UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to §240.14a-12
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ACORN
ENERGY, INC.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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þ
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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ACORN
ENERGY, INC.
4
West Rockland Road
Montchanin,
Delaware 19710
NOTICE
OF 2009 ANNUAL MEETING OF STOCKHOLDERS
To the
Stockholders:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders of Acorn Energy, Inc.
(“Acorn Energy” or the “Company”) will be held at The Union League Club of New
York, 38 East 37th Street,
New York, New York 10016, on Tuesday, August 4, 2009 at 1:00 p.m. Eastern
Daylight Time, for the following purposes, all as more fully described in the
attached Proxy Statement:
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(a)
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the
election of six directors to hold office until the 2010 Annual Meeting and
until their respective successors are elected and qualified;
and
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(b)
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such
other business as may properly come before the Annual Meeting or any
adjournment thereof.
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You are
cordially invited to attend the meeting in person. You are also
invited to be our guest for a buffet lunch to be held before the Annual Meeting
beginning at 12:00 noon Eastern Daylight Time at the Union League Club of New
York.
You are
requested to vote by Internet or by mail whether or not you expect to attend the
meeting in person. This year we are furnishing our proxy materials to
our stockholders who hold their shares through brokers over the Internet, as
permitted by rules adopted by the Securities and Exchange
Commission. These stockholders should have received a notice
containing instructions on how to access these materials and how to vote their
shares online. The notice provides instructions on how you can
request a paper copy of these materials by mail, by telephone or by
e-mail. If you previously requested that you receive annual meeting
materials via e-mail, the e-mail contains voting instructions and links to the
materials on the Internet. All stockholders may read, print and download our
2008 Annual Report and our Proxy Statement at https://materials.proxyvote.com/004848.
The proxy
is revocable by you at any time prior to its exercise and will not affect your
right to vote in person in the event you attend the meeting or any adjournment
thereof. The prompt return of the proxy will be of assistance in preparing for
the meeting and your cooperation in this respect will be
appreciated.
A copy of
the Company’s Annual Report for the year ended December 31, 2008 is
enclosed.
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By
Order of the Board of Directors,
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JOE
B. COGDELL, JR.
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Secretary
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Montchanin,
Delaware
June 22,
2009
ACORN
ENERGY, INC.
4
West Rockland Road
Montchanin,
Delaware 19710
PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON AUGUST 4, 2009
This
proxy statement and the accompanying proxy are being furnished in connection
with the solicitation of proxies by the Board of Directors (the “Board”) of the
Company for use in voting at the 2009 Annual Meeting of Stockholders (the
“Annual Meeting”) to be held at 1:00 p.m. Eastern Daylight Time on Tuesday,
August 4, 2009, at The Union League Club of New York, 38 East 37th Street,
New York, New York 10016, and any adjournments thereof. Distribution to
stockholders of this proxy statement and a proxy form is scheduled to begin on
or about June 22, 2009 to each stockholder of record at the close of business on
June 12, 2009 (the “Record Date”).
Your vote
is important. Whether or not you plan to attend the Annual Meeting, please take
the time to vote your shares of common stock as soon as possible. You can ensure
that your shares are voted at the meeting by submitting your proxy by Internet
or by completing, signing, dating and returning the enclosed proxy in the
envelope provided. Submitting your proxy will not affect your right to attend
the meeting and vote. A stockholder who gives a proxy may revoke it at any time
before it is exercised by voting in person at the Annual Meeting, by delivering
a subsequent proxy or by notifying our corporate Secretary in writing of such
revocation.
INFORMATION
ABOUT THE 2009 ANNUAL MEETING AND PROXY VOTING
What
matters are to be voted on at the Annual Meeting?
Acorn
Energy intends to present the following proposals for stockholder consideration
and voting at the Annual Meeting:
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(1)
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the
election of six directors to hold office until the 2010 Annual Meeting and
until their respective successors are elected and qualified;
and
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(2)
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such
other business as may properly come before the Annual Meeting or any
adjournment thereof.
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What
is the Board’s recommendation?
The Board
of Directors recommends that you vote your shares “FOR” each of the management
nominees for director listed under Proposal 1 on your proxy card.
Will
any other matters be presented for a vote at the Annual Meeting?
We do not
expect that any other matters might be presented for a vote at the Annual
Meeting. However, if another matter were to be properly presented, the proxies
would use their own judgment in deciding whether to vote for or against the
proposal.
Who
is entitled to vote?
All Acorn
Energy stockholders of record at the close of business on the Record Date are
entitled to vote at the Annual Meeting. Each share outstanding on the Record
Date will be entitled to one vote. There were
11,281,787 shares outstanding on the Record Date.
How
do I vote my shares?
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If
you are a stockholder of record you may grant a proxy with respect to your
shares by mail using the proxy included with the proxy
materials. Stockholders who own their shares through banks,
brokers or other nominees may grant their proxy by mail, by telephone or
over the Internet in accordance with the instruction in the Notice of
Internet Availability of Proxy Materials. Internet and telephone voting
will be available through 11:59 p.m. Eastern Daylight Time on August 3,
2009.
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If
you are a stockholder of record or a duly appointed proxy of a stockholder
of record, you may attend the Annual Meeting and vote in person. However,
if your shares are held in the name of a bank, broker or other nominee,
and you wish to attend the Annual Meeting to vote in person, you will have
to contact your bank, broker or other nominee to obtain its proxy. Bring
that document with you to the meeting.
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All
proxies submitted will be voted in the manner you indicate by the
individuals named on the proxy. If you do not specify how your shares are
to be voted, the proxies will vote your shares FOR the election of the
nominees for director named in Proposal
1.
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As
permitted by the Securities and Exchange Commission, or SEC, Acorn Energy is
sending a Notice of Internet Availability of Proxy Materials to stockholders who
hold shares in “street name” through a bank, broker or other holder of record.
All such stockholders will have the ability to access this Proxy Statement and
the Company’s Annual Report at https://materials.proxyvote.com/004848.
The notice also includes information as to how these stockholders may vote their
shares.
May
I change or revoke my proxy after it is submitted?
Yes, you
may change or revoke your proxy at any time before the Annual Meeting
by:
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returning
a later-dated proxy card;
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attending
the Annual Meeting and voting in person;
or
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sending
your written notice of revocation to Joe B. Cogdell, Jr., our
Secretary.
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Your
changed proxy or revocation must be received before the polls close for
voting.
What
is a “quorum?”
In order
for business to be conducted at the Annual Meeting, a quorum must be present. A
quorum will be present if stockholders of record holding a majority in voting
power of the outstanding shares of our common stock entitled to vote at the
Annual Meeting are present in person or are represented by proxies.
What
vote is necessary to pass the items of business at the Annual
Meeting?
Holders
of our common stock will vote as a single class and will be entitled to one vote
per share with respect to each matter to be presented at the Annual Meeting.
There is only one proposal scheduled for this year’s Annual Meeting—Proposal
1—Election of Directors. The six nominees for director receiving a plurality of
the votes cast by holders of common stock, at the Annual Meeting in person or by
proxy, shall be elected to our Board.
Who
pays the costs of this proxy solicitation?
This
solicitation of proxies is made by our Board of Directors, and all related costs
will be borne by us. In addition, we may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners.
2
What
is the deadline for submission of stockholder proposals for the 2010 Annual
Meeting?
Proposals
that our stockholders may wish to include in our proxy statement and form of
proxy for presentation at our 2010 Annual Meeting of Stockholders must be
received by or delivered to us at Acorn Energy, Inc. 4 West Rockland Road,
Montchanin, Delaware 19710, Attention: Joe B. Cogdell, Jr., Secretary, no later
than the close of business on February 24, 2010.
Any
stockholder proposal must be in accordance with the rules and regulations of the
SEC. In addition, with respect to proposals submitted by a stockholder other
than for inclusion in our 2010 proxy statement, our by-laws have established
advance notice procedures that stockholders must follow. Pursuant to the By-laws
of the Company, stockholders who wish to nominate any person for election to the
Board of Directors or bring any other business before the 2010 Annual Meeting
must generally give notice thereof to the Company at its principal executive
offices not less than 60 days nor more than 90 days before the date of the
meeting. All nominations for director or other business sought to be
transacted that are not timely delivered to the Company, or that fail to comply
with the requirements set forth in the Company’s By-laws, will be excluded from
the Annual Meeting, as provided in the By-laws. A copy of the By-laws
of the Company is available upon request from the Secretary of the Company, 4
West Rockland Road, Montchanin, Delaware 19710.
Where
can I find the voting results of the Annual Meeting?
The
preliminary voting results will be announced at the Annual Meeting. The final
results will be published in our quarterly report on Form 10-Q for the quarter
ending September 30, 2009 which will be filed on or before November 16,
2009. Any stockholder may also obtain the results from the Secretary of the
Company, 4 West Rockland Road, Montchanin, Delaware 19710.
INFORMATION
ABOUT COMMUNICATING WITH OUR BOARD OF DIRECTORS
How
may I communicate directly with the Board of Directors?
The Board
provides a process for stockholders to send communications to the Board. You may
communicate with the Board, individually or as a group, as follows:
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BY
MAIL
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BY
PHONE
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The
Board of Directors
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1-302-656-1707
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Acorn
Energy, Inc.
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Attn:
Joe B. Cogdell, Jr., Secretary
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4
West Rockland Road
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Montchanin,
Delaware 19710
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You
should identify your communication as being from an Acorn Energy stockholder.
The Secretary may require reasonable evidence that your communication or other
submission is made by an Acorn Energy stockholder before transmitting your
communication to the Board.
3
OWNERSHIP
OF THE COMPANY’S COMMON STOCK
The
following table and the notes thereto set forth information, as of June 12, 2009
(except as otherwise set forth herein), concerning beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of Common Stock
by (i) each director of the Company, (ii) each executive officer (iii) all
executive officers and directors as a group, and (iv) each holder of 5% or more
of the Company’s outstanding shares of Common Stock.
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Name and Address of Beneficial Owner (1) (2)
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Number of Shares of
Common Stock
Beneficially Owned (2)
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Percentage of
Common Stock
Outstanding (2)
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George
Morgenstern
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498,861 | (3) | 4.3 | % | ||||
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John
A. Moore
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1,080,911 | (4) | 9.1 | % | ||||
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Richard
J. Giacco
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32,666 | (5) | * | |||||
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Joseph
Musanti
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8,333 | (6) | * | |||||
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Richard
Rimer
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111,666 | (7) | * | |||||
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Samuel
M. Zentman
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87,990 | (8) | * | |||||
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Michael
Barth
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96,434 | (9) | * | |||||
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Joe
B. Cogdell, Jr
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— | — | ||||||
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William
J. McMahon
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10,500 | (10) | * | |||||
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Benny
Sela
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40,000 | (6) | * | |||||
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Ray
Simonson
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15,990 | (10) | * | |||||
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All
executive officers and directors of the Company as a group (11
people)
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1,983,351 | (11) | 15.8 | % | ||||
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Austin
W. Marxe and David M. Greenhouse
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868,720 | (12) | 7.7 | % | ||||
* Less
than 1%
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(1)
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Unless
otherwise indicated, the address for each of the beneficial owners listed
in the table is in care of the Company, 4 West Rockland Road, Montchanin,
Delaware 19710.
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(2)
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Unless
otherwise indicated, each person has sole investment and voting power with
respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have “beneficial ownership” of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. Percentage information is based
on 11,281,787 shares outstanding as of June 12,
2009.
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(3)
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Consists
of 51,922 shares, 397,500 shares underlying currently exercisable options,
and 49,439 shares owned by Mr. Morgenstern’s
wife.
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(4)
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Consists
of 520,911 shares and 560,000 shares underlying currently exercisable
options.
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(5)
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Consists
of 6,000 shares and 26,666 shares underlying currently exercisable
options.
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(6)
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Consists
solely of shares underlying currently exercisable
options.
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(7)
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Consists
of 35,000 shares and 76,666 shares underlying currently exercisable
options.
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(8)
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Consists
of 20,000 shares, 1,324 shares underlying currently exercisable warrants
and 66,666 shares underlying currently exercisable
options.
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(9)
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Consists
of 6,289 shares, 1,645 shares underlying currently exercisable warrants
and 88,500 shares underlying currently exercisable
options.
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(10)
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Consists
solely of shares.
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(11)
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Consists
of 716,051 shares, 2,969 shares underlying currently exercisable warrants
and 1,264,331 shares underlying currently exercisable
options.
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(12)
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The
information presented with respect to these beneficial owners is based on
a Schedule 13G filed with the SEC on February 13, 2009. Austin
W. Marxe and David M. Greenhouse share sole voting and investment power
over 179,484 shares of Common Stock owned by Special Situations Cayman
Fund, L.P and 689,236 shares of Common Stock owned by Special Situations
Fund III QP, L.P. The business address for Austin W. Marxe and
David M. Greenhouse is 527 Madison Avenue, Suite 2600, New York, NY
10022.
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4
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board of Directors of the Company is currently comprised of seven
seats. The Board of Directors has nominated its six current
directors, George Morgenstern, John A. Moore, Samuel M. Zentman, Richard J.
Giacco, Richard Rimer, and Joseph Musanti for election as directors at the
Annual Meeting to serve until the 2010 Annual Meeting and until their successors
have been duly elected and qualified. All nominees have consented to
be named as such and to serve if elected. The Board of Directors did
not nominate a candidate to fill the presently vacant seventh Board
seat.
With
respect to the election of directors, stockholders may vote in favor of all
nominees, withhold their votes as to all nominees or withhold their votes as to
specific nominees. Stockholders cannot vote for more than the six
nominees unless a person is nominated as a candidate to fill the presently
vacant seventh Board seat in accordance with Acorn Energy’s By-laws.
Stockholders should specify their choices on the accompanying proxy
card. If no specific instructions are given, the shares represented
by a signed proxy will be voted FOR the election of all six of the Board’s
nominees. If any nominee becomes unavailable for any reason to serve
as a director at the time of the Annual Meeting (which event is not
anticipated), proxies will be voted in the discretion of the persons acting
pursuant to the proxy for any nominee who shall be designated by the current
Board of Directors as a substitute nominee.
Persons
nominated in accordance with the notice requirements of the Company’s By-laws
are eligible for election as directors of the Company. All
nominations for director that are not timely delivered to the Company or that
fail to comply with the requirements set forth in the Company’s By-laws will be
excluded from the Annual Meeting, as provided in the By-laws. A copy
of the Company’s By-laws can be obtained from the Secretary of the Company, 4
West Rockland Road, Montchanin, Delaware 19710. Directors will be
elected at the Annual Meeting by a plurality of the votes cast (i.e., the six
nominees receiving the greatest number of votes will be elected as
directors).
Certain
Information Regarding Directors and Officers
Set forth
below is certain information concerning the directors and certain officers of
the Company:
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Name
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Age
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Position
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George
Morgenstern
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76
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Founder,
Chairman Emeritus; Chairman of the Board of our DSIT Solutions Ltd.
subsidiary (“DSIT”)
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John
A. Moore
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44
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Director,
Chairman of the Board, President and Chief Executive
Officer
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Samuel
M. Zentman
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64
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Director
and member of our Audit Committee
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Richard
J. Giacco
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57
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Director
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Richard
Rimer
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44
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Director
and member of our Audit Committee
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Joe
Musanti
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51
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Director
and Chairman of our Audit Committee
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William
J. McMahon
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53
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Chief
Executive Officer and President of CoaLogix
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Benny
Sela
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61
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Chief
Executive Officer and President of DSIT
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Ray
Simonson
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60
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Chief
Executive Officer and President of Coreworx
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Michael
Barth
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48
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Chief
Financial Officer of the Company and DSIT
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Joe
B. Cogdell, Jr.
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56
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Vice
President, General Counsel and Secretary of the Company and
CoaLogix
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George Morgenstern, founder of
the Company, has been one of our directors since 1986. Mr. Morgenstern served as
Chairman of the Board from June 1993 through March 25, 2009 and as Chairman
Emeritus since March 25, 2009. Mr. Morgenstern served as our
President and Chief Executive Officer from our incorporation in 1986 until March
2006. Mr. Morgenstern also serves as Chairman of the Board of
DSIT. Mr. Morgenstern served as a member of the Board of Directors of
Comverge, Inc. from October 1997 to March 2006 and as Chairman until April
2003.
5
John A. Moore has been a
director and President and Chief Executive Officer of the Company since March
2006. Mr. Moore was elected Chairman of the Board on March 25, 2009. Mr. Moore
also served as a director of Comverge Inc. from March 2006 through January
2008. Mr. Moore is the President and founder of Edson Moore
Healthcare Ventures, which he founded to acquire $150 million of drug delivery
assets from Elan Pharmaceuticals in 2002. Mr. Moore was Chairman and
EVP of ImaRx Therapeutics, a drug and medical therapy development company, from
February 2004 to February 2006 and Chairman of Elite Pharmaceuticals from
February 2003 to October 2004. He is currently a member of the Board
of Directors of Voltaix, Inc., a leading provider of specialty gases to the
solar and semiconductor industries. He was CEO of Optimer, Inc. (a
research based polymer development company) from inception in 1994 until 2002
and Chairman from inception until its sale in February 2008 to Sterling
Capital.
Samuel M. Zentman has been one
of our directors since November 2004. From 1980 until 2006 Dr. Zentman was
the president and chief executive officer of a privately-held textile firm,
where he also served as vice president of finance and administration from 1978
to 1980. From 1973 to 1978, Dr. Zentman served in various capacities
at American Motors Corporation. He holds a Ph.D. in Complex Analysis and serves
on the board of Powersafe Technology Corp. and on the board of a national
not-for-profit organization devoted to advancing the quality of
education.
Richard J. Giacco was
elected to the Board in September 2006. Mr. Giacco has been President
of Empower Materials, Inc., a manufacturer of carbon dioxide based
thermoplastics, since January 1999. Mr. Giacco was also the
Managing Member of Ajedium Film Group, LLC, a manufacturer of thermoplastic
films, from inception in 2002 until its sale in 2008. Mr. Giacco
served as Associate General Counsel of Safeguard Scientifics, Inc. from 1984 to
1990.
Richard Rimer was elected to
the Board in September 2006. From 2001 to 2006, Mr. Rimer was a
Partner at Index Ventures, a private investment company. He formerly
served on the boards of Direct Medica, a provider of marketing services to
pharmaceutical companies, and Addex Pharmaceuticals, a pharmaceutical research
and development company. Prior to joining Index Ventures, Mr. Rimer
was the co-founder of MediService, the leading direct service pharmacy in
Switzerland and served as a consultant with McKinsey & Co.
Joe Musanti was elected to the
Board in September 2007. Mr. Musanti is President of Main Tape Inc.,
a leading manufacturer of surface protection film and paper products, based in
Cranbury, New Jersey. Prior to becoming President, Mr. Musanti served
as Vice President Finance of Main Tape. Before that, Mr. Musanti was
Vice President of Finance of Rheometric Scientific, Inc., a manufacturer of
thermal analytical instrumentation products where he held significant domestic
and foreign, operational, managerial, financial and accounting
positions.
William J. McMahon has
served as Chief Executive Officer and President of CoaLogix since its creation
in November 2007. Mr. McMahon also serves as president of SCR-Tech,
LLC, a position he has held since March 2005. Prior to that, Mr.
McMahon served as Group Vice President of the Ultrapure Water division of
Ionics, Inc. from 2000 to 2004. From 1997 to 2000, he held several
executive level positions including Chairman, President and Chief Executive
Officer of Pantellos; President and Chief Executive Officer of Stone &
Webster Sonat Energy Resources; and President of Stone & Webster Energy
Services Inc. From 1978 to 1997, Mr. McMahon held positions at DB Riley,
Inc. and at The Babcock & Wilcox Company. Mr. McMahon earned a
B.S. degree in Nuclear Engineering from Georgia Institute of Technology and an
MBA from Xavier University.
Benny Sela has served as
the CEO of DSIT since July 2007. Previously, he held the position of
Executive Vice President and Head of the company’s Real Time Division, and prior
thereto, was the General Manager of DSI Technologies. Mr. Sela served
in the Israeli Air Force reaching the position of Lt. Colonel
(Ret.). During his service in the Israeli Air Force, Mr. Sela was
head of the Electronic Warfare branch, working on both the F-16 and Lavi
projects. He holds a B.Sc. in Electrical Engineering, a Masters
Degree in Operations Research from Stanford University, and an
MBA.
6
Ray Simonson has served
as CEO and Chief Technology Officer (“CTO”) of Coreworx since April 2006. Prior
to this, Mr. Simonson served as CTO of Coreworx from September 2004 to April
2006. Previously, he was Senior Vice President and CTO of CheckFree i-Solutions
from 2000 to 2004. From 1996 to 2000, as CTO, he co-founded BlueGill
Technologies and assembled and led the development of the first XML-based
Internet billing application. Prior to his experience with Bluegill and
CheckFree, Mr. Simonson was in a series of senior roles focused on delivering
mission critical IT systems primarily in banking and insurance, with a deep
expertise in enterprise content.
Michael Barth has been our
Chief Financial Officer and the Chief Financial Officer of DSIT since December
2005. For the six years prior, he served as Deputy Chief Financial
Officer and Controller of DSIT. Mr. Barth is a Certified Public
Accountant in both the U.S. and Israel and has over 20 years of experience in
public and private accounting.
Joe B. Cogdell, Jr. has
served as Vice President, General Counsel and Secretary of Acorn and CoaLogix
since January 2, 2009. For the 20 years prior, Mr. Cogdell was a
member of the Corporate and Securities Practice Group of the law firm Womble
Carlyle Sandridge & Rice, PLLC in the firm’s Charlotte, North Carolina
office. Mr. Cogdell has 30 years experience as a corporate and
business lawyer.
CORPORATE
GOVERNANCE MATTERS
Section 16(a)
Beneficial Ownership Reporting Compliance
No person
who, during the fiscal year ended December 31, 2008, was a “Reporting
Person” defined as a director, officer or beneficial owner of more than ten
percent of the our common stock which is the only class of securities of the
Company registered under Section 12 of the Exchange Act, failed to file on
a timely basis reports required by Section 16 of the Exchange Act during
the most recent fiscal year, with the exception of a Form 4 report filed by John
A. Moore on August 28, 2008 (two days after the due date) reporting an open
market purchase of 5,000 shares on August 22, 2008. The foregoing is based
solely upon a review by us of Forms 3 and 4 during the most recent fiscal year
as furnished to us under Rule 16a-3(d) under the Exchange Act, and Forms 5
and amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any representation received by us from any reporting person
that no Form 5 is required. We have implemented measures to
assure timely filing of Section 16(a) reports by our executive officers and
directors in the future.
Board
Composition and Director Independence
Our Board
of Directors is composed of one class, with seven Board seats, one of which is
vacant, and six directors serving until their reelection or replacement at the
2009 annual meeting of stockholders. All members of the Board of
Directors other than Mr. Moore are non-employees of the Company and are
“independent” of us and our management under the applicable standards of the
Nasdaq Global Market.
Meetings
and Meeting Attendance
During
the fiscal year ended December 31, 2008, there were 13 meetings of the
Board of Directors. All incumbent directors attended 75% or more of the Board
meetings and meetings of the committees on which they served during the last
fiscal year. Directors are encouraged to attend the annual meeting of
stockholders, and all directors attended the 2008 annual meeting of
stockholders.
Committees
of the Board
Audit
Committee. Our Board of Directors has established one standing
committee, the Audit Committee, consisting of Joseph Musanti, Richard Rimer and
Sam Zentman. The Audit Committee oversees our accounting and financial reporting
processes and audits of our financial statements by our independent
auditors. Our Audit Committee’s charter is available on our website
at www.acornenergy.com, where it may be found under the “Investor Relations”
tab. All three members of our Audit Committee are “independent” under
Rule 10A-3 of the Securities Exchange Act of 1934 and the Nasdaq Marketplace
Rules. During 2008, the Audit Committee met five
times.
7
Audit Committee Financial
Expert. Joseph Musanti has been designated as our Audit
Committee financial expert. Our Board of Directors has determined that Mr.
Musanti meets the qualifications for an “audit committee financial expert” set
forth in Item 407 of Regulation S-K and is an independent director under Nasdaq
standards.
Audit Committee
Report. The Audit Committee has (1) reviewed and discussed the
audited financial statements with management; (2) discussed with the independent
auditors the matters required to be discussed by the statement of Auditing
Standards No. 61 as amended; and (3) received the written disclosures and the
letter from the independent accountants required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent
accountants’ communications with the Audit Committee concerning independence,
and has discussed with the independent accountant the independent accountant’s
independence.
Based on
the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company’s annual report on Form 10-K for the fiscal year ended December
31, 2008, which was filed with the Securities and Exchange Commission on
March 30, 2009.
|
THE
AUDIT COMMITTEE OF THE
BOARD
OF DIRECTORS OF ACORN
ENERGY,
INC.
|
|
Joseph
Musanti
|
|
Richard
Rimer
|
|
Samuel
M. Zentman
|
Nominating
Procedures. The Company does not have a nominating
committee. We believe that not using a committee of the Board in the
director nomination process fosters fuller active participation of all our
directors in the process. Nominations to the Board must either be
selected or recommended for the Board’s selection by a majority of the Board’s
independent directors. The Board uses established policies and
procedures for director nominations. The Board identifies potential
director candidates from a variety of sources, including recommendations from
current directors or management, recommendations of security holders, or any
other source that the Board has deemed appropriate.
In
considering candidates for the Board of Directors, the Board evaluates the
entirety of each candidate’s credentials, such as (i) business or other relevant
experience; (ii) expertise, skills and knowledge; (iii) integrity and
reputation; (iv) the extent to which the candidate will enhance the objective of
having directors with diverse viewpoints and backgrounds; (v) willingness and
ability to commit sufficient time to Board responsibilities; and (vi)
qualification to serve on specialized board committees.
Our
stockholders may recommend potential director candidates by contacting the
Secretary of the Company to receive a copy of the procedure to recommend a
potential director candidate for consideration by the independent directors, who
will evaluate recommendations from stockholders in the same manner that they
evaluate recommendations from other sources.
Compensation
Committee. The Company does not currently have a compensation
committee. We believe that not using a committee of the Board in
setting compensation policies and making compensation decisions fosters fuller
active participation of all our directors in the process. The entire
Board of Directors establishes the general compensation policies of the Company,
the specific compensation levels for each executive officer, and administers the
Company’s equity compensation plans and practices.
8
As
required by Nasdaq, all action with respect to the compensation of our Chief
Executive Officer is approved or recommended for approval by a majority of our
independent directors.
The
information contained in this proxy statement with respect to the charter of the
Audit Committee and the independence of the non-management members of the Board
of Directors shall not be deemed to be “soliciting material” or to be “filed”
with the SEC, nor shall the information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate it by reference in a
filing.
Code
of Ethics
We have
adopted a Code of Business Conduct and Ethics that applies to all our officers
and employees. This Code of Ethics is designed to comply with the Nasdaq
marketplace rules related to codes of conduct. A copy of this Code of Ethics may
be obtained on our website at http://www.acornenergy.com under the “Investor
Relations” tab. We intend to post on our website any amendments to,
or waiver from, our Code of Business Conduct and Ethics. Other than
this Proxy Statement and proxy card which have been posted on our website, our
website, and the information contained in our website, is not a part of this
Proxy Statement.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table
|
Name and
Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Option
Awards ($)
|
All Other
Compensation
($)
|
Total ($)
|
||||||||||||||||
|
John
A. Moore
President
and CEO
|
2008
|
325,000 | — | 351,331 | (1) | 12,000 | (2) | 688,331 | ||||||||||||||
|
2007
|
275,000 | 200,000 | 177,545 | (3) | — | 652,545 | ||||||||||||||||
|
William
J. McMahon
CEO
and President of
CoaLogix
and SCR-Tech
|
2008
|
223,596 | 171,160 | — | 231,225 | (4) | 625,981 | |||||||||||||||
|
2007
|
31,354 | (5) | 96,750 | — | 1,181 | (6) | 129,285 | |||||||||||||||
|
Benny
Sela
CEO
and President of
DSIT
(7)
|
2008
|
174,321 | 20,500 | — | 59,490 | (9) | 254,311 | |||||||||||||||
|
2007
|
137,287 | — | 30,458 | (8) | 39,331 | (9) | 207,076 | |||||||||||||||
|
(1)
|
Represents
FAS 123R expense with respect to 200,000 stock options granted as of March
4, 2008 with an exercise price of $5.11 per
share.
|
|
(2)
|
Consists
of automobile expense allowance of
$12,000.
|
|
(3)
|
Represents
FAS 123R expense with respect to 400,000 stock options granted as of March
27, 2006 with an exercise price of $2.60 per share and 60,000 options
granted as of February 27, 2007 with an exercise price of $4.53 per
share.
|
|
(4)
|
Consists
of (i) $11,550 in 401k contributions and (ii) $219,675 of FAS 123R stock
compensation expense with respect to CoaLogix stock options granted in
April 2008.
|
|
(5)
|
Appointed
President and CEO of CoaLogix as of November 7, 2007 upon the acquisition
of SCR-Tech by Acorn Energy. The salary shown in the table was
earned subsequent to the acquisition of SCR-Tech by Acorn on November 7,
2007. His total salary for the full year was
$215,000.
|
9
|
(6)
|
Consists
of 401k contributions which were paid subsequent to the acquisition of
SCR-Tech by Acorn on November 7, 2008. His full-year amount was
$8,100.
|
|
(7)
|
Appointed
Chief Executive Officer of DSIT and President of DSIT effective July 1,
2007.
|
|
(8)
|
Represents
FAS 123R expense with respect to 25,000 stock options granted as of
February 27, 2007 with an exercise price of $3.50 per share and 20,000
options granted as of December 31, 2004 with an exercise price of $0.91
per share.
|
|
(9)
|
Consists
of contributions to severance and pension funds and automobile fringe
benefits. Contributions to severance and pension funds are made
on substantially the same basis as those made on behalf of other Israeli
executives.
|
Employment
Arrangements
The
employment arrangements of each named executive officer and certain other
officers are described below.
John A.
Moore became our President and Chief Executive Officer in March
2006. In March 2008, we entered into a three-year Employment
Agreement with Mr. Moore. Under the terms of the Employment Agreement, Mr.
Moore’s initial base salary is $325,000 per annum, retroactive to January 1,
2008, increasing to $350,000 per annum on the first anniversary of the
Employment Agreement and increasing to $375,000 per annum on the second
anniversary. Mr. Moore is eligible to receive an annual cash bonus of up to
$200,000, based upon the attainment of agreed upon personal and company
performance goals and milestones for the preceding fiscal year, as determined by
the Board. Under the Employment Agreement, Mr. Moore is also entitled to (i) the
employee benefits generally made available to the registrant’s executive
officers, (ii) short-term and long-term disability insurance for the benefit of
Mr. Moore, and (iii) a monthly automobile expense allowance of
$1,000. Under the Employment Agreement, Mr. Moore was also granted
non-qualified stock options to purchase 200,000 shares of common stock at an
exercise price of $5.11 per share. The options vest in equal quarterly
installments over a four-year period, commencing 90 days from the date of grant
and expire in March 2018. In February 2009, in lieu of a bonus for 2008, Mr.
Moore was awarded 75,000 stock options exercisable until February 20, 2014 at an
exercise price of $2.51 per share, exercisable immediately as to one-fourth of
the options, with the remainder to vest in equal installments on June 30,
September 30 and December 31, 2009.
William J.
McMahon has served as Chief Executive Officer and President of CoaLogix
since the Company’s acquisition of SCR-Tech and its related companies on
November 7, 2007. Mr. McMahon employment terms are based on
employment agreement signed effective January 1, 2007 between Mr. McMahon and
SCR-Tech’s former parent company. The employment agreement was
subsequently assumed and modified on November 7, 2007 in conjunction with the
Company’s acquisition of SCR-Tech. Mr. McMahon’s employment
agreement calls for base salary of $215,000 per year with cost of living
increases (a base salary of $223,596 in 2008). In April 2008, Mr. McMahon also
received options under the CoaLogix Inc. 2008 Stock Option Plan and a
participation in the CoaLogix Capital Appreciation Rights Plan. Mr. McMahon is
eligible to receive an annual bonus with a target payment equal to 50% of his
base salary based upon criteria developed by the board of directors of CoaLogix.
The actual bonus payout may be more or less than the target level base upon
achievement of annual goals approved by its board of directors. Mr.
McMahon’s bonus for 2008 was $171,160.
Benny Sela
has served as President and Chief Executive Officer of DSIT since July 1,
2007. In December 2007, the Board of DSIT approved new employment
terms for Mr. Sela retroactive to July 1, 2007. Mr. Sela’s current
employment agreement provides for a base salary which is denominated in Israeli
Consumer Price Index (“CPI”) linked NIS, currently equivalent to approximately
$168,000 per annum. In addition to his base salary, Mr. Sela is also
entitled to receive a bonus payment equal to 5% of DSIT’s net profit before
tax. Mr. Sela’s bonus for 2008 was $20,500.
10
Ray
Simonson has served as Chief Executive Officer of Coreworx since the
Company’s acquisition of Coreworx on August 13, 2008. Mr. Simonson’s
employment terms are based on employment agreement signed effective April 1,
2005 between Mr. Simonson and Coreworx. Mr. Simonson’s
employment agreement provides for a base salary which is denominated in Canadian
dollars, currently equivalent to approximately $185,000 per
annum. Mr. Simonson is eligible to receive an annual bonus with a
target payment equal to 50% of his base salary based upon criteria developed by
the board of directors of Coreworx.
Michael
Barth has served as Chief Financial Officer of the Company and Chief
Financial Officer of DSIT beginning December 1, 2005. In September
2008, the Board approved modified terms of the employment arrangement with Mr.
Barth. According to the terms of the modified employment arrangement, the
Company increased Mr. Barth’s salary from $100,000 to $150,000 per annum. One
half of Mr. Barth’s salary is fixed in NIS at the November 1, 2007 exchange rate
and linked to the Israel CPI and adjusted semi-annually. The Board also approved
the payment of a cash bonus to Mr. Barth (equal to the difference between his
prior salary of $100,000 per annum and new salary for the period from November
1, 2007 through the effective date of the modification).
In February 2009, in lieu of a bonus
for 2008, Mr. Barth was awarded 35,000 stock options exercisable until February
20, 2014 at an exercise price of $2.51 per share, exercisable immediately as to
one-fourth of the options, with the remainder to vest in equal installments on
June 30, September 30 and December 31, 2009.
Joe B. Cogdell,
Jr. became Vice President, General Counsel and Secretary of each of the
Company and CoaLogix commencing January 2, 2009. Mr. Cogdell’s
initial base salary is $300,000 per annum. He is eligible to receive
an annual bonus of up to 30% of his base salary, based upon the attainment of
performance goals. The agreement has no fixed term, and the
employment is on an “at-will” basis.
Under the
employment agreement, in January 2009 Mr. Cogdell was awarded 120,000 options to
purchase Acorn common stock at an exercise price of $1.61 per share, vesting as
to 30,000 on the first anniversary of the date of grant and as to the remainder
in equal quarterly installments over a three year period following the first
anniversary of the date of grant, exercisable through January 5,
2019. Under the employment agreement, Mr. Cogdell will also have the
right to participate in any future financing of CoaLogix at the same level and
priority as Acorn. Mr. Cogdell also received options under the
CoaLogix Inc. 2008 Stock Option Plan and a participation in the CoaLogix Capital
Appreciation Rights Plan. Mr. Cogdell is also entitled to the employee benefits
generally made available to other senior executives, officer’s liability and
legal malpractice insurance, as well as bar and legal association dues and
continuing legal education programs. Under the employment agreement,
Mr. Cogdell is subject to non-solicitation and non-compete covenants, which
continue for 18 months after termination of his employment.
Acorn and
CoaLogix have entered into an agreement regarding certain aspects of their joint
employment of Mr. Cogdell including allocation of the costs of employment, bonus
determinations, termination and severance issues and indemnities. Mr. Cogdell’s
compensation is anticipated to be initially apportioned equally between Acorn
and CoaLogix, subject to periodic review.
Outstanding
Equity Awards at 2008 Fiscal Year End
|
Name
|
Number of Securities
Underlying
Unexercised Options
(#)
Exercisable
|
Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
|
Option Exercise
Price ($)
|
Option Expiration Date
|
|||||||||
|
John
A. Moore
|
400,000 | — | 2.60 |
March
31, 2011
|
|||||||||
| 60,000 | — | 4.53 |
March
31, 2011
|
||||||||||
| 37,500 | 162,500 | (1) | 5.11 |
March
4, 2018
|
|||||||||
|
|
|||||||||||||
|
Benny
Sela
|
20,000 | — | 1.80 |
March
31, 2009
|
|||||||||
| 20,000 | — | 0.91 |
December
31, 2009
|
||||||||||
11
|
(1)
|
These
options vest 12,500 options of these options vest each quarterly from
March 4, 2009 through March 4,
2012.
|
Estimated
Payments and Benefits Upon Termination or Change in Control
The amount of compensation and benefits
payable to each named executive officer and certain other officers in various
termination situations is described in the tables below.
John
A. Moore
Under the
terms of the employment agreement with Mr. Moore, our President and Chief
Executive Officer, upon termination by the Company for cause (as defined in the
agreement) and upon termination by Mr. Moore without good reason (as defined in
the agreement), all compensation due to Mr. Moore under his agreement would
cease, except that Mr. Moore would receive all accrued but unpaid base salary up
to the date of termination, and reimbursement of all previously unreimbursed
expenses. All vested and unexercised options granted by the Company
as of the date of termination would be exercisable in accordance with the terms
of the applicable stock option plan and agreements, provided that Mr. Moore
would have only three months to exercise such previously vested
options. All options that had not vested as of the date of
termination would expire.
In the
event that within three months prior to or one year following a change of
control (as defined in the agreement), either (i) the Company terminates the
employment of Mr. Moore, other than for cause, or (ii) Mr. Moore terminates for
good reason, Mr. Moore would receive the following (except to the extent that
any payment would constitute an “excess parachute payment” under the IRS Code):
(i) an amount equal to (A) 24 months of then-current base salary and (B) two
times his most recent annual bonus; (ii) reimbursement of all previously
unreimbursed expenses; (iii) the full vesting of any and all stock options
granted to Mr. Moore by the Company prior to such termination, and extended
exercisability thereof until their respective expiration dates; and (iv) the
continuation of all medical and dental benefits at the Company’s sole expense
for a period of one year after termination.
In the
event that (i) the Company terminates the employment of Mr. Moore (including a
non-renewal of his agreement at the end of the three-year term provided therein,
but not including non-renewal following any subsequent renewal of the term),
other than upon a change of control, death, disability or for cause, or (ii) Mr.
Moore terminates for good reason, other than in connection with a change of
control, Mr. Moore shall receive the following (except to the extent that any
payment would constitute an “excess parachute payment” under the IRS Code): (i)
an amount equal to (A) 12 months of then-current base salary and (B) his most
recent annual bonus; (ii) reimbursement of all previously unreimbursed expenses;
(iii) accelerated vesting of all unvested options that otherwise would have
vested within 24 months of the date of termination, with such accelerated
options and all other vested and unexercised options granted by the Company as
of the date of termination to be exercisable for a period of one year from the
date of termination of employment in accordance with the terms of the applicable
stock option plan and agreements; and (iv) the continuation of all medical and
dental benefits at the Company’s sole expense for a period of one year after
termination.
In the
event of any change of control, all stock options granted to Mr. Moore prior to
such change of control vest and remain exercisable until their respective
expiration dates.
The term
of Mr. Moore’s agreement would end immediately upon his death, or upon
termination by the Company for cause or disability (as defined in the agreement)
or by Mr. Moore for good reason. Upon termination due to Mr. Moore’s
death, all compensation due Mr. Moore under his agreement would
cease.
The
following table describes the potential payments and benefits upon termination
of employment for Mr. Moore, as if his employment terminated as of December 31,
2008, the last day of our last fiscal year:
12
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change of
control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
— | (1) | $ | 325,000 | (2) | $ | 650,000 | (5) | — | |||||||
|
Bonus
|
— | — | (3) | — | (3) | — | ||||||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
— | 6,088 | (4) | 6,088 | (4) | — | ||||||||||
|
Total
|
— | $ | 331,088 | $ | 656,088 | — | ||||||||||
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination.
|
|
(2)
|
The
$325,000 represents 12 months of Mr. Moore’s base
salary.
|
|
(3)
|
No
amounts are included for target bonus as there was no bonus for
2008.
|
|
(4)
|
The
$6,088 represents 12 months of health insurance
payments.
|
|
(5)
|
The
$650,000 represents 24 months of Mr. Moore’s base
salary.
|
William
J. McMahon
Under the
terms of the employment agreement with Mr. McMahon, the President and Chief
Executive Officer of our CoaLogix subsidiary, as modified by the Modification
Agreement signed with Mr. McMahon upon acquisition of SCR-Tech by the Company,
in the event of his involuntarily termination (as defined in the agreement)
other than for cause (as defined in the agreement), Mr. McMahon would be
entitled to receive a lump sum cash payment in an amount equal to two hundred
percent (200%) of his annual compensation (as defined in the
agreement). He would also receive 100% company-paid health, dental
and life insurance coverage at the same level of coverage as was provided to him
and his dependents immediately prior to the termination for up to a maximum of
two years from the date of his termination.
If Mr.
McMahon’s employment terminates by reason of his voluntary resignation (and is
not an involuntary termination), or if he is terminated for cause, then he would
not be entitled to receive severance or other benefits under his employment
agreement.
If the
Company terminates Mr. McMahon’s employment as a result of his disability (as
defined in the agreement), or his employment is terminated due to his death,
then he would not be entitled to receive severance or other benefits under his
employment agreement.
The
following table describes the potential payments and benefits upon termination
of employment for Mr. McMahon, as if his employment terminated as of December
31, 2008, the last day of our last fiscal year:
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change of
control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
— | (1) | $ | 447,192 | (2) | $ | 447,192 | (5) | — | |||||||
|
Bonus
|
— | 223,596 | (3) | 223,596 | (6) | — | ||||||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
— | 14,760 | (4) | 36,600 | (7) | — | ||||||||||
|
Total
|
— | $ | 685,548 | $ | 707,388 | — | ||||||||||
13
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination.
|
|
(2)
|
The
$447,192 represents 200% of Mr. McMahon’s base
salary
|
|
(3)
|
Represents
200% of Mr. McMahon’s target bonus.
|
|
(4)
|
Represents
12 months of subsidized health and dental insurance
payments
|
|
(5)
|
Represents
200% of Mr. McMahon’s base salary.
|
|
(6)
|
Represents
200% of Mr. McMahon’s target bonus.
|
|
(7)
|
Represents
24 months of subsidized health, dental and life insurance
payments.
|
Benny
Sela
Under the
terms of the employment agreement with Mr. Sela, the President and Chief
Executive Officer of our DSIT subsidiary, we are obligated to make certain
payments to fund in part our severance obligations to him. We are
required to pay Mr. Sela an amount equal to 150% of his last month’s salary
multiplied by the number of years (including partial years) that Mr. Sela has
worked for us. This severance obligation will be reduced by the
amount contributed by us to certain Israeli pension and severance funds pursuant
to Mr. Sela’s employment agreement. As of December 31, 2008, the
unfunded portion of these payments was $138,093. Mr. Sela would also
receive a lump sum payment equal to six months base salary in the event of a
voluntary resignation, and a lump sum payment equal to nine months salary in the
event of termination not for cause.
The
following table describes the potential payments and benefits upon termination
of employment for Mr. Sela, as if his employment terminated as of December 31,
2008, the last day of our last fiscal year:
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change
of control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
$ | 84,000 | (1) | $ | 126,000 | (2) | — | $ | 126,000 | (2) | ||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
$ | 381,360 | (3) | $ | 393,390 | (4) | — | $ | 393,390 | (4) | ||||||
|
Total
|
$ | 465,360 | $ | 519,390 | — | $ | 519,390 | |||||||||
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination. The $84,000 represents a lump sum payment of six
months salary due to Mr. Sela.
|
|
(2)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination. The $126,000 represents a lump sum payment of nine
months salary due to Mr. Sela.
|
|
(3)
|
Includes
$417,433 of severance pay based in accordance with Israeli labor law
calculated based on his last month’s salary multiplied by the number of
years (including partial years) that Mr. Sela worked for us multiplied by
150% in accordance with his contract. Of the $417,433 due Mr.
Sela, we have funded $279,350 in an insurance fund. Also
includes accumulated, but unpaid vacation days ($17,857), car benefits
($6,000) and payments for pension and education funds ($18,060) less
$78,000 of benefits waived in support of DSIT’s operations in
2007.
|
14
|
(4)
|
Includes
$417,443 of severance pay based in accordance with Israeli labor law
calculated based on his last month’s salary multiplied by the number of
years (including partial years) that Mr. Sela worked for us multiplied by
150% in accordance with his contract. Of the $417,443 due Mr. Sela,
we have funded $279,350 in an insurance fund. Also includes
accumulated, but unpaid vacation days ($17,857), car benefits ($9,000) and
payments for pension and education funds ($27,090), less $78,000 of
benefits waived by Mr. Sela in support of DSIT’s operations in
2007.
|
Ray
Simonson
Under the
terms of the employment agreement with Mr. Simonson, the Chief Executive Officer
of our Coreworx subsidiary, in the event that he is terminated without cause and
not in connection with a change of control (as defined in the agreement), he
would receive severance pay equal to (i) six months of his base salary plus (ii)
one additional month of his base salary for each full or partial year served
after September 1, 2005 through the date of termination, with such payments to
be made on a salary continuance basis for the period covered, during which time
his benefits under the agreement would also continue.
In the
event that he is terminated without cause and in connection with a change of
control, Mr. Simonson would be entitled to the severance payments described
above as well as an additional lump sum payment in an amount equal to (i) three
months of his base salary plus (ii) one additional month of his base salary for
each full or partial year served after September 1, 2005 through the date of
termination, up to a maximum of 12 months of base salary.
If Mr.
Simonson’s title, role in the Company, responsibilities or line of reporting
were to be materially altered by the Company, he would be entitled to treat his
employment as having been terminated without cause and would be entitled to
receive the severance payments described above.
If he is
terminated for just cause (as defined in the agreement), Mr. Simonson would not
be due any severance compensation.
The
following table describes the potential payments and benefits upon termination
of employment for Mr. Simonson, as if his employment terminated as of December
31, 2008, the last day of our last fiscal year:
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change of
control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
— | (1) | $ | 171,042 | (3) | $ | 171,042 | (3) | — | |||||||
|
Bonus
|
— | — | 119,730 | (4) | — | |||||||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
15,394 | (2) | 15,394 | (2) | 15,394 | (2) | — | |||||||||
|
Total
|
$ | 15,394 | $ | 186,436 | $ | 306,166 | — | |||||||||
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination.
|
|
(2)
|
Represents
unpaid vacation pay.
|
|
(3)
|
Represents
ten months of Mr. Simonson’s base
salary.
|
|
(4)
|
Represents
a lump-sum payment of seven months of Mr. Simonson’s base
salary.
|
15
Michael
Barth
Under the
terms of the employment arrangement with Mr. Barth, our Chief Financial Officer,
we are obligated to make certain payments to fund in part our severance
obligations to him. We would be required to pay Mr. Barth an amount equal
to 120% of his last month’s salary multiplied by the number of years (including
partial years) that Mr. Barth worked for us. This severance obligation,
which is customary for executives of Israeli companies, would be reduced by the
amount contributed by us to certain Israeli pension and severance funds pursuant
to Mr. Barth’s employment arrangement. In addition, the arrangement with
Mr. Barth provides for an additional payment equal to six times his last month’s
total compensation, payable at the end of his employment with us. As of
December 31, 2008, the unfunded portion of these payments was
$90,757.
The
following table describes the potential payments and benefits upon termination
of employment for Mr. Barth, as if his employment terminated as of December 31,
2008, the last day of our last fiscal year.
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change
of
control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
$ | 25,000 | (1) | $ | 75,000 | (2) | — | $ | 75,000 | (2) | ||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
$ | 30,489 | (3) | $ | 135,994 | (4) | — | $ | 135,994 | (4) | ||||||
|
Total
|
$ | 50,489 | $ | 210,994 | — | $ | 210,994 | |||||||||
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination. The $25,000 represents a lump sum payment of two
months salary due to Mr. Barth.
|
|
(2)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination. The $75,000 represents a lump sum payment of 6
months salary due to Mr. Barth upon termination without cause or by death
or disability.
|
|
(3)
|
Includes
$52,094 of severance pay based on the amounts funded in for Mr. Barth’s
severance in accordance with Israeli labor law. Also includes
accumulated, but unpaid vacation days ($19,018), car benefits ($2,000) and
payments for pension and education funds ($5,375), less $48,000 of
benefits waived in support of DSIT’s operations in
2007.
|
|
(4)
|
Includes
$142,851 of severance pay based in accordance with Israeli labor law
calculated based on his last month’s salary multiplied by the number of
years (including partial years) that Mr. Barth worked for us
multiplied by 120% in accordance with his contract. Of the
$142,851 due Mr. Barth, we have funded $52,094 in an insurance
fund. Also includes accumulated, but unpaid vacation days
($19,018), car benefits ($6,000) and payments for pension and education
funds ($16,125), less $48,000 of benefits waived in support of DSIT’s
operations in 2007.
|
16
Joe
B. Cogdell, Jr.
Under the
terms of the employment agreement with Mr. Cogdell, Vice President, General
Counsel and Secretary of each of the Company and CoaLogix, if he were to be
terminated as a result of an involuntary termination without cause (each as
defined in the agreement), Mr. Cogdell would be entitled to receive, as
severance, (i) an amount in cash equal to twice his annual compensation
(determined by reference to base salary and bonus) (the “Cash Severance Amount”)
payable over 24 months and (ii) for up to 18 months post-termination,
CoaLogix-subsidized COBRA premiums for continuing participation by Mr. Cogdell
and his eligible dependents in the companies’ group health plans such that Mr.
Cogdell is required to pay no more than an active employee. If,
however, any such termination were to occur in connection with a change of
control (as defined in the agreement), the Cash Severance Amount would be
payable in one lump sum and the employee benefits obligation would be increased
such that CoaLogix would be fully responsible for the cost thereof and the
benefits would be broadened to include health, dental and life insurance
coverage to the extent Mr. Cogdell and his eligible dependents participated in
the same prior to the change of control. Mr. Cogdell would not be
entitled to severance under the employment agreement in the event that his
employment is terminated for cause or due to voluntary resignation, death or
disability (as defined in the agreement).
|
Circumstances of Termination
|
||||||||||||||||
|
Payments and benefits
|
Voluntary
resignation
|
Termination
not for cause
|
Change of
control
|
Death or
disability
|
||||||||||||
|
Compensation:
|
||||||||||||||||
|
Base
salary
|
— | (1) | $ | 600,000 | (2) | $ | 600,000 | (2) | — | |||||||
|
Bonus
|
— | $ | 180,000 | (3) | $ | 180,000 | (3) | — | ||||||||
|
Benefits
and perquisites:
|
||||||||||||||||
|
Perquisites
and other personal benefits
|
— | 22,145 | (4) | 27,453 | (5) | — | ||||||||||
|
Total
|
— | $ | 802,145 | $ | 807,453 | — | ||||||||||
|
(1)
|
Assumes
that there is no earned but unpaid base salary at the time of
termination.
|
|
(2)
|
Represents
200% of Mr. Cogdell’s annual
compensation.
|
|
(3)
|
Represents
200% of Mr. Cogdell’s targeted
bonus.
|
|
(4)
|
Represents
18 months of subsidized health and dental insurance
payments.
|
|
(5)
|
Represents
18 months of health, dental and life insurance
payments.
|
17
Director
Compensation in 2008
|
Name
|
Fees
Earned or
Paid in
Cash ($)
|
Option
Awards ($)
(1)
|
All Other
Compensation
($)
|
Total ($)
|
||||||||||||
|
Scott
Ungerer
|
45,000 | 37,462 | — | 82,462 | ||||||||||||
|
Joe
Musanti
|
58,000 | (2) | 36,105 | — | 94,105 | |||||||||||
|
George
Morgenstern
|
49,000 | 22,630 | 75,000 | (3) | 146,630 | |||||||||||
|
Samuel
M. Zentman
|
49,000 | 36,932 | 8,000 | (4) | 93,932 | |||||||||||
|
Richard
J. Giacco
|
58,000 | (5) | 37,557 | — | 95,557 | |||||||||||
|
Richard
Rimer
|
48,000 | 35,972 | — | 83,972 | ||||||||||||
|
(1)
|
Reflects
the dollar amount recognized for financial statement reporting purposes
for the fiscal year ended December 31, 2008 in accordance with FAS 123(R),
and thus includes amounts from awards granted in and prior to
2008. All options awarded to directors in 2008 remained
outstanding at fiscal year-end.
|
|
(2)
|
Includes $10,000
for Mr. Musanti’s service as the Chairman of the Audit
Committee.
|
|
(3)
|
Mr.
Morgenstern received a non-accountable expense allowance of $75,000 to
cover travel and other expenses pursuant to a consulting
agreement.
|
|
(4)
|
Mr.
Zentman received $8,000 for services rendered with respect to his
oversight of the Company’s investment in Local Power
Inc.
|
|
(5)
|
Includes
$10,000 for Mr. Giacco’s service as the lead director for compensation
matters.
|
Compensation
of Directors
In
October 2007, we agreed that each of our non-employee directors would be paid an
annual cash retainer of $40,000 payable quarterly in advance, as well as meeting
fees for Board and Committee meetings of $1,000 per meeting, and an additional
annual cash retainer of $10,000 for each of the Chairman of the Audit Committee
and the lead director for compensation matters.
Our 2006
Stock Option Plan for Non-Employee Directors, which was adopted in February 2007
and amended and restated in November 2008, provides for formula grants to
non-employee directors equal to an option to purchase (i) 25,000 shares of our
Common Stock upon a member’s initial appointment or election to the Board of
Directors and (ii) 10,000 shares of our Common Stock to each director, other
than newly appointed or elected directors, immediately following each annual
meeting of stockholders. The initial grant to purchase 25,000 shares
of our Common Stock vests one-third per year for each of the three years
following the date of appointment or election and the annual grant to purchase
10,000 shares vests one year from the date of grant. Both options
shall be granted at an exercise price equal to the closing price on NASDAQ on
the day preceding the date of grant and shall be exercisable until the earlier
of (a) seven years from the date of grant or (b) 18 months from the date that
the director ceases to be a director, officer, employee, or
consultant. The plan also provides for non-formula grants at the
Board’s discretion. The maximum number of shares of our Common Stock
to be issued under the plan is 400,000. The Plan is administered by
the Board of Directors.
Consulting
Agreement with Mr. Morgenstern
Mr.
Morgenstern, our Chairman Emeritus, has been retained as a consultant by our
Company since March 2006 primarily to provide oversight of our Israeli
activities. Mr. Morgenstern’s consulting agreement, as amended to
date, was to expire on March 31, 2009, but was extended on March 25, 2009 and
now expires on March 31, 2011, provides for the payment of an annual consulting
fee of $1.00 and a non-accountable expense allowance of $75,000 per
year.
18
Certain
Related Party Transactions
During
2008, we paid approximately $780,000 for legal services rendered and
reimbursement of out-of-pocket expenses to Eilenberg Krause & Paul LLP, a
law firm in which Sheldon Krause, our former Secretary and General Counsel, is a
member. Such fees related to services rendered by Mr. Krause and
other members and employees of his firm, as well as certain special and local
counsel retained and supervised by his firm who performed services on our
behalf. Mr. Krause is the son-in-law of George Morgenstern, our
Chairman Emeritus, who up until March 2006, also served as our President and
Chief Executive Officer.
In August
2006, as part of our initial investment in Paketeria, we also entered into a
Stock Purchase Agreement with two shareholders of Paketeria—one of whom is our
President and Chief Executive Officer and the other is one of our
directors. Pursuant to that agreement, we were entitled through
August 2007 to purchase the shares of Paketeria equally held by the two
Paketeria shareholders for an aggregate purchase price of the U.S. dollar
equivalent on the date of purchase of €598,000 (approximately $776,000 at the
then exchange rate), payable in our Common Stock and warrants on the same terms
as our July 2006 private placement. The option was initially extended
by both shareholders to November 5, 2007 and again by our President and Chief
Executive Officer for his share (€299,000 or approximately $416,000 at December
31, 2008 exchange rates) to March 31, 2009. At the December 31, 2008
exchange rate, the exercise of the option would result in the issuance of
approximately 157,000 shares of our Common Stock and warrants exercisable for
approximately 39,000 shares of Common Stock. The warrants would have
an exercise price of $2.78 per share and be exercisable for five years from
their grant date.
It is the
policy of the Company that before a transaction with a related party will be
entered into, it must receive the approval of a majority of the disinterested
members of the Board of Directors. In determining whether or not a
transaction involves a related party, we apply the definition provided under
Item 404 of Regulation S-K.
All of
the above transactions received the unanimous approval of the disinterested
members of our Board of Directors.
Independent
Registered Public Accounting Firm
In
January 2004, we engaged Kesselman & Kesselman, a member of
PricewaterhouseCoopers International Limited as our independent auditors for the
fiscal year ended December 31, 2003. They have continued to serve as
our independent auditors for the three most recently completed fiscal years
ended December 31, 2006, December 31, 2007 and December 31, 2008. A
representative of Kesselman & Kesselman is not expected to attend the Annual
Meeting.
Accounting
Fees
Aggregate
fees billed by our principal accountant during the last two fiscal years are as
follows:
|
2007
|
2008
|
|||||||
|
Audit
Fees
|
$ | 237,000 | $ | 323,000 | ||||
|
Audit-
Related Fees
|
— | 14,000 | ||||||
|
Tax
Fees
|
8,000 | 24,000 | ||||||
|
Other
Fees
|
25,000 | 27,000 | ||||||
|
Total
|
$ | 270,000 | $ | 388,000 | ||||
Audit Fees were for
professional services rendered for the audits of the consolidated financial
statements of the Company, statutory and subsidiary audits, assistance with
review of documents filed with the SEC, consents, and other assistance required
to be performed by our independent accountants.
19
Audit-Related Fees were for
the analysis of the opening balance sheet of Coreworx.
Tax Fees were for tax
planning strategies and tax audit related work performed by our independent
accountants.
Other Fees were for services
related to reviewing registration statements, filings related to pro-forma
statements and due diligence procedures.
Audit
Committee Pre-Approval Policies and Procedures
The Audit
Committee’s current policy is to pre-approve all audit and non-audit services
that are to be performed and fees to be charged by our independent auditor to
assure that the provision of these services does not impair the independence of
the auditor. The Audit Committee was in compliance with the
requirements of the Sarbanes-Oxley Act of 2002 regarding the pre-approval of all
audit and non-audit services and fees by the mandated effective date of May 6,
2003. The Audit Committee pre-approved all audit and non-audit
services rendered by our independent auditor in 2008 and
2007.
STOCKHOLDER
PROPOSALS FOR THE 2010 ANNUAL MEETING
Stockholders
may present proposals for inclusion in the 2010 proxy statement for our annual
meeting in 2010, provided that (in addition to other applicable requirements)
such proposals are received by the Company in writing at its principal executive
offices no later than February 24, 2010.
Pursuant
to the By-laws of the Company, stockholders who wish to nominate any person for
election to the Board of Directors or bring any other business before the 2010
Annual Meeting must generally give notice thereof to the Company at its
principal executive offices not less than 60 days nor more than 90 days before
the date of the meeting. All nominations for director or other
business sought to be transacted that are not timely delivered to the Company,
or that fail to comply with the requirements set forth in the Company’s By-laws,
will be excluded from the Annual Meeting, as provided in the
By-laws. A copy of the By-laws of the Company is available upon
request from the Secretary of the Company, 4 West Rockland Road, Montchanin,
Delaware 19710.
OTHER
MATTERS
The Board
of Directors of the Company is not aware of any other matters to be presented
for action at the Annual Meeting other than those listed in the accompanying
Notice of Annual Meeting and described herein. If any other matters
not described herein should properly come before the meeting for stockholder
action, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in respect thereof in accordance with the Board of
Directors’ recommendations.
ANNUAL
REPORT ON FORM 10-K
A copy of
the Company’s Annual Report covering the fiscal year ended December 31, 2008,
including audited financial statements, is enclosed with this Proxy
Statement. Such report is not incorporated in this Proxy Statement
and is not a part of the proxy soliciting material.
20
SOLICITATION
OF PROXIES
The cost
of soliciting proxies for the Annual Meeting will be borne by the
Company. In addition to the use of the mails, proxies may be
solicited by in person interview, Internet, telephone, e-mail or
facsimile. The Company will, upon request and in accordance with
applicable regulation, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of
stock.
|
By
Order of the Board of Directors,
|
|
JOE
B. COGDELL, JR.
|
|
Secretary
|
June 22,
2009
Montchanin,
Delaware
21
