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EX-31.1 - AUTHENTEC INC | ex31-1.htm |
EX-31.2 - AUTHENTEC INC | ex31-2.htm |
United
States
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
AMENDMENT
NO. 1
ý
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended January 1, 2010
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission
File Number 001-33552
AuthenTec,
Inc.
(Exact
name of Registrant as Specified in its Charter)
Delaware
|
59-3521332
|
(State or Other Jurisdiction
of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
100
Rialto Place, Suite 100, Melbourne, Florida
|
32901
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant’s
Telephone Number, Including Area Code: (321) 308-1300
Securities
Registered Pursuant to Section 12(b) of the Act:
Title
of Each Class
|
Name
of Exchange on Which Registered
|
|
Common
Stock, $0.01 par value
|
Nasdaq
Stock Market, LLC
|
Securities
Registered Pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes o No ý
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange
Act. Yes o No ý
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ý No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes o No o
-1-
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
|
o
|
Accelerated filer
|
ý
|
Non-accelerated
filer
|
o
|
Smaller reporting company
|
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No ý
The
aggregate market value of the registrant’s common stock held by non-affiliates
computed by reference to the NASDAQ Global Market closing price on July 3, 2009
(the last business day of the registrant’s most recently completed second fiscal
quarter) was approximately $50,001,000. The number of shares of the
registrant’s common stock outstanding as of March 17, 2010 was
29,900,986.
-2-
EXPLANATORY
NOTE – AMENDMENT NO. 1
This
Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K
of AuthenTec, Inc. for the year ended January 1, 2010, filed with the
Securities and Exchange Commission on March 17, 2010 (the “Original 10-K”) is
being filed solely for the purpose of including the information required by
Part III of Form 10-K. Such information was previously expected
to be incorporated by reference to our definitive proxy statement for the 2010
Annual Meeting of Stockholders. As we will not file our definitive proxy
statement within 120 days of our fiscal year ended January 1, 2010,
Part III, Items 10-14, of the Original 10-K are hereby amended and restated
in their entirety.
Except as described above, this Amendment No. 1 on Form 10-K/A
does not modify or update disclosure in, or exhibits to, the Original 10-K.
Furthermore, this Amendment No. 1 on Form 10-K/A does not change any
previously reported financial results, nor does it reflect events occurring
after the date of the Original 10-K. Information not affected by this Amendment
remains unchanged and reflects the disclosures made at the time the Original
10-K was filed.
CAUTIONARY
STATEMENT RELATING TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This
Amendment No. 1 on Form 10-K/A contains statements relating to
expected future results and business trends that are based upon our current
estimate, expectations, and projections about the industry, and upon our
beliefs, and certain assumptions we have made that are “forward-looking
statements” as defined in the Private Securities Litigation Reform Act of 1995.
Words such as “anticipates,” “guidance,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” “may,” “will,” “prospects,” “outlook,”
“forecast,” and variations of these words or similar expressions are intended to
identify “forward-looking statements.” In addition, any statements that refer to
expectations, projections, or other characterizations of future events or
circumstances, including any underlying assumptions, are “forward-looking
statements.” Such statements are not guarantees of future performance and are
subject to certain risks, uncertainties, and assumptions that are difficult to
predict. Therefore, our actual results may differ materially and adversely from
those expressed in any “forward-looking statement” as a result of various
factors. These factors include, among others, those discussed under “Risk
Factors” in Part I, Item 1A of the Original 10-K and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item
7 of the Original 10-K. These “forward-looking statements” are made only as of
the date hereof, and we undertake no obligation to update or revise the
“forward-looking statements,” whether as a result of new information, future
events or otherwise.
PART
III
Unless
the context suggests otherwise, references herein to “AuthenTec,” the “Company,”
“we,” “us” and “our” mean AuthenTec, Inc. and its subsidiaries.
Item
10. Directors, Executive Officers and Corporate Governance.
Board
of Directors
The
following table sets forth the names, ages, principal occupation and tenure of
each of our directors.
Name
|
Principal
Occupation
|
Age
|
Director
Since
|
|
F.
Scott Moody
|
Chief
Executive Officer of AuthenTec
|
53
|
1998
|
|
Matthew
P. Crugnale
|
President
of Crugnale Associates
|
73
|
1998
|
|
Chris
Fedde
|
President
and Chief Operating Officer of SafeNet, Inc.
|
59
|
2008
|
|
Robert
E. Grady
|
Chairman
of the Board of AuthenTec and Managing Partner of Cheyenne Capital
Fund
|
52
|
2004
|
|
Gustav
H. Koven III
|
Partner/Manager
of various Venture Capital Partnerships/LLCs
|
67
|
1999
|
|
William
Washecka
|
Retired
Partner of Ernst & Young LLP; Consultant
|
62
|
2008
|
-3-
The
business experience and other specific skills, attributes and qualifications of
each of our directors are as follows:
F. Scott Moody is our
co-founder and has served as a member of our Board of Directors and our Chief
Executive Officer, or CEO, since inception. He was elected as Chairman of our
Board of Directors in October 2006, and served in this capacity until January
2010. From inception to July 2006, he also served as our President. Prior to
founding the company in 1998, Mr. Moody was the Vice President of the Core
Products Division of the Semiconductor Sector of Harris Corporation, or Harris,
now Intersil Corporation. Mr. Moody began his career at Harris in 1980,
during which time he held positions in engineering, program management and
marketing. Mr. Moody received a BS degree in Industrial Engineering from
North Carolina State University and an Executive MBA from the University of
Florida. Pursuant to Mr. Moody’s employment agreement, we have agreed
that the Nominating and Corporate Governance Committee of our Board of Directors
will use its best efforts to nominate Mr. Moody to our Board of Directors.
As our co-founder and CEO, Mr. Moody brings insight into all aspects of our
business. Mr. Moody’s leadership, together with the skills and
knowledge of our industry and the Company, has been instrumental in our
leadership position in the market and expansion towards being a solutions
provider.
Matthew P. Crugnale has
served as a member of our Board of Directors since our founding in 1998.
Mr. Crugnale has had a 50-year career in the electronics industry, and
since 1982, he has been the President of Crugnale Associates, a Silicon
Valley-based strategic consulting firm. Mr. Crugnale has successfully
assisted over 70 start-up and spin-off technology companies. Before starting
Crugnale Associates, he was Vice President, International Marketing for Beckman
Instruments. Prior to this, Mr. Crugnale spent 20 years as a General
Electric executive culminating his GE career as Director, Europe, where he
worked directly for Jack Welch. Mr. Crugnale earned a BSEE degree from Case
Institute of Technology, and his education includes graduate work at the
Massachusetts Institute of Technology’s Sloan School of Management and
Renesselar Polytechnic Institute. Mr. Crugnale offers our board a deep
understanding of the electronics industry gained from over 50 years of
experience in the industry and valuable insight into corporate and marketing
strategies as the president of his own strategic consulting firm.
Chris Fedde has served as a
member of our Board of Directors since February 2008. Mr. Fedde has been
the President and Chief Operating Officer of SafeNet, Inc., a $500 million
global leader in information security, since October 2006. From February 2001
through October 2006, Mr. Fedde served as Director of Corporate Business
Development and as a General Manager at SafeNet, Inc., a leader in products that
provide information security and data protection. Mr. Fedde is also on the
Board of Directors of SafeNet. Prior to joining SafeNet, Mr. Fedde was the
Director of Secure Products at Harris, a position he held after leading several
radio business units at Harris. Prior to this, Mr. Fedde directed R&D
departments at Motorola, Inc. While at Motorola and Harris, he was awarded
several patents in the wireless field. Mr. Fedde earned a BSEE degree from the
University of Iowa. Mr. Fedde’s experience at SafeNet, Harris and
Motorola provide the board with an extensive knowledge of the technology
industry and insight into industry wide trends which affect our
business.
Robert E. Grady has served as
a member of our Board of Directors since June 2004. He was elected as Chairman
of our Board of Directors in January 2010. In 2009, Mr. Grady became a partner
at Cheyenne Capital Fund, a private equity firm, and was recently appointed as
Chairman of New Jersey’s Council of Economic Advisors by Governor Chris
Christie. From May 2000 to his retirement in 2009, Mr. Grady was a Managing
Director with the Carlyle Group where he had served as a member of the
Management Committee, global head of the firm’s venture capital practice, and
fund head of Carlyle’s U.S. venture and growth capital fund, Carlyle Venture
Partners. Prior to joining Carlyle, Mr. Grady was Managing Director and
member of the Management Committee at Robertson Stephens & Company, a
leading emerging growth investment bank. Previously, he served in the White
House as Deputy Assistant to President George H.W. Bush and Executive Associate
Director of the Office of Management and Budget. Mr. Grady also serves on
the Board of Directors of Maxim Integrated Products, Inc., a company that
designs, manufactures, and sells high-performance semiconductor products, Thomas
Weisel Partners Group, a leading investment banking firm, and privately held
companies E-Screen, Inc; Eleutian Technology, LLC; Viator, Inc. and Symbio LLC.
He is a former Director of Blackboard, a leading provider of software solutions
for the education industry, and of several privately held companies.
Mr. Grady is a former Director and Chairman of the National Venture Capital
Association, and is a member of the Board of Governors of the Pardee RAND
Graduate School, the Advisory Council of the Royal Bank of Canada’s Venture
Capital Funds, and the National Commission on Energy Policy. Mr. Grady is a
graduate of Harvard College and earned a MBA from Stanford Graduate School of
Business. Mr. Grady’s vast experience in the finance industry, and in
working as a director of and advisor to emerging growth companies, provides the
board with valuable insight into corporate strategy and economic
trends. Throughout his career he has analyzed the financial
performance and strategies of companies and brings this experience to bear as
the Chairman of our board.
-4-
Gustav H. Koven III has
served as a member of our Board of Directors since 1999. Mr. Koven was a
manager of certain aspects of Knickerbocker 1999 Direct Investments LLC from
1999 to 2008 and was a manager of certain aspects of HT 1999 Direct Investments
LLC from 2004 to 2008. Mr. Koven has been the Managing Member of Wildfields
Venture Advisors LLC since 2003. After June 2007, Mr. Koven’s role at
Knickerbocker 1999 Direct Investments LLC and HT 1999 Direct Investments LLC was
with respect to investments of those entities in companies other than the
investment in our company. Mr. Koven is currently a Founding Partner of
SmithDefieux Capital Partners (SDCP Partners LLC) and a Founding Partner of
Savano Direct Capital
Partners LLC and BrownSavano Direct Capital
Partners, LP. From 1990 to the present, Mr. Koven has been a partner in a
number of Edison Venture Fund partnerships. Prior to joining Edison,
Mr. Koven was the President of Chase Manhattan Capital Corporation and
Chase Manhattan Investment Holdings. Mr. Koven earned a Bachelor of Engineering
degree from Stevens Institute of Technology and a MBA from Columbia University
Graduate School of Business. As a member of our board since 1999, Mr.
Koven has been and continues to be instrumental in our growth and offers our
board extensive knowledge of the Company and our business. In
addition, Mr. Koven has served on the boards of multiple technology companies
and brings this experience to bear as the Chairman of our Nominating and
Corporate Governance Committee.
William Washecka has served
as a member of our Board of Directors since June 2008. Mr. Washecka also
serves as a director on the board of Online Resources and in the past served as
a director on the board of Avalon Pharmaceuticals, Inc. From 2004 to 2006,
Mr. Washecka served as Chief Financial Officer of Prestwick
Pharmaceuticals, which specializes in therapies for central nervous system
disorders. From 2001 to 2002, Mr. Washecka served as Chief Financial
Officer for USinternetworking, Inc., an enterprise and e-commerce software
service provider. Previously, Mr. Washecka was a senior audit partner with
Ernst & Young LLP, which he joined in 1972 and was responsible for the
High Technology and emerging business practice in the Mid Atlantic area. He has
a BS in accounting from Bernard Baruch College of New York and completed the
Kellogg Executive Management Program. Mr. Washecka’s extensive financial and
accounting experience gained as a CFO of multiple companies and as a partner at
Ernst & Young is a great asset to our board and our Audit Committee in
particular.
Executive
Officers
The
following table sets forth certain information about our current executive
officers:
Name
|
Position(s)
|
|
Age
|
|
F. Scott Moody
|
Director and
Chief Executive Officer
|
|
53
|
|
Lawrence J. Ciaccia, Jr.
|
President
|
|
51
|
|
Gary R.
Larsen
|
Chief
Financial Officer
|
|
46
|
|
Anthony
Iantosca
|
Sr.
Vice President—Worldwide Operations
|
|
45
|
|
Frederick R. Jorgenson
|
Vice
President—General Counsel
|
|
45
|
The
business experience and other specific skills of each of our executive officers
(other than F. Scott Moody discussed above) are as follows:
Lawrence J. Ciaccia, Jr.
has been our President since July 2006. He joined us as Executive Vice President
of Marketing in March 2005. From March to November 2004, he was Vice President
and General Manager of the wireless data and networking component products
division at Conexant Systems, Inc. From 1999, he held the same position through
a series of acquisitions with Globespan Virata Inc. and Intersil.
Mr. Ciaccia began his career as a design engineer in 1980 with the
Semiconductor Sector of Harris. Mr. Ciaccia received a BS degree in
Electrical Engineering from Clarkson University and an MBA from Florida
Institute of Technology.
Gary R. Larsen has been our
Chief Financial Officer since December 2006. From April 2005 to December 2006,
Mr. Larsen served as Chief Financial Officer of Artesyn Technologies, Inc.
Mr. Larsen also served as Artesyn’s Corporate Controller from May 1999 to
April 2005. Prior to joining Artesyn, Mr. Larsen served in a variety of
management positions with W.R. Grace & Co. Mr. Larsen began his
career with KPMG Peat Marwick, LLP. Mr. Larsen received a BS degree from
the State University of New York at Buffalo and an MBA from Leonard N. Stern
School of Business at New York University.
-5-
Anthony Iantosca has been our
Sr. Vice President of Worldwide Operations since August 2008. From 2005 to 2008,
Mr. Iantosca served as our Vice President of Operations. He joined us as
Director of Manufacturing Operations in August 2000. Prior to joining us,
Mr. Iantosca was a director with Signetics Corporation from 1999 to August
2000. Prior to that, he was the Director of Operations for Catalyst
Semiconductor Inc. from 1995 to 1999. Prior to joining Catalyst,
Mr. Iantosca served as Director of Offshore Manufacturing for Cypress
Semiconductor Corporation. Mr. Iantosca received an MBA from the J.L.
Kellogg Graduate School of Management at Northwestern University, an
International MBA from the Hong Kong University of Science and Technology, and
an Electronic Engineering diploma from the GTE Sylvania Technical
School.
Frederick R. Jorgenson has
been our Vice President and General Counsel since November 2006. Prior to
joining us, Mr. Jorgenson was Senior Counsel for intellectual property and
licensing at Raytheon Company from October 2005 to November 2006. From April
2005 to October 2006, Mr. Jorgenson served as a consultant, after having
served as the Chief Executive Officer of RJ Mears, LLC from January 2003 to
April 2005. From October 2000 through January 2003, Mr. Jorgenson served as
an Assistant General Counsel of Fujitsu Network Communications, Inc. Prior to
that, Mr. Jorgenson served as intellectual property and licensing counsel
with Harris. Mr. Jorgenson received a BS degree in Electrical Engineering
from Florida International University and a JD degree from Florida State
University.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires our executive officers and
directors and persons who beneficially own more than 10% of our Common Stock to
file initial reports of beneficial ownership and reports of changes in
beneficial ownership with the SEC. Such persons are required by SEC regulations
to furnish us with copies of all Section 16(a) forms filed by such
persons.
Based
solely on our review of such forms furnished to us and written representations
from certain reporting persons, we believe that all filing requirements
applicable to our executive officers, directors and greater-than-10%
stockholders were complied with.
Corporate
Governance
Code
of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics that applies to all of our
employees, officers and directors. The Code of Business Conduct and Ethics is
available on our website at www.authentec.com. It is our
intention to disclose any waivers of, or amendments to, the Code of Business
Conduct and Ethics on our website, www.authentec.com.
Audit
Committee
Our Audit
Committee oversees our corporate accounting and financial reporting process
among other matters. The current members of our Audit Committee are William
Washecka, Robert E. Grady, Gustav H. Koven III, and Matthew P. Crugnale.
Mr. Washecka is the Chairman of the Audit Committee and our audit committee
financial expert as currently defined under applicable SEC rules. We believe all
members of our Audit Committee meet the criteria for independence under, and
that the functioning of our Audit Committee complies with, the applicable
requirements of the Nasdaq Stock Market and the SEC rules and
regulations.
Item
11. Executive Compensation.
Compensation
Discussion and Analysis
The
primary goals of the Compensation Committee of our Board of Directors with
respect to executive compensation are to attract and retain the most talented
and dedicated executives possible, to tie annual and long-term cash and stock
incentives to achievement of specified performance objectives, and to align
executives’ incentives with stockholder value creation.
To
achieve these goals, our Compensation Committee recommends executive
compensation packages to our Board of Directors that are generally based on a
mix of salary, discretionary bonus and equity awards. Although our Compensation
Committee has not adopted any formal guidelines for allocating total
compensation between equity compensation and cash compensation, we intend to
implement and maintain compensation plans that tie a substantial portion of our
executives’ overall compensation to achievement of corporate goals and
value-creating milestones such as the development of our products, the
establishment and maintenance of key strategic relationships, reaching sales and
marketing targets and the growth of our customer base as well as our financial
and operational performance, as measured by metrics such as revenue and
profitability.
-6-
Our
Compensation Committee evaluates individual executive performance with a goal of
setting overall compensation at a level that is designed to attract and retain
the most talented executives. The Compensation Committee takes into account our
relative performance in the market and our own strategic goals. The committee
also considers third party compensation survey data that encompass information
from high tech companies, including numerous semiconductor
companies.
In the
past, we have utilized the services of a compensation consultant to review our
policies and procedures with respect to executive compensation. In early 2008,
we engaged an independent compensation consultant to review our compensation
program, to conduct market comparisons, and to make recommendations regarding
suggested changes to our executive compensation program. The
Compensation Committee used this information as a guide in establishing our
compensation program for 2008. For 2009, we continued the
compensation program without significant deviation, and we did not engage a
compensation consultant. In addition, we have historically conducted
an annual review of the aggregate level of our executive compensation, as well
as the mix of elements used to compensate our executive officers. This review is
based on a survey of executive compensation paid by similar companies in the
semiconductor industry conducted externally, and is used as a gauge for
evaluating market competitiveness. We did not undertake such annual review for
2009, however, because we made a decision not to increase compensation levels in
an effort to control expenses. Our Compensation Committee also has historically
taken into account input from other independent members of our Board of
Directors and publicly available data relating to the compensation practices and
policies of other companies both within and outside of our
industry.
Our
Compensation Committee intends to employ the services of third-party executive
compensation specialists from time to time, as it sees fit, in connection with
the establishment of cash and equity compensation and related
policies.
Elements
of Compensation
The
compensation received by our executive officers consists of the following
elements:
Base Salary. Base salaries for
our executives are established based on the scope of their responsibilities and
individual experience, taking into account competitive market compensation paid
by other companies for similar positions within the semiconductor industry. Base
salaries are reviewed annually, and adjusted from time to time to realign
salaries with market levels after taking into account individual experience,
responsibilities and overall performance. Salaries are set annually by the
committee, in the case of the Chief Executive Officer, and by the Chief
Executive Officer and approved by the committee, for the other executives. The
criteria for determining base salary are subjective rather than objective and in
the past have included how the executive has contributed to our company’s
revenue and operating net income, and how the executive has carried out the
responsibilities of his position. For example, an executive may have been
responsible for securing a new major customer or developing or producing a new
product.
Given the
rapidly deteriorating economic conditions in 2009, it was necessary to
substantially reduce expenses, including in the area of compensation. As part of
these actions, our executive officers voluntarily agreed to reduce their annual
base salaries for 2009. As a result of the reduction, Mr. Moody’s annual
base salary was reduced approximately 10% to $265,000 per year, and the annual
salaries of the other named executive officers were reduced between 5% and 10%,
to a range of $179,550 to $204,120.
In March
2010 our Board of Directors approved a salary increase for Mr. Jorgenson in the
amount of $25,450, bringing his current annual compensation to $205,000, in
recognition of his significant contributions toward the successful resolution in
2009 of several legal proceedings involving the company.
-7-
In April
2010, our Board of Directors, upon the recommendation of the Compensation
Committee, reinstated the annual salaries for Mr. Moody and the executive
officers to their 2008 levels. Mr. Moody’s annual salary was
reinstated to $295,000; and the annual salaries for our other executive officers
once again range from $195,300 to $226,800.
Discretionary Annual Bonus. In
addition to base salaries, our Compensation Committee has the authority to award
discretionary annual bonuses to our executive officers. The annual incentive
bonuses are intended to compensate officers for achieving corporate goals and
for achieving what the committee believes to be value-creating milestones. In
prior years, each executive officer was eligible for a discretionary annual
bonus up to an amount equal to a specified percentage of such executive
officer’s salary. The target percentages were set at levels that, upon
achievement of the targets, were likely to result in bonus payments that our
Compensation Committee believed to be at or near the median for target bonus
amounts for comparable companies in our industry. However, our Compensation
Committee could increase the annual bonus paid to our executive
officers.
Given the
economic conditions and the need to reduce expenses, our Compensation Committee
determined that there would not be a discretionary annual bonus paid in
connection with performance in 2009, but would rely on longer-term equity
compensation to more strategically align our executive officers’ compensation
with the interests of our shareholders. While Mr. Moody’s employment contract
provides for an annual bonus, he voluntarily agreed to forgo his participation
in the discretionary annual incentive bonus for 2009.
Our
Compensation Committee again determined that there would not be a discretionary
annual bonus paid in connection with performance in 2010, but would continue to
rely on longer-term equity compensation. Mr. Moody voluntarily agreed to forgo
his participation in the discretionary annual incentive bonus for 2010,
notwithstanding the terms of his employment contract.
Long-Term Incentive Program.
We believe that long-term performance is achieved through an ownership culture
that encourages such performance by our executive officers through the use of
stock options and stock-based awards. Our equity compensation plans have been
established to provide certain our employees, including our executive officers,
with incentives to help align those employees’ interests with the interests of
our stockholders. Our Compensation Committee believes that the use of stock
options and stock-based awards offers the best approach to achieving our
compensation goals. While we have not adopted stock ownership guidelines, our
equity compensation plans have provided the principal method for our executive
officers to acquire a meaningful ownership interest in the
company.
Prior to
our initial public offering, we granted equity awards primarily through our 2004
Stock Incentive Plan, and following our initial public offering, we have
primarily granted equity awards through our 2007 Stock Incentive Plan. Each plan
was adopted by our Board of Directors and stockholders to permit the grant of
stock options, stock appreciation rights, restricted stock, and other
stock-based awards to our officers, directors, employees and consultants.
Typically, we grant options to individuals, including our executive officers, as
part of their commencement of employment, and the amount of options is based
upon the individual’s role and level of compensation. Additionally, we believe
it is important that our executives and other employees have a certain amount of
unvested stock options to provide incentives for them to continue their
employment with the company. As such we typically grant new options
on an annual basis. Equity awards are typically granted on the first trading day
of the month following approval by our Compensation Committee or its designee.
We do not have a program or practice of coordinating the timing of our equity
grants with the release of material non-public information.
Stock
Options
In the
first half of each year, we normally issue a broad based equity grant to the
majority of our employees. Our Compensation Committee believes that these annual
equity grants are important both for aligning the interests of our employees
with shareholders, as well as for the retention of our employees, since new
grants are unvested and typically require the employees to remain with the
company for several years in order for the awards to vest and become
exercisable. In determining the overall size of the 2009 annual grant, the
Compensation Committee sought the advice of a third party compensation
consultant regarding competitive market trends and considered the size of the
estimated burn rate. The Compensation Committee reviewed competitive trend data,
which the committee adjusted downward in consideration of the weak macroeconomic
conditions. The Compensation Committee further refined the individual employee
grants by considering the employee’s job performance and the number of unvested
shares held by the employee. As a part of our 2009 annual equity grants, in the
second quarter of 2009, the Compensation Committee granted stock options to
purchase an aggregate of 98,040, 49,020, 39,216, 42,485 and 35,950 shares of
common stock that vest over a four year period to Messrs. Moody, Ciaccia,
Larsen, Iantosca, and Jorgenson, respectively.
-8-
As
described further in “Employment Arrangements with Named Executives,” each of
our named executives agreed to salary reductions ranging from five to ten
percent of their annual salaries. Additionally, most other employees earning
over one hundred thousand dollars per year participated in the salary reduction.
Subsequent to the executives agreeing to the salary reductions, the Compensation
Committee determined that the named executives and all other employees who
received salary reductions should receive stock option grants to partially
offset the reduction in salaries with longer term equity compensation.
Accordingly, on March 2, 2009, the Compensation Committee granted stock
options to purchase an aggregate of 6,000 and 4,000 shares of our common stock
at an exercise price of $1.36, which vest over two years with 50% vesting one
year from March 2, 2009, with the remaining 50% vesting two years from the
grant date, to Messrs. Iantosca and Jorgenson, respectively. On April 1,
2009, to partially offset the reduction in salaries, the Compensation Committee
also granted stock options to purchase an aggregate of 12,300, 9,500 and 8,600
shares of our common stock at an exercise price of $1.52, which vest over two
years with 50% vesting one year from the grant date, with the remaining 50%
vesting two years from the grant date, to Messrs. Moody, Ciaccia and Larsen,
respectively.
The
Compensation Committee has not yet determined the size or the timing of the
annual grant for 2010.
Performance-Based Restricted
Stock Units
In early
2009, the Compensation Committee evaluated our performance-based equity
compensation program in consideration of several factors, including the state of
the company and industry and the elimination of the discretionary cash bonus in
2009. The Compensation Committee determined that an award of performance-based
restricted stock units (RSUs) to the named executive officers and other
employees was appropriate, and that the performance goals for such awards would
be based on corporate revenue and net income levels for the 2009 and 2010 fiscal
years. In accordance with this evaluation, on April 1, 2009, the
Compensation Committee granted an aggregate of 75,000, 53,000, 42,500, 42,500
and 25,000 performance-based restricted stock units, to Messrs. Moody, Ciaccia,
Larsen, Iantosca, and Jorgenson, respectively. Fifty percent of these
awards could be earned in 2009 and 50% in 2010, based on the company’s
achievement of a revenue goal and a net income goal for each year. Of
the amount that could be earned for each year, 75% could be earned based on
achievement of the revenue goal and 25% could be earned based on achievement of
the net income goal. If at least 80% of the revenue goal or net
income goal was achieved, then 50% of the RSUs associated with the respective
goal would be earned.
The
Compensation Committee determined that the 2009 targets would be stretch goals
designed to motivate management to explore opportunities for growth through
strategic M&A. Correspondingly, the revenue goal for 2009 was set
--well above internal targets-- at $45 million, and the net income (loss) goal
for 2009 was set at $(6.4) million. While management was diligent in considering
M&A opportunities, the Company only completed one small acquisition in 2009
and therefore the Company did not meet these revenue and net income targets.
Accordingly, the Compensation Committee determined that these goals were not
achieved for 2009, and therefore the RSUs attached to 2009 performance were not
earned and were cancelled. The plan remains in effect for the RSUs attached to
2010. The 2010 plan goals reflect improvement in revenue and net income as
compared to the 2009 goals and substantial improvement over the 2009 actual
performance.
Severance and/or Change-in-Control
Benefits. Our named executive officers, whom are designated below under
“Summary Compensation Table,” are entitled to certain severance and/or change of
control benefits, the terms of which are described below under “Change of
Control Arrangements.” We believe these severance and/or change-in-control
benefits are an essential element of our executive compensation package and
assist us in recruiting and retaining talented individuals. On April
3, 2009, Mr. Iantosca received an employment agreement. Our
Compensation Committee approved non-material amendments to the employment
agreements of Messrs. Moody, Larsen, Ciaccia and Jorgenson, effective
January 1, 2009, to comply with certain requirements under
Section 409A of the Internal Revenue Code of 1986, as amended, relating to
the change of control benefits of such executives. Our Compensation Committee
also approved amendments to the employment agreements of Messrs. Larsen, Ciaccia
and Jorgenson, each effective as of April 6, 2009, to update the change of
control arrangements to reflect grants of non-option based incentive equity to
executive officers. See below under “Employment Arrangements with Named
Executive Officers” and “Change of Control Arrangements” for a complete
description of the terms of such agreements.
-9-
Other Compensation. We have
employment agreements with Mr. Moody and each of our other executive
officers. Consistent with our compensation philosophy, we intend to continue to
maintain the current benefits and pre-requisites for our executive officers set
forth in their employment agreements and under existing company compensation
policies; however, our Compensation Committee, in its discretion, may in the
future revise, amend or add to the benefits and pre-requisites of any executive
officer if it deems it advisable. The material terms of our employment
agreements with our named executive officers are described below under
“Employment Arrangements with Named Executive Officers.”
Risk Assessment Related to
Compensation Policies and Practices. We have reviewed the
design and operation of our incentive compensation arrangements for all
employees, including executive officers, for the purpose of determining whether
such programs might encourage inappropriate risk-taking that could have a
material adverse effect on the company. Specifically, management
compiled an inventory of all incentive compensation arrangements applicable to
our employees at all levels, which were summarized and reviewed for the purpose
of identifying any aspects of such programs that might encourage behaviors that
could exacerbate material business risks to the company, and to ensure retention
of employees and achievement of the Company’s objectives. We also have
periodically engaged outside consultants who have assisted the Company in
comparing its compensation plans to other companies in the semiconductor
industry and also to other smaller public companies. We concluded that our
compensation plans, programs and policies do not encourage employees to take
risks that are reasonably likely to have a material adverse effect on our
long-term well-being.
Summary
Compensation Table
The
following table summarizes the compensation earned during 2007, 2008 and 2009 by
our Chief Executive Officer, Chief Financial Officer and our next three most
highly compensated executive officers for services rendered to us in all
capacities. We refer to these officers as our Named Executive
Officers.
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
|
|
Option
|
|
All
Other
|
|
Total
|
($)
|
($)
|
Awards
|
Awards
|
Compensation
|
($)
|
|||||||||
($)(1)
|
($)(2)
|
($)(3)
|
||||||||||||
F.
Scott Moody,
|
|
2009
|
|
271,173
|
|
—
|
|
114,000
|
|
94,439
|
|
9,881
|
|
489,493
|
Chief
Executive Officer
|
|
2008
|
|
287,520
|
|
60,844
|
197,856
|
|
558,051
|
|
17,345
|
|
1,121,616
|
|
|
2007
|
|
279,508
|
|
185,000
|
—
|
|
169,715
|
|
10,887
|
|
645,110
|
||
Lawrence
J. Ciaccia, Jr.
|
|
2009
|
|
208,482
|
|
—
|
|
83,960
|
|
62,889
|
|
1,301
|
|
356,632
|
President
|
|
2008
|
|
220,333
|
|
42,508
|
136,625
|
|
519,392
|
|
688
|
|
919,546
|
|
|
2007
|
|
207,250
|
|
82,184
|
—
|
|
62,545
|
|
652
|
|
352,631
|
||
Gary
R. Larsen,
|
|
2009
|
|
188,626
|
|
—
|
|
64,600
|
|
40,835
|
|
446
|
|
294,507
|
Chief
Financial Officer
|
|
2008
|
|
199,360
|
|
25,640
|
81,696
|
|
148,761
|
|
611
|
|
456,068
|
|
|
2007
|
|
190,000
|
|
50,229
|
—
|
|
488,611
|
|
84,849
|
|
813,689
|
||
Anthony
Iantosca,
|
|
2009
|
|
187,413
|
|
—
|
|
67,260
|
|
49,515
|
|
443
|
|
304,631
|
Sr.
Vice President—Worldwide Operations
|
|
2008
|
|
189,463
|
|
24,366
|
95,250
|
|
390,366
|
|
576
|
|
700,021
|
|
|
2007
|
|
176,096
|
|
46,554
|
—
|
|
465,027
|
|
541
|
|
688,218
|
||
Frederick
Jorgenson,
|
|
2009
|
|
181,367
|
|
—
|
|
38,000
|
|
33,834
|
|
426
|
|
253,627
|
Vice
President—General Counsel
|
|
2008
|
|
183,631
|
|
19,680
|
68,266
|
|
142,710
|
|
553
|
|
414,840
|
|
|
2007
|
|
175,000
|
|
46,264
|
—
|
|
31,785
|
|
63,904
|
|
316,953
|
(1)
|
Represents
the grant date fair value of restricted stock units granted to our named
executive officers, as estimated pursuant to FASB ASC Topic 718 for the
applicable fiscal year. Grant date fair value is calculated based on the
closing market price of the underlying shares on the date of the grant and
the probable outcome of performance-based vesting conditions, excluding
the effect of estimated forfeitures. The actual value realized from these
awards by our executive officers will depend on the achievement of
specified performance objectives. For more information regarding our
valuation of restricted stock unit awards, see “Management’s Discussion
and Analysis of Financial Conditions and Results of Operations—Critical
Accounting Policies—Stock-based Compensation” in our annual report on Form
10-K filed with the SEC on March 17,
2010.
|
-10-
(2)
|
Represents
the grant date fair value of stock options granted to our named executive
officers, as estimated pursuant to FASB ASC Topic 718 for the applicable
fiscal year.
|
(3)
|
For
2009, reflects group life insurance premiums paid by us on behalf of the
executives. Mr. Moody also received compensation for auto lease
allowance and miscellaneous
reimbursements.
|
Grants
of Plan—Based Awards in 2009
The
following table provides information regarding grants of plan-based awards to
our named executive officers during 2009.
Name
|
Grant
|
All Other
|
All Other
|
Exercise or Base
|
Grant Date
|
|||||||||||
Date
|
Estimated
Future Payouts
|
Stock Awards:
|
Option Awards:
|
Price
of Option
|
Fair Value of
|
|||||||||||
Under
Equity Incentive Plan
|
Number of
|
Number
of
|
Awards
|
Stock
and
|
||||||||||||
Awards
|
Shares of Stock
|
Securities
|
($/Sh)
|
Option
|
||||||||||||
Threshold
|
Target
|
Maximum
|
or
Units
|
Underlying
|
Awards
|
|||||||||||
(#)
|
(#)
|
(#)
|
(#)(1)
|
Options
|
($)(2)
|
|||||||||||
(#)
|
||||||||||||||||
F.
Scott Moody
|
4/1/2009
|
—
|
—
|
—
|
—
|
110,340
|
1.52
|
94,439
|
||||||||
4/1/2009
|
37,500
|
75,000
|
75,000
|
—
|
—
|
—
|
114,000
|
|||||||||
Lawrence
J. Ciaccia, Jr.
|
3/2/2009
|
2,500
|
2,500
|
2,500
|
—
|
—
|
—
|
3,400
|
||||||||
4/1/2009
|
—
|
—
|
—
|
—
|
73,520
|
1.52
|
62,889
|
|||||||||
4/1/2009
|
26,500
|
53,000
|
53,000
|
—
|
—
|
—
|
80,560
|
|||||||||
Gary
R. Larsen
|
4/1/2009
|
—
|
—
|
—
|
—
|
47,816
|
1.52
|
40,835
|
||||||||
4/1/2009
|
21,250
|
42,500
|
42,500
|
—
|
—
|
—
|
64,600
|
|||||||||
Anthony
Iantosca
|
3/2/2009
|
—
|
—
|
—
|
—
|
6,000
|
1.36
|
4,432
|
||||||||
4/1/2009
|
—
|
—
|
—
|
—
|
52,485
|
1.52
|
45,083
|
|||||||||
4/1/2009
|
21,250
|
42,500
|
42,500
|
—
|
—
|
—
|
64,600
|
|||||||||
4/1/2009
|
—
|
—
|
—
|
1,750
|
—
|
—
|
2,660
|
|||||||||
Frederick
Jorgenson
|
3/2/2009
|
—
|
—
|
—
|
—
|
4,000
|
1.36
|
2,954
|
||||||||
4/1/2009
|
—
|
—
|
—
|
—
|
35,950
|
1.52
|
30,880
|
|||||||||
4/1/2009
|
12,500
|
25,000
|
25,000
|
—
|
—
|
—
|
38,000
|
(1)
|
This
column shows restricted stock units granted during the fiscal year ended
January 1, 2010 with respect to the Named Executive Officer’s
performance during fiscal 2009. These stock units were performance based
awards. On January 1, 2010, 50% of all the shares of common stock
underling these awards, granted April 1, 2009, were forfeited based on
results achieved associated with each
award.
|
(2)
|
The
values of restricted stock unit and option awards granted have been
estimated pursuant to FASB ASC Topic 718. For more information regarding
our valuation of restricted stock unit and option awards, see
“Management’s Discussion and Analysis of the Financial Condition and
Results of Operations—Critical Accounting Policies—Stock-based
Compensation” in the Original 10-K, filed with the SEC on March 17,
2010.
|
Outstanding
Equity Awards at January 1, 2010
The
following table provides information concerning outstanding equity awards as of
January 1, 2010, by each of our named executive officers.
-11-
Option
Awards
|
Stock
Awards
|
|||||||||||||||||
Number
of Securities
Underlying
Unexercised
Options
|
Number
of
Shares
or
Units
of
|
Market
Value
of
Shares
or
Units
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
|
||||||||||||||
Exercisable | Unexercisable |
Option
Exercise
|
Option
Expiration
|
Stock
That
Have
Not
Vested
|
of
Stock
That
Have
Not
Vested
|
or
Other Rights
That
Have
Not
Vested
|
or
Other Rights
That
Have
Not
Vested
|
|||||||||||
Name
|
Grant
Date
|
(#)
|
(#)
|
Price
($)
|
Date
|
(#)(3)
|
($)(4)
|
(#)(5)
|
($)(6)
|
|||||||||
F.
Scott Moody
|
1/1/2001
|
50,000
|
(1)
|
-
|
$ 0.40
|
1/1/2011
|
||||||||||||
8/25/2003
|
817,541
|
(1)
|
-
|
0.20
|
6/1/2013
|
|||||||||||||
6/29/2006
|
216,995
|
(1)
|
25,233
|
2.84
|
5/28/2016
|
|||||||||||||
2/21/2007
|
29,515
|
(1)
|
12,154
|
6.00
|
2/20/2017
|
|||||||||||||
6/2/2008
|
30,750
|
(1)
|
51,250
|
13.74
|
6/1/2018
|
|||||||||||||
4/1/2009
|
-
|
(1)
|
98,040
|
1.52
|
3/31/2019
|
|||||||||||||
4/1/2009
|
-
|
(2)
|
12,300
|
1.52
|
3/31/2019
|
|||||||||||||
4/1/2009
|
37,500
|
82,875
|
||||||||||||||||
Lawrence
J. Ciaccia, Jr.
|
2/24/2005
|
203,484
|
(1)
|
3,845
|
0.60
|
2/23/2015
|
||||||||||||
2/21/2007
|
11,113
|
(1)
|
4,578
|
6.00
|
2/20/2017
|
|||||||||||||
3/3/2008
|
1,859
|
(1)
|
2,391
|
9.78
|
2/11/2018
|
|||||||||||||
6/2/2008
|
18,750
|
(1)
|
31,250
|
13.74
|
6/1/2018
|
|||||||||||||
6/3/2008
|
3,750
|
(1)
|
6,250
|
13.43
|
6/1/2018
|
|||||||||||||
8/1/2008
|
4,687
|
(1)
|
10,313
|
7.31
|
7/31/2018
|
|||||||||||||
10/1/2008
|
4,687
|
(1)
|
10,313
|
2.21
|
7/31/2018
|
|||||||||||||
1/2/2009
|
4,687
|
(1)
|
10,313
|
1.84
|
7/31/2018
|
|||||||||||||
4/1/2009
|
4,687
|
(1)
|
59,333
|
1.52
|
3/31/2019
|
|||||||||||||
4/1/2009
|
-
|
(2)
|
9,500
|
1.52
|
3/31/2019
|
|||||||||||||
3/2/2009
|
1,875
|
4,144
|
||||||||||||||||
4/1/2009
|
26,500
|
58,565
|
||||||||||||||||
Gary
R. Larsen
|
1/9/2007
|
96,025
|
(1)
|
46,175
|
2.84
|
12/11/2016
|
||||||||||||
2/21/2007
|
7,195
|
(1)
|
2,964
|
6.00
|
2/20/2017
|
|||||||||||||
3/3/2008
|
2,734
|
(1)
|
3,516
|
9.78
|
2/11/2018
|
|||||||||||||
6/2/2008
|
5,250
|
(1)
|
8,750
|
13.74
|
6/1/2018
|
|||||||||||||
6/2/2008
|
1,312
|
(1)
|
2,188
|
13.43
|
6/1/2018
|
|||||||||||||
4/1/2009
|
-
|
(1)
|
39,216
|
1.52
|
3/31/2019
|
|||||||||||||
4/1/2009
|
-
|
(2)
|
8,600
|
1.52
|
3/31/2019
|
|||||||||||||
6/2/2008
|
1,499
|
3,313
|
||||||||||||||||
4/1/2009
|
21,250
|
46,963
|
||||||||||||||||
Anthony
Iantosca
|
2/24/2005
|
11,719
|
(1)
|
-
|
0.60
|
3/1/2015
|
||||||||||||
2/21/2007
|
10,803
|
(1)
|
7,962
|
6.00
|
2/20/2017
|
|||||||||||||
4/26/2007
|
15,833
|
(1)
|
13,334
|
6.00
|
4/25/2017
|
|||||||||||||
3/3/2008
|
2,187
|
(1)
|
2,813
|
9.78
|
2/11/2018
|
|||||||||||||
6/2/2008
|
13,500
|
(1)
|
22,500
|
13.74
|
6/1/2018
|
|||||||||||||
6/3/2008
|
3,375
|
(1)
|
5,625
|
13.43
|
6/1/2018
|
|||||||||||||
8/1/2008
|
3,125
|
(1)
|
6,875
|
7.31
|
7/31/2018
|
|||||||||||||
10/1/2008
|
3,125
|
(1)
|
6,875
|
2.21
|
7/31/2018
|
|||||||||||||
1/2/2009
|
3,125
|
(1)
|
6,875
|
1.84
|
7/31/2018
|
|||||||||||||
3/2/2009
|
-
|
(2)
|
6,000
|
1.36
|
3/1/2019
|
|||||||||||||
4/1/2009
|
3,125
|
(1)
|
6,875
|
1.52
|
3/31/2019
|
|||||||||||||
4/1/2009
|
-
|
(1)
|
42,485
|
1.52
|
3/31/2019
|
|||||||||||||
6/2/2008
|
1,313
|
2,902
|
||||||||||||||||
4/1/2009
|
1,313
|
2,902
|
||||||||||||||||
4/1/2009
|
21,250
|
46,963
|
||||||||||||||||
Frederick
Jorgenson
|
11/13/2006
|
84,368
|
(1)
|
32,516
|
2.84
|
11/13/2016
|
||||||||||||
2/21/2007
|
5,527
|
(1)
|
2,277
|
6.00
|
2/20/2017
|
|||||||||||||
3/3/2008
|
2,187
|
(1)
|
2,813
|
9.78
|
2/11/2018
|
|||||||||||||
6/2/2008
|
5,250
|
(1)
|
8,750
|
13.74
|
6/1/2018
|
|||||||||||||
6/3/2008
|
1,312
|
(1)
|
2,188
|
13.43
|
6/1/2018
|
|||||||||||||
3/2/2009
|
-
|
(2)
|
4,000
|
1.36
|
3/1/2019
|
|||||||||||||
4/1/2009
|
-
|
(1)
|
35,950
|
1.52
|
3/31/2019
|
|||||||||||||
6/2/2008
|
937
|
2,071
|
||||||||||||||||
4/1/2009
|
12,500
|
27,625
|
(1)
|
Options
vest 25% one year from the date of grant, with the remaining vesting in
equal quarterly installments over a three-year
period.
|
-12-
(2)
|
Options
vest 50% one year from the date of grant, with the remaining 50% vesting
in two years from the date of grant.
|
(3)
|
Restricted
stock units were to vest 50% annually over a two year period. These stock
units were performance based awards.
|
(4) |
Restricted
stock units were to vest 25% annually over a four year period. These stock
units were performance based awards. On January 1, 2010, 50% of the
shares of common stock underling these awards were forfeited based on
results achieved associated with each award.
|
(5) |
The
market value of unearned and/or unvested restricted stock units on January
1, 2010.
|
(6) |
The
market value is calculated by multiplying the closing price ($2.21) of our
common stock on the NASDAQ Global Market on December 31, 2009, the last
trading day of fiscal 2009, by the number of restricted stock units that
had not vested.
|
Option
Exercises and Stock Vested
Our named
executive officers did not exercise any options during 2009. The following table
provides information concerning all stock awards vested and value realized upon
vesting, by the named executive officers during 2009.
Stock
Awards
|
||||||
Name
|
Name
|
Number
of Shares
Vested
(#)
|
Value
Realized upon
Vesting
($) (1)
|
|||
Moody
Scott F
|
F.
Scott Moody
|
—
|
—
|
|||
Ciaccia
Lawrence
|
Lawrence
J. Ciaccia, Jr.
|
625
|
1,125
|
|||
Larsen
Gary
|
Gary
R. Larsen
|
501
|
681
|
|||
Iantosca
Anthony
|
Anthony
Iantosca
|
874
|
1,259
|
|||
Jorgenson
Frederick
|
Frederick
Jorgenson
|
313
|
426
|
(1) Reflects
the fair market value of the underlying shares as of the vesting
date.
Employment
Arrangements with Named Executive Officers
F. Scott Moody. In June 2007,
we entered into an employment agreement with Mr. Moody, our Chief Executive
Officer. In March 2009, Mr. Moody agreed to a reduction in pay to provide
an annual base salary of $265,500. In April 2010, our Board of
Directors, upon recommendation of the Compensation Committee, reinstated Mr.
Moody’s annual salary to the 2008 level of $295,000. Mr. Moody
also informed the Compensation Committee that he would decline the discretionary
annual bonus for 2009 and 2010. Mr. Moody is eligible to participate in our
general employee benefit plans in accordance with the terms and conditions of
such plans. The employment agreement provides that Mr. Moody is employed
“at-will”, and his employment may be terminated at any time by us or
Mr. Moody. We have agreed that our Board’s Nominating Committee will use
its best efforts to nominate Mr. Moody to our Board of Directors. The
employment agreement contains non-competition provisions. The employment
agreement also provides Mr. Moody with certain severance and
change-of-control benefits. Mr. Moody also has a non-disclosure agreement
with us. See “Change of Control Arrangements” below.
Lawrence J. Ciaccia, Jr. In
March 2005, we entered into an employment agreement with Mr. Ciaccia, now
our President. In March 2009, Mr. Ciaccia agreed to a reduction in pay to
provide an annual base salary of $204,120. In April 2010, our Board
of Directors, upon recommendation of the Compensation Committee, reinstated Mr.
Ciaccia’s annual salary to the 2008 level of
$226,800. Mr. Ciaccia also informed the Compensation Committee
that he would decline the discretionary annual bonus for 2009 and
2010. Mr. Ciaccia is eligible to participate in our general employee
benefit plans in accordance with the terms and conditions of such plans. The
employment agreement also provides that Mr. Ciaccia is employed “at-will”,
and his employment may be terminated at any time by us or Mr. Ciaccia. The
employment agreement also provides Mr. Ciaccia with certain severance and
change-in-control benefits. He is also subject to our standard non-disclosure
and non-competition agreement. See “Change of Control Arrangements”
below.
-13-
Gary R. Larsen. In December
2006, we entered into an employment agreement with Mr. Larsen, our Chief
Financial Officer. In March 2009, Mr. Larsen agreed to a reduction in pay
to provide an annual base salary of $184,680. In April 2010, our Board of
Directors, upon recommendation of the Compensation Committee, reinstated Mr.
Larsen’s annual salary to the 2008 level of $205,200. Mr. Larsen
also informed the Compensation Committee that he would decline the discretionary
annual bonus for 2009 and 2010. Mr. Larsen is eligible to participate in
our general employee benefit plans in accordance with the terms and conditions
of such plans. Mr. Larsen is employed “at-will”, and his employment may be
terminated at any time by us or Mr. Larsen. The employment agreement also
provides Mr. Larsen with certain severance and change-in-control benefits.
He is also subject to our standard non-disclosure and non-competition agreement.
See “Change of Control Arrangements” below.
Anthony Iantosca. On
April 3, 2009, we entered into an employment agreement with
Mr. Iantosca, our Senior Vice President of Worldwide Operations. Pursuant
to his employment agreement, Mr. Iantosca is entitled to receive an annual
salary of $185,535 and is also eligible to receive an annual performance bonus.
His employment agreement reflects the reduction in pay to $185,535 that Mr.
Iantosca agreed to in March 2009. In April 2010, our Board of
Directors, upon recommendation of the Compensation Committee, reinstated Mr.
Iantosca’s annual salary to the 2008 level of
$195,300. Mr. Iantosca also informed the Compensation Committee
that he would decline the discretionary annual bonus for 2009 and 2010. He is
also subject to our standard non-disclosure and non-competition agreement. See
“Change of Control Arrangements” below.
Frederick R. Jorgenson. In
November 2006, we entered into an employment agreement with Mr. Jorgenson,
our Vice President andGeneral Counsel. In March 2009, Mr. Jorgenson agreed
to a reduction in pay to provide an annual base salary of
$179,550. Mr. Jorgenson also informed the Compensation Committee
that he will decline the discretionary annual bonus for 2009 and
2010. In March 2010, the Compensation Committee approved a
special bonus for Mr. Jorgenson in the amount of $20,000 in recognition of his
contribution in 2009. Additionally, the Compensation Committee
recommended Mr. Jorgenson’s annual salary be increased to $205,000 and that he
be eligible to receive a special bonus of $50,000 in 2010 based on the
achievement of certain MBOs related to M&A and integration
activities. The employment agreement also provides
Mr. Jorgenson with certain severance and change-in-control benefits. He is
also subject to our standard non-disclosure and non-competition agreement. See
“Change of Control Arrangements” below.
Change
of Control Arrangements
F. Scott Moody. Our
employment agreement with Mr. Moody, our Chief Executive Officer, provides
that upon the one year anniversary of a change of control, provided that
Mr. Moody remains an employee through such date, his equity awards will
immediately accelerate in vesting as to that amount of shares that would have
vested during the next twelve months. Should Mr. Moody be terminated either
as part of the change of control or prior to the first anniversary of the change
of control, his equity awards will immediately accelerate in vesting as to the
greater of that amount of additional shares that would have vested between the
date of his termination and the second anniversary of the change of control, or
the amount that would have otherwise vested over the following 18
months.
In
addition, if we terminate Mr. Moody’s employment at any time, before or
after our change of control, without cause or if he is constructively
terminated, he will also be entitled to receive all unpaid accrued obligations
up to termination and a pro-rata portion of the current bonus. He is also
entitled to severance pay equal to 18 months of his then-current salary, an
amount equal to 1.5 times the greater of his target bonus opportunity for the
current year or the actual bonus for the most recent fiscal year, a pro rata
portion of the bonus he would have otherwise been entitled to receive, and up to
18 months reimbursement for the cost of the continuation of his then-current
group health and dental insurance benefits. In addition, the vesting of his
unvested options will accelerate as if the amount of shares that would have
otherwise vested over the following 18 months.
The
following table describes the potential payments to Mr. Moody upon his
termination as of December 31, 2009 (the last business day of our 2009 fiscal
year) without cause or his constructive termination, if applicable, both in
connection with a change of control and not in connection with a change of
control:
-14-
Change
of Control
|
No
Change of Control
|
|||||||||||||||||||||||||||||||
Name
|
Salary(1)
|
Bonus(2)
|
Equity
Acceleration
(3)(4)
|
Benefits
(5)
|
Salary(1)
|
Bonus(2)
|
Equity
Acceleration
(3)(6)
|
Benefits
(5)
|
||||||||||||||||||||||||
F.
Scott Moody
|
$ | 442,500 | $ | 243,375 | $ | 120,942 | $ | 28,582 | $ | 442,500 | $ | 243,375 | $ | 90,707 | $ | 28,582 |
(1)
|
Represents
18 months of continued salary.
|
(2)
|
Represents
an amount equal to 1.5 times Mr. Moody’s target bonus opportunity of
55% of annual salary.
|
(3)
|
Calculated
based on a change of control taking place as of December 31, 2009 and
assuming a price per share of $2.21, which was the closing price of our
common stock as of December 31, 2009 as reported on the NASDAQ Global
Market.
|
(4)
|
Represents
an additional 24 months of vesting of outstanding options and restricted
stock units.
|
(5)
|
Represents
18 months of health and dental benefits under the Consolidated Omnibus
Budget Reconciliation Act of 1986, or
COBRA.
|
(6)
|
Represents
an additional 18 months of vesting of outstanding options and restricted
stock units.
|
In
addition to the potential payments described in the foregoing table, Mr. Moody
may be entitled under his employment agreement to a “gross-up” payment in the
event that he incurs an excise tax liability under Sections 280G and 4999 of the
Internal Revenue Code as a result of his receipt of payments or benefits treated
as contingent upon a change in control of the company or a closely related
event, such as termination of employment. The gross-up payment would be in an
amount necessary to place Mr. Moody in the same after-tax position had no
portion of such contingent payments been subject to excise tax.
Additionally,
if Mr. Moody dies, or if he is terminated due to disability, his employment
agreement provides that he (or his beneficiary) will be paid 12 months base
salary, payable in accordance with the company’s regular payroll practices, and
18 months continued health and dental benefits.
Lawrence J. Ciaccia, Jr. Our
employment agreement with Mr. Ciaccia, our President, provides that upon
Mr. Ciaccia’s termination by us without cause, his equity awards will
continue to vest for twelve months, or if he is constructively terminated by us,
all of his then outstanding equity awards will become immediately vested.
Mr. Ciaccia shall have 12 months from the termination date to exercise any
or all vested option shares. In addition, if we terminate Mr. Ciaccia’s
employment at any time, before or after our change of control, without cause or
if he is constructively terminated, he will also be entitled to receive
severance pay equal to nine months of his then-current salary, not including
accrued vacation, and up to nine months reimbursement for the cost of the
continuation of his then-current group health and dental insurance
benefits.
The
following table describes the potential payments to Mr. Ciaccia upon his
termination as of December 31, 2009 (the last business day of our 2009 fiscal
year) without cause or his constructive termination, if applicable, both in
connection with a change of control and not in connection with a change of
control:
Change
of Control
|
No
Change of Control
|
|||||||||||||||||||||||
Name
|
Salary(1)
|
Equity
Acceleration (2)(4)
|
Benefits (3)
|
Salary(1)
|
Equity
Acceleration (2)(4)
|
Benefits (3)
|
||||||||||||||||||
Lawrence
J. Ciaccia, Jr.
|
$ | 170,100 | $ | 50,924 | $ | 14,291 | $ | 170,100 | $ | 50,924 | $ | 14,291 |
(1)
|
Represents
nine months of continued salary.
|
(2)
|
Calculated
based on a change of control taking place as of December 31, 2009 and
assuming a price per share of $2.21, which was the closing price of our
common stock as of December 31, 2009 as reported on the NASDAQ Global
Market.
|
(3)
|
Represents
nine months of COBRA and dental health
benefits.
|
(4)
|
Represent
an additional 12 months of vesting if Mr. Ciaccia is terminated
without cause. If he terminates for good reason, all of his unvested stock
options and restricted stock units will become immediately vested, in
which event he would receive value from equity acceleration equal to
$120,210.
|
-15-
Gary R. Larsen. Our
employment agreement with Mr. Larsen, our Chief Financial Officer, provides
that upon the one year anniversary of a change of control, provided that
Mr. Larsen remains an employee through such date, his equity awards will
immediately accelerate in vesting as to that amount of shares that would have
vested during the next twelve months. Should Mr. Larsen be terminated
without cause, or be constructively terminated, either as part of the change of
control or prior to the first anniversary of the change of control, his equity
awards will immediately accelerate in vesting as to that amount of additional
shares that would have vested between the date of his termination and the second
anniversary of the change of control.
In
addition, if we terminate Mr. Larsen’s employment at any time, before or
after our change of control, without cause or if he is constructively
terminated, he will also be entitled to receive severance pay equal to nine
months of his then-current salary, an amount equal to 9/12 of
his annual bonus as most recently paid by the Company for the period
immediately preceding the year of termination, and up to nine months
reimbursement for the cost of the continuation of his then-current group health
insurance benefits.
The
following table describes the potential payments to Mr. Larsen upon his
termination as of December 31, 2009 (the last business day of our 2009 fiscal
year) without cause or his constructive termination, if applicable, both in
connection with a change of control and not in connection with a change of
control:
Change
of Control
|
No
Change of Control
|
||||||||||||||||||||
Name
|
Salary
and Bonus(1)
|
Equity
Acceleration (2)(3)
|
Benefits (4)
|
Salary
and Bonus(1)
|
Equity
Acceleration (5)
|
Benefits (4)
|
|||||||||||||||
Gary
R. Larsen
|
$ | 153,900 | $ | 66,772 | $ | 14,291 | $ | 153,900 |
NA
|
$ | 14,291 |
(1)
|
Represents
nine months of continued salary and 9/12ths of Mr. Larsen’s most
recently paid annual bonus.
|
(2)
|
Calculated
based on a change of control taking place as of December 31, 2009 and
assuming a price per share of $2.21, which was the closing price of our
common stock as of December 31, 2009 as reported on the NASDAQ Global
Market.
|
(3)
|
Represents
an additional two years vesting of the options and restricted stock units
held by Mr. Larsen. Mr. Larsen has an additional 90 days from the end
of exercise period (or until December 31 of the year in which the exercise
period terminates, whichever is later) to exercise his
options.
|
(4)
|
Represents
nine months of COBRA health and dental
benefits.
|
(5)
|
Mr. Larsen
is not entitled to equity acceleration upon termination not in connection
with a change in control.
|
Anthony Iantosca. Our
employment agreement with Mr. Iantosca, our Sr. Vice President—Worldwide
Operations, provides that upon the one year anniversary of a change of control,
provided that Mr. Iantosca remains an employee through such date, his
equity awards will immediately accelerate in vesting as to that amount of shares
that would have vested during the next twelve months. Should Mr. Iantosca
be terminated without cause, or be constructively terminated, either as part of
the change of control or prior to the first anniversary of the change of
control, his equity awards will immediately accelerate in vesting as to that
amount of additional shares that would have vested between the date of his
termination and the second anniversary of the change of control. Upon
Mr. Iantosca’s termination by us without cause or constructive termination,
his equity awards will continue to vest for nine months. Mr. Iantosca shall
have nine months from the termination date to exercise any or all vested option
shares.
In
addition, if we terminate Mr. Iantosca’s employment at any time, before or
after our change of control, without cause or if he is constructively
terminated, he will also be entitled to receive severance pay equal to nine
months of his then-current salary, an amount equal to 9/12 of
his annual bonus as most recently paid by the Company for the period
immediately preceding the year of termination, and up to nine months
reimbursement for the cost of the continuation of his then-current group health
insurance benefits.
The
following table describes the potential payments to Mr. Iantosca upon his
termination as of December 31, 2009 (the last business day of our 2009 fiscal
year) without cause or his constructive termination, if applicable, in
connection with a change of control:
-16-
Change
of Control
|
No
Change of Control
|
|||||||||||||||||||||||
Name
|
Salary(1)
|
Equity
Acceleration
(2)(3)
|
Benefits
(4)
|
Salary(1)
|
Equity
Acceleration
(2)(5)
|
Benefits
(4)
|
||||||||||||||||||
Tony
Iantosca
|
$ | 146,475 | $ | 74,305 | $ | 14,291 | $ | 146,475 | $ | 28,434 | $ | 14,291 |
(1)
|
Represents
nine months of continued salary and 9/12ths of Mr. Iantosca’s most
recently paid annual bonus.
|
(2)
|
Calculated
based on a change of control taking place as of December 31, 2009 and
assuming a price per share of $2.21, which was the closing price of our
common stock as of December 31, 2009 as reported on the NASDAQ Global
Market.
|
(3)
|
Represents
an additional 24 months of vesting of outstanding options and restricted
stock units. Mr. Iantosca has nine months from his termination date to
exercise his options.
|
(4)
|
Represents
nine months of COBRA health and dental
benefits.
|
(5)
|
Represents
an additional 9 months of vesting of outstanding options and restricted
stock units.
|
Frederick Jorgenson. Our
employment agreement with Mr. Jorgenson, our General Counsel, provides that
upon the one year anniversary of a change of control, provided that
Mr. Jorgenson remains an employee through such date, his equity awards will
immediately accelerate in vesting as to that amount of shares that would have
vested during the next twelve months. Should Mr. Jorgenson be terminated
without cause, or be constructively terminated, either as part of the change of
control or prior to the first anniversary of the change of control, his equity
awards will immediately accelerate in vesting as to that amount of additional
shares that would have vested between the date of his termination and the second
anniversary of the change of control.
In
addition, if we terminate Mr. Jorgenson’s employment at any
time, before or after our change of control, without cause or if he is
constructively terminated, he will also be entitled to receive severance pay
equal to nine months of his then-current salary, an amount equal to 9/12 of
his annual bonus as most recently paid by the Company for the period
immediately preceding the year of termination, and up to nine months
reimbursement for the cost of the continuation of his then-current group health
insurance benefits.
The
following table describes the potential payments to Mr. Jorgenson upon his
termination as of December 31, 2009 (the last business day of our 2009 fiscal
year) without cause or his constructive termination, if applicable, both in
connection with a change of control and not in connection with a change of
control:
Change
of Control
|
No
Change of Control
|
||||||||||||||||||||
Name
|
Salary
and Bonus(1)
|
Equity
Acceleration (2)(3)
|
Benefits (4)
|
Salary
and Bonus(1)
|
Equity
Acceleration (5)
|
Benefits (4)
|
|||||||||||||||
Frederick
Jorgenson
|
$ | 153,750 | $ | 43,799 | $ | 14,291 | $ | 153,750 |
NA
|
$ | 14,291 |
(1)
|
Represents
nine months of continued salary and 9/12ths of Mr. Jorgenson’s most
recently paid annual bonus.
|
(2)
|
Calculated
based on a change of control taking place as of December 31, 2009 and
assuming a price per share of $2.21, which was the closing price of our
common stock as of December 31, 2009 as reported on the NASDAQ Global
Market.
|
(3)
|
Represents
an additional two years vesting of the options and restricted stock units
held by Mr. Jorgenson. Mr. Jorgenson has an additional 90 days from
the end of exercise period (or until December 31 of the year in which the
exercise period terminates, whichever is later) to exercise his
options.
|
(4)
|
Represents
nine months of COBRA health and dental
benefits.
|
(5)
|
Mr. Jorgenson
is not entitled to equity acceleration upon termination not in connection
with a change in control.
|
Employee
Confidentiality and Non-Competition Arrangements
We enter
into agreements with all of our employees containing confidentiality provisions.
Each of our executive officers is subject to a non-competition
agreement.
Compensation
of Directors
At the
time of our initial public offering, we retained an outside consultant who
assisted in designing the following compensation program. Our non-employee
directors receive payment for their services as directors in a combination of
cash and stock options. Our non-employee directors receive an annual retainer of
$28,000, payable quarterly. Beginning in 2010, the Chairman of the Board
receives an additional annual retainer of $20,000. In addition, the chairperson
of our audit committee receives an annual retainer of $12,500, and each director
serving on the audit committee in a non-chairperson capacity receives an annual
retainer of $6,000. The chairperson of our Compensation Committee receives an
annual retainer of $7,000, and each director serving in a non-chairperson
capacity on the Compensation Committee receives an annual retainer of $4,000.
The chairperson of our nominating committee receives an annual retainer of
$5,000, and each director serving in a non-chairperson capacity on the
nominating committee receives an annual retainer of $2,000. The annual retainers
payable for committee service are payable on a quarterly basis. Under
our director compensation policy, we reimburse non-employee directors for
reasonable expenses in connection with attendance at board and committee
meetings.
-17-
Non-employee
directors receive non-discretionary grants of non-statutory stock options under
our 2004 Stock Incentive Plan. A non-employee director is granted an option to
purchase 20,000 shares of our common stock upon first becoming a member of our
Board of Directors. These initial options vest and become exercisable over four
years, with the first 25% of the underlying shares on the first anniversary of
the date of grant and the remainder vesting in equal amounts monthly thereafter.
Immediately after each of our regularly scheduled annual meetings of
stockholders, each non-employee director is granted a non-statutory option to
purchase 8,500 shares of our common stock. These options will vest on the first
anniversary of the date of grant, or immediately prior to our next annual
meeting of stockholders, if earlier. Non-employee directors are required to hold
these options for a period of two years following the vesting of such
options.
In May of
2009, the Board of Directors, based on the recommendation of the Compensation
Committee, granted a non-statutory option to purchase 17,000 shares of our
common stock to each non-employee director. This recommendation was
based on a review of trends in the industry, Black-Scholes valuations, the
increased level of work and participation on informal committees required of our
directors, as well as the ability to attract and retain
Directors. The information reviewed included an equity cash value
analysis, the work of the compensation consultant retained when the directors’
equity program was established and a decline in the Company’s stock
price.
In early
2010, the Board of Directors, based on the recommendation of the Compensation
Committee, granted a non-statutory option to purchase 20,000 shares of common
stock to Mr. Grady in recognition of his appointment to chairman of the
board.
The
following table shows the compensation earned by our non-employee directors in
2009:
Fees
|
Option
|
Total
|
|
Name
of Director
|
in
Cash
|
Awards
|
($)
|
($)(1)
|
($)(2)
|
||
William
Washecka
|
42,500
|
11,533
|
54,033
|
Matthew
P. Crugnale
|
38,000
|
11,533
|
49,533
|
Robert
E. Grady
|
41,000
|
11,533
|
52,533
|
Gustav
H. Koven III
|
43,000
|
11,533
|
54,533
|
Chris
Fedde
|
34,000
|
11,533
|
45,533
|
(1)
|
This
column reports the amount of cash compensation earned in 2009 for Board
and committee service.
|
(2)
|
The
value of stock option awards has been estimated pursuant to FASB ASC Topic
718. For more information regarding our valuation of option awards, see
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Critical Accounting Policies—Stock-based Compensation.” The
following directors have outstanding option awards at 2009 fiscal
year-end: Mr. Washecka (44,519), Mr. Crugnale (53,292),
Mr. Grady (53,292), Mr. Koven (53,292) and Mr. Fedde
(47,625).
|
Compensation
Committee Interlocks and Insider Participation
During
fiscal 2009, Messrs. Grady, Fedde, Koven III and Crugnale served as members of
the Compensation Committee. None of the members of the Compensation
Committee are or have been an officer or employee of AuthenTec. During fiscal
2009, no member of the Compensation Committee had any relationship with us
requiring disclosure under Item 404 of Regulation S-K. During fiscal
2009, none of our executive officers served on the Compensation Committee (or
its equivalent) or Board of Directors of another entity any of whose executive
officers served on our Compensation Committee or Board of
Directors.
-18-
Compensation
Committee Report
We, the
Compensation Committee of the Board of Directors of AuthenTec, have reviewed and
discussed the Compensation Discussion and Analysis contained in this Amendment
No. 1 on Form 10-K/A with management. Based on such review and discussion, we
have recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Amendment No. 1 on Form 10-K/A.
Robert
E. Grady, Chairman
Chris
Fedde
Gustav
H. Koven III
Matthew
P. Crugnale
|
Item
12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
Equity
Compensation Plan Information
We
currently maintain two compensation plans that provide for the issuance of our
Common Stock to officers and other employees, directors and consultants: the
2004 Stock Incentive Plan and 2007 Stock Incentive Plan, both of which have been
approved by stockholders. The following table sets forth information regarding
outstanding awards and shares reserved for future issuance under the foregoing
plans as of January 1, 2010:
Plan
Category
|
|
Number of shares to
be
issued upon
exercise
of
outstanding
options,
warrants
and rights
(a)
|
Weighted-average
exercise
price of
outstanding options,
warrants
and rights
(b)
|
|
Number of shares
remaining available
for
future issuance
under
equity
compensation
plans
(excluding
shares
reflected
in
column (a))
(c)
|
||||
Equity
compensation plans approved by stockholders
|
|
5,092,910
|
(1)
|
$
|
4.00
|
|
1,159,573
|
(2)
|
|
Equity
compensation plans not approved by stockholders
|
|
—
|
—
|
|
—
|
||||
Total
|
|
5,092,910
|
$
|
4.00
|
|
1,159,573
|
(1)
|
Represents
shares of common stock issuable upon exercise or conversion of stock
options and restricted stock units granted under such equity compensation
plans.
|
(2)
|
Includes shares issuable pursuant to grants of full-value stock awards, such as restricted stock, restricted stock units and performance shares. |
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth, as of April 7, 2010, certain information with
respect to the beneficial ownership of our outstanding common stock by
(i) each person or entity we know to be the beneficial owner of more than
5% of our outstanding common stock, (ii) each of our directors and
director-nominees, (iii) each of the named executive officers, and
(iv) all directors and executive officers as a group.
Beneficial
ownership is determined in accordance with the rules of the SEC. Except as
otherwise indicated, and subject to applicable community property laws, each of
the persons named in this table has sole voting and investment power with
respect to all the shares indicated as beneficially owned by such person. Unless
otherwise indicated, the address for each stockholder listed is c/o AuthenTec,
Inc., 100 Rialto Place, Suite 100, Melbourne, FL 32901.
-19-
Name
and Address of
Beneficial
Owner Outstanding
(1)
|
Number
of Shares
Beneficially
Owned
|
Percent
of
Shares
|
||
5%
Stockholders:
|
||||
Cross
Link Capital, Inc. (2)
|
1,939,600
|
6.5%
|
||
Harris
Corporation (3)
|
1,881,265
|
6.3%
|
||
Named Executive Officers and
Directors:
|
|
|||
F.
Scott Moody (4)
|
1,475,290
|
4.7%
|
||
Lawrence
J. Ciaccia, Jr (5)
|
296,345
|
*
|
||
Gary
R. Larsen (6)
|
190,725
|
*
|
||
Anthony
Iantosca (7)
|
100,155
|
*
|
||
Frederick
Jorgenson (8)
|
128,560
|
*
|
||
Matthew
P. Crugnale (9)
|
47,875
|
*
|
||
Robert
E. Grady (10)
|
47,875
|
*
|
||
Gustav
H. Koven III (11)
|
131,524
|
*
|
||
William
Washecka (12)
|
44,519
|
*
|
||
Chris
Fedde (13)
|
40,875
|
*
|
||
All
directors and executive officers
|
||||
as
a group (10 persons) (14)
|
2,503,743
|
7.8%
|
*
|
Less
than 1%
|
(1)
|
The
percentage of shares beneficially owned was determined based on a
fraction, the numerator of which is the sum of (a) the number of
outstanding shares of common stock beneficially owned by such owner,
(b) the number of shares issuable upon exercise of options
beneficially owned by such owner and exercisable within 60 days of April
7, 2010 and (c) the number of restricted stock units which vest
within 60 days of April 7, 2010, and the denominator of which is the sum
of (a) 29,900,986 shares, which is the aggregate number of shares of
common stock outstanding on April 7, 2010, (b) the aggregate number
of shares of common stock issuable upon exercise of options beneficially
owned by such owner and exercisable within 60 days of April 7, 2010, and
(c) the number of restricted stock units which vest within 60 days of
April 7, 2010.
|
(2)
|
The
number of shares beneficially owned is based on the information contained
in that certain Schedule 13G that was filed with the SEC on February 16,
2010, reporting beneficial ownership of our securities held by Crosslink
Capital, Inc. The stock reported as beneficially owned by
Crosslink Capital, Inc. also includes shares of stock beneficially owned
by Crosslink affiliates. Crossover Fund V Management, LLC,
Crossover Fund IV Management, LLC, Delta Growth Management, LLC, and
Michael J. Stark are affiliates of Crosslink Capital,
Inc. Crosslink Capital, Inc.’s address is Two Embarcadero
Center, Suite 2200, San Francisco, CA 94111.
|
(3) | The number of shares beneficially owned is based on the information contained in that certain Schedule 13G that was filed with the SEC on February 2, 2010, reporting beneficial ownership of our securities by Harris Corporation. Harris Corporation is a publicly traded company, and the corporation itself has voting and dispositive power over these shares. Harris Corporation’s address is 1025 West Nasa Boulevard, Melbourne, FL 32919. |
(4)
|
Includes
1,215,285 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
(5)
|
Includes
296,345 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
(6)
|
Includes
150,388 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
-20-
(7)
|
Includes
99,861 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
(8)
|
Includes
128,350 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
(9)
|
Includes
47,875 shares of stock issuable upon exercise of options that are vested
or will vest within 60 days of April 7,
2010.
|
(10)
|
Includes
47,875 shares of stock issuable upon exercise of options that are vested
or will vest within 60 days of April 7,
2010.
|
(11)
|
Includes
47,875 shares of stock issuable upon exercise of options that are vested
or will vest within 60 days of April 7,
2010.
|
(12)
|
Includes
44,519 shares of stock issuable upon exercise of options that are vested
or will vest within 60 days of April 7, 2010.
|
(13)
|
Includes
38,875 shares of stock issuable upon exercise of options that are vested
or will vest within 60 days of April 7,
2010.
|
(14)
|
Includes
2,117,248 shares of stock issuable upon exercise of options and restricted
stock unit awards that are vested or will vest within 60 days of April 7,
2010.
|
Item
13. Certain Relationships and Related Transactions, and
Director Independence.
Procedures
for Approval of Related Person Transactions
We
adopted a Code of Business Conduct and Ethics, or Code of Conduct, pursuant to
which our executive officers, directors, and principal stockholders, including
their immediate family members and affiliates, are not permitted to enter into a
related party transaction with us without the prior consent of our audit
committee, or other independent committee of our Board of Directors in the case
it is inappropriate for our audit committee to review such transaction due to a
conflict of interest. Any request for us to enter into a transaction with an
executive officer, director, principal stockholder, or any of such persons’
immediate family members or affiliates, in which the amount involved exceeds
$120,000 must first be presented to our audit committee for review,
consideration and approval. All of our directors, executive officers and
employees are required to report to our audit committee any such related party
transaction. In approving or rejecting the proposed agreement, our audit
committee shall consider the relevant facts and circumstances available and
deemed relevant to the audit committee, including, but not limited to the risks,
costs and benefits to us, the terms of the transaction, the availability of
other sources for comparable services or products, and, if applicable, the
impact on a director’s independence. Our audit committee shall approve only
those agreements that, in light of known circumstances, are in, or are not
inconsistent with, our best interests, as our audit committee determines in the
good faith exercise of its discretion.
Related
Person Transactions
The
following is a summary of transactions since January 2, 2009 to which we have
been a party in which the amount involved exceeded $120,000 and in which any of
our executive officers, directors or beneficial holders of more than 5% of our
capital stock had or will have a direct or indirect material interest, other
than compensation arrangements which are described in “Compensation Discussion
and Analysis” in Item 11, Part III of this Amendment No. 1 on
Form 10-K/A. All of the transactions described below were
unanimously approved by the disinterested directors.
Acquisition
of SafeNet’s Embedded Security Business
On
February 26, 2010, we entered into an Asset Purchase Agreement with SafeNet,
Inc., or SafeNet, pursuant to which we acquired substantially all of the assets
related to SafeNet’s Embedded Security business in exchange for approximately
$8.5 million payable in cash, 1,211,482 unregistered shares of our common stock
and an earnout payment of up to $2.5 million in cash based on levels of gross
revenue attributable to the acquired business between March 1, 2010 and December
31, 2010.
-21-
Chris
Fedde, one of our directors, is also the President and Chief Operating Officer
and a director of SafeNet. The Asset Purchase Agreement and the
transactions contemplated therein, including the consideration to be paid by the
Company for SafeNet’s Embedded Security business, were unanimously approved by
the disinterested directors of the Company, who were fully informed of Mr.
Fedde’s positions with SafeNet. The disinterested directors
unanimously determined that the acquisition terms were fair and reasonable to
the Company and our stockholders and that it was in the best interests of the
Company and our stockholders to effect the transactions contemplated by the
Asset Purchase Agreement.
Director
Independence
Our Board
of Directors has determined that, other than F. Scott Moody, each of the members
of our Board of Directors is an independent director for purposes of the Nasdaq
Marketplace Rules.
Item
14. Principal Accountant Fees and Services.
PricewaterhouseCoopers
LLP served as our independent auditor for the fiscal year ended January 1,
2010. PricewaterhouseCoopers LLP has acted as our independent
auditors since its appointment in fiscal year ended December 28,
2007.
The
following table sets forth the aggregate fees billed to us for the fiscal years
ended January 1, 2010 and January 2, 2009 by PricewaterhouseCoopers
LLP:
Fiscal 2009
|
Fiscal 2008
|
|||||||
Audit
Fees(1)
|
$ | 667,047 | $ | 550,712 | ||||
Audited
Related Fees (2)
|
178,155 | |||||||
Tax
Fees(3)
|
— | — | ||||||
All
Other Fees (4)
|
1,500 | 1,500 | ||||||
Total
Fees
|
$ | 846,702 | $ | 552,212 |
(1)
|
Audit Fees consist of
fees billed for professional services rendered for the audit of our
consolidated annual financial statements and review of the interim
consolidated financial statements included in quarterly reports and
services that are normally provided by PricewaterhouseCoopers LLP in
connection with statutory and regulatory filings or
engagements.
|
(2)
|
Audit Related Fees
consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported above under the
caption “Audit Fees.” For
2009 these services consisted of due diligence and accounting
consultations related to acquisitions.
|
(3)
|
Tax Fees consist of
fees billed for professional services rendered for tax compliance, tax
advice and tax planning.
|
(4)
|
All Other Fees consist
of fees for products and services other than the services reported above
under the captions “Audit Fees,” “Audit Related Fees” and “Tax Fees.” All
other fees for 2009 and 2008 consist of fees for research tools provided
on a subscription basis.
|
The Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by our independent auditors. Pre-approval is generally based
on independence, qualifications, and performance. The Audit Committee may
establish pre-approval policies for any engagement to render services if the
policies are detailed as to the services and the committee is informed about the
services for which each independent auditor is engaged at the next scheduled
meeting. The Audit Committee may also delegate to committee members the
authority to grant pre-approval provided the decisions made by the members is
presented to the committee at the next scheduled meeting. The Audit Committee
approved 100% of the fees for all audit and non-audit related services provided
by PricewaterhouseCoopers LLP during the fiscal year ended January 1,
2010.
-22-
PART
IV
Item
15. Exhibits and Financial Statement
Schedules.
(a) (1) Financial
Statements
None.
(2) Financial
Statement Schedules
None.
(b) Exhibit
Index
The
following is a list of exhibits filed with this report.
31.1 Certification
of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
31.2 Certification
of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
(c)
Financial Statements and Schedules of Subsidiaries and
Affiliates
None.
-23-
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AUTHENTEC,
INC.
|
|||
Date:
April 30, 2010
|
By:
|
/s/ F.
Scott Moody
|
|
F.
Scott Moody
Chief
Executive Officer
|
-24-