SONOMA PHARMACEUTICALS, INC.
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
(Rule
14a-101)
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
appropriate box:
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¨
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant §240.14a-12
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OCULUS
INNOVATIVE SCIENCES, INC.
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(Name
of Registrant as Specified in its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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¨
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Fee
computed based on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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Oculus
Innovative Sciences, Inc.
1129 N. McDowell
Blvd.
Petaluma,
California 94954
(707) 782-0792
July 29,
2010
Dear
Stockholder:
You are
cordially invited to attend the 2010 Annual Meeting of Stockholders of Oculus
Innovative Sciences, Inc. The meeting will be held at 10 a.m., Eastern
Daylight Time, on Monday, September 13, 2010, at Marcum, LLP, 750 Third
Avenue, 11th Floor, New York, New York 10017.
The
formal notice of the Annual Meeting and the Proxy Statement has been made a part
of this invitation.
Whether
or not you attend the Annual Meeting, it is important that your shares be
represented and voted at the Annual Meeting. After reading the Proxy Statement,
please promptly vote and submit your proxy by dating, signing and returning the
enclosed proxy card in the enclosed postage-prepaid envelope. Your shares cannot be voted unless
you submit your proxy or attend the Annual Meeting in
person.
We have
also enclosed a copy of our Annual Report for the fiscal year ended March 31,
2010.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Stockholder Meeting To Be Held
on
September 13, 2010 — Oculus’ 2010 Proxy Statement,
Form 10-K and Annual Report for the fiscal year ended March 31,
2010 are available
at http://ir.oculusis.com/annuals.cfm/.
These documents are also
available by contacting Oculus by email at mhayashi@oculusis.com.
The Board
of Directors and management look forward to seeing you at the
meeting.
Sincerely,
Hojabr
Alimi
Chairman of the Board and Chief
Executive Officer
2
Oculus Innovative Sciences,
Inc.
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To
Be Held on Monday, September 13, 2010
To our
Stockholders:
Oculus
Innovative Sciences, Inc. will hold its Annual Meeting of Stockholders at
10 a.m., Eastern Daylight Time, on Monday, September 13, 2010, at
Marcum, LLP, 750 Third Avenue, 11th Floor, New York, New York
10017.
We are
holding this Annual Meeting to:
1. elect
two Class II directors, nominated by the Board of Directors, to serve until
the 2013 Annual Meeting or until their successors are duly elected and
qualified;
2.
approve the adoption of the 2010 Stock Incentive Plan;
3. ratify
the appointment of Marcum LLP as our independent registered public accounting
firm; and
4. transact
such other business as may properly come before the Annual Meeting and any
adjournments or postponements of the Annual Meeting.
Proposal No. 1
relates solely to the election of two Class II directors nominated by the
Board of Directors of the Company.
Stockholders
of record at the close of business on July 15, 2010, are entitled to notice
of and to vote at this meeting and any adjournments or postponements of the
Annual Meeting. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Secretary’s office, 1129 N. McDowell Blvd., Petaluma, California
94954.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Stockholder Meeting To Be Held on
Monday, September 13, 2010: Oculus’ 2010 Proxy Statement,
Form 10-K and Annual Report for 2010 are available at http://ir.oculusis.com/annuals.cfm/.
These documents are also
available by contacting Oculus by email at mhayashi@oculusis.com.
It is important that your shares be
represented at this meeting. Even if you plan to attend the meeting, we hope
that you will promptly vote and submit your proxy by dating, signing and
returning the enclosed proxy card. This will not limit your rights to attend or
vote at the meeting.
By Order
of the Board of Directors
Jim
Schutz
Chief Operating Officer, General
Counsel,
Corporate Secretary and
Director
Petaluma,
California
July 29,
2010
3
TABLE OF
CONTENTS
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Information
Concerning Voting and Solicitation
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5
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Proposal 1
Election of Directors
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7
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| Directors and Nominees |
7
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Executive
Officers
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14
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| Executive Compensation |
14
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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18
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Report
of the Audit Committee
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20
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Proposal
2 Approval of the 2010 Stock Incentive Plan
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21
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Proposal 3
Ratification of the Appointment of Independent Registered Public
Accounting Firm
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23
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Stockholder
proposals for the 2011 Annual Meeting
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24
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Section 16(a)
Beneficial Ownership Reporting Compliance
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24
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Other
Matters
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24
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4
Oculus
Innovative Sciences, Inc.
1129 N. McDowell
Blvd.
Petaluma, California
94954
PROXY
STATEMENT
Information Concerning Voting and
Solicitation
This
Proxy Statement is being furnished to you in connection with the solicitation by
the Board of Directors of Oculus Innovative Sciences, Inc., a Delaware
corporation (“we,” “us,” “Oculus” or the “Company”), of proxies in the
accompanying form to be used at the Annual Meeting of Stockholders of the
Company to be held at Marcum, LLP, 750 Third Avenue, 11th Floor, New York, New
York 10017, on Monday, September 13, 2010, at 10 a.m., Eastern
Daylight Time, and any postponement or adjournment thereof (the “Annual
Meeting”).
This
Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about July 29, 2010.
Questions and Answers About the Proxy
Materials and the Annual Meeting
What proposals will be voted on at
the Annual Meeting?
Three
proposals will be voted on at the Annual Meeting:
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•
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The
election of two Class II directors, nominated by the Board of Directors,
to serve until the 2013 Annual Meeting or until their successors are duly
elected and qualified;
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•
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The
approval of the Company’s 2010 Stock Incentive plan;
and
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•
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The
ratification of the appointment of the independent registered public
accounting firm for fiscal year ending March 31,
2011.
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What are the board’s
recommendations?
Our Board
recommends that you vote:
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•
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“FOR” election of each
of the nominated directors;
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•
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“FOR” the adoption of
the Company’s 2010 Stock Incentive Plan;
and
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•
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“FOR” ratification of
the appointment of the independent registered public accounting firm for
fiscal year ending March 31,
2011.
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Will there be any other items of
business on the agenda?
We do not
expect any other items of business because the deadline for stockholder
proposals and nominations has already passed. Nonetheless, in case there is an
unforeseen need, the accompanying proxy gives discretionary authority to the
persons named on the proxy with respect to any other matters that might be
brought before the meeting. Those persons intend to vote that proxy in
accordance with their best judgment.
Who is entitled to vote?
Stockholders
of record at the close of business on July 15, 2010 (the “Record Date”) may
vote at the Annual Meeting. Each stockholder is entitled to one vote for each
share of the Company’s common stock held as of the Record
Date.
What is the difference between
holding shares as a stockholder of record and as a beneficial owner?
Stockholder of
Record. If your shares are registered directly in your name
with Oculus’ transfer agent, BNY Mellon Shareholder Services, you are
considered, with respect to those shares, the stockholder of record. The Proxy
Statement, Annual Report and proxy card have been sent directly to you by
Oculus.
5
Beneficial
Owner. If your shares are held in a brokerage account or by a
bank or other nominee, you are considered the beneficial owner of shares held in
street name. The Proxy Statement and Annual Report have been forwarded to you by
your broker, bank or nominee who is considered, with respect to those shares,
the stockholder of record. As the beneficial owner, you have the right to direct
your broker, bank or nominee how to vote your shares by using the voting
instruction form included in the mailing.
How do proxies
work?
The Board
of Directors is asking for your proxy. Giving us your proxy means that you
authorize us to vote your shares at the Meeting in the manner you direct. You
may vote “FOR” or “AGAINST” all or some of our director nominees. You may also
vote “FOR” or “AGAINST” the other item(s) or “ABSTAIN” from voting for any item
or any director. If you sign and return the enclosed proxy card but do not
specify how to vote, we will vote your shares ”FOR” all of our director
nominees, “FOR” the adoption of our 2010 Stock Incentive Plan; and “FOR” the
ratification of the selection of Marcum LLP as our independent registered public
accounting firm.
How do I vote?
You may
vote using any of the following methods:
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•
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By Mail — Sign and
date each proxy card you receive and return it in the prepaid envelope.
Sign your name exactly as it appears on the proxy. If you return your
signed proxy but do not indicate your voting preferences, your shares will
be voted on your behalf “FOR” the election of the nominated directors, ,
and “FOR” the ratification of the independent registered public accounting
firm for fiscal year 2010. Stockholders of record may vote by mail or in
person at the Annual Meeting.
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By Telephone or the Internet
— If you are a beneficial owner, you will receive instructions
from the holder of record that you must follow in order for your shares to
be voted. Telephone and Internet voting will be offered to stockholders
owning shares through most banks and brokers. Follow the instructions
located on your voting instruction form. Please be aware that if you vote
over the Internet, you may incur costs such as telephone and Internet
access charges for which you will be responsible. If you vote by telephone
or via the Internet you do not need to return your voting instruction form
to your bank or broker.
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•
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In Person at the Annual
Meeting — Shares held in your name as the stockholder of
record may be voted at the Annual Meeting. Shares held beneficially in
street name may be voted in person only if you obtain a legal proxy from
the broker, bank or nominee that holds your shares giving you the right to
vote the shares. Even if you
plan to attend the Annual Meeting, we recommend that you also submit your
proxy or voting instructions or vote by telephone or the Internet so that
your vote will be counted if you later decide not to attend the
meeting.
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What does it mean if I receive more
than one proxy card?
If you
hold your shares in multiple registrations, or in both registered and street
name, you will receive a proxy card for each account. Please mark, sign, date,
and return each proxy card you receive. If you choose to vote by telephone or
Internet, please vote each proxy card you receive.
Can I change my vote or revoke my
proxy?
You may
change your vote or revoke your proxy at any time prior to the vote at the
Annual Meeting. If you submitted your proxy by mail, you must file with the
Secretary of the Company a written notice of revocation or deliver, prior to the
vote at the Annual Meeting, a valid, later-dated proxy. If you submitted your
proxy by telephone or the Internet, you may change your vote or revoke your
proxy with a later telephone or Internet proxy, as the case may be. Attendance
at the Annual Meeting will not have the effect of revoking a proxy unless you
give written notice of revocation to the Secretary before the proxy is exercised
or you vote by written ballot at the Annual Meeting.
What constitutes a
quorum?
The
presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of common stock outstanding on the Record Date will constitute a
quorum. As of the close of business on the Record Date, there were
26,277,458 shares of our common stock outstanding. Both abstentions and
broker non-votes are counted for the purpose of determining the presence of a
quorum.
6
How
many votes are required to elect directors?
Provided
that a quorum is present, the affirmative vote by the holders of a plurality of
the shares of common stock present and voting at the Annual Meeting is required
to elect each of the nominees for director. Each share of common stock that is
represented, in person or by proxy, at the Annual Meeting will be accorded one
vote on each nominee for director. Thus, assuming a quorum is present at the
Annual Meeting, the two nominees who receive the most affirmative votes will be
elected as Class II directors.
Is cumulative voting permitted for
the election of directors?
Stockholders
may not cumulate votes in the election of directors, which means that each
stockholder may vote no more than the number of shares he or she owns for a
single director candidate.
What vote is required to approve
Proposals 2 and
3?
Proposal
2 and Proposal 3 require the affirmative “FOR” vote of a majority of the shares
present and voting at the Annual Meeting in person or by
proxy.
How are proxies
solicited?
Our
employees, officers and directors may solicit proxies. We will bear the cost of
soliciting proxies and will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses for
forwarding proxy and solicitation material to the owners of common
stock.
IMPORTANT
Please promptly vote and submit your
proxy by signing, dating and returning the enclosed proxy card in the
postage-prepaid return envelope so that your shares can be voted. This will not
limit your rights to attend or vote at the Annual
Meeting.
PROPOSAL 1
ELECTION OF
DIRECTORS
Directors and
Nominees
At
our 2008 Annual Meeting of Stockholders, our stockholders approved an amendment
to our Restated Certificate of Incorporation, which amendment provided that
directors be classified into three classes, as nearly equal in number as
possible, with each class serving for a staggered three-year term. Our Board
currently consists of six directors. Our current Class I directors are Jim
Schutz and Hojabr Alimi. Our current Class II directors are Gregg Alton and
Jay Birnbaum. Our current Class III directors are Richard Conley and
Gregory French.
The
Nominating and Corporate Governance Committee of the Board of Directors has
recommended, and the Board of Directors has nominated, Messrs. Alton and
Birnbaum who are current Class II directors, for election at the Annual
Meeting to serve until the 2013 Annual Meeting of Stockholders and until their
successors are duly elected and qualified. Each of Messrs. Alton and
Birnbaum has agreed to stand for election at the Annual Meeting as Class II
directors. However, if for any reason any nominee should be unable or unwilling
to serve, the proxies will be voted for any nominee designated to fill the
vacancy by your Board of Directors, taking into account the recommendations of
the Nominating and Corporate Governance Committee.
DIRECTORS
AND NOMINEES
Set forth
below is certain information with respect to our directors, including their
class and term of office, their ages as of July 15, 2010 and their
Committee membership. This information has been provided by each director at the
request of the Company. None of the directors is related to each other or any
executive officer of the Company.
7
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Name
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Age
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Position With the Company
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Director Since
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Hojabr
Alimi (4)
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49
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Chairman
of the Board, Chief Executive Officer and Class I
Director
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1999
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Jim
Schutz (4)
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47
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Vice
President, General Counsel, Corporate Secretary and Class I
Director
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2004
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Gregg
Alton (1)(3)
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44
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Class II
Director
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2008
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Jay
Birnbaum (1)
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65
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Class II
Director
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2007
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Richard
Conley (1)(2)(3)(4)
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60
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Class III
Director
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1999
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Gregory
French (2)(3)
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49
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Class III
Director
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2000
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(1)
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Member
of the Audit Committee
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(2)
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Member
of the Compensation Committee
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(3)
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Member
of the Nominating and Corporate Governance
Committee
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(4)
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Member
of the Acquisition and Strategy
Committee
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Biographies
of Directors
Hojabr Alimi, one of our
founders, has served as our Chief Executive Officer, President and director
since 1999 and was appointed as Chairman of the Board of Directors in June 2006.
Prior to co-founding our company with his spouse in 1999, Mr. Alimi was a
Corporate Microbiologist for Arterial Vascular Engineering. Mr. Alimi
received a B.A. in biology from Sonoma State University.
Jim Schutz has served as our
Vice President and General Counsel since August 2003, as a director since May
2004 and Corporate Secretary since June 2006. From August 2001 to August 2003,
Mr. Schutz served as General Counsel at Jomed (formerly EndoSonic Corp.),
an international medical device company. From 1999 to July 2001, Mr. Schutz
served as in-house counsel at Urban Media Communications Corporation, an
Internet/telecom company based in Palo Alto, California. Mr. Schutz
received a B.A. in economics from the University of California, San Diego
and a J.D. from the University of San Francisco School of
Law.
Gregg H. Alton has served as
a director since January 2008. Mr. Alton has served as the Executive Vice
President and Secretary of Gilead Sciences Inc., a biopharmaceutical company
engaged in the discovery, development, and commercialization of therapeutics for
the treatment of life-threatening infectious diseases, since 1999. Prior to
joining Gilead, Mr. Alton was an attorney at the law firm of Cooley
Godward, LLP, where he specialized in mergers and acquisitions, corporate
partnerships and corporate finance transactions for healthcare and information
technology companies. In addition to his corporate responsibilities,
Mr. Alton is a Board member of the AIDS Healthcare Foundation and a Board
member of BayBio, a life sciences industry organization in the
San Francisco Bay Area.
Jay Birnbaum has served as a
director since April 2007. Dr. Birnbaum is a pharmacologist and, prior to
his current role as a consultant to pharmaceutical companies, he served as Vice
President of Global Project Management at Novartis/Sandoz Pharmaceuticals
Corporation, where he had responsibility for strategic planning and development
of the company’s dermatology portfolio. Dr. Birnbaum is a co-founder of
Kythera Biopharmaceuticals, a company developing products in aesthetic and
restorative dermatology, as well as a member of the scientific advisory boards
of NanoBio Corporation and NexMed, Inc. He received a Ph.D. in pharmacology from
the University of Wisconsin and a B.S. in biology from Trinity College in
Connecticut.
Richard Conley has served as
a director since 1999, and served as our Secretary from July 2002 to June
2006. Currently, Mr. Conley serves as Chief Operating Officer at
Kautz Vineyards, Inc., a wine production and marketing company. From
2001 to 2009, he served as Executive Vice President and Chief Operating Officer
at Don Sebastiani & Sons International Wine Negociants, a branded wine
marketing company. From 1994 to March 2001, he served as Senior Vice President
and Chief Operating Officer at Sebastiani Vineyards, a California wine producer,
where he was originally hired as Chief Financial Officer in 1994.
Mr. Conley received a B.S. in finance and accounting from Western Carolina
University and an M.B.A. from St. Mary’s University.
Gregory French has served as
a director since 2000. Mr. French is owner and Chairman of the
Board of G&C Enterprises LLC, a real estate and investment company, which he
founded in 1999. He held various engineering and senior management positions at
several medical device companies, including Advanced Cardiovascular Systems,
Peripheral Systems Group and Arterial Vascular Engineering. Mr. French
received a B.S.I.E. from the California State Polytechnic University,
San Luis Obispo.
8
Required
Vote
With
regard to the election of directors, votes may be cast “FOR” or “WITHHOLD.”
Provided that a quorum is present, the affirmative vote by the holders of a
plurality of the shares of common stock present and voting at the Annual Meeting
is required to elect each of the nominees for director. Each share of common
stock that is represented, in person or by proxy, at the Annual Meeting will be
accorded one vote on each nominee for director. Thus, assuming a quorum is
present at the Annual Meeting, the two nominees who receive the most affirmative
votes will be elected as Class II directors.
Your Board of
Directors
recommends a vote FOR the election of the nominees set forth above as directors
of Oculus.
Director
Independence
As of
July 15, 2010, our Board of Directors has determined that Gregg Alton, Jay
Birnbaum, Richard Conley and Gregory French are “independent directors” as
defined under the standards of independence set forth in the NASDAQ Marketplace
Rules and the rules under the Securities Exchange Act of
1934.
Board
Meetings
Our Board
of Directors held 13 meetings in fiscal year 2010 and, in addition, took action
from time to time by unanimous written consent. Each director attended at least
75% of the aggregate number of meetings of the Board of Directors held during
the period for which such director served on our Board of Directors and of the
Committees on which such director served. In 2006, the independent directors
began to meet in regularly scheduled executive sessions at in-person meetings of
the Board of Directors without the participation of the Chief Executive Officer
or the other members of management. We do not have a policy that requires the
attendance of directors at the Annual Meeting. Three of our Board members
attended our 2009 Annual Meeting.
Committees of the Board of
Directors
Our Board
of Directors has appointed an Audit Committee, a Compensation Committee, a
Nominating and Corporate Governance Committee and an Acquisition and Strategy
Committee. With the exception of the Acquisition and Strategy Committee, the
Board of Directors has determined that each director who serves on these
committees is “independent,” as that term is defined by applicable listing
standards of the NASDAQ Global Market and rules of the SEC. The Board of
Directors has adopted written charters for each of its Committees. Copies of
these charters are available on the investor section of our website
(www.oculusis.com). In addition to the number of meetings referenced below, the
Committees also took actions by unanimous written consent.
Audit
Committee
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Number of
Members:
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3
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Current
Members:
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Richard
Conley (Chair and Audit Committee Financial Expert)
Gregg
H. Alton
Jay
Birnbaum
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Number of Meetings in fiscal
year 2010:
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4
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Functions:
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The
Audit Committee provides assistance to the Board of Directors in
fulfilling its oversight responsibilities relating to the Company’s
financial statements, system of internal control over financial reporting,
and auditing, accounting and financial reporting processes. Other specific
duties and responsibilities of the Audit Committee are to appoint,
compensate, evaluate and, when appropriate, replace the Company’s
independent registered public accounting firm; review and pre-approve
audit and permissible non-audit services; review the scope of the annual
audit; monitor the independent registered public accounting firm’s
relationship with the Company; and meet with the independent registered
public accounting firm and management to discuss and review the Company’s
financial statements, internal control over financial reporting, and
auditing, accounting and financial reporting
processes.
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9
Compensation
Committee
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Number
of Members:
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2
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Current
Members:
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Gregory
French (Chair)
Richard
Conley
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Number
of Meetings in fiscal year 2010:
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3
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Functions:
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The
Compensation Committee’s primary functions are to assist the Board of
Directors in meeting its responsibilities in regard to oversight and
determination of executive compensation and to review and make
recommendations with respect to major compensation plans, policies and
programs of the Company. Other specific duties and responsibilities of the
Compensation Committee are to review and approve goals and objectives
relevant to the recommendations for approval by the independent members of
the Board of Directors regarding compensation of our Chief Executive
Officer and other executive officers, establish and approve compensation
levels for our Chief Executive Officer and other executive officers, and
to administer our stock plans and other equity-based compensation
plans.
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Nominating and
Corporate Governance Committee
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Number
of Members:
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3
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Current
Members:
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Gregg
Alton (Chair)
Gregory
French
Richard
Conley
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Number
of Meetings in fiscal year 2010:
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3
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Functions:
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The
Nominating and Corporate Governance Committee’s primary functions are to
identify qualified individuals to become members of the Board of
Directors, determine the composition of the Board and its Committees, and
monitor a process to assess Board effectiveness. Other specific duties and
responsibilities of the Nominating and Corporate Governance Committee are
to recommend nominees to fill vacancies on the Board of Directors, review
and make recommendations to the Board of Directors with respect to
candidates for director proposed by stockholders, and review on an annual
basis the functioning and effectiveness of the Board and its
Committees.
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Acquisition and
Strategy Committee
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Number
of Members:
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3
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Current
Members:
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Richard
Conley (Chair)
Hojabr
Alimi
Jim
Schutz
|
|
|
Number
of Meetings in fiscal year 2010:
|
4
|
|
|
Functions:
|
The
Acquisition and Strategy Committee’s primary functions are to review the
Company’s strategic direction and, when and if they arise, review
potential mergers, acquisitions or dispositions of material assets or a
material portion of any business and report its conclusions to the Board
of Directors, as appropriate. The Acquisition and Strategy Committee will
also meet with executive officers of the Company as appropriate to review
potential issues.
|
10
Director Nominations
The Board
of Directors nominates directors for election at each Annual Meeting of
Stockholders and appoints new directors to fill vacancies when they arise. The
Nominating and Corporate Governance Committee has the responsibility to
identify, evaluate, recruit and recommend qualified candidates to the Board of
Directors for nomination or election.
One of
the Board of Directors’ objectives is that its membership be composed of
experienced and dedicated individuals with diversity of backgrounds,
perspectives and skills. The Nominating and Corporate Governance Committee will
select candidates for Director based on their character, judgment, diversity of
experience, business acumen, and ability to act on behalf of all stockholders.
The Nominating and Corporate Governance Committee believes that nominees for
Director should have experience, such as experience in management or accounting
and finance, or industry and technology knowledge that may be useful to Oculus
and the Board of Directors, high personal and professional ethics, and the
willingness and ability to devote sufficient time to carry out effectively their
duties as directors. The Nominating and Corporate Governance Committee believes
it appropriate for at least one, and, preferably, multiple, members of the Board
of Directors to meet the criteria for an “audit committee financial expert” as
defined by rules of the SEC, and for a majority of the members of the Board of
Directors to meet the definition of “independent director” under the rules
NASDAQ Marketplace Rules. The Nominating and Corporate Governance Committee also
believes it appropriate for key members of our management to participate as
members of the Board of Directors.
Prior to
each Annual Meeting of Stockholders, the Nominating and Corporate Governance
Committee identifies nominees first by evaluating the current Directors whose
term will expire at the Annual Meeting and who are willing to continue in
service. These candidates are evaluated based on the criteria described above,
including as demonstrated by the candidate’s prior service as a Director, and
the needs of the Board of Directors with respect to the particular talents and
experience of its Directors. In the event that a Director does not wish to
continue in service, the Nominating and Corporate Governance Committee
determines not to re-nominate the Director, or a vacancy is created on the Board
of Directors as a result of a resignation, an increase in the size of the Board
or other event, the Committee will consider various candidates for Board
membership, including those suggested by the Committee members, by other Board
of Directors members, by any executive search firm engaged by the Committee or
by stockholders. The Committee recommended all of the nominees for election
included in this Proxy Statement.
A
stockholder who wishes to suggest a prospective nominee for the Board of
Directors should notify Oculus’ Secretary or any member of the Committee in
writing with any supporting material the stockholder considers appropriate.
In addition, our Bylaws contain provisions addressing the process by which
a stockholder may nominate an individual to stand for election to the Board of
Directors at our Annual Meeting of Stockholders. In order to nominate a
candidate for director, a stockholder must give timely notice in writing to
Oculus’ Secretary and otherwise comply with the provisions of our Bylaws. To be
timely, our Bylaws provide that we must have received the stockholder’s notice
not earlier than 90 days nor more than 120 days in advance of the
one-year anniversary of the date the proxy statement was released to the
stockholders in connection with the previous year’s Annual Meeting of
Stockholders; however, if we have not held an Annual Meeting in the previous
year or the date of the Annual Meeting is changed by more than 30 days from
the date contemplated at the time of the mailing of the prior year’s proxy
statement, we must have received the stockholder’s notice not later than the
close of business on the later of the 90th day prior to the Annual Meeting
or the seventh day following the first public announcement of the Annual Meeting
date. Information required by the Bylaws to be in the notice includes the name
and contact information for the candidate and the person making the nomination
and other information about the nominee that must be disclosed in proxy
solicitations under Section 14 of the Securities Exchange Act of 1934 and
the related rules and regulations under that Section.
Stockholder
nominations must be made in accordance with the procedures outlined in, and
include the information required by, our Bylaws and must be addressed to:
Secretary, Oculus Innovative Sciences, Inc., 1129 N. McDowell Blvd.,
Petaluma, California 94954. You can obtain a copy of our Bylaws by writing to
the Secretary at this address.
Stockholder Communications with the
Board of Directors
If you
wish to communicate with the Board of Directors, you may send your communication
in writing to: Secretary, Oculus Innovative Sciences, Inc.,
1129 N. McDowell Blvd., Petaluma, California 94954. Please include
your name and address in the written communication and indicate whether you are
a stockholder of Oculus. The Secretary will review any communication received
from a stockholder, and all material communications from stockholders will be
forwarded to the appropriate Director or Directors or Committee of the Board of
Directors based on the subject matter.
11
Certain Relationships and Related Transactions
It is our
policy that all employees, officers and directors must avoid any activity that
is or has the appearance of conflicting with the interests of our Company. This
policy is included in our Code of Business Conduct, and our Board formally
adopted Related Party Transaction Policy and Procedures in July 2007 for the
approval of interested transactions with persons who are Board members or
nominees, executive officers, holders of 5% of our common stock, or family
members of any of the foregoing. The Related Party Transaction Policy and
Procedures are administered by our Audit Committee. We conduct a review of all
related party transactions for potential conflict of interest situations on an
ongoing basis and all such transactions relating to executive officers and
directors must be approved by the Audit Committee. The following details our
transactions with related parties.
On
January 26, 2009, we entered into a commercial agreement with VetCure, Inc., a
California corporation, to market and sell our Vetericyn products. VetCure, Inc.
later changed its name to Vetericyn, Inc. This agreement was amended on February
24, 2009 and on July 24, 2009. At the time of each of these transactions,
Vetericyn was wholly-owned by Robert Burlingame, who was a Director at the time
of the transactions. Mr. Burlingame resigned from our Board on
February 10, 2010. Pursuant to the agreement, we provide Vetericyn,
Inc. with bulk product and Vetericyn, Inc. bottles, packages, and sells
Vetericyn Inc. products. We receive a fixed amount for each bottle of Vetericyn
sold by Vertericyn, Inc. In addition, once certain milestones are met
by Vetericyn, Inc., we will share revenue generated by Vetericyn, Inc. related
to Vetericyn sales.
On
February 24, 2009, we entered into a Purchase Agreement with certain
investors, including Robert Burlingame, who was a Director at the time of the
transaction. Mr. Burlingame resigned from our Board on February 10,
2010. Pursuant to the terms of the Purchase Agreement, the investors agreed to
make a $3,000,000 investment in us. The investors paid $1,000,000 (net proceeds
of $948,000 after deducting offering expenses) for 854,701 shares of common
stock on February 24, 2009 and paid $2,000,000 for 1,709,402 shares of
common stock on June 1, 2009. In addition, we issued to the investors
Series A Warrants to purchase a total of 1,500,000 shares of common
stock pro rata to the number of shares of common stock issued on each closing
date at an exercise price of $1.87 per share. The Series A
Warrants became exercisable after six months and have a five year
term. We also issued to the investors Series B Warrants to
purchase a total of 2,000,000 shares of common stock pro rata to the number
of shares of common stock issued on each closing date at an exercise price of
$1.13 per share. The Series B Warrants became exercisable after
six months and have a three year term. In addition, for every two
shares of common stock the investor purchases upon exercise of a Series B
Warrant, the investor will receive an additional Series C Warrant to
purchase one share of common stock. The Series C Warrant shall
be exercisable after six months and will have an exercise price of $1.94 per
share and a five year term. We will only be obligated to issue Series C
Warrants to purchase up to 1,000,000 shares of common
stock.
On April
1, 2009, we entered into a six month agreement with Robert Burlingame, who was a
Director at the time of the transaction. Pursuant to the agreement,
Mr. Burlingame provided us with sales and marketing expertise and services as
part of another revenue sharing agreement. In consideration of his services, on
June 12, 2009, we issued Mr. Burlingame 435,897 unregistered shares of our
common stock.
On
September 15, 2009, we entered a commercial agreement with V&M Industries,
Inc., a California corporation, to market and sell our Microcyn over-the-counter
liquid and gel products. V&M Industries, Inc. was wholly-owned by
Robert Burlingame, who was a Director at the time of the
transaction. V&M Industries, Inc. subsequently changed their name
to Innovacyn, Inc. We manufacture certain Microcyn products and will
continue to bear all inventory and collection risks related to most of these
sales. Once certain milestones are met by Innovacyn, we will share
revenue generated by Innovacyn related to Microcyn OTC sales.
2010 Director
Compensation
The
following table sets forth cash amounts and the value of other compensation
earned or paid to our outside directors for their service in fiscal year
2010:
Director Compensation Table for the
Fiscal Year-Ended March 31, 2010(1)
|
Fees Earned
|
Option
|
All Other
|
||||||||||||||
|
or Paid in Cash(2)
|
Awards(3)
|
Compensation
|
Total
|
|||||||||||||
|
Name
|
($)
|
($)
|
($)
|
($)
|
||||||||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
||||||||||||
|
Gregg
Alton
|
35,000
|
17,691 | (5) |
0
|
52,691 | |||||||||||
|
Jay
Birnbaum
|
30,000
|
83,051 | (6) |
0
|
113,051 | |||||||||||
|
Robert
Burlingame (4)
|
25,000
|
17,691 | (7) |
0
|
42,691 | |||||||||||
|
Richard
Conley
|
39,000
|
252,021 | (8) |
0
|
291,021 | |||||||||||
|
Gregory
French
|
32,000
|
120,066 | (9) |
0
|
152,066 | |||||||||||
12
Notes:
(1) Directors
who are also included in the Summary Compensation Table as named executive
officers are not included in this table.
(2) The
Board has elected to defer the cash compensation earned in the fiscal year ended
March 31, 2010 so that the Company can preserve capital.
(3) Represents
the aggregate grant date fair value of stock option awards granted in the
respective fiscal year as computed in accordance with FASB ASC Topic 718,
Compensation — Stock Compensation. The fair value of each stock option
award is estimated on the date of grant using the Black-Scholes option valuation
model.
(4) Mr.
Burlingame resigned as a member of the Board of Directors effective February 10,
2010.
(5) On
January 5, 2010, we granted Mr. Alton options to purchase 15,000 shares of our
common stock. These options vest in equal monthly installments over
the period of one year and expire on January 5, 2020.
(6) On
November 6, 2009, we granted Mr. Birnbaum options to purchase 50,000 shares of
our common stock. These options vested on May 6, 2010 and expire
on November 6, 2019. On January 5, 2010, we granted Mr. Birnbaum an
option to purchase 15,000 shares of our common stock. These options
vest in equal monthly installments over one year and expire on January 5,
2020.
(7) On
January 5, 2010, we granted Mr. Burlingame options to purchase 15,000 shares of
our common stock. These options vest in equal monthly installments
over one year and expire on January 5, 2020. Upon his resignation
from the Board of Directors on February 10, 2010, Mr. Burlingame forfeited any
unvested options from this award.
(8) On
August 21, 2009, we granted Mr. Conley options to purchase 150,000 shares of our
common stock. These options will vest in 1/3 increments on each of
the first three one year anniversaries following the date of the grant and
expire on August 21, 2019. On January 5, 2010, we granted Mr. Conley
an option to purchase 15,000 shares of our common stock. These
options vested in equal monthly installments over one year, and expire on
January 5, 2020.
(9) On
November 6, 2009, we granted Mr. French options to purchase 75,000 shares of our
common stock. These options will vest in 1/3 increments on each of
the first three one year anniversaries following the date of the grant and
expire on November 6, 2019. On January 5, 2010, we granted Mr. French
an option to purchase 15,000 shares of our common stock. These
options vested in equal monthly installments over one year, and expire on
January 5, 2020.
The
following table sets forth the aggregate number of shares of common stock
underlying option awards outstanding at March 31, 2010:
|
Number of
|
||||
|
Name
|
Shares
|
|||
|
Gregg
Alton
|
90,000 | |||
|
Jay
Birnbaum
|
155,000 | |||
|
Robert
Burlingame
|
131,250 | |||
|
Richard
Conley
|
339,570 | |||
|
Gregory
French
|
298,906 | |||
Narrative
to Director Compensation Table
Pursuant
to our non-employee director compensation plan, each non-employee
director receives an annual retainer of $25,000. In fiscal years 2009 and 2010,
the Board elected to defer such cash payments to preserve capital for the
Company. The Chairperson of the Board of Directors receives $15,000 annually and
the Lead Member of the Board of Directors, if different from the Chairperson,
receives $10,000 annually. The Chairman of our Audit Committee receives an
annual retainer of $10,000; non-chairperson members of the Audit Committee
receive an additional $5,000 annually. The chairpersons of the Compensation
Committee and Nominating and Corporate Governance Committees of the Board
receive an annual retainer of $5,000. Non-chairperson members of the
Compensation Committee and Nominating and Corporate Governance Committee receive
an additional $2,000 annually. The members may elect to receive stock options in
lieu of cash. We also reimburse our non-employee directors for reasonable
expenses in connection with attendance at Board of Director and Committee
meetings.
13
In
addition to cash compensation for services as a member of the board,
non-employee directors are also eligible to receive nondiscretionary, automatic
grants of stock options under our 2006 Stock Incentive Plan. An outside director
who joins our Board is automatically granted an initial option to purchase
50,000 shares upon first becoming a member of our board. The initial option
vests and becomes exercisable over three years, with the first one-third of the
shares vesting on the first anniversary of the date of grant and the remainder
vesting monthly thereafter. After each of our regularly scheduled
Annual Meetings of Stockholders, each outside Director is automatically granted
an option to purchase 15,000 shares of our common stock, provided that no
annual grant shall be granted to a non-employee director in the same calendar
year that such person received his or her initial grant. These options vest in
equal monthly increments over the period of one year.
Directors
who are our employees do not receive any fees for their service on our Board of
Directors or for their service as a chair or committee member. During the fiscal
year ended March 31, 2010, Messrs. Alimi and Schutz were our only
employee directors.
EXECUTIVE
OFFICERS
The
following table identifies our current executive officers:
|
In Current
|
||||||
|
Name
|
Age
|
Capacities in Which Served
|
Position Since
|
|||
|
Hojabr
Alimi
|
49
|
Chief
Executive Officer Principal Executive Officer and Chairman
|
1999
|
|||
|
Robert
Miller
|
68
|
Chief
Financial Officer
|
2004
|
|||
|
Jim
Schutz
|
|
47
|
|
Chief
Operating Officer, General Counsel and Director
|
|
2006
|
Hojabr Alimi, one of our
founders, has served as our Chief Executive Officer, President and director
since 1999 and was appointed as Chairman of the Board of Directors in June 2006.
Prior to co-founding our company with his spouse in 1999, Mr. Alimi was a
Corporate Microbiologist for Arterial Vascular Engineering. Mr. Alimi
received a B.A. in biology from Sonoma State University.
Robert Miller has served as
our Chief Financial Officer since June 2004 and was a consultant to us from
March 2003 to May 2004. Mr. Miller has served as a director of Scanis, Inc.
since 1998 and served as acting Chief Financial Officer from 1998 to June 2006.
He was a Chief Financial Officer consultant to Evit Labs from June 2003 to
December 2004, Wildlife International Network from October 2002 to December
2005, Endoscopic Technologies from November 2002 to March 2004, Biolog from
January 2000 to December 2002 and Webware from August 2000 to August 2002. Prior
to this, Mr. Miller was the Chief Financial Officer for GAF Corporation,
Penwest Ltd. and Bugle Boy and Treasurer of Mead Corporation. He received a B.A.
in economics from Stanford University and an M.B.A. in finance from Columbia
University.
Jim Schutz has served most
recently as our Chief Operating Officer and our General Counsel and in
various capacities as an Executive Officer since August 2003 and as a
director since May 2004. From August 2001 to August 2003, Mr. Schutz served
as General Counsel at Jomed (formerly EndoSonic Corp.), an international medical
device company. From 1999 to July 2001, Mr. Schutz served as in-house
counsel at Urban Media Communications Corporation, an Internet/telecom company
based in Palo Alto, California. Mr. Schutz received a B.A. in economics
from the University of California, San Diego and a J.D. from the University
of San Francisco School of Law.
EXECUTIVE
COMPENSATION
Summary
Compensation
The
following table sets forth, for the fiscal years ended March 31, 2010 and
2009, all compensation paid or earned by (i) our Principal Executive
Officer; and (ii) our two most highly compensated executive officers, other
than our Principal Executive Officer. These executive officers and individuals
are referred to herein as our “named executive officers.”
14
Summary Compensation Table for the
Fiscal Year Ended March 31, 2010 and 2009
|
Non-Equity
|
||||||||||||||||||||||||||
|
Year
|
Option
|
Incentive Plan
|
All Other
|
|||||||||||||||||||||||
|
Ended
|
Salary
|
Bonus
|
Awards(1)
|
Compensation
|
Compensation
|
Total
|
||||||||||||||||||||
|
Name and Principal Position
|
March 31,
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||||||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(f)
|
(g)
|
(i)
|
(j)
|
|||||||||||||||||||
|
Hojabr
Alimi
|
2010
|
376,442 | 0 | 215,370 | 0 | 17,018 | (2) | 608,830 | ||||||||||||||||||
|
Chief
Executive Officer Principal Executive Officer and Chairman
|
2009
|
374,615 | 0 | 226,514 | 0 | 11,131 | (3) | 612,260 | ||||||||||||||||||
|
Robert
Miller
|
2010
|
250,962 | 0 | 269,213 | 0 | 9,932 | (4) | 530,107 | ||||||||||||||||||
|
Chief
Financial Officer
|
2009
|
248,308 | 0 | 143,615 | 0 | 5,195 | (5) | 397,118 | ||||||||||||||||||
|
Jim
Schutz
|
2010
|
257,500 | 23,000 | 261,375 | 0 | 14,130 | (6) | 556,005 | ||||||||||||||||||
|
Chief
Operating Officer, General Counsel and Director
|
2009
|
249,904 | 0 | 143,615 | 0 | 15,270 | (7) | 408,789 | ||||||||||||||||||
Notes
|
(1)
|
Represents
the aggregate grant date fair value of stock option awards granted in the
respective fiscal year as computed in accordance with FASB ASC Topic 718,
Compensation — Stock Compensation. The fair value of each stock
option award is estimated on the date of grant using the Black-Scholes
option valuation model. The amounts reported do not match the amounts
reported in last year’s proxy statement due to new reporting requirements
adopted by the SEC, which require us to restate the amounts for these
years applying the new grant date fair value methodology. With the
exception of options granted to Jim Schutz with a fair value of $171,638,
all options granted during the fiscal year ended March 31, 2010 were
granted pursuant to the 2010 Bonus
Program.
|
|
(2)
|
The
2010 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $2,952; (b) matching IRA contribution
in the amount of $5,451; (c) payment of $4,748 to cover premium for life
insurance policy for the benefit of Mr. Alimi; and (d) payment of $3,867
related to personal financial planning
services.
|
|
(3)
|
The
2009 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $4,421; (b) matching IRA
contribution in the amount of $2,600; and (c) payment of $4,110 to
cover premium for life insurance policy for the benefit of
Mr. Alimi.
|
|
(4)
|
The
2010 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $2,345; (b) matching IRA
contribution in the amount of $7,035; and (c) payment of $552 to
cover premium for life insurance
benefits.
|
|
(5)
|
The
2009 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $3,220; and (b) matching IRA
contribution in the amount of
$1,975.
|
|
(6)
|
The
2010 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $5,278; (b) matching IRA
contribution in the amount of $7,457; and (c) payment of $1,395 to
cover premium for life insurance policy for the benefit of
Mr. Schutz.
|
|
(7)
|
The
2009 perquisites and personal benefits include: (a) personal use of a
Company automobile in the amount of $6,925; (b) matching IRA
contribution in the amount of $7,586; and (c) payment of $759 to
cover premium for life insurance policy for the benefit of
Mr. Schutz.
|
15
Narrative to Summary Compensation
Table
Employment
Agreements of Each Named Executive Officer and Potential Payments Upon
Termination
We have
entered into employment agreements with each of our named executive officers,
each of which provides for payment to such named executive officers in the event
of termination without cause or resignation by the named executive officer for
good reason, as that term is defined in the agreements with our Company. In the
event any of Messrs. Alimi, Miller, or Schutz is terminated without cause
or resigns for good reason, the named executive officer is entitled
to:
|
|
•
|
a
lump severance payment equal to 18 times, in the case of Mr. Miller
and Mr. Schutz, 24 times, in the case of Mr. Alimi, the average
monthly base salary paid to the named executive officer over the preceding
12 months (or for the term of the named executive officer’s
employment if less than
12 months);
|
|
|
•
|
automatic
vesting of all unvested options and other equity
awards;
|
|
|
•
|
the
extension of exercisability of all options and other equity awards to at
least 12 months following the date the named executive officer
terminates employment or, if earlier, until the option
expires;
|
|
|
•
|
up
to one year (the lesser of one year following the date of termination or
until such named executive officer becomes eligible for medical insurance
coverage provided by another employer) reimbursement for health care
premiums under COBRA; and
|
|
|
•
|
a
full gross up of any excise taxes payable by the officer under
Section 4999 of the Internal Revenue Code because of the foregoing
payments and acceleration (including the reimbursement of any additional
federal, state and local taxes payable as a result of the gross
up).
|
Any of
Messrs. Miller, or Schutz may terminate his employment for any reason upon
at least 30 days prior written notice. Mr. Alimi may terminate his
employment for any reason upon at least 60 days prior written
notice.
Receipt
of the termination benefits described above is contingent on each named
executive officer executing a general release of claims against our Company, his
resignation from any and all directorships and every other position held by him
with our Company or any of its subsidiaries and his return to our Company of all
Company property received from or on account of our Company or any of its
affiliates by such named executive officer. In addition, the named executive
officer is not entitled to such benefits if he did not comply with the
non-competition and invention assignment provisions of his employment agreement
during the term of his employment or the confidentiality provisions of his
employment agreement, whether during or after the term of his employment.
Furthermore, we are under no obligation to pay the above-mentioned benefits if
the named executive officer does not comply with the non-solicitation provisions
of his employment agreement, which prohibit a terminated officer from
interfering with the business relations of our Company or any of its affiliates
and from soliciting employees of our Company, which provisions apply during the
term of employment and for two years following termination.
The table
below was prepared as though each of the named executive officers had been
terminated without cause on March 31, 2010, the last business day of our
last completed fiscal year, or resigned for good reason, as that term is defined
in the agreements with our Company. More detailed information about the
payment of benefits, including duration, is contained in the discussion above.
All such payments and benefits would be provided by our Company. The
assumptions and valuations are noted in the footnotes.
|
Continuation of
|
Value of
|
|||||||||||||||
|
Health and
|
Unvested
|
|||||||||||||||
|
Salary
|
Welfare
|
Equity
|
Excise Tax and
|
|||||||||||||
|
Name
|
Continuation
|
Benefits(1)
|
Awards(2)
|
Gross-up(3)
|
||||||||||||
|
Hojabr
Alimi
|
$ | 752,885 | $ | 10,736 | $ | 199,818 | $ | 450,407 | ||||||||
|
Robert
Miller
|
376,442 | 38,307 | 126,688 | 253,122 | ||||||||||||
|
Jim
Schutz
|
386,250 | 10,736 | 150,751 | 256,067 | ||||||||||||
Notes
|
(1)
|
Amount
assumes our cost of providing health and welfare benefits for twelve
months.
|
|
(2)
|
The
values reflect the immediate vesting of all outstanding options and other
equity awards as of termination, based on a March 31, 2010 closing
stock price of $2.12 and exclude amounts for accelerated options that have
an exercise price higher than such closing stock
price.
|
16
|
(3)
|
The
assumptions used to calculate excise and associated taxes are as
follows:
|
|
•
|
termination
occurs on March 31,
2010; and
|
|
•
|
named
executive officer was assumed to be subject to the maximum Federal and
California income and other payroll taxes, aggregating to an effective tax
rate of 46.75%.
|
2011 Bonus
Program
In June
2010, we established our 2011 Bonus Program. The 2011 Bonus Program covers
bonuses earned through March 31, 2011 although such bonuses are paid after our
fiscal year end financials are compiled and reported. Pursuant to our 2011 Bonus
Program, each employee and executive officer, including our named executive
officers, has the potential to earn an annual bonus based on the Compensation
Committee’s assessment of the individual’s and our Company’s contribution to
target goals and milestones. Specific goals and milestones and a bonus potential
range for each employee and executive officer, including our named executive
officers, are set forth in the bonus plan. The Compensation Committee will
generally determine whether a bonus pool for executive officers and
non-executive employees will be established within a specified time period after
the end of each fiscal year. If a bonus pool is established, the Compensation
Committee has discretion to set appropriate bonus amounts within an executive
officer’s bonus range, based on the Compensation Committee’s assessment of
corporate and individual achievements.
The
Compensation Committee may decide that bonuses awarded to executive officers and
non-executive employees under the bonus plan will be paid in cash, options, or a
combination of cash and options, depending on our Company’s year-end cash
position, cash needs and projected cash receipts. The Compensation Committee
will not declare any bonus pool or grant any cash awards that will endanger our
ability to finance our operations and strategic objectives or place us in a
negative cash flow position, in light of our anticipated cash
needs.
2010 Bonus
Program
On June
29, 2010, we granted a cash bonus of $83,000 to Hojabr Alimi, our Chairman
of the Board of Directors and Chief Executive Officer. This
bonus was paid pursuant to the 2010 Bonus Program.
Outstanding
Equity Awards At Fiscal Year-End
The
following table shows grants of options and restricted stock units outstanding
on March 31, 2010, the last day of our fiscal year, to each of the named
executive officers named in the Summary Compensation Table.
17
Outstanding Equity Awards at Fiscal
Year-End Table
|
Option
Awards
|
||||||||||||||
|
Number
of
|
Number
of
|
|||||||||||||
|
Securities
|
Securities
|
|||||||||||||
|
Underlying
|
Underlying
|
|||||||||||||
|
Unexercised
|
Unexercised
|
Option
|
||||||||||||
|
Options
|
Options
|
Exercise
|
Option
|
|||||||||||
|
(#)
|
(#)
|
Price(1)
|
Expiration
|
|||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
($)
|
Date
|
||||||||||
|
(a)
|
(b)
|
(c)
|
(e)
|
(f)
|
||||||||||
|
Hojabr Alimi(1)
|
97,002 | 193,998 | 1.09 |
3/10/2019
|
||||||||||
| 11,041 | 1,459 | 10.16 |
10/1/2015
|
|||||||||||
| 5,000 | 0 | 3.00 |
8/7/2013
|
|||||||||||
| 19,570 | 0 | 3.00 |
7/10/2013
|
|||||||||||
|
Robert Miller(2)
|
61,502 | 122,998 | 1.09 |
3/10/2019
|
||||||||||
| 5,520 | 730 | 10.16 |
10/1/2015
|
|||||||||||
| 34,633 | 0 | 3.00 |
7/10/2014
|
|||||||||||
| 39,181 | 0 | 3.00 |
7/10/2014
|
|||||||||||
|
Jim Schutz(3)
|
10,416 | 114,584 | 1.91 |
2/10/2020
|
||||||||||
| 61,502 | 122,998 | 1.09 |
3/10/2019
|
|||||||||||
| 54,999 | 45,001 | 7.27 |
6/15/2017
|
|||||||||||
| 5,520 | 730 | 10.16 |
10/1/2015
|
|||||||||||
| 50,000 | 0 | 3.00 |
7/10/2014
|
|||||||||||
| 43,750 | 0 | 3.00 |
7/10/2014
|
|||||||||||
| 50,000 | 0 | 3.00 |
9/23/2013
|
|||||||||||
Notes
|
(1)
|
Options
with an expiration date of March 10, 2019 vest over a three-year
period, becoming exercisable as to 16.7% of the shares on the six month
anniversary of the grant date with the remaining shares vesting monthly
thereafter over the following 30 months. Options with an expiration
date of October 1, 2015 vest over a five-year period, becoming
exercisable as to 20% of the shares on the first anniversary of the grant
date with the remaining shares vesting monthly thereafter over the
following 48 months. Options with an expiration date of July 10,
2013 and August 7, 2013 vest over a five-year period, becoming
exercisable as to 20% of the shares on each anniversary of the grant
date.
|
|
(2)
|
Options
with an expiration date of March 10, 2019 vest over a three-year
period, becoming exercisable as to 16.7% of the shares on the six month
anniversary of the grant date with the remaining shares vesting monthly
thereafter over the following 30 months. The 34,633 options with an
expiration date of July 10, 2014 were fully vested at grant and were
immediately exercisable. The 39,181 options with an expiration date of
July 10, 2014 vested quarterly beginning September 30, 2004 and
ending September 30, 2005. Options with an expiration date of
October 1, 2015 vest over a five-year period, becoming exercisable as
to 20% of the shares on the first anniversary of the grant date with the
remaining shares vesting monthly thereafter over the following
48 months. The grant of 30,000 restricted stock units may be settled
on January 15, 2010.
|
|
(3)
|
Options
with an expiration date of February 10, 2020 vest as to 16.7% of the
shares on the six month anniversary of the grant date with the remaining
shares vesting monthly thereafter over the following
30 months. Options with an expiration date of
March 10, 2019 vest over a three-year period, becoming exercisable as
to 16.7% of the shares on the six month anniversary of the grant date with
the remaining shares vesting monthly thereafter over the following
30 months. Options with an expiration date of October 1, 2015
and June 15, 2017 vest over a five-year period, becoming exercisable
as to 20% of the shares on the first anniversary of the grant date with
the remaining shares vesting monthly thereafter over the following
48 months. Options with an expiration date of September 23, 2013
and July 10, 2014 vest over a five-year period, becoming exercisable
as to 20% of the shares on each anniversary of the grant
date.
|
SECURITY
OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information as of July 15, 2010, as to
shares of our common stock beneficially owned by: (1) each of our named
executive officers listed in the summary compensation table, (2) each of
our directors and (3) all of our directors and executive officers as a
group. We are not aware of any person who beneficially owns more than 5%
of our common stock.
We have
determined beneficial ownership in accordance with the rules of the SEC. Except
as indicated by the footnotes below, we believe, based on the information
furnished to us, that the persons and entities named in the table below have
sole voting and investment power with respect to all shares of common stock that
they beneficially own, subject to applicable community property
laws.
In
computing the number of shares of common stock beneficially owned by a person
and the percentage ownership of that person, we deemed outstanding shares of
common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days after July 15, 2010. We did
not deem these shares outstanding, however, for the purpose of computing the
percentage ownership of any other person.
18
|
Number of
|
||||||||
|
Shares of
|
Percentage of
|
|||||||
|
Common Stock
|
Common Stock
|
|||||||
|
Beneficially
|
Beneficially
|
|||||||
|
Name of Beneficial
Owner(1)
|
Owned
|
Owned(2)
|
||||||
|
Directors and Named Executive
Officers:
|
||||||||
|
Hojabr
Alimi(3)
|
1,273,299 | 4.8 | % | |||||
|
Robert
Miller(6)
|
350,678 | 1.3 | % | |||||
|
Jim
Schutz(7)
|
475,895 | 1.8 | % | |||||
|
Richard
Conley(8)
|
327,137 | 1.2 | % | |||||
|
Gregory
French(9)
|
240,729 | * | ||||||
|
Jay
Birnbaum(10)
|
150,000 | * | ||||||
|
Gregg
Alton(11)
|
78,093 | * | ||||||
|
All directors and executive
officers as a group (9 persons)
|
2,895,831 | 10.4 | % | |||||
|
*
|
Percentage
of shares beneficially owned does not exceed one
percent.
|
|
(1)
|
Unless
otherwise stated, the address of each beneficial owner listed on the table
is c/o Oculus Innovative Sciences, Inc., 1129 N. McDowell
Blvd., Petaluma, California 94954.
|
|
(2)
|
Based
on 26,277,458 common shares issued and outstanding on July 15,
2010.
|
|
(3)
|
Mr. Alimi
is our President, Chief Executive Officer and Chairman of the Board of
Directors. Mr. Alimi beneficially owns 1,011,250 shares of common
stock and 262,049 shares of common stock issuable within 60 days of July
15, 2010.
|
|
(6)
|
Mr. Miller
is our Chief Financial Officer. Mr. Miller beneficially owns 73,000
shares of common stock which includes 50,000 shares held by The Miller
2005 Grandchildren’s Trust, from which Mr. Miller is a
trustee. Mr. Miller also owns 277,678 shares of common stock
issuable upon the exercise of options that are exercisable within 60 days
of July 15, 2010.
|
|
(7)
|
Mr. Schutz
is our Chief Operating Officer, General Counsel, Corporate Secretary and a
member of our Board of Directors. Mr. Schutz beneficially owns 35,000
shares of common stock and 440,895 shares of common stock issuable upon
the exercise of options that are exercisable within 60 days of July 15,
2010.
|
|
(8)
|
Mr. Conley
is a member of our Board of Directors. Mr. Conley beneficially owns
122,650 shares of common stock and 204,487 shares of common stock issuable
upon the exercise of options that are exercisable within 60 days of July
15, 2010.
|
|
(9)
|
Mr. French
is a member of our Board of Directors. Mr. French beneficially owns
52,760 shares of common stock and 187,969 shares of common stock issuable
upon the exercise of options that are exercisable within 60 days of July
15, 2010.
|
|
(10)
|
Mr. Birnbaum
is a member of our Board of Directors. Mr. Birnbaum beneficially owns
150,000 shares of common stock issuable upon the exercise of options that
are exercisable within 60 days of July 15,
2010.
|
|
(11)
|
Mr. Alton
is a member of our Board of Directors. Mr. Alton beneficially owns
78,093 shares of common stock issuable upon the exercise of options that
are exercisable within 60 days of July 15,
2010.
|
As of
July 15, 2009, there are no arrangements known to management which may
result in a change in control of our Company.
19
REPORT OF THE AUDIT
COMMITTEE
The Audit
Committee operates under a written charter adopted by the Board of Directors. A
link to a copy of the Audit Committee Charter is available on our website at
www.oculusis.com. All members of the Audit Committee meet the independence
standards established by the NASDAQ Global Market.
The Audit
Committee assists the Board of Directors in fulfilling its responsibility to
oversee management’s implementation of Oculus’ financial reporting process. It
is not the duty of the Audit Committee to plan or conduct audits or to determine
that the financial statements are complete and accurate and are in accordance
with generally accepted accounting principles, or to assess the Company’s
internal control over financial reporting. Management is responsible for the
financial statements and the reporting process, including the system of internal
control over financial reporting and disclosure controls. The independent
registered public accounting firm is responsible for expressing an opinion on
the conformity of those financial statements with accounting principles
generally accepted in the United States.
In
discharging its oversight role, the Audit Committee reviewed and discussed the
audited financial statements contained in the 2010 Annual Report with Oculus’
management and the independent registered public accounting
firm.
The Audit
Committee met privately with the independent registered public accounting firm,
and discussed issues deemed significant by the independent registered public
accounting firm, including those required by Statements on Auditing Standards
No. 61 and No. 90 (Audit Committee Communications). In addition, the
Audit Committee discussed with the independent registered public accounting firm
the firm’s independence from Oculus and its management, including the matters in
the written disclosures required by Independence Standards board Standard
No. 1 (Independence Discussions with Audit Committees), and considered
whether the provision of non-audit services was compatible with maintaining the
independent registered public accounting firm’s independence.
The Audit
Committee has discussed with Oculus’ independent registered public accounting
firm, with and without management present, their evaluations of Oculus’ internal
control over financial reporting and the overall quality of Oculus’ financial
reporting.
In
reliance on the reviews and discussion with management and the independent
registered public accounting firm referred to above, the Audit Committee
recommended to the Board of Directors, and the Board approved, the inclusion of
the audited financial statements in Oculus’ Annual Report on Form 10-K for
the year ended March 31, 2010, for filing with the SEC. The Audit Committee
has appointed Marcum LLP to serve as Oculus’ independent registered public
accounting firm for the 2010 fiscal year.
Audit
Committee
Richard
Conley
Gregg
Alton
Jay
Birnbaum
20
PROPOSAL 2
APPROVAL
OF THE 2010 STOCK INCENTIVE PLAN
On July
28, 2010, the Board of Directors adopted, subject to shareholder approval, the
2010 Stock Incentive Plan. The following is a general summary of the
2010 Stock Incentive Plan and is qualified in its entirety by the full text of
the 2010 Stock Incentive Plan attached to this Proxy Statement as
Exhibit A.
Capitalized terms not defined herein have the meanings ascribed to such terms in
the plan document.
General
The 2010
Stock Incentive Plan is to be administered by the Compensation Committee
of our Board of Directors. The 2010 Stock Incentive Plan provides for the
direct award or sale of shares of common stock of our Company and for the
grant of options to purchase shares of our common stock. The 2010 Stock
Incentive Plan provides for the grant of incentive stock options as defined in
Section 422 of the Internal Revenue Code and the grant of non-statutory
stock options and stock purchase rights to employees, non-employee directors,
advisors and consultants. The 2010 Stock Incentive Plan also permits the grant
of stock appreciation rights, stock units and restricted stock.
The Board
of Directors has authorized three million shares of our common stock for
issuance under the 2010 Stock Incentive Plan, including automatic increases
provided for in the 2010 Stock Incentive Plan through April 1,
2020. The number of shares of our common stock reserved for issuance
under the 2010 Stock Incentive Plan will automatically increase, with no further
action by the stockholders, at the beginning of each fiscal year by an amount
equal to the lesser of (i) 15% of the outstanding shares of our common
stock on the last day of the immediately preceding year, or
(ii) an amount approved by the Board of Directors.
Purpose of the 2010
Plan
Stockholder
approval of the 2010 Stock Incentive Plan has certain tax benefits. Our 2010
Stock Incentive Plan allows it to award “incentive stock options,” which receive
favorable tax treatment under the Internal Revenue Code. The stock option grants
under the 2010 Stock Incentive Plan cannot qualify as incentive stock options
unless the Plan is approved by our stockholders.
Additionally,
the 2010 Stock Incentive Plan is also specifically designed to preserve our
ability to deduct the compensation we pay certain executive officers for income
tax purposes. Section 162(m) of the Internal Revenue Code generally
prevents us from deducting more than $1.0 million in compensation each year
for our chief executive officer and our three most highly compensated executive
officers other than the chief executive officer or chief financial officer.
Compensation treated as “qualified performance-based compensation” under
Section 162(m) is not subject to this limitation. Any awards granted under
the 2010 Stock Incentive Plan may be treated as “qualified performance-based
compensation” only if the plan is approved by a majority vote of our
stockholders.
Finally,
as an issuer listed on the NASDAQ Global Market, we are required by the rules of
the NASDAQ Stock Market to obtain stockholder approval of any stock option or
purchase plan or other equity compensation arrangement under which our officers,
directors, employees or consultants may acquire shares of our common stock,
prior to our issuance of securities under such a plan.
21
Administration
The 2010
Stock Incentive Plan will be administered by the Compensation Committee of the
Board of Directors. The Committee shall have full authority and
discretion to take the following actions: (i) to interpret the 2010 Stock
Incentive Plan and apply its provisions; (ii) to adopt, amend or rescind rules,
procedures and forms relating to the 2010 Stock Incentive Plan; (iii) to adopt,
amend or terminate sub-plans established for the purposes of satisfying
applicable foreign laws including qualifying for preferred tax treatment under
applicable foreign tax laws; (iv) to authorize any person to execute, on behalf
of our Company, any instrument required to carry out the purposes of the 2010
Stock Incentive Plan; (v) to determine when Awards are to be granted under the
2010 Stock Incentive Plan; (vi) to select the Offerees and Optionees; (vii) to
determine the number of Shares to be made subject to each Award; (viii) to
prescribe the terms and conditions of each Award, including (without limitation)
the Exercise Price and Purchase Price, and the vesting or duration of the Award
(including accelerating the vesting of Awards, either at the time of the Award
of thereafter, without the consent of the Participant), to determine whether an
Option is to be classified as an Incentive Stock Option or as a Nonstatutory
Option, and to specify the provisions of the agreement relating to such Award;
(ix) to amend any outstanding Award agreement, subject to applicable legal
restrictions and to the consent of the Participant if the Participant’s rights
or obligations would be materially impaired; (x) to prescribe the
consideration for the grant of each Award or other right under the 2010 Stock
Incentive Plan and to determine the sufficiency of such consideration; (xi) to
determine the disposition of each Award or other right under the 2010 Stock
Incentive Plan in the event of a Participant’s divorce or dissolution of
marriage; (xii) to determine whether Awards under the 2010 Stock Incentive Plan
will be granted in replacement of other grants under an incentive or other
compensation plan of an acquired business; (xiii) to correct any defect, supply
any omission, or reconcile any inconsistency in the 2010 Stock Incentive Plan or
any Award agreement; (xiv) to establish or verify the extent of satisfaction of
any performance goals or other conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award; and (xv) to take any
other actions deemed necessary or advisable for the administration of the 2010
Stock Incentive Plan.
Participants
Participants
of the 2010 Stock Incentive Plan will include certain employees of our Company
and certain advisors, including non-employee members of the Board who perform
services for us, as designated by the Compensation Committee of the Board of
Directors.
Available
Shares
Subject
to adjustment (for example, in the event of recapitalization, stock split, stock
dividend, merger, reorganization or similar event), the maximum number of shares
of common stock that may be issued under the 2010 Stock Incentive Plan is
three million shares. Additionally, the 2010 Stock Incentive Plan permits an
annual increase on the first day of each fiscal year during the term of the 2010
Stock Incentive Plan, beginning April 1, 2011, in an amount equal to the lesser
of (i) 15% of the outstanding shares on the last day of the immediately
preceding year, or (ii) an amount determined by the Board. The number
of shares that are subject to Options or other Awards outstanding at any time
under the 2010 Stock Incentive Plan shall not exceed the number of shares which
then remain available for issuance under the 2010 Stock Incentive
Plan. During the term of the Plan, we intend to at all times reserve
and keep available sufficient shares to satisfy the requirements of the 2010
Stock Incentive Plan.
Awards
Awards
under the 2010 Stock Incentive Plan may consist of grants of (i) Restricted
Shares, (ii) Stock Options, (iii) Stock Appreciation Rights, and (iv) Stock
Units (collectively “Grants”). The terms and features of the various
forms of Grants are described more fully in the 2010 Stock Incentive Plan
itself, attached as Exhibit
A.
An
Employee who owns more than 10% of the total combined voting power of all
classes of outstanding stock of our Company, a Parent or Subsidiary is not
eligible for the grant of an Incentive Stock Option unless such grant satisfies
the requirements of Section 422(c)(5) of the Code.
Reorganization
In the
event that we are a party to a merger or other reorganization, outstanding
Awards shall be subject to the agreement of merger or
reorganization. Such agreement shall provide for: (i) the
continuation of the outstanding Awards by us, if we are a surviving corporation;
(ii) the assumption of the outstanding Awards by the surviving corporation or
its parent or subsidiary; (iii) the substitution by the surviving corporation or
its parent or subsidiary of its own awards for the outstanding Awards; (iv) full
exercisability or vesting and accelerated expiration of the outstanding Awards;
or (v) settlement of the full value of the outstanding Awards in cash or cash
equivalents followed by cancellation of such awards.
Termination
and Amendment
The 2010
Stock Incentive Plan shall terminate on the day immediately preceding the tenth
anniversary of the effective date of the 2010 Stock Incentive Plan, unless the
2010 Stock Incentive Plan is terminated earlier by the Board of Directors, or is
extended by the Board of Directors with the approval of the
shareholders. The Board of Directors may amend or terminate the 2010
Stock Incentive Plan at any time and from time to time. Rights and
obligations under any Award granted before amendment of the 2010 Stock Incentive
Plan shall not be materially impaired by such amendment, except with the consent
of the Participant. An amendment of the 2010 Stock Incentive Plan
shall be subject to the approval of our stockholders only to the extent required
by applicable laws, regulations or rules.
22
Outstanding
Grants and Effect on Prior Plans
The 2010
Stock Incentive Plan shall not be deemed an amendment or restatement of any
previous stock incentive plan. Nothing in the 2010 Stock Incentive
Plan shall be deemed to impair the rights of or give any new or additional right
to any person who received grants under previous stock incentive
plans.
Vote
Required
To be
approved, Proposal 2 must receive “For” votes from a majority of the shares
represented in person or by proxy to become effective. Unless marked to the
contrary, proxies received will be voted “FOR” the approval of the 2010 Stock
Incentive Plan.
Your Board of Directions
recommends a vote FOR approval of the 2010 Stock Incentive
Plan.
Unless
marked to the contrary, proxies received will be voted “FOR” the approval of the
amendment to 2010 Stock Incentive Plan.
PROPOSAL 3
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit
Committee has appointed Marcum LLP as our independent registered public
accounting firm for the fiscal year ending March 31, 2011. Representatives of
Marcum 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. Although stockholder ratification of our
independent registered public accounting firm is not required by our Bylaws or
otherwise, we are submitting the selection of Marcum LLP to our stockholders for
ratification to permit stockholders to participate in this important corporate
decision.
Principal Accountant Fees and
Services
Marcum
LLP has audited our financial statements since April 2006. Aggregate fees for
professional services provided to us by Marcum LLP for the years ended
March 31, 2010 and 2009, were as follows:
|
Services
Provided
|
2010
|
2009
|
||||||
|
Audit
|
$ | 164,000 | $ | 162,000 | ||||
|
Audit-Related
|
121,000 | 90,000 | ||||||
|
Total
|
285,000 | 252,000 | ||||||
Audit fees. The
aggregate fees billed for the years ended March 31, 2010 and 2009 for
professional services rendered by our principal accountants were for the audit
of our financial statements.
Audit related
fees. For the years ended March 31, 2010 and 2009,
audit-related fees included services provided in connection with the review of
our quarterly financial information filed on form 10-Q, consents related to
filings on Form S-1 and review of our filings with the
SEC.
Audit Committee Pre-Approval Policies
and Procedures
The Audit
Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by our independent registered public accounting
firm. All of the services provided during fiscal year 2010 were
pre-approved.
During
the approval process, the Audit Committee considered the impact of the types of
services and the related fees on the independence of the independent registered
public accounting firm. The services and fees were deemed compatible with the
maintenance of that firm’s independence, including compliance with rules and
regulations of the SEC.
Throughout
the year, the Audit Committee will review any revisions to the estimates of
audit fees initially estimated for the engagement.
23
Required Vote
Ratification
of the appointment of Marcum LLP requires the affirmative vote of a majority of
the shares present and voting at the Annual Meeting in person or by proxy.
Unless marked to the contrary, proxies received will be voted “FOR” ratification
of the appointment. In the event ratification is not obtained, the Audit
Committee will review its future selection of our independent registered public
accounting firm but will not be required to select a different independent
registered public accounting firm.
Your Board of
Directors
recommends a vote FOR ratification of Marcum LLP as our independent registered
public accounting firm.
STOCKHOLDER PROPOSALS FOR THE 2011
ANNUAL MEETING
If a
stockholder wishes to present a proposal to be included in our proxy statement
for the 2011 Annual Meeting of Stockholders, the proponent and the proposal must
comply with the proxy proposal submission rules of the SEC. One of the
requirements is that the proposal be received by Oculus’ Secretary no later than
May 13, 2011. Proposals we receive after that date will not be included in
the proxy statement. We urge stockholders to submit proposals by Certified
Mail — Return Receipt Requested.
A
stockholder proposal not included in our proxy statement for the 2011 Annual
Meeting will not be eligible for presentation at the meeting unless the
stockholder gives timely notice of the proposal in writing to our Secretary at
our principal executive offices and otherwise complies with the provisions of
our Bylaws. To be timely, the Bylaws provide that we must have received the
stockholder’s notice not earlier than 90 days nor more than 120 days
in advance of the one-year anniversary of the date the proxy statement was
released to the stockholders in connection with the previous year’s Annual
Meeting of Stockholders; however, if the date of the Annual Meeting is changed
by more than 30 days from the date contemplated at the time of the mailing
of the prior year’s proxy statement, we must have received the stockholder’s
notice not later than the close of business on the later of the 90th day
prior to the Annual Meeting or the 7th day following the first public
announcement of the Annual Meeting date. The stockholder’s notice must set
forth, as to each proposed matter: a brief description of the business desired
to be brought before the meeting; the text of the proposal or business and
reasons for conducting such business at the meeting; the name and address, as
they appear on our books, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made; the class and
number of shares of our securities that are owned beneficially and of record by
the stockholder and the beneficial owner; any material interest of the
stockholder in such business; and any other information that is required to be
provided by such stockholder pursuant to proxy proposal submission rules of the
SEC. The presiding officer of the meeting may refuse to acknowledge any matter
not made in compliance with the foregoing procedure.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership on Forms 3, 4 and 5 with the SEC.
Officers, directors and greater than 10% stockholders are required to furnish us
with copies of all Forms 3, 4 and 5 they file.
Based
solely on our review of the copies of such forms we have received and written
representations from certain reporting person that they filed all required
reports, we believe that all of our officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable
to them with respect to transactions during fiscal year 2010.
OTHER
MATTERS
Your
Board of Directors does not know of any other business that will be presented at
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, your proxy holders will vote on it as they think best unless you direct
them otherwise in your proxy instructions.
Whether
or not you intend to be present at the Annual Meeting, we urge you to submit
your signed proxy promptly.
By Order
of the Board of Directors.
Jim
Schutz
Chief
Operating Officer, General Counsel,
Corporate Secretary and
Director
Petaluma,
California
24
Our
2010 Annual Report on Form 10-K as filed with the SEC on June 8, 2010
has been mailed with this Proxy Statement. We will also provide copies of
exhibits to our Annual Report on Form 10-K, but will charge a reasonable
fee per page to any requesting stockholder. Stockholders may make such requests
in writing to Secretary, Oculus Innovative Sciences, Inc.,
1129 N. McDowell Blvd., Petaluma, California 94954. The request must
include a representation by the stockholder that as of July 15, 2010, the
stockholder was entitled to vote at the Annual Meeting. Our 10-K, the amendments
and exhibits are also available at www.oculusis.com.
25
Exhibit
A. 2010 Stock Incentive Plan.
OCULUS INNOVATIVE SCIENCES,
INC.
2010
STOCK INCENTIVE PLAN
(Adopted
by the Board on July 28, 2010)
Oculus
Innovative Sciences, Inc.
2010
Stock Incentive Plan
Table of Contents
|
SECTION 1. ESTABLISHMENT AND
PURPOSE
|
2
|
|
SECTION 2. DEFINITIONS
|
2
|
|
SECTION 3. ADMINISTRATION
|
7
|
|
SECTION 4. ELIGIBILITY
|
9
|
|
SECTION 5. STOCK SUBJECT TO
PLAN
|
9
|
|
SECTION 6. RESTRICTED
SHARES
|
10
|
|
SECTION 7. TERMS AND CONDITIONS OF
OPTIONS
|
11
|
|
SECTION 8. PAYMENT FOR
SHARES
|
13
|
|
SECTION 9. STOCK APPRECIATION
RIGHTS
|
14
|
|
SECTION 10. STOCK UNITS
|
15
|
|
SECTION 11. ADJUSTMENT OF
SHARES
|
16
|
|
SECTION 12. DEFERRAL OF
AWARDS
|
17
|
|
SECTION 13. AWARDS UNDER OTHER
PLANS
|
18
|
|
SECTION 14. PAYMENT OF DIRECTOR’S FEES IN
SECURITIES
|
18
|
|
SECTION 15. LEGAL AND REGULATORY
REQUIREMENTS
|
19
|
|
SECTION 16. WITHHOLDING
TAXES
|
19
|
|
SECTION 17. OTHER PROVISIONS APPLICABLE TO
AWARDS
|
19
|
|
SECTION 18. NO EMPLOYMENT
RIGHTS
|
20
|
|
SECTION 19. DURATION AND
AMENDMENTS
|
21
|
|
SECTION 20. EXECUTION
|
22
|
1
OCULUS INNOVATIVE SCIENCES,
INC.
2010 STOCK INCENTIVE
PLAN
SECTION
1. ESTABLISHMENT AND PURPOSE
The
Plan was adopted by the Board of Directors on July 28, 2010, and shall be
effective as of the date of the initial offering of Stock to the public pursuant
to a registration statement filed by the Company with the Securities and
Exchange Commission (the “Effective Date”). The purpose of the Plan is to
promote the long-term success of the Company and the creation of stockholder
value by (a) encouraging Employees, Outside Directors and Consultants to
focus on critical long-range objectives, (b) encouraging the attraction and
retention of Employees, Outside Directors and Consultants with exceptional
qualifications and (c) linking Employees, Outside Directors and Consultants
directly to stockholder interests through increased stock ownership. The Plan
seeks to achieve this purpose by providing for Awards in the form of restricted
shares, stock units, options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights.
SECTION
2. DEFINITIONS
(a) “Affiliate”
shall mean any entity other than a Subsidiary, if the Company and/or one
of more Subsidiaries own not less than 50% of such entity.
(b) “Award” shall
mean any award of an Option, a SAR, a Restricted Share or a Stock Unit under the
Plan.
(c) “Board of Directors”
shall mean the Board of Directors of the Company, as constituted from
time to time.
(d) “Change in Control”
shall mean the occurrence of any of the following events:
(i) A
change in the composition of the Board of Directors occurs, as a result of which
fewer than one-half of the incumbent directors are directors who
either:
(A)
Had been directors of the Company on the “look-back date” (as defined below)
(the “original directors”); or
(B)
Were elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority of the aggregate of the original
directors who were still in office at the time of the election or nomination and
the directors whose election or nomination was previously so approved (the
“continuing directors”); or
2
(ii)
Any “person” (as defined below) who by the acquisition or aggregation of
securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the “Base
Capital Stock”); except that any change in the relative beneficial ownership of
the Company’s securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person’s ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person’s
beneficial ownership of any securities of the Company; or
(iii) The
consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (A) the continuing or surviving entity and (B) any direct or
indirect parent corporation of such continuing or surviving entity;
or
(iv) The
sale, transfer or other disposition of all or substantially all of the Company’s
assets.
For
purposes of subsection (d)(i) above, the term “look-back” date shall mean the
later of (1) the Effective Date or (2) the date 24 months prior to the
date of the event that may constitute a Change in Control.
For
purposes of subsection (d)(ii)) above, the term “person” shall have the same
meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall
exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the
Stock.
Any other
provision of this Section 2(d) notwithstanding, a transaction shall not
constitute a Change in Control if its sole purpose is to change the state of the
Company’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately before such transaction, and a Change in Control shall
not be deemed to occur if the Company files a registration statement with the
United States Securities and Exchange Commission for the initial offering of
Stock to the public.
(e) “Code” shall mean
the Internal Revenue Code of 1986, as amended.
3
(f) “Committee” shall
mean the Compensation Committee as designated by the Board of Directors, which
is authorized to administer the Plan, as described in Section 3
hereof.
(g) “Company” shall mean
Oculus Innovative Sciences, Inc., a Delaware corporation.
(h) “Consultant” shall
mean a consultant or advisor who provides bona fide services to the Company, a
Parent, a Subsidiary or an Affiliate as an independent contractor (not including
service as a member of the Board of Directors) or a member of the board of
directors of a Parent or a Subsidiary, in each case who is not an
Employee.
(i) “Employee” shall
mean any individual who is a common-law employee of the Company, a Parent, a
Subsidiary or an Affiliate.
(j) “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
(k) “Exercise Price”
shall mean, in the case of an Option, the amount for which one Share may
be purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement. “Exercise Price,” in the case of a SAR, shall mean an amount,
as specified in the applicable SAR Agreement, which is subtracted from the Fair
Market Value of one Share in determining the amount payable upon exercise of
such SAR.
(l) “Fair Market Value”
with respect to a Share, shall mean the market price of one Share,
determined by the Committee as follows:
(i) If
the Stock was traded over-the-counter on the date in question, then the Fair
Market Value shall be equal to the last transaction price quoted for such date
by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean
between the last reported representative bid and asked prices quoted for such
date by the principal automated inter-dealer quotation system on which the Stock
is quoted or, if the Stock is not quoted on any such system, by the Pink Sheets
LLC;
(ii) If
the Stock was traded on The NASDAQ Stock Market, then the Fair Market Value
shall be equal to the last reported sale price quoted for such date by The
NASDAQ Stock Market;
(iii) If
the Stock was traded on a United States stock exchange other than The NASDAQ
Stock Market on the date in question, then the Fair Market Value shall be equal
to the closing price reported for such date by the applicable
composite-transactions report; and
(iv) If
none of the foregoing provisions is applicable, then the Fair Market Value shall
be determined by the Committee in good faith on such basis as it deems
appropriate.
4
In all
cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
(m) “ISO” shall mean an
employee incentive stock option described in Section 422 of the
Code.
(n) “Nonstatutory Option”
or “NSO” shall
mean an employee stock option that is not an ISO.
(o) “Offeree” shall mean
an individual to whom the Committee has offered the right to acquire Shares
under the Plan (other than upon exercise of an Option).
(p) “Option” shall mean
an ISO or Nonstatutory Option granted under the Plan and entitling the holder to
purchase Shares.
(q) “Optionee” shall
mean an individual or estate who holds an Option or SAR.
(r) “Outside Director”
shall mean a member of the Board of Directors who is not a common-law
employee of, or paid consultant to, the Company, a Parent or a
Subsidiary.
(s) “Parent” shall mean
any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company, if each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain. A corporation that
attains the status of a Parent on a date after the adoption of the Plan shall be
a Parent commencing as of such date.
(t) “Participant” shall
mean an individual or estate who holds an Award.
(u) “Plan” shall mean
this 2010 Stock Incentive Plan of Oculus Innovative Sciences, Inc., as amended
from time to time.
(v) “Purchase Price”
shall mean the consideration for which one Share may be acquired under
the Plan (other than upon exercise of an Option), as specified by the
Committee.
(w) “Restricted Share”
shall mean a Share awarded under the Plan.
(x) “Restricted Share
Agreement” shall mean the agreement between the Company and the recipient
of a Restricted Share which contains the terms, conditions and restrictions
pertaining to such Restricted Shares.
5
(y) “SAR” shall mean a
stock appreciation right granted under the Plan.
(z) “SAR Agreement”
shall mean the agreement between the Company and an Optionee which
contains the terms, conditions and restrictions pertaining to his or her
SAR.
(aa) “Service” shall
mean service as an Employee, Consultant or Outside Director, subject to such
further limitations as may be set forth in the Plan or the applicable Stock
Option Agreement, SAR Agreement, Restricted Share Agreement or Stock Unit
Agreement. Service does not terminate when an Employee goes on a bona fide leave
of absence, that was approved by the Company in writing, if the terms of the
leave provide for continued Service crediting, or when continued Service
crediting is required by applicable law. However, for purposes of determining
whether an Option is entitled to ISO status, an Employee’s employment will be
treated as terminating 90 days after such Employee went on leave, unless
such Employee’s right to return to active work is guaranteed by law or by a
contract. Service terminates in any event when the approved leave ends, unless
such Employee immediately returns to active work. The Company determines which
leaves count toward Service, and when Service terminates for all purposes under
the Plan.
(bb) “Share” shall mean
one share of Stock, as adjusted in accordance with Section 8 (if
applicable).
(cc) “Stock” shall mean
the Common Stock of the Company.
(dd) “Stock Option Agreement”
shall mean the agreement between the Company and an Optionee that
contains the terms, conditions and restrictions pertaining to his
Option.
(ee) “Stock Unit” shall
mean a bookkeeping entry representing the equivalent of one Share, as awarded
under the Plan.
(ff) “Stock Unit Agreement”
shall mean the agreement between the Company and the recipient of a Stock
Unit which contains the terms, conditions and restrictions pertaining to such
Stock Unit.
(gg) “Subsidiary” shall
mean any corporation, if the Company and/or one or more other Subsidiaries own
not less than 50% of the total combined voting power of all classes of
outstanding stock of such corporation. A corporation that attains the status of
a Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.
6
(hh) “Total and Permanent
Disability” shall mean permanent and total disability as defined by
section 22(e)(3) of the Code.
SECTION
3. ADMINISTRATION
(a) Committee
Composition. The Plan shall be administered by the Committee. The
Committee shall consist of two or more directors of the Company, who shall be
appointed by the Board. In addition, the composition of the Committee shall
satisfy
(i) such
requirements as the Securities and Exchange Commission may establish for
administrators acting under plans intended to qualify for exemption under
Rule 16b-3 (or its successor) under the Exchange Act; and
(ii) such
requirements as the Internal Revenue Service may establish for outside directors
acting under plans intended to qualify for exemption under
Section 162(m)(4)(C) of the Code.
(b) Committee for Non-Officer
Grants. The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
satisfy the requirements of Section 3(a), who may administer the Plan with
respect to Employees who are not considered officers or directors of the Company
under Section 16 of the Exchange Act, may grant Awards under the Plan to
such Employees and may determine all terms of such grants. Within the
limitations of the preceding sentence, any reference in the Plan to the
Committee shall include such committee or committees appointed pursuant to the
preceding sentence. The Board of Directors may also authorize one or more
officers of the Company to designate Employees, other than officers under
Section 16 of the Exchange Act, to receive Awards and/or to determine the
number of such Awards to be received by such persons; provided, however, that
the Board of Directors shall specify the total number of Awards that such
officers may so award.
(c) Committee
Procedures. The Board of Directors shall designate one of the members of
the Committee as chairman. The Committee may hold meetings at such times and
places as it shall determine. The acts of a majority of the Committee members
present at meetings at which a quorum exists, or acts reduced to or approved in
writing by all Committee members, shall be valid acts of the
Committee.
(d) Committee
Responsibilities. Subject to the provisions of the Plan, the Committee
shall have full authority and discretion to take the following
actions:
(i) To
interpret the Plan and to apply its provisions;
(ii) To
adopt, amend or rescind rules, procedures and forms relating to the
Plan;
(iii) To
adopt, amend or terminate sub-plans established for the purpose of satisfying
applicable foreign laws including qualifying for preferred tax treatment under
applicable foreign tax laws;
7
(iv) To
authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Plan;
(v) To
determine when Awards are to be granted under the Plan;
(vi) To
select the Offerees and Optionees;
(vii) To
determine the number of Shares to be made subject to each Award;
(viii) To
prescribe the terms and conditions of each Award, including (without limitation)
the Exercise Price and Purchase Price, and the vesting or duration of the Award
(including accelerating the vesting of Awards, either at the time of the Award
or thereafter, without the consent of the Participant), to determine whether an
Option is to be classified as an ISO or as a Nonstatutory Option, and to specify
the provisions of the agreement relating to such Award;
(ix) To
amend any outstanding Award agreement, subject to applicable legal restrictions
and to the consent of the Participant if the Participant’s rights or obligations
would be materially impaired;
(x) To
prescribe the consideration for the grant of each Award or other right under the
Plan and to determine the sufficiency of such consideration;
(xi) To
determine the disposition of each Award or other right under the Plan in the
event of a Participant’s divorce or dissolution of marriage;
(xii) To
determine whether Awards under the Plan will be granted in replacement of other
grants under an incentive or other compensation plan of an acquired
business;
(xiii) To
correct any defect, supply any omission, or reconcile any inconsistency in the
Plan or any Award agreement;
(xiv) To
establish or verify the extent of satisfaction of any performance goals or other
conditions applicable to the grant, issuance, exercisability, vesting and/or
ability to retain any Award; and
(xv) To
take any other actions deemed necessary or advisable for the administration of
the Plan.
Subject
to the requirements of applicable law, the Committee may designate persons other
than members of the Committee to carry out its responsibilities and may
prescribe such conditions and limitations as it may deem appropriate, except
that the Committee may not delegate its authority with regard to the selection
for participation of or the granting of Options or other rights under the Plan
to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.
8
SECTION
4. ELIGIBILITY
(a) General Rule. Only
common-law employees of the Company, a Parent or a Subsidiary shall be eligible
for the grant of ISOs. Only Employees, Consultants and Outside Directors shall
be eligible for the grant of Restricted Shares, Stock Units, Nonstatutory
Options or SARs.
(b) Ten-Percent
Stockholders. An Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company, a Parent or
Subsidiary shall not be eligible for the grant of an ISO unless such grant
satisfies the requirements of Section 422(c)(5) of the Code.
(c) Attribution Rules.
For purposes of Section 4(c) above, in determining stock ownership, an Employee
shall be deemed to own the stock owned, directly or indirectly, by or for such
Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust shall be deemed to be owned proportionately by or for its stockholders,
partners or beneficiaries.
(d) Outstanding Stock.
For purposes of Section 4(c) above, “outstanding stock” shall include all stock
actually issued and outstanding immediately after the grant. “Outstanding stock”
shall not include shares authorized for issuance under outstanding options held
by the Employee or by any other person.
SECTION
5. STOCK SUBJECT TO PLAN
(a) Basic Limitation.
Shares offered under the Plan shall be authorized but unissued Shares or
treasury Shares. The aggregate number of Shares authorized for issuance as
Awards under the Plan shall not exceed 3,000,000 Shares, plus an annual
increase on the first day of each fiscal year during the term of the Plan,
beginning April 1, 2011, in an amount equal to the lesser of (i) 15% of the
outstanding Shares on the last day of the immediately preceding year or
(ii) an amount determined by the Board. The limitations of this
Section 5(a) shall be subject to adjustment pursuant to Section 11. The
number of Shares that are subject to Options or other Awards outstanding at any
time under the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. The Company, during the term of the Plan,
shall at all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(b) Award
Limitation. No Participant may receive Options, SARs,
Restricted Shares or Stock Units under the Plan in any calendar year that relate
to more than 750,000 Shares.
(c) Additional Shares.
If Restricted Shares or Shares issued upon the exercise of Options are
forfeited, then such Shares shall again become available for Awards under the
Plan. If Stock Units, Options or SARs are forfeited or terminate for any other
reason before being exercised, then the corresponding Shares shall again become
available for Awards under the Plan. If Stock Units are settled, then only the
number of Shares (if any) actually issued in settlement of such Stock Units
shall reduce the number available under Section 5(a) and the balance shall again
become available for Awards under the Plan. If SARs are exercised, then only the
number of Shares (if any) actually issued in settlement of such SARs shall
reduce the number available in Section 5(a) and the balance shall again become
available for Awards under the Plan.
9
SECTION
6. RESTRICTED SHARES
(a) Restricted Stock
Agreement. Each grant of Restricted Shares under the Plan shall be
evidenced by a Restricted Stock Agreement between the recipient and the Company.
Such Restricted Shares shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Restricted Stock Agreements entered into under the
Plan need not be identical.
(b) Payment for Awards.
Subject to the following sentence, Restricted Shares may be sold or awarded
under the Plan for such consideration as the Committee may determine, including
(without limitation) cash, cash equivalents, full-recourse promissory notes,
past services and future services.
(c) Vesting. Each Award
of Restricted Shares may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions specified in the
Restricted Stock Agreement. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant’s death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.
(d) Voting and Dividend
Rights. The holders of Restricted Shares awarded under the Plan shall
have the same voting, dividend and other rights as the Company’s other
stockholders. A Restricted Stock Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid.
(e) Restrictions on Transfer of
Shares. Restricted Shares shall be subject to such rights of repurchase,
rights of first refusal or other restrictions as the Committee may determine.
Such restrictions shall be set forth in the applicable Restricted Stock
Agreement and shall apply in addition to any general restrictions that may apply
to all holders of Shares.
10
SECTION
7. TERMS AND CONDITIONS OF OPTIONS
(a) Stock Option
Agreement. Each grant of an Option under the Plan shall be evidenced by a
Stock Option Agreement between the Optionee and the Company. Such Option shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Option Agreement.
The Stock Option Agreement shall specify whether the Option is an ISO or an NSO.
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical. Options may be granted in consideration of a
reduction in the Optionee’s other compensation.
(b) Number of Shares.
Each Stock Option Agreement shall specify the number of Shares that are subject
to the Option and shall provide for the adjustment of such number in accordance
with Section 11.
(c) Exercise Price. Each
Stock Option Agreement shall specify the Exercise Price. The Exercise Price of
an ISO shall not be less than 100% of the Fair Market Value of a Share on the
date of grant, except as otherwise provided in 4(c), and the Exercise Price of
an NSO shall not be less 85% of the Fair Market Value of a Share on the date of
grant. Subject to the foregoing in this Section 7(c), the Exercise Price under
any Option shall be determined by the Committee at its sole discretion. The
Exercise Price shall be payable in one of the forms described in
Section 8.
(d) Withholding Taxes.
As a condition to the exercise of an Option, the Optionee shall make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with such exercise. The Optionee shall also make such arrangements as the
Committee may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e) Exercisability and
Term. Each Stock Option Agreement shall specify the date when all or any
installment of the Option is to become exercisable. The Stock Option Agreement
shall also specify the term of the Option; provided that the term of an ISO
shall in no event exceed 10 years from the date of grant (five years for
Employees described in Section 4(c)). A Stock Option Agreement may provide
for accelerated exercisability in the event of the Optionee’s death, disability,
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee’s Service. Options may
be awarded in combination with SARs, and such an Award may provide that the
Options will not be exercisable unless the related SARs are forfeited. Subject
to the foregoing in this Section 7(e), the Committee at its sole discretion
shall determine when all or any installment of an Option is to become
exercisable and when an Option is to expire.
11
(f) Exercise of Options.
Each Stock Option Agreement shall set forth the extent to which the Optionee
shall have the right to exercise the Option following termination of the
Optionee’s Service with the Company and its Subsidiaries, and the right to
exercise the Option of any executors or administrators of the Optionee’s estate
or any person who has acquired such Option(s) directly from the Optionee by
bequest or inheritance. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of Service.
(g) Effect of Change in
Control. The Committee may determine, at the time of granting an Option
or thereafter, that such Option shall become exercisable as to all or part of
the Shares subject to such Option in the event that a Change in Control occurs
with respect to the Company.
(h) No Rights as a
Stockholder. An Optionee, or a transferee of an Optionee, shall have no
rights as a stockholder with respect to any Shares covered by his Option until
the date of the issuance of a stock certificate for such Shares. No adjustments
shall be made, except as provided in Section 11.
(i) Modification, Extension and
Renewal of Options. Within the limitations of the Plan, the Committee may
modify, extend or renew outstanding options or may accept the cancellation of
outstanding options (to the extent not previously exercised), whether or not
granted hereunder, in return for the grant of new Options for the same or a
different number of Shares and at the same or a different exercise price, or in
return for the grant of the same or a different number of Shares. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, materially impair his or her rights or obligations under such
Option.
(j) Restrictions on Transfer of
Shares. Any Shares issued upon exercise of an Option shall be subject to
such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option Agreement and
shall apply in addition to any general restrictions that may apply to all
holders of Shares.
(k) Buyout Provisions.
The Committee may at any time (a) offer to buy out for a payment in cash or
cash equivalents an Option previously granted or (b) authorize an Optionee
to elect to cash out an Option previously granted, in either case at such time
and based upon such terms and conditions as the Committee shall
establish.
12
SECTION
8. PAYMENT FOR SHARES
(a) General Rule. The
entire Exercise Price or Purchase Price of Shares issued under the Plan shall be
payable in lawful money of the United States of America at the time when such
Shares are purchased, except as provided in Section 8(b) through Section 8(g)
below.
(b) Surrender of Stock.
To the extent that a Stock Option Agreement so provides, payment may be made all
or in part by surrendering, or attesting to the ownership of, Shares which have
already been owned by the Optionee or his representative. Such Shares shall be
valued at their Fair Market Value on the date when the new Shares are purchased
under the Plan. The Optionee shall not surrender, or attest to the ownership of,
Shares in payment of the Exercise Price if such action would cause the Company
to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes.
(c) Services Rendered.
At the discretion of the Committee, Shares may be awarded under the Plan in
consideration of services rendered to the Company or a Subsidiary prior to the
award. If Shares are awarded without the payment of a Purchase Price in cash,
the Committee shall make a determination (at the time of the award) of the value
of the services rendered by the Offeree and the sufficiency of the consideration
to meet the requirements of Section 6(b).
(d) Cashless Exercise.
To the extent that a Stock Option Agreement so provides, payment may be made all
or in part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate Exercise
Price.
(e) Exercise/Pledge. To
the extent that a Stock Option Agreement so provides, payment may be made all or
in part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker or lender to pledge Shares, as security for a
loan, and to deliver all or part of the loan proceeds to the Company in payment
of the aggregate Exercise Price.
(f) Promissory Note. To
the extent that a Stock Option Agreement or Restricted Stock Agreement so
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note.
(g) Other Forms of
Payment. To the extent that a Stock Option Agreement or Restricted Stock
Agreement so provides, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
13
(h) Limitations under
Applicable Law. Notwithstanding anything herein or in a Stock Option
Agreement or Restricted Stock Agreement to the contrary, payment may not be made
in any form that is unlawful, as determined by the Committee in its sole
discretion.
SECTION
9. STOCK APPRECIATION RIGHTS
(a) SAR Agreement. Each
grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the
Optionee and the Company. Such SAR shall be subject to all applicable terms of
the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various SAR Agreements entered into under the
Plan need not be identical. SARs may be granted in consideration of a reduction
in the Optionee’s other compensation.
(b) Number of Shares.
Each SAR Agreement shall specify the number of Shares to which the SAR pertains
and shall provide for the adjustment of such number in accordance with
Section 11.
(c) Exercise Price. Each
SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an
Exercise Price that varies in accordance with a predetermined formula while the
SAR is outstanding.
(d) Exercisability and
Term. Each SAR Agreement shall specify the date when all or any
installment of the SAR is to become exercisable. The SAR Agreement shall also
specify the term of the SAR. A SAR Agreement may provide for accelerated
exercisability in the event of the Optionee’s death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee’s service. SARs may be awarded in
combination with Options, and such an Award may provide that the SARs will not
be exercisable unless the related Options are forfeited. A SAR may be included
in an ISO only at the time of grant but may be included in an NSO at the time of
grant or thereafter. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.
(e) Effect of Change in
Control. The Committee may determine, at the time of granting a SAR or
thereafter, that such SAR shall become fully exercisable as to all Common Shares
subject to such SAR in the event that a Change in Control occurs with respect to
the Company.
(f) Exercise of SARs.
Upon exercise of a SAR, the Optionee (or any person having the right to exercise
the SAR after his or her death) shall receive from the Company (a) Shares,
(b) cash or (c) a combination of Shares and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of Shares received
upon exercise of SARs shall, in the aggregate, be equal to the amount by which
the Fair Market Value (on the date of surrender) of the Shares subject to the
SARs exceeds the Exercise Price.
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(g) Modification or Assumption
of SARs. Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding SARs or may accept the cancellation of outstanding
SARs (whether granted by the Company or by another issuer) in return for the
grant of new SARs for the same or a different number of shares and at the same
or a different exercise price. The foregoing notwithstanding, no modification of
a SAR shall, without the consent of the holder, materially impair his or her
rights or obligations under such SAR.
(h) Buyout Provisions.
The Committee may at any time (a) offer to buy out for a payment in cash or
cash equivalents a SAR previously granted, or (b) authorize an Optionee to
elect to cash out a SAR previously granted, in either case at such time and
based upon such terms and conditions as the Committee shall
establish.
SECTION
10. STOCK UNITS
(a) Stock Unit
Agreement. Each grant of Stock Units under the Plan shall be evidenced by
a Stock Unit Agreement between the recipient and the Company. Such Stock Units
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various Stock Unit Agreements entered into under the Plan need not be identical.
Stock Units may be granted in consideration of a reduction in the recipient’s
other compensation.
(b) Payment for Awards.
To the extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of the Award recipients.
(c) Vesting Conditions.
Each Award of Stock Units may or may not be subject to vesting. Vesting shall
occur, in full or in installments, upon satisfaction of the conditions specified
in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated
vesting in the event of the Participant’s death, disability or retirement or
other events. The Committee may determine, at the time of granting Stock Units
or thereafter, that all or part of such Stock Units shall become vested in the
event that a Change in Control occurs with respect to the Company.
(d) Voting and Dividend
Rights. The holders of Stock Units shall have no voting rights. Prior to
settlement or forfeiture, any Stock Unit awarded under the Plan may, at the
Committee’s discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or in a
combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions (including
without limitation, any forfeiture conditions) as the Stock Units to which they
attach.
15
(e) Form and Time of Settlement
of Stock Units. Settlement of vested Stock Units may be made in the form
of (a) cash, (b) Shares or (c) any combination of both, as
determined by the Committee. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Shares over a series of trading days. Vested Stock Units
may be settled in a lump sum or in installments. The distribution may occur or
commence when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or it may be deferred to any later date. The amount of
a deferred distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Stock Units is settled, the number of such Stock
Units shall be subject to adjustment pursuant to Section 11.
(f) Death of Recipient.
Any Stock Units Award that becomes payable after the recipient’s death shall be
distributed to the recipient’s beneficiary or beneficiaries. Each recipient of a
Stock Units Award under the Plan shall designate one or more beneficiaries for
this purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at any
time before the Award recipient’s death. If no beneficiary was designated or if
no designated beneficiary survives the Award recipient, then any Stock Units
Award that becomes payable after the recipient’s death shall be distributed to
the recipient’s estate.
(g) Creditors’ Rights. A
holder of Stock Units shall have no rights other than those of a general
creditor of the Company. Stock Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Stock Unit Agreement.
SECTION
11. ADJUSTMENT OF SHARES
(a) Adjustments. In the
event of a subdivision of the outstanding Stock, a declaration of a dividend
payable in Shares, a declaration of a dividend payable in a form other than
Shares in an amount that has a material effect on the price of Shares, a
combination or consolidation of the outstanding Stock (by reclassification or
otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a
similar occurrence, the Committee shall make equitable adjustments in one or
more of:
(i) The
number of Options, SARs, Restricted Shares and Stock Units available for future
Awards under Section 5;
(ii) The
number of Shares covered by each outstanding Option and SAR;
(iv) The
Exercise Price under each outstanding Option and SAR; or
(v) The
number of Stock Units included in any prior Award which has not yet been
settled.
16
Except as
provided in this Section 11, a Participant shall have no rights by reason
of any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class.
(b) Dissolution or
Liquidation. To the extent not previously exercised or settled, Options,
SARs and Stock Units shall terminate immediately prior to the dissolution or
liquidation of the Company.
(c) Reorganizations. In
the event that the Company is a party to a merger or other reorganization,
outstanding Awards shall be subject to the agreement of merger or
reorganization. Such agreement shall provide for:
(i) The
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation;
(ii) The
assumption of the outstanding Awards by the surviving corporation or its parent
or subsidiary;
(iii) The
substitution by the surviving corporation or its parent or subsidiary of its own
awards for the outstanding Awards;
(iv) Full
exercisability or vesting and accelerated expiration of the outstanding Awards;
or
(v)
Settlement of the full value of the outstanding Awards in cash or cash
equivalents followed by cancellation of such Awards.
(d) Reservation of
Rights. Except as provided in this Section 11, an Optionee or
Offeree shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Shares subject to
an Option. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION
12. DEFERRAL OF AWARDS
(a) Committee Powers.
The Committee (in its sole discretion) may permit or require a Participant
to:
(i) Have
cash that otherwise would be paid to such Participant as a result of the
exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company’s books;
(ii) Have
Shares that otherwise would be delivered to such Participant as a result of the
exercise of an Option or SAR converted into an equal number of Stock Units;
or
17
(iii)
Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR or the settlement of Stock Units converted into
amounts credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company’s books. Such amounts
shall be determined by reference to the Fair Market Value of such Shares as of
the date when they otherwise would have been delivered to such
Participant.
(b) General Rules. A
deferred compensation account established under this Section 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 12.
SECTION
13. AWARDS UNDER OTHER PLANS
The
Company may grant awards under other plans or programs. Such awards may be
settled in the form of Shares issued under this Plan. Such Shares shall be
treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.
SECTION
14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES
(a) Effective Date. No
provision of this Section 14 shall be effective unless and until the Board
has determined to implement such provision.
(b) Elections to Receive NSOs,
Restricted Shares or Stock Units. An Outside Director may elect to
receive his or her annual retainer payments and/or meeting fees from the Company
in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination
thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock
Units shall be issued under the Plan. An election under this Section 14
shall be filed with the Company on the prescribed form.
(c) Number and Terms of NSOs,
Restricted Shares or Stock Units. The number of NSOs, Restricted Shares
or Stock Units to be granted to Outside Directors in lieu of annual retainers
and meeting fees that would otherwise be paid in cash shall be calculated in a
manner determined by the Board. The terms of such NSOs, Restricted Shares or
Stock Units shall also be determined by the Board.
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SECTION
15. LEGAL AND REGULATORY REQUIREMENTS
Shares
shall not be issued under the Plan unless the issuance and delivery of such
Shares complies with (or is exempt from) all applicable requirements of law,
including (without limitation) the Securities Act of 1933, as amended, the rules
and regulations promulgated thereunder, state securities laws and regulations
and the regulations of any stock exchange on which the Company’s securities may
then be listed, and the Company has obtained the approval or favorable ruling
from any governmental agency which the Company determines is necessary or
advisable. The Company shall not be liable to a Participant or other persons as
to: (a) the non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares under the Plan; and (b) any tax consequences expected, but
not realized, by any Participant or other person due to the receipt, exercise or
settlement of any Award granted under the Plan.
SECTION
16. WITHHOLDING TAXES
(a) General. To the
extent required by applicable federal, state, local or foreign law, a
Participant or his or her successor shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that arise in
connection with the Plan. The Company shall not be required to issue any Shares
or make any cash payment under the Plan until such obligations are
satisfied.
(b) Share Withholding.
The Committee may permit a Participant to satisfy all or part of his or her
withholding or income tax obligations by having the Company withhold all or a
portion of any Shares that otherwise would be issued to him or her or by
surrendering all or a portion of any Shares that he or she previously acquired.
Such Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. In no event may a Participant have Shares
withheld that would otherwise be issued to him or her in excess of the number
necessary to satisfy the legally required minimum tax withholding.
SECTION
17. OTHER PROVISIONS APPLICABLE TO AWARDS
(a) Transferability.
Unless the agreement evidencing an Award (or an amendment thereto authorized by
the Committee) expressly provides otherwise, no Award granted under this Plan,
nor any interest in such Award, may be sold, assigned, conveyed, gifted,
pledged, hypothecated or otherwise transferred in any manner (prior to the
vesting and lapse of any and all restrictions applicable to Shares issued under
such Award), other than by will or the laws of descent and distribution;
provided, however, that an ISO may be transferred or assigned only to the extent
consistent with Section 422 of the Code. Any purported assignment, transfer
or encumbrance in violation of this Section 17(a) shall be void and
unenforceable against the Company.
19
(b) Qualifying Performance
Criteria. The number of Shares or other benefits granted, issued,
retainable and/or vested under an Award may be made subject to the attainment of
performance goals for a specified period of time relating to one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years’ results or to
a designated comparison group or index, in each case as specified by the
Committee in the Award: (a) cash flow, (b) earnings per share,
(c) earnings before interest, taxes and amortization, (d) return on
equity, (e) total stockholder return, (f) share price performance,
(g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or
net operating income, (l) operating profit or net operating profit,
(m) operating margin or profit margin, (n) return on operating
revenue, (o) return on invested capital, or (p) market segment shares
(“Qualifying Performance Criteria”). The Committee may appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to exclude any
of the following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary nonrecurring items as
described in Accounting Principles Board Opinion No. 30 and/or in
managements’ discussion and analysis of financial condition and results of
operations appearing in the Company’s annual report to stockholders for the
applicable year. If applicable, the Committee shall determine the Qualifying
Performance Criteria not later than the 90th day of
the performance period, and shall determine and certify, for each Participant,
the extent to which the Qualifying Performance Criteria have been met. The
Committee may not in any event increase the amount of compensation payable under
the Plan upon the attainment of a Qualifying Performance Goal to a Participant
who is a “covered employee” within the meaning of Section 162(m) of the
Code.
SECTION
18. NO EMPLOYMENT RIGHTS
No
provision of the Plan, nor any right or Option granted under the Plan, shall be
construed to give any person any right to become, to be treated as, or to remain
an Employee. The Company and its Subsidiaries reserve the right to terminate any
person’s Service at any time and for any reason, with or without
notice.
20
SECTION
19. DURATION AND AMENDMENTS
(a) Term of the Plan.
The Plan, as set forth herein, shall terminate automatically on July 27, 2020
and may be terminated on any earlier date pursuant to Subsection
(b) below.
(b) Right to Amend or Terminate
the Plan. The Board of Directors may amend or terminate the Plan at any
time and from time to time. Rights and obligations under any Award granted
before amendment of the Plan shall not be materially impaired by such amendment,
except with consent of the Participant. An amendment of the Plan shall be
subject to the approval of the Company’s stockholders only to the extent
required by applicable laws, regulations or rules.
(c) Effect of
Termination. No Awards shall be granted under the Plan after the
termination thereof. The termination of the Plan shall not affect Awards
previously granted under the Plan.
[Remainder
of this page intentionally left blank]
21
SECTION
20. EXECUTION
To
record the adoption of the Plan by the Board of Directors, the Company has
caused its authorized officer to execute the same.
|
OCULUS
INNOVATIVE SCIENCES, INC.
|
|
|
By:
|
/s/ Robert Miller |
|
Name:
|
Robert Miller |
|
Title:
|
Chief Fianncial Officer |
22
Exhibit B. Proxy
Card.
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