DEF 14A: Definitive proxy statements
Published on January 26, 2001
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
EMCORE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
EMCORE CORPORATION
145 Belmont Drive
Somerset, New Jersey 08873
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 28, 2001
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To the Shareholders of
EMCORE Corporation:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Shareholders
(the "Annual Meeting") of EMCORE Corporation (the "Company"), will be held at
10:00 A.M. local time, on Wednesday, February 28, 2001, at the Marriott Hotel,
110 Davidson Avenue, Somerset, New Jersey 08873, for the following purposes:
(1) To elect three members to the Company's Board of Directors;
(2) To ratify the selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending
September 30, 2001;
(3) To approve an increase in the number of shares reserved for
issuance under EMCORE's 2000 Stock Option Plan; and
(4) 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 January 17,
2001 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,
By: /s/ Howard W. Brodie
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HOWARD W. BRODIE
SECRETARY
Somerset, New Jersey
January 26, 2001
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
145 Belmont Drive
Somerset, New Jersey 08873
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, FEBRUARY 28, 2001
This Proxy Statement is being furnished to shareholders of record of
EMCORE Corporation ("EMCORE", "Company", "we" or "us") as of January 17, 2001,
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
Wednesday, February 28, 2001 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. The approximate date that this Proxy Statement and the enclosed
proxy are first being sent to shareholders is January 26, 2001. Shareholders
should review the information provided herein in conjunction with the Company's
1999 Annual Report to Shareholders which accompanies this Proxy Statement. The
Company's principal executive offices are located at 145 Belmont Drive,
Somerset, New Jersey 08873, and its telephone number is (732) 271-9090.
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 to be 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 three members to the Company's Board of Directors;
(2) To ratify the selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending
September 30, 2001;
(3) To approve an increase in the number of shares reserved for
use in EMCORE's 2000 Stock Option Plan; and;
(4) 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
which have not been revoked in accordance with the procedures set forth above)
will be voted (1) FOR the election of the three nominees for director named
below, (2) FOR ratification of
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the independent auditors named below, (3) FOR the approval of the increase in
the number of shares reserved for use in EMCORE's 2000 Stock Option Plan, and
(4) 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 January 17, 2001 (the "Record Date"),
the Company had 34,309,073 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.
PROPOSAL I: ELECTION OF DIRECTORS
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. Each Class consists of three directors. The directors in each
class hold office for staggered terms of three years. The three Class B
directors, Messrs. Robert Louis-Dreyfus, Charles Scott and Richard A. Stall,
whose present terms expire in 2001, are being proposed for new three year terms
(expiring in 2004) at this Annual Meeting.
The shares represented by proxies returned executed will be voted,
unless otherwise specified, in favor of the three 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, 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 three nominees 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE THREE NOMINEES FOR THE BOARD OF DIRECTORS NAMED BELOW.
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The following tables set forth certain information regarding the
members of and nominees for the Board of Directors:
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(1) Member of Nominating Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
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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. -- 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. 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. Since 1992, he has been an investor and director of several
companies. Dr. Russell currently serves as a director of adidas-Salomon AG and
LD COM Networks. 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 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 1997, 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 one of the
Company's joint ventures, GELcore LLC.
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 eighteen
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. He has also served as director of Uniroyal Optoelectronics LLC, one
of the Company's joint ventures, since 2000.
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 MBE technologies. He has co-authored more than 75 papers and
holds four patents on MBE and MOCVD 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-Salomon AG since April 1993
as well as President and CEO of Louis Dreyfus Communications since May 2000.
Prior to that time, he had been from 1990 until 1993 the Chief Executive Officer
of Saatchi & Saatchi plc (now Cordiant plc) 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, including director of Heidrick &
Struggles since September 1999, advisory board member of The Parthenon Group
since October 1998 and President of Salomon S.A. since August 1998. 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
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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 of Hakuto Co., Ltd. ("Hakuto"), which he
founded in the 1950's and which is the Company's distributor in Japan, China and
Singapore. Mr. Takayama is a Director 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).
CHARLES SCOTT -- Mr. Scott has served as a director of the Company
since February 1998. 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 1995 when he assumed
the title of Chairman.
JOHN J. HOGAN, JR. -- Mr. Hogan has served on the Company's Board of
Directors since February 1999. Mr. Hogan has been President of a private
investment management company since October 1997. Prior to that time, he had
been with the law firm of Dewey Ballantine since 1969. He also serves as a
director of several other corporations and is a former executive officer and/or
director of various subsidiaries of S.A. Louis Dreyfus en Cie.
EXECUTIVE OFFICERS:
HOWARD W. BRODIE, ESQ. 33, joined the Company in August 1999 and serves
as Vice President, General Counsel and Secretary of the Company. From September
1995 to August 1999, Mr. Brodie was an Associate at the law firm of White & Case
LLP, a New York law firm that has served as outside counsel to the Company since
1997. While at White & Case LLP, Mr. Brodie practiced securities law and mergers
and acquisitions. Mr. Brodie has worked on EMCORE matters since 1998, helping to
negotiate and structure several EMCORE joint ventures, including the joint
venture with General Electric Lighting, and the strategic relationship with JDS
Uniphase, as well as assisting in the Company's June 1999 and March 2000 public
offerings. From August 1994 to August 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.
ROBERT P. BRYAN, PH.D., 35, 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 in 1995, 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 to include all components and
products. 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.
CRAIG W. FARLEY, PH.D., 41, joined the Company in June 1998 as Vice
President-Emcore Electronic Materials and Emcore Electronic Devices. Dr. Farley
has experience in all phases of compound semiconductor device design and
manufacturing. Prior to joining EMCORE, he spent 11 years at Rockwell
International Corporation ("Rockwell") where he served as a member of the
technical staff at Rockwell's Science Center from 1987 to 1994 and as Manager of
Advanced Device Technology for Rockwell's Gallium Arsenide Manufacturing
facility from 1994 to 1998. He has also served as director of Uniroyal
Optoelectronics LLC, one of the Company's joint ventures, since 2000.
HONG Q. HOU, PH.D., 36, joined the Company in March 1998 and serves as
a Vice President of MODE. Dr. Hou helped found the EMCORE Photovoltaics division
("EPV") in 1998 as EPV's Chief Technology Officer. Prior to joining the Company,
Dr. Hou was a Principal Member of Technical Staff at Sandia National
Laboratories from 1995 to 1998, and a Member of Technical Staff at AT&T Bell
Laboratories from 1993 to 1995. Dr. Hou has
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many seminal technical contributions to the fundamentals and manufacturability
of high-efficiency solar cells, VCSELs, pHEMTs, and other optoelectronic and
electronic devices, as well as MOCVD technology. Dr. Hou has published more than
250 papers and holds a number of patents, issued and pending.
TOM MIEHE, 41, joined the Company in 1997 as Marketing Manager for the
E(2)M Division prior to becoming Director of Marketing and Sales at corporate
headquarters in Somerset. In March of 1999, Mr. Miehe assumed the post of
Corporate Vice President, Sales and Marketing. Prior to joining the Company, Mr.
Miehe worked at Sumitomo Electric. He held various positions at Sumitomo, the
last being Senior manager Sales & Marketing for compound semiconductor products.
PAUL ROTELLA, 45, joined the Company in 1996 as Director of
Manufacturing and has served as Vice President of TurboDisc(TM) Manufacturing
since October 1997. Prior to 1996, Mr. Rotella served for three years as
worldwide Manufacturing Operations Manager for Datacolor International, a
manufacturer of color measurement and control instrumentation. Prior to working
at Datacolor International, Mr. Rotella spent 18 years with AlliedSignal Inc.,
where he held various positions including Manufacturing Engineer, Manufacturing
Engineering Manager and Program Manager of Quality Improvement Systems.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of January 12, 2000 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 executive officer of the Company, (iii) each director and nominee and
(iv) all directors and executive officers as a group (16 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. Unless otherwise indicated, the address
of each of the beneficial owners is c/o the Company, 145 Belmont Drive,
Somerset, New Jersey 08873. All share amounts are presented on a post-split
basis.
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* Less than 1.0%
Includes shares and underlying warrants and options exercisable within 60
days of January 12, 2001.
1) Includes 3,913,734 shares and warrants to purchase 1,483,314 shares, of
which 2,556,730 shares are held by The AER 1997 Trust.
2) Includes options to purchase 218,824 shares.
3) Includes options to purchase 230,860 shares.
4) Includes options to purchase 207,344 shares.
5) Includes 2,436,846 shares and warrants to purchase 865,070 shares held by
Gallium Enterprises Inc.
6) Includes 1,451,908 shares owned by Hakuto Co. Ltd.; Hakuto & Co. Ltd. is
controlled by Shigeo Takayama, although Mr. Takayama disclaims beneficial
ownership of such shares.
7) Includes 3,041 shares owned by Kircal, Ltd.
8) Includes options to purchase 41,000 shares.
9) Includes options to purchase 2,500 shares.
10) Includes warrants and options to purchase a total of 3,245,174 shares.
11) Includes warrants to purchase 865,070 shares. Gallium Enterprises, Inc.
is controlled by Robert Louis-Dreyfus, a member of the Board of Directors
of the Company. The address of Gallium Enterprises, Inc. is 152 West 57th
Street, 21st Floor, NYC, NY 10019.
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12) Dr. Thomas J. Russell, one of three trustees for the AER1997 Trust, is
the Chairman of the Company. After January 13, 2002, Avery E. Russell,
the daughter of Thomas J. Russell will be the primary beneficiary of the
trust. The address of the trust is 117 Leabrook Lane, Princeton, NJ
08541.
13) The address of Capital Guardian Trust Co. is 222 South Hope Street, 56th
Floor, Los Angeles, CA 90071.
14) The address of IG Investment Management Ltd. is One Canada Center, 447
Portage St. Winnipeg, BC, Canada R3C 3BS.
15) The address of Hakuto Co., Ltd. is CPO Box 25, Tokyo 11-8691, Japan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The President of 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, 2000, sales made through Hakuto
approximated $12.4 million.
In connection with the Dr. Russell's guarantee of the Company's bank
facility through September 1999 and subsequent extension of that facility until
a new bank line was secured by the Company in November, 1999, the Company
granted 300,000 warrants to Mr. Russell exercisable at a price of $12.94 per
share in return for such guarantee and several bridge loans. Mr. Russell
subsequently transferred 30,000 of these warrants to Mr. Richards, and all
300,000 have been exercised.
On November 30, 1998, the Company completed a private placement (the
"Private Placement") of an aggregate of 1,550,000 shares of Series I Preferred
Stock (the "Preferred Stock") to Hakuto, Union Miniere Inc. and UTC. All shares
of the Preferred Stock have since been converted into an equal number of shares
of Common Stock (on a pre-split basis).
In December 1997, certain warrant holders exercised warrants in
connection with the acquisition of MicroOptical Devices, Inc. ("MODE") by
signing full recourse promissory notes to the Company. The Notes bear interest
at 6% per annum and are due on May 1, 2001. Several of the warrant holders are
members of the Company's Board of Directors and/or executive officers of the
Company. The table below indicates the amount of the warrant transaction
(amounts are given on a pre-split basis):
(1) Total amounts outstanding as of December 31, 2000 were $3,714,621 for Dr.
Russell, $672,321 for Mr. Richards, and $3,126,442 for Mr. Louis-Dreyfus.
No greater amounts were outstanding since the beginning of Fiscal Year
2000.
(2) Transaction was via the 1997 AER Trust (the "Trust") of which Dr. Russell
is a trustee. Avery E. Russell, the beneficiary of the Trust, is the
daughter of Thomas J. Russell. As of August 15, 2000, Dr. Russell assumed
this indebtedness of the Trust, and the Company then released the Trust
from its obligations in connection therewith. Dr. Russell's indebtedness
is secured by a pledge of 74,000 shares of Common Stock.
(3) Transaction via Gallium Enterprises, Inc. an entity 100% controlled by
Robert Louis-Dreyfus.
From time to time, the Company has lent money to certain of its
executive officers and directors. Pursuant to due authorization of the Company's
Board of Directors, the Company lent $85,000 to Thomas G. Werthan, Vice
President, Finance, Chief Financial Officer and a director of the Company. The
promissory note executed by Mr. Werthan does not bear interest and provides for
forgiveness of the loan via bonuses payable to Mr. Werthan over a period of up
to 25 years. The balance outstanding on the loan is currently $82,000, and no
larger amount has been outstanding since the beginning of Fiscal Year 2000.
Similarly, pursuant to due authorization of the Company's Board of Directors,
the Company lent funds to Reuben F. Richards, Jr., Chief Executive Officer and a
director of
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the Company. The promissory note executed by Mr. Richards does not bear interest
and provides for forgiveness of the loan via bonuses payable to Mr. Richards.
The balance outstanding on the loan is currently $215,000, and no larger amount
has been outstanding since the beginning of Fiscal Year 2000.
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, 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 4s by
Mr. Russell and Mr. Richards with respect to an aggregate of three transactions
which were filed late, and a Form 4 by Thomas Brennan, who resigned from the
Company effective January 12, 2001, with respect to one transaction which was
also filed late.
COMPENSATION OF DIRECTORS
The Board of Directors held four meetings during fiscal year 2000 and
took certain actions by telephonic meeting and unanimous written consent.
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 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 meeting. Payment of all fees
will be made in common stock of the Company at the average of the last reported
bid and ask prices as of the close of trading the previous day on the Nasdaq
National Market. 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. During fiscal year 2000, all directors of the Company, except for Messrs.
Louis-Dreyfus and Takayama, attended at least 75% of the aggregate meetings of
the Board and committees on which they served. Mr. Louis-Dreyfus attended two of
the four meetings and Mr. Takayama attended no Board meetings in fiscal year
2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of Messrs.
Russell, Scott and 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 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 once annually
.
NOMINATING COMMITTEE
The Company's Nominating Committee currently consists of Messrs.
Russell, Richards and Stall. The Nominating Committee recommends new members to
the Company's Board of Director's. The Nominating Committee meets once annually.
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AUDIT COMMITTEE
The Company's Audit Committee currently consists of Messrs. Fenwick,
Scott and Hogan. 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. Each member of the Audit Committee is independent within the meaning
of NASD Rule 4200(a)(15). The Audit Committee meets four times per year. The
Audit Committee's responsibilities are set forth in a written charter, a copy of
which is annexed hereto as Appendix 1.
The Audit Committee has reviewed and discussed the Company's audited
financial statements for Fiscal Year 2000 with management of the Company. The
Audit Committee has discussed with the Company's independent auditors the
matters required to be discussed by SAS 61. The Audit Committee has received the
written disclosures and letter from the Company's independent accountants
required by independence Standards Board Standard No. 1, and has discussed with
such accountants the independence of such accountants. Based on the foregoing
review and discussions, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements for Fiscal Year 2000
be included in the Company's Annual Report on Form 10-K for Fiscal Year 2000.
PricewaterhouseCoopers LLP ("PwC") and one of its predecessors, Coopers
& Lybrand L.L.P., served as the Company's independent public accountants since
1986. On May 13, 1999 the staff of the Securities and Exchange Commission (the
"SEC") advised the Company that, in its view, because several current and former
Price Waterhouse LLP partners owned shares of the Company's common stock, PwC
had violated the independence standards promulgated by the SEC. The SEC staff
required the Company to change auditors and to have a new accounting firm
reaudit its fiscal 1998 financial statements as a result of such violations by
PwC.
In connection with the foregoing, on May 13, 1999, the Company engaged
Deloitte & Touche LLP as its independent public accountants to reaudit the
Company's financial statements for fiscal year 1998 and dismissed PwC as the
Company's independent public accountant for fiscal year 1998. Both of these
decisions were approved by the audit committee of the Company's Board of
Directors.
PwC's report on the Company's financial statements for the two most
recent fiscal years immediately preceding PwC's dismissal did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles. In addition, during the
Company's two most recent fiscal years immediately preceding PwC's dismissal and
through May 13, 1999, there were no disagreements with PwC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
PwC, would have caused PwC to make reference to the subject matter of the
disagreement in connection with its report.
During the Company's two most recent fiscal years immediately preceding
PwC's dismissal and through May 13, 1999, there were no reportable events, as
defined in Regulation S-K Item 304(a)(1)(v).
Prior to formally being appointed as auditors on May 13, 1999, Deloitte
& Touche LLP performed certain audit-related work at the request of the Company
as a precaution in the event the SEC staff required the Company to change
accountants.
On December 23, 1999, the Company also retained Deloitte & Touche LLP
to reaudit the Company's financial statements for Fiscal Year 1997, which had
been previously audited by PwC, because PwC declined to reissue its report and
related consent on such financial statements, and such financial statements were
required to be included in the Company's annual report on Form 10-K for Fiscal
Year 1999.
10
AUDIT FEES
The aggregate fees billed by the Company's independent accountants for
professional services rendered in connection with the audit of the Company's
financial statements included in the Company's Annual Report on Form 10-K for
Fiscal Year 2000, as well as for the review of the Company's financial
statements included in the Company's Quarterly Reports on Form 10-Q during
Fiscal Year 2000 totaled $126,000 (excluding expenses reimbursed by the
Company).
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees other than those described above under the caption "Audit Fees"
and those described below under the caption "All Other Fees" were billed to the
Company by the Company's independent accountants for professional services in
Fiscal Year 2000.
ALL OTHER FEES
The only fees billed to the Company by its principal accountant during
Fiscal Year 2000 other than those described above related to services provided
with regard to the Company's equity offering pursuant to a registration
statement on Form S-3 and various miscellaneous matters, and such fees totaled
$81,226. The Audit Committee believes that the foregoing expenditures are
compatible with maintaining the independence of the Company's principal
accountant.
Audit Committee:
Hugh H. Fenwick
Charles Scott
John J. Hogan, Jr.
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.
11
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, 2000, 1999 and 1998 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"):
- ----------------------
(1) Consists of bonuses and commissions. The Company's bonus compensation is
based on a calendar year schedule. Accordingly, bonus amounts are
included with respect to the fiscal year in which they were actually
paid.
12
The following table sets forth the number of options granted to the
Named Executive Officers in Fiscal Year 2000, both in absolute terms and as a
percentage of the total number of options granted to all employees of the
Company in the same period, as well as the exercise price, expiration date and
potential realizable value of such options over the term thereof.
OPTION GRANTS IN FISCAL YEAR 2000
- ---------------
(1) In accordance with the Commission's 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.
(2) Calculated based on aggregate number of options granted to Mr. Stall in
Fiscal Year 2000.
13
The following table sets forth the number of shares acquired by the
Named Executive Officers upon options exercised during Fiscal Year 2000 and the
value thereof, together with the number of exercisable and unexercisable options
held by the Named Executive Officers on September 30, 2000 and the aggregate
gains that would have been realized had these options been exercised on
September 30, 2000, even though such options had not been exercised by the Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
AND YEAR-END OPTION VALUES
Shares
Acquired on Value
Name Exercise Realized
- ---- ----------------- --------
Reuben F. Richards, Jr. -- --
Richard A. Stall 10,000 $454,260
Thomas G. Werthan -- --
Howard W. Brodie -- --
Craig Farley 4,000 $146,500
- --------------------
(1) This represents the total number of shares subject to stock options held
by the named executives at September 30, 2000. These options were granted
on various dates during the fiscal years 1995 through 2000.
(2) These amounts represent the difference between the exercise price of the
stock options and the closing price of the Common Stock on September 30,
2000, for all the in-the-money options held by each named executive. The
in-the-money stock option exercise prices range from $0.22 to $22.00.
These stock options were granted at the fair market value of the Common
Stock on the grant date.
14
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 and the 2000 Stock Option Plan. The Compensation
Committee also administers the MicroOptical Devices, Inc. 1996 Stock 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 each position. Comparison 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
satisfies 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
year 2001.
PERFORMANCE AND INCENTIVE COMPENSATION
Arrangements for bonus compensation for the Company's executive
officers are 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.
15
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 a five-year period. 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
Charles Scott
Hugh H. Fenwick
16
STOCK PERFORMANCE GRAPH
The following graph and table compares the cumulative total
shareholders' return on the Company's Common Stock from the initial public
offering date through September 30, 2000 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. Notwithstanding any statement to the
contrary in any of the Company's previous or future fillings with the
Commission, the graph and table shall not be incorporated by reference into any
such fillings.
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN*
AMONG EMCORE CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[graph]
* $100 INVESTED ON 3/6/97 IN STOCK OR INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING
SEPTEMBER 30.
17
PROPOSAL II: APPOINTMENT OF INDEPENDENT AUDITORS
APPOINTMENT OF AUDITORS
Deloitte & Touche LLP, independent certified public accountants,
audited the financial statements of EMCORE Corporation for the fiscal year
ending September 30, 2000. The Audit Committee and the Board of Directors have
selected Deloitte & Touche LLP as the independent auditors of the Company for
the fiscal year ending September 30, 2001. 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 the foregoing appointment of Deloitte & Touche LLP is not ratified
by shareholders, the Board of Directors will appoint other independent
accountants whose appointment for any period subsequent to the 2002 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 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 DELOITTE & TOUCHE LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY.
18
PROPOSAL III: TO APPROVE INCREASE IN 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. At the 2001 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 Plan. As of September 30, 2000, options for
substantially all of the shares authorized for issuance under the 2000 Plan had
been granted. In 1995, our Board of Director adopted the EMCORE Corporation 1995
Incentive and Non-Statutory Stock Option Plan (as amended, the "1995 Plan"). The
1995 Plan 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. As of
September 30, 2000, options for substantially all of the shares authorized for
issuance under the 1995 Plan had been granted.
Accordingly, on December 6, 2000, 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 3,300,000, to 4,750,000 (on a post-split basis). The Board of Directors
recommends approval of this amendment to the 2000 Plan to permit the issuance of
this increased number shares of Common Stock thereunder.
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 4,750,000, 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 4,750,000, without
application of paragraph 4(d) of this Section 4."
The Board of Directors believes that, to attract and retain officers
and employees of the highest caliber, provide increased incentive for such
persons to strive to attain the EMCORE's long-term goal of increasing
shareholder value, and to continue to promote the well-being of the Company, it
is in the best interests of the Company and its shareholders to provide officers
and employees of the Company, through the granting of stock options, the
opportunity to participate in the appreciation in value of the Company's Common
Stock. The 2000 Plan has been effective in retaining and motivating key
employees and attracting and retaining experienced and qualified individuals to
work for EMCORE. Accordingly, the Board of Directors believes that the proposed
increase in the number of shares available for grant under the 2000 Plan is in
the best interests of the Company and the shareholders.
This proposal summarizes the essential features of the 2000 Plan, as it
would be amended pursuant to such 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.
19
The 2000 Plan became effective at the 2000 Annual Meeting. The 2000
Plan currently provides for the grant of options to purchase a total of up to
1,450,000 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:
o 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;
o to establish, amend, waive and rescind rules, regulations and
guidelines for carrying out the 2000 Plan;
o 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;
o to accelerate the vesting or exercisability of options granted
under the 2000 Plan;
o to offer to buy out outstanding options granted under the 2000
Plan;
o to determine the form and content of the option agreements
which represent options granted under the 2000 Plan;
o to interpret the 2000 Plan and option agreements;
o to correct any errors, supply any omissions and reconcile any
inconsistencies in the 2000 Plan and/or any option agreements;
and
o to take any actions necessary or advisable to operate and
administer the 2000 Plan.
Currently, the Compensation Committee consists of Messrs. Russell,
Scott, and Fenwick, 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 4,750,000 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 4,750,000 shares of Common Stock may be granted under the 2000 Plan.
20
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 630 in number), including
all of our executive officers (10 in number, of whom 3 are also directors), are
eligible to receive options under the 2000 Plan. As of September 30, 2000 (the
last date as of which complete data are available), outstanding options under
the 2000 Plan are held by the following named individuals and groups.
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 present executive officers,
including the individuals named in the Compensation Table, will receive such
additional options under the 2000 Plan.
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 January 16, 2001, the fair market value of a share of
Common Stock was $48.50.
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
21
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.
22
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:
o 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;
o decrease the minimum option exercise price required by the
2000 Plan;
o change the class of persons eligible to receive options under
the 2000 Plan; or
o 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
23
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE FOREGOING
PROPOSAL, AND, UNLESS A SHAREHOLDER GIVES INSTRUCTIONS ON THE PROXY CARD TO THE
CONTRARY, THE APPOINTEES NAMED THEREON INTEND SO TO VOTE.
24
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.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2002 Annual
Meeting of Shareholders must be received by the Company no later than October
27, 2001. Proposals may be mailed to the Company, to the attention of Howard W.
Brodie, Secretary, 145 Belmont Drive, Somerset, New Jersey 08873.
By Order of the Board of Directors
By: /s/ Howard W. Brodie
-----------------------------------
Howard W. Brodie
Secretary
25
APPENDIX 1
EMCORE CORPORATION AUDIT COMMITTEE CHARTER
The audit committee of the board of directors of EMCORE Corporation (the
"Company") will have the oversight, responsibility, authority and duties as
described below.
The primary function of the audit committee is to assist the board of directors
in fulfilling its oversight responsibilities by reviewing (i) the financial
information that will be provided to the shareholders and others, (ii) the
systems of internal controls management and the board of directors have
established and (iii) all audit processes.
COMPOSITION
The audit committee will consist of not less than three (3) directors, as
determined by the board of directors. The members of the audit committee will
meet the independence and experience requirements of the Nasdaq Stock Market
("Nasdaq"). One of the members shall be appointed committee chairperson by the
full board of directors.
GENERAL REPONSIBILITIES
1. The audit committee provides open avenues of communication among the
internal auditors, the independent accountant and the board of directors.
2. The audit committee must report committee actions to the full board of
directors and may make appropriate recommendations.
3. The audit committee has the power to conduct or authorize investigations
into matters within the audit committee's scope of responsibilities. The
audit committee is authorized to retain independent counsel, accountants or
others it needs to assist in an investigation.
4. The committee will meet at least four times each year, more frequently if
circumstances make that preferable. The audit committee chairperson has the
power to call a committee meeting whenever he or she thinks there is a
need. An audit committee member should not vote on any matter in which he
or she is not independent. The committee may ask members of management or
others to attend the meeting and is authorized to receive all pertinent
information from management.
5. The committee will do whatever else the law, the Company's charter or
bylaws or the board of directors require.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the audit committee will:
1. Review and reassess the adequacy of this charter annually and recommend any
proposed changes to the board of directors for approval. This should be
done in compliance with applicable Nasdaq audit committee requirements.
2. Review with the Company's management, internal audit personnel and
independent accountants Company's accounting and financial reporting
controls. Obtain annually in writing from the independent accountants their
letter as to the adequacy of such controls.
3. Review with the Company's management, internal audit personnel and
independent accountants significant accounting and reporting principles,
practices and procedures applied by the Company in preparing its financial
statements. Discuss with the independent accountants their judgments about
the quality, not just the acceptability, of the Company's accounting
principles used in financial reporting.
4. Review the scope of internal audit's work plan for the year and receive a
summary report of major findings by internal auditors and how management is
addressing the conditions reported.
5. Review the scope and general extent of the independent accountants' annual
audit. The audit committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the audit committee that no
limitations have been placed on the scope or nature of their audit
procedures. The audit committee will review annually with management the
fee arrangement with the independent accountants.
6. Inquire as to the independence of the independent accountants and obtain
from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as contemplated by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees.
7. Have a predetermined arrangement with the independent accountants that they
will advise the audit committee through its chairperson and management of
the Company of any matters identified through procedures followed for
interim quarterly financial statements, and that such notification is to be
made prior to the related press release or, if not practicable, prior to
filing the applicable Form 10-Q. Also receive a written confirmation
provided by the independent accountants at the end of each of the first
three quarters of the year that they have nothing to report to the audit
committee, if that is the case, or the written enumeration of required
reporting issues.
8. At the completion of the annual audit, review with management, internal
audit and the independent accountants the following:
- The annual financial statements and related footnotes and
financial information to be included in the Company's annual
report to shareholders and on Form 10-K.
- Results of the audit of the financial statements and the related
report thereon and, if applicable, a report on changes during the
year in accounting principles and their application.
- Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during the
audit. Inquire about the cooperation received by the independent
accountants during their audit, including access to all requested
records, data and information. Inquire of the independent
accountants whether there have been any disagreements with
management which, if not satisfactorily resolved, would have
caused them to issue a nonstandard report on the Company's
financial statements.
- Other communications as required to be communicated by the
independent accountants by Statement of Auditing Standards (SAS)
61 as amended, modified or supplemented, relating to the conduct
of the audit. Further, receive a written communication provided
by the independent accountants concerning their judgment about
the quality of the Company's accounting principles, as outlined
in SAS 61 as amended, modified or supplemented, and that they
concur with management's representation concerning audit
adjustments.
2
If deemed appropriate after such review and discussion, recommend to
the Board that the financial statements be included in the Company's
annual report on Form 10-K.
9. After preparation by management and review by internal audit personnel and
independent accountants, approve the report required under SEC rules to be
included in the Company's annual proxy statement. The audit committee
charter is to be published as an appendix to the proxy statement every
three years.
10. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent accountants to the
Company's needs.
11. Meet with management, internal audit personnel and the independent
accountants to discuss any relevant significant recommendations that the
independent accountants may have, particularly those characterized as
`material' or `serious'. Typically, such recommendations will be presented
by the independent accountants in the form of a Letter of Comments and
Recommendations to the audit committee. The audit committee should review
responses of management to the Letter of Comments and Recommendations from
the independent accountants and receive follow-up reports on action taken
concerning the aforementioned recommendations.
12. Recommend to the board of directors the selection, retention or termination
of the Company's independent accountants.
13. Review the appointment and replacement of the senior internal audit
executive.
14. Review with management, internal audit personnel and the independent
accountants the methods used to establish and monitor the Company's
policies with respect to unethical or illegal activities by Company
employees that may have a material impact on the financial statements.
15. Generally as part of the review of the annual financial statements, receive
an oral report(s), at least annually, from the Company's general counsel
concerning legal and regulatory matters that may have a material impact on
the financial statements.
16. As the Committee may deem appropriate, obtain, weigh and consider expert
advice as to Audit Committee related rules of the Nasdaq, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
3
EMCORE CORPORATION
145 BELMONT DRIVE
SOMERSET, NEW JERSEY 08873
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Reuben F. Richards and Thomas G. Werthan,
and each of them, as proxies for the undersigned, each with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated on the reverse side of this proxy card, all of the
shares of stock of the Company that the undersigned is entitled to vote at the
2001 Annual Meeting of Shareholders of the Company, to be held on February 28,
2001 or at any adjournments or postponements thereof.
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" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED IN PROPOSAL (1),
"FOR" THE RATIFICATION OF THE AUDITORS IN PROPOSAL (2) AND "FOR" THE APPROVAL
OF THE INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER EMCORE'S
2000 STOCK OPTION PLAN IN PROPOSAL (3).
SEE REVERSE
SIDE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
VOTE FOR
all nominees listed at
right (except as marked VOTE WITHHELD NOMINEES:
to the contrary below) from all nominees Richard A. Stall
Robert Louis-Dreyfus
[ ] [ ] Charles Scott
(INSTRUCTION: To withhold authority for an individual nominee, write that
nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF DELOITTE & TOUCHE, LLP [ ] [ ] [ ]
AS THE COMPANY'S INDEPENDENT AUDITORS
3. APPROVE INCREASE IN NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER EMCORE'S
2000 STOCK OPTION PLAN [ ] [ ] [ ]
4. Upon such other business as may properly come before the Annual Meeting or
any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting, and any adjournments
or postponements thereof.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED WITHIN THE UNITED STATES.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement, and (iii) the Company's 2000 Annual Report
to Shareholders.
SIGNATURE _____________________ SIGNATURE ______________________ DATE __________
(IF HELD JOINTLY)
NOTE: Please sign exactly as your name appears hereon and mail it promptly even
though you now plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in the partnership name
by authorized person.
EXHIBIT 16.1
January 26, 2001
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Commissioners:
We have read the statements by Emcore Corporation (copy attached), which we
understand will be filed with the Commission, pursuant to Item 304(a) of
Regulation S-K, as part of Company's Definitive Proxy Statement dated January
26, 2001. We agree with the statements concerning our Firm in Item 9 of such
Definitive Proxy Statement.
Very truly yours,
PricewaterhouseCoopers LLP