newport_pre14a.htm
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
[x]
Filed by a Party other
than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy
Statement
[_] Soliciting Material Under
Rule
[_] Confidential,
For Use of
the
14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive
Additional Materials
NEWPORT
CORPORATION
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(Name of Registrant as
Specified In Its Charter)
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(Name of Person(s)
Filing Proxy Statement, if Other Than the 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.
1) Title of
each class of securities to which transaction applies:
____________________________________________________________________________________
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which transaction applies:
3) Per unit price or
other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the
amount on
which the filing fee is
calculated and state how it was
determined):
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____________________________________________________________________________________
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[_] Check box if any part of the fee is offset
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previously. Identify the previous
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or
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filing.
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____________________________________________________________________________________
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Filed:
NEWPORT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 18, 2010
To the Stockholders
of Newport Corporation:
NOTICE IS HEREBY
GIVEN that the Annual Meeting of Stockholders of Newport Corporation will be
held at our corporate headquarters, located at 1791 Deere Avenue, Irvine,
California 92606, on Tuesday, May 18, 2010, at 9:00 a.m. Pacific Time, for the
purpose of considering and acting upon the following:
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1. |
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To elect two
Class II directors to serve for four years; |
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2. |
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To ratify the
appointment of Deloitte & Touche LLP as Newport’s independent auditors
for the fiscal year ending January 1, 2011; |
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3. |
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To consider an
amendment to Newport’s Restated Articles of Incorporation, as amended, to
declassify the Board of Directors and provide for the annual election of
directors; and |
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4. |
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To transact such
other business as may properly be brought before the meeting or any
adjournment thereof. |
The foregoing items
of business are more fully described in the proxy statement accompanying this
notice.
Only stockholders of
record at the close of business on March 26, 2010 are entitled to notice of and
to vote at the meeting.
All stockholders are
cordially invited to attend the meeting. However, to ensure your representation
at the meeting, you are urged to vote by proxy prior to the meeting. Any
stockholder attending the meeting may vote in person even if he or she has voted
by proxy.
By order of the Board of Directors |
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/s/ Jeffrey B. Coyne |
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Jeffrey B. Coyne |
Senior Vice President, General
Counsel |
and Corporate
Secretary |
April 7,
2010
Irvine, California
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN
TO ATTEND THE MEETING, PLEASE VOTE BY PROXY PRIOR TO THE MEETING. IF YOU
CHOOSE TO VOTE BY MAIL, PLEASE DO SO PROMPTLY TO ENSURE YOUR PROXY ARRIVES
IN SUFFICIENT TIME.
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NEWPORT CORPORATION
PROXY STATEMENT
GENERAL INFORMATION
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PROXY STATEMENT AND SOLICITATION OF PROXIES
Solicitation by Board
This proxy statement is being furnished in
connection with the solicitation of proxies by our Board of Directors for use at
our Annual Meeting of Stockholders to be held on May 18,
2010.
Solicitation of Proxies and Related Expenses
All expenses incurred
in connection with this solicitation shall be borne by us. We anticipate that
this solicitation of proxies will be made primarily by mail and pursuant to Rule
14a-16 of the Securities Exchange Act of 1934, as amended; however, in order to
ensure adequate representation at the meeting, our directors, officers and
employees may communicate with stockholders, brokerage houses and others by
telephone, facsimile or electronic transmission, or in person to request that
proxies be furnished. We may reimburse banks, brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses in forwarding proxy
materials to the beneficial owners of the shares held by them.
Record Date and Voting Securities
Our Board of
Directors has fixed the close of business on March 26, 2010 as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the meeting. As of the record date, there were ___________ shares of our
common stock outstanding and entitled to vote. Each stockholder is entitled to
one vote for each share of common stock held as of the record date.
Availability of Materials
We are making this
proxy statement and our Annual Report on Form 10-K for our fiscal year ended
January 2, 2010 available to all stockholders of record on the record date for
the meeting for the first time on or about April 7, 2010. On such date, we are
mailing to each stockholder of record on the record date for the meeting either
a Notice Regarding the Availability of Proxy Materials informing the stockholder
of how to electronically access a copy of this proxy statement and our Annual
Report on Form 10-K and how to vote online (the “Notice”), or printed copies of
such materials, if printed copies have been previously requested by the
stockholder. If any stockholder who receives a Notice would like to receive
printed copies of such materials, such printed copies may be requested, free of
charge, by following the instructions contained in the Notice.
We are also making
available on our Internet site at www.newport.com/2009annualreport a web-based Annual Report to Stockholders
containing information regarding our business which supplements the business and
financial information contained in our Annual Report on Form 10-K. Except as may
be required by Securities and Exchange Commission rules and regulations, our
Annual Report on Form 10-K and our web-based Annual Report to Stockholders are
not to be regarded as proxy soliciting material or as communications by means of
which any solicitation is to be made.
1
Quorum
A quorum is the
number of shares of capital stock of a corporation that must be represented in
person or by proxy in order to transact business. A majority of shares entitled
to vote, represented in person or by proxy, will constitute a quorum at the
annual meeting.
Abstentions
When an eligible
voter attends the annual meeting but decides not to vote, his, her or its
decision not to vote is called an “abstention.” Properly executed proxy cards
that are marked “abstain” on any proposal will be treated as abstentions for
that proposal. We will treat abstentions as follows:
- abstention shares will be treated
as not voting for purposes of determining the outcome on any proposal
for which the minimum
affirmative vote required for approval of the proposal is a plurality (or a
majority or some other
percentage) of the votes actually cast, and thus will have no effect on the
outcome; and
- abstention shares will have the
same effect as votes against a proposal if the minimum affirmative vote
required for approval of the proposal
is a majority (or some other percentage) of (i) the shares present and
entitled to vote, or (ii) all shares
outstanding and entitled to vote.
Broker Non-Votes
Broker non-votes
occur when shares held in “street name” by a broker, bank or other nominee
(each, a “Nominee”) for a beneficial owner are not voted with respect to a
particular proposal because (i) the Nominee does not receive voting instructions
from the beneficial owner, and (ii) the Nominee lacks discretionary authority to
vote the shares. We will treat broker non-votes as follows:
- broker non-votes will not be
treated as shares present and entitled to vote for purposes of any
matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote (even though
the same shares may be considered present for quorum purposes and may be
entitled to vote on other
matters). Thus, a broker non-vote will not affect the outcome of the voting on
a proposal for which the
minimum affirmative vote required for approval of the proposal is a plurality
(or a majority or some other
percentage) of (i) the votes actually cast, or (ii) the shares present and
entitled to vote; and
- broker non-votes will have the
same effect as votes against a proposal for which the minimum
affirmative vote required for
approval of the proposal is a majority (or some other percentage) of all
shares outstanding and entitled
to vote.
Vote Required
A quorum is required
for the approval of any of the proposals set forth herein. Directors will be
elected by a plurality of the votes cast. The affirmative vote of the holders of
a majority of our shares of common stock outstanding as of the record date for
the annual meeting is necessary for approval of the proposal to amend Newport’s
Restated Articles of Incorporation, as amended, to declassify the Board of
Directors and provide for the annual election of directors. The approval of any
other proposal to be considered at the annual meeting requires the affirmative
vote of the holders of a majority of the shares present and entitled to vote at
the annual meeting in person or by proxy.
Voting of Proxies
Stockholders may vote
by proxy or in person at the meeting. To vote by proxy, stockholders may vote by
Internet, telephone or mail. The instructions and information needed to access
our proxy materials and vote by Internet can be found in the Notice.
Alternatively, if printed copies of our proxy materials have been requested by a
stockholder, the instructions and information needed to vote by Internet,
telephone or mail can be found in the proxy card accompanying such
materials.
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If you are the
beneficial owner of shares held by a Nominee, then your Nominee, as the record
owner of the shares, must vote those shares in accordance with your
instructions. Please refer to the voting instruction form that your Nominee
makes available to you for voting your shares.
Two of our officers,
Robert J. Phillippy and Charles F. Cargile, have been designated by our Board as
proxies for voting on matters brought before the 2010 annual meeting. Each proxy
properly received by us prior to the meeting, and not
revoked, will be voted in accordance with the instructions given in the proxy.
If a choice is not specified in the proxy, the proxy will be voted (i) FOR
election of the director nominees listed therein, (ii) FOR ratification of our
appointment of Deloitte & Touche LLP as our independent auditors for the
fiscal year ending January 1, 2011, and (iii) AGAINST the proposal to amend
Newport’s Restated Articles of Incorporation, as amended, to declassify the
Board of Directors and provide for the annual election of
directors.
Revoking a Proxy
Any proxy may be
revoked or superseded by executing a later proxy or by giving notice of
revocation in writing prior to, or at, the annual meeting, or by attending the
annual meeting and voting in person. Attendance at the annual meeting will not
in and of itself constitute revocation of the proxy. Any written notice revoking
a proxy should be sent to our Corporate Secretary at our corporate offices at
1791 Deere Avenue, Irvine, California 92606, and must be received prior to the
commencement of the meeting.
If your shares are
held in the name of a Nominee, you may change your vote by submitting new voting
instructions to your Nominee. Please note that if your shares are held of record
by a Nominee and you decide to attend and vote at the annual meeting, your vote
in person at the annual meeting will not be effective unless you present a legal
proxy, issued in your name from your Nominee.
STOCKHOLDER PROPOSALS
Any stockholder
desiring to submit a proposal for action at our 2011 annual meeting of
stockholders and presentation in our proxy statement for such meeting should
deliver the proposal to us at our corporate offices no later than December 8,
2010 in order to be considered for inclusion in our proxy statement relating to
that meeting. Matters pertaining to proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects are regulated by the Securities Exchange Act of 1934, as amended,
rules and regulations of the Securities and Exchange Commission and other laws
and regulations to which interested persons should refer. In addition, our
bylaws contain procedures for stockholders to submit nominations of director
candidates, which are discussed under the heading “Stockholder Nominations” on
page 10 of this proxy statement.
Rule 14a-4 under the
Securities Exchange Act of 1934, as amended, governs our use of our
discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in our proxy statement. Such rule provides that if a
proponent of a proposal fails to notify us at least 45 days prior to the current
year’s anniversary of the date of mailing of the prior year’s proxy statement,
then we will be allowed to use our discretionary voting authority when the
proposal is raised at the meeting, without any discussion of the matter in the
proxy statement. We anticipate that our next annual meeting will be held in May
2011. If we do not receive any stockholder proposals for our 2011 annual meeting
before February 21, 2011, we will be able to use our discretionary voting
authority as outlined above.
OTHER MATTERS
Management is not
aware of any other matters that will be presented for consideration at our 2010
annual meeting. If any other matter not mentioned in this proxy statement is
brought before the meeting, the proxies named above will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
NEWPORT CORPORATE OFFICE
Our corporate offices
are located at 1791 Deere Avenue, Irvine, California 92606.
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PROPOSAL ONE ELECTION OF DIRECTORS |
The size of our Board
is currently fixed at eight directors. The Board is divided into four classes,
with one class of directors elected each year for a term of four years. Our
Board currently consists of six directors, with one vacancy in Class I and one
vacancy in Class III. At our 2010 annual meeting, two directors will be elected
to serve as Class II directors until our annual meeting in 2014. Our Class III
director will continue to serve until our annual meeting in 2011, our Class IV
directors will continue to serve until our annual meeting in 2012, and our Class
I director will continue to serve until our annual meeting in 2013. Our Board is
currently seeking candidates to fill at least one of the vacancies on the Board.
Such vacancies are not eligible to be filled at the 2010 annual
meeting.
If the proposal to
amend our Restated Articles of Incorporation, as amended, to declassify our
Board and provide for the annual election of directors, which is included in
this proxy statement, is approved at our 2010 annual meeting, our Class III
director (and any director appointed by the Board to fill one of the vacancies
on the Board) would stand for election at our 2011 annual meeting for a one-year
term expiring at our 2012 annual meeting, and they or their successors would
stand for election for one-year terms thereafter. Our Class IV, Class I and
Class II directors would continue to serve until the expiration of their terms
at our 2012, 2013 and 2014 annual meetings, respectively, and they or their
successors would then stand for election for one-year terms thereafter. Any
director appointed by the Board to fill the remaining vacancy on the Board would
stand for election for a one-year term at the annual meeting immediately
following his or her appointment to the Board. Accordingly, if the proposal is
approved, all directors would be elected on an annual basis commencing in
2014.
CLASS II DIRECTOR NOMINEES
Based upon the
recommendation of our Corporate Governance and Nominating Committee, our Board
has nominated the individuals set forth below to serve as Class II directors
until our annual meeting of stockholders in 2014:
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Director |
Name |
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Principal Occupation |
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Age |
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Since |
C. Kumar N. Patel |
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Professor of Physics and Astronomy,
University of California, Los Angeles; Chairman and Chief Executive
Officer, Pranalytica, Inc. |
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71 |
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1986 |
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Kenneth F. Potashner |
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Chairman of the Board, Newport
Corporation; Independent Investor |
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52 |
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1998 |
C. Kumar N. Patel was elected to the Board in 1986. Dr. Patel was Vice Chancellor-Research,
University of California, Los Angeles from 1993 to 1999, and in January 2000 he
was appointed to the position of Professor of Physics and Astronomy. Since
February 2000, Dr. Patel has also served as Chairman and Chief Executive Officer
of Pranalytica, Inc., a company involved in ultra-low level trace gas detection
technologies. Previously, he was employed by AT&T Bell Laboratories, a
telecommunications research company, as Executive Director of the Research,
Materials Science, Engineering and Academic Affairs Division from 1987 to 1993,
and as Executive Director, Physics and Academic Affairs Division from 1981 to
1987. He joined Bell Laboratories in 1961. Dr. Patel brings to the Board
extensive experience in laser and photonics research and technology, and
significant contacts in the global research community.
Kenneth F. Potashner was elected to the Board in 1998. He served as
the Board’s Lead Independent Director from August 2003 to August 2006. In
September 2007, Mr. Potashner was appointed as Chairman of the Board. From May
2003 to present, Mr. Potashner has been an independent investor. From 1996 to
May 2003, he was Chairman of the Board of Directors of Maxwell Technologies,
Inc., a manufacturer of ultracapacitors, microelectronics and high voltage
capacitors, and he also served as President and Chief Executive Officer of
Maxwell Technologies from 1996 to October 1998. From November 1998 to August
2002, Mr. Potashner was President, Chief Executive Officer and Chairman of
SONICblue Incorporated (formerly S3 Incorporated), a supplier of digital media
appliances and services. Mr. Potashner was Executive Vice President and General
Manager of Disk Drive Operations for Conner Peripherals, a manufacturer of
storage systems, from 1994 to 1996. From 1991 to 1994, he was Vice President,
Worldwide Product Engineering for Quantum Corporation, a manufacturer of disk
drives. From 1981 to 1991, he held various engineering management positions with
Digital Equipment Corporation, a manufacturer of computers and peripherals,
culminating with the position of Vice President of Worldwide Product Engineering
in 1991. Mr. Potashner also serves on the boards of directors of several private
companies. Mr. Potashner brings to the Board extensive experience in the
management and operation of technology companies, particularly in the
microelectronics industry.
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Unless otherwise
instructed, each proxy received by us will be voted in favor of the election of
Dr. Patel and Mr. Potashner as Class II directors. The nominees have indicated
that they are willing and able to serve as directors if elected. If the nominees
should become unable or unwilling to serve, it is the intention of the persons
designated as proxies to vote instead, in their discretion, for such other
persons as may be designated as nominees by our Board.
The Board of Directors recommends a vote “FOR”
the election of Dr. Patel and Mr. Potashner as Class II directors.
CONTINUING DIRECTORS
The following
directors will continue to serve on our Board:
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Term |
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Director |
Name |
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Principal Occupation |
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Age |
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Class |
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Expires |
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Since |
Robert L. Guyett |
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President and Chief Executive Officer,
Crescent Management Enterprises, LLC |
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73 |
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IV |
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2012 |
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1990 |
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Michael T. O’Neill |
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President and Chief Executive Officer,
Miragene, Inc. |
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69 |
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I |
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2013 |
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2003 |
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Robert J. Phillippy |
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President and Chief Executive Officer,
Newport Corporation |
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49 |
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IV |
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2012 |
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2007 |
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Peter J. Simone |
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Independent Consultant |
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62 |
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III |
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2011 |
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2003 |
Robert L. Guyett was elected to the Board in 1990. Since April 1996, Mr. Guyett has been
President and Chief Executive Officer of Crescent Management Enterprises, LLC, a
financial management and investment advisory services firm. From May 2003 until
May 2007, he served as Chairman of the Board of Directors of Maxwell
Technologies, Inc., a manufacturer of ultracapacitors, microelectronics and high
voltage capacitors, and he continues to serve on that board. From May 1995 to
December 1996, he was a consultant to Engelhard Corporation, an international
specialty chemical and precious metals company. Between September 1991 and May
1995, Mr. Guyett served as Senior Vice President and Chief Financial Officer and
a member of the Board of Directors of Engelhard Corporation. From January 1987
to September 1991, he was the Senior Vice President and Chief Financial Officer
and a member of the Board of Directors of Fluor Corporation, an international
engineering and construction firm. Mr. Guyett also currently serves as the
Treasurer and a director of the Christopher and Dana Reeve Foundation. Mr.
Guyett brings to the Board extensive experience in accounting and finance
issues, and is an “audit committee financial expert” as defined by the
regulations promulgated by the Securities and Exchange Commission.
Michael T. O’Neill was appointed to the Board in April 2003. Since November 2000, Mr.
O’Neill has served as President and Chief Executive Officer, and as a director,
of Miragene, Inc., a biotechnology company. From May 1995 to October 2000, Mr.
O’Neill served as an independent consultant to several private companies in the
biotechnology industry. From 1973 to 1995, Mr. O’Neill was employed by Beckman
Instruments, Inc., a manufacturer of automated analytical systems for the life
and health sciences market, in various management positions, most recently as
Senior Vice President, Worldwide Commercial Operations from 1993 to 1995, and as
Group Vice President, Life Sciences Operations from 1989 to 1993. Mr. O’Neill
brings to the Board extensive experience in the management and operation of
companies in the life and health sciences and biotechnology
industries.
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Robert J. Phillippy joined Newport in April 1996 as Vice President and General Manager of
the Science and Laboratory Products Division. In August 1999, he was appointed
to the position of Vice President and General Manager of the U.S. operations of
our Industrial and Scientific Technologies Division (now a part of our Photonics
and Precision Technologies Division). In July 2004, Mr. Phillippy was appointed
as President and Chief Operating Officer, and in September 2007, he was
appointed as President and Chief Executive Officer and as a member of the Board.
Prior to joining us, Mr. Phillippy was Vice President of Channel Marketing at
Square D Company, an electrical equipment manufacturer, from 1994 to 1996. He
joined Square D Company in 1984 as a sales engineer and held various sales and
marketing management positions with that company prior to his election as Vice
President in 1994. Mr. Phillippy brings to the Board his extensive knowledge of
our business, operations and markets from his roles with Newport, as well as
extensive experience in the management and operation of technology
companies.
Peter J. Simone was appointed to the Board in March 2003. Mr. Simone currently serves as
an independent consultant to several venture capital firms and venture-funded
private companies. Mr. Simone was Executive Chairman of SpeedFam-IPEC, Inc., a
semiconductor equipment company, from June 2001 to December 2002 when it was
acquired by Novellus Systems, Inc. He served as a director of and a consultant
to Active Controls eXperts, Inc. (“ACX”), a leading supplier of precision motion
control and smart structures technology, from January 2000 to August 2000, and
was President and a director of ACX from August 2000 to February 2001 when it
was acquired by Cymer, Inc. He served as President, Chief Executive Officer and
director of Xionics Document Technologies, Inc., a provider of embedded software
solutions for printer and copier manufacturers, from April 1997 until Xionics’
merger with Oak Technology, Inc. in January 2000. Mr. Simone’s previous
experience includes seventeen years with GCA Corporation, a manufacturer of
semiconductor photolithography capital equipment, holding various management
positions including President and director. Mr. Simone also serves on the boards
of directors of several other private and public companies. Mr. Simone brings to
the Board extensive experience in the management and operation of technology
companies, particularly in the microelectronics industry, and is an “audit
committee financial expert” as defined by the regulations promulgated by the
Securities and Exchange Commission.
Other Directorships
Mr. Guyett currently
serves on the board of directors of one other publicly traded company, Maxwell
Technologies, Inc. Mr. Guyett does not currently serve, and during the past five
years has not served, on the board of directors of any other publicly traded
company or investment company.
Mr. Potashner
previously served on the boards of directors of two publicly traded companies,
Applied Solar, Inc. (formerly, Open Energy Corporation), from 2008 to 2009, and
California Micro Devices Corporation, from 2009 to 2010. Mr. Potashner does not
currently serve, and during the past five years has not served, on the board of
directors of any other publicly traded company or investment
company.
Mr. Simone currently
serves on the boards of directors of three other publicly traded companies,
Cymer, Inc., Monotype Imaging, Inc. and Veeco Instruments, Inc. Mr. Simone
previously served on the board of directors on one other publicly traded
company, Sanmina-SCI Corporation, from 2003 to 2008. Mr. Simone does not
currently serve, and during the past five years has not served, on the board of
directors of any other publicly traded company or investment company.
No other director
currently serves, or during the past five years has served, on the board of
directors of any other publicly traded company or investment company.
CORPORATE GOVERNANCE
We are committed to
promoting the best interests of our stockholders by establishing sound corporate
governance practices and maintaining the highest standards of responsibility and
ethics. Our Board of Directors has adopted Corporate Governance Guidelines,
which consist of written standards relating to, among other things, the
composition, leadership, operation and evaluation of the Board and its
committees. The Corporate Governance and Nominating Committee of our Board
reviews and evaluates, at least annually, the adequacy of and our compliance
with such guidelines. A copy of our Corporate Governance Guidelines is available
on our Internet site at www.newport.com/corporategovernance. We will also provide an electronic or paper
copy of these guidelines, free of charge, upon request made to our Corporate
Secretary.
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Board of Directors
Independence
With the exception of
Mr. Phillippy, our President and Chief Executive Officer, all of the current
members of our Board of Directors, and all individuals who served on our Board
during our fiscal year ended January 2, 2010, are “independent” as defined by
Rule 5605(a)(2) of the Nasdaq Listing Rules. Our Board has determined that no
member has a relationship that would interfere with the exercise of independent
judgment in carrying out his responsibilities as a director. The independence of
each director is reviewed periodically to ensure that, at all times, at least a
majority of our Board is independent.
Board Leadership
At such times as an
independent director is serving as Chairman of the Board, the leadership of the
Board is the responsibility of the Chairman. Mr. Potashner, who is an
independent director, has served as Chairman of the Board since September 2007.
In accordance with our Corporate Governance Guidelines, if a non-independent
director, such as our Chief Executive Officer, is serving as Chairman of the
Board, the leadership of the Board would be shared by the Chairman and a lead
independent director who would be appointed by the independent directors from
among themselves. We believe that this leadership structure provides the
appropriate level of independent oversight necessary to ensure that the Board
meets its fiduciary obligations to our stockholders, that the interests of
management and our stockholders are properly aligned, and that we establish and
follow sound business practices and strategies that are in the best interests of
our stockholders.
Board’s Role in Risk Management
The Board provides
oversight with respect to our management of risk, both as a whole and through
its standing committees. The Board typically reviews and discusses with
management at each of its regular quarterly meetings, information presented by
management relating to our operational results and outlook, including
information regarding risks related to our business and operations, as well as
risks associated with the markets we serve. At least annually, the Board reviews
and discusses an overall risk assessment conducted by management and the
strategies and actions developed and implemented by management to monitor,
control and mitigate such risks.
The Audit Committee
of our Board also provides risk oversight, focusing in particular on financial
and credit risk. The Audit Committee oversees the management of such risks,
generally as part of its responsibilities related to the review of our financial
results and our internal control over financial reporting, and specifically in
connection with its consideration of particular actions being contemplated by us
such as financing activities and repurchases of our common stock or convertible
notes. The Compensation Committee has responsibility for overseeing the
management of risk related to our compensation policies and practices. The
Compensation Committee considers risks associated with our business in
developing compensation policies and the components of our executive
compensation program, and periodically reviews and discusses assessments
conducted by management with respect to risk that may arise from our
compensation policies and practices for all employees.
Meetings
It is the policy of
our Board to hold at least four regular meetings each year, typically in
February, May, August and November. The regular meeting held in May of each year
coincides with our annual meeting of stockholders. We have not adopted a formal
policy regarding attendance by members of the Board of Directors at our annual
meetings of stockholders, however, generally, all directors attend such
meetings. All directors who were serving on our Board at the time of our 2009
annual meeting of stockholders attended such meeting.
Our Board held eight
meetings (including telephonic meetings) during the fiscal year ended January 2,
2010. Each director attended more than seventy-five percent of the aggregate of
the number of meetings of the Board (held during the period in which he served
as a director) and the number of meetings held by all committees of the Board on
which he served (held during the period in which he served on such
committees).
Private Sessions
Our independent
directors meet privately, without management present, at least four times during
the year. These private sessions are generally held in conjunction with the
regular quarterly Board meetings. Other private meetings are held as often as
deemed necessary by the independent directors.
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Committees of the Board
Our Board has three
separate standing committees: the Audit Committee, the Compensation Committee
and the Corporate Governance and Nominating Committee. Each committee operates
under a written charter adopted and reviewed annually by the Board. Copies of
the charters of all standing committees are available on our Internet site at
www.newport.com/corporategovernance. We will also provide electronic or paper
copies of the standing committee charters free of charge, upon request made to
our Corporate Secretary. The Board may establish other committees from time to
time as deemed appropriate by the Board based on the needs of the Board and the
company.
Audit Committee
The Audit Committee
is comprised of three directors. The current members are Messrs. Guyett
(Chairman) and Simone and Dr. Patel. Markos I. Tambakeras, who resigned from the
Board effective as of December 31, 2009, served as a member of the Audit
Committee during the entire year of 2009. None of the members serving on the
Audit Committee currently or during 2009 are or have been our officers or
employees, and each member qualifies as an independent director as defined by
Rule 5605(a)(2) of the Nasdaq Listing Rules and Section 10A(m) of the Securities
Exchange Act of 1934, as amended, and Rule 10A-3 thereunder. The Board has
determined that Messrs. Guyett and Simone are “audit committee financial
experts” as defined by the regulations promulgated by the Securities and
Exchange Commission. The Audit Committee held eight meetings (including
telephonic meetings) during the fiscal year ended January 2, 2010.
The Audit Committee
has the sole authority to appoint and, when deemed appropriate, replace our
independent auditors, and has a policy of pre-approving all audit and
permissible non-audit services provided by our independent auditors and the fees
associated therewith. The Audit Committee has, among other things, the
responsibility to:
- evaluate the qualifications and
independence of our independent auditors;
- review and approve the scope and
results of the annual audit;
- evaluate independently and with
our independent auditors our financial and internal audit staff and the
adequacy and effectiveness of our
systems and internal control over financial reporting;
- review and discuss with management
and the independent auditors the content of our financial statements
prior to the filing of our quarterly
reports on Form 10-Q and annual reports on Form 10-K;
- review the content and clarity of
our press releases and related Securities and Exchange Commission reports regarding our operating results and
other financial matters;
- review significant changes in our
accounting policies;
- review and approve transactions
with related persons for which approval is required under applicable
law, including Securities and
Exchange Commission and Nasdaq rules;
- establish procedures for
receiving, retaining and investigating reports of illegal acts involving us
or complaints or concerns
regarding questionable accounting or auditing matters, and supervise
the investigation of any such
reports, complaints or concerns;
- establish procedures for the
confidential, anonymous submission by our employees of concerns or
complaints regarding questionable
accounting or auditing matters;
- review and discuss assessments
conducted by management with respect to our major financial and credit
risk exposures, and actions being
taken to monitor and control such exposures;
- provide sufficient opportunity for
the independent auditors to meet with the committee without management present;
- adopt and continually review and
assess our investment policy;
- oversee the management of our
investment portfolio and evaluate the performance of our portfolio
managers; and
- review and approve or make
recommendations to the Board with respect to certain significant
spending proposals.
8
Compensation Committee
The Compensation
Committee is comprised of four directors. The current members are Messrs.
O’Neill (Chairman), Guyett and Potashner and Dr. Patel. Mr. Tambakeras served as
a member of the Compensation Committee during the entire year of 2009. None of
the members serving on the Compensation Committee currently or during 2009 are
or have been our officers or employees, and each member qualifies as an
independent director as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules.
The Compensation Committee held four meetings (including telephonic meetings)
during the fiscal year ended January 2, 2010. The Compensation Committee has,
among other things, the responsibility to:
- develop guidelines for, evaluate
and approve cash and equity compensation and benefit plans, programs
and agreements for our Chief Executive
Officer and other executive officers;
- review and discuss assessments
conducted by management with respect to risk that may arise from our
compensation policies and practices
for all employees;
- oversee the development of and
administer our long-term incentive plans, including equity-based
incentive plans;
- develop guidelines for and approve
awards to key personnel under our equity-based incentive plans;
and
- evaluate the form and amount of
director compensation and make recommendations to the Board related
thereto.
Additional
information regarding the Compensation Committee’s consideration and
determination of executive officer and director compensation is included under
the heading “Compensation Discussion and Analysis” beginning on page 12 of this
proxy statement.
Corporate Governance and Nominating Committee
The Corporate
Governance and Nominating Committee is comprised of four directors. The current
members are Messrs. Potashner (Chairman), O’Neill and Simone and Dr. Patel. None
of the members of the Corporate Governance and Nominating Committee are or have
been our officers or employees, and each member qualifies as an independent
director as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules. The
Corporate Governance and Nominating Committee held three meetings (including
telephonic meetings) during the fiscal year ended January 2, 2010.
The Corporate
Governance and Nominating Committee ensures that the Board is properly
constituted to meet its fiduciary obligations to Newport and our stockholders
and that we have and follow appropriate governance standards. To carry out this
purpose, the Corporate Governance and Nominating Committee has, among other
things, the responsibility to:
- develop, continually assess and
monitor compliance with our corporate governance guidelines;
- evaluate the size and composition
of our Board, the criteria for Board membership and the independence of
Board members;
- oversee the evaluation of the
performance of our Board and its committees and our
management;
- assist our Board in establishing
appropriate committees and recommend members for such committees;
- identify, evaluate and recommend
to our Board candidates for nomination and election as members of our
Board; and
- review and make recommendations to
our Board regarding our responses to proposals received from stockholders, and engage in discussions with
the proponents of approved stockholder proposals.
9
Identifying and Evaluating Director Candidates
The Corporate
Governance and Nominating Committee identifies potential director candidates
through a variety of sources, including recommendations made by current or
former directors, members of our executive management, stockholders and
business, academic and industry contacts. When appropriate, a search firm may be
retained by the committee to identify director candidates. In March 2010, the
Corporate Governance and Nominating Committee engaged Heidrick & Struggles,
a firm specializing in the recruitment of directors and executives, to assist
the committee in identifying and recruiting director candidates to fill at least
one of the current vacancies on the Board.
There are no specific
minimum qualifications that the Corporate Governance and Nominating Committee
requires to be met by a director nominee recommended for a position on the
Board, nor are there any specific qualities or skills that are necessary for one
or more members of our Board to possess, other than as are necessary to meet the
requirements of the rules and regulations applicable to us. The Corporate
Governance and Nominating Committee reviews and assesses at least annually the
size and composition of our Board and the criteria for Board membership,
including business background, experience, judgment, independence, character,
age, diversity, and other relevant matters. Candidates for director are
evaluated based on such established criteria and certain provisions of our
bylaws.
In assessing the
composition of the Board, the Corporate Governance and Nominating Committee
considers the Board’s current and anticipated needs, and makes every effort to
maintain appropriate balance and diversity of business background, skills and
expertise based on the nature and requirements of our business and the variety
of markets that we serve. In evaluating a potential director candidate, the
Corporate Governance and Nominating Committee considers all relevant information
regarding the candidate, including the membership criteria stated above, and
whether the candidate would meet the Committee’s objectives for the overall
composition of the Board, well as the candidate’s ability and willingness to
devote adequate time to Board responsibilities. When appropriate, the Corporate
Governance and Nominating Committee will recommend qualified candidates for
nomination by the full Board. Any stockholder may recommend candidates for
evaluation by the Corporate Governance and Nominating Committee by submitting a
written recommendation to our Corporate Secretary containing the same
information regarding such candidates required for stockholder nominations as
described under the heading “Stockholder Nominations” below. The Corporate
Governance and Nominating Committee will consider any such recommended
candidates in the same manner as all other proposed candidates in accordance
with these standards.
Stockholder Nominations
In accordance with
our bylaws, stockholders may submit a nomination of a candidate for election as
director by delivering a written notice to our Corporate Secretary at least
ninety days prior to the date corresponding to the record date of our previous
year’s annual meeting in the event of election at an annual meeting, and at
least seventy-five days prior to the initiation of solicitation to our
stockholders for election in the event of election other than at an annual
meeting. Such notice shall set forth (1) the name, age, business address and
residence address of such nominee, (2) the principal occupation or employment of
such nominee, (3) the number of shares (if any) of our capital stock which are
beneficially owned by such nominee, and (4) such other information concerning
such nominee as would be required under the then-current rules of the Securities
and Exchange Commission to be included in a proxy statement soliciting proxies
for the election of the nominee. Any such notice shall be accompanied by a
signed consent of such nominee to serve as a director, if elected. If the
Corporate Governance and Nominating Committee or the Board determines that any
nomination made by a stockholder was not made in accordance with the foregoing
procedures, the rules and regulations of the Securities and Exchange Commission
or other applicable laws or regulations, such nomination will be
void.
Communications with our Board
Any stockholder may
communicate with our Board, any Board committee or any individual director. All
communications should be made in writing, addressed to the Board, the Board
committee or the individual director, as the case may be, in care of our
Corporate Secretary, mailed or delivered to our corporate offices at 1791 Deere
Avenue, Irvine, California 92606. Our Corporate Secretary will forward or
otherwise relay all such communications to the intended
recipient(s).
10
Corporate Responsibility
Code of Ethics
Our Board has adopted
a written code of ethics that applies to our Chief Executive Officer, Chief
Financial Officer, Controller and persons performing similar functions. Such
code of ethics consists of standards that, among other things, are designed to
deter wrongdoing and to promote honest and ethical conduct, including the
ethical handling of actual or apparent conflicts of interest between personal
and professional relationships; full, fair, accurate, timely and understandable
disclosure in reports and documents that we file with, or furnish to, the
Securities and Exchange Commission and/or make in other public communications;
compliance with applicable governmental laws, rules and regulations; the prompt
internal reporting of violations of the code to our Legal Department and/or our
Audit Committee; and accountability for adherence to the code. A copy of our
code of ethics is available on our Internet site at www.newport.com/corporategovernance. We will also provide an electronic or paper
copy of the code of ethics, free of charge, upon request made to our Corporate
Secretary. If any substantive amendments are made to the written code of ethics,
or if any waiver (including any implicit waiver) is granted from any provision
of the code to our Chief Executive Officer, Chief Financial Officer or
Controller, we will disclose the nature of such amendment or waiver on our
Internet site at www.newport.com/corporategovernance or in a current report on Form
8-K.
Procedures for Submitting Complaints Regarding
Accounting and Auditing Matters
We are committed to
compliance with all applicable securities laws and regulations, accounting
standards and accounting controls. The Audit Committee of our Board has
established written procedures for the receipt, retention and treatment of
complaints received by us regarding accounting, internal accounting controls or
auditing matters, and the confidential, anonymous submission by our employees of
concerns or complaints regarding such matters. Our Audit Committee oversees the
handling of such concerns or complaints. The procedures for non-employees to
submit concerns or complaints regarding accounting, internal accounting controls
and auditing matters are available on our Internet site at www.newport.com/corporategovernance. We will also provide an electronic or paper
copy of these procedures free of charge, upon request made to our Corporate
Secretary.
EXECUTIVE OFFICERS
We currently have
five executive officers who serve at the pleasure of our Board and are elected
on an annual basis:
Name |
|
Age |
|
Title |
Robert J. Phillippy |
|
49 |
|
President and Chief Executive
Officer |
|
|
|
|
|
Charles F. Cargile |
|
45 |
|
Senior Vice President, Chief Financial
Officer and Treasurer |
|
|
|
|
|
Jeffrey B. Coyne |
|
43 |
|
Senior Vice President, General Counsel
and Corporate Secretary |
|
|
|
|
|
Gary J. Spiegel |
|
59 |
|
Vice President, Sales, Marketing and
Business Development |
|
|
|
|
|
David J. Allen |
|
55 |
|
Vice President and General Manager,
Lasers Division |
Mr. Phillippy’s
biography is presented on page 6. The biographies of our other executive
officers are set forth below.
Charles F. Cargile joined us in October 2000 as Vice President and Chief Financial Officer.
In July 2004, he was appointed Senior Vice President, and in February 2005, he
was appointed Treasurer. Prior to joining us, Mr. Cargile was Vice President,
Finance and Corporate Development for York International Corporation (now a
division of Johnson Controls, Inc.), a manufacturer of air conditioning and
refrigeration products. He joined York in November 1998, and served in a number
of executive positions, including Corporate Controller and Chief Accounting
Officer, until his promotion to Vice President, Finance and Corporate
Development in February 2000. Prior to joining York, Mr. Cargile was employed by
Flowserve Corporation, a manufacturer of highly-engineered pumps, seals and
valves primarily for the petroleum and chemical industries, in various
positions, most recently as Corporate Controller and Chief Accounting Officer
from February 1995 to November 1998.
11
Jeffrey B. Coyne joined us in June 2001 as Vice President, General Counsel and Corporate
Secretary. In July 2004, he was appointed Senior Vice President, with
responsibility for human resources in addition to legal affairs. Prior to
joining us, Mr. Coyne was a partner in the Corporate and Securities Law
Department of Stradling Yocca Carlson & Rauth, our outside corporate
counsel, from January 2000 to June 2001, and was an associate attorney at such
firm from February 1994 to December 1999. From November 1991 to February 1994,
Mr. Coyne was an associate attorney at Pillsbury Madison & Sutro (now
Pillsbury Winthrop Shaw Pittman LLP), an international law firm. Mr. Coyne is a
member of the State Bar of California and the Orange County Bar
Association.
Gary J. Spiegel joined us in 1991 through our acquisition of Micro-Controle, SA and its
subsidiary, Klinger Scientific. He was appointed to the position of Vice
President with responsibility for domestic sales in June 1992. During 1997, Mr.
Spiegel was assigned additional responsibility for export sales including our
sales subsidiaries in Canada and Taiwan. In March 2002, Mr. Spiegel was
appointed Vice President, Worldwide Sales and Marketing, expanding his role to
include responsibility for all marketing communications and market management.
Since that time, he has held various leadership roles with responsibility for
worldwide sales, service and marketing, and most recently was appointed as Vice
President, Sales, Marketing and Business Development in January 2010. Prior to
joining us, Mr. Spiegel was Vice President of Sales and Marketing for Klinger
Scientific.
David J. Allen joined us in March 2007 as Vice President and General Manager of our
Lasers Division. Prior to joining us, from October 1999 to July 2006, Mr. Allen
was employed by Agilent Technologies, Inc., a global provider of measurement and
analytical instrumentation, and Avago Technologies, Inc., a company which was
formed in December 2005 by the spin off of Agilent’s semiconductor products
division. During such time, he held a number of management positions, most
recently serving as Vice President and General Manager, Fiber Optics Products
Division from April 2004 to July 2006, as Vice President and General Manager,
Networking Solutions Business Unit from November 2003 to December 2005, and as
Vice President and General Manager, Personal Systems Business Unit from November
2001 to October 2003. Prior to his positions with Agilent and Avago, Mr. Allen
held various management positions at Hewlett-Packard Company from December 1984
to October 1999. Prior to joining Hewlett-Packard Company, Mr. Allen held
various sales positions at General Electric Company.
Family Relationships
There are no family
relationships between any director, executive officer or person nominated or
chosen to become a director or executive officer.
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Executive Compensation Program and
Objectives
Our executive
compensation program is intended to fulfill three primary objectives: first, to
attract and retain the high-caliber executives required for the success of our
business; second, to reward these executives for strong financial and operating
performance; and third, to align their interests with those of our stockholders
to incentivize them to create long-term stockholder value.
To fulfill these
objectives, we have adopted the following policies:
- paying compensation that is
competitive with other technology companies in our markets and in our
geographic locations that have comparable revenue levels;
- tying a significant portion of our
executives’ total compensation to performance, by:
- |
providing annual cash incentives that are tied to the achievement
of challenging annual financial and/or non-financial performance
objectives; and
|
|
|
- |
providing long-term incentives, in the form of equity-based awards
that are tied to the achievement of challenging financial performance
objectives; and
|
- providing a significant long-term
incentive to executives to encourage them to remain with Newport for long and
productive careers and to build long-term stockholder value.
12
Implementation of Our Compensation Objectives and the Role of Our
Compensation Committee
Our executive
compensation program is overseen and administered by the Compensation Committee
of our Board (the “Committee”), which is comprised entirely of independent
directors as determined in accordance with applicable Nasdaq, Securities and
Exchange Commission and Internal Revenue Service rules. The Committee operates
under a written charter adopted and reviewed annually by our Board. A copy of
this charter is available on our Internet site at www.newport.com/corporategovernance. We will also provide electronic or paper
copies of this charter, free of charge, upon request made to our Corporate
Secretary.
The Committee is
guided by the above policies in determining the appropriate allocation among the
various elements of our executive compensation program, as well as in the
structuring and administration of those elements. In determining the particular
elements of compensation that will be used to implement these compensation
policies and the allocation of compensation among these elements, the Committee
takes into consideration a number of factors related to our performance, such as
our revenue and profit performance and goals and other financial goals, as well
as competitive practices among our peer companies. The Committee also evaluates
risk factors associated with our businesses in determining our compensation
policies and the components of our executive compensation program. Members of
the Committee also serve as members of our Audit Committee, and the Chairman of
the Audit Committee is a member of the Committee. This provides the Committee
with insight regarding our business risks and gives the Committee additional
information to consider the impact of those risks on our compensation structure
and pay practices.
The Committee
typically determines each executive’s target total annual cash compensation
(salary and cash incentive) and target total direct compensation (salary, cash
incentive and long-term equity incentive) after reviewing similar compensation
information from a group of peer companies in the high technology industry with
whom we compete for executive talent. This review usually occurs in February of
each year, and base salary adjustments typically are effective as of April 1 of
each year. However, the Committee has not conducted such a review since February
2008. In November 2008, due to the deteriorating macro-economic conditions in
several of our end markets and our financial outlook for 2009, the Committee
determined that increases in compensation for 2009, if any, would be nominal
and, as such, did not conduct a detailed review of executive compensation for
2009. The Committee subsequently made a decision to temporarily reduce the base
salaries of executives by 10% effective in February 2009. Similarly, in November
2009, while the Committee determined that it would likely reinstate the
pre-reduction base salaries of the executives in 2010, the Committee also
determined that it would not consider further increases of such base salaries at
this time and, as such, did not conduct a detailed review of executive
compensation for 2010.
Information regarding
the most recent compensation study reviewed by the Committee in February 2008 is
included under the heading “Compensation Discussion and Analysis” in our proxy
statement relating to our 2009 Annual Meeting of Stockholders. The Committee’s
general practice is to target base salaries, total cash compensation and
performance-based equity compensation at the 50th percentile of peer
companies, and to tie a significant portion of total compensation to the
achievement of performance objectives, which we believe helps to align the
interests of executives with those of our stockholders. The Committee has the
discretion to deviate from the peer company data to take into account factors
such as an executive’s performance, the scope of the executive’s position and
responsibilities and relative levels of compensation among our executive
officers.
Role of Compensation Consultants in the Compensation Determination
Process
The Committee has the
authority to engage its own compensation consultants and other independent
advisors to assist in creating and administering our executive compensation
policies. While the Committee has historically engaged compensation consultants
to assist in its annual review of executive compensation, most recently in
February 2008, the Committee did not engage a compensation consultant for 2009
or 2010, for the reasons described above.
13
Role of Management in the Compensation Determination
Process
The Committee
periodically meets with our Chief Executive Officer and/or other executive
officers to obtain recommendations with respect to compensation programs for
executives and other employees. Our Chief Executive Officer makes
recommendations to the Committee on the base salaries, incentive targets and
measures and equity compensation for our executives and other key employees. The
Committee considers, but is not bound to and does not always accept,
management’s recommendations with respect to executive compensation. The
Committee has made modifications
to several of management’s proposals in recent years, including 2009. In
February 2009, management recommended to the Committee that it implement
reductions in the base salaries of all executive officers, and the Committee
implemented a 10% reduction based on management’s recommendation. In February
2010, management recommended that the pre-reduction base salaries be reinstated
effective in April 2010 and that no further increases be made in such base
salaries, which recommendations were accepted by the Committee. While the
Committee did not engage compensation consultants in connection with its review
of executive compensation in 2009 or 2010, the Committee typically seeks input
from compensation consultants prior to making any final determinations. Our
Chief Executive Officer and other executives attend most of the Committee’s
meetings, but the Committee also holds private sessions not attended by any
members of management or non-independent directors. The Committee discusses our
Chief Executive Officer’s compensation package with him, but makes decisions
with respect to his compensation without him present. The Committee has
delegated to management the authority to make salary adjustments and annual
incentive decisions and grant long-term incentive awards to employees other than
executive officers under guidelines set by the Committee. The Committee has not
delegated any of its authority with respect to the compensation of executive
officers.
Elements of Executive Compensation Program
There are five major
elements that comprise our executive compensation program: (i) base salary; (ii)
cash incentives; (iii) long-term equity incentives; (iv) retirement benefits
provided under our 401(k) plan; and (v) executive perquisites and benefits and
generally available benefit programs. We have selected these elements because we
believe that each helps to fulfill one or more of the principal objectives of
our executive compensation policy. We believe that these elements of
compensation, when combined, are effective in achieving the objectives of our
executive compensation program. The Committee will continue to review all
elements of our executive compensation program on at least an annual basis to
ensure that our benefit levels remain competitive and that each element
continues to be effective in achieving our objectives.
Base Salary
The Committee
determines the base salary levels for our executives based on factors including
the competitive market, the scope of their responsibilities, their performance
and contributions to our success, time on the job and internal equity of
compensation among our executives. The Committee reviews the base salaries for
our executives on at least an annual basis and makes adjustments thereto as it
deems appropriate in its sole discretion. While the Committee’s general policy
is for executive compensation to be more heavily weighted towards
performance-based compensation, it has continued to make base salaries a
significant part of the total executive compensation package as it believes that
this is necessary in order to remain competitive in attracting and retaining
executive talent.
As noted above, in
February 2009, after taking into account the macro-economic conditions in
several of our end markets and our financial outlook for 2009, as well as the
recommendations of management, the Committee temporary reduced the base salaries
of all executive officers by 10%. Such reductions were to remain in effect for
the longer of six months or until the Committee determined that business
conditions and our financial outlook warranted reinstatement of the
pre-reduction base salary levels. Prior to such reductions, the base salaries of
each of the named executive officers ranged from 13.8% below to 8.1% above the
50th percentile of
market, based on the peer group data provided by the Committee’s compensation
consultants in February 2008. In February 2010, in light of improved business
conditions and our financial outlook for 2010, the Committee reinstated the
pre-reduction base salaries for all executive officers effective at the
beginning of April 2010.
Cash Incentives
Each of our
executives participates in cash incentive plans developed by the Committee.
These cash incentive plans focus on linking a significant portion of each
executive’s total compensation to the achievement of challenging performance
targets. Under certain circumstances, the Committee may award discretionary
bonuses in cases where such performance targets are not met. The Committee did
not award any such discretionary bonuses for 2009.
The Committee
typically establishes an annual cash incentive plan under which incentive
payouts are tied to the achievement of annual performance goals. Each executive
is generally assigned a combination of financial performance measures and
individual non-financial goals. However, in 2009, the Committee determined that,
due to the poor macro-economic conditions and the uncertainty and lack of
visibility in several of our end markets, it would be very difficult to
accurately forecast our financial performance for the full year. Therefore, the
Committee made the decision to structure the cash incentive plan for 2009 as two
semi-annual plans. In addition, due to our primary focus on financial
performance in the challenging economic climate, the Committee determined that
100% of the target incentives
would be tied to financial goals. The overall structure of the two semi-annual
plans for 2009, as well as the financial measures and targets, and the
weightings thereof for each executive, for the first half of 2009, were approved
by the Committee in February 2009. The financial measures, targets and
weightings for the second half of 2009 were approved by the Committee in August
2009.
14
Target Incentives. The target incentive for each executive is
determined by the Committee based on the position and responsibility of the
executive, the compensation targets discussed above and the peer group data
provided by the Committee’s compensation consultants. The Committee’s general
practice is to set target incentive levels at approximately the 50th percentile of the
peer group. For 2009, the target incentives for the named executive officers
remained the same as the target incentives previously established by the
Committee in February 2008, as follows:
|
|
Target Incentive |
|
|
|
|
|
Target Incentive |
|
|
(as % of Approved |
|
Full Year |
|
Under Each Half- |
|
|
Pre-Reduction |
|
Target Incentive |
|
Year 2009 Plan |
Name |
|
Base Salary) |
|
($) |
|
($) |
Robert J. Phillippy |
|
|
100% |
|
|
|
$ 450,000 |
|
|
|
$ 225,000 |
|
Charles F. Cargile |
|
|
75% |
|
|
|
247,500 |
|
|
|
123,750 |
|
Jeffrey B. Coyne |
|
|
50% |
|
|
|
140,000 |
|
|
|
70,000 |
|
Gary J. Spiegel |
|
|
50% |
|
|
|
137,500 |
|
|
|
68,750 |
|
David J. Allen |
|
|
50% |
|
|
|
140,000 |
|
|
|
70,000 |
|
Such target incentive
levels for each named executive officer ranged from 10% below to 15% above the
50th percentile of
market, based on the peer group data provided by the Committee’s compensation
consultants in February 2008.
Payout Structure. Under our cash incentive plans, the Committee
generally establishes minimum, target and maximum achievement levels for each
financial measure. In 2009, the Committee set the minimum level for each measure
under the half-year cash incentive plans at or slightly above the level set
forth in our 2009 annual operating plan for the first half of 2009, and in our
forecast for the second half of 2009. Such level corresponded to a payout level
of 0%, and the target and maximum achievement levels corresponded to payout
levels of 100% and 200%, respectively. Payouts are prorated on a straight-line
basis for achievement between the minimum and target levels or the target and
maximum levels. If we did not exceed the minimum performance level for a
measure, no payout would be made for that measure. Further, the payout of all
financial measures was conditioned upon the achievement of at least the minimum
level for the executive’s primary profitability goal (consolidated operating
income for Messrs. Cargile, Coyne, Phillippy and Spiegel, and Lasers Division
operating income for Mr. Allen).
In previous years,
the target level, rather than the minimum level, for each measure was generally
set at approximately the level set forth in our annual operating plan, and the
minimum level corresponded to a payout level of 50%, rather than 0%. The payout
of each financial measure was determined separately and was not subject to any
additional condition with respect to the achievement level of any other
financial measures. The Committee implemented the changes to the payout
structure for the half-year 2009 plans, as described above, to ensure that any
payouts would only occur in the event of overachievement of our annual operating
plan (or overachievement of our forecast, in the case of the second half of
2009). The Committee believed that, in light of our business outlook for 2009,
it was appropriate to reward the executives only in the event of overachievement
of our financial plan and not to reward executives for simply meeting our
financial plan in whole or in part.
Financial Measures. The financial performance measures for each
executive are selected by the Committee each year based on our corporate goals
for that year and the Board’s priorities. The measures selected, and their
relative weighting, vary among the executives based upon such executive’s area
of responsibility and potential impact on our operating and financial
performance, to provide optimal correlation between performance and reward.
Management provides recommendations to the Committee with respect to financial
performance measures for each executive and the relative weighting of such
measures. The Committee considers, but is not bound to accept such
recommendations, and has made changes to the measures and relative weighting in
recent years, including 2009.
15
As noted above, the
Committee determined that 100% of the target incentives should be tied to
financial goals in 2009. For both of the half-year 2009 plans, the financial
measures and relative weightings thereof for each named executive officer were
as follows:
|
|
Consolidated |
|
Lasers Division |
|
|
Earnings |
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
Return on |
|
|
(Loss) |
|
Operating |
|
|
|
Free Cash |
|
Return on |
|
Income |
|
|
|
Cash |
|
Selected |
Name |
|
Per Share |
|
Income |
|
Net Sales |
|
Flow |
|
Capital |
|
(Loss) |
|
Net Sales |
|
Flow |
|
Assets |
Robert J. Phillippy |
|
35% |
|
20% |
|
15% |
|
15% |
|
15% |
|
– |
|
– |
|
– |
|
– |
Charles F. Cargile |
|
35% |
|
20% |
|
15% |
|
15% |
|
15% |
|
– |
|
– |
|
– |
|
– |
Jeffrey B. Coyne |
|
35% |
|
20% |
|
15% |
|
15% |
|
15% |
|
– |
|
– |
|
– |
|
– |
Gary J. Spiegel |
|
– |
|
20% |
|
60% |
|
10% |
|
10% |
|
– |
|
– |
|
– |
|
– |
David J. Allen |
|
– |
|
15% |
|
– |
|
– |
|
– |
|
40% |
|
15% |
|
15% |
|
15% |
The minimum, target
and maximum levels established for each financial measure applicable to the
named executive officers, and the actual results with respect to each such
measure, for the first half of 2009 and second half of 2009, were as
follows:
First Half 2009 |
Financial Measure |
|
Financial Goals(1) |
|
Actual |
|
|
Minimum |
|
Target |
|
Maximum |
|
Results(1) |
Earnings (Loss) Per Share |
|
$ |
(0.03 |
) |
|
$ |
– |
|
|
$ |
0.08 |
|
|
$ |
(0.11 |
) |
Consolidated Operating Income |
|
$ |
1,300 |
|
|
$ |
3,000 |
|
|
$ |
5,500 |
|
|
$ |
(1,651 |
) |
Consolidated Net Sales |
|
$ |
195,000 |
|
|
$ |
205,000 |
|
|
$ |
220,000 |
|
|
$ |
177,077 |
|
Consolidated Free Cash Flow |
|
$ |
3,808 |
|
|
$ |
5,808 |
|
|
$ |
7,808 |
|
|
$ |
7,543 |
|
Consolidated Return on Capital |
|
|
0.5 |
% |
|
|
1.5 |
% |
|
|
3.0 |
% |
|
|
(0.7 |
)% |
Lasers Division Operating Income (Loss) |
|
$ |
(2,700 |
) |
|
$ |
(1,500 |
) |
|
$ |
2,500 |
|
|
$ |
(4,725 |
) |
Lasers Division Net Sales |
|
$ |
80,000 |
|
|
$ |
88,000 |
|
|
$ |
96,000 |
|
|
$ |
72,954 |
|
Lasers Division Cash Flow(2) |
|
$ |
5,106 |
|
|
$ |
7,500 |
|
|
$ |
10,500 |
|
|
$ |
(678 |
) |
Lasers Division
Return on Selected Assets(3) |
|
|
(10.0 |
)% |
|
|
6.0 |
% |
|
|
10.0 |
% |
|
|
(19.0 |
)% |
Second Half 2009 |
Financial Measure |
|
Financial Goals(1) |
|
Actual |
|
|
Minimum |
|
Target |
|
Maximum |
|
Result(1) |
Earnings (Loss) Per Share |
|
$ |
(0.02 |
) |
|
$ |
– |
|
|
$ |
0.05 |
|
|
$ |
0.19 |
|
Consolidated Operating Income |
|
$ |
1,496 |
|
|
$ |
3,000 |
|
|
$ |
6,000 |
|
|
$ |
9,233 |
|
Consolidated Net Sales |
|
$ |
184,065 |
|
|
$ |
195,000 |
|
|
$ |
205,000 |
|
|
$ |
189,912 |
|
Consolidated Free Cash Flow |
|
$ |
(6,771 |
) |
|
$ |
(3,400 |
) |
|
$ |
– |
|
|
$ |
7,452 |
|
Consolidated Return on Capital |
|
|
(0.03 |
)% |
|
|
0.5 |
% |
|
|
2.0 |
% |
|
|
1.5 |
% |
Lasers Division Operating Income |
|
$ |
1,430 |
|
|
$ |
2,500 |
|
|
$ |
5,000 |
|
|
$ |
3,561 |
|
Lasers Division Net Sales |
|
$ |
77,693 |
|
|
$ |
82,000 |
|
|
$ |
98,000 |
|
|
$ |
76,292 |
|
Lasers Division Cash Flow(2) |
|
$ |
3,193 |
|
|
$ |
4,500 |
|
|
$ |
6,000 |
|
|
$ |
1,571 |
|
Lasers Division Return on Selected
Assets(3) |
|
|
(8.5 |
)% |
|
|
– |
% |
|
|
10.0 |
% |
|
|
(2.8 |
)% |
____________________
(1) |
|
All figures are in thousands except
percentages and per share data. For both periods, the goals and actual
results for the consolidated operating income and earnings (loss) per
share measures reflect non-GAAP amounts that exclude certain items, and
the goals and actual results for the consolidated free cash flow and
consolidated return on capital measures were calculated utilizing the
non-GAAP consolidated operating income amount. The goals and actual
results for all other measures reflect amounts calculated in accordance
with generally accepted accounting principles (GAAP). The items that have
been excluded from the consolidated operating income measure are: (1)
expenses related to cost reduction and facility consolidation actions, (2)
costs related to acquisition, integration and divestiture activities, and
(3) impairment of assets and a loss on disposal of assets. The items that
have been excluded from earnings (loss) per share are (1) all items
excluded from consolidated operating income, (2) recovery of assets
related to previously discontinued operations, (3) a gain on
extinguishment of debt, (4) non-cash interest expense on convertible
notes, and (5) the tax impact of the foregoing
items. |
16
(2) |
|
Lasers Division
Cash Flow is calculated as the division’s operating income plus
depreciation, stock compensation expense, changes in inventory and capital
expenditures during each period.
|
|
(3) |
|
Lasers Division
Return on Selected Assets is calculated as the division’s operating income
divided by the division’s inventory and property and equipment, net, at
the end of each period.
|
As noted above, the
minimum levels for the first half of 2009 were set at or slightly above the
levels set forth in our 2009 annual operating plan for that period, and the
minimum levels for the second half of 2009 were set at or slightly above the
levels reflected in our forecast for the second half of 2009. The Committed
believes that these minimum levels were challenging but achievable with
significant effort, the target levels were set at levels that represented
extremely challenging performance goals, and the maximum levels were set at
levels that represented both extremely challenging performance goals and
outstanding achievement.
2009 Results. For the first half of 2009, we did not achieve
any of the performance goals for financial measures applicable to the named
executive officers other than the consolidated free cash flow measure. Although
we exceeded such measure, we did not achieve the minimum performance level for
consolidated operating income, and as such, no payouts were made to any named
executive officer for the first half of 2009. For the second half of 2009, we
exceeded the minimum performance level for all financial measures applicable to
the named executive officers, other than the Lasers Division net sales and cash
flow measures. In certain cases, we also exceeded the target performance level
or the maximum performance level. Accordingly, for the second half of 2009,
Messrs. Phillippy, Cargile and Coyne received payouts under the incentive plan
equal to 173% of their target incentives, Mr. Spiegel received a payout equal to
109% of his target incentive, and Mr. Allen received a payout equal to 97% of
his target incentive.
For 2010, the
Committee has approved a plan structure that is similar to that used in 2009,
except that, in light of the recent improvement in our business conditions and
the greater visibility to our financial outlook for 2010, the Committee has
determined that it is appropriate to return to annual performance goals.
Accordingly, for 2010, 100% of the target incentives for the named executive
officers will be conditioned upon the achievement of full year 2010 financial
goals, with the minimum performance levels for each financial measure set at or
slightly above the levels set forth in our 2010 annual operating plan,
corresponding to a 0% payout level, and the target and maximum performance
levels corresponding to 100% and 200% payout levels, respectively. The payout of
all financial measures will be conditioned upon the achievement of at least the
minimum level for the executive’s primary profitability goal.
Long-Term Equity
Incentives
We provide long-term
incentive compensation to our executives through equity-based awards, such as
stock options, stock appreciation rights, restricted stock and/or restricted
stock units, which generally vest over multiple years. Prior to 2006, we used
options to purchase shares of our common stock with time-based vesting as our
primary equity incentives. In late 2005, the Committee decided that
substantially all equity compensation should be performance-based to link the
benefits received by the executives to the achievement of challenging
performance goals that the Committee believes to be important drivers of
stockholder value. The Committee believes that this policy helps to further
align the interests of executives with those of our stockholders, and provides
executives with an additional incentive to drive superior financial performance.
In addition, due to the long-term nature of this equity compensation, the
Committee believes that this program provides executives with an incentive to
remain employed by us and to drive sustained, long-term financial
performance.
In March 2006, our
Board adopted the 2006 Performance-Based Stock Incentive Plan (“2006 Plan”)
subject to stockholder approval, which was received in May 2006. The 2006 Plan
allows us to grant a variety of equity award types, including stock options,
stock appreciation rights, restricted stock and restricted stock units, and
provides that the vesting of substantially all awards to executives and other
employees will be conditioned on the achievement of performance goals
established by the Committee.
17
The Committee
considers the appropriate award size and the appropriate equity-based vehicles
or combination of vehicles when making award decisions. The target long-term
equity incentive value for each executive is determined by the Committee based
on the position and responsibility of the executive and the data provided by the
Committee’s compensation consultants related to our peer companies. The
Committee’s general practice is to set target long-term equity incentive levels
at approximately the 50th percentile of peer
companies. However, the Committee also considers other factors, including the
compensation expense associated with the awards, and individual factors such as
the executive’s performance and scope of responsibility and relative levels of
compensation among our executives, in making award decisions. The Committee does
not consider existing equity ownership, as it does not want to discourage
executives from holding significant amounts of our stock. In selecting the
equity vehicles to be used each year, the Committee seeks to achieve an
appropriate balance between awards that provide higher incentive value, such as
options or stock appreciation rights, and awards that provide higher retention
value, such as restricted stock or restricted stock units. The Committee also
takes into account the relative efficiencies of each type of equity vehicle in
terms of the number of shares required to provide the targeted value opportunity
to the executive, in order to minimize stockholder dilution.
In 2009, the
Committee granted equity awards to each named executive officer under our 2006
Plan. Such awards are reflected in the table entitled “Grants of Plan-Based
Awards in Fiscal Year 2009” on page 25 of this proxy statement. One-half of the
total number of shares awarded to each executive was provided as restricted
stock units (representing approximately two-thirds of the total award value) and
one-half was provided as stock appreciation rights (representing approximately
one-third of the total award value). The Committee selected this combination of
equity vehicles after considering several factors including the retention value
offered by restricted stock units and the incentive value offered by stock
appreciation rights, while minimizing stockholder dilution in both cases, as
well as the number of restricted stock units available for award under the 2006
Plan. In determining the sizes of the 2009 awards, although the Committee took
into consideration the peer group data and recommendations provided by its
compensation consultants in 2008, in light of our business conditions and
financial outlook for 2009, the Committee determined that it was necessary to
significantly reduce the grant date values of the awards from the grant date
fair values of the awards granted in 2008, in order to reduce the compensation
expense associated with the awards. The grant date values of the awards granted
to the named executive officers in 2009 were approximately 50% of the grant date
value of the 2008 awards.
For the 2009 awards,
the Committee reevaluated the vesting structure and made changes to the
structure that had been used in prior years to ensure that such awards would
provide adequate incentive and retention value to our executive officers and key
employees. Equity awards granted under the 2006 Plan prior to 2009 generally
vest in equal annual installments over three years, provided that we achieve
certain specified annual financial performance goals for each of those years. At
the time of grant, target and minimum achievement levels, corresponding to 100%
vesting and 70% vesting, respectively, were established for each performance
measure for each of the three years. For the first two performance periods, if
less than 100% of the awards vest for the performance period, then 50% of the
awards that did not vest for such performance period will remain outstanding and
will be eligible for vesting in the next performance period if at least the
target level for the applicable performance measure is achieved for the next
performance period. This structure was originally developed by the Committee to
provide executives with incentive to drive long-term financial performance.
However, as a result of the downturn in our business conditions, which began in
2007 and significantly worsened during 2008 and 2009, the financial performance
goals established under the prior awards for the 2007 to 2010 performance
periods have not been achieved or are not expected to be achieved. As a result,
substantially all of the outstanding awards under the 2006 Plan that were
granted prior to 2009 have lost their incentive and retention value. Further,
the Committee has recognized the challenges we face in setting precise financial
goals for three years, particularly given the current uncertainty in the
macro-economic climate.
Accordingly, for the
2009 awards, the Committee established a vesting structure that includes both
performance-based and time-based components. The vesting of all awards was
conditioned upon our achievement of a consolidated operating income goal of
breakeven for 2009 (on a non-GAAP basis) and, if such financial goal was
achieved, the awards would vest in equal annual installments on the first three
anniversaries of the grant date. Such operating income goal was set at
approximately the level set forth in our 2009 forecast at the time of grant, due
to the deteriorating macro-economic conditions and the significant uncertainty
in our outlook at that time. For 2009, due to a strong rebound in our business
during the second half of the year, we recorded consolidated operating income of
$11.9 million on a non-GAAP basis, exceeding the goal established under the 2009
awards. As such, the awards granted in 2009 will continue to vest in equal
annual installments on the first three anniversaries of the grant date. In
establishing the goal and in determining the actual result for the consolidated
operating income measure, the following items were excluded: (1) expenses
related to cost reduction and facility consolidation actions, (2) costs related
to acquisition, integration and divestiture activities, (3) impairment of assets
and a loss on disposal of assets, and (4) operating losses incurred by our diode
laser operations, which we divested in July 2009.
18
The Committee
believes that the vesting structure utilized for the 2009 awards is appropriate
as it takes into account the uncertain outlook in our markets while providing an
incentive for our executives to drive company profitability, which is a key
focus of our Board in the current business environment, and it also provides
long-term retention value. The Committee expects to grant equity awards to the
named executive officers in 2010 that are subject to the same vesting structure,
conditioned upon the achievement of a consolidated operating income goal for
2010.
Executive Perquisites and
Benefits
We provide our
executives with other benefits that we believe are reasonable, competitive and
consistent with our overall executive compensation program. The costs of these
benefits are reflected in the “All Other Compensation” column in the Summary
Compensation Table on page 23 of this proxy statement, and consist of term life
insurance for the benefit of the executives, supplemental long-term disability
insurance, auto allowances and annual physical examinations that are more
extensive than that provided under our standard plans. The costs of these
benefits constitute only a small percentage of each executive’s total
compensation.
Generally Available Benefit Programs
Each executive is
eligible to receive benefits pursuant to programs that provide for broad-based
employee participation. These benefits programs include our 401(k) plan,
employee stock purchase plan, medical, dental and vision insurance, long-term
and short-term disability insurance, life and accidental death and dismemberment
insurance, health and dependent care flexible spending accounts, business travel
accident insurance, wellness programs, educational assistance, employee
assistance and certain other benefits.
Section 401(k) Plan
We maintain a
tax-qualified retirement plan that provides eligible employees with an
opportunity to save for retirement on a tax advantaged basis. Each of our
executives is eligible to participate in this plan. Participants are able to
defer up to 50% of their eligible compensation, subject to applicable annual
limits under the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”). Pre-tax contributions are allocated to each participant’s
individual account and are then invested in selected investment alternatives
according to the participant’s directions. Employee elective deferrals are 100%
vested at all times. The 401(k) plan allows for matching contributions to be
made by us starting immediately upon participation in the 401(k) plan. We match
employee elective deferrals up to a maximum of 6% of eligible compensation,
subject to applicable annual Internal Revenue Code limits. These matching
contributions are immediately vested. The 401(k) plan is intended to qualify
under Sections 401(a) and 501(a) of the Internal Revenue Code. As a
tax-qualified retirement plan, contributions to the 401(k) plan and earnings on
those contributions are not taxable to the employees until distributed from the
401(k) plan, and all contributions are deductible by us when made.
Employee Stock Purchase
Plan
We maintain an
employee stock purchase plan, which is intended to qualify as an “employee stock
purchase plan” under Section 423 of the Internal Revenue Code. Each of our U.S.
employees who customarily works more than 20 hours per week and more than five
months in any calendar year is eligible to participate in this plan. To
participate in the plan, an employee may designate prior to the commencement of
a quarterly offering period the amount of payroll deductions to be made from his
or her paycheck for the purchase of shares of our common stock under the plan,
which amount may not exceed 15% of his or her compensation. On each purchase
date, shares of our stock are purchased automatically for each participant with
the amounts held from his or her payroll deductions at a price equal to 95% of
the fair market value of the shares on the purchase date. An employee may not
participate in an offering period if, immediately after the purchase of shares,
the employee would own shares or hold options to purchase shares of stock
possessing 5% or more of the total combined voting power or value of all classes
of our stock.
19
Deferred Compensation Plan
We have established a
Deferred Compensation Plan which is designed to allow certain individuals,
including members of our Board of Directors and a select group of management
and/or highly compensated employees, to defer a portion of their current income
on a pre-tax basis and receive a tax-deferred return on such deferrals. Our
Deferred Compensation Plan is offered to these employees to allow them to defer
more compensation than they would otherwise be permitted to defer under a
tax-qualified retirement plan, such as our 401(k) plan. We believe that our
Deferred Compensation Plan is a competitive benefit that aids us in attracting
and retaining management talent. Each of our executives is eligible to
participate in our Deferred Compensation Plan.
Under the plan, a
participant may defer up to 100% of his or her annual base salary, annual
incentive bonus and/or restricted stock or restricted stock unit awards, subject
to a minimum deferral amount of $2,000 in each plan year. In addition to a
participant’s deferrals, amounts are credited or debited to a participant’s
account based on the performance of one or more measurement funds selected by
the participant. The measurement funds available under the plan are selected and
announced by the plan committee based on certain mutual funds and crediting
rates. The plan committee may, in its sole discretion upon written notice to
participants, discontinue, substitute or add a measurement fund under the plan.
Any restricted stock or restricted stock units deferred under the plan is at all
times allocated to a company stock fund which consists solely of our common
stock, with any dividends paid thereon being reinvested in additional shares of
our common stock. Amounts credited or debited to a participant’s account are
based solely on the market performance of the measurement funds selected by the
participant, and we do not pay any “above-market” interest or return on the
deferrals made by any participant. As such, these amounts are not shown in the
Summary Compensation Table below.
Several named
executive officers have elected to defer amounts under the Deferred Compensation
Plan, and have accumulated the deferred compensation amounts shown in the table
entitled “Nonqualified Deferred Compensation in Fiscal Year 2009” on page 29 of
this proxy statement. The amounts deferred are unsecured obligations of the
company, receive no preferential standing, and are subject to the same risks as
any of our other general obligations.
Stock Ownership Guidelines
Our Board of
Directors has established stock ownership guidelines for executives that are
designed to increase the executive’s equity stake in Newport and more closely
align his or her interests with those of our stockholders. The current
guidelines provide that each executive should own, at a minimum, a specified
number of shares of our common stock depending upon the position held. In
accordance with these guidelines, our Chief Executive Officer should own a
minimum of 65,000 shares, our Senior Vice President and Chief Financial Officer
should own a minimum of 35,000 shares, and our other executive officers should
own between 15,000 and 25,000 shares depending upon position held. Newly
appointed or promoted executives should achieve the applicable minimum stock
ownership guideline within two years of such appointment or
promotion.
The guidelines also
provide that our executives shall not sell shares of our stock if the executive
is not in compliance, or if such sale would cause the executive to become out of
compliance, with the minimum stock ownership guidelines, except under certain
circumstances, including cases of financial hardship, if approved by the
Chairman of the Compensation Committee of our Board. These restrictions do not
apply to the sale, or the surrender to us, of shares in connection with the
exercise or settlement of a stock option or stock appreciation right, or the
vesting of restricted stock or restricted stock units, in payment of the
exercise price and/or withholding taxes due in connection with such exercise,
settlement or vesting.
In addition to the
guidelines described above, the terms of certain stock options previously
granted to certain executives provide that the executive must hold at least 50%
of all shares received upon the exercise of a stock option, for the longer of
one year or until such time as the executive is in compliance with these stock
ownership guidelines.
Under our insider
trading policy, covered employees are prohibited from trading in any interest or
position relating to the future price of our securities, such as a put, call or
short sale.
20
Accounting and Tax Considerations
In designing our
compensation programs, we take into consideration the accounting and tax effect
that each element will or may have on Newport and the executive officers and
other employees as a group. We aim to keep the expense related to our
compensation programs to the minimum necessary to accomplish the objectives of
our compensation programs. When determining how to allocate between differing
elements of compensation, the goal is to meet our objectives while maintaining
cost neutrality. For instance, if we increase the benefits under one program
resulting in higher compensation expense, we may seek to decrease costs under
another program in order to avoid increasing our total compensation
expense.
Under Section 162(m)
of the Internal Revenue Code, we generally receive a federal income tax
deduction for compensation paid to any of our named executive officers only if
the compensation is less than $1 million during any fiscal year or is
“performance-based” under Section 162(m). We have not paid, and do not currently
expect to pay, any compensation that is not deductible for federal income tax
purposes. However, non-deductible compensation may still be paid to executives
in extraordinary circumstances, when necessary for competitive reasons or to
attract or retain a key executive.
In order to preserve
our ability to deduct the compensation income associated with equity awards
granted to such persons, for the purposes of Section 162(m) of the Internal
Revenue Code, the 2006 Plan provides that (i) in no event shall any plan
participant be granted options or stock appreciation rights in any one calendar
year pursuant to which the aggregate number of shares of common stock that may
be acquired thereunder exceeds 300,000 shares, subject to adjustments in capital
structure, and (ii) in no event shall any participant be granted restricted
stock awards in any one calendar year pursuant to which the aggregate number of
shares of common stock governed by such restricted stock awards exceeds 200,000
shares, subject to adjustments in capital structure. To the extent grants under
the 2006 Plan are in excess of these limitations, such excess shall not be
exempt from the deductibility limits of Section 162(m) of the Internal Revenue
Code.
Employment Agreements and Arrangements
With the exception of
the severance compensation agreements discussed below, which provide for payment
of certain compensation and benefits in the event of termination of employment
under certain circumstances, we do not have an agreement with any named
executive officer with respect to the length of his employment or the level of
cash compensation, equity compensation or other benefits payable to him. The
base salary and any annual or long-term cash or equity incentive compensation of
each executive officer are determined by the Compensation Committee, in its sole
discretion, in accordance with its compensation philosophy, policies, objectives
and guidelines discussed above.
Termination Following Change in Control
We have entered into
a severance compensation agreement with each of our named executive officers
providing for certain payments and benefits in the event that such officer’s
employment is terminated within two years of a “change in control” of Newport
(as defined in the agreement), unless such termination results from the
officer’s death, disability or retirement, or the officer’s resignation for
reasons other than “good reason” (as defined in the agreement), or constitutes a
termination by us for “cause” (as defined in the agreement). In such event, the
executive officer will be entitled to: (i) a lump sum severance payment equal to
twelve months of such officer’s highest base salary during the twelve month
period preceding termination (with the exception of Mr. Phillippy, who will be
entitled to a severance payment of twenty-four months of salary); (ii) a bonus
payment equal to such officer’s incentive compensation bonus payable under our
annual incentive plan or other bonus plans then in effect, based on 100%
satisfaction of all performance goals (with the exception of Mr. Phillippy, who
will be entitled to receive two times such bonus payment); (iii) continuation of
benefits under our medical, dental and vision plans, and long-term disability
insurance for twenty-four months; (iv) automatic vesting and settlement of all
unvested restricted stock and restricted stock units held by the officer, based
on 100% satisfaction of any applicable performance goals; (v) automatic vesting
of all unvested stock appreciation rights, and the automatic settlement of all
stock appreciation rights, held by the officer, based on 100% satisfaction of
any applicable performance goals; (vi) automatic vesting of all unvested stock
options and, unless otherwise specified by the officer, payment of an amount
equal to the difference between the exercise price and fair market price
(calculated as set forth in the agreement) of the shares of common stock subject
to all vested and unvested stock options held by the officer; and (vii) certain
other benefits, including payment of an amount sufficient to offset any excess
“parachute payment” excise tax payable by the officer pursuant to the provisions
of the Internal Revenue Code, and/or any comparable provision of state or
foreign law.
21
Other Termination
Our agreements with
each of Mr. Phillippy and Mr. Cargile provide that, in the event we terminate
his employment other than for cause at any time during the term of the agreement
in absence of a change in control of Newport, he will be entitled to receive (i)
a severance payment equal to twelve months of his highest base salary in effect
during the twelve month period preceding termination, payable in a lump sum on
his date of termination, (ii) a bonus payment in an amount equal to his
incentive bonus payable under our annual incentive plan or other bonus plans
then in effect, based on 100% satisfaction of all performance goals, payable in
a lump sum on his date of termination, and (iii) continuation of benefits under
our medical, dental and vision plans, and long-term disability insurance for
twelve months.
The estimated
payments and benefits that each named executive officer would have received
under the severance compensation agreements described above in the event that
his employment had been terminated by us under certain circumstances as of
January 2, 2010 are discussed under the heading “Payments Upon Certain
Termination Events” beginning on page 30 of this proxy statement.
Non-Employee Director Compensation
The Committee has the
authority and responsibility to review and evaluate periodically the cash and
equity compensation paid to non-employee directors. Based on such review and
evaluation, the Committee makes recommendations to our Board, and the Board
approves all non-employee director compensation in its sole
discretion.
The Committee has the
authority to engage compensation consultants to assist the Committee in
evaluating the amount and form of non-employee director compensation. In
evaluating and making its recommendations regarding non-employee director
compensation, the Committee reviews market data obtained through surveys
conducted by such consultants or through other external resources. While the
Committee may direct management to engage compensation consultants on behalf of
the Committee, the Committee does not delegate any authority to management to
determine or make recommendations regarding such compensation.
Each of our
non-employee directors receives an annual fee for service as a director, which
fee was $26,250 through March 2009. Effective in April 2009, the Board
temporarily reduced this annual fee by 10%. Such fee was reinstated to $26,250
effective in April 2010. In addition, each non-employee director is paid $2,500
for each in-person Board meeting attended, $1,500 for each telephonic Board
meeting attended, $2,000 for each in-person committee meeting attended, and
$1,000 for each telephonic committee meeting attended. Each committee
chairperson receives an additional $1,000 for each in person or telephonic
committee meeting attended. Our non-employee directors are also reimbursed for
expenses incurred in connection with attending Board and committee
meetings.
Mr. Potashner
receives an additional annual fee of $12,000 for his service as Chairman of the
Board. At such times as a lead independent director is serving, such director
would receive an additional annual fee of $6,000, prorated for any portion of a
year during which he serves. No director served as lead independent director
during 2009.
Each non-employee
director receives annually restricted stock units having a grant date value of
$120,000. Such restricted stock units vest in full on the first anniversary of
the award date. Upon initial appointment or election to our Board, each
non-employee director receives restricted stock units having a target grant date
value of $250,000, which vest in 25% increments on each of the first four
anniversaries of the award date.
All cash compensation
earned by each non-employee director, and the grant date fair values of all
equity awards granted to each non-employee director, during the fiscal year
ended January 2, 2010 are shown in the table entitled “Director Compensation in
Fiscal Year 2009” on page 31 of this proxy statement.
22
SUMMARY COMPENSATION TABLE
The following table
sets forth compensation earned during the fiscal years ended January 2, 2010,
January 3, 2009, and December 29, 2007 by our principal executive officer,
Robert J. Phillippy; our principal financial officer, Charles F. Cargile; and
our three other most highly compensated executive officers who were serving as
executive officers at January 2, 2010 and whose total compensation exceeded
$100,000 for the fiscal year ended January 2, 2010; as well as the grant date
fair values of share-based compensation awarded to such officers during such
fiscal years. These officers are referred to in this proxy statement as the
“named executive officers.”
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Compen- |
|
Compen- |
|
|
|
|
|
|
|
|
Salary(1) |
|
Awards(2) |
|
Awards(3) |
|
sation(4) |
|
sation(5) |
|
Total |
Name and Principal
Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Robert J. Phillippy(6) |
|
2009 |
|
$ |
411,923 |
|
|
$ |
348,612 |
|
|
$ |
136,776 |
|
|
$ |
389,925 |
|
|
$ |
35,662 |
|
|
$ |
1,322,898 |
|
President and Chief Executive Officer |
|
2008 |
|
|
442,788 |
|
|
|
983,197 |
|
|
|
– |
|
|
|
69,051 |
|
|
|
26,072 |
|
|
|
1,521,108 |
|
|
|
2007 |
|
|
336,541 |
|
|
|
806,651 |
|
|
|
– |
|
|
|
28,091 |
|
|
|
31,585 |
|
|
|
1,202,868 |
|
|
|
Charles F. Cargile |
|
2009 |
|
|
302,077 |
|
|
|
174,306 |
|
|
|
68,388 |
|
|
|
214,459 |
|
|
|
32,768 |
|
|
|
791,998 |
|
Senior Vice President, |
|
2008 |
|
|
324,808 |
|
|
|
491,598 |
|
|
|
– |
|
|
|
62,350 |
|
|
|
25,279 |
|
|
|
904,035 |
|
Chief Financial Officer and Treasurer |
|
2007 |
|
|
312,000 |
|
|
|
455,621 |
|
|
|
– |
|
|
|
19,500 |
|
|
|
33,214 |
|
|
|
820,335 |
|
|
|
Jeffrey B. Coyne |
|
2009 |
|
|
256,308 |
|
|
|
139,696 |
|
|
|
54,809 |
|
|
|
121,310 |
|
|
|
28,493 |
|
|
|
600,616 |
|
Senior Vice President, |
|
2008 |
|
|
269,907 |
|
|
|
393,397 |
|
|
|
– |
|
|
|
34,541 |
|
|
|
23,987 |
|
|
|
721,832 |
|
General Counsel and Corporate Secretary |
|
2007 |
|
|
245,011 |
|
|
|
325,377 |
|
|
|
– |
|
|
|
24,050 |
|
|
|
31,402 |
|
|
|
625,840 |
|
|
|
Gary J. Spiegel |
|
2009 |
|
|
251,731 |
|
|
|
114,992 |
|
|
|
45,116 |
|
|
|
74,731 |
|
|
|
39,640 |
|
|
|
526,210 |
|
Vice President, Sales, Marketing |
|
2008 |
|
|
272,114 |
|
|
|
344,148 |
|
|
|
– |
|
|
|
36,395 |
|
|
|
27,124 |
|
|
|
679,781 |
|
and
Business Development |
|
2007 |
|
|
264,996 |
|
|
|
260,487 |
|
|
|
– |
|
|
|
24,063 |
|
|
|
54,848 |
|
|
|
604,394 |
|
|
|
David J. Allen(7) |
|
2009 |
|
|
252,431 |
|
|
|
114,992 |
|
|
|
45,116 |
|
|
|
67,795 |
|
|
|
6,748 |
|
|
|
487,082 |
|
Vice President and General Manager, |
|
2008 |
|
|
277,115 |
|
|
|
324,390 |
|
|
|
– |
|
|
|
43,703 |
|
|
|
1,393 |
|
|
|
646,601 |
|
Lasers Division |
|
2007 |
|
|
212,885 |
|
|
|
309,155 |
|
|
|
– |
|
|
|
54,555 |
|
|
|
1,095 |
|
|
|
577,690 |
|
____________________
(1) |
|
In February
2009, due to business conditions and our financial outlook for 2009, the
base salaries of all of the named executive officers were temporarily
reduced by 10%. Such base salaries have been reinstated effective at the
beginning of April 2010.
|
|
(2) |
|
Reflects the
grant date fair values of restricted stock units awarded to each named
executive officer in each year, which were computed based on the closing
market price of our common stock on the grant date. The vesting of all
restricted stock units awarded to the named executive officers in each
year is conditioned upon the achievement of certain financial performance
goals. The vesting of restricted stock units awarded in 2007 was
conditioned upon the achievement of performance goals for our fiscal years
2007, 2008 and 2009. The vesting of restricted stock units awarded in 2008
was and is conditioned upon the achievement of performance goals for our
fiscal years 2008, 2009 and 2010. The vesting of restricted stock units
awarded in 2009 is conditioned upon the achievement of a performance goal
for 2009, as well as a time-based vesting schedule. As of the grant date
of each award, the achievement of the applicable performance conditions
was considered probable and, therefore, the full grant date fair values of
the awards are shown in the table above. However, for the awards granted
in 2007 and 2008, we did not achieve the 2007, 2008 and/or 2009
performance goals applicable to such awards and, therefore, a substantial
portion of such awards has been forfeited, as follows: (i) all of the 2007
awards have been forfeited in full, (ii) the portion of the 2008 awards
originally tied to 2008 performance goals established under those awards
has been forfeited, and (iii) 50% of the portion of the 2008 awards tied
to 2009 performance goals established under those awards has been
forfeited. The remaining 50% of the portion of the 2008 awards tied to
2009 performance goals remains outstanding and eligible for vesting
conditioned on our achievement of the target performance goals established
for such awards for 2010. For the awards granted in 2009, we have achieved
the applicable performance goal, and such awards will continue to vest in
accordance with the applicable time-based vesting schedule. See additional
information regarding the 2009 awards under the heading “Compensation
Discussion and Analysis” above and in the table entitled “Grants of
Plan-Based Awards in Fiscal Year 2009” below.
|
23
(3) |
|
Reflects the
grant date fair values of stock-settled stock appreciation rights awarded
to each named executive officer in 2009. No stock options or stock
appreciation rights were awarded to the named executive officers in 2007
or 2008. The fair value of the stock-settled stock appreciation rights was
estimated on the grant date using the Black-Scholes-Merton option pricing
model. The assumptions used in the valuation of such stock appreciation
rights are discussed in Note 1, under the heading “Stock-Based
Compensation,” and in Note 5 to our consolidated financial statements
included in our Annual Report on Form 10-K for our fiscal year ended
January 2, 2010. The vesting of the stock appreciation rights awarded in
2009 is conditioned upon the achievement of a performance goal for 2009,
as well as a time-based vesting schedule. As of the grant date of each
award, the achievement of the applicable performance conditions was
considered probable and, therefore, the full grant date fair values of the
awards is shown in the table above. Such performance goal has been
achieved, and such awards will continue to vest in accordance with the
applicable time-based vesting schedule. See additional information
regarding these awards under the heading “Compensation Discussion and
Analysis” above and in the table entitled “Grants of Plan-Based Awards in
Fiscal Year 2009” below.
|
|
(4) |
|
Reflects the
amounts earned by each named executive officer under our cash incentive
plans based upon the achievement of financial and/or non-financial
performance goals for our 2009, 2008 and 2007 fiscal years, which amounts
were paid in March of 2010, 2009 and 2008, respectively, in accordance
with the terms of such plans.
|
|
(5) |
|
All other
compensation for 2009 consists of: (i) company contributions to our 401(k)
plan for each named executive officer (other than Mr. Allen), which
totaled $13,200 for Messrs. Phillippy, Cargile and Spiegel, and $10,180
for Mr. Coyne; (ii) company-paid premiums for term life insurance for the
benefit of each named executive officer; (iii) company-paid premiums for
supplemental long-term disability insurance for the benefit of each named
executive officer, which totaled $11,002 for Mr. Phillippy and $12,224 for
Mr. Spiegel; (iv) auto allowances paid to each named executive officer
(other than Mr. Allen); and (v) company-paid costs for an annual executive
physical for Mr. Spiegel.
|
|
(6) |
|
Mr. Phillippy
was promoted to President and Chief Executive Officer in September 2007.
Mr. Phillippy’s annual base salary was increased to $425,000 at that time,
was increased in $450,000 in 2008, and was temporarily reduced by 10% in
2009.
|
|
(7) |
|
Mr. Allen
joined us in March 2007. The amounts set forth for the year 2007 reflect
amounts earned by Mr. Allen from March through December of
2007.
|
|
24
GRANTS OF PLAN-BASED AWARDS
The following table
sets forth information regarding grants of awards to each named executive
officer during our fiscal year ended January 2, 2010 under our equity and
non-equity incentive plans.
Grants of Plan-Based Awards in Fiscal Year
2009
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
Future |
|
|
|
|
|
|
|
|
|
|
Payouts under |
|
Exercise |
|
Grant Date |
|
|
|
|
|
|
Equity |
|
or Base |
|
Fair Value |
|
|
|
|
Estimated Possible Payouts
under |
|
Incentive Plan |
|
Price
of |
|
of
Stock |
|
|
|
|
Non-Equity Incentive Plan Awards(1) |
|
Awards(2) |
|
Option |
|
and Option |
|
|
Grant |
|
Threshold |
|
Target |
|
Maximum |
|
Target |
|
Awards(3) |
|
Awards(4) |
Name |
|
Date |
|
($) |
|
($) |
|
($) |
|
(#) |
|
($) |
|
($) |
Robert J. Phillippy |
|
– |
|
|
$ |
– |
|
|
$ |
225,000 |
|
|
$ |
450,000 |
|
|
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
|
– |
|
|
|
– |
|
|
|
225,000 |
|
|
|
450,000 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
83,400 |
|
|
|
– |
|
|
|
348,612 |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
83,400 |
|
|
|
4.18 |
|
|
|
136,776 |
|
Charles F. Cargile |
|
– |
|
|
|
– |
|
|
|
123,750 |
|
|
|
247,500 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
123,750 |
|
|
|
247,500 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
41,700 |
|
|
|
– |
|
|
|
174,306 |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
41,700 |
|
|
|
4.18 |
|
|
|
68,388 |
|
Jeffrey B. Coyne |
|
– |
|
|
|
– |
|
|
|
70,000 |
|
|
|
140,000 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
70,000 |
|
|
|
140,000 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
33,420 |
|
|
|
– |
|
|
|
139,696 |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
33,420 |
|
|
|
4.18 |
|
|
|
54,809 |
|
Gary J. Spiegel |
|
– |
|
|
|
– |
|
|
|
68,750 |
|
|
|
137,500 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
68,750 |
|
|
|
137,500 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
27,510 |
|
|
|
– |
|
|
|
114,992 |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
27,510 |
|
|
|
4.18 |
|
|
|
45,116 |
|
David J. Allen |
|
– |
|
|
|
– |
|
|
|
70,000 |
|
|
|
140,000 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
70,000 |
|
|
|
140,000 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
27,510 |
|
|
|
– |
|
|
|
114,992 |
|
|
|
03/20/09 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
27,510 |
|
|
|
4.18 |
|
|
|
45,116 |
|
____________________
(1) |
|
Reflects the
potential payouts to the named executive officers under two equal
half-year awards granted to each named executive officer under our
half-year cash incentive plans established for 2009, which are described
in more detail under the heading “Compensation Discussion and Analysis”
above. The amounts shown as threshold, target and maximum payouts
represent 0%, 100% and 200% payouts, respectively, based on minimum,
target and maximum performance levels for certain financial performance
measures established under such plan for each half-year period. Payouts
would be made for a particular financial measure only if we exceeded the
minimum performance level for that measure, subject to additional
conditions described in more detail under the heading “Compensation
Discussion and Analysis” above. No amounts were earned under the awards
relating to the first half of 2009. The actual amounts earned by the named
executive officers under the awards relating to the second half of 2009
are included in the Summary Compensation Table above under the column
heading “Non-Equity Incentive Plan Compensation” for the year
2009.
|
|
(2) |
|
The equity
incentive plan awards set forth in the table above consist of an equal
number of restricted stock units and stock-settled stock appreciation
rights awarded to each named executive officer under our 2006
Performance-Based Stock Incentive Plan, which awards and plan are
described in more detail under the heading “Compensation Discussion and
Analysis” above. No consideration was paid by any named executive officer
for any equity incentive plan award. The vesting of such awards is
conditioned upon achievement of a single target performance level for a
single financial measure established under the plan, as well as a
time-based vesting schedule, as described in more detail under the heading
“Compensation Discussion and Analysis” above. We have achieved the target
performance level for such awards and, therefore, such awards will
continue to vest in accordance with the applicable time-based vesting
schedule.
|
|
25
(3) |
|
Reflects the
base value of the stock-settled stock appreciation rights awarded to each
named executive officer, which is equal to the closing price of our common
stock on the grant date.
|
|
(4) |
|
Reflects the
grant date fair values of the restricted stock units and stock-settled
stock appreciation rights awarded to each named executive officer. The
fair values of the restricted stock units were determined based on the
closing price of our common stock on the grant date, which was $4.18 per
share. The fair values of stock appreciation rights were estimated on the
grant date using the Black-Scholes-Merton option pricing model. The
assumptions used in the valuation of such stock appreciation rights are
discussed in Note 1, under the heading “Stock-Based Compensation,” and in
Note 5 to our consolidated financial statements included in our Annual
Report on Form 10-K for our fiscal year ended January 2, 2010. As of the
grant date of each award, the achievement of the applicable performance
conditions was considered probable and, therefore, the full grant date
fair values of the awards are shown in the table above.
|
|
26
OUTSTANDING EQUITY AWARDS
The table below sets
forth information regarding outstanding equity awards held by each named
executive officer as of January 2, 2010 including: (i) the number of shares of
our common stock underlying both exercisable and unexercisable stock options and
stock-settled stock appreciation rights held by each named executive officer and
the exercise prices (or base values) and expiration dates thereof, (ii) the
number of restricted stock units held by each named executive officer and the
market value thereof that were earned but had not yet vested as of January 2,
2010; and (iii) the number of restricted stock units held by each named
executive officer and the market value thereof that were unearned and unvested
as of January 2, 2010.
Outstanding Equity
Awards at 2009 Fiscal Year End |
|
|
|
Option
Awards |
|
Stock
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Market or |
|
|
|
|
|
|
|
|
Number of |
|
Market or |
|
Number of |
|
Payout Value |
|
|
Number of Securities |
|
|
|
|
|
Shares, |
|
Payout Value |
|
Unearned |
|
of Unearned |
|
|
Underlying |
|
|
|
|
|
Units or |
|
of Shares, |
|
Shares, Units |
|
Shares, Units |
|
|
Unexercised Options |
|
|
|
|
|
Other |
|
Units or Other |
|
or Other |
|
or Other |
|
|
(#) |
|
Option |
|
|
|
Rights That |
|
Rights That |
|
Rights That |
|
Rights That |
|
|
|
|
|
|
Exercise |
|
Option |
|
Have Not |
|
Have Not |
|
Have Not |
|
Have Not |
|
|
|
|
|
|
Price |
|
Expiration |
|
Vested(1) |
|
Vested(2) |
|
Vested(3) |
|
Vested(2) |
Name |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date |
|
(#) |
|
($) |
|
(#) |
|
($) |
Robert J. Phillippy |
|
20,000 |
|
|
– |
|
|
$ |
68.25 |
|
|
01/01/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
13.16 |
|
|
09/17/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
70,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
– |
|
|
|
16.91 |
|
|
01/01/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
100,000 |
|
|
– |
|
|
|
13.03 |
|
|
08/03/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
83,400 |
(4) |
|
|
4.18 |
|
|
03/20/16 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
– |
|
|
83,400 |
|
|
$
|
766,446 |
|
|
87,502 |
|
|
$
|
804,143 |
|
Charles F. Cargile |
|
60,000 |
|
|
– |
|
|
$ |
75.75 |
|
|
11/15/10 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
|
– |
|
|
|
68.25 |
|
|
01/01/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
13.16 |
|
|
09/17/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
95,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
31,250 |
|
|
– |
|
|
|
16.91 |
|
|
01/01/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
– |
|
|
|
13.03 |
|
|
08/03/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
41,700 |
(4) |
|
|
4.18 |
|
|
03/20/16 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
– |
|
|
41,700 |
|
|
$ |
383,223 |
|
|
43,469 |
|
|
$ |
399,480 |
|
Jeffrey B. Coyne |
|
50,000 |
|
|
– |
|
|
$ |
30.80 |
|
|
05/29/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
13.16 |
|
|
09/17/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
55,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
|
– |
|
|
|
16.91 |
|
|
01/01/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
– |
|
|
|
13.03 |
|
|
08/03/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
33,420 |
(4) |
|
|
4.18 |
|
|
03/20/16 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
– |
|
|
33,420 |
|
|
$ |
307,130 |
|
|
33,770 |
|
|
$ |
310,346 |
|
(table continued on next page)
27
|
|
Option
Awards |
|
Stock
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Market or |
|
|
|
|
|
|
|
|
Number of |
|
Market or |
|
Number of |
|
Payout Value |
|
|
Number of Securities |
|
|
|
|
|
Shares, |
|
Payout Value |
|
Unearned |
|
of Unearned |
|
|
Underlying |
|
|
|
|
|
Units or |
|
of Shares, |
|
Shares, Units |
|
Shares, Units |
|
|
Unexercised Options |
|
|
|
|
|
Other |
|
Units or Other |
|
or Other |
|
or Other |
|
|
(#) |
|
Option |
|
|
|
Rights That |
|
Rights That |
|
Rights That |
|
Rights That |
|
|
|
|
|
|
Exercise |
|
Option |
|
Have Not |
|
Have Not |
|
Have Not |
|
Have Not |
|
|
|
|
|
|
Price |
|
Expiration |
|
Vested(1) |
|
Vested(2) |
|
Vested(3) |
|
Vested(2) |
Name |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date |
|
(#) |
|
($) |
|
(#) |
|
($) |
Gary J. Spiegel |
|
20,000 |
|
|
– |
|
|
$ |
68.25 |
|
|
01/01/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
30,000 |
|
|
– |
|
|
|
13.16 |
|
|
09/17/11 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
55,000 |
|
|
– |
|
|
|
11.27 |
|
|
02/23/13 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
20,000 |
|
|
– |
|
|
|
16.91 |
|
|
01/01/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
– |
|
|
|
13.03 |
|
|
08/03/14 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
27,510 |
(4) |
|
|
4.18 |
|
|
03/20/16 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
– |
|
|
27,510 |
|
|
$ |
252,817 |
|
|
28,917 |
|
|
$ |
265,747 |
|
David. J. Allen |
|
– |
|
|
27,510 |
(4) |
|
|
4.18 |
|
|
03/20/16 |
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
|
– |
|
|
27,510 |
|
|
$ |
252,817 |
|
|
28,904 |
|
|
$ |
265,628 |
|
____________________
(1) |
|
Consists of
restricted stock units awarded to each named executive officer on March
20, 2009, which had not vested, but for which the relevant financial
performance conditions had been satisfied, as of January 2, 2010.
One-third (1/3rd) of such restricted stock units have subsequently vested
on March 20, 2010 and have been settled by the delivery of shares of our
common stock to the named executive officers, net of a portion of such
vested shares which were withheld at the election of each named executive
officer in satisfaction of tax withholding obligations. The remaining
two-thirds (2/3rds) of such awards will vest in two equal annual
installments on second and third anniversaries of the grant
date.
|
|
(2) |
|
The market
values of all restricted stock units reflected in the table above have
been calculated based on the closing price of our common stock on December
31, 2009 (the last trading day of our fiscal year) as reported on the
Nasdaq Global Select Market, which was $9.19 per share.
|
|
(3) |
|
Consists of
outstanding restricted stock units awarded to each named executive officer
in 2007 and 2008, all of which were unearned and unvested as of January 2,
2010. The restricted stock units awarded in 2007, which were outstanding
as of January 2, 2010, have vesting conditioned upon the achievement of
certain performance goals for our fiscal year 2009. The restricted stock
units awarded in 2008, which were outstanding as of January 2, 2010, have
vesting conditioned upon the achievement of certain performance goals for
our fiscal years 2009 and 2010. The numbers of shares and market values
reflected in the table assume the achievement of the minimum performance
goals for the 2009 and 2010 performance periods (or, in the case of the
portion of such awards carried over from the 2008 performance period,
which were eligible for vesting only if the target performance goals for
2009 were achieved, such numbers of shares and market values assume the
achievement of such target performance goals). In February 2010, we
determined that we did not achieve the performance goals for the 2009
performance period applicable to the 2007 and 2008 awards. Accordingly, a
substantial portion of the restricted stock units that were held by the
named executive officers as of January 2, 2010 and were conditioned upon
the achievement of our 2009 performance goals were forfeited in February
2010. In accordance with the terms of the 2008 award agreements, 50% of
the restricted stock units awarded in 2008 that were first conditioned
upon the achievement of our 2009 performance goals will remain outstanding
and will be eligible for vesting if we achieve the target performance
goals established for such awards for 2010. If and to the extent that we
determine that the 2010 performance goals established under the 2008
awards have been achieved, the remaining outstanding restricted stock
units tied to such 2010 performance goals will vest upon such
determination, which is expected to occur in approximately March
2011.
|
|
(4) |
|
Consists of stock-settled stock
appreciation rights that were awarded to each named executive officer on
March 20, 2009, which had not vested, but for which the relevant financial
performance conditions had been satisfied, as of January 2, 2010.
One-third (1/3rd) of such stock appreciation rights have subsequently
vested on March 20, 2010 and are currently exercisable. The remaining
two-thirds (2/3rds) of such awards will vest in two equal annual
installments on second and third anniversaries of the grant
date.
|
|
28
OPTION EXERCISES AND STOCK VESTED
During the year ended
January 2, 2010, no stock options, stock appreciation rights or similar
instruments were exercised by, and no restricted stock, restricted stock units
or similar instruments vested for, any named executive officer.
NON-QUALIFIED DEFERRED COMPENSATION
The table below sets
forth certain information relating to each named executive officer’s
participation in our Deferred Compensation Plan during our fiscal year ended
January 2, 2010, including (a) the aggregate dollar amounts of: (i)
contributions made by the executive to the plan, (ii) interest and other
earnings accrued on the executive’s account, and (iii) withdrawals by and
distributions to the executive from the plan; and (b) the total balance of the
executive’s account as of January 2, 2010. We did not make any contributions to
the plan on behalf of any named executive officer in 2009. Our Deferred
Compensation Plan is described in more detail under the heading “Compensation
Discussion and Analysis” above.
Nonqualified Deferred Compensation in
Fiscal Year 2009 |
|
|
|
Executive |
|
Aggregate |
|
Aggregate |
|
Aggregate |
|
|
Contributions in |
|
Earnings in Last |
|
Withdrawals/ |
|
Balance at Last |
|
|
Last Fiscal Year |
|
Fiscal Year(1) |
|
Distributions |
|
Fiscal Year End(2) |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
Robert J. Phillippy |
|
$ |
– |
|
|
$ |
114,975 |
|
|
$ |
(206,468 |
) |
|
$ |
475,626 |
|
Charles F. Cargile |
|
|
– |
|
|
|
21,621 |
|
|
|
– |
|
|
|
74,119 |
|
Jeffrey B. Coyne |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Gary J. Spiegel(3) |
|
|
38,851 |
|
|
|
52,239 |
|
|
|
(21,738 |
) |
|
|
250,915 |
|
David J. Allen |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
____________________
(1) |
|
The aggregate
earnings in 2009 consisted of market-based earnings on all compensation
deferred under the plan based on the performance of the measurement funds
selected by the named executive officer. No named executive officer has
received any above-market or preferential earnings on amounts deferred
under our Deferred Compensation Plan and, accordingly, no such amounts
have been reported in the Summary Compensation Table included in this
proxy statement.
|
|
(2) |
|
The aggregate
balance of each named executive officer’s account as of January 2, 2010
consists of amounts contributed to the plan in 2009 and/or in prior years
in the form of deferrals of salary and/or bonus, all of which compensation
has been reported in the Summary Compensation Table included in this proxy
statement or in our proxy statements filed in prior years to the extent
such executive’s compensation was required to be reported in each
applicable year (less any amounts which have been previously distributed
from the plan), together with earnings and losses
thereon.
|
|
(3) |
|
All of the
contributions made by Mr. Spiegel in 2009 are reported as salary in the
Summary Compensation Table included in this proxy statement for the year
2009.
|
|
29
PAYMENTS UPON CERTAIN TERMINATION EVENTS
We have entered into
a severance compensation agreement with each of our named executive officers
which provides for certain payments and benefits if the named executive
officer’s employment is terminated under certain circumstances. The key terms of
such agreements, including the events triggering payments thereunder, are
discussed in more detail under the heading “Compensation Discussion and
Analysis” above.
Termination Following Change in Control
The table below sets
forth information regarding the estimated payments and benefits that each named
executive officer would have received in the event that his employment had been
terminated by us without cause, or he had resigned for “good reason,” as of
January 2, 2010, following a change in control of Newport.
Estimated Payments in the Event of
Termination
at 2009 Fiscal Year End Following Change in Control
|
|
|
|
Incentive- |
|
|
|
|
|
|
|
|
|
|
Salary-Based |
|
Based |
|
|
|
|
|
|
|
Total |
|
|
Severance |
|
Severance |
|
Option |
|
Stock |
|
Continuation |
|
Estimated |
Name |
|
Payments(1) |
|
Payments(2) |
|
Awards(3) |
|
Awards(4) |
|
of Benefits(5) |
|
Payments(6) |
Robert J. Phillippy |
|
$ |
900,000 |
|
|
$ |
900,000 |
|
|
$ |
417,834 |
|
|
$ |
1,809,925 |
|
|
$ |
53,078 |
|
|
$ |
4,080,837 |
|
Charles F. Cargile |
|
|
330,000 |
|
|
|
247,500 |
|
|
|
208,917 |
|
|
|
901,723 |
|
|
|
41,408 |
|
|
|
1,729,548 |
|
Jeffrey B. Coyne |
|
|
280,000 |
|
|
|
140,000 |
|
|
|
167,434 |
|
|
|
710,387 |
|
|
|
33,748 |
|
|
|
1,331,569 |
|
Gary J. Spiegel |
|
|
275,000 |
|
|
|
137,500 |
|
|
|
137,825 |
|
|
|
598,407 |
|
|
|
46,625 |
|
|
|
1,195,357 |
|
David J. Allen |
|
|
280,000 |
|
|
|
140,000 |
|
|
|
137,825 |
|
|
|
597,488 |
|
|
|
42,010 |
|
|
|
1,197,323 |
|
____________________
(1) |
|
Represents payment of twenty-four months of the approved base
salary for Mr. Phillippy, and twelve months of the approved base salary
for all other named executive officers, which would have been payable in a
lump sum on the date of termination. |
|
(2) |
|
Represents payment of the target incentive that each named
executive officer would have been entitled to receive for the full year of
2009 (two times such target incentive amount in the case of Mr. Phillippy)
based on achievement of 100% of the relevant performance goals, which
would have been payable in a lump sum on the date of
termination. |
|
(3) |
|
Represents the aggregate market value of the net number of shares
underlying stock-settled stock appreciation rights held by each named
executive officer as of January 2, 2010. Such stock-settled stock
appreciation rights would have become immediately vested assuming
achievement of 100% of any relevant performance goals and would have been
automatically settled by delivery of shares of our common stock having a
value equal to the difference between the base value of each such stock
appreciation right and the closing price of our common stock on December
31, 2009 (the last trading day of our fiscal year), which was $9.19 per
share, subject to payment by the executive officer of applicable
withholding taxes. Pursuant to the terms of the severance compensation
agreements with our named executive officers, in the event of termination
following a change in control, each named executive officer would also be
entitled to receive an amount equal to the aggregate gain on all vested
and unvested stock options held by each named executive officer as of
January 2, 2010, calculated based on the difference between the exercise
price of each such option and the closing price of our common stock on
such date, and payable in a lump sum, subject to payment by the executive
officer of applicable withholding taxes, unless otherwise specified by the
executive officer. However, as of January 2, 2010, the exercise prices of
all stock options held by our named executive officers exceeded the price
of our common stock and, accordingly, no such amounts would have been
payable. Outstanding out-of-the-money options to purchase an aggregate of
936,250 shares of our common stock would have expired 90 days following
termination if not exercised by the named executive officers during such
period. |
|
(4) |
|
Represents the aggregate market value of unvested restricted stock
units held by each named executive officer as of January 2, 2010 based on
the closing price of our common stock on December 31, 2009 (the last
trading day of our fiscal year), which was $9.19 per share. Such
restricted stock units would have become immediately vested assuming
achievement of 100% of any relevant performance goals and would have been
settled by delivery of shares of our common stock, subject to payment by
the executive officer of applicable withholding taxes. |
|
|
|
(5) |
|
Represents an estimate of the total cost
of company-paid premiums for continuation of medical, dental, vision and
long-term disability benefits for a period of 24 months following the date
of termination, calculated based upon the premiums for such benefits in
effect as of January 2, 2010. The actual cost of health benefits may vary
during the benefits continuation period depending upon the overall premium
rates that we would be required to pay under our health benefit
programs.
|
|
|
|
(6) |
|
The total estimated payments would be
increased in an amount sufficient to offset any excess “parachute payment”
excise tax payable by the named executive officer pursuant to the
provisions of the Internal Revenue Code, and/or any comparable provision
of state or foreign law.
|
|
30
Other Termination
As discussed under
“Compensation Discussion and Analysis” above, our agreements with each of Mr.
Phillippy and Mr. Cargile also provide for certain payments in the event we
terminate his employment other than for cause in absence of a change in control
of Newport. If we had terminated Mr. Phillippy’s employment other than for cause
and in absence of a change in control as of January 2, 2010, Mr. Phillippy would
have received estimated severance payments totaling $926,539. If we had
terminated Mr. Cargile’s employment other than for cause and in absence of a
change in control as of January 2, 2010, Mr. Cargile would have received
estimated severance payments totaling $598,204. Such payments would be increased
in an amount sufficient to offset any excess “parachute payment” excise tax
payable by the executive pursuant to the provisions of the Internal Revenue
Code, and/or any comparable provision of state or foreign law.
DIRECTOR COMPENSATION
Each of our
non-employee directors receives cash compensation, consisting of annual retainer
fees, chairman or lead independent director fees (if applicable) and meeting
participation fees, and equity-based awards. Such cash and equity compensation
is discussed in more detail under the heading “Compensation Discussion and
Analysis” above. The table below sets forth cash compensation earned by each
non-employee director, and the grant date fair values of equity awards granted
to each non-employee director, during the fiscal year ended January 2, 2010. All
compensation of Mr. Phillippy is reported in the Summary Compensation Table
above and has been excluded from the table below.
Director Compensation in Fiscal Year
2009 |
|
|
|
Fees Earned or |
|
Stock |
|
Option |
|
All Other |
|
|
|
|
Paid in Cash(1) |
|
Awards(2)(4) |
|
Awards(3)(4) |
|
Compensation |
|
Total |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Robert L. Guyett |
|
$ |
66,281 |
|
|
$ |
119,966 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
186,247 |
|
Michael T. O’Neill |
|
|
58,281 |
|
|
|
119,966 |
|
|
|
– |
|
|
|
– |
|
|
|
178,247 |
|
C. Kumar N. Patel |
|
|
49,281 |
|
|
|
119,966 |
|
|
|
– |
|
|
|
– |
|
|
|
169,247 |
|
Kenneth F. Potashner |
|
|
69,281 |
|
|
|
119,966 |
|
|
|
– |
|
|
|
– |
|
|
|
189,247 |
|
Peter J. Simone |
|
|
56,281 |
|
|
|
119,966 |
|
|
|
– |
|
|
|
– |
|
|
|
176,247 |
|
Markos I. Tambakeras(5) |
|
|
59,281 |
|
|
|
119,966 |
|
|
|
– |
|
|
|
22,313 |
|
|
|
201,560 |
|
____________________
(1) |
|
Reflects fees earned in 2009 by each non-employee director who
served on our Board during 2009, including annual retainer fees and
meeting fees for meetings which occurred during 2009. The fees for Mr.
Potashner include additional fees for services in his role of Chairman of
the Board. |
|
(2) |
|
Reflects the grant date fair values of restricted stock unit awards
granted to each non-employee director on March 20, 2009. The grant date
fair value of each award was determined based on the closing price of our
common stock on the grant date, which was $4.18 per share. One-half of Mr.
Tambakeras’ award
vested on December 31, 2009 and one-half was forfeited on such date, as
discussed in more detail in footnote (5) below. All other awards vested in
full on the first anniversary of the grant date. |
|
(3) |
|
No stock options or stock appreciation rights were granted to any
non-employee director during 2009. |
|
31
(4) |
|
The aggregate number of stock awards,
consisting entirely of restricted stock units, and the aggregate number of
stock options held by each non-employee director who served on our Board
during 2009 as of January 2, 2010 were as
follows: |
|
|
Aggregate Number of |
|
Aggregate Number of |
|
|
Shares Underlying |
|
Shares Underlying |
|
|
Unvested Restricted |
|
Outstanding Stock |
Name |
|
Stock Units |
|
Options |
Robert L. Guyett |
|
|
28,700 |
|
|
|
50,000 |
|
Michael T. O’Neill |
|
|
28,700 |
|
|
|
34,500 |
|
C. Kumar N. Patel |
|
|
28,700 |
|
|
|
50,000 |
|
Kenneth F. Potashner |
|
|
28,700 |
|
|
|
40,000 |
|
Peter J. Simone |
|
|
28,700 |
|
|
|
23,500 |
|
Markos I. Tambakeras |
|
|
– |
|
|
|
– |
|
(5) |
|
Mr. Tambakeras resigned from the Board
effective December 31, 2009. Pursuant to our agreement with Mr. Tambakeras
relating to his resignation, a total of 16,778 outstanding restricted
stock units, consisting of one-half of the restricted stock units awarded
to him in 2009 (14,350 shares) and a portion of the restricted stock units
awarded to him in 2008 (2,428 shares), which represented slightly less
than a prorated portion of his outstanding awards based on his term of
service, became fully vested and were settled on the effective date of his
resignation. All other restricted stock units held by him were forfeited.
The grant date value of the restricted stock units awarded to Mr.
Tambakeras in 2009 is already included in the amount shown under the
heading “Stock
Awards”
in the table above. The amount shown under the heading “All Other
Compensation” for Mr.
Tambakeras in the table above represents the market value on December 31,
2009 of the other 2,428 shares that vested and were issued to him upon his
resignation, calculated based on the closing price of our stock on that
date, which was $9.19 per share. |
OTHER AGREEMENTS
Indemnification of Officers and Directors
We have entered into
indemnification agreements with each of our executive officers and directors,
and certain other officers, which provide contractual protection of certain
rights of indemnification by us. The indemnification agreements provide for
indemnification of our officers and directors to the fullest extent permitted by
our articles of incorporation, bylaws and applicable law. Under the agreements,
we indemnify our officers and directors against all fees, expenses, liabilities
and losses (including attorneys’ fees, judgments, fines, and amounts paid in any
settlement we approve) actually and reasonably incurred in connection with any
investigation, claim, action, suit or proceeding to which any such officer or
director is a party by reason of any action or inaction in his capacity as our
officer or director or by reason of the fact that the officer or director is or
was serving as our director, officer, employee, agent or fiduciary, or of any of
our subsidiaries or divisions, or is or was serving at our request as our
representative with respect to another entity, subject to limitations imposed by
applicable law. We will not indemnify such officer or director, however, for
expenses and the payment of profits arising from the purchase and sale by the
officer or director of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation
Committee is currently comprised of four non-employee directors: Messrs. Guyett,
O’Neill and Potashner and Dr. Patel, all of whom served on the Compensation
Committee during 2009. In addition, Mr. Tambakeras served as a member of the
Compensation Committee during 2009. None of the members serving on the
Compensation Committee currently or during 2009 are or have been our officers or
employees, and each member qualifies as an independent director as defined by
Rule 5605(a)(2) of the Nasdaq Listing Rules. No executive officer serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving on our Board or our Compensation
Committee.
32
REPORT OF THE COMPENSATION COMMITTEE
The Compensation
Committee is responsible for, among other things, establishing, developing
guidelines for, evaluating and approving all base salaries and annual and
long-term cash and equity incentive compensation of Newport’s executive
officers, and all other executive benefit plans, programs and agreements. In
fulfilling its responsibilities, the Compensation Committee has reviewed and
discussed with management the information provided under the heading
“Compensation Discussion and Analysis” in Newport’s proxy statement for its 2010
annual meeting of stockholders. Based on such review and discussion, the
Compensation Committee recommended to the Board of Directors that such
information be included in such proxy statement.
Respectfully
submitted,
Michael T. O’Neill,
Chairman
Robert L. Guyett
C. Kumar N. Patel
Kenneth F. Potashner
The material in this report is not “soliciting
material” and is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference in any filing of Newport under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires our directors and
executive officers and persons who own more than ten percent of a registered
class of our equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
our common stock and other equity securities. Officers, directors and greater
than ten percent stockholders are required by Securities and Exchange Commission
regulations to furnish us with copies of all Section 16(a) reports they file. To
our knowledge, based solely upon the review of copies of such reports furnished
to us and written representations that no other reports were required during
fiscal year 2009 or prior fiscal years, all of our officers, directors and
greater than ten percent stockholders have complied with all applicable Section
16(a) filing requirements.
TRANSACTIONS WITH RELATED PERSONS
We have not entered
into a transaction with any related person since the beginning of our 2009
fiscal year.
In accordance with
our Corporate Governance Guidelines and the charter of the Audit Committee of
our Board of Directors, the Audit Committee is responsible for reviewing and
approving any proposed transaction with any related person for which such
approval is required under applicable law, including Securities and Exchange
Commission and Nasdaq rules. Currently, this review and approval requirement
applies to any transaction to which Newport or any of our subsidiaries will be a
party, in which the amount involved exceeds $120,000, and in which any of the
following persons will have a direct or indirect material interest: (a) any of
our directors or executive officers; (b) any nominee for election as a director;
(c) any security holder who is known to us to own of record or beneficially more
than five percent of any class of our voting securities; or (d) any member of
the immediate family (as defined in Regulation S-K, Item 404) of any of the
persons described in the foregoing clauses (a)-(c).
In the event that
management becomes aware of any related person transaction, management will
present information regarding such transaction to the Audit Committee for review
and approval. In addition, on at least an annual basis, the Audit Committee
reviews and considers with management the disclosure requirements relating to
transactions with related persons and the potential existence of any such
transaction.
33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
sets forth specified information with respect to the beneficial ownership of our
common stock as of March 15, 2010 by: (1) each person (or group of affiliated
persons) who is known by us to beneficially own more than 5% of the outstanding
shares of our common stock; (2) each of our named executive officers; (3) each
of our directors; and (4) all of our directors and executive officers as a
group.
|
|
Number of Shares |
|
|
Beneficially Owned(2) |
Name and Address of Beneficial
Owners(1) |
|
Number |
|
Percentage |
T. Rowe Price Associates, Inc. |
|
|
3,911,761 |
|
|
|
10.3 |
% |
|
100 E. Pratt
Street |
|
|
|
|
|
|
|
|
|
Baltimore, MD 21202(3) |
|
|
|
|
|
|
|
|
|
Michael W. Cook Asset Management, Inc. |
|
|
3,594,029 |
|
|
|
9.9 |
% |
|
(d/b/a SouthernSun Asset Management) |
|
|
|
|
|
|
|
|
|
6000 Poplar Avenue, Suite
220 |
|
|
|
|
|
|
|
|
|
Memphis, TN 38119(4) |
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP |
|
|
3,290,011 |
|
|
|
9.1 |
% |
|
Palisades West, Building
One |
|
|
|
|
|
|
|
|
|
6300 Bee Cave
Road |
|
|
|
|
|
|
|
|
|
Austin, TX 78746(5) |
|
|
|
|
|
|
|
|
|
BlackRock, Inc. |
|
|
3,098,319 |
|
|
|
8.5 |
% |
|
(and certain of its subsidiaries) |
|
|
|
|
|
|
|
|
|
40 East 52nd
Street |
|
|
|
|
|
|
|
|
|
New York, NY 10022(6) |
|
|
|
|
|
|
|
|
|
Van Den Berg Management |
|
|
2,806,375 |
|
|
|
7.7 |
% |
|
805 Las Cimas Parkway,
Suite 430 |
|
|
|
|
|
|
|
|
|
Austin, TX 78746(7) |
|
|
|
|
|
|
|
|
|
Royce & Associates, LLC |
|
|
2,122,187 |
|
|
|
5.8 |
% |
|
745 Fifth
Avenue |
|
|
|
|
|
|
|
|
|
New York, NY 10151(8) |
|
|
|
|
|
|
|
|
|
Robert J. Phillippy(9) |
|
|
386,758 |
|
|
|
1.1 |
% |
|
Charles F. Cargile(10) |
|
|
347,058 |
|
|
|
* |
|
|
Jeffrey B. Coyne(11) |
|
|
235,028 |
|
|
|
* |
|
|
C. Kumar N. Patel(12) |
|
|
212,519 |
|
|
|
* |
|
|
Gary J. Spiegel(13) |
|
|
206,127 |
|
|
|
* |
|
|
Robert L. Guyett(14) |
|
|
192,470 |
|
|
|
* |
|
|
Kenneth F. Potashner(15) |
|
|
104,596 |
|
|
|
* |
|
|
Michael T. O’Neill(16) |
|
|
104,170 |
|
|
|
* |
|
|
Peter J. Simone(17) |
|
|
77,350 |
|
|
|
* |
|
|
David J. Allen(18) |
|
|
18,340 |
|
|
|
* |
|
|
All executive officers and directors as
a group (10 persons)(19) |
|
|
1,884,416 |
|
|
|
5.0 |
% |
|
____________________
*
|
Less than
1%
|
|
|
(1) |
Unless otherwise indicated, the business
address of each holder is c/o Newport Corporation, 1791 Deere Avenue,
Irvine, California 92606. |
|
(2) |
The beneficial ownership is calculated
based on 36,315,834 shares of our common stock outstanding as of March 15,
2010. Beneficial ownership is determined in accordance with Securities and
Exchange Commission rules. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
common stock subject to options, restricted stock units and/or other
rights held by that person that are exercisable and/or will be settled
upon vesting within 60 days of March 15, 2010 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage of each other person. To our knowledge, except pursuant to
applicable community property laws or as otherwise indicated, each person
named in the table has sole voting and investment power with respect to
the shares set forth opposite such person’s
name. |
34
(3) |
Includes 1,731,811 shares of common
stock that are deemed outstanding and beneficially owned directly by the
holder subject to conversion of 2.5% convertible subordinated notes due
2012 issued by us in February 2007, which are held by the holder. The
holder has sole voting power with respect to 740,027 shares of common
stock and has sole dispositive power with respect to 3,911,761 shares of
common stock. These securities are owned by various individual and
institutional investors for which the holder serves as investment advisor
with power to direct investments and/or sole power to vote securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, the holder is deemed to be a beneficial owner of such securities;
however, the holder expressly disclaims that it is, in fact, the
beneficial owner of such securities. The beneficial ownership information
reflected in the table is included in the Schedule 13G, Amendment No. 3
filed by the holder with the Securities and Exchange Commission on
February 11, 2010. |
|
|
(4) |
The holder has sole voting power with
respect to 3,296,379 shares of common stock and has sole dispositive power
with respect to 3,594,029 shares of common stock. The beneficial ownership
information reflected in the table is included in the Schedule 13G filed
by the holder with the Securities and Exchange Commission on February 16,
2010. |
|
(5) |
The holder has sole voting power with
respect to 3,273,224 shares of common stock and has sole dispositive power
with respect to 3,290,011 shares of common stock. The holder furnishes
investment advice to four investment companies and serves as investment
manager to certain commingled group trusts and separate accounts. In
certain cases, subsidiaries of the holder may act as advisor or
sub-advisor to certain investment companies, trusts and accounts. In its
role as investment advisor, sub-advisor and/or manager, the holder
possesses investment and/or voting power over shares owned by such
investment companies, trusts and accounts and may be deemed to be the
beneficial owner of such shares; however, all such securities are owned by
such investment companies, trusts and accounts, and the holder disclaims
beneficial ownership of such securities. The beneficial ownership
information reflected in the table is included in the Schedule 13G,
Amendment No. 5 filed by the holder with the Securities and Exchange
Commission on February 8, 2010. |
|
(6) |
The beneficial ownership information
reflected in the table is included in the Schedule 13G filed by the holder
with the Securities and Exchange Commission on January 29, 2010, which
amends the most recent Schedule 13G previously filed by Barclays Global
Investors, NA and certain of its affiliates (which were acquired by the
holder on December 1, 2009) with respect to our common stock. |
|
(7) |
Consists of 2,781,915 shares of common
stock with respect to which the holder has shared voting and shared
dispositive power, and 24,460 shares of common stock with respect to which
the holder has sole voting and sole dispositive power. The beneficial
ownership information reflected in the table is included in the Schedule
13G, Amendment No. 2 filed by the holder with the Securities and Exchange
Commission on January 15, 2009. |
|
(8) |
The beneficial ownership information
reflected in the table is included in the Schedule 13G, Amendment No. 8
filed by the holder with the Securities and Exchange Commission on January
26, 2010. |
|
(9) |
Includes options to purchase 275,000
shares of common stock and stock-settled stock appreciation rights with
respect to 27,800 shares of common stock that are exercisable within 60
days of March 15, 2010; 27,800 shares of common stock that are issuable
within 60 days of March 15, 2010 upon the vesting of restricted stock
units; and 31,714 shares of common stock held by Mr. Phillippy and his
spouse as trustees of a family trust. |
|
(10) |
Includes options to purchase 291,250
shares of common stock and stock-settled stock appreciation rights with
respect to 13,900 shares of common stock that are exercisable within 60
days of March 15, 2010, and 13,900 shares of common stock that are
issuable within 60 days of March 15, 2010 upon the vesting of restricted
stock units. |
|
(11) |
Includes options to purchase 200,000
shares of common stock and stock-settled stock appreciation rights with
respect to 11,140 shares of common stock that are exercisable within 60
days of March 15, 2010, and 11,140 shares of common stock that are
issuable within 60 days of March 15, 2010 upon the vesting of restricted
stock units. |
|
(12) |
Includes options to purchase 50,000
shares of common stock that are exercisable within 60 days of March 15,
2010; 28,700 shares of common stock that are issuable within 60 days of
March 15, 2010 upon the vesting of restricted stock units; and 113,849
shares of common stock held by Dr. Patel and his spouse as trustees of a
family trust. |
35
(13) |
Includes options to purchase 170,000
shares of common stock and stock-settled stock appreciation rights with
respect to 9,170 shares of common stock that are exercisable within 60
days of March 15, 2010; 9,170 shares of common stock that are issuable
within 60 days of March 15, 2010 upon the vesting of restricted stock
units; and 5,028 shares held by Mr. Spiegel and his spouse as trustees of
a family trust. |
|
|
(14) |
Consists of options to purchase 50,000
shares of common stock that are exercisable within 60 days of March 15,
2010; 28,700 shares of common stock that are issuable within 60 days of
March 15, 2010 upon the vesting of restricted stock units; and 113,770
shares of common stock held by Mr. Guyett as trustee of a family
trust. |
|
(15) |
Includes options to purchase 40,000
shares of common stock that are exercisable within 60 days of March 15,
2010, and 28,700 shares of common stock that are issuable within 60 days
of March 15, 2010 upon the vesting of restricted stock units. |
|
(16) |
Consists of options to purchase 34,500
shares of common stock that are exercisable within 60 days of March 15,
2010; 28,700 shares of common stock that are issuable within 60 days of
March 15, 2010 upon the vesting of restricted stock units; and 40,970
shares of common stock held by Mr. O’Neill as trustee of a family
trust. |
|
(17) |
Includes options to purchase 23,500
shares of common stock that are exercisable within 60 days of March 15,
2010, and 28,700 shares of common stock that are issuable within 60 days
of March 15, 2010 upon the vesting of restricted stock units. |
|
(18) |
Consists of stock-settled stock
appreciation rights with respect to 9,170 shares of common stock that are
exercisable within 60 days of March 15, 2010, and 9,170 shares of common
stock that are issuable within 60 days of March 15, 2010 upon the vesting
of restricted stock units. |
|
(19) |
Includes options to purchase 1,134,250
shares of common stock and stock-settled stock appreciation rights with
respect to 71,180 shares of common stock that are exercisable within 60
days of March 15, 2010, and 214,680 shares of common stock that are
issuable within 60 days of March 15, 2010 upon the vesting of restricted
stock units. |
36
REPORT OF THE AUDIT COMMITTEE
Committee Members and Charter
The Audit Committee
is comprised of three directors. None of the members of the Committee are or
have been officers or employees of Newport and each member qualifies as an
independent director as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules
and Section 10A(m) of the Securities Exchange Act of 1934, as amended, and Rule
10A-3 thereunder. Newport’s Board has determined that Messrs. Guyett and Simone
are “audit committee financial experts” as defined by the regulations
promulgated by the Securities and Exchange Commission.
The Committee
operates under a written charter adopted by Newport’s Board. The Committee
reviews its charter on an annual basis. A copy of the charter of the Audit
Committee is available on Newport’s Internet site at www.newport.com/corporategovernance. Newport will also provide electronic or
paper copies of the Audit Committee charter free of charge, upon request made to
Newport’s Corporate Secretary.
Role of the Audit Committee
Newport’s management
is responsible for Newport’s financial reporting process, including its systems
of internal control over financial reporting, and for the preparation of its
financial statements in accordance with generally accepted accounting
principles. Newport’s independent auditors are responsible for auditing those
financial statements. The role and responsibility of the Committee is to monitor
and review these processes on behalf of the Board.
The members of the
Committee are not employees of Newport and are not, nor do they represent
themselves to be, accountants or auditors by profession, and they do not
undertake to conduct auditing or accounting reviews or procedures. Therefore, in
performing the Committee’s oversight role, the Committee necessarily must rely
on management’s representations that it has maintained appropriate accounting
and financial reporting principles or policies, and appropriate internal control
over financial reporting and disclosure controls and procedures designed to
assure compliance with accounting standards and applicable laws and regulations,
and that Newport’s financial statements have been prepared with integrity and
objectivity and in conformity with generally accepted accounting principles, and
on the representations of the independent auditors included in their report on
Newport’s financial statements.
Report of the Audit Committee
The Committee held
eight meetings during 2009, including telephonic meetings. The meetings were
designed, among other things, to facilitate and encourage communication among
the Committee, management, and Newport’s independent auditors. In addition to
regularly scheduled meetings of the Committee, which correspond with the
meetings of the Board held in February, May and November, the Committee held a
meeting following the end of each quarter for the purpose of reviewing Newport’s
annual or quarterly financial statements and its proposed public communications
regarding its operating results and other financial matters. The Committee also
held a special meeting in March 2009 relating to the dismissal of Ernst &
Young LLP, and the appointment of Deloitte & Touche LLP, as Newport’s
independent auditors.
In fulfilling its
oversight responsibilities, the Committee reviewed and discussed with management
the audited financial statements of Newport for the fiscal year ended January 2,
2010, including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant estimates and
judgments, critical accounting policies and the clarity of disclosures in the
financial statements. During 2009, the Committee reviewed Newport’s quarterly
financial statements and its proposed public communications regarding its
operating results and other financial matters, and reviewed Newport’s quarterly
reports on Form 10-Q and annual report on Form 10-K prior to filing.
The Committee
reviewed with Deloitte & Touche LLP, Newport’s independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United
States, their judgments as to the quality, not just the acceptability, of
Newport’s accounting principles, the reasonableness of significant estimates and
judgments, critical accounting policies, the clarity of disclosures in the
financial statements, and such other matters as are required to be discussed
with the Committee under auditing standards generally accepted in the United
States.
37
The Committee
discussed with Deloitte & Touche LLP the overall scope and plans for their
annual audit and approved the fees to be paid to Deloitte & Touche LLP in
connection therewith. The Committee also discussed with management and Deloitte
& Touche LLP the adequacy and effectiveness of Newport’s disclosure controls
and procedures and internal control over financial reporting. The Committee met
separately with Deloitte & Touche LLP, without management present, to
discuss the results of their examinations, their evaluations of Newport’s
internal control over financial reporting, and the overall quality of Newport’s
financial reporting.
The Committee also
has discussed with Deloitte & Touche LLP the matters required to be
discussed by Public Company Accounting Oversight Board Rule 3526 (Communication
with Audit Committees Concerning Independence). In addition, the Committee has
received the written disclosures and the letter from Deloitte & Touche LLP
as required by applicable requirements of the Public Company Accounting
Oversight Board regarding communications with the Committee concerning
independence, and the Committee has discussed the independence of Deloitte &
Touche LLP with that firm, including the compatibility of non-audit services
with Deloitte & Touche LLP’s independence. The Committee has concluded that
Deloitte & Touche LLP is independent from Newport and its management.
Based on the
Committee’s review of the matters noted above and its discussions with Newport’s
independent auditors and Newport’s management, the Committee recommended to the
Board that the audited financial statements be included in Newport’s Annual
Report on Form 10-K for the fiscal year ended January 2, 2010.
Respectfully
submitted,
Robert L. Guyett,
Chairman
C. Kumar N. Patel
Peter J. Simone
The material in this report is not “soliciting
material” and is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference in any filing of Newport under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
38
Proposal Two |
Ratification of Appointment of Independent
Auditors |
The Audit Committee
of our Board has selected Deloitte & Touche LLP, or Deloitte, as our
independent auditors for the fiscal year ending January 1, 2011. Deloitte
audited our financial statements for the fiscal year ended January 2, 2010.
Neither our bylaws nor the Nevada General Corporation Law requires the approval
of the selection of the independent auditors by our stockholders, but in view of
the importance of the financial statements to stockholders, our Board deems it
desirable that our stockholders ratify the selection of our
auditors.
A representative of
Deloitte will be present at the annual meeting, will be given the opportunity to
make a statement if he or she so desires, and will be available to respond to
appropriate questions. If this proposal is not approved, the Audit Committee
will reconsider its selection of independent auditors.
Prior to the Audit
Committee’s appointment of Deloitte, Ernst & Young LLP, or E&Y, served
as our independent auditors. On March 30, 2009, the Audit Committee dismissed
E&Y, and, on the same date, appointed Deloitte as our independent auditors
for our fiscal year 2009.
E&Y’s audit
report on our financial statements as of and for each of the two fiscal years
ended January 3, 2009 and December 29, 2007 did not contain any adverse opinion
or disclaimer of opinion, nor was it qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audit of our
financial statements for each of the two fiscal years ended January 3, 2009 and
December 29, 2007, and in the subsequent interim period through March 30, 2009,
the date of the dismissal of E&Y, (i) there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to E&Y’s satisfaction, would have caused E&Y to make reference
to the subject matter of the disagreement in connection with its report, and
(ii) there were no “reportable events,” as that term is described in Item
304(a)(1)(v) of Regulation S-K.
The Audit Committee’s
determination to appoint Deloitte and to dismiss E&Y as its independent
auditors was previously reported on a Current Report on Form 8-K filed by us on
April 3, 2009. We provided E&Y with a copy of the above disclosures and
requested that E&Y furnish us with a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the foregoing statements and,
if not, stating the respects in which it does not agree. A copy of the letter
from E&Y was filed as Exhibit 16.1 to our Form 8-K filed on April 3, 2009.
During our two most
recent fiscal years and during the interim period through March 30, 2009,
neither the Company nor anyone acting on its behalf has consulted with Deloitte
regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, and no written report nor oral
advice was provided by Deloitte that was an important factor considered by us in
reaching a decision as to the accounting, auditing or financial reporting issue,
or (ii) any matter that was either the subject of a disagreement, as that term
is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions
to Item 304 of Regulation S-K, or a reportable event, as that term is defined in
Item 304(a)(1)(v) of Regulation S-K.
The Board of Directors recommends a vote “FOR”
this proposal.
39
FEES BILLED BY DELOITTE & TOUCHE LLP
The table below
reflects the aggregate fees billed for audit, audit-related, tax and other
services rendered by Deloitte for our fiscal year ended January 2, 2010.
Deloitte did not provide any services for our fiscal year ended January 3, 2009.
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Year Ended |
Fee Category |
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January 2, 2010 |
Audit Fees |
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$ |
936,500 |
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Audit-Related Fees |
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– |
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Tax Fees |
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116,887 |
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All Other Fees |
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– |
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Total Fees |
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$ |
1,053,387 |
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Audit Fees
Audit fees consisted
of fees for professional services rendered for: (i) the audit of our annual
consolidated financial statements; (ii) the review of our consolidated financial
statements included in our quarterly reports on Form 10-Q; (iii) the review of
our reports filed with the Securities and Exchange Commission and related public
disclosures; (iv) the audit of our internal control over financial reporting to
provide an attestation report on our internal control over financial reporting
as required by the rules and regulations promulgated under Section 404 of the
Sarbanes-Oxley Act of 2002; and (v) the review of accounting matters related to
our asset exchange transaction with Oclaro, Inc., which was consummated in July
2009.
Audit-Related Fees
Deloitte did not
provide any audit-related services for our fiscal year ended January 2,
2010.
Tax Fees
Tax fees consisted of
fees for services relating to tax compliance and planning and preparation of tax
returns.
All Other Fees
No other services
were rendered by Deloitte to us for our fiscal year ended January 2,
2010.
Audit Committee Pre-Approval Policies and
Procedures
Consistent with
Securities and Exchange Commission rules, the Audit Committee has the
responsibility for appointing, setting compensation for and overseeing the work
of our independent auditors. As such, the Audit Committee has established a
policy of pre-approving all audit and permissible non-audit services provided to
us by our independent auditors. Prior to engagement, the Audit Committee
pre-approves these services by category of service. The fees are budgeted and
the Audit Committee requires the independent auditors and management to report
actual fees versus the budget periodically throughout the year by category of
service. During the year, circumstances may arise when it may become necessary
to engage our independent auditors for additional services not contemplated in
the original pre-approval. In those instances, the Audit Committee requires
specific pre-approval prior to engagement. All audit and non-audit services
provided by our independent auditors for our fiscal year 2009 were approved by
the Audit Committee pursuant to this policy.
The Audit Committee
may delegate pre-approval authority to one or more of its members. The member to
whom such authority is delegated must report, for informational purposes only,
any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
The Audit Committee
reviewed and discussed the services, in addition to audit services, rendered by
Deloitte during fiscal year 2009, as well as the fees paid therefor, and has
determined that the provision of such other services by Deloitte, and the fees
paid therefor, were compatible with maintaining Deloitte’s independence.
40
Proposal
Three |
Amendment to
Restated Articles of Incorporation |
to Declassify
the Board of Directors and |
Provide for the Annual Election of
Directors |
The Board of
Directors is submitting for consideration by stockholders an amendment to our
Restated Articles of Incorporation, as amended to date (the “Restated Articles”)
to provide for the phased elimination over four years of the classified
structure of our Board (the “Amendment”). In accordance with our Restated
Articles and Restated Bylaws, the Board is currently divided into four classes,
with the members of each class elected to serve staggered four-year terms. If
the Amendment is approved, two Class III directors would stand for election at
our 2011 annual meeting for a one-year term expiring at our 2012 annual meeting
and they or their successors would stand for election for one-year terms
thereafter. Our Class IV, Class I and Class II directors would continue to serve
until the expiration of their terms at our 2012, 2013 and 2014 annual meetings,
respectively, and they or their successors would then stand for election for
one-year terms thereafter. Accordingly, if the Amendment is approved, all
directors would be elected on an annual basis commencing in 2014. In all cases,
each director would hold office until his or her successor has been elected and
qualified or until the director’s earlier resignation or removal, and vacancies
that occur during the year would be appointed by the Board to serve until the
next annual meeting.
If the Amendment is
approved by stockholders, our Restated Articles will be amended to restate the
language contained in subparagraph (c) of Article Fifth of the Restated Articles
(which provides for the classified board structure) in its entirety to provide
for the phased elimination of the classified structure as described above. The
text of the proposed amendment to Article Fifth of the Restated Articles is set
forth below. In addition, our Board has adopted, subject to approval of the
Amendment by our stockholders, a resolution to make conforming changes to our
Restated Bylaws.
Article Fifth,
subparagraph (c) of the Restated Articles, would be amended to read as
follows:
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“(c)
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Beginning with
any Director elected at the 2011 annual meeting of stockholders, each
Director shall be elected for a term of one (1) year. Any Director who was
elected for a four (4) year term prior to the 2011 annual meeting of
stockholders (each, a “Previously Elected Director”) shall serve the
remainder of his or her four (4) year term, subject to his or her earlier
resignation or removal. Upon the expiration of any term of a Previously
Elected Director, each elected successor for such Director shall be
elected for a one (1) year term.”
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BACKGROUND
William C. Thompson,
Jr., Comptroller of the City of New York, on behalf of the Boards of Trustees of
various retirement and pension systems, previously submitted a non-binding
proposal for adoption of a stockholder resolution requesting that our Board take
the necessary steps to declassify the Board and establish annual elections of
directors. Such proposal was included in our proxy statements for consideration
by stockholders at both our 2008 and 2009 annual meetings. At our 2008 annual
meeting, the proposal received approximately 52.5% of the total of the votes
cast on the proposal and abstentions thereon and was therefore approved, but the
affirmative votes represented only 37.7% of our outstanding shares as of the
record date for the meeting. At our 2009 annual meeting, the proposal received
approximately 66.6% of the total of the votes cast on the proposal and
abstentions thereon, which represented 51.6% of our outstanding shares as of the
record date for the meeting.
While the stockholder
proposal was a non-binding proposal, the Board of Directors gives serious and
deliberate consideration to the positions of our stockholders. After considering
the level of support that the stockholder proposal received in 2009, our Board
has approved the Amendment for submission to stockholders at the 2010 annual
meeting, as the Board believes that our stockholders should be afforded the
opportunity to decide whether or not the Board should be classified by voting on
the proposed Amendment.
RECOMMENDATION
The Board of
Directors believes that approval of an amendment to our Restated Articles to
eliminate the classified structure of the Board would not be in the best
interests of our company and our stockholders for the reasons described below
and, therefore, the Board recommends a vote against this
proposal.
41
We believe that a
classified board enhances continuity and stability in our business and policies
since a majority of the directors at any given time will have had prior
experience and familiarity with our business. This continuity and stability
fosters a greater focus on long-term strategic planning and other areas of
oversight, thereby enhancing our value to stockholders. Our company is engaged
in the development and manufacture of high technology products and solutions for
a wide range of industries, including scientific research, microelectronics,
aerospace and defense/security, life and health sciences and industrial
manufacturing. We believe that the long-term perspective resulting from board
continuity and stability is particularly important for a company such as ours,
given the significant time, money and effort that is required to successfully
develop and commercialize such products and solutions, the fundamentally
unpredictable nature of technology development, and the inherent volatility in
stock prices for technology companies. Four-year terms also support independent
thought and action by non-employee directors, who need not worry about being
renominated each year. Moreover, this continuity helps us attract and retain
qualified individuals willing to commit the time and dedication necessary to
understand our operations and our competitive environment, who we believe are
therefore better able to make decisions that benefit our
stockholders.
A classified board
does not preclude takeover offers. Rather, in the event of an unfriendly or
unsolicited effort to take over or restructure the company, the classified board
structure facilitates our ability to obtain the best outcome for stockholders by
giving us time to negotiate with the entity seeking to gain control of the
company and to consider alternative methods of maximizing stockholder value. If
a corporation has a classified board and a hostile bidder stages and wins a
proxy contest at the corporation’s annual meeting, the bidder can replace
approximately one-fourth of the existing directors at that meeting, meaning that
the bidder would need to stage and win a second proxy contest at the next annual
meeting to potentially gain control of the board. In contrast, if the
corporation’s board was declassified, a hostile bidder could at the first annual
meeting replace a majority of the directors with directors who are friendly to
the bidder.
In the opinion of the
Board of Directors, directors of a classified board are just as accountable to
stockholders as those on an annually elected board. Since approximately
one-fourth of our directors stand for election each year, stockholders have the
opportunity annually to vote against, or withhold their votes from, those
directors as a way of expressing any dissatisfaction with the Board of Directors
or management. Our directors believe that they are no less attentive to
stockholder concerns as a result of having been elected to four-year terms, and
that they are equally accountable to the stockholders in years when they do not
face re-election. The Board of Directors is committed to the highest quality of
corporate governance and has adopted Corporate Governance Guidelines that, among
other things, focus on the independence of our directors and the effective
performance and functioning of the Board of Directors.
The affirmative vote
of the holders of a majority of our outstanding shares of common stock is
necessary for approval of this proposal. The Board of Directors recommends a vote “AGAINST” this proposal.
Accordingly, if a vote is
not specified in a proxy received in response to this solicitation, the proxy
will be voted against this proposal.
Your cooperation in
giving this matter your immediate attention and in returning your proxy promptly
will be appreciated.
By order of the Board of Directors |
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/s/ Jeffrey B. Coyne |
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Jeffrey B. Coyne |
Senior Vice President, General
Counsel |
and Corporate
Secretary |
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NEWPORT CORPORATION 1791 DEERE AVENUE IRVINE, CA 92606
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VOTE BY
INTERNET — www.proxyvote.com |
Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form. |
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ELECTRONIC DELIVERY OF FUTURE
SHAREHOLDER COMMUNICATIONS |
If you would like to reduce the costs incurred by Newport
Corporation in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access shareholder communications
electronically in future years. |
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VOTE BY
PHONE — 1-800-690-6903 |
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand when you call and then
follow the instructions. |
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VOTE BY
MAIL |
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Newport
Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR
BLACK INK AS FOLLOWS: |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED. |
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NEWPORT
CORPORATION |
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Vote On Directors |
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1. |
ELECTION OF TWO CLASS II
DIRECTORS |
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TO SERVE FOR FOUR YEARS |
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Nominees: |
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01) |
C. Kumar N. Patel |
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02) |
Kenneth F. Potashner |
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For All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual nominee(s), mark
“For All Except” and write the number(s) of the nominee(s) on the line
below.
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The Board of Directors recommends a vote FOR all
director nominees. |
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Vote On Proposals |
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For |
Against |
Abstain |
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2. |
RATIFICATION OF THE APPOINTMENT OF DELOITTE &
TOUCHE LLP AS NEWPORT’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JANUARY 1, 2011
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The Board of Directors recommends a vote FOR
proposal 2.
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3. |
CONSIDERATION OF AN AMENDMENT TO NEWPORT’S
RESTATED ARTICLES OF INCORPORATION, AS AMENDED, TO DECLASSIFY THE BOARD OF
DIRECTORS AND PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS
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The Board of Directors recommends a vote AGAINST
proposal 3.
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4. |
OTHER BUSINESS: In their discretion, the proxies are
authorized to vote upon such other business as may properly be brought
before the meeting or any adjournment thereof.
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For address changes and/or comments, please check this
box and write them on the back where indicated.
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(NOTE: Please sign exactly as
your name(s) appear(s) hereon. All holders must sign. When signing as
attorney, executor, administrator, or other fiduciary, please give full
title as such. Joint owners should each sign personally. If a corporation,
please sign in full corporate name, by authorized officer. If a
partnership, please sign in partnership name by authorized person.) |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
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Signature (Joint Owners) |
Date |
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Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K
are available at www.proxyvote.com.
NEWPORT CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 2010 ANNUAL MEETING OF
STOCKHOLDERS
TUESDAY, MAY 18, 2010
By signing the proxy,
the undersigned revokes all prior proxies and appoints Robert J. Phillippy and
Charles F. Cargile, and each of them individually, the attorney, agent and proxy
of the undersigned, with full power of substitution, to vote all stock of
Newport Corporation which the undersigned is entitled to represent and vote on
the matters shown on the reverse side at the 2010 Annual Meeting of Stockholders
of Newport Corporation to be held at the corporate headquarters, located at 1791
Deere Avenue, Irvine, California 92606, on May 18, 2010, at 9:00 a.m. Pacific
Time, and at any and all adjournments or postponements thereof, as fully as if
the undersigned were present and voting at the meeting. In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED
FOR ELECTION OF THE DIRECTOR NOMINEES, FOR PROPOSAL 2, AND AGAINST PROPOSAL 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS
WHICH MAY BE BROUGHT BEFORE THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
YOU ARE URGED TO SIGN AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME
PRIOR TO ITS USE.
Address Changes/Comments:
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(If you noted any
Address Changes/Comments above, please mark corresponding box on the
reverse side.) |