Occam Networks 10-K 2006
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Amendment No. 1)
For the fiscal year ended December 31, 2005
For the transition period from to
Commission file number: 000-30741
OCCAM NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Registrants telephone number, including area code: (805) 692-2900
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Based on the average bid and asked price on June 30, 2005 (the last business day of the registrants most recently completed second quarter), the aggregate market value of the voting common stock held by non-affiliates of the registrant on such date was approximately $13.2 million. For purposes of this disclosure, the registrant has excluded shares of common stock held by directors, executive officers and holders of 5% or more of the registrants outstanding common stock in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of April 26, 2006, the number of shares outstanding of the registrants common stock was 7,055,933 shares (15,789,969 shares including, 8,734,036 of common stock issuable upon conversion of outstanding Series A-2 preferred stock).
This report on Form 10-K/A (Amendment No. 1) is being filed to disclose those items previously omitted from Part III of the Annual Report on Form 10-K, filed by Occam Networks, Inc., a Delaware corporation, on March 30, 2006, in compliance with General Instruction G.3 to Form 10-K. In addition, pursuant to the rules of the Securities and Exchange Commission, we are including with this Amendment certain currently dated certifications. All capitalization data in this Amendment give effect to a 1-for-40 reverse split of the shares of our common stock that was effective on March 10, 2006.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of our directors and certain information about them as of May 15, 2006, are set forth below. Information regarding our executive officers is included in Item 4A, Part I of our Annual Report on Form 10-K previously filed on March 30, 2006, under the caption Executive Officers of the Registrant. Information as to the stock ownership of each director, each executive officer named in the summary compensation table set forth on page 6, and all of our current directors and executive officers as a group is set forth below in Item 12 under Ownership of Securities.
Robert L. Howard-Anderson has served as our President and Chief Executive Officer since May 2002 and as one of our directors since July 2002. Mr. Howard-Anderson was Senior Vice President of Product Operations at Occam CA from February 2002 to May 2002. Mr. Howard-Anderson was Vice President of Product Operations at Procket Networks, Inc., a network infrastructure company, from August 2000 to February 2002 and Vice President of Engineering at Sun Microsystems, Inc., a computer company, from June 1995 to August 2000. Mr. Anderson has a B.S. in electrical engineering from Tufts University.
Steven M. Krausz has served as a director of Occam since May 1997 and has served as Chairman since May 2002. As our non-executive Chairman, Mr. Krausz functions as our Lead Director. Mr. Krausz also served as a director of Occam Networks, Inc., the predecessor California corporation that acquired us in May 2002, from February 2000 to May 2002 and served as its Chairman from March 2002 until the closing of the merger, when he became our Chairman. Mr. Krausz has been a managing member of several venture capital funds affiliated with U.S. Venture Partners, a venture capital firm, since August 1985. Mr. Krausz holds a B.S. in electrical engineering and an M.B.A. from Stanford University.
Robert B. Abbott has served as a director of Occam since May 2002. He served as a director of Occam, the California corporation, from February 2001 to May 2002. Mr. Abbott is currently a General Partner with Norwest Venture Partners, a venture capital firm he has been with since August 1998. He also serves as a director for several private companies. Mr. Abbott received a B.S. in electrical engineering, an M.S. in electrical engineering and an M.B.A. from Stanford University.
Robert E. Bylin has served as a director of Occam since September 2004. Mr. Bylin has served as the Chief Financial Officer of Pyxis Technology, Inc., an electronic design automation company, since November 2005. From April 2004 to November 2005, Mr. Bylin served as the Chief Financial Officer of TAK Imaging, a provider of imaging processors. From March 2001 to October 2003, Mr. Bylin served as Chief Financial Officer and Chief Operations Officer for D.T. Consulting, consulting company specializing in technical integration of hardware and software systems. Prior to that he served as Chief Financial Officer and Vice President of Finance for Veridicom, Inc., a semiconductor and software company. Mr. Bylin currently serves as a director for Technology Credit Union. Mr. Bylin received a B.S. in mathematics from Trinity College and an M.B.A. from Harvard.
Thomas E. Pardun has served as director of Occam since September 2004. Mr. Pardun recently retired and is currently engaged in board assignments, venture capital investments and management consulting. Mr. Pardun currently serves on the boards of directors of Western Digital Corporation, a manufacturer of hard-disk drives for personal computer and home entertainment markets, Exabyte Corporation, a provider of tape storage solutions, and two privately-held companies. Mr. Pardun served as Western Digitals Chairman from January 2000 to January 2002. In addition, from December 2000 to October 2001, he served as Chairman and Chief Executive Officer of edge2Net, a provider of voice, data and video services. From May 1996 to July 2000, Mr. Pardun served as President of MediaOne International, an investment company investing in cable television, telephony and internet properties in the Asia/Pacific region. Prior to that, Mr. Pardun served for three years as President and Chief Executive Officer of US West Multimedia Communications Group, a US West company developing cable television and multimedia business. Mr. Pardun has also served in various executive capacities with US West Communications, Sprint, United Telecommunications, Inc., a predecessor company to Sprint, and IBM over a period of approximately twenty-seven years. Mr. Pardun received a B.B.A. in economics and marketing from University of Iowa and Management School Certificates from Harvard Business School, Stanford University and Dartmouth University.
Kenneth R. Cole has served as a director of Occam since December 2004. Mr. Cole has served as a director since March 2004 and as Vice-Chairman since April 2004 of Valor Communications Group, Inc., a telecommunications service provider in rural communities. From March 2002 to April 2004, Mr. Cole served as Chief Executive Officer of Valor and from January 2000 to March 2002 as Valors President and Chief Operating Officer. Prior to 2000, Mr. Cole served in various capacities during a 26-year career at CenturyTel, Inc., a telecommunications company, including serving as Chief Operating Officer from 1999 to January 2000.
Brian H. Strom was appointed to our board of directors on May 17, 2006. Mr. Strom served as President and Chief Executive Officer of SureWest Communications from December 1993 to December 2005 and as a director of SureWest from December 1993 to May 2006. He served as chairman of the United States Telecom Association (USTA) from October 2003 to October 2004. He also served as chair of the Sacramento Area Commerce and Trade Organization (SACTO) from July 2003 to July 2004, and served as chairman of the California Telephone Association from February 2001 to February 2002. In 2002, Mr. Strom was honored by the Sacramento Metropolitan Chamber of Commerce as Businessman of the Year.
No family relationships exist between any of our directors and executive officers.
Our audit committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Our audit committee is primarily responsible for selecting our independent registered public accounting firm, overseeing our internal financial reporting and accounting controls and consulting with and reviewing the services provided by our independent registered public accounting firm.
Until May 2006, our audit committee consisted of directors Robert B. Abbott, Robert E. Bylin, and Steven M. Krausz. In May 2006, the audit committee was reconstituted to consist of directors Robert E. Bylin, Brian Strom, and Kenneth R. Cole. Mr. Bylin serves as the chairman of the audit committee. The audit committee as currently constituted satisfies the director independence requirements of The NASDAQ National Market and the audit committee director independence requirements established by the SEC that apply to companies listed on NASDAQ. Our board of directors has determined that Mr. Bylin is an audit committee financial expert as defined by SEC regulations. This designation is a disclosure requirement of the SEC and does not impose upon Mr. Bylin any duties, obligations, or liability greater than that which would otherwise be imposed by virtue of his membership on the board or the audit committee. In addition, this designation does not affect the duties, obligations, or liabilities of any other director or audit committee member. Our board of directors has determined that each audit committee member has sufficient knowledge in reading and understanding financial statements to serve on the audit committee.
Section 16(a) Beneficial Ownership Reporting Compliance
The members of our board of directors, our executive officers and persons who hold more than 10% of our outstanding common stock are subject to the reporting requirements of Section 16(a) of the Exchange Act which require them to file reports with respect to their ownership of the common stock and their transactions in such common stock. Based upon (i) the copies of Section 16(a) reports which we received from such persons for their 2005 fiscal year transactions in the common stock and their common stock holdings, and (ii) the representations received from one or more of such persons that no annual Form 5 reports were required to be filed by them for the 2005 fiscal year, we believe that, except as noted below, all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by our directors, executive officers and greater than ten percent beneficial owners.
Certain funds and individuals affiliated with New Enterprise Associates, and certain funds and individuals affiliated with U.S. Venture Partners, were each delinquent in the filing of a Form 4 relating to the purchase of shares of our Series A-2 preferred stock.
Howard Bailey, our former Chief Financial Officer, was delinquent in the filing of a Form 4 relating to the purchase of shares of our common stock.
Mr. Abbott, Mr. Mason, Mr. Pardun and Mr. Cole were each delinquent in the filing of a Form 4 relating to the grants of options to purchase shares of our common stock.
Code of Ethics
We have adopted the Occam Code of Ethics (Code of Ethics). The Code of Ethics is available at our website, located at http://www.occamnetworks.com. It may be found at our website as follows:
1. From our main web page, click on Company.
2. Next, click on Investor Info.
3. Finally, click on Code of Ethics.
We intend to satisfy disclosure requirements regarding an amendment to, or waiver from, a provision of the Code of Ethics by posting such information on our website, at the address and location specified above.
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the compensation earned for services rendered during the 2005, 2004 and 2003 fiscal years by our current chief executive officer and for each of our four other most highly compensated executive officers whose salary and bonus for the 2005 fiscal year was in excess of $100,000. No other executive officer that would otherwise have been included in this table on the basis of salary and bonus earned for the 2005 fiscal year has been excluded by reason of his or her termination of employment or change in executive status during that year.
SUMMARY COMPENSATION TABLE
Stock option grants
The following table contains information concerning the stock options granted during our 2005 fiscal year to each of our executive officers named above in the summary compensation table. Grants were made under our amended and restated 2000 Stock Incentive Plan. We did not grant any stock appreciation rights during the 2005 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Aggregated option exercises and fiscal year-end values
The following table provides information, with respect to each of our executive officers named above in the summary compensation table, concerning unexercised options held by them at the end of the 2005 fiscal year. None of the named executive officers exercised any stock options or stock appreciation rights during the 2005 fiscal year, and no stock appreciation rights were held by any named executive officer at the end of such year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Employment contracts and change in control arrangements
Robert L. Howard-Anderson, our current President and Chief Executive Officer, is a party to an employment agreement with Occam, which became effective as of February 14, 2002 when he joined Occam CA as Senior Vice President of Product Operations. In connection with his employment agreement, Mr. Howard-Anderson was granted an option to purchase 81,479 shares of our common stock at an exercise price of $3.60 per share. One-fourth of the shares subject to the option vested one year after the commencement of his employment and the remainder are vesting in equal installments each month thereafter so that the option will be fully vested and exercisable four years from the vesting commencement date. If Mr. Howard-Anderson is involuntarily terminated within twelve months following an acquisition of over 50% of our then-outstanding voting securities or a merger or consolidation in which we do not own more than 50% of the surviving entity, or through a sale or disposition of all or substantially all of our assets, vesting on the unvested portion of the option to purchase 81,479 shares of our common stock will accelerate and vest to the extent of an additional 25% of the number of shares originally granted.
Our board of directors has approved the terms of an employment agreement to be entered into with Christopher B. Farrell, our current Chief Financial Officer. Under the terms of the employment agreement, if Mr. Farrell is involuntarily terminated within twelve months following an acquisition of over 50% of our then-outstanding voting securities or a merger or consolidation in which we do not own more than 50% of the surviving entity, or through a sale or disposition of all or substantially all of our assets, vesting on the unvested portion of all options to purchase our common stock held by Mr. Farrell will accelerate and vest to the extent of an additional 20% of the number of shares originally granted under such options. As of May 15, 2006, Mr. Farrell held options to purchase an aggregate of 81,500 shares of our common stock at a weighted average exercise price of $14.29. As of May 15, 2006, none of the shares subject to such options were vested.
The compensation committee of the board of directors, as the plan administrator of the amended and restated 2000 Stock Incentive Plan, has the authority to provide for accelerated vesting of the shares of common stock subject to any outstanding options held by the chief executive officer, or any other executive officer, or any unvested share issuances actually held by such individual, in connection with certain changes in control of Occam or the subsequent termination of the officers employment following the change in control event.
Pursuant to agreements between us and directors Robert Bylin, Thomas Pardun and Kenneth Cole, each of these directors received certain options to purchase our common stock. In the event of a merger, consolidation, sale of all assets or other change of control of our company, all such options held by these directors will accelerate and vest immediately prior to the closing of such change of control transaction.
Compensation committee interlocks and insider participation
Our compensation committee is responsible for determining salaries, incentives, and other forms of compensation for directors, officers, and other employees of Occam. Until May 2006, our compensation committee consisted of directors Steven M. Krausz and Thomas E. Pardun. In May 2006, the compensation committee was reconstituted to consist of directors Robert B. Abbott, Steven M. Krausz and Thomas E. Pardun, none of whom was an officer or employee of Occam during fiscal 2005. None of our current executive officers has ever served as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a member of our board of directors or compensation committee.
We currently compensate directors in cash for their service as members of our board of directors, in addition to reimbursing directors for all reasonable expenses incurred by them in attending board and committee meetings. We currently compensate our directors $4,000 per quarter for service on the board, $1,000 for each meeting they attend and $250 for each ad hoc telephone meeting.
In fiscal 2005, non-employee directors were eligible to receive option grants under the Automatic Option Grant Program in effect under our amended and restated 2000 Stock Incentive Plan. Under such program, each individual who first joined our board as a non-employee director received, at the time of such initial election or appointment, an automatic option grant to purchase 750 shares of our common stock, provided such person had not previously been in our employ. In addition, on the date of each annual stockholders meeting, each individual who was to continue to serve as a non employee board member, whether or not such individual was standing for reelection at that particular annual meeting, was be granted an option to purchase 250 shares of common stock, provided such individual had served as a non-employee board member for at least six months. Directors who were also employees were eligible to receive options and be issued shares of common stock directly under our amended and restated 2000 Stock Incentive Plan. As noted in the table below, in fiscal 2005 we granted options to certain of our directors under the Discretionary Option Grant Program under the amended and restated 2000 Stock Incentive Plan.
Each grant under the Automatic Option Grant Program or the amended and restated 2000 Stock Incentive Plan had an exercise price per share not less than the fair market value per share of our common stock on the grant date, and had a maximum term of ten years, subject to earlier termination if such individual ceases to serve as a member of our board of directors.
In May 2006, our board of directors approved the 2006 Equity Incentive Plan, which replaced our amended and restated 2000 Stock Incentive Plan. Going forward, option grants to our directors will be made under the 2006 Equity Incentive Plan. Under the 2006 Equity Incentive Plan, each non-employee director will be automatically granted an option to purchase 20,000 shares of our common stock upon the date on which such individual becomes a director, provided such individual has not previously been in our employ. In addition, beginning in fiscal 2007, at each of our annual stockholders meetings, each non-employee director who was a non-employee director on the date of the prior years annual meeting will be automatically granted an option to purchase 5,000 shares of our common stock. Directors who are also employees are eligible to receive options and be issued shares of common stock directly under the 2006 Equity Incentive Plan.
Each grant to our directors under the 2006 Equity Incentive Plan will have an exercise price per share not less than the fair market value per share of our common stock on the grant date, and will have a maximum term of ten years, subject to earlier termination if the individual ceases to serve as a member of our board of directors.
The following table sets forth options granted to our non-employee directors under our amended and restated 2000 Stock Incentive Plan during the year ended December 25, 2005 and through May 17, 2006.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock and Series A-2 preferred stock on April 26, 2006. Based on the current conversion price of $4.40, the 3,842,976 shares of Series A-2 preferred stock outstanding on April 26, 2006 are convertible into approximately 8,734,036 shares of common stock. The table also reflects ownership of the Series A-2 preferred stock as a separate class. The table reflects beneficial ownership for the following persons and classes of persons:
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by the footnotes below, we believe, based on 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 shown as beneficially owned by them, subject to community property laws, where applicable. In computing the number of shares of common stock beneficially owned, shares subject to options or warrants held by a stockholder that are exercisable within sixty days of April 26, 2006 are deemed outstanding for the purpose of determining the percentage ownership of that stockholder. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other stockholder. As of April 26, 2006, we had 7,055,933 shares of common stock outstanding and 3,842,976 shares of Series A-2 preferred stock outstanding. Assuming conversion of all outstanding Series A-2 preferred stock at the current conversion price, we would have had outstanding 15,789,969 shares of common stock as of April 26, 2006. Unless otherwise indicated, the address for each person is our address at 77 Robin Hill Road, Santa Barbara, California 93117.
Equity Compensation Plan Information
The following table provides information as of December 25, 2005, about shares of our common stock that may be issued upon the exercise of options and similar rights under all of our existing equity compensation plans, including our amended and restated 2000 Stock Incentive Plan, 1999 Stock Plan, and 2000 Employee Stock Purchase Plan. Our stockholders have approved all of our equity incentive plans. Occam CAs stockholders approved its 1999 Stock Plan. Options to purchase shares of Occam CA common stock granted pursuant to Occam CAs 1999 Stock Plan were assumed by us in connection with the merger of Occam CA and Accelerated Networks and are governed by the terms of that plan. No additional options will be issued under the 1999 Stock Plan and employee contributions and stock issuances under the 2000 Employee Stock Purchase Plan have been terminated.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Employment and indemnification arrangements
We are a party to an employment agreement with our Chief Executive Officer as described under the caption Employment contracts and change in control arrangements, on page 8 of this Form 10-K/A.
In addition to the indemnification provisions contained in our certificate of incorporation and bylaws, we have entered into separate indemnification agreements with each of our directors and officers. These agreements require us, among other things, to indemnify each such director and officer against expenses (including attorneys fees), judgments, fines and settlements paid by such individual in connection with any action, suit or proceeding arising out of such individuals status or service as our director or officer (other than such liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest) and to advance expenses incurred by such individual in connection with any proceeding against such individual with respect to which such individual may be entitled to indemnification by us. We also provide director and officer liability insurance to our directors and officers at our
expense. We have been named as defendants in several class action lawsuits generally referred to as IPO Allocation and Florida IPO Allocation claims relating to our initial public offering in June 2000. Certain of our former officers and directors, and one of our current directors, Steven Krausz, have been named as co-defendants in these class action lawsuits and we may be required to indemnify these persons in connection with the lawsuits and our director and officer liability insurance provider may be required to pay damages, awards or settlement amounts on behalf of such former directors and officers.
Series A-2 financing
In October 2003, in light of a substantial need for additional working capital, our board of directors delegated full authority to a special financing committee of the board to structure, negotiate, and conclude, with the assistance of Occams financial advisor and Chief Financial Officer, an equity financing transaction with existing investors. Occam had previously sought alternative sources of financing from new investors but had not been successful in obtaining any financing commitments. The special committee was initially comprised of Robert L. Howard-Anderson, who serves as our President and Chief Executive Officer and as a member of our board of directors. In January 2004, Tom Frederick joined our board of directors and was appointed to serve as a member of the special financing committee. Mr. Frederick resigned from the board of directors in September 2004. Directors Robert E. Bylin and Kenneth Cole were appointed to the committee in January 2005.
In November 2003, the special committee designated a new series of our preferred stock as the Series A-2 preferred stock, and we raised approximately $16.1 million in the initial private placement of Series A-2 preferred stock. The principal investors at the initial closing were investment funds affiliated with U.S. Venture Partners (USVP), Norwest Venture Partners (Norwest), and New Enterprise Associates (NEA). These investors collectively held approximately 64.7% of our outstanding common stock immediately prior to the private placement, and representatives of each of these funds serve on our board of directors. We sold the Series A-2 preferred stock at a price of $10.00 per share, and each share is presently convertible into approximately 2.27275 shares of common stock at a common-equivalent conversion price of $4.40.
In January and February 2004, the special committee, together with Occams financial advisors, negotiated the terms of an additional investment in the Series A-2 preferred stock by investment funds affiliated with Alta Partners. Alta had not previously invested in Occam. At a closing held in March 2004, Alta invested $4.0 million in the Series A-2 preferred stock financing at the same price per share and with substantially similar contractual rights as those established at the initial closing. As a condition to obtaining Altas investment, however, the special financing committee approved our granting to Alta Partners warrants to acquire up to an additional $3.8 million of Series A-2 preferred stock at an exercise price of $10.00 per share. No other purchasers of Series A-2 preferred stock in the private placement transactions received any warrants, and purchasers in the recent rights offering did not receive any warrants. The amount of the Alta warrants was subject to reduction based on our ability to raise additional financing. In April 2004, investment funds affiliated with USVP and Norwest purchased additional shares of Series A-2 preferred stock for an aggregate additional investment of $1.5 million. As a result, the amount subject to the Alta warrants automatically decreased to approximately $2.3 million. This amount was subject to further reduction by the amount, if any, that we raised in excess of $1.5 million in connection with the rights offering. To the extent exercisable, Alta was permitted to exercise these warrants during the period beginning after the end of the rights offering and continuing through September 2005. In April 2005, Occams Board of Directors approved an amendment of the warrant to permit Alta to exercise it immediately for a total of 226,800 shares of Series A-2 preferred stock. The Board approved the amendment because the commencement of the rights offering had been substantially delayed from the anticipated schedule at the time the warrant was issued, because the warrant would otherwise expire in September 2005, and because it was not clear if the rights offering would be concluded before the expiration of the warrant. On April 20, 2005, Alta exercised the warrant in full, acquiring 226,800 shares of Series A-2 preferred stock for aggregate proceeds of $2.3 million.
Alta was also granted certain board rights and observer rights in connection with its investment. Under these rights, Alta may require us to nominate a designee of Alta for election to the board of directors in connection with any meeting of stockholders at which directors will be elected and to include the nomination in any stockholder solicitation materials relating to the election. We are then required to use our commercially reasonable efforts to cause the election of Altas designee and to maintain the designee as a director. In addition, Alta may at any time request that the board of directors appoint a designee of Alta to serve as a director. In such event, we have agreed to use our commercially reasonable efforts to cause Altas designee to be appointed to the board, to cause the nomination of the designee in connection with subsequent stockholder solicitations to elect directors, to recommend election of the Alta designee as part of any such solicitation, and to maintain the status of Altas designee as a director. If Alta has not designated a director, we have agreed to permit one representative of Alta to attend and participate in board meetings in a non-voting observer capacity, subject to our ability to exclude the observer from such meetings under certain circumstances.
From November 2003 through the end of 2004, Occam raised gross proceeds of approximately $22.2 million through the issuance of our Series A-2 preferred stock. Occam raised an additional $5.6 million in January 2005 and $4.9 million in March 2005 through additional issuance of Series A-2 preferred stock. In addition, In March 2005, a holder of an outstanding promissory note converted $534,790 of outstanding principal and accrued interest into shares of
Series A-2 preferred stock and, as noted above, in April 2005, Alta exercised its warrants to purchase 226,800 shares of Series A-2 preferred stock for $2,268,000. The outstanding shares of Series A-2 preferred stock are presently convertible into approximately 8,734,036 shares of common stock and, for voting purposes, will have a number of votes equal to the number of shares of common stock that are issuable upon conversion.
Each of USVP, NEA, and Norwest held in excess of 5% of our outstanding voting stock at the time of the financing, and each continues to hold in excess of 5% of our outstanding common stock and in excess of 5% of our outstanding Series A-2 preferred stock. Affiliates of each of these investment firms currently serve on our board of directors. Director Steven M. Krausz is a managing member of the general partner of USVP. Robert B. Abbott is a general partner of Norwest. Former director Thomas C. McConnell is a former general partner of NEA.
Restricted stock grant
On September 12, 2005, our Board of Directors, based on the recommendation of its Compensation Committee, approved a restricted stock grant to Robert Howard-Anderson, our Chief Executive Officer. The restricted stock grant consisted of 15,000 shares of our common stock, subject to applicable tax withholding, and is subject to the terms and conditions of our executive officer stock grant programrestricted stock grant agreement. On September 12, 2005, we entered into the restricted stock grant agreement with Mr. Howard-Anderson and issued to him a net of 10,967 shares of our common stock, reflecting a reduction of 4,033 in the number of shares otherwise issuable to Mr. Howard-Anderson to satisfy tax withholding obligations. All of the shares subject to the restricted stock grant were fully vested upon issuance to Mr. Howard-Anderson. The aggregate fair market value of the shares on the date of grant was $165,600, based on the last sale price per share of our common stock on September 12, 2005 of $11.04, as reported by the OTC Bulletin Board.
Statement regarding affiliate transactions
We believe that all of the transactions described above were made on terms no less favorable to Occam than could have been obtained from unaffiliated third parties.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees of Singer Lewak Greenbaum & Goldstein LLP during the 2005 fiscal year and PricewaterhouseCoopers LLP during the 2005 and 2004 fiscal years are summarized below:
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The audit committees policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm subject to limited discretionary authority granted to our chief financial officer. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis. For fiscal 2005, the audit committee reviewed and pre-approved all audit and permissible non-audit fees for services provided by PricewaterhouseCoopers LLP and Singer Lewak Greenbaum & Goldstein LLP.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
Previously filed with our Annual Report on Form 10-K filed on March 30, 2006.
(2) Financial Statement Schedules
The financial statement schedules have been omitted because they are not applicable or the information required to be set forth therein is included in the consolidated financial statements or notes thereto previously filed with our Annual Report on Form 10-K filed on March 30, 2006.
The following exhibits are filed herewith or incorporated by reference.
The exhibits filed as part of this report are listed in Item 15(a)(3) of this Form 10-K/A.
The financial statement schedules required by Regulation S-X and Item 8 of this form are listed in Item 15(a)(2) of this Form 10-K/A.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert L. Howard-Anderson and Christopher B. Farrell, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-facts and agents, or his substitute or substitutes, or any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.