DEF 14A: Definitive proxy statements
Published on March 27, 2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by
the Registrant þ
Filed by
a Party other than the Registrant o
Check the
appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to Section 240.14a-12
EMCORE
CORPORATION
(Name of
Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate box):
þNo fee
required.
o Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) 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):
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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. o
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
EMCORE
CORPORATION
10420
Research Road, SE
Albuquerque,
New Mexico 87123
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON THURSDAY, APRIL 30, 2009
Important
Notice Regarding the Availability of Proxy Materials
For
the Shareholder Meeting to Be Held on April 30, 2009
The
Proxy Statement and 2008 Annual Report are available at
http://www.emcore.com/investor/2009_proxy.pdf.
To
our Shareholders:
The 2009
Annual Meeting of Shareholders (the “Annual Meeting”) of EMCORE Corporation (the
“Company”) will be held at 10:00 A.M. local time on Thursday, April 30, 2009, at
the Albuquerque Marriott Hotel 2101 Louisiana Blvd. NE Albuquerque, New Mexico
87110 for the following purposes:
To
elect one (1) member to the Company’s Board of
Directors;
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(2)
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To
ratify the selection of Deloitte & Touche LLP as the Company’s
independent registered public
accounting
firm for the fiscal year ending September 30, 2009;
|
(3)
|
To
approve an increase in the number of shares reserved for issuance under
the Company’s 2000
Employee
Stock Purchase Plan;
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(4)
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To
approve an increase in the number of shares reserved for issuance under
the Company’s 2000
Stock Option Plan; and |
(5)
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To
transact such other business as may properly come before the Annual
Meeting and any
adjournments
or postponements thereof.
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The Board
of Directors has fixed the close of business on March 6, 2009 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,
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||
/s/ | Keith J. Kosco | |
Keith
J. Kosco, Esq.
Secretary
|
March 27,
2009
Albuquerque,
New Mexico
THIS IS
AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN
PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A PROXY
CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY, AND VOTE THEIR
SHARES IN PERSON.
EMCORE
CORPORATION
PROXY
STATEMENT
TABLE OF
CONTENTS
Page
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Annual
Meeting of Shareholders
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1
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1
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Information
Concerning Proxy
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2
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||
Purposes
of the Meeting
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2
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Outstanding
Voting Securities and Voting Rights
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Proposal
I:
Election
of Director
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3
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Directors
and Executive Officers
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4
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Recommendation
of the Board of Directors
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5
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Governance
of the Company
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6
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Director
Compensation
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8
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Compensation
Discussion and Analysis
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10
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Executive
Compensation
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16
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Compensation
Committee Report
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22
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Compensation
Committee Interlocks and Insider Participation
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22
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Ownership
of Securities
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23
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Security
Ownership of Certain Beneficial Owners and Management
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23
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Equity
Compensation Plan Information
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24
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Section
16(a) Beneficial Ownership Reporting Compliance
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25
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Proposal
II:
Appointment
of Independent Registered Public Accounting Firm
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26
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Fiscal
2008 & 2007 Auditor Fees and Services
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26
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Report
of the Audit Committee
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27
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Recommendation
of the Board of Directors
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27
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Proposal
III:
To
Approve an Increase in the Number of Shares Reserved for Issuance Under
the Company’s 2000 Employee Stock Purchase Plan
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28
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Description
of Material Features of the 2000 ESPP
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28
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Terms
of Options
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29
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Recommendation
of the Board of Directors
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31
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Proposal
IV:
To
Approve an Increase in the Number of Shares Reserved for Issuance Under
the Company’s 2000
Stock
Option Plan
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32
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Description
of Material Features of the 2000 Stock Option Plan
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33
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Terms
of Options
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34
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Recommendation
of the Board of Directors
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37
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General
Matters
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38
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EMCORE
CORPORATION
10420
Research Road, SE
Albuquerque,
New Mexico 87123
PROXY
STATEMENT
ANNUAL MEETING OF
SHAREHOLDERS
APRIL 30,
2009
This
Proxy Statement is being furnished to shareholders of record of EMCORE
Corporation (“EMCORE”, “Company”, “we”, or “us”) as of the close of business on
March 6, 2009, in connection with the solicitation on behalf of the Board of
Directors of EMCORE of proxies for use at the 2009 Annual Meeting of
Shareholders (the “Annual Meeting”) to be held at 10:00 A.M. local time, on
April 30, 2009, at the Albuquerque Marriott Hotel, 2101 Louisiana Blvd., NE,
Albuquerque, New Mexico 87110, or at any adjournments thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. This
Proxy Statement and the enclosed proxy card are first being sent to shareholders
beginning on or about March 27, 2009. Shareholders should review the information
provided herein in conjunction with the Company’s 2008 Annual Report to
Shareholders, which accompanies this Proxy Statement. The Company’s principal
executive office is located at 10420 Research Road, SE, Albuquerque, New Mexico
87123. The Company’s main telephone number is (505) 332-5000. The Company’s
principal executive officers may be reached at the foregoing business address
and telephone number.
INFORMATION CONCERNING
PROXY
The
enclosed proxy is solicited on behalf of the Company’s Board of Directors. The
giving of a proxy does not preclude the right to vote in person should any
shareholder giving the proxy so desire. Shareholders have an unconditional right
to revoke their proxy at any time prior to the exercise thereof, either in
person at the Annual Meeting or by filing with the Company’s Secretary at the
Company’s headquarters a written revocation or duly executed proxy bearing a
later date; however, no such revocation will be effective until written notice
of the revocation is received by the Company at or prior to the Annual
Meeting.
The cost
of preparing, assembling, and mailing this Proxy Statement, the Notice of Annual
Meeting of Shareholders, and the enclosed proxy is borne by the Company. In
addition to the use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company’s employees will receive no
compensation for soliciting proxies other than their regular salaries. The
Company may request banks, brokers and other custodians, nominees, and
fiduciaries to forward copies of the proxy material to their principals and to
request authority for the execution of proxies. The Company may reimburse such
persons for their expenses in so doing.
1
PURPOSES OF THE
MEETING
At the
Annual Meeting, the Company’s shareholders will consider and vote upon the
following matters:
(1)
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To
elect one (1) member to the Company’s Board of
Directors;
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(2)
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To
ratify the selection of Deloitte & Touche LLP as the Company’s
independent registered public
accounting
firm for the fiscal year ending September 30, 2009;
|
(3)
|
To
approve an increase in the number of shares reserved for issuance under
the Company’s 2000
Employee
Stock Purchase Plan;
|
(4)
|
To
approve an increase in the number of shares reserved for issuance under
the Company’s 2000
Stock
Option Plan; and
|
(5)
|
To
transact such other business as may properly come before the Annual
Meeting and any
adjournments or postponements thereof. |
Unless
contrary instructions are indicated on the enclosed proxy, all shares
represented by valid proxies received pursuant to this solicitation (and that
have not been revoked in accordance with the procedures set forth above) will be
voted: (1) FOR the election of the nominee for director named below; (2) FOR
ratification of the Company’s independent registered public accounting firm
named above; (3) FOR the increase in the number of shares reserved for issuance
under the Company’s 2000 Employee Stock Purchase Plan; (4) FOR the increase in
the number of shares reserved for issuance under the Company’s 2000 Stock Option
Plan; and (5) by the proxies in their discretion upon any other proposals as may
properly come before the Annual Meeting. In the event a shareholder specifies a
different choice by means of the enclosed proxy, such shareholder’s shares will
be voted in accordance with the specification so made.
OUTSTANDING VOTING
SECURITIES AND VOTING RIGHTS
As of the
close of business on March 6, 2009 (the “Record Date”), the Company had
78,337,504 shares of no par value common stock (“Common Stock”) issued and
outstanding. Each shareholder of record on the Record Date is entitled to one
vote on all matters presented at the Annual Meeting for each share of Common
Stock held by such shareholder. 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 nominee for election as a director 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 as follows:
Proposal
1
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(Election
of Directors)
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Each
nominee for director will be elected by a plurality of the votes cast in person
or by proxy at the Annual Meeting. Each shareholder may vote for or
withhold such vote from any or all nominees. The nominees who receive
the most votes that are properly cast at the Annual Meeting will be
elected.
Proposal 2 | (Appointment of Independent Registered Public Accounting Firm), |
Proposal 3 | (Increase in the Number of Shares Reserved for Issuance Under the Company’s 2000 Employee Stock Purchase Plan), and |
Proposal
4
|
(Increase
in the Number of Shares Reserved for Issuance Under the Company’s 2000
Stock Option
Plan).
|
The
approval of proposals 2-4 requires an affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting. Each shareholder may vote for, vote against or abstain from
voting on each of these proposals. Abstentions and broker non-votes
are not counted as votes cast and will have no affect on the outcome of the vote
for each proposal.
2
PROPOSAL
I:
ELECTION OF
DIRECTOR
Pursuant
to EMCORE’s Restated Certificate of Incorporation, the Board of Directors of
EMCORE is divided into three classes as set forth in the following table. The
directors in each class hold office for staggered terms of three years. The
Class C director, Mr. Gillen, is being proposed for another three-year term
(expiring in 2012) at this Annual Meeting. Mr. Gillen was re-elected in 2006 for
a term that expires in 2009.
The
shares represented by proxies that have been executed and returned will be
voted, unless otherwise specified, in favor of the nominee for the Board of
Directors named below. If, as a result of circumstances not known or unforeseen,
such nominee shall be unavailable to serve as director, proxies will be voted
for the election of such other person as the Board of Directors may
select.
The
following table sets forth certain information regarding the members of and
nominee for the Board of Directors:
Name
and Other Information
|
Age
|
Class
and Year
in
Which
Term
Will Expire
|
Principal
Occupation
|
Served
as
Director
Since
|
NOMINEE FOR ELECTION AT THE
2009 ANNUAL MEETING
John
Gillen (1) (2)
(3)(4)
|
67
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Class
C
2009
|
Partner,
Gillen and Johnson, P.A., Certified Public Accountants
|
2003
|
DIRECTORS WHOSE TERMS
CONTINUE
Thomas
J. Russell, Ph.D. (2)
(4)
|
77
|
Class
A
2011
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Chairman
Emeritus of the Board, EMCORE Corporation
|
1995
|
Reuben
F. Richards, Jr.
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53
|
Class
A
2011
|
Executive
Chairman, Chairman of the Board, EMCORE Corporation
|
1995
|
Robert
Bogomolny (1) (3)
(4)
|
70
|
Class
A
2011
|
President,
University of Baltimore
|
2002
|
Charles
T. Scott (1) (2)
(3) (4)
|
59
|
Class
B
2010
|
Chairman
of William Hill plc
|
1998
|
Hong
Q. Hou, Ph.D.
|
44
|
Class
B
2010
|
Chief
Executive Officer, EMCORE Corporation
|
2006
|
(1)
|
Member
of Audit Committee.
|
(2)
|
Member
of Nominating Committee.
|
(3)
|
Member
of Compensation Committee.
|
(4)
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Determined
by the Board of Directors to be an independent
director.
|
3
DIRECTORS AND EXECUTIVE
OFFICERS
Set forth
below is certain information with respect to the nominee for the office of
director and other directors and executive officers of EMCORE.
THOMAS J.
RUSSELL, Ph.D., 77, has been a director of the Company since May 1995 and was
elected Chairman of the Board on December 6, 1996. In March 2008, Dr. Russell
was named Chairman Emeritus. Dr. Russell founded Bio/Dynamics, Inc.
in 1961 and managed the company until its acquisition by IMS International in
1973, following which he served as President of that company’s Life Sciences
Division. From 1984 until 1988, he served as Director, then as Chairman of IMS
International until its acquisition by Dun & Bradstreet in 1988. From 1988
to 1992, he served as Chairman of Applied Biosciences, Inc., and was a Director
until 1996. In 1990, Dr. Russell was appointed as a Director of
Saatchi & Saatchi plc (now Cordiant plc), and served on that board until
1997. He served as a Director of Adidas-Salomon AG from 1994 to
2001. He also served on the board of LD COM Networks until
2004. He holds a Ph.D. in physiology and biochemistry from Rutgers
University.
REUBEN F.
RICHARDS, JR., 53, has been a director since May 1995 and Chairman of the Board
of Directors since March 2008. Mr. Richards joined the Company in
October 1995 and served in various executive capacities. In March,
2008, Mr. Richards was named the Executive Chairman and Chairman of the Board of
the Company. Mr. Richards previously served as Chief Executive
Officer from December 1996 until March 2008. From October 1995 to
December 2006, Mr. Richards served as the Company’s President. From September
1994 to December 1996, Mr. Richards was a Senior Managing Director of Jesup
& Lamont Capital Markets, Inc. (an affiliate of a registered broker-dealer).
From December 1994 to December 1996, he was a member and President of Jesup
& Lamont Merchant Partners, L.L.C. From 1992 through 1994, Mr.
Richards was a principal with Hauser, Richards & Co., a firm engaged in
corporate restructuring and management turnarounds. From 1986 until 1992, Mr.
Richards was a Director at Prudential-Bache Capital Funding in its Investment
Banking Division. Mr. Richards served as a Director of WorldWater
& Solar Technologies Corporation (now Entech Solar, Inc.) from November 2006
to January 2009.
HONG Q.
HOU, Ph.D., 44, has served as a director of the Company since December 2006. Dr.
Hong Hou joined the Company in March 1998 and was appointed Chief Executive
Officer in March 2008. During his employment, Dr. Hou has served in a
variety of progressively more responsible technical and managerial leadership
roles. Early in his career with the Company, Dr. Hou co-founded the
Company’s Photovoltaics Division and subsequently served as Vice President
General Manager of the Company’s Fiber Optics Division and was appointed
President and Chief Operating Officer of the Company and joined the Company’s
Board in December 2006. Dr. Hou is responsible for developing the
Company’s first solar cell and is currently listed as the inventor on 8
patents. Prior to joining the Company, Dr. Hou served as a Principal
Member of the Technical Staff at Sandia National Laboratories and a member of
the Technical Staff at AT&T Bell Laboratories. Dr. Hou served as a Director
of Crystal IS, Inc. from 2003 to February 2009 and has served as a Director of
WorldWater & Solar Technologies Corporation (now Entech Solar, Inc.) from
November 2006 to January 2009. He holds a Ph.D. in Electrical
Engineering from the University of California at San Diego.
CHARLES
T. SCOTT, 59, has served as a director of the Company since February 1998. Since
January 2004, he has served as Chairman of the Board of Directors of William
Hill plc, a leading provider of bookmaking services in the United Kingdom. Prior
to that, Mr. Scott served as Chairman of a number of companies, including
Cordiant Communications Group plc, Saatchi & Saatchi Company plc, and Robert
Walters plc.
JOHN
GILLEN, 67, has served as a director of the Company since March
2003. Mr. Gillen has been a partner in the firm of Gillen and
Johnson, P.A., Certified Public Accountants since 1974. Prior to that
time, Mr. Gillen was employed by the Internal Revenue Service and Peat Marwick
Mitchell & Company, Certified Public Accountants (now KPMG
LLP).
ROBERT
BOGOMOLNY, 70, has served as a director of the Company since April 2002. Since
August 2002, Mr. Bogomolny has served as President of the University of
Baltimore. Prior to that, he served as Corporate Senior Vice President and
General Counsel of G.D. Searle & Company, a pharmaceuticals manufacturer,
from 1987 to 2001. At G.D. Searle, Mr. Bogomolny was responsible at various
times for its legal, regulatory, quality control, and public affairs activities.
He also led its government affairs department in Washington, D.C., and served on
the Searle Executive Management Committee.
4
Non-Director
Executive Officers
JOHN M.
MARKOVICH, 52, joined the Company in August 2008 as Chief Financial
Officer. Mr. Markovich has more than 20 years of executive financial
management experience in working with rapid-growing public and private
technology-based companies. Prior to joining the Company, Mr.
Markovich was Executive Vice President and Chief Financial Officer of Energy
Innovations, Inc., a venture capital-backed CPV systems and EPC
company. Previously, he served as Chief Financial Officer for a
number of private and publicly-traded technology companies including Orqis
Medical Corporation, Pictos Technologies, Tickets.com, Inc., and Optical Coating
Laboratories, Inc. Earlier in his career, Mr. Markovich was Vice
President and Treasurer of Western Digital Corporation and managed Citibank’s
high-tech corporate banking business in Southern California and
Arizona. Mr. Markovich earned a B.S. in business from Miami
University, an M.B.A. in finance from Michigan State University and is a
graduate of Stanford University’s Financial Management Program. Mr.
Markovich is SOX certified by the Sarbanes-Oxley Institute.
KEITH J.
KOSCO, ESQ., 56, joined the Company in January 2007 and serves as Chief Legal
Officer and Secretary of the Company. From 2003 to 2006, Mr. Kosco served as
General Counsel and Corporate Secretary of Aspire Markets, Inc. and from 2002 to
2003 served as General Counsel and Corporate Secretary of 3D Systems
Corporation, a high-tech capital goods manufacturer. From 1998 to
2001, Mr. Kosco served as Director of Mergers and Acquisitions and Assistant
General Counsel of Litton Industries, Inc., a technology and defense company
that was acquired by Northrop Grumman Corporation in 2001. Mr. Kosco
also has over 17 years of experience in private practice with the law firms of
Squire Sanders & Dempsey and Morgan, Lewis & Bockius. Mr.
Kosco received his J.D. degree from Harvard Law School in 1979.
JOHN
IANNELLI, Ph.D., 43, joined the Company in January 2003 through the acquisition
of Ortel Corporation from Agere Systems and has served as Chief Technology
Officer since June 2007. Prior to his current role, Dr. Iannelli was Senior
Director of Engineering of EMCORE’s Broadband Fiber Optics division
(Ortel). Dr. Iannelli joined Ortel in 1995 and has led several
development programs and products in the areas of analog and digital
transmitters/transceivers. He has made seminal inventions in the areas of fiber
optic transport in digital and broadband infrastructures. He has numerous
publications and issued U.S. patents. Dr. Iannelli holds a Ph.D. and
MS degree in Applied Physics from the California Institute of Technology, a BS
degree in Physics from Rensselaer Polytechnic Institute, and a Masters degree in
Business Administration from the University of Southern California.
Additional
Information Regarding Directors and Executive Officers
Mr.
Robert Louis-Dreyfus, after serving as a director of the Company since March
1997, resigned his seat on the Company’s Board of Directors on October 30,
2007.
Mr.
Thomas Werthan, after serving as a director of the Company since May 1992,
resigned his seat on the Company’s Board of Directors on April 1,
2008.
Mr. Adam
Gushard, after serving as Interim Chief Financial Officer from February 2007
until August 2008, continues to serve as the Company’s Vice President of
Finance.
RECOMMENDATION OF THE BOARD
OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
ELECTION OF THE NOMINEE LISTED ABOVE UNDER PROPOSAL I.
5
GOVERNANCE OF THE
COMPANY
Board of
Directors
The Board
of Directors oversees EMCORE’s business and affairs pursuant to the New Jersey
Business Corporation Act and the Company’s Restated Certificate of Incorporation
and Bylaws. The Board of Directors is the ultimate decision-making body of the
Company, except on matters reserved for the shareholders.
Code of
Ethics
The
Company has adopted a code of ethics entitled “EMCORE Corporation Code of
Business Conduct and Ethics”, which is applicable to all employees, officers,
and directors of EMCORE. The full text of the Code of Business Conduct and
Ethics is included with the Corporate Governance information available on the
Company’s website (www.emcore.com). The Company intends to disclose
any changes in or waivers from its code of ethics by posting such information on
its website or by filing a Current Report on Form 8-K.
Related Person Transaction
Approval Policy
The Board
of Directors has adopted a written policy on the review and approval of related
person transactions as defined under applicable Securities and Exchange
Commission regulations. Related persons covered by the policy are executive
officers, directors and director nominees, any person who is known to be a
beneficial owner of more than five percent of the voting securities of the
Company, any immediate family member of any of the foregoing persons or any
entity in which any of the foregoing persons has or will have a direct or
indirect material interest.
A related
person transaction is defined by the policy as any financial or other
transaction, arrangement or relationship (including any indebtedness or
guarantee of indebtedness) or any series of similar transactions, arrangements
or relationships in which the Company (or a subsidiary) would be a participant
and the amount involved would exceed $120,000, and in which any related person
would have a direct or indirect material interest. A related person will not be
deemed to have a direct or indirect material interest in a transaction if the
interest arises only from the position of the person as a director of another
corporation or organization that is a party to the transaction or the direct or
indirect ownership by such person and all the related persons, in the aggregate,
of less than a 10 percent equity interest in another person (other than a
partnership) which is a party to the transaction. In addition, certain interests
and transactions, such as director compensation that has been approved by the
Board, transactions where the rates or charges are determined by competitive bid
and compensatory arrangements solely related to employment with the Company (or
a subsidiary) that have been approved by the Compensation Committee, are not
subject to the policy.
The Board
of Directors has delegated to the Compensation Committee the
responsibility for reviewing, approving and, where applicable, ratifying related
person transactions. If a member of the committee has an interest in a related
person transaction, then he or she will not be part of the review
process.
In
considering the appropriate action to be taken regarding a related person
transaction, the committee or the Board (as the case may be) will consider the
best interests of the Company, whether the transaction is comparable to what
would be obtainable in an arms-length transaction, is fair to the Company and
serves a compelling business reason, and any other factors as
it deems relevant. As a condition to approving or ratifying any
related person transaction, the committee may impose whatever conditions and
standards it deems appropriate, including periodic monitoring of ongoing
transactions.
The
Company’s Code of Business Conduct and Ethics includes the Company’s Conflicts
of Interest Policy, among other policies. Directors are expected to read the
Code of Business Conduct and Ethics and adhere to its provisions to the extent
applicable in carrying out their duties and responsibilities as Directors. The
Conflicts of Interest Policy provides, among other things, that conflicts of
interest exists where the interests or benefits of one person or entity conflict
with the interests or benefits of the Company. The Code also provides
restrictions on outside directorships, business interests and employment,
receipt of gifts and entertainment and it also provides that all material
violations of the Company’s Code of Business Conduct and Ethics or matters
involving financial or legal misconduct will be reported to the Company’s Audit
Committee on at least a quarterly basis, or more frequently depending upon the
level of severity of the violation.
The Board
of Directors reviews the independence of and any possible conflicts of interest
of directors and director nominees at least annually. Directors are also
required to disclose potential and existing related person transactions in
completing Directors and Officers Questionnaires.
6
During
fiscal 2008, the Company entered into agreements for the sale of its interests
in the company formerly named WorldWater & Solar Technologies
Corporation, now named Entech Solar, Inc. The Company closed these transactions
and sold its shares of WorldWater Series D Convertible Preferred Stock and
warrants to The Quercus Trust, which at the time beneficially owned more than
five percent of the Company’s common stock, during fiscal 2008 and the first two
quarters of fiscal 2009, for approximately $24.4 million, which included
additional consideration as a result of the termination of certain operating
arrangements between the companies. Following completion of the sale, Messrs.
Richards and Hou resigned their seats on the WorldWater board of directors.
Except for this transaction, the Company did not engage in any other related
person transaction during the fiscal year ended September 30,
2008.
Director
Independence
The Board
of Directors has determined that a majority of the directors are independent as
required by the NASDAQ Rules. The Board has affirmatively determined that
Messrs. Russell, Bogomolny, Scott, Gillen and Louis-Dreyfus (who resigned his
seat on the Board on October 30, 2007) are independent within the meaning of the
NASDAQ Rules. There were no specific transactions, relationships or
arrangements requiring consideration by the Board of Directors in making these
independence determinations. The Board of Directors has determined
that Messrs. Richards and Hou are not independent because they are both
employees of the Company and that Mr. Werthan (who resigned his seat on the
Board on April 1, 2008) is not independent because he was employed by the
Company within the past three years.
Messrs.
Russell (chairman), Scott and Gillen serve as members of our Nominating
Committee. The members of our Compensation Committee are Messrs. Gillen
(chairman), Bogomolny, and Scott. Messrs. Scott (chairman), Bogomolny
and Gillen serve as members of our Audit Committee. All members of
each of our Nominating Committee, Compensation Committee and Audit Committee are
“independent” as defined by the NASDAQ Rules.
Board Meetings and
Attendance
The Board
of Directors held 15 regularly scheduled and special telephonic meetings during
fiscal 2008, and took other certain actions by unanimous written consent. During
fiscal 2008, all directors of the Company, except for Mr. Louis-Dreyfus and Mr.
Werthan, attended at least 75% of the aggregate meetings of the Board and
committees on which they served, during their tenure on the Board.
Board
Committees
Audit
Committee
The
Company has a separately-designated standing Audit Committee (the “Audit
Committee”) established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The Audit Committee currently consists of Messrs. Scott
(chairman), Gillen, and Bogomolny. Each member of the Audit Committee
is currently an independent director within the meaning of Nasdaq Marketplace
Rule 4200(a)(15). The Board of Directors has determined that Messrs.
Scott and Gillen are each Audit Committee financial experts. The
Audit Committee met 10 times in fiscal 2008.
Compensation
Committee
The
Compensation Committee evaluates the performance of the Executive Chairman and
other officers and reviews and approves their compensation. The
Compensation Committee currently consists of Messrs. Gillen (chairman),
Bogomolny, and Scott. A copy of the Charter of the Compensation Committee is
posted on the Company’s website (www.emcore.com). The
processes and procedures for the review and approval of executive compensation
are described in the Compensation Discussion and Analysis section of this Proxy
Statement. In addition, the Compensation Committee has responsibility for
recommending to the Board the level and form of compensation and benefits for
directors. It also administers the Company’s incentive compensation plans and
reviews and monitors succession plans for the Executive Chairman and the other
officers. The Compensation Committee met 10 times in fiscal
2008.
To the
extent consistent with its obligations and responsibilities, the Compensation
Committee may form subcommittees of one or more members of the committee and
delegate its authority to the subcommittees as it deems appropriate. In
addition, the committee has the authority to retain and terminate external
advisors in connection with the discharge of its duties.
Nominating
Committee
The
Nominating Committee recommends new members to the Company’s Board of
Directors. The Nominating Committee currently consists of Messrs.
Russell (chairman), Scott, and Gillen. A copy of the Charter of the
Nominating Committee is posted on the Company’s website (www.emcore.com). The
Nominating Committee did not meet in fiscal 2008.
7
When
considering a potential director candidate, the Nominating Committee looks for
demonstrated character, judgment, relevant business, functional and industry
experience, and a high degree of acumen. There are no differences in the manner
in which the Nominating Committee evaluates nominees for director based on
whether the nominee is recommended by a shareholder. The Company does not pay
any third party to identify or assist in identifying or evaluating potential
nominees.
The
Nominating Committee will consider suggestions from shareholders regarding
possible director candidates for election in 2010. Such suggestions, together
with appropriate biographical information, should be submitted to the Company’s
Secretary. See the section titled “Shareholder Proposals” below under “General
Matters” for details regarding the procedures and timing for the submission of
such suggestions. The director nominated in this Proxy Statement was recommended
for re-election by the Board of Directors. The Board of Directors did not
receive any notice of a Board of Directors nominee recommendation in connection
with this Proxy Statement from any shareholder.
Board Attendance at Annual
Meetings
The
Company strongly encourages members of the Board of Directors to attend the
Company’s Annual Meetings of Shareholders, and historically a majority have done
so. Last year, the entire Board of Directors attended the 2008 Annual
Meeting of Shareholders.
Communications with the
Board
Shareholders
may communicate with the Company’s Board of Directors through its Secretary by
writing to the following address: Board of Directors, c/o Mr. Keith J. Kosco,
Secretary, EMCORE Corporation, 10420 Research Road, SE, Albuquerque, New Mexico
87123. The Company’s Secretary will forward all correspondence to the Board of
Directors, except for junk mail, mass mailings, product complaints or inquiries,
job inquiries, surveys, business solicitations or advertisements, or patently
offensive or otherwise inappropriate material. The Company’s Secretary may
forward certain correspondence, such as product-related inquiries, elsewhere
within the Company for review and possible response.
DIRECTOR COMPENSATION FOR
FISCAL YEAR 2008
The
Company compensates each non-employee Director for service on the Board of
Directors. Director compensation for fiscal 2008 included the
following:
Name
(1)
|
Fees
Earned or
Paid
in Cash
($)(4)
|
Stock
Awards
($)(5)(6)
|
Total
($)
|
||||||
Thomas
J. Russell, Ph.D.
|
76,600
|
43,400
|
120,000
|
||||||
Charles
T. Scott
|
96,000
|
46,600
|
142,600
|
||||||
John
Gillen
|
101,800
|
50,300
|
152,100
|
||||||
Robert
Bogomolny
|
67,300
|
43,400
|
110,700
|
||||||
Robert
Louis-Dreyfus (2)
|
-
|
-
|
-
|
||||||
Thomas
Werthan (3)
|
60,600
|
19,000
|
79,600
|
(1)
|
Reuben
F. Richards, Jr., the Company’s Executive Chairman and Chairman of the
Board, and Hong Q. Hou, Ph.D., the Company’s Chief Executive Officer, are
not included in this table as they are employees of the Company and
receive no compensation for their services as Directors. Their
compensation is disclosed in the Summary Compensation
Table.
|
(2)
|
Robert
Louis-Dreyfus resigned his seat on the Company’s Board of Directors on
October 30, 2007.
|
(3)
|
Thomas
Werthan resigned his seat on the Company’s Board of Directors on April 1,
2008.
|
(4)
|
These
amounts include the “make-whole” cash payments approved by the
Compensation Committee for the period March 2007 through December 2007, as
outlined below.
|
(5)
|
The
amounts shown represent the dollar amount recognized upon grant for
financial statement reporting purposes with respect to 2008 fiscal year
for the fair value of Company common stock granted in fiscal
2008. The grants of common stock are made yearly, and the grant
date fair value at the time of grant is the number of shares granted
multiplied by the closing price of our common stock on the grant date. The
aggregate compensation expense is recognized in our financial statements
for fiscal 2008 in accordance with the provisions of FAS
123(R).
|
(6)
|
The
Company did not grant any stock options to non-employee directors during
fiscal 2008. At the end of fiscal 2008, non-employee directors did not
hold any options to acquire Company common
stock.
|
8
Pursuant
to the Company’s Directors’ Stock Award Plan adopted by the shareholders at the
Company’s 2007 annual meeting (the “2007 Stock Award Plan”), the Company pays
non-employee directors a fee in the amount of $3,500 per Board meeting attended
and $500 per committee meeting attended ($1,000 for the chairman of a
committee). The Company also reimburses a non-employee director's
reasonable out-of-pocket expenses incurred in connection with such Board or
committee meetings. From time to time, Board members are invited to attend
meetings of Board committees of which they are not members. When this
occurs, these non-committee Board members receive a committee meeting fee of
$500. Payment of fees under the 2007 Stock Award Plan will be made in common
stock of the Company payable in one issuance annually based on the closing price
on The NASDAQ Global Market on the date of issuance.
The
Company’s Outside Directors Cash Compensation Plan provides for the payment of
cash compensation to non-employee directors for their participation at Board
meetings, in amounts established by the Board and periodically reviewed. Each
non-employee director receives a meeting fee for each meeting that he attends
(including telephonic meetings, but excluding execution of unanimous written
consents) of the Board. In addition, each non-employee director receives a
committee meeting fee for each meeting that he attends (including telephonic
meetings, but excluding execution of unanimous written consents) of a Board
committee. Until changed by resolution of the Board, the meeting fee is $4,000
and the committee meeting fee is $1,500; provided that the meeting fee for
special telephonic meetings (i.e., Board meetings that are not regularly
scheduled and in which non-employee directors typically participate
telephonically) is $750 and the committee meeting fee for such special
telephonic meetings is $600. Any non-employee director who is the chairman of a
committee receives an additional $750 for each meeting of the committee that he
chairs, and an additional $200 for each special telephonic meeting of such
committee. Directors may defer cash compensation otherwise payable under the
Outside Directors Cash Compensation Plan.
Based on
the results of our review of our past director compensation practices, the
Compensation Committee concluded that certain directors had not been properly
compensated under the Company’s 1997 Director’ Stock Award Plan (“1997 Stock
Award Plan”), which lapsed in March 2007. In May 2008, it was concluded by the
Compensation Committee that in order to properly compensate the affected
directors that they would be given “make-whole” cash payments in lieu of shares
that should have been received under the Company’s 1997 Stock Award
Plan:
Name
|
“Make-Whole”
Cash Payment
|
Special
Committee
“Make-Whole”
Cash
Payment
|
||
Thomas
J. Russell, Ph.D.
|
$45,300
|
$4,500
|
||
Charles
T. Scott
|
$54,300
|
$2,300
|
||
John
Gillen
|
$59,400
|
-
|
||
Robert
Bogomolny
|
$29,900
|
$2,300
|
||
Thomas
Werthan
|
$40,200
|
-
|
The cash
payments were calculated by multiplying the number of shares that should have
been awarded to the affected director by $7.51, which was the average price
during the period between the 1997 Stock Award Plan lapsing and the 2007 Stock
Award Plan becoming effective, during which time the Company did not have a
stock award plan under which it could award shares to
directors. These cash payments will be paid by the Company to the
affected directors in 25% increments. In May 2008, the first such
payment was made. The second payment was made in January
2009. The third payment is expected to be paid by June 30, 2009 and
the final payment is expected to be paid by December 31, 2009. The
Special Committee “make-whole” cash payment was paid in October
2008.
No
director who is an employee of the Company receives compensation for services
rendered as a director under the Outside Directors Cash Compensation Plan or the
2007 Stock Award Plan.
As
announced in the Company’s Current Report on Form 8-K that was filed with the
SEC on March 6, 2009, the Compensation Committee agreed to temporarily suspend
the Company’s Outside Directors Cash Compensation Plan until the Company is able
to secure additional financing.
9
COMPENSATION
DISCUSSION AND ANALYSIS
This
Compensation Discussion and Analysis describes EMCORE’s executive compensation
program and analyzes the compensation decisions made for the executive officers
included in the Summary Compensation Table (the “Named Executive Officers”) for
fiscal 2008. The analysis includes the disclosure of certain
performance targets that are used in connection with the Company’s executive
compensation program. These targets should not be understood to be statements of
management’s expectations of the Company’s future results.
Objectives
and Components of the Company’s Compensation Program
EMCORE’s
executive compensation program is designed to motivate executives to achieve
strong financial, operational, and strategic performance and recognizes
individual contributions to that performance. Through the
compensation program, the Company seeks to attract and retain talented executive
officers by providing total compensation that is competitive with that of other
executives employed by companies of similar size, complexity and lines of
business. The Company’s executive compensation program is also
designed to link executives’ interests with shareholders’ interests by providing
a portion of total compensation in the form of stock-based
incentives.
The Company’s Annual Compensation
Decision-Making Process
The
Compensation Committee of the Board of Directors is responsible for setting and
administering policies that govern EMCORE’s executive compensation
program. In October/November of each year, the Compensation Committee
reviews the Company’s performance and the performance of each of the Named
Executive Officers for the prior fiscal year and market surveys and proxy
statements of our peer group as well as companies that have our same Standard
Industrial Classification (SIC) code and annual revenues of $500 million or
less. Based on this review, the Compensation Committee discusses and
approves base salary increases related to the current fiscal year and awards
annual cash incentives and stock option grants in recognition of Company and
individual performance for the prior fiscal year.
The
purpose of the Compensation Committee’s review of the market surveys and proxy
statements that list the compensation paid by companies within our peer group as
well as a broader market group is to provide a reference point that will assist
the Compensation Committee in determining the competitiveness of our executive
compensation program and is not determinative of the amount of compensation that
is paid or awarded to our executives. The Compensation Committee
reviews and selects the companies that are included in our peer group, which is
comprised of companies of similar size, complexity and lines of
business. For fiscal 2008, the peer group consisted of the following
companies:
•
Evergreen Solar, Inc.
•
Sunpower Corporation
• First
Solar, Inc.
• Finisar
Corporation
• JDS
Uniphase Corporation
• Opnext,
Inc.
In
addition to the use of market surveys and peer group proxy statements, the
Compensation Committee intends to retain a compensation consultant in the coming
year to assess EMCORE’s competitive position with respect to each component of
the Company’s executive compensation program, which consists of: (i) base
salary, (ii) annual cash incentives, and (iii) long term stock-based
incentives.
Base Salary
The
Company’s Compensation Committee reviews base salary levels from peer group
companies, as well as relevant market data provided by Equilar, Inc., and uses a
range between the 25th percentile and the 75th percentile, and a target of the
50th percentile, when setting salaries for our Named Executive Officers. These
ranges are set by the Compensation Committee and are intended to maintain the
Company’s competitive position among similar companies with which it competes
for executive talent. During fiscal 2008, only Keith J. Kosco and Dr. Hong Q.
Hou had a base salary that was outside of this compensation range.
10
Prior to
being promoted to the Company’s General Counsel position, Mr. Kosco served as
Vice President and Deputy General Counsel of the Company. Upon his promotion to
General Counsel, Mr. Kosco received an increase to his base yearly salary of
11.11%, including this raise his base salary reached $200,000, but fell below
the 25th percentile when compared to other general counsel executives identified
in the Equilar market data. Dr. Hong Q. Hou served as the Company’s Chief
Operating Officer during fiscal year 2007 and the first half of fiscal year
2008. Dr. Hou’s base yearly salary was increased from $227,000 to $400,000
effective as of December 14, 2006, in connection with his appointment as
President and Chief Operating Officer of the Company. At the
time of his appointment to President and Chief Operating Officer, it was
contemplated by the Compensation Committee that Dr. Hou would be promoted to
Chief Executive Officer of the Company in the next fiscal year, and thus he
began to take on an increased role and responsibility in the management of the
Company. From November 2007, he has been compensated a base yearly
salary of $420,000, which is at the top of the range when compared to other
chief operating officers identified in the Equilar market data. When Dr. Hou was
promoted on March 31, 2008 to Chief Executive Officer he did not receive an
additional salary increase. Following his promotion to Chief Executive Officer,
Dr. Hou’s base salary of $420,000 is at the 61st percentile when compared to
other chief executive officers identified in the Equilar market
data.
Base
salaries for executives are determined based upon job responsibilities, level of
experience, individual performance, and comparisons to the salaries of
executives in similar positions obtained from market surveys and proxy
statements. The goal for the base salary component is to compensate
executives at a level that approximates the median salaries of individuals in
comparable positions and markets. Mr. Richards, the Company’s
Executive Chairman, reviews the performance of the Chief Executive Officer and
the other executive officers and recommends salary increases for these
individuals to the Compensation Committee. These recommendations are
advisory and reflect the judgment and opinion of the Company’s Executive
Chairman based upon his review of the above-listed factors. In turn, the
Compensation Committee reviews, adjusts, where appropriate, and approves the
salary increases, if any, for these executive officers. With respect
to each executive officer, the Compensation Committee exercises its judgment as
to how to weigh each of the above listed factors when determining any such
salary increases. In executive session, the Compensation Committee reviews any
salary increase for the Executive Chairman.
On
November 13, 2007, the Compensation Committee approved a base salary increase,
for each of the Named Executive Officers, effective retroactively to October 1,
2007. The base salaries were adjusted as follows:
|
·
|
Mr.
Richard’s base salary was increased from $416,500 to
$437,325
|
|
·
|
Dr.
Hou’s base salary was increased from $400,000 to
$420,000
|
|
·
|
Mr.
Gushard’s base salary was increased from $240,000 to
$260,000
|
|
·
|
Dr.
Iannelli’s base salary was increased from $225,000 to
$236,250
|
|
·
|
Mr.
Kosco’s base salary was increased from $200,000 to
$210,000
|
In August
2008, in connection with his appointment as Chief Financial Officer, the
Compensation Committee approved for Mr. Markovich an annual base salary of
$300,000.
Each of
these base salary increases was based on publicly available data and each was
intended to maintain the Company’s competitive position among similar companies
with which it competes for executive talent. In setting base salary
compensation levels, the Compensation Committee used a market data study
gathered by Equilar, Inc. This market data included base salary information for
companies with revenue between $200-$500 million and a SIC Code of 3674, which
included 31 companies, some of which were: Avanex Corp., Bookham, Inc., Cree,
Inc., Finisar Corp., Opnext, Inc, and Triquint Semiconductor, Inc.
As
announced in the Company’s Current Report on Form 8-K that was filed with the
SEC on March 6, 2009, the Compensation Committee has, at the recommendation of
the Company’s Executive Management, approved temporary decreases in the annual
base salaries of its Chief Executive Officer, its Chief Financial Officer and
each of the other current Named Executive Officers of the
Company. Accordingly, effective March 2, 2009, and until the Company
is able to secure additional financing, the annual base salaries have been
adjusted as follows:
|
·
|
Mr.
Richard’s base salary was reduced by 15% from $437,325 to
$371,726
|
|
·
|
Dr.
Hou’s base salary was reduced 15% from $420,000 to
$357,000
|
|
·
|
Mr.
Markovich’s base salary was reduced 10% from $300,000 to
$270,000
|
|
·
|
Dr.
Iannelli’s base salary was reduced 5% from $236,250 to
$224,437
|
|
·
|
Mr.
Kosco’s base salary was reduced 5% from $210,000 to
$199,500
|
11
Annual Cash
Incentives
Each
fiscal year EMCORE establishes a cash incentive plan, which provides the
Company’s executive officers an opportunity to receive an annual cash payment in
addition to their base salaries. The cash incentive plan is designed
to place at risk a significant portion of an executive’s annual cash
compensation by linking the amount of compensation that an executive can achieve
under the plan with individual and Company performance. We believe
that providing annual cash incentive opportunities is a key component of
maintaining a competitive executive compensation program.
Pursuant
to EMCORE’s Fiscal 2008 Executive Bonus Plan (the “2008 Bonus Plan”), bonus
targets for each executive officer of the Company were established to promote
the achievement of individual and Company performance objectives for fiscal
2008. The bonus targets are a percentage of each executive’s base
salary and are established based on each executive’s job responsibilities and
experience as well as market data. The following bonus targets were
set under the 2008 Bonus Plan:
Name
and Title
|
Target
|
|
Reuben
F. Richards, Jr., Executive Chairman
Hong
Q. Hou, Ph.D., Chief Executive Officer
|
80%
of base salary
|
|
Adam
Gushard, Interim Chief Financial Officer
|
50%
of base salary
|
|
John
Iannelli, Ph.D., Chief Technology Officer
Keith
J. Kosco, Esq., Chief Legal Officer
|
35%
of base salary
|
The
portion of the target to be paid is based on both Company and individual
performance. The Company performance metrics are weighted equally and
are measured on the attainment of revenue and adjusted EBITDA goals (earnings
before interest, taxes, depreciation, amortization and other non-cash and
non-recurring charges). A threshold level of 75% of the revenue goal
and 70% of the adjusted EBITDA goal is set. If the Company’s
performance is below both of these performance targets, no cash incentive
payments are awarded. Achievement of 100% of revenue and adjusted
EBITDA goals correlates to payment of 100% of the bonus targets, and attainment
of lesser percentages of the revenue and adjusted EBITDA goals correlates to
payment of lesser percentages of the bonus targets. Attainment of
110% of the revenue and adjusted EBITDA goals will result in eligibility for
120% of the bonus targets.
The
individual performance component acts as a multiplier and can accelerate or
decelerate the target bonus percentage based upon individual performance as
determined by the Executive Chairman and the Compensation
Committee. The multiplier ranges from 0% to 140% of the executive’s
target bonus. The Compensation Committee reviews the Executive
Chairman’s individual performance. The Chief Executive Officer’s and
other executive officers’ individual performance is reviewed by the Executive
Chairman and approved by the Compensation Committee.
The
Compensation Committee retains the discretion to modify individual executive
cash incentive awards based upon individual performance and the successful
completion of business objectives.
The
Compensation Committee establishes revenue and adjusted EBITDA goals because it
believes these financial performance metrics are the best indicators of the
Company’s performance. The Company’s revenue and adjusted EBITDA
targets for fiscal 2008, as presented to the Compensation Committee, were
approximately $292 million and $15.5 million, respectively, and revenue and
adjusted EBITDA for fiscal 2008, as presented to the Compensation Committee were
approximately $294 million and ($9.6) million, respectively. The
Compensation Committee has the discretion to make adjustments to these financial
performance metrics to account for significant events that occur during the
year, such as acquisitions, divestitures, and unusual items and, with respect to
fiscal 2008, adjusted EBITDA was calculated by adding back interest, taxes,
depreciation and amortization to net loss while also excluding non-cash
stock-based compensation expense, one-time non-recurring charges related to the
Company’s review of its historical stock option granting practices, certain
legal, bad debt, inventory, severance and restructuring charges, and transition
service charges related to the integration of acquired assets. The
Compensation Committee reviewed and approved the fiscal 2008 financial
performance metrics calculations in November 2008. Based on fiscal 2008 revenue
and EBITDA results, each of the Named Executive Officers were eligible to
receive 30% of their individual bonus target. However, individual
performance and accomplishments were taken into account before the final
incentive compensation bonus was awarded. In determining incentive
compensation, the Compensation Committee also considered: i) the efforts of the
Named Executive Officers in assisting the Company in aligning strategic
directions, ii) Dr. Iannelli’s significant efforts in growing its fiber optics
business through acquisitions, iii) Mr. Gushard’s significant efforts in
restating the Company’s financial statements, and iv) the efforts of the Named
Executive Officers in developing product and business opportunities in the
emerging terrestrial solar power segment. With respect to each Named Executive
Officer, the Compensation Committee exercised its judgment
12
as to how
to weigh each of the above listed factors when determining the final bonus
amount awarded. Based on these factors, the Compensation Committee approved cash
incentive awards for the following Named Executive Officers as outlined
below.
These
awards are also set forth in the Summary Compensation Table under the heading
“Non-Equity Incentive Plan Compensation”.
Name
|
Target
Incentive Award
|
Actual
Incentive Award
|
Actual
Award as % of Target
|
|||
Reuben
F. Richards, Jr.
|
$ 349,860
|
$ 78,719
|
23%
|
|||
Hong
Q. Hou, Ph.D.
|
$ 336,000
|
$ 75,600
|
23%
|
|||
Adam
Gushard
|
$ 130,000
|
$ 39,000
|
30%
|
|||
John
Iannelli, Ph.D.
|
$ 82,688
|
$ 20,341
|
25%
|
|||
Keith
J. Kosco, Esq.
|
$ 73,500
|
$ 14,333
|
20%
|
Long-Term Stock-Based
Incentives
Long-term
equity awards consist of stock options, which are designed to give executive
officers an opportunity to acquire shares of common stock of the Company, to
provide an incentive for the executives to continue to promote the best
interests of the Company and enhance its long-term performance and to provide an
incentive for executives to join and remain with the Company. Equity
awards are an effective tool for aligning the interests of our executives with
the interests of our shareholders.
Stock
options give an executive the right to buy a share of the Company’s common stock
in the future at a predetermined exercise price. The exercise price
is the fair market value of the common stock on the grant date. New
hire stock option awards vest over a five-year period while annual stock option
awards vest over a four-year period. Other supplemental stock option
awards vest over a four-year period. All options expire ten years
after the grant date. In addition, no one recipient can be granted an
award of options to purchase more than 600,000 shares of common stock in any
twelve month period. Executives who voluntarily resign or are
terminated for cause immediately forfeit all options that have not vested unless
otherwise determined by the Compensation Committee.
In
granting equity awards, the Compensation Committee uses its judgment and
discretion and does not issue a targeted number of stock options, but rather
reviews the executive’s individual performance and the performance of the
Company in meeting its revenue and adjusted EBITDA goals in the prior fiscal
year to determine the appropriate value of the award at the time it is
granted. Grants of stock options to executive officers are also based
upon each officer’s relative position, responsibilities, historical and expected
contributions to the Company, and the officer’s vested option balance and
previous option grants, with primary weight given to the executive officer’s
relative rank and responsibilities. Initial stock option grants designed to
recruit an executive officer to join the Company may be based on negotiations
with the officer and with reference to historical option grants to existing
officers. The ultimate value of the award depends in large part on the future
performance of our common stock.
In March
2008, in connection with his appointment as Executive Chairman, the Compensation
Committee approved for Mr. Richards a one-time promotional grant of options to
purchase 500,000 shares of the Company’s common stock. This grant vests in four
equal installments over a four year period, with the first installment of
options vesting on the one-year anniversary of the grant date and equal amounts
vesting on each subsequent anniversary of the grant date.
In April
2008, in connection with his appointment as Chief Executive Officer, the
Compensation Committee approved for Dr. Hou a promotional grant of options to
purchase 150,000 shares of the Company’s common stock. This grant vests in four
equal installments over a four year period, with the first installment of
options vesting on the one-year anniversary of the grant date and equal amounts
vesting on each subsequent anniversary of the grant date.
13
In May
2008, in connection with the Company’s annual stock option retention grant plan,
the Compensation Committee approved the following stock option grant
awards:
Name
|
Number
of
Stock
Options
|
|
Reuben
F. Richards, Jr.
|
100,000
|
|
Hong
Q. Hou, Ph.D.
|
195,000
|
|
Adam
Gushard
|
100,000
|
|
John
Iannelli, Ph.D.
|
75,000
|
|
Keith
J. Kosco, Esq.
|
80,000
|
This
grant vests in four equal installments over a four year period, with the first
installment of options vesting on the one-year anniversary of the grant date and
equal amounts vesting on each subsequent anniversary of the grant date. The
relative size of Dr. Hou’s May 2008 retention stock option grant was due in part
to his promotion to Chief Executive Officer on March 31, 2008.
In August
2008, in connection with his appointment as Chief Financial Officer, the
Compensation Committee approved for Mr. Markovich a grant of options to purchase
475,000 shares of the Company’s common stock. This grant vests in five equal
installments over a five year period, with the first installment of options
vesting on the one-year anniversary of the grant date and equal amounts vesting
on each subsequent anniversary of the grant date. In addition, if
performance metrics are met, the Company has agreed that it would recommend to
the Compensation Committee of its Board of Directors that Mr. Markovich be
granted options to purchase 125,000 shares of the Company’s common stock in the
second calendar quarter of 2010 as a performance based award. If
granted, these options would vest equally over 4 years and expire 10 years after
the grant date, and the exercise price of these options would be the closing
price of the Company’s common stock on the grant date, as determined pursuant to
the Company’s 2000 Stock Option Plan.
The
exercise price for each of the above-described grants of options was the fair
market value of the common stock on the grant date.
Based on
our review of historical stock option granting practices in fiscal 2006, the
Audit Committee concluded that, pursuant to Accounting Principles Board Opinion
No. 25, Accounting for
Stock Issued to Employees, and related interpretations, the applicable
measurement dates on certain stock options awarded differed from the grant dates
previously used in accounting for such awards. Certain affected options may be
deemed to have been granted with below-market exercise prices, which could have
potentially subjected the affected option grantee to adverse taxation under
Section 409A of the Internal Revenue Code, referred to as
Section 409A.
To
provide employees of the Company holding those options with an opportunity to
avoid such adverse taxation, the Company commenced a special tender offer on
November 19, 2008. The tender offer allowed those employees to tender options
that were potentially subject to Section 409A for replacement. Following
the completion of the tender offer on December 17, 2008, each tendered option
was amended to increase the exercise price of the option to fair market value as
of the actual measurement dates that should have been used for financial
accounting purposes. Accordingly, the Company entered into agreements with Dr.
Hou and Dr. Iannelli since they both received discounted option grants prior to
becoming Section 16 officers of the Company. To compensate them for
the increased amounts reflected in the exercise price of their amended options,
the Company paid Dr. Hou $9,100 and Dr. Iannelli $1,560 in January
2009.
Company
Benefits
EMCORE’s
benefits are an important tool in our ability to attract and retain outstanding
employees throughout the Company. As a business matter, we weigh the
benefits we need to offer to attract and retain talented employees against the
benefits we can afford to pay and still remain competitive. Benefit
levels are reviewed periodically to ensure they are cost-effective and
competitive and support the overall needs of Company employees.
This
section describes the benefits that EMCORE provides to key executives and notes
those instances when benefits for the Named Executive Officers differ from the
general plan. In some instances, we also describe the programs we offer across
the Company as context to specific discussions about executive
benefits.
14
Medical,
Dental, and Vision Benefits
The
Company offers a standard benefits package to all of its employees, which
includes medical, dental, and vision coverage. The Named Executive
Officers receive coverage at 100% whereas all other employees of the Company
receive coverage ranging from 50% - 100% depending on the service
performed.
Company-sponsored
Retirement Plans
The
EMCORE Corporation 401(k) Plan (the “401(k) Plan”) is a defined contribution
plan with a 401(k) arrangement and is designed to comply with ERISA, the
Internal Revenue Code, as well as federal and state legal
requirements. The 401(k) Plan is designed to provide retirement
benefits to eligible employees of EMCORE and is administered by Prudential
Financial. Participants in the 401(k) Plan may elect to reduce
compensation by a specific percentage, which is contributed to the participant’s
401(k) account on a pre-tax basis as a salary deferral.
Employees
may elect to contribute to the 401(k) Plan through salary reduction up to the
yearly maximum tax-deductible deferral allowed pursuant to IRS
regulations. A participant may elect to defer between 1-30% of his or
her compensation per pay period. The deferral amount will not be
subject to income tax until distribution. Each participant is
able to direct his or her investment into any of the available investment
options. Participant’s contributions are vested at 100%.
EMCORE
may provide a discretionary match of 50% of the first 6% of base compensation of
a participant’s contribution to the 401(k) Plan and this matching contribution
vests over an initial five-year period. This matching contribution is
in the form of the Company’s common stock. Participants
are able to exchange out of the Company’s common stock to other investment
options within the 401(k) Plan upon receipt of the Company
match. Exchanges from other investment options to the Company’s
common stock are not permitted under the 401(k) Plan.
An
employee becomes eligible to participate in the 401(k) Plan on the first day of
the month following his or her date of hire and attaining the age of 20
years. An EMCORE re-hire is eligible to participate in the 401(k)
Plan immediately.
Perquisites
EMCORE
provides perquisites to key executive officers, including the Named Executive
Officers, as a recruiting and retention tool. We believe that our
perquisites are appropriate and we benchmark our perquisites against generally
accepted corporate practices.
The
perquisites provided to our Named Executive Officers in fiscal 2008 included
relocation expenses. For more information regarding perquisites
provided to the Named Executive Officers in fiscal 2008 see the footnotes to the
“All Other Compensation” column of the Summary Compensation Table.
EMCORE’s
Severance Policy and Severance Agreements
Under the
Company’s Executive Severance Policy, participants are eligible to receive
certain severance benefits if their employment with the Company is terminated
and the termination constitutes a “Separation of Service” within the meaning of
Section 409A of the Internal Revenue Code. However, participants are
not eligible to receive severance benefits if they are terminated with cause,
due to death or disability, or if they voluntarily terminate their employment
other than for good reason. In addition, a participant that is
eligible to receive severance benefits under the Severance Policy must execute
an agreement (a “Separation Agreement”) prepared by the Company that includes,
among other things, a release by the participant of the Company from any
liability or obligation to the participant. A participant will not
receive severance benefits if the participant does not enter into a Separation
Agreement with the Company and all severance benefits will cease if the
participant violates any provision of his or her Separation
Agreement.
Under the
Severance Policy participants at the Chief /C-level Officers or higher will
receive (i) for those hired or promoted prior to May 1, 2007, the continuation
of their base salary for a period equal to one year and two weeks plus two
additional weeks for each year the participant was employed by the Company or
(ii) for those hired or promoted on or after May 1, 2007, the continuation of
their base salary for a period equal to one year and one week plus one
additional week for each year the participant was employed by the
Company.
15
Participants
at the Vice President level will receive (i) for those hired or promoted prior
to May 1, 2007, the continuation of their base salary for a period equal to five
months and two weeks plus two additional weeks for each year the participant was
employed by the Company or (ii) for those hired or promoted on or after May 1,
2007, the continuation of their base salary for a period equal to five months
and one week plus one additional week for each year the participant was employed
by the Company.
If,
following a disposition, a participant’s employment is terminated after the end
of a fiscal year but before annual cash incentive awards or pay-for-performance
payments are distributed and the participant would otherwise be entitled to a
cash incentive award, the participant will remain entitled to the annual cash
incentive award or pay-for-performance payment attributable to the immediately
preceding fiscal year. The Severance Policy also provides that
participants will be eligible for certain benefits, including continued payment
of certain health insurance premiums, outplacement services and other
perquisites.
Compensation
of the Executive Chairman
The
Compensation Committee annually reviews the compensation of Mr. Richards,
Executive Chairman, and recommends any adjustments to the Board of Directors for
approval. Mr. Richards participates in the same compensation programs
and receives compensation based upon the same criteria as EMCORE’s other
executive officers. However, Mr. Richards’ compensation reflects the
higher level of responsibility that he has with respect to the strategic
direction of EMCORE, the Company’s financial and operating results, and
interactions with the investment community.
After
considering EMCORE’s overall performance in fiscal 2007 and competitive
practices, the Compensation Committee on November 17, 2007 recommended, and the
Board of Directors approved, a 5% increase to Mr. Richards’ base salary, to
$437,325. This increase was made effective on October 1,
2007. Annual cash incentive compensation for Mr. Richards is based
upon achievement of targets set by the Board of Directors. Based on
the attainment of certain strategic corporate milestones, including significant
effort in growing the fiber optics business through acquisitions, and tremendous
progress in developing product and business opportunities in the emerging
terrestrial solar power segment, the Compensation Committee awarded Mr. Richards
$78,719 in the form of a cash incentive award.
As
announced in the Company’s Current Report on Form 8-K that was filed with the
SEC on March 6, 2009, the Compensation Committee has, at the recommendation of
the Company’s management, approved temporary decreases in the annual base
salaries of its Chief Executive Officer, its Chief Financial Officer and each of
the other current named executive officers of the
Company. Accordingly, effective March 2, 2009, Mr. Richard’s base
salary was reduced by 15% from $437,325 to $371,726.
Tax
and Accounting Considerations
Under
Section 162(m) of the Internal Revenue Code, EMCORE may not deduct annual
compensation in excess of $1 million paid to certain employees; generally it’s
Chief Executive Officer and its four other most highly compensated executive
officers, unless that compensation qualifies as performance-based compensation.
While the Compensation Committee intends to structure performance-related awards
in a way that will preserve the maximum deductibility of compensation awards,
the Compensation Committee may from time to time approve awards that would vest
upon the passage of time or other compensation, which would not result in
qualification of those awards as performance-based compensation.
EXECUTIVE
COMPENSATION
The
following table sets forth certain information concerning the annual and
long-term compensation earned for services in all capacities to the Company for
the fiscal year ended September 30, 2008 of those persons who during such fiscal
year (i) served as the Company’s Chief Executive Officer, (ii) served as the
Company’s Chief Financial Officer, and (iii) were the three most
highly-compensated officers (other than the Chief Executive Officer and Chief
Financial Officer):
16
Summary
Compensation Table for Fiscal 2008
Name
and Principal Position
|
Year
|
Salary
($)(5)
|
Option
Awards
($)(6)
|
Non-Equity
Incentive Plan Compensation ($)(7)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Reuben
F. Richards, Jr.
Executive
Chairman and Chairman of the Board (1)
|
2008
2007
|
437,325
412,165
|
463,914
250,532
|
78,719
326,536
|
374
384
|
(8)
(8)
|
980,332
989,617
|
Hong
Q. Hou, Ph.D.
Chief
Executive Officer (2)
|
2008
2007
|
421,000
360,080
|
713,889
1,181,529
|
75,600
313,600
|
5,196
179,334
|
(9)
(10)
|
1,215,685
2,034,543
|
John
M. Markovich
Chief
Financial Officer (3)
|
2008
|
36,997
|
31,284
|
-
|
4,720
|
(11)
|
73,001
|
John
Iannelli, Ph.D.
Chief
Technology Officer
|
2008
2007
|
237,625
203,857
|
179,998
87,760
|
20,341
34,294
|
6,588
5,877
|
(12)
(13)
|
444,552
331,788
|
Keith
J. Kosco, Esq.
Chief
Legal Officer
|
2008
2007
|
210,000
132,308
|
109,031
25,874
|
14,333
45,733
|
374
25,174
|
(14)
(15)
|
333,738
229,089
|
Adam
Gushard
Former
Interim
Chief
Financial Officer (4)
|
2008
2007
|
262,395
236,835
|
170,134
261,280
|
39,000
192,600
|
15,816
13,338
|
(16)
(17)
|
487,345
704,053
|
_________________
(1)
|
Mr.
Richards was appointed to Executive Chairman and Chairman of the Board on
March 31, 2008 and previously served as the Company’s Chief Executive
Officer.
|
(2)
|
Dr.
Hou was appointed to Chief Executive Officer on March 31, 2008 and
previously served as the Company’s President and Chief Operating
Officer.
|
(3)
|
Mr.
Markovich was appointed to Chief Financial Officer on August 18,
2008.
|
(4)
|
Mr.
Gushard was the Company’s Interim Chief Financial Officer until August 18,
2008 and continues to serve as Vice President of Finance for the
Company.
|
(5)
|
Salary
represents amounts paid to the individual during the fiscal year ended
September 30, 2008. It does not represent an employee’s current
annual base salary.
|
(6)
|
The
amounts in this column reflect the dollar amount recognized for financial
statement reporting purposes in fiscal 2008, in accordance with Statement
of Financial Accounting Standards No. 123(R), “Share-Based Payment”
(revised 2004) (without regard to estimated forfeitures related to a
service based condition) and includes amounts from awards granted in and
prior to fiscal 2008. Assumptions used in the calculation of these amounts
are included in footnote 4 to the Company’s audited financial statements
for the fiscal year ended September 30, 2008, included in the Company’s
Annual Report on Form 10-K filed with the SEC on December 30, 2008. These
amounts reflect the Company’s accounting expense for these awards and do
not necessarily correspond to the actual value that will be recognized by
the Named Executive Officer.
|
(7)
|
The
amounts in this column reflect the cash incentive awards earned in each
fiscal year presented as approved by the Compensation Committee. The
incentive awards for Fiscal 2008 have not yet been paid out by
the Company.
|
(8)
|
Consists
of life insurance premiums.
|
(9)
|
Consists
of life insurance premiums of $374, EMCORE’s matching contributions under
its 401(k) plan of $4,822, which are made in EMCORE common
stock.
|
(10)
|
Consists
of life insurance premiums of $384, EMCORE’s matching contributions under
its 401(k) plan of $4,673, which are made in EMCORE common stock, $45,000
related to relocation and housing and $129,277 to cover the reimbursement
of Section 409A taxes that the Company paid on behalf of Dr. Hou relating
to events prior to him being a Section 16 officer of the
Company.
|
(11)
|
Consists
of life insurance premiums of $374 and EMCORE’s matching contributions
under its 401(k) plan of $346, which are made in EMCORE common stock and
relocation of $4,000.
|
(12)
|
Consists
of life insurance premiums of $374 and EMCORE’s matching contributions
under its 401(k) plan of $6,214, which are made in EMCORE common
stock.
|
(13)
|
Consists
of life insurance premiums of $384 and EMCORE’s matching contributions
under its 401(k) plan of $5,493, which are made in EMCORE common
stock.
|
(14)
|
Consists
of life insurance premiums.
|
(15)
|
Consists
of life insurance premiums of $384 and relocation of
$24,790.
|
(16)
|
Consists
of life insurance premiums of $374 and EMCORE’s matching contributions
under its 401(k) plan of $9,442, which are made in EMCORE common stock and
a car allowance of $6,000.
|
(17)
|
Consists
of life insurance premiums of $384 and EMCORE’s matching contributions
under its 401(k) plan of $6,954, which are made in EMCORE common stock and
a car allowance of $6,000.
|
17
Grants
of Plan-Based Awards in Fiscal 2008
Name
|
Grant
Date
|
Estimated
Future Payouts Under
Non-Equity
Incentive
Plan
Awards (1)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
(2)
|
Exercise
or Base Price of Option Awards
($/Sh)
(3)
|
Grant
Date Fair Value of Stock and Option Awards
($)
(4)
|
||
Threshold
($)
|
Target
($)
|
Maximum
($)
|
|||||
Reuben
F. Richards, Jr.
|
3/31/08
5/19/08
N/A
|
87,465
|
349,860
|
419,832
|
500,000
100,000
|
5.76
8.38
|
1,999,150
583,540
|
Hong
Q. Hou, Ph.D.
|
4/3/08
5/19/08
N/A
|
84,000
|
336,000
|
403,200
|
150,000
195,000
|
6.67
8.38
|
697,305
1,137,903
|
John
M. Markovich (5)
|
8/18/08
|
475,000
|
5.57
|
1,607,558
|
|||
John
Iannelli, Ph.D.
|
5/19/08
N/A
|
20,672
|
82,688
|
99,226
|
75,000
|
8.38
|
437,655
|
Keith
J. Kosco, Esq.
|
5/19/08
N/A
|
18,375
|
73,500
|
88,200
|
80,000
|
8.38
|
466,832
|
Adam
Gushard
|
5/19/08
N/A
|
32,500
|
130,000
|
156,000
|
100,000
|
8.38
|
583,540
|
___________
(1)
|
These
columns reflect the possible payment amounts under performance-based cash
incentive awards granted for fiscal 2008 to the Named Executive Officers,
as described above under “Compensation Discussion and Analysis”. The
amounts actually awarded to these executives for 2008 are reported above
in the Summary Compensation Table as “Non-Equity Incentive Plan
Awards”. Threshold is defined as 25% of Target and Maximum is
defined as 120% of Target. At the Compensation Committee’s sole
discretion, they may adjust the non-equity incentive award obtained down
to 0% or up to 140% based upon the level of individual
achievements.
|
(2)
|
This
column reflects the number of shares underlying options granted to the
Named Executive Officers in fiscal 2008.
|
(3)
|
All
options were granted at an exercise price equal to the closing price of
our common stock on the option grant date.
|
(4)
|
This
column reflects the fair value of these awards on the grant date as
determined under the accounting principles used to calculate the value of
equity awards. For the assumptions and methodologies used to value the
awards reported in this column, see footnote (6) to the Summary
Compensation Table.
|
(5)
|
Due
to Mr. Markovich’s hire date of August 18, 2008, he was not eligible for a
2008 Incentive Plan Award. As previously disclosed in the
Company’s Current Report on Form 8-K filed with the SEC on August 18,
2008, Mr. Markovich received an option to purchase 475,000 shares of the
Company’s common stock pursuant to his offer letter dated August 7,
2008.
|
18
Outstanding
Equity Awards at September 30, 2008
Option
Awards
|
|||||||||
Name
|
Number
of Securities Underlying Unexercised Options
(#)
|
Number of Securities Underlying Unexercised
Options
(#) |
Option Exercise Price
($)
|
Option Expiration
Date
|
|||||
Reuben
F. Richards, Jr.
|
50,000
|
-
|
(16)
|
6.44
|
12/1/08
|
||||
25,000
|
-
|
22.00
|
4/14/10
|
||||||
72,500
|
-
|
2.63
|
5/18/14
|
||||||
225,000
|
-
|
|
3.42
|
5/18/15
|
|||||
-
|
500,000
|
(1)
|
5.76
|
3/31/18
|
|||||
-
|
100,000
|
(2) |
8.38
|
5/19/18
|
|||||
Hong
Q. Hou, Ph.D.
|
35,000
|
-
|
(17)
|
2.63
|
5/18/14
|
||||
-
|
6,875
|
(4)
|
3.00
|
2/28/15
|
|||||
27,500
|
27,500
|
(5)
|
7.29
|
8/28/16
|
|||||
245,000
|
-
|
5.76
|
12/14/16
|
||||||
63,750
|
191,250
|
(6)
|
8.78
|
9/25/17
|
|||||
-
|
150,000
|
(7)
|
6.67
|
4/3/18
|
|||||
-
|
195,000
|
(2)
|
8.38
|
5/19/18
|
|||||
John
M. Markovich
|
-
|
475,000
|
(3)
|
5.57
|
8/18/18
|
||||
John
Iannelli, Ph.D.
|
40,000
|
-
|
1.87
|
1/22/13
|
|||||
6,000
|
-
|
(17)
|
2.63
|
5/18/14
|
|||||
8,250
|
2,750
|
(4)
|
3.00
|
2/28/15
|
|||||
881
|
-
|
7.32
|
12/29/15
|
||||||
9,000
|
9,000
|
(9)
|
5.18
|
10/12/15
|
|||||
6,000
|
6,000
|
(10)
|
7.95
|
3/10/16
|
|||||
1,000
|
1,000
|
(11)
|
9.75
|
4/5/16
|
|||||
2,500
|
7,500
|
(12)
|
4.98
|
3/29/17
|
|||||
18,750
|
56,250
|
(13)
|
5.33
|
6/25/17
|
|||||
-
|
75,000
|
(2)
|
8.38
|
5/19/18
|
|||||
Keith
J. Kosco, Esq.
|
6,000
|
24,000
|
(14)
|
5.49
|
1/8/17
|
||||
12,500
|
37,500
|
(15)
|
5.08
|
4/27/17
|
|||||
-
|
80,000
|
(2)
|
8.38
|
5/19/18
|
|||||
Adam
Gushard
|
17,000
|
-
|
(16)
|
1.82
|
12/1/08
|
||||
8,000
|
-
|
1.82
|
4/14/10
|
||||||
5,000
|
-
|
1.82
|
4/26/12
|
||||||
17,500
|
-
|
1.82
|
10/3/11
|
||||||
7,500
|
-
|
1.82
|
4/4/11
|
||||||
2,000
|
-
|
1.82
|
3/2/11
|
||||||
17,500
|
-
|
(4)
|
2.63
|
5/18/14
|
|||||
20,625
|
6,875
|
3.00
|
2/28/15
|
||||||
1,598
|
-
|
|
7.32
|
12/29/15
|
|||||
22,500
|
22,500
|
(5)
|
7.29
|
8/28/16
|
|||||
62,500
|
37,500
|
(8)
|
4.06
|
2/20/17
|
|||||
-
|
100,000
|
(2) |
8.38
|
5/19/18
|
19
_____________
(1)
|
The
unvested portions of these awards are scheduled to vest in four
installments on March 31, 2009, 2010, 2011 and 2012.
|
(2)
|
The
unvested portions of these awards are scheduled to vest in four
installments on May 19, 2009, 2010, 2011 and 2012.
|
(3)
|
The
unvested portions of these awards are scheduled to vest in five
installments on August 18, 2009, 2010, 2011, 2012 and
2013.
|
(4)
|
The
unvested portions of these awards are scheduled to vest in one installment
on February 28, 2009.
|
(5)
|
The
unvested portions of these awards are scheduled to vest in two
installments on August 28, 2009 and 2010.
|
(6)
|
The
unvested portions of these awards are scheduled to vest in three
installments on September 25, 2009, 2010 and 2011.
|
(7)
|
The
unvested portions of these awards are scheduled to vest in four
installments on April 3, 2009, 2010, 2011 and 2012.
|
(8)
|
The
unvested portions of these awards are scheduled to vest in three
installments on February 20, 2009, 2010 and 2011.
|
(9)
|
The
unvested portions of these awards are scheduled to vest in two
installments on October 12, 2008 and 2009.
|
(10)
|
The
unvested portions of these awards are scheduled to vest in two
installments on March 10, 2009 and 2010.
|
(11)
|
The
unvested portions of these awards are scheduled to vest in two
installments on April 5, 2009 and 2010.
|
(12)
|
The
unvested portions of these awards are scheduled to vest in three
installments on March 29, 2009, 2010 and 2011.
|
(13)
|
The
unvested portions of these awards are scheduled to vest in three
installments on June 25, 2009, 2010, and 2011.
|
(14)
|
The
unvested portions of these awards are scheduled to vest in four
installments on January 8, 2009, 2010, 2011 and 2012.
|
(15)
|
The
unvested portions of these awards are scheduled to vest in three
installments on April 27, 2009, 2010, and 2011.
|
(16)
|
This
option grant expired and was cancelled on December 1,
2008.
|
(17)
|
In
December 2008, the Company entered into a special tender offer with Dr.
Hou and Dr. Iannelli regarding this option grant which increased the
exercise price from $2.63 to $2.89, which represents the fair market value
as of the actual measurement date for this option
grant.
|
Option
Exercises in Fiscal 2008
Option
Awards
|
||||
Name
|
Number
of Shares
Acquired
on Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
||
Reuben
F. Richards, Jr. (1)
|
100,000
|
487,200
|
||
Hong
Q. Hou, Ph.D. (2)
|
133,750
|
1,079,707
|
||
John
M. Markovich
|
-
|
-
|
||
Adam
Gushard (3)
|
10,000
|
109,700
|
||
John
Iannelli, Ph.D.
|
-
|
-
|
||
Keith
J. Kosco, Esq.
|
-
|
-
|
__________
(1)
|
These
shares were exercised in two tranches of 65,000 shares on February 25,
2008 and 35,000 shares on February 26, 2008.
|
(2)
|
These
shares were exercised in three tranches of 120,000 shares on December 19,
2007, 6,875 shares on December 31, 2007 and 6,875 shares on March 14,
2008.
|
(3)
|
These
shares were exercised on December 14, 2007, prior to expiration, and have
not been sold.
|
20
Potential
Payments upon Termination or Change-in-Control
Under the
Company’s Executive Severance Policy, participants are eligible to receive
certain severance benefits if their employment with the Company is terminated
and the termination constitutes a “Separation of Service” within the meaning of
Section 409A of the Internal Revenue Code. However, participants are
not eligible to receive severance benefits if they are terminated with cause,
due to death or disability, or if they voluntarily terminate their employment
other than for good reason. In addition, a participant that is
eligible to receive severance benefits under the Severance Policy must execute
an agreement (a “Separation Agreement”) prepared by the Company that includes,
among other things, a release by the participant of the Company from any
liability or obligation to the participant. A participant will not
receive severance benefits if the participant does not enter into a Separation
Agreement with the Company and all severance benefits will cease if the
participant violates any provision of his or her Separation
Agreement.
Under the
Severance Policy, participants at the Chief /C-level Officer or higher will
receive (i) for those hired or promoted prior to May 1, 2007, the continuation
of their base salary for a period equal to one year and two weeks plus two
additional weeks for each year the participant was employed by the Company or
(ii) for those hired or promoted on or after May 1, 2007, the continuation of
their base salary for a period equal to one year and one week plus one
additional week for each year the participant was employed by the
Company.
Participants
at the Vice President level will receive (i) for those hired or promoted prior
to May 1, 2007, the continuation of their base salary for a period equal to five
months and two weeks plus two additional weeks for each year the participant was
employed by the Company or (ii) for those hired or promoted on or after May 1,
2007, the continuation of their base salary for a period equal to five months
and one week plus one additional week for each year the participant was employed
by the Company.
If,
following the sale, transfer, spin-off or other disposition of the stock or
assets of any subsidiary, business unit or division of the Company, a
participant’s employment is terminated after the end of a fiscal year but before
annual cash incentive awards or pay-for-performance payments are distributed and
the participant would otherwise be entitled to such awards or payments, the
participant will remain entitled to the annual cash incentive award or
pay-for-performance payment attributable to the immediately preceding fiscal
year. The Severance Policy also provides that participants will be
eligible for certain benefits, including continued payment of certain health
insurance premiums, outplacement services and other perquisites.
The
following are estimated payments and benefits that would be provided to each of
Messrs. Richards, Hou, Markovich, Iannelli, Kosco, and Gushard in the event the
executive’s employment is terminated under certain circumstances. We
have calculated these amounts based on the Company’s Executive Severance Policy
(the “Severance Policy”) and, in some cases, the terms of individual offer
letters that were entered into in connection with an executive’s promotion to
his current position. The calculations assume a termination date of September
30, 2008, the last business day of fiscal 2008. The actual amounts of
the payments and costs of the benefits, however, can only be determined at the
time of an executive’s separation from the Company.
Name
|
Severance
|
Cash
Incentive Award
|
COBRA
(Company Portion)
|
Outplacement
Services (1)
|
Perquisites (2)
|
Reuben
F. Richards, Jr.
|
$655,988
|
$78,719
|
$19,154
|
$30,000
|
-
|
Hong
Q. Hou, Ph.D.
|
$597,692
|
$75,600
|
$19,154
|
$30,000
|
-
|
John
M. Markovich
|
$311,538
|
-
|
$ 3,928
|
$30,000
|
-
|
John
Iannelli, Ph.D.
|
$304,399
|
$20,341
|
$16,818
|
$30,000
|
-
|
Keith
J. Kosco, Esq.
|
$226,154
|
$14,333
|
$13,834
|
$30,000
|
-
|
Adam
Gushard
|
$370,000
|
$39,000
|
$19,154
|
$30,000
|
$59,000
|
___________________
(1)
|
On
December 30, 2008, the Compensation Committee amended the Company’s
Executive Severance Plan to reduce the outplacement services maximum
amount payable by the Company to $15,000.
|
(2)
|
Includes
$9,000 for a car allowance and an estimated cost of $50,000 for
relocation-related expenses, which is payable to Mr. Gushard if terminated
without cause.
|
21
Vesting
of Equity Awards in Connection with a Change in Control
Upon a
change in control of the Company, unvested stock options will vest and become
exercisable pursuant to the terms of the Company’s 2000 Stock Option Plan
applicable to all plan participants. The value of accelerating
unvested stock options, as measured by the difference between the closing price
of $4.94 on September 30, 2008, and the option grant price, would be zero for
Mr. Richards, Mr. Markovich, and Mr. Kosco, $46,525 for Mr. Gushard,
$13,338 for Dr. Hou, and $5,335 for Dr. Iannelli.
COMPENSATION COMMITTEE
REPORT
The
information contained under this “Compensation Committee Report”, shall not be
deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such
information be incorporated by reference into any filings under the Securities
Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or be subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference into any such
filing.
The
Compensation Committee is responsible for evaluating the performance of the
Executive Chairman, the Chief Executive Officer and other EMCORE officers as
well as reviewing and approving their compensation. The Committee also
establishes and monitors overall compensation programs and policies for the
Company, including administering the incentive compensation plans. The
Committee’s processes and procedures for the consideration and determination of
executive compensation are explained in greater detail in the Compensation
Discussion and Analysis section.
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis. Based on this review and discussion, the
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the Company’s Annual Report on Form 10-K/A and its
Proxy Statement in accordance with Item 407(e) of Regulation
S-K.
This
report is submitted by the Compensation Committee.
January
28, 2009
COMPENSATION COMMITTEE
John
Gillen, Chairman
Charles
T. Scott
Robert
Bogomolny
|
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The
Company’s Compensation Committee is comprised of Messrs. Gillen, Scott and
Bogomolny. No member of the Compensation Committee served as one of
the Company’s officers or employees during fiscal 2008 or was formerly an
officer or employee of the Company at any time. None of the Company’s
executive officers served as a member of the compensation committee of any other
company that has an executive officer serving as a member of the Company’s Board
of Directors or Compensation Committee during fiscal 2008. None of
the Company’s executive officers served as a member of the board of directors of
any other company that has an executive officer serving as a member of the
Company’s Compensation Committee during fiscal 2008.
22
OWNERSHIP OF
SECURITIES
SECURITY
OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth as of February 17, 2009 certain information regarding
the beneficial ownership of common stock of the Company by (i) each person or
“group” (as that term is defined in Section 13(d)(3) of the Exchange Act) known
by the Company to be the beneficial owner of more than 5% of the common stock of
the Company, (ii) each Named Executive Officer of the Company, (iii) each
director and nominee, and (iv) all directors and executive officers as a group
(10 persons). Except as otherwise indicated, the Company believes,
based on information furnished by such persons, that each person listed below
has the sole voting and investment power over the shares of common stock shown
as beneficially owned, subject to common property laws, where
applicable. Shares beneficially owned include shares of common stock
and warrants and options to acquire shares of common stock that are exercisable
within sixty (60) days of February 17, 2009. Unless otherwise indicated, the
address of each of the beneficial owners is c/o EMCORE Corporation, 10420
Research Road, SE, Albuquerque, New Mexico 87123.
Name
|
Shares
Beneficially
Owned
|
Percent
of
Common
Stock
|
|||||
Thomas
J. Russell, Ph.D. (1)
|
5,276,815
|
6.7
|
%
|
||||
Reuben
F. Richards, Jr. (2)
|
1,012,054
|
1.3
|
%
|
||||
Robert
Bogomolny
|
86,972
|
*
|
|||||
Charles
Scott (3)
|
42,409
|
*
|
|||||
John
Gillen
|
29,242
|
*
|
|||||
Hong
Q. Hou, Ph.D. (4)
|
503,859
|
*
|
|||||
John
M. Markovich
|
-
|
*
|
|||||
John
Iannelli, Ph.D. (5)
|
113,893
|
*
|
|||||
Keith
J. Kosco, Esq.(6)
|
24,500
|
*
|
|||||
Adam
Gushard (7)
|
212,141
|
*
|
|||||
All
directors and executive officers as a group
(10
persons) (8)
|
7,301,885
|
9.3
|
%
|
||||
Wells
Fargo & Company (9)
|
5,690,440
|
7.3
|
%
|
||||
Kingdon
Capital Management, LLC (10)
|
4,752,041
|
6.1
|
%
|
||||
Intel
Corporation (11)
|
4,452,299
|
5.7
|
%
|
||||
Kopp
Investment Advisors, LLC (12)
|
4,101,349
|
5.2
|
%
|
||||
AMVESCAP
PLC (13)
|
4,000,005
|
5.1
|
%
|
*
|
Less
than 1.0%
|
(1)
|
Includes
2,280,035 shares held by The AER Trust.
|
(2)
|
Includes
options to purchase 322,500 shares and 175,000 shares held by
spouse.
|
(3)
|
Includes
30,409 shares owned by Kircal, Ltd.
|
(4)
|
Includes
options to purchase 378,125 shares and 7,609 shares held in the Company’s
401(k) Plan.
|
(5)
|
Includes
options to purchase 102,631 shares and 4,683 shares held in the Company’s
401(k) Plan.
|
(6)
|
Includes
options to purchase 24,500 shares.
|
(7)
|
Includes
options to purchase 184,098 shares and 9,395 shares held in the Company’s
401(k) Plan.
|
(8)
|
Includes
options to purchase 1,011,854 shares beneficially owned by Reuben F.
Richards, Jr., Executive Chairman; Hong Hou, Chief Executive Officer; Adam
Gushard, Former Interim Chief Financial Officer; John Iannelli, Chief
Technology Officer; and Keith J. Kosco, Chief Legal
Officer.
|
(9)
|
This
information is based solely on information contained in a Schedule 13G
filed with the SEC on January 22, 2009, by Wells Fargo &
Company. Wells Fargo & Company reports beneficially owning
a total of 5,690,440 shares including having sole voting power over
2,592,468 shares and sole dispositive power over 3,317,535
shares. Wells Fargo & Company is a parent holding company
and the relevant subsidiaries are Wachovia Bank, National Association,
Wachovia Securities, LLC (IA) and Wachovia Bank, N.A.
(B.K.). Wachovia Securities, LLC is an investment advisor for
clients; the securities reported by this subsidiary are beneficially owned
by such clients. Wachovia Bank, N.A. (B.K.) holds the
securities reported in a fiduciary capacity for its respective
customers. The address of Wells Fargo & Company is 420
Montgomery Street, San Francisco,
California 94163.
|
23
(10)
|
This
information is based solely on information contained in a Schedule 13G
filed with the SEC on February 17, 2009, by Kingdon Capital Management,
LLC (Kingdon). Kingdon beneficially owns 4,752,041 shares. The
address of Kingdon Capital Management, LLC is 152 West 57th
Street, 50th
Floor, New York, New York 10019.
|
(11)
|
This
information is based solely on information contained in a Schedule 13G
filed with the SEC on February 17, 2009, by Intel Corporation (Intel).
Intel beneficially owns 4,452,299 shares. The address of Intel Corporation
is 2200 Mission College Boulevard, Santa Clara,
California 95052-8119.
|
(12)
|
This
information is based solely on information contained in a Schedule 13D
filed with the SEC on April 4, 2008, by Kopp Investment Advisors, LLC
(“KIA”), a wholly-owned subsidiary of Kopp Holding Company, LLC (“KHC”),
which is controlled by Mr. LeRoy C. Kopp (“Kopp”) (collectively, the “Kopp
Parties”). KIA reports beneficially owning a total of 4,101,349
shares including having sole voting power over 4,101,349 shares and shared
dispositive power over 2,242,774 shares. Kopp reports
beneficially owning a total of 4,242,774 shares, including having sole
dispositive power over 2,000,000 shares. The address of the
Kopp Parties is 7701 France Avenue South, Suite 500, Edina, Minnesota
55435. The address of Kopp Investment Advisors, LLC is 7701 France Avenue
South, Suite 500, Edina, Minnesota 55435.
|
(13)
|
This
information is based solely on information contained in a Schedule 13G
filed with the SEC on February 14, 2007, by AMVESCAP PLC, a U.K. entity,
on behalf of itself and PowerShares Capital Management LLC, a U.S. entity
(“PowerShares”). The shares reported for AMVESCAP PLC represent the total
shares held by AMVESCAP PLC through PowerShares. The address of
AMVESCAP PLC is 30 Finsbury Square, London EC2A 1AG,
England.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth, as of September 30, 2008, the number of securities
outstanding under each of EMCORE’s stock option plans, the weighted average
exercise price of such options, and the number of options available for grant
under such plans:
Plan
Category
|
Number
of securities
to
be issued upon
exercise
of outstanding
options,
warrants and rights
|
Weighted
average
exercise
price
of
outstanding options,
warrants
and rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in
column
(a))
|
||||
(a)
|
(b)
|
(c)
|
|||||
Equity
compensation plans approved by security holders
|
8,929,453
|
$
|
6.57
|
287,003
|
24
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, as well as anyone who is a beneficial owner
of more than 10 percent of a registered class of the Company’s common stock,
pursuant to Section 16(a) of the Exchange Act, as amended, and written
representations furnished to the Company, the Company believes that there was
compliance with all filing requirements of Section 16(a) applicable to directors
and executive officers of the Company during the fiscal year 2008 with the
following exceptions, due to administrative errors on the part of the Company’s
Legal Department:
|
·
|
On
December 24, 2008, Dr. Hou cancelled an option grant dated May 18,
2004, which was later determined to be issued at a discount to fair market
value. In exchange, Dr. Hou received a new option grant having
an exercise price equal to the fair market value as of the date of grant
and a cash payment of $9,100. The Company filed a delinquent
Form 4 on January 8, 2009.
|
|
·
|
On
December 24, 2008, Dr. Iannelli cancelled an option grant dated May
18, 2004, which was later determined to be issued at a discount to fair
market value. In exchange, Dr. Iannelli received a new option
grant having an exercise price equal to the fair market value as of the
date of grant and a cash payment of $1,560. The Company filed a
delinquent Form 4 on January 8,
2009.
|
|
·
|
Mr.
Markovich filed a delinquent Form 3 and Form 4 on January 20,
2009 following his appointment as Chief Financial Officer effective as of
August 18, 2008.
|
25
PROPOSAL
II:
APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP, an independent registered public accounting firm, audited the
financial statements of EMCORE Corporation for the fiscal year ending September
30, 2008. The Audit Committee and the Board of Directors have selected Deloitte
& Touche LLP as the Company’s independent registered public accounting firm
for the fiscal year ending September 30, 2009. The ratification of the
appointment of Deloitte & Touche LLP will be determined by the vote of the
holders of a majority of the shares present in person or represented by proxy at
the Annual Meeting. If this appointment of Deloitte & Touche LLP is not
ratified by shareholders, the Board of Directors will appoint another
independent registered public accounting firm whose appointment for any period
subsequent to the Annual Meeting will be subject to the approval of shareholders
at that meeting.
Representatives
of Deloitte & Touche LLP are expected to attend the Annual Meeting. They
will have the opportunity to make a statement if they desire to do so, and are
expected to be available to answer appropriate questions.
FISCAL 2008 & 2007
AUDITOR FEES AND SERVICES
Deloitte
& Touche LLP was the independent registered public accounting firm that
audited EMCORE’s financial statements for fiscal 2008 and 2007. The
aggregate fees billed by Deloitte & Touche LLP in connection with audit
services rendered for fiscal 2008 and 2007 are as follows:
Fiscal
2008
|
Fiscal
2007
|
||||||
Audit
fees (1)
|
$
|
3,149,100
|
$
|
4,593,000
|
|||
Audit-related
fees (2)
|
75,200
|
49,000
|
|||||
Tax
fees (3)
|
--
|
--
|
|||||
All
other fees
(4)
|
131,800
|
--
|
|||||
Total
|
$
|
3,356,100
|
$
|
4,642,000
|
__________
(1)
|
Represents
fees for professional services rendered in connection with the audit of
our annual financial statements, reviews of our quarterly financial
statements, and advice provided on accounting matters that arose in
connection with audit services. Fiscal 2008 included $766,000 and fiscal
2007 included $885,000 of audit fees for professional services rendered in
connection with the audit of our internal controls over financial
reporting (SOX 404 compliance). The fees incurred during fiscal
2008 and 2007 include fees related to our voluntary stock option review
and the related restatement of our financial data for the fiscal years
ended September 30, 2006 and 2005 and 2004.
|
(2)
|
Represents
fees for professional services related to the audits of our employee
benefit plans and other statutory or regulatory
filings.
|
(3)
|
Not
applicable.
|
(4)
|
Represents
fees for professional services related to the review of our Form S-1
Registration Statement filed in fiscal
2008.
|
26
REPORT OF THE AUDIT
COMMITTEE
The
following Report of the Audit Committee does not constitute soliciting material,
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act or the Exchange Act, except to the
extent the Company specifically incorporates this Report of the Audit Committee
by reference therein.
The
Company has a separately-designated standing Audit Committee (the “Audit
Committee”) established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The Audit Committee currently consists of Messrs. Scott, Gillen, and
Bogomolny. Each member of the Audit Committee is currently an independent
director within the meaning of Nasdaq Marketplace Rule 4200(a)(15). The Board of
Directors has determined that Messrs. Scott and Gillen are each Audit Committee
financial experts. The Audit Committee met 10 times in fiscal 2008. The Audit
Committee performs the functions set forth in the EMCORE Corporation Audit
Committee Charter, which has been adopted by the Board of
Directors. The Audit Committee Charter is available on our website
(www.emcore.com).
The Audit
Committee has reviewed and discussed the Company’s audited financial statements
for fiscal 2008 with management of the Company. The Audit Committee has
discussed with the Company’s independent registered public accounting firm the
matters required to be discussed by SAS No. 114, “The Auditor’s Communication
With Those Charged With Governance”. Furthermore, the Audit Committee has
reviewed management’s assessment of the effectiveness of the Company’s internal
controls over financial reporting, and has reviewed the opinion of the Company’s
independent registered public accounting firm regarding such assessment and the
effectiveness of the Company’s internal controls over financial
reporting.
The Audit
Committee has received the written disclosures and letter from the Company’s
independent registered public accounting firm required by Independence Standards
Board Standard No. 1, and has discussed with such accounting firm the
independence of such accounting firm. Based on the foregoing review and
discussions, the Audit Committee recommended to the Board of Directors that the
Company’s audited financial statements be included in the Company’s Annual
Report on Form 10-K for fiscal 2008, which was filed on December 30,
2008.
AUDIT
COMMITTEE
Charles
T. Scott, Chairman
Robert
Bogomolny
John
Gillen
|
Audit
Committee Pre-Approval and Procedures
The Audit
Committee pre-approves all audit and permissible non-audit services provided by
the independent auditors. These services may include audit services,
audit-related services, tax services and other services. The Audit Committee has
adopted a policy for the pre-approval of services provided by the independent
auditors. Under the policy, pre-approval is generally provided for up to one
year and any pre-approval is detailed as to the particular service or category
of services and is subject to a specific budget. In addition, the Audit
Committee may also pre-approve particular services on a case-by-case basis. For
each proposed service, the independent auditors are required to provide detailed
back-up documentation at the time of approval. Pursuant to the Sarbanes-Oxley
Act of 2002, all of the fees and services provided as noted in the table above
were authorized and approved by the Audit Committee in compliance with the
pre-approval policies and procedures described herein.
RECOMMENDATION OF THE BOARD
OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM UNDER PROPOSAL II.
27
PROPOSAL
III:
TO APPROVE AN INCREASE IN
THE NUMBER OF SHARES AVAILABLE
UNDER
EMCORE'S 2000 EMPLOYEE STOCK PURCHASE PLAN
The
maximum number of shares of our common stock that may be issued pursuant to
purchases made under the 2000 Employee Stock Purchase Plan (the “2000 ESPP”) is
currently 2,000,000 shares. As of March 6, 2009, 1,712,728 shares have
been issued under the 2000 ESPP and 287,272 shares remain available for
future issuance. We use the 2000 ESPP to facilitate the development of equity
ownership by our employees, which we believe more effectively aligns the
interests of our employees with those of our stockholders.
On
November 8, 1999, the Board of Directors adopted the EMCORE Corporation 2000
Employee Stock Purchase Plan which provides the Company’s employees with the
opportunity to acquire an ownership interest in EMCORE Corporation through the
purchase of shares of the Company’s common stock through payroll deductions. The
option price is set at 85% of the market price for the Company’s common stock on
either the first or last day of the participation period, whichever is lower.
Contributions are limited to 10% of an employee's compensation. The 2000 ESPP
became effective upon its approval by the Company’s shareholders at the 2000
Annual Meeting. It was amended by a vote of the shareholders at the Company’s
2006 Annual Meeting to increase the number of shares available for issuance by
1,000,000 to 2,000,000. In fiscal 2004, the 2000 ESPP was amended by the Board
of Directors to change from a 12-month duration plan to a 6-month duration plan,
with new participation periods beginning in January and July of each
year.
The 2000
ESPP currently provides for a total of 2,000,000 shares of the Company’s common
stock for purchase by employees, subject to adjustment for certain changes in
our capital (described under “Changes in Capital” below). The 2000 ESPP
qualifies as an “employee stock purchase plan” under section 423 of the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”), so that our
employees may enjoy certain tax advantages (see “Certain Federal Income
Tax Consequences” below).
On March
6, 2009, the Board of Directors, acting on the recommendation of the
Compensation Committee, unanimously adopted an amendment to the 2000 ESPP,
subject to approval by the shareholders, to increase the total number of shares
of Common Stock on which options may be granted under the 2000 ESPP by
2,500,000, to 4,500,000. The Board of Directors recommends approval of this
amendment to the 2000 ESPP to permit the issuance of this increased number of
shares of Common Stock thereunder. The Board of Directors believes that this
proposed increase is in the best interests of the Company and the shareholders.
In the event this proposal is not approved by our shareholders, and as a
consequence we are unable to continue to grant options at competitive levels,
the Board of Directors believes that it will negatively affect our ability to
meet our need for highly qualified personnel and our ability to manage future
growth.
If this
proposal is adopted, the first sentence of Section 5.01(a) of the 2000 ESPP
would be amended to read, in its entirety, as follows:
“The
maximum number of shares of Common Stock that may be issued under the Plan shall
be 4,500,000 shares.”
This
proposal summarizes the essential features of the 2000 ESPP, as it would be
amended pursuant to this proposal. You should read the amended plan for a full
statement of its terms and conditions. A copy of the 2000 ESPP may be obtained
upon written request to our Investor Relations Department at 10420 Research Road
SE, Albuquerque, New Mexico 87123.
Description
of Material Features of the 2000 ESPP
Administration.
The Board of Directors selects at least three of its members to serve on a
Committee that administers the 2000 ESPP. Subject to limitations of applicable
laws or rules, the Board of Directors may exercise the powers of the Committee,
and, if no such committee exists, the Board of Directors will perform all the
functions of the Committee. All decisions and actions of the Committee will be
final and conclusive. Subject to limitations of applicable laws or rules, the
Committee may delegate its administrative responsibilities and powers under the
2000 ESPP.
In
addition to its other powers under the 2000 ESPP described in this summary, and
subject to the express provisions of the 2000 ESPP, the Committee will have
discretionary authority to:
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·
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interpret
the 2000 ESPP and option
agreements,
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·
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determine
eligibility to participate in the 2000
ESPP,
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·
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adjudicate
and determine all disputes arising under or in connection with the 2000
ESPP,
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28
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·
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impose
restrictions on ownership and transferability of the shares of our common
stock underlying options granted under the 2000
ESPP
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·
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establish
procedures for carrying out the 2000 ESPP,
and
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·
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make
all other determinations deemed necessary or advisable for administering
the 2000 ESPP.
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The
Compensation Committee (which consists of Messrs. Gillen, Scott, and Bogomolny,
each of whom is a director, but not an employee, of EMCORE) is presently
responsible for managing the 2000 ESPP.
Eligibility.
All full-time and part-time employees of EMCORE and those of our designated
subsidiaries are eligible to participate in the 2000 ESPP, except:
an
employee may not be granted an option under the 2000 ESPP if:
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·
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immediately
after the grant of such option, the employee would own 5 percent or more
of the vote or value of all classes of our stock or the stock of any of
our subsidiaries, or
|
|
·
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such
option would permit the employee to purchase more than $25,000 of our
stock (using the fair market value of our stock at the time the option is
granted) under the 2000 ESPP (and any other employee stock purchase plan
of us or our subsidiaries) per calendar year when the option is
outstanding;
|
and the
Committee may, in its discretion, exclude from participation in the 2000 ESPP
employees who:
· customarily
work 20 or fewer hours per week,
· customarily
work 5 or fewer months per calendar year, or
· are
highly compensated employees (within the meaning of Section 414(q) of the
Internal Revenue Code).
Since the
effective date of the 2000 ESPP (and until the Committee determines otherwise),
employees who customarily work 20 or fewer hours per week, or who customarily
work 5 or fewer months per calendar year, have been ineligible to participate in
the 2000 ESPP.
Approximately
650 employees are currently eligible to participate in the 2000 ESPP. In
December 2008 (for the period from July 1, 2008 to December 31, 2008), employees
participating in the 2000 ESPP purchased 468,080 shares of the Company’s common
stock. In June 2008 (for the period from January 1, 2008 to June 30, 2008),
employees participating in the 2000 ESPP purchased 120,791 shares of the
Company’s common stock.
Terms of
Options.
Options and Offering Periods.
An option granted to an eligible employee under the 2000 ESPP allows the
employee to use payroll deductions accumulated during successive six-month
offering periods to purchase shares of our common stock at the end of each
offering period. The option price of the shares is the lesser of 85 percent of
our common stock's fair market value on the first day of the offering period or
the last day of the offering period. Offering periods begin on the first trading
date on or after January 1 and July 1, and end on the last trading date on or
before June 30 and December 31 of each calendar year, while the 2000 ESPP is in
effect. The Committee may change the commencement and duration of offering
periods under the 2000 ESPP. Our Board of Directors also may terminate a pending
offering period, in which case payroll deductions that have accumulated in
participants' accounts (see “Payroll Deductions”
below) will be used to exercise outstanding options or returned to the
appropriate participants, as determined by the Board of Directors, in its
discretion.
Participation. Each eligible
employee decides for himself or herself whether to participate or not
participate in the 2000 ESPP during each offering period. An eligible employee
may elect to enroll in the 2000 ESPP by filing an agreement with the Company’s
payroll office before the first day of the applicable offering
period.
Payroll Deductions. A
participant's agreement must specify the percentage, from 1 to 10 percent, to be
deducted from his or her compensation (as defined in the 2000 ESPP) on each
payroll date during the offering period. Payroll deductions will be credited to
a bookkeeping account in the participant’s name. The Company does not set aside
any assets with respect to such participant accounts, and such accounts do not
bear interest. A participant may decrease his or her contribution rate no more
than once each offering period. The Committee may limit the number of
participants who change their contribution rates during any offering period and
may, subject to certain limitations in the 2000 ESPP, decrease the contribution
rate of any participants. Except in the event of a change in control of EMCORE
(as described under “Changes in Capital” below), participants are not permitted
to make contributions to their accounts under the 2000 ESPP otherwise than
through payroll deductions as described above.
29
Exercise of Option. Unless a
participant provides the Company with written notice or withdraws from the 2000
ESPP, his or her option will be automatically exercised on the last day of the
offering period to purchase the maximum number of full shares of our common
stock that can be purchased at the applicable option price using the accumulated
payroll deductions in the participant's account. The 2000 ESPP sets forth
certain limitations on the number of shares that a participant may purchase in a
single offering period. Any excess payroll deductions remaining in a
participant’s account after exercise of his or her option will be returned to
the participant, without interest, and may not be used to exercise options
granted under the 2000 ESPP in any subsequent offering period (except for any
excess funds attributable to the inability to purchase a fractional share, which
will be retained in the participant's account for a subsequent offering period
or may be withdrawn by the participant).
Withdrawal/Termination of
Employment. A participant may withdraw from the 2000 ESPP at any time,
receiving payment of his or her accumulated payroll deductions and ceasing
further payroll deductions, by providing the Company with written notice to
withdraw. If a participant so terminates his or her employment, such participant
will be considered to have withdrawn from the 2000 ESPP. A leave of absence in
excess of 90 days without a guaranteed right to reemployment will be considered
a termination of employment for purposes of the 2000 ESPP. When a participant
withdraws from the 2000 ESPP, his or her unexercised options will automatically
terminate, and we will return to the participant all accumulated payroll
deductions in his or her account.
Transferability of Options.
No one other than the participant who receives an option under the 2000 ESPP may
exercise such option during such participant’s lifetime. Participants are not
entitled to transfer, assign or otherwise dispose of their payroll deductions or
rights to exercise options or receive common stock under the 2000 ESPP, except,
in the event of a participant’s death, by will, the laws of descent and
distribution or to the deceased participant’s designated
beneficiary.
Changes in
Capital. In the event of certain changes in our outstanding common stock
or capital structure, such as a stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, or corporate separation or division, or
change in the number of shares of our capital stock effected without receipt of
full consideration, the Committee may, in its discretion, make appropriate
adjustments or substitutions with respect to the following to reflect equitably
the effects of such changes to participants in the 2000 ESPP:
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·
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the
number, class and kind of shares available under the 2000
ESPP,
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·
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the
number, class and kind of shares covered by outstanding
options,
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·
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the
maximum number of shares that a participant may purchase during an
offering period,
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·
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the
option prices of outstanding options,
and
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·
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any
other necessary characteristics or terms of the 2000 ESPP or the
options.
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If a
“change in control” of EMCORE (as defined in the 2000 ESPP) occurs, the 2000
ESPP gives the Committee discretion to:
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·
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terminate the pending offering
period and permit each participant to make a one-time cash contribution
equal to the amount that the Committee determines such participant would
have contributed under the 2000 ESPP through payroll deductions until the
otherwise scheduled end of the pending offering period and use the
accumulated payroll deductions to exercise outstanding options;
or
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·
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terminate each participant's
options in exchange for a cash payment equal to (a) the balance of the
participant's account under the 2000 ESPP, plus (b)
the highest value of the consideration received for a share of our common
stock in the change in control transaction (or, if greater, the highest
fair market value of a share of our common stock during the 30 consecutive
trading days prior to the closing or expiration date of the change in
control transaction), less the option price of the participant's option
(determined as if the option were exercised on the closing or expiration
date of the change in control transaction), multiplied by the number of
full shares of our common stock that the participant could have purchased
immediately prior to the change in control with the then outstanding
balance of the participant's account under the 2000
ESPP.
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Tax Withholding Obligations.
If any taxes are required to be withheld when a participant exercises his or her
option, or when shares are issued under the 2000 ESPP or disposed of by a
participant, we may, as a condition to delivery of stock certificates under the
2000 ESPP, require that the participant remit to us the amount necessary to
satisfy such taxes, or we may make other arrangements, including withholding
from the participant’s compensation or other amounts due to such participant, to
satisfy such taxes.
30
Amendment and
Termination of the 2000 ESPP. Our Board of Directors may terminate,
discontinue, amend or suspend the 2000 ESPP at any time. However, without
approval of the shareholders, the Board of Directors may not:
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·
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increase
the maximum number of shares that we may issue under the 2000 ESPP, or
that a participant may purchase in any offering period (except as
described under "Changes in Capital"
above);
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·
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change
the class of employees eligible to receive options under the 2000 ESPP
(except for the designation of any subsidiaries whose employees will be
eligible to participate in the 2000 ESPP);
or
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·
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change
the formula by which the option price is determined under the 2000
ESPP.
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Except
for an amendment or termination described under “Changes in Capital” above, or
in the last sentence of the portion of this summary under “Terms of Options -
Options and Offering Periods,” above, no amendment or termination of the 2000
ESPP may materially adversely affect the existing rights of any participant
under his or her option without such participant’s consent.
Certain Federal
Income Tax Consequences. The following is a brief summary of certain
significant United States Federal income tax consequences under the Internal
Revenue Code, as in effect on the date of this summary, applicable to EMCORE and
employees in connection with participation and purchase of shares of our common
stock under the 2000 ESPP. This summary is not intended to be exhaustive, and
among other things, does not describe state, local or foreign tax consequences,
or the effect of gift, estate or inheritance taxes. References to “EMCORE” and
“us” in this summary of tax consequences mean EMCORE Corporation or any
subsidiary of EMCORE Corporation that employs an employee who participates in
the 2000 ESPP, as the case may be.
An
employee will not recognize any taxable income upon an election to participate
in the 2000 ESPP and receipt of an option to purchase stock under the 2000 ESPP.
The amounts deducted from the salary of an employee who participates in the 2000
ESPP will constitute ordinary income taxable to the employee. The 2000 ESPP is
intended to qualify for the favorable income tax consequences of Section 423 of
the Internal Revenue Code. As such, no income tax consequences will arise for an
employee when shares of our common stock are purchased by exercising such
employee’s option under the 2000 ESPP. The employee receives a tax basis in the
shares purchased equal to his or her payroll deductions used to exercise the
option.
If such
an employee does not dispose of the shares purchased upon exercise of his or her
option under the 2000 ESPP until at least eighteen months after the grant date
of the employee’s option (i.e., the first day of the offering period) and one
year after the date of such purchase, and if such employee remains an employee
of EMCORE at all times from the grant date of such option to the day three
months before such exercise, or if the employee dies while owning such shares,
the employee will recognize taxable ordinary income upon disposition of such
shares, or death, equal to the lesser of the excess of the fair market value of
the shares when the option was granted (i.e., the first day of the offering
period) over the purchase price paid for such shares or the excess of the fair
market value of such shares at the time of such disposition or death over the
purchase price paid for the shares. EMCORE is not entitled to a tax deduction
with respect to any such disposition. Any such ordinary income recognized by an
employee upon disposition of his or her shares will increase the employee’s
basis in such shares, for purposes of computing capital gain thereon. Any
proceeds received for the shares in excess of such adjusted basis will be
taxable as capital gain. If an employee sells such shares for less than the
purchase price paid, he or she will recognize no such ordinary income, and such
employee will have a capital loss equal to the difference between the sale price
and the purchase price previously paid.
If an
employee disposes of shares purchased under the 2000 ESPP before meeting the
requisite holding periods described in the preceding paragraph, that employee
will be required to report taxable ordinary income at the time of such
disposition to the extent of the difference between the fair market value of
such shares on the date of purchase and the purchase price paid. EMCORE will
generally be allowed a tax deduction equal to the amount of such ordinary income
so reported by such employee. The basis of an employee in such shares acquired
under the 2000 ESPP will be increased by such amount reported as ordinary income
by such employee upon disposition of such shares. Any proceeds received for the
shares in excess of such employee’s adjusted basis will be taxable as capital
gain; if such adjusted basis exceeds the amount received for such shares, such
excess will be a capital loss.
RECOMMENDATION OF THE BOARD
OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
INCREASE IN SHARES AVAILABLE UNDER THE 2000 EMPLOYEE STOCK PURCHASE PLAN IN
ACCORDANCE WITH PROPOSAL III.
31
PROPOSAL
IV:
TO APPROVE AN INCREASE IN
THE NUMBER OF SHARES AVAILABLE
UNDER EMCORE’S 2000 STOCK
OPTION PLAN
On
November 8, 1999, the Board of Directors adopted the EMCORE Corporation 2000
Stock Option Plan (the “2000 Plan”). The 2000 Plan became effective upon its
approval by the Company’s shareholders at the 2000 Annual Meeting. It was
amended by a vote of the shareholders at the Company’s 2001 Annual Meeting to
increase the number of shares of Common Stock on which options could be granted
by 3,300,000, to 4,750,000, amended a second time by a vote of the shareholders
at the Company’s 2004 Annual Meeting to increase the number of shares of Common
Stock on which options could be granted by 2,100,000 (for a maximum total of
6,850,000), amended a third time by a vote of the shareholders at the Company’s
2006 Annual Meeting to increase the number of shares of Common Stock on which
options could be granted by 2,500,000 (for a maximum total of 9,350,000), and
amended a fourth time by a vote of the shareholders at the Company’s 2008 Annual
Meeting to increase the number of shares of Common Stock on which options could
be granted by 3,500,000 (for a maximum total of 12,850,000).
At the
2009 Annual Meeting, the shareholders will be requested to approve an additional
increase in the number of shares of Common Stock available for issuance under
the 2000 Plan. As of the date of the 2009 Annual Meeting, we expect to have
options for only approximately 1,146,786 shares authorized and available for
issuance under the 2000 Plan. Furthermore, no shares are currently available for
grant under the EMCORE Corporation 1995 Incentive and Non-Statutory Stock Option
Plan (as amended, the “1995 Plan”). The 1995 Plan had allowed the grant of a
total of 2,744,118 shares of Common Stock (on a post-split basis) pursuant to
stock options and stock appreciation rights.
Our
Company’s philosophy on employee compensation is to provide employees and
management with equity participation linked to long-term stock price
performance, while at the same time remaining sensitive to the potential impact
on our other shareholders. We believe that offering broad-based equity
compensation through stock options is critical to attracting and retaining the
highest caliber employees. Employees with a stake in the future success of our
business are motivated to achieve long-term growth and thus maximize shareholder
value. Options have historically formed a significant portion of our employees’
overall compensation, and almost all of our current employees have received
options. The purpose of this proposal is to provide sufficient reserves of
shares, based on our current business plans, to ensure the Company’s ability to
continue to provide new hires, employees and management with an equity stake in
the Company over the next year.
Accordingly,
on March 6, 2009, 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 3,000,000, to 15,850,000. The Board of Directors recommends approval of
this amendment to the 2000 Plan to permit the issuance of this increased number
of shares of Common Stock thereunder. The Board of Directors believes that this
proposed increase is in the best interests of the Company and the shareholders.
In the event this proposal is not approved by our shareholders, and as a
consequence we are unable to continue to grant options at competitive levels,
the Board of Directors believes that it will negatively affect our ability to
meet our need for highly qualified personnel and our ability to manage future
growth.
If this
proposal is adopted, the third sentence of Section 4(a) of the 2000 Plan would
be amended to read, in its entirety, as follows:
“The
total number of shares of Stock that may be delivered pursuant to Options
granted under the Plan is 15,850,000, 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 15,850,000,
without application of paragraph 4(d) of this Section 4.”
Other key
features of the 2000 Plan and significant historical option grant information
are as follows:
·
|
The
2000 Plan and the 1995 Plan were both approved by the Company’s
shareholders;
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·
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The
2000 Plan is administered solely by the Compensation Committee, which is
composed entirely of independent
directors;
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·
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It
is the Company’s policy only to grant options under the 2000 Plan that
have an exercise price equal to or greater than the fair market value (as
defined in the 2000 Plan, as amended) of our Common Stock at the date of
grant;
|
·
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It
is the Company’s policy to grant options with a five-year vesting schedule
for first-time grants;
|
·
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The 2000 Plan authorizes only the grant of options; and |
·
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The
2000 Plan does not include any automatic share reserve increase provision
(i.e., any “evergreen” provision).
|
32
In
connection with our internal review of our historical stock option granting
practices, on November 13, 2006, the Board of Directors adopted a revised
Incentive Stock Option Grant Policy that provided that:
·
|
non-administrative
grant responsibilities other than with respect to new-hire options are to
be set by the Compensation
Committee;
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·
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all
new-hire options be issued the later of an employee’s first day of
employment, or where applicable, the date the Compensation Committee
approved the terms of the new-hire grant and have an exercise price of not
less than 100% of the fair market value of the Company’s stock on that
date. The Board will conduct a review of all new-hire grants to
ensure compliance with the Company’s policies and
procedures;
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·
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the
grant date for all options awarded to employees other than new-hire
options is the date on which the Compensation Committee meets and approves
the grants;
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·
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the
exercise price of options other than new hire-options should be set at the
closing price of the Common Stock of the Company on the date on which the
Compensation Committee approves the
grants;
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·
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the
Company should, with respect to annual retention grants to employees,
maintain the practice of awarding retention grants to senior management on
the same date and with the same exercise price as retention grants awarded
to non-senior management employees;
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·
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no
additions or modifications to option grants should be permitted after the
Compensation Committee has approved the option grants;
and
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·
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all
grants are to be communicated to employees as soon as reasonably
practicable after the grant date.
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Effective
October 1, 2005, the first day of fiscal 2006, EMCORE adopted SFAS No. 123(R),
Share-Based Payment (Revised 2004), on a modified prospective basis. As a
result, EMCORE will now include stock-based compensation costs in its results of
operations for the fiscal quarter ended December 31, 2005 and subsequent
reporting periods.
This
proposal summarizes the essential features of the 2000 Plan, as it would be
amended pursuant to this proposal. You should read the amended plan for a full
statement of its terms and conditions. A copy of the 2000 Plan may be obtained
upon written request to our Investor Relations Department at 10420 Research
Road, SE, Albuquerque, New Mexico 87123.
DESCRIPTION OF MATERIAL
FEATURES OF THE 2000 PLAN
The
purpose of the 2000 Plan is to enable us to grant stock options to eligible
officers, employees, non-employee directors and consultants at levels we believe
will motivate superior performance and help us attract and retain outstanding
personnel. We believe that providing our key personnel with stock option
incentives will enhance our long-term performance.
The 2000
Plan became effective at the 2000 Annual Meeting. As previously amended, the
2000 Plan currently provides for the grant of options to purchase a total of up
to 12,850,000 shares of Common Stock (subject to adjustment for certain changes
in our capital, as described below under “Changes in Capital”).
Administration.
The Compensation Committee has the exclusive discretionary authority to operate,
manage and administer the 2000 Plan in accordance with its terms. The
Compensation Committee’s decisions and actions concerning the 2000 Plan are
final and conclusive. Within the limitations of the 2000 Plan and applicable
laws and rules, the Compensation Committee may allocate or delegate its
administrative responsibilities and powers under the 2000 Plan, and our Board of
Directors is permitted to exercise all of the Compensation Committee’s powers
under the 2000 Plan.
In
addition to its other powers under the 2000 Plan described in this summary, the
Compensation Committee has the following authorities and powers under the 2000
Plan in accordance with its terms:
● | to determine which eligible employees, officers, directors and/or consultants will receive options under the 2000 Plan and the number of shares of Common Stock covered by each such option; |
● |
to
establish, amend, waive and rescind rules, regulations and guidelines for
carrying out the 2000 Plan;
|
● |
to
establish, administer and waive terms, conditions, performance criteria,
restrictions, or forfeiture provisions, or additional terms, under the
2000 Plan, or applicable to options granted under the 2000
Plan;
|
● |
to
accelerate the vesting or exercisability of options granted under the 2000
Plan;
|
● |
to
offer to buy out outstanding options granted under the 2000
Plan;
|
● |
to
determine the form and content of the option agreements which represent
options granted under the 2000 Plan;
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● |
to
interpret the 2000 Plan and option agreements;
|
● |
to
correct any errors, supply any omissions and reconcile any inconsistencies
in the 2000 Plan and/or any
option
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33
|
agreements;
and
|
·
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to
take any actions necessary or advisable to operate and administer the 2000
Plan.
|
Currently,
the Compensation Committee consists of Messrs. Gillen, Scott, and Bogomolny,
each of whom is a director, but not an employee, of EMCORE.
Shares Subject to
the 2000 Plan; Limitations on Grants of Options. If this proposal is
approved by the shareholders, a total of 15,850,000 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
15,850,000 shares of Common Stock may be granted under the 2000
Plan.
No more
than 600,000 shares of Common Stock (subject to adjustment for certain changes
in our capital (described below under “Changes in Capital”)) may be subject to
options granted under the 2000 Plan to a single recipient during a 12-month
period.
Participation.
The Compensation Committee may grant options under the 2000 Plan to our
officers, employees, directors (including non-employee directors) and
consultants, as well as those of our affiliates. Our affiliates, for purposes of
the 2000 Plan, are generally entities in which we have, directly or indirectly,
greater than 50 percent ownership interest, or which have a more than 50 percent
direct or indirect ownership interest in us, or any other entity in which we
have a material equity interest that the Compensation Committee designates as an
affiliate for purposes of the 2000 Plan. Only employees of EMCORE and its
subsidiaries (as defined in the 2000 Plan) are eligible to receive “incentive
stock options” under the 2000 Plan, however.
All of
our employees (currently approximately 650 in number), including all of our
executive officers (5 in number, of whom 2 are also directors), are eligible to
receive options under the 2000 Plan. The individuals to whom additional options
will be granted under the 2000 Plan, and the amounts of such individual grants,
have not been determined, but it is anticipated that, among others, all of our
Named Executive Officers, will receive such additional options under the 2000
Plan. Options are granted on a discretionary basis as approved by the
Compensation Committee.
TERMS OF
OPTIONS.
Types of
Options. Additional options to be granted under the 2000 Plan will be
either “incentive stock options,” which are intended to receive special tax
treatment under the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”), or options other than incentive stock options (referred to as
“non-qualified options”), as determined by the Compensation Committee and stated
in the applicable option agreement.
Option
Price. The Compensation Committee determines the option exercise price of
each option granted under the 2000 Plan at the time of grant. However, the
per-share exercise price of an “incentive stock option” granted under the 2000
Plan must be at least equal to 100 percent of the fair market value of Common
Stock (as defined in the 2000 Plan, as amended) on the date such incentive stock
option is granted. On March 6, 2009, the fair market value of a share of Common
Stock was $0.54.
Payment.
The option exercise price of any options granted under the 2000 Plan may be paid
in any legal manner prescribed by the Compensation Committee. The method of
payment includes a “cashless exercise” program if the Compensation Committee
elects to establish such a program, or use of shares of Common Stock already
owned for at least six months by the person exercising an option, subject in any
case to whatever conditions or limitations the Compensation Committee may
prescribe. Any cash proceeds that we receive upon the exercise of options
granted under the 2000 Plan constitute general funds of EMCORE.
34
Exercise of Options.
The Compensation Committee determines, as set forth in the applicable option
agreements, the times or conditions upon which options granted under the 2000
Plan may be exercised, and any events that will cause such options to terminate.
Each option granted under the 2000 Plan will expire on or before ten years
following the date such option was granted. In general, options granted under
the 2000 Plan also terminate when the recipient’s service as a director,
employee or consultant of EMCORE or its affiliates terminates; however, the
Compensation Committee may permit an option that has not otherwise expired to be
exercised after such a termination of service as to all or part of the shares
covered by such option. A recipient may elect to defer until a later date
delivery of shares otherwise deliverable upon exercise of such recipient’s
option, if permitted by the Compensation Committee.
Transferability
of Options. Options granted under the 2000 Plan are, in general, only
exercisable during the lifetime of the recipient by him or her. A deceased
recipient’s options are, however, transferable by will or the laws of descent
and distribution or to a designated beneficiary of such recipient. The
Compensation Committee may permit the recipient of a non-qualified option under
the 2000 Plan to transfer such option during his or her lifetime, subject to
such terms and conditions as the Compensation Committee may
prescribe.
Changes in
Capital. In order to preserve the benefits or potential benefits intended
to be made available under the 2000 Plan or outstanding options, or as otherwise
necessary, the Compensation Committee may, in its discretion, make appropriate
adjustments in (a) the number, class and kind of shares available under the 2000
Plan, (b) the limit on the number of shares of Common Stock that can be subject
to options granted to a single recipient during a 12-month period, and (c) the
number, class, kind and price of shares under each outstanding option, in the
event of changes in our outstanding Common Stock resulting from certain changes
in our corporate structure or capitalization, such as the payment of a stock
dividend, a stock split, a recapitalization, reorganization, merger or
consolidation (whether or not EMCORE is the surviving corporation), a spin-off,
liquidation or other substantial distribution of assets or the issuance of our
stock for less than full consideration, or rights or convertible securities with
respect to our stock.
In the
event of a “change in control” of EMCORE (as defined in the 2000 Plan), all
options then outstanding under the 2000 Plan will be accelerated and become
immediately exercisable in full. The 2000 Plan gives the Compensation Committee
discretion, in the event of such a change in control transaction, to substitute
for shares of Common Stock subject to options outstanding under the 2000 Plan
shares or other securities of the surviving or successor corporation, or another
corporate party to the transaction, with approximately the same value, or to
cash out outstanding options based upon the highest value of the consideration
received for Common Stock in such transaction, or, if higher, the highest fair
market value of Common Stock during the 30 business days immediately prior to
the closing or expiration date of such transaction, reduced by the option
exercise price of the options cashed out. The Compensation Committee may also
provide that any options subject to any such acceleration, adjustment or
conversion cannot be exercised after such a change in control transaction. If
such a change in control transaction disqualifies an employee’s incentive stock
options from favorable “incentive stock option” tax treatment under the Internal
Revenue Code or results in the imposition of certain additional taxes on such an
employee, we may, in the Compensation Committee’s discretion, make a cash
payment that would leave such an employee in the same after-tax position that he
or she would have been in had such disqualification not occurred, or to
otherwise equalize such employee for such taxes.
Tax Withholding
Obligations. Recipients who exercise their options under the 2000 Plan
are required to pay, or make other satisfactory arrangements to pay, tax
withholding obligations arising under applicable law with respect to such
options. Such taxes must be paid in cash by a recipient, or, if the Compensation
Committee permits, a recipient may elect to satisfy all or a part of such tax
obligations by requesting that we withhold shares otherwise deliverable upon the
exercise of his or her option and/or by tendering shares of Common Stock already
owned by such recipient for at least six months. We may also, in accordance with
applicable law, deduct any such taxes from amounts that are otherwise due to
such a recipient.
Amendment and
Termination of the 2000 Plan. Our Board of Directors may amend, alter,
suspend or terminate the 2000 Plan. However, the Board of Directors will be
required to obtain approval of the shareholders, if such approval is required by
any applicable law (including requirements relating to incentive stock options)
or rule, of any amendment of the 2000 Plan that would:
•
|
except
in the event of certain changes in our capital (as described above under
“Changes in Capital”), increase the number of shares of Common Stock that
may be delivered under the 2000 Plan, or that may be subject to options
granted to a single recipient in a 12-month period;
|
• | decrease the minimum option exercise price required by the 2000 Plan; |
• | change the class of persons eligible to receive options under the 2000 Plan; or |
• | extend the duration of the 2000 Plan or the exercise period of any options granted under the 2000 Plan. |
Accordingly,
a vote of the shareholders is required for the amendment to the 2000 Plan
contemplated by this proposal.
35
The
Compensation Committee may amend outstanding options. However, no such amendment
or termination of the 2000 Plan or amendment of outstanding options may
materially impair the previously accrued rights of any recipient of an option
under the 2000 Plan without his or her written consent.
The 2000
Plan will terminate on February 16, 2010, unless the 2000 Plan is terminated
earlier by our Board of Directors or due to delivery of all shares of Common
Stock available under the 2000 Plan; however, any options outstanding when the
2000 Plan terminates will remain outstanding until such option terminates or
expires.
Certain Federal
Income Tax Consequences. The following is a brief summary of certain
significant United States Federal income tax consequences, under the Internal
Revenue Code, as in effect on the date of this summary, applicable to EMCORE and
recipients of options under the 2000 Plan (who are referred to in this summary
as “optionees”) in connection with the grant and exercise of options under the
2000 Plan. This summary is not intended to be exhaustive, and, among other
things, does not describe state, local or foreign tax consequences, or the
effect of gift, estate or inheritance taxes. References to “EMCORE” and “us” in
this summary of tax consequences mean EMCORE Corporation or any affiliate of
EMCORE Corporation that employs an optionee, as the case may be.
The grant
of stock options under the 2000 Plan will not result in taxable income to
optionees or an income tax deduction for us. However, the transfer of Common
Stock to optionees upon exercise of their options may or may not give rise to
taxable income to the optionees and tax deductions for us, depending upon
whether the options are “incentive stock options” or non-qualified
options.
The
exercise of a non-qualified option generally results in immediate recognition of
ordinary income by the optionee and a corresponding tax deduction for us in the
amount by which the fair market value of the shares of Common Stock purchased,
on the date of such exercise, exceeds the aggregate option price. Any
appreciation or depreciation in the fair market value of such shares after the
date of such exercise will generally result in a capital gain or loss to the
optionee at the time he or she disposes of such shares.
In
general, the exercise of an incentive stock option is exempt from income tax
(although not from the alternative minimum tax) and does not result in a tax
deduction for us at any time unless the optionee disposes of the Common Stock
purchased thereby within two years of the date such incentive stock option was
granted or one year of the date of such exercise (known as a “disqualifying
disposition”). If these holding period requirements under the Internal Revenue
Code are satisfied, and if the optionee has been an employee of us at all times
from the date of grant of the incentive stock option to the day three months
before such exercise (or twelve months in the case of termination of employment
due to disability), then such optionee will recognize any gain or loss upon
disposition of such shares as capital gain or loss. However, if the optionee
makes a disqualifying disposition of any such shares, he or she will generally
be obligated to report as ordinary income for the year in which such disposition
occurs the excess, with certain adjustments, of the fair market value of the
shares disposed of, on the date the incentive stock option was exercised, over
the option price paid for such shares. We would be entitled to a tax deduction
in the same amount so reported by such optionee. Any additional gain realized by
such optionee on such a disqualifying disposition of such shares would be
capital gain. If the total amount realized in a disqualifying disposition is
less than the exercise price of the incentive stock option, the difference would
be a capital loss for the optionee.
Under
Section 162(m) of the Internal Revenue Code, we may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess of
$1 million is paid to our Chief Executive Officer or any one of our other four
highest paid executive officers who are employed by us on the last day of our
taxable year. However, certain “performance-based compensation” the material
terms of which are disclosed to and approved by our shareholders is not subject
to this deduction limitation. We have structured the 2000 Plan with the
intention that compensation resulting from options granted under the 2000 Plan
will be qualified performance-based compensation and, assuming shareholder
approval of the 2000 Plan, deductible without regard to the limitations
otherwise imposed by Section 162(m) of the Internal Revenue Code.
Under
certain circumstances, accelerated vesting or exercise of options under the 2000
Plan in connection with a “change in control” of EMCORE might be deemed an
“excess parachute payment” for purposes of the golden parachute payment
provisions of Section 280G of the Internal Revenue Code. To the extent it is so
considered, the optionee would be subject to an excise tax equal to 20 percent
of the amount of the excess parachute payment, and we would be denied a tax
deduction for the excess parachute payment.
36
RECOMMENDATION OF THE BOARD
OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
INCREASE IN SHARES AVAILABLE UNDER THE 2000 STOCK OPTION PLAN IN ACCORDANCE WITH
PROPOSAL IV.
37
GENERAL
MATTERS
Annual Report on Form 10-K
and Financial Statements
The
Company’s 2008 Annual Report on Form 10-K is being mailed to the Company’s
shareholders together with this Proxy Statement. Additional exhibits to the Form
10-K not included in this mailing will be furnished upon written request
directed to the Company at 10420 Research Road, SE, Albuquerque, New Mexico
87123, Attention: Investor Relations. The Company’s 2008 Annual Report on Form
10-K (including amendments and exhibits thereto) and this Proxy Statement are
also available on the Company’s website (www.emcore.com).
Shareholder
Proposals
Shareholder
proposals intended to be presented at the 2010 Annual Meeting of Shareholders,
including nominations for the Company’s Board of Directors, must be received by
the Company by November 4, 2009. Proposals may be mailed to the Company, to the
attention of Keith J. Kosco, Secretary, 10420 Research Road, SE, Albuquerque,
New Mexico 87123. Proposals must comply with all applicable SEC
rules.
Delivery of Documents to
Shareholders Sharing an Address
The
Company will deliver only one Annual Report and Proxy Statement to shareholders
who share a single address unless we have received contrary instructions from
any shareholder at the address. In that case, we will deliver promptly a
separate copy of the Annual Report and/or Proxy Statement. For future
deliveries, shareholders who share a single address can request a separate copy
of the Company’s annual report and/or proxy statement. Similarly, if multiple
copies of the annual report and proxy statement are being delivered to a single
address, shareholders can request a single copy of the annual report and proxy
statement for future deliveries. To make a request, please write to Keith J.
Kosco, Secretary, EMCORE Corporation, 10420 Research Road, SE, Albuquerque, New
Mexico 87123.
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.
By
Order of the Board of Directors,
/s/ Keith J.
Kosco
Keith
J. Kosco, Esq.
Secretary
|
38
EXHIBIT I TO PROXY
STATEMENT
EMCORE
CORPORATION
2000
EMPLOYEE STOCK PURCHASE PLAN
AMENDED
February 13, 2006
ARTICLE I
ESTABLISHMENT
Purpose
The
EMCORE Corporation 2000 Employee Stock Purchase Plan (the “Plan”) is hereby
established by EMCORE Corporation (the “Company”), the purpose of which is to
provide a method whereby employees of the Company or any Designated Subsidiary
(as defined herein), will have an opportunity to acquire a proprietary interest
in the Company through the purchase of shares of Common Stock. The
Plan is also established to help promote the overall financial objectives of the
Company’s stockholders by promoting those persons participating in the Plan to
achieve long-term growth in stockholder equity. The Plan is intended to qualify
as an “employee stock purchase plan” under Section 423 of the Internal Revenue
Code of 1986, as amended (the “Code”). The provisions of the Plan
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of Section 423 of the Code and the regulations
promulgated thereunder.
ARTICLE II
DEFINITIONS
The
following words and phrases, as used herein, shall have the meanings indicated
unless the context clearly indicates to the contrary:
2.01 Account shall mean the
bookkeeping account established on behalf of a Participant to which is credited
all contributions paid for the purpose of purchasing Common Stock under the
Plan, and to which shall be charged all purchases of Common Stock, or
withdrawals, pursuant to the Plan. Such Account shall remain unfunded
as described in Section 8.11 of the Plan.
2.02 Affiliate shall mean, with
respect to any Person, any other Person that, directly or indirectly, controls,
is controlled by, or is under common control with, such Person. Any
“Relative” (for this purpose, “Relative” means a spouse, child, parent, parent
of spouse, sibling or grandchild) of an individual shall be deemed to be an
Affiliate of such individual for this purpose. Neither the Company
nor any Person controlled by the Company shall be deemed to be an Affiliate of
any holder of Common Stock.
2.03 Agreement shall mean, either
individually or collectively, any subscription, enrollment and/or withholding
agreement, in the form prescribed by the Committee, entered into pursuant to the
Plan between the Company or a Designated Subsidiary and a
Participant. Such Agreement shall be an authorization for the Company
or a Designated Subsidiary to withhold amounts from such Participant’s
Compensation, at the Contribution Rate specified in the Agreement, to be applied
to purchase Common Stock.
2.04 Beneficial Ownership
(including correlative terms) shall have the meaning given such term in Rule
13d-3 promulgated under the Exchange Act.
2.05 Beneficiary shall mean the
person specified by a Participant in his or her most recent written designation
that is filed with the Committee to receive any benefits under the Plan in the
event of such Participant’s death, in accordance with Section 8.01.
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2.06
|
Board shall mean the
Board of Directors of the Company.
|
2.07 Change in Control shall mean
the occurrence of any of the following:
1
(a) an
acquisition in one transaction or a series of related transactions (other than
directly from the Company or pursuant to awards granted under the Plan or
compensatory options or other similar awards granted by the Company) of any
Voting Securities by any Person, immediately after which such Person has
Beneficial Ownership of fifty percent (50%) or more of the combined voting power
of the Company’s then outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred pursuant to this Section
2.07(a), Voting Securities which are acquired in a Non-Control Acquisition shall
not constitute an acquisition that would cause a Change in Control;
(b) the
individuals who, immediately prior to the Effective Date, are members of the
Board (the “Incumbent
Board”), cease for any reason to constitute at least a majority of the
members of the Board; provided, however, that if the
election, or nomination for election, by the Company’s common stockholders, of
any new director was approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of the Plan, be considered as a
member of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened “Election Contest”
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a “Proxy
Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(c) the
consummation of:
(1) a
merger, consolidation or reorganization involving the Company
unless:
(A) the
stockholders of the Company, immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately following such merger,
consolidation or reorganization, more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(B) the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation or
reorganization constitute at least a majority of the members of the board of
directors of the Surviving Corporation, or a corporation Beneficially Owning,
directly or indirectly, a majority of the voting securities of the Surviving
Corporation, and
(C) no
Person, other than (i)
the Company, (ii) any Related Entity (as defined in Section 2.20), (iii) any
employee benefit plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was maintained by the
Company, the Surviving Corporation, or any Related Entity or (iv) any Person
who, together with its Affiliates, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifty percent (50%)
or more of the then outstanding Voting Securities, owns, together with its
Affiliates, Beneficial Ownership of fifty percent (50%) or more of the combined
voting power of the Surviving Corporation’s then outstanding voting securities
(a transaction described in clauses (A) through (C) above is referred to herein
as a “Non-Control
Transaction”);
(2) a
complete liquidation or dissolution of the Company; or
(3) an
agreement for the sale or other disposition of all or substantially all of the
assets or business of the Company to any Person (other than a transfer to a
Related Entity or the distribution to the Company’s stockholders of the stock of
a Related Entity or any other assets).
2
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject
Person”) acquired Beneficial Ownership of fifty percent (50%) or more of
the combined voting power of the then outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities then outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Persons, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and (1) before such share
acquisition by the Company the Subject Person becomes the Beneficial Owner of
any new or additional Voting Securities in a related transaction or (2) after
such share acquisition by the Company the Subject Person becomes the Beneficial
Owner of any new or additional Voting Securities which in either case increases
the percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall be deemed to
occur.
2.08 Commission shall mean the
Securities and Exchange Commission or any successor entity or
agency.
2.09 Committee shall mean the Plan
Committee of the Board as described in Article VII.
2.10 Compensation shall mean, for
the relevant period, (a) the total compensation paid in cash to a Participant by
the Company and/or a Designated Subsidiary, including salaries, wages,
commissions, overtime pay, shift premiums, bonuses, and incentive compensation,
plus (b) any pre-tax contributions made by a Participant under
Section 401(k) or 125 of the Code. Compensation shall exclude
non-cash items, moving or relocation allowances, geographic hardship pay, car
allowances, tuition reimbursements, imputed income attributable to cars or life
insurance, severance or notice pay, fringe benefits, contributions (except as
provided in clause (b) of the immediately preceding sentence) or benefits
received under employee benefit or deferred compensation plans or arrangements,
income attributable to stock options and similar items.
2.11 Common Stock shall mean
shares of common stock of the Company, without par value, or the common stock of
any successor to the Company, which is designated for the purposes of the
Plan.
2.12 Contribution Rate shall be
that rate of contribution of Compensation to the Plan stated in the Agreement,
subject to determination in accordance with Article IV.
2.13 Designated Subsidiary shall
mean any Subsidiary that has been designated by the Board from time to time in
its sole discretion as eligible to participate in the Plan.
2.14 Effective Date shall mean
April 1, 2000.
2.15 Eligible Employee shall mean
any individual who is employed on a full-time or part-time basis by the Company
or a Designated Subsidiary on an Enrollment Date, except that the Committee in
its sole discretion may exclude:
(i) | employees whose customary employment is not more than 20 hours per week; | |
(ii) | employees whose customary employment is for not more than five months in any calendar year; and | |
(iii) | employees who are considered to be a highly compensated employee of the Company or Designated Subsidiary within the meaning of Section 414(q) of the Code. |
As of the
Effective Date, and unless and until the Committee determines otherwise, only
those employees described in Section 2.15(i) and (ii) are excluded from the
class of Eligible Employees.
2.16 Enrollment Date shall mean
the first day of each Offering Period.
2.17 Exchange Act means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated by the Commission thereunder.
2.18 Exercise Date shall mean the
last day of each Offering Period.
2.19 Fair Market Value of a share
of Common Stock as of a given date shall mean: (i) if the Common
Stock is listed or admitted to trading on an established stock exchange
(including, for this purpose, the Nasdaq National Market), the mean of the
highest and lowest sale prices for a share of the Common Stock on the composite
tape or in Nasdaq National Market trading as reported in The Wall Street Journal (or,
if not so reported, such other nationally recognized reporting source as the
Committee shall select) for such date, or, if no such prices are reported for
such date, the most recent day for which such prices are available shall be
used; (ii) if the Common Stock is not then listed or admitted to trading on such
a stock exchange, the mean of the closing representative bid and asked prices
for the Common Stock on such date as reported by the Nasdaq Small Cap Market or,
if not so reported, by the OTC Bulletin Board (or any successor or similar
quotation system regularly reporting the market value of the Common Stock in the
over-the-counter market), or, if no such prices are reported for such date, the
most recent day for which such prices are available shall be used; or (iii) in
the event neither of the valuation methods provided for in clauses (i) and (ii)
above are practicable, the fair market value of a share of Common
Stock determined by such other reasonable valuation method as the Committee
shall, in its discretion, select and apply in good faith as of such
date.
3
2.20 Non-Control Acquisition shall
mean an acquisition by (1) an employee benefit plan (or a trust forming a part
thereof) maintained by (x) the Company or (y) any corporation or other Person of
which a majority of its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Company (a “Related Entity”), (2) the
Company or any Related Entity, (3) any of Thomas Russell, The AER Trust 1997,
Robert Louis-Dreyfus, Gallium Enterprises, Inc. and Reuben Richards, or (4) any
Person in connection with a Non-Control Transaction.
2.21 Offering Period shall mean a
period as determined by the Committee during which a Participant’s Option may be
exercised and the accumulated value of the Participant’s Account may be applied
to purchase Common Stock. Unless otherwise specified by the
Committee, the initial Offering Period will begin on the Effective Date and end
on the last Trading Day on or before December 31st of the
same calendar year. Thereafter, each successive Offering Period
shall consist of twelve-month periods commencing on the first Trading Day on or
after January 1st of each
calendar year and ending on the last Trading Day on or before December 31st of such
year. The duration of Offering Periods may be changed by the
Committee or the Board pursuant to Section 3.06 or 5.04.
2.22 Option shall mean the right
to purchase the number of shares of Common Stock specified in accordance with
the Plan at a price and for a term fixed in accordance with the Plan, and
subject to such other limitations and restrictions as may be imposed by the Plan
or the Committee in accordance with the Plan.
2.23 Option Price shall mean an
amount equal to 85% of the Fair Market Value of a share of Common Stock on the
Enrollment Date or Exercise Date, whichever is lower.
2.24 Participant shall mean an
Eligible Employee who satisfies the eligibility conditions of Article III, and
to whom an Option has been granted by the Committee under the Plan.
2.25 Person shall mean “person” as
such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act,
including, without limitation, any individual, corporation, limited liability
company, partnership, trust, unincorporated organization, government or any
agency or political subdivision thereof, or any other entity or any group of
Persons.
2.26 Plan Year shall mean the
period of twelve (12) or fewer consecutive months commencing on the Effective
Date and ending on December 31st of the
same calendar year, and the twelve (12) consecutive month period ending the last
day of each December of each calendar year thereafter. The Committee
may at any time designate another period as the Plan Year.
2.27 Reserves shall mean the
number of shares of Common Stock covered by each Option under the Plan that have
not yet been exercised and the number of shares of Common Stock that have been
authorized for issuance under the Plan but not yet placed under an
Option.
2.28 Securities Act shall mean the
Securities Act of 1933, as amended, and the rules and regulations promulgated by
the Commission thereunder.
4
2.29 Subsidiary shall mean any
present or future corporation, domestic or foreign, which is or would be a
“subsidiary corporation,” as defined under Section 424(f) of the Code, of the
Company.
2.30 Trading Day shall mean a day
on which national stock exchanges are open for trading.
2.31 Voting Securities shall mean
all outstanding voting securities of the Company entitled to vote generally in
the election of the Board.
ARTICLE III
ELIGIBILITY AND
PARTICIPATION
|
3.01
|
Initial
Eligibility
|
Any
individual who is otherwise an Eligible Employee and who is employed with the
Company or a Designated Subsidiary on the Effective Date or becomes employed
with the Company or a Designated Subsidiary after the Effective Date and is
otherwise an Eligible Employee, may participate in the Plan immediately
beginning with the first Offering Period that occurs concurrent with or next
following either the Effective Date or that individual’s initial date of such
employment.
3.02 Leave of Absence
For
purposes of the Plan, an individual’s employment relationship is still
considered to be continuing intact while such individual is on sick leave, or
other leave of absence approved by the Committee or the Participant’s
supervisor; provided,
however, that if the
period of leave of absence exceeds ninety (90) days and the individual’s right
to reemployment is not guaranteed either by statute or by contract, the
employment relationship shall be deemed to have terminated on the ninety-first
(91st) day of
such leave.
|
3.03
|
Eligibility
Restrictions
|
Notwithstanding
any provisions of the Plan to the contrary, no employee of the Company or a
Designated Subsidiary shall be granted an Option under the Plan:
|
(a)
|
if,
immediately after the Option is granted, applying the rules under Section
424(d) of the Code to determine Common Stock ownership, such employee
would own, immediately after the Option is granted, five percent (5%) or
more of the total combined voting power or value of all classes of stock
of the Company or any Subsidiary;
or
|
|
(b)
|
which
permits such employee’s rights to purchase stock under the Plan and any
other employee stock purchase plans of the Company or any Subsidiary to
accrue at a rate that exceeds $25,000 (or such other amount as may be
adjusted from time to time under applicable provisions of the Code or
Regs) in Fair Market Value of Common Stock (determined at the time such
Option is granted) for each calendar year in which such Option is
outstanding.
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|
3.04
|
Participation
|
(a) An
Eligible Employee may commence participation by completing an Agreement
authorizing payroll deductions and filing it with the payroll office of the
Company prior to the applicable Enrollment Date. Such an Eligible
Employee is referred to as a Participant.
(b) Any
payroll deductions for a Participant shall commence on the first payroll date
following the Enrollment Date and shall end on the last payroll date in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the Participant as provided in Article VI.
5
|
3.05
|
Option
Grant
|
On the
Enrollment Date of each Offering Period, each Participant participating in the
Offering Period shall be granted an Option to purchase on the Exercise Date of
such Offering Period (at the appropriate Option Price) up to a number of shares
of Common Stock as determined by dividing the particular Participant’s payroll
deductions that have accumulated prior to such Exercise Date and retained in
such Participant’s Account as of that Exercise Date by the appropriate Option
Price. Such purchase of shares of Common Stock shall be subject to
the limitations under Sections 3.03 and 3.09. Exercise of the Option
shall occur as provided in Section 3.07, unless the Participant has withdrawn as
provided in Article VI. The Option shall expire on the last day of
the Offering Period. The Committee may determine that there shall be
no Options granted under the Plan for any particular Plan Year.
|
3.06
|
Offering
Period
|
The Plan
shall be implemented by consecutive Offering Periods of Common
Stock. Each Agreement shall specify the Offering Period for which the
Option is granted, which shall be determined by the Committee in accordance with
the Plan. The Committee shall have the authority to change the
duration of Offering Periods, including the commencement dates thereof, with
respect to future offerings without approval of the Company’s
stockholders. Under such circumstances, any change to the Offering
Periods shall be announced at least ten (10) days prior to the scheduled
beginning of the initial Offering Period to be affected. In no event,
however, shall an Offering Period extend beyond the period permitted under
Section 423(b)(7) of the Code.
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3.07
|
Exercise of
Option
|
Unless a
Participant provides written notice to the Company, or withdraws from the Plan
as provided in Article VI, his Option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to the Option shall be purchased for such Participant at the
applicable Option Price, using the accumulated payroll deductions in his
Account, subject to the limitations under Sections 3.03 and 3.09. No
fractional shares shall be purchased. Any payroll deductions
accumulated in an Account that are not sufficient to purchase a full share of
Common Stock shall be retained in the Account for the subsequent Offering
Period, subject to earlier withdrawal by the Participant as provided in Article
VI. Any other monies remaining in a Participant’s Account after the
Exercise Date shall be returned to the Participant or his Beneficiary in cash,
without interest. During a Participant’s lifetime, such Participant’s
Option is exercisable only by such Participant.
|
3.08
|
Delivery of
Stock
|
(a) As
promptly as practical after each Exercise Date on which a purchase of Common
Stock occurs, the Company shall arrange the delivery to each Participant, or his
Beneficiary, of a certificate representing the shares of Common Stock purchased
upon exercise of such Participant’s Option, except that the Committee may
determine that such shares shall be held for each Participant’s benefit by a
broker designated by the Committee unless the Participant has delivered to the
Committee a written election that certificates representing such shares be
issued to him. Shares of Common Stock issued upon exercise of an
Option and delivered to or for the benefit of a Participant or Beneficiary will
be registered in the name of such Participant or Beneficiary, as the case may
be. Alternatively, at the direction of a Participant through written
notice to the Committee at least ten (10) days prior to the applicable Exercise
Date, such shares shall be registered in the names of such Participant and one
other person as may be designated by the Participant, as joint tenants with
rights of survivorship, community property or as tenants by the entirety, to the
extent permitted by applicable law.
(b) The
Committee may require a Participant or his Beneficiary to give prompt written
notice to the Company concerning any disposition of shares of Common Stock
received upon the exercise of such Participant’s Option within: (i)
two (2) years from the date of granting of such Option to such Participant, (ii)
one (1) year from the transfer of such shares of Common Stock to such
Participant, or (iii) such other period as the Committee may from time to time
determine.
6
3.09 Maximum Number of
Shares
In no
event shall the number of shares of Common Stock that a Participant may purchase
during any one Offering Period under the Plan exceed the number of shares
determined by (a) multiplying twenty percent (20%) of the amount of the
Participant’s Compensation for the payroll period immediately preceding the date
he is first granted an Option for such Offering Period by the number of payroll
periods from such date to the end of such Offering Period, and (b) dividing that
product by 85% of the Fair Market Value of a share of Common Stock on such
date.
3.10 Withholding
At the
time an Option is exercised, or at the time some or all of the Common Stock that
is issued under the Plan is disposed of, the Company may withhold from any
Compensation or other amount payable to the applicable Participant, or require
such Participant to remit to the Company (or make other arrangements
satisfactory to the Company, as determined in the Committee’s discretion,
regarding payment to the Company of), the amount necessary for the Company to
satisfy any Federal, state or local taxes required by law to be withheld with
respect to the shares of Common Stock subject to such Option or disposed of, as
a condition to delivery of any certificate or certificates for any such shares
of Common Stock. Whenever under the Plan payments are to be made in
cash, such payments shall be made net of an amount sufficient to satisfy any
Federal, state or local tax or withholding obligations with respect to such
payments.
ARTICLE IV
PAYROLL
DEDUCTIONS
|
4.01
|
Contribution
Rate
|
(a) At
the time a Participant files an Agreement with the Committee authorizing payroll
deduction, he may elect to have payroll deductions made on each payday during
the Offering Period, and such Contribution Rate shall be a minimum of one
percent (1%) and a maximum of ten percent (10%) of the Participant’s
Compensation in effect on each payroll period during the Offering Period, unless
the Committee determines otherwise in a manner applicable uniformly to all
Participants. The payroll deductions shall only be made in whole
percentages of the Participant’s Compensation. Participants may not
make any separate cash payments outside payroll deductions under the Plan except
as otherwise provided in Section 5.04(d) in the event of a Change in
Control.
(b) A
Participant may discontinue his participation in the Plan as provided in Article
VI, or may elect to decrease the rate of his payroll deductions during the
Offering Period by filing a new Agreement with the Committee that authorizes a
change in his Contribution Rate. Such election by the Participant to
decrease his Contribution Rate shall only be permitted once during each Offering
Period. The Committee may, in its discretion, in a fair and equitable
manner, limit the number of Participants who change their Contribution Rate
during any Offering Period. Any such change in Contribution Rate
accepted by the Committee shall be effective with the first full payroll period
following ten (10) business days after the Committee’s receipt of the new
Agreement authorizing the new Contribution Rate, unless the Committee elects to
process a change in the Contribution Rate more quickly. A
Participant’s authorization to change his Contribution Rate shall remain in
effect for successive Offering Periods unless terminated as provided in Article
VI.
(c) Notwithstanding
the foregoing provisions of this Section 4.01, the Committee may decrease a
Participant’s Contribution Rate, but not below zero percent, at any time during
an Offering Period to the extent necessary
to comply with Section 423(b)(8) of the Code or Section 3.03 of the
Plan. To the extent necessary in such case, payroll deductions shall
recommence at the rate provided in such Participant’s Agreement at the beginning
of the first Offering Period that is scheduled to begin in the following Plan
Year, unless the Participant withdraws from the Plan in accordance with Article
VI.
7
4.02 Participant
Account
All
payroll deductions made for a Participant shall be credited to his Account under
the Plan.
|
4.03
|
Interest
|
No
interest shall accrue on the payroll deductions of a Participant under the
Plan. In addition, no interest shall be paid on any and all money
that is distributed to a Participant, or his Beneficiary, pursuant to the
provisions of Sections 6.01 and/or 6.03.
ARTICLE V
COMMON
STOCK
|
5.01
|
Shares
Provided
|
(a) The
maximum number of shares of Common Stock that may be issued under the Plan shall
be 2,000,000 shares. This number is subject to an adjustment upon any
changes in capitalization of the Company as provided in Section
5.04.
(b) The
Committee may determine, in its sole discretion, to include in the number of
shares of Common Stock available under the Plan any shares of Common Stock that
cease to be subject to an Option or are forfeited or any shares subject to an
Option that terminates without issuance of shares of Common Stock actually being
made to the Participant.
(c) If
the number of shares of Common Stock that Participants become entitled to
purchase under the Plan is greater than the shares of Common Stock offered in a
particular Offering Period or remaining available under the Plan, the available
shares of Common Stock shall be allocated by the Committee among such
Participants in such manner as the Committee determines is fair and
equitable.
5.02 Participant
Interest
The
Participant shall have no interest as a shareholder, including, without
limitation, voting or dividend rights, with respect to shares of Common Stock
covered by his Option until such Option has been exercised in accordance with
the Plan and his Agreement.
|
5.03
|
Restriction of Shares Upon
Exercise
|
The
Committee may, in its discretion, require as conditions to the exercise of any
Option that the shares of Common Stock reserved for issuance upon the exercise
of the Option shall have been duly listed upon a stock exchange, and that
either:
|
(a)
|
a
registration statement under the Securities Act with respect to the shares
shall be effective, or
|
|
(b)
|
the
Participant shall have represented at the time of purchase, in form and
substance satisfactory to the Company, that it is his intention to
purchase the shares for investment and not for resale or
distribution.
|
|
5.04
|
Changes in
Capital
|
(a) Subject
to any required action by the shareholders of the Company, upon changes in the
outstanding Common Stock by reason of a stock split, reverse stock split, stock
dividend, combination or exchange of shares, merger, recapitalization,
consolidation, corporate separation or division of the Company (including, but
not limited to, a split-up, spin-off, split-off or distribution to Company
stockholders other than a normal cash dividend), reorganization,
reclassification, or increase or decrease in the number of shares of capital
stock of the Company effected without receipt of full consideration therefor, or
any other similar change affecting the
8
Company’s
capital structure, the Committee shall make appropriate adjustments, in its
discretion, to, or substitute, as applicable, the number, class and kind of
shares of stock available for Options under the Plan, outstanding Options and
the Reserves, the maximum number of shares that a Participant may purchase per
Offering Period, the Option Prices of outstanding Options and any other
characteristics or terms of the Options or the Plan as the Committee shall
determine are necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that any fractional
shares resulting from any such adjustment shall be eliminated by rounding to the
next lower whole number of shares with appropriate payment for such fractional
shares as shall be reasonably determined by the Committee. Notice of
any such adjustment shall be given by the Committee to each Participant whose
Option has been adjusted and such adjustment, whether or not such notice has
been given, shall be effective and binding for all purposes of the
Plan.
(b) The
existence of the Plan and any Options granted hereunder shall not affect in any
way the right or power of the Board or the shareholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or consolidation of
the Company or a Subsidiary, any issue of debt, preferred or prior preference
stock ahead of or affecting Common Stock, the authorization or issuance of
additional shares of Common Stock, the dissolution or liquidation of the Company
or any Subsidiary, any sale or transfer of all or part of the Company’s or a
Subsidiary’s assets or business or any other corporate act or
proceeding.
(c) The
Board may at any time terminate an Offering Period then in progress and provide,
in its discretion, that Participants’ then outstanding Account balances shall be
used to purchase shares pursuant to Article III or returned to the applicable
Participants.
(d) In
the event of a Change in Control, the Committee may, in its
discretion:
|
(i)
|
permit
each Participant to make a single sum payment with respect to his
outstanding Option before the Exercise Date equal to the amount the
Participant would have contributed as determined by the Committee for the
payroll periods remaining until the Exercise Date, and provide for
termination of the Offering Period then in progress and purchase of shares
pursuant to Article III; or
|
|
(ii)
|
provide
for payment in cash to each Participant of the amount standing to his
Account plus an amount equal to the highest value of the consideration to
be received in connection with such transaction for one share of Common
Stock, or, if higher, the highest Fair Market Value of the Common Stock
during the 30 consecutive Trading Days immediately prior to the closing
date or expiration date of such transaction, less the Option Price of the
Participant’s Option (determined for all purposes of this Section
5.04(d)(ii) using such closing or termination date as the Exercise Date in
applying Section 2.23), multiplied by the number of full shares of Common
Stock that could have been purchased for such Participant immediately
prior to the Change in Control with the amount standing to his Account at
the Option Price, and that all Options so paid shall
terminate.
|
ARTICLE VI
WITHDRAWAL
|
6.01
|
General
|
By
written notice to the Committee, at any time prior to the last day of any
particular Offering Period, a Participant may elect to withdraw all of the
accumulated payroll deductions in his Account at such time. All of
the accumulated payroll deductions credited to such withdrawing Participant’s
Account shall be paid to such Participant promptly after receipt of his written
notice of withdrawal. In addition, upon the Participant’s written
notice of withdrawal, the Participant’s Option for the Offering Period shall be
automatically terminated, and no further payroll deductions for the purchase of
shares on behalf of such Participant shall be made for such Offering
Period. If a Participant withdraws from an Offering Period, payroll
deductions shall not resume at the beginning of the succeeding Offering Period
unless the Participant delivers to the Committee a new Agreement authorizing
payroll deductions.
9
6.02 Effect on Subsequent
Participation
A
Participant’s withdrawal from an Offering Period shall not have any effect upon
his eligibility to participate in any similar plan that may hereafter be adopted
by the Company or a Subsidiary or in succeeding Offering Periods that commence
after the termination of the Offering Period from which the Participant
withdraws.
|
6.03
|
Termination of
Employment
|
Upon
termination of employment as an Eligible Employee, for any reason, a Participant
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such Participant’s Account during the Offering Period but
not yet used to exercise the Option shall be returned to such Participant, or,
in the case of a Participant’s death, the payroll deductions credited to such
deceased Participant’s Account shall be paid to his Beneficiary or
Beneficiaries, and the Participant’s Option shall be automatically
terminated. A transfer of a Participant’s employment between or among
the Company and any Designated Subsidiary or Designated Subsidiaries shall not
be treated as a termination of employment for purposes of the Plan.
ARTICLE VII
ADMINISTRATION
|
7.01
|
Generally
|
The Plan
shall be administered by a committee the members of which are appointed by the
Board. The Committee shall consist of no fewer than three (3)
members. Notwithstanding the foregoing, the Board, in its absolute
discretion, may at any time and from time to time exercise any and all rights,
duties and responsibilities of the Committee under the Plan, including, but not
limited to, establishing procedures to be followed by the Committee, except with
respect to any matters which under any applicable law, regulation or rule are
required to be determined in the sole discretion of the Committee. If
and to the extent that no Committee exists which has the authority to administer
the Plan, the functions of the Committee shall be exercised by the
Board. In addition, the Board shall have discretionary authority to
designate, from time to time, without approval of the Company’s stockholders,
those Subsidiaries that shall be Designated Subsidiaries, the employees of which
are eligible to participate in the Plan.
|
7.02
|
Authority of the
Committee
|
The
Committee shall have all authority that may be necessary or helpful to enable it
to discharge its responsibilities with respect to the Plan. Without
limiting the generality of the foregoing sentence or Section 7.01, subject to
the express provisions of the Plan, the Committee shall have full and exclusive
discretionary authority to interpret and construe any and all provisions of the
Plan and any Agreements, determine eligibility to participate in the Plan, adopt
rules and regulations for administering the Plan, adjudicate and determine all
disputes arising under or in connection with the Plan, determine whether a
particular item is included in “Compensation,” and make all other determinations
deemed necessary or advisable for administering the Plan. Decisions,
actions and determinations
by the Committee with respect to the Plan or any Agreement shall be final,
conclusive and binding on all parties. Except to the extent
prohibited by applicable law or the rules of a stock exchange, the Committee
may, in its discretion, from time to time, delegate all or any part of its
responsibilities and powers under the Plan to any member or members of the
management of the Company, and revoke any such delegation.
10
|
7.03
|
Appointment
|
The Board
may from time to time appoint members to the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however caused,
on the Committee. The Committee may select one member as its Chair
and shall hold its meetings at such times and places as it shall deem
advisable. It may also hold telephonic meetings. A
majority of its members shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members. The
Committee may correct any defect or omission or reconcile any inconsistency in
the Plan or any Agreement in the manner and to the extent the Committee
determines to be desirable. Any decision or determination reduced to
writing and signed by a majority of the members of the Committee shall be as
fully effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a secretary and shall make
such rules and regulations for the conduct of its business as it shall deem
advisable.
ARTICLE VIII
MISCELLANEOUS
|
8.01
|
Designation of
Beneficiary
|
(a) A
Participant may file with the Committee a written designation of a Beneficiary
who is to receive any Common Stock and/or cash from the Participant’s Account in
the event of such Participant’s death subsequent to an Exercise Date on which
the Option is exercised but prior to delivery to such Participant of such Common
Stock and cash. Unless a Participant’s written Beneficiary
designation states otherwise, the designated Beneficiary shall also be entitled
to receive any cash from the Participant’s Account in the event of such
Participant’s death prior to exercise of his Option.
(b) A
Participant’s designation of Beneficiary may be changed by the Participant at
any time by written notice to the Committee. In the event of the
death of a Participant and in the absence of a valid Beneficiary designation
under the Plan at the time of such Participant’s death, the Company shall
deliver the shares and/or cash to which the deceased Participant was entitled
under the Plan to the executor or administrator of the estate of such
Participant. If no such executor or administrator has been appointed
as can be determined by the Committee, the Company shall deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Committee may designate. Any such
delivery or payment shall be a complete discharge of the obligations and
liabilities of the Company, the Subsidiaries, the Committee and the Board under
the Plan.
|
8.02
|
Transferability
|
Neither
payroll deductions credited to the Participant’s Account nor any rights with
regard to the exercise of an Option or to receive Common Stock under the Plan
may be assigned, transferred, pledged, or otherwise disposed of in any way other
than by will, the laws of descent and distribution, or as provided under Section
8.01. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with
Article VI.
8.03 Conditions Upon Issuance of
Shares
(a) If
at any time the Committee shall determine, in its discretion, that the listing,
registration and/or qualification of shares of Common Stock upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the sale or purchase of shares of Common Stock hereunder, no
Option may be exercised or paid in whole or in part unless and until such
listing, registration, qualification, consent and/or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Committee.
11
(b) If
at any time counsel to the Company shall be of the opinion that any sale or
delivery of shares of Common Stock pursuant to an Option is or may be in the
circumstances unlawful, contravene the requirements of any stock exchange, or
result in the imposition of excise taxes on the Company or any Subsidiary under
the statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under
the Securities Act, or otherwise with respect to shares of Common Stock or
Options and the right to exercise any Option shall be suspended until, in the
opinion of such counsel, such sale or delivery shall be lawful or will not
result in the imposition of excise taxes on the Company or any
Subsidiary.
(c) The
Committee, in its absolute discretion, may impose such restrictions on the
ownership and transferability of the shares of Common Stock purchasable or
otherwise receivable by any person under any Option as it deems
appropriate. The certificates evidencing such shares may include any
legend that the Committee deems appropriate to reflect any such
restrictions.
8.04 Participants Bound by
Plan
By
accepting any benefit under the Plan, each Participant and each person claiming
under or through such Participant shall be conclusively deemed to have indicated
their acceptance and ratification of, and consent to, all of the terms and
conditions of the Plan and any action taken under the Plan by the Committee, the
Company or the Board, in any case in accordance with the terms and conditions of
the Plan.
8.05 Use of Funds
All
payroll deductions received or held by the Company under the Plan may be used by
the Company for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.
|
8.06
|
Amendment or
Termination
|
The Board
may terminate, discontinue, amend or suspend the Plan at any time, with or
without notice to Participants. No such termination or amendment of
the Plan may materially adversely affect the existing rights of any Participant
with respect to any outstanding Option previously granted to such Participant,
without the consent of such Participant, except for any amendment or termination
permitted by Section 5.04. In addition, no amendment of the Plan by
the Board shall, without the approval of the shareholders of the Company, (i)
increase the maximum number of shares that may be issued under the Plan or that
any Participant may purchase under the Plan in any Offering Period, except
pursuant to Section 5.04; (ii) change the class of employees eligible to receive
Options under the Plan, except as provided by the Board pursuant to the last
sentence of Section 7.01; or (iii) change the formula by which the Option Price
is determined under the Plan.
|
8.07
|
No Employment
Rights
|
The Plan
does not, either directly or indirectly, create an independent right for the
benefit of any employee or class of employees to purchase any shares of Common
Stock under the Plan. In addition, the Plan does not create in any
employee or class of employees any right with respect to continuation of
employment by the Company or any Subsidiary, and the Plan shall not be deemed to
interfere in any way with the Company’s or any Subsidiary’s employment
at will relationship with the employee and/or interfere in any way with the
Company’s or any Subsidiary’s right to terminate, or otherwise modify, an
employee’s employment at any time or for any or no reason.
|
8.08
|
Indemnification
|
No
current or previous member of the Board, or the Committee, nor any officer or
employee of the Company acting on behalf of the Board, or the Committee, shall
be personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan. All such members of the
Board or the Committee and each and every officer or employee
of the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation of the Plan. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such individuals may be entitled under the Company’s Certificate of
Incorporation, or Bylaws, as a matter of law or otherwise.
12
|
8.09
|
Construction of
Plan
|
Whenever
the context so requires, the masculine shall include the feminine and neuter,
and the singular shall also include the plural, and conversely. The
words “Article” and “Section” herein shall refer to provisions of the Plan,
unless expressly indicated otherwise.
|
8.10
|
Term of
Plan
|
Following
the adoption of the Plan by the Board, and approval of the Plan by the
shareholders of the Company who are present and represented at a special or
annual meeting of the shareholders where a quorum is present, which approval
must occur not earlier than one (1) year before, and not later than one (1) year
after, the date the Plan is adopted by the Board, the Plan shall become
effective on the Effective Date.
8.11 Unfunded Status of
Plan
The Plan
shall be an unfunded plan. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments,
provided that the
existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan.
|
8.12
|
Governing
Law
|
The law
of the State of New Jersey will govern all matters relating to the Plan except
to the extent such law is superseded by the laws of the United
States.
13
EXHIBIT II TO PROXY
STATEMENT
EMCORE
CORPORATION
AMENDED AND RESTATED 2000
STOCK OPTION PLAN
Revised
March 31, 2008
1. Purposes.
The purposes of the EMCORE Corporation 2000 Stock Option Plan are to give
officers and other employees, consultants and non-employee directors of the
Company and its Affiliates an opportunity to acquire shares of Stock, to provide
an incentive for such employees, consultants and directors to continue to
promote the best interests of the Company and its Affiliates and enhance its
long-term performance and to provide an incentive for such employees,
consultants and directors to join or remain with the Company and its Affiliates.
Toward these objectives, the Committee may grant Options to such employees,
directors and consultants, all pursuant to the terms and conditions of the
Plan.
2. Definitions.
As used in the Plan, the following capitalized terms shall have the meanings set
forth below:
(a) “Affiliate” - other than the
Company, (i) any corporation or limited liability company in an unbroken chain
of corporations or limited liability companies ending with the Company if each
corporation or limited liability company owns stock or membership interests (as
applicable) possessing more than fifty percent (50%) of the total combined
voting power of all classes of stock in one of the other corporations or limited
liability companies in such chain; (ii) any corporation, trade or business
(including, without limitation, a partnership or limited liability company)
which is more than fifty percent (50%) controlled (whether by ownership of
stock, assets or an equivalent ownership interest or voting interest) by the
Company or one of its Affiliates; or (iii) any other entity, approved by the
Committee as an Affiliate under the Plan, in which the Company or any of its
Affiliates has a material equity interest.
(b) “Agreement” - a written stock
option award agreement evidencing an Option, as described in Section
3(e).
(c) “Award Limit” - 300,000 shares
of Stock (as adjusted in accordance with Section 10).
(d) “Beneficial Ownership” -
(including correlative terms) shall have the same meaning given such term in
Rule 13d-3 promulgated under the Exchange Act.
(e) “Board” - the Board of
Directors of the Company.
(f) “Change in Control” - the
occurrence of any of the following:
(i) an
acquisition in one transaction or a series of related transactions (other than
directly from the Company or pursuant to Options granted under the Plan or other
similar awards granted by the Company) of any Voting Securities by any Person,
immediately after which such Person has Beneficial Ownership of fifty percent
(50%) or more of the combined voting power of the Company’s then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred pursuant to this Section 2(f), Voting
Securities which are acquired in a Non-Control Acquisition shall not constitute
an acquisition that would cause a Change in Control;
(ii) the
individuals who, immediately prior to the Effective Date, are members of the
Board (the “Incumbent
Board”), cease for any reason to constitute at least a majority of the
members of the Board; provided, however, that if the
election, or nomination for election, by the Company’s common stockholders, of
any new director was approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of the Plan, be considered as a
member of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened “Election Contest”
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a “Proxy
Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
14
(iii) the
consummation of:
(A) a
merger, consolidation or reorganization involving the Company unless:
(1) the
stockholders of the Company, immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately following such merger,
consolidation or reorganization, more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(2) the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation or
reorganization constitute at least a majority of the members of the board of
directors of the Surviving Corporation, or a corporation Beneficially Owning,
directly or indirectly, a majority of the voting securities of the Surviving
Corporation, and
(3) no
Person, other than (i)
the Company, (ii) any Related Entity (as defined in Section 2(p)), (iii) any
employee benefit plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was maintained by the
Company, the Surviving Corporation, or any Related Entity or (iv) any Person
who, together with its Affiliates, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifty percent (50%)
or more of the then outstanding Voting Securities, owns, together with its
Affiliates, Beneficial Ownership of fifty percent (50%) or more of the combined
voting power of the Surviving Corporation’s then outstanding voting
securities (a transaction described in clauses (1) through (3) above is
referred to herein as a “Non-Control
Transaction”);
(B) a
complete liquidation or dissolution of the Company; or
(C) an
agreement for the sale or other disposition of all or substantially all of the
assets or business of the Company to any Person (other than a transfer to a
Related Entity or the distribution to the Company’s stockholders of the stock of
a Related Entity or any other assets).
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject
Person”) acquired Beneficial Ownership of fifty percent (50%) or more of
the combined voting power of the then outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities then outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Persons, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and (1) before such share
acquisition by the Company the Subject Person becomes the Beneficial Owner of
any new or additional Voting Securities in a related transaction or (2) after
such share acquisition by the Company the Subject Person becomes the Beneficial
Owner of any new or additional Voting Securities which in either case increases
the percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall be deemed to occur. Solely
for purposes of this Section 2(f), (x) “Affiliate” shall mean, with respect to
any Person, any other Person that, directly or indirectly, controls, is
controlled by, or is under common control with, such Person; (y) any “Relative”
(for this purpose, “Relative” means a spouse, child, parent, parent of spouse,
sibling or grandchild) of an individual shall be deemed to be an Affiliate of
such individual for this purpose; and (z) neither the Company nor any Person
controlled by the Company shall be deemed to be an Affiliate of any holder of
Common Stock.
(g) “Code” - the Internal Revenue
Code of 1986, as it may be amended from time to time, including regulations and
rules thereunder and successor provisions and regulations and rules
thereto.
(h) “Committee” - the Compensation
Committee of the Board, or such other Board committee as may be designated by
the Board to administer the Plan.
(i) “Company” - EMCORE Corporation,
a New Jersey corporation, or any successor entity.
15
(j) “Disqualified Option” - the
meaning given such term in Section 10(d).
(k) “Disqualifying Disposition” -
the meaning given such term in Section 10(d).
(l) “Effective Date” - the date on
which the Plan is effective, as determined pursuant to Section 15.
(m) “Exchange Act” - the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(n) “Fair Market Value” - of a
share of Stock as of a given date shall be: (i) if the Stock is listed or
admitted to trading on an established stock exchange (including, for this
purpose, the Nasdaq National Market), the mean of the highest and lowest sale
prices for a share of Stock on the composite tape or in Nasdaq National Market
trading as reported in The
Wall Street Journal (or, if not so reported, such other nationally
recognized reporting source as the Committee shall select) for such date, or, if
no such prices are reported for such date, the most recent day for which such
prices are available shall be used; (ii) if the Stock is not then listed or
admitted to trading on such a stock exchange, the mean of the closing
representative bid and asked prices for the Stock on such date as reported by
the Nasdaq Small Cap Market or, if not so reported, by the OTC Bulletin Board
(or any successor or similar quotation system regularly reporting the market
value of the Stock in the over-the-counter market), or, if no such prices are
reported for such date, the most recent day for which such prices are available
shall be used; or (iii) in the event neither of the valuation methods provided
for in clauses (i) and (ii) above are practicable, the fair market value of a
share of Stock determined by such other reasonable valuation method as the
Committee shall, in its discretion, select and apply in good faith as of the
given date; provided,
however, that for
purposes of paragraphs (a) and (h) of Section 6, such fair market value shall be
determined subject to Section 422(c)(7) of the Code.
(o) “ISO” or “Incentive Stock Option” - a
right to purchase Stock granted to an Optionee under the Plan in accordance with
the terms and conditions set forth in Section 6 and which conforms to the
applicable provisions of Section 422 of the Code.
(p) “Non-Control Acquisition” - an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (a “Related Entity”), (ii) the
Company or any Related Entity, (iii) any of Thomas Russell, The AER Trust 1997,
Robert Louis-Dreyfus, Gallium Enterprises, Inc. and Reuben Richards or (iv) any
Person in connection with a Non-Control Transaction.
(q) “Notice” - written notice
actually received by the Company at its executive offices on the day of such
receipt, if received on or before 1:30 p.m., on a day when the Company’s
executive offices are open for business, or, if received after such time, such
notice shall be deemed received on the next such day, which notice may be
delivered in person to the Company’s Secretary or sent by facsimile to the
Company at (732) 271-9686, or sent by certified or registered mail or overnight
courier, prepaid, addressed to the Company at 394 Elizabeth Avenue, Somerset,
New Jersey 08873, Attention: Secretary.
(r) “Option” - a right to purchase
Stock granted to an Optionee under the Plan in accordance with the terms and
conditions set forth in Section 6. Options may be either ISOs or stock options
other than ISOs.
(s) “Optionee” - an individual who
is eligible, pursuant to Section 5, and who has been selected, pursuant to
Section 3(c), to participate in the Plan, and who holds an outstanding Option
granted to such individual under the Plan in accordance with the terms and
conditions set forth in Section 6.
(t) “Person” - “person” as such
term is used for purposes of Section 13(d) or 14(d) of the Exchange Act,
including, without limitation, any individual, corporation, limited liability
company, partnership, trust, unincorporated organization, government or any
agency or political subdivision thereof, or any other entity or any group of
Persons.
(u) “Plan” - this EMCORE
Corporation 2000 Stock Option Plan.
16
(v) “Predecessor Plan” - the
Company’s 1995 Incentive and Non-Statutory Stock Option Plan.
(w) “Securities Act” - the
Securities Act of 1933, as it may be amended from time to time, including the
regulations and rules promulgated thereunder and successor provisions and
regulations and rules thereto.
(x) “Stock” - the common stock of
the Company, without par value.
(y) “Subsidiary” - any present or
future corporation which is or would be a “subsidiary corporation” of the
Company as the term is defined in Section 424(f) of the Code.
(z) “Voting Securities” - all the
outstanding voting securities of the Company entitled to vote generally in the
election of the Board.
3. Administration
of the Plan. (a) The Committee shall have exclusive authority to operate,
manage and administer the Plan in accordance with its terms and conditions.
Notwithstanding the foregoing, in its absolute discretion, the Board may at any
time and from time to time exercise any and all rights, duties and
responsibilities of the Committee under the Plan, including, but not limited to,
establishing procedures to be followed by the Committee, but excluding matters
which under any applicable law, regulation or rule, including, without
limitation, any exemptive rule under Section 16 of the Exchange Act (including
Rule 16b-3, or any successor rule, as the same may be amended from time to time)
or Section 162(m) of the Code, are required to be determined in the sole
discretion of the Committee. If and to the extent that no Committee exists which
has the authority to administer the Plan, the functions of the Committee shall
be exercised by the Board.
(b) The
Committee shall be appointed from time to time by the Board, and the Committee
shall consist of not less than three members of the Board. Appointment of
Committee members shall be effective upon their acceptance of such appointment.
Committee members may be removed by the Board at any time either with or without
cause, and such members may resign at any time by delivering notice thereof to
the Board. Any vacancy on the Committee, whether due to action of the Board or
any other reason, shall be filled by the Board.
(c) The
Committee shall have full authority to grant, pursuant to the terms of the Plan,
Options to those individuals who are eligible to receive Options under the Plan.
In particular, the Committee shall have discretionary authority, in accordance
with the terms of the Plan, to: determine eligibility for participation in the
Plan; select, from time to time, from among those eligible, the employees,
directors and consultants to whom Options shall be granted under the Plan, which
selection may be based upon information furnished to the Committee by the
Company’s or an Affiliate’s management; determine whether an Option shall take
the form of an ISO or an Option other than an ISO; determine the number of
shares of Stock to be included in any Option and the periods for which Options
will be outstanding; establish and administer any terms, conditions, performance
criteria, restrictions, limitations, forfeiture, vesting or exercise schedule,
and other provisions of or relating to any Option; grant waivers of terms,
conditions, restrictions and limitations under the Plan or applicable to any
Option, or accelerate the vesting or exercisability of any Option; amend or
adjust the terms and conditions of any outstanding Option and/or adjust the
number and/or class of shares of Stock subject to any outstanding Option; at any
time and from time to time after the granting of an Option, specify such
additional terms, conditions and restrictions with respect to any such Option as
may be deemed necessary or appropriate to ensure compliance with any and all
applicable laws or rules, including, but not limited to, terms, restrictions and
conditions for compliance with applicable securities laws, regarding an
Optionee’s exercise of Options by tendering shares of Stock or under any
“cashless exercise” program established by the Committee, and methods of
withholding or providing for the payment of required taxes; and, to the extent
permitted under the applicable Agreement, permit the transfer of an Option or
the exercise of an Option by one other than the Optionee who received the grant
of such Option (other than any such a transfer or exercise which would cause any
ISO to fail to qualify as an “incentive stock option” under Section 422 of the
Code).
(d) The
Committee shall have all authority that may be necessary or helpful to enable it
to discharge its responsibilities with respect to the Plan. Without limiting the
generality of the foregoing sentence or Section 3(a), and in addition to the
powers otherwise expressly designated to the
17
Committee
in the Plan, the Committee shall have the exclusive right and discretionary
authority to interpret the Plan and the Agreements; construe any ambiguous
provision of the Plan and/or the Agreements and decide all questions concerning
eligibility for and the amount of Options granted under the Plan. The Committee
may establish, amend, waive and/or rescind rules and regulations and
administrative guidelines for carrying out the Plan and may correct any errors,
supply any omissions or reconcile any inconsistencies in the Plan and/or any
Agreement or any other instrument relating to any Options. The Committee shall
have the authority to adopt such procedures and subplans and grant Options on
such terms and conditions as the Committee determines necessary or appropriate
to permit participation in the Plan by individuals otherwise eligible to so
participate who are foreign nationals or employed outside of the United States,
or otherwise to conform to applicable requirements or practices of jurisdictions
outside of the United States; and take any and all such other actions it deems
necessary or advisable for the proper operation and/or administration of the
Plan. The Committee shall have full discretionary authority in all matters
related to the discharge of its responsibilities and the exercise of its
authority under the Plan. Decisions and actions by the Committee with respect to
the Plan and any Agreement shall be final, conclusive and binding on all persons
having or claiming to have any right or interest in or under the Plan and/or any
Agreement.
(e) Each
Option shall be evidenced by an Agreement, which shall be executed by the
Company and the Optionee to whom such Option has been granted, unless the
Agreement provides otherwise; two or more Options granted to a single Optionee
may, however, be combined in a single Agreement. An Agreement shall not be a
precondition to the granting of an Option; no person shall have any rights under
any Option, however, unless and until the Optionee to whom the Option shall have
been granted (i) shall have executed and delivered to the Company an Agreement
or other instrument evidencing the Option, unless such Agreement provides
otherwise, and (ii) has otherwise complied with the applicable terms and
conditions of the Option. The Committee shall prescribe the form of all
Agreements, and, subject to the terms and conditions of the Plan, shall
determine the content of all Agreements. Any Agreement may be supplemented or
amended in writing from time to time as approved by the Committee; provided that the terms and
conditions of any such Agreement as supplemented or amended are not inconsistent
with the provisions of the Plan.
(f) A
majority of the members of the entire Committee shall constitute a quorum and
the actions of a majority of the members of the Committee in attendance at a
meeting at which a quorum is present, or actions by a written instrument signed
by all members of the Committee, shall be the actions of the
Committee.
(g) The
Committee may consult with counsel who may be counsel to the Company. The
Committee may, with the approval of the Board, employ such other attorneys
and/or consultants, accountants, appraisers, brokers and other persons as it
deems necessary or appropriate. In accordance with Section 12, the Committee
shall not incur any liability for any action taken in good faith in reliance
upon the advice of such counsel or other persons.
(h) In
serving on the Committee, the members thereof shall be entitled to
indemnification as directors of the Company, and to any limitation of liability
and reimbursement as directors with respect to their services as members of the
Committee.
(i) Except
to the extent prohibited by applicable law, including, without limitation, the
requirements applicable under Section 162(m) of the Code to any Option intended
to be “qualified performance-based compensation,” or the requirements for any
Option granted to an officer or director to be covered by any exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3, or any successor
rule, as the same may be amended from time to time), or the applicable rules of
a stock exchange, the Committee may, in its discretion, allocate all or any
portion of its responsibilities and powers under this Section 3 to any one or
more of its members and/or delegate all or any part of its responsibilities and
powers under this Section 3 to any person or persons selected by it; provided, however, that the Committee
may not delegate its authority to correct errors, omissions or inconsistencies
in the Plan. Any such authority delegated or allocated by the Committee under
this paragraph (i) of Section 3 shall be exercised in accordance with the terms
and conditions of the Plan and any rules, regulations or administrative
guidelines that may from time to time be established by the Committee, and any
such allocation or delegation may be revoked by the Committee at any
time.
4. Shares
of Stock Subject to the Plan. (a) The shares of stock subject to
Options
18
granted
under the Plan shall be shares of Stock. Such shares of Stock subject to the
Plan may be either authorized and unissued shares (which will not be subject to
preemptive rights) or previously issued shares acquired by the Company or any
Subsidiary. The total number of shares of Stock that may be delivered pursuant
to Options granted under the Plan is 12,850,000, 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 total
number of shares of Stock that may be delivered pursuant to Incentive Stock
Options under the Plan is 12,850,000, without application of paragraph (d) of
this Section 4.
(b) Notwithstanding
any of the foregoing limitations set forth in this Section 4, the numbers of
shares of Stock specified in this Section 4 shall be adjusted as provided in
Section 10.
(c) Any
shares of Stock subject to an Option which for any reason expires or is
terminated or canceled without having been fully exercised by delivery of shares
of Stock may again be granted pursuant to an Option under the Plan, subject to
the limitations of this Section 4.
(d) If
the option exercise price of an Option granted under the Plan or a stock option
granted under the Predecessor Plan is paid by tendering to the Company shares of
Stock already owned by the holder of such option (or such holder and his or her
spouse jointly), only the number of shares of Stock issued net of the shares of
Stock so tendered shall be deemed delivered for purposes of determining the
total number of shares of Stock that may be delivered under the
Plan.
(e) Any
shares of Stock delivered under the Plan in assumption or substitution of
outstanding stock options, or obligations to grant future stock options, under
plans or arrangements of an entity other than the Company or an Affiliate in
connection with the Company or an Affiliate acquiring such another entity, or an
interest in such an entity, or a transaction otherwise described in Section
6(j), shall not reduce the maximum number of shares of Stock available for
delivery under the Plan.
5. Eligibility.
Executive employees and other employees, including officers, of the Company and
the Affiliates, directors (whether or not also employees), and consultants of
the Company and the Affiliates, shall be eligible to become Optionees and
receive Options in accordance with the terms and conditions of the Plan, subject
to the limitations on the granting of ISOs set forth in Section
6(h).
6. Terms
and Conditions of Stock Options. All Options to purchase Stock granted
under the Plan shall be either ISOs or Options other than ISOs. To the extent
that any Option does not qualify as an Incentive Stock Option (whether because
of its provisions or the time or manner of its exercise or otherwise), such
Option, or the portion thereof which does not so qualify, shall constitute a
separate Option other than an Incentive Stock Option. Each Option shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms and conditions not inconsistent
therewith as the Committee shall determine and which are set forth in the
applicable Agreement. Options need not be uniform as to all grants and
recipients thereof.
(a) The
option exercise price per share of shares of Stock subject to each Option shall
be determined by the Committee and stated in the Agreement; provided, however, that, subject to
paragraph (h)(iii) and/or (j) of this Section 6, if applicable, such price
applicable to any ISO shall not be less than one hundred percent (100%) of the
Fair Market Value of a share of Stock at the time that the Option is granted.
(b) Each
Option shall be exercisable in whole or in such installments, at such times and
under such conditions as may be determined by the Committee, in its discretion
in accordance with the Plan, and stated in the Agreement, and, in any event,
over a period of time ending not later than ten (10) years from the date such
Option was granted, subject to paragraph (h)(iii) of this Section 6.
(c) An
Option shall not be exercisable with respect to a fractional share of Stock or
the lesser of one hundred (100) shares and the full number of shares of Stock
then subject to the Option. No fractional shares of Stock shall be issued upon
the exercise of an Option.
(d) Each
Option may be exercised by giving Notice to the Company specifying the number of
shares of Stock to be purchased, which shall be accompanied by payment in full
including applicable taxes, if any, in accordance with Section 9. Payment shall
be in any manner permitted by applicable law and prescribed by the Committee, in
its discretion, and set forth in the Agreement, including, in
the
19
Committee’s
discretion, and subject to such terms, conditions and limitations as the
Committee may prescribe, payment in accordance with a “cashless exercise”
arrangement established by the Committee and/or in Stock owned by the Optionee
or by the Optionee and his or her spouse jointly and acquired more than six (6)
months prior to such tender.
(e) No
Optionee or other person shall become the beneficial owner of any shares of
Stock subject to an Option, nor have any rights to dividends or other rights of
a shareholder with respect to any such shares until he or she has exercised his
or her Option in accordance with the provisions of the Plan and the applicable
Agreement.
(f) An
Option may be exercised only if at all times during the period beginning with
the date of the granting of the Option and ending on the date of such exercise,
the Optionee was an employee, director or consultant of the Company or an
Affiliate, as applicable. Notwithstanding the preceding sentence, the Committee
may determine in its discretion that an Option may be exercised prior to
expiration of such Option following termination of such continuous employment,
directorship or consultancy, whether or not exercisable at the time of such
termination, to the extent provided in the applicable Agreement.
(g) Subject
to the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised).
(h) (i)
Each Agreement relating to an Option shall state whether such Option will or
will not be treated as an ISO. No ISO shall be granted unless such Option, when
granted, qualifies as an “incentive stock option” under Section 422 of the Code.
No ISO shall be granted to any individual otherwise eligible to participate in
the Plan who is not an employee of the Company or a Subsidiary on the date of
granting of such Option. Any ISO granted under the Plan shall contain such terms
and conditions, consistent with the Plan, as the Committee may determine to be
necessary to qualify such Option as an “incentive stock option” under Section
422 of the Code. Any ISO granted under the Plan may be modified by the Committee
to disqualify such Option from treatment as an “incentive stock option” under
Section 422 of the Code.
(ii)
Notwithstanding any intent to grant ISOs, an Option granted under the Plan will
not be considered an ISO to the extent that it, together with any other
“incentive stock options” (within the meaning of Section 422 of the Code, but
without regard to subsection (d) of such Section) under the Plan and any other
“incentive stock option” plans of the Company, any Subsidiary and any “parent
corporation” of the Company within the meaning of Section 424(e) of the Code,
are exercisable for the first time by any Optionee during any calendar year with
respect to Stock having an aggregate Fair Market Value in excess of $100,000 (or
such other limit as may be required by the Code) as of the time the Option with
respect to such Stock is granted. The rule set forth in the preceding sentence
shall be applied by taking Options into account in the order in which they were
granted.
(iii) No
ISO shall be granted to an individual otherwise eligible to participate in the
Plan who owns (within the meaning of Section 424(d) of the Code), at the time
the Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or a Subsidiary or any “parent
corporation” of the Company within the meaning of Section 424(e) of the Code.
This restriction does not apply if at the time such ISO is granted the Option
exercise price per share of Stock subject to the Option is at least 110% of the
Fair Market Value of a share of Stock on the date such ISO is granted, and the
ISO by its terms is not exercisable after the expiration of five years from such
date of grant.
(i) An
Option and any shares of Stock received upon the exercise of an Option shall be
subject to such other transfer and/or ownership restrictions and/or legending
requirements as the Committee may establish in its discretion and which are
specified in the Agreement and may be referred to on the certificates evidencing
such shares of Stock. The Committee may require an Optionee to give prompt
Notice to the Company concerning any disposition of shares of Stock received
upon the exercise of an ISO within: (i) two (2) years from the date of granting
such ISO to such Optionee or (ii) one (1) year from the transfer of such shares
of Stock to such Optionee or (iii) such other period as the Committee may from
time to time determine. The Committee may direct that an Optionee with respect
to an ISO undertake in the applicable Agreement to give such Notice described in
the preceding sentence, at such time and containing such information as the
Committee may prescribe, and/or that the certificates evidencing shares of Stock
acquired by exercise of an ISO refer to such requirement to give such
Notice.
20
(j) In the event that a transaction described in Section 424(a)
of the Code involving the Company or a Subsidiary is consummated, such as the
acquisition of property or stock from an unrelated corporation, individuals who
become eligible to participate in the Plan in connection with such transaction,
as determined by the Committee, may be granted Options in substitution for stock
options granted by another corporation that is a party to such transaction. If
such substitute Options are granted, the Committee, in its discretion and
consistent with Section 424(a) of the Code, if applicable, and the terms of the
Plan, though notwithstanding paragraph (a) of this Section 6, shall determine
the option exercise price and other terms and conditions of such substitute
Options.
(k) Notwithstanding
any other provision contained in the Plan to the contrary, the maximum number of
shares of Stock which may be subject to Options granted under the Plan to any
Optionee in any twelve (12) month period shall not exceed the Award Limit. To
the extent required by Section 162(m) of the Code, shares of Stock subject to
Options which are canceled shall continue to be counted against the Award Limit
and if, after the grant of an Option, the price of shares subject to such Option
is reduced and the transaction is treated as a cancellation of the Option and a
grant of a new Option, both the Option deemed to be canceled and the Option
deemed to be granted shall be counted against the Award
Limit.
7. Transfer,
Leave of Absence. A transfer of an employee from the Company to an
Affiliate (or, for purposes of any ISO granted under the Plan, a Subsidiary), or
vice versa, or from one Affiliate to another (or in the case of an ISO, from one
Subsidiary to another), and a leave of absence, duly authorized in writing by
the Company or a Subsidiary or Affiliate, shall not be deemed a termination of
employment of the employee for purposes of the Plan or with respect to any
Option (in the case of ISOs, to the extent permitted by the Code).
8. Rights
of Employees and Other Persons. (a) No person shall have any rights or
claims under the Plan except in accordance with the provisions of the Plan and
the applicable Agreement.
(b) Nothing
contained in the Plan or in any Agreement shall be deemed to (i) give any
employee or director the right to be retained in the service of the Company or
any Affiliate nor restrict in any way the right of the Company or any Affiliate
to terminate any employee’s employment or any director’s directorship at any
time with or without cause or (ii) confer on any consultant any right of
continued relationship with the Company or any Affiliate, or alter any
relationship between them, including any right of the Company or an Affiliate to
terminate its relationship with such consultant.
(c) The
adoption of the Plan shall not be deemed to give any employee of the Company or
any Affiliate or any other person any right to be selected to participate in the
Plan or to be granted an Option.
(d) Nothing
contained in the Plan or in any Agreement shall be deemed to give any employee
the right to receive any bonus, whether payable in cash or in Stock, or in any
combination thereof, from the Company or any Affiliate, nor be construed as
limiting in any way the right of the Company or any Affiliate to determine, in
its sole discretion, whether or not it shall pay any employee bonuses, and, if
so paid, the amount thereof and the manner of such payment.
9. Tax
Withholding Obligations. (a) The Company and/or any Affiliate are
authorized to take whatever actions are necessary and proper to satisfy all
obligations of Optionees (including, for purposes of this Section 9, any other
person entitled to exercise an Option pursuant to the Plan or an Agreement) for
the payment of all Federal, state, local and foreign taxes in connection with
any Options (including, but not limited to, actions pursuant to the following
paragraph (b) of this Section 9).
(b) Each
Optionee shall (and in no event shall Stock be delivered to such Optionee with
respect to an Option until), no later than the date as of which the value of the
Option first becomes includible in the gross income of the Optionee for income
tax purposes, pay to the Company in cash, or make arrangements satisfactory to
the Company, as determined in the Committee’s discretion, regarding payment to
the Company of, any taxes of any kind required by law to be withheld with
respect to the Stock or other property subject to such Option, and the Company
and any Affiliate shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to such
Optionee. Notwithstanding the above, the Committee may, in its discretion and
pursuant to procedures approved by the Committee, permit the Optionee to (i)
elect withholding by the Company of Stock otherwise deliverable to such Optionee
pursuant to his or her Option (provided, however, that the amount of
any Stock so withheld shall not exceed the amount necessary to satisfy required
Federal, state, local and foreign withholding obligations using the minimum
statutory rate) and/or (ii) tender to the Company Stock owned by such Optionee
(or by such Optionee and his or her spouse jointly) and acquired more than six
(6) months prior to such tender in full or partial satisfaction of such tax
obligations, based, in each case, on the Fair Market Value of the Stock on the
payment date as determined by the Committee.
21
10. Changes
in Capital. (a) The existence of the Plan and any Options granted
hereunder shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company or an
Affiliate, any issue of debt, preferred or prior preference stock ahead of or
affecting Stock, the authorization or issuance of additional shares of Stock,
the dissolution or liquidation of the Company or its Affiliates, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
(b)(i)
Upon changes in the outstanding Stock by reason of a stock dividend, stock
split, reverse stock split, subdivision, recapitalization, reclassification,
merger, consolidation (whether or not the Company is a surviving corporation),
combination or exchange of shares of Stock, separation, or reorganization, or in
the event of an extraordinary dividend, “spin-off,” liquidation, other
substantial distribution of assets of the Company or acquisition of property or
stock or other change in capital of the Company, or the issuance by the Company
of shares of its capital stock without receipt of full consideration therefor,
or rights or securities exercisable, convertible or exchangeable for shares of
such capital stock, or any similar change affecting the Company’s capital
structure, the aggregate number, class and kind of shares of stock available
under the Plan as to which Options may be granted, the Award Limit, and the
number, class and kind of shares under each outstanding Option and the exercise
price per share applicable to any such Options shall be appropriately adjusted
by the Committee in its discretion to preserve the benefits or potential
benefits intended to be made available under the Plan or with respect to any
outstanding Options or otherwise necessary to reflect any such
change.
(ii) Fractional
shares of Stock resulting from any adjustment in Options pursuant to Section
10(b)(i) shall be aggregated until, and eliminated at, the time of exercise of
the affected Options. Notice of any adjustment shall be given by the Committee
to each Optionee whose Option has been adjusted and such adjustment (whether or
not such Notice is given) shall be effective and binding for all purposes of the
Plan.
(c) In
the event of a Change in Control:
(i) Immediately
prior thereto, all outstanding Options shall be accelerated and become
immediately exercisable as to all of the shares of Stock covered thereby,
notwithstanding anything to the contrary in the Plan or the
Agreement.
(ii) In
its discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide, either by the terms of the Agreement applicable to any
Option or by resolution adopted prior to the occurrence of the Change in
Control, that any outstanding Option shall be adjusted by substituting for Stock
subject to such Option stock or other securities of the surviving corporation or
any successor corporation to the Company, or a parent or subsidiary thereof, or
that may be issuable by another corporation that is a party to the transaction
resulting in the Change in Control, whether or not such stock or other
securities are publicly traded, in which event the aggregate exercise price
shall remain the same and the amount of shares or other securities subject to
the Option shall be the amount of shares or other securities which could have
been purchased on the closing date or expiration date of such transaction with
the proceeds which would have been received by the Optionee if the Option had
been exercised in full (or with respect to a portion of such Option, as
determined by the Committee, in its discretion) prior to such transaction or
expiration date and the Optionee exchanged all of such shares in the
transaction.
(iii) In
its discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide, either by the terms of the Agreement applicable to any
Option or by resolution adopted prior to the occurrence of the Change in
Control, that any outstanding Option shall be converted into a right to receive
cash on or following the closing date or expiration date of the transaction
resulting in the Change in Control in an amount equal to the highest value of
the consideration to be received in connection with such transaction for one
share of Stock, or, if higher, the highest Fair Market Value of the Stock during
the thirty (30) consecutive business days immediately prior to the closing date
or expiration date of such transaction, less the per share exercise price of
such Option, multiplied by the number of shares of Stock subject to such Option,
or a portion thereof.
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(iv) The
Committee may, in its discretion, provide that an Option cannot be exercised
after such a Change in Control, to the extent that such Option is or becomes
fully exercisable on or before such Change in Control or is subject to any
acceleration, adjustment or conversion in accordance with the foregoing
paragraphs (i), (ii) or (iii) of this Section 10.
No
Optionee shall have any right to prevent the consummation of any of the
foregoing acts affecting the number of shares of Stock available to such
Optionee. Any actions or determinations of the Committee under this subsection
10(c) need not be uniform as to all outstanding Options, nor treat all Optionees
identically. Notwithstanding the foregoing adjustments, in no event may any
Option be exercised after ten (10) years from the date it was originally
granted, and any changes to ISOs pursuant to this Section 10 shall, unless the
Committee determines otherwise, only be effective to the extent such adjustments
or changes do not cause a “modification” (within the meaning of Section
424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such
ISOs.
(d) If,
as a result of a Change in Control transaction, an ISO fails to qualify as an
“incentive stock option,” within the meaning of Section 422 of the Code, either
because of the failure of the Optionee to meet the holding period requirements
of Code Section 422(a)(1) (a “Disqualifying Disposition”) or the exercisability
of such Option is accelerated pursuant to Section 10(c)(i), or any similar
provision of the applicable Agreement, in connection with such Change in Control
and such acceleration causes the aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Stock with respect to which such
Option, together with any other “incentive stock options,” as provided in
Section 6(h)(ii), are exercisable for the first time by such Optionee during the
calendar year in which such accelerated exercisability occurs to exceed the
limitations set forth in Section 6(h)(ii) (a “Disqualified Option”); or any
other exercise, payment, acceleration, adjustment or conversion of an Option in
connection with a Change in Control transaction results in any additional taxes
imposed on an Optionee, then the Company may, in the discretion of the
Committee, make a cash payment to or on behalf of the Optionee who holds any
such Option equal to the amount that will, after taking into account all taxes
imposed on the Disqualifying Disposition or other exercise, payment,
acceleration, adjustment or conversion of the Option, as the case may be, and
the receipt of such payment, leave such Optionee in the same after-tax position
the Optionee would have been in had the Code Section 422(a)(1) holding period
requirements been met at the time of the Disqualifying Disposition or had the
Disqualified Option continued to qualify as an “incentive stock option,” within
the meaning of Code Section 422 on the date of such exercise or otherwise
equalize the Optionee for any such taxes; provided, however, that the amount,
timing and recipients of any such payment or payments shall be subject to such
terms, conditions and limitations as the Committee shall, in its discretion,
determine. Without limiting the generality of the proviso contained in the
immediately preceding sentence, in determining the amount of any such payment or
payments referred to therein, the Committee may adopt such methods and
assumptions as it considers appropriate, and the Committee shall not be required
to examine or take into account the individual tax liability of any
Optionee.
11. Prohibition
on Repricing and Reload Grants. Other than in connection
with a change in the Company’s capitalization (e.g., stock splits,
recapitalizations, etc., as described in Section 10 of the Plan), without
stockholder approval (i) the exercise price of an Option may not be reduced,
(ii) no Option may be amended or cancelled for the purpose of repricing,
replacing or regranting such Option with an exercise price that is less than the
original exercise price of such Option, and (iii) the Committee shall not offer
to buy out an Option previously granted for cash or other
consideration.
12. Miscellaneous
Provisions. (a) The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares of Stock or the payment
of cash upon exercise or payment of any Option. Proceeds from the sale of shares
of Stock pursuant to Options granted under the Plan shall constitute general
funds of the Company.
23
(b) Except
as otherwise provided in this paragraph (b) of Section 12 or by the Committee,
an Option by its terms shall be personal and may not be sold, transferred,
pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise
than by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of an Optionee only by him or her. An Agreement may permit
the exercise or payment of an Optionee’s Option (or any portion thereof) after
his or her death by or to the beneficiary most recently named by such Optionee
in a written designation thereof filed with the Company, or, in lieu of any such
surviving beneficiary, as designated by the Optionee by will or by the laws of
descent and distribution. In the event any Option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased Optionee, or
such an Optionee’s beneficiary, or the transferee of an Option, in any such case
pursuant to the terms and conditions of the Plan and the applicable Agreement
and in accordance with such terms and conditions as may be specified from time
to time by the Committee, the Company shall be under no obligation to issue
Stock thereunder unless and until the Committee is satisfied that the person or
persons exercising such Option is the duly appointed legal representative of the
deceased Optionee’s estate or the proper legatee or distributee thereof or the
named beneficiary of such Optionee, or the valid transferee of such Option, as
applicable.
(c) (i)
If at any time the Committee shall determine, in its discretion, that the
listing, registration and/or qualification of shares of Stock upon any
securities exchange or under any state, Federal or foreign law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares of Stock
hereunder, no Option may be granted, exercised or paid in whole or in part
unless and until such listing, registration, qualification, consent and/or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
(ii) If
at any time counsel to the Company shall be of the opinion that any sale or
delivery of shares of Stock pursuant to an Option is or may be in the
circumstances unlawful or result in the imposition of excise taxes on the
Company or any Affiliate under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such sale
or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act, or otherwise with
respect to shares of Stock or Options and the right to exercise any Option shall
be suspended until, in the opinion of such counsel, such sale or delivery shall
be lawful or will not result in the imposition of excise taxes on the Company or
any Affiliate.
(iii) Upon
termination of any period of suspension under this Section 12(c), any Option
affected by such suspension which shall not then have expired or terminated
shall be reinstated as to all shares available before such suspension and as to
the shares which would otherwise have become available during the period of such
suspension, but no suspension shall extend the term of any Option.
(d) The
Committee may require each person receiving Stock in connection with any Option
under the Plan to represent and agree with the Company in writing that such
person is acquiring the shares of Stock for investment without a view to the
distribution thereof. The Committee, in its absolute discretion, may impose such
restrictions on the ownership and transferability of the shares of Stock
purchasable or otherwise receivable by any person under any Option as it deems
appropriate. Any such restrictions shall be set forth in the applicable
Agreement, and the certificates evidencing such shares may include any legend
that the Committee deems appropriate to reflect any such
restrictions.
(e) By
accepting any benefit under the Plan, each Optionee and each person claiming
under or through such Optionee shall be conclusively deemed to have indicated
their acceptance and ratification of, and consent to, all of the terms and
conditions of the Plan and any action taken under the Plan by the Committee, the
Company or the Board, in any case in accordance with the terms and conditions of
the Plan.
(f) In
the discretion of the Committee, an Optionee may elect irrevocably (at a time
and in a manner determined by the Committee) prior to exercising an Option that
delivery of shares of Stock upon such exercise shall be deferred until a future
date and/or the occurrence of a future event or events, specified in such
election. Upon the exercise of any such Option and until the delivery of any
deferred shares, the number of shares otherwise issuable to the Optionee shall
be credited to a memorandum account in the records of the Company or its
designee and any dividends or other distributions payable on such shares shall
be deemed reinvested in additional shares of Stock, in a manner determined by
the Committee, until all shares of Stock credited to such Optionee’s memorandum
account shall become issuable pursuant to the Optionee’s election.
24
(g) The
Committee may, in its discretion, extend one or more loans to Optionees who are
directors, key employees or consultants of the Company or an Affiliate in
connection with the exercise or receipt of an Option granted to any such
individual. The terms and conditions of any such loan shall be established by
the Committee.
(h) Except
with respect to Incentive Stock Options granted under the Predecessor Plan
(within the meaning of the Predecessor Plan) and outstanding on the Effective
Date, subject to approval of the Plan by the Company’s shareholders, in
accordance with Section 15, the provisions of the Plan shall apply to and govern
all stock options granted under the Predecessor Plan and, unless otherwise
determined by the Committee, such stock options granted under the Predecessor
Plan shall be deemed to be amended to provide any additional rights applicable
to Options hereunder, subject to the right of any affected participant in the
Predecessor Plan to refuse to consent to such amendment pursuant to the terms
and conditions of the Predecessor Plan and the applicable option or award
agreement between the Company and such participant.
(i) Neither
the adoption of the Plan nor anything contained herein shall affect any other
compensation or incentive plans or arrangements of the Company or any Affiliate
(other than the Predecessor Plan, as provided in paragraph (h) of this Section
12), or prevent or limit the right of the Company or any Affiliate to establish
any other forms of incentives or compensation for their directors, employees or
consultants or grant or assume options or other rights otherwise than under the
Plan.
(j) The
Plan shall be governed by and construed in accordance with the laws of the State
of New Jersey, without regard to such state’s conflict of law provisions, and,
in any event, except as superseded by applicable Federal law.
(k) The
words “Section,” “subsection” and “paragraph” herein shall refer to provisions
of the Plan, unless expressly indicated otherwise. Wherever any words are used
in the Plan or any Agreement in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases where they would
so apply, and wherever any words are used herein in the singular form they shall
be construed as though they were also used in the plural form in all cases where
they would so apply.
(l) The
Company shall bear all costs and expenses incurred in administering the Plan,
including expenses of issuing Stock pursuant to any Options granted
hereunder.
13. Limits
of Liability. (a) Any liability of the Company or an Affiliate to any
Optionee with respect to any Option shall be based solely upon contractual
obligations created by the Plan and the Agreement.
(b) None
of the Company, any Affiliate, any member of the Committee or the Board or any
other person participating in any determination of any question under the Plan,
or in the interpretation, administration or application of the Plan, shall have
any liability, in the absence of bad faith, to any party for any action taken or
not taken in connection with the Plan, except as may expressly be provided by
statute.
14. Limitations
Applicable to Certain Options Subject to Exchange Act Section 16 and Code
Section 162(m). Unless stated otherwise in the Agreement, notwithstanding
any other provision of the Plan, any Option granted to an officer or director of
the Company who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3, or any successor
rule, as the same may be amended from time to time) that are requirements for
the application of such exemptive rule, and the Plan and applicable Agreement
shall be deemed amended to the extent necessary to conform to such limitations.
Furthermore, unless stated otherwise in the Agreement, notwithstanding any other
provision of the Plan, any Option granted to an employee of the Company or an
Affiliate intended to qualify as “other performance-based compensation” as
described in Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code or any regulations or
rulings issued thereunder (including any amendment to any of the foregoing) that
are requirements for qualification as “other performance-based compensation” as
described in Section 162(m)(4)(C) of the Code, and the Plan and applicable
Agreement shall be deemed amended to the extent necessary to conform to such
requirements.
25
15. Amendments
and Termination. The Board may, at any time and with or without prior
notice, amend, alter, suspend or terminate the Plan, retroactively or otherwise;
provided, however, unless otherwise
required by law or specifically provided herein, no such amendment, alteration,
suspension or termination shall be made which would impair the previously
accrued rights of any holder of an Option theretofore granted without his or her
written consent, or which, without first obtaining approval of the stockholders
of the Company (where such approval is necessary to satisfy (i) any applicable
requirements under the Code relating to ISOs or for exemption from Section
162(m) of the Code; (ii) the then-applicable requirements of Rule 16b-3
promulgated under the Exchange Act, or any successor rule, as the same may be
amended from time to time; or (iii) any other applicable law, regulation or
rule), would:
(a)
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except
as is provided in Section 10, increase the maximum number of shares of
Stock which may be sold or awarded under the Plan or increase the
limitations set forth in Section 6(k) on the maximum of shares of Stock
that may be subject to Options granted to an
Optionee;
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(b)
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except
as is provided in Section 10, decrease the minimum option exercise price
requirements of Section 6(a);
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(c)
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change
the class of persons eligible to receive Options under the
Plan;
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(d)
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extend
the duration of the Plan or the period during which Options may be
exercised under Section 6(b); or
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(e)
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other
than in connection with a change in the Company’s capitalization (e.g.,
stock splits, recapitalizations, etc., as described in Section 10 of the
Plan), (i) reduce the exercise price of an Option, (ii) amend or cancel
any Option for the purpose of repricing, replacing or regranting such
Option with an exercise price that is less than the original exercise
price of such Option or (iii) permit the Committee to buy out an Option
previously granted for cash or other
consideration.
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The
Committee may amend the terms of any Option theretofore granted, including any
Agreement, retroactively or prospectively, but no such amendment shall
materially impair the previously accrued rights of any Optionee without his or
her written consent.
16. Duration.
Following the adoption of the Plan by the Board, the Plan shall become effective
as of the date on which it is approved by the holders of a majority of the
Company's outstanding Stock which is present and voted at a meeting, or by
written consent in lieu of a meeting (the “Effective Date”), which approval must
occur within the period ending twelve (12) months after the date the Plan is
adopted by the Board. The Plan shall terminate upon the earliest to occur
of:
(a)
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the
effective date of a resolution adopted by the Board terminating the
Plan;
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(b)
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the
date all shares of Stock subject to the Plan are delivered pursuant to the
Plan's provisions; or
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(c)
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ten
(10) years from the Effective Date.
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No Option
may be granted under the Plan after the earliest to occur of the events or dates
described in the foregoing paragraphs (a) through (c) of this Section 15; however, Options theretofore
granted may extend beyond such date.
No such
termination of the Plan shall affect the previously accrued rights of any
Optionee hereunder and all Options previously granted hereunder shall continue
in force and in operation after the termination of the Plan, except as they may
be otherwise terminated in accordance with the terms of the Plan or the
Agreement.
26
ANNUAL MEETING OF SHAREHOLDERS
OF
EMCORE
CORPORATION
April 30,
2009
NOTICE OF INTERNET AVAILABILITY OF
PROXY MATERIAL:
The
Notice of Meeting, proxy statement and proxy card
are
available at http://www.emcore.com/investor/2009_proxy.pdf
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
Please
detach along perforated line and mail in the envelope provided.
■ 10030303000000000000
1
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043009
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THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE “FOR” PROPOSALS 1 THROUGH 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE x
FOR | AGAINST | ABSTAIN | ||||||
1. Election of Directors: | NOMINEE: | 2. RATIFICATION OF DELOITTE & TOUCHE, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. | o |
o
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o
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o
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FOR
THE NOMINEE
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John
Gillen
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3.
TO APPROVE AN INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER
THE COMPANY'S 2000 EMPLOYEE STOCK PURCHASE PLAN.
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o
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o
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o
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4.
TO APPROVE AN INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER
THE COMPANY'S 2000 STOCK OPTION PLAN.
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o
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o
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o
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o
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WITHHOLD
AUTHORITY
FOR THE NOMINEE |
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5.
Upon such other business as may properly come before the Annual Meeting or
any adjournment thereof.
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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.
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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. | ||||||||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o | The undersigned hereby acknowledges receipt of (i) the Notice of Annual Meeting, (ii) the Proxy Statement, and (iii) the Company’s 2008 Annual Report to Shareholders. |
Signature of Shareholder |
Date
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Signature
of Shareholder
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Date
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Note: Please sign exactly as your name
or names appear on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving
full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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■
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EMCORE
CORPORATION
10420 Research Road,
SE
Albuquerque, New Mexico
87123
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The
undersigned hereby appoints Reuben F. Richards, Jr., Hong Q. Hou and John M.
Markovich, 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 2009 Annual
Meeting of Shareholders of the Company, to be held on April 30, 2009 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 THE DIRECTOR NOMINEE LISTED IN PROPOSAL (1),
"FOR"
THE RATIFICATION OF THE AUDITORS IN PROPOSAL (2), "FOR" AN INCREASE IN THE
NUMBER
OF SHARES RESERVED FOR ISSUANCE UNDER THE COMPANY'S 2000 EMPLOYEE STOCK
PURCHASE PLAN IN ACCORDANCE WITH PROPOSAL (3), AND "FOR" AN INCREASE IN
THE
NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE COMPANY'S 2000 STOCK
OPTION
PLAN IN ACCORDANCE WITH PROPOSAL (4).
(Continued and to be signed on the
reverse side)
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14475
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