
|
Total ($)
|
|
Luke
P. LaValle, Jr.
|
|
|
17,750
|
|
|
|
—
|
|
|
|
13,000
|
|
|
|
30,750
|
|
Thomas
H. Lenagh
|
|
|
17,250
|
|
|
|
—
|
|
|
|
51,750
|
|
|
|
69,000
|
|
Dennis
G. Romano (4)
|
|
|
4,598
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
9,598
|
|
N.E.
Rick Strandlund
|
|
|
16,000
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
21,000
|
|
Jan
M. Winston
|
|
|
20,909
|
|
|
|
—
|
|
|
|
13,000
|
|
|
|
33,909
|
|
John
C. Rich (5)
|
|
|
9,272
|
|
|
|
—
|
|
|
|
8,000
|
|
|
|
17,272
|
|
Daniel
Lehrfeld (6)
|
|
|
1,103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,103
|
|
(1)
|
The
value of stock option awards and restricted stock unit grants is
calculated using the aggregate grant date fair value of the stock option
awards or restricted stock unit grants computed in accordance with FASB
ASC Topic 718. Unless otherwise indicated, stock option awards
and restricted stock unit grants vest over three years, and accrue
proportionally over the three year vesting
period.
|
(2)
|
The
aggregate fair value of restricted stock unit grants is the product of the
number of units granted times the closing price of common stock of the
Company on the date of the grant. No stock unit awards were
made in 2009. In 2009, the number of restricted stock unit
grants which vested and which resulted in the issuance of an equal number
of shares of common stock to each non-employee director were as
follows: Luke P. LaValle, Jr., 834; Thomas H.
Lenagh, 834; Jan M. Winston, 834; and John C. Rich,
2,500. At fiscal year end, the aggregate number of grants
outstanding for each non-employee director then serving as a director was
as follows: Luke P. LaValle, Jr., 1,666; Thomas H. Lenagh,
1,666; and Jan M. Winston, 1,666.
|
(3)
|
The
value of stock option awards is computed in accordance with FASB ASC Topic
718. These amounts reflect the aggregate grant date fair value
of the awards. At fiscal year end, the aggregate number of
option awards outstanding for each non-employee director then serving as a
director was as follows: Luke P. LaValle, Jr., 18,611; Thomas
H. Lenagh, 158,611; Jan M. Winston, 51,611; Dennis G. Romano 5,000; and
N.E. Rick Strandlund, 5,000.
|
(4)
|
Mr.
Romano was appointed to the Board of Directors on September 14, 2009 to
serve under this appointment until the election of directors at the Annual
Meeting of Shareholders.
|
(5)
|
Mr.
Rich, the former Chairman, did not stand for re-election at the Annual
Meeting of Shareholders on May 13,
2009.
|
(6)
|
Mr.
Lehrfeld, the former President and Chief Executive of the Board, retired
as of December 31, 2009 but continued to serve as a non-employee director
until his resignation on January 23,
2009.
|
THE
BOARD OF DIRECTORS AND ITS COMMITTEES
Board of
Directors
Composition
of the Board
The Board
of Directors in 2009 consisted of five independent directors, and the Company’s
President and CEO, Mr. Joseph J. Rutherford. The Board of Directors
has determined that each of its five outside directors, Mr. N.E. Rick
Strandlund, Mr. Dennis G. Romano, Mr. Thomas H. Lenagh, Mr. Jan M. Winston, and
Mr. Luke P. LaValle, Jr., has no material relationship with the Company (other
than as director) and is therefore “independent” within the meaning of the
current listing standards of the Nasdaq National Market and the requirements of
the Sarbanes Oxley Act. In its annual review of director
independence, the Board of Directors considers all commercial, banking,
consulting, legal, accounting or other business relationships any director may
have with the Company. The Board of Directors considers a “material
relationship” to be one that impairs or inhibits, or has the potential to impair
or inhibit, a director’s exercise of critical and disinterested judgment on
behalf of the Company and its shareholders. When assessing the
“materiality” of a director’s relationship with the Company, the Board of
Directors considers all relevant facts and circumstances not only from the
standpoint of the director in his or her individual capacity, but also from the
standpoint of the persons to whom the director is related and organizations with
which the director is affiliated.
Mr.
Rutherford does not serve on any Committees of the Board. Mr. Jan M.
Winston served as Chairman of the Board during the year. The Board
met nine times during fiscal year 2009 with all members in
attendance. Board members are encouraged, but not required by any
specific Board policy, to attend the Company’s Annual Meeting. During
2009, each non-employee director of the Company was also a member of each
Committee of the Board of Directors and each attended all of the meetings of the
Board and the respective committees of the Board on which they served in fiscal
2009. On September 9, 2009 the Board appointed Mr. Dennis G. Romano
to fill the seat left vacant by the departure of John C. Rich in May of
2009.
Board
Leadership Structure
The Board
does not have a policy on whether or not the roles of Chief Executive Officer
and Chairman of the Board should be separate and, if they are to be separate,
whether the Chairman of the Board should be selected from the non-employee
Directors or be an employee. The Board believes that it should be free to make a
choice from time to time in any manner that is in the best interests of the
Company and its shareholders.
Currently,
Mr. Winston serves as the Chairman of the Board and Mr. Rutherford serves as a
Director and Chief Executive Officer. The Board of Directors believes this is
the most appropriate structure for the Company at this time because it makes the
best use of Mr. Winston’s skills and experience, including 10 years as a
Director of the Company.
Board’s
Role in the Oversight of Risk Management
Companies
face a variety of risks, including credit risk, liquidity risk, and operational
risk. In fulfilling its risk oversight role, the Board focuses on the
adequacy of the Company’s risk management process and overall risk management
system. The Board believes an effective risk management system will
(1) adequately identify the material risks that the Company faces in a timely
manner, (2) implement appropriate risk management strategies that are responsive
to the Company’s risk profile and specific material risk exposures, (3)
integrate consideration of risk and risk management into business
decision-making throughout the Company, and (4) include policies and procedures
that adequately transmit necessary information with respect to material risks to
senior executives and, as appropriate, to the Board or relevant
committee.
The Audit
Committee has been designated to take the lead in overseeing risk management at
the Board level. Accordingly, the Audit Committee schedules time for
periodic review of risk management, in addition to its other
duties. In this role, the Audit Committee receives reports from
management and other advisors, and strives to generate serious and thoughtful
attention to the Company’s risk management process and system, the nature of the
material risks the Company faces, and the adequacy of the Company’s policies and
procedures designed to respond to and mitigate these risks.
Although
the Board’s primary risk oversight has been assigned to the Audit Committee, the
full Board also periodically receives information about the Company’s risk
management system and the most significant risks that the Company
faces. This is principally accomplished through Audit Committee
reports to the Board and summary versions of the briefings provided by
management and advisors to the Committee.
In
addition to the formal compliance program, the Board and the Audit Committee
encourage management to promote a corporate culture that understands risk
management and incorporates it into the overall corporate strategy and
day-to-day business operations. The Company’s risk management
structure also includes an ongoing effort to assess and analyze the most likely
areas of future risk for the Company. As a result, the Board and
Audit Committee periodically ask the Company’s executives to discuss the most
likely sources of material future risks and how the Company is addressing any
significant potential vulnerability.
Audit
Committee
The
Company has a separately designated standing Audit Committee. The
Board of Directors has determined that the members of the Audit Committee each
satisfy the requirements for independence under Section 301 of the
Sarbanes-Oxley Act, as well as the independence standards of the NASDAQ National
Market. In 2009, the Audit Committee was comprised of all
active outside Directors. Luke P. LaValle, Jr. (Chairman), Thomas H.
Lenagh and Jan M. Winston served as Audit Committee members for the full year.
John C. Rich served until his retirement in May 2009. N.E. Rick
Strandlund and Dennis G. Romano joined the Committee as of their respective date
of appointment to the Board of Directors. The Audit Committee is
empowered by the Board of Directors to, among other things, serve as an
independent and objective party to monitor the Company’s financial reporting
process, internal control system and disclosure control system, review and
appraise the audit efforts of the Company’s independent accountants, assume
direct responsibility for the appointment, compensation, retention and oversight
of the work of the outside auditors and for the resolution of disputes between
the outside auditors and the Company’s management regarding financial reporting
issues, and provide an open avenue of communication among the independent
accountants, financial and senior management, and the Company’s Board of
Directors. The Audit Committee charter is attached as Exhibit A to
the Company’s 2009 Proxy Statement, filed with the SEC on April 20,
2010.
The Audit
Committee met four times during 2009 with all members in attendance at all of
the meetings.
Audit
Committee Financial Expert
The Board
of Directors of the Company has determined that Luke P. LaValle, Jr. is an
“audit committee financial expert” as such term is defined by the
SEC.
Compensation
Committee
The
Compensation Committee is comprised of all of the independent, non-management
directors, and is responsible for establishing appropriate salaries and bonuses
for all executive officers and senior management of the Company.
The
Compensation Committee has the responsibility of granting equity-based incentive
compensation (i.e. stock options and grants of restricted stock units) to
eligible employees including the executive officers, and to its
directors. The Compensation Committee duties also include
administering and interpreting the Photonic Products Group, Inc. 2000
Equity Compensation Program (“the Stock Option Plan”). The duties
relating to the Company’s Stock Option Plan include selecting from eligible
employees those persons to whom awards will be granted and determining the type
of award, the number of shares to be included in each award, any restrictions
for some or all of the shares subject to the award and the award
price. The Compensation Committee reviews and approves all matters
regarding the compensation of the executive officers and other executives of the
Company. The Compensation Committee has no charter.
The
Compensation Committee has the authority to hire independent advisors to help
fulfill its duties.
In 2009, the Compensaton
Committee was comprised of all active outside Directors.
In
May 2009, N.E. Rick Strandlund replaced Jan Winston as the Chairman of the
Compensation Committee.
The
Compensation Committee met five times during the year with all members in
attendance.
Nominating
Committee
During
2009, the Nominating Committee was comprised of all active outside
directors. The Nominating Committee met once during the year with all
members in attendance. The Committee strives to compose the Board of
Directors with a collection of individuals who bring a variety of complementary
skills which, as a group, will possess the appropriate skills and experience to
oversee the Company’s business. Accordingly, although diversity may be a
consideration in the Committee’s process, the Committee and the Board of
Directors do not have a formal policy with regard to the consideration of
diversity in identifying director nominees. The Nominating Committee charter is
attached as Exhibit B to the Company’s 2009 Proxy Statement, filed with the SEC
on April 20, 2010.
Procedures
for Considering Nominations Made by Stockholders
The
Nominating Committee’s charter describes procedures for nominations to be
submitted by stockholders and other third-parties, other than candidates who
have previously served on the Board or who are recommended by the
Board. The charter states that a nomination must be delivered to the
Secretary of the Company at the principal executive offices of the Company not
later than the close of business on the ninetieth (90th) day nor earlier than
the close of business on the one hundred twentieth (120
th
) day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that if the date of the annual meeting is more than thirty days before
or more than sixty days after such anniversary date, notice to be timely must be
so delivered not earlier than the close of business on the one hundred twentieth
day prior to such annual meeting and not later than the close of business on the
later of the ninetieth day prior to such annual meeting or the close of business
on the tenth day following the day on which public announcement of the date of
such meeting is first made by the Company. The public announcement of
an adjournment or postponement of an annual meeting will not commence a new time
period (or extend any time period) for the giving of a notice as described
above. The charter requires a nomination notice to set forth as to
each person whom the proponent proposes to nominate for election as a director:
(a) all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected), and (b) information that will enable the Nominating Committee to
determine whether the candidate satisfies the criteria established by the
Nominating Committee, as described below.
Qualifications
The
charter describes the minimum qualifications for nominees and the qualities or
skills that are necessary for directors to possess. Each
nominee:
|
·
|
must
satisfy any legal requirements applicable to members of the
Board;
|
|
·
|
must
have business or professional experience that will enable such nominee to
provide useful input to the Board in its
deliberations;
|
|
·
|
must
have a reputation in the Company’s industry, for honesty and ethical
conduct;
|
|
·
|
must
have a working knowledge of the types of responsibilities expected of
members of a board of directors of a public corporation;
and
|
|
·
|
must
have experience, either as a member of the board of directors of another
public or private company or in another capacity that demonstrates the
nominee’s capacity to serve in a fiduciary
position.
|
Identification
and Evaluation of Candidates for the Board
Candidates
to serve on the Board will be identified from all available sources, including
recommendations made by stockholders. The Nominating Committee’s
charter provides that there will be no differences in the manner in which the
Nominating Committee evaluates nominees recommended by stockholders and nominees
recommended by the Committee or management, except that no specific process
shall be mandated with respect to the nomination of any individuals who have
previously served on the Board. The evaluation process for
individuals other than existing Board members will include:
|
·
|
a
review of the information provided to the Nominating Committee by the
proponent;
|
|
·
|
a
review of reference letters from at least two sources determined to be
reputable by the Nominating Committee;
and
|
|
·
|
a
personal interview of the
candidate;
|
together
with a review of such other information as the Nominating Committee shall
determine to be relevant.
Third
Party Recommendations
In
connection with the 2010 Annual Meeting, the Nominating Committee did not
receive any nominations from any stockholder or group of stockholders which
owned more than 5% of the Company’s Common Stock for at least one
year.
Communication
with the Board
The Board
has established a procedure that enables stockholders to communicate in writing
with members of the Board. Any such communication should be addressed
to the Company’s Secretary and should be sent to such individual c/o the Company
at its principal place of business at 181 Legrand Ave, Northvale, NJ
07647. Any such communication must state, in a conspicuous manner,
that it is intended for distribution to the entire Board. Under the
procedures established by the Board, upon the Secretary’s receipt of such
communication, the Company’s Secretary will send a copy of such communication to
each member of the Board, identifying it as a communication received from a
stockholder. Absent unusual circumstances, at the next regularly
scheduled meeting of the Board held more than two days after such communication
has been distributed, the Board will consider the substance of any such
communication.
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
Executive Officers of the
Registrant
The
following table sets forth the name and age of each executive officer of the
Company, the period during which each such person has served as an executive
officer and the positions with the Company held by each such
person:
Name and Age
|
|
Since
|
|
Position With the Company
|
|
|
|
|
|
Joseph
J. Rutherford, 63
|
|
2009
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
William
J. Foote, 59
|
|
2006
|
|
Chief
Financial Officer, Corporate Secretary and Treasurer
|
|
|
|
|
|
William
D. Brucker, 62
|
|
2007
|
|
Vice
President Human Resources and Administration
|
|
|
|
|
|
Miro
Dosoudil, 46
|
|
2008
|
|
Vice
President of Operations
|
|
|
|
|
|
John
R. Ryan, 40
|
|
2007
|
|
Vice
President of Sales and
Marketing
|
On
January 1, 2009, Mr. Joseph J. Rutherford was appointed President and Chief
Executive officer of the Company. Mr. Rutherford has spent more than
30 years as an executive in the optics industry and is an experienced leader in
optical component development and manufacturing businesses serving customers in
both defense and commercial sectors of the photonics industry. Prior to joining
the Company, from 1989 through 2006, he was VP/GM of Charlotte, NC-based
Synoptics, a subsidiary successively of Litton and Northrop Grumman corporations
and an industry leader in laser crystal products and related optical
components. Prior to that, he held executive level sales and
marketing positions within Memtech Corporation, Material Progress Corporation,
and Allied Corporation. Mr. Rutherford holds a Bachelor of Science
degree in Education from Trenton State College.
William
J. Foote joined the Company in May 2006 and was appointed its Chief Financial
Officer and Corporate Secretary on May 16, 2006. In May, 2009, he was
appointed to the position of Treasurer. Mr. Foote served as
Chief Financial Officer of INSL-X Products Corporation, a private paint and
coatings manufacturer, from 2002 through 2005. From 2000 to 2002, he
was CFO of ASD Group, Inc., a publicly held contract manufacturer serving
the OEM marketplace in the high-tech sector. Prior to that, from 1990
through 1999, Mr. Foote held several executive positions including Director and
Vice-President of Finance positions with Benjamin Moore & Co., a large
public paint and coatings manufacturer. Earlier in his career,
Mr. Foote served in various senior financial roles with a number of
manufacturing firms in Canada. Mr. Foote is both a Certified
Public Accountant and a Chartered Accountant (Canada). His past
experience includes working in the audit area with the public accounting firm of
KPMG (Canada). Mr. Foote holds a Bachelor of Arts degree from
Carleton University in Ottawa and a Masters Degree in Accounting from the
University of British Columbia.
William
D. Brucker joined the Company in 2000 as Director of Human
Resources. In 2006 he was appointed Vice President of Human Resources
and Administration. Prior to joining the Company, Mr. Brucker held
corporate divisional HR leadership responsibilities with Hughes
Aircraft/Raytheon, RJR/Nabisco, Proctor & Gamble, and The Journal of
Commerce. In addition to competency in all the classic HR disciplines
including regulatory compliance, he has experience in multi-site organizations
and facility/operational integration and transition. Mr. Brucker
holds a BA degree from Salem College. Mr. Brucker was appointed an
officer of the Company on January 19, 2007.
Miroslav
Dosoudil joined the Company as Director of Manufacturing Engineering in 2000 and
has successively held the positions of Director of Operations for Laser Optics,
Vice-President of Operations for Northvale. Prior to joining PPGI, he
held optical manufacturing engineering positions with Circon, Tirolit and Meopta
(Czech Republic). Mr. Dosoudil holds various degrees in science and
engineering including a Doctor of Science and Physical Electronics and Optics
from the University of Palackiana in the Czech Republic.
John R.
Ryan joined the Company in 2007 as Corporate Vice President of Sales and
Marketing. Mr. Ryan served since 2005 as Director of Sales for
Labsphere, Inc., a privately held manufacturer of electro-optical test and
measurement products. He was a key member of their executive team,
responsible for all domestic and international sales channels. From
2003 through 2005, Mr. Ryan was Director of North American Sales for Xtera
Communications, Inc., a supplier of DWDM systems. Earlier, from
1993 through 2003, he held positions as Regional Sales Manager for Photon
Dynamics and Electro Scientific Industries, manufacturers of optical inspection
equipment and laser-based process equipment,
respectively. Mr. Ryan received his Bachelor of Science degree
from Merrimack College in Business Administration and Marketing in
1992.
Each of
the executive officers has been elected by the Board of Directors to serve as an
officer of the Company until the next election of officers, as provided by the
Company’s by-laws.
Summary of Cash and Certain
Other Compensation
The
following Summary Compensation Table sets forth, for the years ended
December 31, 2009 and 2008, the compensation paid by the Company and its
Subsidiaries, with respect to the Company’s Chief Executive Officer and two
other highest paid executives.
Summary
Compensation Table
Name & Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
(2)
|
|
|
Option
Awards
($)
(1)
|
|
|
Stock
Awards
($)
(1)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Joseph
J. Rutherford,
|
|
2009
|
|
|
180,000
|
|
|
|
—
|
|
|
|
75,830
|
|
|
|
—
|
|
|
|
—
|
|
|
|
255,830
|
|
President
and CEO
|
|
2008
|
|
|
52,771
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,300
|
|
|
|
7,500
|
|
|
|
75,571
|
|
(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
J. Foote, CFO,
|
|
2009
|
|
|
141,000
|
|
|
|
—
|
|
|
|
14,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
155,300
|
|
Corporate
Secretary
|
|
2008
|
|
|
141,000
|
|
|
|
4,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
155,000
|
|
and
Treasurer(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
R. Ryan,
|
|
2009
|
|
|
150,000
|
|
|
|
—
|
|
|
|
16,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166,300
|
|
VP
Sales and
|
|
2008
|
|
|
150,000
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,000
|
|
|
|
186,000
|
|
Marketing
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
aggregate grant date fair value of option awards and stock awards are
computed in accordance with FASB ASC Topic 718, in accordance with new SEC
rules. In prior years, the applicable rules required disclosure
of the dollar amount recognized for financial statement
purposes. Accordingly, the amounts in the Option Awards and
Stock Awards columns for 2008 have been revised to conform to the new
disclosure requirements. No stock awards were granted to these individuals
in 2009.
|
(2)
|
Represents
cash bonus amounts accrued and expensed in the 2008 fiscal year and paid
in the first quarter of the 2009.
|
(3)
|
Mr.
Rutherford’s compensation for 2008 reflects that portion of his annualized
salary of $140,000 for that year, having joined the Company on July 30,
2008, in the position of Vice President and General Manager of the
Company’s Sarasota operations. On July 31, 2008, Mr. Rutherford
also received a stock grant of 6,000 shares with a fair value of $2.55 per
share which was the closing market price on the date of the grant which
had an aggregate fair value of approximately $15,300. These
stock awards vest over three years, one-third upon each anniversary of the
grant date. Included in All Other Compensation, is a $7,500
living allowance paid in 2008, to Mr.
Rutherford.
|
(4)
|
Effective
January 1, 2009, Mr. Rutherford was appointed President and CEO of the
Company. Mr. Rutherford’s annual salary is
$180,000. He was entitled to participate in the Company’s 2000
Equity Compensation Program and was eligible for an incentive compensation
cash award in 2009, targeted at $50,000 based on performance objectives to
be established during the year by the Company’s Compensation Committee. No
incentive compensation cash award was awarded in 2008. Also, on
January 1, 2009, Mr. Rutherford received a sign-on grant of
17,143 stock options with a term of 10 years and an exercise price of
$1.75 which was the closing market price on the date of the grant and an
aggregate fair value of approximately $29,830. These stock
options will vest over three years, one-third upon each anniversary of the
grant. On January 22, 2009, he was also granted a 10 year stock
option of 6,897 shares with an exercise price of $1.75 for achievements in
2008. These stock options will vest over three years, one-third
upon each anniversary of the grant and had an aggregate fair value of
$12,000. On December 28, 2009, Mr. Rutherford received an award
of 34,000 shares with a 10 year term and an exercise price of $1.00 for
achievements in 2009. These stock options will vest over three
years, one-third upon each anniversary of the grant and had an aggregate
fair value of $34,000.
|
(5)
|
Mr. Foote was
granted a 10 year stock option of 4,598 shares with an exercise price of
$1.75 on January 22, 2009 for achievements in 2008.
These stock
options will vest over three years, one-third upon each anniversary date
of the grant and had an aggregate fair value of $8,000. In
addition, Mr. Foote was awarded
a 10 year stock
option of 6,300 shares with an exercise price of $1.00 on December 28,
2009 for achievements in 2009.
These stock options will vest over
three years, one-third upon each anniversary date of the grant and had an
aggregate fair value of $6,300.
|
(6)
|
Included
in Mr. Ryan’s other compensation for 2008 was a $10,000 sign-on bonus of
$10,000 paid in 2008 but pursuant to his joining the Company in December,
2007 and $21,000 paid as a temporary living allowance to Mr.
Ryan. On January 22, 2009, Mr. Ryan was awarded a 10 year stock
option grant of 5,747 shares with an exercise price of $1.75 and an
aggregate fair value of $10,000 which vest over three years at one-third
on the anniversary date of the grant.
In
addition, Mr. Ryan was awarded
a 10 year stock option grant of
6,300 shares with an exercise price of $1.00 and an aggregate fair value
of $6,300 which vest over three years at one-third on the anniversary date
of the grant.
|
Grants of Plan-Based
Awards
Shown
below is information on grants of stock options and restricted stock units
pursuant to the 2000 Equity Compensation plan made during the fiscal year ended
December 31, 2009 to the executive officers named in the Summary
Compensation Table, and/or earned for performance during the fiscal year but
awarded in the weeks following (under “All Other Option and Stock
Awards”):
Grants
of Plan-Based Awards
Name
|
|
Grant Date
|
|
All Other
Option and
Stock
Awards:
Number of
Securities
Underlying
Award (#)
|
|
|
Exercise
or Base
Price of
Option
and
Stock
Awards
($/Sh)
|
|
|
Grant Date
Fair Value
of Stock
Option and
Stock
Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Joseph
J.
|
|
12/28/2009
|
|
|
34,000
|
|
|
|
1.00
|
|
|
|
34,000
|
|
Rutherford,
|
|
1/22/2009
|
|
|
6,897
|
(3)
|
|
|
1.75
|
|
|
|
12,000
|
|
President
and CEO
|
|
1/1/2009
|
|
|
17,143
|
|
|
|
1.75
|
|
|
|
29,830
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
J. Foote,
|
|
12/28/2009
|
|
|
6,300
|
|
|
|
1.00
|
|
|
|
6,300
|
|
CFO,
Corporate
|
|
1/22/2009
|
|
|
4,598
|
(3)
|
|
|
1.75
|
|
|
|
8,000
|
|
Secretary
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
R. Ryan,
|
|
12/28/2009
|
|
|
6,300
|
|
|
|
1.00
|
|
|
|
6,300
|
|
VP
Sales and
|
|
1/22/2009
|
|
|
5,747
|
(3)
|
|
|
1.75
|
|
|
|
10,000
|
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
grant date fair value of stock option grants is the value computed in
accordance with
FASB ASC Topic
718
, using the Black-Scholes options pricing model. The
grant date fair value of restricted stock unit grants is the number of
shares granted times the closing market price on the day of
grant. Stock options and stock awards are subject to three year
vesting, unless specifically disclosed. Stock options have a
ten year term.
|
(2)
|
Effective
January 1, 2009, Mr. Joseph J. Rutherford was appointed President and CEO
of the Company.
|
(3)
|
Represents
Stock Option grants made in January 2009 but awarded based on performance
in 2008.
|
Outstanding Equity-Based
Awards at Fiscal Year-End
The
following table provides information pertaining to vested and non-vested stock
options held by each of the executive officers named in the Summary Compensation
Table as of December 31, 2009.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
OPTION AWARDS (1)
|
|
STOCK AWARDS (2)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
($)
|
|
Number of
Shares or
Units of
Stock that
have not
Vested
(#)
|
|
|
Market
Value of
Shares of
Units of
Stock
that
Have not
Vested
($)
|
|
Joseph
J.
|
|
|
—
|
|
|
|
34,000
|
|
|
|
1.00
|
|
12/28/2019
|
|
|
|
|
|
|
Rutherford,
|
|
|
—
|
|
|
|
6,897
|
|
|
|
1.75
|
|
01/22/2019
|
|
|
|
|
|
|
President
and CEO
|
|
|
—
|
|
|
|
17,143
|
|
|
|
1.75
|
|
01/01/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
10,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
J. Foote,
|
|
|
—
|
|
|
|
6,300
|
|
|
|
1.00
|
|
12/28/2019
|
|
|
|
|
|
|
|
CFO,
Secretary and
|
|
|
—
|
|
|
|
4,598
|
|
|
|
1.75
|
|
01/22/2019
|
|
|
|
|
|
|
|
Treasure
|
|
|
2,253
|
|
|
|
1,125
|
|
|
|
1.50
|
|
01/19/2017
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
1.00
|
|
05/16/2016
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,253
|
|
|
|
12,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,666
|
|
|
|
6,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
R. Ryan
|
|
|
—
|
|
|
|
6,300
|
|
|
|
1.00
|
|
12/28/2019
|
|
|
|
|
|
|
|
|
VP
Sales and
|
|
|
—
|
|
|
|
5,747
|
|
|
|
1.75
|
|
01/22/2019
|
|
|
|
|
|
|
|
|
Marketing
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
16,000
|
|
|
(1)
|
Options
vest at the rate of one-third per year over the ten year life of the
option.
|
|
(2)
|
Stock awards vest at
the rate of one-third per year on the anniversary date of the
award.
The grant date fair value of restricted stock
unit grants is the number of shares granted times the closing market price
on the day of grant.
|
Equity Compensation Plan
Information
The
following table gives information about the Company’s Common Stock that
may be issued upon the exercise of options, warrants and rights under the
Company’s Key Employee Compensation Plan and the Company’s 2000 Equity
Compensation Program, as of December 31, 2009. These plans were
the Company’s only equity compensation plans in existence as of
December 31, 2009.
Plan Category
|
|
(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
|
|
|
(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
|
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a)
|
|
Equity
Compensation Plans Approved by Shareholders
|
|
|
1,233,719
|
|
|
$
|
1.12
|
|
|
|
3,615,177
|
|
Equity
Compensation Plans Not Approved by Shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,233,719
|
|
|
$
|
1.12
|
|
|
|
3,615,177
|
|
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
and officers, and persons who own more than 10% of a registered class of
the Company’s equity securities, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange
Commission. These persons are required by the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) reports that
they file. Based on our review of copies of all disclosure reports
filed by our directors and executive officers pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended, the following Forms 3 and 4 were
not timely filed: Mr. Lenagh was late in filing two reports, one filed on June
23, 2009 covering a June 10, 2009 transaction and the other filed on January 12,
2010 covering a December 28, 2009 transaction. Mr. Romano, Mr.
LaValle, Mr. Dosoudil, Mr. Foote, Mr. Brucker, Mr. Rutherford, Mr. Winston, and
Mr. Strandlund were each late in filing one report covering their respective
December 28, 2009 transactions, which they each filed on January 12,
2010.
Certain Relationships and
Related Transactions
The
documented ethics policies of the Company restrict certain types of
related-party transactions between the Company and its directors, officers, and
employees of the Company. Specifically, compensation for services
provided by directors, officers, and employees to the Company may not be through
any source but the Company. The Company’s policies do permit
related-parties to participate in financial transactions, limited to financing
via debt or equity. In such instances, the Board of Directors has an
informal policy of requiring that when financing through a related party, that
the terms of such financing, including but not limited to interest rates and
fees, are at least equal to or better than the terms obtainable via
financing from other sources.
In March
2009, the maturity date of a $1,500,000 Subordinated Convertible Promissory Note
to Clarex Limited (“Clarex”), a major shareholder and debt holder, was extended
to April 1, 2011. The note bears interest at 6% and was originally
due in January 2006, extended to December 31, 2008 and subsequently
again to April 1, 2009. Interest accrues yearly and along with
principal may be converted into securities of the Company as
follows: The Note is convertible in the aggregate into 1,500,000
Units with each unit consisting of one share of common stock and one
warrant. The warrants had an original expiration date of August 2009
and each warrant allowed the holder to acquire 0.75 shares of common stock at a
price of $1.35 per share. The expiration date of the warrants under
the conversion terms has been extended to April 1, 2014.
In March
2009, the maturity date of a $1,000,000 Subordinated Convertible Promissory Note
bearing interest at 6% was extended to April 1, 2011. The note was
originally due in January 2006 and was subsequently extended to April 1,
2009. Interest accrues yearly and along with principal may be
converted into securities of the Company as follows: The Note is
convertible in the aggregate into 1,000,000 Units with each unit consisting of
one share of common stock and one warrant. The warrants had an
original expiration date of August 2009 and each warrant allowed the holder to
acquire 0.75 shares of common stock at a price of $1.35 per
share. The expiration date of the warrants under the conversion terms
has been extended to April 1, 2014. The holder of the note is an
affiliate of Clarex.
The
Company has adopted a Code of Ethics that applies to the Company’s principal
executive officer, principal financial officer, principal accounting officer or
controller (or persons performing similar functions). A copy of such
Code of Ethics is available on the Company website at
www.ppgioptics.com
and will be made available without charge and upon written request addressed to
the attention of the Secretary of the Company and mailed to the Company’s
principal executive offices, 181 Legrand Avenue, Northvale, NJ
0764.
Relationship with
Independent Public Accountants
Holtz
Rubenstein Reminick, LLP, (the “Auditors”) independent accountants, has been
selected by the Board of Directors to examine and report on the financial
statements of the Company for the fiscal year ending December 31,
2010. Representatives of Holtz Rubenstein Reminick, LLP are expected
to be present at the annual meeting. They will have an opportunity to make a
statement, if they desire to do so, and will be available to respond to
appropriate questions.
Principal Accounting Fees
and Services
In
accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit
Committee’s charter, all audit and audit-related work and all non-audit work
performed by the Company’s independent accountants is approved in advance by the
Audit Committee, including the proposed fees for such work. The Audit
Committee is informed of each service actually rendered.
Audit
Fees.
Audit
fees billed or expected to be billed to the Company by the Company’s principal
accountant for the audit of the financial statements included in the Company’s
Annual Reports on Form 10-K, and reviews of the financial statements
included in the Company’s Quarterly Reports on Form 10-Q, for the years
ended December 31, 2009 and 2008 were $83,000 and $83,000,
respectively.
Audit-Related
Fees
The
Company was billed $8,617 and $605 by the Company’s principal accountant for the
fiscal years ended December 31, 2009 and 2008, respectively, for assurance
and related services that are reasonably related to the performance of the audit
or review of the Company’s financial statements and are not reported under the
caption “
Audit
Fees”
above.
Tax
Fees
The
Company was billed an aggregate of $12,000 and $12,000 by the Company’s
principal accountant for the fiscal years ended December 31, 2009 and 2008,
respectively, for tax services, principally the preparation of income tax
returns.
All
Other Fees
The
Applicable law and regulations provide an exemption that permits certain
services to be provided by the Company’s outside auditors even if they are not
pre-approved. The Company has not relied on this exemption at any
time since the Sarbanes-Oxley Act was enacted. There have been no
other fees that have been pre-approved by the Audit Committee of the Board of
Directors.
Audit Committee
Report
In
connection with the preparation and filing of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009:
|
(1)
|
the
Audit Committee reviewed and discussed the audited financial statements
with the Company’s management;
|
|
(2)
|
the
Audit Committee discussed with the Company’s independent auditors the
matters required to be discussed by SAS
61;
|
|
(3)
|
the
Audit Committee received and reviewed the written disclosures and the
letter from the Company’s independent auditors required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with the Company’s independent auditors
any relationships that may impact their objectivity and independence and
satisfied itself as to the auditor’s independence;
and
|
|
(4)
|
based
on the review and discussions referred to above, the Audit Committee
recommended to the Board that the audited financial statements be included
in the 2009 Annual Report on Form
10-K.
|
This
report shall not be deemed incorporated by reference by any general statement
incorporating this Proxy Statement by reference to any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, and shall not be deemed filed under either of such acts except
to the extent that the Company specifically incorporates this information by
reference.
This
report is furnished by the Audit Committee of the Board of
Directors.
/s/
Luke P. LaValle, Jr.
|
|
/s/
Thomas H. Lenagh
|
Luke
P. LaValle, Jr.
|
|
Thomas
H. Lenagh
|
Audit
Committee Chairman
|
|
|
|
|
|
/s/
Dennis G. Romano
|
|
/s/
N. E. Rick Strandlund
|
Dennis
G. Romano
|
|
N.
E. Rick Strandlund
|
|
|
|
/s/
Jan M. Winston
|
|
|
Jan M.
Winston
|
|
|
NOTICE
REGARDING FILING OF SHAREHOLDERS PROPOSALS
AT
2011 ANNUAL MEETING
Any
proposal intended to be presented by a shareholder at the 2011 Annual Meeting of
Shareholders must be received by the Company at the Company’s principal
executive offices, 181 Legrand Avenue, Northvale, NJ 07647 no later than the
close of business on December 31, 2010 to be considered for inclusion in the
Proxy Statement for the 2011 Annual Meeting and by March16, 2011 in order for
the proposal to be considered timely for consideration at next years Annual
Meeting (but not included in the Proxy Statement for such meeting).
The
Annual Meeting of Stockholders is called for the purposes set forth in the
Notice. The Board does not know of any matter for action by
stockholders at such meeting other than the matters described in the
Notice. However, the enclosed proxy will confer discretionary
authority with respect to matters which are not known at the date of printing
hereof which may properly come before the meeting. It is the
intention of the person named in the proxy to vote in accordance with their
judgment on any such matter.
You are
cordially invited to attend the Annual Meeting in person. Your
participation in discussion of the Company’s affairs will be
welcome.
|
/S/ William J. Foote
|
|
William
J. Foote, Secretary
|
Dated: April
30, 2010
A
copy of the Company's annual report on Form 10-K for the fiscal year ended
December 31, 2009, filed with the Securities and Exchange Commission, is
available (excluding exhibits) without cost to shareholders upon written
request. The annual report is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation is to be
made.
EXHIBIT
A
CERTIFICATE OF
AMENDMENT
OF
CERTIFICATE OF
INCORPORATION
OF
PHOTONIC PRODUCTS GROUP,
INC.
Pursuant to N.J.S.
14:9-4(3)
Dated: [______,___]
2010
The
undersigned corporation, having adopted an amendment to its Restated Certificate
of Incorporation, hereby certifies as follows:
1. The
name of the corporation is Photonic Products Group, Inc.
2. The
first paragraph of the present Article IV of the Restated Certificate of
Incorporation shall be deleted and inserted in lieu thereof shall be the
following:
“Article
IV
The
members of the board shall be divided into three classes, the respective terms
of office of which shall end in successive years. The number of
directors in each class shall be specified in the bylaws of the
Corporation. Unless they are elected to fill vacancies, the directors
in each class shall be elected to hold office until the third successive annual
meeting of shareholders after their election and until their successors have
been elected and qualified. At each annual meeting of shareholders,
the directors of only one class shall be elected, except directors elected to
fill vacancies. An affirmative vote of the holders of at least
two-thirds of the outstanding shares of the Corporation's common stock shall be
required to amend or repeal this provision.
3. The
Amendment was adopted by the shareholders on [_____, __] 2010.
4. There
were [__________] shares of Common Stock entitled to vote on the
Amendment.
5. The
number of shares voted for and against the Amendment was as
follows:
For:
____________
Against:
____________
6. This
Certificate of Amendment shall be effective immediately upon
filing.
IN
WITNESS WHEREOF, the undersigned corporation has caused this Certificate to be
executed on its behalf by its duly authorized officer as of this [_____] day of
[______], 2010.
PHOTONIC
PRODUCTS GROUP, INC.
|
|
By:
|
|
|
Joseph
J. Rutherford,
President
|
EXHIBIT
B
PPGI,
INC.
2010
EQUITY COMPENSATION PROGRAM
1.
Purposes
. This
PPGI, Inc. 2010 Equity Compensation Program (the “Program”) is intended to
secure for PPGI, Inc. (the “Corporation”), its direct and indirect present and
future subsidiaries, including without limitation any entity which the
Corporation reasonably expects to become a subsidiary (the “Subsidiaries”), and
its shareholders, the benefits arising from ownership of the Corporation's
Common Stock, par value $.01 per share (“Common Stock”), by those selected
directors, officers, employees and consultants of the Corporation and the
Subsidiaries who are responsible for future growth. The Program is
designed to help attract and retain superior individuals for positions of
substantial responsibility with the Corporation and the Subsidiaries and to
provide these persons with an additional incentive to contribute to the success
of the Corporation and the Subsidiaries.
2.
Elements of the
Program
. In order to maintain flexibility in the award of
benefits, the Program is comprised of four parts — the Incentive Stock Option
Plan (“Incentive Plan”), the Supplemental Stock Option Plan (“Supplemental
Plan”), the Stock Appreciation Rights Plan (“SAR Plan”) and the Restricted Stock
Award Plan (“Restricted Stock Plan”). Copies of the Incentive Plan,
Supplemental Plan, SAR Plan and Restricted Stock Plan are attached hereto as
Parts I, II, III and IV, respectively. Each such plan is referred to
herein as a “Plan” and all such plans are collectively referred to herein as the
“Plans.” The grant of any options, stock appreciation rights,
restricted shares, unrestricted shares or restricted stock units under one of
the Plans (collectively, the “Awards”) shall not be construed to prohibit the
grant of options, stock appreciation rights, restricted shares, unrestricted
shares or restricted stock units under any of the other Plans.
3.
Applicability of General
Provisions
. Unless any Plan specifically indicates to the
contrary, all Plans shall be subject to the general provisions of the Program
set forth below under the heading “General Provisions of the Equity Compensation
Program” (the “General Provisions”).
GENERAL
PROVISIONS OF THE EQUITY COMPENSATION PROGRAM
Article
1.
Administration
. The
Program shall be administered by the Board of Directors of the Corporation (the
“Board” or the “Board of Directors”) or any duly created committee appointed by
the Board and charged with the administration of the Program. To the
extent required in order to satisfy the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), such committee shall
consist solely of “Outside Directors” (as defined herein). The Board,
or any duly appointed committee, when acting to administer the Program, is
referred to as the “Program Administrator”. Any action of the Program
Administrator shall be taken by majority vote at a meeting or by unanimous
written consent of all members without a meeting. No Program
Administrator or member of the Board of the Corporation shall be liable for any
action or determination made in good faith with respect to the Program or with
respect to any option, stock appreciation right, restricted stock award or
restricted stock unit award granted pursuant to the Program, and each of the
foregoing shall be entitled in all cases to indemnification and reimbursement by
the Corporation in respect of any claim, loss, damage or expense (including
without limitation reasonable attorneys’ fees) arising or resulting therefrom to
the fullest extent permitted by law and/or under any directors’ and officers’
liability insurance coverage which may be in effect from time to
time. For purposes of the Program, the term “Outside Director” shall
mean a director who (a) is not a current employee of the Corporation or the
Subsidiaries; (b) is not a former employee of the Corporation or the
Subsidiaries who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the then current taxable year; (c)
has not been an officer of the Corporation or the Subsidiaries; and (d) does not
receive remuneration (which shall be deemed to include any payment in exchange
for goods or services) from the Corporation or the Subsidiaries,
either directly or indirectly, in any capacity other than as a director, except
as otherwise permitted under Code Section 162(m) and the regulations
thereunder.
Article
2.
Authority of Program
Administrator
. Subject to the other provisions of this
Program, and with a view to effecting its purpose, the Program Administrator
shall have the authority: (a) to construe and interpret the Program;
(b) to define the terms used herein; (c) to prescribe, amend and rescind rules
and regulations relating to the Program; (d) to determine the persons to whom
Awards shall be granted under the Program; (e) to determine the time or times at
which Awards shall be granted under the Program; (f) to determine the number of
shares subject to any Award; (g) to determine the exercise price of any option
or stock appreciation right, and the duration of each option or stock
appreciation right granted under the Program; (h) to determine all other terms
and conditions of any Award; and (i) to make any other determinations necessary
or advisable for the administration of the Program and to do everything
necessary or appropriate to administer the Program. All decisions,
determinations and interpretations made by the Program Administrator shall be
binding and conclusive on all participants in the Program and on their legal
representatives, heirs and beneficiaries.
Article
3.
Maximum
Number of Shares Subject to the Program
. The maximum aggregate
number of shares of Common Stock issuable pursuant to the Program shall
be 4,000,000 shares. No one person participating in the
Program may receive options, separately exercisable stock appreciation rights or
other awards for more than 500,000 shares of Common Stock in any calendar
year. All such shares may be issued under any Plan which is part of
the Program. If any of the options (including incentive stock
options) or stock appreciation rights granted under the Program expire or
terminate for any reason before they have been exercised in full, the unissued
shares subject to those expired or terminated options and/or stock appreciation
rights shall again be available for purposes of the Program. If the
conditions associated with the grant of any restricted shares or restricted
stock units are not satisfied within the time period required by the Award, the
shares of Common Stock associated with such Award shall again be available for
purposes of the Program. Any shares of Common Stock delivered
pursuant to the Program may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
Article
4.
Eligibility and
Participation
. All directors, officers, employees and
consultants of the Corporation and the Subsidiaries shall be eligible to
participate in the Program. The term "employee" shall include any
person who has agreed to become an employee and the term "consultant" shall
include any person who has agreed to become a consultant.
Article
5.
Effective Date and Term of
Program
. The Program shall become effective immediately upon
approval of the Program by the Board of Directors of the Corporation, subject to
approval of the Program by the shareholders of the Corporation within twelve
months after the date of approval of the Program by the Board of
Directors. The Program shall continue in effect for a term of ten
years from the date that the Program is adopted by the Board of Directors,
unless sooner terminated by the Board of Directors of the
Corporation.
Article
6.
Adjustments
. In
the event that the outstanding shares of Common Stock of the Corporation are
hereafter increased, decreased, changed into or exchanged for a different number
or kind of shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization, reclassification,
stock dividend, stock split or reverse stock split (an "Adjustment Event"), an
appropriate and proportionate adjustment shall be made by the Program
Administrator in the maximum number and kind of shares as to which Awards may be
granted under the Program. A corresponding adjustment changing the
number or kind of shares allocated to unexercised options, stock appreciation
rights, restricted shares and restricted stock units which shall have been
granted prior to any such Adjustment Event, shall likewise be
made. Any such adjustment in outstanding options and stock
appreciation rights shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the option or stock appreciation right
but with a corresponding adjustment in the price for each share or other unit of
any security covered by the option or stock appreciation right. In
making any adjustment pursuant to this Article 6, any fractional shares shall be
disregarded.
Article
7.
Termination and Amendment of
Program and Awards
. No Award shall be granted under the
Program after the termination of the Program. The Program
Administrator may at any time amend or revise the terms of the Program or of any
outstanding Award issued under the Program, provided, however, that (a) any
shareholder approval required by applicable law or regulation shall be obtained
and (b) no amendment, suspension or termination of the Program or of any
outstanding Award shall, without the consent of the person who has received such
Award, impair any of that person's rights or obligations under such
Award.
Article
8.
Privileges of Stock
Ownership
. Notwithstanding the exercise of any option or stock
appreciation rights granted pursuant to the terms of the Program or the
satisfaction of any condition specified in any Award of restricted shares or
restricted stock units granted pursuant to the terms of the Program, no person
shall have any of the rights or privileges of a stockholder of the Corporation
in respect of any shares of stock issuable upon the exercise of his or her
option or stock appreciation right or achievement of such condition(s) until
certificates representing the shares of Common Stock covered thereby have been
issued and delivered. If certificates for restricted stock have been
issued, the holder of such shares shall have voting rights with respect to such
shares unless the Program Administrator provides otherwise. No
adjustment shall be made for dividends or any other distributions for which the
record date is prior to the date on which any stock certificate is issued
pursuant to the Program.
Article
9.
Reservation
of Shares of Common Stock
. During the term of the Program, the
Corporation will at all times reserve and keep available such number of shares
of its Common Stock as shall be sufficient to satisfy the requirements of the
Program.
Article
10.
Tax
Withholding
. The exercise of any option or stock appreciation right, and
the delivery of any shares of Common Stock upon vesting or lapse of any
conditions or restrictions associated with restricted shares or restricted stock
units under the Program, is subject to the condition that, if at any time the
Corporation shall determine, in its discretion, that the satisfaction of
withholding tax or other withholding liabilities under any state or federal law
is necessary or desirable as a condition of, or in any connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then, in such
event, the exercise of the option or stock appreciation right or delivery of
shares of Common Stock in connection with the vesting or lapse of any conditions
or restrictions associated with restricted shares or restricted stock units,
shall not be effective unless such withholding tax or other withholding
liabilities shall have been satisfied in a manner acceptable to the
Corporation.
Article
11.
Employment;
Service as a Consultant or Director
. Nothing in the Program gives to any
person any right to continued employment by the Corporation or the Subsidiaries
or to continued service as a consultant to or director of the Corporation or the
Subsidiaries or limits in any way the right of the Corporation or the
Subsidiaries at any time to terminate or alter the terms of that employment or
service.
Article
12.
Investment
Letter; Restrictions on Obligation of the Corporation to Issue Securities;
Restrictive Legend
. Any person acquiring or receiving Common Stock or
other securities of the Corporation pursuant to the Program, as a condition
precedent to receiving the shares of Common Stock or other securities, may be
required by the Program Administrator to submit a letter to the Corporation
stating that the shares of Common Stock or other securities are being acquired
for investment and not with a view to the distribution thereof. The Corporation
shall not be obligated to sell or issue any shares of Common Stock or other
securities pursuant to the Program unless, on the date of sale and issuance
thereof, the shares of Common Stock or other securities are either registered
under the Securities Act of 1933, as amended, and all applicable state
securities laws, or exempt from registration thereunder. All shares of Common
Stock and other securities issued pursuant to the Program shall bear a
restrictive legend referring to any restrictions on transferability applicable
thereto, including, if such shares are not then covered by an effective
registration statement, those imposed by federal and state securities
laws.
Article
13.
Rights Upon
Termination of Employment, Service as a Consultant or Service as a
Director
. Notwithstanding any other provision of the Program, any Award
granted to an individual who has agreed to become an employee or a consultant of
the Corporation or any Subsidiary or to become an employee of any entity which
the Corporation reasonably expects to become a Subsidiary, shall immediately
terminate if the Program Administrator determines, in its sole discretion, that
such person will not become an employee or consultant of the Corporation or any
Subsidiary. If a recipient ceases to be employed by or to provide consulting
services or services as a director to the Corporation or any Subsidiary, or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies, for
any reason other than death or disability, then, unless any other provision of
the Program provides for earlier termination or the grant agreement provides
otherwise:
(a) all
options and stock appreciation rights (other than “Naked Rights”, as hereinafter
defined) shall terminate immediately in the event the recipient's employment or
consulting services are terminated for cause and shall be exercisable, to the
extent exercisable on the date of termination, for a period of:
(i) 90
days after the date of such termination if such termination is due to the
recipient’s resignation; and
(ii) 12
months after the date of such termination if such termination is due to the
involuntary termination of the recipient’s service or employment other than for
cause.
(b) subject
to Section 5(b) of the SAR Plan, all Naked Rights not payable on the date of
termination shall terminate immediately; and
(c) all
restricted share and restricted stock unit awards shall terminate immediately
unless the conditions of the Award have been satisfied.
Article
14.
Rights
Upon Disability
. If a recipient becomes disabled within the
meaning of Section 22(e)(3) of the Code while employed by or while rendering
consulting services or services as a director to the Corporation or any
Subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Section 424(a) of
the Code applies), then, unless any other provision of the Program provides for
earlier termination or the grant agreement provides otherwise:
(a) all
options and stock appreciation rights (other than Naked Rights) may be
exercised, to the extent exercisable on the date of termination
,
,
at any time within one year after the date of termination due to
disability;
(b) all
Naked Rights shall be fully paid by the Corporation as of the date of
disability; and
(c) all
restricted share and restricted stock unit awards for which all conditions of
the Award have been satisfied (other than continued employment or status as a
consultant on the Vesting Date) shall be paid in full by the Corporation; all
other restricted shares and restricted stock units shall terminate
immediately.
Article
15.
Rights
Upon Death
. If a recipient dies while employed by or while
rendering consulting services or services as a director to the Corporation or
any Subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Section 424(a) of
the Code applies), then, unless any other provision of the Program provides for
earlier termination or the grant agreement provides otherwise:
(a) all
options and stock appreciation rights (other than Naked Rights) may be exercised
by the person or persons to whom the recipient's rights shall pass by will or by
the laws of descent and distribution, to the extent exercisable on the date of
death
,
,
at any time within one year after the date of death unless any other provision
of the Program provides for earlier termination;
(b) all
Naked Rights shall be fully paid by the Corporation as of the date of death;
and
(c) all
restricted share and restricted stock unit awards for which all conditions of
the Award have been satisfied (other than continued employment or status as a
consultant on the Vesting Date) shall be paid in full by the Corporation; all
other restricted shares and restricted stock units shall terminate
immediately.
Article
16.
Non-Transferability
. Options
and stock appreciation rights granted under the Program may not be sold,
pledged, assigned or transferred in any manner by the recipient otherwise than
by will or by the laws of descent and distribution and shall be exercisable (a)
during the recipient's lifetime only by the recipient and (b) after the
recipient's death only by the recipient's executor, administrator or personal
representative, provided, however that the Program Administrator may permit the
recipient of an option granted pursuant to Part II of the Program to transfer
options and/or stock appreciation rights granted in tandem with such options to
a family member or a trust or partnership created for the benefit of family
members. In the case of such a transfer, the transferee's rights and
obligations with respect to the applicable options or stock appreciation rights
shall be determined by reference to the recipient and the recipient's rights and
obligations with respect to the applicable options or stock appreciation rights
had no transfer been made. The recipient shall remain obligated
pursuant to Articles 10 and 12 hereunder if required by applicable
law. Common Stock which represents restricted shares or restricted
stock units prior to the satisfaction of the stated conditions may not be sold,
pledged, assigned or transferred in any manner.
Article
17.
Change
in Control
.
. The
Program Administrator shall have the authority to provide, either at the time
that any Award is granted or thereafter, that an option or stock appreciation
right shall become fully exercisable upon the occurrence of a Change in Control
Event or that all restrictions, performance objectives, performance objective
periods and risks of forfeiture pertaining to restricted shares and restricted
stock units shall lapse upon the occurrence of a Change in Control
Event. As used in the Program, a "Change in Control Event" shall be
deemed to have occurred if any of the following events occur:
(a) the
consummation of any consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or any consolidation
or merger in which the holders of the Corporation's Shares immediately prior to
the consolidation or merger do not own fifty percent (50%) or more of the common
stock of the surviving corporation immediately after the consolidation or
merger; or
(b) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Corporation, other than to a subsidiary or affiliate; or
(c) an
approval by the shareholders of the Corporation of any plan or proposal for the
liquidation or dissolution of the Corporation; or
(d) (A)
a purchase by any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity of any voting securities of the
Corporation (the "Voting Securities") (or securities convertible into Voting
Securities) for cash, securities or any other consideration pursuant to a tender
offer or exchange offer, unless, prior to the making of such purchase of Voting
Securities (or securities convertible into Voting Securities), the Board shall
determine that the making of such purchase shall not be deemed a Change in
Control for purposes of the Program, or (B) any action pursuant to which any
person (as such term is defined in Section 13(d) of the Exchange Act),
corporation or other entity (other than the Corporation or any benefit plan
sponsored by the Corporation or any of its subsidiaries) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of Voting Securities representing fifty percent
(50%) or more of the combined voting power of the Corporation's then outstanding
Voting Securities ordinarily (and apart from any rights accruing under special
circumstances) having the right to vote in the election of directors (calculated
as provided in Rule 13d-3(d) in the case of rights to acquire any such
securities), unless, prior to such person so becoming such beneficial owner, the
Board shall determine that such person so becoming such beneficial owner shall
not be deemed to constitute a Change in Control for purposes of the Program;
or
(e) the
individuals (A) who, as of the date on which the Program is first adopted by the
Board of Directors, constitute the Board (the "Original Directors") and (B) who
thereafter are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two thirds of the
Original Directors then still in office (such Directors being called "Additional
Original Directors") and (C) who thereafter are elected to the Board and whose
election or nomination for election to the Board was approved by a vote of at
least two thirds of the Original Directors and Additional Original Directors
then still in office, cease for any reason to constitute a majority of the
members of the Board.
Article
18.
Merger
or Asset Sale
. For purposes of the Program, a merger or
consolidation which would constitute a Change in Control Event pursuant to
Article 17 and a sale of assets which would constitute a Change in Control Event
pursuant to Article 17 are hereinafter referred to as “Article 18
Events”. In the event of an Article 18 Event, each outstanding
Award shall be assumed or an equivalent benefit shall be substituted by the
entity determined by the Board of Directors of the Corporation to be the
successor corporation. However, in the event that any such successor
corporation does not agree in writing, at least 15 days prior to the anticipated
date of consummation of such Article 18 Event, to assume or so substitute each
such Award, each option and stock appreciation right not so assumed or
substituted shall be deemed to be fully vested and exercisable and the
restrictions or conditions associated with each restricted stock award and
restricted stock unit award not so assumed or substituted shall immediately
lapse or be deemed satisfied immediately prior to the Article 18 Event and the
shares of Common Stock associated with such restricted stock award or restricted
stock unit award shall be issued and delivered to the recipient of such
Award. If an option or stock appreciation right becomes fully vested
and exercisable pursuant to the terms of this Article 18, the Program
Administrator shall notify the holder thereof in writing or electronically that
(a) such holder’s option or stock appreciation right shall be fully exercisable
until immediately prior to the consummation of such Article 18 Event and (b)
such holder’s option or stock appreciation right shall terminate upon the
consummation of such Article 18 Event. For purposes of this Article
18, an Award shall be considered assumed if, immediately following consummation
of the applicable Article 18 Event, the Award confers the right to purchase or
receive, for each share of Common Stock subject to the Award immediately prior
to the consummation of such Article 18 Event, the consideration (whether stock,
cash or other securities or property) received in such Article 18 Event by
holders of Common Stock for each share of Common Stock held on the effective
date of such Article 18 Event (and, if holders of Common Stock are offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in such Article 18 Event is not solely common stock
of such successor, the Program Administrator may, with the consent of such
successor corporation, provide for the consideration to be received in
connection with such Award to be solely common stock of such successor equal in
fair market value to the per share consideration received by holders of Common
Stock in the Article 18 Event.
Article
19.
Method
of Exercise
. Any holder of an option or stock appreciation
right may exercise his or her option or stock appreciation right from time to
time by giving written notice thereof to the Corporation at its principal office
together with payment in full for the shares of Common Stock to be
purchased. The date of such exercise shall be the date on which the
Corporation receives such notice. Such notice shall state the number
of shares to be purchased. The purchase price of any shares purchased
upon the exercise of any option or stock appreciation right granted pursuant to
the Program shall be paid in full at the time of exercise of the option or stock
appreciation right by certified or bank cashier's check payable to the order of
the Corporation, by tender of shares of Common Stock which have a Fair Market
Value on the date of tender equal to the purchase price, or by a combination of
checks and shares of Common Stock; provided however that any shares of Common
Stock so tendered shall have been owned by the optionee for a period of least
six months free of any substantial risk of forfeiture or were purchased on the
open market without assistance, direct or indirect, from the
Corporation. The Program Administrator may, subject to such rules and
procedures as the Program Administrator may prescribe, permit a holder of an
option or stock appreciation right to effect a net exercise or make “cashless
exercise” arrangements, to the extent permitted by applicable law, and may
require such holders to utilize the services of a single broker selected by the
Program Administrator in connection with any cashless exercise. No
option or stock appreciation right may be exercised for a fraction of a share of
Common Stock. If any portion of the purchase price is paid in shares
of Common Stock, those shares shall be valued at their then Fair Market Value as
determined by the Program Administrator in accordance with Section 4 of the
Incentive Plan.
Article
20.
Ten-Year
Limitations
. Notwithstanding any other provision of the
Program, (a) no Award may be granted pursuant to the Program more than ten years
after the date on which the Program was adopted by the Board of Directors and
(b) any option or stock appreciation right granted under the Program shall, by
its terms, not be exercisable more than ten years after the date of
grant.
Article
21.
Substitute
Options
. In the event that the Corporation, directly or
indirectly, acquires another entity, the Program Administrator may authorize the
issuance of stock options (“substitute options”) to the individuals performing
services for the acquired entity in substitution of stock options previously
granted to those individuals in connection with their performance of services
for such entity upon such terms and conditions as the Program Administrator
shall determine, taking into account the conditions of Code Section 424(a), as
from time to time amended or superseded, in the case of a substitute option that
is intended to be an incentive stock option within the meaning of Section 422 of
the Code. Shares of Common Stock underlying substitute stock options
shall not constitute shares of Common Stock issued pursuant to the Plan for any
purpose.
Article
22.
Sunday
or Holiday
. In the event that the time for the performance of
any action or the giving of any notice is called for under the Program within a
period of time which ends or falls on a Sunday or legal holiday, such period
shall be deemed to end or fall on the next day following such Sunday or legal
holiday which is not a Sunday or legal holiday.
Article
23.
Governing
Law
. The Program shall be governed by and construed in
accordance with the laws of the State of New Jersey.
Article
24.
Covenant Against
Competition
. The Program Administrator shall have the right to
condition any Award upon the recipient's execution and delivery to the
Corporation of an agreement in a form satisfactory to the Program Administrator
containing such non-compete, non-solicitation and non-disclosure terms as shall
be determined by the Program Administrator.
Article
25.
Termination, Rescission and
Recapture of Awards.
(a) Each
Award under the Plan is intended to align the recipient’s long-term interest
with those of the Corporation. If the recipient engages in certain
activities discussed below, either during employment or service with the
Corporation or after service with the Corporation terminates for any reason, the
recipient is acting contrary to the long-term interests of the
Corporation. Accordingly, but only to the extent expressly provided
in an Award agreement, the Corporation may terminate any outstanding,
unexercised, unexpired or unpaid Awards (“Termination”), rescind any exercise,
payment or delivery pursuant to the Award (“Rescission”), or recapture any
Common Stock (whether restricted or unrestricted) or proceeds from the
recipient’s sale of shares of Common Stock issued pursuant to the Award
(“Recapture”), if the recipient does not comply with the conditions of
subsections (b), (c) and (e) hereof (collectively, the
“Conditions”).
(b) A
recipient shall not, without the Corporation’s prior written authorization,
disclose to anyone outside the Corporation, or use in other than the
Corporation’s business, any proprietary or confidential information or material,
as those or other similar terms are used in any applicable patent,
confidentiality, inventions, secrecy, or other agreement between the recipient
and the Corporation with regard to any such proprietary or confidential
information or material.
(c) Pursuant
to any agreement between the recipient and the Corporation with regard to
intellectual property (including but not limited to patents, trademarks,
copyrights, trade secrets, inventions, developments, improvements, proprietary
information, confidential business and personnel information), a recipient shall
promptly disclose and assign to the Corporation or its designee all right,
title, and interest in such intellectual property, and shall take all reasonable
steps necessary to enable the Corporation to secure all right, title and
interest in such intellectual property in the United States and in any foreign
country.
(d) Upon
exercise, payment, or delivery of cash or Common Stock pursuant to an Award, the
recipient shall certify on a form acceptable to the Corporation that he or she
is in compliance with the terms and conditions of the Plan and, if a severance
of service has occurred for any reason, shall state the name and address of the
recipient’s then-current employer or any entity for which the recipient performs
business services and the recipient’s title, and shall identify any organization
or business in which the recipient owns a greater-than-five-percent equity
interest.
(e) If
the Corporation determines, in its sole and absolute discretion, that (i) a
recipient has violated any of the Conditions or (ii) during his or her service
with the Corporation or its Subsidiaries, or within
one (1) year after its
termination for any reason, a recipient (x) has rendered services to or
otherwise directly or indirectly engaged in or assisted, any organization or
business that, in the judgment of the Corporation in its sole and absolute
discretion, is or is working to become competitive with the Corporation; (y) has
solicited any non-administrative employee of the Corporation to terminate
employment with the Corporation; or (z) has engaged in activities which are
materially prejudicial to or in conflict with the interests of the Corporation,
including any breach of fiduciary duty or the duty of loyalty, then the
Corporation may, in its sole and absolute discretion, impose a Termination,
Rescission, and/or Recapture with respect to any or all of the recipient’s
relevant Awards, Shares, and the proceeds thereof.
(f) Within
ten days after receiving notice from the Corporation of any such activity
described in Article 25(e) above, the recipient shall deliver to the Corporation
the shares of Common Stock acquired pursuant to the Award, or, if recipient has
sold the shares, the gain realized, or payment received as a result of the
rescinded exercise, payment, or delivery; provided, that if the recipient
returns shares that the recipient purchased pursuant to the exercise of an
Option (or the gains realized from the sale of such Common Stock), the
Corporation shall promptly refund the exercise price, without earnings, that the
recipient paid for such shares. Any payment by the recipient to the
Corporation pursuant to this Article 25 shall be made either in cash or by
returning to the Corporation the number of shares that the recipient received in
connection with the rescinded exercise, payment, or delivery. It
shall not be a basis for Termination, Rescission or Recapture if after
termination of a recipient’s service with the Corporation and its Subsidiaries,
the recipient purchases, as an investment or otherwise, stock or other
securities of such an organization or business, so long as (i) such stock or
other securities are listed upon a recognized securities exchange or traded
over-the-counter, and (ii) such investment does not represent more than a five
percent (5%) equity interest in the organization or business.
(g)
Notwithstanding the foregoing provisions of this Article 25, the Corporation has
sole and absolute discretion not to require Termination, Rescission and/or
Recapture, and its determination not to require Termination, Rescission and/or
Recapture with respect to any particular act by a particular recipient or Award
shall not in any way reduce or eliminate the Corporation’s authority to require
Termination, Rescission and/or Recapture with respect to any other act or
recipient or Award. Nothing in this Section shall be construed to
impose obligations on the recipient to refrain from engaging in lawful
competition with the Corporation after the termination of employment that does
not violate subsections (b) or (c) of this Article, other than any obligations
that are part of any separate agreement between the Corporation and the
recipient or that arise under applicable law.
(h) All
administrative and discretionary authority given to the Corporation under this
Article shall be exercised by the most senior human resources executive of the
Corporation or such other person or committee (including without limitation
the Program Administrator) as the Program Administrator
may designate from time to time.
(i) Notwithstanding
any provision of this Article, if any provision of this Article is
determined to be unenforceable or invalid under any applicable law, such
provision will be applied to the maximum extent permitted by applicable law, and
shall automatically be deemed amended in a manner consistent with its objectives
to the extent necessary to conform to any limitations required under applicable
law. Furthermore, if any provision of this Article is illegal under
any applicable law, such provision shall be null and void to the extent
necessary to comply with applicable law.
Notwithstanding
the foregoing, but subject to any contrary terms set forth in any Award
agreement, this Article shall not be applicable) to any recipient from and after
his or her termination of service with the Corporation and its Subsidiaries
after a Change in Control Event.
Article
26.
Recoupment of
Awards
. Unless otherwise specifically provided in an Award
agreement, and to the extent permitted by applicable law, the Program
Administrator may in its sole and absolute discretion, without obtaining the
approval or consent of the Corporation’s shareholders or any recipient with
respect to his or her outstanding Awards, require that each recipient agree to
reimburse the Corporation for all or any portion of any Awards granted under
this Plan (“Reimbursement”), or the Program Administrator may require
the Termination or Rescission of, or the Recapture associated with, any Award,
if –
(a) the
granting, vesting, or payment of such Award (or portion thereof) was predicated
upon the achievement of certain financial results or other performance
criteria;
(b) in
the Program Administrator’s view the recipient either benefited from
a calculation that later proves to be materially inaccurate, or engaged in one
or more material acts of fraud or misconduct that caused or partially caused the
need for a financial restatement by the Corporation or any material Subsidiary;
and
(c) a
lower granting, vesting, or payment of such Award would have occurred based upon
the conduct described in clause (b) of this Article.
In each
instance, the Program Administrator will, to the extent practicable
and allowable under applicable laws, require Reimbursement, Termination or
Rescission of, or Recapture relating to, any such Award granted to a recipient,
including reimbursement for any gains realized on the exercise of Options or
SARs attributable to such Awards, plus a reasonable rate of interest, effecting
the cancellation of restricted shares, restricted stock units, unrestricted
shares, and outstanding Options and SARs; provided that the Corporation will not
seek Reimbursement, Termination or Rescission of, or Recapture relating to, any
such Awards that were paid or vested more than three years prior to the date the
applicable restatement is disclosed.
PART
I
INCENTIVE
STOCK OPTION PLAN
The following provisions shall apply with respect to options granted by the
Program Administrator pursuant to Part I of the Program:
Section
1.
General
. This
Incentive Stock Option Plan ("Incentive Plan") is Part I of the Corporation's
Program. The Corporation intends that options granted pursuant to the
provisions of the Incentive Plan will qualify and will be identified as
"incentive stock options" within the meaning of Section 422 of the
Code. Unless any provision herein indicates to the contrary, this
Incentive Plan shall be subject to the General Provisions of the
Program.
Section
2.
Terms
and Conditions
. The Program Administrator may grant incentive
stock options to purchase Common Stock to any employee of the Corporation or its
Subsidiaries. The terms and conditions of options granted under the
Incentive Plan may differ from one another as the Program Administrator shall,
in its discretion, determine, as long as all options granted under the Incentive
Plan satisfy the requirements of the Incentive Plan.
Section
3.
Duration
of Options
. Each option and all rights thereunder granted
pursuant to the terms of the Incentive Plan shall expire on the date determined
by the Program Administrator, but in no event shall any option granted under the
Incentive Plan expire later than ten years from the date on which the option is
granted. Notwithstanding the foregoing, any option granted under the
Incentive Plan to any person who owns more than 10% of the combined voting power
of all classes of stock of the Corporation or any Subsidiary shall expire no
later than five years from the date on which the option is granted.
Section
4.
Purchase
Price
. The option price with respect to any option granted
pursuant to the Incentive Plan shall not be less than the Fair Market Value of
the shares on the date of the grant of the option; except that the option price
with respect to any option granted pursuant to the Incentive Plan to any person
who owns more than 10% of the combined voting power of all classes of stock of
the Corporation shall not be less than 110% of the Fair Market Value of the
shares on the date the option is granted. For purposes of the
Program, the phrase “Fair Market Value” shall mean on the date of
grant or other relevant date: (i) the closing price of a share of
Common Stock as reported on the principal nationally recognized stock exchange
on which shares of Common Stock are traded on such date, or if no prices are
reported with respect to such shares on such date, the closing price of a share
of Common Stock on the last preceding date on which there were reported prices
of such shares; or (ii) if shares of Common Stock are not listed or admitted to
unlisted trading privileges on a nationally recognized stock exchange, but are
traded on the OTC Bulletin Board, the closing sale price of the Common Stock for
such date (or the closing bid price for that date or the nearest preceding date
if no sale price is available on that date) on the OTC Bulletin Board, or (iii)
if neither (i) nor (ii) apply and the Common Stock is reported in the “Pink
Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported on such date (or the nearest preceding
date); or (iv) if none of (i), (ii) or (iii) apply, the Fair Market Value of a
share the Common Stock will be determined in good faith by the Program
Administrator acting in its discretion using the reasonable application of a
reasonable valuation method based on the facts and circumstances existing on the
valuation date, which determination will be conclusive.
Section
5.
Maximum
Amount of Options in Any Calendar Year
. The aggregate Fair
Market Value (determined as of the time the option is granted) of the Common
Stock with respect to which incentive stock options are exercisable for the
first time by any employee during any calendar year (under the terms of the
Incentive Plan and all incentive stock option plans of the Corporation and the
Subsidiaries) shall not exceed $100,000.
Section
6.
Exercise
of Options
. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to the General Provisions of
the Program or otherwise by the Program Administrator with respect to any one or
more previously granted options, incentive stock options may only be exercised
to the following extent during the following periods of time
:
:
|
|
Maximum
Percentage of
|
|
|
|
Shares
Covered by
|
|
|
|
Option
Which May be
|
|
During
|
|
Purchased
|
|
|
|
|
|
First
12 months after grant
|
|
0
|
|
|
|
|
|
First
24 months after grant
|
|
33-1/3%
|
|
|
|
|
|
First
36 months after grant
|
|
66-2/3%
|
|
|
|
|
|
Beyond
36 months after grant
|
|
100%
|
|
Section
7.
Failure
to Satisfy Applicable Requirements
. In the event that an
option is intended to be granted pursuant to the provisions of this Incentive
Plan but fails to satisfy one or more requirements of this Incentive Plan, such
option shall be deemed to have been granted pursuant to the Supplemental Plan
set forth as Part II of the Program, provided that such option satisfies the
requirements of the Supplemental Plan.
PART
II
SUPPLEMENTAL
STOCK OPTION PLAN
The following provisions shall apply with respect to options granted by the
Program Administrator pursuant to Part II of the Program:
Section
1.
General
. This
Supplemental Stock Option Plan ("Supplemental Plan") is Part II of the
Corporation's Program. Any option granted pursuant to this
Supplemental Plan shall not be an incentive stock option as defined in Section
422 of the Code. Unless any provision herein indicates to the
contrary, this Supplemental Plan shall be subject to the General Provisions of
the Program.
Section
2.
Terms
and Conditions
. The Program Administrator may grant
supplemental stock options to any person eligible under Article 4 of the General
Provisions. The terms and conditions of options granted under this
Supplemental Plan may differ from one another as the Program Administrator
shall, in its discretion, determine as long as all options granted under this
Supplemental Plan satisfy the requirements of this Supplemental
Plan.
Section
3.
Duration
of Options
. Each option and all rights thereunder granted
pursuant to the terms of this Supplemental Plan shall expire on the date
determined by the Program Administrator, but in no event shall any option
granted under this Supplemental Plan expire later than ten years from the date
on which the option is granted.
Section
4.
Purchase
Price
. The option price with respect to any option granted
pursuant to this Supplemental Plan shall be determined by the Program
Administrator at the time of grant.
Section
5.
Exercise
of Options
. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to the General Provisions of
the Program or otherwise by the Program Administrator with respect to any one or
more previously granted options, supplemental stock options may only be
exercised to the following extent during the following periods of
time:
|
|
Maximum
Percentage of
|
|
|
|
Shares
Covered by
|
|
|
|
Option
Which May be
|
|
During
|
|
Purchased
|
|
|
|
|
|
First
12 months after grant
|
|
0
|
|
First
24 months after grant
|
|
33-1/3%
|
|
First
36 months after grant
|
|
66-2/3%
|
|
Beyond
36 months after grant
|
|
100%
|
|
PART
III
STOCK
APPRECIATION RIGHTS PLAN
The following provisions shall apply with respect to stock appreciation rights
granted by the Program Administrator pursuant to Part III of the
Program:
Section
1.
General
. This
Stock Appreciation Rights Plan ("SAR Plan") is Part III of the Corporation's
Program.
Section
2.
Terms
and Conditions
. The Program Administrator may grant stock
appreciation rights to any person eligible under Article 4 of the General
Provisions. Stock appreciation rights may be granted either in tandem
with supplemental stock options or incentive stock options as described in
Section 4 of this SAR Plan or as naked stock appreciation rights as described in
Section 5 of this SAR Plan.
Section
3.
Mode of
Payment
. At the discretion of the Program Administrator,
payments to recipients upon exercise of stock appreciation rights may be made in
(a) cash or by the Corporation’s check, (b) shares of Common Stock having a Fair
Market Value (determined in the manner provided in Section 4 of the Incentive
Plan) equal to the amount of the payment, (c) a note in the amount of the
payment containing such terms as are approved by the Program Administrator or
(d) any combination of the foregoing in an aggregate amount equal to the amount
of the payment.
Section
4.
Stock
Appreciation Right in Tandem with Supplemental or Incentive Stock
Option
. A SAR granted in tandem with a supplemental stock
option or an incentive stock option (in either case, an "Option") shall be on
the following terms and conditions:
(a) Each
SAR shall relate to a specific Option or portion of an Option granted under the
Supplemental Plan or Incentive Plan, as the case may be, and may be granted by
the Program Administrator at the same time that the Option is granted or at any
time thereafter prior to the last day on which the Option may be
exercised.
(b) A
SAR shall entitle a recipient, upon surrender of the unexpired related Option,
or a portion thereof, to receive from the Corporation an amount equal to the
excess of (i) the Fair Market Value (determined in accordance with Section 4 of
the Incentive Plan) of the shares of Common Stock which the recipient would have
been entitled to purchase on that date pursuant to the portion of the Option
surrendered over (ii) the amount which the recipient would have been required to
pay to purchase such shares upon exercise of such Option.
(c) A
SAR shall be exercisable only for the same number of shares of Common Stock, and
only at the same times, as the Option to which it relates. SARs shall
be subject to such other terms and conditions as the Program Administrator may
specify.
(d) A
SAR shall lapse at such time as the related Option is exercised or lapses
pursuant to the terms of the Program. On exercise of the SAR, the
related Option shall lapse as to the number of shares exercised.
Section
5.
Naked
Stock Appreciation Right
. SARs granted by the Program
Administrator as naked stock appreciation rights ("Naked Rights") shall be
subject to the following terms and conditions:
(a) The
Program Administrator may award Naked Rights to recipients for periods not
exceeding ten years. Each Naked Right shall represent the right to
receive the excess of the Fair Market Value of one share of Common Stock
(determined in accordance with Section 4 of the Incentive Plan) on the date of
exercise of the Naked Right over the Fair Market Value of one share of Common
Stock (determined in accordance with Section 4 of the Incentive Plan) on the
date the Naked Right was awarded to the recipient.
(b) Unless
otherwise provided by the Program Administrator at the time of award or unless
the installment provisions set forth herein are subsequently accelerated
pursuant to the General Provisions of the Program or otherwise by the Program
Administrator with respect to any one or more previously granted Naked Rights,
Naked Rights may only be exercised to the following extent during the following
periods of employment or service as a consultant or director:
|
|
Maximum
Percentage
|
|
|
|
of
Naked Rights Which
|
|
During
|
|
May Be Exercised
|
|
|
|
|
|
First
12 months after award
|
|
0%
|
|
First
24 months after award
|
|
33-1/3%
|
|
First
36 months after award
|
|
66-2/3%
|
|
Beyond
36 months after award
|
|
100%
|
|
(c) The
Naked Rights solely measure and determine the amounts to be paid to recipients
upon exercise as provided in Section 5(a). Naked Rights do not
represent Common Stock or any right to receive Common Stock. The
Corporation shall not hold in trust or otherwise segregate amounts which may
become payable to recipients of Naked Rights; such funds shall be part of the
general funds of the Corporation. Naked Rights shall constitute an
unfunded contingent promise to make future payments to the
recipient.
PART
IV
RESTRICTED
STOCK AWARD PLAN
The following provisions shall apply with respect to restricted shares and
restricted stock units granted by the Program Administrator pursuant to Part IV
of the Program:
Section
1.
General
. This
Restricted Stock Award Plan (“Restricted Stock Plan”) is Part IV of the
Corporation’s Program. Unless any provision herein indicates to the
contrary, this Restricted Stock Plan shall be subject to the General Provisions
of the Program.
Section
2.
Terms
and Conditions
. The Program Administrator may in its sole
discretion grant restricted shares of Common Stock to any person eligible under
Article 4 of the General Provisions and shall evidence such grant in an Award
agreement that is delivered to the recipient and that sets forth the number of
restricted shares of Common Stock, the purchase price for such restricted shares
(if any), and the terms upon which the restricted shares may become
vested. In addition, the Corporation may in its discretion grant to any
person eligible under Article 4 of the General Provisions the right to receive
shares of Common Stock after certain vesting requirements are met (“restricted
stock units”), and shall evidence such grant in an Award agreement that is
delivered to the recipient which sets forth the number of shares of Common Stock
(or formula, that may be based on future performance or conditions, for
determining the number of shares of Common Stock) that the recipient shall be
entitled to receive upon vesting and the terms upon which the shares subject to
a restricted stock unit may become vested. The Program Administrator may
condition any Award of restricted shares or restricted stock units upon
receiving from the recipient such further assurances and documents as the
Program Administrator may require to enforce the restrictions. In
addition, the Program Administrator may grant Awards hereunder in the form of
unrestricted shares of Common Stock; that is, shares of Common Stock without
conditions and conveying immediate ownership to the holder upon the date of
grant or such other date as the Program Administrator may
determine.
Section
3.
Vesting
and Forfeiture
. The Program Administrator shall set forth in an
Award agreement granting restricted shares or restricted stock units, the terms
and conditions under which the recipient’s interest in the restricted shares or
the shares subject to restricted stock units will become vested and
non-forfeitable, which conditions may be based on the recipient’s continued
employment or services to the Corporation and its Subsidiaries and/or the
achievement of such specified performance objectives as the program
Administrator may establish.
Section
4.
Issuance
of Shares upon Vesting
.
As soon as practicable
after vesting of a holder’s restricted shares (or right to receive shares of
Common Stock underlying restricted stock units) and the recipient’s satisfaction
of applicable tax withholding requirements, the Corporation shall release to the
recipient, free from the vesting restrictions, one share of Common Stock for
each vested restricted share (or issue one share of Common Stock free of the
vesting restriction for each vested restricted stock unit), unless an Award
agreement provides otherwise. No fractional shares shall be distributed,
and cash shall be paid in lieu thereof.
Section
5.
Dividends Payable on
Vesting
.
Unless otherwise
provided in an Award agreement, whenever shares of Common Stock are released to
an individual as a result of the vesting of restricted shares, such individual
shall also be entitled to receive (unless otherwise provided in the Award
agreement), with respect to each share of Common Stock released or issued a
number of shares of Common Stock equal to (i) any stock dividends, which were
declared and paid to the holders of shares of Common Stock between the date of
the Award and the date such share of Common Stock is released from the vesting
restrictions, and (ii) in the discretion of the Program Administrator, (x) a
number of shares of Common Stock equal to the shares of Common Stock that the
individual could have purchased at Fair Market Value on the payment date of any
cash dividends for shares of Common Stock if the individual had received such
cash dividends with respect to each restricted share between the date of the
Award and lapse of the restrictions of such restricted share, and/or (y) a cash
amount equal to the cumulative amount of such cash dividends.
|
|
VOTE
BY INTERNET -
www.proxyvote.com
|
PHOTONICS
PRODUCTS GROUP, INC.
181
LEGRAND AVENUE
NORTHVALE,
NJ 07647
|
|
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction
form.
|
|
|
|
|
|
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
|
|
|
If
you would like to reduce the costs incurred by Photonics Products
Group, Inc. in mailing proxy materials, you can consentto receiving
all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access
shareholder communications electronically in future
years.
|
|
|
|
|
|
VOTE
BY MAIL
|
|
|
Mark,
sign and date your proxy card
and return it in the postage-paid
envelope we have provided or return it to Photonics Products
Group, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
PHOPR1
|
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
|
|
|
DETACH
AND RETURNTHIS PORTION
ONLY
|
THIS
PROXYCARD IS VALID ONLY WHEN SIGNED AND DATED.
PHOTONICS
PRODUCTS GROUP, INC.
THE BOARD
OF DIRECTORS RECOMMENDS A
VOTE “FOR” THE PROPOSAL.
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
A.
|
To
amend the Company’s Restated Certificate of Incorporation
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For All
|
|
Withhold
All
|
|
For All
Except
|
|
To
withhold authority to vote for any
individual
nominee(s), mark “For All Except”
|
B.
|
In
the event the Amendment is approved:
|
|
|
|
|
|
|
|
and
write the number(s) of the nominee(s) on the
|
|
Election
of the Board’s nominees for Class I
Directors
to serve for one year, for Class II
Directors
to serve for two years, and for Class III
Director
to serve for three years.
|
|
o
|
|
o
|
|
o
|
|
line
below.
|
|
|
|
|
|
|
|
|
|
|
|
Or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
the event the Amendment is not approved:
|
|
|
|
|
|
|
|
___________________
|
|
|
|
|
|
|
|
|
|
|
|
Election of the Board’s nominees to serve for one
year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOMINEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01) Dennis
G. Romano (Class I)
02) N.
E. Rick Strandlund (Class I)
03) Luke
P. LaValle, Jr. (Class II)
04) Joseph
J. Rutherford (Class II)
05) Thomas
H. Lenagh (Class III)
06) Jan
Winston (Class III)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.
|
Approve
the Company’s 2010 Equity
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
Compensation
Plan
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
D.
|
Ratify
Holtz Rubenstein Reminick, LLP as the
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
independent
registered public accounting firm for for the fiscal year ending December
31, 2010
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
|
Transact
such other business as may properly come before the meeting or any
adjournment thereof
|
|
|
|
|
|
|
|
|
UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION, FOR THE BOARD NOMINEES, FOR THE EQUITY
COMPENSATION PLAN AND FOR THE RATIFICATION OF THE AUDITORS.
PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON
IF YOU ATTEND.
Note
:
|
Please
sign exactly as your name or names appear(s) on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
For address changes and/or comments, please check
|
|
0
|
this
box and write changes on the back where indicated.
|
|
|
Signature (PLEASE SIGN WITHIN BOX)
|
|
Date
|
|
Signature
(Joint Owners)
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANNUAL
MEETING OF SHAREHOLDERS OF
PHOTONIC
PRODUCTS GROUP, INC.
JUNE
2, 2010
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
Please detach along
perforated line and mail in the envelope provided.
|
PHOTONIC
PRODUCTS GROUP, INC.
181
Legrand Avenue
Northvale,
NJ 07647
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned appoints Joseph J. Rutherford and Jan M. Winston, and each of them,
as Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, for and on behalf of the undersigned,
all the shares of common stock of PHOTONIC PRODUCTS GROUP, Inc. held of
record by the undersigned on April 8, 2010 at the Annual Meeting of Shareholders
of the Company to be held at the offices of Lowenstein Sandler PC, 1251 Avenue
of the Americas, 18th Floor, New York, NY 10020 on Wednesday, June 2, 2010 at
10:00 a.m. Eastern Daylight Time or any adjournment thereof, upon matters
properly coming before the meeting, as set forth in the Notice of Annual Meeting
and Proxy Statement, both of which have been received by the undersigned and
upon all such other matters that may properly be brought before the meeting, as
to which the undersigned confers discretionary authority upon said proxies.
Without otherwise limiting the general authorization given hereby, said proxies
are instructed to vote as directed on the reverse side.
|
|
Address
Changes/Comments:
|
|
|
|
|
|
(If you
noted any Address Changes/Comments above, please mark corresponding box on the
reverse side.)
(Continued
and to be signed on the reverse side)