SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment No.)
Filed by
the Registrant T
Filed by
a Party other than the Registrant £
Check the
appropriate box:
|
£
|
Preliminary
Proxy Statement
|
|
£
|
Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
|
T
|
Definitive
Proxy Statement
|
|
£
|
Definitive
Additional Materials
|
|
£
|
Soliciting
Material Pursuant to §240.14a-12
|
SOUTHWALL
TECHNOLOGIES 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):
|
T
|
No
fee required.
|
|
£
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
1.
|
Title
of each class of securities to which transaction
applies:
|
|
2.
|
Aggregate
number of securities to which transaction
applies:
|
|
3.
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
|
4.
|
Proposed
maximum aggregate value of
transaction:
|
|
5.
|
Total
fee paid:
|
|
£
|
Fee
paid previously with preliminary
materials:
|
|
£
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
|
|
1.
|
Amount
previously paid:
|
|
2.
|
Form,
Schedule or Registration Statement
No.:
|
|
3.
|
Filing
Party:
|
|
4.
|
Date
Filed:
|
SOUTHWALL
TECHNOLOGIES INC.
3788
Fabian Way
Palo
Alto, California 94303
April 13,
2009
Dear
Stockholder:
You are
cordially invited to attend our Annual Meeting of Stockholders, which will be
held on May 13, 2009, at 8:30 a.m. local time, at our principal executive
offices at 3788 Fabian Way, Palo Alto, California.
The
following Notice of Annual Meeting of Stockholders and Proxy Statement describe
the items to be considered and acted upon by the stockholders and contain
certain information about us and our officers and directors.
Please
sign and return the enclosed proxy card as soon as possible in the envelope
provided, or vote by Internet or telephone, so that your shares can be voted at
the meeting in accordance with your instructions. Even if you plan to
attend the meeting, we urge you to sign and promptly return the proxy card, or
vote by Internet or telephone. You may revoke it at any time before
it is exercised at the meeting or vote your shares personally if you attend the
meeting.
Thank you
in advance for your participation and prompt attention. We look
forward to seeing you.
|
Sincerely,
|
|
|
Andre
R. Horn
|
|
|
Chairman
of the Board
|
SOUTHWALL
TECHNOLOGIES INC.
3788
Fabian Way
Palo
Alto, California 94303
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on May 13, 2009
To the
Stockholders of Southwall Technologies Inc.:
The Board
of Directors of Southwall Technologies Inc. has called an annual meeting of
Stockholders to seek stockholder approval of the matters listed
below.
Each of
the matters submitted to our stockholders at the annual meeting is described in
more detail in the accompanying proxy statement. We encourage you to
read the proxy statement in its entirety. The details of the annual
meeting are as follows:
|
Date:
|
May
13, 2009
|
||
|
Time:
|
8:30
a.m., local time.
|
||
|
Place:
|
Our
principal executive offices at 3788 Fabian Way, Palo Alto,
California 94303.
|
||
|
Items
of Business:
|
At
the annual meeting, you and our other stockholders will be asked
to:
|
||
|
1.
|
Elect
directors to serve for the ensuing year; and
|
||
|
2.
|
Transact
such other business as may properly come before the meeting or any
adjournment or postponement thereof.
|
||
|
Record
Date:
|
You
may vote at the annual meeting if you were a stockholder of record at the
Close of business on April 1, 2009.
|
||
|
Proxy
Voting:
|
Your
vote is important. You may vote on these matters in person or
by proxy. We ask that you complete and return the enclosed proxy card
promptly, whether or not you plan to attend the annual meeting, in the
enclosed addressed, postage-paid envelope, or vote by Internet or
telephone, so that your shares will be represented and voted at the annual
meeting in accordance with your wishes. You can revoke your
proxy at any time prior to its exercise by written notice received by us,
by delivering to us a duly executed proxy bearing a later date, or by
attending the annual meeting and voting your shares in
person.
|
||
This
notice, the attached proxy statement and form of proxy card are first being
mailed to our stockholders beginning on or about April 13, 2009.
|
By
Order of the Board of Directors,
|
|
|
Andre
R. Horn
|
|
|
Chairman
of the Board of Directors
|
|
|
Palo
Alto, California
|
April 13,
2009
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER
MEETING TO BE HELD ON MAY 13, 2009:
The Proxy
Statement, the Southwall Technologies, Inc. Annual Report for the fiscal year
ended
December
31, 2008 and the Proxy Card are available at www.southwall.com
Table of Contents
|
Page
|
|
|
1
|
|
|
7
|
|
|
10
|
|
|
12
|
|
|
16
|
|
|
18
|
|
|
25
|
|
|
25
|
|
|
25
|
|
|
30
|
|
|
32
|
|
|
32
|
|
|
33
|
|
|
34
|
|
|
34
|
SOUTHWALL
TECHNOLOGIES INC.
3788
Fabian Way
Palo,
Alto, California 94303
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on May 13, 2009
This
proxy statement contains information about the 2009 Annual Meeting of
Stockholders of Southwall Technologies Inc. (“Southwall” or the
“Company”). The meeting will be held on May 13, 2009, beginning at
8:30 a.m., local time, at our principal executive offices at 3788 Fabian Way,
Palo Alto, California 94303.
This
proxy statement is furnished in connection with the solicitation of proxies by
our Board of Directors for use at the annual meeting and at any adjournment or
postponement of that meeting. All proxies will be voted in accordance
with the instructions they contain. If no instruction is specified on
a proxy, it will be voted “For” the election of the nominees for directors in
proposal 1 set forth in the notice of the meeting. A stockholder may
revoke any proxy at any time before it is exercised by giving Mallorie Burak our
Principal Accounting Officer and Controller written notice to that
effect.
Our
Annual Report on Form 10-K to Stockholders for the fiscal year ended December
31, 2008 is being mailed to stockholders with the mailing of these proxy
materials on or about April 13, 2009. The Annual Report does not
constitute any part of this proxy statement.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
We
have included the following discussion of the matters to be presented at the
annual meeting to provide summary answers to some of the questions that you
might have about the annual meeting and the proposals to be presented to our
stockholders at the annual meeting. You are encouraged to read the
entire proxy statement. The information below is qualified in its entirety by
the full text of this proxy statement.
What
is the purpose of the annual meeting?
At the
annual meeting, stockholders will consider and vote on the following
matters:
|
|
1.
|
The
election of directors to serve for the ensuing
year.
|
|
|
2.
|
Any
other business that may properly come before the
meeting.
|
The
stockholders will also act on any other business that may properly come before
the meeting.
Who
may vote at the annual meeting?
Only
holders of our common stock at the close of business on the record date, April
1, 2009, are entitled to receive notice of, and to vote their shares at, the
annual meeting. As of the record date, there were issued and
outstanding 28,706,222 shares of common stock. Shares of our Series A 10%
Cumulative Convertible Preferred Stock, or the Series A shares, are not entitled
to vote on the matters to be presented at the meeting.
How
many votes do I have?
At the
annual meeting, you will be entitled to one vote for each share of common stock
you held on the record date.
Is
my vote important?
Your vote
is important regardless of how many shares you own. Please take time
to vote. Take a moment to read the instructions below.
How
do I vote?
You can
vote your shares in four ways. You can vote by mail, over the
Internet, by telephone, or in person at the meeting. The Board of
Directors recommend that your vote “for” the
election of the nominees for directors in Proposal 1.
You may vote by
mail. You may vote by completing and signing the proxy card
that accompanies this proxy statement and promptly mailing it in the enclosed
postage-prepaid envelope. You do not need to put a stamp on the
enclosed envelope if you mail it in the United States. The shares you
own will be voted according to the instructions on the proxy card you
mail. If you return the proxy card but do not give any instructions
on a particular matter described in this proxy statement, the shares you own
will be voted in accordance with the recommendations of our Board of
Directors. The Board of Directors recommends that you vote “For” the
election of the nominees for directors in Proposal 1.
You may vote over the
Internet. If you have Internet access, you may vote your
shares from any location in the world by following the “Vote by Internet”
instructions set forth on the enclosed proxy card.
You may vote by
telephone. You may vote your shares by following the “Vote by
Telephone” instructions set forth on the enclosed proxy card.
You may vote in
person. If you attend the meeting, you may vote by delivering
your completed proxy card in person or you can vote by completing a ballot.
Ballots will be available at the meeting. If you elect to vote in
person, however, you must bring to the annual meeting a legal proxy from the
broker or other nominee authorizing you to vote the shares that are held of
record by such broker or other nominee.
May
I revoke my proxy?
Yes. Even
if you complete and return a proxy, whether by mail, internet, or telephone you
may revoke it at any time before it is exercised by taking one of the following
actions:
|
·
|
send
written notice
that you wish to revoke your proxy to Mallorie Burak, at our address set
forth in the Notice of Annual Meeting appearing before this proxy
statement;
|
|
·
|
send
us another signed
proxy with a later date; or
|
|
·
|
attend
the annual meeting, notify Mallorie Burak that you are present, and then
vote in person.
|
If,
however, you elect to vote in person at the annual meeting and a broker or other
nominee holds your shares, you must bring to the annual meeting a legal proxy
from the broker or other nominee authorizing you to vote the
shares.
What
if a broker holds my shares in “street name”?
If your
shares are held in “street name” by a bank or other nominee, your bank or
nominee, as the record holder of your shares, is required to vote your shares
according to your instructions. You should instruct your broker or
other nominee to vote your shares by following the procedure provided by your
broker or other nominee. Even if you do not give your broker or other
nominee instructions as to how to vote on the other proposals described in this
proxy statement, your broker or other nominee may be entitled to use its
discretion in voting your shares in accordance with industry practice and
applicable law. You may also attend the annual meeting and vote in
person. If you elect to vote in person, however, you must bring to
the annual meeting a legal proxy from the broker or other nominee authorizing
you to vote the shares.
How
many shares must be present in person or by proxy to transact business at the
annual meeting?
Our
by-laws require that shares representing a majority of the votes entitled to be
cast by the holders of stock outstanding on the record date be present in person
or by proxy at the annual meeting to constitute a quorum to transact business
with regard to each of the proposals. Shares as to which holders
abstain from voting as to a particular matter and broker non-votes will be
counted in determining whether there is a quorum of stockholders present at the
annual meeting.
How
many votes are required to approve the proposals?
The votes
necessary to approve each of the proposals are as follows:
|
·
|
Election of
Directors. The seven nominees receiving the highest
number of votes cast at the annual meeting will be elected, regardless of
whether that number represents a majority of the votes
cast.
|
|
·
|
Other
Matters. The affirmative vote of a majority of the total
number of shares cast at the meeting is needed to approve other matters if
any to be voted on at the meeting.
|
Abstentions
and broker non-votes will not be counted as votes in favor of a proposal, and
will also not be counted as votes cast or shares voting on such
proposal. Accordingly, abstentions and broker non-votes will have no
effect on the outcome of voting with respect to Proposal 1 (election of
directors).
Who
will count the votes?
The votes
will be counted, tabulated and certified by our transfer agent and registrar,
Computershare Trust Company, N.A.
What
if additional proposals are presented at the annual meeting?
If other
proposals are properly presented at the annual meeting for consideration, and if
you have completed and returned a proxy the persons named in the proxy card that
accompanies this proxy statement will have the discretion to vote on those
proposals for you. As of the date of the mailing of this proxy
statement, we do not know of any other proposals to be presented at the annual
meeting.
Will
any other business be conducted at the annual meeting or other matters be voted
on?
The Board
of Directors does not know of any other matters that may come before the
meeting. If any matter properly comes before the meeting, the persons
named in the proxy card that accompanies this proxy statement will exercise
their judgment in deciding how to vote, or otherwise act, at the meeting with
respect to that matter or proposal.
Where
can I find the voting results?
We will
report the voting results in our Quarterly Report on Form 10-Q for the second
quarter of 2009, which we expect to file with the Securities and Exchange
Commission, or the SEC, on or before August 14, 2009.
How
and when may I submit a stockholder proposal for the 2010 annual
meeting?
If you
are interested in submitting a proposal for inclusion in the proxy statement for
the 2010 annual meeting, you need to follow the procedures outlined in Rule
14a-8 of the Securities Exchange Act of 1934 as amended (the “Exchange
Act”). To be eligible for inclusion, your stockholder proposal
intended for inclusion in the proxy statement for the 2010 annual meeting of the
stockholders must be received by us at our principal corporate offices in Palo
Alto, California as set forth below no later than December 14,
2009..
If a
stockholder wishes to present a proposal before the 2010 annual meeting of
stockholders, but does not wish to have the proposal considered for inclusion in
the proxy statement and proxy card, the stockholder must also give written
notice to us at the address written below. If a stockholder provides
notice of a proposal to be presented at the 2010 annual meeting of stockholders
by February 27, 2010, the proxies designated by our Board of Directors will have
discretionary authority to vote on that proposal.
Any
proposals or notices should be sent to:
Southwall
Technologies Inc.
3788
Fabian Way
Palo
Alto, California 94303
Attention:
Chairman of the Boards of Directors
Who
will bear the costs of soliciting these proxies?
We will
bear the costs of solicitation of proxies. Brokers, bankers,
custodians and fiduciaries will be requested to forward proxy soliciting
material to the owners of shares of our common stock they hold in their
names. We will reimburse such brokers, banks, and custodians and
fiduciaries for their reasonable out-of-pocket expense incurred in connection
with the distribution of proxy materials.
How
can I obtain the proxy materials or Southwall’s Annual Report on Form
10-K?
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008, is being
mailed to stockholders with the mailing of these proxy materials. If you would
like a copy of our Annual Report, we will send you one without
charge. Please contact:
Southwall
Technologies Inc.
3788
Fabian Way
Palo
Alto, California 94303
Attention:
Investor Relations
Telephone:
(650) 798-1200
This
Proxy Statement, our Annual Report on From 10-K for the fiscal year ended
December 31, 2008 and proxy card are also available on our website at
www.southwall.com
Whom
can I contact for more information regarding the proxy materials or voting my
shares?
If you
have any additional questions about the proposals in this proxy statement, you
should contact Michael Vargas, by telephone at (650) 798-1200 or by e-mail
to mvargas@southwall.com.
Householding
of Annual Meeting Materials
Some
banks, brokers and other nominee record holders may be participating in the
practice of “householding” proxy statements and annual reports. This
means that only one copy of our proxy statement and Annual Report on Form 10-K
to stockholders may have been sent to multiple stockholders in your
household. We will promptly deliver a separate copy of either
document to you if you contact us at the following address or telephone number:
Investor Relations, Southwall Technologies Inc., 3788 Fabian Way, Palo Alto,
California 94303, Telephone: (650) 798-1200. If you want to receive
separate copies of the proxy statement or Annual Report on Form 10-K in the
future, or if you are receiving multiple copies and would like to receive only
one copy per household, you should contact your bank, broker or other nominee
record holder, or you may contact us at the above address or telephone
number.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth material information regarding beneficial ownership
of our common stock as of March 2, 2009, by:
|
|
·
|
Each
person who we know to own beneficially more than 5% of our common
stock;
|
|
|
·
|
Each
of our current and former executive officers, for whom compensation
information is provided elsewhere in this proxy
statement;
|
|
|
·
|
Each
director and nominee for director;
and
|
|
|
·
|
All
executive officers and directors as a
group.
|
Except as
noted below, the address of each person listed on the table is c/o Southwall
Technologies Inc., 3788 Fabian Way, Palo Alto, California 94303, and each person
has sole voting and investment power over the shares shown as beneficially
owned, except to the extent authority is shared by spouses under applicable
law. Beneficial ownership is determined in accordance with the rules
of the SEC. The information below regarding persons beneficially
owning more than 5% of our common stock is based solely on public filings made
by such persons with the SEC through March 3, 2009.
|
Name
and Address
|
Common
Stock Beneficially Owned
|
Percent of
Outstanding Shares(1)
|
||||||
|
|
||||||||
|
Needham
Investment Management, LLC (2)
|
1,428,000 | 5.0 | % | |||||
|
445
Park Avenue
|
||||||||
|
New
York, New York 10022
|
||||||||
|
Needham &
Company, LLC
|
2,009,807 | 7.0 | % | |||||
|
445
Park Avenue
|
||||||||
|
New
York, New York 10022
|
||||||||
|
Needham
Capital Management (Bermuda) L.L.C. (3)
|
1,127,098 | 3.9 | % | |||||
|
445
Park Avenue
|
||||||||
|
New
York, New York 10022
|
||||||||
|
Needham
Capital Management, L.L.C. (4)
|
6,755,541 | 21.4 | % | |||||
|
445
Park Avenue
|
||||||||
|
New
York, New York 10022
|
||||||||
|
Dolphin
Direct Equity Partners, L.P. (5)
|
6,258,062 | 20.6 | % | |||||
|
PO
Box 16867
|
||||||||
|
Fernandina,
Florida 32035
|
||||||||
|
William
A. Berry (6)
|
121,805 | * | ||||||
|
George
Boyadjieff (7)
|
599,643 | 2.0 | % | |||||
|
Dennis
Bunday (8)
|
20,000 | * | ||||||
|
Jami
K. Dover Nachtsheim (9)
|
119,343 | * | ||||||
|
R.
Eugene Goodson (10)
|
320,000 | 1.1 | % | |||||
|
Andre
R. Horn (11)
|
97,857 | * | ||||||
|
Peter
E. Salas (12)
|
6,343,776 | 20.9 | % | |||||
|
Dennis
Capovilla (13)
|
666,035 | 2.2 | % | |||||
|
Mallorie
Burak (14)
|
21,500 | * | ||||||
|
Michael
Vargas (15)
|
186,016 | * | ||||||
|
All
current officers and directors as a group (10 persons)
(16)
|
8,578,921 | 29.1 | % | |||||
______________
* Less
than 1%
|
(1)
|
The
number of shares of common stock deemed outstanding consists of
(i) 28,706,222 shares of common stock outstanding as of March 2,
2009, and (ii) shares of common stock issuable upon conversion of
outstanding Series A shares or upon exercise of, options or warrants held
by the respective persons or group that are exercisable within 60 days of
March 2, 2009, as set forth below.
|
|
(2)
|
Consists
of shares of common stock owned by private investment partnerships and
registered investment companies with respect to which Needham Investment
Management, LLC is a general partner or investment adviser and, therefore,
may be deemed to own. Needham Investment Management, LLC
disclaims beneficial ownership of these
shares.
|
|
(3)
|
Consists
of 804,063 shares of common stock and 332,704 shares of common stock
issuable upon conversion of Series A shares owned by Needham Capital
Partners III (Bermuda), L.P. and 323,045 shares of common stock and
133,655 shares of common stock issuable upon conversion of Series A shares
owned by Needham Capital Partners II (Bermuda), L.P., with respect to
which, in each case, Needham Capital Management (Bermuda) L.L.C. is a
general partner and, therefore, may be deemed to own. Needham
Capital Management (Bermuda) L.L.C. disclaims beneficial ownership of
these shares.
|
|
(4)
|
Consists
of 2,304,511 shares of common stock and 953,557 shares of common stock
issuable upon conversion of Series A shares owned by Needham Capital
Partners II, L.P.; 4,034,378 shares of common stock and 1,669,338 shares
of common stock issuable upon conversion of Series A shares owned by
Needham Capital Partners III, L.P.; and 416,652 shares of common stock and
172,402 shares of common stock issuable upon conversion of Series A shares
owned by Needham Capital Partners IIIA, L.P., with respect to which, in
each case, Needham Capital Management, L.L.C. is a general partner and,
therefore, may be deemed to own. Needham Capital Management,
L.L.C. disclaims beneficial ownership of these
shares
|
|
(5)
|
Includes
1,630,883 shares of common stock issuable upon conversion of Series A
shares that were issued pursuant to an investment
agreement.
|
|
(6)
|
Includes
currently exercisable options to purchase 91,429
shares.
|
|
(7)
|
Includes
currently exercisable options to purchase 499,643
shares
|
|
(8)
|
Includes
currently exercisable options to purchase 20,000
shares.
|
|
(9)
|
Includes
currently exercisable options to purchase 91,429
shares.
|
|
(10)
|
Includes
currently exercisable options to purchase 20,000
shares.
|
|
(11)
|
Includes
currently exercisable options to purchase 17,857
shares.
|
|
(12)
|
Includes
currently exercisable options to purchase 35,714 shares. Includes shares
by Dolphin Direct Equity Partners, LP. Mr. Salas disclaims
beneficial ownership of shares held by Dolphin Direct Equity Partners, LP
except to the extent of his individual pecuniary interest
therein.
|
|
(13)
|
Includes
currently exercisable options to purchase 650,714
shares.
|
|
(14)
|
Includes
currently exercisable options to purchase 21,000
shares
|
|
(15)
|
Includes
currently exercisable options to purchase 178,571
shares.
|
|
(16)
|
Includes
currently exercisable options to purchase 1,626,357
shares.
|
PROPOSAL 1
ELECTION
OF DIRECTORS
There are
currently seven members of our Board of Directors. The Board has
fixed the number of directors for the ensuing year at seven and has nominated
for such positions the seven people listed below each of whom is currently
serving as a director. The persons named in the enclosed proxy card
as proxies will vote to elect each of the nominees unless you withhold authority
to vote for the election of one or more nominees by marking the proxy card to
that effect in accordance with the instructions in the proxy
card. Each of the seven nominees has agreed to serve, but if any of
them shall become unable or unwilling to serve, the proxies, unless authority
has been withheld as to such nominee, may be voted for election of a substitute
nominee designated by our Board of Directors or the Board may reduce the number
of directors. Proxies may not be voted for more than seven
persons.
There are
no family relationships among any of our executive officers or
directors.
The
following information as of the date of this proxy statement is furnished with
respect to each nominee for election as a director. The information
presented includes information each director and nominee has given us about his
or her age, all positions he or she holds with us, his or her principal
occupation and business experience during the past five years, and the names of
other publicly-held companies of which he or she serves as a
director. Information about the number of shares of common stock and
Series A shares beneficially owned by each director or nominee, directly and
indirectly, as of March 2, 2009, appears above under the heading “Security
Ownership of Certain Beneficial Owners and Management.”
|
Name
|
Age
|
|
William
A. Berry (1)
|
70
|
|
George
Boyadjieff (3)
|
70
|
|
Dennis
Bunday (3)
|
58
|
|
R.
Eugene Goodson
|
74
|
|
Andre
R. Horn (1)(2)
|
80
|
|
Jami
K. Dover Nachtsheim (1)(2)
|
50
|
|
Peter
E. Salas (2)(3)
|
54
|
|
(1)
|
Member
of the Audit Committee.
|
|
(2)
|
Member
of the Nominating and Corporate Governance
Committee.
|
|
(3)
|
Member
of the Compensation Committee.
|
Mr. Berry has served on our
Board of Directors since May 2003. Mr. Berry worked for the Electric
Power Research Institute (“EPRI”), a non-profit energy research organization
providing science and technology-based solutions to global energy companies,
from April 1996 until his retirement in December 2003. While at EPRI,
Mr. Berry served as Chief Financial Officer from April 1996 to July
2003. From August 2003 to December 2003, Mr. Berry served as
Special Projects Manager for EPRI. From 1992 to March 1996, Mr. Berry
was the Senior Vice President and Chief Financial Officer of Compression Labs,
Inc., a manufacturer of visual communications systems based on digital
technology, and from 1989 to 1992 was the President of Optical Shields, Inc. Mr.
Berry worked at Raychem Corporation, a producer of industrial electronics
components, from 1967 until 1988, where he was a Corporate Vice President and
Chief Administrative Officer from 1985 to 1988. Mr. Berry holds a BS
in industrial engineering and an MBA from Stanford University.
Mr. Boyadjieff joined our
Board of Directors as Chairman in December 2003. From August 9, 2006
to October 31, 2006, Mr. Boyadjieff served as our interim Chief Executive
Officer. Mr. Boyadjieff was the Chief Executive Officer of Varco
International, Inc., a diversified oil service company, from 1991 through 2002,
and the chairman of the Board of Directors of Varco from 1998 through 2003. Mr.
Boyadjieff retired from active leadership of Varco in 2003 at which time he
joined the Southwall Technologies Board of Directors. Mr. Boyadjieff
holds a BS and an MS in mechanical engineering from the University of California
at Berkeley.
Mr. Bunday joined our Board
of Directors in June, 2008. He has been Executive Vice President,
Chief Financial Officer, and Secretary of Williams Control, Inc, (NASDAQ: WMCO),
a manufacturer of electronic throttle controls, since July 2002. From
January 2001 until June 2002, he served as Chief Financial Officer for Williams
Control in his capacity as an independent contractor for Williams Control,
Inc. Prior to joining Williams Control, Inc., he served as Vice
President-Finance and Chief Financial Officer from 1998 to 2001, for Babler
Bros., Inc., as manufacture of pre-cast concrete products. From 1996
until 1998, he held the same positions with Quality Veneer & Lumber, Inc.,
and its predecessor, the Morgan Company, a producer of forest
products. Mr. Bunday received a Bachelors degree in Accounting from
Washington State University.
Dr. Goodson joined our Board
of Directors in April 2006 and served as our Chief Operating Officer from
September 18, 2006 through October 31, 2006 and as Principal Executive Officer
of Southwall from November 1, 2006 through May 15,
2008. Dr. Goodson was the Chief Executive Officer and
President of Williams Controls Inc. (NASDAQ: WMCO), a manufacturer of electronic
throttle controls, from July 2002 until October 2004, and the Chairman of the
Board of Williams Controls since October 2004. From 1990 to 1997, Dr.
Goodson was the Chairman and Chief Executive Officer of Oshkosh Truck
Corporation, a developer and producer of heavy-duty on and off road
trucks. After retiring from Oshkosh in 1998, Dr. Goodson became an
Adjunct Professor at the University of Michigan Business School, teaching
operations management. He was a director of the Executive Officer
Association of American Industrial Partners, a private equity firm, from 1998 to
2005.
Mr. Horn was appointed to our
Board of Directors in February of 2006 and became Chairman of the Board on May
15, 2008. Mr. Horn retired in 1985 as Chairman of Joy Manufacturing
Co. in Pittsburgh, Pennsylvania, now known as Joy Global Inc., a manufacturer of
heavy equipment. Mr. Horn served as the Chairman of Needham &
Co., Inc. (“Needham”), from which position he retired in 1991, and was elected
Chairman Emeritus of
Needham. Mr. Horn is currently a director of Needham. Mr.
Horn is currently a director and Chairman of the Board of REMEC, Inc., a San
Diego, California manufacturer of microwave components for communications and
defense electronics, which is in the process of liquidation. Mr. Horn
holds a BA in Mathematics from the University of Paris and is a graduate from
the Ecole des Hautes Etudes Commerciales.
Ms. Nachtsheim has been a
member of our Board of Directors since April 2003. Ms. Nachtsheim
retired in June, 2000 after 20 years with Intel Corporation, a semiconductor
manufacturer. Ms. Nachtsheim served in a variety of positions at
Intel, most recently as Corporate Vice President of the Sales and Marketing
Group and Director of Worldwide Marketing, from 1998 until her
retirement. Ms. Nachtsheim is a member of the Board of
Directors for ACT Conferencing, a telephone conferencing services
company. From January 2003 to December 2003, Ms. Nachtsheim served on
the Board of Directors of Vixel Corporation, a creator of disruptive storage
networking technologies. Ms. Nachtsheim is a graduate of
Arizona State University with a BA in Business
Management.
Mr. Salas was appointed to
our Board of Directors in November of 2005. Mr. Salas has been
President of Dolphin Asset Management Corporation and its related companies
(“Dolphin”) since he founded it in 1988. Prior to founding Dolphin, he was with
J.P. Morgan Investment Management, Inc. for ten years. Mr. Salas is
currently a director and Chairman of the Board of Tengasco, Inc. (AMEX: TGC), an
independent oil and gas producer and Williams Controls, Inc. (NASDAQ: WMCO), a
manufacturer of electronic throttle controls. Mr. Salas
received an A.B. degree from Harvard.
The
Board of Directors recommends a vote “FOR” the election of all of the above
nominees.
CORPORATE GOVERNANCE
General
We
believe that good corporate governance is important to ensure that Southwall is
managed for the long-term benefit of its stockholders. We are
committed to having sound corporate governance principles. During the
past year, we reviewed our corporate governance policies and practices and to
compare them to those suggested by various authorities in corporate governance
and the practices of other public companies. We have also reviewed
the provisions of the Sarbanes-Oxley Act of 2002, the new and proposed rules of
the SEC and the NASDAQ listing standards. As noted below, we have
attempted to continue to comply with NASDAQ listing standards relating to
corporate governance, even though we are no longer listed on
NASDAQ.
Determination
of Independence
Our Board
of Directors has determined that none of Messrs. Berry, Boyadjieff, Bunday, Horn
or Salas or Ms. Nachtsheim has a material relationship with us (directly or as a
partner, shareholder or officer of an organization that has a relationship with
us) and that each of these directors is an “independent director” within the
meaning of NASDAQ’s director independence standards. In addition, our
Board of Directors has determined that each of the members of each of our Audit
Committee, Compensation Committee and Nominating and Corporate Governance
Committee has no material relationship with us (either directly or as a partner,
shareholder or officer of an organization that has a relationship with us) and
is an “independent director” within the meaning of NASDAQ’s director
independence standards.
Director
Candidates
Our
stockholders may recommend director candidates for inclusion by the Board of
Directors in the slate of nominees that the Board recommends to our stockholders
for election. The qualifications of recommended candidates will be
reviewed by our Nominating and Corporate Governance Committee. Following its
review, the Nominating and Corporate Governance Committee will decide whether to
recommend that such candidate be nominated by the Board of Directors for
election as a director by the stockholders. If the Board determines
to nominate a stockholder-recommended candidate and recommends his or her
election as a director by the stockholders, the name will be included in our
proxy card for the stockholders meeting at which his or her election is
recommended.
Stockholders
may recommend individuals for the Nominating and Corporate Governance Committee
to consider as potential director candidates by submitting their names and
background to the “Southwall Technologies Inc. Nominating and Corporate
Governance Committee” c/o Southwall Technologies Inc., 3788 Fabian Way, Palo
Alto, California 94303. The Nominating and Corporate Governance
Committee will consider a recommendation only if appropriate biographical
information and background material is provided on a timely
basis. The process followed by the Nominating and Corporate
Governance Committee to identify and evaluate candidates includes requests to
Board members and others for recommendations, meetings from time to time to
evaluate biographical information and background material relating to potential
candidates and interviews of selected candidates by members of the Nominating
and Corporate Governance Committee and the Board. Assuming that
appropriate biographical and background material is provided for candidates
recommended by stockholders, the Nominating and Corporate Governance Committee
will evaluate those candidates by following substantially the same process, and
applying substantially the same criteria, as for candidates submitted by Board
members.
In
considering whether to recommend any candidate for inclusion in the Board’s
slate of recommended director nominees, including candidates recommended by
stockholders, the Nominating and Corporate Governance Committee will apply the
criteria set forth in Southwall’s Nominating and Corporate Governance Committee
Charter. These criteria include the candidate’s demonstrated
character and integrity, business acumen, the current composition and mix of
Board members, age, expertise and experience, commitment, independence,
diligence, conflicts of interest and the candidate’s ability to act in the
interest of all stockholders. The Nominating and Corporate Governance
Committee does not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all prospective
nominees. We believe that the backgrounds and qualifications of the
directors, considered as a group, should provide a significant composite mix of
experience, knowledge and abilities that will allow the Board to fulfill its
responsibilities. We have not paid, to date, any third party a fee to
assist in evaluating and identifying nominees.
Communications
from Stockholders and Other Interested Parties with the Board
The Board
of Directors will give appropriate attention to written communications on issues
that are submitted by stockholders and other interested parties, and will
respond if and as appropriate. Absent unusual circumstances or as
contemplated by committee charters, the Chairman of the Nominating and Corporate
Governance Committee will, with the assistance of our legal counsel, (1) be
primarily responsible for monitoring communications from stockholders and other
interested parties and (2) provide copies or summaries of such communications to
the other directors as he or she considers appropriate.
Communications
will be forwarded to all directors if they relate to substantive matters and
include suggestions or comments that the Chairman of the Nominating and
Corporate Governance Committee considers to be important to be brought to the
attention of the directors. Stockholders and other interested parties
who wish to send communications on any topic to the Board should address such
communications to:
Ms. Jami
K. Dover Nachtsheim
Chair of
the Nominating and Corporate Governance Committee
c/o
Southwall Technologies Inc.
3788
Fabian Way
Palo
Alto, CA 94303
Board
of Directors Meetings and Committees
The Board
of Directors has responsibility for establishing broad corporate policies and
reviewing our overall performance rather than day-to-day
operations. The Board’s primary responsibility is to oversee the
management of the Company and, in so doing, serve the best interests of the
Company and its stockholders. The Board selects, evaluates and
provides for the succession of executive officers and, subject to stockholder
election, directors. It reviews and approves corporate objectives and
strategies, and evaluates significant policies and proposed major commitments of
corporate resources. The Board participates in decisions that have a
potential major economic impact on the Company and its
stockholders. Management keeps the directors informed of Company
activity through regular written reports and presentations at Board and
committee meetings.
The Board
of Directors met 6 times in 2008. During 2008, each of our directors
attended 75% or more of the total number of meetings of the Board of Directors
and the committees of which such director was a member. The Board has
standing Audit, Compensation and Nominating and Corporate Governance
Committees. Each committee has a written charter that has been
approved by the Board, current copies of which may be found on our website at
www.southwall.com. You
can also request copies of these charters, as well as our Corporate Governance
Guidelines and Code of Business Conduct and Ethics, by writing to:
Michael
Vargas
c/o
Southwall Technologies Inc.
3788
Fabian Way
Palo
Alto, CA 94303
Executive
sessions of non-management directors are held at least four times per year, and
during 2008, there were five such sessions. The sessions are
scheduled and chaired by Mr. Horn. Any non-management director can
request that an additional executive session be scheduled.
It is our
current policy to have the Chairman of the Board and the President and Chief
Executive Officer attend the annual meetings of stockholders. All of
our then current directors and our current President and Chief Executive Officer
attended the 2008 annual meeting of stockholders
Audit
Committee
The
current members of our Audit Committee are Messrs. Berry (Chair) and Horn and
Ms. Nachtsheim. The Board of Directors has determined that each of
Messrs. Berry and Horn qualifies as an “audit committee financial expert” under
applicable SEC rules. The Board of Directors has determined that each
of Messrs. Berry and Horn and Ms. Nachtsheim is an “independent director” under
the NASDAQ rules governing the qualifications of the members of audit
committees. In addition, our Board of Directors has determined that
each member of the Audit Committee meets the financial literacy and
sophistication requirements under NASDAQ rules. None of Messrs. Berry
and Horn and Ms. Nachtsheim serves on the audit committees of more than two
other public companies. The Audit Committee met 4 times during
2008. The responsibilities of our Audit Committee and its activities
during 2008 are summarized in the Report of the Audit Committee contained below
in this proxy statement.
Compensation
Committee
The
current members of the Compensation Committee are Messrs. Salas (Chair),
Boyadjieff and Bunday. The Board of Directors has determined that
Messrs. Salas, Boyadjieff, and Bunday are “independent
directors” under NASDAQ rules. Our Compensation Committee held 5
meetings during 2008. “For more information regarding our
Compensation Committee, see “Compensation Discussion and Analysis
below.”
Nominating
and Corporate Governance Committee
The
current members of the Nominating and Corporate Governance Committee are Ms.
Nachtsheim (Chair) and Messrs. Horn and Salas. The Board of Directors
has determined that each of Ms. Nachtsheim and Messrs. Horn and Salas is an
“independent director” under NASDAQ rules. The purpose of
the Nominating and Corporate Governance Committee is to identify individuals
qualified to become nominees for director recommend candidates to be nominated
by the Board for election as directors, develop and recommend to the Board a set
of corporate governance principles and oversee the evaluation of the
Board. The Nominating and Corporate Governance Committee is
authorized to retain any advisers or consultants. For information
relating to nominations of directors by our stockholders, see “Proposal 1
Election of Directors” above. Our Nominating and Corporate Governance
Committee met 4 times in 2008.
Audit
Committee’s Pre-Approval Policy and Procedures
Our Audit
Committee pre-approves all services, including both audit and non-audit
services, provided by our independent registered public accounting firm for the
purpose of maintaining the independence of our independent registered public
accounting firm. For audit services, each year the independent
registered public accounting firm outlines the scope of the audit services
proposed to be performed during the year, which must be approved by the Audit
Committee before the audit commences. The independent registered
public accounting firm also submits an audit services fee proposal, which also
must be approved by the Audit Committee before the audit
commences. Unless a type of service to be provide by the independent
registered public accounting firm has received a general pre-approval, it will
require specific pre-approval by the Audit Committee. Any proposed
service exceeding pre-approved cost levels requires specific pre-approval by the
Audit Committee.
Each
year, management also submits to the Audit Committee a list of non-audit
services that it recommends the independent registered public accounting firm be
engaged to provide and an estimate of the fees to be paid for each. Management
and the independent registered public accounting firm must each confirm to the
Audit Committee that the performance of the non-audit services on the list would
not compromise the independence of the independent registered public accounting
firm and would be permissible under all applicable legal
requirements. The Audit Committee must approve both the list of
non-audit services and the budget for each such service before commencement of
the work. Management and the independent registered public accounting
firm report to the Audit Committee at each of its regularly scheduled meetings
as to the non-audit services actually provided by the independent registered
public accounting firm and the approximate fees incurred by us for those
services.
During
2008, no services were provided to us by Burr, Pilger & Mayer LLP, our
independent registered public accounting firm, or any other accounting firm
other than in accordance with the pre-approval policies and procedures described
above.
REPORT OF THE AUDIT COMMITTEE
The Audit
Committee oversees our financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal
controls. The primary duties and responsibilities of the Audit
Committee are to: (1) select and approve our independent registered
public accounting firm; (2) ensures that deficiencies in the financial reporting
process and internal control system, as reported by the Independent Accountants,
are corrected; (3) review and appraise the audit efforts of our independent registered public
accounting firm; (4) review and authorize the independent registered public
accounting firm’s fee; and (5) provide an open avenue of communication among the
independent registered public
accounting firm, financial and senior management and the Board of
Directors.
In
fulfilling its oversight responsibilities regarding the 2008 financial
statements, the Audit Committee reviewed and discussed with management the
audited financial statements in our Annual Report on Form 10-K for year ended
December 31, 2008, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial
statements. The Audit Committee’s review included discussion with the
independent registered public accounting firm of matters required to be
discussed pursuant to Statement of Auditing Standards No. 114 (Codification of
Statements on Auditing Standards), including the process used by management in
formulating particularly sensitive accounting estimates and the basis for the
conclusions of the independent registered public
accounting firm regarding the reasonableness of those estimates.
The Audit
Committee also reviewed and discussed with the independent registered public
accounting firm, who are responsible for expressing an opinion on the conformity
of those audited financial statements with generally accepted accounting
principles, their judgment as to the quality, not just the acceptability, of
Southwall’s accounting principles and such other matters as are required to be
discussed with the Audit Committee by the statement on Auditing Standards No.
114, as amended (The Auditor’s Communication with Those Charged with
Governance), and the Public Company Accounting Oversight Board rules and
regulations, as currently in effect. In addition, the Audit
Committee has received the written disclosures and the letter from the
independent registered accounting firm required by applicable requirements of
the Public Company Accounting Oversight Board (Independence Discussions with
Audit Committees) regarding the independent registered public accounting firm’s
communications with the Audit Committee concerning independence, and has
discussed with the independent registered public accounting firm their
independence from management and Southwall.
The Audit
Committee discussed with Southwall’s independent registered public
accounting firm the overall scope and plans for their audit in
2008. The Audit Committee meets with the independent registered public
accounting firm, with and without management present, to discuss the results of
their examination, and the overall quality of Southwall’s financial
reporting. The Audit Committee held 4 meetings during
2008.
In
reliance on the reviews and discussions referred to 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 Annual Report
on Form 10-K for the year ended December 31, 2008, for filing with the
SEC.
|
The
Audit Committee
|
|
|
William
A. Berry, Chairman
|
|
|
Jami
K. Dover Nachtsheim
|
|
|
Andre
R. Horn
|
COMPENSATION DISCUSSION AND ANALYSIS
Overview
of Compensation Program
The
Compensation Committee (for purposes of this discussion, the “Committee”) of the
Board of Directors has responsibility for establishing, implementing and
continually monitoring adherence with Southwall’s compensation
philosophy. The Committee ensures that the total compensation paid to
our executive officers is fair, reasonable and competitive. The
members of the Committee are Messrs. Salas (Chair), Mr. Boyadjieff and Mr.
Bunday. Messrs. Salas, Boyadjieff and Bunday, are independent
directors under NASDAQ rules and regulations. Our Compensation
Committee held 5 meetings during 2008. Messrs. Salas, Boyadjieff and
Bunday were chosen to serve on the Committee because of their status as
independent directors and their experience in compensation matters.
The
Committee operates pursuant to a written charter, which can be found on our
website at www.southwall.com. The
Committee charter gives the Committee authority to determine or recommend to the
Board for determination the Chief Executive Officer and other executive
officers’ compensation. The Committee charter also gives the
Committee authority to hire outside consultants to provide assistance in
determining market levels of executive compensation. The Committee
did not retain an outside compensation consultant in 2008 as part of the process
in determining executive compensation.
Of the 5
meetings held by the Committee in 2008, the Company’s Chief Executive Officer
attended 2 of these meetings. Each member of the Committee was paid $750 for
each meeting attended in person if the meeting was held on a date other than a
regularly scheduled board meeting or $500 for each Committee meeting held via
teleconference. As Chairman of the Compensation Committee, Mr. Salas
was paid a retainer of $15,000 in 2008
Throughout
this proxy statement, the individuals included in the Summary Compensation Table
below, are referred to as the “named executive officers.”
Compensation
Philosophy and Objectives
The
Committee believes that the most effective executive compensation program is one
that evaluates both performance and compensation to ensure that we maintain our
ability to attract and retain superior employees in key positions and that
compensation provided to key employees remains competitive relative to the
compensation paid to similarly situated executives of our Compensation Peer
Group, as defined below. To that end, the Committee believes
compensation packages provided by Southwall to its executives, including the
named executive officers should include both cash and stock-based compensation
that reward performance as measured against established goals.
Role
of Executive Officers in Compensation Decisions
The
Committee makes or recommends to the Board all compensation decisions for the
Company’s executive officers and approves recommendations from the Board of
Directors regarding equity awards to all executive officers of the
Company. Decisions regarding the compensation of non-executive
officers are made by the functional Vice Presidents.
The Chief
Executive Officer annually reviews the performance of each executive officer
(other than the Chief Executive Officer whose performance is reviewed by the
Committee). The conclusions reached and recommendations based on
these reviews, including with respect to salary adjustments and annual award
amounts, are made by the Committee.
Setting
Executive Compensation
Based on
the foregoing objectives, the Committee has structured Southwall’s annual and
long-term incentive-based cash and non-cash executive compensation to motivate
executives to achieve the business goals set by the Company and reward the
executives for achieving such goals.
In
determining the particular elements of compensation that are used to implement
our overall compensation policies, the Committee takes into consideration a
number of factors related to our performance including competitive practices
among our Compensation Peer Group. The Compensation Peer Group,
against which we believe we compete for talent, consists of both public and
private similarly situated companies in the California market. The
Committee compares each element of compensation given to executive officers
against the Compensation Peer Group. Data on the compensation practices of the
Compensation Peer Group generally is gathered through searches of publicly
available information, including publicly available
databases. Publicly available information does not typically include
information regarding target cash compensation, so we rely upon compensation
surveys. Compensation Peer Group data is gathered with respect
to base salary, bonus targets and all equity awards (including stock options,
performance shares, restricted stock and long-term, cash-based
awards). It does not include deferred compensation benefits or
generally available benefits, such as 401(k) plans or health care
coverage. We compete with many larger companies for top
executive-level talent. Because of the competitive marketplace for
talent, the Committee generally sets compensation for its executive officers at
approximately the midpoint of compensation paid to similarly situated executives
of the companies comprising the Compensation Peer Group. Variations
to this objective may occur as dictated by the experience level and performance
of the individual and market factors
Compensation
Components
For the
fiscal year ended December 31, 2008, the principal components of compensation
for the named executive officers were: (i) base salary, (ii) bonuses, (iii)
long-term equity incentive compensation, (iv) retirement benefits provided under
a 401(k) plan and (v) perquisites and other generally available benefit
programs. The Compensation Committee has selected these elements
because each is considered useful and/or necessary to meet one or more of the
principal objectives of our compensation policy. For instance, base
salary and bonus target percentage are set with the goal of attracting employees
and adequately compensating and rewarding them on a day-to-day basis for the
time spent and the services they perform, while our equity programs are geared
toward providing an incentive and reward for the achievement of long-term
business objectives and retaining key talent. We believe that these
elements of compensation, when combined, are effective, and will continue to be
effective, in achieving the objectives of our compensation program.
Base
Salary
We
provide executive officers and other employees with base salary to compensate
them for services rendered during the fiscal year. Base salary ranges
for executive officers are determined for each executive based on his or her
position and responsibility by using market data from the Compensation Peer
Group. Base salary ranges are designed so that salary opportunities
for a given position will be at the midpoint of the base salary established for
each range.
During
its review of base salaries for executives, the Committee primarily
considers:
|
|
·
|
market
data for the Compensation Peer
Group
|
|
|
·
|
internal
review of the executive’s
compensation
|
|
|
·
|
individual
performance of the executive
|
Salary
levels are typically considered annually as part of the company’s performance
review process as well as upon a promotion or other change in job
responsibility. Merit based increases to salaries of executive
officers are based on the Committee’s assessment of the individual’s
performance.
Annual
Bonus
Annual
bonuses also are paid to our named executive officers to reward the achievement
of Southwall’s business goals. Bonuses are intended to reflect an
individual’s accomplishment of both corporate and functional
objectives. Substantial weight is given to the achievement of
corporate rather than functional objectives such as: profitability improvement,
asset management, market position, product leadership and product
development.
Achievement
of the targeted goals under the bonus plan are intended to result in
compensation that the Committee believes reflects an appropriate range to enable
us to attract and retain key personnel and to motivate the executives to meet
our business goals. While the achievement of our business goals is a
significant factor in determining an individual’s bonus, the Board of Directors
retains discretion and may evaluate criteria other than defined performance
objectives, as business and economic conditions change throughout the year our
Board of Directors may re-evaluate and modify performance targets.
At the
beginning of each fiscal year, the Compensation committee meets with the Chief
Executive Officer to review Company and individual objectives for the current
year and establish performance-based target bonuses expressed as a percentage of
base salary paid during the year. The Committee, the Board of
Directors, and the Chief Executive Officer establish the quantitative and
qualitative goals. These goals are based on the achievement of
specified operating income levels and other key performance measures, such as
product development and strategic vertical alliances. Once the
current target bonus is agreed upon, our current policy provides opportunities
for employees to earn between 0% and 150% of their target
bonuses. For 2008, our named executive officers were eligible to
receive a target bonus calculated as a percentage of their respective base
annual salaries as follows: Dennis Capovilla (50%), Mallorie Burak
(30%), and Michael Vargas (35%).
For 2008,
a portion of the performance goals, for our named executive officers, included
achieving specified operating income ranging from $1,000,000 to
$5,000,000. For fiscal 2008, our net income achieved the target, and
the key performance initiatives were achieved.
The
purpose of the bonus is to reward employees for their contribution to the
achievement of company goals. While the achievement of corporate
goals is a significant factor in determining an individual’s bonus, it is not
entirely definitive. The Board of Directors retains discretion and
evaluates criteria other than defined performance objectives. As
conditions change throughout the year, the Board of Directors may re-evaluate
and modify performance targets. In 2008, no adjustments to the performance
targets were made.
Long-Term
Equity Incentive Compensation
Southwall
provides long-term incentive compensation through awards of stock options that
generally vest over four years. Our equity compensation program is
intended to align the interests of our officers with those of our stockholders
by creating an incentive for our officers to maximize stockholder
value. The equity compensation program also is designed to encourage
our officers to remain employed with Southwall despite a very competitive labor
market.
Equity-based
incentives are granted to our officers under our 2007 Long Term Incentive
Plan. The Committee has granted equity awards at its scheduled
meetings or by unanimous written consent. Grants approved during
scheduled meetings become effective and are priced as of the date of approval.
Grants approved by unanimous written consent become effective and are priced as
of the date the last signature is obtained or as of a predetermined future
date. All stock option grants have a per share exercise price equal
to the fair market value of our common stock on the grant date. The
Committee has not granted, nor does it intend in the future to grant, equity
compensation awards to executives in anticipation of the release of material
nonpublic information that is likely to result in changes to the price of our
common stock, such as a significant positive or negative earnings
announcement. Similarly, the Committee has not timed, nor does it
intend in the future to time, the release of material nonpublic information
based on equity award grant dates. Because equity compensation
awards typically vest over a four-year period, the value to recipients of any
immediate increase in the price of our stock following a grant is
diminished
We grant
stock options because they can be an effective tool for meeting our compensation
objective to increase long-term stockholder value by tying the value of the
stock options to our performance in the future. Employees are able to
profit from stock options only if the trading price our stock increases over the
stock option’s exercise price.
The
number of stock options our Committee grants to each officer and the vesting
schedule for each grant is determined based on a variety of factors, including
the number of options already held by the officer, market data collected
regarding the equity grant ranges for the Compensation Peer Group listed above
and our goal to award grants in line with the competitive benchmark data, as
well as the performance rating each executive is given by our Chief Executive
Officer. The Chief
Executive Officer assigns a performance rating to each named executive officer
based on a number of factors, including the individual’s accomplishments during
the prior fiscal year and over the course of his or her service with
Southwall. The Chief Executive Officer then makes a recommendation to
the Committee as to the number of options to be granted to each named executive
officer, as well as the total options to be granted to other
employees. In deciding the number of stock options granted to the
named executive officers, the Chief Executive Officer and
the Committee consider the officer’s position, the number of options
already held by the officer, the performance assessment (both historical and
future potential), and the number of shares available in the 2007 Long Term
Incentive Plan. For 2008, the Committee accepted the Chief Executive
Officer’s recommendations with respect to stock option grants, and the Board of
Directors voted to grant the stock options as presented by the
Committee.
In 2008,
the Committee and our Board of Directors relied upon the above-mentioned factors
to approve stock option grants for the named executive officers and other senior
officers. The Principal Executive Officer made recommendations to the
Committee based on guidelines that include award ranges for employees at
specific job responsibility levels and performance ratings. Stock
options generally vest 25% per year over a period of four
years. Stock option awards to employees were made under our 2007 Long
Term Incentive Plan for Employees and Consultants.
Retirement
Benefits under 401(k) Plans, Perquisites and Generally Available Benefit
Programs
In fiscal
2008, the named executive officers were eligible to receive health care coverage
that is generally available to other Southwall employees. We also
maintain a tax-qualified 401(k) Plan and Roth 401(k) Plan, which provides for
broad-based employee participation. Under both 401(k) Plans, all
Southwall employees are eligible to receive matching contributions from
Southwall. The matching contribution for the 401(k) Plan in 2008 was
25% on the first $6,000 contributed by the employee up to a maximum company
match of $1,500 subject to applicable Federal limits. We do not
provide defined benefit pension plans or defined contribution retirement plans
to our executives or other employees other than the 401(k) Plan or Roth 401(k)
Plan.
We also
offer a number of other benefits to the named executive officers pursuant to
benefit programs that provide for broad-based employee
participation. These benefits programs include medical insurance,
including flexible spending accounts,, dental and vision insurance, long-term
and short-term disability insurance, life and accidental death and dismemberment
insurance, business travel insurance, employee assistance plans and certain
other benefits.
The
401(k) Plan and other generally available benefit programs allow us to remain
competitive for qualified employees, and we believe that the availability of the
benefit programs generally enhances employee productivity and loyalty to
Southwall. The main objectives of our benefit programs are to give
our employees access to quality healthcare, financial protection from unforeseen
extraordinary events, assistance in achieving retirement financial goals,
enhanced health and productivity and to provide support for global workforce
mobility, in full compliance with applicable legal
requirements. These generally available benefits typically do not
specifically factor into decisions regarding an individual executive’s total
compensation or equity award package.
On an
annual basis, we benchmark our overall benefits programs, including our 401(k)
Plan, against external benchmark data and surveys from our benefit consultants
and plan administrators. We generally target our overall benefits
programs to be the mid range of overall benefits offered by our Compensation
Peer Group to their employees, which we believe allows us to remain competitive
in attracting and retaining talent. We consider possible changes to
our benefits programs in light of the overall objectives of the program,
including the effectiveness of the retention and incentive features of such
programs and our targeted percentile range compared to our Compensation Peer
Group.
Stock
Ownership Guidelines
We have
not adopted stock ownership guidelines that require our directors and named
executive officers to maintain a certain amount of Southwall
stock. We believe such guidelines are unnecessary because we believe
that the interests of directors and named executive officers are already closely
aligned with the interests of stockholders through grants of stock options made
under our 2007 Long Term Incentive Plan. We have an insider trading
policy which, among other things, prohibits covered employees from short sales
and trading in publicly listed options for Southwall shares. We have
no specific policy regarding hedging of stock ownership positions, but any such
hedging must be accomplished within the requirements of the insider trading
policy.
Compensation
of Principal Executive Officer
During
2008, R Eugene Goodson served as Chief Executive Officer through May, 2008 and
received $ 37,500 from January 1 through May, 2008. Dennis Capovilla
succeeded Dr. Goodson as Chief Executive Officer, having previously served as
president, and received a salary of $324,423 for the entire year. In
setting Mr. Capovilla’s salary, target bonus and equity compensation grant, the
Committee relied on market-competitive pay data and the strong belief that the
Chief Executive Officer significantly and directly influences Southwall’s
overall performance. The Committee also took into consideration the
overall compensation policies discussed above.
Accounting
and Tax Considerations
In
designing our compensation programs, we take into consideration the accounting
and tax effect that each element will or may have on Southwall and the executive
officers and other employees as a group. Our goal is to keep the
expense related to our compensation programs as a whole within certain
affordability levels. We recognize a charge to earnings for
accounting purposes when stock options are granted. We also take into
account that the 401(k) Plan provides a tax-advantaged retirement planning
vehicle for our executives.
In
addition, we have not provided any employee or director with a gross-up or other
reimbursement for tax amounts the executive might pay pursuant to Section 280G
or Section 409A of the Internal Revenue Code. Section 280G and
related Internal Revenue Code sections and regulations provide employees,
directors and certain other service providers could be subject to significant
additional taxes if they receive payments or benefits in connection with a
change in control of Southwall that exceeds certain limits, and that Southwall
or its successor could lose a deduction on the amounts subject to the additional
tax. Section 409A also imposes additional significant taxes in the
event that an executive officer, director or service provider receives “deferred
compensation” that does not meet the requirements of Section 409A. To
assist in the avoidance of additional tax under Section 409A, we structure our
equity awards in a manner intended to comply with the applicable Section 409A
requirements.
In
determining which elements of compensation are to be paid and how they are
weighted, we also take into account whether a particular form of compensation
will be considered “performance-based” compensation for purposes of Section
162(m) of the Internal Revenue Code. Under Section 162(m), we
generally receive a federal income tax deduction for compensation paid to any of
our named executive officers only if the compensation is less than $1 million
during any fiscal year or is “performance-based” under Section
162(m). Our prior 1997 Stock Incentive Plan and 1998 Stock Option
Plan for Employees and Consultants, as well as the current 2007 Long Term
Incentive Plan, permit our Committee to pay compensation that is
“performance-based” and thus fully tax-deductible by Southwall. Our
Committee currently intends to continue seeking a tax deduction for all of our
executive compensation, to the extent we determine it is in the best interests
of Southwall. All of the stock options granted to our executive
officers qualify under Section 162(m) as performance-based
compensation.
Severance
Agreements
During
2008, we had in place a severance policy that covered the three named executive
officers, under which they might become entitled to annual benefits in
connection with certain changes in control of Southwall in connection with a
merger, liquidation or tender offer. Under the policy, each
participant might become entitled to a lump sum severance payment upon his or
her involuntary termination or a material change in responsibilities within
twelve months after a change in control. The lump sum payment
would have been equal to (i) in the case of our Chief Executive Officer, one and
half times the sum of the Chief Executive Officer’s annual base salary in effect
at the time of his involuntary termination plus the bonuses earned by him or her
for the immediately preceding fiscal year and (ii) in the case of each other
participant, up to twelve months severance based on the sum of the participant’s
annual rate salary in effect at the time of his or her involuntary
termination. In addition, the amount paid to each participant would
have been grossed up if the amount received by the participant is subject to
federal excise tax as an “excess parachute payment” for federal tax
purposes.
COMPENSATION COMMITTEE REPORT
The
Compensation Committee of the Board of Directors oversees our compensation
program on behalf of the Board of Directors. In fulfilling its
oversight responsibilities, the Compensation Committee reviewed and discussed
with management the Compensation Discussion and Analysis set forth in this proxy
statement.
In
reliance on this review and these discussions referred to above, the
Compensation Committee recommended to the Board that the Compensation Discussion
and Analysis be included in this proxy statement.
|
The
Compensation Committee
|
|
|
Peter
E. Salas, Chairman
|
|
|
George
Boyadjieff
|
|
|
Dennis
Bunday
|
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Our
Compensation Committee is composed of Messrs. Salas, Boyadjieff and
Bunday. Mr. Salas has not at any time since our formation been an
officer or employee of Southwall. Mr. Boyadjieff was interim Chief
Executive Officer of Southwall from August 9, 2006 through October 31,
2006. At that time, he was not a member of the Compensation
Committee. Mr. Bunday had served as a consultant to Southwall since
2007.. None of our present executive officers currently serves, or in
the past has served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board of Directors or Compensation Committee.
EXECUTIVE COMPENSATION
Management
The
following sets forth certain information with respect to the Company’s officers
as of March 2, 2009.
Dennis Capovilla, age 49,
joined Southwall in July, 2003 and became Chief Executive Officer in May,
2008. He was appointed President in April, 2007. Prior to joining
Southwall Mr. Capovilla was employed by Palm, Inc., a manufacturer of
personal digital assistant devices, where he was the Vice President, Enterprise
sales from 2002 to March 2007. From 1997 to 2002 he was employed by
FATBRAIN, LLC, an e-commerce provider of books and information products, as the
President and Chief Executive Officer from 2000 to2002, the President and Chief
Operating Officer from 1999 to 2000, and the VP of Sales and Business
Development from 1997-1999. From 1993-1997, Mr. Capovilla was with Apple
Computer, Inc., a computer manufacturer, as the Director, Americas Imaging
Division and Worldwide Printer Supplies (1996-1997), Manager Printer Supplies
Business unit (1995-1996) and as Worldwide Product Marketing Manager, Imaging
Systems (1993-1995). Mr. Capovilla held various Sales and Marketing
Management positions with Versatec, Inc. and Xerox Corporation. Dennis holds a
B.S. in Marketing from the University of Santa Clara.
Mallorie Burak, age 38,
joined Southwall in September, 2007 as Chief Accounting Officer and
Corporate
Controller. Ms.
Burak was previously employed by Oracle Corporation, a software company, where
she was the Finance Director for the Communications Global Business Unit, a
business unit created as a result of Oracle’s acquisition of Portal Software,
where Ms. Burak served as Director of Revenue from 2005 to
2007. Prior to Portal Software, Ms. Burak was the US Corporate
Controller at Ilog, Inc., a software company from 2004 to 2005. From
2002 to 2004, Ms. Burak was with Iverson Financial Systems, Inc., a financial
reference data management company, as Director of Finance. Ms. Burak
has held various financial management positions with TrueSan Networks, Zilog,
Inc. and Hewlett Packard Company. Ms. Burak earned her Masters in
Business Administration and Bachelor of Science in Business Administration from
San Jose State University.
Michael Vargas, age 50,
joined Southwall in 2004 from Agilent Technologies, Inc., where he was
Senior Business Human Resources Manager for a $150 million Storage Networking
Solutions Business called I/O Solutions Division and the Worldwide
Controllership function for a $2 billion Semiconductor Products Group from 1999
to 2004. Previously he spent 15 years at Hewlett Packard in various
human resources businesses and recruiting management roles in the semiconductor
and personal computer businesses.
Summary
Compensation Table
The
following table sets forth information about the compensation of each person who
served as Principal Executive Officer, Principal Financial Officer, and each of
the three other most highly compensated executive officers (the “named executive
officers”) during 2008.
|
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)(13)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
All
Other Compensation
($)
|
Total($)
|
||||||||||||||||||
|
R.
Eugene Goodson
|
2008
|
$ | 82,500 | (1) | $ | 21,563 | $ | 11,950 | (3) | $ | 116,013 | ||||||||||||||
|
Principal
Executive
|
2007
|
$ | 215,411 | $ | 106,250 | -- | $ | -- | $ | 18,300 | (4) | $ | 339,961 | ||||||||||||
|
Officer
(2)
|
2006
|
$ | 67,058 | (2) | $ | $ | 91,691 | $ | 4,214 | $ | 162,963 | ||||||||||||||
|
Dennis
Capovilla
|
2008
|
$ | 324,423 | $ | 186,875 | $ | 1,500 | (5) | $ | 512,798 | |||||||||||||||
|
Chief
Executive Officer
|
2007
|
$ | 300,000 | $ | 150,000 | $ | 67,500 | $ | 12,900 | (6) | $ | 530,400 | |||||||||||||
|
2006
|
$ | 247,500 | $ | -- | $ | 33,009 | $ | 74,633 | (7) | $ | 355,172 | ||||||||||||||
|
Mallorie
Burak (8)
|
2008
|
$ | 165,000 | $ | 56,925 | $ | 1,500 | (9) | $ | 223,425 | |||||||||||||||
|
Chief
Accounting Officer
|
2007
|
$ | 50,135 | $ | 10,154 | $ | 48,000 | $ | 108,289 | ||||||||||||||||
|
Michael Vargas
|
2008
|
$ | 164,492 | $ | 66,413 | $ | $ | 1,500 | (10) | $ | 232,405 | ||||||||||||||
|
Vice
President
|
2007
|
$ | 143,000 | $ | 41,113 | $ | 30,150 | $ | 8,150 | (11) | $ | 222,413 | |||||||||||||
|
Administration
And Human Resources
|
2006
|
$ | 143,000 | $ | $ | 21,300 | $ | 1,500 | (12) | $ | 165,800 | ||||||||||||||
|
(1)
|
The
assumptions used to value these option awards are consistent with
contemporary practices for their accounting treatment and recognized in
accordance with SFAS No. 123R, “Share Based Payments.” These
assumptions are set forth in Note 2, “Stock Based Compensation,” of the
footnotes to our Consolidated Financial Statements contained in our Annual
Report on Form 10-K for year ended December 31, 2008 which is being mailed
along with this proxy statement.
|
|
(2)
|
Dr.
Goodson resigned as Chief Executive Officer on May 15,
2008. The amount set forth under Salary for 2008 include
$45,000 paid to Dr. Goodson in his role as a non-employee director and as
a consultant, and $37,000 in his role as Principal Executive
Officer. Dr. Goodson became our Chief Operating Officer on
September 18, 2006 and our Chief Executive Officer on November 1,
2006. The amounts set forth under Salary for 2006 include
$4,750 paid to Dr. Goodson in his role as a non-employee director prior to
becoming Chief Executive Officer, and the amount set forth under “Option
Awards” for 2006 includes the value of options to acquire 40,000 shares
received by Dr. Goodson for his service as a non-employee
director.
|
|
(3)
|
Consists
of $11,950 of COBRA benefits.
|
|
(4)
|
Consists
of $10,125 car allowance and $1,500 of Company matching contributions to
401(k) plan .and $6,675 of COBRA
benefits.
|
|
(5)
|
Consists
of $1,500 of Company matching contributions to 401(k)
plan.
|
|
(6)
|
Consists
of $11,400 car allowance and $1,500 of Company matching contributions to
401(k) plan.
|
|
(7)
|
Consists
of $61,923 of commissions, $11,400 car allowance, and $1,340 of Company
matching contribution to 401 (k)
plan.
|
|
(8)
|
Ms.
Burak joined the Company as Chief Accounting Officer and Corporate
Controller in September 2007.
|
|
(9)
|
Consists
of $1,500 of Company matching contributions to 401(k)
plan.
|
|
(10)
|
Consists
of $1,500 of Company matching contributions to 401 (k)
plan.
|
|
(11)
|
Consists
of $6,650 of car allowance and $1,500 of Company matching
contributions to 401(k) plan.
|
|
(12)
|
Consists
of $1,500 of Company matching contributions to 401 (k)
plan.
|
|
(13)
|
Represents
bonus paid in 2009, 2008 and 2007 for annual performance in 2008, 2007 and
2006 respectively.
|
Grants
of Plan-Based Awards
All
grants of plan-based awards to the named executive officers in 2008 are
presented in the table below.
|
Name
|
Grant
Date
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Grant
Date Fair Value of Stock and Option Awards ($)
|
||||||||||||
|
Dennis
Capovilla
|
5/15/2008
|
100,000 | (1) | $ | 1.17 | $ | 78,500 | |||||||||
|
2/26/2008
|
160,000 | (1) | $ | 0.84 | $ | 81,152 | ||||||||||
|
Mallorie
Burak
|
2/26/2008
|
10,000 | (1) | $ | 0.84 | $ | 5,072 | |||||||||
|
Mike
Vargas
|
2/26/2008
|
80,000 | (1) | $ | 0.84 | $ | 40,576 | |||||||||
_______________
|
(1)
|
These
options will vest in four equal annual installments beginning with the
first anniversary of the grant
date.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information about all equity awards held by the named
executive officers at December 31, 2008
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
|||||||||
|
R.
Eugene Goodson
|
181,818 | 0 | $ | 0.41 |
11/01/16
|
||||||||
| 118,182 | 0 | $ | 0.41 |
11/01/16
|
|||||||||
| 20,000 | 20,000 | (2) | $ | 0.62 |
07/28/16
|
||||||||
|
Dennis
F. Capovilla
|
|||||||||||||
| 0 | 100,000 | (4) | $ | 1.17 |
05/15/18
|
||||||||
| 0 | 160,000 | (4) | $ | 0.84 |
02/26/18
|
||||||||
| 75,000 | 75,000 | (3) | $ | 0.45 |
02/06/17
|
||||||||
| 37,500 | 37,500 | (2) | $ | 0.71 |
05/11/16
|
||||||||
| 123,214 | 267,886 | (5) | $ | .58 |
12/09/15
|
||||||||
| 200,000 | 0 | $ | .50 |
10/05/14
|
|||||||||
| 50,000 | 0 | $ | 1.81 |
02/24/11
|
|||||||||
| 100,000 | 0 | $ | 1.05 |
07/17/10
|
|||||||||
|
Mallorie
Burak
|
|
||||||||||||
| 0 | 10,000 | (4) | $ | 0.84 |
02/26/18
|
||||||||
| 18,750 | 56,250 | (3) | $ | 0.64 |
10/30/17
|
||||||||
|
Michael
Vargas
|
|||||||||||||
| 0 | 80,000 | (4) | $ | 0.84 |
02/26/18
|
||||||||
| 3,750 | 11,250 | (3) | $ | 0.51 |
02/12/17
|
||||||||
| 12,500 | 37,500 | (3) | $ | 0.45 |
02/06/17
|
||||||||
| 15,000 | 15,000 | (2) | $ | 0.71 |
05/11/16
|
||||||||
| 39,286 | 10,714 | (1) | $ | 0.58 |
12/09/15
|
||||||||
| 70,000 | 0 | $ | 1.22 |
12/09/14
|
|||||||||
_______________
|
(1)
|
These
options vest at a rate of 25% per year over four years.from
2005-2009
|
|
(2)
|
These
options vest at a rate of 25% per year over four years from
2006-2010
|
|
(3)
|
These
options vest at a rate of 25% per year over four years from
2007-2011
|
|
(4)
|
These
options vest at a rate of 25% per year over four years form
2008-2012
|
|
(5)
|
These
options vest at a rate of 25% after six months and then monthly thereafter
for 42 months.
|
Option
Exercises and Stock Vested Table
| Name |
Number
of Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
|||||
|
R.
Eugene Goodson
|
300,000
|
$ |
131,460
|
|
(1)
|
Value
realized is calculated based on the difference between the closing market
price of our common stock on the date of exercise and the exercise
price.
|
Pension
Benefits: Nonqualified Define Contribution and Other Nonqualified Deferred
Compensation Plan.
We do not
have any pension plans nor do we have any nonqualified defined contribution or
other nonqualified deferred compensation plans.
DIRECTOR COMPENSATION
During
2008, we paid each of our non-employee directors a $1,000 per month retainer for
his or her services. As chairman of the Audit Committee, Mr. Berry
was paid an additional retainer of $6,000. As chairman of the
Compensation Committee, Mr. Salas was paid an additional retainer of
$3,000. As chairperson of the Nominating and Corporate Governance
Committees, Ms. Nachtsheim was paid an additional retainer of
$3,000. In addition, in 2008, each non-employee director received
$1,000 plus expenses for each Board meeting attended in person and a
fee of $500 for each Board meeting held via teleconference. In 2008,
non-employee directors who served on committees of the Board also received $750
for each committee meeting attended and a fee of $500 for each committee meeting
in person or by teleconference held other than on the day board of directors
meetings.
Directors
may also from time to time be granted options to purchase shares of common stock
under our 2007 Stock Incentive Plan. During 2008, each non-employee
director received options to purchase 20,000 shares of common stock, all at an
exercise price of $0.84 per share. These options vest at a rate of
25% per year over four years.
Assuming
the election of the nominees for directors presented pursuant to Proposal 1, the
non-employee directors’ annual retainer fees for 2009 are as follows: Mr.
Berry—$18,000; Mr. Boyadjieff-$12,000; Mr. Bunday-$12,000; Mr. Horn -
$21,000; Ms. Nachtsheim - $15,000; and Mr. Salas - $15,000. In
addition, each non-employee director will receive $1,000 plus expenses for each
Board meeting attended. Non-employee directors also receive a fee of
$500 for each Board meeting held via teleconference.
The total
compensation paid to our non-employee directors during 2008 is shown in the
following table. Because Dr. Goodson is among our named executive officers and
all compensation he received during 2008, including as director, is reflected in
the “Summary Compensation Table” above, information about his compensation as a
director is not provided in the table below.
|
Name
|
Fees
Earned or Paid in Cash ($) (2)
|
Option
Awards ($)(1)
|
Total
($)
|
|||||||||
|
William
A. Berry
|
$ | 27,000 | $ | 10,1448 | $ | 37,144 | ||||||
|
George
Boyadjeff
|
$ | 19,500 | $ | 10,144 | $ | 29,644 | ||||||
|
Dennis
Bunday
|
$ | 46,000 | $ | 20,288 | $ | 66,288 | ||||||
|
Andre
R. Horn
|
$ | 25,000 | $ | 10,144 | $ | 35,144 | ||||||
|
Jami
K. Nachtsheim
|
$ | 23,750 | $ | 10,144 | $ | 33,894 | ||||||
|
Peter
E. Salas
|
$ | 22,500 | $ | 10,144 | $ | 32,644 | ||||||
|
(1)
|
On
February 26,, 2008 each of the above directors received an option to
purchase 20,000 shares of Common Stock at $0.84 per share the OTC closing
price for an aggregate of options to purchase 120,000 shares of common
stock. All of the above options vest at the rate of 25% per
year commencing on the first anniversary of this grant and each successive
year thereafter for three years. The amounts in the columns reflect the
dollar amount to be recognized for financial statements reporting
purposes, in accordance with FAS123R. Assumptions used in the calculation
of amounts are described in Note 2 to the Company’s audited financial
statements for the year ended December 31, 2008 included in the Company’s
Annual Report on Form 10-k mailed with this
proxy.
|
|
(2)
|
During
2008, Mr. Bunday was paid $27,000 for consulting services and $19,000 for
director fees.
|
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The
following table sets forth information as of March 2, 2009 regarding our 1997
Stock Incentive Plan, 1998 Stock Option Plan for Employees and Consultants, 1997
Employee Stock Purchase Plan and 2007 Long-Term Incentive Plan. Our
stockholders previously approved each of these plans and all amendments that
were subject to stockholder approval. We have no other equity
compensation plans that have not been approved by stockholders.
|
Number
of Shares of Common Stock to be Issued Upon Exercise of Outstanding Stock
Options ,Warrants and Rights
(a)
|
Weighted-Average
Exercise Price of Outstanding Stock Options, Warrants and
Rights
(b)
|
Number
of Shares of Common Stock Remaining Available for Future Issuance
(excluding securities reflected in column
(c)
|
||||||||||
|
1997
Stock Incentive Plan (1)
|
1,746,723 | $ | 0.83 | 0 | ||||||||
|
1997
Employee Stock Purchase Plan (1)
|
Not
applicable
|
|||||||||||
|
1998
Stock Option Plan for Employees and Consultants (1)
|
1,721,247 | $ | 0.91 | 0 | ||||||||
|
2007
Long-Term Incentive Plan(2)
|
1,306,000 | $ | 0.86 | 8,694,000 | ||||||||
|
Total
|
4,773,970 | $ | 0.87 | 8,694,000 | ||||||||
(1) A
total of 325,000 shares of common stock are reserved for issuance under the 1997
Employee Stock Purchase Plan. Through May 31, 2007, we had issued
280,934 shares under the 1997 Employee Stock Purchase Plan, which was suspended
on May 31, 2007.
(2) In
addition to the issuance of stock options, each of the 1997 Stock Incentive Plan
and the 1998 Stock Option Plan allows for the issuance of stock and restricted
stock. Since the adoption of the 2007 Long-Term Incentive Plan, no
additional equity awards or other grants will be made pursuant to the 1997 Stock
Incentive Plan or the 1998 Stock Option Plan.
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
Pursuant
to our Audit Committee Charter, our Audit Committee is responsible for reviewing
and approving transactions involving the Company and related
parties.
During
2008, no transactions were required to be disclosed pursuant to Item 404(a) of
Regulation S-K promulgated by the SEC.
PRINCIPAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND
SERVICES
The
following able shows the fees paid or accrued by us for the audit and other
services provided by our principal independent registered public
accounting firms for 2008 and 2007.
|
2008
|
2007
|
|||||||
|
Audit
fees(1)
|
$ | 318,602 | $ | 301,810 | ||||
|
Tax
fees
|
- | -- | ||||||
|
Audit
related fees (2)
|
$ | 10,110 | $ | 9,660 | ||||
|
Total
|
$ | 328,712 | $ | 311,470 | ||||
(1) Audit
fees represent fees for professional services provided by Burr, Pilger &
Mayer LLP in connection with the audit of our financial statements for the
fiscal years ended December 31, 2008 and 2007 and the review of quarterly
reports on Form 10-Q filed during 2008 and 2007.
(2) Audit
related fees for professional services provided by Burr, Pilger, & Mayer LLP
in connection with responses to comment letters from the Securities and Exchange
Commission relating to 2006 and accounting consultation.
All audit
and non-audit services provided by our independent registered public accounting
firm are approved by the Audit Committee, which considers whether the provision
of non-audit services is compatible with maintaining the independent registered
public accounting firm’s independence.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
requires our officers and directors and persons who own more than ten percent of
our common stock to file reports with the SEC disclosing their ownership of
stock in Southwall and changes in such ownership. Officers, directors
and 10% stockholders are required by SEC regulations to furnish us with copies
of all Section 16(a) forms they file. Based solely on a review of the
copies of such reports received by us and the written representations received
from one or more such persons, these reports were timely filed.
OTHER BUSINESS
We know
of no other business that may be presented for consideration at the 2009 annual
meeting. If any other matters are properly presented to the annual
meeting, however, it is the intention of the persons named in the accompanying
proxy card to vote, or otherwise to act, in accordance with their best judgment
on such matters.
The Board
of Directors hopes that stockholders will attend the annual meeting. Whether or not you plan
to attend, you are urged to complete, sign and return the enclosed proxy in the
accompanying envelope, or vote by Internet or telephone. A prompt
response will greatly facilitate arrangements for the annual meeting, and your
cooperation will be appreciated. Stockholders who attend the annual
meeting may vote their shares personally even though they have sent in their
proxies.
|
By
Order of the Board of Directors
|
|
|
Andre
R. Horn
|
|
|
Chairman
of the Board of Directors
|
Palo
Alto, California
April 13,
2009
|
0000000000.000000
ext
|
0000000000.000000
ext
|
||||
|
0000000000.000000
ext
|
0000000000.000000
ext
|
||||
|
0000000000.000000
ext
|
0000000000.000000
ext
|
||||
|
MR
A SAMPLE
|
Electronic
Voting Instructions
|
||||
|
DESIGNATION
(IF ANY)
|
|||||
|
ADD
1
ADD
2
|
You
can vote by Internet or telephone!
Available
24 hours a day, 7 days a week!
|
||||
|
ADD
3
|
|||||
|
ADD
4
ADD
5
|
Instead
of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
|
||||
|
ADD
6
|
|||||
|
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
|
|||||
|
Proxies
submitted by the Internet or telephone must be received by 1:00 a.m.,
Central Time, on May 11, 2009.
|
|||||
 |
Vote
by Internet
• Log
on to the Internet and go to
www.investorvote.com
• Follow
the steps outlined on the secured website.
|
||||
 |
Vote
by telephone
• Call
toll free 1-800-652-VOTE (8683) within the United States, Canada &
Puerto Rico any time on a touch tone telephone. There is NO CHARGE to
you for the call.
• Follow
the instructions provided by the recorded message.
|
||||
|
Using
a black ink pen,
mark your votes with an X as
shown in this example. Please do not write outside the designated
areas.
|
T
|
||||
|
Annual
Meeting Proxy Card
|
123456
|
C0123456789
|
12345
|
€IF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
A Proposals
— The Board of Directors recommends a vote FOR all the nominees
listed below.
1.
Election of Directors to hold office until the 2010 Annual Meeting of
Stockholders and until their successors are elected:
|
01
- William A. Berry
|
02
- George I. Boyadjieff
|
03-Dennis
E. Bunday
|
04
- R. Eugene Goodson
|
|
05
- Andre R. Horn
|
06
- Jami K. Dover Nachtsheim
|
07
- Peter E. Salas
|
|
o
|
Mark
here to vote FOR all
nominees
|
o
|
Mark
here to WITHHOLD vote from all
nominees
|
|
01
|
02
|
03
|
04
|
05
|
06
|
07
|
|||
|
o
|
For All EXCEPT- To withhold a
vote for one or more nominees, mark the box to the left and the
corresponding numbered box(es) to the right.
|
o
|
o
|
o
|
o
|
o
|
o
|
o
|
|
For
|
Against
|
Abstain
|
For
|
Against
|
Abstain
|
||
|
2 In
their discretion,
|
o
|
o
|
o
|
||||
|
are
authorized to vote upon such other business as may properly come before
the Annual Meeting and at any adjournment or postponement
Thereof.
|
B
Non-Voting Items
|
Change of Address—
Please print your new address below.
|
Comments— Please print
your comments below.
|
Meeting
Attendance
|
|||
|
Mark
the box to the right if you plan to attend the Annual
Meeting.
|
o
|
||||
C
Authorized Signatures — This section must be completed for your vote to be
counted. — Date and Sign Below
Please
sign exactly as your name appears hereon. If the stock is registered in the
names of two or more persons, each should sign. If signer is a corporation,
please give full corporate name and have a duly authorized officer sign stating
title. If signer is a partnership, please sign in partnership name by authorized
person.
|
Date
(mm/dd/yyyy) — Please print date below.
|
Signature
1 — Please keep signature within the box.
|
Signature
2 — Please keep signature within the box.
|
||
IF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
Proxy
— SOUTHWALL TECHNOLOGIES INC.
Annual
Meeting of Stockholders- May 13, 2009
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Dennis Capovilla and Mike Vargas, and each of them,
as attorneys and proxies of the undersigned, with full power of substitution, to
vote all of the shares of stock of Southwall Technologies Inc. (the “Company”)
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Company’s principal executive
offices at 3788 Fabian Way, Palo Alto, California 94303 on Wednesday, May 13,
2009 at 8:30 a.m., local time, and at all continuations, and adjournments or
postponements thereof, with all of the powers the undersigned would possess if
personally present, upon and in respect of the matters as listed on the reverse
side and in accordance with the instructions designated on the reverse side,
with the discretionary authority as to all other matters that may properly come
before the meeting.
Receipt
is hereby acknowledged of the Notice of Annual Meeting of Stockholders and Proxy
Statement dated April 13, 2009 (the “Proxy Statement”).
UNLESS
A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AS MORE SPECIFICALLY SET FORTH IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
|
SEE
REVERSE SIDE
|
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
|
SEE
REVERSE SIDE
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
-38-