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
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Filed by a Party other than the
Registrant
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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
o
Soliciting
Material Pursuant to §240.14a-12
RENEGY HOLDINGS, 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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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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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
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which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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NOTICE OF 2008 ANNUAL MEETING
OF STOCKHOLDERS
to Be Held on
September 25, 2008
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 2008 Annual Meeting of
Stockholders (the Annual Meeting) of Renegy
Holdings, Inc., a Delaware corporation (the Company,
Renegy, we, us, or
our), will be held on September 25, 2008, at
10:00 a.m., local time, at the principal executive offices
of Renegy Holdings, Inc., 60 E. Rio Salado
Parkway, Suite 1012, Tempe, Arizona 85281 for the following
purposes:
1. To elect one Class I Director of the Company to
serve a three-year term.
2. To approve the amended and restated 2007 Equity
Incentive Plan.
3. To transact such other business as may properly come
before the Annual Meeting or any postponement(s) or
adjournment(s) thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice of Annual Meeting of
Stockholders.
Only stockholders of record at the close of business on
August 1, 2008 are entitled to notice of, and to vote at,
the Annual Meeting.
All stockholders are cordially invited to attend the Annual
Meeting in person. However, to assure your representation at the
Annual Meeting, you are urged to vote your Proxy as promptly as
possible by following the voting instructions included on the
enclosed proxy card. Any stockholder attending the Annual
Meeting may vote in person even if he or she has previously
voted a Proxy.
Sincerely,
Robert M. Worsley
Chairman, President, Chief Executive Officer
and Director
Tempe, Arizona
September 2, 2008
TABLE OF CONTENTS
2008
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the
solicitation by Renegy Holdings, Inc. (the Company,
Renegy, we, us, or
our) of proxies to be used at Renegys 2008
Annual Meeting of Stockholders (the Annual Meeting)
to be held on September 25, 2008, at 10:00 a.m., local
time, at Renegy Holdings, Inc., 60 E. Rio Salado
Parkway, Suite 1012, Tempe, Arizona 85281, or any
postponement(s) or adjournment(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Companys principal executive offices are
located at 60 E. Rio Salado Parkway, Suite 1012,
Tempe, Arizona 85281, and its telephone number is
480-556-5555.
These Proxy solicitation materials and the Annual Report on
Form 10-KSB
for the year ended December 31, 2007 are being mailed on or
about September 2, 2008 to all stockholders entitled to
vote at the Annual Meeting.
Background
Renegy was formed through a merger transaction, which combined
Catalytica Energy Systems, Inc. (Catalytica) with
the renewable energy divisions of NZ Legacy LLC (the
Merger Transaction). The Merger Transaction, which
closed on October 1, 2007, is described in more detail in
the section entitled Transactions with Related
Persons in this Proxy Statement. The 2008 Annual Meeting
of Stockholders will be Renegys first annual meeting of
stockholders.
Who May
Vote
Only stockholders of record at the close of business on
August 1, 2008 (the Record Date) are entitled
to receive notice of and to vote at the Annual Meeting. The
outstanding voting securities of the Company as of
August 1, 2008 consisted of 6,207,812 shares of common
stock. Every stockholder of record on the Record Date is
entitled, for each share held, to one vote on each proposal or
item that comes before the Annual Meeting.
Voting
Your Proxy
If a broker, bank or other nominee holds your shares, you will
receive instructions from them that you must follow in order to
have your shares voted. The instructions from your broker, bank
or other nominee will also provide details regarding Internet
and telephone voting. If a bank, broker or other nominee holds
your shares and you wish to attend the meeting and vote in
person, you must obtain a legal proxy from the
record holder of the shares giving you the right to vote the
shares.
If you hold your shares in your own name as a holder of record,
you may instruct the proxy holders how to vote your common stock
by following the voting instructions included in the enclosed
proxy card. You can appoint a proxy to vote your shares
(i) by using the Internet
(http://www.proxyvote.com),
(ii) by calling the toll-free telephone number
(1-800-690-6903),
or (iii) by completing, signing and dating the proxy card
where indicated and by mailing or otherwise returning the card
to us by 10:00 a.m. Arizona time on September 25,
2008. Telephone and Internet voting facilities for stockholders
of record will be available 24 hours a day and will close
at 11:59 p.m., Eastern Time, on September 24, 2008. Of
course, you may also choose to attend the meeting and vote your
shares in person.
The proxy holders will vote your shares in accordance with your
instructions. If you sign and return a proxy card without giving
specific voting instructions, your shares will be voted as
recommended by our Board of Directors.
Revoking
Your Voting Instructions to Your Proxy Holders
If you are a holder of record and you vote by proxy using any
method, you may later revoke your proxy instructions by:
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sending a written statement to that effect to Renegy Holdings,
Inc., Attn: Corporate Secretary, 60 E. Rio Salado
Parkway, Suite 1012, Tempe, Arizona 85281;
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submitting a proxy card with a later date and signed as your
name appears on the stock account;
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voting at a later time by telephone or the Internet; or
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voting in person at the Annual Meeting.
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If a broker, bank or other nominee holds your shares and you
vote by proxy, you may later revoke your proxy instructions by
informing the broker, bank or other nominee in accordance with
that entitys procedures.
Cost of
This Proxy Solicitation
The cost of this solicitation will be borne by the Company. The
Company may reimburse expenses incurred by brokerage firms and
other persons representing beneficial owners of shares in
forwarding solicitation material to beneficial owners. Proxies
may be solicited by certain of the Companys directors,
officers and employees, without additional compensation,
personally or by telephone, letter, electronic mail or facsimile.
Required
Vote; Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the
Annual Meeting is a majority of the votes eligible to be cast by
holders of shares of common stock issued and outstanding on the
Record Date, which number is 3,103,907 shares of common
stock, present or represented by proxy at the Annual Meeting.
Shares of common stock present at the Annual Meeting or
represented by proxy, including shares which abstain or do not
vote with respect to one or more of the matters presented for
stockholder approval, will be counted for purposes of
determining whether a quorum is present at the Annual Meeting.
The affirmative vote of the holders of a plurality of the shares
of common stock voting on the matter is required for the
election of directors. The affirmative vote of the holders of a
majority of the shares of common stock voting on the matter is
required to approve the Companys amended and restated 2007
Equity Incentive Plan.
Shares which abstain from voting as to a particular matter and
shares held in street name by brokers or nominees
who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular
matter will not be voted in favor of such matter and will not be
counted as shares voting or votes cast on such matter.
Accordingly, abstentions and broker non-votes will
have no effect with respect to the voting on any of these
proposals.
Delivery
of Documents to Stockholders Sharing an Address
Certain stockholders who share an address are being delivered
only one copy of this Proxy Statement and the Companys
2007 Annual Report on
Form 10-KSB
unless the Company or one of its mailing agents has received
contrary instructions.
Upon the written or oral request of a stockholder at a shared
address to which a single copy of the Companys Proxy
Statement and 2007 Annual Report on
Form 10-KSB
was delivered, the Company will promptly deliver a separate copy
of such documents to such stockholder. Written requests should
be made to Renegy Holdings, Inc., Attention: Investor Relations,
1061 Alameda de las Pulgas, Belmont, California 94002. Oral
requests may be made by calling the Investor Relations
Department of the Company at
(650) 631-2847.
2
Stockholders sharing an address who are receiving multiple
copies of the Companys Proxy Statement and 2007 Annual
Report on
Form 10-KSB
may request delivery of a single copy by writing to the address
above or calling the telephone number above.
Deadline
for Receipt of Stockholder Proposals
Stockholders may present proposals for action at a future
meeting only if they comply with the requirements of the proxy
rules established by the Securities and Exchange Commission, or
SEC, and our Bylaws. Stockholder proposals that are intended to
be included in our Proxy Statement and form of Proxy relating to
the meeting for our 2009 Annual Meeting of Stockholders under
rules set forth in the Securities Exchange Act of 1934, as
amended, or the Securities Exchange Act, must be received by us
no later than May 5, 2009 to be considered for inclusion.
If a stockholder intends to submit a proposal or nomination for
director for our 2009 Annual Meeting of Stockholders that is not
to be included in Renegys Proxy Statement and form of
Proxy relating to the meeting, the stockholder must give us
notice in accordance with the requirements set forth in
Renegys Bylaws no later than May 5, 2009.
Renegys Bylaws require that certain information and
acknowledgments with respect to the proposal and the stockholder
making the proposal be set forth in the notice. A copy of the
relevant Bylaw provision is available upon written request to
Renegy Holdings, Inc., 60 E. Rio Salado Parkway,
Suite 1012, Tempe, Arizona 85281, Attention: Corporate
Secretary. You can also access our SEC filings, including our
Annual Report on
Form 10-KSB,
on the SECs website located at www.sec.gov and on our
website at www.renegy.com.
Security
Ownership of Principal Stockholders and Management
The following table sets forth, as of July 31, 2008 (except
for the outstanding shares, which is as of August 9, 2008),
certain information with respect to the beneficial ownership of
the Companys common stock by (i) each person or
entity known by the Company to own beneficially more than five
percent of the outstanding shares of the Companys common
stock, (ii) each director or nominee for director of the
Company, (iii) each of the Companys Named Executive
Officers listed in the Summary Compensation Table and
(iv) all current Executive Officers and directors as a
group.
3
The table is based on information supplied by our officers,
directors, principal stockholders and Schedules 13F, 13D, 13G
and other documents filed with the SEC. The number of shares of
our common stock beneficially owned by each 5% stockholder,
director or executive officer is determined under the rules of
the SEC. Under the SEC rules, beneficial ownership includes any
shares as to which the individual or entity has sole or shared
voting power or investment power and also includes any shares of
common stock that the individual or entity has the right to
acquire within 60 days after July 31, 2008 through the
exercise of stock options, warrants or other rights to acquire
shares of the Companys common stock, and any reference in
the footnotes to this table to shares subject to stock options,
warrants or other rights to acquire common stock refers only to
such stock options, warrants and rights that are so exercisable.
For purposes of computing the percentage of outstanding shares
of our common stock held by each individual or entity, all
shares of common stock subject to options, warrants and similar
rights currently exercisable or exercisable within 60 days
after July 31, 2008 are deemed to be outstanding for the
purpose of computing the percentage ownership of the individual
or entity holding such options, warrants and similar rights, but
are not deemed to be outstanding for computing the percentage
ownership of any other individual or entity. Unless otherwise
indicated below, we believe that each stockholder named in the
table has sole or shared voting and investment power with
respect to all shares beneficially owned, subject to applicable
community property laws. The inclusion in the table of any
shares deemed beneficially owned does not constitute an
admission of beneficial ownership of those shares. Unless
otherwise indicated in the table, the address of each individual
or entity listed in the table is Renegy Holdings, Inc.,
60 E. Rio Salado Parkway, Suite 1012, Tempe,
Arizona 85281.
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Shares of Common Stock Beneficially Owned
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Percentage
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Name of Person or Identity of Group
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Number
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Ownership(1)
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AWM Investment Company, Inc.(2)
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547,241
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8.82
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%
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153 East 53rd Street, 55th floor
New York, New York 10022
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Metalmark Capital LLC(3)
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471,786
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7.60
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%
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1177 Avenue of the Americas
New York, New York 10036
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Farallon Capital Management, L.L.C.(4)
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321,129
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5.17
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%
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One Maritime Plaza, Suite 2100
San Francisco, CA 94111
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Robert M. Worsley and Christi M. Worsley Revocable Trust(5)
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4,377,498
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62.25
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%
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3418 N. Val Vista Drive
Mesa, Arizona 85213
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Robert M. Worsley(6)
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4,378,212
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62.25
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%
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Robert W. Zack(7)
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84,425
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1.34
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%
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Ricardo B. Levy(8)
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68,072
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1.09
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%
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Richard A. Abdoo(9)
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15,215
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*
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Hugh W. Smith(10)
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*
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Scott K. Higginson(11)
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7,143
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*
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William B. Ellis(12)
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11,639
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*
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Susan F. Tierney(13)
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11,447
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*
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All current executive officers and Directors as a group
(8 persons)(14)
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4,576,153
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63.96
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%
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*
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Less than 1%
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(1)
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Based upon 6,207,812 shares of common stock outstanding as
of August 9, 2008.
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(2)
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Based on information as of June 30, 2008 as set forth in a
Schedule 13F filed on August 15, 2008, and on
information as of December 31, 2007 as set forth in a
Schedule 13G filed on February 13, 2008. Includes
shares of common stock owned by Special Situations Cayman Fund,
L.P. (SSCF), Special Situations Fund III, L.P.
(SSF) and Special Situations Fund III QP, L.P.
(SSFQ). AWM Investment Company, Inc.
(AWM) serves as general partner of SSCF, SSF and
SSFQ and may be deemed to be the beneficial owner of the shares
of
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Company common stock held by these entities. Austin W. Marxe
(Marxe) and David M. Greenhouse
(Greenhouse) are the controlling principals of AWM,
the general partner of and investment adviser to SSCF. AWM also
serves as the general partner of MGP Advisers Limited
Partnership, the general partner of and investment adviser to
SSF and the general partner of SSFQ. AWM serves as the
investment adviser to SSFQ.
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(3)
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Based solely on information as of October 1, 2007 as set
forth in a Schedule 13D filed on October 11, 2007.
Consists of 427,969 shares owned by Morgan Stanley Capital
Partners III, L.P. (MSCP III) and 43,817 shares
owned by MSCP III 892 Investors, L.P. (MSCP III
892). Pursuant to a subadvisory agreement between certain
affiliates of Morgan Stanley and Metalmark Capital LLC
(Metalmark) and Metalmark Subadvisor LLC, Metalmark
agreed to manage MSCP III and MSCP III 892 on a subadvisory
basis, and as a result, may be deemed to beneficially own
427,969 shares. Metalmark is an independent private equity
firm managed by Howard I. Hoffen and senior team members
formerly from Morgan Stanley Capital Partners. Mr. Hoffen
disclaims beneficial ownership of all shares owned by these
entities, except to the extent of his pecuniary interest therein.
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(4)
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Based on information as of June 30, 2008 as set forth in a
Schedule 13F filed on August 14, 2008, and on
information as of October 1, 2007 as set forth in a
Schedule 13G filed on October 11, 2007. The aggregate
321,129 shares are owned directly by Farallon Capital
Partners, L.P., Farallon Capital Institutional Partners, L.P.,
Farallon Capital Institutional Partners II, L.P., Farallon
Capital Institutional Partners III, L.P. and Tinicum Partners,
L.P. (collectively, the Partnerships) and by a
discretionary account (the Managed Account) managed
by Farallon Capital Management, L.L.C. (FCMLLC). As
the general partner to each of the Partnerships, Farallon
Partners, L.L.C. (FPLLC) may be deemed to be the
beneficial owner of the Companys securities held by each
of the Partnerships. FCMLLC, as the registered investment
advisor to the Managed Account, may be deemed to be the
beneficial owner of the Companys securities held by the
Managed Account. Each of Noonday G.P. (U.S.), L.L.C.
(NGPUS) and Noonday Asset Management, L.P.
(NAMLP), as a sub-investment adviser to the
Partnerships and the Managed Account, may be deemed to be the
beneficial owner of the Companys securities held by the
Partnerships and the Managed Account. As the general partner of
NAMLP, Noonday Capital, L.L.C. (NCLLC) may be deemed
to be the beneficial owner of the Issuers securities held
by the Partnerships and the Managed Account.
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(5)
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Includes (i) 3,553,157 shares of common stock held by
the Robert M. Worsley and Christi M. Worsley Revocable Trust
(the Trust), and (ii) 824,341 shares of
common stock issuable pursuant to warrants held by the Trust
which are exercisable within 60 days of July 31, 2008.
Robert M. Worsley and his spouse, Christi M. Worsley,
are the trustees of the Trust.
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(6)
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Includes (i) 3,553,157 shares of common stock held by
the Robert M. Worsley and Christi M. Worsley Revocable Trust
(the Trust), of which Mr. Worsley serves as a
trustee, (ii) 824,341 shares of common stock issuable
pursuant to warrants held by the Trust which are exercisable
within 60 days of July 31, 2008, and
(iii) 714 shares of common stock issuable upon
exercise of options held by Mr. Worsley which are
exercisable within 60 days of July 31, 2008. In
January 2008, Mr. Worsley was granted 59,400 options under
the 2007 Equity Incentive Plan which vest ratably over four
years. However, prior to stockholder approval of such plan,
vested shares are not exercisable. Accordingly, vested shares as
of July 31, 2008 and shares vesting within 60 days of
July 31, 2008 which were issued under the 2007 Equity
Incentive Plan were not included in the number of shares of
common stock beneficially owned by Mr. Worsley as of
July 31, 2008. Had the 2007 Equity Incentive Plan been
approved by the date of this filing, 7,425 options would have
been included as vested as of July 31, 2008 and 2,475
additional options would have been included as vested and
exercisable within 60 days of July 31, 2008.
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(7)
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Includes (i) 9,660 shares of common stock held by
Mr. Zack and (ii) 74,765 shares of common stock
issuable upon exercise of options held by Mr. Zack, which
are exercisable within 60 days of July 31, 2008. In
January 2008, Mr. Zack was granted 76,989 options
under the 2007 Equity Incentive Stock Plan which vest ratably
over four years. However, prior to stockholder approval of such
plan, vested shares are not exercisable. Accordingly, vested
shares as of July 31, 2008 and shares vesting within
60 days of July 31, 2008 which were issued under the
2007 Equity Incentive Plan were not included in the number of
shares of common stock beneficially owned by Mr. Zack as of
July 31, 2008. Had the 2007 Equity Incentive Plan been
approved by the date of this filing, 9,900 options would have
been included as vested as of July 31, 2008 and 3,300
additional options would have been included as vested and
exercisable within 60 days of July 31, 2008.
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(8)
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Includes (i) 2,165 shares held by Dr. Levy,
(ii) 39,807 shares of common stock held by the Levy
Family Trust, of which Dr. Levy serves as trustee,
(iii) 958 shares of common stock held by the Polly
Jean Cusumano Trust, of which Dr. Levy serves as trustee,
and (iv) 25,142 shares of common stock issuable upon
exercise of options held by Dr. Levy, which are exercisable
within 60 days of July 31, 2008. Dr. Levy
disclaims beneficial ownership of the shares owned by the Polly
Jean Cusumano Trust. In March 2008, Dr. Levy was granted
20,325 options under the 2007 Equity Incentive Plan which vested
immediately. However, prior to stockholder approval of such
plan, vested shares are not exercisable. Accordingly, vested
shares which were issued under the 2007 Equity Incentive Plan
were not included in the number of shares of common stock
beneficially owned by Dr. Levy as of July 31, 2008.
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(9)
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Includes (i) 9,430 shares held by Mr. Abdoo,
(ii) 786 shares held by the Richard A. Abdoo and Joan
F. Abdoo revocable trust, and (iii) 4,999 shares of
common stock issuable upon exercise of options by
Mr. Abdoo, which options are exercisable within
60 days of July 31, 2008. In March 2008,
Mr. Abdoo was granted 20,325 options under the 2007 Equity
Incentive Plan which vested immediately. However, prior to
stockholder approval of such plan, vested shares are not
exercisable. Accordingly, vested shares which were issued under
the 2007 Equity Incentive Plan were not included in the number
of shares of common stock beneficially owned by Mr. Abdoo
as of July 31, 2008.
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(10)
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In March 2008, Mr. Smith was granted 100,000 options under
the 2007 Equity Incentive Plan which vest ratably over four
years. However, prior to stockholder approval of such plan,
vested shares are not exercisable. Accordingly, vested shares as
of July 31, 2008 and shares vesting within 60 days of
July 31, 2008 which were issued under the 2007 Equity
Incentive Plan were not included in the number of shares of
common stock beneficially owned by Mr. Smith as of
July 31, 2008. Had the 2007 Equity Incentive Plan been
approved by the date of this filing, 8,333 options would have
been included as vested as of July 31, 2008 and 4,167
additional options would have been included as vested and
exercisable within 60 days of July 31, 2008.
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(11)
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Includes 7,143 shares of common stock held by
Mr. Higginson. In October 2007, Mr. Higginson was granted
7,143 options under the 2007 Equity Incentive Plan, which vested
immediately. In January 2008, Mr. Higginson was granted an
additional 26,400 options under the 2007 Equity Incentive Plan
which vest ratably over four years. However, prior to
stockholder approval of such plan, vested shares are not
exercisable. Accordingly, vested shares as of July 31, 2008
and shares vesting within 60 days of July 31, 2008
which were issued under the 2007 Equity Incentive Plan were not
included in the number of shares of common stock beneficially
owned by Mr. Higginson as of July 31, 2008. Had the
2007 Equity Incentive Plan been approved by the date of this
filing, 10,443 options would have been included as vested as of
July 31, 2008 and 1,100 additional options would have been
included as vested and exercisable within 60 days of
July 31, 2008.
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(12)
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Includes (i) 3,929 shares of common stock held by
Dr. Ellis and (ii) 7,710 shares of common stock
issuable upon exercise of options by Dr. Ellis, which are
exercisable within 60 days of July 31, 2008. In March
2008, Dr. Ellis was granted 20,325 options under the 2007
Equity Incentive Plan which vested immediately. However, prior
to stockholder approval of such plan, vested shares are not
exercisable. Accordingly, vested shares which were issued under
the 2007 Equity Incentive Plan were not included in the number
of shares of common stock beneficially owned by Dr. Ellis
as of July 31, 2008.
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(13)
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Includes (i) 2,165 shares held by Dr. Tierney and
(ii) 9,282 shares of common stock issuable upon
exercise of options by Dr. Tierney, which are exercisable
within 60 days of July 31, 2008. In March 2008,
Dr. Tierney was granted 20,325 options under the 2007
Equity Incentive Plan which vested immediately. However, prior
to stockholder approval of such plan, vested shares are not
exercisable. Accordingly, vested shares which were issued under
the 2007 Equity Incentive Plan were not included in the number
of shares of common stock beneficially owned by Dr. Tierney
as of July 31, 2008.
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(14)
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Includes 122,612 shares of common stock issuable upon
exercise of options and 824,341 shares of common stock
issuable upon exercise of warrants by current executive officers
and directors, which are exercisable within 60 days of
July 31, 2008.
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6
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys Executive Officers, directors and persons who own
more than 10% of a registered class of the Companys equity
securities to file reports of ownership and changes in ownership
with the SEC.
Executive Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms and
amendments thereto received by it, or written representations
from certain reporting persons, the Company believes that,
during fiscal year 2007, all reporting persons complied with
Section 16(a) filing requirements applicable to them.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Directors
and Nominees for Director
Our Board of Directors currently consists of seven
directorships, of which two are currently vacant. In accordance
with our Certificate of Incorporation, the Board is divided into
three classes, with each director serving a three-year term, or
until his or her successor has been duly appointed or elected
and qualified, and one class being elected at each years
Annual Meeting of Stockholders. There is currently one vacancy
in each of the Class I and Class II classes.
The Class I directors consists of two directors. One
Class I director will be elected at the Annual Meeting for
a term of three years. The other Class I directorship is
currently vacant. The Board has chosen to leave the vacancy
unfilled to allow the Nominating / Governance
Committee of the Board additional time to identify a suitable
candidate for Board membership. Proxies cannot be voted for a
greater number of persons than the number of nominees named.
Each director elected at the Annual Meeting will serve until his
or her term expires at the Annual Meeting of Stockholders in
2011, or until his or her successor has been duly appointed or
elected and qualified. The Class I nominee is
Mr. Richard A. Abdoo.
The nominee has agreed to serve if elected, and management has
no reason to believe that the nominee will be unavailable to
serve. In the event a nominee is unable or declines to serve as
a director at the time of the Annual Meeting, the Proxies will
be voted for any nominee who may be designated by our present
Board of Directors to fill the vacancy. Unless otherwise
instructed, the Proxy holders will vote the Proxies received by
them FOR the nominee named above.
Vote
Required and Recommendation of our Board of Directors
If a quorum is present or represented by Proxy at the Annual
Meeting, the nominee(s) receiving the highest number of
affirmative votes of the shares entitled to be voted shall be
elected to our Board of Directors. Votes withheld from any
director are counted for purposes of determining the presence or
absence of a quorum, but have no other legal effect under
Delaware law. Abstentions and broker non-votes will be counted
for purposes of determining whether a quorum is present at the
Annual Meeting, but will not have any effect on the outcome of
the voting in the election of directors. See Required
Vote; Quorum; Abstentions; Broker Non-Votes.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE CLASS I DIRECTOR
NOMINEE LISTED BELOW.
7
Information
About Our Directors
The following table sets forth for each nominee to be elected at
the Annual Meeting and for each director whose term of office
will extend beyond the Annual Meeting, the year each such
nominee or director was first elected as a director, the
positions currently held by each nominee or director with us,
the year each nominees or directors term will expire
and the class of director of each nominee or director:
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Directors Name and
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Year Director First
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Position(s) Held with the
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Year Term
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Class of
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Became a Director
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Company
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Will Expire
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Director
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Nominees:
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Richard A. Abdoo (2007)
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Director
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2008
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I
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Continuing Directors:
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Robert M. Worsley (2007)
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Chairman of the Board, Director
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2009
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II
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Ricardo B. Levy (2007)
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Lead Independent Director
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2010
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III
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William B. Ellis (2007)
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Director
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2010
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III
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Susan F. Tierney (2007)
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Director
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2010
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III
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OCCUPATIONS
OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the ages (as of the date of the
Annual Meeting) and present positions for each director nominee
to be elected at the Annual Meeting, the current directors who
will continue to serve as directors beyond the Annual Meeting,
and our current executive officers. Each officer shall serve
until his or her successor is elected and qualified.
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Name
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Age
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Position
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Robert M. Worsley
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52
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Chairman, President, Chief Executive Officer and Director
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Ricardo B. Levy(1)(2)(3)
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63
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Lead Independent Director
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Richard A. Abdoo(4)
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64
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Director
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William B. Ellis(1)(2)
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68
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Director
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Susan F. Tierney(1)(2)(3)(4)
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57
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Director
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Hugh W. Smith
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50
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Chief Operating Officer
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Robert W. Zack
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45
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Chief Financial Officer
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Scott K. Higginson
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52
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Senior Vice President
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(1)
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Member of the Special Committee.
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(2)
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Member of the Audit Committee.
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(3)
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Member of the Nominating / Governance Committee.
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(4)
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Member of the Compensation Committee.
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Director
to be Elected at the Annual Meeting
Richard A. Abdoo
has served on our board of directors
since June 2007. Previously, Mr. Abdoo served on the board
of directors of Catalytica Energy Systems, Inc. from July 2004
until September 2007, most recently as vice chairman.
Mr. Abdoo is president of R.A. Abdoo & Company
LLC, and brings nearly three decades of energy industry
expertise to the Companys board membership, having retired
in April 2004 from his position as chairman, president and chief
executive officer of Wisconsin Energy Corporation (WEC) after a
29-year
career with WEC and its subsidiary, Wisconsin Electric Power
Company (WEPC), now known as We Energies. Mr. Abdoo first
joined WEC as a director of corporate planning in 1975 and held
positions of increasing responsibility in planning and
operations for WEC through 1989 including vice president, senior
vice president and executive vice president. In 1989,
Mr. Abdoo was named president and chief operating officer
of WEPC and several other WEC subsidiaries, and subsequently
served as chief executive officer of all WEC subsidiaries until
1991 when he was elected
8
chairman, president and chief executive officer of WEC. Under
his executive leadership, WEC grew to become a Fortune
500 company through a series of mergers and acquisitions
which both enriched and enlarged the offerings and markets of
the Company. He oversaw the merger of WEPC and Wisconsin Natural
Gas into a single utility in 1996, the acquisition of WICOR,
Inc. and its Wisconsin Gas subsidiary in 2000, and later that
same year the introduction of the WECs Power the Future
plan to meet the future energy needs of southeastern Wisconsin.
Mr. Abdoos experience includes planning and
leadership in coal both in Wisconsins energy plan and
support of state regulation to support coal industry
initiatives. Mr. Abdoo currently serves on the boards of
directors of AK Steel Holding Corporation and NiSource,
Inc. He earned a B.S. degree in electrical engineering from the
University of Dayton and a Masters degree in economics
from the University of Detroit. He has also completed
post-graduate studies in engineering at Wayne State University.
Directors
Whose Terms Extend Beyond the Annual Meeting
Robert M. Worsley
has served as our chairman and chief
executive officer since October 2007. Previously,
Mr. Worsley founded and served as president of NZ Legacy,
LLC; an Arizona land, mineral and energy development company
whose renewable energy divisions merged into Renegy. Prior to
founding NZ Legacy in March 2002, Mr. Worsley served as the
chairman, chief executive officer and president of SkyMall,
Inc., which he founded in 1989, until his retirement in 2003.
During his tenure at SkyMall, Mr. Worsley was successful in
leading the Company through an IPO in 1996 and a sale to
Newscorps Gemstar affiliate in 2001, and growing the
business to become the largest in-flight catalog company in the
world with over $85 million in annual revenues. From 1985
to 1989, Mr. Worsley was a principal of ExecuShare, Inc.,
an executive services firm that provided time-shared financial
executives for small companies. From 1980 to 1985,
Mr. Worsley was an accountant with Price Waterhouse, a
public accounting firm, where he most recently held the position
of Audit Manager. Mr. Worsley has a bachelors degree
in accounting from Brigham Young University. Mr. Worsley
was a Certified Public Accountant for over twenty years.
Ricardo Levy, Ph.D.
has served on our board of
directors since June 2007. Previously, Dr. Levy served as
chairman of the board of Catalytica Energy Systems, Inc. from
December 2000 through September 2007. In addition to his role as
chairman, Dr. Levy also served as interim president and
chief executive officer of Catalytica Energy Systems from June
through December 2002, having previously served as president and
chief executive officer of the former parent company Catalytica,
Inc. Dr. Levy founded Catalytica, Inc. in 1974, serving as
chief operating officer until 1991 and then as president and
chief executive officer until December 2000, when Catalytica,
Inc. and its subsidiary Catalytica Pharmaceuticals Inc. were
sold to DSM N.V concurrent with the spin-off of Catalytica
Energy Systems. Before founding Catalytica, Inc., Dr. Levy
was a founding member of Exxons chemical physics research
team. Dr. Levy currently serves on the board of directors
of public companies Accelrys, Inc. (formerly known as
Pharmacopeia, Inc.) and StemCells, Inc. He has an M.S. from
Princeton University, a Ph.D. in chemical engineering from
Stanford University and is an alumnus of Harvard
Universitys Executive Management Program.
William B. Ellis, Ph.D.
has served on our board of
directors since June 2007. Previously, Dr. Ellis served on
the board of directors of Catalytica Energy Systems, Inc. from
September 1995 until September 2007. Dr. Ellis is a
lecturer and resident fellow of the Yale University School of
Forestry and Environmental Studies. Dr. Ellis retired as
chairman of Northeast Utilities in 1995, where he also served as
chief executive officer from 1983 to 1993. Dr. Ellis joined
Northeast Utilities in 1976 as its chief financial officer. He
was a consultant with McKinsey & Co. from 1969 to 1976
and was a principal in that firm from 1975 to 1976.
Dr. Ellis serves on the boards of directors of the
Massachusetts Mutual Life Insurance Company and on the Pew
Center on Global Climate Change. He has a Ph.D. in chemical
engineering from the University of Maryland.
Susan Tierney, Ph.D.
has served on our board of
directors since June 2007. Previously, Dr. Tierney served
on the board of directors of Catalytica Energy Systems, Inc.
from December 2001 until September 2007. Dr. Tierney is
currently a managing principal of Analysis Group Inc. where she
specializes in energy industry issues. Dr. Tierney served
as senior vice president of Lexecon Inc. from 1995 to 2003.
Dr. Tierney is chairperson of the Board of Directors of The
Energy Foundation and Clean Air-Cool Planet, non-profit
organizations. Additionally, she previously served as a director
of the following non-profit organizations: American Council on
Renewable Energy (ACORE), Climate Policy Center, and the
Northeast States Center for a Clean Air Future. During 2004, she
was also chairperson of the board for the Electricity Innovation
Institute (a subsidiary of EPRI). She was also a director of
9
EPRI from 1998 to 2003 and from 2005 to 2006. Before joining
Lexecon (and its predecessor company, the Economics Resource
Group) in November 1995, Dr. Tierney served in senior
positions in federal and state government from 1983 until 1995,
most recently as assistant secretary for policy at the
U.S. Department of Energy, Secretary of Environmental
Affairs for the Commonwealth of Massachusetts and commissioner
of the Massachusetts Department of Public Utilities. Previously,
she was an assistant professor at the University of California,
Irvine from 1978 until 1982. Dr. Tierney has a Ph.D. and a
Masters degree in regional planning from Cornell University and
a bachelors degree from Scripps College.
Non-Director
Executive Officers
Hugh W. Smith
has served as our chief operating officer
since March 2008. From July 2007 to March 2008, Mr. Smith
was senior vice president of generation and development for
EnergyCo LLC where he was responsible for operations, strategic
assessment of new assets, and developing policies and procedures
associated with the startup of a non-regulated energy company.
From 2004 to June 2007, Mr. Smith served as senior vice
president of energy resources at PNM Resources during which time
he led operations of the companys power generation fleet
consisting of over 2,500 megawatts of coal, nuclear, gas-fired
and renewable assets. From 1979 to 2003, he held positions of
increasing responsibility at Tampa Electric Company, most
recently as vice president of energy supply and trading.
Mr. Smith previously chaired the United Way Community
Investment Council and served on the Board of Directors for the
United Way of Central New Mexico and for the All Faiths
Receiving Home. Mr. Smith graduated with a Bachelors
degree from the University of Florida.
Robert W. Zack
has served as our executive vice president
and chief financial officer since June 2007 and as our chief
executive officer from inception to September 2007. Previously,
Mr. Zack served as the president and CEO of Catalytica
Energy Systems, Inc. since July 2005 and as a member of the
Board of Directors since February 2006. During this time,
Mr. Zack also continued to serve as chief financial officer
for Catalytica Energy Systems, a position he had held since
April 2003. Prior to that, Mr. Zack had served as vice
president, finance and controller of Catalytica Energy Systems
since February 2002. Before joining Catalytica Energy Systems,
Mr. Zack served as group vice president of finance for
MicroAge, Inc. From 1995 to 1999, he served as the chief
financial officer of NIENEX. Previously, Zack has held various
executive and financial management roles at Active Noise and
Vibration Technologies, Pinnacle West Capital Corporation and
Arthur Andersen L.L.P. He earned his B.S. in accounting and his
MBA from Arizona State University. He is also a certified public
accountant.
Scott K. Higginson
has served as our senior vice
president, business development & public affairs since
October 2007. Previously, Mr. Higginson was executive vice
president of NZ Legacy, LLC since January 2005. From 2001 to
2005, Mr. Higginson was an owner of Four Square Group, a
government and public affairs consulting firm that represented
clients on issues related to natural resources, healthcare,
agriculture and renewable energy at the federal, state and local
levels of government in Arizona and Nevada. From 1995 to 2001,
Mr. Higginson was the corporate vice president of
government and public affairs at Del Webb Corporation. From 1989
to 1995, Mr. Higginson served two terms on the Las Vegas
City Council and was the owner of a public relations and
advertising consulting business focusing on business
communications and political campaign management.
Mr. Higginson has a Bachelors degree in political
science and journalism from Brigham Young University.
There are no family relationships between any of the directors
or executive officers of the Company.
No events have occurred in the past five years that are material
to an evaluation of the ability or integrity of any person
serving in a director or executive officer role of the Company.
CORPORATE
GOVERNANCE AND BOARD AND COMMITTEE MATTERS
Independence
of Members of our Board of Directors and Committees
Our Board of Directors has determined that four of its five
current members Richard A. Abdoo, William B. Ellis,
Ricardo B. Levy, and Susan F. Tierney are
independent, as such term is defined in Marketplace
Rule 4200(a)(15) of the Nasdaq Stock Market. No directors
are members of Committees of our Board of Directors who are not
independent
10
under such Committee independence standards. The independent
directors meet regularly in executive session without
non-independent directors and management.
Board of
Directors Meetings
Our Board of Directors held a total of four meetings during the
year ended December 31, 2007. During fiscal 2007, each of
our directors attended at least 75% of the aggregate of all
meetings of the Board and the committees, if any, upon which
such director served and which were held during the period of
time that such director served on the Board or such committee.
In addition, during fiscal 2007 and prior to the Merger
Transaction on October 1, 2007, Catalytica held a total of
eleven meetings of its Board of Directors. Each of
Catalyticas directors attended at least 75% of the
aggregate of all meetings of Catalyticas Board that were
held during the period of time that such director served on the
Board.
We have a policy of encouraging our Board members to attend the
annual meetings of our stockholders, including this first Annual
Meeting of the Companys stockholders.
Board
Committees
Our Board of Directors has established four committees: an Audit
Committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act, a Compensation
Committee, a Nominating / Governance Committee, and a
Special Committee.
Audit
Committee
Among other things, our Audit Committee:
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Oversees the Companys accounting and financial reporting
processes and the audit of the Companys financial
statements;
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Appoints independent auditors to audit the Companys
financial statements;
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Assists our Board of Directors in the oversight of: (i) the
integrity of the Companys financial statements;
(ii) the Companys compliance with legal and
regulatory requirements; (iii) the independent
auditors qualifications, independence and performance; and
(iv) the Companys internal accounting and financial
controls; and
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Provides to our Board of Directors such information and
materials as it may deem necessary to make our Board of
Directors aware of financial matters requiring the attention of
our Board of Directors.
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The Audit Committee held one meeting during the year ended
December 31, 2007. In addition, during fiscal 2007 and
prior to the Merger Transaction on October 1, 2007, the
Audit Committee of Catalytica held a total of four meetings.
Renegys Audit Committee consists of three of the
Companys independent directors William B.
Ellis, Chairman, Ricardo B. Levy, and Susan F. Tierney. The
Board of Directors has determined that each member of the Audit
Committee meets the independence criteria prescribed by
applicable law and the rules of the SEC for audit committee
membership and meets the criteria for audit committee membership
required by The NASDAQ Stock Market, Inc. (Nasdaq).
Further, each Audit Committee member meets Nasdaqs
financial knowledge requirements. Also, our Board has determined
that William B. Ellis qualifies as an audit committee
financial expert, as defined in the rules and regulations
of the SEC.
The Audit Committee operates under a written charter adopted by
our Board of Directors on August 29, 2007, which is
available on the Investor Relations section of our website at
http://www.renegy.com
.
11
Compensation
Committee
Among other things, our Compensation Committee:
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Oversees the compensation of the Companys Chief Executive
Officer and other executive officers, including officers
reporting under Section 16 of the Exchange Act;
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Administers the Companys stock plans and approves grants
under those stock plans;
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Consults with management regarding compensation and benefits for
non-executive officers and other employees of the Company and
compensation of directors of the Company;
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Oversees the Companys compensation policies, plans and
benefits programs generally; and
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Undertakes such other duties as the Board from time to time
prescribes.
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In carrying out its responsibilities, the Compensation Committee
may engage outside consultants and consult with the
Companys human resources department and other company
executives as the Compensation Committee determines to be
appropriate. While the Compensation Committee did not engage any
outside consultants to review our compensation plans or
arrangements for 2007, the Compensation Committee may do so in
the future. The Compensation Committee may also delegate any of
its responsibilities to subcommittees or the Chairperson of the
Compensation Committee to the extent permitted by applicable law
and NASDAQ rules. The Compensation Committee has not made such a
delegation of its responsibilities and has no plans to do so.
During the year ended December 31, 2007, the Company did
not hold any Compensation Committee meetings. During fiscal 2007
and prior to the Merger Transaction on October 1, 2007, the
Compensation Committee of Catalytica held one meeting.
Renegys Compensation Committee consists of Richard A.
Abdoo, Chairman, and Susan F. Tierney, each of whom has been
determined by the Board to be independent under NASDAQ rules as
currently in effect, as outside directors as such term is
defined with respect to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Internal Revenue
Code), and non-employee directors under Section 16(b)
of the Securities Exchange Act of 1934.
The Compensation Committee operates under a written charter
adopted by our Board of Directors on August 29, 2007, which
is available on the Investor Relations section of our website at
http://www.renegy.com
.
Nominating/Governance
Committee
Among other things, our Nominating/Governance Committee:
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Identifies individuals qualified to become directors and
selects, or recommends that our Board of Directors select, the
candidates for all directorships to be filled by our Board of
Directors or by the stockholders;
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Develops and recommends to our Board of Directors a set of
corporate governance principles applicable to the Company; and
otherwise takes a leadership role in shaping the corporate
governance of the Company.
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During the year ended December 31, 2007, the Company did
not hold any Nominating/Governance Committee meetings. During
fiscal 2007 and prior to the Merger Transaction on
October 1, 2007, the Nominating/Governance Committee of
Catalytica held one meeting.
The members of the Nominating/Governance Committee are Susan F.
Tierney, Chairperson, and Ricardo B. Levy. Our Board of
Directors has determined that each of the current members of the
Nominating / Governance Committee meet the director
independence standards of the NASDAQ Stock Market, Inc.
The Nominating/Governance Committee operates under a written
charter adopted by our Board of Directors on August 29,
2007, which is available on the Investor Relations section of
our website at
http://www.renegy.com
.
Special
Committee
Renegys Certificate of Incorporation in effect upon the
closing of the Merger Transaction on October 1, 2007,
provided for the appointment of an independent board committee
consisting of the Companys Class III directors,
12
which we refer to as the Special Committee in this
Proxy Statement. The Merger Transaction is described in more
detail in the section entitled Transactions with Related
Persons in this Proxy Statement.
The Special Committee was established upon the closing of the
Merger Transaction and held two meetings during the year ended
December 31, 2007.
The Special Committee has the authority and is empowered to, on
behalf of Renegy:
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enforce the obligations of Robert M. Worsley
(Worsley) under the Contribution and Merger
Agreement;
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and on behalf of Catalytica (i) make the determination of
whether to satisfy, in full or in part, any indemnification
obligation in favor of Worsley through the payment of cash or
issuance of stock, (ii) conduct the defense of any claim in
respect of indemnification under the contribution and merger
agreement, (iii) negotiate, enter into settlements and
compromises of, and comply with orders of courts and awards of
arbitrators with respect to any such claim, and (iv) take
all other actions that are necessary or appropriate in the
judgment of the special committee for the accomplishment of the
foregoing;
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administer, interpret and enforce the registration rights
agreement;
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administer, interpret and enforce the warrants, including
assessing and making the determination of whether any vesting
milestone has been achieved;
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conduct such investigations as it deems necessary or appropriate
to discharge its duties under Renegys Certificate of
Incorporation;
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retain separate legal counsel and any other experts and advisors
as the special committee deems necessary or advisable for the
purpose of discharging its duties;
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make determinations as to whether to commence, settle
and/or
terminate litigation or any other proceeding or action in
furtherance of the foregoing; and
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fill vacancies in the Class I or Class III directors
of Renegy during the initial terms of such Classes.
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The authority of the Class III directors acting as the
Special Committee will terminate on the expiration of the
initial term of the Class III directors. The Contribution
and Merger Agreement also provides that:
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until the expiration of the initial term of the Class I
directors of Renegy, committees of the board of directors (other
than the Special Committee) will consist of at least one
Class II director, and at least two directors that are
Class I and Class III directors; provided, that the
total numbers of Class I and Class III directors will
exceed the number of Class II directors by at least one
director; and
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for the period commencing on the expiration of the initial term
of the Class I directors of Renegy and ending on the
expiration of the initial term of the Class III directors,
committees of the board (other than the Special Committee) will
consist of at least one Class II director, and at least two
directors that are Class III directors (or, if any
Class I director(s) is reelected at the first annual
meeting following the closing of the transaction, such
Class I director(s)); provided, that the total numbers of
Class III directors (and applicable reelected Class I
directors) will exceed the number of Class II directors by
at least one director.
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The effect of the foregoing means that the majority of the
members comprising any board committee through the expiration of
the initial term of the Class III directors will consist of
former Catalytica directors.
The members of the Special Committee are Ricardo B. Levy,
Chairman, William B. Ellis and Susan F. Tierney, three of the
Companys independent directors.
Director
Nomination Process
Stockholder
Nominations
The policy of our Board of Directors is that the
Nominating / Governance Committee is to consider
properly submitted stockholder recommendations and nominations
for candidates for membership on the Board of Directors as
described under Identifying Nominees below.
Stockholders that wish to recommend individuals for
13
consideration by the Nominating / Governance Committee
must give written notice to the Secretary of the Company at the
address set forth below in the manner described in our Bylaws.
Renegy Holdings, Inc.
Attn: Secretary
60 E. Rio Salado Parkway, Suite 1012
Tempe, Arizona 85281
Our Bylaws provide that nominations of persons for election to
our Board of Directors may be made at an annual meeting of
stockholders by any stockholder who was a stockholder at the
time of giving of the prescribed notice, who is entitled to vote
at the meeting and who has complied with the notice procedures
in our Bylaws. To be timely, a stockholders notice must be
delivered to the Secretary at our principal executive offices,
currently the address set forth above, not less than
120 days prior to the first anniversary of the preceding
years annual meeting of stockholders; provided, however,
that if the date of the annual meeting is advanced more than
30 days prior to or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the 150th day prior
to and not later than the close of business on the later of the
90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of
such meeting is first made. Such stockholders notice shall
set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director
all information relating to such person as would be required to
be disclosed in solicitations or proxies for the election of
such nominees as directors pursuant to Regulation 14A under
the Exchange Act, including such persons written consent
to being named in the proxy statement as a nominee and to
serving as a director if elected and (ii) as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (A) the
name and address of such stockholder, as they appear on our
books, and of such beneficial owner and (B) the class and
number of shares that are owned beneficially and of record by
such stockholder and such beneficial owner.
Director
Qualifications
The Nominating/Governance Committee is responsible for reviewing
the appropriate skills and characteristics required of board
members individually as well as the Board of Directors as a
whole. Except as may be required by rules promulgated by NASDAQ
or the SEC, it is the current belief of our Board of Directors
that there are no specific minimum qualifications that must be
met by each candidate for our Board of Directors, nor are there
specific qualities or skills that are necessary for one or more
of the members of our Board of Directors to possess. In
evaluating nominees, the Nominating/Governance Committee
considers a variety of factors, including the appropriate size
of our Board of Directors, the Companys needs with respect
to the particular talents and experience of the directors, the
nominees experience and understanding of the
Companys industry, familiarity with national and
international business matters, experience with accounting rules
and practices, and professional expertise and experience
beneficial to the achievement of the Companys strategic
goals. The Nominating/Governance Committee may also consider
such other factors as it may deem are in the best interests of
the Company and its stockholders. The Nominating/Governance
Committee will consider each individual candidate in the context
of the current perceived needs of our Board of Directors as a
whole. While our Board of Directors has not established specific
minimum qualifications for director candidates, our Board of
Directors believes that candidates and nominees must have broad
experience and business acumen, a record of professional
accomplishments in his or her field, and demonstrated honesty
and integrity consistent with our values as reflected in our
Code of Conduct and Ethics.
Identifying
Nominees
The Nominating/Governance Committee identifies nominees by first
identifying the desired skills and experience of a new nominee
based on the qualifications discussed above. The
Nominating/Governance Committee will solicit ideas for possible
candidates from members of the Board, senior level executives,
individuals personally known to the members of the Board and
third-party search firms. As described above, the
Nominating/Governance Committee will consider properly submitted
stockholder recommendations and nominations for candidates for
our Board of Directors. Properly submitted recommendations will
usually be aggregated and evaluated by the Nominating/Governance
Committee at a regularly scheduled meeting of our Board of
Directors.
14
Communications
with the Board of Directors
To contact members of our Board of Directors, stockholders
should send a letter using the contact information provided
below. Communications may be addressed to the entire Board of
Directors, to the non-management directors as a group, or to any
individual director.
Renegy Holdings, Inc.
Attn: Chairman, Nominating/Governance Committee
60 E. Rio Salado Parkway, Suite 1012
Tempe, Arizona 85281
Depending on the subject matter, the Nominating/Governance
Committee Chair will:
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Forward the communication to the Board member or members to
which it is addressed (for example, if the communication
received relates to questions, concerns or complaints regarding
accounting, internal accounting controls and auditing matters,
it will be forwarded to the chair of the Audit Committee for
review);
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Forward to management if appropriate (for example, if the
communication is a request for information about us or our
operations or if it is a stock-related matter that does not
appear to require direct attention by our Board or an individual
Board member); or
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Not forward the communication if it is primarily commercial in
nature or if it relates to a topic deemed improper or irrelevant.
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Director
Compensation
The following table describes the compensation paid to the
members of our Board of Directors in the fiscal year ended
December 31, 2007:
DIRECTOR
COMPENSATION
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Fees
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Non-Equity
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Nonqualified
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Earned or
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Incentive
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Deferred
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Paid in
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Stock
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Option
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Plan
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Compensation
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All Other
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Name
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Cash(1)
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Awards(2)(3)
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Richard A. Abdoo(a)
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$
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64,500
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$
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85,000
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$
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$
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$
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$
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$
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149,500
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William B. Ellis(b)
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$
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49,500
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$
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25,000
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$
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$
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$
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$
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$
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74,500
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Ricardo B. Levy(c)
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$
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92,750
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$
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25,000
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$
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$
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$
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$
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$
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117,750
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Susan F. Tierney(d)
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$
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38,500
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$
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25,000
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$
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$
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$
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$
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$
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63,500
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(1)
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We report in this column the cash value of board retainer fees,
committee chair fees, and board and committee meeting fees
earned by each non-employee director in 2007 irrespective of
whether they were paid in 2007. The cash value includes payments
earned for serving as directors and committee members for
Catalytica.
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(2)
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On January 25, 2007, all board members were granted 2,165
restricted stock units each (adjusted for merger exchange ratio)
by Catalytica. In addition, Richard A. Abdoo was granted 5,195
restricted stock units (adjusted for merger exchange ratio) by
Catalytica in payment of consulting services to be provided by
Mr. Abdoo during 2007.
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(3)
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In connection with the Merger Transaction on October 1,
2007, all outstanding stock options and unvested restricted
stock units fully vested immediately prior to the merger. As a
result, all unrecognized valuation amounts related to these
stock awards was expensed in the third quarter of fiscal 2007.
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(a)
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As of the end of fiscal 2007, Richard A Abdoo had 4,999 option
awards outstanding.
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(b)
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As of the end of fiscal 2007, William B. Ellis had 7,710 option
awards outstanding.
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(c)
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As of the end of fiscal 2007, Ricardo B. Levy had 25,142 option
awards outstanding.
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(d)
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As of the end of fiscal 2007, Susan Tierney had 9,282 option
awards outstanding.
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15
Effective for the fiscal year commencing January 1, 2007,
directors of Catalytica who were not officers of Catalytica each
received an annual retainer for their services in the amount of
$30,000, plus reimbursement of expenses, and the Chairman of the
Board and the Vice Chairman of the Board of Catalytica received
additional annual compensation of $45,000 and $40,000,
respectively. Upon consummation of the Merger Transaction,
effective October 1, 2007, directors who are not officers
of the Company each receive an annual retainer for their
services in the amount of $30,000, plus reimbursement of
expenses, and the Lead Independent Director of the Board
receives additional annual compensation of $40,000. Directors
who are employed by the Company do not receive any compensation
for their Board activities. Committee chairs and committee
members receive additional compensation of $2,500 and $1,500,
respectively, per attended committee meeting.
Our Certificate of Incorporation limits the liability of our
directors to us or our stockholders for breaches of the
directors fiduciary duties to the fullest extent permitted
by Delaware law. In addition, our certificate of incorporation
and bylaws provide for mandatory indemnification of directors
and officers to the fullest extent permitted by Delaware law. We
also maintain directors and officers liability
insurance and enter into indemnification agreements with all of
our directors and executive officers.
16
REPORT OF
THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS
This report of the Audit Committee of the Board of Directors
shall not be deemed soliciting material or to be
filed with the SEC and shall not be incorporated by
reference into any future filings under the Securities Act of
1933, as amended, or the Exchange Act, except to the extent that
we specifically request that it be treated as soliciting
material or specifically incorporate it by reference into such
filings.
The Audit Committee of our Board of Directors (the Audit
Committee) assists our Board of Directors in the oversight
and monitoring of the integrity of the Companys financial
statements, the Companys compliance with legal and
regulatory requirements, the independent registered public
accountants qualifications, independence and performance,
and the Companys internal accounting and financial
controls and reporting practices. The three members of the Audit
Committee are William B. Ellis, Chairman, Ricardo B. Levy, and
Susan F. Tierney. The role of the Audit Committee is more fully
detailed in the Charter for the Audit Committee, which was
adopted by the Board on August 29, 2007.
Management is responsible for the preparation, presentation and
integrity of the financial statements, including establishing
accounting and financial reporting principles and designing
systems of internal controls over financial reporting. The
Companys independent auditors are responsible for
expressing an opinion on the Companys consolidated
financial statements in accordance with generally accepted
auditing standards. It is the Audit Committees
responsibility to oversee these processes.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee reviewed and discussed with
management the audited financial statements included in the
Annual Report on
Form 10-KSB
for the fiscal year ended December 31, 2007;
2. The Audit Committee discussed with the independent
registered public accountants the matters required to be
discussed by the statement on Auditing Standards No. 61, as
amended (AICPA,
Professional Standards
, Vol. 1 AU
section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T;
3. The Audit Committee received the written disclosures and
the letter from the independent registered public accountants
required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees
), as
adopted by the Public Company Accounting Oversight Board in
Rule 3600T, and has discussed with the independent
registered public accountants the independent registered public
accountants independence; and
4. Based on the review and discussions referred to in
paragraphs (1) through (3) above, the Audit Committee
recommended to the Board of Directors, and the Board of
Directors has approved, that the audited financial statements be
included in the Companys Annual Report on
Form 10-KSB
for the fiscal year ended December 31, 2007.
AUDIT COMMITTEE
William B. Ellis, Chairman
Ricardo B. Levy
Susan F. Tierney
17
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Disclosure
of Auditor Fees.
The following table shows the fees billed to the company by
Ernst & Young LLP for the years ended
December 31, 2007 and December 31, 2006.
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Type of Fee
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2007
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2006
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Audit Fees
fees for Ernst &
Youngs audit of the companys annual consolidated
financial statements and its audit of internal control over
financial reporting, its review of consolidated financial
statements included in our quarterly reports on
Forms 10-Q,
services provided in connection with statutory and regulatory
filings, irrespective of when the fees and expenses were billed
or paid or when the services were rendered. 2007 fees also
include (i) three quarterly reviews for Catalytica and the
2007 annual audit for the Company and (ii) three quarterly
reviews for 2006 and 2007 and annual audits for 2005 and 2006
for the Snowflake entities performed in connection with the
Merger Transaction. This category also includes fees associated
with advice on accounting and audit matters that arose during,
or as a result of, the audit or review services, and services
provided in connection with our SEC registration statements.
2006 fees include three quarterly reviews and an annual audit
for Catalytica for 2006.
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$
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1,078,797
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$
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279,087
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Audit-Related Fees
includes fees for
professional services, including accounting consultations and
other attestation services not required by statute, fees for
non-audit services that normally can only be provided by the
companys independent registered public accounting firm
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$
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151,000
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$
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Tax Fees
fees for professional services
related to tax compliance, tax advice or tax planning, primarily
for
non-U.S.
locations
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$
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$
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All Other Fees
fees paid by the company to
Ernst & Young for other services
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$
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$
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Pre-approval
of Independent Auditor Fees.
The Audit Committee has considered and determined that the fees
paid to Ernst & Young LLP for non-audit-related
services is compatible with maintaining
Ernst &Youngs independence. The Audit Committee
has adopted a policy that requires advance approval of all
audit, audit-related, tax and other services performed by the
independent auditor and all fees of Ernst & Young LLP
for 2007 and 2006 were approved in advance by the Audit
Committee. The policy provides for pre-approval by the Audit
Committee of specifically defined audit and non-audit services.
Unless the specific service has been previously pre-approved
with respect to that year, the Audit Committee must approve the
permitted service before the independent auditor is engaged to
perform it. The Audit Committee has delegated to the Chair of
the Audit Committee authority to approve permitted services
provided that the Chair reports any decisions to the Committee
at its next scheduled meeting.
EXECUTIVE
COMPENSATION
This section summarizes the processes and procedures used by the
Compensation Committee of our Board of Directors (the
Compensation Committee) to consider and determine
the compensation of the Companys Executive Officers,
including the Chief Executive Officer, and the directors of the
Company.
Overview
of Compensation Program and Philosophy
The Compensation Committee oversees the compensation of the
Companys Chief Executive Officer and other executive
officers, including officers reporting under Section 16 of
the Exchange Act. The Compensation Committees philosophy
with respect to executive compensation is to provide a
compensation program that enables the Company to attract, retain
and motivate top executive talent, and which is linked to
corporate, business and individual performance. The
Companys compensation programs are also designed to
support the Companys objective of creating value for its
stockholders. Accordingly, the Compensation Committee believes
that Executive Officers should have a significant stake in the
Companys stock performance and that compensation programs
18
should link executive compensation to stockholder value. In the
view of the Compensation Committee, one of the ways to
accomplish this is by making a significant portion of individual
compensation directly dependent on the Companys
achievement of business and financial goals, and by providing
significant rewards for exceeding those goals. The Compensation
Committee believes that strong financial performance, on a
sustained basis, is an effective means of enhancing long-term
stockholder returns.
Components
of Executive Compensation
The compensation program for the Companys Executive
Officers consists of:
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base salary;
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annual incentive opportunities in the form of a cash bonus and a
stock option bonus;
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long-term incentive opportunities in the form of restricted
stock; and
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other benefits, such as health and welfare insurance, a defined
contribution 401(k) plan, and an employee stock purchase plan,
all of which are also available to all other eligible Company
employees.
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The compensation package for any particular Executive Officer is
determined in light of the compensation practices of other
competitor companies in energy technology and related
industries, the performance of the individual and the
Companys performance.
In order to establish competitive compensation, the Compensation
Committee considers the compensation levels of companies from
clean energy and related industries, including the base
salaries, bonus opportunities and stock option awards for their
top executives. The Compensation Committee also considers that
cross-company comparisons require some adjustments to reflect
varying levels of specific responsibilities, complexity of the
business, the business ultimate potential, the background
and training of the Executive Officer, and the Companys
market capitalization compared with the market basket of
companies. Such considerations set the base level of
compensation, assuming an acceptable level of performance.
Performance variations on an individual and business level are
then applied.
Personal performance is appraised against a budget and business
plan laid out at the beginning of each year. The plan includes a
set of personal objectives regarding such things as budgetary
control, achieving milestones in the Companys commercial
and development programs, successful execution and
implementation of collaborative agreements or contracts,
achieving planned revenues and other criteria. Assessment of
performance in this regard determines the annual increase in
base salary and also determines, in part, the level of cash
bonus and long-term incentive compensation. Cash, restricted
stock and stock option bonuses are also affected by the
Companys performance.
Achievement of corporate objectives, designed to enhance
stockholder value, is a key factor in establishing stock option
award bonus and cash bonuses. Typical corporate objectives would
include sound management of all balance sheet items, appropriate
balancing of new opportunities and risks and the creation of
opportunities for future business activity. The bonus plan for
Executive Officers is based on the achievement of a combination
of financial and non-financial goals. For 2007, these goals
included consummating the Merger Transaction between Catalytica
Energy Systems, Inc. and the renewable energy divisions of NZ
Legacy LLC (as described in more detail in the section of this
Proxy Statement entitled Transactions with Related
Parties), integrating such entities following the Merger
Transaction, consummating the sale of the Companys
SCR-Tech subsidiary, advancing the construction of the
Companys 24 megawatt biomass power generation facility
located in Snowflake, Arizona, expanding the Companys
biomass fuels and wood shavings businesses, and expanding the
Company through the acquisition of power generation facilities.
In determining the compensation packages for the Executive
Officers as described above, the Compensation Committee obtains
recommendations from our management, including from
Mr. Worsley, our Chief Executive Officer, and
Mr. Zack, our Chief Financial Officer. The Compensation
Committee considers, but is not bound by and does not always
accept, such recommendations. Messrs. Worsley and Zack and
other executives or employees sometimes attend the Compensation
Committees meetings, but they leave the meetings as
appropriate when
19
matters of executive compensation are discussed. The
Compensation Committee considers and discusses the CEOs
compensation package without him present.
Chief
Executive Officer Compensation for Fiscal 2007
Mr. Robert M. Worsley has served as Chairman, President and
Chief Executive Officer of the Company since October 1,
2007. In establishing the compensation for Mr. Worsley for
fiscal 2007, the Compensation Committee applied the principles
outlined above, as well as the criteria described below.
Mr. Robert
M. Worsley
In determining Mr. Worsleys compensation as Chief
Executive Officer, the Compensation Committee compared his
compensation to that of chief executive officers of public
companies in energy technology and related industries.
Mr. Worsleys annualized salary for 2007 was
established at $300,000. Mr. Worsley also earned a cash
bonus for 2007 performance of $112,500, which was paid in 2008.
In addition, in recognition of Mr. Worsleys 2007
performance, he earned a stock option bonus award of
59,400 shares issued on January 22, 2008 with an
exercise price of $5.24 per share (the closing price of
Renegys common stock on January 22, 2008). The
options were granted under the Renegy Holdings, Inc. 2007 Equity
Incentive Plan (the Plan). The options become
exercisable in 48 equal monthly installments commencing one
month after the date of grant and expire ten years from the
date of grant. The exercise of each of the options is
conditioned upon the approval by the Board and the
Companys stockholders of an amended Plan that includes
certain tax provisions not currently included in the Plan,
including provisions relating to Section 162(m) of the
Internal Revenue Code of 1986, as amended, as recommended to the
Board by the Compensation Committee. In the event such approvals
are not obtained, the options will be cancelled. The options
granted to Mr. Worsley are incentive stock options under
the Plan. Both cash and stock bonuses for Mr. Worsley were
computed based upon his achievement of Company and personal
objectives, primarily focused on consummating the Merger
Transaction between Catalytica and the renewable energy
divisions of NZ Legacy LLC, integrating such entities following
the Merger Transaction, advancing the construction of the
Companys 24 megawatt biomass power generation facility
located in Snowflake, Arizona, expanding the Companys
biomass fuels and wood shavings businesses, and expanding the
Company through the acquisition of power generation facilities.
Effective as of March 1, 2008, the Compensation Committee
approved an increase to Mr. Worsleys annual base
salary from $300,000 to $400,000. In addition, Mr. Worsley
is eligible to receive an annual bonus for 2008 with a target
payment equal to 125% of his base salary if the performance
targets established by the Board are achieved, with 50% payable
in cash and 75% payable in equity of the Company.
Internal
Revenue Code Section 162(m)
Under Section 162(m) of the Internal Revenue Code, as
amended, and regulations adopted under it by the Internal
Revenue Service, publicly held companies may be precluded from
deducting certain compensation paid to certain executive
officers in excess of $1.0 million in a year. Exceptions to
this deductibility limit may be made for various forms of
performance-based compensation. The Compensation
Committee believes that awards granted under the Companys
equity incentive plans described above can be excluded from the
$1.0 million limit. In addition, the non-equity-based
compensation paid to the Named Executive Officers in fiscal 2007
did not exceed $1.0 million for any individual. While we
cannot predict how the deductibility limit may impact the
Companys compensation program in future years, we intend
to maintain an approach to executive compensation that strongly
links pay to performance.
20
SUMMARY
COMPENSATION TABLE FOR FISCAL 2007
The following table sets forth certain summary information
concerning the annual compensation received for services
rendered to the Company during the fiscal year ended
December 31, 2007 by: (i) Robert M. Worsley, the
Companys Chairman, President and Chief Executive Officer
on December 31, 2007, and (ii) each of the other most
highly compensated executive officers of the Company during 2007
(collectively, the Named Executive Officers).
SUMMARY
COMPENSATION TABLE(1)
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Stock
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Option
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All Other
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|
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Bonus
|
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Awards
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Awards
|
|
Compensation
|
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|
Name and Principal Position
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Year
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Salary
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(2)
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(3)
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|
(3)
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(4)
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Total
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Robert M. Worsley(5)(6)
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2007
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$
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69,231
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$
|
112,500
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|
|
$
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|
|
|
$
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|
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|
$
|
52
|
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$
|
181,783
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|
President, Chief Executive Officer
|
|
|
2006
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Robert W. Zack(7)(8)
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2007
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$
|
300,000
|
|
|
$
|
150,000
|
|
|
$
|
87,744
|
|
|
$
|
83,177
|
|
|
$
|
238,498
|
|
|
$
|
859,419
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|
Executive Vice President and Chief Financial Officer
|
|
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2006
|
|
|
$
|
260,000
|
|
|
$
|
175,500
|
|
|
$
|
18,750
|
|
|
$
|
67,228
|
|
|
$
|
18,218
|
|
|
$
|
539,696
|
|
Scott K. Higginson(9)(10)
|
|
|
2007
|
|
|
$
|
169,712
|
|
|
$
|
75,000
|
|
|
$
|
58,215
|
|
|
$
|
29,436
|
|
|
$
|
1,494
|
|
|
$
|
333,857
|
|
Senior Vice President
|
|
|
2006
|
|
|
$
|
162,019
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
162,058
|
|
|
|
|
(1)
|
|
In connection with the consummation of the Merger Transaction,
Renegys financial statement presentation for fiscal 2007
includes the results of operations for the combined Snowflake
entities for the nine months ended September 30, 2007 and
for Renegy on a consolidated basis for the fourth quarter of
2007. Data presented in the Summary Compensation Table
represents compensation for the entire fiscal year. In the
supporting footnotes which follow, disclosures of amounts by
period are provided (i.e., first three quarters and fourth
quarter).
|
|
(2)
|
|
Represents bonuses accrued in the year of service whether paid
during the year of service or thereafter.
|
|
(3)
|
|
Amounts set forth in the Stock Awards and Option Awards columns
represent the aggregate amount recognized for financial
statement reporting purposes, disregarding the estimate of
forfeitures related to service-based vesting conditions, but
otherwise computed in accordance with the Statement of Financial
Accounting Standards (SFAS) No 123, as amended by
SFAS No. 123(R), Share-Based Payment,
(SFAS 123(R)) based on the assumptions set
forth in Note 6 to the Companys consolidated
financial statements as filed herein. There were no equity award
forfeitures by the Named Executive Officers during Fiscal 2007.
Restricted stock awards are computed in accordance with
SFAS 123(R) based on the closing stock price on the grant
date. These amounts reflect the Companys accounting
expense for these awards, and do not reflect the actual value
that will be recognized by the Named Executive Officers.
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(4)
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Includes 401(k) matching contributions accrued in the year of
service whether paid during the year of service or the following
year.
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(5)
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During the first three quarters of 2007, Mr. Worsley was
not paid a salary. Amounts under Salary consist of
(i) $0 for the first three quarters and (ii) $69,231
for the fourth quarter. Amounts under All Other
Compensation include contributions by the Company of $52
for supplemental life insurance premiums.
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(6)
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During 2006, Mr. Worsley did not receive a salary or other
benefits for his service.
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(7)
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Amounts under Salary include $225,000 paid by
Catalytica as its CEO and CFO for the first three quarters.
Amounts under All Other Compensation include
contributions by the Company of $1,260 for supplemental life
insurance premiums; (ii) $4,138 for supplemental disability
insurance premiums; (iii) $225,000 for retention bonuses;
and (iv) $8,100 for 401k employer contributions.
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(8)
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During 2006, all of Mr. Zacks compensation was paid
by Catalytica. Amounts under All Other Compensation
include contribution by Catalytica of (i) $12,320 under its
401(k) plan; (ii) $1,260 for supplemental life insurance
premiums and (iii) $4,638 for supplemental disability
premiums.
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21
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(9)
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Amounts under Salary include $118,750 paid by the
Snowflake entities for the first three quarters. Amounts under
All Other Compensation include contributions by the
Company of (i) $52 for supplemental life insurance
premiums; and (ii) $1,442 for medical insurance premiums.
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(10)
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During 2006, all of Mr. Higginsons compensation was
paid by the Snowflake entities. Amounts under All Other
Compensation include $39 for supplemental life insurance
premiums.
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The material terms of each Named Executive Officers
employment agreement or arrangement is set forth below under
Employment Contracts and Termination of Employment and
Change-in-Control
Arrangements.
Outstanding
Equity Awards at Fiscal Year End
The following table sets forth the outstanding equity awards at
the end of the fiscal year ended December 31, 2007 held by
each of the Named Executive Officers:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
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Option Awards
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Stock Awards
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Equity
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Incentive
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Plan
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Equity
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Awards:
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Incentive
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Market
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Plan
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Value or
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Equity
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Awards:
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Payout
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Incentive
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Market
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Number of
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Value of
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Plan
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Number of
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Value of
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Unearned
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Unearned
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Awards:
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Shares or
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Shares or
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Shares,
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Shares,
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Number of
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Number of
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Units of
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Units of
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Units or
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Units or
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Securities
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Number of
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Securities
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Stock
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Stock
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Other
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Other
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Underlying
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Securities
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Underlying
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That
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That
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Rights
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Rights
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Unexercised
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Underlying
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Unexercised
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Option
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Have
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Have
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That Have
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That
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Options (#)
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Unexercised
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Unearned
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Exercise
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Option
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Not
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Not
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Not
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Have Not
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Exercisable
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Options (#)
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Options
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Price
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Expiration
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Vested
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Vested
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Vested
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Vested
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Name
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(1)
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Unexercisable
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(#)
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($)
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Date
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(#)
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($)
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(#)
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($)
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Robert M. Worsley
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714
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Robert W. Zack
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1,428
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24.85
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4/1/2012
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12,142
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19.32
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2/10/2013
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1,428
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24.14
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8/29/2013
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9,999
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28.22
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1/26/2014
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3,656
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16.87
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1/31/2015
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27,142
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8.05
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3/22/2016
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7,142
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9.45
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11/6/2016
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11,828
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13.44
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1/11/2017
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Scott K. Higginson
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7,143
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(2)
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8.15
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10/1/2017
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(1)
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In connection with the Merger Transaction on October 1,
2007, all outstanding stock options and unvested restricted
stock units fully vested immediately prior to the merger. The
options subject to acceleration remain exercisable throughout
the original term of each option award. However, executives that
remain employed with the Company have agreed not to exercise
their options until they would otherwise come due under the
terms of their options agreements, which would be six months
after the closing of the Merger Transaction.
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(2)
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Exercisable only upon stockholder approval of the 2007 Plan.
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Employment
Contracts and Termination of Employment and
Change-in-Control
Arrangements
On May 8, 2007, the Company entered into an Employment
Agreement with Robert M. Worsley. The agreement provides for a
base salary of $300,000, which may be increased in 2008 and
subsequent years by the Companys Board of Directors or the
Compensation Committee. Mr. Worsleys initial term of
employment will be three years, and will continue for successive
one year terms unless earlier terminated pursuant to the
employment agreement termination provisions or either Renegy or
Mr. Worsley provides written notice of termination of
employment not less than 120 days prior to the end of the
initial term or any additional term. In addition,
22
Mr. Worsley will be eligible to receive an annual bonus on
account of the Companys 2007 fiscal year performance with
a target payment equal to 125% of his base salary. The target
bonus may be paid to Mr. Worsley in a mixture of cash and
equity compensation, as determined by the Compensation Committee
in its sole discretion; provided, however, that the cash
component shall be no less than 50% of the target bonus;
provided, further, that for the 2007 fiscal year, the mixture of
the 125% of the base salary payable as the target tonus shall be
50% cash and 75% equity compensation. In 2008 and subsequent
years, the target bonus may be increased by the Companys
Board of Directors or the Compensation Committee. The agreement
also provides that if Mr. Worsley is involuntarily
terminated other than for cause (as such terms are defined in
the agreement), or if Mr. Worsley terminates his employment
for good reason (as defined in the agreement), he is entitled to
(i) a severance payment equal to two years of his yearly
salary in effect on the termination date; (ii) a pro-rated
portion of the amount of incentive compensation he would earn
for the fiscal year in which the termination occurs if the
results of operations of Renegy for the period from the
beginning of such fiscal year to the termination date were
annualized; (iii) full vesting of all outstanding stock
options held by him; and (iv) subsidized COBRA premiums for
up to a maximum of eighteen months. Further, if Mr. Worsley
is terminated during a pending change of control or within
24 months after a change of control, or if he terminates
his employment for good reason within 24 months after a
change of control, he is entitled to receive as a
change-in-control
payment: (i) an amount equal to two years of his yearly
salary in effect on the termination date; (ii) the maximum
amount of incentive compensation which he could earn for the
fiscal year in which the termination date occurs; and
(iii) full vesting of all outstanding stock options held by
him.
On January 22, 2008, the Compensation Committee approved a
salary increase for Mr. Worsley from $300,000 to $400,000,
effective March 1, 2008.
On August 14, 2008, the Company entered into an Employment
Agreement with Hugh W. Smith. Mr. Smiths initial term
of employment will be three years, commencing March 3,
2008. The agreement provides that Mr. Smith shall receive
(i) a base salary of $350,000 per annum; (ii) a target
bonus equal to 125% of his base salary, which may be paid in a
combination of cash and equity compensation, provided that at
least 50% of the target bonus must be paid in cash; (iii) a
grant of 100,000 stock options under the Companys 2007
Equity Incentive Plan, which will vest ratably over a
48-month
period commencing as of his employment with the Company;
(iv) 15 months of mortgage payment reimbursement
beginning in March 2008 and continuing until
Mr. Smiths home is sold, but not to exceed $45,000;
and (v) a $100,000 signing bonus (paid $10,000 per month
during the first ten months of employment). The reimbursement of
mortgage payments is in addition to prior payments made by the
Company to Mr. Smith in the amount of $75,000 for
relocation expenses. In addition, among other things, the
agreement provides that if Mr. Smith is involuntarily
terminated other than for cause at any time prior to an
announcement of a change of control, or on or after the date
that is 24 months following a change of control or the
announcement of a change of control whichever comes later, then
Mr. Smith will be entitled to receive the following
severance and non-competition benefits: (i) a cash payment
equal to one year of his annual compensation;
(ii) subsidized COBRA premiums for up to a maximum of
18 months; and (iii) a pro-rated portion of the amount
of current year bonus award which Mr. Smith would earn for
the fiscal year in which the termination occurs. Additionally,
if Mr. Smith is involuntarily terminated other than for
cause at any time after an announcement of a change of control
and prior to 24 months following a change of control or the
announcement of a change of control, whichever comes later, then
Mr. Smith will be entitled to receive the following
severance and non-competition benefits: (i) a cash payment
equal to 200% of his annual compensation plus the maximum amount
of the current year bonus award which Mr. Smith could earn
for the fiscal year in which the termination date occurs; and
(ii) full acceleration of the vesting of the unvested
portion of any stock option held by Mr. Smith.
On March 23, 2007, the Company entered into an Amended and
Restated Employment Agreement with Robert W. Zack. The
agreement provides for a base salary of $300,000, which may be
increased in 2008 and subsequent years by the Companys
Board of Directors or the Compensation Committee. In addition,
Mr. Zack will be eligible to receive an annual bonus on
account of the Companys 2007 fiscal year performance with
a target payment equal to 125% of his base salary. In 2008 and
subsequent years, the target bonus may be increased by the
Companys Board of Directors or the Compensation Committee.
The target bonus may be paid in a combination of cash and equity
compensation, provided that the cash component will be no less
than 50% of the bonus. The agreement also provides that if
Mr. Zack is involuntarily terminated other than for cause
(as such terms are defined in the agreement) and not in
connection with a change of control of the Company, he will
receive an aggregate cash
23
amount equal to 200% of his annual compensation (an amount equal
to the greater of Mr. Zacks (i) base salary for
the twelve (12) months preceding a change in control plus
his target bonus for the same period, or
(ii) Mr. Zacks base salary on an annualized
basis and his target bonus as of the termination date) plus a
pro rata cash payment of his target bonus and subsidized COBRA
premiums for up to a maximum of eighteen (18) months.
Further if Mr. Zack is involuntarily terminated in
connection with a change of control event (as defined in the
agreement), he will receive a cash payment in an amount equal to
200% of his annual compensation plus a pro rata cash payment of
his target bonus, less any change of control retention payments
(as described below) already paid to him. Mr. Zack will
also receive continued employee benefits for up to two years
from the date of his involuntary termination, and accelerated
vesting for all of his unvested stock options or restricted
stock (including restricted stock units). In the event of a
change of control where Mr. Zack is employed by the
acquiring entity in the position of Chief Financial Officer or a
greater position, he will receive change of control retention
payments as follows:
1
/
3
of his annual compensation on the date of the change of control,
another
1
/
3
of his annual compensation six months following the change of
control and a final
1
/
3
of his annual compensation one year following the change of
control, subject to Mr. Zacks continuous employment
by the acquiring entity through such dates. This Amended and
Restated Employment Agreement superseded the Employment
Agreement entered into between Robert Zack and Catalytica dated
September 22, 2005. On October 1, 2007, in connection
with the Merger Transaction (as described in more detail in the
section entitled Transactions with Related Persons),
the Amended and Restated Employment Agreement between Robert
Zack and Catalytica was assumed by the Company. As a result of
the change of control of Catalytica, Mr. Zack received
$225,000 retention payments on each of October 1, 2007 and
April 1, 2008, and is entitled to receive a final retention
payment of $225,000 on October 1, 2008, subject to
Mr. Zacks continued employment with the Company.
On May 8, 2007, the Company entered into an Employment
Agreement with Scott K. Higginson. The agreement provides for a
base salary of $200,000, which may be increased in 2008 and
subsequent years by the Companys Board of Directors or the
Compensation Committee. Mr. Higginsons initial term
of employment will be three years, and will continue for
successive one year terms unless earlier terminated pursuant to
the employment agreement termination provisions or either Renegy
or Mr. Higginson provides written notice of termination of
employment not less than 120 days prior to the end of the
initial term or any additional term. In connection with the
consummation of the Contribution and Merger Agreement,
Mr. Higginson was issued 7,143 shares of common stock
of Renegy and 7,143 stock options of Renegy at an exercise price
equal to the market price of Renegys common stock on the
date of grant (October 1, 2007). In addition,
Mr. Higginson will be eligible to receive an annual bonus
on account of the Companys 2007 fiscal year performance
with a target payment equal to 100% of his base salary. The
target bonus may be paid to Mr. Higginson in a mixture of
cash and equity compensation, as determined by the Compensation
Committee in its sole discretion; provided, however, that the
cash component shall be no less than 50% of the target bonus;
provided, further, that for the 2007 fiscal year, the mixture of
the 100% of the base salary payable as the target bonus shall be
50% cash and 50% equity compensation and shall be pro-rated for
the portion of 2007 during which Mr. Higginson is employed.
In 2008 and subsequent years, the target bonus may be increased
by the Companys Board of Directors or the Compensation
Committee. The agreement also provides that if
Mr. Higginson is involuntarily terminated other than for
cause (as such terms are defined in the agreement), or if
Mr. Higginson terminates his employment for good reason (as
defined in the agreement), he is entitled to (i) a
severance payment equal to two years of his yearly salary in
effect on the termination date; (ii) a pro-rated portion of
the amount of incentive compensation he would earn for the
fiscal year in which the termination occurs if the results of
operations of Renegy for the period from the beginning of such
fiscal year to the termination date were annualized;
(iii) full vesting of all outstanding stock options held by
him; and (iv) subsidized COBRA premiums for up to a maximum
of eighteen months. Further, if Mr. Higginson is terminated
during a pending change of control or within 24 months
after a change of control, or if he elects to terminates his
employment within 24 months after a change of control, he
is entitled to receive as a
change-in-control
payment: (i) an amount equal to two years of his yearly
salary in effect on the termination date; (ii) the maximum
amount of incentive compensation which he could earn for the
fiscal year in which the termination date occurs; and
(iii) full vesting of all outstanding stock options held by
him.
Reference is made to the section of this Proxy Statement
entitled Transactions with Related Persons for a
description of transactions involving executive officers and
directors of the Company.
24
Unless otherwise determined by our Board of Directors, the 2007
Equity Incentive Plan provides that in the event of a merger or
Change in Control, as defined in the 2007 Equity
Incentive Plan, if the successor corporation does not assume or
substitute an equivalent option or right, this will result in
the automatic acceleration of granted awards (such that they
become exercisable in full). A more detailed description of the
2007 Equity Incentive Plan appears under the
Proposal No. 2 of this Proxy Statement.
TRANSACTIONS
WITH RELATED PERSONS
We entered into a Contribution and Merger Agreement (the
Contribution and Merger Agreement) on May 8,
2007 by and among (i) us, (ii) Catalytica Energy
Systems, Inc., a Delaware corporation (Catalytica),
(iii) Snowflake Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of us (Merger
Sub), (iv) Renegy, LLC, an Arizona limited liability
company (Renegy LLC), (v) Renegy Trucking, LLC,
an Arizona limited liability company (Renegy
Trucking), (vi) Snowflake White Mountain Power, LLC,
an Arizona limited liability company (Snowflake and,
together with Renegy LLC and Renegy Trucking, the
Snowflake entities), (vii) Robert M. Worsley,
(viii) Christi M. Worsley (Mrs. Worsley)
and (ix) the Robert M. Worsley and Christi M. Worsley
Revocable Trust (the Worsley Trust and, together
with Mr. Worsley and Mrs. Worsley, the
Worsleys). At a special stockholders meeting held on
September 27, 2007, Catalytica stockholders holding a
majority of the Catalytica common stock outstanding approved the
adoption of the Contribution and Merger Agreement, and, on
October 1, 2007, the parties to the Contribution and Merger
Agreement completed the transactions contemplated thereby. In
the transaction, Catalytica and the Snowflake entities combined
their businesses through the merger of Merger Sub with and into
Catalytica, with Catalytica surviving the merger, and the
concurrent contribution to Renegy by the Worsley Trust, the
beneficial owners of the Snowflake entities, of all of the
outstanding equity interests of the Snowflake entities (the
Merger Transaction). As a result of the Merger
Transaction, Catalytica and the Snowflake entities now operate
under Renegy as wholly-owned subsidiaries. In connection with
the consummation of the Merger Transaction, Catalytica
terminated its registration under the Exchange Act with its
filing of Form 15 on October 2, 2007.
Pursuant to the terms of the Contribution and Merger Agreement,
each outstanding share of common stock of Catalytica was
converted into the right to receive one-seventh (1/7th) of a
share of Renegy common stock. Additionally, each outstanding
option to purchase Catalytica common stock was assumed by Renegy
and now represents an option to acquire shares of Renegy common
stock, subject to the conversion ratio, on the terms and
conditions set forth in the Contribution and Merger Agreement.
Each outstanding Catalytica restricted stock unit award was
accelerated immediately prior to the consummation of the Merger
Transaction and was treated in the same manner as other shares
of Catalytica common stock which were outstanding immediately
prior to consummation of the Merger Transaction.
Further, pursuant to the terms of the Contribution and Merger
Agreement, the Worsley Trust received 3,774,048 shares of
our common stock and warrants to purchase up to
2,473,023 shares of our common stock in connection with the
Merger Transaction. The warrants have an exercise price of
$16.38 per share, provide for vesting in three tranches
conditioned upon the registrants achievement of certain
renewable energy-related milestones, and expire at specified
times no later than six years following the closing of the
Merger Transaction. Upon the closing of the Merger Transaction,
the Catalytica stockholders held approximately 41.3% of our
outstanding stock and the Worsley Trust held approximately
58.7%, which would increase to approximately 70% if the warrants
issued to the Worsley Trust are exercised in full.
On November 7, 2007, we consummated the sale of our
SCR-Tech subsidiary, a provider of emissions compliance services
for coal-fired power plants, to CoaLogix Inc., a wholly-owned
subsidiary of Acorn Energy, Inc. In accordance with the terms of
the Contribution and Merger Agreement, net proceeds received in
excess of a threshold amount as defined in the agreement were to
be reflected in a reduction of the number of shares of our
common stock issued to the Worsley Trust. Net proceeds from the
sale of SCR-Tech were approximately $1.8 million in excess
of the threshold. Accordingly, the number of shares issued to
the Worsley Trust was reduced by 220,891 shares, or
approximately 1.5%, thereby reducing the percentage of our
common stock held by the Worsley Trust to 57.2%, as compared to
58.7% at the effective time of the Merger Transaction.
25
In connection with the Contribution and Merger Agreement, the
Worsleys have agreed to indemnify Catalytica and Renegy and our
respective affiliates, directors, officers and employees from
and against any and all damages arising out of, resulting from
or in any way related to a breach of, or the failure to perform
or satisfy any of the representations, warranties, covenants and
agreements made by any of the Snowflake entities
and/or
the
Worsleys in the Contribution and Merger Agreement. Renegy and
Catalytica have agreed to indemnify the Worsleys from and
against any and all damages arising out of, resulting from or in
any way related to (i) a breach of, or the failure to
perform or satisfy any of the representations, warranties,
covenants and agreements made by Catalytica in the Contribution
and Merger Agreement, and (ii) the construction cost
guarantee of the Worsleys to CoBank up to $2 million. The
respective obligations of the parties to indemnify for any
breaches of their respective representations and warranties will
survive until April 1, 2009, except for any indemnification
claim resulting from fraud or intentional misrepresentation. No
indemnification is required until the aggregate liability for a
party exceeds $250,000, and the indemnity obligations of each
party are subject to a $10 million cap, except in the case
of fraud or intentional misrepresentation. The indemnification
obligations of the Worsleys may be satisfied in cash or shares
of our common stock based on a value of $12.25 per share,
rounded up to the nearest whole share. Renegys obligation
to indemnify the Worsleys may be satisfied by paying cash or
shares of Renegy common stock, grossed up to reflect
the Worsleys anticipated 58.5% ownership of our
outstanding common stock, which percentage was projected at the
time of execution of the Contribution and Merger Agreement to
exist at consummation of the Contribution and Merger Agreement
using the treasury stock method. Specifically, Renegy may pay
cash to the Worsleys in an amount equal to (i) the quotient
obtained by dividing (A) the amount of the damages for
which indemnification is being made by (B) 0.415, less
(ii) the amount of such damages (the adjusted
damages) or issue to the Worsley Trust such number of
Renegy shares equal to the quotient obtained by dividing
(i) the adjusted damages by (ii) $12.25, rounded up to
the nearest whole share.
In addition, in connection with the Contribution and Merger
Agreement, we have agreed to indemnify the Worsleys for any
claims arising under their guarantee to Salt River Project
relating to the payment of all sums owed by Snowflake to Salt
River Project under its power purchase agreement with Snowflake
and for maintaining a net worth of at least $35 million.
Pursuant to the Contribution and Merger Agreement, we agreed to
pay the first $2.0 million of Project Costs, as defined in
our Credit Agreement with CoBank, ACB (the CoBank Credit
Agreement), related to the construction of our biomass
power plant in Snowflake, Arizona (the Snowflake
Plant) that exceed the approximately $67.3 million
Project Cap, as defined in the CoBank Credit Agreement. The
Worsleys agreed to pay to us the amount by which Project Costs
exceed the sum of the Project Cap and $2.0 million in
sufficient time for us to be able to pay such excess Project
Costs pursuant to an Overrun Guaranty (the Overrun
Guaranty). A committee of independent directors (the
Special Committee), acting on our behalf, has the
authority to enforce the Worsleys obligations under the
Overrun Guaranty.
In February 2008, we issued a press release announcing that we
expect the Project Costs for the Snowflake plant to exceed the
Project Cap by approximately $12.5 million. Pursuant to a
letter agreement between us and the Worsleys (the First
Letter Agreement), which constitutes an amendment to the
Contribution and Merger Agreement and the Overrun Guaranty, we,
with the approval of the Special Committee, and the Worsleys
agreed that, notwithstanding the provisions of the Contribution
and Merger Agreement and the Overrun Guaranty, we will be
responsible for the payment of an additional $6.0 million
of capital costs incurred beyond the Project Cap that have been,
or may be, incurred by us and the $2.0 million already
payable by us as described above. We believe that the
$6.0 million in additional capital costs will enhance the
Snowflake plant and further increase the efficiency, reliability
and long-term operating performance of the plant. The First
Letter Agreement provides that we will have no obligation to pay
for any Project Costs beyond the $2.0 million previously
agreed to and the $6.0 million described in this paragraph.
Pursuant to a Sponsor Guaranty, dated September 1, 2006
between the Worsleys and CoBank, ACB (the Sponsor
Guaranty), the Worsleys have guaranteed the payment of all
Project Costs in excess of the Project Cap. The First Letter
Agreement provides that the Worsleys will deposit a minimum of
$5.0 million in cash in our general operating bank account
by March 5, 2008 to be applied against the Worsleys
obligations pursuant to the Sponsor Guaranty and Overrun
Guaranty, which deposit has been made.
In accordance with the terms of the First Letter Agreement, we
entered into a Revolving Credit Agreement (the Credit
Agreement) with the Worsleys pursuant to which the
Worsleys agreed to lend us up to $6.0 million, which could
be drawn on by us beginning March 31, 2008 for general
working capital purposes, including to pay the
26
capital costs that we have agreed to pay as described above.
Until March 31, 2009, interest was to accrue at the Prime
Rate (as reported by the Wall Street Journal) on the outstanding
balance of the loan, but would not be payable until the
termination of the loan. Commencing April 1, 2009, interest
would accrue on the unpaid balance of the loan and would be
payable monthly by us. The outstanding principal could be
prepaid by us in whole or part at any time without penalty, and
any repaid amounts could be re-borrowed by us. Any unpaid
balance under the Credit Agreement would be due on the date that
is the earlier of March 31, 2010 or such date that we were
able to obtain alternative debt or equity financing in the
amount of at least $6.0 million, unless terminated earlier
in accordance with the terms of the Credit Agreement.
Also in accordance with the terms of the First Letter Agreement,
the Worsleys agreed to personally guarantee a line of credit in
an amount of $6.0 million to be established for us at a
bank or other financial institution reasonably acceptable to us
and that was on commercially reasonable terms acceptable to us
in our reasonable discretion. Upon the establishment of the line
of credit or at such time as we secured alternative debt or
equity financing in an amount of a minimum of $6.0 million,
the Worsleys obligation to provide a line of credit to us was to
be released.
On March 28, 2008, we entered into a credit facility with
Comerica providing for up to $6.2 million in borrowings,
which facility was guaranteed by the Worsleys. As a result of
the Comerica Credit Agreement, the Worsley line of credit was
terminated.
On August 13, 2008, we entered into another letter
agreement (the Second Letter Agreement) with the
Worsleys to finalize all amounts owed by the Worsleys for the
Project Costs related to the Snowflake plant described above.
The Special Committee, acting on behalf of the Company, agreed
pursuant to the Second Letter Agreement that the Worsleys
obligation to pay for unpaid Project Cost overruns incurred
prior to the commencement of commercial operations of the
Snowflake plant, which occurred on June 10, 2008, would be
satisfied by the $5.0 million cash deposit previously made
by the Worsleys to the Company and funding by the Worsleys,
through the direct deposit of funds or a letter of credit, of
the debt service reserve (the DSR) under the
Companys credit agreement with its project lender for the
Snowflake plant, CoBank, ACB) of approximately $2.8 million
beginning at the time the Companys construction loans with
CoBank related to the Snowflake plant convert into term loans,
which, as of the date of this Proxy Statement, the Company
expects to occur on or before September 30, 2008. The
Second Letter Agreement provides that the Worsleys will be
released from their obligation with respect to the DSR to the
extent the Snowflake plant operates in excess of certain output
parameters. Specifically, the Worsleys obligation to fund
the DSR will be reduced monthly in an amount equal to 70% of the
revenue on a daily output in excess of 576
megawatt-hours.
In addition, the parties agreed that previous deposits by the
Worsleys with the Company in the aggregate amount of
$1.0 million for purposes of paying potential Project Cost
overruns will be treated as loan proceeds in exchange for the
issuance of $1.0 million in convertible debt to the
Worsleys, as evidenced by a Convertible Subordinated Promissory
Note issued by the Company to the Worsleys on August 13,
2008 (the Note), which Note is described in more
detail below. The Second Letter Agreement also requires the
Worsleys to use commercially reasonable efforts to loan the
Company up to $4.0 million, at the option of the Company,
at ay time during the period commencing October 1, 2008
through the earlier of December 31, 2009 or the date upon
which the Company completes an Equity Funding Event (as defined
below), under the same terms as the convertible debt represented
by the Note to fund the Companys operations for the
remainder of 2008. Pursuant to the Second Letter Agreement, the
Special Committee also agreed that 824,341 of the common stock
Warrants issued to the Worsleys on October 1, 2007 in
connection with the Merger Transaction have vested as of
June 10, 2008 as a result of the achievement of commercial
operation of the Snowflake plant. The Second Letter Agreement
constitutes an amendment to the First Letter Agreement, the
Contribution and Merger Agreement and the related agreements
between the parties.
On August 13, 2008, we issued a Convertible Subordinated
Promissory Note (the Note) to the Worsleys in the
principal amount of $1.0 million in exchange for cash
advances made by the Worsleys to us in the amounts of $600,000
and $400,000 on June 30, 2008 and July 7, 2008,
respectively. The Note is subordinate to all other Company
secured debt and accrues interest at a rate of 10% per annum.
The principal and accrued interest under the Note are due and
payable by the Company on December 31, 2009. The Note will
automatically convert if, prior to December 31, 2009, the
Company obtains at least $5,000,000 of equity financing pursuant
to the issuance of equity securities of the Company pursuant to
a private placement to one or more bona fide third party
investors (an Equity Funding Event). Upon completion
of the Equity Funding Event, the entire principal amount of the
convertible debt
27
represented by the Note, together with accrued interest thereon,
will be converted as part of such financing into the same type
of equity securities issued in the Equity Funding Event and at
the same purchase price for such equity securities in the Equity
Funding Event. Commencing December 31, 2008, the Worsleys
will have the right, at their option, to convert the outstanding
principal and accrued interest under the Note, in whole but not
in part, into the Companys common stock, at a per share
conversion price equal to the closing price of the
Companys common stock as quoted on the Nasdaq Capital
Market (or such other national securities exchange or other
quotation medium that publishes quotes of the common stock) on
the date prior to the date of the Worsleys notice of
conversion to the Company. The Note provides that any conversion
of the Note would be subject at all times to the applicable
Marketplace Rules of the Nasdaq Stock Market, LLC regarding
stockholder approval (for so long as the Companys
securities are subject to such rules). Upon prior written notice
to the Worsleys, the Company may at any time prepay in whole or
in part the principal of the Note, plus interest accrued to the
date of such payment.
We have entered into a Registration Rights Agreement with the
Worsley Trust pursuant to which we have agreed, at our expense,
to prepare and file a registration statement pursuant to
Rule 415 under the Securities Act of 1933, as amended
covering the resale from time to time of all of the shares of
our common stock issued to the Worsley Trust in connection with
the Merger Transaction as well as all shares of common stock
issuable upon exercise of the warrants issued to the Worsley
Trust. We must prepare and file such registration statement upon
the request of the Worsley Trust at any time from and after
July 1, 2008, provided that we may delay any requested
registration for up to 60 consecutive days in any calendar year
(or 120 days in the aggregate in any calendar year) if and
for so long as certain conditions exist.
Effective January 1, 2007, Catalytica entered into a
one-year consulting agreement with Richard Abdoo, a member of
our Board of Directors. The agreement provided that
Mr. Abdoo will provide assistance to Catalytica and its
management with respect to its subsidiary, SCR-Tech, LLC,
including assisting on business strategy and customer matters.
The consulting agreement provided compensation to Mr. Abdoo
in the form of restricted stock units having a value on the date
of grant of January 25, 2007 of $60,000, rounded down to
the nearest whole share, with such units vesting monthly during
2007. Mr. Abdoo also was entitled to be reimbursed for
reasonable travel and other out-of-pocket expenses incurred by
him in rendering such services. The consulting agreement also
contained customary invention assignment, confidentiality and
other similar provisions. This agreement expired in connection
with the sale of SCR-Tech in November 2007.
PROPOSAL NO. 2
APPROVAL OF AMENDED AND RESTATED 2007 EQUITY INCENTIVE
PLAN
Proposal
On September 27, 2007, our Board of Directors adopted,
subject to stockholder approval, the 2007 Equity Incentive Plan.
On January 22, 2008, our Compensation Committee approved
certain technical amendments to such plan, including for certain
tax purposes, and recommended adoption of the plan, as amended,
by the Board. On February 5, 2008, our Board approved the
amended and restated 2007 Equity Incentive Plan, which is
referred to herein as the Plan. As required by the
Plan and NASDAQ Stock Market rules, our Board is submitting the
Plan for approval by our stockholders, and has specifically
conditioned the effectiveness of the Plan on such approval.
Description
of the 2007 Equity Incentive Plan
The following summary is qualified in its entirety by reference
to the Plan, a copy of which is attached as Appendix A to
this Proxy Statement.
Purpose
The purpose of the Plan is to:
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attract, motivate and retain the best available personnel for
positions of substantial responsibility;
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provide additional incentive to employees, directors and
consultants; and
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promote the success of the Companys business.
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28
Shares
Subject to the Plan
The maximum aggregate number of shares of common stock that may
be issued under the Plan is 1,000,000 shares (subject to
adjustment in the event of stock splits and other similar
events), all of which may be issued as incentive stock options.
The number of shares available for issuance under the Plan will
be increased on the first day of each fiscal year beginning with
the 2009 fiscal year in an amount equal to the least of
(A) 500,000 shares, (B) four percent of the
outstanding shares on the last day of the immediately preceding
fiscal year or (C) such number of shares determined by the
Board; provided, however, that the maximum aggregate number of
shares that may be issued under the Plan as incentive stock
options will remain 1,000,000 shares.
Types
of Awards
The Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Code,
non-statutory stock options, restricted stock, restricted stock
units, stock appreciation rights, performance units, and
performance shares to employees, non-employee directors and
consultants in exchange for services received.
Incentive Stock Options and Non-statutory Stock
Options.
Optionees receive the right to purchase
a specified number of shares of common stock at a specified
option price and subject to such other terms and conditions as
are specified in connection with the option grant. Options must
be granted at an exercise price which is equal to or greater
than the fair market value of the common stock on the date of
grant. Under present law, incentive stock options and options
intended to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code) may not be granted at an exercise
price less than 100% of the fair market value of the common
stock on the date of grant (or less than 110% of the fair market
value in the case of incentive stock options granted to
optionees holding more than 10% of our voting power). Options
may not be granted for a term in excess of ten years (or in
excess of five years in the case of incentive stock options
granted to optionees holding more than 10% of our voting power).
The 2007 Plan permits the following forms of payment of the
exercise price of options: (i) payment by cash, check,
promissory note or in connection with a cashless
exercise through a broker, (ii) subject to certain
conditions, surrender to us of shares of common stock,
(iii) any other lawful means, or (iv) any combination
of these forms of payment. Each option will be designated in the
award agreement as either an incentive stock option or a
non-statutory stock option. However, notwithstanding such
designation, to the extent that the aggregate fair market value
of the shares with respect to which incentive stock options are
exercisable for the first time by the optionee during any
calendar year (under all plans of the Company and any parent or
subsidiary) exceeds $100,000, such options will be treated as
non-statutory stock options. After termination of an employee,
director or consultant, he or she will be able to exercise his
or her option for the period of time stated in the option
agreement. Generally, if termination is due to death or
disability, the option will remain exercisable for
12 months. In all other cases, the option will generally
remain exercisable for three months. However, an option
generally may not be exercised later than the expiration of its
term.
Restricted Stock and Restricted Stock Unit
Awards.
Restricted stock awards entitle
recipients to acquire shares of our common stock, subject to our
right to repurchase all or part of such shares if the conditions
specified in the applicable award are not satisfied before the
end of the applicable restriction period. Restricted stock unit
awards entitle the recipient to receive shares of our common
stock to be delivered in the future subject to such terms and
conditions on the delivery of the shares as our Board may
determine. Restricted stock and restricted stock unit awards
granted under the Plan may vest on the basis of passage of time,
achievement of specified performance objectives or a combination
of both time and performance. The Compensation Committee may, at
the time of grant, make a restricted stock or restricted stock
unit award subject to such performance objectives as to qualify
it for deduction under Section 162(m) of the Code.
Stock Appreciation Rights.
A stock
appreciation right, or SAR, is an award entitling the holder,
upon exercise, to receive an amount in common stock determined
by reference to appreciation, from and after the date of grant,
in the fair market value of a share of common stock. The
administrator will determine the terms of stock appreciation
rights, including when such rights become exercisable and
whether to pay the increased appreciation in cash or with shares
of our common stock, or a combination thereof. Stock
appreciation rights will expire under the same rules that apply
to stock options.
Performance Units and Performance
Shares.
Performance units and performance shares
are awards that will result in a payment to a participant only
if performance goals established by the administrator are
achieved or the awards otherwise vest. The administrator will
establish organizational or individual performance goals in its
discretion, which,
29
depending on the extent to which they are met, will determine
the number
and/or
the
value of performance units and performance shares to be paid out
to participants. Performance units will have an initial dollar
value established by the administrator prior to the grant date.
Performance shares also will have an initial value equal to the
fair market value of our common stock on the grant date. Payment
for performance units and performance shares may be made in cash
or in shares of our common stock with equivalent value, or in
some combination, as will be determined by the administrator.
Eligibility
to Receive Awards.
The 2007 Plan provides for the grant of incentive stock options,
within the meaning of Section 422 of the Code, to our
employees and any parent and subsidiary corporations
employees, and for the grant of non-statutory stock options,
stock appreciation rights, restricted stock, restricted stock
units, performance units and performance shares to our
employees, directors and consultants and our parent and
subsidiary corporations employees and consultants.
As of August 1, 2008, all employees of Renegy Holdings,
Inc., and its subsidiaries were eligible to receive awards under
the Plan, including our four executive officers and four
non-employee directors. The granting of awards under the Plan is
discretionary, and we cannot now determine the number or type of
awards to be granted in the future to any particular person or
group.
On August 1, 2008, the last reported sale price of our
common stock on the NASDAQ Capital Market was $2.75 per share.
Since the Plan was adopted by our Board of Directors, subject to
stockholder approval, the Company has granted the following
options to the individuals and groups listed below as of
August 1, 2008:
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Weighted Average
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Total Option
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Name and Position
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Exercise Price
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Shares Granted
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Named executive officers
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Robert M Worsley
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$
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5.24
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59,400
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President, Chief Executive Officer and Chairman
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Robert W. Zack
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$
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5.24
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79,200
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Executive Vice President and Chief Financial Officer
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Hugh W. Smith
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$
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5.11
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100,000
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Chief Operating Officer
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Scott K. Higginson
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$
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5.86
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33,543
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Senior Vice President
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Directors who are not executive officers
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Richard A. Abdoo (Nominee)
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$
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5.11
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20,325
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Ricardo B. Levy
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$
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5.11
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20,325
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William B. Ellis
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$
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5.11
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20,325
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Susan F. Tierney
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$
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5.11
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20,325
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All current directors who are not executive officers, as a
group
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$
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5.11
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81,300
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All current executive officers, as a group
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$
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5.27
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272,143
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All employees and other parties who are not executive
officers, as a group
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$
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5.27
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71,314
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Associates of current directors, executive officers or
nominees for director
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Administration
The 2007 Plan is administered by our Board of Directors, or the
administrator. Our Board of Directors has the
authority to adopt, amend, and repeal the administrative rules,
guidelines, and practices relating to the 2007 Plan and to
interpret the provisions of the 2007 Plan. Pursuant to the terms
of the 2007 Plan, our Board of Directors may delegate authority
under the 2007 Plan to one or more committees or subcommittees
of our Board of Directors.
30
Our Board of Directors is required to make appropriate
adjustments in connection with the 2007 Plan and any outstanding
awards to reflect stock splits, stock dividends,
recapitalizations, spin-offs, and other similar changes in
capitalization. The 2007 Plan also contains provisions
addressing the consequences of any merger or Change of Control,
which is defined as the occurrence of any of the following
events: (i) any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as defined in
Rule 13d-3
of the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the total voting power
represented by the Companys then outstanding voting
securities; (ii) the consummation of the sale or
disposition by the Company of all or substantially all (80%
percent) of the Companys assets; (iii) a change in
the composition of the Board occurring within a one (1)-year
period, as a result of which fewer than a majority of the
directors are incumbent directors; or (iv) the consummation
of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or its parent) at least 50%
of the total voting power represented by the voting securities
of the Company or such surviving entity or its parent
outstanding immediately after such merger or consolidation. In
the event of a merger or Change in Control, each outstanding
award will be treated as the administrator determines,
including, without limitation, that each award be assumed or an
equivalent option or right substituted by the successor
corporation or a parent or subsidiary of the successor
corporation. The administrator will not be required to treat all
awards similarly in the transaction.
Transferability
Unless the administrator provides otherwise, the 2007 Plan will
not allow for the transfer of awards and only the recipient of
an award will be able to exercise an award during his or her
lifetime. The administrator will have the discretion to
implement an award transfer program pursuant to which
participants would have the ability to transfer outstanding
awards to a financial institution or other person or entity
approved by the administrator.
Provisions
for Foreign Participants
Our Board may modify awards granted to participants who are
foreign nationals or employed outside the United States or
establish subplans or procedures under the Plan to recognize
differences in laws, rules, regulations or customs of such
foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Termination
or Amendment
No award may be made under the Plan after the completion of ten
years from the date on which the Plan was approved by our Board,
but awards previously granted may extend beyond that date. Our
Board may at any time amend, alter, suspend or terminate the
Plan provided such action does not impair the rights of any
participant. If the stockholders do not approve the adoption of
the Plan, the Plan will no longer be effective and we will not
grant any additional awards under the Plan. In such event, our
Board will consider whether to adopt alternative arrangements
based on its assessment of our needs.
Federal
Income Tax Consequences
The following summarizes the U.S. federal income tax
consequences that generally will arise with respect to awards
granted under the Plan. This summary is based on the tax laws in
effect as of the date of this Proxy Statement. This summary
assumes that all awards granted under the Plan are exempt from,
or comply with, the rules under Section 409A of the Code
related to nonqualified deferred compensation. Changes to these
laws could alter the tax consequences described below.
Incentive Stock Options.
A participant will
not have income upon the grant of an incentive stock option.
Also, except as described below, a participant will not have
income upon exercise of an incentive stock option if the
participant has been employed by the Company or a 50% or
more-owned corporate subsidiary at all times beginning with the
option grant date and ending three months before the date the
participant exercises the option. If the participant has not
been so employed during that time, then the participant will be
taxed as described below under Non-statutory Stock
Options. The exercise of an incentive stock option may
subject the participant to the alternative minimum tax.
31
A participant will have income upon the sale of the stock
acquired under an incentive stock option at a profit (if sales
proceeds exceed the exercise price). The type of income will
depend on when the participant sells the stock. If a participant
sells the stock more than two years after the option was granted
and more than one year after the option was exercised, then all
of the profit will be long-term capital gain. If a participant
sells the stock prior to satisfying these waiting periods, then
the participant will have engaged in a disqualifying disposition
and a portion of the profit will be ordinary income and a
portion may be capital gain. This capital gain will be long-term
if the participant has held the stock for more than one year and
otherwise will be short-term. If a participant sells the stock
at a loss (sales proceeds are less than the exercise price),
then the loss will be a capital loss. This capital loss will be
long-term if the participant held the stock for more than one
year and otherwise will be short-term.
Non-statutory Stock Options.
A participant
will not have income upon the grant of a non-statutory stock
option. A participant will have compensation income upon the
exercise of a non-statutory stock option equal to the value of
the stock on the day the participant exercised the option less
the exercise price. Upon sale of the stock, the participant will
have capital gain or loss equal to the difference between the
sales proceeds and the value of the stock on the day the option
was exercised. This capital gain or loss will be long-term if
the participant has held the stock for more than one year and
otherwise will be short-term.
Restricted Stock.
A participant will not have
income upon the grant of restricted stock unless an election
under Section 83(b) of the Code is made within 30 days
of the date of grant. If a timely 83(b) election is made, then a
participant will have compensation income equal to the value of
the stock on the date of grant less the purchase price, if any.
When the stock is sold, the participant will have capital gain
or loss equal to the difference between the sales proceeds and
the value of the stock on the date of grant. If the participant
does not make an 83(b) election, then when the stock vests the
participant will have compensation income equal to the value of
the stock on the vesting date less the purchase price, if any.
When the stock is sold, the participant will have capital gain
or loss equal to the sales proceeds less the value of the stock
on the vesting date. Any capital gain or loss will be long-term
if the participant held the stock for more than one year from
the vesting date and otherwise will be short-term.
Restricted Stock Units.
A participant will
have income from a restricted stock unit equal to the difference
between the fair market value of the stock on the date of
delivery of the stock less the purchase price, if any. A
participant is not permitted to make a Section 83(b)
election for a restricted stock unit.
Stock Appreciation Rights
. A participant will
not have income upon the grant of a stock appreciation right. A
participant generally will recognize compensation income upon
the exercise of a SAR equal to the fair market value of any
stock received. Upon the sale of the stock, the participant will
have capital gain or loss equal to the difference between the
sales proceeds and the value of the stock on the day the SAR was
exercised. This capital gain or loss will be long-term if the
participant held the stock for more than one year and otherwise
will be short-term.
Other Stock-Based Awards.
The tax consequences
associated with other stock-based awards granted under the Plan
will vary depending on the specific terms of such award. Among
the relevant factors are whether or not the award has a readily
ascertainable fair market value, whether or not the award is
subject to forfeiture provisions or restrictions on transfer,
the nature of the property to be received by the participant
under the award and the participants holding period and
tax basis for the award or underlying common stock.
Tax Consequences to Us.
There will be no tax
consequences to us except that we will be entitled to a
deduction when a participant has compensation income. Any such
deduction will be subject to the limitations of
Section 162(m) of the Code.
Vote
Required and Recommendation of our Board of Directors
The affirmative vote of the votes cast at the Annual Meeting,
either in person or by proxy, is required to approve the 2007
Plan. Abstentions and broker non-votes will each be counted as
present for purposes of determining the presence of a quorum but
will not have any effect on the outcome of the proposal.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE AMENDED AND RESTATED 2007
EQUITY INCENTIVE PLAN
.
32
OTHER
INFORMATION
Stockholders may request additional copies of our 2007 Annual
Report on
Form 10-KSB,
including financial statements and financial statement schedules
thereto (if any) and exhibits thereto, free of charge, by making
a written request to the following address:
Renegy Holdings, Inc.
Attn: Secretary
60 E. Rio Salado Parkway, Suite 1012
Tempe, Arizona 85281
Current and prospective stockholders can also access our 2007
Annual Report on
Form 10-KSB
by visiting the Investor Relations section of our website at
http://www.renegy.com
.
OTHER
MATTERS
The Company does not currently intend to bring before the Annual
Meeting any matters other than those set forth herein, and has
no present knowledge that any other matters will or may be
brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the
Proxies in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Sincerely,
Robert M. Worsley
Chairman, President, Chief Executive Officer
and Director
Tempe, Arizona
September 2, 2008
33
APPENDIX A
RENEGY
HOLDINGS, INC.
2007 EQUITY INCENTIVE PLAN
(As
Amended and Restated February 5, 2008)
1.
Purposes of the Plan
.
The
purposes of this Plan are:
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to attract and retain the best available personnel for positions
of substantial responsibility,
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to provide additional incentive to Employees, Directors and
Consultants, and
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to promote the success of the Companys business.
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The Plan permits the grant of Incentive Stock Options,
Nonstatutory Stock Options, Restricted Stock, Restricted Stock
Units, Stock Appreciation Rights, Performance Units and
Performance Shares.
2.
Definitions
.
As used
herein, the following definitions will apply:
(a)
Administrator
means the Board
or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.
(b)
Affiliate
means any employer
with which the Company would be considered a single employer,
within the meaning of Section 414(b) and 414(c) of the
Code, applied using 80% as the percentage of ownership required
under such Code sections.
(c)
Applicable Laws
means the
requirements relating to the administration of equity-based
awards under U.S. state corporate laws, U.S. federal
and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction
where Awards are, or will be, granted under the Plan.
(d)
Award
means, individually or
collectively, a grant under the Plan of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Units or Performance Shares.
(e)
Award Agreement
means the
written or electronic agreement setting forth the terms and
provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the
Plan.
(f)
Award Transfer Program
means
any program instituted by the Committee which would permit
Participants the opportunity to transfer any outstanding Awards
to a financial institution or other person or entity approved by
the Committee.
(g)
Board
means the Board of
Directors of the Company.
(h)
Change in Control
means the
occurrence of any of the following events:
(i) Any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as defined in
Rule 13d-3
of the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the
total voting power represented by the Companys then
outstanding voting securities;
(ii) The consummation of the sale or disposition by the
Company of all or substantially all (80% percent) of the
Companys assets;
(iii) A change in the composition of the Board occurring
within a one (1)-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors.
Incumbent Directors means individuals who are
Directors as of the effective date of the Plan and, after the
effective date of the Plan, means Directors who are elected, or
nominated for election, to the Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time of
such election or nomination (but will not include an individual
whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors
to the Company); or
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(iv) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at
least fifty percent (50%) of the total voting power represented
by the voting securities of the Company or such surviving entity
or its parent outstanding immediately after such merger or
consolidation.
(v)
Code
means the Internal Revenue Code
of 1986, as amended. Any reference to a section of the Code
herein will be a reference to any successor or amended section
of the Code.
(i)
Committee
means a committee
of Directors or of other individuals satisfying Applicable Laws
appointed by the Board in accordance with Section 4 hereof.
(j)
Common Stock
means the common
stock of the Company.
(k)
Company
means Renegy
Holdings, Inc., a Delaware corporation, or any successor thereto.
(l)
Consultant
means any person,
including an advisor (who is not an Employee or a common law
employee of the Company), engaged by the Company or a Parent or
Subsidiary to render services to such entity.
(m)
Director
means a member of
the Board.
(n)
Disability
means total and
permanent disability as defined in Section 22(e)(3) of the
Code, except that in the case of Awards that constitute
nonqualified deferred compensation within the
meaning of Section 409A, Disability means a
disability as defined in Section 409A.
(o)
Employee
means any person,
including Officers and Directors, employed by the Company or any
Parent or Subsidiary of the Company and designated as employee
on the payroll records of such entity. Neither service as a
Director nor payment of a directors fee by the Company
will be sufficient to constitute employment by the
Company.
(p)
Exchange Act
means the
Securities Exchange Act of 1934, as amended.
(q)
Exchange Program
means a
program in accordance with Applicable Laws under which
(i) outstanding Awards are surrendered or cancelled in
exchange for Awards of the same type (which may have higher or
lower exercise prices and different terms), Awards of a
different type,
and/or
cash,
and/or
(ii) the exercise price of an outstanding Award is reduced.
The Administrator will determine the terms and conditions of any
Exchange Program in its sole discretion.
(r)
Fair Market Value
means, as
of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without
limitation the Nasdaq Global Select Market, the Nasdaq Global
Market or the Nasdaq Capital Market of The Nasdaq Stock Market,
its Fair Market Value will be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system on the day of determination, as
reported in
The Wall Street Journal
or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share will be the mean
between the high bid and low asked prices for the Common Stock
on the day of determination, as reported in
The Wall Street
Journal
or such other source as the Administrator deems
reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value will be determined in good
faith by the Administrator consistent with Section 409A.
(s)
Fiscal Year
means the fiscal
year of the Company.
(t)
Incentive Stock Option
means
an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
A-2
(u)
Inside Director
means a
Director who is an Employee.
(v)
Nonstatutory Stock Option
means an Option that by its terms does not qualify or is not
intended to qualify as an Incentive Stock Option.
(w)
Officer
means a person who is
an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated
thereunder.
(x)
Option
means a stock option
granted pursuant to the Plan.
(y)
Outside Director
means a
Director who is not an Employee.
(z)
Parent
means a parent
corporation of the Company, whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(aa)
Participant
means the holder
of an outstanding Award.
(bb)
Performance Share
means an
Award denominated in Shares which may be earned in whole or in
part upon attainment of performance goals or other vesting
criteria as the Administrator may determine pursuant to
Section 10.
(cc)
Performance Unit
means an
Award which may be earned in whole or in part upon attainment of
performance goals or other vesting criteria as the Administrator
may determine and which may be settled for cash, Shares or other
securities or a combination of the foregoing pursuant to
Section 10.
(dd)
Period of Restriction
means
the period during which the transfer of Shares of Restricted
Stock are subject to restrictions and therefore, the Shares are
subject to a substantial risk of forfeiture. Such restrictions
may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events as
determined by the Administrator.
(ee)
Plan
means this 2007 Equity
Incentive Plan, as amended from time to time.
(ff)
Restricted Stock
means
Shares issued pursuant to a Restricted Stock Award under
Section 7 of the Plan, or issued pursuant to the early
exercise of an Option.
(gg)
Restricted Stock Unit
means
a bookkeeping entry representing an amount equal to the Fair
Market Value of one Share, granted pursuant to Section 8.
Each Restricted Stock Unit represents an unfunded and unsecured
obligation of the Company.
(hh)
Rule 16b-3
means
Rule 16b-3
of the Exchange Act or any successor to
Rule 16b-3,
as in effect when discretion is being exercised with respect to
the Plan.
(ii)
Section 409A
means
Section 409A of the Code and the guidance issued by the
United States Department of the Treasury or Internal Revenue
Service.
(jj)
Section 16(b)
means
Section 16(b) of the Exchange Act.
(kk)
Separation from Service
means a termination of employment with the Company and all
Affiliates that is a separation from service within
the meaning of Section 409A.
(ll)
Service Provider
means an
Employee, Director or Consultant.
(mm)
Share
means a share of the
Common Stock, as adjusted in accordance with Section 13 of
the Plan.
(nn)
Specified Employee
means a
specified employee within the meaning of
Section 409A and the Companys specified employee
identification policy, if any.
(oo)
Stock Appreciation Right
means an Award, granted alone or in connection with an Option,
that pursuant to Section 9 is designated as a Stock
Appreciation Right.
(pp)
Subsidiary
means a
subsidiary corporation of the Company, whether now
or hereafter existing, as defined in Section 424(f) of the
Code.
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3.
Stock Subject to the
Plan
.
(a)
Stock Subject to the
Plan
.
Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of
Shares that may be issued under the Plan is
1,000,000 Shares, all of which may be issued as Incentive
Stock Options. The Shares may be authorized, but unissued, or
reacquired Common Stock.
(b)
Automatic Share Reserve
Increase
.
The number of Shares available for
issuance under the Plan will be increased on the first day of
each Fiscal Year beginning with the 2009 Fiscal Year, in an
amount equal to the least of (A) 500,000 Shares,
(B) four percent (4%) of the outstanding Shares on the last
day of the immediately preceding Fiscal Year or (C) such
number of Shares determined by the Board; provided, however,
that the maximum aggregate number of Shares that may be issued
under the Plan as Incentive Stock Options shall remain
1,000,000 Shares.
(c)
Lapsed Awards
.
If an Award
expires or becomes unexercisable without having been exercised
in full, is surrendered pursuant to an Exchange Program, or,
with respect to Restricted Stock, Restricted Stock Units,
Performance Units or Performance Shares, is forfeited to or
repurchased by the Company due to failure to vest, the
unpurchased Shares (or for Awards other than Options or Stock
Appreciation Rights the forfeited or repurchased Shares) which
were subject thereto will become available for future grant or
sale under the Plan (unless the Plan has terminated). With
respect to Stock Appreciation Rights, only Shares actually
issued pursuant to a Stock Appreciation Right will cease to be
available under the Plan; all remaining Shares under Stock
Appreciation Rights will remain available for future grant or
sale under the Plan (unless the Plan has terminated). Shares
that have actually been issued under the Plan under any Award
will not be returned to the Plan and will not become available
for future distribution under the Plan; provided, however, that
if Shares issued pursuant to Awards of Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units
are repurchased by the Company or are forfeited to the Company,
such Shares will become available for future grant under the
Plan. Shares used to pay the exercise price of an Award or to
satisfy the tax withholding obligations related to an Award will
become available for future grant or sale under the Plan. To the
extent an Award under the Plan is paid out in cash rather than
Shares, such cash payment will not result in reducing the number
of Shares available for issuance under the Plan. Notwithstanding
the foregoing and, subject to adjustment as provided in
Section 13, the maximum number of Shares that may be issued
upon the exercise of Incentive Stock Options will equal the
aggregate Share number stated in Section 3(a), plus, to the
extent allowable under Section 422 of the Code and the
Treasury Regulations promulgated thereunder, any Shares that
become available for issuance under the Plan pursuant to this
Section 3(c).
(d)
Share Reserve.
The Company, during
the term of this Plan, will at all times reserve and keep
available such number of Shares as will be sufficient to satisfy
the requirements of the Plan.
(e)
Limitation on Shares Subject to
Awards
.
Subject to adjustment as provide in
Section 13 hereof, during any time when the Company has a
class of equity security registered under Section 12 of the
Exchange Act:
(i) the maximum number of Shares subject to Options or
Stock Appreciation Rights that can be awarded under the Plan to
any Service Provider eligible for an Award under the Plan is
five hundred thousand (500,000) per twelve-month period; and
(ii) for Awards of Restricted Stock
and/or
Restricted Stock Units
and/or
Performance Shares
and/or
Performance Units relating to Shares that can be awarded under
the Plan to any Service Provider eligible for an Award under the
Plan, no Service Provider shall be awarded Restricted Stock
and/or
Restricted Stock Units
and/or
Performance Shares
and/or
Performance Units relating to more than five hundred thousand
(500,000) Shares per twelve-month period.
4.
Administration of the Plan
.
(a)
Procedure
.
(i)
Multiple Administrative
Bodies
.
Different Committees with respect to
different groups of Service Providers may administer the Plan.
(ii)
Section 162(m)
.
To the
extent that the Administrator determines it to be desirable to
qualify Awards granted hereunder as performance-based
compensation within the meaning of Section 162(m) of
the Code, the Plan will be administered by a Committee of two
(2) or more outside directors within the
meaning of
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Section 162(m) of the Code. Awards granted to covered
employees within the meaning of Section 162(m) of the
Code, which are intended to qualify for the performance-based
exception under Code Section 162(m) and related
regulations, shall include any such additional terms,
conditions, limitations and provisions as are necessary to
comply with the performance-based compensation exemption of Code
Section 162(m), unless the Administrator, in its
discretion, determines otherwise.
(iii)
Section 162(m) and
Section 409A
.
If the Administrator
reasonably anticipates that a deduction with respect to an Award
payment would not be permitted solely due to the application of
Section 162(m) of the Code, the Administrator may defer
that amount of the payment to the extent deemed necessary to
ensure deductibility; provided, however, that, to the extent
Section 409A applies, (i) the deduction limitation of
Section 162(m) of the Code shall be applied to all payments
to similarly situated Participants on a reasonably consistent
basis; (ii) the payment must be made by the earliest of
(x) during Companys (or the Affiliates) first
taxable year in which the Company (or the Affiliate) reasonably
anticipates, or should reasonably anticipate, that if the
payment is made during such year, the deduction of such payment
will not be barred by application of Section 162(m) of the
Code or (y) during the period beginning with the date of
the Participants Separation from Service and ending on the
later of the last day of the taxable year of the Company (or the
Affiliate) in which the Participant incurs a Separation from
Service or the fifteen (15th) day of the third month following
the Participants Separation from Service; (iii) where
any payment to a particular Participant is delayed because of
Section 162(m) of the Code, the delay in payment will be
treated as a subsequent deferral election under
Section 409A unless all scheduled payments to such
Participant that could be delayed are also delayed;
(iv) where a payment is delayed to a date on or after the
Participants Separation from Service, the payment will be
considered a payment upon a Separation from Service for purposes
of the Section 409A six- (6-) month delay for Specified
Employees; and (v) no election may be provided to a
Participant with respect to the timing of payment hereunder.
(iv)
Rule 16b-3
.
To
the extent desirable to qualify transactions hereunder as exempt
under
Rule 16b-3,
the transactions contemplated hereunder will be structured to
satisfy the requirements for exemption under
Rule 16b-3.
(v)
Other Administration
.
Other
than as provided above, the Plan will be administered by (A) the
Board or (B) a Committee, which committee will be
constituted to satisfy Applicable Laws.
(b)
Powers of the
Administrator
.
Subject to the provisions of
the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be
granted hereunder;
(iii) to determine the number of Shares to be covered by
each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder. Such
terms and conditions include, but are not limited to, the
exercise price, the time or times when Awards may be exercised
(which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the Shares
relating thereto, based in each case on such factors as the
Administrator will determine;
(vi) to determine the terms and conditions of any, and to
institute, any Exchange Program in accordance with Applicable
Laws;
(vii) to determine the terms and conditions of any, and to
institute any Award Transfer Program in accordance with
Section 12(b) and Applicable Laws;
(viii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan (except Incentive Stock
Options that qualify as such) so as to avoid the application of
or so as to comply with, as the case may be, Section 409A;
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(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying
applicable foreign laws;
(x) to modify or amend each Award (subject to
Section 18(c) of the Plan) in accordance with
Section 409A, including but not limited to the
discretionary authority to extend the post-termination
exercisability period of Awards and to extend the maximum term
of an Option (subject to Section 6(b) regarding Incentive
Stock Options);
(xi) to allow Participants to satisfy withholding tax
obligations in such manner as prescribed in Section 14;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Award
previously granted by the Administrator;
(xiii) to allow a Participant to defer the receipt of the
payment of cash or the delivery of Shares that would otherwise
be due to such Participant under an Award pursuant to such
procedures as the Administrator may determine in accordance with
Section 409A; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c)
Effect of Administrators
Decision
.
The Administrators decisions,
determinations and interpretations will be final and binding on
all Participants and any other holders of Awards.
5.
Eligibility
.
Nonstatutory
Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Shares and Performance Units
may be granted to Service Providers. Incentive Stock Options may
be granted only to Employees.
6.
Stock Options
.
(a)
Limitations
.
Each Option will
be designated in the Award Agreement as either an Incentive
Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds one hundred
thousand dollars ($100,000), such Options will be treated as
Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options will be taken into
account in the order in which they were granted. The Fair Market
Value of the Shares will be determined as of the date of grant
of the Option. The number of Shares subject to the Option shall
also be fixed on the date of grant.
(b)
Term of Option
.
The term of
each Option will be stated in the Award Agreement. In the
absence of a specified term in an Award Agreement for a
Nonstatutory Stock Option, the term will be ten (10) years
from the date of grant. In the case of an Incentive Stock
Option, the term will be ten (10) years from the date of
grant or such shorter term as may be provided in the Award
Agreement. Moreover, in the case of an Incentive Stock Option
granted to a Participant who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date
of grant or such shorter term as may be provided in the Award
Agreement.
(c)
Option Exercise Price and Consideration
.
(i)
Exercise Price
.
The per share
exercise price for the Shares to be issued pursuant to exercise
of an Option will be determined by the Administrator, subject to
the following:
(1) In the case of an Incentive Stock Option
a. granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise
price will be no less than one hundred ten percent (110%) of the
Fair Market Value per Share on the date of grant.
A-6
b. granted to any Employee other than an Employee described
in subparagraph (a) immediately above, the per Share
exercise price will be no less than one hundred percent (100%)
of the Fair Market Value per Share on the date of grant.
(2) In the case of a Nonstatutory Stock Option, the per
Share exercise price will be no less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.
(3) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant
pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code and
Section 409A.
(ii)
Waiting Period and Exercise
Dates
.
At the time an Option is granted, the
Administrator will fix the period within which the Option may be
exercised and will determine any conditions that must be
satisfied before the Option may be exercised.
(iii)
Form of Consideration
.
At
the date of grant, the Administrator will determine the
acceptable form of consideration for exercising an Option,
including the method of payment. Such consideration may consist
entirely of: (1) cash; (2) check; (3) promissory
note, (4) other Shares, provided that such Shares have a
Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option
will be exercised and provided that accepting such Shares, in
the sole discretion of the Administrator, will not result in any
adverse accounting consequences to the Company;
(5) consideration received by the Company under a
broker-assisted (or other) cashless exercise program implemented
by the Company in connection with the Plan; (6) such other
consideration and method of payment for the issuance of Shares
to the extent permitted by Applicable Laws; or (7) any
combination of the foregoing methods of payment.
(d)
Exercise of Option
.
(i)
Procedure for Exercise; Rights as a
Stockholder
.
Any Option granted hereunder
will be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the
Administrator and set forth in the Award Agreement. An Option
may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives:
(i) notice of exercise (in such form as the Administrator
may specify from time to time) from the person entitled to
exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised (together with
applicable withholding taxes). Full payment may consist of any
consideration and method of payment authorized by the
Administrator and permitted by the Award Agreement and the Plan.
Shares issued upon exercise of an Option will be issued in the
name of the Participant or, if requested by the Participant, in
the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of
the Company), no right to vote or receive dividends or any other
rights as a stockholder will exist with respect to the Shares
subject to an Option, notwithstanding the exercise of the
Option. The Company will issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner will decrease the number of
Shares thereafter available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which
the Option is exercised.
(ii)
Termination of Relationship as a Service
Provider
.
If a Participant ceases to be a
Service Provider, other than upon the Participants
termination as the result of the Participants death or
Disability, the Participant may exercise his or her Option
within such period of time as is specified in the Award
Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the
absence of a specified time in the Award Agreement, the Option
will remain exercisable for three (3) months following the
Participants termination (unless the Option term is
shorter as provided in Section 6(b)). Unless otherwise
provided by the Administrator, if on the date of termination the
Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will be
forfeited by the Participant and will revert to the Plan. If
after termination the Participant does not exercise his or her
Option within the time specified by the Administrator, the
Option will terminate, and the Shares covered by such Option
will revert to the Plan.
A-7
(iii)
Disability of
Participant
.
If a Participant ceases to be a
Service Provider as a result of the Participants
Disability, the Participant may exercise his or her Option
within such period of time as is specified in the Award
Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the
absence of a specified time in the Award Agreement, the Option
will remain exercisable for twelve (12) months following
the Participants termination (unless the Option term is
short as provided in Section 6(b)). Unless otherwise
provided by the Administrator, if on the date of termination the
Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will be
forfeited by the Participant and will revert to the Plan. If
after termination the Participant does not exercise his or her
Option within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to
the Plan.
(iv)
Death of Participant
.
If a
Participant dies while a Service Provider, the Option may be
exercised following the Participants death within such
period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of death (but in no
event may the option be exercised later than the expiration of
the term of such Option as set forth in the Award Agreement), by
the Participants designated beneficiary, provided such
beneficiary has been designated prior to Participants
death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such
Option may be exercised by the personal representative of the
Participants estate or by the person(s) to whom the Option
is transferred pursuant to the Participants will or in
accordance with the laws of descent and distribution. In the
absence of a specified time in the Award Agreement, the Option
will remain exercisable for twelve (12) months following
Participants death (unless the Option term is shorter as
provided in Section 6(b)). Unless otherwise provided by the
Administrator, if at the time of death the Participant is not
vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option will be forfeited by the
Participant and will immediately revert to the Plan. If the
Option is not so exercised within the time specified herein, the
Option will terminate, and the Shares covered by such Option
will revert to the Plan.
(e)
No Deferral Feature
.
No Option
may have any feature that would allow for the deferral of
compensation (within the meaning of Section 409A) other
than the deferral of recognition of income until the later of
the exercise or disposition of the Option or the time Shares
acquired subject to the exercise of the Option first become
substantially vested (as defined in Treasury
Regulation Section 1.83-3(b)).
7.
Restricted Stock
.
(a)
Grant of Restricted
Stock
.
Subject to the terms and provisions of
the Plan, the Administrator, at any time and from time to time,
may grant Shares of Restricted Stock to Service Providers in
such amounts as the Administrator, in its sole discretion, will
determine.
(b)
Restricted Stock
Agreement
.
Each Award of Restricted Stock
will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such
other terms and conditions as the Administrator, in its sole
discretion, will determine. Unless the Administrator determines
otherwise, the Company as escrow agent will hold Shares of
Restricted Stock until the restrictions on such Shares have
lapsed.
(c)
Transferability
.
Except as
provided in this Section 7, Shares of Restricted Stock may
not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period
of Restriction.
(d)
Other Restrictions
.
The
Administrator, in its sole discretion, may impose such other
restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.
(e)
Removal of
Restrictions
.
Except as otherwise provided in
this Section 7, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan will be released from
escrow as soon as practicable after the last day of the Period
of Restriction or at such other time as the Administrator may
determine. The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed.
(f)
Voting Rights
.
During the
Period of Restriction, Service Providers holding Shares of
Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Administrator
determines otherwise.
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(g)
Dividends and Other
Distributions
.
During the Period of
Restriction, Service Providers holding Shares of Restricted
Stock will be entitled to receive all dividends and other
distributions paid with respect to such Shares, unless the
Administrator provides otherwise. If any such dividends or
distributions are paid in Shares, the Shares will be subject to
the same restrictions on transferability and forfeitability as
the Shares of Restricted Stock with respect to which they were
paid.
(h)
Return of Restricted Stock to
Company
.
On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become
available for grant under the Plan.
8.
Restricted Stock Units
.
(a)
Grant
.
Restricted Stock Units
may be granted at any time and from time to time as determined
by the Administrator. After the Administrator determines that it
will grant Restricted Stock Units under the Plan, it will advise
the Participant in an Award Agreement of the terms, conditions,
and restrictions related to the grant, including the number of
Restricted Stock Units.
(b)
Vesting Criteria and Other
Terms
.
The Administrator will set vesting
criteria in its discretion, which, depending on the extent to
which the criteria are met, will determine the number of
Restricted Stock Units that will be paid out to the Participant.
The Administrator may set vesting criteria based upon the
achievement of Company-wide, business unit, or individual goals
(including, but not limited to, continued employment), or any
other basis determined by the Administrator in its discretion.
(c)
Earning Restricted Stock
Units
.
Upon meeting the applicable vesting
criteria, the Participant will be entitled to receive a payout
as determined by the Administrator. Upon the death or Disability
of a Participant, the Administrator may reduce or waive the
vesting criteria that must be met in order to receive a payout.
Notwithstanding the foregoing, at any time after the grant of
Restricted Stock Units, the Administrator, in its sole
discretion, may reduce or waive in accordance with
Section 409A any vesting criteria that must be met to
receive a payout.
(d)
Form and Timing of
Payment
.
Subject to Section 8(e), in the
absence of payment arrangements in the Award Agreement in
accordance with Section 409A, payments related to earned
Restricted Stock Units will be made in a lump sum ninety
(90) calendar days after the end of the restriction period
set forth in the Award Agreement; provided that if such ninety-
(90-) day period begins in one calendar year and ends in
another, the Participant shall have no right to designate the
calendar year of payment. Unless otherwise provided in an Award
Agreement, payments upon the death or Disability of a
Participant shall be made in a lump sum ninety
(90) calendar days after the Participants death or
the Administrators determination of Disability, as
applicable; provided that if such ninety- (90-) day period
begins in one calendar year and ends in another, the Participant
or beneficiary shall have no right to designate the calendar
year of payment. The Administrator, in its sole discretion, may
only settle earned Restricted Stock Units in cash, Shares, or a
combination of both.
(e)
Payments to Specified
Employees
.
Notwithstanding anything to the
contrary in Section 8(d), Restricted Stock Units payable
upon a Separation from Service of a Specified Employee, to the
extent they constitute nonqualified deferred compensation
subject to Section 409A, shall not be paid or issued until
within the
30-day
period commencing with the first day of the seventh month
following the month of the Specified Employees Separation
from Service; provided that if such
30-day
period begins in one calendar year and ends in another calendar
year, the Participant shall have no right to designate the
calendar year of payment.
(f)
Cancellation
.
On the date set
forth in the Award Agreement, all unearned Restricted Stock
Units will be forfeited to the Company.
(g)
No Acceleration
.
Except as
would not cause taxation under Section 409A(a)(1)(B), no
acceleration of the time or form of payment of a Restricted
Stock Unit may be permitted under the Plan or any Award
Agreement.
9.
Stock Appreciation
Rights
.
(a)
Grant of Stock Appreciation
Rights
.
Subject to the terms and conditions
of the Plan, a Stock Appreciation Right may be granted to
Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion.
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(b)
Number of Shares
.
The
Administrator will have complete discretion to determine the
number of Stock Appreciation Rights granted to any Service
Provider, which number shall be fixed on the date of grant.
(c)
Exercise Price and Other
Terms
.
The per share exercise price for the
Shares to be issued pursuant to exercise of a Stock Appreciation
Right will be determined by the Administrator and will be no
less than one hundred percent (100%) of the Fair Market Value
per Share on the date of grant. Otherwise, subject to
Section 6(a) of the Plan, the Administrator, subject to the
provisions of the Plan and except as would cause taxation under
Section 409A(a)(1)(B), will have complete discretion to
determine the terms and conditions of Stock Appreciation Rights
granted under the Plan.
(d)
Stock Appreciation Right
Agreement
.
Each Stock Appreciation Right
grant will be evidenced by an Award Agreement that will specify
the exercise price, the term of the Stock Appreciation Right,
the conditions of exercise, and such other terms and conditions
of such Award.
(e)
Expiration of Stock Appreciation
Rights
.
A Stock Appreciation Right granted
under the Plan will expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of
Section 6(d) also will apply to Stock Appreciation Rights.
(f)
Payment of Stock Appreciation Right
Amount
.
Upon exercise of a Stock Appreciation
Right, a Participant will be entitled to receive payment from
the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share
on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock
Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock
Appreciation Right exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.
(g)
No Acceleration
.
Except as
would not cause taxation under Section 409A(a)(1)(B), no
acceleration of the time or form of payment of a Stock
Appreciation Right may be permitted under the Plan or any Award
Agreement.
10.
Performance Units and Performance
Shares
.
(a)
Grant of Performance
Units/Shares
.
Performance Units and
Performance Shares may be granted to Service Providers at any
time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will
have complete discretion in determining the number of
Performance Units and Performance Shares granted to each
Participant.
(b)
Value of Performance
Units/Shares
.
Each Performance Unit will have
an initial value that is established by the Administrator on or
before the date of grant. Each Performance Share will have an
initial value equal to the Fair Market Value of a Share on the
date of grant.
(c)
Performance Objectives and Other
Terms
.
The Administrator will, subject to
409A, set performance objectives or other vesting provisions
(including, without limitation, continued status as a Service
Provider) in its discretion which, depending on the extent to
which they are met, will determine the number or value of
Performance Units/Shares that will be paid out to the Service
Providers. The time period during which the performance
objectives or other vesting provisions must be met will be
called the Performance Period. Each Award of
Performance Units/Shares will be evidenced by an Award Agreement
that will specify the Performance Period, and such other terms
and conditions as the Administrator, in its sole discretion and
except as would cause taxation under Section 409A(a)(1)(B),
will determine. The Administrator may set performance objectives
based upon the achievement of Company-wide, divisional, or
individual goals, applicable federal or state securities laws,
Section 162(m) of the Code, or any other basis determined
by the Administrator in its discretion.
(d)
Earning of Performance
Units/Shares
.
After the applicable
Performance Period has ended, the holder of Performance
Units/Shares will be entitled to receive a payout of the number
of Performance Units/Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent
to which the corresponding performance objectives or other
vesting provisions have been achieved. Upon the death or
Disability of a Participant, the Administrator may reduce or
waive the performance objectives or other vesting provisions
that must be met in order to receive a payout of Performance
Units/Shares. After the grant of a Performance Unit/Share,
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the Administrator, in its sole discretion, may, except as would
cause taxation under Section 409A(a)(1)(B), reduce or waive
any performance objectives or other vesting provisions for such
Performance Unit/Share.
(e)
Form and Timing of Payment of Performance
Units/Shares
.
Subject to Section 10(f),
payment of earned Performance Units/Shares will be made in a
lump sum within ninety (90) calendar days after the
expiration of the applicable Performance Period; provided that
if such ninety- (90-) day period begins in one calendar year and
ends in another, the Participant shall have no right to
designate the calendar year of payment. Unless otherwise
provided in an Award Agreement, payments upon the death or
Disability of a Participant shall be made in a lump sum ninety
(90) calendar days after the Participants death or
the Administrators determination of Disability, as
applicable; provided that if such ninety- (90-) day period
begins in one calendar year and ends in another, the Participant
or beneficiary shall have no right to designate the calendar
year of payment. The Administrator, in its sole discretion, may
pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the
applicable Performance Period) or in a combination thereof.
(f)
Payments to Specified
Employees
.
Notwithstanding anything to the
contrary in Section 10(e) and except as would not cause
taxation under Section 409A(a)(1)(B), Performance
Units/Shares payable upon a Separation from Service of a
Specified Employee, to the extent they constitute nonqualified
deferred compensation subject to Section 409A, shall not be
paid or issued until within the thirty (30)-day period
commencing with the first day of the seventh month following the
month of the Specified Employees Separation from Service;
provided that if such thirty (30)-day period begins in one
calendar year and ends in another calendar year, the Participant
shall have no right to designate the calendar year of payment.
(g)
Cancellation of Performance
Units/Shares
.
On the date set forth in the
Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be
available for grant under the Plan.
(h)
No Acceleration
.
Except as
would not cause taxation under Section 409A(a)(1)(B), no
acceleration of the time or form of payment of a Performance
Units/Shares Unit may be permitted under the Plan or any Award.
11.
Leaves of Absence/Transfer Between
Locations
.
Unless the Administrator provides
otherwise or except as required by Applicable Laws, vesting of
Awards granted hereunder will be suspended during any unpaid
leave of absence. A Service Provider will not cease to be an
Employee in the case of (i) any leave of absence approved
by the Company (except to avoid taxation under Code
Section 409A(a)(l)(B)), or (ii) transfers between
locations of the Company or between the Company, its Parent, or
any Subsidiary. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved
by the Company is not so guaranteed, then three (3) months
following the ninety-first (91st) day of such leave any
Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option.
12.
Transferability of
Awards
.
(a)
General
.
Unless determined
otherwise by the Administrator, an Award may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the
Participant, only by the Participant. If the Administrator makes
an Award transferable, such Award will contain such additional
terms and conditions as the Administrator deems appropriate.
(b)
Award Transfer
Program
.
Notwithstanding any contrary
provision of the Plan, other than the last sentence of this
Section 12(b), the Committee shall have all discretion and
authority to determine and implement the terms and conditions of
any Award Transfer Program instituted pursuant to this
Section 12(b) and shall have the authority to amend the
terms of any Award participating, or otherwise eligible to
participate in, the Award Transfer Program pursuant to its
original terms, including (but not limited to) the authority to
(i) amend (including to extend) the expiration date,
post-termination exercise period
and/or
forfeiture conditions of any such Award, (ii) amend or
remove any provisions of the Award relating to the Award
holders continued service to the Company, (iii) amend
the permissible payment methods with respect to the exercise or
purchase of any such Award, (iv) amend the adjustments to
be implemented in the event of changes in the capitalization and
other similar events with respect to such Award, and
(v) make such other changes to the terms of such Award as
the Committee deems necessary or appropriate in its sole
discretion. The other provisions of this Section 12(b)
notwithstanding, (i) the Award Transfer Program shall not
amend an Award, Award Agreement, or this Plan so as not to
comply with Applicable Laws,
A-11
including without limitation Section 409A, and
(ii) the Committee shall not, without the written consent
of the Participant, amend any Incentive Stock Option in a way
that would cause such Option to cease to be treated as an
incentive stock option under Section 422 of the Code.
13.
Adjustments; Dissolution or Liquidation;
Merger or Change in Control
.
(a)
Adjustments
.
In the event that
any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger,
consolidation,
split-up,
spin-off, combination, repurchase, or exchange of Shares or
other securities of the Company, or other change in the
corporate structure of the Company affecting the Shares occurs,
the Administrator, in order to prevent diminution or enlargement
of the benefits or potential benefits intended to be made
available under the Plan, will adjust the number and class of
Shares that may be delivered under the Plan
and/or
the
number, class, and price of Shares covered by each outstanding
Award and the numerical Share limits in Section 3 of the
Plan.
(b)
Dissolution or Liquidation
.
In
the event of the proposed dissolution or liquidation of the
Company, the Administrator will notify each Participant as soon
as practicable prior to the effective date of such proposed
transaction. To the extent it has not been previously exercised,
an Award will terminate immediately prior to the consummation of
such proposed action.
(c)
Merger or Change in
Control
.
In the event of a merger or Change
in Control, each outstanding Award will be treated as the
Administrator determines, including, without limitation, that
each Award be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. The Administrator will
not be required to treat all Awards similarly in the transaction.
In the event that the successor corporation does not assume or
substitute for the Award, the Participant will fully vest in and
have the right to exercise all of his or her outstanding Options
and Stock Appreciation Rights, including Shares as to which such
Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Stock and Restricted Stock Units will
lapse, and, with respect to Awards with performance-based
vesting, all performance goals or other vesting criteria will be
deemed achieved at one hundred percent (100%) of target levels
and all other terms and targets/conditions met. In addition, if
an Option or Stock Appreciation Right is not assumed or
substituted in the event of a Change in Control, the
Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will
be fully vested and exercisable for a period of time determined
by the Administrator in its sole discretion, and the Option or
Stock Appreciation Right will terminate upon the expiration of
such period.
For the purposes of this subsection (c), an Award will be
considered assumed if, following the Change in Control, the
Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the Change in Control,
the consideration (whether stock, cash, or other securities or
property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is
not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon
the exercise of an Option or Stock Appreciation Right or upon
the payout of a Restricted Stock Unit, Performance Unit or
Performance Share, for each Share subject to such Award, to be
solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration
received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this Section 13(c) to the
contrary, an Award that vests, is earned or paid-out upon the
satisfaction of one or more performance goals will not be
considered assumed if the Company or its successor modifies any
of such performance goals without the Participants
consent; provided, however, a modification to such performance
goals only to reflect the successor corporations
post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.
14.
Tax Withholding
.
(a)
Withholding
Requirements
.
Prior to the delivery of any
Shares or cash pursuant to an Award (or exercise thereof), the
Company will have the power and the right to deduct or withhold,
or require a Participant to remit to the
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Company, an amount sufficient to satisfy federal, state, local,
foreign or other taxes (including the Participants FICA
obligation) required to be withheld with respect to such Award
(or exercise thereof).
(b)
Withholding Arrangements
.
The
Administrator, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole
or in part by (without limitation) (a) paying cash,
(b) electing to have the Company withhold otherwise
deliverable cash or Shares having a Fair Market Value equal to
the minimum statutory amount required to be withheld, or
(c) delivering to the Company already-owned Shares having a
Fair Market Value equal to the minimum statutory amount required
to be withheld. The Fair Market Value of the Shares to be
withheld or delivered will be determined as of the date that the
taxes are required to be withheld.
15.
No Effect on Employment or
Service
.
Neither the Plan nor any Award will
confer upon a Participant any right with respect to continuing
the Participants relationship as a Service Provider with
the Company, nor will they interfere in any way with the
Participants right or the Companys right to
terminate such relationship at any time, with or without cause,
to the extent permitted by Applicable Laws.
16.
Date of Grant
.
The date
of grant of an Award will be, for all purposes, the date on
which the Administrator makes the determination granting such
Award, or such other later date as is determined by the
Administrator, but in each case the Administrator shall have
fixed, for each Award to be granted, the identity of the
Participant, the maximum number of Shares subject to the Award,
and the Fair Market Value/grant price of the Award. Notice of
the determination will be provided to each Participant within a
reasonable time after the date of such grant.
17.
Term of Plan
.
Subject to
Section 21 of the Plan, the Plan will become effective upon
its adoption by the Board. It will continue in effect for a term
of ten (10) years from the date adopted by the Board,
unless terminated earlier under Section 18 of the Plan.
18.
Amendment and Termination of the
Plan
.
(a)
Amendment and Termination
.
The
Board may at any time amend, alter, suspend or terminate the
Plan.
(b)
Stockholder Approval
.
The
Company will obtain stockholder approval of any Plan amendment
to the extent necessary and desirable to comply with Applicable
Laws.
(c)
Effect of Amendment or
Termination
.
No amendment, alteration,
suspension or termination of the Plan will impair the rights of
any Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in
writing (which may include
e-mail)
and
signed by the Participant and the Company. Termination of the
Plan will not affect the Administrators ability to
exercise the powers granted to it hereunder with respect to
Awards granted under the Plan prior to the date of such
termination.
19.
Conditions Upon Issuance of
Shares
.
(a)
Legal Compliance
.
Shares will
not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such
Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect
to such compliance.
(b)
Investment Representations
.
As
a condition to the exercise of an Award, the Company may require
the person exercising such Award to represent and warrant at the
time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
20.
Inability to Obtain
Authority
.
The inability of the Company to
obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Companys counsel to be
necessary to the lawful issuance and sale of any Shares
hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such
requisite authority will not have been obtained.
21.
Stockholder
Approval
.
The Plan will be subject to
approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the
Board. Such stockholder approval will be obtained in the manner
and to the degree required under Applicable Laws.
* * *
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RENEGY HOLDINGS, INC.
2008 ANNUAL MEETING OF STOCKHOLDERS
September 25, 2008
The undersigned stockholder of Renegy Holdings, Inc., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each
dated September 2, 2008, and hereby appoints Robert M. Worsley and Robert W. Zack, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2008 Annual Meeting of Stockholders of
Renegy Holdings, Inc., to be held on Thursday, September 25, 2008, at 10:00 a.m., local time, at
Renegy Holdings, Inc., 60 E. Rio Salado Parkway, Suite 1012, Tempe, Arizona 85281, and at any
postponement(s) or adjournment(s) thereof, and to vote all shares of common stock that the
undersigned would be entitled to vote if then and there personally present, on the matters set
forth on the reverse side and, in their discretion, upon such other matter or matters that may
properly come before the meeting and any postponement(s) or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED
(1) FOR THE ELECTION OF THE CLASS I DIRECTOR, (2) FOR THE APPROVAL OF THE AMENDED AND RESTATED 2007
EQUITY INCENTIVE PLAN, AND (3) AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT BOX ON THE REVERSE SIDE
(Continued and to be signed on reverse side)
(FOLD AND DETACH HERE)
ANNUAL
MEETING OF STOCKHOLDERS Thursday, September 25, 2008
10:00 a.m., local time, at Renegy Holdings, Inc.
60 E. Rio Salado Parkway, Suite 1012, Tempe, Arizona 85281.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR EACH OF THE FOLLOWING PROPOSALS.
Please
Mark your votes as indicated in this example
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1.
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ELECTION OF DIRECTORS
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Nominee:
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01 Richard A. Abdoo
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o
FOR NOMINEE
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WITHOLD FOR NOMINEE
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2.
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Proposal to approve the Amended and Restated 2007 Equity Incentive Plan
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FOR
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AGAINST
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ABSTAIN
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o
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3.
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To transact such other business as may properly come before the Annual Meeting and any
adjournment thereof.
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I PLAN TO ATTEND THE MEETING
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o
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COMMENTS/ADDRESS CHANGE
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o
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Please mark this if you have written comments/address change
on the reverse side
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(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants or as community property, both
should sign.)
(FOLD AND DETACH HERE)
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