DEF 14A: Definitive proxy statements
Published on January 26, 1998
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
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[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EMCORE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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EMCORE CORPORATION
394 Elizabeth Avenue
Somerset, New Jersey 08873
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, FEBRUARY 27, 1998
To the Shareholders of
EMCORE Corporation:
Notice is Hereby Given that the Annual Meeting of Shareholders of EMCORE
Corporation will be held at the Marriott Hotel, 110 Davidson Avenue, Somerset,
New Jersey 08873 on Friday, February 27, 1998 at 10 o'clock a.m. (E.S.T.) for
the purpose of considering and acting upon the following:
1) The election of 8 Directors.
2) A proposal to approve an amendment to the 1995 Incentive and Non-
Statutory Stock Option Plan to increase the number of common shares
issuable thereunder by 725,000 shares.
3) The ratification of Coopers & Lybrand, L.L.P. as independent auditors
of EMCORE Corporation for the fiscal year ending September 30, 1998.
4) The transaction of such other business as may properly be brought
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 23, 1998
as the record date for the determination of the shareholders of the Company
entitled to notice of and to vote at the Annual Meeting of Shareholders and
any adjournment or postponement thereof. Each share of the Company's common
stock is entitled to one vote on all matters presented at the Annual Meeting.
Shareholders are cordially invited to attend the Annual Meeting. However,
whether or not a shareholder plans to attend, each shareholder is requested to
complete, sign, date and return the enclosed proxy in the accompanying postage
prepaid envelope. Until your proxy is voted you may revoke it by delivery to
the Company of a subsequently executed proxy or a written notice of
revocation. Your prompt response will be appreciated. The Company's Annual
Report, Proxy Statement and Proxy are enclosed with this notice.
By order of the Board of Directors,
Thomas G. Werthan
Secretary
January 26, 1998
EMCORE CORPORATION
394 ELIZABETH AVENUE
SOMERSET, NEW JERSEY 08873
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, FEBRUARY 27, 1998
INTRODUCTION
This proxy statement is being furnished to shareholders of record of EMCORE
Corporation ("EMCORE" or "Company") as of January 23, 1998, 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 on Friday, February 27,
1998 at 10 o'clock a.m. (E.S.T.), at the Marriott Hotel, 110 Davidson Avenue,
Somerset, New Jersey 08873, or at any adjournments thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. Notice
of Annual Meeting, Proxy Statement, Proxy and Annual Report are first being
mailed to shareholders of record on or about January 27, 1998.
As of the close of business on January 23, 1998 the Company had 9,321,107
shares of common stock outstanding ("Common Stock"). 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 referred to below.
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. Abstentions and broker non-votes will be included in the
determination of whether a quorum is present but will not be treated as a vote
cast on a proposal.
PROPOSAL I. ELECTION OF DIRECTORS
All directors of the Company hold office until the next annual meeting of
shareholders or until their successors are duly elected and qualified. The
Board of Directors has no reason to believe that any nominee will be unable to
serve if elected.
The shares represented by proxies returned executed will be voted, unless
otherwise specified, in favor of the 8 nominees for the Board of Directors
named below. If, as a result of circumstances not known or unforeseen, any of
such nominees shall be unavailable to serve as director, the number of
directors to be elected may be reduced. 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 8 nominees unless instructions
to "withhold" votes are set forth on the proxy card. Withheld votes will be
included as votes cast for purposes of determining a plurality.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO ELECT THE 8
NOMINEES FOR THE BOARD OF DIRECTORS NAMED BELOW.
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NOMINEES FOR ELECTION AS DIRECTOR
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(1)Member of Compensation Committee
(2)Member of Nominating Committee
(3)Member of Audit Committee
Howard R. Curd, Howard F. Curd and Thomas Constance, who are currently
directors, are not standing for reelection.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to each of the nominees
for the office of director and other executive officers of EMCORE.
Thomas J. Russell, Ph.D.--Dr. Russell 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. (biotech research) in 1961 and managed the
company until its acquisition by IMS International (pharmaceutical
information) 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.
(biotech research). Since 1992, he has been an investor and director of
several companies. Dr. Russell currently serves as a director of Cordiant plc,
Adidas AG, and Uniroyal Technology Corporation ("UTC"). Dr. Russell is one of
three trustees of the AER 1997 Trust.
Reuben F. Richards, Jr.--Mr. Richards 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 the present, Mr. Richards has been a Senior
Managing Director of Jesup & Lamont Capital Markets Inc. ("Jesup & Lamont")
(an affiliate of a registered broker-dealer). From December 1994 to the
present, he has been a member of and President of Jesup & Lamont Merchant
Partners, L.L.C. (merchant banking). From 1992-1994, Mr. Richards was a
principal with Hauser, Richards & Co., a firm engaged in corporate
restructuring and management turnarounds. From 1986-1992, Mr. Richards was a
Director at Prudential-Bache Capital Funding in its Investment Banking
Division. Mr. Richards also serves as a director of S.A. Telecommunications,
Inc., a full service long distance telecommunications company located in
Richardson, Texas.
Thomas G. Werthan--Mr. Werthan joined the Company in 1992 as its Chief
Financial Officer, Vice President--Finance and Administration and a director.
Mr. Werthan is a Certified Public Accountant and has over 15 years experience
in assisting high technology, venture capital financed growth companies. Prior
to
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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.--Dr. Stall became a director of the Company in
December 1996. Dr. Stall helped found the Company in 1984 and has been 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 materials science technologies. He has co-authored more
than 75 papers and holds four patents on materials science technology and the
characterization of compound semiconductor materials.
Robert Louis-Dreyfus--Mr. Louis-Dreyfus has been a director of the Company
since March 1997. Mr. Louis-Dreyfus has been the Chairman of the Board of
Directors and Chief Executive Officer of Adidas AG (sporting goods) since
April 1993. Prior to that time, he had been from 1990 until 1993 the Chief
Executive Officer of Saatchi & Saatchi plc (now Cordiant plc) (advertising)
and a director of Saatchi & Saatchi plc from January 1990 until December 1994.
Since 1992, he has been an investor and a director of several other companies.
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.
Hugh H. Fenwick--Mr. Fenwick served as a director of the Company from 1990
until 1995, and was again elected to serve on the Company's Board of Directors
in June 1997. Since 1992, Mr. Fenwick has been a private investor and he
currently holds the office of Mayor of Bernardsville, New Jersey, to which he
was elected in 1994. From 1990 until 1992, Mr. Fenwick was the Executive
Director of the Alliance for Technology Management at the Stevens Institute in
Hoboken, New Jersey. Prior to that time, Mr. Fenwick worked as a marketing
executive with Lockheed Electronics and with Alenia (formerly Selenia), an
Italian subsidiary of Raytheon.
Shigeo Takayama--Mr. Takayama became a director of the Company in July 1997.
Mr. Takayama is the Chairman, President of Hakuto Co., Ltd., which he founded
in the 1950s and which is the Company's distributor in Japan and several Asian
countries. Mr. Takayama is a Director of Emeritus of Semiconductor Equipment &
Material International (SEMI), Chairman of the Japan Electronics Products
Importers Association (JEPIA), and Director of the Japan Machinery Importers'
Association (JMIA). Mr. Takayama is also a director of Temptronic Corp., a
semiconductor test equipment manufacturer in Newton, Massachusetts, and of
Anatel Corp., a TOC high-purity water monitor manufacturer in Boulder,
Colorado.
Charles Scott--Mr. Scott has been nominated to serve on the Company's Board
of Directors. Mr. Scott is presently Chairman of Cordiant Communications Group
plc, the successor corporation of the Saatchi & Saatchi Advertising Group. He
joined Saatchi & Saatchi Company in 1990 and served as Chief Financial Officer
until 1992 when he was appointed Chief Operating Officer. In 1993, be became
Chief Executive Officer and held that position until 1996 when he assumed the
title of Chairman.
EXECUTIVE OFFICERS:
William J. Kroll, 53, joined the Company in 1994 as Vice President--Business
Development and in 1996 became Executive Vice President--Business Development.
Prior to 1994, Mr. Kroll served for seven years as Senior Vice President of
Sales and Marketing for Matheson Gas Products, Inc., a manufacturer and
distributor of specialty gases and gas control and handling equipment. In that
position, Mr. Kroll was responsible for $100 million in sales and 700
employees worldwide. Prior to working at Matheson Gas Products, Mr. Kroll was
Vice President of Marketing for Machine Technology, Inc., a manufacturer of
semiconductor equipment for photoresist or applications, plasma strip, and
related equipment.
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Paul T. Fabiano, 33, joined the Company in 1985 as a process engineer and
has served as Vice President--Engineering since March 1996. Mr. Fabiano has
experience in all critical phases of the Company's operations including sales,
service, manufacturing and engineering. During his tenure at the Company, Mr.
Fabiano has held various managerial positions including Vice President,
Manufacturing and Director of Field Engineering.
Louis A. Koszi, 53, joined the Company in 1995 as Vice President--Device
Manufacturing. Prior to 1995, Mr. Koszi was a member of AT&T Bell Laboratories
for 25 years. Mr. Koszi has experience in all phases of semiconductor device
design and manufacturing processes and associated quality programs. Mr. Koszi
holds 17 U.S. patents, five foreign patents, and is a co-author of 35
publications. He was named a Distinguished Member of Technical Staff in 1989.
In 1992, he was presented with the Excellence in Engineering from the Optical
Society of America.
Laurence P. Wagner, 37, joined the Company in March 1996 as Vice President--
Wafer Manufacturing, and has more than twelve years experience in operations,
engineering and research in the electronic and semiconductor materials
industries. Before joining EMCORE, he spent seven years at Shipley Company,
L.L.C., a subsidiary of Rohm & Haas, where he served successively as Corporate
Projects Manager, Product Engineer, Engineering Manager, Manufacturing
Manager, and, from 1994 to 1996, Operating Unit Manager.
David D. Hess, 36, joined the Company in 1989 as General Accounting Manager.
He was named Controller in 1990. Mr. Hess is a Certified Public Accountant and
has more than ten years experience in monitoring and controlling all phases of
product and process cost and general accounting systems. Prior to his
employment at EMCORE, he held several positions as cost accounting manager,
divisional accountant and inventory control supervisor in manufacturing firms
such as Emerson Quiet Kool (air conditioner manufacturers), Huls, North
America (paint/solvent processors), and Brintec Corporation (screw machine
manufacturers).
Thomas M. Brennan, 43, joined the Company as a result of the Company's
acquisition of MicroOptical Devices, Inc. ("MODE") on December 5, 1997 and now
serves as a Vice President of the Company. Prior to co-founding MODE, Mr.
Brennan was a senior member of the technical staff at Sandia National
Laboratories from 1986 to 1996. At Sandia, he focused his efforts on the
material growth of III-V compound semiconductors, reactor design, in-situ
reactor diagnostics, and material characterization. His responsibilities and
activities included growth of some of the first vertical cavity surface-
emitting laser ("VCSEL") material at Sandia and in the U.S., and development
of new and unique manufacturing techniques for VCSEL material growth. Prior to
joining Sandia, Mr. Brennan was a member of the technical staff at AT&T Bell
Laboratories from 1980 to 1984. At both facilities, he focused his efforts on
epitaxial materials growth and characterization, and epitaxial reactor design.
He has published more than 100 articles and holds twelve patents issued and
pending.
Robert P. Bryan, Ph.D., 32, joined the Company as a result of the Company's
acquisition of MODE on December 5, 1997 and now serves as a Vice President of
the Company. Prior to co-founding MODE, he was a co-founder of Vixel
Corporation in 1992, a Bloomfield, Colorado company which, at the time, was
the first commercial company to develop and manufacture VCSEL devices for data
links. He was the specific oversight executive for optoelectronic product
development, including all engineering management. From 1990 to 1992, he was a
senior member of the technical staff at Sandia National Laboratories where his
research focused on the areas of VCSEL design, fabrication and
characterization.
4
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the Company's knowledge, the only persons or groups that may be deemed to
own beneficially 5% or more of the Company's outstanding Common Stock, as of
January 23, 1998, are the following:
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(1) Includes 1,446,559 shares and warrants to purchase 513,910 shares owned by
the AER 1997 Trust. Dr. Thomas J. Russell, one of three trustees for the
AER Trust, is the Chairman of the Company.
(2) Includes warrants to purchase 432,535 shares. Gallium Enterprises Inc. is
controlled by Robert Louis- Dreyfus, a member of the Board of Directors of
the Company.
(3) Based on Schedule 13D/A filed with the Securities and Exchange Commission
on October 22, 1997 (the "Schedule"). As described in the Schedule, West
Highland Capital, Inc. shares voting power with a shareholder group
consisting of Estero Partners, LLC, West Highland Partners, L.P.,
Buttonwood Partners, L.P. and Lang H. Gerhard.
5
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of January 23, 1998, by (i) each
of the Company's directors, (ii) each of the Company's executive officers and
(iii) the Company's directors and executive officers as a group. Except as
otherwise indicated, each nominee named in the table has sole voting and
investment power with respect to the shares as beneficially owned by him.
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* Less than 1.0%
(1) Includes 1,446,559 shares and warrants to purchase 513,910 shares held by
The AER 1997 Trust. See note (1) on previous page relating to The AER
1997 Trust.
(2) Includes of options to purchase 29,412 shares and warrants to purchase
93,015 shares.
(3) Includes options to purchase 28,534 shares and warrants to purchase
23,586 shares.
(4) Includes options to purchase 33,271 shares and warrants to purchase
30,012 shares.
(5) Includes warrants to purchase 93,015 shares.
(6) Includes warrants to purchase 93,015 shares.
(7) Consists of 1,217,510 shares and warrants to purchase 432,535 shares held
by Gallium Enterprises Inc. See note 13.
(8) Includes 367,368 shares owned by Hakuto & Co., Ltd.; Hakuto & Co., Ltd.
is controlled by Shigeo Takayama.
(9) Includes options to purchase 14,954 shares and warrants to purchase
16,134 shares.
(10) Includes options to purchase 14,744 shares and warrants to purchase
14,806 shares.
(11) Includes options to purchase 6,519 shares.
(12) Includes options to purchase 24,112 shares.
(13) Includes options to purchase 24,112 shares.
(14) Includes options to purchase 123,563 shares and warrants to purchase
1,311,193 shares.
CERTAIN TRANSACTIONS AND RELATED PARTIES
In fiscal 1997, the Company entered into a non-exclusive and non-refundable
technology licensing and royalty agreement with Uniroyal Technology
Corporation ("UTC") for the process technology to develop and manufacture high
brightness light emitting diodes. During fiscal year 1997, revenue associated
with the UTC licensing agreement amounted to $2.5 million. UTC's Chairman and
Chief Executive Officer, Howard
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R. Curd, is a member of EMCORE's Board of Directors and EMCORE's Chairman,
Thomas J. Russell, is on the Board of Directors of UTC. Additionally, the
Company and a wholly-owned subsidiary of UTC have agreed in principle to form
a venture in which the Company will have a minority interest, for the
production and marketing of products related to this licensed technology.
Subsequent to September 30, 1997, the Company's outstanding related party
accounts receivable were paid in full and the payments under the terms of the
licensing agreement are not refundable. The Company believes that these
transactions were made on an arms' length basis.
The Chairman and CEO of Hakuto & Co. Ltd. ("Hakuto"), the Company's Asian
distributor, is a member of the Company's Board of Directors and Hakuto is a
minority shareholder of the Company. During the year ended September 30, 1997,
sales made through Hakuto approximated $9.1 million. The Company believes that
these transactions were made on an arms' length basis.
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 Securities Exchange Act of 1934, as amended, 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,
except for Form 4 filed by Mr. Wagner with respect to an exercise of 1,941
options to purchase shares of Common Stock at an exercise price of $4.08 per
share which was filed late.
COMPENSATION OF DIRECTORS
The Board of Directors met six times during fiscal 1997. In July 1997, the
Company instituted its Directors' Stock Award Plan whereby non-employee
directors will receive a fee in the amount of $3,000 per Board meeting
attended and $500 for each committee meeting attended ($600 for the Chairman
of the committee), including in each case reimbursement of reasonable out-of-
pocket expenses incurred in connection with such Board or committee. Payment
of all fees will be made in Common Stock of the Company based on the average
of the last reported bid and ask prices as of the close of trading on the
Nasdaq National Market on the day next preceding the applicable meeting date.
No director who is an employee of the Company will receive compensation for
services rendered as a director. 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 payable in
Common Stock. During fiscal year 1997, all directors of the Company attended
at least 89% of the aggregate meetings of the Board and committees on which
they served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of Thomas J.
Russell, Howard R. Curd and Hugh H. Fenwick. 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 employee of the Company. The Compensation Committee meets once
annually.
NOMINATING COMMITTEE
The Company's Nominating Committee currently consists of Thomas J. Russell,
Reuben F. Richards, Jr. and Richard Stall. The Nominating Committee recommends
new members to the Company's Board of Directors. The Nominating Committee
meets once annually. The Nominating Committee also recommends to the Board
candidates for election as Directors, and would consider nominees recommended
by stockholders. Such
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recommendations should be submitted in writing to the Secretary of the Company
with a description of the proposed nominee's qualifications and other relevant
biographical information, and the nominee's consent to serve as a director.
AUDIT COMMITTEE
The Company's Audit Committee currently consists of and Howard F. Curd,
Thomas E. Constance and Hugh H. Fenwick. The Audit Committee recommends the
engagement of the Company's independent accountants, approves the auditing
services performed, and reviews and evaluates the Company's accounting
policies and systems of internal controls. The Audit Committee meets once
annually.
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended Certificate of Incorporation and Amended and Restated
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.
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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, 1997 and 1996 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"):
SUMMARY COMPENSATION TABLE
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(1) Consists of bonuses and commissions.
(2) Consists of insurance premiums and automobile allowances paid by the
Company.
(3) Mr. Richards became Chief Executive Officer in December 1996.
(4) Of this amount, $145,000 was received from Jesup & Lamont. Mr. Richards'
salary is now paid by the Company and his base annual compensation
effective October 1, 1997 is $250,000.
9
OPTION GRANTS IN FISCAL YEAR 1997
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(1) These stock options vest over five years at a rate of 20% per year and
have a 10-year term.
(2) The option purchase price is equal to the fair market value at the date of
the grant, November 22, 1996.
(3) In accordance with SEC rules, these columns show gains that might exist
for the respective options, assuming the market price of the Company's
Common Stock appreciates from the date of grant over a period of five
years at the annualized rates of five and ten percent respectively. If the
stock price does not increase above the exercise price at the time of
exercise, realized value to the named executives from these options would
be zero.
There were no option exercises by the Named Executive Officers in fiscal
year 1997, 1996 or 1995.
The following table sets forth the number of shares covered by exercisable
and unexercisable options held by the Named Executive Officers on September
30, 1997 and the aggregate gains that would have been realized had these
options been exercised on September 30, 1997, even though these options had
not been exercised by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND YEAR-END OPTION VALUES
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(1) This represents the total number of shares subject to stock options held
by the named executives at September 30, 1997. These options were granted
on various dates during the fiscal years 1995 through 1997.
(2) These amounts represent the difference between the exercise price of the
stock options and the closing price of the Company's stock on September
30, 1997, for all the in-the-money options held by each named executive.
The in-the-money stock option exercise prices range from $3.03 to $10.20.
These stock options were granted at the fair market value of the stock on
the grant date.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee recommends compensation arrangements for the
Company's executive officers and administers the Company's 1995 Incentive and
Non-Statutory Stock Option Plan (the "Option Plan"). The Company's
compensation program is designed, with the advice of independent consultants,
to be competitive with companies similar in structure and business to the
Company.
The Company's executive compensation program is structured to help the
Company achieve its business objectives by:
. setting levels of compensation designed to attract and retain superior
executives in a highly competitive environment;
. designing equity-related and other performance-based incentive
compensation programs to align the interests of management with the
ongoing interests of shareholders;
. providing incentive compensation that varies directly with both Company
financial performance and individual contributions to that performance;
and
. linking compensation to elements that affect short- and long-term stock
price performance.
The Company has used a combination of salary and incentive compensation,
including cash bonuses and equity-based incentives to achieve its compensation
goals.
COMPENSATION OF EXECUTIVE OFFICERS
SALARY
The salary levels of the Company's executive officers including the Chief
Executive Officer, are intended to reflect the duties and level of
responsibilities inherent in the position in question. Comparisons of the
salaries paid by other companies in similar industries are considered in
establishing the salary level for each position. The particular qualifications
of the individual holding the position, relevant experience and the importance
to the Company of the individual's expected contribution are also considered
in establishing salaries.
In general, compensation payments in excess of $1.0 million to any of the
executive officers are subject to a limitation on deductibility by the Company
under Section 162(m) of the Internal Revenue Code of 1986, as amended. The
deduction limit does not apply to performance based compensation that satifies
certain requirements. The Compensation Committee has not yet determined a
policy with regard to Section 162(m); however, no officer of the Company is
expected to earn compensation in excess of $1.0 million in fiscal 1998.
PERFORMANCE AND INCENTIVE COMPENSATION
Arrangements for bonus compensation for the Company's executive officers are
also negotiated individually with each executive officer. Bonus compensation
arrangements take various forms, but generally are based on factors such as
the Company's financial performance, operating performance and individual
performance.
EQUITY-RELATED INCENTIVES
The Company's primary method of compensating senior executives has been
through the grant of stock options granted at the commencement of their
employment agreements. Stock options grants to executive officers are
generally long-term and vest over five-year period in most cases. The Company
has favored stock options as a way of aligning management's interests with the
long-term interests of the Company's shareholders and inducing executives to
remain with the Company on a long-term basis. Individual option grants have
been based on the performance and level of responsibility of the optionee.
Compensation Committee:
Thomas J. Russell
Howard R. Curd
Hugh H. Fenwick
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholders' return on the
Company's Common Stock from the initial public offering dates through September
30, 1997 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 March 6, 1997 in the Company's common stock. The
Company did not declare, nor did it pay any dividends during the comparison
period.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
COMPARISON CUMULATIVE TOTAL RETURN
AMONG EMCORE CORPORATION,
NASDAQ MARKET INDEX AND SIC CODE INDEX
EMCORE SIC CODE NASDAQ MARKET
CORPORATION INDEX INDEX
3/6/97 100 100 100
3/31/97 107.88 97.78 93.54
4/30/97 110.3 105.79 96.57
5/30/97 164.85 108.94 107.42
6/30/97 163.03 103.35 110.69
7/31/97 240 127.73 122.33
8/29/97 220.61 127.78 121.87
9/30/97 181.82 129.26 129.18
ASSUMES $100 INVESTED ON MAR 06, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEPT. 30, 1997
PROPOSAL II: TO APPROVE AN AMENDMENT TO THE 1995 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES ISSUABLE THEREUNDER
The Company's 1995 Incentive and Non-Statutory Stock Option Plan was
originally adopted by the Board of Directors and approved by the Company's
shareholders in 1995 (as thereafter amended, the "Plan"). The aggregate number
of shares of Common Stock which may be issued under the Plan, as amended by the
Board of Directors and the Company's shareholders in March 1996, after
adjustment for the reverse stock split of the Common Stock in February 1997, is
647,059.
As of December 1, 1997, options to purchase 521,972 shares of Common Stock
were outstanding or approved to be granted under the Plan, at exercise prices
of $3.03 to $24.75 per share, and 45,290 shares have
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been issued pursuant to options exercised under the Plan since its adoption
and approval by the Board of Directors and the Company's shareholders in 1995,
leaving 79,797 shares available for future awards. There are currently no
stock appreciation rights granted and outstanding under the Plan. On October
23, 1997, the Board of Directors unanimously adopted an amendment to the Plan,
subject to approval of the shareholders, to increase the number of shares of
Common Stock that may be issued under the Plan by 725,000 shares. The Board of
Directors approved this amendment to increase the number of shares issuable
under the Plan to ensure that the Company can continue to grant awards under
the Plan to key employees and other Plan participants at levels determined
appropriate by the Company and to provide incentives for such persons to
continue to promote the best interests of the Company and accomplish the other
purposes of the Plan. If approved by the shareholders, the aggregate number of
shares of Common Stock authorized for issuance pursuant to the Plan will be
increased from 647,059 shares to 1,372,059 shares.
If this proposal is adopted, the first sentence, paragraph 3(b) of the Plan
would read as follows:
"The aggregate number of shares of Common Stock available for grant under
the Plan is 1,372,059, subject to adjustment pursuant to Section 8."
The affirmative vote of a majority of the Company's shares of outstanding
Common Stock entitled to vote at the Annual Meeting is required to approve
this proposal to amend the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL II
TO AMEND THE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE
THEREUNDER BY 725,000 SHARES.
The essential features of the Plan, as amended as described herein, are
summarized below. This summary is qualified in its entirety by reference to
the full text of the Plan, as so amended, which will be made available to any
shareholder of the Company requesting it in writing.
PURPOSES
The purpose of the Plan is to give officers and executive personnel, and
consultants or non-employee directors, of the Company and its subsidiaries an
opportunity to acquire Common Stock, to provide an incentive for key employees
and other participants to continue to promote the best interests of the
Company and enhance its long-term performance, and to provide an incentive for
key employees and other participants to join or remain with the Company and
its subsidiaries.
TYPES OF AWARDS
Incentive stock options ("ISOs") intended to qualify for special tax
treatment in accordance with Section 422 of the Internal Revenue Code of 1986,
as amended ("Code"), and non-statutory stock options ("NSOs"), which do not
qualify for such special tax treatment, may be granted under the Plan. In
addition, stock appreciation rights ("SARs") may be granted under the Plan in
conjunction with ISOs.
SHARES SUBJECT TO PLAN
Subject to adjustment for certain corporate changes, as described below, the
aggregate number of shares of Common Stock available for grant under the Plan,
prior to the amendment described herein, is 647,059 shares. The shareholders
are being asked to approve the amendment of the Plan to include an additional
725,000 shares to be available for grant thereunder. Shares of Common Stock
issued pursuant to the Plan may be either authorized but unissued shares or
treasury shares. To the extent that any option granted under the Plan expires
or otherwise terminates unexercised (other than in connection with the
exercise of a tandem SAR pursuant to which Common Stock is delivered to the
holder thereof), the shares of Common Stock previously subject thereto are
added to the shares available for grant under the Plan.
ADMINISTRATION
The Plan is administered by the Board of Directors which, to the extent it
shall determine, may delegate its administrative powers (other than its power
to amend or terminate the Plan) to a committee (the "Committee")
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appointed by the Board of Directors and composed of not less than three
members of the Board of Directors. The Board of Directors is authorized to
determine (i) the persons to whom awards under the Plan shall be granted, (ii)
the time or times at which such awards shall be granted, (iii) the form and
amount of the awards and (iv) the limitations, restrictions and conditions
applicable to any such award. In general, the Board of Directors also may
interpret the Plan, prescribe, amend, and rescind rules and regulations
relating to it, and make all other determinations it deems necessary or
advisable for the administration of the Plan.
The Board of Directors may from time to time alter, amend or suspend the
Plan or any award granted thereunder, or may at any time terminate the Plan,
except that it may not, without the approval of the Company's shareholders
(except with respect to certain changes in corporate structure), (i)
materially increase the total number of shares of Common Stock available for
grant under the Plan, (ii) materially modify the class of eligible employees
or participants under the Plan, (iii) materially increase benefits to any key
employee who is subject to the restrictions of Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or (iv) effect a change
relating to ISOs granted thereunder which is inconsistent with Section 422 of
the Code and the regulations issued thereunder. No action taken by the Board
of Directors in connection with the Plan, either with or without shareholder
approval, may materially and adversely affect any outstanding award without
the consent of the holder thereof.
The Plan originally became effective on June 20, 1995. No award under the
Plan may be granted after June 20, 2005, or the effective date of termination
of the Plan by the Board of Directors, if earlier; however, awards theretofore
granted may extend beyond such date.
In the sole discretion of the Board of Directors, adjustments will be made
in the number of shares of Common Stock available under the Plan, and the
number of shares of Common Stock and the option price of shares subject to
outstanding grants of options and SARs, to reflect increases or decreases in
the number of shares of issued Common Stock resulting from a reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or the payment of a share dividend or other increase or decrease in the number
of such shares outstanding effected without receipt of consideration by the
Company.
TERMS OF OPTIONS AND SARS
Awards granted under the Plan will be exercisable and subject to such terms
and conditions as the Board of Directors or the Committee determines in
accordance with the Plan and which may be set forth in a written option
agreement. In general, the option price for ISOs shall not be less than 100%
of the fair market value of the Common Stock subject thereto on the date of
grant thereof. The option price for NSOs shall not be less than 10% of the
fair market value of the Common Stock subject thereto on the date of grant
thereof. For purposes of the Plan, "fair market value" means, in general, the
average of the mean between the bid and asked price, at the close of trading,
or the closing price, for the Common Stock, if the Common Stock is traded on
the over-the- counter market or listed on a national securities exchange,
respectively, for the ten consecutive trading days immediately preceding a
given date; otherwise, such fair market value is determined by the Board of
Directors, in good faith. Upon notice of an intent to exercise an option in
accordance with the Plan, the option price shall be paid in full in cash or by
certified check or, in the Board of Directors' discretion, in shares of Common
Stock already owned by the optionee. As soon as reasonably possible following
such exercise of an option, a certificate representing the shares of Common
Stock purchased thereby, registered in the name of the optionee, are delivered
to such optionee.
ISOs granted under the Plan may include a SAR, either at the time of the
granting of the ISO or while the ISO is outstanding, which shall be
exercisable only (i) to the extent that the underlying ISO is exercisable and
(ii) for such period of time as determined by the Board of Directors, expiring
not later than the expiration date of the underlying ISO. A SAR is exercisable
only when the fair market value of a share of Common Stock exceeds the option
price specified for the ISO under which the SAR was granted. A SAR entitles
the holder thereof to surrender to the Company unexercised the ISO to which
such SAR is related, or any portion thereof, and to receive from the Company
in exchange therefor that number of shares of Common Stock having an aggregate
fair market value equal to the excess of the fair market value on the date of
such surrender of one share of
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Common Stock over the option price per share specified in such ISO, multiplied
by the number of shares of Common Stock subject to the ISO, or portion
thereof, which is so surrendered, or, at the election of the Board of
Directors, cash in such amount. Notwithstanding the preceding sentence, the
Company does not have a right to elect full or partial cash settlement upon
the exercise of a SAR which is held by an officer or director of the Company
unless such exercise occurs no less than six months after the date such SAR is
granted, and either (1) the SARs held by such officer or director become
automatically exercised for cash within 30 days prior to the effective date of
a dissolution or liquidation of the Company, or a merger or consolidation of
the Company in which the Company is not the surviving corporation, or (2)
during the period beginning on the third, and ending on the twelfth, business
day following the date of release by the Company for publication of its
quarterly or annual summary statements of sales and earnings.
Each option and SAR shall expire on the tenth anniversary of the date of
grant thereof or, if earlier, the expiration date set forth in the applicable
option agreement. Notwithstanding the foregoing, an option or SAR shall expire
on the date 30 days following the date the employment or participation of the
holder with the Company terminates for any reason other than death or
disability. The Board of Directors may, however, permit a former employee to
exercise an option or SAR, subject to compliance with any covenant not to
compete in effect between the Company and such former employee, during a
period following his or her termination of employment not exceeding three
months. Any options and/or SARs held by a participant whose employment or
other participation with the Company terminates due to disability or death
expire no later than the first anniversary of such termination of employment
or participation, or, if earlier, the expiration date of such options or SARs
as described in the first sentence of this paragraph.
Options and SARs awarded under the Plan may not be transferred except as
provided by will or the applicable laws of descent or distribution, and shall
not be subject to execution, attachment or similar process. An ISO or SAR may
be exercised only by a key employee during his or her lifetime or, pursuant to
the Plan, by his or her estate or the person who acquires the right to
exercise such ISO or SAR upon his or her death by bequest or inheritance.
DISSOLUTION, MERGER AND CONSOLIDATION
Except as described above with respect to SARs held by officers or
directors, upon a dissolution or liquidation of the Company, or a merger or
consolidation of the Company in which the Company is not the surviving
corporation, each ISO and SAR granted under the Plan shall expire as of the
effective date of such transaction. However, the Board of Directors is
required to give at least 30 days' prior written notice of such an event to
each optionee. After receipt of such notice such optionee may exercise his or
her unexercised ISO or SAR, without regard to any installment exercise
limitations thereof, but subject to the limitations on exercise following a
termination of employment or other relationship of the optionee with the
Company described above, at any time prior to the effective date of such
transaction.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain significant United States
Federal income tax consequences under the Code, as in effect on the date of
this summary, applicable to the Company and a Plan participant in connection
with the grant and exercise of NSOs, ISOs and SARs under the 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 the "Company" in this summary of
tax consequences shall mean the Company or the subsidiary of the Company that
employs the Plan participant, as the case may be.
The grant of an ISO or NSO will not result in taxable income to the
recipient thereof or an income tax deduction to the Company. 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 to the
Company depending upon whether the option is an NSO or an ISO.
The exercise of an NSO generally results in immediate recognition of
ordinary income by the NSO holder and a corresponding tax deduction to the
Company in the amount by which the fair market value of the shares of
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Common Stock acquired exceeds the aggregate option price. Upon disposition of
any such shares, any appreciation or depreciation in the fair market value of
such shares after the date of such exercise will generally be capital gain or
loss.
In general, the exercise of an ISO is exempt from income tax (although not
from the alternative minimum tax) and does not result in a tax deduction to
the Company at any time unless the ISO holder disposes of the Common Stock
acquired thereby within two years of the date of grant of such ISO or one year
of the date of such exercise (a "disqualifying disposition"). If these holding
periods are satisfied, and if the ISO holder has been an employee of the
Company at all times from the date of grant of the ISO to the day three months
before such exercise (or twelve months in the case of termination of
employment on account of disability), then such ISO holder will recognize any
gain or loss upon disposition of such shares as capital gain or loss. However,
if the ISO holder 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 occurred the amount by which the fair market value of
such shares on the date of exercise exceeded the option price thereof. The
Company would be entitled to a deduction equal to the amount of any ordinary
income so reported by such ISO holder. Any additional gain realized by such
ISO holder 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 ISO, the difference would be a capital loss to the
ISO holder.
The granting of SARs does not produce taxable income to the recipient
thereof or an income tax deduction for the Company. Upon the exercise of a SAR
for cash, the amount of cash received by the participant is immediately
taxable to the participant as ordinary income and deductible by the Company.
The exercise of a SAR for Common Stock is generally taxable and deductible in
the same manner as the exercise of an NSO.
Under Section 162(m) of the Code, the Company may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess
of $1 million is paid to the Chief Executive Officer of the Company or any one
of the other four highest paid executive officers who are employed by the
Company on the last day of the taxable year. It is not intended that
compensation resulting from any awards under the Plan will qualify for any
exceptions to the limitations imposed by Section 162(m) of the Code.
Under certain circumstances, accelerated vesting or exercise of options or
SARs in connection with a "change in control" of the Company might be deemed
an "excess parachute payment" for purposes of the golden parachute payment
provisions of Section 280G of the Code. To the extent it is so considered, the
participant would be subject to an excise tax equal to 20% of the amount of
the excess parachute payment, and the Company would be denied a tax deduction
for the excess parachute payment.
PROPOSAL III: APPOINTMENT OF INDEPENDENT AUDITORS
APPOINTMENT OF AUDITORS
Coopers & Lybrand, L.L.P., independent certified public accountants, audited
the financial statements of EMCORE Corporation for the fiscal year ending
September 30, 1997. The Audit Committee and the Board of Directors have
selected Coopers & Lybrand, L.L.P. as the independent auditors of the Company
for the fiscal year ending September 30, 1998. The ratification of the
appointment of Coopers & Lybrand, L.L.P. 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 the foregoing appointment of Coopers & Lybrand,
L.L.P. is not ratified by shareholders, the Board of Directors will appoint
other independent accountants whose appointment for any period subsequent to
the 1999 Annual Meeting of Shareholders will be subject to the approval of
shareholders at that meeting.
Representatives of Coopers & Lybrand, L.L.P. are expected to attend the
Annual Meeting of Shareholders and will have the opportunity to make a
statement if they desire to do so and are expected to be available to answer
appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS THE INDEPENDENT AUDITORS OF
THE COMPANY.
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GENERAL
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.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing
this proxy statement. In addition to solicitation of proxies by mail,
directors, officers and employees of the Company (who will receive no
additional compensation therefor) may solicit the return of proxies by
telephone, telegram or personal interview. Arrangement have also been made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred by them in connection therewith.
Each holder of the Company's Common Stock who does not expect to be present
at the Annual Meeting or who plans to attend but who does not wish to vote in
person is urged to fill in, date and sign the proxy and return it promptly in
the enclosed return envelope.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual Meeting of
Shareholders must be received by the Company no later than October 27, 1998.
Proposals may be mailed to the Company, to the attention of Thomas G. Werthan,
Secretary, 394 Elizabeth Avenue, Somerset, New Jersey 08873.
By order of the Board of Directors
Thomas G. Werthan
Secretary
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EMCORE CORPORATION
The undersigned hereby appoints Reuben F. Richards, Jr. and Thomas Werthan
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of EMCORE Corporation standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Shareholders of the Company to be held February 27, 1998
or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
The Board of Directors recommends a vote FOR proposals I, II, and III
Please mark your
votes as indicated [X]
in this example
Proposal I: ELECTION OF DIRECTORS
[_] FOR all nominees listed below
[_] Withhold Authority to vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual
nominee mark the box next to the nominee's name
below.)
Nominees:
1. Thomas J. Russell [_]
2. Reuben F. Richards, Jr. [_]
3. Thomas G. Werthan [_]
4. Richard A. Stall [_]
5. Robert Louis-Dreyfus [_]
6. Hugh H. Fenwick [_]
7. Shigeo Takayama [_]
8. Charles Scott [_]
Proposal II: TO APPROVE AN AMENDMENT TO 1995 FOR AGAINST ABSTAIN
INCENTIVE AND NON-STATUTORY STOCK [_] [_] [_]
OPTION PLAN TO INCREASE THE NUMBER
OF NO PAR VALUE COMMON SHARES
ISSUABLE THEREUNDER BY 725,000
SHARES.
Proposal III: TO RATIFY THE SELECTION OF COOPERS FOR AGAINST ABSTAIN
& LYBRAND, L.L.P. AS INDEPENDENT [_] [_] [_]
AUDITORS OF EMCORE CORPORATION FOR
THE FISCAL YEAR ENDING SEPTEMBER
30, 1998.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR all proposals.
Signature(s) Date
----------------------------------- ---------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Please check here if you expect to attend the Annual Meeting of Shareholders [_]