|
|
 | | | |
- close
- close
- close
- close
EMCORE 10-K 2008 Documents found in this filing:UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION>
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No.1)
(Mark
One)
For
the fiscal year ended September
30, 2007
or
For
the transition period from ___ to
___
Commission
File Number 0-22175
 EMCORE Corporation (Exact
name of registrant as specified
in its charter)
Registrant’s
telephone number, including
area code: (505)
332-5000
Securities
registered pursuant to
Section 12(b) of the Act:
Title
of each class:
Common Stock,
No Par Value
Name
of each exchange on which
registered: NASDAQ
Securities
registered pursuant to
Section 12(g) of the
Act: None
Indicate
by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. ¨Yes xNo
Indicate
by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the
Act. ¨Yes xNo
Indicate
by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or
15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements
for the past 90
days. xYes o No
Indicate
by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part
III
of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate
by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Indicate
by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Act). ¨Yes xNo
The
aggregate market value of common
stock held by non-affiliates of the registrant as of March 30, 2007 (the last
business day of the registrant's most recently completed second fiscal quarter)
was approximately $203.8
million, based on the
closing sale price of $5.00 per share of common stock as reported on the NASDAQ
Global Market.
The
number of shares outstanding of the
registrant’s no par value common stock as of December 26, 2007 was
52,253,883.
EMCORE
Corporation
FORM
10-K/A
For
The Fiscal Year Ended September 30,
2007
TABLE
OF CONTENTS
Explanatory
Note
This
Amendment No. 1 on Form 10-K/A
(this “Amendment”) amends our Annual Report on Form 10-K for the fiscal year
ended September 30, 2007, that was filed with the Securities and Exchange
Commission (“SEC”) on December 31, 2007 (the “Original Filing”). We
are filing this
Amendment to include the
information required by Part III and not included in the Original Filing, as
we
will not file our definitive proxy statement within 120 days of the end of
our
fiscal year ended September 30, 2007.
Except
as set forth in Part III below,
no other changes are made to the Original Filing. Unless expressly
stated, this Amendment does not reflect events occurring after the filing of
the Original Filing, nor does it
modify or update in any way the disclosures contained in the Original
Filing. Throughout
this report, references to the
“Company,” “we,” “our,” or “us” refer to EMCORE Corporation and its consolidated
subsidiaries, taken as a whole, unless the context otherwise
indicates.
PART
III
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 A directors, Messrs. Russell, Richards and Bogomolny, are being proposed
for a three-year term (expiring in 2011) at our 2008 Annual Meeting of
Shareholders.
The
following table sets forth certain information regarding the members of and
nominees for the Board of Directors:
DIRECTORS
AND EXECUTIVE OFFICERS
Set
forth
below is certain information with respect to each of the nominees for the office
of director and other directors and executive officers of EMCORE.
THOMAS
J.
RUSSELL, Ph.D., 76, has been a director of the Company since May 1995 and was
elected Chairman of the Board on December 6, 1996. Dr. Russell founded
Bio/Dynamics, Inc. in 1961 and managed the company until its acquisition by
IMS
International in 1973, following which he served as President of that company’s
Life Sciences Division. From 1984 until 1988, he served as Director, then as
Chairman of IMS International until its acquisition by Dun & Bradstreet in
1988. From 1988 to 1992, he served as Chairman of Applied Biosciences, Inc.,
and
was a Director until 1996. In 1990, Dr. Russell was appointed as a Director
of
Saatchi & Saatchi plc (now Cordiant plc), and served on that board until
1997. He served as a Director of Adidas-Salomon AG from 1994 to 2001. He also
served on the board of LD COM Networks until 2004. He holds a Ph.D. in
physiology and biochemistry from Rutgers University.
REUBEN
F.
RICHARDS, JR., 52, joined the Company in October 1995 and became Chief Executive
Officer in December 1996. Mr. Richards has been a director of the Company since
May 1995. 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 currently serves as a Director of Worldwater & Solar Technologies
Corp.
HONG
Q.
HOU, Ph.D., 43, has served as a director of the Company since December 2006.
Dr.
Hou joined the Company in 1998 and became President and Chief Operating Officer
of the Company in December 2006. Dr. Hou co-started the Company’s Photovoltaics
division, and subsequently managed the Company’s Digital Fiber Optic Products
division. In 2005 and 2006, Dr. Hou was responsible for managing the Company’s
Broadband Fiber Optics division. From 1995 to 1998, Dr. Hou was a Principal
Member of Technical Staff at Sandia National Laboratories, a Department of
Energy weapon research lab managed by Lockheed Martin. He was a Member of
Technical Staff at AT&T Bell Laboratories from 1993 to 1995, where he
engaged in research on high-speed optoelectronic devices. Dr.
Hou
currently serves as a Director of Worldwater & Solar Technologies
Corp. He holds a Ph.D. in Electrical Engineering from the University of
California at San Diego.
CHARLES
SCOTT, 58, has served as a director of the Company since February 1998. Since
January 1, 2004, he has served as Chairman of the Board of Directors of William
Hill plc, a leading provider of bookmaking services in the United Kingdom.
Prior
to that, Mr. Scott served as Chairman of a number of companies, including
Cordiant Communications Group plc, Saatchi & Saatchi Company plc, and Robert
Walters plc.
JOHN
GILLEN, 66, 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.
ROBERT
BOGOMOLNY, 69, 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.
THOMAS
G.
WERTHAN, 51, served as the Company’s Chief Financial Officer from June 1992 to
February 2007 and has been a member of the Board of Directors since 1992. He
is
currently Chief Financial Officer of EPV SOLAR, Inc., a private company. Prior
to joining the Company, he was associated with The Russell Group, a venture
capital partnership, as Chief Financial Officer for several portfolio companies.
The Russell Group was affiliated with Thomas J. Russell, Chairman of the Board
of Directors of the Company. From 1985 to 1989, Mr. Werthan served as
Chief Operating Officer and Chief Financial Officer for Audio Visual Labs,
Inc.,
a manufacturer of multimedia and computer graphics equipment.
Non-Director
Executive Officers
ADAM
GUSHARD, 37, joined the Company in December 1997 and has served as Interim
Chief
Financial Officer since February 2007. Previously, Mr. Gushard served as Vice
President of Finance and has extensive experience with the Company's financial
operations, controls, and corporate strategy, having served as an assistant
controller, controller and corporate controller at the Company. Prior to joining
the Company, Mr. Gushard was a certified public accountant with the public
accounting firm, Coopers & Lybrand LLP (now PriceWaterhouseCoopers LLP). Mr.
Gushard has a Bachelor of Science degree in Finance from Pennsylvania State
University.
KEITH
J.
KOSCO, ESQ., 55, 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 technology 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., 42, joined the
Company in January 2003 through
the acquisition of Ortel 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.
As
previously reported in our Form 8-K filed with the SEC on December 20, 2006,
Mr.
Richards will continue to serve as the Company’s Chief Executive Officer until
the Company’s 2008 Annual Meeting, at which time he will become Executive
Chairman and Chairman of the Board of Directors and Dr. Russell, the current
Chairman, will become Chairman Emeritus and Lead Director. At that
time, Dr. Hou will succeed Mr. Richards as the Company’s Chief Executive
Officer.
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 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 2007,
with the exception of December 27, 2006 filings
for Dr. Hou on Form 3 and Form 4
(reporting an employee stock option grant), both of which were reported 13
days
late and one filing
on
July 16, 2007 for Dr.
Iannelli on Form 3, which was reported 21 days late due to an administrative
error.
CODE
OF
ETHICS
We
have adopted a code of ethics
entitled the “EMCORE Corporation Code of Business Conduct and Ethics,” which is
applicable to all employees, officers, and directors of EMCORE. The
full text of our Code of Business Conduct and Ethics is included with the
Corporate Governance information available on our website (www.emcore.com).
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, Gillen, and
Bogomolny. Each member of the audit committee is currently an independent
director within the meaning of NASD Rule 4200(a)(15). The Board of Directors
has
determined that Messrs. Scott and Gillen are each audit committee financial
experts.
ITEM
11.
Executive
Compensation
COMPENSATION
OF DIRECTORS
The
Board
of Directors held 10 regularly scheduled and special telephonic meetings during
fiscal 2007, and took other certain actions by unanimous written consent. During
fiscal 2007, all directors of the Company, except for Mr. Louis-Dreyfus,
attended at least 75% of the aggregate meetings of the Board and committees
on
which they served, during their tenure on the Board.
Director
Compensation
___________________
Pursuant
to the Company’s Directors’ Stock Award Plan adopted by the shareholders in
March 1997 (the “1997 Stock Award Plan”), the Company has paid non-employee
directors a fee in the amount of $3,000 per Board meeting attended ($3,600
for
the Chairman of the Board) and $500 per committee meeting attended ($600 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 1997 Stock Award
Plan
has historically been made in common stock of the Company at the closing price
on the NASDAQ National Market for the day prior to the meeting. In accordance
with the terms of the new Directors’ Stock Award Plan adopted by the
shareholders at the Company’s 2007 annual meeting (the “2007 Stock Award Plan”),
payment of fees will be made in common stock of the Company payable in one
issuance annually based on the closing price on the NASDAQ National Market
for
the date of issuance. The 1997 Stock Award Plan expired in March 2007
and the 2007 Stock Award Plan became effective as of January 1,
2008.
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.
No
director who is an employee of the Company receives compensation for services
rendered as a director under the Outside Directors Cash Compensation Plan,
the
1997 Stock Award Plan or the 2007 Stock Award Plan.
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 2007. 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 and operational 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/or 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. During fiscal 2007,
however, this compensation review and discussion was postponed due to the
Company’s then ongoing voluntary review of its historical stock option grant
procedures, and was performed in June 2007.
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 2007, the peer group consisted of the following
companies:
•ANADIGICS,
Inc.
•ATMI,
Inc.
•TriQuint
Semiconductor, Inc.
•Kopin
Corporation
•Cree,
Inc.
•Veeco
Instruments, Inc.
•Vitesse
Semiconductor Corporation
In
addition to the use of market surveys and proxy statements, the Compensation
Committee intends to retain a compensation consultant in the future 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
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 Chief
Executive Officer, reviews the performance of the Chief Operating Officer and
the other executive officers and recommends salary increases for these
individuals to the Compensation Committee. In turn, the Compensation
Committee reviews, adjusts, where appropriate, and approves the salary increases
for these executive officers. In executive session, the Compensation
Committee reviews any salary increase for the Chief Executive
Officer. On
June
11, 2007, the Compensation Committee approved a base salary increase of 4%,
to
$414,416, retroactively effective as of January 1, 2007, for Mr.
Richards. At this time, the Compensation Committee did not increase
the base salaries of any of the other Named Executive Officers because, in
the
case of Messrs. Werthan, Brodie and Stall, they had left or were about to leave
the employment of the Company and in the case of Messrs. Hou, Gushard, Kosco
and
Iannelli, they had received the following base salary increases when they were
promoted as executive officers:
Each
of
these base salary increases was based on market surveys and other data and
each
was intended to maintain the Company’s competitive position among similar
companies with which it competes for executive talent.
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 2007 Executive Bonus Plan (the “2007 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
2007. 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 surveys. The following bonus targets
were set under the 2007 Bonus Plan:
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 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 Chief Executive Officer and the Compensation
Committee. The multiplier ranges from 0% to 140% of the executive’s
target bonus. The Compensation Committee reviews the Chief
Executive’s individual performance. The Chief Operating Officer’s and
other executive officers’ individual performance is reviewed by the Chief
Executive Officer and approved by the Compensation Committee. The
Compensation Committee and the Chief Executive Officer retain 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 2007, as presented to the Compensation Committee, were
approximately $170 million and ($0.5) million, respectively, and
revenue and adjusted EBITDA for fiscal 2007, as presented to the Compensation
Committee were approximately $170 million and ($2.4) 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 2007, adjusted EBITDA was calculated by adding back interest,
taxes, depreciation and amortization to net loss while also excluding non-cash
stock-based compensation expense and one-time non recurring charges related
to
the Company’s review of its historical stock option granting practices and
certain legal, bad debt, inventory, severance and restructuring
charges. The Compensation Committee reviewed and approved the fiscal
2007 financial performance metrics calculations in November 2007. When
making its compensation decisions, the Compensation Committee also considered
the fact that the Company had met its revenue target and that two of its three
divisions had also met or exceeded their adjusted EBITDA thresholds.
In addition to the Company’s financial performance, the Compensation
Committee also considered the efforts of the Named Executive Officers in
assisting the Company in becoming current with its filing requirements under
the
Securities Exchange Act, the development of corporate growth for the fiber
segment and the development of additional revenue for the solar
segment. Based on these factors, the Compensation Committee approved
cash incentive awards for the following Named Executive Officers equal to 98%
of
their respective targets.
These
awards are also set forth in the Summary Compensation Table under the heading
“Non-Equity Incentive Plan Compensation.”
_____________________
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 grants generally vest over a four year period unless otherwise determined
by the Compensation Committee. 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 does not issue a targeted
number of stock options, but rather reviews the executive’s performance and the
performance of the Company in the prior fiscal year as well as market surveys
to
determine the appropriate value of the award at the time it is
granted. The ultimate value of the award depends in large part on the
future performance of our common stock. For this reason we do not
consider the value of past equity awards when determining current
compensation. Due to the Company’s voluntary review of its historical
stock option grant procedures, no option grants were made in fiscal year 2007
other than grants in connection with new hires or the promotion of an
employee. In
December 2006, in connection with his appointment as President and Chief
Operating Officer, the Compensation Committee approved for Dr. Hou a grant
of
options to purchase 245,000 shares of our common stock with all options vesting
on the grant date. In addition, the Compensation Committee approved
for Dr. Hou an additional grant of options to purchase 255,000 shares of our
common stock, which was made on September 25, 2007. 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
February 2007, in connection with his appointment as Interim Chief Financial
Officer, the Compensation Committee approved for Mr. Gushard a grant of options
to purchase 100,000 shares of our common stock. Of this grant, 50,000
stock options vested on the grant date and the other 50,000 will vest in equal
installments over a four year period beginning on the first anniversary of
the
grant date.
In
April
2007, in connection with his appointment as Chief Legal Officer, the
Compensation Committee approved for Mr. Kosco a grant of options to purchase
50,000 shares of our common stock. Similarly, in June 2007, in
connection with his appointment as Chief Technology Officer, the Compensation
Committee approved for Dr. Iannelli a grant of options to purchase 75,000 shares
of our common stock. Each of these grants has a vesting schedule of
four years with the first installment of options vesting on the one-year
anniversary of the respective grant date and equal amounts vesting on each
subsequent anniversary of the respective grant date.
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.
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.
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 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 1-15% 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 plan and this matching contribution vests
over an initial five year period. This matching contribution is in
the form of our common stock. Participants
are able to exchange out of our common stock to other investment options within
the 401(k) Plan. However, matching contributions continue to be
directed to our common stock. Exchanges from our common stock have
the effect of transferring both vested and non-vested contributions in our
common stock into other investments. Exchanges into our 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 2007 were
relocation and housing expenses. For more information regarding
perquisites provided to the Named Executive Officers in fiscal 2007 see the
footnotes to the “All Other Compensation” column of the Summary Compensation
Table.
EMCORE’s
Severance Policy and Severance Agreements
On
March
29, 2007, the Compensation Committee approved an Executive Severance Policy,
effective as of May 1, 2007 (the “Effective Date”). The Severance
Policy amended the fundamental terms of a severance policy adopted by the
Compensation Committee in 2004. Under the Severance Policy
participants in the policy at the Executive Vice President or higher level
will
receive (i) for those hired or promoted prior to the Effective Date, 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 the Effective Date,
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 or lower level will receive (i) for those hired or
promoted prior to the Effective Date, 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 the Effective Date, 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.
Messrs.
Brodie, Stall and Werthan each entered into a severance agreement with the
Company in connection with their departure during fiscal
2007. Payments and benefits provided to these individuals pursuant to
their respective severance agreement are described in the “Potential Payments
Upon Termination or Change in Control” section.
Compensation
of the Chief Executive Officer
The
Compensation Committee annually reviews the compensation of Mr. Richards 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. Richard’s compensation reflects his
greater policy- and decision-making authority and the higher level of
responsibility that he has with respect to the strategic direction of EMCORE
and
its financial and operating results.
After
considering EMCORE’s overall performance in fiscal 2006 and competitive
practices, the Compensation Committee recommended, and the Board of Directors
approved, a 4% increase in Mr. Richards’ base salary, to $414,416, effective
January 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 our revenue target and the growth of our fiber segment
and
the development of additional revenue for our solar segment, the Compensation
Committee awarded Mr. Richards $326,536 in the form of a cash incentive
award. 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 its
Chief Executive Officer and its four other most highly compensated executive
officers, unless that compensation qualifies as performance-based compensation.
While the Compensation Committee intends to structure performance-related awards
in a way that will preserve the maximum deductibility of compensation awards,
the Compensation Committee may from time to time approve awards that would
vest
upon the passage of time or other compensation, which would not result in
qualification of those awards as performance-based
compensation. 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, 2007 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, (ii) were the three most highly-compensated
officers (other than the chief executive officer and chief financial officer)
and (iv) two additional individuals for whom disclosure would have been provided
but for the fact that the individual was not serving as an executive officer
at
the end of the last completed fiscal year:
Summary
Compensation Table for Fiscal 2007
_________________
Grants
of Plan-Based Awards in Fiscal 2007
_____________________
Outstanding
Equity Awards at September
30, 2007
__________________
Option
Exercises in Fiscal 2007
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 in the policy at the Executive Vice President
or
higher 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 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 or lower 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, Gushard, Hou, Iannelli and Kosco 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
28,
2007, the last business day of our fiscal year ended September 30,
2007. 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.
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 $9.60 on September 28, 2007, and the option grant price, would be $463,500
for Mr. Richards, $476,206 for Mr. Gushard, $517,113 for Dr. Hou,
$549,565 for Dr. Iannelli and $349,300 for Mr. Kosco.
Severance
Agreements with Messrs. Werthan, Brodie and Stall
On
February 8, 2007, the Company entered into a severance agreement with Mr.
Werthan specifying his severance benefits. In accordance with the
Company’s Severance Policy adopted in 2004 (the “Severance Policy”), under the
terms of the severance agreement the Company paid Mr. Werthan $387,040
(equal to 82 weeks of his salary), less applicable tax withholdings and
deductions, in a lump-sum payment on September 14,
2007. Additionally, Mr. Werthan elected to continue coverage
under the Company’s health plans pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), and $7,235 was deducted from
Mr. Werthan’s lump sum severance payment, which represents the amount of
Mr. Werthan’s portion of the COBRA premiums. In connection with Mr.
Werthan’s resignation in February 2007 and pursuant to the terms of the
promissory note, the Board of Directors forgave his $82,000 loan with the
Company. Mr. Werthan was responsible for the personal taxes related
to the loan forgiveness.
On
April
17, 2007, the Company entered into a severance agreement with Mr.
Brodie. In accordance with the Severance Policy, under the terms of
the severance agreement, the Company paid Mr. Brodie $313,939 (equal to 68
weeks of his salary plus automobile expenses), less applicable tax withholdings
and deductions, in a lump-sum payment on November 1,
2007. Additionally, Mr. Brodie elected to continue coverage
under the Company’s health plans pursuant to COBRA and $6,431 was deducted from
Mr. Brodie’s lump sum severance payment, which represents the amount of Mr.
Brodie’s portion of the COBRA premiums. The Company also paid Mr.
Brodie $55,341, less applicable withholdings and deductions, representing the
amount earned by Mr. Brodie under the Company’s 2006 Executive Bonus
Plan.
On
June
25, 2007, the Company entered into a severance agreement with Dr.
Stall. In accordance with the Company’s Severance Policy, under the
terms of the severance agreement, the Company paid Dr. Stall $470,400
(equal to 98 weeks of his salary), less applicable tax withholdings and
deductions, in a lump-sum payment on January 2,
2008. Additionally, Dr. Stall elected to continue coverage under
the Company’s health plans pursuant to COBRA and $7,235 was deducted from Dr.
Stall’s lump sum severance payment, which represents the amount of Dr. Stall’s
portion of the COBRA premiums. 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
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 2007 Annual Report on Form 10-K and
its 2008 Proxy Statement in accordance with Item 407(e) of Regulation
S-K.
This
report is submitted by the Compensation Committee.
January
28, 2008
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 2007 or was formerly an
officer 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 2007. 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 2007.
ITEM
12.
Security
Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
SECURITY
OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth as of
January 15, 2008 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 January 15, 2008. Unless otherwise indicated, the
address of each of the beneficial owners is c/o EMCORE Corporation, 10420 Research Road,
SE, Albuquerque,
New
Mexico 87123.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth, as of September 30, 2007, 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:
ITEM
13.
Certain Relationships, Related Transactions and Director Independence
TRANSACTIONS
WITH RELATED PERSONS
The
Board
of Directors has adopted a written policy on the review and approval of related
person transactions. 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
Compensation Committee is responsible 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. In
connection with the shareholder derivative litigation and the internal review
of
the Company’s historical stock options granting practices disclosed in Item III,
Legal Proceedings, of the Original Filing, Thomas Werthan retained counsel
from
the law firm of Katten Muchin Rosenman LLP (“Katten
Muchin”). Pursuant to the Company’s Restated Certificate of
Incorporation, the Company has indemnified Mr. Werthan for all expenses incurred
in connection with the derivative suit, including legal expenses payable to
Katten Muchin. Mr. Werthan’s brother, Jeffrey M. Werthan, a partner
at Katten Muchin, is the billing partner responsible for Mr. Werthan’s
representation, but has not performed any work related to the
matters. During fiscal 2007, the aggregate cost of such
representation paid to Katten Muchin was approximately $370,000.
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 served as
a
director during fiscal 2007, but resigned his seat on the Board of Directors
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 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,
Bogomolny and Scott. Messrs. Scott, 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. ITEM
14.
Principal Accountant Fees and Services
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, 2007. 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, 2008. 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 2008 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 2008 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
2007
& 2006 AUDITOR FEES AND SERVICES
Deloitte
& Touche LLP was the independent registered public accounting firm that
audited EMCORE’s financial statements for fiscal 2007 and 2006. There
were no non-audit services performed by Deloitte & Touche LLP during these
periods.
The
aggregate fees billed by Deloitte & Touche LLP in connection with audit
services rendered for fiscal 2007 and 2006 are as follows:
_____________________
PART
IV
ITEM
15.
Exhibits and Financial
Statement Schedules.
(a)(3) Exhibits
__________
*
Filed
with the Form
10-K filed on December 31, 2007
**
Filed
herewith
†
Management
contract
or compensatory plan SIGNATURES
Pursuant
to the requirements of Section
13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has
duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||