DEF 14A: Definitive proxy statements
Published on January 9, 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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by the Registrant þ
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Preliminary
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þ
Definitive
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o
Definitive
Additional
Materials
o
Soliciting
Material Pursuant to Section
240.14a-12
EMCORE
CORPORATION
(Name
of Registrant as Specified in its Charter)
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EMCORE
CORPORATION
145
Belmont Drive
Somerset,
New Jersey 08873
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MONDAY, FEBRUARY 13, 2006
To
our Shareholders:
The
2006
Annual Meeting of Shareholders (the “Annual Meeting”) of EMCORE Corporation (the
“Company”) will be held at 10:00 A.M. local time on Monday, February 13, 2006,
at the Resort
at
Longboat Key Club, 301 Gulf of Mexico Drive, Longboat Key, FL, 34228,
for the
following purposes:
|
(1)
|
To
elect two (2) members to the Company’s Board of
Directors;
|
|
(2)
|
To
ratify the selection of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for
the fiscal year ending September 30,
2006;
|
|
(3)
|
To
approve an increase in the number of shares reserved for issuance
under
the Company’s 2000 Stock Option
Plan;
|
|
(4)
|
To
approve an increase in the number of shares reserved for issuance
under
the Company’s 2000 Employee Stock Purchase Plan;
and
|
|
(5)
|
To
transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements
thereof.
|
The
Board
of Directors has fixed the close of business on December 23, 2005 as the
record
date for determining those shareholders entitled to notice of, and to vote
at,
the Annual Meeting and any adjournments or postponements thereof. Whether
or not
you expect to be present, please sign, date, and return the enclosed proxy
card
in the enclosed pre-addressed envelope as promptly as possible. No postage
is
required if mailed in the United States.
|
By
Order of the Board of Directors,
 HOWARD W. BRODIE SECRETARY |
January
9, 2006
Somerset,
New Jersey
THIS
IS
AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN
PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE
A PROXY
CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY, AND VOTE
THEIR
SHARES IN PERSON.
EMCORE
CORPORATION
PROXY
STATEMENT
TABLE
OF CONTENTS
Information
Concerning Proxy
Purposes
of the Meeting
Outstanding
Voting Securities and Voting Rights
Directors
and Executive Officers
Compensation
of Directors
Nominating
Committee
Limitation
of Officers’ and Directors’ Liability and Indemnification Matters
Recommendation
of the Board of Directors
Security
Ownership of Certain Beneficial Owners and Management
Equity
Compensation Plan Information
Section
16(a) Beneficial Ownership Reporting Compliance
Compensation
Committee Interlocks and Insider Participation
Report
of
the Compensation Committee
Fiscal
2006 Executive Bonus Plan
Executive
Compensation
Options
Grants in Fiscal 2005
Aggregated
Option Exercises in Fiscal 2005 and Year-End Option Values
Certain
Relationships and Related Transactions
Fiscal
2005 & 2004 Fees and Services
Report
of
the Audit Committee
Recommendation
of the Board of Directors
Recommendation
of the Board of Directors
Recommendation
of the Board of Directors
EMCORE
CORPORATION
145
Belmont Drive
Somerset,
New Jersey 08873
ANNUAL
MEETING OF SHAREHOLDERS
MONDAY,
FEBRUARY 13, 2006
This
Proxy Statement is being furnished to shareholders of record of EMCORE
Corporation (“EMCORE”, “Company”, “we”, or “us”) as of January 9, 2006, in
connection with the solicitation on behalf of the Board of Directors
of EMCORE
of proxies for use at the Annual Meeting of Shareholders to be held
at 10:00
A.M. local time, on Monday, February 13, 2006, at the Resort
at
Longboat Key Club, 301 Gulf of Mexico Drive, Longboat Key, FL, 34228,
or at
any adjournments thereof, for the purposes set forth in the accompanying
Notice
of Annual Meeting of Shareholders. The approximate date that this Proxy
Statement and the enclosed proxy are first being sent to shareholders
is January
9, 2006. Shareholders should review the information provided herein
in
conjunction with the Company’s 2005 Annual Report to Shareholders, which
accompanies this Proxy Statement. The Company’s principal executive office is
located at 145 Belmont Drive, Somerset, New Jersey 08873. The Company’s main
telephone number is (732) 271-9090. The Company’s principal executive officers
may be reached at the foregoing business address and telephone
number.
INFORMATION
CONCERNING PROXY
The
enclosed proxy is solicited on behalf of the Company’s Board of Directors. The
giving of a proxy does not preclude the right to vote in person should
any
shareholder giving the proxy so desire. Shareholders have an unconditional
right
to revoke their proxy at any time prior to the exercise thereof, either
in
person at the Annual Meeting or by filing with the Company’s Secretary at the
Company’s headquarters a written revocation or duly executed proxy bearing
a
later date; however, no such revocation will be effective until written
notice
of the revocation is received by the Company at or prior to the Annual
Meeting.
The
cost
of preparing, assembling, and mailing this Proxy Statement, the Notice
of Annual
Meeting of Shareholders, and the enclosed proxy is borne by the Company.
In
addition to the use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company’s employees will receive no
compensation for soliciting proxies other than their regular salaries.
The
Company may request banks, brokers and other custodians, nominees,
and
fiduciaries to forward copies of the proxy material to their principals
and to
request authority for the execution of proxies. The Company may reimburse
such
persons for their expenses in so doing.
PURPOSES
OF THE MEETING
At
the
Annual Meeting, the Company’s shareholders will consider and vote upon the
following matters:
|
(1)
|
To
elect two (2) members to the Company’s Board of
Directors;
|
|
(2)
|
To
ratify the selection of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal
year ending
September 30, 2006;
|
|
(3)
|
To
approve an increase in the number of shares reserved for
issuance under
the Company’s 2000 Stock Option
Plan;
|
|
(4)
|
To
approve an increase in the number of shares reserved for
issuance under
the Company’s 2000 Employee Stock Purchase Plan;
and
|
|
(5)
|
To
transact such other business as may properly come before
the Annual
Meeting and any adjournments or postponements
thereof.
|
Unless
contrary instructions are indicated on the enclosed proxy, all shares
represented by valid proxies received pursuant to this solicitation
(and that
have not been revoked in accordance with the procedures set forth above)
will be
voted: (1) FOR the election of the nominees for directors named below;
(2) FOR
ratification of the Company’s independent registered public accounting firm
named above; (3) FOR the increase in the number of shares reserved
for issuance
under EMCORE’s 2000 Stock Option Plan, as amended; (4) FOR the increase in the
number of shares reserved for issuance under EMCORE’s 2000 Employee Stock
Purchase Plan; and (5) by the proxies in their discretion upon any
other
proposals as may properly come before the Annual Meeting. In the event
a
shareholder specifies a different choice by means of the enclosed proxy,
such
shareholder’s shares will be voted in accordance with the specification so
made.
OUTSTANDING
VOTING SECURITIES AND VOTING RIGHTS
As
of the
close of business on December 23, 2005 (the “Record Date”), the Company had
48,532,120 shares of no par value common stock (“Common Stock”) outstanding.
Each share of Common Stock is entitled to one vote on all matters presented
at
the Annual Meeting. The presence, either in person or by properly executed
proxy, of the holders of the majority of the shares of Common Stock
entitled to
vote at the Annual Meeting is necessary to constitute a quorum at the
Annual
Meeting. Attendance at the Annual Meeting will be limited to shareholders
as of
the Record Date, their authorized representatives, and guests of the
Company.
If
the
enclosed proxy is signed and returned, it may nevertheless be revoked
at any
time prior to the voting thereof at the pleasure of the shareholder
signing it,
either by a written notice of revocation received by the person or
persons named
therein or by voting the shares covered thereby in person or by another
proxy
dated subsequent to the date thereof.
Proxies
in the accompanying form will be voted in accordance with the instructions
indicated thereon, and, if no such instructions are indicated, will
be voted in
favor of the nominees for election as directors named below and for
the other
proposals herein.
The
vote
required for approval of each of the proposals before the shareholders
at the
Annual Meeting is specified in the description of such proposal below.
For the
purpose of determining whether a proposal has received the required
vote,
abstentions and broker non-votes will be included in the vote total,
with the
result that an abstention or broker non-vote, as the case may be will
have the
same effect as if no instructions were indicated.
Pursuant
to EMCORE’s Restated Certificate of Incorporation, the Board of Directors of
EMCORE is divided into three classes as set forth in the following
table. The
directors in each class hold office for staggered terms of three years.
The
Class C directors, Messrs. Werthan and Gillen, whose present terms
expire in
2006, are being proposed for a new three-year term (expiring in 2009)
at this
Annual Meeting.
The
shares represented by proxies returned executed will be voted, unless
otherwise
specified, in favor of the nominee for the Board of Directors named
below. If,
as a result of circumstances not known or unforeseen, any of such nominee
shall
be unavailable to serve as director, proxies will be voted for the
election of
such other person or persons as the Board of Directors may select.
Each nominee
for director will be elected by a plurality of votes cast at the Annual
Meeting
of Shareholders. Proxies will be voted FOR the election of the nominee
unless
instructions to “withhold” votes are set forth on the proxy card. Withholding
votes will not influence voting results. Abstentions may not be specified
as to
the election of directors.
The
following tables set forth certain information regarding the members
of and
nominees for the Board of Directors:
|
Name
and Other Information
|
Age
|
Class
and Year
in
Which
Term Will
Expire
|
Principal
Occupation
|
Served
as
Director
Since
|
NOMINEES
FOR ELECTION AT THE 2006 ANNUAL MEETING
|
Thomas
G. Werthan
|
49
|
Class
C
2006
|
Executive
V.P. and Chief Financial Officer, EMCORE Corporation
|
1992
|
|
John
Gillen (1)
(2) (3) (4)
|
64
|
Class
C
2006
|
Partner,
Gillen and Johnson, P.A., Certified Public Accountants
|
2003
|
DIRECTORS
WHOSE TERMS CONTINUE
|
Charles
Scott
(1) (2) (3) (4)
|
56
|
Class
B
2007
|
Chairman
of William Hill plc
|
1998
|
|
Richard
A. Stall
|
49
|
Class
B
2007
|
Executive
V.P. and Chief Technology Officer, EMCORE Corporation
|
1996
|
|
Robert
Louis-Dreyfus (4)
|
59
|
Class
B
2007
|
Chairman
of IVS; Chairman of Infront Sports and Media AG
|
1997
|
|
Thomas
J. Russell (2)
(4)
|
74
|
Class
A
2008
|
Chairman
of the Board, EMCORE Corporation
|
1995
|
|
Reuben
F. Richards, Jr.
|
50
|
Class
A
2008
|
President
and Chief Executive Officer, EMCORE Corporation
|
1995
|
|
Robert
Bogomolny (1)
(3) (4)
|
67
|
Class
A
2008
|
President,
University of Baltimore
|
2002
|
____________________
|
(1)
|
Member
of Audit Committee.
|
|
(2)
|
Member
of Nominating Committee.
|
|
(3)
|
Member
of Compensation Committee.
|
|
(4)
|
Determined
by the Board of Directors to be an independent
director.
|
DIRECTORS
AND EXECUTIVE OFFICERS
Set
forth
below is certain information with respect to each of the nominees for
the office
of director and other directors and executive officers of EMCORE.
THOMAS
J.
RUSSELL, PH.D. has been a director of the Company since May 1995 and
was elected
Chairman of the Board on December 6, 1996. Dr. Russell founded Bio/Dynamics,
Inc. in 1961 and managed the company until its acquisition by IMS International
in 1973, following which he served as President of that company’s Life Sciences
Division. From 1984 until 1988, he served as Director, then as Chairman
of IMS
International until its acquisition by Dun & Bradstreet in 1988. From 1988
to 1992, he served as Chairman of Applied Biosciences, Inc., and was
a Director
until 1996. In 1990, Dr. Russell was appointed as a Director of Saatchi
&
Saatchi plc (now Cordiant plc), and served on that board until 1997.
He served
as a Director of adidas-Salomon AG from 1994 to 2001. He also served
on the
board of LD COM Networks until 2004. He holds a Ph.D. in physiology
and
biochemistry from Rutgers University.
REUBEN
F.
RICHARDS, JR. joined the Company in October 1995 as its President and
Chief
Operating Officer, and became Chief Executive Officer in December 1996.
Mr.
Richards has been a director of the Company since May 1995. From September
1994
to December 1996, Mr. Richards was a Senior Managing Director of Jesup
&
Lamont Capital Markets Inc. (“Jesup & Lamont” (an affiliate of a registered
broker-dealer)). From December 1994 to December 1996, he was a member
and
President of Jesup & Lamont Merchant Partners, L.L.C. From 1992 through
1994, Mr. Richards was a principal with Hauser, Richards & Co., a firm
engaged in corporate restructuring and management turnarounds. From
1986 until
1992, Mr. Richards was a Director at Prudential-Bache Capital Funding
in its
Investment Banking Division. Mr. Richards also serves on the board
of the
Company’s GELcore LLC joint venture.
THOMAS
G.
WERTHAN joined the Company in 1992 as its Chief Financial Officer and
a
director. Mr. Werthan has over 22 years experience in assisting high
technology,
venture capital financed growth companies. Prior to joining the Company
in 1992,
he was associated with The Russell Group, a venture capital partnership,
as
Chief Financial Officer for several portfolio companies. The Russell
Group was
affiliated with Thomas J. Russell, Chairman of the Board of Directors
of the
Company. From 1985 to 1989, Mr. Werthan served as Chief Operating Officer
and
Chief Financial Officer for Audio Visual Labs, Inc., a manufacturer
of
multimedia and computer graphics equipment.
RICHARD
A. STALL, PH.D. became a director of the Company in December 1996.
Dr. Stall
helped found the Company in 1984 and has been the Chief Technology
Officer
(previously titled Vice President - Technology) at the Company since
October
1984, except for a sabbatical year in 1993 during which Dr. Stall acted
as a
consultant to the Company and his position was left unfilled. Prior
to 1984, Dr.
Stall was a member of the technical staff of AT&T Bell Laboratories and was
responsible for the development of MBE technologies. He has co-authored
more
than 75 papers and holds seven patents on MBE and MOCVD technology
and the
characterization of compound semiconductor materials.
ROBERT
LOUIS-DREYFUS has been a director of the Company since March 1997.
Mr.
Louis-Dreyfus was the Chairman of Louis Dreyfus Communications (now
Neuf
Cegetel) from May 2000 through October 2004. From 1993 through 2001,
he was
Chairman of the Board of Directors and Chief Executive Officer of adidas-Salomon
AG. From 1989 until 1993, Mr. Louis-Dreyfus was the Chief Executive
Officer of
Saatchi & Saatchi plc (now Cordiant plc). Since 1992, he has been an
investor and a director of several other companies, and is currently
serving as
an advisory board member of The Parthenon Group since October 1998,
Chairman of
the Board of IVS since 2002, and Chairman of the Board of Infront Sports
and
Media AG since 2002. From 1982 until 1988, he served as Chief Operating
Officer
(1982 to 1983), and then as Chief Executive Officer (from 1984 to 1988),
of IMS
International until its acquisition by Dun & Bradstreet in
1988.
ROBERT
BOGOMOLNY has served as a director of the Company since April 2002.
Since August
2002, Mr. Bogomolny has served as President of the University of Baltimore.
Prior to that, he served as Corporate Senior Vice President and General
Counsel
of G.D. Searle & Company, a pharmaceuticals manufacturer, from 1987 to 2001.
At G.D. Searle, Mr. Bogomolny was responsible at various times for
its legal,
regulatory, quality control, and public affairs activities. He also
led its
government affairs department in Washington, D.C., and served on the
Searle
Executive Management Committee.
CHARLES
SCOTT has served as a director of the Company since February 1998.
Since January
1, 2004, he has served as Chairman of the Board of Directors of William
Hill
plc, a leading provider of bookmaking services in the United Kingdom.
Prior to
that, Mr. Scott served as Chairman of a number of companies, including
Cordiant
Communications Group plc, Saatchi & Saatchi Company plc, and Robert Walters
plc.
JOHN
GILLEN has served as a director of the Company since March 2003. Mr.
Gillen has
been a partner in the firm of Gillen and Johnson, P.A., Certified Public
Accountants since 1974. Prior to that time, Mr. Gillen was employed
by the
Internal Revenue Service and Peat Marwick Mitchell & Company, Certified
Public Accountants.
Non-Director
Executive Officers
HOWARD
W.
BRODIE, ESQ., 38, joined the Company in August 1999 and serves as Executive
Vice
President, Chief Legal Officer, and Secretary of the Company. From
1995 to 1999,
Mr. Brodie was with the law firm of White & Case LLP, where he practiced
securities law and mergers and acquisitions. From 1994 to 1995, Mr.
Brodie
served as a judicial law clerk to Chief Judge Gilbert S. Merritt on
the Sixth
Circuit Court of Appeals. Mr. Brodie received his J.D. degree from
Yale Law
School in 1994.
SCOTT
T.
MASSIE, 44, joined the Company in September 2002 and serves as Executive
Vice
President and Chief
Operating Officer. From 1997 to 2000, Mr. Massie was Chief Operating
Officer of
IQE plc, a merchant epi wafer supplier, and its predecessor, QED. In
2000, Mr.
Massie became President of IQE, Inc., the U.S. subsidiary of IQE plc,
and he
held this position until 2002. Mr. Massie holds a B.S. in mathematics,
a B.S. in
physics, and an M.S. in physics, all from Virginia Tech University.
He also is a
Commonwealth Fellow of the Commonwealth of Virginia, and a Director
of the
Greater Albuquerque Chamber of Commerce.
COMPENSATION
OF DIRECTORS
The
Board
of Directors held five regularly scheduled and special telephonic meetings
during fiscal 2005, and took other certain actions by unanimous written
consent.
During
fiscal 2005, all directors of the Company, except for Mr. Louis-Dreyfus,
attended at least 75% of the aggregate meetings of the Board and committees
on
which they served, during their tenure on the Board.
Pursuant
to its Directors’ Stock Award Plan, the Company pays non-employee directors a
fee in the amount of $3,000 per Board meeting attended and $500 per
committee
meeting attended ($600 for the chairman of a committee), as well as
reimburses a
non-employee director's reasonable out-of-pocket expenses incurred
in connection
with such Board or committee meeting. From time to time, Board members
are
invited to attend meetings of Board committees of which they are not
members; in
such cases, such Board members receive a committee meeting fee of $500.
Payment
of fees under the Directors’ Stock Award Plan is made in common stock of the
Company at the closing price on the NASDAQ National Market for the
day prior to
the meeting.
In
addition, on October 20, 2005, the Board of Directors instituted an
Outside
Directors Cash Compensation Plan providing for the payment of cash
compensation
to outside directors for their participation at Board meetings. Director
compensation is established by the Board and periodically reviewed.
The
objectives of the Outside Directors Cash Compensation Plan are to provide
the
Company with an advantage in attracting and retaining outside directors.
Each
non-employee director receives a meeting fee for each meeting that
he or she
attends (including telephonic meetings, but excluding execution of
unanimous
written consents) of the Board. In addition, each non-employee director
receives
a committee meeting fee for each meeting that he or she attends (including
telephonic meetings, but excluding execution of unanimous written consents)
of a
Board committee. Until changed by resolution of the Board, the meeting
fee is
$5,000 and the committee meeting fee is $3,000; provided that the meeting
fee
for special telephonic meetings (i.e., Board meetings that are not
regularly
scheduled and in which non-employee directors typically participate
telephonically) is $1,000 and the committee meeting fee for such special
telephonic meetings is $600. Any non-employee director who is the chairman
of a
committee receives an additional $1,000 for each meeting of the committee
that
he or she chairs, and an additional $200 for each special telephonic
meeting of
such committee. Directors may defer cash compensation otherwise payable
under the Outside Directors Cash Compensation Plan.
No
director who is an employee of the Company receives compensation for
services
rendered as a director under either the Outside Directors Cash Compensation
Plan
or the Directors’ Stock Award Plan.
NOMINATING
COMMITTEE
The
Company’s Nominating Committee currently consists of Messrs. Russell, Scott,
and
Gillen, each of whom is an independent director, as that term is defined
by the
NASDAQ listing standards. The Nominating Committee recommends new members
to the
Company’s Board of Directors. The Nominating Committee meets once annually.
A
copy of the Charter of the Nominating Committee is posted on the Company’s
website, www.emcore.com.
When
considering a potential director candidate, the Nominating Committee
looks for
demonstrated character, judgment, relevant business, functional and
industry
experience, and a high degree of acumen. There are no differences in
the manner
in which the Nominating Committee evaluates nominees for director based
on
whether the nominee is recommended by a shareholder. The Company does
not pay
any third party to identify or assist in identifying or evaluating
potential
nominees.
The
Nominating Committee will consider suggestions from shareholder regarding
possible director candidates for election in 2007. Such suggestions,
together
with appropriate biographical information, should be submitted to the
Company’s
Secretary. See the section titled “Shareholder Proposals” below under “General
Matters” for details regarding the procedures and timing for the submission
of
such suggestions. Each director nominated in this Proxy was recommended
for
election by the Board of Directors. The Board of Directors did not
receive any
notice of a Board of Directors nominee recommendation in connection
with this
Proxy Statement from any shareholder.
LIMITATION
OF OFFICERS’ AND
DIRECTORS’
LIABILITY AND INDEMNIFICATION MATTERS
The
Company’s Restated Certificate of Incorporation and By-Laws include provisions
(i) to reduce the personal liability of the Company’s directors for monetary
damage resulting from breaches of their fiduciary duty, and (ii) to
permit the
Company to indemnify its directors and officers to the fullest extent
permitted
by New Jersey law. The Company has obtained directors’ and officers’ liability
insurance that insures such persons against the costs of defense, settlement,
or
payment of a judgment under certain circumstances. There is no pending
litigation or proceeding involving any director, officer, employee,
or agent of
the Company as to which indemnification is being sought. The Company
is not
aware of any pending or threatened litigation that might result in
claims for
indemnification by any director or executive officer.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
ELECTION OF EACH OF NOMINEES LISTED ABOVE UNDER PROPOSAL
I.
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth as of December
23, 2005
certain
information regarding the beneficial ownership of voting Common Stock
by (i)
each person or “group” (as that term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) known by the
Company to be the beneficial owner of more than 5% of the voting Common
Stock,
(ii) each named executive officer of the Company, (iii) each director
and
nominee, and (iv) all directors and executive officers as a group (10
persons).
Except as otherwise indicated, the Company believes, based on information
furnished by such persons, that each person listed below has the sole
voting and
investment power over the shares of Common Stock shown as beneficially
owned,
subject to common property laws, where applicable. Shares beneficially
owned
include shares and underlying warrants and options exercisable within
sixty (60)
days of December 23, 2005. Unless otherwise indicated, the address
of each of
the beneficial owners is c/o the Company, 145 Belmont Drive, Somerset,
NJ
08873.
|
Name
|
Shares
Beneficially
Owned
|
Percent
of
Common
Stock
|
|||||
|
Thomas
J. Russell (1)
|
5,017,368
|
10.3
|
%
|
||||
|
Reuben
F. Richards, Jr. (2)
|
1,243,540
|
2.5
|
%
|
||||
|
Thomas
G. Werthan (3)
|
342,968
|
*
|
|||||
|
Richard
A. Stall (4)
|
425,000
|
*
|
|||||
|
Robert
Louis-Dreyfus (5)
|
3,302,416
|
6.8
|
%
|
||||
|
Robert
Bogomolny
|
81,462
|
*
|
|||||
|
John
Gillen
|
23,250
|
*
|
|||||
|
Charles
Scott (6)
|
36,062
|
*
|
|||||
|
Howard
W. Brodie, Esq.
(7)
|
138,756
|
*
|
|||||
|
Scott
T. Massie (8)
|
65,805
|
*
|
|||||
|
All
directors and executive officers as a group (10 persons)
(9)
|
10,676,627
|
21.5
|
%
|
||||
|
State
of Wisconsin Investment Board (10)
|
4,842,867
|
10.0
|
%
|
||||
|
Pioneer
Global Asset Management S.p.A. (11)
|
2,494,045
|
5.1
|
%
|
||||
|
Wellington
Management Company, LLP (12)
|
2,434,061
|
5.0
|
%
|
____________________
|
*
|
Less
than 1.0%
|
|
(1)
|
Includes
2,280,035 shares are held by The AER
Trust.
|
|
(2)
|
Includes
options to purchase 331,250 shares.
|
|
(3)
|
Includes
options to purchase 267,546 shares.
|
|
(4)
|
Includes
options to purchase 316,720 shares.
|
|
(5)
|
All
3,302,416 shares held by Gallium Enterprises
Inc.
|
|
(6)
|
Includes
24,062 shares owned by Kircal, Ltd.
|
|
(7)
|
Includes
options to purchase 135,000 shares.
|
|
(8)
|
Includes
options to purchase 60,000 shares
|
|
(9)
|
Includes
options to purchase 1,110,516
shares.
|
|
(10)
|
The
address of State of Wisconsin Investment Board is 121 East
Wilson Street,
2nd
Floor, Madison, WI, 53703.
|
|
(11)
|
The
address of Pioneer Global Asset Management S.p.A. is Galleria
San Carlo 6,
20122 Milan, Italy.
|
|
(12)
|
The
address of Wellington Management Company, LLP is 75 State
Street,
19th
Floor, Boston, MA, 02109.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth, as of September 30, 2005, the number of
securities
outstanding under each of EMCORE’s stock option plans, the weighted average
exercise price of such options, and the number of options available
for grant
under such plans:
|
Plan
Category
|
Number
of securities
to
be issued upon
exercise
of outstanding
options,
warrants and rights
|
Weighted
average
exercise
price
of
outstanding options,
warrants
and rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans (excluding securities
reflected
in column (a))
|
|||||
|
(a)
|
(b)
|
(c)
|
||||||
|
Equity
compensation plans
approved
by security holders
|
6,164,306
|
|
$
|
4.16
|
|
|
449,972
|
|
|
Equity
compensation plans
not
approved by security holders
|
1,920
|
|
|
0.23
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
6,166,226
|
|
$
|
4.16
|
|
|
449,972
|
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based
on
the Company’s review of copies of all disclosure reports filed by directors and
executive officers of the Company pursuant to Section 16(a) of the
Exchange Act,
as amended, and written representations furnished to the Company, the
Company
believes that there was compliance with all filing requirements of
Section 16(a)
applicable to directors and executive officers of the Company during
the fiscal
year, with the exception of March
7,
2005 filings for Messrs. Gillen, Bogomolny, and Scott, and a September
20, 2005
filing for Mr. Richards, which were not timely reported. The Company
has since
corrected its process.
The
Company’s Compensation Committee currently consists of Messrs. Gillen,
Bogomolny, and Scott. The Compensation Committee reviews and recommends
to the
Board of Directors the compensation and benefits of all executive officers
of
the Company, reviews general policy matters relating to compensation
and
benefits of executive officers and employees of the Company, and administers
the
issuance of stock options and stock appreciation rights and awards
of restricted
stock to the Company’s officers and key salaried employees. No member of the
Compensation Committee is now or ever was an officer or an employee
of the
Company. No executive officer of the Company serves as a member of
the
Compensation Committee of the Board of Directors of any entity one
or more of
whose executive officers serves as a member of the Company’s Board of Directors
or Compensation Committee. The Compensation Committee meets at least
once
annually.
REPORT
OF THE COMPENSATION COMMITTEE
The
following Report of the Compensation Committee does not constitute
soliciting
material, and should not be deemed filed or incorporated by reference
into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange
Act of 1934, except to the extent the Company specifically incorporates
this
Report of the Compensation Committee by reference therein.
The
Committee’s Responsibilities
The
Compensation Committee of the Board of Directors is composed entirely
of
independent directors. The Compensation Committee is responsible for
setting and
administering policies which govern EMCORE’s executive compensation programs.
The purpose of this report is to summarize the compensation philosophy
and
policies that the Compensation Committee applied in making executive
compensation decisions in 2005. The Compensation Committee met three
times in
fiscal 2005 (October 2004, November 2004, and May 2005). A summary
of the
compensation policies are attached hereto.
Compensation
Philosophy
The
Compensation Committee has approved compensation programs intended
to:
| · |
Attract
and retain talented executive officers and key employees
by providing
total compensation competitive with that of other executives
employed by
companies of similar size, complexity and lines of business;
|
| · |
Motivate
executives and key employees to achieve strong financial
and operational
performance;
|
| · |
Emphasize
performance-based compensation, which balances rewards for
short-term and
long-term results;
|
| · |
Reward
individual performance;
|
| · |
Link
the interests of executives with shareholders by providing
a significant
portion of total pay in the form of stock-based incentives
and requiring
target levels of stock ownership; and
|
| · |
Encourage
long-term commitment to EMCORE.
|
Compensation
Methodology
Each
year
the Compensation Committee reviews data from market surveys, proxy
statements,
and independent consultants to assess EMCORE’s competitive position with respect
to the following three components of executive compensation:
| · |
Base
salary;
|
| · |
Annual
incentives; and
|
| · |
Long-term
incentives.
|
The
Compensation Committee also considers individual performance, level
of
responsibility, and skills and experience in making compensation decisions
for
each executive.
Components
of Compensation
Base
Salary. Base
salaries for executives are determined based upon job responsibilities,
level of
experience, individual performance, comparisons to the salaries of
executives in
similar positions obtained from market surveys, and competitive data
obtained
from consultants and staff research. The goal for the base pay component
is to
compensate executives at a level which approximates the median salaries
of
individuals in comparable positions and markets. The Compensation Committee
approves all salary increases for executive officers, as such are recommended
to
the Committee by the Company’s Chief Executive Officer.
Base
pay
increases were approved, effective October 1, 2004, for Messrs. Stall,
Werthan,
Brodie, and Massie as follows:
|
Name
|
Existing
Base
|
New
Base
|
|
Stall
|
$
235,000
|
$
240,000
|
|
Werthan
|
$
225,000
|
$
236,000
|
|
Brodie
|
$
210,000
|
$
215,000
|
|
Massie
|
$
215,000
|
$
250,000
|
Annual
Incentives.
Annual
cash incentives are provided to executives to promote the achievement
of
performance objectives of EMCORE. In May 2005, the Compensation Committee
awarded the following cash compensation, based in part upon recommendations
from
the CEO:
|
Name
|
Cash
Bonus
|
|
Stall
|
$
75,000
|
|
Werthan
|
$
75,000
|
|
Brodie
|
$
75,000
|
|
Massie
|
$
93,750
|
Long-Term
Incentives.
In May
2005, the Compensation Committee approved awards of stock options to
the
following executive officers: Stall, Werthan, Brodie, and Massie. All
of the
stock options were granted under the 2000 Stock Option Plan. The exercise
price
for each of these option grants is $3.42 per share (the closing price
of the
Company’s common stock on the Nasdaq National Market on May 18, 2005). Each
option grant vests 25% per year with the first tranche vesting on May
18, 2006,
resulting in the grant fully vesting after four years. The options
expire ten
(10) years from the date such option was granted.
|
Name
|
Options
|
|
Stall
|
45,000
|
|
Werthan
|
60,000
|
|
Brodie
|
45,000
|
|
Massie
|
67,500
|
Compliance
with Section 162(m) of the Internal Revenue Code
Under
Section 162(m) of the Internal Revenue Code, EMCORE may not deduct
annual
compensation in excess of $1 million paid to certain employees, generally
its
Chief Executive Officer and its four other most highly compensated
executive
officers, unless that compensation qualifies as performance-based compensation.
While the Compensation Committee intends to structure performance-related
awards
in a way that will preserve the maximum deductibility of compensation
awards,
the Compensation Committee may from time to time approve awards that
would vest
upon the passage of time or other compensation, which would not result
in
qualification of those awards as performance-based compensation.
Compensation
of the Chief Executive Officer
The
Compensation Committee reviews annually the compensation of the Chief
Executive
Officer and recommends any adjustments to the Board of Directors for
approval.
The Chief Executive Officer participates in the same programs and receives
compensation based upon the same criteria as EMCORE’s other executive officers.
However, the Chief Executive Officer’s compensation reflects the greater policy-
and decision-making authority that the Chief Executive Officer holds,
and the
higher level of responsibility that he has with respect to the strategic
direction of EMCORE and its financial and operating results.
The
components of Mr. Richard’s 2005 compensation were:
Base
Salary.
After
considering EMCORE’s overall performance and competitive practices, the
Compensation Committee recommended, and the Board of Directors approved,
a 5%
increase in Mr. Richards’ base salary, to $385,000, effective October 1, 2004.
Annual
Incentives.
Annual
incentive compensation for Mr. Richards is based upon achievement of
targets set
by the Board of Directors. Based on 2004 and the first half of fiscal
2005
performance, in May 2005 Mr. Richards received a payment of
$225,000.
Long-Term
Incentives.
In May
2005, Mr. Richards received a stock option award for 300,000 shares
under the
2000 Stock Option Plan. The exercise price for each of these option
grants is
$3.42 per share (the closing price of the Company’s common stock on the Nasdaq
National Market on May 18, 2005). Each option grant vests 25% per year
with the
first tranche vesting on May 18, 2006, resulting in the grant fully
vesting
after four years. The options expire ten (10) years from the date such
option
was granted.
The
Compensation Committee conducts its annual review of Chief Executive
Officer
performance and compensation after the close of the fiscal year, to
assure
thorough consideration of year-end results.
This
report has been provided by the Compensation Committee.
May
2005
|
COMPENSATION
COMMITTEE
John
Gillen, Chairman
Charlie
Scott
Robert
Bogomolny
|
FISCAL
2006 EXECUTIVE BONUS PLAN
On
October 20, 2005, the Compensation Committee of the Board of Directors
of EMCORE
adopted the Fiscal 2006 Executive Bonus Plan. The purpose of the
Fiscal 2006
Executive Bonus Plan is to establish and implement a consistent,
market-driven,
performance-based approach to compensation that is compatible with
EMCORE’s
compensation policy and supports EMCORE’s strategic business plan and goals.
Under
the
Fiscal 2006 Executive Bonus Plan, a bonus target for each executive
is created
based on corporate performance during fiscal 2006. Half of the target
is related
to the Company meeting revenue targets as set forth in EMCORE’s fiscal 2006
budget (the “Fiscal 2006 Budget”) and half of the target is related to the
Company meeting EBIT targets set forth in the Fiscal 2006 Budget.
For each
individual executive, the bonus target is equal to 80% of the Chief
Executive
Officer’s base salary, 60% of the Chief Operating Officer’s base salary, and 50%
of the other executive officers’ respective base salaries. In the event that
EMCORE’s financial performance exceeds either the revenue or EBIT targets
contained in the Fiscal 2006 Budget by 10% or more, each executive’s target
bonus may be increased up to an additional 20%. The Fiscal 2006 Executive
Bonus
Plan also contains an individual performance component that acts
as a
multiplier, which can accelerate or decelerate the target bonus percentage
based
upon individual performance as determined by the Chief Executive
Officer and the
Compensation Committee. The multiplier ranges from 0% to 140% of
the executive’s
target bonus. The Chief Executive Officer’s individual performance is reviewed
by the Compensation Committee. Each individual performance of the
Chief
Operating Officer and the other executive officers is reviewed by
the Chief
Executive Officer and approved by the Compensation Committee.
Payment
of bonuses (if any) is normally made after the end of the performance
period
during which the bonuses were earned. Bonuses normally will be paid
in cash in a
single lump sum, subject to payroll taxes and tax withholdings.
The
Compensation Committee and the Chief Executive Officer retain the
ability to
modify individual executive bonuses based upon individual performance
and the
successful completion of business projects and other management performance
objectives. In addition, the Compensation Committee makes long-term
incentive
grants to executive officers and employees, which are not covered
under the
terms of the Fiscal 2006 Executive Bonus Plan.
EXECUTIVE
COMPENSATION
The
following table sets forth certain information concerning the annual
and
long-term compensation for services in all capacities to the Company
for fiscal
years ended September 30, 2005, 2004, and 2003 of those persons who
during such
fiscal year (i) served as the Company’s chief executive officer, and (ii) were
the four most highly-compensated officers (other than the chief executive
officer) (collectively, the “Named Executive Officers”):
|
Annual
Compensation
|
|
Name
and Principal
Position
|
Fiscal
Year
|
Salary
|
Bonus(1)
|
|
Other
Annual
Compensation
|
Long-term
Compensation
Securities
Underlying
Options
|
All
Other
Compensation
|
||||||||||||
|
Reuben
F. Richards, Jr.
President
and Chief Executive Officer
|
2005
2004
2003
|
$
$
$
|
399,423
356,923
327,307
|
$
$
|
225,000
325,000
--
|
--
--
--
|
300,000
145,000
--
|
--
--
--
|
|||||||||||
|
Richard
A. Stall
Executive
Vice President and Chief
Technology Officer
|
2005
2004
2003
|
$
$
$
|
280,439
231,615
203,461
|
$
$
|
75,000
100,000
--
|
$
|
25,317
--
--
|
(2)
|
45,000
50,000
--
|
--
--
--
|
|||||||||
|
Thomas
G. Werthan
Executive
Vice President and Chief Financial Officer
|
2005
2004
2003
|
$
$
$
|
266,988
218,269
190,392
|
$
$
|
75,000
125,000
--
|
$
|
20,700
--
--
|
(3)
|
60,000
80,000
--
|
--
--
--
|
|||||||||
|
Howard
W. Brodie, Esq.
Executive
Vice President and Chief Legal Officer
|
2005
2004
2003
|
$
$
$
|
223,173
205,961
181,538
|
$
$
|
75,000
125,000
--
|
--
--
--
|
45,000
60,000
--
|
--
--
--
|
|||||||||||
|
Scott
T. Massie
Executive
Vice President and Chief Operating Officer
|
2005
2004
2003
|
$
$
$
|
258,942
197,482
175,000
|
$
$
|
93,750
80,000
--
|
--
--
--
|
67,500
40,000
--
|
--
--
--
|
|||||||||||
____________________
|
(1)
|
In
addition to the fiscal 2004 bonus amounts described in the
March 2004
Report of the Compensation Committee, the bonuses listed
above for Messrs.
Richards, Stall, Werthan, and Brodie include an additional
$25,000 bonus
awarded in November 2003.
|
|
(2)
|
In
November 2004, the Compensation Committee forgave a loan
made in 1994 by
the Company to Dr. Stall in the amount of $16,750 to pay
for warrant
exercises at that time. In light of Dr. Stall’s past and continued service
to the Company, the Compensation Committee cancelled the
loan through a
bonus in the amount of $25,317, which includes repayment
of the loan and
additional cash to cover taxes.
|
|
(3)
|
In
November 2004, the Compensation Committee forgave a loan
made in 1994 by
the Company to Mr. Werthan in the amount of $13,450 to pay
for warrant
exercises at that time. In light of Mr. Werthan’s past and continued
service to the Company, the Compensation Committee cancelled
the loan
through a bonus in the amount of $20,700, which includes
repayment of the
loan and additional cash to cover
taxes.
|
OPTION
GRANTS IN FISCAL 2005
The
following table sets forth information with respect to option grants
to the
Named Executive Officers during fiscal 2005:
| · |
The
number of shares of EMCORE common stock underlying options
granted during
fiscal 2005;
|
| · |
The
percentage that such options represent of all options of
the same class
granted to employees during fiscal
2005;
|
| · |
The
exercise price (equal to the fair market value of the stock
on the date of
grant);
|
| · |
The
expiration date of the grant; and
|
| · |
The
potential realizable value at assumed annual rates of stock
price
appreciation (5% and 10%) through the expiration of the option
term.
|
|
|
Number
of Options Granted
|
%
of Total
Options
Granted
to
Employees
In
FY’05
|
|
Exercise
Price
($/Share)
|
|
Expiration
Date
|
Potential
Realizable
Value
@ 5%
|
|
Potential
Realizable
Value
@ 10%
|
|
|||||||||
|
Reuben
F. Richards, Jr.
|
300,000
|
16.7
|
%
|
$
|
3.42
|
5/18/2015
|
$
|
645,200
|
$
|
1,635,200
|
|||||||||
|
Thomas
G. Werthan
|
60,000
|
3.3
|
%
|
$
|
3.42
|
5/18/2015
|
$
|
129,000
|
$
|
327,000
|
|||||||||
|
Richard
A. Stall
|
45,000
|
2.5
|
%
|
$
|
3.42
|
5/18/2015
|
$
|
96,800
|
$
|
245,300
|
|||||||||
|
Howard
W. Brodie, Esq.
|
45,000
|
2.5
|
%
|
$
|
3.42
|
5/18/2015
|
$
|
96,800
|
$
|
245,300
|
|||||||||
|
Scott
T. Massie
|
67,500
|
3.8
|
%
|
$
|
3.42
|
5/18/2015
|
$
|
145,200
|
$
|
367,900
|
|||||||||
AGGREGATED
OPTION EXERCISES IN FISCAL 2005
AND
YEAR-END OPTION VALUES
The
following table sets forth the number of shares acquired by the Named
Executive
Officers upon options exercised during fiscal 2005 and the value thereof,
together with the number of exercisable and unexercisable options held
by the
Named Executive Officers on September 30, 2005 and the aggregate gains
that
would have been realized had these options been exercised on September
30, 2005,
even though such options had not been exercised by the Named Executive
Officers.
| Name |
Shares
Acquired On Exercise(1)
|
Value
Realized
|
Total
Number of Unexercised
Options
at September
30, 2005(2)
|
Value
of Unexercised In-the-Money
Options
at
September 30, 2005(3)
|
|||||||||||||||
|
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||||
|
Reuben
F. Richards, Jr.
|
58,824
|
$
|
255,002
|
331,250
|
408,750
|
$
|
126,513
|
$
|
1,189,538
|
||||||||||
|
Richard
A. Stall
|
2,648
|
$
|
4,918
|
339,620
|
82,500
|
$
|
106,987
|
$
|
252,375
|
||||||||||
|
Thomas
G. Werthan
|
37,824
|
$
|
92,858
|
267,546
|
120,000
|
$
|
120,847
|
$
|
371,400
|
||||||||||
|
Howard
W. Brodie, Esq.
|
15,000
|
$
|
22,870
|
135,000
|
90,000
|
--
|
$
|
278,550
|
|||||||||||
|
Scott
T. Massie
|
--
|
--
|
60,000
|
97,500
|
$
|
198,400
|
$
|
286,950
|
|||||||||||
____________________
|
(1)
|
A
total 114,296 options were exercised by Named Executive Officers
in fiscal
2005.
|
|
(2)
|
This
represents the total number of shares subject to stock options
held by
each Named Executive Officer at September 30, 2005. These options
were granted on various dates during the fiscal years 1995
through
2005.
|
|
(3)
|
These
amounts represent the difference between the exercise price
of the stock
options and the closing price of the Common Stock on September
30,
2005
for all the in-the-money options held by each Named Executive
Officer. The
in-the-money stock option exercise prices range from $2.63
to $5.10. These
stock options were granted at the fair market value of the
Common Stock on
the grant date.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From
time
to time, prior to July 2002, EMCORE has loaned money to certain of
its executive
officers and directors. Pursuant to due authorization from EMCORE's
Board of
Directors, EMCORE loaned $3.0 million to the Chief Executive Officer
in February
2001. The promissory note matures on February 22, 2006 and bears interest
(compounded annually) at a rate of (a) 5.18% per annum through May
23, 2002 and
(b) 4.99% from May 24, 2002 through maturity. All interest is payable
at
maturity. The note is partially secured by a pledge of shares of EMCORE's
common
stock. Accrued interest at September 30, 2005 totaled approximately
$0.8
million.
In
addition, pursuant to due authorization of the Company's Board of Directors,
EMCORE loaned $82,000 to the Chief Financial Officer (CFO) of EMCORE
in December
1995. The loan does not bear interest and provides for offset of the
loan via
bonuses payable to the CFO over a period of up to 25 years. The remaining
balance relates to $87,260 of loans from the Company to an officer
(who is not a
Named Executive Officer) that were made during 1997 through 2000, and
are
payable on demand.
During
the first quarter of fiscal 2005, pursuant to due authorization of
the Company’s
Compensation Committee, EMCORE wrote-off $34,000 of notes receivable
that were
issued in 1994 to certain EMCORE employees.
STOCK
PERFORMANCE
GRAPH
The
following Stock Performance Graph does not constitute soliciting material,
and
should not be deemed filed or incorporated by reference into any other
Company
filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934,
except to the extent the Company specifically incorporates this Stock
Performance Graph by reference therein.
The
following graph and table compares the cumulative total shareholders’ return on
the Company’s common stock for the five-year period from the September 30, 2000
through September 30, 2005 with the cumulative total return on the
NASDAQ Stock
Market Index and the NASDAQ Electronic Components Stocks Index (SIC
Code 3674).
The comparison assumes $100 was invested on September 30, 2000 in the
Company’s
common stock. The Company did not declare, nor did it pay, any dividends
during
the comparison period.
PROPOSAL
II: APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP, an independent registered public accounting firm, audited
the
financial statements of EMCORE Corporation for the fiscal year ending
September
30, 2005. The Audit Committee and the Board of Directors have selected
Deloitte
& Touche LLP as the
Company’s independent registered public accounting firm for
the
fiscal year ending September 30, 2006. The ratification of the appointment
of
Deloitte & Touche LLP will be determined by the vote of the holders of a
majority of the shares present in person or represented by proxy at
the Annual
Meeting. If this appointment of Deloitte & Touche LLP is not ratified by
shareholders, the Board of Directors will appoint another independent
registered
public accounting firm whose appointment for any period subsequent
to the 2005
Annual Meeting of Shareholders will be subject to the approval of shareholders
at that meeting.
Representatives
of Deloitte & Touche LLP are expected to attend the Annual Meeting of
Shareholders. They will have the opportunity to make a statement if
they desire
to do so, and are expected to be available to answer appropriate
questions.
FISCAL
2005 & 2004 FEES AND SERVICES
Deloitte
& Touche LLP was the independent registered public accounting firm that
audited EMCORE’s financial statements for fiscal 2005 and 2004. In addition to
performing the audit services for fiscal 2005 and 2004, the Company
also
retained Deloitte & Touche LLP to perform other non-audit related services
during these periods.
The
aggregate fees billed by Deloitte & Touche LLP in connection with audit and
non-audit services rendered for fiscal 2005 and 2004 are as
follows:
|
|
Fiscal
2005
|
Fiscal
2004
|
|||||
|
Audit
fees (1)
|
$
|
621,000
|
$
|
279,000
|
|||
|
Audit-related
fees (2)
|
28,000
|
156,000
|
|||||
|
Tax
fees (3)
|
--
|
59,000
|
|||||
|
All
other fees
(4)
|
17,000
|
15,000
|
|||||
|
Total
|
$
|
666,000
|
$
|
509,000
|
Notes
|
(1)
|
Represents
fees for professional services rendered in connection with
the audit of
our annual financial statements, reviews of our quarterly
financial
statements, and advice provided on accounting matters that
arose in
connection with audit services. $237,000 of the Fiscal 2005
audit fees
were for professional services rendered in connection with
the audit of
our internal controls over financial reporting (SOX 404
compliance).
|
|
(2)
|
Represents
fees for professional services related to the audits of our
employee
benefit plan and other statutory or regulatory
filings.
|
|
(3)
|
Represents
fees for tax services provided in connection with general
tax
matters.
|
|
(4)
|
All
other fees represent fees for services provided to EMCORE
that are not
otherwise included in the categories
above.
|
REPORT
OF THE AUDIT COMMITTEE
The
following Report of the Audit Committee does not constitute soliciting
material,
and should not be deemed filed or incorporated by reference into any
other
Company filing under the Securities Act of 1933 or the Securities Exchange
Act
of 1934, except to the extent the Company specifically incorporates
this Report
of the Audit Committee by reference therein.
The
Company has a separately-designated standing audit committee (the “Audit
Committee”) established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act. The Audit Committee currently consists of Messrs. Scott,
Gillen,
and Bogomolny. Each member of the audit committee is currently an independent
director within the meaning of NASD Rule 4200(a)(15). The Board of
Directors has
determined that Messrs. Scott and Gillen are each audit committee financial
experts. The Audit Committee met seven times in fiscal 2005. The Audit
Committee
performs the functions set forth in the EMCORE Corporation Audit Committee
Charter, which has been adopted by the Board of Directors. The Audit
Committee
Charter is available on our website at www.emcore.com.
The
Audit
Committee has reviewed and discussed the Company’s audited financial statements
for fiscal 2005 with management of the Company. The Audit Committee
has
discussed with the Company’s independent registered public accounting firm the
matters required to be discussed by SAS 61. Furthermore, the Audit
Committee has
reviewed management’s assessment of the effectiveness of the Company’s internal
controls over financial reporting, and has reviewed the opinion of
the Company’s
independent registered public accounting firm regarding such assessment
and the
effectiveness of the Company’s internal controls over financial
reporting.
The
Audit
Committee has received the written disclosures and letter from the
Company’s
independent registered public accounting firm required by independence
Standards
Board Standard No. 1, and has discussed with such accounting firm the
independence of such accounting firm. Based on the foregoing review
and
discussions, the Audit Committee recommended to the Board of Directors
that the
Company’s audited financial statements be included in the Company’s Annual
Report on Form 10-K for Fiscal 2005, which was filed on December 14,
2005.
The
Audit
Committee has determined that the provision of non-audit services by
Deloitte
& Touche LLP is compatible with maintaining the independence of Deloitte
& Touche LLP. In accordance with its charter, the Audit Committee approves
in advance all audit and non-audit services to be rendered by Deloitte
&
Touche LLP. In considering whether to approve such services, the Audit
Committee
will consider the following:
| · |
Whether
the services are performed principally for the Audit
Committee
|
| · |
The
effect of the service, if any, on audit effectiveness or
on the quality
and timeliness of the Company’s financial reporting
process
|
| · |
Whether
the service would be performed by a specialist (e.g. technology
specialist) and who also provide audit support and whether
that would
hinder independence
|
| · |
Whether
the service would be performed by audit personnel and, if
so, whether it
will enhance the knowledge of the Company’s
business
|
| · |
Whether
the role of those performing the service would be inconsistent
with the
auditor’s role (e.g., a role where neutrality, impartiality and auditor
skepticism are likely to be
subverted)
|
| · |
Whether
the audit firm’s personnel would be assuming a management role or creating
a mutuality of interest with
management
|
| · |
Whether
the auditors would be in effect auditing their own
numbers
|
| · |
Whether
the project must be started and completed very
quickly
|
| · |
Whether
the audit firm has unique expertise in the service,
and
|
| · |
The
size of the fee(s) for the non-audit
service(s)
|
During
fiscal 2005, all professional services provided Deloitte & Touche LLP were
pre-approved by the Audit Committee in accordance with this policy.
|
AUDIT
COMMITTEE
Charles
Thomas Scott, Chairman
Robert
Bogomolny
John
Gillen
|
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM UNDER PROPOSAL II.
PROPOSAL
III: TO APPROVE AN INCREASE IN THE NUMBER
OF
SHARES
AVAILABLE UNDER EMCORE'S 2000 STOCK OPTION PLAN
General
On
November 8, 1999, the Board of Directors adopted the EMCORE Corporation
2000
Stock Option Plan (the “2000 Plan”). The 2000 Plan became effective upon its
approval by the Company’s shareholders at the 2000 Annual Meeting. It was
amended by a vote of the shareholders at the Company’s 2001 Annual Meeting to
increase the number of shares of Common Stock on which options could
be granted
by 3,300,000, to 4,750,000, and amended a second time by a vote of
the
shareholders at the Company’s 2004 Annual Meeting to increase the number of
shares of Common Stock on which options could be granted by 2,100,000
(for a
maximum total of 6,850,000).
At
the
2006 Annual Meeting, the shareholders will be requested to approve
an additional
increase in the number of shares of Common Stock available for issuance
under
the 2000 Plan. As of the date of the 2006 Annual Meeting, we expect
to have
options for only approximately 421,000 shares authorized and available
for
issuance under the 2000 Plan. Furthermore, no shares are currently
available for
grant under the EMCORE Corporation 1995 Incentive and Non-Statutory
Stock Option
Plan (as amended, the “1995 Plan”). The 1995 Plan had allowed the grant of a
total of 2,744,118 shares of Common Stock (on a post-split basis) pursuant
to
stock options and stock appreciation rights.
Our
Company’s philosophy on employee compensation is to provide employees and
management with equity participation linked to long-term stock price
performance, while at the same time remaining sensitive to the potential
impact
on our other shareholders. We believe that offering broad-based equity
compensation through stock options is critical to attracting and retaining
the
highest caliber employees. Employees with a stake in the future success
of our
business are motivated to achieve long-term growth and thus maximize
shareholder
value. Options have historically formed a significant portion of our
employees’
overall compensation, and almost all of our current employees have
received
options. The purpose of this proposal is to provide sufficient reserves
of
shares, based on our current business plans, to ensure the Company’s ability to
continue to provide new hires, employees and management with an equity
stake in
the Company over the next year.
The
Company’s three-year average “burn rate” (the average number of stock options
granted during fiscal 2003-2005 compared to the total shares outstanding
in each
fiscal year) is roughly 6.2%. This is lower than the maximum burn rate
threshold
(one standard deviation above the mean burn rate of a company’s peer group)
announced by the Institutional Shareholder Services (“ISS”) in its 2006 policy
updates, which ISS reports is 7.7% for semiconductor-related companies
in the
Russell 3000. Furthermore, the Company’s burn rates in the past two fiscal years
(3.7% in fiscal 2005 and 4.0% in fiscal 2004) are significantly lower
than the
mean burn rate (4.8%) for semiconductor-related companies in the Russell
3000.
In fiscal 2006, given continued progress towards key financial objectives
and
assuming that this proposal is approved by the Company’s shareholders, the Board
of Directors expects to award stock option grants at all levels of
the Company
that would total approximately 2.1 million shares, which would result
in a
fiscal 2006 burn rate (4.4%) that is again below the mean burn rate
(4.8%) for
semiconductor-related companies in the Russell 3000.
Accordingly,
on October 20, 2005, the Board of Directors, acting on the recommendation
of the
Compensation Committee, unanimously adopted an amendment to the 2000
Plan,
subject to approval by the shareholders, to increase the total number
of shares
of Common Stock on which options may be granted under the 2000 Plan
by
2,500,000, to 9,350,000. The Board of Directors recommends approval
of this
amendment to the 2000 Plan to permit the issuance of this increased
number of
shares of Common Stock thereunder. The Board of Directors believes
that this
proposed increase is in the best interests of the Company and the shareholders.
In the event this proposal is not approved by our shareholders, and
as a
consequence we are unable to continue to grant options at competitive
levels,
the Board of Directors believes that it will negatively affect our
ability to
meet our need for highly qualified personnel and our ability to manage
future
growth.
If
this
proposal is adopted, the third sentence of Section 4(a) of the 2000
Plan would
be amended to read, in its entirety, as follows:
“The
total number of shares of Stock that may be delivered pursuant to Options
granted under the Plan is 9,350,000, plus any shares of Stock subject
to a stock
option granted under the Predecessor Plan which for any reason expires
or is
terminated or canceled without having been fully exercised by delivery
of shares
of Stock; provided,
however,
that the
number of shares of Stock that may be delivered pursuant to Incentive
Stock
Options under the Plan is 9,350,000, without application of paragraph
4(d) of
this Section 4.”
Other
key
features of the 2000 Plan and significant historical option grant information
are as follows:
| · |
The
2000 Plan and the 1995 Plan were both approved by the Company’s
shareholders;
|
| · |
The
2000 Plan is administered solely by the Compensation Committee,
which is
composed entirely of independent
directors;
|
| · |
It
is the Company’s policy only to grant options under the 2000 Plan that
have an exercise price equal to or greater than the fair
market value of
our common stock at the date of
grant;
|
| · |
It
is the Company’s policy to grant options with a five-year vesting schedule
for first-time grants;
|
| · |
The
2000 Plan authorizes only the grant of options;
and
|
| · |
The
2000 Plan does not include any automatic share reserve
increase provision
(i.e. any “evergreen” provision).
|
Effective
October 1, 2005, the first day of fiscal 2006, EMCORE adopted SFAS
No. 123(R),
Share-Based
Payment
(Revised
2004), on a modified prospective basis. As a result, EMCORE will now
include
stock-based compensation costs in its results of operations for the
fiscal
quarter ended December 31, 2005 and subsequent reporting periods.
This
proposal summarizes the essential features of the 2000 Plan, as it
would be
amended pursuant to this proposal. You should read the amended plan
for a full
statement of its terms and conditions. A copy of the 2000 Plan may
be obtained
upon written request to our Investor Relations Department at 145 Belmont
Drive,
Somerset, NJ 08873.
Description
of Material Features of the 2000 Plan
The
purpose of the 2000 Plan is to enable us to grant stock options to
eligible
officers, employees, non-employee directors and consultants at levels
we believe
will motivate superior performance and help us attract and retain outstanding
personnel. We believe that providing our key personnel with stock option
incentives will enhance our long-term performance.
The
2000
Plan became effective at the 2000 Annual Meeting. As previously amended,
the
2000 Plan currently provides for the grant of options to purchase a
total of up
to 6,850,000 shares
of
Common Stock (subject to adjustment for certain changes in our capital,
as
described below under “Changes in Capital”).
Administration.
The
Compensation Committee has the exclusive discretionary authority to
operate,
manage and administer the 2000 Plan in accordance with its terms. The
Compensation Committee’s decisions and actions concerning the 2000 Plan are
final and conclusive. Within the limitations of the 2000 Plan and applicable
laws and rules, the Compensation Committee may allocate or delegate
its
administrative responsibilities and powers under the 2000 Plan, and
our Board of
Directors is permitted to exercise all of the Compensation Committee's
powers
under the 2000 Plan.
In
addition to its other powers under the 2000 Plan described in this
summary, the
Compensation Committee has the following authorities and powers under
the 2000
Plan in accordance with its terms:
| · |
to
determine which eligible employees, officers, directors
and/or consultants
will receive options under the 2000 Plan and the number
of shares of
Common Stock covered by each such
option;
|
| · |
to
establish, amend, waive and rescind rules, regulations
and guidelines for
carrying out the 2000 Plan;
|
| · |
to
establish, administer and waive terms, conditions, performance
criteria,
restrictions, or forfeiture provisions, or additional terms,
under the
2000 Plan, or applicable to options granted under the 2000
Plan;
|
| · |
to
accelerate the vesting or exercisability of options granted
under the 2000
Plan;
|
| · |
to
offer to buy out outstanding options granted under the
2000
Plan;
|
| · |
to
determine the form and content of the option agreements
which represent
options granted under the 2000
Plan;
|
| · |
to
interpret the 2000 Plan and option
agreements;
|
| · |
to
correct any errors, supply any omissions and reconcile
any inconsistencies
in the 2000 Plan and/or any option agreements;
and
|
| · |
to
take any actions necessary or advisable to operate and
administer the 2000
Plan.
|
Currently,
the Compensation Committee consists of Messrs. Gillen, Scott, and Bogomolny,
each of whom is a director, but not an employee, of EMCORE.
Shares
Subject to the 2000 Plan; Limitations on Grants of
Options.
If this
proposal is approved by the shareholders, a total of 9,350,000 shares
of Common
Stock would be available for delivery upon exercise of options granted
under the
2000 Plan, subject to adjustment for certain changes in our capital
(described
below under “Changes in Capital”). The shares of Common Stock that may be
delivered under the 2000 Plan consist of either authorized and unissued
shares
(which will not be subject to preemptive rights) or previously issued
shares
that we have reacquired and hold as treasury shares. In addition, shares
of
Common Stock covered by options that terminate or are canceled before
being
exercised under the 2000 Plan or the 1995 Plan would be available for
future
options grants under the 2000 Plan. If any person exercises an option
under the
2000 Plan or the 1995 Plan by paying the exercise price with shares
of Common
Stock which such person already owns, only the number of shares in
excess of the
shares so paid by such person will count against the total number of
shares that
may be delivered under the 2000 Plan. “Incentive Stock Options” (as described
below under “Terms of Options—Types of Options”) covering no more than a total
of 9,350,000 shares of Common Stock may be granted under the 2000
Plan.
No
more
than 600,000 shares of Common Stock (subject to adjustment for certain
changes
in our capital (described below under “Changes in Capital”)) may be subject to
options granted under the 2000 Plan to a single recipient during a
12-month
period.
Participation.
The
Compensation Committee may grant options under the 2000 Plan to our
officers,
employees, directors (including non-employee directors) and consultants,
as well
as those of our affiliates. Our affiliates, for purposes of the 2000
Plan, are
generally entities in which we have, directly or indirectly, greater
than 50
percent ownership interest, or which have a more than 50 percent direct
or
indirect ownership interest in us, or any other entity in which we
have a
material equity interest that the Compensation Committee designates
as an
affiliate for purposes of the 2000 Plan. Only employees of EMCORE and
its
subsidiaries (as defined in the 2000 Plan) are eligible to receive
“incentive
stock options” under the 2000 Plan, however.
All
of
our employees (currently approximately 675 in number), including all
of our
executive officers (5 in number, of whom 3 are also directors), are
eligible to
receive options under the 2000 Plan. The individuals to whom additional
options
will be granted under the 2000 Plan, and the amounts of such individual
grants,
have not been determined, but it is anticipated that, among others,
all of our
Named Executive Officers, will receive such additional options under
the 2000
Plan. Options are granted on a discretionary basis as approved by the
Compensation Committee.
Terms
of Options.
Types
of Options.
Additional options to be granted under the 2000 Plan will be either
“incentive
stock options,” which are intended to receive special tax treatment under the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), or
options other than incentive stock options (referred to as “non-qualified
options”), as determined by the Compensation Committee and stated in the
applicable option agreement.
Option
Price.
The
Compensation Committee determines the option exercise price of each
option
granted under the 2000 Plan at the time of grant. However, the per-share
exercise price of an “incentive stock option” granted under the 2000 Plan must
be at least equal to 100 percent of the fair market value of Common
Stock (as
defined in the 2000 Plan) on the date such incentive stock option is
granted. On
December 23, 2005, the fair market value of a share of Common Stock
was $7.63.
Payment.
The
option exercise price of any options granted under the 2000 Plan may
be paid in
any legal manner prescribed by the Compensation Committee. The method
of payment
includes a “cashless exercise” program if the Compensation Committee elects to
establish such a program, or use of shares of Common Stock already
owned for at
least six months by the person exercising an option, subject in any
case to
whatever conditions or limitations the Compensation Committee may prescribe.
Any
cash proceeds that we receive upon the exercise of options granted
under the
2000 Plan constitute general funds of EMCORE.
Exercise
of Options.
The
Compensation Committee determines, as set forth in the applicable option
agreements, the times or conditions upon which options granted under
the 2000
Plan may be exercised, and any events that will cause such options
to terminate.
Each option granted under the 2000 Plan will expire on or before ten
years
following the date such option was granted. In general, options granted
under
the 2000 Plan also terminate when the recipient’s service as a director,
employee or consultant of EMCORE or its affiliates terminates; however,
the
Compensation Committee may permit an option that has not otherwise
expired to be
exercised after such a termination of service as to all or part of
the shares
covered by such option. A recipient may elect to defer until a later
date
delivery of shares otherwise deliverable upon exercise of such recipient’s
option, if permitted by the Compensation Committee.
Transferability
of Options.
Options
granted under the 2000 Plan are, in general, only exercisable during
the
lifetime of the recipient by him or her. A deceased recipient’s options are,
however, transferable by will or the laws of descent and distribution
or to a
designated beneficiary of such recipient. The Compensation Committee
may permit
the recipient of a non-qualified option under the 2000 Plan to transfer
such
option during his or her lifetime, subject to such terms and conditions
as the
Compensation Committee may prescribe.
Changes
in Capital.
In order
to preserve the benefits or potential benefits intended to be made
available
under the 2000 Plan or outstanding options, or as otherwise necessary,
the
Compensation Committee may, in its discretion, make appropriate adjustments
in
(a) the number, class and kind of shares available under the 2000 Plan,
(b) the
limit on the number of shares of Common Stock that can be subject to
options
granted to a single recipient during a 12-month period, and (c) the
number,
class, kind and price of shares under each outstanding option, in the
event of
changes in our outstanding common stock resulting from certain changes
in our
corporate structure or capitalization, such as the payment of a stock
dividend,
a stock split, a recapitalization, reorganization, merger or consolidation
(whether or not EMCORE is the surviving corporation), a spin-off, liquidation
or
other substantial distribution of assets or the issuance of our stock
for less
than full consideration, or rights or convertible securities with respect
to our
stock.
In
the
event of a “change in control” of EMCORE (as defined in the 2000 Plan), all
options then outstanding under the 2000 Plan will be accelerated and
become
immediately exercisable in full. The 2000 Plan gives the Compensation
Committee
discretion, in the event of such a change in control transaction, to
substitute
for shares of Common Stock subject to options outstanding under the
2000 Plan
shares or other securities of the surviving or successor corporation,
or another
corporate party to the transaction, with approximately the same value,
or to
cash out outstanding options based upon the highest value of the consideration
received for Common Stock in such transaction, or, if higher, the highest
fair
market value of Common Stock during the 30 business days immediately
prior to
the closing or expiration date of such transaction, reduced by the
option
exercise price of the options cashed out. The Compensation Committee
may also
provide that any options subject to any such acceleration, adjustment
or
conversion cannot be exercised after such a change in control transaction.
If
such a change in control transaction disqualifies an employee’s incentive stock
options from favorable “incentive stock option” tax treatment under the Internal
Revenue Code or results in the imposition of certain additional taxes
on such an
employee, we may, in the Compensation Committee’s discretion, make a cash
payment that would leave such an employee in the same after-tax position
that he
or she would have been in had such disqualification not occurred, or
to
otherwise equalize such employee for such taxes.
Tax
Withholding Obligations.
Recipients who exercise their options under the 2000 Plan are required
to pay,
or make other satisfactory arrangements to pay, tax withholding obligations
arising under applicable law with respect to such options. Such taxes
must be
paid in cash by a recipient, or, if the Compensation Committee permits,
a
recipient may elect to satisfy all or a part of such tax obligations
by
requesting that we withhold shares otherwise deliverable upon the exercise
of
his or her option and/or by tendering shares of Common Stock already
owned by
such recipient for at least six months. We may also, in accordance
with
applicable law, deduct any such taxes from amounts that are otherwise
due to
such a recipient.
Amendment
and Termination of the 2000 Plan.
Our
Board of Directors may amend, alter, suspend or terminate the 2000
Plan.
However, the Board of Directors will be required to obtain approval
of the
shareholders, if such approval is required by any applicable law (including
requirements relating to incentive stock options) or rule, of any amendment
of
the 2000 Plan that would:
| · |
except
in the event of certain changes in our capital (as described
above under
“Changes in Capital”), increase the number of shares of Common Stock that
may be delivered under the 2000 Plan, or that may be subject
to options
granted to a single recipient in a 12-month
period;
|
| · |
decrease
the minimum option exercise price required by the 2000
Plan;
|
| · |
change
the class of persons eligible to receive options under
the 2000 Plan; or
|
| · |
extend
the duration of the 2000 Plan or the exercise period of
any options
granted under the 2000 Plan.
|
Accordingly,
a vote of the shareholders is required for the amendment to the 2000
Plan
contemplated by this proposal.
The
Compensation Committee may amend outstanding options. However, no such
amendment
or termination of the 2000 Plan or amendment of outstanding options
may
materially impair the previously accrued rights of any recipient of
an option
under the 2000 Plan without his or her written consent.
The
2000
Plan will terminate on February 16, 2010, unless the 2000 Plan is terminated
earlier by our Board of Directors or due to delivery of all shares
of Common
Stock available under the 2000 Plan; however, any options outstanding
when the
2000 Plan terminates will remain outstanding until such option terminates
or
expires.
Certain
Federal Income Tax Consequences.
The
following is a brief summary of certain significant United States Federal
income
tax consequences, under the Internal Revenue Code, as in effect on
the date of
this summary, applicable to EMCORE and recipients of options under
the 2000 Plan
(who are referred to in this summary as “optionees”) in connection with the
grant and exercise of options under the 2000 Plan. This summary is
not intended
to be exhaustive, and, among other things, does not describe state,
local or
foreign tax consequences, or the effect of gift, estate or inheritance
taxes.
References to “EMCORE” and “us” in this summary of tax consequences mean EMCORE
Corporation or any affiliate of EMCORE Corporation that employs an
optionee, as
the case may be.
The
grant
of stock options under the 2000 Plan will not result in taxable income
to
optionees or an income tax deduction for us. However, the transfer
of Common
Stock to optionees upon exercise of their options may or may not give
rise to
taxable income to the optionees and tax deductions for us, depending
upon
whether the options are “incentive stock options” or non-qualified
options.
The
exercise of a non-qualified option generally results in immediate recognition
of
ordinary income by the optionee and a corresponding tax deduction for
us in the
amount by which the fair market value of the shares of Common Stock
purchased,
on the date of such exercise, exceeds the aggregate option price. Any
appreciation or depreciation in the fair market value of such shares
after the
date of such exercise will generally result in a capital gain or loss
to the
optionee at the time he or she disposes of such shares.
In
general, the exercise of an incentive stock option is exempt from income
tax
(although not from the alternative minimum tax) and does not result
in a tax
deduction for us at any time unless the optionee disposes of the common
stock
purchased thereby within two years of the date such incentive stock
option was
granted or one year of the date of such exercise (known as a “disqualifying
disposition”). If these holding period requirements under the Internal Revenue
Code are satisfied, and if the optionee has been an employee of us
at all times
from the date of grant of the incentive stock option to the day three
months
before such exercise (or twelve months in the case of termination of
employment
due to disability), then such optionee will recognize any gain or loss
upon
disposition of such shares as capital gain or loss. However, if the
optionee
makes a disqualifying disposition of any such shares, he or she will
generally
be obligated to report as ordinary income for the year in which such
disposition
occurs the excess, with certain adjustments, of the fair market value
of the
shares disposed of, on the date the incentive stock option was exercised,
over
the option price paid for such shares. We would be entitled to a tax
deduction
in the same amount so reported by such optionee. Any additional gain
realized by
such optionee on such a disqualifying disposition of such shares would
be
capital gain. If the total amount realized in a disqualifying disposition
is
less than the exercise price of the incentive stock option, the difference
would
be a capital loss for the optionee.
Under
Section 162(m) of the Internal Revenue Code, we may be limited as to
Federal
income tax deductions to the extent that total annual compensation
in excess of
$1 million is paid to our Chief Executive Officer or any one of our
other four
highest paid executive officers who are employed by us on the last
day of our
taxable year. However, certain “performance-based compensation” the material
terms of which are disclosed to and approved by our shareholders is
not subject
to this deduction limitation. We have structured the 2000 Plan with
the
intention that compensation resulting from options granted under the
2000 Plan
will be qualified performance-based compensation and, assuming shareholder
approval of the 2000 Plan, deductible without regard to the limitations
otherwise imposed by Section 162(m) of the Internal Revenue Code.
Under
certain circumstances, accelerated vesting or exercise of options under
the 2000
Plan in connection with a “change in control” of EMCORE might be deemed an
“excess parachute payment” for purposes of the golden parachute payment
provisions of Section 280G of the Internal Revenue Code. To the extent
it is so
considered, the optionee would be subject to an excise tax equal to
20 percent
of the amount of the excess parachute payment, and we would be denied
a tax
deduction for the excess parachute payment.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
INCREASE IN SHARES AVAILABLE UNDER THE 2000 STOCK OPTION PLAN IN ACCORDANCE
WITH
PROPOSAL III.
PROPOSAL
IV: TO APPROVE AN INCREASE IN THE NUMBER
OF
SHARES
AVAILABLE UNDER EMCORE'S 2000 EMPLOYEE STOCK PURCHASE
PLAN
General
On
November 8, 1999, the Board of Directors adopted the EMCORE Corporation
2000
Employee Stock Purchase Plan (the “2000 ESPP”), which provides the Company’s
employees with the opportunity to acquire an ownership interest in
EMCORE
Corporation through the purchase of shares of the Company’s common stock
through
payroll deductions. The option price is set at 85% of the market price
for the
Company’s common stock on either the first or last day of the participation
period, whichever is lower. Contributions are limited to 10% of an
employee's
compensation. The
2000
ESPP became effective upon its approval by the Company’s shareholders at the
2000 Annual Meeting. In
fiscal
2004, the 2000 ESPP was amended by the Board of Directors to change
from a
12-month duration plan to a 6-month duration plan, with new participation
periods beginning in January and July of each year.
The
2000
ESPP currently provides for a total of 1,000,000 shares of the Company’s common
stock for purchase by employees, subject to adjustment for certain
changes in
our capital (described under “Changes in Capital” below). The 2000 ESPP
qualifies as an “employee stock purchase plan” under section 423 of the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”), so that our
employees may enjoy certain tax advantages (see“Certain
Federal Income Tax Consequences” below).
At
the
2006 Annual Meeting, the shareholders will be requested to approve
an increase
in the number of shares of Common Stock available for issuance under
the 2000
ESPP. As of the date of the 2006 Annual Meeting, we expect to have
no
shares
authorized and available for issuance under the 2000 ESPP, and to have
had to
cut back Participant purchases on the December 30, 2005 exercise date
because of
the lack of available shares.
On
October 20, 2005, the Board of Directors, acting on the recommendation
of the
Compensation Committee, unanimously adopted an amendment to the 2000
ESPP,
subject to approval by the shareholders, to increase the total number
of shares
of Common Stock on which options may be granted under the 2000 ESPP
by
1,000,000, to 2,000,000. The Board of Directors recommends approval
of this
amendment to the 2000 ESPP to permit the issuance of this increased
number of
shares of Common Stock thereunder. The Board of Directors believes
that this
proposed increase is in the best interests of the Company and the shareholders.
In the event this proposal is not approved by our shareholders, and
as a
consequence we are unable to continue to grant options at competitive
levels,
the Board of Directors believes that it will negatively affect our
ability to
meet our need for highly qualified personnel and our ability to manage
future
growth.
If
this
proposal is adopted, the first sentence of Section 5.01(a) of the 2000
ESPP
would be amended to read, in its entirety, as follows:
“The
maximum number of shares of Common Stock that may be issued under the
Plan shall
be 2,000,000 shares.”
Effective
October 1, 2005, the first day of fiscal 2006, EMCORE adopted SFAS
No. 123(R),
Share-Based
Payment
(Revised
2004), on a modified prospective basis. As a result, EMCORE will now
include
stock-based compensation costs in its results of operations for the
fiscal
quarter ended December 31, 2005 and subsequent reporting periods.
This
proposal summarizes the essential features of the 2000 ESPP, as it
would be
amended pursuant to this proposal. You should read the amended plan
for a full
statement of its terms and conditions. A copy of the 2000 ESPP may
be obtained
upon written request to our Investor Relations Department at 145 Belmont
Drive,
Somerset, NJ 08873.
Description
of Material Features of the 2000 ESPP
Administration.
The
Board of Directors selects at least three of its members to serve on
a Committee
that administers the 2000 ESPP. Subject to limitations of applicable
laws or
rules, the Board of Directors may exercise the powers of the Committee,
and, if
no such committee exists, the Board of Directors will perform all the
functions
of the Committee. All decisions and actions of the Committee will be
final and
conclusive. Subject to limitations of applicable laws or rules, the
Committee
may delegate its administrative responsibilities and powers under the
2000
ESPP.
In
addition to its other powers under the 2000 ESPP described in this
summary, and
subject to the express provisions of the 2000 ESPP, the Committee will
have
discretionary authority to:
| · |
interpret
the 2000 ESPP and option
agreements,
|
| · |
determine
eligibility to participate in the 2000
ESPP,
|
| · |
adjudicate
and determine all disputes arising under or in connection
with the 2000
ESPP,
|
| · |
impose
restrictions on ownership and transferability of the shares
of our common
stock underlying options granted under the 2000
ESPP
|
| · |
establish
procedures for carrying out the 2000 ESPP,
and
|
| · |
make
all other determinations deemed necessary or advisable for
administering
the 2000 ESPP.
|
The
Compensation Committee (which consists of Messrs. Gillen, Scott, and
Bogomolny,
each of whom is a director, but not an employee, of EMCORE) is presently
responsible for managing the 2000 ESPP.
Eligibility.
All
full-time and part-time employees of EMCORE and those of our designated
subsidiaries are eligible to participate in the 2000 ESPP, except:
an
employee may not be granted an option under the 2000 ESPP if:
| · |
immediately
after the grant of such option, the employee would own 5
percent or more
of the vote or value of all classes of our stock or the stock
of any of
our subsidiaries, or
|
| · |
such
option would permit the employee to purchase more than $25,000
of our
stock (using the fair market value of our stock at the time
the option is
granted) under the 2000 ESPP (and any other employee stock
purchase plan
of us or our subsidiaries) per calendar year when the option
is
outstanding;
|
and
the
Committee may, in its discretion, exclude from participation in the
2000 ESPP
employees who:
| · |
customarily
work 20 or fewer hours per week,
|
| · |
customarily
work 5 or fewer months per calendar year,
or
|
| · |
are
highly compensated employees (within the meaning of Section
414(q) of the
Internal Revenue Code).
|
Since
the
effective date of the 2000 ESPP (and until the Committee determines
otherwise),
employees who customarily work 20 or fewer hours per week, or who customarily
work 5 or fewer months per calendar year, have been ineligible to participate
in
the 2000 ESPP.
Approximately
675 employees are currently eligible to participate in the 2000 ESPP.
In
December 2004 (for the period from July 1, 2004 to December 31, 2004),
employees
participating in the 2000 ESPP purchased 167,546 shares of the Company’s common
stock. In June 2005 (for the period from January 1, 2005 to June 30,
2005),
employees participating in the 2000 ESPP purchased 174,169 shares of
the
Company’s common stock.
Terms
of Options.
Options
and Offering Periods.
An
option granted to an eligible employee under the 2000 ESPP allows the
employee
to use payroll deductions accumulated during successive six-month offering
periods to purchase shares of our common stock at the end of each offering
period. The option price of the shares is the lesser of 85 percent
of our common
stock's fair market value on the first day of the offering period or
the last
day of the offering period. Offering periods begin on the first trading
date on
or after January 1 and July 1, and end on the last trading date on
or before
June 30 and December 31 of each calendar year, while the 2000 ESPP
is in effect.
The Committee may change the commencement and duration of offering
periods under
the Purchase Plan. Our Board of Directors also may terminate a pending
offering
period, in which case payroll deductions that have accumulated in participants'
accounts (see
"Payroll
Deductions" below) will be used to exercise outstanding options or
returned to
the appropriate participants, as determined by the Board of Directors,
in its
discretion.
Participation.
Each
eligible employee decides for himself or herself whether to participate
or not
participate in the 2000 ESPP during each offering period. An eligible
employee
may elect to enroll in the 2000 ESPP by filing an agreement with the
Company’s
payroll office before the first day of the applicable offering
period.
Payroll
Deductions.
A
participant's agreement must specify the percentage, from 1 to 10 percent,
to be
deducted from his or her compensation (as defined in the 2000 ESPP)
on each
payroll date during the offering period. Payroll deductions will be
credited to
a bookkeeping account in the participant's name. The Company does not
set aside
any assets with respect to such participant accounts, and such accounts
do not
bear interest. A participant may decrease his or her contribution rate
no more
than once each offering period. The Committee may limit the number
of
participants who change their contribution rates during any offering
period and
may, subject to certain limitations in the 2000 ESPP, decrease the
contribution
rate of any participants. Except in the event of a change in control
of EMCORE
(as described under "Changes in Capital" below), participants are not
permitted
to make contributions to their accounts under the 2000 ESPP otherwise
than
through payroll deductions as described above.
Exercise
of Option.
Unless
a participant provides the Company with written notice or withdraws
from the
2000 ESPP, his or her option will be automatically exercised on the
last day of
the offering period to purchase the maximum number of full shares of
our common
stock that can be purchased at the applicable option price using the
accumulated
payroll deductions in the participant's account. The 2000 ESPP sets
forth
certain limitations on the number of shares that a participant may
purchase in a
single offering period. Any excess payroll deductions remaining in
a
participant's account after exercise of his or her option will be returned
to
the participant, without interest, and may not be used to exercise
options
granted under the 2000 ESPP in any subsequent offering period (except
for any
excess funds attributable to the inability to purchase a fractional
share, which
will be retained in the participant's account for a subsequent offering
period
or may be withdrawn by the participant).
Withdrawal/Termination
of Employment.
A
participant may withdraw from the 2000 ESPP at any time, receiving
payment of
his or her accumulated payroll deductions and ceasing further payroll
deductions, by providing the Company with written notice to withdraw.
If a
participant so terminates his or her employment, such participant will
be
considered to have withdrawn from the 2000 ESPP. A leave of absence
in excess of
90 days without a guaranteed right to reemployment will be considered
a
termination of employment for purposes of the 2000 ESPP. When a participant
withdraws from the 2000 ESPP, his or her unexercised options will automatically
terminate, and we will return to the participant all accumulated payroll
deductions in his or her account.
Transferability
of Options.
No one
other than the participant who receives an option under the 2000 ESPP
may
exercise such option during such participant's lifetime. Participants
are not
entitled to transfer, assign or otherwise dispose of their payroll
deductions or
rights to exercise options or receive common stock under the 2000 ESPP,
except,
in the event of a participant's death, by will, the laws of descent
and
distribution or to the deceased participant's designated
beneficiary.
Changes
in Capital.
In the
event of certain changes in our outstanding common stock or capital
structure,
such as a stock dividend, stock split, recapitalization, reorganization,
merger,
consolidation, or corporate separation or division, or change in the
number of
shares of our capital stock effected without receipt of full consideration,
the
Committee may, in its discretion, make appropriate adjustments or substitutions
with respect to the following to reflect equitably the effects of such
changes
to participants in the 2000 ESPP:
| · |
the
number, class and kind of shares available under the 2000
ESPP,
|
| · |
the
number, class and kind of shares covered by outstanding
options,
|
| · |
the
maximum number of shares that a participant may purchase
during an
offering period,
|
| · |
the
option prices of outstanding options,
and
|
| · |
any
other necessary characteristics or terms of the 2000 ESPP
or the
options.
|
If
a
"change in control" of EMCORE (as defined in the 2000 ESPP) occurs,
the 2000
ESPP gives the Committee discretion to:
| · |
terminate
the pending offering period and permit each participant to
make a one-time
cash contribution equal to the amount that the Committee
determines such
participant would have contributed under the 2000 ESPP through
payroll
deductions until the otherwise scheduled end of the pending
offering
period and use the accumulated payroll deductions to exercise
outstanding
options; or
|
| · |
terminate
each participant's options in exchange for a cash payment
equal to (a) the
balance of the participant's account under the 2000 ESPP,
plus
(b) the highest value of the consideration received for a
share of our
common stock in the change in control transaction (or, if
greater, the
highest fair market value of a share of our common stock
during the 30
consecutive trading days prior to the closing or expiration
date of the
change in control transaction), less the option price of
the participant's
option (determined as if the option were exercised on the
closing or
expiration date of the change in control transaction), multiplied
by the
number of full shares of our common stock that the participant
could have
purchased immediately prior to the change in control with
the then
outstanding balance of the participant's account under the
2000
ESPP.
|
Tax
Withholding Obligations.
If any
taxes are required to be withheld when a participant exercises his
or her
option, or when shares are issued under the 2000 ESPP or disposed of
by a
participant, we may, as a condition to delivery of stock certificates
under the
2000 ESPP, require that the participant remit to us the amount necessary
to
satisfy such taxes, or we may make other arrangements, including withholding
from the participant's compensation or other amounts due to such participant,
to
satisfy such taxes.
Amendment
and Termination of the 2000 ESPP.
Our
Board of Directors may terminate, discontinue, amend or suspend the
2000 ESPP at
any time. However, without approval of the shareholders, the Board
of Directors
may not:
| · |
increase
the maximum number of shares that we may issue under the
2000 ESPP, or
that a participant may purchase in any offering period (except
as
described under "Changes in Capital"
above);
|
| · |
change
the class of employees eligible to receive options under
the 2000 ESPP
(except for the designation of any subsidiaries whose employees
will be
eligible to participate in the 2000 ESPP);
or
|
| · |
change
the formula by which the option price is determined under
the 2000
ESPP.
|
Except
for an amendment or termination described under "Changes in Capital"
above, or
in the last sentence of the portion of this summary under "Terms of
Options -
Options and Offering Periods," above, no amendment or termination of
the 2000
ESPP may materially adversely affect the existing rights of any participant
under his or her option without such participant's consent.
Certain
Federal Income Tax Consequences.
The
following is a brief summary of certain significant United States Federal
income
tax consequences under the Internal Revenue Code, as in effect on the
date of
this summary, applicable to EMCORE and employees in connection with
participation and purchase of shares of our common stock under the
2000 ESPP.
This summary is not intended to be exhaustive, and among other things,
does not
describe state, local or foreign tax consequences, or the effect of
gift, estate
or inheritance taxes. References to "EMCORE" and "us" in this summary
of tax
consequences mean EMCORE Corporation or any subsidiary of EMCORE Corporation
that employs an employee who participates in the 2000 ESPP, as the
case may
be.
An
employee will not recognize any taxable income upon an election to
participate
in the 2000 ESPP and receipt of an option to purchase stock under the
2000 ESPP.
The amounts deducted from the salary of an employee who participates
in the 2000
ESPP will constitute ordinary income taxable to the employee. The 2000
ESPP is
intended to qualify for the favorable income tax consequences of Section
423 of
the Internal Revenue Code. As such, no income tax consequences will
arise for an
employee when shares of our common stock are purchased by exercising
such
employee's option under the 2000 ESPP. The employee receives a tax
basis in the
shares purchased equal to his or her payroll deductions used to exercise
the
option.
If
such
an employee does not dispose of the shares purchased upon exercise
of his or her
option under the 2000 ESPP until at least eighteen months after the
grant date
of the employee's option (i.e., the first day of the offering period)
and one
year after the date of such purchase, and if such employee remains
an employee
of EMCORE at all times from the grant date of such option to the day
three
months before such exercise, or if the employee dies while owning such
shares,
the employee will recognize taxable ordinary income upon disposition
of such
shares, or death, equal to the lesser of the excess of the fair market
value of
the shares when the option was granted (i.e., the first day of the
offering
period) over the purchase price paid for such shares or the excess
of the fair
market value of such shares at the time of such disposition or death
over the
purchase price paid for the shares. EMCORE is not entitled to a tax
deduction
with respect to any such disposition. Any such ordinary income recognized
by an
employee upon disposition of his or her shares will increase the employee's
basis in such shares, for purposes of computing capital gain thereon.
Any
proceeds received for the shares in excess of such adjusted basis will
be
taxable as capital gain. If an employee sells such shares for less
than the
purchase price paid, he or she will recognize no such ordinary income,
and such
employee will have a capital loss equal to the difference between the
sale price
and the purchase price previously paid.
If
an
employee disposes of shares purchased under the 2000 ESPP before meeting
the
requisite holding periods described in the preceding paragraph, that
employee
will be required to report taxable ordinary income at the time of such
disposition to the extent of the difference between the fair market
value of
such shares on the date of purchase and the purchase price paid. EMCORE
will
generally be allowed a tax deduction equal to the amount of such ordinary
income
so reported by such employee. The basis of an employee in such shares
acquired
under the 2000 ESPP will be increased by such amount reported as ordinary
income
by such employee upon disposition of such shares. Any proceeds received
for the
shares in excess of such employee's adjusted basis will be taxable
as capital
gain; if such adjusted basis exceeds the amount received for such shares,
such
excess will be a capital loss.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
INCREASE IN SHARES AVAILABLE UNDER THE 2000 EMPLOYEE STOCK PURCHASE
PLAN IN
ACCORDANCE WITH PROPOSAL IV.
GENERAL
MATTERS
Annual
Report on Form 10-K and Financial Statements
The
Company’s 2005 Annual Report on Form 10-K is being mailed to the Company’s
shareholders together with this Proxy Statement. Additional exhibits
to the
Form 10-K not included in this mailing will be furnished upon written
request directed to the Company at 145 Belmont Drive, Somerset, NJ 08873,
Attention: Investor Relations. The Company’s 2005 Annual Report on
Form 10-K (including exhibits thereto) and this Proxy Statement are also
available on the Company’s website (www.emcore.com).
Shareholder
Proposals
Shareholder
proposals intended to be presented at the 2007 Annual Meeting of Shareholders,
including nominations for the Company’s Board of Directors, must be received by
the Company no later than September 29, 2006. Proposals may be mailed
to the
Company, to the attention of Howard W. Brodie, Secretary, 145 Belmont
Drive,
Somerset, NJ 08873. Proposals must comply with all applicable SEC
rules.
Shareholder
Communications with the Board
Shareholders
may communicate with the Company’s Board of Directors through its Secretary by
writing to the following address: Board of Directors, c/o Howard W.
Brodie,
Secretary, EMCORE Corporation, 145 Belmont Drive, Somerset, NJ 08873.
The
Company’s Secretary will forward all correspondence to the Board of Directors,
except for junk mail, mass mailings, product complaints or inquiries,
job
inquiries, surveys, business solicitations or advertisements, or patently
offensive or otherwise inappropriate material. The Company’s Secretary may
forward certain correspondence, such as product-related inquiries,
elsewhere
within the Company for review and possible response.
Board
Attendance at Annual Meetings
The
Company strongly encourages members of the Board of Directors to attend
the
Company’s Annual Meeting of Shareholders, and historically a majority have
done
so. For example, 6 of 8 directors attended the 2004 Annual Meeting,
and 7 of 8
directors attended the 2005 Annual Meeting.
Other
Matters
The
Board
of Directors knows of no other business which will be presented at
the meeting.
If, however, other matters are properly presented, the persons named
in the
enclosed proxy will vote the shares represented thereby in accordance
with their
judgment on such matters.
Proxy Card - Page 1
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