UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No._)
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|_| Soliciting Material Pursuant to SS.240.14a-11(c) or SS.240.14a-12
CLEARFIELD, INC.
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[Clearfield, Inc. Logo]
Clearfield, Inc
5480 Nathan Lane, Suite 120
Plymouth, MN 55442
763-456-6866
January 9, 2009
Dear Shareholder:
You are invited to attend the annual meeting of shareholders of Clearfield,
Inc. to be held at the corporate offices, located at 5480 Nathan Lane, Suite
120, Plymouth, MN 55442, on February 26, 2009, at 3:00 p.m., Central Standard
Time.
At the meeting you will asked to vote for the election of our board of
directors, amending the 2007 Stock Plan and conducting other business as may be
required. I encourage you to vote for each director nominee and approval of the
Stock Plan amendment.
Whether or not you are able to attend the meeting in person, I urge you to
sign and date the enclosed proxy and return it promptly in the enclosed
envelope.
Very truly yours,
Clearfield, Inc.
Ronald G. Roth
Chairman
Clearfield, Inc
5480 Nathan Lane, Suite 120
Plymouth, MN 55442
763-456-6866
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
THURSDAY FEBRUARY 26, 2009
To Clearfield, Inc. Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Annual
Meeting") of Clearfield, Inc. a Minnesota corporation ("Company"), will be held
at the offices, located at 5480 Nathan Lane, Suite 120, Plymouth, MN 55442, on
February 26, 2009, at 3:00 p.m., Central Standard Time, for the following
purposes:
1. To elect the six members named in the attached proxy statement to the
Company's Board of Directors.
2. Amendment of the 2007 Stock Compensation Plan of the Company to
provide that all 1,500,000 shares of Common Stock reserved for
issuance thereunder shall be available for incentive stock options.
3. To transact other business as may properly come before the meeting.
Only shareholders of record at the close of business on January 13, 2009,
the record date for the Annual Meeting, will be entitled to vote at the Annual
Meeting. Our transfer books will not be closed.
Whether or not you expect to be present personally at the annual meeting,
please complete, date, sign and return the accompanying proxy in the enclosed,
self addresses envelope at your earliest convenience.
The Company's Proxy Statement is submitted herewith. The Annual Report for
the fiscal year ended September 30, 2008 is being mailed to shareholders
together with this Notice and Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS,
Janna R. Severance
Secretary
January 13, 2009
PROXY STATEMENT
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING 1
CHANGE OF FISCAL YEAR 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 4
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 5
PROPOSAL 1: ELECTION OF DIRECTORS 5
CORPORATE GOVERNANCE 6
Code of Ethics 6
Board Composition, Committees and Meetings 6
Board Nomination Process 8
Compensation Committee Interlocks and Insider Participation 9
Executive Session of the Board 9
Policy Regarding Attendance at Annual Meetings 9
Non-Employee Director Compensation 9
EXECUTIVE COMPENSATION 10
Compensation Discussion and Analysis 10
Compensation Committee Report on Executive Compensation 12
Employment and Change in Control Agreements 13
Outstanding Equity Awards at Fiscal Year-End 14
Option Exercises and Stock Vested 14
Pension Benefits 14
Nonqualified Deferred Compensation 14
PROPOSAL 2: AMENDMENT OF 2007 STOCK COMPENSATION PLAN 15
SHAREHOLDER PROPOSALS FOR 2010 ANNUAL MEETING 20
OTHER MATTERS 20
-i-
PROXY STATEMENT
2009 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 26, 2009
The Board of Directors of Clearfield, Inc. is soliciting proxies for use at our
annual meeting of shareholders to be held on February 26, 2009, and at any
adjournment of the meeting. This proxy statement and the enclosed proxy card are
first being mailed or given to shareholders on or about January 20, 2009.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters outlined in the
Notice of Annual Meeting of Shareholders. These consist of the election of
director nominees and the proposed amendment to the 2007 Stock Plan. Also,
management will report on our performance during the last fiscal year and
respond to questions from shareholders.
Who is entitled to vote at the meeting?
The Board of Directors has set January 13, 2009, as the record date for the
annual meeting. If you were a shareholder of record at the close of business on
January 13, 2009, you are entitled to notice of and to vote at the annual
meeting.
As of the record date, 11,938,131 shares of common stock, par value of $.01,
were issued and outstanding and, therefore, eligible to vote at the annual
meeting.
What are my voting rights?
Holders of our common stock are entitled to one vote per share. Therefore, a
total of 11,938,131 votes are entitled to be cast at the meeting. There is no
cumulative voting.
How many shares must be present to hold the meeting?
In accordance with our bylaws, shares equal to at least a majority of the power
of the outstanding shares of our common stock as of the record date must be
present at the meeting in order to hold the meeting and conduct business. This
is called a quorum. Shares are counted as present at the meeting if:
o you are present and vote in person at the meeting; or
o you have properly submitted a proxy by internet or U.S. mail.
How do I vote my shares?
If you are a shareholder of record you can give a proxy to be voted at the
meeting by completing, signing and mailing the enclosed proxy card. If you
properly execute, duly return and do not revoke your proxy, it will be voted in
the manner you specify.
Can I vote my shares in person at the meeting?
Yes, if you are a shareholder of record, you may vote your shares in person at
the meeting by completing a ballot at the meeting.
How does the Board of Directors recommend that I vote?
The Board of Directors recommends a vote:
o FOR all of the nominees for director;
o FOR the amendment to the 2007 Stock Plan
What vote is required for the election of directors or for a proposal to be
approved?
In accordance with Minnesota law, the nominees for election as directors will be
elected by a plurality of the votes cast at the annual meeting. This means that
since shareholders will be electing six directors, the six nominees receiving
the highest number of votes will be elected. The affirmative vote of a majority
of the shares of our common stock present in person or by proxy and entitled to
vote at the annual meeting is required for the approval of the other proposals
(provided that a quorum is present at the meeting).
How are votes counted?
You may either vote "FOR" or "WITHHOLD AUTHORITY" to vote for each nominee for
the Board of Directors. You may vote "FOR," "AGAINST" or "ABSTAIN" on the other
proposal.
If you submit your proxy but abstain from voting or withhold authority to vote
on one or more matters, your shares will be counted as present at the meeting
for the purpose of determining a quorum. Your shares also will be counted as
present at the meeting for the purpose of calculating the vote on the particular
matter with respect to which you abstained from voting or withheld authority to
vote.
If you withhold authority to vote for one or more of the directors, this has no
effect on the election of those directors. If you abstain from voting on a
proposal, your abstention has the same effect as a vote against that proposal.
If you hold your shares in "street name" and do not provide voting instructions
to your broker, your shares will be considered to be "broker non-votes" and will
not be voted on any proposal on which your broker does not have discretionary
authority to vote. Shares that constitute broker non-votes will be counted as
present at the meeting for the purpose of determining a quorum but will not be
represented at the meeting for purposes of calculating the vote with respect to
such matter or matters. This effectively reduces the number of shares needed to
approve such matter or matters.
How are broker non-votes treated?
If a broker turns in a "non-vote" proxy, indicating a lack of voting instruction
by the beneficial holder of the shares and a lack of discretionary authority on
the part of the broker to vote on a particular matter, then the shares covered
by such non-vote proxy will be considered present at the meeting for purposes of
determining a quorum but will not be considered to be represented at the meeting
for purposes of calculating the vote required for approval of such matter.
What if I do not specify how I want my shares voted?
If you submit a signed proxy card and do not specify how you want to vote your
shares, we will vote your shares:
o FOR all of the nominees for director;
o FOR the amendment to the 2007 Stock Plan
o In the discretion of the person named in the proxy
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Can I change my vote after submitting?
Yes, you may change or revoke your proxy at any time before the proxy vote is
cast at the annual meeting in any of the following ways;
o by giving written notice of revocation to Bruce G. Blackey, our Chief
Financial Officer and Treasurer;
o by submitting a later-dated proxy; or
o by voting in person at the meeting.
Who pays for the cost of proxy preparation and solicitation?
We pay for the cost of proxy preparation and solicitation.
We are soliciting proxies primarily by mail. In addition, some of our officers,
directors and regular employees may solicit the return of proxies by telephone,
facsimile or personally. These individuals will receive no additional
compensation for these services.
How can I communicate with the Board of Directors?
Any matter intended for the Board, or for any individual member or members of
the Board, should be directed to our Chief Financial Officer at the Company
address below with a request to forward the same to the intended recipient. All
such communications will be forwarded unopened.
Bruce G. Blackey, Chief Financial Officer
Clearfield, Inc.
5480 Nathan Lane North
Suite 120
Plymouth, MN 55442
Our Chief Financial Officer will deliver your letter to a director that can
address the matter, or to a specified director if so addressed.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on February 26, 2009. The proxy statement
information statement annual report and 10-K is available at
http://materials.proxyvote.com/18482P.
3
CHANGE OF FISCAL YEAR
In August 2007, we changed our fiscal year end from March 31 to September
30, resulting in a six-month transitional year beginning on April 1, 2007, and
ending on September 30, 2007. All references in this Proxy Statement to fiscal
year 2007 mean such six-month transition year. Fiscal year 2008 is the period
beginning October 1, 2007, and ending on September 30, 2008.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of January 5, 2009, the stock ownership of (i)
all persons known by us to be beneficial owners of more than five percent of our
outstanding shares of Common Stock, (ii) each director and each nominee for
election as a director, (iii) the Named Executive Officers (as defined below
under the caption "Executive Compensation"), and (iv) all current directors and
executive officers as a group:
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes generally voting power and/or
investment power with respect to our securities. Shares of our common stock
issuable pursuant to stock options and convertible securities that are
exercisable or convertible currently or within 60 days after February 5, 2009
are deemed outstanding for computing the beneficial ownership percentage of the
person or member of a group holding the options but are not deemed outstanding
for computing the beneficial ownership percentage of any other person. Except as
indicated by footnote, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The address of each director and executive officer
named below is the same as that of Clearfield.
Percentage of
Number of Shares Outstanding
Name and Address of Beneficial Owner Beneficially Owned Footnote Shares
--------------------------------------------- ---------------------- ------------- ------------------
Cheryl Beranek Podzimek, CEO 110,100 (2) 1.0
Johnny Hill, COO 23,200 (3) *
Bruce G. Blackey, CFO 3,000 *
Ronald G. Roth, Chairman 740,698 (4,7) 6.2
John G. Reddan 23,500 (4) *
Stephen L. Zuckerman, M.D. 35,500 (4) *
Donald R. Hayward 12,500 (5) *
Charles N. Hayssen -0- *
Herman Lee, (Independent investor) 777,150 6.5
Anil K. Jain, (Independent investor) 1,424,141 (1) 11.9
All current directors and executive
officers as a group (8 persons) 948,498 (6) 8.0
* Less than 1%.
(1) Includes 5,250 shares held by Dr. Jain as custodian for minor relatives.
Dr. Jain disclaims beneficial ownership of such shares.
(2) Includes 70,100 shares that may be acquired upon exercise of options that
are or will become exercisable within sixty days of the record date.
(3) Includes 13,200 shares that may be acquired upon exercise of options that
are or will become exercisable within sixty days of the record date.
(4) Includes 22,500 shares that may be acquired upon exercise of options that
are or will become exercisable within sixty days of the record date.
(5) Includes 7,500 shares that may be acquired upon exercise of options that
are or will become exercisable within sixty days of the record date.
(6) Includes 158,300 shares that may be acquired up exercise of options that
are or will become exercisable within sixty days of the record date.
(7) Includes 156,760 shares owned by spouse. Mr. Roth disclaims beneficial
ownership of such shares.
4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, our directors and officers, and any
beneficial owner of more than 10% of our common stock are required to report
their ownership of our equity securities and any changes in ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established by the SEC, and we are required to disclose in this Proxy
Statement any delinquent filing of those reports and any failure to file reports
during the fiscal year ended September 30, 2008. Based upon information provided
by officers and directors, all our officers, directors and 10% shareholders
filed all reports on a timely basis in the 2008 fiscal year.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Nominating Committee has named the individuals listed below for
election as directors, each to serve until the next annual meeting of the
shareholders and until his or her successor is elected and qualified or until
his earlier resignation or removal. All of the nominees are currently directors.
Unless instructed not to vote for the election of directors or not to vote
for any specific nominee, your proxy will be voted to elect the listed nominees.
If any nominee withdraws as a candidate or is otherwise unavailable to stand for
election at the meeting, the named proxies will vote for such other persons as
they may determine, in their discretion. We do not anticipate that any candidate
will withdraw.
The following information is provided with respect to the nominees for
directors:
Name Age Director Since
---- --- --------------
Ronald G. Roth (2,3) 63 2002
Stephen L. Zuckerman, M.D.(1,2,3,4) 68 2002
John G. (Jack) Reddan (1,2,3,4) 77 2002
Cheryl Beranek Podzimek 46 2007
Donald R. Hayward (1,4) 51 2007
Charles N. Hayssen (1,4) 57 2008
(1) Member of audit committee
(2) Member of compensation committee
(3) Member of nominating committee
(4) Member of investment committee
Information Regarding the Board
Ronald G. Roth was elected Chairman of the Board of the Company in June
2007. Mr. Roth was Chairman of the Board and Chief Executive Officer of Waste
Systems Corp., a privately held waste hauling and disposal company, for 25 years
prior to its sale to a national solid waste management company in 1995. From
1995 to 2001, he was Chairman of the Board of Access Cash International L.L.C.,
a North American provider of ATMs and related processing and financial services
until its sale. Since 1990 he has been an owner of, and has served in various
capacities, including director and officer, with Phillips Recycling Systems. Mr.
Roth holds a B.A. in Marketing from Michigan State University.
Dr. Stephen L. Zuckerman served as a director of the Company from January
1986 through August 1991 and was reappointed to the Board in February 2002. Dr.
Zuckerman has been actively involved for many years with developing companies in
the high tech area. Dr. Zuckerman was co-founder and chairman of the board of
Hypertension Diagnostic Inc., a biotechnology company that has developed a
methodology for early detection of blood vessel disorders (1988 to 1991), and as
a member of the board of Biosensor Inc. (1989 to 1991) and Micromedics Inc.
(1986 to 1991 and February 2002) to present. He is also president of M-T Venture
Capital Fund II, Inc. and chairman of the board of Minnesota Film Arts, an
organization created thru the merger of the University Film Society and the Oak
Street Cinema, Minneapolis, Minnesota (2000 to present).
John G. (Jack) Reddan joined the Board of Directors in November 2002. Mr.
Reddan, retired, most recently has worked as a volunteer with the Presbytery of
the Twin Cities Area (Presbyterian Church USA) in various roles. From 1992 to
1994 he worked as a volunteer with the Presbyterian Border Ministries in
McAllen, Texas. Mr. Reddan's professional career spanned over thirty years as
both a general and program manager with Unisys.
5
Cheryl Beranek Podzimek joined the Company in July 2003 as President of its
subsidiary, APA Cables & Networks ("APACN"). In June 2007, she was named
President and CEO of the Company. Prior to 2003, Ms. Podzimek was President of
Americable, which was acquired by APACN in June 2003. She served as President of
Americable from 2002 to 2003 and from 2001 to 2002 she was Chief Operating
Officer. Previously, Ms. Podzimek held a variety of lead marketing positions
with emerging high-growth technology companies. She served as Vice President of
Marketing from 1996-2001 at Transition Networks, a manufacturer of network
connectivity products, Director of Marketing from 1992 to 1996 at Tricord
Systems, an early stage multi-processor based super server manufacturer, and
Director of Marketing from 1988 to 1992 at Digi International, a designer and
manufacturer of connectivity products. Ms. Podzimek holds a Bachelors of Science
Degree from Southwest Minnesota State University and a Masters of Science Degree
from North Dakota State University.
Donald R. Hayward is currently President of Engel Diversified Industries
(EDI), a privately held manufacturing company. Immediately prior to joining EDI,
Mr. Hayward held the position of Director of Corporate Services at Minnesota
Technology, Inc. (MTI) a publicly funded, private non-profit in support of
Minnesota's technology community. Prior to 1998, Mr. Hayward spent nearly 20
years working in business administration, finance and manufacturing for LecTec,
Pine Island and Goodhue Elevator Associations, the Pillsbury Corporation as well
as private elementary school. Mr. Hayward holds a Bachelor of Science in
Business Administration and Economics from the University of Wisconsin.
Charles N. Hayssen, 58, has been a director since September 2008. From
August 2007 to September 2008 Mr. Hayssen was a private investor. From August
2004 until August 2007, Mr. Hayssen was Chief Operating Officer of AllOver
Media, Inc., an out-of-home media company. Mr. Hayssen was a private investor
from April 2004 to August 2004, and Chief Financial Officer of ThinkEquity
Partners LLC, an equity capital markets firm, from September 2002 to April 2004.
Prior to September 2002, Mr. Hayssen was a private investor from November 2001
to September 2002, and Chief Financial Officer of Access Cash International
L.L.C. from February 2000 to November 2001. Previously, Mr. Hayssen held a
number of positions over a nineteen-year career with Piper Jaffray Companies
Inc., including three years as Chief Information Officer, two years as Chief
Operating Officer of Piper Capital Management and seven years as Chief Financial
Officer.
CORPORATE GOVERNANCE
Code of Ethics
The Company has adopted a code of ethics applicable to its chief executive
officer and senior financial officer. The code is available at no charge by
request to the Company in writing, to the attention of the Comptroller.
Additionally, the code is filed with the Securities and Exchange Commission as
an exhibit to the Company's Report on Form 10-K for the fiscal year ended March
31, 2004, and is available on our website (www.clearfieldconnection.com).
Board Composition, Committees and Meetings
The Board of Directors held 6 meetings during fiscal 2008. All directors
attended at least 75% of the meetings of the Board of Directors and of each
committee on which they served.
The Board of Directors has determined that five of our six directors are
independent directors as defined under the applicable rules of the SEC and The
NASDAQ Capital Market. Our non independent director is our CEO Cheryl Beranek
Podzimek. All of our committees are composed of all non-employees (outside
directors). The Company has an audit committee, a compensation committee, an
investment committee and a nominating committee. The members of these committees
during fiscal 2008 were as follows:
6
Audit Committee Compensation Committee Investment Committee Nominating Committee
--------------- ---------------------- -------------------- --------------------
John Reddan, Ronald G. Roth, Donald Hayward, Ronald G. Roth,
Chairman Chairman Chairman Chairman
Dr. Stephen Zuckerman Dr. Stephen Zuckerman Dr. Stephen Zuckerman Dr. Stephen Zuckerman
Donald Hayward John Reddan John Reddan John Reddan
Charles N. Hayssen Charles N. Hayssen
(added in fiscal 2009) (added in fiscal 2009)
Audit Committee
The audit committee has sole authority to appoint, review and discharge our
independent public accountants. The committee also reviews and approves in
advance the services provided by the independent public accountants and reviews
our internal accounting controls. The Audit Committee operates under a written
charter adopted by the Board of Directors. All members of the Audit Committee
are "independent" under the current NASDAQ Capital Market listing standards. In
2008 the Board identified John G. Reddan as the member of our Audit Committee
who meets the definition of an "Audit Committee Financial Expert" under rules of
the Securities and Exchange Commission. In the first quarter of fiscal year 2009
Charles N. Hayssen was added to the committee and appointed chairman of the
Committee. Mr. Hayssen also meets the definition of "Audit Committee Financial
Expert" as defined in the applicable rules of the SEC. During fiscal 2008, the
Audit Committee held four meetings. At each Audit Committee meeting the
Committee meets with the independent public accountants in executive session
without any director or officer who does not meet the independence requirements
for the listing standards of The NASDAQ Capital Market being present. See
"RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS - Report of Audit Committee"
below.
Compensation Committee
The Committee met twice during the past year. The compensation committee
reviews and recommends to the Board of Directors the compensation guidelines and
stock option grants for executive officers and other key employees of the
Company. The Compensation Committee operates under a written charter adopted by
the Board of Directors. The principal functions of this Committee are to:
o annually review and approve corporate goals and objectives relevant to
the Chief Executive Officer and corresponding compensation, evaluating
performance in light of those goals and objectives and setting
compensation levels based on this evolution and other factors
identified as relevant by the committee,
o annually reviewing and determining for our executive officers their
annual base salary level, their annual incentive opportunity and
employment agreements,
o annually reviewing company wide compensation and annual incentive
programs,
o reviewing and making recommendations to the Board of Directors with
respect to compensation programs and policies, including incentive
compensation plans and equity-based plans (i.e. stock option related
plans).
Investment Committee
The Committee met three times during the past year. The Investment
Committee operates under a written charter adopted by the Board of Directors The
principal functions of this Committee are to review and make recommendations to
the Board concerning:
o management's financial and tax policies and standards,
o our financing requirements, including the evaluation of management's
proposals concerning funding to meet such requirements,
7
o evaluation of investments,
o our capital expenditure budget; and
o adequacy of insurance coverage.
The Committee also evaluates specific acquisition, divestiture and capital
expenditure projects from a financial standpoint.
Nominating Committee
The Committee met once during the past year. The nominating committee
selects nominees for election as directors of the Company. The Nominating
Committee operates under a written charter adopted by the Board of Directors. In
fiscal 2008, the nominating committee met once, at which time it selected
nominees for election at the upcoming annual meeting. The nominating committee
will consider qualified director nominees recommended by shareholders for
election in 2009 and beyond. Our process for receiving and evaluating Board
member nominations from our shareholders is described below under the caption
"Nominations." This year no nominees were presented by shareholders.
Board Nomination Process
Effective May 27, 2005, the Board of Directors appointed a standing
nominating committee for selection of nominees for election to the Board of
Directors. The committee's charter is available on our website
(www.clearfieldconnection.com) or by request in writing to the Company (Attn:
Chief Financial Officer).
The nominating committee determines the required selection criteria and
qualifications of director nominees based upon the needs of the Company at the
time nominees are considered. In general, at a minimum, a candidate must possess
the ability to apply good business judgment and must be in a position to
properly exercise his or her duties of loyalty and care. In addition, the
committee evaluates candidates based on financial literacy, knowledge of the
Company's industry or other background relevant to the Company's needs, status
as a shareholder in the Company, "independence" for purposes of compliance with
the rules of the SEC and the Nasdaq Stock Market, and willingness, ability, and
availability for service. Candidates will be preferred who hold an established
executive level position in business, finance, law, education, research or
government. When current Board members are considered for nomination for
reelection, the nominating committee also takes into consideration their prior
Company Board contributions, performance and meeting attendance records.
The nominating committee has not utilized the services of any third party
search firm to assist in the identification or evaluation of Board member
candidates. However, the committee may engage a third party to provide such
services in the future, as it deems necessary or appropriate at the time in
question.
The nominating committee will consider qualified candidates for possible
nomination that are submitted by our shareholders. Shareholders who wish to make
such a submission may do so by sending the following information to the
nominating committee c/o Clearfield, Inc., Attn: Chief Financial Officer: (1)
name of the candidate and a brief biographical sketch and resume; (2) contact
information for the candidate and a document evidencing the candidate's
willingness to serve as a director if elected; (3) a signed statement as to the
submitting shareholder's current status as an owner and the number of shares
currently held. Nominations are further subject to the requirements of Section
2.14-a of the Company's Bylaws. Our Bylaws are available on our website
(www.clearfieldconnection.com) or by request in writing to the Company (Attn:
Chief Financial Officer).
This information will be evaluated against the criteria established by the
committee and the specific needs of the Company at that time. Based upon such
preliminary assessment, candidate(s) who appear best suited to meet the needs of
the Company may be invited to participate in a series of interviews, which are
used as a further means of evaluating potential candidates. On the basis of
information learned during this process, the committee will determine which
nominee(s) to propose for election at the next annual meeting. The committee
will use the same process for evaluating all nominees, regardless of the source
of the nomination.
No candidates for director nominations were submitted to the committee by
any shareholders in connection with the 2009 Annual Meeting. Any shareholders
desiring to present a nomination for consideration by the committee prior to our
2010 annual meeting must do so at least 90 days prior to the one year
anniversary of this year's Annual Meeting (i.e. 90 days prior to February 26,
2010), as required by Section 2.14-a of our Bylaws.
8
Compensation Committee Interlocks and Insider Participation
No executive officer serves as a member of the board of directors or
compensation committee of any entity that has any of its executive officers
serving as a member of our Board of Directors or Compensation Committee.
Executive Session of the Board
At least twice annually, our independent directors meet in executive
session without any director who does not meet the independence requirements for
the listing standards of The NASDAQ Capital Market being present. During 2008,
our independent directors met two times in executive session.
Policy Regarding Attendance at Annual Meetings
We encourage, but do not require, our Board members to attend the annual
meeting of shareholders. Last year, all of our directors with the exception of
Dr. Anil Jain attended the annual shareholders meeting. Dr. Jain has since
resigned from the Board.
Non-Employee Director Compensation
The following table provides information on the compensation paid in fiscal
2008 to each of our non-employee directors. Dr. Jain, was not employed by the
Company during fiscal 2008, but he received the proceeds of a severance package.
Cheryl Podzimek, who was and is an employee, received no compensation for their
Board activities.
Fees Earned or Paid
Name in Cash Option Awards (1) Total ($)
Ronald G. Roth $2,500 $2,463 $4,963
John G. Reddan $2,500 $2,463 $4,963
Stephen L. Zuckerman $2,500 $2,463 $4,963
Don Hayward $2,500 $2,463 $4,963
(1) On February 27, 2008, each board member was granted a six year option to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$.96 per share with a one year vesting period. This represents the amount
recognized for financial statement reporting purposes for the fiscal year
ended September 30, 2008, in accordance with FAS 123(R). The assumptions
used to determine the valuation of the awards are discussed in Management's
Discussion and Analysis of Financial Condition and Results of Operations
and Note A to our consolidated financial statements, each included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on December 22, 2008. Each of the option awards, computed in
accordance with FAS 123(R), is the same as the amount recognized for
financial statement reporting purposes as reflected in this column. The
full grant date fair value of all the awards to these directors, computed
in accordance with FAS 123(R), is $10,806.
As of September 30, 2008, each non-employee director had 22,500 options
outstanding with the exception of Don Hayward who had 7,500 options
outstanding and Charles Hayssen, who had none.
9
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This discussion of compensation describes the elements of compensation
awarded to, earned or paid to our named executive officer for the fiscal years
2007 and 2008. Our named executive officer was Cheryl Beranek Podzimek, who was
our Chief Executive Officer and President throughout the year.
Overview
The Company uses three primary tools to compensate executives: base salary,
annual bonus and long-term equity compensation. Together they combine to provide
an executive's total compensation package. The Company does not provide benefits
or perquisites of extraordinary value to its executives from the Company's
perspective. The Company views base salary as a primary indicator of the market
value needed to attract and retain executives with the skills and expertise to
perform the duties and discharge the responsibilities of their positions. Annual
bonus is principally seen as a means of rewarding superior job performance and
enhancing base salary to meet current market value, and the Company utilizes
stock options as a means of linking executives' long-term benefits to the rate
of return received by shareholders and as retention devices. The objectives of
the Company's compensation program are to recruit and retain high-caliber
executives, and to incentivize those executives to achieve the best possible
long-term financial results for the Company and its shareholders. The
Compensation Committee believes that this is the most effective means of
aligning executive incentives with shareholders' interests.
Process
The Compensation Committee uses surveys and reports prepared internally to
understand the compensation levels and pay structure at peer group companies of
like size and complexity. The Compensation Committee to date has not utilized
outside consultants in this process. The Company's structural compensation is
generally targeted within the range of compensation paid by a peer group of
Minnesota based public companies of comparable size and complexity; however, we
also use our judgment to determine specific pay levels necessary to attract and
retain executive talent. In exercising this judgment, we look beyond the market
data and place significant weight on individual job performance and compensation
history, future potential, retention risk for individual executives, and, in the
case of new hires, compensation at former employers.
The Compensation Committee determines base salary and potential bonus
annually. We generally determine officers' annual bonus and equity awards in
October of the succeeding fiscal year after the Company's financial results for
the prior fiscal year are announced. We generally grant each officer a certain
number of stock options as of that month.
Allocation and Amount
The Company compensates its executives through a combination of annual cash
compensation (comprised of base salary and annual bonus) and long-term incentive
compensation (comprised of stock options). The Compensation Committee views base
salary and the annual bonus target as an essential part of attracting and
retaining executive officers and, thus, we set both at a level that we believe
are necessary to attract and retain top executives. The Compensation Committee
also believes, based on market data and actual experience, that equity incentive
compensation is an essential factor in recruiting and retaining top executives
and in driving superior performance.
The use and relative weights of base salary, annual bonus and long-term
equity compensation are based on a subjective determination by the Compensation
Committee of the effectiveness of each in supporting the Company's strategic
operations and talent strategies, as well as the prevalence, weight and value of
these elements for executives at other companies. Generally, the Compensation
Committee views the various elements of compensation as part of one overall
package but believes that a majority of the total compensation package should
depend upon the performance of the Company to align management's interest with
our shareholders. As a result, base salary, benefits and perquisites generally
represent more than half of each executive's potential compensation if the
Company performs at expected levels reflecting the importance of
performance-based compensation. For the Chief Executive Officer, the Committee
targets more approximately one third of her total compensation to be at-risk.
10
Salary
The Compensation Committee reviews the base salary of the Chief Executive
Officer each fiscal year. Historically, the named Chief Executive Officers have
received annual adjustments consistent with the movement of wages in the
marketplace and, to reflect individual or company performance.
Based on this annual review Ms. Podzimek's compensation was adjusted to
reflect both market position and her new position as Chief Executive Officer in
fiscal 2008. In October 2007, the Compensation Committee increased Ms.
Podzimek's base annual salary, effective as of October 1, 2007, to $185,000 to
bring it more in line with the duties and responsibilities of the position of
Chief Executive Officer and President of the Company.
Annual Bonus
The Compensation Committee determines the actual amount of bonus awarded to
the Chief Executive Officer after the end of each fiscal year primarily by
considering the financial results of the Company for the given year and the
officer's individual performance and contribution to the Company. The bonus may
be paid in cash or equity. We generally set potential target bonuses for each
named executive officer at the beginning of each fiscal year as a percentage of
base salary.
When determining the amount of cash bonuses, the Committee generally
considers the Company's revenue and operating income. We use a pre-determined
formula to calculate the Chief Executive Officers bonus compensation.
Fiscal 2007, In October of 2007, the Compensation Committee met to
determine the bonus based on the Company's performance in fiscal 2007. Revenue
and operating income targets were achieved at 100% of plan. This resulted in the
Compensation Committee approving the 100% payout of the Chief Executive Officer
of $43,000.
Fiscal 2008, In October of 2008, the Compensation Committee met to
determine the bonus based on the Company's performance in fiscal 2008. Both
revenue and operating income targets were achieved at 100% of plan. This
resulted in the Compensation Committee approving the 100% payout of the Chief
Executive Officer of $112,500.
Long-Term Equity Compensation
Long term-equity compensation within Clearfield has traditionally been
incentive stock options. Prior to Fiscal 2007 the Compensation Committee had
used stock options on a limited basis with respect to the Chief Executive
Officer and other named Executive Officers compensation. In fiscal 2007, the
Compensation Committee reconsidered its approach to stock options. It began by
evaluating the effects of stock ownership on the Chief Executive position and
considered various formulas for determining a quantity of stock options that
would be commensurate with the CEO position and would provide long term
incentive. The first year formula the Committee utilized was approximately 85%
of base salary divided by current market price to determine the number of stock
options issued; this translated to 150,000 stock options at an exercise price of
$1.09. On November 19, 2007 the Chief Executive Officer, Ms. Podizimek was
awarded 150,000 stock options.
Benefits and Perquisites
In addition to qualified retirement plans available to employees generally,
the Company provides its executives with benefits such as medical, dental, life
and disability insurance and other benefits that are generally available to full
time employees.
11
Compensation Committee Report on Executive Compensation
This report of the Compensation Committee is required by the Securities and
Exchange Commission and, in accordance with the Commission's rules, will not be
deemed to be part of or incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that Clearfield, Inc. specifically
incorporates this information by reference, and will not otherwise be deemed
"soliciting material" or "filed" under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
The Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with management and based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
By the Compensation Committee -
Ronald G Roth, Chair
John G Reddan
Stephen L. Zuckerman
12
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during the fiscal year ended September 30, 2008 to our chief executive
officer during such year (the "Named Executive Officers").
Option All Other
Bonus Awards Compensation
Name and ----- ------ ------------
Principal Positions Year Salary (2) (3) (4) Total
------------------- ---- ------ --- --- --- -----
Cheryl Beranek Podzimek 2008 $ 174,769 $ 112,500 $ 24,002 $ 13,885 $ 325,156
Chief Executive Officer 2007 $ 73,846 $ 43,000 $ 5,809 $ 5,491 $ 128,146
(1) We do not maintain any pension plans or non-qualified deferred compensation
plans.
(2) These amounts were earned and awarded under the Company's executive bonus
program.
(3) Amounts listed reflect the dollar amount recognized for financial statement
reporting purposes in accordance with SFAS No. 123R on stock option awards
and thus includes amounts from awards granted prior to fiscal years 2007
and 2008, as applicable. Information related to the financial reporting of
stock options is presented in Footnotes A and L to the Consolidated
Financial Statements presented in our Annual Report on Form 10-K for the
year ended September 30, 2008 (the "2008 10-K") and Footnotes A and L to
the Consolidated Financial Statements presented in our Annual Report on
Form 10-K for the year ended September 30, 2007.
(4) These amounts consist of Company contribution on Ms. Podzimek's behalf to
401(K) plan and taxable fringe benefits associated with long term
disability insurance.
Employment and Change in Control Agreements
We implemented employment agreements on December 16, 2008 with Cheryl
Beranek Podzimek, Chief Executive Officer and President, and Johnny Hill, Chief
Operating Officer, providing for certain benefits in the event of a change in
control (as defined in the agreement) of the Company.
The employment agreement with Ms. Podzimek and Mr. Hill ("Executive")
provides that if the Executive's employment is terminated by the Company without
"cause" or by the Executive for "good reason" prior to a "change in control"
(each as defined in the employment agreement), or if the Company elects to not
proceed with automatic renewal of the agreement, the Executive will be entitled
to the following severance payments and benefits, subject to their execution and
non-revocation of a general release of claims, in addition to accrued salary and
vacation at the time of termination:
o in two lump-sum payments, an amount equal to 200% of the sum of their
then-current annual base salary plus average bonus over the prior
three years,
o their prorated annual bonus for the year in which the termination
occurs
o immediate vesting of any unvested stock options, incentive units,
restricted stock and other equity awards granted under the Company's
equity incentive plan; and
o health benefits for the 12 months following the executive's
termination of employment or until she is no longer eligible to
participate, whichever is sooner.
If a change in control (as defined in the employment agreement) occurs
during the employment period, the Company shall pay to the executive a lump sum
payment in the amount of the executive's base salary in effect on the date of
the change in control. If the Executive's employment is terminated by the
Company without cause or by the executive for good reason or without good reason
within one (1) year after the effective date of the change in control, then the
Executive shall also be entitled to receive the payments and benefits outlined
above. The employment agreement also provides that the Executive or their estate
will be entitled to certain severance benefits in the event of the Executives
death or disability.
In June 2007, Dr. Jain's employment terminated. Pursuant to the terms of a
September 15, 2005 agreement regarding separation upon change of control or
under other circumstances, we are obligated to pay him an amount equal to twice
his annual salary, as in effect as the date of termination, over a period of two
years, payable in installments corresponding to our regular payroll dates. The
aggregate amount payable to Dr. Jain under this arrangement is $380,085.
13
Grants of Plan-Based Awards
There were no grants of Plan Based Awards in fiscal year 2008 to officers of the
Company.
Outstanding Equity Awards at Fiscal Year-End
Option Awards
--------------------------- ---------------- -------------------- -------------------- ------------- ---------------
# of Equity incentive
Securities # of Securities Plan Awards: # of
Underlying Underlying Securities
Unexercised Unexercised underlying Option Option
Options (#) Options (#) Unexercised Exercise Expiration
Name Exercisable Unexercisable Unearned Options Price Date
--------------------------- ---------------- -------------------- -------------------- ------------- ---------------
Cheryl Beranek Podzimek 35,000 -- -- $2.55 10/30/2009
--------------------------- ---------------- -------------------- -------------------- ------------- ---------------
5,100 4,900 -- $1.30 8/18/2011
--------------------------- ---------------- -------------------- -------------------- ------------- ---------------
30,000 120,000 -- $1.09 11/9/2013
--------------------------- ---------------- -------------------- -------------------- ------------- ---------------
Option Exercises and Stock Vested
There were no options exercised or stock vested in fiscal year 2008 to
officers of the Company.
Pension Benefits
There were no pension benefits in fiscal year 2008 to officers of the
Company.
Nonqualified Deferred Compensation
There was no nonqualified deferred compensation in fiscal year 2008 to
officers of the Company.
14
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Lease for Company Facility. In fiscal 2007 and prior to October 30, 2007 of
fiscal 2008 we leased our principal executive office and manufacturing facility
in Blaine, Minnesota, from Jain-Olsen Properties, a partnership consisting of
Dr. Anil K. Jain and Kenneth A. Olsen. Both of them are former officers and
directors of the Company. On October 30, 2007, we (i) purchased this facility at
appraised fair market value, pursuant to an option to purchase contained in the
lease, (ii) terminated the lease, and (iii) sold the property to a third party.
India Facility. Prior to June 28, 2007, Kul B. Jain, brother of our former
chief executive officer, Anil K. Jain, was a director of our APA Optronics
(India) Private Limited subsidiary that was established in fiscal 2005. Kul B.
Jain was paid approximately $250 per month in this position. He was not an
employee of APA Optronics (India) or APA Enterprises, Inc. On June 28, 2007, we
sold all of our interest in our Indian subsidiary to an entity controlled by
Anil K. Jain, our former chief executive officer, on terms deemed by the
independent directors to be fair and reasonable to the Company. The purchase
price of $500,000 is payable over 5 years and is secured by pledges of stock and
Dr. Jain's payments under his separation agreement, as well as by a guarantee
from Dr. Jain. All payments are current.
Split Dollar Insurance. In November 1989, we adopted a split dollar life
insurance plan (the "1989 Plan") for the benefit of Dr. Anil K. Jain. Under the
terms of the 1989 Plan, we pay the premiums on a $5 million insurance policy
(the "Policy") on the lives of Dr. Jain and his spouse. The Policy is a whole
life, joint and survivor policy, on which all premiums are paid by us and income
is imputed to Dr. Jain in an amount equal to the term rate for his insurance as
established by the insurer. No premium payments have been made since January
1996. The Policy is owned by the Jain Children's Irrevocable Trust dated
November 28, 1989, (the "Trust"). The 1989 Plan is designed so that we will
recover all premium payments and advances made by us on account of the Policy
held by the Trust. Our interest in the premium payments and advances is secured
by a collateral assignment of the Policy. Upon the death of the last to die of
Dr. Jain and his spouse, we will be reimbursed from the insurance proceeds paid
to the Trust in an amount equal to the total premiums and advances made by us.
In the event the trustee of the Trust surrenders the Policy for its cash
surrender value at some date in the future, we will be reimbursed for the
premiums paid on the Policy.
PROPOSAL 2: AMENDMENT OF 2007 STOCK COMPENSATION PLAN
In 2006, the Board of Directors adopted and the shareholders approved the
2007 Stock Compensation Plan (the "Plan") to assist in attracting, retaining and
rewarding employees. 1,500,000 shares of Common Stock are currently authorized
and reserved for issuance under the Plan, (increased from 750,000 by shareholder
vote on February 27, 2008). As of December 31, 2008, 506,500 shares of common
stock remain available for grants to employees under the Plan.
On December 11, 2008, the Board of Directors approved an amendment to the
Plan, subject to shareholder approval, to permit all 1,500,000 shares of common
stock authorized and reserved for issuance thereunder to be available for
incentive stock options. Currently the Plan limits the number of shares
available for incentive stock options to 750,000.
The Board of Directors believes that compensation based on the value of the
Company's stock is an important element in attracting and retaining highly
skilled and qualified employees and, further, that stock-based awards are highly
effective in aligning the interests of these individuals with those of the
shareholders. The Plan provides for a number of different types of option and
stock awards, as described below. The Board of Directors believes that it is
desirable to amend the Plan to give the board maximum flexibility in using the
available shares to fund any of the incentive vehicles authorized by the Plan,
and thus encourages the shareholders to approve the proposed amendment. Approval
of the amendment will eliminate the cap on the number of shares which can be
used for incentive stock grants. There are no share caps on any other types of
awards or options under the Plan.
Shares Subject to the Plan. A total of 1,500,000 shares of common stock
were originally reserved for issuance under the Plan. The shares of common stock
that may be issued or transferred to grantees under the Plan may be authorized
but unissued shares or outstanding shares acquired by the Company. The Plan
provides for appropriate adjustment in the number of shares subject to the Plan
and to the grants previously made if there is a stock split, stock dividend,
reorganization or other relevant change affecting the Company's corporate
structure or its equity securities. If shares subject to an award are not issued
to the extent permitted prior to expiration of the award or an award is
otherwise forfeited, such shares will become available for inclusion in future
grants. On January 2, 2009, the closing price for the common stock in the Nasdaq
Global Market was $1.17 per share.
15
Administration. The Plan is administered by the Board or a committee
appointed by the Board. The Board or committee determines the participants,
grants stock options, with or without stock appreciation rights, and other
awards, establishes rules and regulations for the operation of the Plan, and
determines the price, term, vesting schedule, number of shares and other terms
of options and other awards. The Board or committee may delegate its powers and
duties to members of the Company's administration with respect to Plan
participants who are not subject to Section 16 of the Securities Exchange Act of
1934.
Eligible Participants. The Plan allows grants of awards to any employee of
the Company or any affiliate or subsidiary, no matter where located.
As of January 2 2009, there were approximately 105 employees eligible to
participate in the Plan. The number of grantees may vary from year to year.
The following table sets forth, as of January 2, 2009, the number of stock
options granted under the Plan to the Named Executive Officer (see "Summary
Compensation Table"), all current executive officers as a group, and all
employees (including officers who are not executive officers) as a group. No
director or director nominee, except Ms. Podzimek, no nonemployee, and no
associate of any director, director nominee or executive officer has received
any grant under the Plan; nor has any person been granted options to purchase 5%
or more of the shares available under the Plan.
--------------------------------------------------------- ---------------------
Number of Shares
--------------------------------------------------------- ---------------------
Cheryl Beranek Podzimek, Named Executive Officer 395,000
--------------------------------------------------------- ---------------------
All current executive officers, as a group (3 persons) 589,000
--------------------------------------------------------- ---------------------
All employees (excluding executive officers) as a group 338,700
--------------------------------------------------------- ---------------------
Stock Options. Options granted under the Plan may be in the form of either
options that qualify as "incentive stock options" under Section 422 of the Code
("ISOs") or those that do not qualify as such ("NQSOs"). The term of an option
is fixed by the Board or committee, but no option may have a term of more than
ten years from the date of grant. Options are exercisable at such times as
determined by the Board or committee. The option exercise price is determined by
the Board or committee at the time of grant but cannot be less than 100% of the
fair market value of the common stock on the date of grant. The grantee may pay
the option price in cash or, if permitted by the Board, by note or by delivering
to the Company shares of common stock already owned by the grantee that have a
fair market value equal to the option exercise price. If an ISO is granted to a
participant who owns, at the date of grant, in excess of 10% of the Company's
outstanding common stock, the exercise price must be at least 110% of the fair
market value on the date of grant and the term of the ISO may be no more than
five years from the date of grant. In addition, the total fair market value of
shares subject to ISOs which are exercisable for the first time by any
participant in any given calendar year cannot exceed $100,000 (valued as of the
date of grant).
Stock Appreciation Rights. The Board or committee may grant stock
appreciation rights ("SARs") in connection with a stock option granted under the
Plan. If a grantee exercises an SAR, the grantee will receive an amount equal to
the excess of the fair market value of the shares with respect to which the SAR
is being exercised over the option exercise price of the shares. If an SAR is
exercised in whole or in part, the right under the related option to purchase
shares with respect to which the SAR has been exercised will terminate to the
same extent. If a stock option is exercised, any SAR related to the shares
purchased will terminate.
Other Stock-Based Awards. The Board or committee, in its discretion, may
grant other awards that are valued in whole or in part by reference to, or
otherwise based on, the common stock, including, without limitation, performance
shares, convertible preferred stock, convertible debentures, or exchangeable
securities. Such awards may be granted in addition to or in tandem with stock
options or stock appreciation rights granted under the Plan. The Board or
committee may set such terms with regard to the vesting of such awards as it
deems reasonable.
16
Termination of Employment. Unless otherwise provided in the related award
agreement, awards granted under the Plan are generally not transferable other
than by the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or their rules and regulations thereunder. Following the
death of an optionee, any option held may be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Board or committee may determine at or after grant, by the legal representative
of the optionee's estate or by any person who acquired the option by will or the
laws of descent and distribution for a period of one year or such other period
as the Board of committee may specify at grant from the date of such death or
until the expiration of the stated term of the option, whichever period is
shorter. If a participant's employment by the Company is terminated by reason of
disability, any option held by such participant may thereafter be exercised, to
the extent it was exercisable at the time of termination or on such accelerated
basis as the Board or committee may determine at or after grant until the
expiration of the stated term of such option (unless otherwise specified by the
Board or committee at the time of grant). If the optionee dies prior to the
expiration of any unexercised option, the option may thereafter be exercised to
the extent it was exercisable at the time of death for a period of one year from
the date of death or until the expiration of the stated term of the option,
whichever period is shorter. If any optionee's employment by the Company is
terminated for any other reason, the option may be exercised, to the extent
otherwise then exercisable, for the lesser of three months from the date of
termination of employment or the balance of their term of the option. Terms for
awards other than stock options and stock appreciation rights may be set by the
Board or committee at the time of the granting of the award.
Change of Control. In the event of a "Change of Control" (as defined in the
Plan), unless determined otherwise by the Board of Directors prior to the Change
of Control, any award granted under the Plan will become fully exercisable and
vested and will terminate 60 days thereafter. For purposes of the Plan, a
"Change in Control" occurs when (i) the majority of the directors of the Company
are persons other than persons whose election has been solicited by the Board of
Directors or have been appointed by the Board to fill vacancies created by
death, resignation, or a new position, (ii) any person or group of persons (as
defined in Section 13(d) of the Exchange Act and the rules thereunder) acquires
30% or more of the outstanding voting stock of the Company, or (iii) the
shareholders of the Company approve a merger or consolidation (other than a
merger or consolidation with a subsidiary of the Company or in which the Company
is the surviving corporation and the shareholders of the Company immediately
prior to the merger own more than 70% of the outstanding voting stock of the
surviving corporation or its parent corporation), exchange of shares, sale or
other disposition of all or substantially all of the Company's assets, or
liquidation or dissolution of the Company.
Tax Rules. The following is a brief summary of the federal income tax rules
currently applicable to stock options that may be granted under the Plan.
The grant of a NQSO will have no immediate tax consequences to the grantee
or to the Company. Upon the exercise of a NQSO, the grantee will recognize
ordinary income (and the Company will generally be entitled to a compensation
deduction) in an amount equal to the excess of the fair market value of the
shares of common stock on the date of the exercise of the option over the option
exercise price. The grantee's tax basis in the shares will be the exercise price
plus the amount of ordinary income recognized by the grantee, and the grantee's
holding period will commence on the date the shares are transferred. Special
rules apply in the event all or a portion of the exercise price is paid in the
form of stock. Other special rules may also apply to a grantee who is subject to
Section 16 of the Exchange Act.
Upon a subsequent sale of shares of common stock acquired pursuant to the
exercise of an NQSO, any difference between the grantee's tax basis in the
shares and the amount realized on the sale is treated as long-term or
short-terms capital gain or loss, depending on the holding period of the shares.
The grant of an ISO will have no immediate tax consequences to the grantee
or to the Company. The exercise of an ISO by the payment of cash to the Company
will generally have no immediate tax consequences to the grantee (except to the
extent it is an adjustment in computing alternative minimum taxable income) or
to the Company. If a grantee holds the shares acquired pursuant to the exercise
of an ISO for the required holding period, the grantee generally will realize
long-term capital gain or long-term capital loss upon a subsequent sale of the
shares in the amount of the difference between the amount realized upon the sale
and the purchase price of the shares (i.e., the exercise price). In such a case,
no compensation deduction will be allowable to the Company in connection with
the grant or exercise of the ISO or the sale of shares of common stock acquired
pursuant to such exercise.
17
If, however, a grantee disposes of the shares prior to the expiration of
the required holding period (a "disqualifying disposition"), the grantee will
recognize ordinary income (and the Company will generally be entitled to a
compensation deduction) equal to the excess of the fair market value of the
shares of common stock on the date of exercise (or the proceeds of the
disposition, if less) over the exercise price. Special rules apply in the event
all or a portion of the exercise price is paid in the form of stock.
No income will be realized by a participant and the Company is not entitled
to a compensation deduction in connection with a grant of an SAR. When the SAR
is exercised, the participant will generally be required to include as taxable
ordinary income in the year of exercise an amount equal to the amount of cash
and the fair market value of any shares of common stock received. The Company
will be entitled to a compensation deduction at the time and in the amount
included in the participant's income by reason of the exercise. If the
participant received common stock upon exercise of an SAR, the post-exercise
appreciation or depreciation will be treated in the same manner as discussed
above regarding the tax treatment of NQSOs.
The federal income tax treatment of other stock-based awards will depend on
the nature of any such award and the restrictions applicable to such award. Such
an award may, depending upon the conditions applicable to the award, be taxable
as an option or as an award of restricted or deferred stock. In certain
instances, a participant may be entitled to defer recognition of income on the
value of a grant of stock if the stock is subject to substantial risk of
forfeiture. The participant will be subject to tax at ordinary income rates on
the fair market value of the stock on the date that income is recognized. The
Company generally will be entitled to a compensation deduction equal to the
amount that is taxable as ordinary income to the participant in the year that
such income is taxable. With respect to the subsequent sale of stock received,
the holding period to determine whether a participant will recognize long-term
or short-term capital gain or loss will generally begin when any restriction
period expires (or the date on which the participant recognizes income), and the
tax basis for such shares will generally be the fair market value of the shares
on that date.
Plan Benefits. Grants of options and award under the Plan are
discretionary. Accordingly, it is not possible to identify the recipients or
specify the amounts to be received by any recipient. In general, the Board or
the committee administering the Plan will seek recommendations from management
(as to non-executive employees) concerning the recipients of grants and awards,
the appropriate amounts and types of awards, and the term of the exercise.
Grants and awards may be made annually, or more frequently in the case of new
hires, promotions, or other special circumstances. In general, the Committee's
compensation policy includes stock incentives for executive management as a
significant component of total compensation.
Equity Compensation Plan Information. The Company currently has three
compensation plans: The 1993 Directors Plan, the 1997 Stock Compensation Plan,
and the Amended 2007 Stock Compensation Plan, all of which have been approved by
the shareholders of the Company. The following table presents information as of
September 30, 2008, about these plans and awards.
(a) Number of (b) Weighted-average (c) Number of
Plan Category securities to be exercise price of securities remaining
issued upon exercise outstanding options, available for future
of outstanding warrants and rights issuance under equity
options, warrants and compensation plans
rights (excluding securities
reflected in column
(a))
------------------------- ------------------------ ------------------------- ------------------------
Equity compensation 386,700 $1.37 1,232,500
plans approved by
shareholders
Total 386,700 $1.37 1,232,500
Accounting Treatment. FASB Statement No. 123 (revised 2004), Share-Based
Payment, requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. The provisions in Statement 123(R) became effective for all stock
options or other equity-based awards to employees or directors that vested or
became exercisable in 2006. The Company first reported in accordance with the
new standard in its fiscal quarter ended June 30, 2006.
18
The affirmative vote of a majority of the shares of common stock present
and voting on such matter is necessary for the proposed amendment of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 2008 STOCK COMPENSATION PLAN. YOUR PROXY WILL BE SO VOTED
UNLESS YOU SPECIFY OTHERWISE.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised of three
non-employee directors. All members are independent as defined under the rules
of The NASDAQ Capital Market.
The Audit Committee held 4 meetings during the fiscal year ended September
30, 2008. The meetings were designed to facilitate and encourage communication
between the Audit Committee and the Company's independent public accountants,
Grant Thornton LLP.
During these meetings, the Audit Committee reviewed and discussed the
quarterly and audited financial statements with management and Grant Thornton
LLP.
The discussions with Grant Thornton LLP also included the matters required
by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
Grant Thornton LLP also provided to the Audit Committee the written disclosures
and the letter regarding their independence as required by the Public Company
Accounting Oversight Board. This information was discussed with Grant Thornton
LLP.
Based on these discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements for the fiscal year ended
September 30, 2008, be included in the Company's annual report on Form 10-K.
Members of the Audit Committee -
Charles N. Hayssen, Chairman
John G. Reddan
Stephen L. Zuckerman, M.D
Donald Hayward
Independent Public Accountants' Fees
The firm of Grant Thornton LLP, independent public accountants, audited our
financial statements for the years ended March 31, 2007, 2006, and 2005, for the
transitional year ended September 30, 2007 and for the full fiscal year ended
September 30, 2008. Our audit committee has appointed them to serve as our
auditors for the fiscal year ending September 30, 2009, subject to agreement on
a definitive engagement letter. Representatives of Grant Thornton LLP are
expected to attend the annual meeting to answer any questions and will have the
opportunity to make a statement if they wish.
The following table presents fees for professional services rendered for
the two most recent fiscal years.
Fiscal Year Ended Six month transition Year
September 30, 2008 Ended September 30, 2007
----------------------- --------------------------
Audit fees (1) $ 115,904 $ 99,696
Audit-related fees (2) 12,420 12,820
Tax fees - -
Tax compliance fees 32,729 15,629
Other tax (3) 11,133 2,588
----------------------- --------------------------
$ 172,186 $ 130,733
======================= ==========================
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(1) Audit fees include fees billed expected to be billed for the fiscal year
ended September 30, 2008 and fees billed and expected to be billed for
professional services rendered for the audit of our annual financial
statements for that period, the review of our financial statements included
in our reports on Form 10-Q, services in connection with registration
statements filed with the SEC, and accounting consultations necessary for
the rendering of an opinion on our financial statements.
(2) Audit-related services include audit expenses of our 401(k) plan,
consultations related to Sarbanes-Oxley Section 404 and adoption of our
2007 Stock Compensation Plan.
(3) Other tax services include tax planning, state tax planning and other tax
consultation.
Our Audit Committee must pre-approve all audit services, engagement fees
and terms, and all permitted non-audit engagements, subject to the de minimus
exceptions permitted pursuant to the Securities Exchange Act of 1934. Pursuant
to its pre-approval policy, the Audit Committee has authorized management to
engage Grant Thornton for tax planning and preparation and filing of the
Company's tax returns.
SHAREHOLDER PROPOSALS FOR 2010 ANNUAL MEETING
The Company's 2010 Annual Meeting of Shareholders is expected to be held on
or about February 27, 2010, and proxy materials in connection with that meeting
are expected to be mailed on or about January 20, 2010. In order to be included
in the Company's proxy materials for the 2009 Annual Meeting, shareholder
proposals prepared in accordance with the proxy rules must be received by the
Company on or before September 20, 2008.
In addition, pursuant to the Company's Bylaws, a shareholder must give
notice to the Company prior to December 1, 2009, of any nominations for director
or any proposal which such shareholder intends to raise at the 2010 Annual
Meeting. If the Company receives notice of such nomination or proposal on or
after December 1, 2009, such nomination or proposal will not be considered at
the annual meeting.
Additionally, if the Company receives notice of a shareholder proposal
after December 14, 2009, it will be considered untimely pursuant to SEC Rules
14a-4 and 14a-5(e), and the persons named in the proxies solicited by the Board
of Directors for the 2010 Annual Meeting may exercise discretionary voting power
with respect to the proposal.
OTHER MATTERS
We are not aware that any matter other than those described in the Notice
of Meeting will be presented for action at the meeting. If, however, other
matters do properly come before the meeting, it is the intention Ms. Podzimek
and Mr. Blackey (the persons named as proxies) to vote the proxied shares in
accordance with their best judgment on such matters.
20
ADDITIONAL INFORMATION
A copy of the Company's Report to Shareholders for the fiscal year ended
September 30, 2008, accompanies this Notice of Annual Meeting and Proxy
Statement.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008, TO
EACH PERSON WHO IS A SHAREHOLDER OF THE COMPANY, UPON RECEIPT OF A WRITTEN
REQUEST FOR SUCH REPORT. SUCH REQUESTS SHOULD BE SENT TO:
CLEARFIELD, INC.
Attention: Chief Financial Officer
5480 Nathan Lane
Plymouth, MN 55442
By Order of the Board of Directors
Janna R. Severance
Secretary
January 5, 2009
21
CLEARFIELD, INC.
ANNUAL MEETING OF SHAREHOLDERS
Thursday, February 26, 2009
3:00 p.m.
5480 Nathan Lane
Suite 120
Plymouth, MN 55442
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on February 26, 2009.
The undersigned hereby appoints Cheryl Podzimek and Bruce Blackey, or either of
them, proxies or proxy, with full power of substitution, to vote all shares of
Common Stock of Clearfield, Inc. (the "Company") which the undersigned is
entitled to vote at the 2009 Annual Meeting of Shareholders to be held at the
offices of the Company, 5480 Nathan Lane, Suite 120, Plymouth, MN 55442,
February 26, 2009, at 3:00 p.m., Central Standard Time, and at any adjournment
thereof, as directed below with respect to the proposals set forth below, all as
more fully described in the Proxy Statement, and upon any other matter that may
properly come before the meeting or any adjournment thereof. The power to vote
granted by this Proxy may be exercised by Cheryl Podzimek and Bruce Blackey,
jointly or singly, or their substitute(s), who are present and acting at said
Annual Meeting or any adjournment of said Annual Meeting. The undersigned hereby
revokes any and all prior proxies given by the undersigned to vote at this
Annual Meeting. It is urgent that each shareholder complete, date, sign, and
mail this Proxy as soon as possible. Your vote is important!
PLEASE DO NOT FORGET TO DATE THIS PROXY.
The Board of Directors Recommends a Vote FOR Items 1 and 2.
:
1. Election 01 Ronald G. Roth 04 Stephen L. Zuckerman |_| Vote FOR |_| Vote WITHHELD
of all from all
directors: nominees nominees
(except as
02 Cheryl Beranek Podzimek 05 Donald R. Hayward marked)
03 John G. Reddan 06 Charles N. Hayssen
-----------------------------
(Instructions: To withhold authority to vote for any indicated | |
nominee, write the number(s) of the nominee(s) in the box provided to | |
the right.) | |
-----------------------------
2. Amendment of the 2007 Stock Compensation Plan |_| For |_| Against |_| Abstain
3. Upon such other matters as may properly come before the meeting |_| Granted |_| Withheld
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDER'S INSTRUCTIONS. IF
THE SHAREHOLDER EXECUTES THIS PROXY BUT DOES NOT PROVIDE INSTRUCTIONS, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE PROPOSED DIRECTORS, FOR THE
AMENDMENT OF THE 2007 STOCK COMPENSATION PLAN, AND IN THE DISCRETION OF THE
PROXY HOLDER ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
It is urgent that each shareholder complete, date, sign, and mail this Proxy as
soon as possible. Your vote is important!
Dated and Signed ________________, 2009
----------------------------------------
Signature of Shareholder(s)
----------------------------------------
Signature of Shareholder(s)
Please sign as your name(s) appears above. When signing as attorney, executor,
administrator, trustee, guardian, authorized officer of a corporation, or
partner of a partnership, please provide the name of the entity on whose behalf
you are signing and your title.
PLEASE DO NOT FORGET TO DATE THIS PROXY.
2