UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed
by
the Registrant [X]
Filed
by
a Party other than the Registrant [ ]
Check
the
appropriate box:
[ ] Preliminary
Proxy Statement
[ ] Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive
Proxy Statement
[ ] Definitive
Additional Materials
[ ] Soliciting
Material Pursuant to §240.14a-12
ClearOne
Communications, Inc.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X] No
fee required.
[ ] Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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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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4)
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Proposed
maximum aggregate value of
transaction:
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[ ]
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Fee
paid previously with preliminary
materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule-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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE
HELD NOVEMBER 20, 2007
TO
THE
SHAREHOLDERS:
NOTICE
IS HEREBY GIVEN that the Annual
Meeting of Shareholders of ClearOne Communications, Inc. (the "Company"),
a Utah
Corporation, will be held on Tuesday, November 20, 2007, at 9:00 A.M. MST,
at
the Company’s corporate offices, 5225 Wiley Post Way, Suite 500, Salt Lake City,
Utah 84116.
Please
note that attendance at the
Annual Meeting will be limited to shareholders of record (or their authorized
representatives) at the close of business on October 1, 2007. Proof of ownership
can be a copy of the enclosed proxy card.
The
following describes the purpose of
the Annual Meeting:
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1.
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To
elect four members of the Company's Board of
Directors;
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2.
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To
approve the Company’s 2007 Equity Incentive
Plan
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3.
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To
transact such other business as may properly come before the meeting
or
any adjournment thereof.
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The
foregoing items of business are
more fully described in the Proxy Statement accompanying this Notice. The
Board
of Directors recommends that an affirmative vote be cast in favor of all
nominees and for each of the proposals listed in the proxy card.
All
shareholders are cordially invited
to attend the meeting in person. However, to ensure your representation at
the
meeting, you are urged to mark, sign, date, and return the enclosed proxy
as
promptly as possible in the postage-prepaid envelope enclosed for that purpose.
Any shareholder attending the meeting may vote in person even if such
shareholder has previously returned a proxy.
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BY
ORDER OF THE BOARD OF DIRECTORS
/s/ Greg A. LeClaire
Greg A. LeClaire
Corporate
Secretary
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TABLE
OF CONTENTS
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PAGE
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PROXY
STATEMENT
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1
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PROPOSAL
ONE - ELECTION OF DIRECTORS
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2
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STOCK
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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4
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EXECUTIVE
COMPENSATION
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6
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Compensation
Committee
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6
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Compensation
Committee Interlocks and Insider Participation
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6
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Compensation
Discussion and Analysis
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7
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Compensation
Committee Report
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9
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2007
Summary Compensation Table
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10
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2007
Grants of Plan-Based Awards
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11
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Outstanding
Equity Awards at 2007 Fiscal Year End
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13
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2007
Option Exercises and Stock Vested
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13
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2007
Pension Benefits
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13
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2007
Nonqualified Deferred Compensation
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13
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2007
Director Compensation
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14
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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14
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BOARD
OF DIRECTORS AND OTHER BOARD COMMITTEE REPORTS
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15
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STOCK
PERFORMANCE CHART
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17
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PROPOSAL
TWO – APPROVAL 2007 EQUITY COMPENSATION PLAN
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18
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INDEPENDENT
PUBLIC ACCOUNTANTS
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21
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SHAREHOLDER
PROPOSALS
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23
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MISCELLANEOUS
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23
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CLEARONE
COMMUNICATIONS, INC.
PROXY
STATEMENT
The
enclosed Proxy is solicited on
behalf of the Board of Directors of ClearOne Communications, Inc. (the
"Company") for use at the Company's 2007 Annual Meeting of Shareholders ("Annual
Meeting") to be held November 20, 2007 at 9:00 A.M. MST, or at any postponement
or adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
will
be held at the above date and time at the Company’s corporate offices, 5225
Wiley Post Way, Suite 500, Salt Lake City, Utah 84116.
These
proxy solicitation materials are
being first furnished to shareholders of the Company on or about October
15,
2007.
INFORMATION
CONCERNING SOLICITATION AND VOTING
Record
Date and Shares Outstanding
Shareholders
of record at the close of
business on October 1, 2007 (the "Record Date") are entitled to notice of,
and
to vote at, the Annual Meeting. On the Record Date, 10,937,539 shares of
Common
Stock were issued and outstanding. Each shareholder will be entitled to one
vote
for each share of Common Stock held on the record date.
Voting
of Proxies
By
completing and returning the
accompanying proxy, the shareholder authorizes Zeynep Hakimoglu, Chairman
and
Chief Executive Officer, and Greg A. LeClaire, Vice-President Finance, as
designated on the face of the proxy, to vote all shares for the shareholder.
All
proxies that are properly signed and dated will be voted as the shareholder
directs. If no direction is given, executed proxies will be voted FOR each
of
the nominees and listed proposals.
Vote
Required for Approval
A
quorum of the shares of the Company
must be present at the Annual Meeting in order for the shareholders to take
official action. Under Utah law and the Articles of Incorporation and Bylaws
of
the Company, a quorum will exist if a majority of the shares issued by the
Company and entitled to vote on a matter at the Annual Meeting are present,
in
person or by proxy. Abstentions and broker non-votes will be considered present
at the Annual Meeting and will be counted for purposes of determining whether
a
quorum exists, but abstentions and broker non-votes will not be counted for
purposes of determining the vote on any matter currently proposed for action
at
the Annual Meeting. The election of directors will be determined by plurality
vote. The approval of the 2007 Equity Compensation Plan requires the vote
of a
majority of the shareholders that are present at the meeting in person or
by
proxy. The Board of Directors recommends that an affirmative vote be cast
in
favor of all nominees and for the proposal listed in the proxy
card.
Revocability
of Proxies
Any
proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before its
use
by delivering to the Secretary of the Company, a written notice of revocation,
a
duly executed proxy bearing a later date or by attending the Annual Meeting
and
voting in person.
Solicitation
The
cost of this solicitation will be
borne by the Company. In addition, the Company may reimburse brokerage firms
and
other persons representing beneficial owners of shares for their expenses
in
forwarding solicitation material to such beneficial owners. Proxies may also
be
solicited by certain of the Company's directors, officers, and regular
employees, without additional compensation, personally or by telephone,
facsimile, or telegram.
PROPOSAL
ONE - ELECTION OF DIRECTORS
The
Company had five directors as of
October 1, 2007. The term of each of our directors expires at the 2007 Annual
Meeting. At the 2007 Annual Meeting the number of directors comprising the
Board
of Directors will be reduced from five to four. Four are nominated for
reelection at the Annual Meeting to serve until the next Annual Meeting of
Shareholders or until their respective successors are duly elected and
qualified. Unless otherwise instructed, the proxies will be voted for the
election of the four nominees named below. In the event any nominee is unable
to
serve, the proxies will be voted for a substitute nominee, if any, to be
designated by the Board of Directors. The Board of Directors has no reason
to
believe any nominee will be unavailable.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES
NAMED BELOW TO THE BOARD OF DIRECTORS.
Nominees
for Director
The
following individuals were
directors of the Company as of October 1, 2007. All but Harry Spielberg are
nominated for reelection as directors of the Company:
Name
|
Age
|
Position
with
ClearOne
Communications, Inc.
|
Director
Since
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Zeynep
“Zee” Hakimoglu
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54
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Chairman,
Chief Executive Officer, and President
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2006
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Brad
R. Baldwin
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51
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Director
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1988
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Larry
R. Hendricks
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64
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Director
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2003
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Scott
M. Huntsman
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42
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Director
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2003
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Harry
Spielberg
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51
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Director
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2001
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Zee
Hakimoglu joined our Board of Directors in April 2006. Ms. Hakimoglu
joined us in December 2003 with more than 15 years of executive and
senior-level, high-tech management experience and was appointed as President
and
Chief Executive Officer in July 2004. She served in a variety of executive
business development, product marketing, and engineering roles including
Vice-President of Product Line Management for ClearOne from December 2003
to
July 2004; Vice-President of Product Line Management for Oplink Communications,
a publicly traded developer of fiber optic subsystems and components from
December 2001 to December 2002; President of OZ Optics USA, a manufacturer
of
fiber optic test equipment and components from August 2000 to November 2001;
and
various management positions including Vice-President of Wireless Engineering
and wireless business unit Vice-President for Aydin Corp., a telecommunications
equipment company, formerly traded on the New York Stock Exchange from May
1982
until it was acquired in September 1996. She also was Vice-President of
Business Development for Kaifa Technology from October 1998 to August 2000
and
was instrumental in its acquisition by E-Tek Dynamics, then again acquired
by
JDS Uniphase. Through these acquisitions, she held the role of Deputy General
Manager of the Kaifa business unit. Ms. Hakimoglu earned a Bachelor of Science
Degree in Physics from California State College, Sonoma, and a Master’s Degree
in Physics from Drexel University.
Brad
R. Baldwin joined our Board of Directors in October 1988. Mr. Baldwin
is an attorney licensed to practice in Utah. Since April 2001, he has been
engaged in the commercial real estate business with Commerce CRG in Salt
Lake
City, Utah. From February 2000 to March 2001, Mr. Baldwin was an executive
with
Idea Exchange Inc. From October 1994 to January 2000, he served as President
and
Chief Executive Officer of Bank One, Utah, a commercial bank headquartered
in
Salt Lake City, Utah. Mr. Baldwin holds a Degree in Finance from the University
of Utah and a Juris Doctorate Degree from the University of
Washington.
Larry
R. Hendricks
joined our Board of Directors in June 2003. Mr. Hendricks is a Certified
Public
Accountant who retired in December 2002 after serving as Vice-President of
Finance and General Manager of Daily Foods, Inc., a national meat processing
company. During his 30-year career in accounting, he was also a self-employed
CPA and worked for the international accounting firm Peat Marwick &
Mitchell. Mr. Hendricks has served on the boards of eight other organizations,
including Tunex International, Habitat for Humanity, Daily Foods, and Skin
Care
International. He earned a Bachelor's Degree in Accounting from Utah State
University and a Master of Business Administration Degree from the University
of
Utah. Mr. Hendricks is currently a member of the American Institute of Certified
Public Accountants and the Utah Association of Certified Public
Accountants.
Scott
M. Huntsman
joined our Board of Directors in June 2003. Mr. Huntsman has served
as
President and Chief Executive Officer of GlobalSim, a private technology
and
simulation company, since February 2003 and Chief Financial Officer from
April
2002 to February 2003. Prior to GlobalSim, he spent 11 years on Wall Street
as
an investment banker, where he focused on mergers, acquisitions, and corporate
finance transactions. From August 1996 to 2000, Mr. Huntsman served at
Donaldson, Lufkin and Jenrette Securities Corporation until their merger
with
Credit Suisse First Boston where he served until October 2001. Mr. Huntsman
earned a Bachelor's Degree from Columbia University and a Master of Business
Administration Degree from The Wharton School at the University of Pennsylvania.
He also studied at the London School of Economics as a Kohn Fellowship
recipient.
Security
holders who would like to send
communications to the Board may do so by submitting such communications to
ClearOne Communications, Inc., 5225 Wiley Post Way, Suite 500, Salt Lake
City,
Utah 84116, Attention: Corporate Secretary. The communications will
then be forwarded to the Board. The Board suggests, but does not require,
that
such submissions include the name and contact information of the security
holder
making the submission and a description of the matter that is the subject
of the
communication.
STOCK
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth certain
information regarding ownership of our common stock as of August 30, 2007
by (i)
each person known to us to be the beneficial owner of more than 5 percent
of our
outstanding common stock, (ii) each director, (iii) the named executive
officers, and (iv) all of our named executive officers and directors as a
group.
Each person has sole investment and voting power with respect to the shares
indicated, subject to community property laws where applicable, except as
otherwise indicated below. The address for each director and officer is in
care
of ClearOne Communications, Inc., 5225 Wiley Post Way, 5th Floor,
Salt Lake
City, Utah 84116.
Names
of
Beneficial Owners
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Amount
of
Beneficial
Ownership
|
Percentage
of
Class1
|
Beneficial
Owners
|
|
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Edward
Dallin Bagley2
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1,866,883
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16.1%
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FMR
Corp.
|
940,503
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8.1%
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Royce
& Associates Inc.
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710,344
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6.1%
|
|
|
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Total
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3,517,730
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30.3%
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Directors
and
Executive
Officers
|
|
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Zee
Hakimoglu4
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225,489
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1.9%
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Brad
R. Baldwin3
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223,082
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1.9%
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Harry
Spielberg5
|
100,416
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0.9%
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Tracy
A. Bathurst6
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89,087
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0.8%
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Larry
R. Hendricks7
|
50,416
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0.4%
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Scott
M. Huntsman8
|
50,416
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0.4%
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Marthes
Solamuthu9
|
24,983
|
0.2%
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Greg
A. LeClaire10
|
11,274
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0.1%
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Steven
Andresen11
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0
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0.0%
|
|
|
|
Directors
and Executive Officers as a Group
|
|
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(9
people)12
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775,163
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6.7%
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1 For
each individual included in the table, the calculation of percentage
of
beneficial ownership is based on 10,962,711 shares of common
stock
outstanding as of August 30, 2007 and shares of common stock that
could be acquired by the individual within 60 days of August
30, 2007,
upon the exercise of options or
otherwise.
|
|
2 Includes
126,166 shares held by Mr. Bagley’s spouse with respect to which he
disclaims beneficial ownership and options to purchase 48,416 shares
that
are exercisable within 60 days after August 30,
2007.
|
|
3 Includes
88,666 shares held in the Baldwin Family Trust; 9,000 shares owned
directly, which are held in an IRA under the name of Mr. Baldwin;
and
options to purchase 125,416 shares that are exercisable within
60 days
after August 30, 2007.
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4 Includes
options to purchase 204,166 shares that are exercisable within
60 days
after August 30, 2007.
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5 Includes
options to purchase 100,416 shares that are exercisable within
60 days
after August 30, 2007.
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6
Includes
options to purchase 88,589 shares that are exercisable within 60
days
after August 30, 2007.
|
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7
Includes
options to purchase 50,416 shares that are exercisable within 60
days
after August 30, 2007.
|
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8
Includes
options to purchase 50,416 shares that are exercisable within 60
days
after August 30, 2007.
|
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9
Includes
options to purchase 19,444 shares that are exercisable within 60
days
after August 30, 2007.
|
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10
Includes
options to purchase 0 shares that are exercisable within 60 days
after
August 30, 2007.
|
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11
Includes
options to purchase 0 shares that are exercisable within 60 days
after
August 30, 2007.
|
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12
Includes
options to purchase a total of 638,863 shares that are exercisable
within 60 days after August 30, 2007 by executive officers and
directors.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act, as amended, requires our directors and executive
officers, and persons who own more than 10 percent of a registered class
of our
equity securities to file with the SEC initial reports of ownership on Form
3
and reports of changes of ownership of our equity securities on Forms 4 and
5.
Officers, directors, and greater than 10 percent shareholders are required
to
furnish us with copies of all Section 16(a) reports they file.
Based
solely on a review of the reports and amendments to reports furnished to
us, we
believe that all reports required by Section 16(a) were filed on a timely
basis.
EXECUTIVE
OFFICERS
Our
executive officers as of October 1,
2007 are as follows:
Name
|
Age
|
Position
with
ClearOne
Communications, Inc.
|
Zee
Hakimoglu
|
54
|
President,
Chief Executive Officer, and Chairman of the Board of
Directors
|
Greg
A. LeClaire
|
38
|
Vice-President
of Finance and Corporate Secretary
|
Tracy
A. Bathurst
|
43
|
Chief
Technology Officer
|
Steven
P. Andresen
|
39
|
Vice-President
of Worldwide Sales
|
Marthes
Solamuthu
|
34
|
Vice-President
of Operations
|
For
the biography of Ms. Hakimoglu, see
"Nominees for Director."
Greg
A. LeClaire joined us in September 2006 as our Vice President of
Finance. Mr. LeClaire served as Vice President of Finance and Administration
with Livedeal.com, an early stage online classifieds website, from April
2006 to
August 2006. He held a 12-year career in a variety of senior finance and
accounting positions with Utah Medical Products (UTMD), a publicly traded
specialty medical device company, including serving as Vice President and
Chief
Financial Officer from January 2001 to April 2006. He earned a Bachelor of
Science degree in Accounting from the University of Utah and a Master of
Science
degree in Management from Stanford University.
Tracy
A. Bathurst joined us in September 1988 and held
several positions with us until he was named Chief Technology Officer in
August
2007. He was most recently ClearOne’s Vice-President of Product Line
Management and has nearly 20 years experience in defining and developing
communications-related products and technology. Mr. Bathurst has led the
design
and development of ClearOne’s high performance audio and telecommunications
equipment. He earned a Bachelor of Science degree in Industrial Technology
from
Southern Utah University.
Steven
P. Andresen joined us in January 2007 as our Vice President of
Worldwide Sales. Mr. Andresen brings 13 years of enterprise technology sales
and
management experience to ClearOne. From May 2002 to August 2007, he served
as
regional vice president, responsible for global accounts, for SBC Communications
(now AT&T) in its Advanced Enterprise Sales (AES) business unit, a network
integration, emerging technologies and value added reseller. Mr. Andresen
also
served as SBC's regional vice president in charge of 14 western states for
AES.
Prior to May 2002, Mr. Andresen held a variety of technology sales and sales
management roles with such leading companies as Compaq Computer, Cable and
Wireless and Cincinnati Bell Long Distance. In these roles, he led over $600
million in sales technology hardware and services sales, partnering with
more
than 100 technology firms such as Cisco, Nortel, Network Associates, Avaya,
3Comm, Hewlett-Packard, Deloitte and Touche and others. He has also partnered
with dealers, end users, distributors and value-added resellers at the regional,
national and international levels. His experience has focused on telecom
and
information technology product distribution and all aspects of client sales
relationships. Mr. Andresen earned a bachelor of arts degree in business
administration and psychology from Hope College in Holland,
Michigan.
Marthes
Solamuthu
joined us in August 2006. From January 2001 to August 2006, Mr. Solamuthu
was
Senior Operations Manager for Venture Corporation, one of the world’s largest
contract manufacturing companies, where he oversaw two manufacturing plants
and
had full responsibility for large-scale production, materials purchasing,
planning, engineering, quality, program management and sales. He earlier
held a
variety of senior manufacturing positions with Ericsson Mobile, Motorola
and
Western Digital. He earned a bachelor’s degree in mechanical engineering from
Technology University, in Malaysia. In addition to English, Mr. Solamuthu
speaks
Bahasa (spoken in Malaysia and Indonesia), Chinese (Cantonese) and Tamil
(spoken
in India).
EXECUTIVE
COMPENSATION
The
Compensation
Committee. The Compensation Committee makes recommendations to the
Board of Directors regarding remuneration of our executive officers and
directors and administers the incentive plans for our directors, officers,
and
key employees. The Compensation Committee is currently composed of Brad R.
Baldwin (Chair), Scott M. Huntsman and Harry Spielberg. The Compensation
Committee sets the overall compensation principles for the Company, subject
to
annual review. In consultation with the Chief Executive Officer, it establishes
the individual compensation levels for Company executives.
The
directors who serve on the
Compensation Committee are all “independent” for purposes of the rules of the
National Association of Securities Dealers. That is, the Board of Directors
has
determined that none of the Compensation Committee members have a relationship
to the Company that would interfere with that person’s exercise of independent
judgment in carrying out the responsibilities of a director.
Compensation
Committee
Interlocks and Insider Participation. No interlocking relationships
exist between any member of the Company’s Board of Directors or Compensation
Committee and any member of the Board of Directors or Compensation Committee
of
any other company nor has any such interlocking relationship existed in the
past. No member of the Compensation Committee is or was formerly an executive
officer or an employee of the Company or its subsidiaries. The Compensation
Committee is currently composed of Brad R. Baldwin (Chair), Scott M. Huntsman
and Harry Spielberg.
Compensation
Discussion and Analysis. The following discussion and analysis provides
information regarding the Company’s executive compensation objectives and
principles, procedures, practices and decisions, and is provided to help
give
perspective to the numbers and narratives that follow in the tables in this
section. This discussion focuses on the Company’s objectives,
principles, practices and decisions with regards to the compensation of the
Company’s named executive officers.
The
Company’s compensation objectives for executive officers are as
follows:
· To
attract and retain highly qualified individuals capable of making significant
contributions to the long-term success of the Company;
· To
use
incentive compensation to reinforce strategic performance
objectives;
· To
align
the interest of the executives with the interests of the shareholders such
that
risks and rewards of strategic decisions are shared; and
· To
reflect the value of each officer’s position in the marketplace and within the
company.
Policies
and Practices Related to ClearOne’s Compensation Program. ClearOne
strives to create an overall compensation package for each executive officer
that satisfies the aforementioned objectives, recognizing that certain elements
of compensation are better suited to reflect different compensation objectives.
For example, as base salaries are the only element of compensation that is
fixed
in amount in advance of the year in which the compensation will be earned,
the
Compensation Committee believes that it is most appropriate to determine
base
salaries with a focus on the market practices for similarly situated officers
at
comparable companies as adjusted to reflect the individual officer’s performance
during the preceding year. In contrast, cash bonuses and long-term incentives
are better able to reflect ClearOne’s performance as measured by financial
metrics and are well-suited to motivate officers to achieve specific performance
goals that the Compensation Committee and management have determined are
in the
best interest of the company. Equity grants are also well-suited to drive
long-term performance and align management’s interests with those of
shareholders. The Compensation Committee believes that as an officer’s
responsibility increases, so does his or her ability to influence the
performance of the company and accordingly, the proportion of his or her
compensation that consists of his or her salary and cash bonus should decrease
while the proportion of equity incentives to total compensation should
increase.
Comparable
Companies. In making compensation decisions, including assessing the
competitiveness of the total compensation structure for each named executive
officer, the Compensation Committee considers compensation survey data from
companies that the Compensation Committee has selected as comparable companies,
namely comparable in terms of size and location. The Committee periodically
reviews the companies that are included as comparable companies and makes
revisions to the group as appropriate.
Equity
Grant Practices. The Committee recognizes the importance of equity
ownership in the alignment of shareholder and management interests. The exercise
price of each stock option awarded to our executive officers under our incentive
compensation programs is the closing price of our common stock on the date
of
grant, which is the date when the Compensation Committee acts to approve
equity
awards for senior executives. Performance-based equity awards are also granted
to our named executive officers at this time.
Elements
of Executive Compensation
The
following components of the Company’s executive compensation program and the
policies that govern their implementation are outlined briefly
below:
·
|
Quarterly/Annual
Bonus Plan
|
·
|
Long-Term
Incentive Compensation/Equity
Awards
|
·
|
Employee
Stock Purchase Plan
|
·
|
Other
Personal Benefits
|
Base
Compensation. The Committee believes that executive officer base
compensation needs to be competitive with market rates and makes salary
decisions in coordination with the Chief Executive Officer. Certain executive
officers received salary increases for fiscal 2007 from fiscal 2006 base
pay
rates.
Quarterly/Annual
Bonus Plan. The fiscal year 2007 annual bonus plan was developed to reward
executives based on meeting or exceeding certain internal financial objectives
that were created by the Chief Executive Officer and the Company’s Board of
Directors. The financial objectives were established in the beginning of
the
fiscal year and were based on the Company’s revenues, gross margin, operating
income and a certain discretionary amount. Objectives were established for
each
fiscal quarter. If a quarterly objective was met, a bonus was paid for that
quarter. If a quarterly objective was not met, then no related bonus was
paid.
Executives were not allowed to make up a missed quarterly bonus based on
subsequent performance.
Long-Term
Incentive Compensation. The Compensation Committee uses employee stock
options for long-term executive compensation as a means of achieving the
compensation goals previously described. Options are granted under the Company’s
1998 Stock Option Plan (the “Plan”). The Compensation Committee, in consultation
with the Chief Executive Officer, determines the number of options granted
to
each executive with the exception of options granted to the Chief Executive
Officer which are determined solely by the Compensation Committee. Factors
bearing on the number of options granted to an executive include his or her
position, individual performance, and contribution to the Company’s overall
performance.
Option
grants under the Plan permit a recipient to purchase shares of Company stock
at
a fixed price (the market price on the date the option is granted). Options
granted to executive officers typically vest over three years. Vesting schedules
are based on three-year vesting schedules, with one-third vesting on the
first
anniversary and the remaining options vesting ratably over the remainder
of the
vesting term. Vested options expire 90 days after leaving the
Company.
Retirement
Benefits. The Company’s policy is to provide an attractive benefit package
to all employees. Named executive officers of the Company are
generally eligible to participate, on the terms and conditions applicable
to all
eligible employees of the Company, in the ClearOne Communications, Inc. 401(k)
Profit Sharing Plan, a broad-based, tax-qualified contributory savings and
profit sharing plan (the “401(k) Plan”).
Employee
Stock Purchase Plan. The Company’s 1997 Employee Stock Purchase Plan
encourages employee ownership in the Company and provides all employees,
including named executive officers an opportunity to purchase common stock
through weekly payroll deductions. Plan participants are able to purchase
ten
shares of the Company’s Common Stock for the price of nine shares.
Other
Personal Benefits. The Company also provides other traditional
welfare benefits and limited perquisites to the named executive officers
in
order to achieve a competitive pay package as detailed in the Summary
Compensation Table below. The Compensation Committee believes that
those benefits are reasonable, competitive and consistent with the Company’s
overall executive compensation objectives. Those benefits consist
primarily of Company-paid premiums for health, life and disability
insurance.
The
Company has not entered into Employment Agreements with any of its named
executive officers. All officers of the Company are employed at will and
can be
terminated without cause. All employees of the Company have signed
Confidentiality Agreements to keep certain information
confidential.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed the foregoing Compensation Discussion
and
Analysis required by Item 402(b) of Regulation S-K and discussed the
Compensation Discussion and Analysis with the Company’s
management. Based on such review and discussions with management, the
Compensation Committee recommended to the Board of Directors of the Company
that
the foregoing Compensation Discussion and Analysis be included in this Proxy
Statement.
Respectfully
submitted by the members of the Compensation Committee.
Brad
R.
Baldwin (Chair)
Scott
M.
Huntsman
Harry
Spielberg
[The
remainder of this page intentionally left blank]
EXECUTIVE
OFFICER COMPENSATION
Summary
Compensation
The
following table sets forth for the periods indicated the compensation paid
or
earned by each Named Executive Officer for the fiscal year ending June 30,
2007.
2007
SUMMARY COMPENSATION TABLE
Name
and Position
|
Fiscal
Year
|
Salary
($)
|
Bonus ($)
|
Option
Awards ($)(1)
|
Non-equity
Incentive
Plan Compensation ($)(2)
|
All
Other Compensation ($)(3)
|
Total
($)
|
Zee
Hakimoglu
Chairman
of the Board
Chief
Executive Officer
and
President
|
2007
|
200,000
|
-
|
288,149
|
-
|
5,014
|
493,163
|
Greg
A. LeClaire
Vice
President &
Principal
Financial
Officer
(4)
|
2007
|
110,384
|
-
|
25,886
|
33,978
|
19,182
|
189,430
|
Craig
E. Peeples
Former
Interim Chief
Financial
Officer and
Corporate
Controller (5)
|
2007
|
50,425
|
-
|
-
|
20,000
|
897
|
71,322
|
Tracy
A. Bathurst
Chief
Technology
Officer
(6)
|
2007
|
139,077
|
-
|
42,950
|
37,590
|
3,891
|
224,431
|
Steven
P. Andresen
Vice
President of
Worldwide
Sales (7)
|
2007
|
63,538
|
-
|
19,108
|
15,961
|
17,631
|
116,238
|
Marthes
Solamuthu
Vice
President of
Operations
(8)
|
2007
|
133,558
|
-
|
28,738
|
32,500
|
38,123
|
232,919
|
Werner
H. Pekarek
Vice
President (9)
|
2007
|
37,206
|
-
|
7,576
|
3,000
|
14,415
|
54,621
|
Joseph
P. Sorrentino
Vice
President (10)
|
2007
|
54,898
|
-
|
14,667
|
4,922
|
1,099
|
60,919
|
1
|
The
amounts in the “Option Awards” column reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year
ended June
30, 2007, in accordance with SFAS 123(R) of awards of stock options
granted pursuant to the Company’s long-term incentive plans, and thus may
include amounts from awards granted in and prior to each reported
fiscal
year. Assumptions used in the calculation of these amounts are
included in
footnotes to the Company’s audited financial statements for the year ended
June 30, 2007, included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange
Commission.
|
2
|
The
amounts in the “Non-equity Incentive Plan Compensation” column reflect
incentive bonuses based on pre-established performance
criteria.
|
3
|
The
amounts in the “All Other Compensation” column reflect Company 401(k), the
value of Employee Stock Purchase Plan (“ESPP”) matching contributions and
relocation as follows. Ms. Hakimoglu 401(k) matching contribution
of
$3,724; ESPP matching contribution of $1,291. Mr. LeClaire 401(k)
matching
contribution of $3,458; ESPP matching contribution of $723; Relocation
of
$15,000. Mr. Andresen 401(k) matching contribution of $1,216; Relocation
of $16,415. Mr. Bathurst 401(k) matching contribution of $3,891.
Mr.
Solamuthu ESPP matching contribution of $300; Relocation of $20,000;
U.S.
H-1B visa, Green Card and related immigration sponsorship fees
of $17,823.
Mr. Pekarek 401(k) matching contribution of $648; Severance Payment
of
$13,767. Mr. Sorrentino 401 (k) matching contribution of
$1,099.
|
4
|
Mr.
LeClaire joined the Company in September
2006.
|
5
|
Mr.
Peeples terminated employment in October
2006.
|
6
|
Mr.
Bathurst was named the Company’s Chief Technology Officer in August 2007.
He was formerly Vice-President of Product Line
Management.
|
7
|
Mr.
Andresen joined the Company in January
2007.
|
8
|
Mr.
Solamuthu joined the Company in August
2006.
|
9
|
Mr.
Pekarek terminated employment in August
2006.
|
10
|
Mr.
Sorrentino terminated employment in September
2006.
|
2007
GRANTS OF PLAN-BASED AWARDS
The
following table sets forth information concerning non-equity based and
equity-based plan awards granted to the Named Executive Officers during the
year
ended June 30, 2007.
Name
|
Grant
Date
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards Target ($)
(1)
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards Maximum ($)
(2)
|
All
Other Option Awards: Number of Securities Underlying Options Granted
(#)
(3)
|
Exercise
or Base Price of Option Awards ($/sh) (4)
|
Grant
Date Fair Value of Stock and Option Awards ($) (5)
|
|
|
|
|
|
|
|
Zee
Hakimoglu
|
September
19, 2006
|
0
|
0
|
150,000
|
3.65
|
341,458
|
|
|
|
|
|
|
|
Greg
A. LeClaire
|
November
20, 2006
|
|
|
45,000
|
4.20
|
117,126
|
|
February
2, 2007
|
|
|
5,000
|
5.05
|
15,490
|
|
April
1, 2007
|
16,672
|
18,772
|
|
|
|
|
|
|
|
|
|
|
Tracy
A. Bathurst
|
September
18,2006
|
|
|
25,000
|
3.65
|
56,909
|
|
April
1, 2007
|
16,672
|
18,772
|
|
|
|
|
|
|
|
|
|
|
Steven
P. Andresen
|
February
2,2007
|
|
|
45,000
|
5.05
|
139,413
|
|
April
1, 2007
|
16,672
|
18,772
|
|
|
|
|
|
|
|
|
|
|
Marthes
Solamuthu
|
August
23,2006
|
|
|
50,000
|
3.26
|
101,147
|
|
April
1, 2007
|
18,458
|
20,873
|
|
|
|
|
1
Listed target amounts reflect estimated incentive performance bonuses
applicable to fiscal 2007 to be paid upon individuals meeting
specific
performance criteria. Actual performance based bonuses paid and
accrued
for fiscal 2007 are listed in the “Non-Equity Incentive Plan Compensation”
column in the 2007 “Summary Compensation Table”. The threshold (minimum)
payout for each is $0.
|
|
2
Listed maximum amounts reflect estimated incentive performance
maximum bonuses to be paid upon individual exceeding specific
performance
criteria. Actual performance based bonuses earned for fiscal
2007 are
listed in the “Non-Equity Incentive Plan Compensation” column in the 2007
“Summary Compensation Table.”
|
|
3 Stock
options fully vest three years from the date of
grant.
|
|
4
The
exercise
price per share under each stock option is the market closing price
on the
date of grant.
|
|
5
Fair
value of
the options as computed under SFAS 123(R) and the expense attributable
to
stock awards. Generally, the Company expenses these amounts in
its
financial statements over the term of the award’s vesting
schedule.
|
Additional
Narrative Disclosure to the Summary Compensation Table
The
Compensation Committee establishes
the criteria, and directs the implementation, of all compensation program
elements for the executive officers. The CEO’s base salary is set at the
beginning of each fiscal year by the board of directors after review of the
recommendation of the Compensation Committee. There were no changes to the
base
salaries of executive officers during the 2007 fiscal year. In lieu of being
eligible for an incentive bonus, Ms. Hakimoglu was granted additional options
during the 2007 fiscal year.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Amounts
Payable upon Change in Control
Termination.
As of the end of
our 2007 fiscal year, none of the named executive officers was party to an
employment or severance agreement with us, and each named executive officer’s
employment was on an “at-will” basis, permitting either the Company or each
officer to terminate his or her employment for any reason or for no
reason.
Accelerated
Stock Option Vesting
Upon a Change in Control. For certain option grants to executive officers
and directors, in the event of a change in control, then all of such optionee’s
unvested stock option shares will vest and become purchasable immediately
prior
to the event or closing of the transaction causing the change in control
although no amounts would be payable by Company.
Except
as otherwise set forth in an
option grant, in the event of a change in control, merger, sale etc., the
Board
of Directors has the sole authority to elect that each outstanding option
automatically accelerate so that each such option shall, immediately prior
to
the effective date of the Corporate Transaction, shall become fully exercisable
for all of the shares of Common Stock at the time subject to such option
and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock although no amounts would be payable by the Company.
[The
remainder of this page intentionally left blank]
Outstanding
Equity Awards at 2007 Fiscal Year End
The
following table provides information on the holdings of stock options by
the
Named Executive Officers as of June 30, 2007.
Name
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
|
|
|
|
Zee
Hakimoglu
|
50,000
|
0
|
6.40
|
3/24/2014
|
|
97,222
|
2,778
|
5.55
|
7/26/2014
|
|
0
|
150,000
|
3.65
|
9/18/2016
|
|
|
|
|
|
Greg
A. LeClaire
|
0
|
45,000
|
4.20
|
11/20/2016
|
|
0
|
5,000
|
5.05
|
2/2/2017
|
|
|
|
|
|
Tracy
A. Bathurst
|
6,750
|
3,250
|
14.00
|
12/29/2009
|
|
50,000
|
0
|
15.25
|
5/17/2010
|
|
3,958
|
1,042
|
6.50
|
4/12/2004
|
|
16,111
|
3,889
|
4.00
|
1/27/2015
|
|
0
|
25,000
|
3.65
|
9/18/2016
|
|
|
|
|
|
Steven
P. Andresen
|
0
|
45,000
|
5.05
|
2/2/2017
|
|
|
|
|
|
Marthes
Solamuthu
|
0
|
50,000
|
3.26
|
8/23/2016
|
The
Company has made no Stock Awards.
2007
Option Exercises and Stock Vested
No
Named Executive exercised stock
options during the fiscal year ending June 30, 2007.
2007
Pension Benefits
The
Company does not provide a defined
benefit pension plan to any employee.
2007
Nonqualified Deferred Compensation
The
Company does not provide
nonqualified deferred compensation to any employee.
2007
Director Compensation
The
following table summarizes the compensation paid by the Company to non-employee
directors for the year ended June 30, 2007.
Name
|
Fees
Earned or
Paid
in Cash
($)
(2)
|
Stock
Awards
($)
|
Option
Awards
($)
(3)
|
All
Other
Compensation
($)
|
Total
($)
|
Edward
Dallin Bagley(1)
|
48,000
|
-
|
65,637
|
-
|
113,637
|
Brad
R. Baldwin
|
24,000
|
-
|
55,303
|
-
|
79,303
|
Larry
R. Hendricks
|
24,000
|
-
|
37,341
|
-
|
61,341
|
Scott
M. Huntsman
|
24,000
|
-
|
37,341
|
-
|
61,341
|
Harry
Spielberg
|
24,000
|
-
|
58,976
|
-
|
82,976
|
1
Mr. Bagley was paid
$4,000 per month as Chairman of the Board. Mr. Bagley resigned from the Board
in
July, 2007 and was paid $200,000 upon his resignation.
2
The base annual
directors fee for fiscal 2007 was $24,000.
3
The amounts shown
in the “Option Awards” column reflect the dollar amount recognized for financial
statement reporting purposes for the year ended June 30, 2007 in accordance
with
SFAS 123(R), and thus included amounts for awards granted in prior years
and
fiscal 2007. The grant date fair value of each equity award computed in
accordance with FAS 123R. The grant date fair value of stock options awarded
to
each of the directors in 2006 under SFAS 123(R) was $37,950.
4
As of the end of
fiscal year 2007, each non-employee director had outstanding options for
the
following number of Company shares: Mr. Bagley, 185,000; Mr. Baldwin, 135,000;
Mr. Hendricks, 60,000; Mr. Huntsman, 60,000 and Mr. Spielberg,
110,000.
All
directors are also reimbursed by the Company for their out-of-pocket travel
and
related expenses incurred in attending all Board of Directors and committee
meetings.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Indemnification
of
Officers and Directors. The Company’s bylaws and the Utah Revised
Business Corporation Act provide for indemnification of directors and officers
against reasonable expenses incurred by such persons in connection with civil
or
criminal actions or proceedings to which they have been made parties because
they are or were directors or officers of the Company or its subsidiaries.
Indemnification is permitted if the person satisfies the required standards
of
conduct. Certain of the litigation matters described in “Item 3. Legal
Proceedings” of the Company’s Form 10-K for the year ended June 30, 2007
involved certain of the Company’s current and former directors and officers, all
of whom are covered by the aforementioned indemnity and if applicable, certain
prior period insurance policies. More specifically, the Company incurred
costs
of defending and resolving claims against certain of its present and former
directors and officers in connection with the SEC complaint filed on January
15,
2003, the shareholders’ class action filed on June 30, 2003, and a shareholder
derivative action. Additionally, on July 25, 2007, the United States Attorney’s
Office for the District of Utah indicted two of the Company’s former officers,
Frances Flood and Susie Strohm, for allegedly causing the Company to issue
materially misstated financial statements for its 2001 and 2002 fiscal years.
Please refer to the Company’s Form 10-k for the year ended June 30,
2007.
Joint
Prosecution and Defense Agreement. In connection with the Insurance
Coverage Action described under the caption “Item 3. Legal Proceedings” of the
Company’s Form 10-K for the year ended June 30, 2007, the Company and its
counsel entered into a Joint Prosecution and Defense Agreement dated as of
April
1, 2004 with Edward Dallin Bagley, Chairman of the Board of Directors, and
his
counsel, which generally provides that ClearOne and Mr. Bagley will jointly
prosecute their claims against the carriers of certain prior period directors
and officers liability insurance policies and jointly defend the claims made
by
the insurance carriers in order to reduce litigation expenses.
BOARD
OF DIRECTORS AND OTHER BOARD COMMITTEE REPORTS
Our
Board of Directors has three
standing committees; namely, an Audit Committee established in accordance
with
section 3(a)(58)(A) of the Exchange Act, a Nominating Committee and a
Compensation Committee.
Meetings
of the Board of Directors and Committees
The
Board of Directors held sixteen
meetings during fiscal 2007. The Audit Committee held six meetings during
fiscal
2007. The Nominating Committee met informally during fiscal 2007 at board
of
director meetings. The Compensation Committee held four meetings during fiscal
2007. In 2007, each director attended at least 75 percent of the meetings
of the
Board of Directors and the committees on which they served. Four members
of the
Board of Directors attended the Company’s 2006 annual meeting. The Company does
not have a policy with respect to Board member attendance at shareholder
meetings.
REPORT
OF THE AUDIT COMMITTEE
The
Audit Committee of the Board of
Directors is composed of all outside directors, all of whom are independent
as
defined in Nasdaq Stock Market Rule 4200(a)(15) and under Rule 10A-3(b)(1)
adopted pursuant to the Securities Exchange Act of 1934. The members of the
Audit Committee are Scott M. Huntsman, Brad R. Baldwin, and Larry R. Hendricks.
Larry R. Hendricks is the Board of Directors’ designated Audit Committee
Financial Expert consistent with The Sarbanes-Oxley Act of 2002.
The
Audit Committee oversees the
Company’s financial reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and
the
reporting process including the system of internal control. In fulfilling
its
oversight responsibilities, the Committee reviewed and discussed the audited
financial statements in the Annual Report with management including a discussion
of the quality, not just the acceptability, of the accounting principles,
the
reasonableness of significant judgments, and the clarity of disclosures in
the
financial statements.
The
Committee formally met six times
during the Company’s fiscal 2007 and once to date in fiscal 2008. The Committee
reviewed with the principal accountants, who are responsible for expressing
an
opinion on the conformity of those audited financial statements with generally
accepted accounting principles, their judgments as to the quality, not just
the
acceptability, of the Company’s accounting principles and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards. In addition, the Committee has discussed with the principal
accountants the auditors’ independence from management and the Company including
the matters in the written disclosure and the letter required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit
Committee) and considered the compatibility of nonaudit services with the
accountants’ independence. The Committee also discussed with the principal
accountants any matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees).
The
Committee discussed with the
Company’s principal accountants the overall scope and plans for their audits.
The Committee meets with the principal accountants, with and without management
present, to discuss the results of their examinations, their evaluations
of the
Company’s internal control, and the overall quality of the Company’s financial
reporting.
In
reliance on the reviews and
discussions referred to above, the Committee recommended to the Board of
Directors (and the Board has approved) that the audited financial statements
be
included in the Annual Report on Form 10-K for the year ended June 30, 2007
for
filing with the Securities and Exchange Commission.
Respectfully
submitted by the members
of the Audit Committee.
Scott
M.
Huntsman (Chair)
Brad
R.
Baldwin
Larry
R.
Hendricks
The
Board
of Directors has adopted a written charter for the Audit Committee setting
out
the functions the Committee is to perform. A copy of this charter was attached
as Exhibit A to the Company’s proxy statement filed with the Securities and
Exchange Commission in connection with the Company’s 2006 Annual Meeting of
Shareholders and is also available on the Company’s Internet website
at www.clearone.com.
NOMINATING
COMMITTEE
Nomination
of Director Candidates
The
members of the Nominating Committee
are Larry Hendricks, Brad Baldwin and Scott Huntsman. The directors
who serve on the Nominating Committee are all “independent” for purposes of the
rules of the National Association of Securities Dealers. That is, the Board
of
Directors has determined that none of the Compensation Committee members
has a
relationship to the Company that would interfere with that person’s exercise of
independent judgment in carrying out the responsibilities of a
director.
The
Nominating Committee met informally during 2007 at board of director meetings.
The Nominating Committee’s role specifically defined in its charter, is to
recommend to the Board the slate of director nominees for election to the
Company’s Board, to identify and recommend candidates to fill vacancies
occurring between annual shareholder meetings and to develop, review, evaluate
and recommend changes to Company policies relating to (i) director candidates
recommended by Company security holders, (ii) minimum director nominee
qualifications, (iii) the process for identification and evaluation of director
nominees, (iv) the process for Company security holders to send communications
to the Board and (v) Board meeting attendance. The Board of Directors will
consider recommendations for director nominees by shareholders if the names
of
those nominees and relevant biographical information are submitted in writing
to
the Secretary of the Company in the manner described for shareholder nominations
below under the heading “Proposals of Shareholders.”
All
director nominees, whether submitted by a shareholder or the Board of Directors,
will be evaluated in the same manner. The current director nominees
were recommended by the Nominating Committee and nominated by the Board of
Directors including the independent members thereof. The Board of Directors
has
adopted a Nominating Committee Charter, a copy of which is attached as Exhibit
A
to this proxy statement and is also available on the Company’s Internet website
at www.clearone.com.
Code
of Ethics
On
August 23, 2006, the Board of
Directors adopted a code of ethics that applies to our Board of Directors,
executive officers, and employees, a copy of which was included as an exhibit
to
our Form 10-K for the period ended June 30, 2006 and is also
available on the Company’s Internet website at
www.clearone.com.
STOCK
PERFORMANCE GRAPH
The
following graph compares what an investor’s five-year cumulative total return
(assuming reinvestment of dividends) would have been assuming $100 initial
investments on June 30, 2002, for the Company’s Common Stock and the two
indicated indices.
Cumulated
shareholder return data respecting the Nasdaq Composite Index are included
as
the comparable broad market index. The peer group compared is the Morgan
Stanley
Technology Index.
|
June
2002
|
June
2003
|
June
2004
|
June
2005
|
June
2006
|
June
2007
|
ClearOne
Communications, Inc.
|
$100
|
$20.37
|
$51.89
|
$34.91
|
$33.02
|
$44.34
|
Nasdaq
Composite Index
|
$100
|
$75.11
|
$94.78
|
$95.21
|
$100.53
|
$120.49
|
Morgan
Stanley Technology Index
|
$100
|
$110.12
|
$147.45
|
$141.23
|
$147.75
|
$185.89
|
Changes
in Control
The
Company is not aware of any
arrangements which may result in a change in control of the
Company.
PROPOSAL
TWO – APPROVE 2007 EQUITY INCENTIVE PLAN
The
following summary is qualified in
its entirety by the provisions of the 2007 Equity Incentive Plan (“Plan), a copy
of which is attached to the Proxy Statement as Exhibit B.
SUMMARY
In
August 2007, the Company’s Board of
Directors adopted the Plan to allow continuing granting of stock options
to
employees and directors as the ability to award options under the current
plan
will expire in less than one year. Additionally, the Plan provides for the
granting of stock appreciation rights, restricted stock and restricted stock
units. The Company’s shareholders must approve this Plan in order for it to
become effective.
GENERAL
The
Plan provides for the granting of Incentive Stock Options (“ISO’s”) qualified
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
non-qualified stock options ("NSOs"), stock appreciation rights, restricted
stock and restricted stock units. The Plan will be administered by the
Compensation Committee of the Board of Directors or, in the absence of a
Compensation Committee, the Board of Directors itself (the"Administrator").
Option grants are made at the discretion of the Administrator and may be
made to
Company officers, directors, employees, and other persons as determined by
the
Administrator. Presently, there are five (5) executive officers, four (4)
non-employee directors, and 105 other employees of the Company employed by
the
Company, all of whom (as well as all future employees) are eligible to
participate in the Plan. The Plan will terminate upon the earlier of ten
years
from the Plan’s Effective Date, or the date on which all shares available under
the Plan have been issued.
The
Plan provides that a maximum of 1,000,000 shares of Common Stock may be issued
under the Plan (subject to adjustment in the event of stock splits or other
changes in the Common Stock as provided in the Plan). Shares subject to an
Award
under this Plan may not again be made available for issuance under this Plan
if
such shares are: (i) shares that were subject to a stock-settled Stock
Appreciation Right and were not issued upon the net settlement or net exercise
of such Stock Appreciation Right, (ii) shares used to pay the exercise price
of
an Option, (iii) shares delivered to or withheld by the Company to pay the
withholding taxes related to an Option or a Stock Appreciation Right, or
(iv)
shares repurchased on the open market with the proceeds of an Option
exercise.
Shares
issued under the Plan will be "restricted" as defined under Securities and
Exchange Commission ("SEC") Rule 144, until such time as the Company determines
in its discretion, if at all, to register such shares under the Securities
Act
of 1933. It is the Company's present intention to file
a
registration statement on Form S-8 to allow the public sale of the shares
issued
pursuant to the Plan. Cash proceeds from the exercise of option grants will
be
used for general corporate purposes.
The
Company's Board of Directors has determined that the Plan will replace the
Company's 1998 Stock Option Plan (the "1998 Plan") and no additional option
grants will be made under the 1998 Plan after adoption of the Plan. All options
issued under the 1998 Plan will remain outstanding subject to the terms and
conditions of the 1998 Plan.
No
determination has been made with
respect to persons who will receive awards under the Plan or the amount of
any
such awards. In addition, the Plan does not require that the Company provide
current or future Plan funding.
THE
ADMINISTRATOR
As
mentioned above, the Administrator of the Plan will be the Compensation
Committee of the Board of Directors or, in the absence of a Compensation
Committee, the Board of Directors itself. Such committee, if it grants options
to officers and directors of the Company, must be made up of two or more
"non-employee directors" (as defined under SEC Rule16(b)(3)). The Administrator
has full authority and discretion in the administration of the Plan, including
adopting rules for administration of the Plan and determining the designation
of
those persons receiving grants, the type of award granted, the number of
shares
to be covered, the exercise price, and other terms. The Administrator's
decisions in the administration of the Plan are final and binding on all
persons
for all purposes.
OPTION
TERMS
The
Company may grant ISOs under the Plan only to employees of the Company. Such
grants must be at an exercise price per share not less than 100% of the fair
market value of the Common Stock at the date of the grant (110% for optionees
holding 10% or more of the Company's Common Stock). The Plan limits grants
of
ISOs that may be exercised for the first time by the holder during any calendar
year to $100,000 in market value. For optionees holding more than 10% of
the
Company's Common Stock, ISOs must expire within five years from the date
of
grant. ISOs are exercisable during a recipient's lifetime only by such recipient
and are transferable only upon death by will or the laws of descent and
distribution.
The
Company may grant NSOs under the Plan to directors, employees, consultants
and
advisors. Such NSOs are not subject to the requirements of the Code and,
therefore, may not contain the same restrictions as ISOs issued under the
Plan.
NSOs must, however, have an exercise price not lower than the fair market
value
of the Common Stock on the date of grant. Additionally, no option, either
ISO or
NSO, may have a term of more than 10 years from the date of grant.
Stock
Appreciation Rights may be
granted to directors, employees, consultants and advisors either in tandem
with
or as a component of other Awards granted under the Plan. The provisions
of
Stock Appreciation Rights need not be the same with respect to each grant
or
each recipient. Any Stock Appreciation Right granted in tandem with an Award
may
be granted at the same time such Award is granted or at any time thereafter
before exercise or expiration of such Award.
Restricted
Stock and Restricted Stock
Units may be granted at any time and from time to time prior to the termination
of the Plan as determined by the Administrator. Restricted Stock is an award
or
issuance of Shares the grant, issuance, retention, vesting and/or
transferability of which is subject during specified periods of time to such
conditions (including continued employment or performance conditions) and
terms
as the Administrator deems appropriate. Restricted Stock Units are awards
denominated in units of shares under which the issuance of Shares is subject
to
such conditions (including continued employment or performance conditions)
and
terms as the Administrator deems appropriate.
The
Administrator shall establish the
term of each Option, which in no case shall exceed a period of ten (10) years
from the date of grant. Upon the death of a optionee, while in the employ
of the
Company or any Subsidiary or while serving as a member of the Board, such
options then held shall be exercisable by his or her estate, heir or beneficiary
at any time during the one (1) year period commencing on the date of death
to
the extent that the options are exercisable as of that date. Upon termination
of
employment as a result of the total and permanent disablement of an optionee
,
such options then held shall be exercisable during the one (1) year period
commencing on the date of termination to the extent that the options are
exercisable as of that date. Upon retirement of a optionee, options then
held
shall be exercisable during the one (1) year period commencing on the date
of
retirement. Upon the date of a termination of a optionee’s employment for cause,
any option that is unexercised prior to the date of termination shall terminate
as of such date. These general rules regarding exercise following termination
may be varied by the Administrator, but in no event may an option be exercised
later than the date of expiration of the option.
Options
may or may not be subject to a vesting schedule, whereby the options become
exercisable by the recipient in portions. Such vesting may be based on the
passing of time, performance goals, or some other criteria determined by
the
Administrator. Generally, such vesting may be accelerated by the Administrator
in its discretion in the event of a major corporation transaction (such as
a
merger or sale of all assets) or certain changes in control of the
Company.
AMENDMENTS
The
Board of Directors can increase the number of shares that may be awarded
under
the Plan, subject in certain instances to approval by the shareholders. The
Administrator may otherwise amend the Plan at any time and in any manner,
subject to the rights of the holders of outstanding options as specified
in
their option agreements.
FEDERAL
INCOME TAX CONSEQUENCES OF THE 2007 EQUITY COMPENSATION PLAN
The
following describes the general federal income tax consequences of the option
grants for grant recipients and the Company. A recipient will not realize
any
income at the time an ISO is granted nor upon exercise of an ISO. However,
the
difference between the option exercise price and the Common Stock's fair
market
value at the time of exercise will be taken into account for purposes of
the
recipient's alternative minimum income tax, if any.
Upon
the subsequent disposition of shares of Common Stock acquired by the exercise
of
an ISO more than (i) two years after the ISO is granted and (ii) one year
after
the transfer of shares of Common Stock upon the exercise of such option,
the
recipient will realize capital gain or loss upon such disposition. The option
exercise price will be the recipient's basis for determining the gain or
loss.
If the subsequent disposition of stock occurs before the special holding
requirements described above are met, the recipient generally will recognize
ordinary income upon such disposition equal to the excess of the fair market
value of the shares at the time the option was exercised over the exercise
price.
A
recipient will not realize any income at the time an NSO is granted. Upon
the
recipient's exercise of an NSO, the difference between the fair market value
of
the Common Stock at the time of exercise and the option price will be ordinary
income to the optionee.
At
the time the recipient realizes ordinary income from the exercise of an NSO,
the
Company will be entitled to a tax deduction in the same amount as the ordinary
income realized by the recipient. No such deduction or other tax consequence
is
applicable to the Company upon grant or exercise of an
ISO.
The
foregoing is only a summary of the effect of federal income taxation upon
a
recipient with respect to the grant and exercise of options under the Plan.
This
summary does not purport to be complete and does not discuss the income tax
laws
of any state or foreign country in which an employee
may
reside.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
2007 EQUITY INCENTIVE PLAN
INDEPENDENT
PUBLIC ACCOUNTANTS
On
October 6, 2006 the Board of
Directors appointed Jones Simkins, P.C., as the Company’s auditor and
independent certified public accountants for the fiscal year ended June 30,
2007.
Hansen
Barnett & Maxwell, were appointed the Company’s principal accountants for
the fiscal year ended June 30, 2006 and dismissed by the Company’s Audit
Committee on October 6, 2006. The report of Hansen Barnett & Maxwell on the
Company’s financial statements during the two fiscal years ended June 30, 2006
and 2005 did not contain an adverse opinion or disclaimer of opinion and
was not
qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements or reportable events (as defined in the Regulation
S-K Item 304(a)(1)(v)) in connection with the Company’s fiscal year June 30,
2006 and 2005 audits, except that Hansen Barnett & Maxwell reported in a
letter to the Company’s Audit Committee, dated August 30, 2006, that it had
identified a deficiency that existed in the design or operation of the Company’s
internal control over financial reporting that it considered to be a “material
weakness.” This material weakness in the Company’s internal controls related to
an ineffective financial statement close process, whereas the timeliness
of the
monthly close process was ineffective to allow a timely financial statement
close. The Company’s accounting personnel had not been able to focus full
attention to correcting this weakness due to their focus on the preparation,
audit, and issuance for the restated fiscal 2001, restated fiscal 2002, and
fiscal 2003, 2004, and 2005 consolidated financial statements as well as
the
interim fiscal 2006 condensed consolidated financial statements. The Company
disclosed this material weakness in its Form 10-K filing for the fiscal year
ended June 30, 2006 but believes it has since remedied this weakness through
the
commitment of considerable resources. The Company authorized Hansen, Barnett
& Maxwell to respond fully to any inquiries by Jones Simkins PC regarding
significant deficiencies or material weaknesses in internal controls. No
consultations occurred between the Company and Jones Simkins during the two
fiscal years ended June 30, 2006 and 2005, and any subsequent interim period
prior to Jones Simkins' appointment regarding either (i) the application
of
accounting principles to a specific completed or contemplated transaction,
the
type of audit opinion that might be rendered on the Company’s financial
statements, or other information provided that was considered by the Company
in
reaching a decision as to an accounting, auditing, or financial reporting
issue,
or (ii) any matter that was the subject of disagreement or a reportable event
requiring disclosure under Item 304(a)(1)(v) of Regulation S-K.
The
selection of the Company’s auditors for the current fiscal year is not being
submitted to the shareholders for their consideration in the absence of a
requirement to do so. The selection of the independent auditors for fiscal
2008
will be made by ClearOne’s Audit Committee of the Board of Directors, at such
time as they may deem it appropriate.
It
is anticipated that a representative
of Jones Simkins, P.C. will attend the Annual Meeting and will be available
to
respond to questions. It is not anticipated that the representative will
make
any statement or presentation, although the representative will have an
opportunity to do so if he desires.
Audit
Fees
For
the fiscal 2007 audit, Jones
Simkins, P.C. billed the Company $76,317 for professional services rendered
by
our principal accountant for the audit of our financial statements, review
of
financial statements included in our quarterly reports and other fees that
are
normally provided by the accountant in connection with the statutory and
regulatory filings or engagements. For the fiscal 2006 audit, Hansen, Barnett
& Maxwell billed the Company $205,165 for professional services rendered for
the audit of its annual financial statements. KPMG LLP billed the Company
$15,909 for the fiscal 2006 audit, respectively, for reissuing its opinion
in
ClearOne’s latest 10-K filings and other fees associated with statutory and
regulatory filings.
Neither
Jones Simkins, P.C., nor any of
its members have ever had any direct or indirect financial interest in the
Company or been connected with the Company as promoter, underwriter, voting
trustee, director, officer, or employee.
Audit
Related Fees
The
Company did not pay its principal
accountant any audit-related fees during fiscal 2007 or 2006.
Tax
Fees
During
fiscal 2007, the Company paid
Jones Simkins, P.C. $2,533 for tax filing, preparation, and tax advisory
services.
All
Other Fees
The
Company did not pay its principal
accountant any other fees during fiscal 2007 or 2006.
Audit
Committee
It
is the Company’s policy that the
Audit Committee pre-approves all audit, tax and related services. All of
the
services described under the prior five headings were approved in advance
by our
Audit Committee. No items were approved by the Audit Committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. The Audit Committee
has
considered whether the provision of the services performed by our principal
accountant is compatible with maintaining the principal accountant’s
independence.
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SHAREHOLDER
PROPOSALS
It
is anticipated that the next
Annual Meeting of Shareholders will be held during November 2008. In accordance
with SEC Rule 14a-8, shareholders may present proposals for inclusion in
the
Company’s proxy statement. Any shareholder desiring to submit a proposal for
inclusion in the Company’s proxy statement and form of proxy for the Company’s
2008 Annual Meeting of Shareholders should transmit such proposal to the
Secretary of the Company on or before July 15, 2008. For any other proposal
that
a shareholder wishes to have considered at the Company’s 2008 Annual Meeting,
the shareholder must notify the Company of the proposal on or before August
31,
2008. Proposals for which the Company receives notice after that time will
be
considered untimely and the persons serving as proxies will have discretionary
authority to vote on such matters at the meeting.
MISCELLANEOUS
Other
Business
Management
does not know of any
business other than that referred to in the Notice that may be considered
at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying form
of
proxy to vote the proxies held by them in accordance with their best
judgment.
In
order to assure the presence of
the necessary quorum and to vote on the matters to come before the Annual
Meeting, please indicate your choices on the enclosed proxy and date, sign
and
return it promptly in the envelope provided.
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By
Order of the Board of Directors
/s/ Zeynep Hakimoglu
Zeynep Hakimoglu, Chairman &
CEO
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Salt
Lake
City, Utah
October
1, 2007
[This
Page Left Intentionally Blank]
EXHIBIT
A
ClearOne
Communications, Inc.
NOMINATING
COMMITTEE CHARTER
ORGANIZATION
There
shall be a Committee of the Board of Directors of ClearOne Communications,
Inc.
(the “Company”) to be known as the Nominating Committee. The Nominating
Committee shall be composed of directors who are independent of the management
of the Company and are free of any relationship that, in the opinion of the
board of directors (the “Board”), would interfere with their exercise of
independent judgment as a committee member.
STATEMENT
OF POLICY
The
Nominating Committee’s role is to recommend to the Board the slate of director
nominees for election to the Company’s Board, to identify and recommend
candidates to fill vacancies occurring between annual shareholder meetings
and
to develop, review, evaluate and recommend changes to Company policies relating
to (i) director candidates recommended by Company security holders, (ii)
minimum
director nominee qualifications, (iii) the process for identification and
evaluation of director nominees, (iv) the process for Company security holders
to send communications to the Board and (v) Board meeting
attendance.
COMPOSITION
The
Nominating Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors. The members of
the
Nominating Committee shall be appointed by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
qualified and appointed. Unless a chair is appointed by the full Board, the
members of the Nominating Committee may designate a chair by majority vote
of
the full Nominating Committee. The Board, by the affirmative vote of a majority
of the entire Board, may remove any director from membership on the Nominating
Committee with or without cause.
MEETINGS
The
Nominating Committee shall meet at least two times annually. Additional meetings
may occur as the Nominating Committee or its chair deems advisable. The
Nominating Committee will cause to be kept adequate minutes of all its
proceedings, and will report its actions to the next meeting of the Board.
Nominating Committee members will be furnished with copies of the minutes
of
each meeting and any action taken by unanimous consent. The Nominating Committee
is governed by the same rules regarding meetings (including meetings by
conference telephone or similar communications equipment), action without
meetings, notice, waiver of notice, and quorum and voting requirements as
are
applicable to the Board. The Nominating Committee is authorized and empowered
to
adopt its own rules of procedure not inconsistent with (a) any provision
of this
Charter, (b) any provision of the Bylaws of the Company or (c) the laws of
the
State of Utah.
AUTHORITY
The
Nominating Committee will have the resources and authority necessary to
discharge its duties and responsibilities, including the authority to retain
outside counsel or other experts or consultants, as it deems appropriate.
Any
communications between the Nominating Committee and legal counsel in the
course
of obtaining legal advice will be considered privileged communications of
the
Company and the Nominating Committee will take all necessary steps to preserve
the privileged nature of those communications.
RESPONSIBILITIES
In
carrying out its responsibilities, the Nominating Committee’s policies and
procedures will remain flexible in order to best react to changing conditions
and to ensure that the nominating processes and procedures of the Company
are in
accordance with all requirements. In carrying out these responsibilities,
the
Nominating Committee will perform the following functions.
1.
|
New
Director Candidates. The Nominating Committee will identify
individuals qualified to become Board members and recommend candidates
to
fill new or vacant positions. In recommending such candidates,
the
Nominating Committee will consider such factors as it deems appropriate
to
assist in developing a Board and committees that are diverse in
nature and
comprised of experienced and seasoned advisors. These factors may
include
judgment, skill, diversity (including factors such as race, gender
or
experience), integrity, experience with businesses and other organizations
of comparable size, the interplay of the candidate's experience
with the
experience of other Board members, and the extent to which the
candidate
would be a desirable addition to the Board and any committees of
the
Board. The Nominating Committee will also review the qualifications
of,
and make recommendations regarding, director nominations submitted
to the
Company by security holders in accordance with the Company's Bylaws
or
otherwise.
|
2.
|
Incumbent
Directors Evaluation. The Nominating Committee will evaluate
whether an incumbent director should be nominated for reelection
to the
Board or any committee of the Board upon expiration of such director's
term. The Nominating Committee will use the same factors established
for
new director candidates to make its evaluation and will also take
into
account the incumbent director's performance as a Board
member.
|
3.
|
Board
Effectiveness Evaluation. The Nominating Committee will evaluate
the overall effectiveness of the Board and make recommendations
to the
Board resulting from the findings of its evaluation. The Nominating
Committee will conduct its evaluation in such manner as it deems
appropriate.
|
4.
|
Develop
Policies. To the extent that the Nominating Committee deems
appropriate and prudent under the circumstances, the committee
shall
develop policies relating to (i) director candidates recommended
by
Company security holders, (ii) minimum director nominee qualifications,
(iii) the process for identification and evaluation of director
nominees,
(iv) the process for Company security holders to send communications
to
the Board and (v) Board meeting attendance. These policies shall
be
updated at least annually or as business developments may dictate
and each
policy and policy update shall be submitted to the Board for
approval.
|
5.
|
Other
Duties and Responsibilities. The Nominating Committee will
perform any other duties or responsibilities delegated to the Nominating
Committee by the Board from time to
time.
|
6.
|
Annual
Review. At least annually, the Nominating Committee will (i)
review this Charter with the Board and recommend any changes to
the Board,
and (ii) evaluate its performance against the requirements of this
Charter
and report the results of this evaluation to the Board. The Nominating
Committee will conduct its review and evaluation in such manner
as it
deems appropriate.
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EXHIBIT
B
ClearOne
Communications, Inc.
2007
EQUITY INCENTIVE PLAN
1. Purpose
The
purpose of the ClearOne Communications, Inc. 2007 Equity Incentive Plan (the
“Plan”) is to advance the interests of the ClearOne Communications, Inc. (the
“Company”) by stimulating the efforts of employees, officers, nonemployee
directors and other service providers, in each case who are selected to be
participants, by heightening the desire of such persons to continue in working
toward and contributing to the success and progress of the Company. The Plan
provides for the grant of Incentive and Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock and Restricted Stock Units, any of
which
may be performance-based, as determined by the Administrator.
2. Definitions
As used in the Plan, the following terms shall have the meanings
set
forth below:
(a) “Administrator”
means the Administrator of the Plan in accordance with Section 18.
(b) “Award”
means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock or Restricted Stock Unit granted to a Participant
pursuant to the provisions of the Plan, any of which the Administrator may
structure to qualify in whole or in part as a Performance Award.
(c) “Award
Agreement” means a written agreement or other instrument as may be approved from
time to time by the Administrator implementing the grant of each Award. An
Agreement may be in the form of an agreement to be executed by both the
Participant and the Company (or an authorized representative of the Company)
or
certificates, notices or similar instruments as approved by the
Administrator.
(d) “Board”
means the board of directors of the Company.
(e) “Cause”
means the commission of an act of fraud or theft against the Company; conviction
(including a guilty plea or plea of nolo contendere) for any felony; conviction
(including a guilty plea or plea of nolo contendere) for any misdemeanor
involving moral turpitude which might, in the Company’s opinion, cause
embarrassment to the Company; significant violation of any material Company
policy; willful or repeated nonperformance or substandard performance of
material duties which is not cured within thirty (30) days after written
notice
thereof to the Optionee; or violation of any material state or federal laws,
rules or regulations in connection with or during performance of the Optionee’s
work which, if such violation is curable, is not cured within thirty (30)
days
after notice thereof to the Optionee.
(f) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and
the
rulings and regulations issues thereunder.
(g) “Company”
means ClearOne Communications, Inc., a Utah corporation.
(h) “Incentive
Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a
Participant may become entitled to receive an amount based on satisfaction
of
such performance criteria as are specified in the Award Agreement.
(i) “Incentive
Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.
(j) “Nonemployee
Director” means each person who is, or is elected to be, a member of the Board
and who is not an employee of the Company or any Subsidiary.
(k) “Nonqualified
Stock Option” means a stock option that is not intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the
Code.
(l) “Option”
means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6 of the Plan.
(m) “Participant”
means any individual described in Section 3 to whom Awards have been granted
from time to time by the Administrator and any authorized transferee of such
individual.
(n) “Performance
Award” means an Award, the grant, issuance, retention, vesting or settlement of
which is subject to satisfaction of one or more performance criteria pursuant
to
Section 13.
(o) “Plan”
means the ClearOne Communications, Inc. 2007 Equity Incentive Plan as set
forth
herein and as amended from time to time.
(p) “Qualifying
Performance Criteria” has the meaning set forth in Section 13(b).
(q) “Restricted
Stock” means Shares granted pursuant to Section 8 of the Plan.
(r) “Restricted
Stock Unit” means an Award granted to a Participant pursuant to Section 8
pursuant to which Shares or cash in lieu thereof may be issued in the
future.
(s) “Retirement”
has the meaning specified by the Administrator in the terms of an Award
Agreement or, in the absence of any such term, for Participants other than
Nonemployee Directors shall mean retirement from active employment with the
Company and its Subsidiaries (i) at or after age [55] and with the approval
of
the Administrator or (ii) at or after age [65]. The determination
of the Administrator as to an individual’s Retirement shall be conclusive on all
parties.
(t) “Share”
means a share of the Company’s common stock, par value $.001, subject to
adjustment as provided in Section 12.
(u) “Stock
Appreciation Right” means a right granted pursuant to Section 7 of the Plan that
entitles the Participant to receive, in cash or Shares or a combination thereof,
as determined by the Administrator, value equal to or otherwise based on
the
excess of (i) the market price of a specified number of Shares at the time
of
exercise over (ii) the exercise price of the right, as established by the
Administrator on the date of grant.
(v) “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company where each of the corporations in
the
unbroken chain other than the last corporation owns stock possessing at least
50
percent or more of the total combined voting power of all classes of stock
in
one of the other corporations in the chain, and if specifically determined
by
the Administrator in the context other than with respect to Incentive Stock
Options, may include an entity in which the Company has a significant ownership
interest or that is directly or indirectly controlled by the
Company.
(w) “Termination
of employment” means ceasing to serve as a full-time employee of the Company and
its Subsidiaries or, with respect to a service provider, ceasing to serve
as
such for the Company, except that with respect to all or any Awards held
by a
Participant (i) the Administrator may determine, subject to Section 6(d),
that
an approved leave of absence or approved employment on a less than full-time
basis is not considered a “termination of employment,” (ii) the Administrator
may determine that a transition of employment to service with a partnership,
joint venture or corporation not meeting the requirements of a Subsidiary
in
which the Company or a Subsidiary is a party is not considered a “termination of
employment,” (iii) service as a member of the Board shall constitute continued
employment with respect to Awards granted to a Participant while he or she
served as an employee and (iv) service as an employee of the Company or a
Subsidiary shall constitute continued employment with respect to Awards granted
to a Participant while he or she served as a member of the Board. The
Administrator shall determine whether any corporate transaction, such as
a sale
or spin-off of a division or subsidiary that employs a Participant, shall
be
deemed to result in a termination of employment with the Company and its
Subsidiaries for purposes of any affected Participant’s Options, and the
Administrator’s decision shall be final and binding.
(x) “Total
and Permanent Disablement” has the meaning specified by the Administrator in the
terms of an Award Agreement or, in the absence of any such term or in the
case
of an Option intending to qualify as an Incentive Stock Option, the inability
to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in
death or which has lasted or can be expected to last for a continuous period
of
not less than 12 months. The determination of the Administrator as to an
individual’s Total and Permanent Disablement shall be conclusive on all
parties.
3. Eligibility
Any
person who is a current or prospective officer or employee (including any
director who is also an employee, in his or her capacity as such) of the
Company
or of any Subsidiary shall be eligible for selection by the Administrator
for
the grant of Awards hereunder. To the extent provided by Section 5(d), any
Nonemployee Director shall be eligible for the grant of Awards hereunder
as
determined by the Administrator. In addition any service provider who has
been
retained to provide consulting, advisory or other services to the Company
or to
any Subsidiary shall be eligible for selection by the Administrator for the
grant of Awards hereunder. Options intending to qualify as Incentive Stock
Options may only be granted to employees of the Company or any Subsidiary
within
the meaning of the Code, as selected by the Administrator. For purposes of
this
Plan, the Chairman of the Board’s status as an employee shall be determined by
the Administrator.
4. Effective
Date and Termination of Plan
This
Plan
will become effective (the “Effective Date”) upon approval by the Company’s
shareholders and subsequent adoption by the Board of Directors. All Awards
granted under this Plan are subject to, and may not be exercised before,
the
approval of this Plan by the shareholders prior to the first anniversary
date of
the effective date of the Plan, by the affirmative vote of the holders of
a
majority of the outstanding Shares of the Company present, or represented
by
proxy, and entitled to vote, at a meeting of the Company’s shareholders or by
written consent in accordance with the laws of the State of Utah; provided
that
if such approval by the shareholders of the Company is not forthcoming, all
Awards previously granted under this Plan shall be void. The Plan shall remain
available for the grant of Awards until the tenth (10th) anniversary of the
Effective Date. Notwithstanding the foregoing, the Plan may be terminated
at
such earlier time as the Board may determine. Termination of the Plan will
not
affect the rights and obligations of the Participants and the Company arising
under Awards theretofore granted and then in effect.
5. Shares
Subject to the Plan and to Awards
(a) Aggregate
Limits. The aggregate number of Shares issuable pursuant to all Awards
under this Plan shall not exceed 1,000,000; provided that any Shares granted
after the Effective Date under Options or Stock Appreciation Rights shall
be
counted against this limit on a one-for-one basis and any Shares granted
as
Awards other than Options or Stock Appreciation Rights shall be counted against
this limit as two (2) Shares for every one (1) Share subject to such Award.
The
aggregate number of Shares available for grant under this Plan and the number
of
Shares subject to outstanding Awards shall be subject to adjustment as provided
in Section 12. The Shares issued pursuant to Awards granted under this Plan
may
be shares that are authorized and unissued or shares that were reacquired
by the
Company, including shares purchased in the open market.
(b) Issuance
of Shares. For purposes of Section 5(a), the aggregate number of Shares
issued under this Plan at any time shall equal only the number of Shares
actually issued upon exercise or settlement of an Award under this Plan.
Notwithstanding the foregoing, Shares subject to an Award under this Plan
may
not again be made available for issuance under this Plan if
such
shares are: (i) shares that were subject to a stock-settled Stock Appreciation
Right and were not issued upon the net settlement or net exercise of such
Stock
Appreciation Right, (ii)
shares used to pay the exercise price of an Option, (iii) shares delivered
to or
withheld by the Company to pay the withholding taxes related to an Option
or a
Stock Appreciation Right, or (iv) shares repurchased on the open market with
the
proceeds of an Option exercise. Shares subject to Awards that have been
canceled, expired, forfeited or otherwise not issued under an Award and shares
subject to Awards settled in cash shall not count as shares issued under
this
Plan.
6. Options
(a) Option
Awards. Options may be granted at any time and from time to time prior to
the termination of the Plan to Participants as determined by the Administrator.
No Participant shall have any rights as a shareholder with respect to any
Shares
subject to Option hereunder until said Shares have been issued, except that
the
Administrator may authorize dividend equivalent accruals with respect to
such
Shares. Each Option shall be evidenced by an Award Agreement. Options granted
pursuant to the Plan need not be identical but each Option must contain and
be
subject to the terms and conditions set forth below.
(b) Price.
The Administrator will establish the exercise price per Share under
each
Option, which, in no event will be less than the fair market value of the
Shares
on the date of grant;
provided, however, that the exercise price per Share with respect to an Option
that is granted in connection with a merger or other acquisition as a substitute
or replacement award for options held by optionees of the acquired entity
may be
less than 100% of the market price of the Shares on the date such Option
is
granted if such exercise price is based on a formula set forth in the terms
of
the options held by such optionees or in the terms of the agreement providing
for such merger or other acquisition. The exercise price of any Option may
be
paid in Shares, cash or a combination thereof, as determined by the
Administrator, including an irrevocable commitment by a broker to pay over
such
amount from a sale of the Shares issuable under an Option, the delivery of
previously owned Shares and withholding of Shares deliverable upon
exercise.
(c) No
Repricing. Other than in connection with a change in the Company’s
capitalization (as described in Section 12) the exercise price of an Option
may
not be reduced without shareholder approval (including canceling previously
awarded Options and regranting them with a lower exercise
price).
(d) Provisions
Applicable to Options. The date on which Options become exercisable shall
be determined at the sole discretion of the Administrator and set forth in
an
Award Agreement. Unless provided otherwise in the applicable Award Agreement,
to
the extent that the Administrator determines that an approved leave of absence
or employment on a less than full-time basis is not a termination of employment,
the vesting period and/or exercisability of an Option shall be adjusted by
the
Administrator during or to reflect the effects of any period during which
the
Participant is on an approved leave of absence or is employed on a less than
full-time basis.
(e) Term
of Options and Termination of Employment. The Administrator shall establish
the term of each Option, which in no case shall exceed a period of ten (10)
years from the date of grant. Unless an Option earlier expires upon the
expiration date established pursuant to the foregoing sentence, upon the
termination of the Participant’s employment, his or her rights to exercise an
Option then held shall be only as follows, unless the Administrator specifies
otherwise:
(1) Death.
Upon the death of a Participant while in the employ of the Company or
any
Subsidiary or while serving as a member of the Board, the Participant’s Options
then held shall be exercisable by his or her estate, heir or beneficiary
at any
time during the one (1) year period commencing on the date of death to the
extent that the Options are exercisable as of that date. Any and all of the
deceased Participant’s Options that are not exercised during the one (1) year
commencing on the date of death shall terminate as of the end of such one
(1)
year period. To the extent that any Option is not exercisable as of the date
of
death, such portion of the Option shall remain unexercisable and shall terminate
as of such date.
If
a
Participant should die within thirty (30) days of his or her termination
of
employment with the Company and its Subsidiaries, an Option shall be exercisable
by his or her estate, heir or beneficiary at any time during the one (1)
year
period commencing on the date of termination, but only to the extent of the
number of Shares as to which such Option was exercisable as of the date of
such
termination. Any and all of the
deceased
Participant’s Options that are not exercised during the one (1) year period
commencing on the date of termination shall terminate as of the end of such
one
(1) year period. A Participant’s estate shall mean his or her legal
representative or other person who so acquires the right to exercise the
Option
by bequest or inheritance or by reason of the death of the
Participant.
(2) Total
and Permanent Disablement. Upon termination of employment as a result of
the Total and Permanent Disablement of any Participant, the Participant’s
Options then held shall be exercisable during the one (1) year period commencing
on the date of termination to the extent that the Options are exercisable
as of
that date. Any and all Options that are not exercised during the one (1)
year
period commencing on the date of termination shall terminate as of the end
of
such one (1) year period. To the extent that any Option is not exercisable
as of
the date of termination, such portion of the Option shall remain unexercisable
and shall terminate as of such date.
(3) Retirement.
Upon Retirement of a Participant, the Participant’s Options then held shall
be exercisable during the one (1) year period commencing on the date of
Retirement. The number of Shares with respect to which the Options shall
be
exercisable shall equal the total number of Shares that were exercisable
under
the Participant’s Option on the date of his or her Retirement. Any and all
Options that are not exercised during the one (1) year period commencing
on the
date of termination shall terminate as of the end of such one (1) year period.
To the extent that any Option is not exercisable as of his or her Retirement,
such portion of the Option shall remain unexercisable and shall terminate
as of
such date.
(4) Cause.
Upon the date of a termination of a Participant’s employment for Cause, any
Option that is unexercised prior to the date of termination shall terminate
as
of such date.
(5) Other
Reasons. Upon the date of a termination of a Participant’s employment for
any reason other than those stated above in Sections 6(e)(1), (e)(2), (e)(3)
and
(e)(4) or as described in Section 15, (A) to the extent that any Option is
not
exercisable as of such termination date, such portion of the Option shall
remain
unexercisable and shall terminate as of such date, and (B) to the extent
that
any Option is exercisable as of such termination date, such portion of the
Option shall expire on the earlier of (i) ninety (90) days following such
date
and (ii) the expiration date of such Option.
(f) Incentive
Stock Options. Notwithstanding anything to the contrary in this Section 6,
in the case of the grant of an Option intending to qualify as an Incentive
Stock
Option: (i) if the Participant owns stock possessing more than 10 percent
of the
combined voting power of all classes of stock of the Company (a “10%
Shareholder”), the exercise price of such Option must be at least 110 percent of
the fair market value of the Shares on the date of grant and the Option must
expire within a period of not more than five (5) years from the date of grant,
and (ii) termination of employment will occur when the person to whom an
Award
was granted ceases to be an employee (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the Company
and its Subsidiaries. Notwithstanding anything in this Section 6 to the
contrary, options designated as Incentive Stock Options shall not be eligible
for treatment under the Code as Incentive Stock Options (and will be deemed
to
be Nonqualified Stock Options) to the extent that either (a) the aggregate
fair
market value of Shares (determined as of the time of grant) with respect
to
which such Options are exercisable for the first time by the Participant
during
any calendar year (under all plans of the Company and any Subsidiary) exceeds
$100,000, taking Options into account in the order in which they were granted,
or (b) such Options otherwise remain exercisable but are not exercised within
three (3) months of Termination of employment (or such other period of time
provided in Section 422 of the Code).
7. Stock
Appreciation Rights
Stock
Appreciation Rights may be granted to Participants from time to time either
in
tandem with or as a component of other Awards granted under the Plan (“tandem
SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may,
but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect
to
each grant or each recipient. Any Stock Appreciation Right granted in tandem
with an Award may be granted at the same time such Award is granted or at
any
time thereafter before exercise or expiration of such Award. All freestanding
SARs shall be granted subject to the same terms and conditions applicable
to
Options as set forth in Section 6 and all tandem SARs shall have the same
exercise price, vesting, exercisability, forfeiture and termination provisions
as the Award to which they relate. Subject to the provisions of Section 6
and
the immediately preceding sentence, the Administrator may impose such other
conditions or restrictions on any Stock Appreciation Right as it shall deem
appropriate. Stock Appreciation Rights may be settled in Shares, cash or
a
combination thereof, as determined by the Administrator and set forth in
the
applicable Award Agreement. Other than in connection with a change in the
Company’s capitalization (as described in Section 12) the exercise price of
Stock Appreciation Rights may not be reduced without shareholder approval
(including canceling previously awarded Stock Appreciation Rights and regranting
them with a lower exercise price).
8. Restricted
Stock and Restricted Stock Units
(a) Restricted
Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted
Stock Units may be granted at any time and from time to time prior to the
termination of the Plan to Participants as determined by the Administrator.
Restricted Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including continued employment or
performance conditions) and terms as the Administrator deems appropriate.
Restricted Stock Units are Awards denominated in units of Shares under which
the
issuance of Shares is subject to such conditions (including continued employment
or performance conditions) and terms as the Administrator deems appropriate.
Each grant of Restricted Stock and Restricted Stock Units shall be evidenced
by
an Award Agreement. Unless determined otherwise by the Administrator, each
Restricted Stock Unit will be equal to one Share and will entitle a Participant
to either the issuance of Shares or payment of an amount of cash determined
with
reference to the value of Shares. To the extent determined by the Administrator,
Restricted Stock and Restricted Stock Units may be satisfied or settled in
Shares, cash or a combination thereof. Restricted Stock and Restricted Stock
Units granted pursuant to the Plan need not be identical but each grant of
Restricted Stock and Restricted Stock Units must contain and be subject to
the
terms and conditions set forth below.
(b) Contents
of Agreement. Each Award Agreement shall contain provisions regarding (i)
the number of Shares or Restricted Stock Units subject to such Award or a
formula for determining such number, (ii) the purchase price of the Shares,
if
any, and the means of payment, (iii) the performance criteria, if any, and
level
of achievement versus these criteria that shall determine the number of Shares
or Restricted Stock Units granted, issued, retainable and/or vested, (iv)
such
terms and conditions on the grant, issuance, vesting and/or forfeiture of
the
Shares or Restricted Stock Units as may be determined from time to time by
the
Administrator, (v) the term of the performance period, if any, as to which
performance will be measured for determining the number of such Shares or
Restricted Stock Units, and (vi) restrictions on the transferability of the
Shares or Restricted Stock Units. Shares issued under a Restricted Stock
Award
may be issued in the name of the Participant and held by the Participant
or held
by the Company, in each case as the Administrator may provide.
(c) Vesting
and Performance Criteria. The grant, issuance, retention, vesting and/or
settlement of shares of Restricted Stock and Restricted Stock Units will
occur
when and in such installments as the Administrator determines or under criteria
the Administrator establishes, which may include Qualifying Performance
Criteria. The grant, issuance, retention, vesting and/or settlement of Shares
under any such Award that is based on performance criteria and level of
achievement versus such criteria will be subject to a performance period
of not
less than six months, except that the Administrator may provide for the
satisfaction and/or lapse of all conditions under any such Award in the event
of
the Participant’s death, disability, retirement or in connection with a change
of control, and the Administrator may provide that any such restriction or
limitation will not apply in the case of a Restricted Stock or Restricted
Stock
Unit Award that is issued in payment or settlement of compensation that has
been
earned by the Participant. Notwithstanding anything in this Plan to the
contrary, the performance criteria for any Restricted Stock or Restricted
Stock
Unit that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code will be a measure based on one or
more Qualifying Performance Criteria selected by the Administrator and specified
when the Award is granted.
(d) Discretionary
Adjustments and Limits. Subject to the limits imposed under Section 162(m)
of the Code for Awards that are intended to qualify as “performance based
compensation,” notwithstanding the satisfaction of any performance goals, the
number of Shares granted, issued, retainable and/or vested under an Award
of
Restricted Stock or Restricted Stock Units on account of either financial
performance or personal performance evaluations may, to the extent specified
in
the Award Agreement, be reduced by the Administrator on the basis of such
further considerations as the Administrator shall determine.
(e) Voting
Rights. Unless otherwise determined by the Administrator, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares during the period of restriction.
Participants shall have no voting rights with respect to Shares underlying
Restricted Stock Units unless and until such Shares are reflected as issued
and
outstanding shares on the Company’s stock ledger.
(f) Dividends
and Distributions. Participants in whose name Restricted Stock is granted
shall be entitled to receive all dividends and other distributions paid with
respect to those Shares, unless determined otherwise by the Administrator.
The
Administrator will determine whether any such dividends or distributions
will be
automatically reinvested in additional shares of Restricted Stock and subject
to
the same restrictions on transferability as the Restricted Stock with respect
to
which they were distributed or whether such dividends or distributions will
be
paid in cash. Shares underlying Restricted Stock Units shall be entitled
to
dividends or dividend equivalents only to the extent provided by the
Administrator.
9. Deferral
of Gains
The
Administrator may, in an Award Agreement or otherwise, provide for the deferred
delivery of Shares upon settlement, vesting or other events with respect
to
Restricted Stock or Restricted Stock Units, or in payment or satisfaction
of an
Incentive Bonus. Notwithstanding anything herein to the contrary, in no event
will any deferral of the delivery of Shares or any other payment with respect
to
any Award be allowed if the Administrator determines, in its sole discretion,
that the deferral would result in the imposition of the additional tax under
Section 409A(a)(1)(B) of the Code.
10. Conditions
and Restrictions Upon Securities Subject to Awards
The
Administrator may provide that the Shares issued upon exercise of an Option
or
Stock Appreciation Right or otherwise subject to or issued under an Award
shall
be subject to such further agreements, restrictions, conditions or limitations
as the Administrator in its discretion may specify prior to the exercise
of such
Option or Stock Appreciation Right or the grant, vesting or settlement of
such
Award, including without limitation, conditions on vesting or transferability,
forfeiture or repurchase provisions and method of payment for the Shares
issued
upon exercise, vesting or settlement of such Award (including the actual
or
constructive surrender of Shares already owned by the Participant) or payment
of
taxes arising in connection with an Award. Without limiting the foregoing,
such
restrictions may address the timing and manner of any resales by the Participant
or other subsequent transfers by the Participant of any Shares issued under
an
Award, including without limitation (i) restrictions under an insider trading
policy or pursuant to applicable law, (ii) restrictions designed to delay
and/or
coordinate the timing and manner of sales by Participant and holders of other
Company equity compensation arrangements, (iii) restrictions as to the use
of a
specified brokerage firm for such resales or other transfers, and (iv)
provisions requiring Shares to be sold on the open market or to the Company
in
order to satisfy tax withholding or other obligations.
11. Adjustment
of and Changes in the Stock
The
number and kind of Shares available for issuance under this Plan (including
under any Awards then outstanding), and the number and kind of Shares subject
to
the individual limits set forth in Section 5 of this Plan, shall be adjusted
by
the Administrator as it determines appropriate to reflect any reorganization,
reclassification, combination of shares, stock split, reverse stock split,
spin-off, dividend or distribution of securities, property or cash (other
than
regular, quarterly cash dividends), or any other event or transaction that
affects the number or kind of Shares of the Company outstanding. Such adjustment
may be designed to comply with Section 425 of the Code or, except as otherwise
expressly provided in Section 5(c) of this Plan, may be designed to treat
the
Shares available under the Plan and subject to Awards as if they were all
outstanding on the record date for such event or transaction or to increase
the
number of such Shares to reflect a deemed reinvestment in Shares of the amount
distributed to the Company’s security holders. The terms of any outstanding
Award may also be adjusted by the Administrator as to price, number or kind
of
Shares subject to such Award, vesting, and other terms to reflect the foregoing
events, which adjustments need not be uniform as between different Awards
or
different types of Awards.
In
the
event there shall be any other change in the number or kind of outstanding
Shares, or any stock or other securities into which such Shares shall have
been
changed, or for which it shall have been exchanged, by reason of a change
of
control, other merger, consolidation or otherwise, then the Administrator
shall,
in its sole discretion, determine the appropriate adjustment, if any, to
be
effected. In addition, in the event a change in control or of such other
change
described in this paragraph, the Administrator may accelerate the time or
times
at which any Award may be exercised and may provide for cancellation of such
accelerated Awards that are not exercised within a time prescribed by the
Administrator in its sole discretion.
No
right
to purchase fractional shares shall result from any adjustment in Awards
pursuant to this Section 12. In case of any such adjustment, the Shares subject
to the Award shall be rounded down to the nearest whole share. The Company
shall
notify Participants holding Awards subject to any adjustments pursuant to
this
Section 12 of such adjustment, but (whether or not notice is given) such
adjustment shall be effective and binding for all purposes of the
Plan.
12. Qualifying
Performance-Based Compensation
(a) General.
The Administrator may establish performance criteria and level of
achievement versus such criteria that shall determine the number of Shares
or
units to be granted, retained, vested, issued or issuable pursuant to an
Award,
which criteria may be based on Qualifying Performance Criteria or other
standards of financial performance and/or personal performance evaluations.
A
Performance Award may be identified as “Performance Share”, “Performance
Equity”, “Performance Unit” or other such term as chosen by the Administrator.
In addition, the Administrator may specify that an Award or a portion of
an
Award is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code, provided that the performance
criteria for such Award or portion of an Award that is intended by the
Administrator to satisfy the requirements for “performance-based compensation”
under Section 162(m) of the Code shall be a measure based on one or more
Qualifying Performance Criteria selected by the Administrator and specified
at
the time the Award is granted. The Administrator shall certify the extent
to
which any Qualifying Performance Criteria has been satisfied, and the amount
payable as a result thereof, prior to payment, settlement or vesting of any
Award that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Notwithstanding satisfaction of
any performance goals, the number of Shares issued under or the amount paid
under an award may, to the extent specified in the Award Agreement, be reduced
by the Administrator on the basis of such further considerations as the
Administrator in its sole discretion shall determine.
(b) Qualifying
Performance Criteria. For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied
to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative
to a
preestablished target, to previous years’ results or to a designated comparison
group, in each case as specified by the Administrator: (i) cash flow (before
or
after dividends), (ii) earning or earnings per share (including earnings
before
interest, taxes, depreciation and amortization), (iii) stock price, (iv)
return
on equity, (v) total shareholder return, (vi) return on capital or investment
(including return on total capital, return on invested capital, or return
on
investment), (vii) return on assets or net assets, (viii) market capitalization,
(ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue,
(xii) income or net income, (xiii) operating income, (xiv) operating profit
or
net operating profit, (xv) operating margin or profit margin, (xvi) return
on
operating revenue, (xvii) cash from operations, (xviii) operating ratio,
(xix)
operating revenue, (xx) NSR and/or Total backlog, (xxi) days sales outstanding,
or (xxii) customer service. To the extent consistent with Section 162(m)
of the
Code, the Administrator (A) shall appropriately adjust any evaluation of
performance under Qualifying Performance Criteria to eliminate the effects
of
charges for restructurings, discontinued operations, extraordinary items
and all
items of gain, loss or expense determined to be extraordinary or unusual
in
nature or related to the acquisition or disposal of a segment of a business
or
related to a change in accounting principle all as determined in accordance
with
standards established by opinion No. 30 of the Accounting Principles Board
(APA
Opinion No. 30) or other applicable or successor accounting provisions, as
well
as the cumulative effect of accounting changes, in each case as determined
in
accordance with generally accepted accounting principles or identified in
the
Company’s financial statements or notes to the financial statements, and (B) may
appropriately adjust any evaluation of performance under Qualifying Performance
Criteria to exclude any of the following events that occur during a performance
period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) accruals of any amounts for payment under
this
Plan or any other compensation arrangement maintained by the
Company.
13. Transferability
Each
Award may not be sold, transferred, pledged, assigned, or otherwise alienated
or
hypothecated by a Participant other than by will or the laws of descent and
distribution, and each Option or Stock Appreciation Right shall be exercisable
only by the Participant during his or her lifetime. Notwithstanding the
foregoing, to the extent permitted by the Administrator, the person to whom
an
Award is initially granted (the “Grantee”) may transfer an Award to any “family
member” of the Grantee (as such term is defined in Section 1 (a)(5) of the
General Instructions to Form S-8 under the Securities Act of 1933, as amended
(“Form S-8”)), to trusts solely for the benefit of such family members and to
partnerships in which such family members and/or trusts are the only partners;
provided that, (i) as a condition thereof, the transferor and the transferee
must execute a written agreement containing such terms as specified by the
Administrator, and (ii) the transfer is pursuant to a gift or a domestic
relations order to the extent permitted under the General Instructions to
Form
S-8. Except to the extent specified otherwise in the agreement the Administrator
provides for the Grantee and transferee to execute, all vesting, exercisability
and forfeiture provisions that are conditioned on the Grantee’s continued
employment or service shall continue to be determined with reference to the
Grantee’s employment or service (and not to the status of the transferee) after
any transfer of an Award pursuant to this Section 14, and the responsibility
to pay any taxes in connection with an Award shall remain with the Grantee
notwithstanding any transfer other than by will or intestate
succession.
14. Suspension
or Termination of Awards
Except
as
otherwise provided by the Administrator, if at any time (including after
a
notice of exercise has been delivered or an award has vested) the Chief
Executive Officer or any other person designated by the Administrator (each
such
person, an “Authorized Officer”) reasonably believes that a Participant may have
committed an Act of Misconduct as described in this Section 15, the Authorized
Officer, Administrator or the Board may suspend the Participant’s rights to
exercise any Option, to vest in an Award, and/or to receive payment for or
receive Shares in settlement of an Award pending a determination of whether
an
Act of Misconduct has been committed.
If
the
Administrator or an Authorized Officer determines a Participant has committed
an
act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed
to the
Company or any Subsidiary, breach of fiduciary duty, violation of Company
ethics
policy or code of conduct, or deliberate disregard of the Company or Subsidiary
rules resulting in loss, damage or injury to the Company or any Subsidiary,
or
if a Participant makes an unauthorized disclosure of any Company or Subsidiary
trade secret or confidential information, solicits any employee or service
provider to leave the employ or cease providing services to the Company or
any
Subsidiary, breaches any intellectual property or assignment of inventions
covenant, engages in any conduct constituting unfair competition, breaches
any
non-competition agreement, induces any Company or Subsidiary customer to
breach
a contract with the Company or any Subsidiary or to cease doing business
with
the Company or any Subsidiary, or induces any principal for whom the Company
or
any Subsidiary acts as agent to terminate such agency relationship (any of
the
foregoing acts, an “Act of Misconduct”), then except as otherwise provided by
the Administrator, (i) neither the Participant nor his or her estate nor
transferee shall be entitled to exercise any Option or Stock Appreciation
Right
whatsoever, vest in or have the restrictions on an Award lapse, or otherwise
receive payment of an Award, (ii) the Participant will forfeit all outstanding
Awards and (iii) the Participant may be required, at the Administrator’s sole
discretion, to return and/or repay to the Company any then unvested Shares
previously issued under the Plan. In making such determination, the
Administrator or an Authorized Officer shall give the Participant an opportunity
to appear and present evidence on his or her behalf at a hearing before the
Administrator or its designee or an opportunity to submit written comments,
documents, information and arguments to be considered by the Administrator.
Any
dispute by a Participant or other person as to the determination of the
Administrator shall be resolved pursuant to Section 23 of the
Plan.
15. Compliance
with Laws and Regulations
This
Plan, the grant, issuance, vesting, exercise and settlement of Awards
thereunder, and the obligation of the Company to sell, issue or deliver Shares
under such Awards, shall be subject to all applicable foreign, federal, state
and local laws, rules and regulations, stock exchange rules and regulations,
and
to such approvals by any governmental or regulatory agency as may be required.
The Company shall not be required to register in a Participant’s name or deliver
any Shares prior to the completion of any registration or qualification of
such
shares under any foreign, federal, state or local law or any ruling or
regulation of any government body which the Administrator shall determine
to be
necessary or advisable. To the extent the Company is unable to or the
Administrator deems it infeasible to obtain authority from any regulatory
body
having jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, the Company
and its Subsidiaries shall be relieved of any liability with respect to the
failure to issue or sell such Shares as to which such requisite authority
shall
not have been obtained. No Option shall be exercisable and no Shares shall
be
issued and/or transferable under any other Award unless a registration statement
with respect to the Shares underlying such Option is effective and current
or
the Company has determined that such registration is unnecessary.
In
the
event an Award is granted to or held by a Participant who is employed or
providing services outside the United States, the Administrator may, in its
sole
discretion, modify the provisions of the Plan or of such Award as they pertain
to such individual to comply with applicable foreign law or to recognize
differences in local law, currency or tax policy. The Administrator may also
impose conditions on the grant, issuance, exercise, vesting, settlement or
retention of Awards in order to comply with such foreign law and/or to minimize
the Company’s obligations with respect to tax equalization for Participants
employed outside their home country.
16. Withholding
To
the
extent required by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner satisfactory to the
Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Shares issued under an Incentive Stock Option, the
vesting of or settlement of an Award, an election pursuant to Section 83(b)
of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries
shall not be required to issue Shares, make any payment or to recognize the
transfer or disposition of Shares until such obligations are satisfied. The
Administrator may provide for or permit the minimum statutory withholding
obligations to be satisfied through the mandatory or elective sale of Shares
and/or by having the Company withhold a portion of the Shares that otherwise
would be issued to him or her upon exercise of the Option or the vesting
or
settlement of an Award, or by tendering Shares previously
acquired.
17. Administration
of the Plan
(a) Administrator
of the Plan. The Plan shall be administered by the Administrator who shall
be the Compensation Committee of the Board or, in the absence of a Compensation
Committee, a properly constituted Compensation Committee or the Board itself.
Any power of the Administrator may also be exercised by the Board, except
to the
extent that the grant or exercise of such authority would cause any Award
or
transaction to become subject to (or lose an exemption under) the short-swing
profit recovery provisions of Section 16 of the Securities Exchange Act of
1934
or cause an Award designated as a Performance Award not to qualify for treatment
as performance-based compensation under Section 162(m) of the Code. To the
extent that any permitted action taken by the Board conflicts with action
taken
by the Administrator, the Board action shall control. The Compensation Committee
may by resolution authorize one or more officers of the Company to perform
any
or all things that the Administrator is authorized and empowered to do or
perform under the Plan, and for all purposes under this Plan, such officer
or
officers shall be treated as the Administrator; provided, however, that the
resolution so authorizing such officer or officers shall specify the total
number of Awards (if any) such officer or officers may award pursuant to
such
delegated authority, and any such Award shall be subject to the form of Option
agreement theretofore approved by the Compensation and Organization Committee.
No such officer shall designate himself or herself as a recipient of any
Awards
granted under authority delegated to such officer. In addition, the Compensation
Committee may delegate any or all aspects of the day-to-day administration
of
the Plan to one or more officers or employees of the Company or any Subsidiary,
and/or to one or more agents.
(b) Powers
of Administrator. Subject to the express provisions of this Plan, the
Administrator shall be authorized and empowered to do all things that it
determines to be necessary or appropriate in connection with the administration
of this Plan, including, without limitation: (i) to prescribe, amend and
rescind
rules and regulations relating to this Plan and to define terms not otherwise
defined herein; (ii) to determine which persons are Participants, to which
of
such Participants, if any, Awards shall be granted hereunder and the timing
of
any such Awards; (iii) to grant Awards to Participants and determine the
terms
and conditions thereof, including the number of Shares subject to Awards
and the
exercise or purchase price of such Shares and the circumstances under which
Awards become exercisable or vested or are forfeited or expire, which terms
may
but need not be conditioned upon the passage of time, continued employment,
the
satisfaction of performance criteria, the occurrence of certain events
(including events which constitute a change of control), or other factors;
(iv)
to establish and verify the extent of satisfaction of any performance goals
or
other conditions applicable to the grant, issuance, exercisability, vesting
and/or ability to retain any Award; (v) to prescribe and amend the terms
of the
agreements or other documents evidencing Awards made under this Plan (which
need
not be identical) and the terms of or form of any document or notice required
to
be delivered to the Company by Participants under this Plan; (vi) to determine
whether, and the extent to which, adjustments are required pursuant to Section
12; (vii) to interpret and construe this Plan, any rules and regulations
under
this Plan and the terms and conditions of any Award granted hereunder, and
to
make exceptions to any such provisions in good faith and for the benefit
of the
Company; and (viii) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
(c) Determinations
by the Administrator. All decisions, determinations and interpretations by
the Administrator regarding the Plan, any rules and regulations under the
Plan
and the terms and conditions of or operation of any Award granted hereunder,
shall be final and binding on all Participants, beneficiaries, heirs, assigns
or
other persons holding or claiming rights under the Plan or any Award. The
Administrator shall consider such factors as it deems relevant, in its sole
and
absolute discretion, to making such decisions, determinations and
interpretations including, without limitation, the recommendations or advice
of
any officer or other employee of the Company and such attorneys, consultants
and
accountants as it may select.
(d) Subsidiary
Awards. In the case of a grant of an Award to any Participant employed by a
Subsidiary, such grant may, if the Administrator so directs, be implemented
by
the Company issuing any subject Shares to the Subsidiary, for such lawful
consideration as the Administrator may determine, upon the condition or
understanding that the Subsidiary will transfer the Shares to the Participant
in
accordance with the terms of the Award specified by the
Administrator
pursuant to the provisions of the Plan. Notwithstanding any other provision
hereof, such Award may be issued by and in the name of the Subsidiary and
shall
be deemed granted on such date as the Administrator shall
determine.
18. Amendment
of the Plan or Awards
The
Board
may amend, alter or discontinue this Plan and the Administrator may amend,
or
alter any agreement or other document evidencing an Award made under this
Plan
but, except as provided pursuant to the provisions of Section 12, no such
amendment shall, without the approval of the shareholders of the
Company:
(a) increase
the maximum
number of Shares for which Awards may be granted under this Plan;
(b) reduce
the price at
which Options may be granted below the price provided for in Section
6(a);
(c) reduce
the exercise
price of outstanding Options;
(d) extend
the term of
this Plan;
(e) change
the class of persons eligible to be Participants;
(f) otherwise
amend the Plan in any manner requiring shareholder approval by law or under
the
Nasdaq listing requirements; or
(g) increase
the individual maximum limits in Sections 5(c) and (d).
No
amendment or alteration to the Plan or an Award or Award Agreement shall
be made
which would impair the rights of the holder of an Award, without such holder’s
consent, provided that no such consent shall be required if the Administrator
determines in its sole discretion and prior to the date of any change of
control
that such amendment or alteration either is required or advisable in order
for
the Company, the Plan or the Award to satisfy any law or regulation or to
meet
the requirements of or avoid adverse financial accounting consequences under
any
accounting standard.
19. No
Liability of Company
The
Company and any Subsidiary or affiliate which is in existence or hereafter
comes
into existence shall not be liable to a Participant or any other person as
to:
(i) the non-issuance or sale of Shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction or the authority deemed
by the Company’s counsel to be necessary to the lawful issuance and sale of any
Shares hereunder; and (ii) any tax consequence expected, but not realized,
by
any Participant or other person due to the receipt, exercise or settlement
of
any Award granted hereunder.
20. Non-Exclusivity
of Plan
Neither
the adoption of this Plan by the Board nor the submission of this Plan to
the
shareholders of the Company for approval shall be construed as creating any
limitations to the power of the Board or the Administrator to adopt such
other
incentive arrangements as either may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan or an arrangement not intended to qualify under Code Section
162(m), and such arrangements may be either generally applicable or applicable
only in specific cases.
21. Governing
Law
This
Plan
and any agreements or other documents hereunder shall be interpreted and
construed in accordance with the laws of the State of Utah and applicable
federal law. Any reference in this Plan or in the agreement or other document
evidencing any Awards to a provision of law or to a rule or regulation shall
be
deemed to include any successor law, rule or regulation of similar effect
or
applicability.
22. No
Right to
Employment, Reelection or Continued Service
Nothing
in this Plan or an Award Agreement shall interfere with or limit in any way
the
right of the Company, its Subsidiaries and/or its affiliates to terminate
any
Participant’s employment, service on the Board or service for the Company at any
time or for any reason not prohibited by law, nor shall this Plan or an Award
itself confer upon any Participant any right to continue his or her employment
or service for any specified period of time. Neither an Award nor any benefits
arising under this Plan shall constitute an employment contract with the
Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and
19,
this Plan and the benefits hereunder may be terminated at any time in the
sole
and exclusive discretion of the Board without giving rise to any liability
on
the part of the Company, its Subsidiaries and/or its affiliates.
23. Market
Standoff
To
the extent requested by the Company
and any underwriter of securities of the Company in connection with a firm
commitment underwriting, no holder of any Shares received as part of an Award
will sell or otherwise transfer any such Shares not included in such
underwriting, or not previously registered pursuant to a registration statement
filed under the Securities Act of 1933, during the one hundred eighty (180)
day
period following the effective date of the registration statement filed with
the
Securities and Exchange Commission in connection with such offering, which
period may be reduced in the sole discretion of the Company.
24. Unfunded
Plan
The
Plan
is intended to be an unfunded plan. Participants are and shall at all times
be
general creditors of the Company with respect to their Awards. If the
Administrator or the Company chooses to set aside funds in a trust or otherwise
for the payment of Awards under the Plan, such funds shall at all times be
subject to the claims of the creditors of the Company in the event of its
bankruptcy or insolvency.
[The
remainder of this page
intentionally left blank]
CLEARONE
COMMUNICATIONS, INC.
Proxy
for Annual Meeting of Shareholders
November
20, 2007
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned shareholder of ClearOne
Communications, Inc., a Utah corporation (the "Company"), hereby acknowledges
receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement,
each dated October 1, 2007, and hereby appoints Zeynep Hakimoglu and Greg
A.
LeClaire, proxies and attorneys-in-fact, with full power to each of substitution
in behalf of and in the name of the undersigned, to represent the undersigned
at
the Annual Meeting of Shareholders to be held on November 20, 2007, at 9:00
A.M.
MST, at the Company’s corporate offices, 5225 Wiley Post Way, Suite 500, Salt
Lake City, Utah 84116, and at any postponement or adjournment thereof, and
to
vote all shares of Common Stock which the undersigned would be entitled to
vote,
if then and there personally present, on the matters set forth
below.
A
majority of such attorneys or
substitutes as shall be present and shall act at said meeting or any
postponement or adjournment thereof (or, if only one shall be present and
act,
then that one) shall have and may exercise all the powers of said
attorneys-in-fact hereunder. In addition to the following proposals,
the proxies are authorized to vote upon such other matters as may properly
come
before the meeting or any postponement or adjournment thereof.
I. ELECTION
OF DIRECTORS
|
FOR
|
WITHHOLD
VOTE
|
Brad
R. Baldwin
|
_____
|
_____
|
Zeynep
"Zee" Hakimoglu |
_____
|
_____
|
Larry
R. Hendricks |
_____
|
_____
|
Scott
M. Huntsman |
_____
|
_____
|
|
|
|
Mark
here to vote for the entire
slate of nominees listed above
|
_____
|
_____
|
II. APPROVAL
OF THE CLEARONE COMMUNICATIONS, INC. 2007 EQUITY INCENTIVE PLAN
FOR _____
AGAINST
_____
ABSTAIN _____
III. To
Transact such other business as
may
properly
come before the Annual
Meeting
(Continued
for signature on reverse side)
[Reverse
side of proxy card]
THIS
PROXY, WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL
BE VOTED FOR ALL DIRECTORS SET FORTH HEREIN, AND AS SAID PROXIES DEEM ADVISABLE
ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
________________________________________
Date
|
________________________________________
Signature
|
________________________________________
Signature (if held jointly)
|
________________________________________
Name of Shareholder (please
print)
|
|
________________________________________
Title (if
any)
|
(This
proxy should be marked, dated, signed by each shareholder exactly as such
shareholder's name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as community
property, both should sign.)
47