UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A
(Rule
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.
)
Filed by
the Registrant
x
Filed by a
Party other than the Registrant
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))
x
Definitive Proxy
Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to SS.240.14a-11(c) or SS.240.14a-12
CLEARFIELD,
INC.
(Name of Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of
Filing Fee (Check the appropriate box):
x
No 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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value of transaction:
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o
Fee paid
previously with preliminary materials:
o
Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the form or
Schedule
and the date of its filing.
1) Amount previously
paid:
2) Form, Schedule or
Registration Statement No.:
3) Filing Party:
4) Date Filed:
Clearfield,
Inc.
5480
Nathan Lane, Suite 120
Plymouth,
Minnesota 55442
(763)
476-6866
____________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held February 25, 2010
____________________
TO
THE SHAREHOLDERS OF
CLEARFIELD,
INC.:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders of Clearfield, Inc., a
Minnesota corporation, will be held on Thursday, February 25, 2010, at
2:00 p.m. (local time), at Hilton Garden Inn Minneapolis – Maple Grove,
6530 Vinewood Lane North, Maple Grove, Minnesota 55311, for the following
purposes:
1.
|
To
elect six (6) directors to serve until the next Annual Meeting of the
Shareholders or until their respective successors have been elected and
qualified.
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2.
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To
adopt the Clearfield, Inc. 2010 Employee Stock Purchase
Plan.
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3.
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To
ratify and approve the appointment of Grant Thornton LLP as the
independent registered public accounting firm for Clearfield, Inc. for the
fiscal year ending September 30,
2010.
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Only
holders of record of Clearfield, Inc.’s common stock at the close of business on
January 12, 2010 are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
Each of
you is invited to attend the Annual Meeting in person. Whether or not
you plan to attend in person, please mark, date and sign the enclosed proxy, and
mail it promptly. A return envelope is enclosed for your
convenience.
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By
Order of the Board of Directors
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Ronald
G. Roth
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Chairman
of the Board of Directors
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January
25, 2010
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WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE
SIGN THE PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
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IMPORTANT
NOTICE REGARDING AVAILABILITY
OF
PROXY MATERIALS FOR THE
2010
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON THURSDAY, FEBRUARY 25, 2010
Under new
rules promulgated by the Securities and Exchange Commission, Clearfield, Inc. is
providing access to its proxy materials both by sending you this full set of
proxy materials and by notifying you of the availability of its proxy materials
on the Internet.
You may
access the following proxy materials as of the date they are first mailed to our
shareholders at
http://materials.proxyvote.com/18482P
:
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—
Notice of 2010 Annual Meeting of Shareholders to be held on Thursday,
February 25, 2010;
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—
Proxy Statement for 2010 Annual Meeting of Shareholders to be held on
Thursday, February 25, 2010; and
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—
Annual Report on Form 10-K for the fiscal year ended September 30,
2009.
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These
proxy materials are available free of charge and will remain available through
the conclusion of the Annual Meeting. Additionally, we will not
collect information, such as “cookies,” that would allow us to identify visitors
to the site.
TABLE
OF CONTENTS
Page
PROXY
STATEMENT
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1
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Solicitation
of Proxies
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1
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Cost
and Method of Solicitation
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1
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Voting
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1
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Quorum
and Voting Requirements
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1
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Revoking
a Proxy
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2
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Annual
Meeting and Special Meetings; Bylaw Amendments
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3
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OWNERSHIP
OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT
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4
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PROPOSAL
1: ELECTION OF DIRECTORS
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5
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Information
Regarding Nominees
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5
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Voting
Required
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6
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CORPORATE
GOVERNANCE
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7
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Board
Independence
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7
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Committees
of the Board of Directors and Committee Independence
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7
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Director
Nominations
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8
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Board
Attendance at Board, Committee and Annual Shareholder
Meetings
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9
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Communications
With Directors
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10
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Code
of Ethics
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10
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REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
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11
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PROPOSAL
2: APPROVAL OF THE 2010 EMPLOYEE STOCK PURCHASE PLAN
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12
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Summary
of the 2010 Stock Purchase Plan
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12
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New
Plan Benefits
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15
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Registration
with Securities and Exchange Commission
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15
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Vote
Required
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15
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OTHER
INFORMATION REGARDING EQUITY COMPENSATION PLANS
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16
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EXECUTIVE
OFFICERS
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17
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EXECUTIVE
COMPENSATION
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17
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Explanation
of Compensation
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17
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Employment
Arrangements with Named Executive Officers and Post-Employment
Compensation
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20
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Summary
Compensation Table
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25
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Grants
of Plan-Based Awards in Fiscal Year 2009
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26
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Outstanding
Equity Awards At Fiscal Year-End
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26
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2009
Options Exercised and Stock Vested
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27
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DIRECTOR
COMPENSATION
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27
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CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
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28
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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29
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PROPOSAL
3: APPOINTMENT OF INDEPENDENT AUDITORS
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29
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RELATIONSHIP
WITH INDEPENDENT ACCOUNTANTS
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30
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Accountant
Fees and Services
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30
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Audit
Committee Pre-Approval Procedures
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30
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SHAREHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
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31
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OTHER
BUSINESS
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31
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Appendix
A: Clearfield, Inc. 2010 Employee Stock Purchase Plan
Clearfield,
Inc.
5480
Nathan Lane, Suite 120
Plymouth,
Minnesota 55442
(763)
476-6866
____________________
PROXY
STATEMENT
____________________
Solicitation
of Proxies
The
accompanying Proxy is solicited on behalf of the Board of Directors of
Clearfield, Inc. (“we” or “Clearfield”) for use at the Annual Meeting of
Shareholders to be held on February 25, 2010, at 2:00 p.m. (local time) at
Hilton Garden Inn Minneapolis – Maple Grove, 6530 Vinewood Lane North, Maple
Grove, Minnesota 55311, and at any postponements or adjournments thereof (the
“Meeting”). The mailing of this proxy statement to our shareholders
commenced on or about January 25, 2010.
Cost
and Method of Solicitation
This
solicitation of proxies to be voted at the Meeting is being made by our Board of
Directors. The cost of this solicitation of proxies will be borne by
us. In addition to solicitation by mail, our officers, directors and
employees may solicit proxies by telephone or in person. We may also
request banks and brokers to solicit their customers who have a beneficial
interest in our common stock registered in the names of nominees and will
reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Voting
The total
number of shares outstanding and entitled to vote at the Meeting as of January
12, 2010 consisted of 11,978,831 shares of common stock, $.01 par
value. Each share of common stock is entitled to one
vote. Only shareholders of record at the close of business on January
12, 2010 will be entitled to vote at the Meeting.
All
shareholders are cordially invited to attend the Meeting in
person. Whether or not you expect to attend the Meeting, please
complete, date, sign and return the enclosed proxy as promptly as possible (or
follow instructions to grant a proxy to vote by means of telephone or internet)
in order to ensure your representation at the Meeting. A return
envelope (which is postage prepaid if mailed in the United States) is enclosed
for that purpose. Even if you have given your proxy, you may still
vote in person if you attend the Meeting. Please note, however, that
if your shares are held of record by a broker, bank or other nominee and you
wish to vote at the Meeting, you must bring to the Meeting a letter from the
broker, bank or other nominee confirming your beneficial ownership of the
shares. Additionally, in order to vote at the Meeting, you must
obtain from the record holder a proxy issued in your name.
If you
sign and return the proxy card on time, the individuals named on the proxy card
will vote your shares as you have directed. If you just sign and
submit your proxy card without voting instructions, your shares will be voted
“FOR” each director nominee and “FOR” the other proposal.
Quorum
and Voting Requirements
A quorum,
consisting of a majority of the shares of common stock entitled to vote at the
Meeting, must be present, in person or by proxy, before action may be taken at
the Meeting.
Directors
are elected by a plurality of the votes cast at the meeting by holders of common
stock voting for the election of directors. This means that since
shareholders will be electing six directors, the six nominees receiving the
highest number of votes will be elected.
The
affirmative vote of a majority of the shares of our common stock present in
person or by proxy and entitled to vote at the annual meeting is required for
the approval of the Clearfield, Inc. 2010 Employee Stock Purchase Plan and to
ratify the appointment of Grant Thornton LLP as Clearfield’s independent
registered public accounting firm for fiscal year 2010.
You may
either vote “FOR” or “WITHHOLD” authority to vote for each nominee for the Board
of Directors. You may vote “FOR,” “AGAINST” or “ABSTAIN” on any other
proposal. If you withhold authority to vote for the election of one
of the directors, it has the same effect as a vote against that
director. Abstentions are counted as present and entitled to vote for
the purposes of determining a quorum, but are not counted for the purposes of
determining whether shareholders have approved that
matter. Therefore, if you abstain from voting on any of the other
proposals, it has the same effect as a vote against the proposal.
If you
hold your shares in street name and do not provide voting instructions to your
broker, your shares will not be voted on any proposal on which your broker does
not have discretionary authority to vote (a broker non-vote). Shares
held by brokers who do not have discretionary authority to vote on a particular
matter and who have not received voting instructions from their customers are
not counted or deemed to be present or represented for the purpose of
determining whether shareholders have approved that matter, but they are counted
as present for the purpose of determining a quorum at the Meeting.
So far as
our management is aware, no matters other than those described in this proxy
statement will be acted upon at the Meeting. In the event that any
other matters properly come before the Meeting calling for a vote of
shareholders, the persons named as proxies in the enclosed form of proxy will
vote in accordance with their best judgment on such other matters.
Revoking
a Proxy
You may
change your vote and revoke your proxy at any time before it is voted
by:
§
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Sending
a written statement to that effect to the Secretary of Clearfield,
Inc.;
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§
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Submitting
a properly signed proxy card with a later
date;
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§
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if
you voted by telephone or through the Internet, by voting again either by
telephone or through the Internet prior to the close of the voting
facility; or
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§
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Voting
in person at the
Meeting.
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All shares
represented by valid, unrevoked proxies will be voted at the Meeting and any
adjournment(s) or postponement(s) thereof. Our principal offices are
located at 5480 Nathan Lane, Suite 120, Plymouth, Minnesota 55442, and our
telephone number is (763) 476-6866.
Annual
Meeting and Special Meetings; Bylaw Amendments
This 2010
Annual Meeting of Shareholders is a regular meeting of our shareholders and has
been called by our Board of Directors in accordance with our
bylaws. Under our bylaws, special meetings of our shareholders may be
held at any time and for any purpose and may be called by our Chief Executive
Officer, Chief Financial Officer, any two directors or by a shareholder or
shareholders holding 10% or more of shares entitled to vote, except that a
special meeting for the purpose of considering any action to directly or
indirectly facilitate or affect a business combination, including any action to
change or otherwise affect the composition of the Board of Directors for that
purpose, must be called by 25% or more of the shares entitled to
vote. The business transacted at a special meeting is limited to the
purposes as stated in the notice of the meeting. For business to be
properly brought before a regular meeting of shareholders, a written notice
containing the required information must be timely submitted. For
more information, please review our bylaws and the section of this proxy
statement entitled “Shareholder Proposals for 2011 Annual Meeting.”
Our bylaws
may be amended or altered by an action of the Board of Directors at any
meeting. The authority of the Board is subject to the power of our
shareholders, exercisable in the manner provided by Minnesota law, to adopt or
amend, repeal bylaws adopted, amended, or repealed by the
Board. Additionally, the Board may not make or alter any bylaws
fixing a quorum for meetings of shareholders, prescribing procedures for
removing directors or filling vacancies in the Board of Directors, or fixing the
number of directors or their classifications, qualifications, or terms of
office, except that the Board may adopt or amend any bylaw to increase the
number of directors.
OWNERSHIP OF VOTING SECURITIES BY
PRINCIPAL HOLDERS AND MANAGEMENT
The
following table sets forth certain information as of January 12, 2010 with
respect to our common stock beneficially owned by (i) each director and each
nominee for director, (ii) each person known to us to beneficially own more than
five percent of our common stock, (iii) each executive officer named in the
Summary Compensation Table (the “Named Executive Officers”), and (iv) all
current executive officers and directors as a group. Unless otherwise
indicated, all beneficial owners have sole voting and investment power over the
shares held. Except as indicated below, the business address of each individual
set forth below is 5480 Nathan Lane, Suite 120, Plymouth, Minnesota
55442.
Name and Address of Beneficial
Owner
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Number
of Shares
Beneficially Owned (1)
|
Percent of Outstanding
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Anil
K. Jain (2)
9
West Bay Lane
North
Oaks, MN
55127
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935,782
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7.8%
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Herman
H. Lee (3)
20152
Highway 9 North
P.O.
Box 37
Borup,
MN
56519
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822,650
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6.9%
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Ronald
G. Roth
(4)(5)
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955,750
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8.0%
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Cheryl
P. Beranek
(4)(6)
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198,400
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1.6%
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Charles
N. Hayssen
(4)
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37,500
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*
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Donald
R. Hayward
(4)
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21,200
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*
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John
G. Reddan
(4)
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39,000
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*
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Stephen
L. Zuckerman, M.D.
(4)
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37,000
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*
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John
P. Hill
(6)
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67,660
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*
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Bruce
G. Blackey
(6)
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16,700
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*
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All
current executive officers and directors
as a
group (8
persons)
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1,373,200
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11.2%
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* Less
than one percent
(1)
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Includes
shares which could be purchased within 60 days of January 12, 2010 upon
the exercise of the following stock options: Mr. Roth, 30,000 shares;
Ms. Beranek, 133,400 shares; Mr. Hayssen, 7,500 shares; Mr. Hayward,
15,000 shares; Mr. Reddan, 30,000 shares; Dr. Zuckerman, 30,000 shares;
Mr. Hill, 57,660 shares; Mr. Blackey, 13,200 shares; and all current
directors and executive officers as a group, 316,760
shares.
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(2)
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Based
on information provided by the shareholder to Clearfield on December 2,
2009.
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(3)
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Based
on Schedule 13G filed by the shareholder on December 16, 2009 in which the
shareholder reports that as of December 15, 2009, he has sole voting and
dispositive power over 317,650 shares of our common stock and shared
voting and dispositive power over 505,000 shares of our common
stock. Of the 505,000 shares of common stock, the shareholder
reports that 5,000 shares are held by his spouse and 500,000 shares are
held in grantor retained annuity trusts of which the shareholder acts as
trustee.
|
(4)
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Currently
serves as our director and nominated for election as a director at the
Meeting.
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(5)
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Includes
156,760 shares owned by Mr. Roth’s
spouse.
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(6)
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Named
Executive Officer.
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PROPOSAL
1:
ELECTION
OF DIRECTORS
Six
directors will be elected at the Meeting to serve until the next Annual Meeting
of Shareholders or until their successors have been elected and shall
qualify. Pursuant to our bylaws, we have set the number of directors
at six. Proxies cannot be voted for a greater number of persons than
the number of nominees named. The Board of Directors has nominated
for election the six persons named below. Each nominee is currently a
director of Clearfield. All nominees were elected by the shareholders
at our 2009 Annual Meeting.
The
persons named in the accompanying proxy card intend to vote the proxies held by
them in favor of the nominees named below as directors, unless otherwise
directed. Should any nominee for director become unable to serve as a
director for any reason, the proxies have indicated they will vote for such
other nominee as the Board of Directors may propose. The Board of
Directors has no reason to believe that any candidate will be unable to serve if
elected and each has consented to being named a nominee.
Information
Regarding Nominees
Set forth
below is biographical and other information with respect to each
nominee:
Name and Age
|
Principal
Occupation and
Business Experience
|
Director
Since
|
|
|
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Cheryl
P. Beranek
Age
47
|
Ms.
Beranek has served as our President and Chief Executive Officer and as a
director since June 2007. From July 2003 to June 2007, Ms.
Beranek served as President of our former subsidiary, APA Cables and
Networks. Prior to joining us, Ms. Beranek was President of
Americable from 2002 until July 2003, when we acquired
Americable. She also served as the Chief Operating Officer of
Americable in 2001 and 2002. Previously, Ms. Beranek held a variety of
lead marketing positions with emerging high-growth technology companies,
Ms. Beranek holds a Bachelors of Science Degree from Southwest Minnesota
State University and a Masters of Science Degree from North Dakota State
University.
|
2007
|
|
|
|
Ronald
G. Roth
Age
64
|
Mr.
Roth is currently retired. Mr. Roth was Chairman of the Board
and Chief Executive Officer of Waste Systems Corp., a privately held waste
hauling and disposal company, for 25 years prior to its sale to a national
solid waste management company in 1995. From 1995 to 2001, he was Chairman
of the Board of Access Cash International L.L.C., a North American
provider of ATMs and related processing and financial services until its
sale. Since 1990 he has been an owner of, and has served in various
capacities, including Chairman of the Board and an officer, with Phillips
Recycling Systems. Mr. Roth holds a Bachelor of Arts in Marketing from
Michigan State University.
|
2002
|
|
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Charles
N. Hayssen
Age
58
|
Mr.
Hayssen is currently President of Safeway Driving School. From
August 2007 to September 2008 Mr. Hayssen was a private investor. From
August 2004 until August 2007, Mr. Hayssen was Chief Operating Officer of
AllOver Media, Inc., an out-of-home media company. From September 2002 to
April 2004, Mr. Hayssen was the Chief Financial Officer of ThinkEquity
Partners LLC, an equity capital markets firm. Mr. Hayssen holds a Bachelor
of Arts from Dartmouth and from the University of Chicago Graduate School
of Business a Master of Business Administration.
|
2008
|
Name and Age
|
Principal
Occupation and
Business Experience
|
Director
Since
|
|
|
|
Donald
R. Hayward
Age
52
|
Since
2006, Mr. Hayward has served as the President of Engel Diversified
Industries (EDI), a privately held manufacturing company. From 1997 until
joining EDI, Mr. Hayward was Director of Corporate Services at Minnesota
Technology, Inc. a publicly funded, private non-profit in support of
Minnesota’s technology community. Mr. Hayward holds a Bachelor of Science
in Business Administration and Economics from the University of
Wisconsin.
|
2007
|
|
|
|
John
G. Reddan
Age
78
|
Mr.
Reddan has been retired since 1991. Mr. Reddan’s professional
career spanned over thirty years as both a general and program manager
with Unisys. Mr. Reddan is an active volunteer. Mr. Reddan
holds a Bachelor of Arts from Grinnell College of Iowa
and a Bachelor of
Foreign Trade from the Thunderbird School of Global
Management.
|
2002
|
|
|
|
Stephen
L. Zuckerman, M.D.
Age
69
|
Dr.
Zuckerman has been practicing physician since 1969. Dr. Zuckerman has been
a member of the board of Micromedics Inc covering the periods 1986 to 1991
and February 2002 to present. Since 1985 he has served as president of M-T
Venture Capital Fund II, Inc. Since 2001 he has served as chairman of the
board of Minnesota Film Arts, an organization created thru the merger of
the University Film Society and the Oak Street Cinema, Minneapolis,
Minnesota (2000 to present). Dr. Zuckerman also served on our Board of
Directors from January 1986 through August 1991. Dr. Zuckerman has a
Bachelor of Science from Union College and a Medical Doctorate of Internal
Medicine from SUNY Downstate Medical Center of Brooklyn New York
.
|
2002
|
We know of
no arrangements or understandings between a director or nominee and any other
person pursuant to which he has been selected as a director or
nominee. There is no family relationship between any of the nominees,
our directors or our executive officers.
Voting
Required
Under
Minnesota law and our bylaws, directors are elected by a plurality of the votes
cast at the meeting by holders of common stock voting for the election of
directors. This means that since shareholders will be electing six
directors, the six nominees receiving the highest number of votes will be
elected.
THE BOARD
OF DIRECTORS RECOMMENDS
THAT
SHAREHOLDERS VOTE FOR
THE
ELECTION OF EACH NOMINEE
_________________________________
CORPORATE
GOVERNANCE
Board
Independence
The Board
of Directors undertook a review of director independence in December 2009 as to
all six directors then serving. As part of that process, the Board
reviewed all transactions and relationships between each director (or any member
of his immediate family) and Clearfield, our executive officers and our
auditors, and other matters bearing on the independence of
directors. As a result of this review, the Board of Directors
affirmatively determined that each of the directors, with the exception of Ms.
Beranek, are independent according to the “independence” definition of the
Nasdaq Marketplace Rules. Ms. Beranek is not independent under the
Nasdaq Marketplace Rules because she is employed by Clearfield and serves as our
executive officer.
Committees
of the Board of Directors and Committee Independence
The Board
of Directors has established a Compensation Committee, an Audit Committee and a
Nominating and Corporate Governance Committee. The composition and
function of these committees are set forth below.
Compensation
Committee.
The Compensation Committee operates under a written
charter that was amended and restated in August 2009. The
Compensation Committee reviews and approves the compensation and other terms of
employment of our Chief Executive Officer and other executive officers of our
company. Among its other duties, the Compensation Committee oversees
all significant aspects of our compensation plans and benefit programs,
including succession plans for executive officers. The Compensation
Committee annually reviews and approves corporate goals and objectives for the
compensation of the Chief Executive Officer and the other executive officers, as
well as the Board of Directors evaluation of the Chief Executive Officer
pursuant to the evaluation process established by the Nominating and Corporate
Governance Committee. The Compensation Committee also administers our
2007 Stock Compensation Plan.
The
charter of the Compensation Committee requires that this Committee consist of no
fewer than two Board members who satisfy the requirements of the Nasdaq Stock
Market, the “non-employee director” requirements of Section 16b-3 of the
Securities Exchange Act of 1934, and the “outside director” requirements of
Section 162(m) of the Internal Revenue Code. Each member of our
Compensation Committee meets these requirements. A copy of the
current charter of the Compensation Committee is available by following the link
to “Corporate Governance” in the “Investor Relations” section of our website at
www.clearfieldconnection.com
.
The
current members of the Compensation Committee are Ronald G. Roth (Chair), John
G. Reddan and Stephen L. Zuckerman, M.D. During fiscal year 2009, the
Compensation Committee met three times, including in executive session without
management present.
Nominating and Corporate Governance
Committee.
The Nominating and Corporate Governance Committee
operates under a written charter that was amended and restated in August
2009. The Nominating and Corporate Governance Committee is charged
with the responsibility of identifying, evaluating and approving qualified
candidates to serve as directors of our company, ensuring that our Board and
governance policies are appropriately structured, developing and recommending a
set of corporate governance guidelines, overseeing Board orientation, training
and evaluation, and establishing an evaluation process for the Chief Executive
Officer. The Nominating and Corporate Governance Committee also has
responsibility for overseeing our annual process of self-evaluation by members
of the committees and the Board of Directors as a whole.
The
charter of the Nominating and Corporate Governance Committee requires that this
Committee consist of no fewer than two Board members who satisfy the
“independence” requirements of the Nasdaq Stock Market. Each member
of our Nominating and Corporate Governance Committee meets these
requirements. A copy of the current charter of the Nominating and
Corporate Governance Committee is available by following the link to “Corporate
Governance” in the “Investor Relations” section of our website at
www.clearfieldconnection.com
. A
copy of our current Governance Guidelines is also available in the “Corporate
Governance” section of our website, found through the link to the “Investor
Relations” section. The current members of the Nominating and
Corporate Governance Committee are Donald R. Hayward (Chair), John G. Reddan and
Stephen L. Zuckerman, M.D. During fiscal year 2009, the Nominating
and Corporate Governance Committee met two times.
Audit
Committee.
The Audit Committee assists the Board by reviewing
the integrity of our financial reporting processes and controls; the
qualifications, independence and performance of the independent auditors; and
compliance by us with certain legal and regulatory requirements. The
Audit Committee has the sole authority to retain, compensate, oversee and
terminate the independent auditors. The Audit Committee reviews our
annual audited financial statements, quarterly financial statements and filings
with the Securities and Exchange Commission. The Audit Committee
reviews reports on various matters, including our critical accounting policies,
significant changes in our selection or application of accounting principles and
our internal control processes. The Audit Committee also pre-approves
all audit and non-audit services performed by the independent
auditor.
The Audit
Committee operates under a written charter that was amended and restated in
August 2009 and a copy of the current Audit Committee charter is available by
following the link to “Corporate Governance” in the “Investor Relations” section
of our website at
www.clearfieldconnection.com
. Our
Audit Committee presently consists of four directors: Charles N.
Hayssen (Chair), Donald R. Hayward, John G. Reddan and Stephen L. Zuckerman
M.D. During fiscal year 2009, the Audit Committee met six times,
including in executive session without management present.
The Board
of Directors has determined that all members of the Audit Committee are
“independent” directors under the rules of the Nasdaq Stock Market and the rules
of the Securities and Exchange Commission. Our Board of Directors has
reviewed the education, experience and other qualifications of each of the
members of its Audit Committee. After review, the Board of Directors
has determined that Mr. Hayssen meets the Securities and Exchange Commission
definition of an “audit committee financial expert.” The members of
the Audit Committee also meet the Nasdaq Stock Market requirements regarding the
financial sophistication and the financial literacy of members of the audit
committee. A report of the Audit Committee is set forth
below.
Director
Nominations
The
Nominating and Corporate Governance Committee will consider candidates for Board
membership suggested by its members, other Board members, as well as management
and shareholders. Shareholders who wish to recommend a prospective
nominee should follow the procedures set forth in Section 2.14 of our bylaws as
described in the section of this proxy statement entitled “Shareholder Proposals
for Nominees.” The Nominating and Corporate Governance Committee has
not adopted a formal policy for increasing or decreasing the size of the Board
of Directors. Our Governance Guidelines provides that the Board
should generally have between five and seven directors. The
Nominating and Corporate Governance Committee believes that a six person Board
of Directors is appropriate. At six directors, the Board of Directors
has a diversity of talent and experience to draw upon, is able to appropriately
staff the committees of the Board and engage the directors in Board and
committee service, all while maintaining efficient function and communication
among members. If appropriate, the Board may determine to increase or
decrease its size, including in order to accommodate the availability of an
outstanding candidate.
Criteria for Nomination to the
Board.
The Nominating and Corporate Governance Committee is
responsible for identifying, evaluating and approving qualified candidates for
nomination as directors. The Nominating and Corporate Governance
Committee has not adopted minimum qualifications that nominees must meet in
order for the Nominating and Corporate Governance Committee to recommend them to
the Board of Directors, as the Nominating and Corporate Governance Committee
believes that each nominee should be evaluated based on his or her merits as an
individual, taking into account the needs of Clearfield and the Board of
Directors. In November 2009, the Nominating and Corporate Governance
Committee determined that it would evaluate each prospective nominee against the
following standards and qualifications:
·
|
Background,
including demonstrated high personal and professional ethics and
integrity;
|
·
|
The
ability to exercise good business judgment and enhance the Board’s ability
to manage and direct the affairs and business of
Clearfield;
|
·
|
Commitment,
including the willingness to devote adequate time to the work of the Board
and its committees;
|
·
|
The
ability to represent the interests of all shareholders and not a
particular interest group;
|
·
|
The
skills needed by the Board, within the context of the existing composition
of the Board, including knowledge of our industry and business or
experience in business, finance, law, education, research or
government;
|
·
|
The
candidate’s qualification as “independent” under Nasdaq or other standards
and qualification to serve on Board committees;
and
|
·
|
Diversity,
in terms of knowledge, experience, skills, expertise, and other
demographics which contribute to the
Board
|
In
reviewing prospective nominees, the Nominating and Corporate Governance
Committee reviews the number of public-company boards on which a director
nominee serves to determine if the nominee will have the ability to devote
adequate time to the work of our Board and its committees. Our
Governance Guidelines provide that non-employee directors should serve on no
more than four boards of other publicly-held companies, subject to Board waiver
with respect to this guideline on a case-by-case basis.
The
Nominating and Corporate Governance Committee also considers such other relevant
factors as it deems appropriate. The Nominating and Corporate
Governance Committee will consider persons recommended by the shareholders using
the same standards used for other nominees.
Process for Identifying and
Evaluating Nominees.
The process for identifying and
evaluating nominees to the Board of Directors is initiated by identifying a
slate of candidates who meet the criteria for selection as a nominee and have
the specific qualities or skills being sought based on input from members of the
Board and, if the Nominating and Corporate Governance Committee deems
appropriate, a third-party search firm. The Nominating and Corporate
Governance Committee evaluates these candidates by reviewing the candidates’
biographical information and qualifications and checking the candidates’
references. One or more Nominating and Corporate Governance Committee
members may interview the prospective nominees in person or by
telephone. After completing the evaluation, the Nominating and
Corporate Governance Committee makes a recommendation to the full Board of the
nominees to be presented for the approval of the shareholders or for election to
fill a vacancy.
Board Nominees for the 2010 Annual
Meeting.
The nominees for the Meeting were selected by the
Nominating and Corporate Governance Committee in December 2009. All
nominees were elected by shareholders at our 2009 Annual Meeting. We
have not engaged a third-party search firm to assist us in identifying potential
director candidates, but the Nominating and Corporate Governance Committee may
choose to do so in the future.
Shareholder Proposals for
Nominees.
The Nominating and Corporate Governance Committee
will consider written proposals from shareholders for nominees for
director. Any such nominations should be submitted to the Nominating
and Corporate Governance Committee c/o the Secretary of Clearfield, Inc. and
should include the following information: (a) the name of the nominee and
all information relating to such nominee that is required to be disclosed
pursuant to Regulation 14A under the Securities Exchange Act of 1934
(including such person’s written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) the name and record
address of the shareholder making the nomination, and (c) the class and number
of shares of the corporation beneficially owned by the
shareholder. To be considered, the written notice must be submitted
in the time frame described in our bylaws and in the section of this proxy
statement entitled “Shareholder Proposals for 2011 Annual
Meeting.”
Board
Attendance at Board, Committee and Annual Shareholder Meetings
During
fiscal year 2009, the Board of Directors met six times. Each nominee
for director attended at least 75% of the meetings of the Board and committees
on which he or she served during fiscal year 2009. The Board of
Directors regularly meets in executive session without the presence of members
of management, including the Chief Executive Officer. We do not have
a formal policy on attendance at meetings of our
shareholders. However, we encourage all Board members to attend all
meetings, including the annual meeting of shareholders. All directors
then serving attended the 2009 Annual Meeting of Shareholders.
Communications
With Directors
Shareholders
may communicate with the board as a group, the chair of any committee of the
board of directors, or any individual director by sending an e-mail to
ir@clfd.net
or by
directing the communication in care of the Secretary of Clearfield, to the
address set forth on the front page of this proxy statement. Shareholders making
a communication in this manner will receive a confirmation of receipt of the
communication if the Secretary is provided with an address for that purpose and
the shareholder does not otherwise request that no confirmation be
sent.
All
communications that are not excluded for the reasons stated below will be
forwarded unaltered to the director(s) to which the communication is addressed
or to the other appropriate director(s). Communications received from
shareholders will be forwarded as part of the materials sent before the next
regularly scheduled board or committee meeting, although the board has
authorized the Secretary, in his or her discretion, to forward communications on
a more expedited basis if circumstances warrant.
The board
of directors has authorized the Secretary to exclude a communication on matters
that are unrelated to the duties and responsibilities of the board, such
as:
§
|
Product
inquiries, complaints or
suggestions
|
§
|
Resumes
and other forms of job
inquiries
|
§
|
Business
solicitations or
advertisements
|
In
addition, material that is unduly hostile, threatening, illegal or similarly
unsuitable will be excluded. Any excluded communication will be made
available to the board of directors upon request of any director.
If
shareholders have a communication that is a proposal for a nominee for director
or is a proposal for shareholder action to be included in our proxy statement,
the communication must be directed to Secretary and must conform to the
requirements of Clearfield’s bylaws. For more information, please For
more information, please review our bylaws and the sections of this proxy
statement entitled “Director Nominations – Shareholder Proposals for Nominees”
and “Shareholder Proposals for 2011 Annual Meeting.”
Code
of Ethics
We have
adopted a code of ethics that applies to all directors, officers and employees,
including our principal executive officer, principal financial officer and
controller. This code of ethics is included in our Code of Ethics and
Business Conduct which is publicly available by following the link to “Corporate
Governance” in the “Investor Relations” section of our website at
www.clearfieldconnection.com
. To
the extent permitted, we intend to disclose any amendments to, or waivers from,
the code of ethics applicable to our principal executive officer, principal
financial officer, principal accounting officer or persons performing similar
functions or with respect to the required elements of the code of ethics on our
website at
www.clearfieldconnection.com
by following
the “Corporate Governance” link in the “Investor Relations”
section.
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
The
following report of the Audit Committee shall not be deemed to be “soliciting
material” or to be “filed” with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that we specifically incorporate it by reference
in such filing.
In
accordance with its charter, the Audit Committee reviewed and discussed the
audited financial statements with management and Grant Thornton LLP, our
independent registered public accounting firm. The discussions with Grant
Thornton LLP also included the matters required by Statement on Auditing
Standards No. 114 (Communication with Audit Committees).
Grant
Thornton LLP provided to the Audit Committee the written disclosures and the
letter regarding its independence as required by the Public Company Accounting
Oversight Board. This information was discussed with Grant Thornton
LLP.
Based on
the review and discussions referred to above, the Audit Committee recommended to
our Board that our audited financial statements be included in our Annual Report
on Form 10-K for the fiscal year ending September 30, 2009.
BY: THE
AUDIT COMMITTEE
Charles N.
Hayssen (Chair)
Donald R.
Hayward
John G.
Reddan
Stephen L.
Zuckerman, M.D.
PROPOSAL
2:
APPROVAL
OF THE 2010 EMPLOYEE STOCK PURCHASE PLAN
On January
5, 2010, the Board of Directors adopted, subject to shareholder approval, the
Clearfield, Inc. 2010 Employee Stock Purchase Plan (the “2010 Stock Purchase
Plan”). The purpose of the 2010 Stock Purchase Plan is to provide employees of
Clearfield with an opportunity to share in the ownership of Clearfield by
providing them with a convenient and cost-effective means to purchase our common
stock to provide a stronger incentive to work for the continued success of
Clearfield. The 2010 Stock Purchase Plan will also enhance our
ability to obtain and retain the services of employees. The 2010 Stock Purchase
Plan is intended to be an “employee stock purchase plan” within the meaning of
Section 423 of the Internal Revenue Code.
Summary
of the 2010 Stock Purchase Plan
The
following is a summary of the material terms of the 2010 Stock Purchase Plan and
is qualified in its entirety by reference to the text of the 2010 Stock Purchase
Plan. A copy of the 2010 Stock Purchase Plan is attached as
Appendix A
to this
proxy statement.
Administration
The
Compensation Committee will administer the 2010 Stock Purchase Plan. It will
have full power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the 2010 Stock Purchase Plan and not
inconsistent with the 2010 Stock Purchase Plan, to construe and interpret the
2010 Stock Purchase Plan, and to make all other determinations necessary or
advisable for the administration of the 2010 Stock Purchase Plan. The
Compensation Committee may delegate ministerial duties to our employees, outside
entities and outside professionals as the Compensation Committee so determines.
The Board of Directors may also exercise the Compensation Committee’s powers and
duties under the 2010 Stock Purchase Plan.
Share Purchases
Participation
in the 2010 Stock Purchase Plan is voluntary. The 2010 Stock Purchase Plan
permits shares of our common stock to be sold to participating employees on the
last calendar day of any contribution period at a price not less than the lesser
of (1) 85% of the fair market value of our common stock on the first calendar
day of the contribution period or (2) 85% of the fair market value of our common
stock on the last calendar day of each contribution period.
Unless
otherwise determined by the Board of Directors, each six-month period is a
contribution period under the 2010 Stock Purchase Plan. The Board of Directors
may, in its discretion and with prior notice, change the duration and/or
frequency of contribution periods from time to time, provided that in no event
will a contribution period be greater than 27 months. The first contribution
period under the 2010 Stock Purchase Plan will commence on July 1, 2010 and end
on December 31, 2010.
Eligible Participants
Each of
our employees is eligible to participate in the 2010 Stock Purchase Plan,
provided that:
§
|
The
employee’s customary employment is at least 20 hours per week and is more
than five months per year;
|
§
|
The
employee has been continuously employed by us or a designated subsidiary
for at least 30 days prior to the start of the next available contribution
period; and
|
§
|
Immediately
after the grant of the share purchase rights under the 2010 Stock Purchase
Plan, the employee would not own shares (including shares which such
employee may purchase under the 2010 Stock Purchase Plan or under
outstanding share purchase rights) having 5% or more of the total combined
voting power or value of all classes of our capital stock or of any
subsidiary.
|
The
Compensation Committee also has the power and authority to allow employees who
are employed by any subsidiary we may have in the future to participate in the
2010 Stock Purchase Plan.
As of
January 12, 2010, approximately 120 employees were eligible as a class to
participate in the 2010 Stock Purchase Plan.
Number of Shares
The
aggregate number of shares of our common stock that are available for purchase
under the 2010 Stock Purchase Plan is 300,000 shares. The number of shares of
common stock available for purchase under the 2010 Stock Purchase Plan, as well
as the price per share of our common stock covered by share purchase rights that
have not been exercised, are subject to adjustment in the event of a stock
split, reverse stock split, stock dividend, combination or reclassification of
our common stock (including any such change in the number of shares effected in
connection with a change in domicile of Clearfield), reorganization,
recapitalization, rights offering or other increase or reduction of our
outstanding common stock, and in the event that Clearfield is consolidated with
or merged into any other corporation.
No
participant may purchase (1) shares having a fair market value (determined at
the beginning of each contribution period) exceeding $25,000 under the 2010
Stock Purchase Plan and all other employee stock purchase plans (if any) for any
calendar year or (2) more than 12,500 shares under the 2010 Stock Purchase Plan
for any calendar year.
Terms and Conditions
Participating
employees may direct us to make payroll deductions for each payroll paid during
the contribution period in full dollar amounts not less than $10 and not more
than 10% (or such other maximum as may be established by the Board of Directors)
of such participant’s regular straight time earnings, commissions and
commission-based sales bonuses (excluding payments, if any, for overtime,
incentive compensation, incentive payments, premiums, bonuses (including bonuses
paid under our cash incentive plan) and any other special compensation) on each
payroll paid during the contribution period. A participant may not increase or
decrease the amount of his or her contributions during a contribution
period.
Participating
employees, other than employees who are executive officers under Section 16 of
the Exchange Act, may withdraw from the 2010 Stock Purchase Plan at least 30
days prior to the end of a contribution period and be paid in cash all
contributions in their contribution accounts. Participants who withdraw from the
2010 Stock Purchase Plan will not be permitted to re-enroll in the 2010 Stock
Purchase Plan until the next contribution period. Upon a participant’s
termination of employment with Clearfield or a designated subsidiary for any
reason, including the death or retirement of the participant, the participant’s
participation in the 2010 Stock Purchase Plan will cease and the participant, or
the participant’s beneficiary or estate, as the case may be, will be paid in
cash all contributions in the participant’s contribution account. The 2010 Stock
Purchase Plan does not provide for the payment of interest on a participant’s
contributions.
Participants
have no interest or voting rights in shares of our common stock covered by share
purchase rights until such rights have been exercised.
Duration, Termination and
Amendment
Unless
earlier terminated by the Board of Directors, the 2010 Stock Purchase Plan will
continue in effect until all of the shares of common stock issuable under the
2010 Stock Purchase Plan have been exhausted. The 2010 Stock Purchase Plan
permits the Board of Directors to amend or terminate the 2010 Stock Purchase
Plan at any time, except that:
§
|
No
amendment to the 2010 Stock Purchase Plan may make any change in any share
purchase rights previously granted that adversely affects the rights of
any participant, except as otherwise provided in the 2010 Stock Purchase
Plan; and
|
§
|
Prior
shareholder approval will be required for any amendment to the 2010 Stock
Purchase Plan to the extent necessary to comply with Rule 16b-3 under the
Exchange Act or Section 423 of the Internal Revenue Code or the
requirements of The Nasdaq Stock Market or any other securities exchange
that are applicable to
us.
|
Transferability of Contributions and
Purchase Rights
During a
participant’s lifetime, a participant’s share purchase rights under the 2010
Stock Purchase Plan are exercisable only by the participant. Neither
contributions credited to a participant’s account nor any rights with regard to
the exercise of share purchase rights or the right to receive shares under the
2010 Stock Purchase Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (except as otherwise set forth in the 2010 Stock Purchase
Plan in the event of the participant’s death) by the participant.
Federal Income Tax
Consequences
The
following is a brief summary of the federal income tax aspects of the share
purchase rights that may be granted under the 2010 Stock Purchase Plan based
upon federal income tax laws in effect on the date of this proxy statement. This
summary is not intended to be exhaustive and does not describe foreign, state or
local tax consequences.
The 2010
Stock Purchase Plan, and the right of participants to make purchases of our
common stock pursuant to the 2010 Stock Purchase Plan, are intended to be
eligible for the favorable tax treatment provided by Sections 421 and 423 of the
Internal Revenue Code. The amounts of payroll deductions under the 2010 Stock
Purchase Plan will be taxable to a participant as compensation for the year in
which such amounts otherwise would have been paid to the participant. A
participant will realize no income upon the grant of the share purchase rights
or upon the purchase of common stock under the 2010 Stock Purchase Plan, and we
will not be entitled to any deduction at the time of grant of the rights or
purchase of the shares. Taxable income will not be recognized until there is a
sale or other disposition of the shares acquired under the 2010 Stock Purchase
Plan.
The amount
of a participant’s tax liability upon disposition of the shares acquired will
depend on whether or not the participant satisfies the prescribed holding period
as summarized below. If the participant holds the shares purchased for the
prescribed holding period of two years from the grant of the share purchase
right and one year from the purchase date, then upon disposition of shares we
will receive no deduction and the participant will recognize:
§
|
ordinary
income on the lesser of the participant’s gain on the sale or the purchase
price discount under the 2010 Stock Purchase Plan, applied to the fair
market value of the shares at the first day of the contribution period;
and
|
§
|
long-term
capital gain (or loss) on the difference between the sale price and the
sum of the purchase price and any ordinary income recognized on the
disposition.
|
However,
consequences for both us and the participant would differ if the participant did
not satisfy the prescribed holding period described above. In the event that the
shares are sold or disposed of (including by way of gift) before the expiration
of the prescribed holding periods, the excess of the fair market value of the
shares on the date such shares are purchased over the purchase price of such
shares will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gratuitous transfer of the shares is made. The
balance of any gain will be treated as capital gain and will be treated as
long-term capital gain if the shares have been held more than one year. Even if
the shares are sold for less than their fair market value on the date the shares
are purchased, the same amount of ordinary income is attributed to a participant
and a capital loss is recognized equal to the difference between the sales price
and the value of the shares on such date of purchase. We ordinarily will be
allowed a tax deduction at the time and in the amount of the ordinary income
recognized by the participant.
New
Plan Benefits
Because
the amount of future benefits under the 2010 Stock Purchase Plan will depend on
which of our employees elect to participate, the amount of their contribution
elections and the fair market value of our common stock, it is not possible to
determine the benefits that will be received by eligible participants if the
2010 Stock Purchase Plan is approved by our shareholders. The closing price of a
share of our common stock as reported on the Global Market of The Nasdaq Stock
Market, Inc. on January 12, 2010, was $2.71.
Registration
with Securities and Exchange Commission
Upon
approval of the 2010 Stock Purchase Plan by our shareholders, we intend to file
a registration statement with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1933, as amended, covering the 300,000 shares
issuable under the 2010 Stock Purchase Plan.
Vote
Required
The
affirmative vote of the holders of a majority of the shares of the common stock
represented at the Meeting and entitled to vote is necessary for the approval of
Proposal 2: Approval of Clearfield, Inc. 2010 Employee Stock Purchase Plan.
Proxies will be voted in favor of Proposal 2 unless otherwise
indicated.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE
FOR
APPROVAL
OF THE 2010 EMPLOYEE STOCK PURCHASE PLAN.
_________________________________
OTHER INFORMATION REGARDING EQUITY
COMPENSATION PLANS
The
following table sets forth information regarding our equity compensation plans
in effect as of September 30, 2009. Each of our equity compensation
plans is an “employee benefit plan” as defined by Rule 405 of Regulation C of
the Securities Act of 1933.
|
|
Securities
Authorized for Issuance Under Equity Compensation Plans
|
|
Plan
Category
|
|
(a)
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
|
|
(b)
Weighted-average
exercise
price of
outstanding
options,
warrants
and
rights
|
|
|
(c)
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans
(excluding
those
reflected
in column (a))
|
|
Equity
compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
2007
Stock Compensation Plan
|
|
|
887,200
|
|
|
$
|
1.06
|
|
|
|
510,500
|
|
Stock
Option Plan for Non-Employee Directors
|
|
|
112,500
|
|
|
$
|
1.22
|
|
|
|
67,500
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
999,700
|
|
|
$
|
1.08
|
|
|
|
578,000
|
|
EXECUTIVE
OFFICERS
Set forth
below is biographical and other information for our current executive
officers. Information about Ms. Cheryl P. Beranek, our President and
Chief Executive Officer, may be found in this proxy statement under the heading
“Election of Directors.”
John P. Hill
, 44, was
appointed as our Chief Operating Officer effective October 30,
2008. Prior to being appointed in this position, Mr. Hill had been
our Vice President of Engineering and Product Management since
2007. He also served as our Vice President of Product Management and
Development from 2004 to 2007 and was our first Vice President of Sales from
2003 to 2004. Mr. Hill attended Macalester College and the University
of Minnesota.
Bruce G. Blackey
, 58,
joined us in June of 2007 as our Interim Chief Financial Officer and in October
2008, Mr. Blackey became our Chief Financial Officer on a full-time, non-interim
basis. Mr. Blackey has extensive experience in finance and
administration and has worked as an independent business consultant and interim
CFO from 2001 to 2007 for several companies. Mr. Blackey held the position of
CFO with Tiro Industries a contract manufacturing firm serving the cosmetic
industry from 1997 to 2001. Prior to that he held the senior financial position
with Conwed Plastics, a manufacturer of plastic netting from 1988 to 1997. Mr.
Blackey holds a Bachelors of Science degree in Business Administration and
Accounting from the University of Minnesota business school, now known as the
Carlson School of Management.
EXECUTIVE COMPENSATION
Explanation
of Compensation
The
following discussion of executive compensation describes various aspects of our
compensation policies and practices as applied to the following executive
officers who are referred to in this proxy statement as the Named Executive
Officers:
·
|
Cheryl
P. Beranek, our Chief Executive
Officer
|
·
|
Bruce
G. Blackey, our Chief Financial
Officer
|
·
|
John
P. Hill, our Chief Operating
Officer
|
This
section is intended to provide a framework within which to understand the actual
compensation awarded to, earned or held by each Named Executive Officer during
fiscal year 2009, as reported in the compensation tables and accompanying
narrative sections appearing on pages 18 to 27 of this proxy
statement.
Overview
of the Executive Compensation Process
The
responsibility of the Compensation Committee is to review and approve the
compensation and other terms of employment of our Chief Executive Officer and
our other executive officers. Among its other duties, the
Compensation Committee oversees all significant aspects of our compensation
plans and benefit programs, including succession plans for executive officers
other than the Chief Executive Officer. The Board of Directors is
responsible for, and regularly reviews, the succession plan for our Chief
Executive Officer. The Compensation Committee annually reviews and
approves corporate goals and objectives for the Chief Executive Officer’s
compensation and evaluates the Chief Executive Officer’s performance in light of
those goals and objectives. The Compensation Committee has also been
appointed by the Board of Directors to administer our equity compensation plans,
which for fiscal year 2009 consisted of the 2007 Stock Compensation Plan (the
“2007 Plan”) that was originally approved by our shareholders at the Annual
Meeting of Shareholders held in 2006.
In
carrying out its duties, the Compensation Committee participates in the design
and implementation and ultimately reviews and approves specific compensation
programs. On October 30, 2008, the Compensation Committee recommended
and the Board of Directors approved the establishment of a cash incentive
compensation program for fiscal year 2009 (the “2009 Bonus Plan”) for our
certain of our employees including executive officers. As part of the
establishment of the 2009 Bonus Plan, the Board also approved the target and
maximum goals under the 2009 Bonus Plan and the cash bonuses that executive
officers may earn under the 2009 Bonus Plan based upon percentages of their
respective salaries based upon the recommendation of the Compensation
Committee.
Use
of Compensation Consultant and Role of Management
Under the
Compensation Committee’s charter, the Compensation Committee has the authority
to retain, at our expense, such independent counsel or other advisers as it
deems necessary to carry out its responsibilities. For fiscal year
2009, the Compensation Committee did not retain a compensation
consultant. Instead, the Compensation Committee relied upon certain
aspects of our historical compensation practices, published reports and surveys,
and other information against which it measured the competitiveness of our
compensation of the Named Executive Officers in fiscal year 2009.
In
determining compensation for Named Executive Officers, other than the Chief
Executive Officer, the Compensation Committee solicits input from the Chief
Executive Officer regarding the duties and responsibilities of the other
executive officers and the results of performance reviews. The Chief
Executive Officer also recommends to the Compensation Committee the base salary
for all Named Executive Officers, the awards under the cash incentive
compensation program such as the 2009 Bonus Plan, and equity
awards. The Chief Executive Officer also recommended to the
Compensation Committee the financial performance goals under the 2009 Bonus
Plan. No Named Executive Officer, other than the Chief Executive Officer, has a
role in establishing executive compensation. From time to time, the
Named Executive Officers are invited to attend meetings of the Compensation
Committee. However, no Named Executive Officer attends any executive
session of the Compensation Committee or is present during deliberations or
determination of such Named Executive Officer’s compensation.
2009
Compensation for Named Executive Officers
For the
Named Executive Officers, annual compensation consists of base salary, a cash
bonus based on achievement of goals determined by the Compensation Committee,
and long-term equity compensation. Ms. Beranek, who is both a
director and a Named Executive Officer, receives no compensation for her service
as a Board member.
Base Salaries
On October
30, 2008, the Board of Directors approved recommendations of the Compensation
Committee with respect to the base salaries of the Named Executive Officers. The
base salary for Ms. Beranek was set at $220,000 per year effective October 1,
2008, which represents an increase of 19% over the prior fiscal
year. In connection with the promotion of Mr. Hill to Chief Executive
Officer on October 30, 2008, Mr. Hill’s base salary was increased to $170,000
from $110,000 in recognition of his new responsibilities. In
connection with Mr. Blackey’s appointment as our Chief Financial Officer on a
non-interim, full-time basis on October 30, 2008, Mr. Blackey’s base salary was
adjusted both in recognition of the full-time nature of the position, as well as
the additional responsibilities. Mr. Blackey’s base salary was set at
$145,600 effective October 30, 2008 from $137,400 on an annualized basis for
consulting services.
In
determining the base salary increase, the Compensation Committee reviewed and
discussed historical salary data for the Named Executive Officers, as well as
the total cash compensation the Named Executive Officers may earn from the 2009
Bonus Plan. The Compensation Committee also considered our overall
performance in fiscal year 2008 and expected performance in fiscal year 2009,
the duties of the Named Executive Officer, the Named Executive Officer’s
performance, and various surveys, reports and other information, and with
respect to the Named Executive Officers other than the Chief Executive Officer,
the recommendations of the Chief Executive Officer.
Design of and Payouts Under the 2009
Bonus Plan
Consistent
with its compensation philosophy and the objectives of annual cash incentive
programs generally, the Compensation Committee adopted the 2009 Bonus Plan as
our performance based compensation program.
Under the
2009 Bonus Plan, the Named Executive Officers are eligible for cash bonuses
depending upon our achievement of fiscal year 2009 net income from continuing
operations, excluding taxes, interest income or expense, income gain or loss on
our Aberdeen, South Dakota property, and any bonus amount (“ICO”) and depending
on position. The table below under the 2009 Cash Bonus Plan shows the
bonus amounts as a percentage of salary that would have been earned by the Named
Executive Officers under the 2009 Bonus Plan upon Clearfield’s achievement of
the target and maximum goals relating to ICO and upon Mr. Blackey’s achievement
of his personal objectives. Achievement of the performance goals at
less than target level will result in a decreasing bonus until the achievement
fails to meet the minimum performance goals, at which point the Named Executive
Officer is entitled to no bonus.
|
2009
Cash Bonus Plan
|
Name of Executive
|
% of
Salary
For
FY 2009
Target ICO
|
|
% of
Salary
For
FY 2009
Maximum ICO
|
|
|
|
|
Cheryl
P. Beranek
|
60%
|
|
150%
|
John
P. Hill
|
40%
|
|
150%
|
Bruce
G. Blackey
|
40%
|
|
75%
|
The fiscal
year 2009 target goals established by the Compensation Committee for ICO was
$2,400,000. The Compensation Committee intends this target goal to be
aggressive to encourage significant improvements in financial performance and
growth in our business. For fiscal year 2009, our ICO met the minimum
amount, but was less than the target amount. Therefore, under the
2009 Cash Bonus Plan, Ms. Beranek earned $130,000 and Mr. Blackey earned
$58,240. The Compensation Committee exercised its discretion, upon the
recommendation of Ms. Beranek, to increase Mr. Hill’s bonus amount under the
2009 Bonus Plan from $68,000 to $102,000. The Compensation Committee
considered a number of factors relating to Mr. Hill’s achievements in fiscal
year 2009 and his contributions to our business and financial performance in
fiscal year 2009, particularly in the area of product development. The Committee
also exercised its discretion to award an additional bonus to Ms. Beranek, Mr.
Hill and Mr. Blackey by $4,830, $3,734 and $3,182, respectively, which
represents their pro rata portion of the amount budgeted for bonuses remaining
after all amounts paid.
Long-Term
Equity Compensation
The
Compensation Committee may from time to time grant equity awards to executive
officers for their performance during a fiscal year or on a case-by-case basis
to reward particular aspects of performance during a fiscal year. The
Compensation Committee’s policy is to grant all equity awards under shareholder
approved equity compensation plans, such as the 2007 Plan, except in limited and
special circumstances.
On
November 20, 2009, the Compensation Committee granted stock options to the Named
Executive Officers in respect of performance in fiscal year
2009. Pursuant to this action, Ms. Beranek, Mr. Hill and Mr. Blackey
were granted an option to purchase 25,000 shares, 25,000 shares and 10,000
shares of common stock; respectively. The stock options were granted
as incentive stock options pursuant to 2007 Plan, have a term of seven years,
vest and become exercisable as to one-third of the shares on the first three
anniversaries of the date of grant, and have an exercise price equal to the fair
market value of our common stock on the date of grant.
In
determining the number of shares underlying the stock options granted in respect
of fiscal year 2009 performance, the Compensation Committee considered the
overall value of the award, the Black-Scholes accounting expense associated with
the awards, previously made grants to the Named Executive Officers and the value
of both cash and equity compensation of executive officers for fiscal year
2009. The Compensation Committee also reviewed executive compensation
survey data showing the comparative value of executive equity
awards.
In August
2009, the Compensation Committee delegated its authority to the Chief Executive
Officer under the 2007 Plan to make grants of options to purchase our common
stock to newly hired non-executive employees who are hired between scheduled
meetings of the Compensation Committee. If the Chief Executive
Officer makes a discretionary grant of options under this authority, the grant
date will be the second Tuesday of the month following the employee’s first day
of employment, or if the Nasdaq Stock Market was closed on such second Tuesday,
the next succeeding day on which the Nasdaq Stock Market is open for regular
trading. Further, the Chief Executive Officer’s authority is limited to grants
to any individual of an option to purchase no more than 5,000 shares and she
must advise the Compensation Committee at its next meeting of the terms of any
such grant. In all other respects, options granted pursuant to the
Chief Executive Officer’s delegated authority shall have the terms and
conditions applicable to incentive stock options specified in the 2007 Plan and
consistent with the new-hire option awards previously approved by the
Committee.
Stock
options granted in fiscal year 2009 have an exercise price of the fair market
value of our common stock on the date of grant. The date of grant is
determined under the 2007 Plan by reference to the closing market price of our
common stock on the date the Compensation Committee meets (or takes action in
writing in lieu of meeting) and determines the award recipient, the number of
shares underlying stock option awards and the other material terms of the stock
option grant, or such future date specified as the grant date by the
Compensation Committee when all material terms of the stock option grant are
determined. For those options granted by our Chief Executive Officer
under delegated authority, the date of grant is the second Tuesday of the month
following the employee’s start date, or if the Nasdaq Stock Market was closed on
such second Tuesday, the next succeeding day on which the Nasdaq Stock Market is
open for regular trading.
Employment
Arrangements with Named Executive Officers and Post-Employment
Compensation
Cheryl
Podzimek Beranek was appointed as our President and Chief Executive Officer
effective June 28, 2007. Bruce G. Blackey was appointed our Interim
Chief Financial Officer also on June 28, 2007 and effective October 30, 2008,
Mr. Blackey became our Chief Financial Officer on a full-time, non-interim
basis. John P. Hill was appointed as our Chief Operating Officer
effective October 30, 2008.
On
December 16, 2008, we entered into employment agreements with Ms. Beranek and
with Mr. Hill (each, an “Executive”). The employment agreements have
a term ending on December 16, 2011 except that the employment agreements will
automatically renew for successive one year periods unless either the Executive
or we elect not to extend the term by at least sixty days’ written
notice. Each Executive received a sign-on bonus in the amount of
$2,000 as additional consideration for the employment agreement. Mr.
Blackey’s employment with us is “at will” and we do not have any agreement or
other arrangement with Mr. Blackey relating to post-termination
compensation.
In
addition to the provision of the employment agreements described below for Ms.
Beranek and Mr. Hill, the 2007 Plan also provides that all awards granted under
the 2007 Plan will become fully exercisable and vested in the event of a “Change
in Control” and will terminate 60 days thereafter, unless otherwise determined
by the Board of Directors prior to the change in control. All
outstanding options granted to the Named Executive Officers were granted
pursuant to the 2007 Plan.
Description
of Beranek and Hill Agreements
Pursuant
to the employment agreement with Ms. Beranek, she will serve as our President
and Chief Executive Officer for a base salary of $220,000, subject to increase
or decrease (but not below the initial base salary of $220,000) pursuant to our
normal practices for our executives. In addition to the base
salary, Ms. Beranek is eligible to earn, for each fiscal year during
the period of her employment, an annual cash performance bonus with the amount
of the annual bonus and the target performance goals applicable to the annual
bonus determined in accordance with the terms and conditions of the bonus plan
as in effect from time to time. However, Ms. Beranek’s target annual
bonus must be 60% of her base salary for that year, and her maximum annual bonus
must be 150% of base salary for that year. Ms. Beranek is also
entitled to participate in our welfare benefit plans, fringe benefit plans and
is entitled to receive paid vacation in accordance with the policies applicable
to our senior executives.
Pursuant
to the employment agreement with Mr. Hill, he will serve as our Chief Operating
Officer for a base salary of $170,000, subject to increase or decrease (but not
below the initial base salary of $170,000) pursuant to our normal practices for
our executives. In addition to the base salary, Mr. Hill is eligible
to earn, for each fiscal year of during the period of his employment, an annual
cash performance bonus with the amount of the annual bonus and the target
performance goals applicable to the annual bonus determined in accordance with
the terms and conditions of the bonus plan as in effect from time to
time. However, Mr. Hill’s target annual bonus must be 40% of his base
salary for that year, and his maximum annual bonus must be 150% of base salary
for that year. Mr. Hill is also entitled to participate in our
welfare benefit plans, fringe benefit plans and is entitled to receive paid
vacation in accordance with the policies applicable to our senior
executives.
We may
terminate either Executive’s employment for Cause or without
Cause. We must provide the Executive with a notice of termination for
Cause specifying the facts providing a basis for the termination and the date of
termination, which may not be less than thirty days from the date notice is
provided. The Executive may terminate her or his employment for Good
Reason or without Good Reason. The Executive must provide us with a
notice of the occurrence of the event constituting a Good Reason within ninety
days of such event and may only terminate her or his employment if we fail to
remedy the event within thirty days of our receipt of the notice.
If the
Executive’s employment is terminated by us for Cause or by the Executive without
Good Reason, we will have no further obligations to the Executive under the
employment agreement other than the obligation to pay to the Executive the
accrued base salary, any pro-rated annual bonus required to be paid to the
Executive, and to provide the other welfare plan or fringe benefits in
accordance with the provisions of the applicable plan. In the event
of death or Disability, we will be obligated to pay to the Executive’s estate or
beneficiaries or the Executive, the accrued base salary in a lump sum within
twenty days following the termination date, any pro-rated annual bonus required
to be paid to the Executive at the time when annual bonuses are paid to our
other senior executive, and if any of the Executive’s qualified beneficiaries
makes an election to continue in our group health plans, we will pay the premium
for the coverage for the earlier of one year from the date of termination or the
date on which the qualified beneficiary is no longer eligible for such
coverage.
If the
Executive’s employment is terminated by us without Cause or by the Executive for
Good Reason, or if we elect to extend the term of the employment agreement, the
Executive will be entitled to the following severance payments and
benefits:
§
|
In
two lump sum payments, the Executive’s earned but unpaid base salary and
accrued but unpaid vacation through the date of termination and any
prorated annual bonus required to be paid for the fiscal year that ends on
or before the date of termination to the extent not previously paid and an
amount equal to two times the sum of the Executive’s annual base salary in
effect of the date of termination plus average bonus over the prior three
years;
|
§
|
The
Executive’s prorated annual bonus for the year in which the termination
occurs, payable at the time bonuses are paid to the other senior
executives;
|
§
|
We
will pay premiums for the Executive’s continuing coverage until the
earlier of one year from the date of termination or the date on which the
executive is no longer eligible for such
coverage;
|
§
|
Any
unvested stock options shall become vested in full;
and
|
§
|
We
will timely pay or provide any vested benefits or other amounts or
benefits required to be paid or provided that the Executive is eligible to
receive on the date of termination under any plan, contract or
agreement.
|
If a
Change in Control occurs during the employment period, we will pay to the
executive a lump sum payment in the amount of the executive’s base salary in
effect on the date of the change in control. If the Executive’s
employment is terminated by us without Cause or by the Executive for Good Reason
or without Good Reason within one year after the effective date of the Change in
Control, then the Executive will also be entitled to receive the payments and
benefits outlined in the five bullet points above. In addition, in
the event of termination of the Executive’s employment, all outstanding stock
options, restricted stock and other equity awards granted to the Executive under
any of our equity compensation plans (or substitute awards covering the
securities of the successor company) will become immediately vested and
exercisable in full.
Further,
in the event it is determined that any payment to the Executive under the
employment agreement would be subject to an excise tax, then the Executive may
be entitled to receive an additional payment under the excise tax
gross-up payment plan provided to our senior executives. We currently
have no such plan. Further, to the extent any payment or commencement
of a payment under the employment agreement and other payment or benefits would
result in accelerated or additional tax under Section 409A of the Internal
Revenue Code, as amended, we will defer such payments until the earlier of the
first day of the seventh month following the date of termination of the
Executive’s employment or the Executive’s death and such deferred payments will
be paid in one lump sum, without interest, at such time.
Each of
the employment agreements contains provisions relating to non-competition,
non-solicitation, protection of our confidential information and assignment of
inventions.
Certain
Definitions Used in Employment Agreements and the 2007 Plan.
Each of
the employment agreements with Ms. Beranek and Mr. Hill described above
incorporates the following definitions of “disability,” “cause,” and “good
reason” where “Executive” refers to the executive officer party to the
employment agreement.
Defined
Term
|
Definition
|
|
|
Disability
|
“Disability”
means a physical or mental illness which renders Executive unable to
perform her essential duties for ninety (90) consecutive days or a total
of one hundred and eighty (180) days in any twelve (12) month period with
or without reasonable accommodations, or unable to perform those duties in
a manner that would not endanger her health or safety or the health or
safety of others even with reasonable accommodations
|
|
|
Cause
|
“Cause”
shall mean the occurrence of any one or more of the following
events:
(i) The
Executive’s willful failure to perform or gross negligence in performing
her duties owed to the Company (other than such failure resulting from the
Executive’s Disability or any such actual failure after her issuance of a
Notice of Termination for Good Reason), which continues after thirty (30)
days following a written notice delivered to the Executive by the Board,
which notice specifies such willful failure or gross
negligence;
(ii) The
Executive’s commission of an act of fraud or dishonesty in the performance
of her duties;
(iii) The Executive’s
conviction of, or entry by the Executive of a guilty or no contest plea
to, any felony or a misdemeanor involving moral turpitude;
(iv) Any
material breach by the Executive of any fiduciary duty or duty of loyalty
owed to the Company; or
(v) The
Executive’s material breach of any of the provisions of this Agreement
which is not cured within thirty (30) days following written notice
thereof from the Company.
|
Good
Reason
|
“Good
Reason” shall mean the occurrence of any one or more of the following
events without the Executive’s prior written consent, provided that the
Executive terminates her employment within one hundred and eighty (180)
days following the lapse of the Company’s cure period described below as
to one or more of such events and unless the Company fully corrects the
circumstances constituting Good Reason (provided such circumstances are
capable of correction) prior to the Date of Termination:
(i)
The Company’s reduction of the Executive’s annual base salary below the
initial Base Salary or reduction in the Executive’s target annual
bonus;
(ii)
The Company’s material change of the Executive’s duties in a manner
inconsistent with the Executive’s position, authority, duties or
responsibilities as contemplated by Section 2(a) or other action by the
Company
which materially diminishes such position, authority, duties or
responsibilities, excluding for this purpose
isolated, insubstantial or inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof from Executive;
(iii)
The relocation of the Company’s offices at which Executive is principally
employed to a location more than 50 miles from such offices;
(iv)
The failure of a successor to the Company to (A) assume and agree to
perform the obligations of the Company hereunder, or (B) replace this
Agreement with an employment contract of substantially similar terms
acceptable to the Executive and no less favorable than those terms
provided to an acquiring Company’s executive officers; or
(v)
The Company’s material breach of its obligations under the
Agreement.
Notwithstanding
any other provision of this Section 3(e), the occurrence of any event
described in Section 3(e)(i) or (v) shall constitute Good Reason only if
(A) the Executive provides written notice to the Company of the occurrence
of such event within ninety (90) days of the initial occurrence of such
event, and (B) the Company fails to remedy the event described in the
Executive’s written notice within thirty (30) days of the Company’s
receipt of such notice.
|
For the
purposes of the employment agreements with the Executives, the term “Change in
Control” has the same meaning as provided in the 2007 Plan as in effect on
December 16, 2008, but excluding from such definition the occurrence of an event
in which 30% or more of the outstanding voting stock of the Company is acquired
or beneficially owned (as defined in Rule 13d-3 under the Exchange Act or any
successor rule thereto) by any person (other than the Company or a subsidiary of
the Company) or group of persons acting in concert (other than the acquisition
and beneficial ownership by a parent corporation or its wholly-owned
subsidiaries, as long as they remain wholly-owned subsidiaries, of 100% of the
outstanding voting stock of the Company as a result of a merger which complies
with certain provisions of the 2007 Plan).
Therefore,
“Change in Control” for the purposes of the employment agreements with the
Executives means the happening of any of the following:
(i) A
majority of the directors of the Company shall be persons other than
persons
(A) For
whose election proxies shall have been solicited by the Board, or
(B) Who
are then serving as directors appointed by the Board to fill vacancies on the
Board caused by death or resignation (but not by removal) or to fill
newly-created directorships,
(ii)
[omitted pursuant to the employment agreements], or
(iii) The
shareholders of the Company approve a definitive agreement or plan
to
(A) Merge
or consolidate the Company with or into another corporation other
than
(1) a
merger or consolidation with a subsidiary of the Company or
(2) a
merger in which
(a) the
Company is the surviving corporation,
(b) no
outstanding voting stock of the Company (other than fractional shares) held by
shareholders immediately prior to the merger is converted into cash, securities,
or other property (except (i) voting stock of a parent corporation owning
directly, or indirectly through wholly owned subsidiaries, both beneficially and
of record 100% of the voting stock of the Company immediately after the merger
and (ii) cash upon the exercise by holders of voting stock of the Company of
statutory dissenters’ rights),
(c) the
persons who were the beneficial owners, respectively, of the outstanding common
stock and outstanding voting stock of the Company immediately prior to such
merger beneficially own, directly or indirectly, immediately after the merger,
more than 70% of, respectively, the then outstanding common stock and the then
outstanding voting stock of the surviving corporation or its parent corporation,
and
(d) if
voting stock of the parent corporation is exchanged for voting stock of the
Company in the merger, all holders of any class or series of voting stock of the
Company immediately prior to the merger have the right to receive substantially
the same per share consideration in exchange for their voting stock of the
Company as all other holders of such class or series,
(B)
exchange, pursuant to a statutory exchange of shares of voting stock of the
Company held by shareholders of the Company immediately prior to the exchange,
shares of one or more classes or series of voting stock of the Company for cash,
securities, or other property,
(C) sell
or otherwise dispose of all or substantially all of the assets of the Company
(in one transaction or a series of transactions), or
(D)
liquidate or dissolve the Company.
Summary
Compensation Table
The
following table shows information concerning compensation earned for services in
all capacities during the last two fiscal years for (i) Cheryl P. Beranek, who
served as our President and Chief Executive Officer in fiscal years 2009 and
2008; (ii) Bruce G. Blackey, who served as our Chief Financial Officer beginning
October 30, 2008 and as our interim Chief Financial Officer during the remainder
of fiscal year 2009 and for fiscal year 2008; and (iii) the one other executive
officer of our company, John P. Hill, our Chief Operating Officer since October
30, 2008, whose total compensation during fiscal year 2009 was at least $100,000
(together referred to as our “Named Executive Officers”). For the
Named Executive Officers, amounts reflect compensation in all positions for the
fiscal years noted.
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Stock
Awards ($)
(1)
|
Option
Awards ($)
(2)
|
Non-Equity
Incentive
Plan Compensation
($)
(3)
|
All
Other
Compensation
($)
(4)
|
Total
($)
|
Cheryl
P. Beranek
President
and Chief Executive Officer
|
2009
|
$218,696
|
-
|
$37,955
|
$136,830
|
$11,955
|
$405,436
|
2008
|
174,769
|
-
|
22,195
|
$112,500
|
$13,885
|
$323,349
|
Bruce
G. Blackey
Chief
Financial Officer
|
2009
|
138,110
|
-
|
4,772
|
$ 61,422
|
$ 3,109
|
$207,413
|
2008
|
137,443
|
-
|
-
|
$ 15,000
|
-
|
$152,443
|
John
P. Hill
Chief
Operating Officer
|
2009
|
167,231
|
-
|
16,997
|
$105,734
|
$10,457
|
$300,419
|
2008
|
118,462
|
$12,100
|
4,489
|
$
82,900
|
$ 6,611
|
$224,562
|
(1)
|
Represents
stock awarded to Mr. Hill on September 22,
2009
|
(2)
|
Values
expressed represent the actual compensation cost recognized by our company
during the fiscal year for equity awards granted in that fiscal year and
prior fiscal years as determined pursuant to Statement of Financial
Accounting Standards No. 123R, “Share-Based Payment” (“SFAS
123R”). The determination utilizes the respective assumptions
and accounting principles discussed in Note 2, “Stock-Based Compensation,”
in the notes to consolidated financial statements included in our Annual
Report on Form 10-K for the year ended September 30,
2009.
|
(3)
|
Represents
bonuses paid to the Named Executive Officers under our Incentive Plan for
the year noted, which are reported for the year in which the related
services were performed.
|
(4)
|
Represents
the following amounts.
|
Name
|
Year
|
Matching
Contributions
to
401(k)
Plan
|
Consideration
for
Execution
of
Employment
Agreement
|
Long-Term
Disability
Insurance
Premiums
|
Cheryl
P. Beranek
|
2009
|
$ 9,656
|
$2,000
|
$299
|
2008
|
13,666
|
-
|
219
|
Bruce
G. Blackey
|
2009
|
2,890
|
-
|
219
|
2008
|
-
|
-
|
-
|
John
P. Hill
|
2009
|
8,164
|
$2,000
|
293
|
2008
|
6,410
|
-
|
201
|
Grants
of Plan-Based Awards in Fiscal Year 2009
The
following table sets forth certain information concerning plan-based awards
granted to the Named Executive Officers during the fiscal year ending September
30, 2009.
|
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards (1)
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Cheryl
P. Beranek
|
10/22/2008
|
—
|
$132,000
|
$330,000
|
Bruce
G. Blackey
|
10/22/2008
|
—
|
$ 58,240
|
$109,200
|
John
P. Hill
|
10/22/2008
|
—
|
$ 68,000
|
$255,000
|
(1)
|
Represents
bonuses that may have been earned by the Named Executive Officers under
our 2009 Bonus Plan. Under the matrix associated with the 2009
Bonus Plan, achievement of the performance goals at less than target level
will result in a decreasing bonus until the achievement fails to meet the
minimum performance goals, at which point the executive officer is
entitled to no bonus such that there is no “threshold” level of
achievement. See the column of the Summary Compensation Table
entitled “Non-Equity Incentive Plan Compensation” for the amounts actually
earned under the 2009 Bonus Plan. For explanation of the 2009 Bonus Plan,
refer to the description under the heading of this proxy statement
entitled “Executive Compensation – Explanation of Compensation – 2009
Compensation for Named Executive Officers – Design of and Payouts Under
the 2009 Bonus Plan.”
|
Outstanding
Equity Awards At Fiscal Year-End
The
following table sets forth certain information concerning equity awards
outstanding to the Named Executive Officers at September 30, 2009.
|
Option
Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
(2)
|
Cheryl
P. Beranek (1)
|
7,400
|
2,600
|
$1.30
|
8/18/2011
|
Cheryl
P. Beranek (2)
|
60,000
|
90,000
|
$1.09
|
11/9/2013
|
Cheryl
P. Beranek (3)
|
66,000
|
134,000
|
$1.03
|
10/30/2018
|
Bruce
G. Blackey (3)
|
13,200
|
26,800
|
$1.03
|
10/30/2018
|
John
P. Hill (4)
|
7,200
|
2,800
|
$1.34
|
5/13/2011
|
John
P. Hill (2)
|
16,800
|
25,200
|
$1.09
|
11/9/2013
|
John
P. Hill (3)
|
33,660
|
68,340
|
$1.03
|
10/30/2018
|
(1)
|
Options
vest in annual installments of 31%, 20% 23% and 26% over four years
beginning on August 18, 2007 with a six year
term.
|
(2)
|
Options
vest in annual installments of 20% for five years beginning on November
09, 2008 with a six year term.
|
(3)
|
Options
vest in annual installments of 33% for three years beginning on October
30, 2009 with a ten year term.
|
(4)
|
Options
vest in annual installments of 28%, 20% 24% and 28% over four years
beginning on May 13, 2005 with a six year
term.
|
2009
Options Exercised and Stock Vested
The
following table sets forth certain information concerning options exercised
during fiscal year 2009 for the Named Executive Officers. We have not
granted restricted stock to any Named Executive Officer.
|
Option
Awards
|
Name
|
Number
of Shares
Acquired
on Exercise (#)
|
Value
Realized
on
Exercise ($) (1)
|
Cheryl
P. Beranek
|
35,000
|
$23,450
|
Bruce
G. Blackey
|
-
|
-
|
John
P. Hill
|
-
|
-
|
(1)
|
Represents
the difference between the exercise price and the fair market value of our
common stock on the respective dates of
exercise.
|
DIRECTOR
COMPENSATION
Our
non-employee directors received an annual retainer of $7,500 for Board and
committee service during fiscal year 2009.
On October
22, 2009, the Board of Directors determined that each non-employee director
elected or re-elected at the Meeting will receive a retainer of $10,000 payable
at the end of fiscal year 2010 and the chair of the Audit Committee will receive
an additional retainer of $2,500 for fiscal year 2010. Additionally,
each non-employee director elected or re-elected at the Meeting will receive an
option to purchase 1,000 shares of our common stock vesting on the one year
anniversary of the date of grant and with a term of 6 years, with an exercise
price equal to the fair market value of one share on the date of grant as
determined under our 2007 Stock Plan. The option will be granted the
first business day following the date of the Meeting. The changes in
director compensation for fiscal year 2010 were recommended by the Compensation
Committee.
The
following table shows for fiscal year 2009, the cash and other compensation paid
by us to each of our Board members:
Name
|
Fees
Earned or
Paid
in Cash
($)
(1)
|
Option
Awards
($)
(2)
|
Total
($)
|
Ronald
G. Roth
|
$ 7,500
|
$ 3,325
|
$ 10,825
|
Charles
N. Hayssen
|
10,000
|
2,325
|
12,325
|
Donald
R. Hayward
|
7,500
|
3,325
|
10,825
|
John
G. Reddan
|
7,500
|
3,325
|
10,825
|
Stephen
L. Zuckerman, M.D.
|
7,500
|
3,325
|
10,825
|
(1)
|
Represents
cash retainer for fiscal year 2009 as described
above.
|
(2)
|
Values
expressed represent the actual compensation cost recognized by our company
during fiscal 2008 for equity awards granted in fiscal year 2009 and prior
years as determined pursuant to SFAS 123R utilizing the assumptions and
accounting principles discussed in Note 2, “Stock-Based Compensation,” in
the notes to consolidated financial statements included in our Annual
Report on Form 10-K for the year ended September 30,
2009.
|
The
aggregate number of stock options outstanding at September 30, 2009 held by
directors was: Mr. Roth, 30,000 shares; Mr. Hayssen, 7,500 shares; Mr. Hayward,
15,000 shares; Mr. Reddan, 30,000 shares; Dr. Zuckerman, 30,000 shares; and
Ms. Beranek, 360,000 shares.
Cheryl P.
Beranek, who served as our director and an executive officer in fiscal year
2009, received no compensation for Board or committee service during fiscal year
2009.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Since the
beginning of fiscal year 2009, we have not entered into any transaction and
there are no currently proposed transactions, in which we were or are to be a
participant and the amount involved exceeds $120,000 and in which any related
person had or will have a direct or indirect material interest.
The
charter of our Audit Committee provides that the Audit Committee is responsible
for reviewing and approving the terms and conditions of all transactions we
enter into in which an officer, director or 5% or greater shareholder or any
affiliate of these persons has a direct or indirect material
interest. Our Code of Ethics and Business Conduct, which is
applicable to all of our employees and directors, also prohibits our employees,
including our executive officers, and our directors from engaging in conflict of
interest transactions. Requests for waivers by our executive officers
and directors from the provisions of, or requests for consents by our executive
officers and directors under, our Code of Ethics and Business Conduct must be
made to the Audit Committee.
In
addition, in December 2009, we adopted a formal related person
transaction approval policy, which sets forth our policies and procedures for
the review, approval or ratification of any transaction required to be reported
in our filings with the Securities and Exchange Commission. Our
policy applies to any financial transaction, arrangement or relationship or any
series of similar transactions, arrangements or relationships in which our
company is a participant and in which a related person has a direct or indirect
interest. Through the policy, the Audit Committee has also identified and
pre-approved certain transactions with related persons, including:
·
|
employment
of executive officers and director compensation to be reported in our
proxy statement;
|
·
|
ordinary
course business travel and expenses, advances and
reimbursements;
|
·
|
payments
made under our articles of incorporation, bylaws, insurance policies or
other agreements relating to
indemnification
|
·
|
any
transaction with another company where the related party is an employee,
director or beneficial owner of that other company, if the aggregate
amount involved does not exceed
$50,000;
|
·
|
transactions
in which our shareholders receive proportional benefits;
and
|
·
|
regulated
transactions at rates or charges fixed in conformity with law or
governmental authority and transactions involving certain banking related
services.
|
The Audit Committee
must approve any related person transaction subject to this policy before
commencement of the related party transaction. If pre-approval is not
feasible, the Audit Committee may ratify, amend or terminate the related person
transaction. The Audit Committee will analyze the following factors,
in addition to any other factors the Committee deems appropriate, in determining
whether to approve a related party transaction:
·
|
whether
the terms are fair to us;
|
·
|
whether
the terms of the related party transaction are no less favorable than
terms generally available to an unaffiliated third-party under the same or
similar circumstances;
|
·
|
whether
the related party transaction is material to
us;
|
·
|
the
role the related party has played in arranging the
transaction;
|
·
|
the
structure of the related party
transaction;
|
·
|
the
interests of all related parties in the
transaction;
|
·
|
the
extent of the related party’s interest in the transaction;
and
|
·
|
whether
the transaction would require a waiver of our Code of Ethics and Business
Conduct.
|
The Audit
Committee may, in its sole discretion, approve or deny any related person
transaction. Approval of a related person transaction may be
conditioned upon our company and the related person taking such precautionary
actions, as the Audit Committees deems appropriate.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under
federal securities laws, our directors and officers, and any beneficial owner of
more than 10% of a class of our equity securities, are required to report their
ownership of our equity securities and any changes in such ownership to the
Securities and Exchange Commission. Specific due dates for these
reports have been established by the Securities and Exchange Commission, and we
are required to disclose in this proxy statement any delinquent filing of such
reports and any failure to file such reports during the fiscal year ending
September 30, 2009.
Based upon
information provided by our officers and directors, we believe that all
officers, directors and 10% shareholders filed all reports on a timely basis in
fiscal year 2009.
PROPOSAL
3:
APPOINTMENT
OF INDEPENDENT AUDITORS
The Audit
Committee has selected Grant Thornton LLP as our independent registered public
accounting firm for the fiscal year ending September 30, 2010. While
the Audit Committee retains the sole authority to retain, compensate, oversee
and terminate the independent registered public accounting firm, the Audit
Committee is submitting the reappointment of Grant Thornton LLP as our
independent registered public accountants for ratification. In the
event the shareholders do not ratify the reappointment of Grant Thornton LLP,
the Audit Committee will reconsider the selection.
The
affirmative vote of the holders of a majority of the shares of common stock
represented at the Meeting and entitled to vote is required to approve the
ratification of the appointment of the independent auditors, provided that the
total number of shares that vote on the proposal represent a majority of our
shares outstanding on the record date. Proxies will be voted in favor
of this proposal unless otherwise indicated.
THE BOARD
OF DIRECTORS RECOMMENDS
THAT
SHAREHOLDERS VOTE FOR
THE
RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP
_______________________
RELATIONSHIP
WITH INDEPENDENT ACCOUNTANTS
The Audit
Committee has selected Grant Thornton LLP as its independent registered public
accounting firm for Clearfield’s fiscal year ending September 30, 2010 and has
asked the shareholders to ratify such appointment. Representatives of
Grant Thornton LLP are expected to be present at the Meeting, will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
Accountant
Fees and Services
The
following is an explanation of the fees billed to us by Grant Thornton LLP for
professional services rendered for the fiscal years ended September 30, 2009 and
September 30, 2008, which totaled approximately $160,551 and $172,000,
respectively.
Audit Fees.
The
aggregate fees billed or estimated to be billed to us for professional services
related to the audit of our annual financial statements, review of financial
statements included in our Forms 10-Q, or other services normally provided by
Grant Thornton LLP in connection with statutory and regulatory filings or
engagements for the fiscal years ended September 30, 2009 and September 30, 2008
totaled approximately $115,000 and $116,000, respectively.
Audit-Related
Fees.
The aggregate fees billed to us for professional
services for assurance and related services by Grant Thornton LLP that are
reasonably related to the performance of the audit or review of our financial
statements and are not reported above under “Audit Fees” for the fiscal years
ended September 30, 2009 and September 30, 2008 totaled approximately $12,900
and $12,400, respectively. Audit-related fees consist of fees for
services relating to the audit of our 401(k) plan, consultation relating to
internal control over financial reporting and, for fiscal year 2008, review of
certain amendments to our 2007 Stock Compensation Plan.
Tax Fees.
The
aggregate fees billed to us by Grant Thornton LLP for professional services
related to tax compliance, tax advice, and tax planning, including preparation
of federal and state tax returns for the fiscal years ended September 30, 2009
and September 30, 2008, totaled approximately $32,900 and $43,862,
respectively.
All Other
Fees.
There were no fees billed to us by Grant Thornton LLP
for the fiscal years ended September 30, 2009 and September 30, 2008 other than
those described above.
Audit
Committee Pre-Approval Procedures
We have
not adopted formal pre-approval policies and procedures for the Audit Committee
relating to audit and certain permitted non-audit services by the independent
auditors. However, as a matter of Clearfield policy and practice, our
Audit Committee is required to and does approve all audit and permitted
non-audited services by the independent auditors (including the terms of the
engagement and fees relating thereto) prior to engagement of the independent
auditor to render such services. The Audit Committee does not
delegate its pre-approval authority to any person, including
management. All of the services described above for fiscal year 2009
were pre-approved by the Audit Committee before Grant Thornton LLP was engaged
to render the services.
SHAREHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
Clearfield’s
2011 Annual Meeting of Shareholders is expected to be held on February 24, 2011,
and proxy materials in connection with that meeting are expected to be mailed on
or about January 18, 2011.
The proxy
rules of the Securities and Exchange Commission permit our shareholders, after
timely notice to us, to present proposals for shareholder action in our proxy
statement where such proposals are consistent with applicable law, pertain to
matters appropriate for shareholder action and are not properly omitted by our
action in accordance with the proxy rules. In order for a shareholder
proposal to be considered for inclusion in the proxy statement for the 2011
Annual Meeting of Shareholders, the proposal prepared in accordance with the
proxy rules must be received by the Secretary of Clearfield, Inc. in writing at
our corporate offices, 5480 Nathan Lane, Suite 120, Plymouth, Minnesota 55442,
no later than September 27, 2010.
Pursuant
to our bylaws, in order for any proposal to be properly brought before the next
annual meeting by a shareholder, including a nominee for director to be
considered at such annual meeting, the shareholder must give written notice of
such shareholder’s intent to bring a matter before the annual meeting, or
nominate the director, not less than 90 days prior to the first anniversary date
of the prior year’s annual meeting or no later than November 27,
2010. Each such notice must set forth certain information with
respect to the shareholder who intends to bring such matter before the meeting
and the business desired to be conducted, as set forth in greater detail in the
section of this proxy statement entitled “Director Nominations – Shareholder
Proposals for Nominees” and in our bylaws.
In
addition, if we receive notice of a shareholder proposal after December 11,
2010, such proposal also will be considered untimely pursuant to Rules 14a-4 and
14a-5(e) and the persons named in proxies solicited by the Board of Directors
for our 2011 Annual Meeting of Shareholders may exercise discretionary voting
power with respect to such proposal.
OTHER
BUSINESS
At the
date of this proxy statement, management knows of no other business that may
properly come before the Meeting. However, if any other matters
properly come before the Meeting, the persons named in the enclosed form of
proxy will vote the proxies received in response to this solicitation in
accordance with their best judgment on such matters.
|
By
Order of the Board of Directors
|
|
|
|
|
|
|
|
Ronald
G. Roth
|
|
Chairman
of the Board of Directors
|
|
|
Plymouth,
Minnesota
|
|
January
25, 2010
|