Oplink Communications DEF 14A 2007
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Oplink Communications, Inc.
(Name of Registrant as Specified In Its Charter)
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OPLINK COMMUNICATIONS, INC.
46335 Landing Parkway
Fremont, California 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 8, 2007
You are cordially invited to attend the Annual Meeting of Stockholders of Oplink Communications, Inc., a Delaware corporation. The meeting will be held on Thursday, November 8, 2007, at 10:00 a.m. local time at our principal offices located at 46335 Landing Parkway, Fremont, California 94538, for the following purposes:
1. To elect one Class I director to serve for a three-year term that expires at the 2010 Annual Meeting of Stockholders.
2. To ratify the selection by the Audit Committee of the Board of Directors of Burr, Pilger & Mayer LLP as the independent registered public accounting firm of the Company for its fiscal year ending June 30, 2008.
3. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
These foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
The meeting will begin promptly at 10:00 a.m., local time, and check-in will begin at 9:30 a.m., local time. Only holders of record of shares of Oplink common stock (Nasdaq: OPLK) at the close of business on September 26, 2007 are entitled to notice of and to vote at the meeting and any postponements or adjournments of the meeting.
For a period of at least 10 days prior to the meeting, a complete list of stockholders of record entitled to vote at the meeting will be available and open to the examination of any stockholder for any purpose germane to the meeting during normal business hours at our corporate headquarters located at 46335 Landing Parkway, Fremont, California 94538. This list also will be made available for inspection at the meeting.
By Order of the Board of Directors,
Thomas P. Keegan
Vice President, Business Development, General
Counsel and Secretary
October 9, 2007
You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.
TABLE OF CONTENTS
OPLINK COMMUNICATIONS, INC.
46335 Landing Parkway
Fremont, California 94538
FOR THE 2007 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 8, 2007
The Board of Directors of Oplink Communications, Inc., a Delaware corporation, is soliciting the enclosed proxy from you. The proxy will be used at our 2007 Annual Meeting of Stockholders to be held on Thursday, November 8, 2007 at 10:00 a.m. local time at 46335 Landing Parkway, Fremont, California 94538, and at any postponements or adjournments thereof. This proxy statement contains important information regarding the meeting. Specifically, it identifies the matters upon which you are being asked to vote, provides information that you may find useful in determining how to vote and describes the voting procedures.
In this proxy statement, the terms we, our, Oplink and the Company each refer to Oplink Communications, Inc., the terms Board of Directors and Board refer to the Board of Directors of Oplink and the term 2007 Annual Meeting means our upcoming 2007 Annual Meeting of Stockholders to be held on November 8, 2007.
We are mailing this proxy statement, the proxy card and our annual report for the year ended June 30, 2007 on or about October 9, 2007, to all stockholders of record at the close of business on September 26, 2007, which date is sometimes referred to in this proxy statement as the record date for the 2007 Annual Meeting.
On January 1, 2001, we adopted a fiscal year which ends on the Sunday closest to June 30. For example, our most recently completed fiscal year ended on July 1, 2007. In this proxy statement, for clarity of presentation, we present each fiscal year as if it ended on June 30. For example, we refer to our most recently completed fiscal year as having ended on June 30, 2007, and our current fiscal year as ending on June 30, 2008.
We sent you this proxy statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote at the 2007 Annual Meeting. You are invited to attend the annual meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card.
Only stockholders of record at the close of business on September 26, 2007 will be entitled to vote at the annual meeting. On this record date, there were 23,181,808 shares of common stock outstanding and entitled to vote.
If on September 26, 2007 your shares were registered directly in your name with our transfer agent, The Bank of New York, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted.
If on September 26, 2007 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in street name and
these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.
There are two matters scheduled for a vote:
1. To elect one Class I director to serve for a three-year term that expires at the 2010 Annual Meeting of Stockholders.
2. To ratify the selection by the Audit Committee of the Board of Directors of Burr, Pilger & Mayer LLP as the independent registered public accounting firm of the Company for its fiscal year ending June 30, 2008.
You may either vote For the nominee to the Board of Directors or you may Withhold your vote for the nominee. For the other matters to be voted on, you may vote For or Against or abstain from voting. The procedures for voting are fairly simple:
If you are a stockholder of record, you may vote in person at the annual meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person if you have already voted by proxy.
If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from Oplink. Simply complete and mail the proxy card to ensure that your vote is counted. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
On each matter to be voted upon, you have one vote for each share of common stock you own as of September 26, 2007.
If you return a signed and dated proxy card without marking any voting selections, your shares will be voted For the election of the nominees for director and For the ratification of Burr, Pilger & Mayer LLP as the independent registered public accounting firm of the Company. If any other matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.
To be considered for inclusion in next years proxy materials, your proposal must be submitted in writing by June 13, 2008, to our Secretary at 46335 Landing Parkway, Fremont, California 94538. Stockholders wishing to submit proposals or director nominations that are not to be included in such proxy statement and proxy must do so not later than the close of business on August 14, 2008 nor earlier than the close of business on July 13, 2008. Stockholders are also advised to review our Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations. Our Bylaws are available on our website at www.oplink.com, under the Investors link.
Votes will be counted by the inspector of election appointed for the meeting, who will separately count For and Withhold and, with respect to proposals other than the election of directors, Against votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as Against votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.
If your shares are held by your broker as your nominee (that is, in street name), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to discretionary items, but not with respect to non-discretionary items. Discretionary items are proposals considered routine (such as Proposals 1 and 2) on which your broker may vote shares held in street name in the absence of your voting instructions.
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares are represented by stockholders present at the meeting or by proxy. On the record date, there were 23,181,808 shares outstanding and entitled to vote. Thus, at least 11,590,905 shares must be represented by stockholders present at the meeting or by proxy to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum of the votes present at the meeting the Company may adjourn the meeting to another date.
Preliminary voting results will be announced at the annual meeting. Final voting results will be published in the Companys quarterly report on Form 10-Q for the quarterly period ending December 31, 2007.
Our Amended and Restated Certificate of Incorporation provides that our Board of Directors is divided into three classes, designated as Class I, Class II and Class III, with each class of directors serving for staggered three-year terms. We currently have five directors, consisting of one Class I director whose term expires at the upcoming 2007 Annual Meeting, two Class II directors whose terms expire at our annual meeting of stockholders to be held in 2008, and two Class III directors whose terms expire at our annual meeting of stockholders to be held in 2009.
Vacancies on the Board of Directors may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board of Directors to fill a vacancy in a class shall serve for the remainder of the full term of that class, and until the directors successor is elected and qualified. This includes vacancies created by an increase in the number of directors.
There is one nominee for election as a Class I director at the upcoming annual meeting. The Board of Directors, based on the recommendation of its Nominating and Corporate Governance Committee, has nominated the Companys current sole Class I director, Joseph Y. Liu, for re-election as a Class I director. If re-elected, Mr. Liu will hold office as a Class I director until our annual meeting of stockholders held in 2010 and until his successor is elected and qualified, or until his earlier death, resignation or removal.
If you sign your proxy or voting instruction card but do not give instructions with respect to the voting of directors, your shares will be voted for the nominee recommended by the Board. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy or voting instruction card. The Board expects that Mr. Liu will be available to serve as a director. In the event that Mr. Liu becomes unavailable, however, the proxy holders will be voted for any nominee designated by the Board. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as to assure the election of Mr. Liu.
The following table and paragraphs set forth the name and age of the nominee and each current director of Oplink whose term of office continues after the upcoming meeting, the principal occupation of each during the past five years and the period during which each has served as a director of Oplink. Information as to the stock ownership of each of our directors and all of our current executive officers as a group is set forth below under Security Ownership of Certain Beneficial Owners and Management. There are no family relationships between any director or executive officer.
Joseph Y. Liu. Mr. Liu, one of our founders, has served as our Chief Executive Officer and President since October 2002, and has served as a member of our Board of Directors since our inception in 1995. Previously, Mr. Liu served as our Chief Executive Officer from September 1999 to November 2001, and served as our Chairman of the Board of Directors from our inception in 1995 through May 2000 and again from November 2001 to August 2002. From 1994 to 1995, Mr. Liu was the General Partner of Techlink Technology Ventures. Prior to 1994, Mr. Liu spent ten years as Chairman and Chief Executive Officer of Techlink Semiconductor and Equipment Corp., a semiconductor equipment and technology company. Mr. Liu also served as a director of InterVideo, Inc., a DVD software provider, which was subsequently acquired by Corel Corporation in December 2006. Mr. Liu received his B.S. from Chinese Cultural University, Taiwan and his M.S. from California State University, Chico.
Chieh Chang. Mr. Chang has been a member of our Board of Directors since September 1995. From February 2000 to February 2003, Mr. Chang served as Chief Executive Officer of Programmable Microelectronics Company, Inc. (now Gingistek, Inc.), a fabless semiconductor design company. From April 1992 to August 1996, Mr. Chang was the Director of Technology at Cirrus Logic, Inc., a semiconductor company. Mr. Chang serves on the board of directors of Genesis Microchip, Inc., a semiconductor company. Mr. Chang received his B.S. in Electrical Engineering from the National Taiwan University and his M.S. in Electrical Engineering from UCLA.
Hua Lee. Mr. Lee has been a member of our Board of Directors since February 2006. Mr. Lee has been Professor of Electrical and Computer Engineering at the University of California, Santa Barbara since 1990. Prior to his tenure at the University of California, Santa Barbara, Mr. Lee was on the faculty of the University of Illinois at Urbana-Champaign. Mr. Lee received his B.S. degree in Electrical Engineering from the National Taiwan University, and M.S. and PhD in Electrical Engineering from University of California, Santa Barbara.
Jesse W. Jack. Mr. Jack has been a member of our Board of Directors since July 2002. Since January 2003, Mr. Jack has been self-employed as an attorney with The Law Offices of Jesse Jack. He is also the Vice President and General Counsel for I-Bus Corporation, a privately held company. From 1996 until January 2003, Mr. Jack was a partner in the law firm of Jack & Keegan, a California Limited Liability Partnership. Mr. Jack served on the board of directors of The Parkinsons Institute from 1988 through 2000. Mr. Jack received his B.S. from California State University, San Jose and his J.D. from Hastings College of Law.
Leonard J. LeBlanc. Mr. LeBlanc has been a member of our Board of Directors since July 2000 and became the chairman of the board in February 2006. From August 2000 until December 2004, Mr. LeBlanc was on the Board of Directors of eBest Inc., a private software company providing collaborative business management solutions. From February 2001 to September 2003, Mr. LeBlanc was Vice President of Corporate Development and Acting Chief Financial Officer of eBest Inc. Mr. LeBlanc was the Executive Vice President and Chief Financial Officer of Vantive Corporation, a customer relationship management software and solution company, from August 1998 to January 2000. From March 1996 to July 1997, Mr. LeBlanc was the Executive Vice President of Finance and Administration and Chief Financial Officer at Infoseek Corporation, an Internet search and navigation company. From September 1993 to December 1994, Mr. LeBlanc served as Senior Vice President, Finance and Administration of GTECH Corporation, a manufacturer of lottery equipment and systems. From May 1987 to December 1992, Mr. LeBlanc served as Executive Vice President, Finance and Administration and Chief Financial Officer of Cadence Design Systems, Inc., an electronic design automation software company. Mr. LeBlanc also serves on the board of directors of AXT, Inc., a company involved with the manufacture and sale of high-performance compound semiconductor substrates. Mr. LeBlanc received his B.S. and M.S. from the College of Holy Cross, and his masters degree in finance from George Washington University.
The nominee receiving the highest number of affirmative FOR votes at the meeting (a plurality of votes cast) will be elected to serve as a Class I director. Votes withheld from any director nominee will be counted for purposes of determining the presence or absence of a quorum, but have no other legal effect under Delaware law.
Our Board recommends a vote FOR the election of Joseph Y. Liu as a Class I director.
Oplink is committed to having sound corporate governance principles. Having such principles is essential to running our business efficiently and to maintaining our integrity in the marketplace. Oplinks governance practices are designed to promote honesty and integrity throughout the Company. As part of our corporate governance policy, we have adopted a Code of Business Conduct and Ethics that applies to all officers, directors, employees and consultants. The Code of Business Conduct and Ethics is available on our website at www.oplink.com. If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.
The Board has determined that to be considered independent, an outside director may not have a direct or indirect material relationship with Oplink other than his relationship as a director of the Company. A material relationship is one which impairs or inhibits or has the potential to impair or inhibit a directors exercise of critical and disinterested judgment on behalf of the Company and its stockholders. Our Board of Directors consults with our outside counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of independent director, including but not limited to those set forth in Nasdaq Stock Market listing standards.
After review of all relevant transactions or relationships between each director, or any of his or her family members, and Oplink, its senior management and its independent registered public accounting firm, the Board has determined that all of Oplinks directors are independent directors except for Mr. Liu, our President and Chief Executive Officer.
The Board has three standing committees: (1) the Audit Committee, (2) the Compensation Committee and (3) the Nominating and Corporate Governance Committee. Members of the individual standing committees are named below:
Below is a description of each committee of the Board of Directors. The Board of Directors has determined that each member of each committee meets the applicable rules and regulations regarding the independence requirements of the Nasdaq Stock Market and the rules and regulations of the Securities and Exchange Commission (the SEC), as such requirements are defined as of the mailing date of this proxy statement, and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to the Company.
The Audit Committee of the Board of Directors oversees the Companys corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent registered public accounting firm; determines and approves the engagement of the independent registered public accounting firm; determines whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; reviews and approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent registered public accounting firm on the Companys audit engagement team as required by law; confers with management and the independent registered public accounting firm regarding the effectiveness of internal controls over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; reviews the financial statements to be included in the Companys periodic reports; and discusses with management and the independent registered public accounting firm the results of the annual audit and the results of the Companys quarterly financial statements.
The Audit Committee has established procedures for receipt, retention and treatment, on a confidential basis, of complaints received by the Company, including the Board and the Audit Committee, regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.
The Audit Committee is composed of three independent directors: Chieh Chang, Jesse W. Jack and Leonard J. LeBlanc. Mr. LeBlanc serves as Chairman of the Audit Committee. The Board of Directors has determined that Mr. LeBlanc is an audit committee financial expert (as defined by SEC rules and regulations) and that he also meets the financial sophistication requirements of the Nasdaq Stock Market, as such requirements are defined as of the mailing date of this proxy statement.
The charter of the Audit Committee is included as Appendix A to this proxy statement.
The Compensation Committee makes recommendations concerning salaries and incentive compensation, awards stock options to employees and consultants under the Companys stock option plans and otherwise determines compensation levels and performs such other functions regarding compensation as the Board of Directors may delegate. The Compensation Committee is composed of three independent directors: Chieh Chang, Leonard J. LeBlanc and Hua Lee. Mr. Chang serves as Chairman of the Compensation Committee.
The charter of the Compensation Committee is included as Appendix B to this proxy statement.
The Nominating and Corporate Governance Committee identifies, evaluates and recommends candidates for membership on the Companys Board of Directors and committees thereof, oversees the Companys corporate governance procedures and establishes guidelines for continuing education of our directors. The Nominating and Corporate Governance Committee is composed of two non-employee directors: Jesse W. Jack and Hua Lee. Mr. Jack serves as Chairman of the Nominating and Corporate Governance Committee.
The charter of the Nominating and Corporate Governance Committee is included as Appendix C to this proxy statement.
The Board of Directors held twenty meetings during the fiscal year ended June 30, 2007. The Audit Committee met in executive session without management present (including our President and Chief Executive Officer, who is a member of the Board) on four occasions.
The Boards committees met and/or acted by written consent during the fiscal year ended June 30, 2007, as follows: the Audit Committee met eleven times; the Compensation Committee met eight times; and the Nominating and Corporate Governance Committee met five times. All directors attended at least 75% of the meetings of the Board and of the committees on which they served.
It is the Companys policy to invite directors to attend the annual meeting of stockholders. All independent members of the Board were in attendance at the 2006 Annual Meeting of Stockholders.
The Company has not adopted a formal process for stockholder communications with the Board. Nevertheless, every effort has been made to ensure that the views of stockholders are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely manner. Stockholders who wish to do so may communicate directly with the Board, or specified individual directors, by writing to: Board of Directors of Oplink Communications, Inc., 46335 Landing Parkway, Fremont, California 94538, Attention: Chairman of the Nominating and Corporate Governance Committee.
Stockholder Nominees. The Nominating and Corporate Governance Committee has not determined whether it will consider nominees recommended by stockholders (as opposed to formally nominated) or, if so, what procedures stockholders should follow in submitting recommendations. However, as described above in the Question and Answer section under When are stockholder proposals or director nominations due for next years annual meeting?, stockholders may submit formal nominations for directors by following the procedures set forth in our Bylaws.
Director Qualifications. The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated
excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Companys stockholders. Candidates for director nominees will be reviewed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of stockholders. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews such directors overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors independence.
Identifying and Evaluating Nominees for Directors. The Nominating and Corporate Governance Committee will generally use its network of contacts to identify potential director candidates, but may also engage, if it deems appropriate, a professional search firm. To date, the Nominating and Corporate Governance Committee has not paid a fee to any third party to assist in the process of identifying or evaluating director candidates. At this time, the Nominating and Corporate Governance Committee does not consider director candidates recommended by stockholders, but reserves the right to consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee believes that it is in the best position to identify, review, evaluate and select qualified candidates for Board membership, based on the criteria for Board membership approved by the Board.
The following table provides information concerning the compensation paid by us to each of our non-employee directors during the fiscal year ended June 30, 2007. Mr. Liu, our chief executive officer, did not receive additional compensation for his service as a director.
Prior to the change to our director compensation described below, each director was automatically granted an option to purchase 10,285 shares of common stock under our 2000 Equity Incentive Plan every three years upon his re-election to the board of directors. Such option grants vest monthly over the directors three year term of office. During fiscal 2007, each of Messrs. LeBlanc and Jack was awarded an option to purchase 10,285 shares of our common stock at an exercise price of $20.09 per share in connection with their re-election to our board of directors in November 2006. Neither Mr. Chang nor Mr. Lee received any option grants during fiscal 2007. As of June 30, 2007, our non-employee directors stock option holding were as follows:
The Company reimburses our non-employee directors from time to time for travel, lodging and related expenses associated with their service as directors of the Company, or pays such expenses on the directors behalf.
In August 2007, the Compensation Committee approved changes to the cash and equity compensation of our non-employee directors for our 2008 fiscal year. The Compensation Committees decision was based on several factors, including the report and recommendation of a third-party consultant and the increased responsibilities of the Companys non-employee directors as a result of the Companys acquisition of a majority interest in OCP.
The changes to the non-employee directors cash compensation are as follows:
With respect to the directors equity compensation, the Committee determined to replace the current arrangement, under which each non-employee director receives a stock option grant every three years, with annual grants of common stock. Under the Companys 2000 Equity Incentive Plan (the Plan), each non-employee
director automatically receives an option grant of 10,285 shares every three years, upon their election or re-election to the Board, which vests monthly over their three-year term of office. The Committee has approved an amendment to the Plan eliminating these automatic option grants to non-employee directors, which will be replaced with annual grants of common stock. On August 23, 2007, each non-employee director received a grant of 4,000 shares of Company common stock. The shares were fully vested upon grant. It is expected that similar grants will be made in the future on an annual basis, in amounts and on terms to be determined by the Committee or the Board. The Committee also adopted a stock ownership guideline for non-employee directors, under which each non-employee director is requested to hold at least 4,000 shares of the Companys common stock for so long as they remain on the Board. The foregoing changes were made to better align the incentives of the Companys non-employee directors with those of the Companys stockholders.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the 1934 Act), requires the Companys directors and executive officers, and persons who own more than ten percent of a registered class of the Companys equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Executive officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms that we have received and written representations from reporting persons, we believe that during the fiscal year ended June 30, 2007, all executive officers, directors and greater than ten percent beneficial owners complied with all applicable filing requirements, except as follows: Yanfeng Yang, one of our executive officers, filed a Form 4 reporting the receipt of an option grant on May 15, 2007, which was four days late.
The material in this report is not soliciting material, is not deemed filed with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended.
The Audit Committee represents and assists the Board of Directors in fulfilling its responsibilities for oversight of the integrity of the Companys financial statements, its internal accounting and financial controls, its compliance with legal and regulatory requirements, the organization and performance of its internal audit function and the qualifications, independence and performance of its independent registered public accounting firm.
The management of the Company is responsible for establishing and maintaining internal controls and for preparing the Companys consolidated financial statements. The Companys independent registered public accounting firm, Burr, Pilger & Mayer LLP, is responsible for expressing an opinion on the conformity of the Companys audited financial statements with accounting principles generally accepted in the United States. It is the responsibility of the Audit Committee to oversee these activities.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial statements with the Companys management and with Burr, Pilger & Mayer LLP, the Companys independent registered public accounting firm.
2. The Audit Committee has discussed with Burr, Pilger & Mayer LLP the matters required to be discussed by the Statement on Auditing Standards No. 61 (required communications with audit committees).
3. The Audit Committee has received the written disclosures and the letter from Burr, Pilger & Mayer LLP required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committee) and has discussed with Burr, Pilger & Mayer LLP their independence.
4. Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of the Directors, and the Board of Directors has approved, that the audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended July 1, 2007, for filing with the SEC.
The Audit Committee
Leonard J. LeBlanc (Chairman)
Jesse W. Jack
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Burr, Pilger & Mayer LLP as the Companys independent registered public accounting firm for the fiscal year ending June 30, 2008, and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Burr, Pilger & Mayer LLP performed the audit of our financial statements for the fiscal years ended June 30, 2007 and June 30, 2006. Representatives of Burr, Pilger & Mayer LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
Neither the Companys Bylaws nor other governing documents or law require stockholder ratification of the selection of Burr, Pilger & Mayer LLP as the Companys independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of Burr, Pilger & Mayer LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
The following table represents aggregate fees billed to the Company by Burr, Pilger & Mayer LLP for the fiscal years ended June 30, 2006 and June 30, 2007.
All of the fees described above were pre-approved by the Audit Committee. The Audit Committee has determined the rendering of all other non-audit services by Burr, Pilger & Mayer LLP is compatible with maintaining their independence.
The Audit Committee has adopted policies and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm. Pre-approval is provided as part of the Audit Committees approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. Mr. LeBlanc, the chairman of the Audit Committee, has also been authorized to pre-approve non-audit services, provided that any such approvals must be reported to the full Audit Committee at its next scheduled meeting.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to ratify the selection of Burr, Pilger & Mayer LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.
Our Board of Directors, on behalf of the Audit Committee, Recommends a Vote FOR the ratification of the selection of Burr, Pilger & Mayer LLP as the Companys independent registered public accounting firm for the fiscal year ending June 30, 2008.
The names of the executive officers of the Company and certain information about them, including their ages as of September 30, 2007, are set forth below:
Biographical information about Mr. Liu is set forth under Proposal 1 above.
Shirley Yin has been at Oplink since June 2000 when she joined as our Accounting Manager and was promoted to Controller in October 2003. From July 2007 to August 2007, Ms. Yin held the position of Vice President, Finance, and Acting Chief Financial Officer. In August 2007, Ms. Yin was promoted to Chief Financial Officer. Before joining Oplink, Ms. Yin spent three years at PricewaterhouseCoopers as a Business Assurance Senior Associate. She is a Certified Public Accountant. Ms. Yin received a Bachelor of Economics in Business Management from Zhongshan University in China and her M.S. in Accountancy from the University of Southern California.
Chi-Min (James) Cheng has served as our General Manager, China/Macau since May 2005. From June 2003 to February 2005, Mr. Cheng was a consultant for Stratum Technologies, Inc. in Cleveland, Ohio. From November 1998 to June 2003, Mr. Cheng served as the Country Manager and Factory General Manager at RAE Systems Inc. in Shanghai (Jiading) China. Mr. Cheng received his B.S. in Mechanical Engineering from Taugtong University, Taiwan.
River Gong has served as our Vice President of Sales since February 2003. From January 2001 to February 2003, Ms. Gong served as our Sr. Director of Sales, from May 1999 to January 2001 she was Director of Sales, and from January 1998 to May 1999 she was Sales Manager. Prior to joining Oplink, Ms. Gong was Division Manager and Sales Manager of MP Fiber Optics (now Global Opticom), a fiber optics company, from January 1995 to December 1997. Prior to that, she was an architect in China for five years. Ms. Gong received her B.S. in Architecture from Harbin Institute University.
Thomas P. Keegan has served as our General Counsel and Vice-President of Business Development since August, 2007. From January 2003 to January 2006, Mr. Keegan was self-employed as an attorney with the Law Office of Thomas P. Keegan. From 1996 to January 2003, he was a partner in the law firm of Jack & Keegan, a California Limited Liability Partnership. Mr. Keegan received his B.A. from St. Louis University in 1975 and his J.D. from Golden Gate University College of Law in 1988. He was admitted to practice law in the State of California in 1988 and is a member of the California State Bar Association. He also serves as a member of the board of directors of the Chinese Language Immersion Program Community Organization, a non-profit corporation.
Robert Shih served as our Vice President and OCP liaison from August 2007 until his resignation from the Company effective October 5, 2007. Mr. Shih served as our Vice President of Business Development from August 2005 to August 2007. Before joining Oplink, Mr. Shih was Chief Executive Officer of Infomax Optical Technology Corporation, a fiber optics company. Mr. Shih joined Infomax through the acquisition of New Elite Technology Inc., where he was the CEO since January 2004. Prior to Infomax, Mr. Shih was with Finisar Corporation, a company that develops fiber optic subsystems, as the Vice President of Business Development in Asia, and had joined Finisar through the acquisition of Demeter Technology Inc. Prior to Demeter, Mr. Shih was the Chief Technology Officer of AXT, Inc., a semi-conductor company, since 1998. Mr. Shih joined AXT through the acquisition of Alpha Photonics which he founded and managed since 1992. Prior to 1992, Mr. Shih was the Senior Scientist with Physical Optics Corporation, a fiber optics communications company. Mr. Shih received his Ph.D., M.S., and B.S. in Electrical Engineering from the University of California, Los Angeles.
Yangfeng Yang joined Oplink in January 1999 and most recently has served as our Vice President of Operations since May 2005. Previously, Mr. Yang served as our General Manager, China Operations since August 2004 and from January 1999 to August 2004, he served in various positions with us, including General Manager, Shanghai Operation, CEO Staff, Vice President of Global Manufacturing/ Operations, Senior Director of United States Operation and Research and Development Manager. Prior to joining Oplink, Mr. Yang spent six years as Director of the Research Institute of Optoelectronics at China Daheng Corporation, a high tech photonic company under the Chinese Academy of Sciences (CAS), from March 1993 to January 1999. Mr. Yang is a member of the Optical Society of China as well as the International Society of Optical Engineering. Mr. Yang received his B. S., M. S. and Ph.D. in Optical Engineering from Beijing Institute of Technology, China.
The following discussion and analysis of compensation arrangements of our named executive officers for fiscal 2007 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.
We compete with many other technology companies in seeking to attract and retain a skilled work force. To meet this challenge, we have implemented a compensation philosophy to enable our management to make decisions regarding our compensation programs, to manage these programs, and to effectively communicate the goals of these programs to our employees and stockholders.
Our compensation philosophy is to offer our employees compensation and benefits that are competitive and that meet our goals of attracting, retaining and motivating highly skilled employees so that we can achieve our financial and strategic objectives.
Utilizing this philosophy, our compensation programs are designed to attract, retain and motivate executives to enhance long-term profitability and shareholder value by:
The four key elements of our typical total compensation package for executives are base pay, variable pay, equity-based rewards and our benefits program. As a total rewards package, we design our compensation program
to enable us to attract and retain talented personnel. The individual elements of our compensation program serve to satisfy this larger goal in specific ways as described below.
Base Pay. We create a set of base pay structures that are both affordable and competitive in relation to the market. In general, an employees base pay level should reflect the employees overall sustained performance level and contribution to Oplink over time. We design base pay to provide the essential reward for an employees work and to be competitive in attracting talent. Once base pay levels are initially determined, increases in base pay are provided to recognize an employees specific performance achievements. Our managers typically make performance assessments once a year, and provide ongoing feedback to employees to help maximize individual and team performance levels.
Equity-Based Rewards. We design our equity programs to be both affordable and competitive in relation to the market. We monitor applicable accounting, corporate, securities and tax laws and regulations and adjust our equity programs as needed. Stock options and other forms of equity compensation are designed to reflect and reward a high level of sustained individual performance over time. We design our equity programs to align employees interests with those of our stockholders. We design equity-based compensation, including stock options, to help retain talent over a period of time, and to provide optionees with a form of reward that aligns their interests with those of our stockholders. Employees whose skills and results we deem to be critical to our long-term success are eligible to receive higher levels of equity-based compensation.
Variable Pay. We design our variable pay programs to be both affordable and competitive in relation to the market. Our variable pay programs, such as our sales commissions program and our bonus program, are designed to motivate executives and other key employees and sales employees to achieve overall goals. Our programs are designed to avoid entitlements, to align actual payouts with the actual results achieved and to be easy to understand and administer.
Benefits Programs. Core benefits, such as our basic health benefits, 401(k) program and life insurance, are designed to provide a stable array of support to employees and their families throughout various stages of their careers, and are provided to all employees regardless of their individual performance levels. We design our benefits programs to be both affordable and competitive in relation to the market while conforming with local laws and practices. We monitor the market, local laws and practices and adjust our benefits programs as needed. We design our benefits programs to provide an element of core benefits, and to the extent possible, offer options for additional benefits, be tax-effective for employees in each country and balance costs and cost sharing between us and our employees.
In fiscal 2007, we granted a total of 594,912 option shares, of which a total of 80,000 option shares were granted to our executives, representing 13.4% of all option shares granted in fiscal 2007. Options granted to executives and other employees typically vest over a period of four years. Our board of directors does not apply a rigid formula in allocating stock options to executives as a group or to any particular executive. Instead, our board of directors exercises its judgment and discretion and considers, among other things, the role and responsibility of the executive, competitive factors, the amount of stock-based equity compensation already held by the executive, and the non-equity compensation received by the executive. The number of stock options granted to each executive is set forth below in the Grants of Plan-Based Awards Table. The value of such grants, as determined in accordance with SFAS 123R for each individual named executive officer is set forth below in the column Option Grants in the Summary Compensation Table.
Our board of directors generally grants stock options to current executives (other than to our Chief Executive Officer, as discussed further below) and other current employees once per year. With respect to newly hired employees, our practice is typically to make stock grants at the first meeting of the board following such employees hire date. We do not have any program, plan or practice to time stock options grants in coordination with the release of material non-public information. We do not time, nor do we plan to time, the release of material non-public information for the purposes of affecting the value of executive compensation. In October 2006, our board of
directors adopted a Stock Option Granting Policy which sets forth the policy that option grants shall be approved at quarterly meetings of the Compensation Committee held during the second month of each fiscal quarter.
Several of our executives have employment and other agreements which provide for severance payment arrangements and/or acceleration of stock option vesting that would be triggered by an acquisition or other change in control of Oplink. See Employment Agreements below for a description of the severance and change in control arrangements for our named executive officers.
In the review and establishment of our compensation programs, we consider the anticipated accounting and tax implications to us and our executives. While we consider the applicable accounting and tax treatment, these factors alone do not determine our compensation programs, as we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives.
Section 162(m) of the Internal Revenue Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to our chief executive officer and each of our next four most highly compensated executive officers, unless certain specific and detailed criteria are satisfied. Performance-based compensation, as defined in the Internal Revenue Code, is fully deductible if the programs are approved by stockholders and meet other requirements. In general, we have determined that we will not seek to limit executive compensation so that it is deductible under Section 162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the requirements of Section 162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and therefore our compensation committee has not adopted a policy requiring all compensation to be deductible. Our compensation committee will continue to assess the impact of Section 162(m) on our compensation practices and determine what further action, if any, is appropriate.
Our board of directors and our compensation committee generally seek input from Mr. Liu, our Chief Executive Officer, when discussing the performance of, and compensation levels for executives other than Mr. Liu himself. The compensation committee also works with Mr. Liu and with our chief financial officer in evaluating the financial, accounting, tax and retention implications of our various compensation programs. Neither Mr. Liu nor any of our other executives participates in deliberations relating to his or her own compensation.
In determining the compensation of Mr. Liu, our Chief Executive Officer, the Compensation Committee generally follows the compensation philosophy described above, but tailored specifically to Mr. Liu to maximize his incentives for performance. With a salary of $150,000 per year and no cash bonus eligibility, Mr. Lius cash compensation is well below the market rate for chief executives of similarly-situated companies. However, the Committee believes that, when combined with his equity compensation, Mr. Lius total compensation package is competitive with compensation paid to chief executives of peer companies and provides adequate retention and performance incentives to Mr. Liu.
The Committee believes, based on its experience and familiarity with Mr. Liu, that equity compensation provides Mr. Liu with greater performance incentives than does cash compensation, and therefore allocates relatively more of Mr. Lius total compensation to equity awards than to cash. Mr. Liu was awarded a stock option during fiscal 2006 to purchase 700,285 shares of the Companys Common Stock. The exercise price for the stock option is $20.25 per share, and the option vests over four years. The stock option award, if fully exercised, would represent approximately 3.2% of the Companys outstanding share capital. This option grant is intended to cover Mr. Lius equity incentive compensation for the four year vesting period of the option. However, the Compensation Committee may consider grants of further equity compensation to Mr. Liu during the vesting period of this option if it determines that additional incentive compensation to Mr. Liu is in the Companys best interest.
The Committee determined the size of Mr. Lius stock option award based on several factors. First, Mr. Liu had not received any equity awards since his award in October 2002 of an option to purchase 714,000 shares, which award was almost fully vested, and would vest completely by the end of October 2006. The Committee determined that a new option grant, with vesting restrictions, was necessary to provide Mr. Liu with sufficient retention and performance incentives. Second, like the October 2002 award, the June 2006 award is intended to address Mr. Lius equity compensation for the four years following the grant date, which is consistent with the four-year vesting period of the award. As such, the Committee does not expect, barring a change in circumstances, to grant additional equity incentive awards to Mr. Liu during this four-year period. Third, as discussed above, the Committee has determined that it is desirable to allocate more of Mr. Lius total compensation to equity awards rather than cash compensation, to provide adequate retention and performance incentives for Mr. Liu and to align Mr. Lius interests more closely with those of the Company and its stockholders. Finally, the Committee considered the report and recommendations of an independent consultant retained by the Committee to evaluate the Companys compensation of its executives, including Mr. Liu, in light of market trends, best practices and compensation practices at peer companies.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with Oplinks management. Based upon the review and discussions noted above, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee
Chieh Chang (Chairman)
Leonard J. LeBlanc
Summary Compensation Table
The following table presents information concerning the total compensation of the Companys CEO, CFO and the other most highly compensated officers during the last fiscal year (the Named Executive Officers) for services rendered to the Company in all capacities for the fiscal year ended June 30, 2007.
The following table presents information concerning grants of plan-based awards to each of the Named Executive Officers during the fiscal year ended June 30, 2007.
The following table presents certain information concerning equity awards held by the Named Executive Officers at the end of the fiscal year ended June 30, 2007.
The following table presents certain information concerning the exercise of options by each of the Named Executive Officers during the fiscal year ended June 30, 2007.
We have entered into an executive corporate event agreement with Mr. Liu that provides for full acceleration of all unvested options, a severance payment in the amount of $300,000 and payment by us of the COBRA premiums necessary to continue Mr. Lius health insurance benefits for up to twelve (12) months following his employment termination date, upon his termination of employment by the Company without cause or Mr. Lius voluntary termination with good reason in connection with a change of control. In such event, Mr. Liu is also entitled to an extended post-termination exercise period of up to twenty-four (24) months with respect to his stock options.
We have entered into an executive corporate event agreement with Ms. Gong, as amended, that provides for full acceleration of all unvested options upon her termination of employment by the Company without cause or Ms. Gongs voluntary termination with good reason in connection with a change of control. In such event, Ms. Gong is also entitled to an extended post-termination exercise period of up to twelve (12) months with respect to certain stock options and up to twenty-four (24) months with respect to other stock options.
Pursuant to the provisions of the 2000 Plan, in the event of a change of control, all options granted pursuant to the 2000 Plan to our directors will become fully vested and exercisable. In addition, each member of the Board of Directors may exercise their vested stock options for a two-year period after such director ceases providing services to us.
During the fiscal year ending June 30, 2007, no executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that had one or more executive officers serving as a member of our Board of Directors or our Compensation Committee.
The following table provides certain information with respect to all of the Companys equity compensation plans in effect as of June 30, 2007.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of the Companys common stock as of September 26, 2007, the record date for the annual meeting, by: (i) each director and nominee for director; (ii) each of the Named Executive Officers; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its common stock.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the NASDAQ Composite and the NASDAQ Telecommunications Index for each of the last five fiscal years ended June 30, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Oplink Communications, Inc., The NASDAQ Composite Index
And The NASDAQ Telecommunications Index
This Section is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the 1933 Act or the 1934 Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The Company has entered into indemnity agreements with certain officers and directors which provide, among other things, that the Company will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Delaware law and the Companys Bylaws. Reference is also made to the employment agreements, termination of employment and change-in-control arrangements described under Executive Compensation in this proxy statement.
The Company believes that each of the foregoing transactions were in the best interests of the Company and its stockholders. As a matter of policy all future transactions between the Company and any of its officers, directors or principal stockholders will be ratified or approved by a majority of the independent and disinterested members of the Board of Directors. Furthermore, the transactions will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties and will be in connection with a bona fide business purpose.
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as householding, potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Oplink stockholders will be householding our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker, direct your written request to Oplink Communications, Inc., Shirley Yin, Chief Financial Officer, 46335 Landing Parkway, Fremont, California 94538, or contact Ms. Yin at (510) 933-7200. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their broker.
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
Thomas P. Keegan
Vice President, Business Development, General
Counsel and Secretary
October 9, 2007
A copy of the Companys Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended July 1, 2007 is available without charge upon written request to: Investor Relations, Oplink Communications, Inc., 46335 Landing Parkway, Fremont, California 94538.
OPLINK COMMUNICATIONS, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of Oplink Communications, Inc. (the Company) shall consist of at least three members of the Board of Directors (the Board). The Audit Committee shall meet the independence and financial experience requirements of The Nasdaq Stock Market Inc. (Nasdaq) and the rules and regulations of the Securities and Exchange Commission (SEC). In particular, no Audit Committee member shall be an employee of the Company and each member shall be free from any relationship that would interfere with the exercise of his or her independent judgment, as determined by the Board of Directors, in accordance with the independence requirements of Nasdaq and the SEC. The members of the Audit Committee shall also be able to read and understand the financial statements of the Company and otherwise comply with the financial literacy requirements of Nasdaq and SEC rules and regulations. To the extent mandated by the requirements of Nasdaq or the SEC, at least one member of the Committee shall be a financial expert within the meaning of such requirements.
The Audit Committee shall provide assistance to the Board in fulfilling its responsibility to the stockholders, potential stockholders, and investment community relating to corporate accounting and reporting practices of the Company, including the Companys systems of internal controls, and the quality and integrity of the financial reports of the Company, as well as the qualifications, independence and performance of the firm or firms of certified public accountants engaged as the Companys independent outside auditors (the Auditors). In so doing, it is the responsibility of the Audit Committee to maintain free and open means of communication between the Companys directors, Auditors and management team. The Audit Committee shall also establish procedures, and maintain easy access to the Audit Committee, for all employees and consultants to the Company to voice concerns and report potential misconduct to the Audit Committee. The Audit Committee shall have a clear understanding with management and the Auditors that the Auditors are to report directly to the Audit Committee, and that the Auditors are ultimately accountable to the Board and the Audit Committee, as representatives of the Companys stockholders.
The Audit Committee shall have full access to all books, records, facilities and personnel of the Company as deemed necessary or appropriate by any member of the Audit Committee to discharge his or her responsibilities hereunder. The Audit Committee shall have authority to retain, at the Companys expense, special legal, accounting or other advisors or consultants as it deems necessary or appropriate in the performance of its duties. The Audit Committee shall have authority to require that any of the Companys personnel, counsel, Auditors or investment bankers, or any other consultant or advisor to the Company attend any meeting of the Audit Committee or meet with any member of the Audit Committee or any of its special legal, accounting or other advisors and consultants.
In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible in order to best react to changing conditions and to ensure to the directors and stockholders that the corporate accounting and reporting practices of the Company are in accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee shall:
1) Have sole authority to hire and terminate the Auditors.
2) Negotiate, execute and approve the engagement letter to be entered into between the Company and its Auditors, and establish the compensation to be received by the Auditors to perform any and all services, which approval may be delegated pursuant to preapproval policies and procedures, including the delegation of preapproval authority to one or more Audit Committee members (as permitted under the rules and regulations of the SEC and listing requirements of Nasdaq).
3) Evaluate on a periodic basis the performance and qualifications of the Auditors engaged to audit the financial statements of the Company and its divisions and subsidiaries.
4) Monitor the rotation of the partners of the Auditors on the Companys audit engagement team as required by applicable law.
5) Have the sole authority to approve non-audit services to be performed by the Auditors, but only as permitted by the Nasdaq rules and the rules and regulations of the SEC, which authority the Audit Committee may delegate to one or more members of the Audit Committee from time to time, including delegation of preapproval authority.
6) At least annually, receive and review written statements from the Auditors delineating all relationships between the Auditors and the Company consistent with Independence Standards Board Standard No. 1, and consider and discuss with the Auditors any disclosed relationships and any compensation or services that could affect the Auditors objectivity and independence, and take appropriate action to ensure the objectivity and independence of the Auditors.
7) Have the sole authority to approve the hiring of any employee who is employed by the Auditor, or has been employed by an independent auditor within the five years prior to the date of determination whether or not to hire such employee.
8) Meet with the Auditors and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including any comments or recommendations of the Auditors.
9) Review with the Auditors and the Companys financial and accounting personnel (including, if applicable, the Companys internal auditor) the adequacy and effectiveness of the accounting and financial controls of the Company, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable. Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions, or procedures that might be deemed illegal or otherwise improper.
10) Review and discuss with management and the Auditors, as appropriate, the Companys guidelines and policies with respect to risk assessment and risk management, including the Companys major financial risk exposures and the steps taken by management to monitor and control these exposures.
11) Review with the Auditors and, if appropriate, management, any management or internal control letter issued or, to the extent practicable, proposed to be issued by the Auditors and managements response, if any, to such letter, as well as any additional material written communications between the Auditors and management.
12) Review the financial statements contained in the annual report to stockholders and other public filings or disclosures with management and the Auditors, as well as any significant correcting adjustments identified by the Auditors or disagreements between management and the Auditors, to determine that the Auditors are satisfied with the disclosure and content of such financial statements. Any changes in accounting principles should also be reviewed.
13) Review the financial statements and Managements Discussion and Analysis section of the Companys Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
14) Review and approve (to the extent not previously approved by the Companys Board of Directors) related party transactions as such term is used by Statement of Financial Accounting Standards No. 57 or as otherwise required to be disclosed in the Companys financial statements or periodic filings with the SEC. It is managements responsibility to bring such related party transactions to the attention of the Audit Committee.
15) Discuss with management and the Auditors the results of the annual audit, including the Auditors assessment of the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments and estimates (including material changes in estimates), any material audit adjustments proposed by the Auditors and immaterial adjustments not recorded, the adequacy of the disclosures in the financial statements and any other matters required to be communicated to the Audit Committee by the Auditors under generally accepted auditing standards.
16) Review, prior to announcement or filing, Company earnings releases and other disclosures containing financial information (including the substance of financial information and earnings guidance provided therein) for the purpose of ensuring that such earnings releases and other disclosures properly disclose financial information presented in accordance with GAAP and, to the extent non-GAAP information is included, adequately disclose how such non-GAAP information differs from the comparable GAAP information and that such non-GAAP information is not given undue prominence or otherwise provide misleading presentations of the Companys results of operations or financial condition.
17) Meet with the Auditors and the Companys management (and, if applicable, the Companys internal auditor) in separate executive sessions to discuss any matters that the Audit Committee, the Auditors or management believe should be discussed privately with the Audit Committee. Discuss and evaluate, among other things, the cooperation received by the Auditors during their audit examination, including their access to all requested records, data and information, the sufficiency of the Companys financial, accounting and auditing personnel, and the responsiveness of the Auditors to the Companys needs.
18) Review with management and the Auditors significant issues that arise regarding accounting principles and financial statement presentation, including critical accounting policies and practices, alternative accounting policies available under GAAP related to material items discussed with management, and any other significant reporting issues and judgments.
19) Review with counsel, the Auditors and management, as appropriate, any significant regulatory or other legal or accounting initiatives or matters that may have a material impact on the Companys financial statements, compliance programs and policies if, in the judgment of the Committee, such review is necessary or appropriate.
20) Review accounting and financial human resources planning within the Company.
21) Investigate any matter brought to the attention of the Audit Committee within the scope of its duties, with the power to retain and pay for, out of Company funds, outside counsel, separate accountants and other advisors if, in its judgment, such retention or investigation is appropriate.
22) Review and assess the adequacy of this charter annually (or such other times as appropriate or desirable) and recommend any proposed changes to the Board for approval.
23) Submit the minutes of all meetings of the Audit Committee to, or discuss the matters discussed at each Audit Committee meeting with, the Board.
24) Prepare/review the report required by the rules of the SEC to be included in the Companys annual proxy statement.
25) Establish and maintain procedures for, and a policy of, open access to the members of the Audit Committee by the employees and consultants to the Company to enable the employees and consultants to bring to
the attention of the Audit Committee concerns held by such employees and consultants regarding the financial reporting of the Company, and to report potential misconduct to the Audit Committee.
26) Report to the Board from time to time, or whenever it shall be called upon to do so, material issues that arise regarding the quality or integrity of the Companys financial statements, the Companys compliance with legal or regulatory requirements, the performance or independence of the Companys Auditors or such other matters as the Audit Committee deems appropriate.
27) Perform such other functions and have such power as it may deem necessary or advisable in the efficient and lawful discharge of the foregoing.
28) To serve as the qualified legal compliance committee and, as such, adopt written procedures for the confidential receipt, retention and consideration of any report of evidence of a material violation under Rule 205.3 of the Rules of Professional Conduct for Attorneys Appearing and Practicing Before the Commission in the Representation of an Issuer. The Committee shall be authorized to cause an investigation where appropriate, including the hiring of legal and accounting advisors at the Companys expense at the Committees sole discretion, determine and recommend appropriate remedial measures and report the results of the investigation to the Companys chief legal officer, Chief Executive Officer and the Board. The Committee shall also be authorized to take appropriate action, including notifying the Securities and Exchange Commission, if the Company fails to implement an appropriate response recommended by the Committee.
The operation of the Audit Committee shall be subject to the Bylaws as in effect from time to time and Section 141 of the Delaware General Corporation Law. It shall be the responsibility of management to prepare the Companys financial statements and periodic reports and the responsibility of the Auditors to audit those financial statements. These functions shall not be the responsibility of the Audit Committee, nor shall it be the Audit Committees responsibility to ensure that the financial statements or periodic reports are complete and accurate, conform to generally accepted accounting principles or otherwise comply with applicable laws.
CHARTER OF THE COMPENSATION COMMITTEE
The Charter of the Compensation Committee is established as follows.
The Compensation Committee of the Board of Directors (the Board) of Oplink Communications, Inc. (the Company) shall consist of at least two (2) members of the Board of Directors who are not employees of or service providers to the Company. The selection of the members of the Compensation Committee shall be made in accordance with Section 162(m) of the Internal Revenue Code, as amended (or any successor to Section 162(m) as in effect from time to time), and income tax regulations promulgated thereunder as in effect from time to time, Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (or any successor to Rule 16b-3 as in effect from time to time) and the listing standards of the Nasdaq Stock Market.
The Compensation Committee shall be charged with the following functions:
1. To review and approve the compensation of the Companys Chief Executive Officer and its other executive officers, including salary and bonus, equity incentive compensation, severance or change in control arrangements, and any other benefits or arrangements.
2. To oversee the development of compensation policies that will attract and retain the highest quality executives, that will clearly articulate the relationship of corporate performance to executive compensation and that will reward executives for the Companys progress.
3. To propose the adoption, amendment, and termination of stock option plans, stock appreciation rights plans, pension and profit sharing plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans, and other similar programs (Compensation Plans) and to administer the Compensation Plans in accordance with their terms.
4. To grant rights, participation and interests in Compensation Plans to eligible participants.
5. To review and approve such other compensation matters as the Board or the Chief Executive Officer of the Company wishes to have the Committee approve.
6. To prepare a report to be filed with the Companys proxy or information statement which shall disclose the compensation policies applicable to the Companys executive officers.
7. To establish guidelines pursuant to which the Chief Executive Officer, or such other officer who serves as a member of the Board and is appointed as administrator by the Board, pursuant to Section 3(c) of each of the 2000 Equity Incentive Plan, 2000 Non-Employee Directors Equity Incentive Plan, the 1995 Stock Option Plan, the 1998 Stock Option Plan and the 2000 Employee Stock Purchase Plan (the Plans), shall administer the Plans with respect to options granted thereunder to all the Companys employees and consultants, other than the Companys executive officers.
8. To perform such other functions and have such other powers as may be necessary or convenient in the efficient discharge of the foregoing.
9. To report to the Board from time to time, or whenever it shall be called upon to do so.
The Compensation Committee will hold at least one regular meeting per year and additional meetings as the Committee members deem appropriate. Officers of the Company may attend these meetings at the invitation of the Compensation Committee.
Minutes of each meeting of the Compensation Committee shall be kept and distributed to each member of the Compensation Committee, members of the Board who are not members of the Compensation Committee and the Secretary of the Company. The Chairperson of the Compensation Committee shall report to the Board from time to time, or whenever requested by the Board.
OPLINK COMMUNICATIONS, INC.
CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
The Nominating and Corporate Governance Committee (the Committee) of the Board of Directors (the Board) of Oplink Communications, Inc., a Delaware corporation (the Company), shall consist of at least two (2) members of the Board. No Committee member shall be an employee of the Company and each member shall be free from any relationship that would interfere with the exercise of his or her independent judgment, as determined by the Board of Directors, in accordance with the applicable independence requirements of The Nasdaq Stock Market and the rules and regulations of the Securities and Exchange Commission (SEC). The members of the Committee and the Committee chairperson shall be appointed by the Board.
The purpose of the Committee shall be to (i) oversee all aspects of the Companys corporate governance functions on behalf of the Board; (ii) make recommendations to the Board regarding corporate governance issues; (iii) identify, review and evaluate candidates to serve as directors of the Company; (iv) serve as a focal point for communication between such candidates, non-committee directors and the Companys management; (v) recommend such candidates to the Board; and (vi) make such other recommendations to the Board regarding affairs relating to the directors of the Company, including director compensation.
In fulfilling its function and responsibilities, the Committee should give due consideration to the following operating principles and processes:
The operation of the Committee will be subject to the provisions of the Bylaws of the Company and the Delaware General Corporation Law, each as in effect from time to time. The Committee will have the full power and authority to carry out the following primary responsibilities or to delegate such power and authority to one or more subcommittees of the Committee:
The Committee shall also have the primary responsibility for evaluating, reviewing and considering the recommendation for nomination of current directors for reelection to the Board. The selection of nominees for director to be presented to the stockholders for election or reelection, and the selection of new Directors to fill vacancies and newly created directorships on the Board, shall be made by the full Board based on the recommendations of the Committee.
The Committee shall also determine whether it shall consider stockholder suggestions for director nomination, and if so, shall establish appropriate procedures for stockholders to submit suggestions.
The Committee will hold at least one regular meeting per year and additional meetings as the Committee deems appropriate. The President, Chief Executive Officer, Chairman of the Board and Chief Financial Officer may attend any meeting of the Committee, except for portions of the meetings where his, her or their presence would be inappropriate, as determined by the Committee.
Minutes of each meeting will be kept and distributed to each member of the Committee, members of the Board who are not members of the Committee and the Secretary of the Company. The Chairman of the Committee will report to the Board from time to time, or whenever so requested by the Board.