HURCO COMPANIES INC
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by
the Registrant x
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))
x Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Pursuant to Rule 240.14a-12
Hurco
Companies 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):
|
x
|
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: _____________
|
|
ONE
TECHNOLOGY WAY
P.O. BOX
68180
INDIANAPOLIS,
INDIANA 46268
(317)
293-5309
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To Be
Held March 18, 2010
The 2010
Annual Meeting of Shareholders of Hurco Companies, Inc., will be held at our
corporate headquarters, One Technology Way, Indianapolis, Indiana 46268, at
10:00 a.m. EDT on Thursday, March 18, 2010, for the following
purposes:
|
|
1.
|
To
elect nine directors to serve until the next annual meeting and their
successors are duly elected and
qualify,
|
|
|
2.
|
To
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal 2010,
and
|
|
|
3.
|
To
transact such other business as may properly come before the meeting or
any adjournments thereof.
|
The Board of Directors recommends a
vote FOR items 1 and 2. The persons named as proxies will use their
discretion to vote on other matters that may properly arise at the annual
meeting.
The above
items of business are more fully described in our proxy statement accompanying
this notice. Please read our proxy statement carefully.
If you do
not expect to attend the annual meeting, please mark, sign and date the enclosed
proxy and return it in the enclosed return envelope which requires no postage if
mailed in the United States.
Only
shareholders of record as of the close of business on January 13, 2010, are
entitled to notice of and to vote at the annual meeting or any adjournments
thereof. In the event there are not sufficient votes for approval of
one or more of the above matters at the time of the annual meeting, the annual
meeting may be adjourned in order to permit further solicitation of
proxies.
|
By
order of the Board of Directors,
|
|
|
John
G. Oblazney, Secretary
|
Indianapolis,
Indiana
January
26, 2010
YOUR VOTE IS IMPORTANT—Even if
you plan to attend the meeting, we urge you to mark, sign and date the enclosed
proxy and return it promptly in the enclosed envelope.
Important
Notice Regarding the Availability of Proxy Materials
In
accordance with the rules of the Securities and Exchange Commission, we are
advising our shareholders of the availability on the Internet of our proxy
materials related to the annual meeting described above. These rules allow
companies to provide access to proxy materials in one of two ways. Because we
have elected to utilize the “full set delivery” option, we are delivering to all
shareholders paper copies of all of the proxy materials, as well as providing
access to those proxy materials on a publicly accessible website.
The
notice of annual meeting of shareholders, proxy statement, form of proxy card
and annual report to shareholders on Form 10-K are available at www.hurco.com/proxymaterials. You
may obtain directions to the annual meeting by written request directed to John
G. Oblazney, Vice President and Chief Financial Officer, Hurco Companies, Inc.,
One Technology Way, P. O. Box 68180, Indianapolis, Indiana 46268 or by telephone
at (317) 293-5309.
HURCO
COMPANIES, INC.
One
Technology Way
P.
O. Box 68180
Indianapolis,
Indiana 46268
Annual
Meeting of Shareholders
March
18, 2010
PROXY
STATEMENT
SOLICITATION,
VOTING AND REVOCABILITY OF PROXIES
This
proxy statement is furnished to the holders of common stock of Hurco Companies,
Inc. (“Hurco,” the “Company,” “we,” “us” or “our”) in connection with the
solicitation of proxies by the Board of Directors for the 2010 Annual Meeting of
Shareholders to be held at 10:00 a.m. EDT on Thursday, March 18, 2010, at
our corporate headquarters at One Technology Way, Indianapolis, Indiana, and at
any adjournments thereof. This proxy statement and the accompanying
form of proxy are being mailed to our shareholders on or about January 26,
2010. Proxies are being solicited principally by mail. Our
directors, officers and other employees may also solicit proxies personally by
telephone, electronic mail or otherwise. All expenses incident to the
preparation and mailing of this proxy statement and form of proxy will be paid
by us.
Shareholders
of record as of the close of business on January 13, 2010, are entitled to
notice of and vote at the annual meeting or any adjournments
thereof. On that date, 6,440,851 shares of
our common stock were outstanding and entitled to vote. Each share
will be entitled to one vote with respect to each matter submitted to a
vote. The presence in person or by proxy of the holders of a majority
of the outstanding shares entitled to vote at the annual meeting is necessary to
constitute a quorum for the transaction of business.
If the
enclosed form of proxy is executed and returned, it may be revoked at any time
before it is voted by giving written notice to the Secretary of the
Company. If a shareholder executes more than one proxy, the proxy
having the latest date will revoke any earlier proxies. Shareholders
who attend the annual meeting may revoke their proxies and vote in
person.
A proxy,
if returned properly executed and not subsequently revoked, will be voted in
accordance with the instructions of the shareholder in the proxy. The
election of directors will be determined by the vote of a plurality of the votes
cast. The proposal to ratify the appointment of auditors will be
approved if more votes are cast in favor of it than are cast
against.
You
should be aware that due to a change in NYSE rules applicable to shareholder
meetings held on or after January 1, 2010, brokers will no longer be
entitled to exercise discretion to vote shares in an uncontested election of
directors if the shareholder does not give voting
instructions. Accordingly, if you hold your shares in "street name"
and wish your shares to be voted in the election of directors, you must give
your broker voting instructions. If your shares are held in "street
name" and you do not give your broker voting instructions, your broker will
nonetheless have discretion to vote your shares for the proposal to ratify the
selection of auditors. Abstentions will be
considered as present for quorum purposes, but not as voting in favor of such
proposal. Broker non-votes and abstentions will not affect the
election of directors or the other proposal to be voted on at the annual
meeting.
1
ELECTION
OF DIRECTORS
The Board
of Directors currently consists of eight members. The Board of Directors has
amended our By-Laws, effective as of the date of the annual meeting, to increase
the number of directors to nine. The Board, acting on the
recommendation of our Nominating and Governance Committee, has nominated all
eight current directors for re-election and Gerhard Kohlbacher, a recently
retired Hurco executive, to fill the newly-created vacancy. Each
director will serve for a term of one year, which expires at our next annual
meeting of shareholders and until his or her successor has been elected and
qualifies.
The nine
nominees are identified below. No fees were paid to any third parties
to identify or evaluate potential nominees. Unless authority is
specifically withheld, the shares voting by proxy will be voted in favor of
these nominees.
If any of
these nominees becomes unable to accept election, the persons named in the proxy
will exercise their voting power in favor of other such person or persons as the
Board may recommend. All of the nominees have consented to being
named in this proxy statement and to serve if elected. The Board of
Directors knows of no reason why any of the nominees would be unable to accept
election.
The
following information sets forth the name of each nominee, his or her age,
tenure as a director, principal occupation and business experience for the last
five years. There are no family relationships among any of our
directors or officers.
|
Name
|
Age
|
Served as a
Director since
|
|||||
|
Stephen
H. Cooper 1,2
|
70
|
2005
|
|||||
|
Robert
W. Cruickshank 1,3
|
64
|
2000
|
|||||
|
Michael
Doar
|
54
|
2000
|
|||||
|
Philip
James3
|
67
|
2007
|
|||||
|
Gerhard
Kohlbacher
|
59
|
N/A
|
|||||
|
Michael
P. Mazza 3
|
45
|
2006
|
|||||
|
Richard
T. Niner 2
|
70
|
1986
|
|||||
|
Charlie
Rentschler 2
|
70
|
1986
|
|||||
|
Janaki
Sivanesan1
|
38
|
2008
|
|||||
|
|
1Member of Audit
Committee
|
|
|
2Member
of Nominating and Governance
Committee
|
|
|
3Member
of Compensation Committee
|
Stephen
H. Cooper has been a practicing attorney and member of the bar of the State of
New York since December 1965. Until his retirement in December 2004,
Mr. Cooper was for more than thirty years a partner in the international law
firm Weil, Gotshal & Manges LLP, based in New York, where he specialized in
corporate finance and federal securities law. Since August 2002, he
has served as an Adjunct Professor of Law at New York Law School, Pace
University Law School, and, most recently, Albany Law School,
teaching courses on federal securities regulation and corporate law, including
corporate governance. For more than twenty-five years, Mr. Cooper has
been an active member of the senior leadership of the Committee on the Federal
Regulation of Securities of the American Bar Association.
2
Robert W.
Cruickshank has been a consultant providing private clients with financial
advice since 1981. Mr. Cruickshank also is a director of Calgon
Carbon Corporation, a producer of products and services for the purification,
reparation and concentration of liquids and gases.
Michael
Doar was elected Chairman of our Board of Directors and our Chief Executive
Officer in fiscal 2001. He was appointed to the additional office of
President in November 2009 following the resignation of James D.
Fabris. Prior to joining Hurco, Mr. Doar served as Vice President of
Sales and Marketing of Ingersoll Contract Manufacturing Company, a subsidiary of
Ingersoll International, an international engineering and machine tool systems
business. Mr. Doar had held various management positions with
Ingersoll International from 1989. Mr. Doar also serves as a director
of Twin Disc, Incorporated, a manufacturer of marine and heavy duty off-highway
power transmission equipment.
Philip
James is President of James Consulting Associates LLC, a firm that provides
strategic advice to senior management of global manufacturing companies, with
special emphasis on China. Mr. James has conducted business extensively in China
for twenty-five years. Previously, Mr. James served as Chief
Executive Officer of Ingersoll Production Systems, a subsidiary of Dalian
Machine Tool Group, a Chinese machine tool manufacturer.
Gerhard
Kohlbacher served as President of our subsidiary, Hurco GmbH, from November 2004
to December 2009, when he retired. He was primarily responsible for
managing our operations in Europe. From November 1985 to November 2004, he held
other senior positions in our European operations.
Michael
P. Mazza is an intellectual property attorney, and the principal of his law
firm, Michael P. Mazza, LLC. Previously, he was associated with Niro,
Scavone, Haller & Niro, a Chicago intellectual property law
firm.
Richard
T. Niner is a self-employed private investor.
Charlie
Rentschler is a Senior Vice President of Morgan Joseph & Co. Inc., an
investment banking firm. From 2006 to 2009 he was Vice President of Wall Street
Access, a registered broker dealer in New York. Between 2003 to 2006,
he was the Director, Industrial Research, of Foresight Research Solutions, an
independent research firm. From 2001 to 2003, Mr. Rentschler was an
independent business consultant providing service to the foundry industry. From
1985 to 2001, Mr. Rentschler served as President and CEO of The Hamilton Foundry
& Machine Co. in Harrison, Ohio. He is also a director of
Accuride Corporation, a manufacturer of commercial vehicle components located in
Evansville, Indiana.
Janaki
Sivanesan is a practicing attorney and has her own private practice. She
previously practiced law at a large, New York law firm. She was
admitted to the bars of the State of New York and Georgia in 2007 and 1996,
respectively. Ms. Sivanesan's practice involves a wide range of corporate
transactions, from mergers and acquisitions to corporate finance, including
public offerings of securities and private equity and venture capital
transactions. Ms. Sivanesan also has experience in cross border
transactions related to manufacturing and outsourcing, and is particularly
knowledgeable with respect to business operations in India.
The
Board of Directors recommends a vote “FOR” each of the nominees listed
above.
3
CORPORATE
GOVERNANCE
Director
Independence and Board Meetings
The Board
of Directors has determined that a majority of our directors are “independent
directors” as defined by the listing standards of The Nasdaq Stock Market LLC
(“Nasdaq”) (the market in which our common stock trades), and the director
independence rules of the Securities and Exchange Commission (the
“SEC”). The independent directors are currently Messrs. Cooper,
Cruickshank, James, Mazza, Niner and Rentschler and Ms.
Sivanesan. The Board has affirmatively determined that none of the
persons who served as independent directors during fiscal 2009 have a
relationship with us that would impair their independence.
Directors
are expected to attend Board meetings, meetings of committees on which they
serve and our annual meeting of shareholders, and to spend the time needed and
meet as frequently as necessary to properly discharge their
responsibilities. During fiscal 2009, the Board of Directors held
four regular meetings. All directors attended at least 75% of the
aggregate number of meetings of the Board and the committees on which they
served during fiscal 2009. With the exception of Mr. Niner, all directors
attended the 2009 annual meeting of shareholders.
Board
Committees and Committee Meetings
The Board
of Directors has appointed the following three standing committees.
Audit
Committee
The Audit
Committee oversees our accounting and financial reporting
activities. It appoints our independent registered public accounting
firm and meets with that firm and our Chief Financial Officer to review the
scope, cost and results of our annual audit and to review our internal
accounting controls, policies and procedures. The Report of the Audit
Committee is included on page 18 of this proxy statement.
The
current members of the Audit Committee are Messrs. Cruickshank (Chairman) and
Cooper and Ms. Sivanesan. All members of the Audit Committee are
“independent” as such term is defined for audit committee members under the
Nasdaq rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). The Board has determined that Mr. Cruickshank
meets the definition of an “audit committee financial expert,” as defined in
Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act.
The Audit
Committee held twelve meetings during fiscal 2009.
The Audit
Committee operates under a written charter, a copy of which is available on our
website at www.hurco.com.
Compensation
Committee
The
Compensation Committee reviews and recommends to the Board the compensation of
our officers and managers and guidelines for the general wage structure of the
entire workforce. The Compensation Committee also oversees the
administration of our employee benefit plans and discusses with management the
Compensation Discussion and Analysis and, if appropriate, recommends its
inclusion in our Annual Report on Form 10-K and proxy statement. The
Report of the Compensation Committee is included on page 9 of this proxy
statement.
4
The
current members of the Compensation Committee are Messrs. James (Chairman),
Cruickshank and Mazza. All members of the Compensation Committee are
independent directors as defined by Nasdaq rules.
The
Compensation Committee held three meetings during fiscal 2009.
The
Compensation Committee operates under a written charter, a copy of which is
available on our website at www.hurco.com.
Nominating and Governance
Committee
The
Nominating and Governance Committee assists the Board by identifying individuals
qualified to become Board members, maintains our Corporate Governance Principles
and Code of Business Conduct and Ethics, leads the Board in an annual
self-evaluation, recommends members and chairs for each standing committee, and
determines and evaluates succession plans for our Chief Executive
Officer.
The
current members of the Nominating and Governance Committee are Messrs. Niner
(Chairman), Cooper and Rentschler. All members of the Nominating and
Governance Committee are independent directors as defined by Nasdaq
rules.
The
Nominating and Governance Committee held two meetings during fiscal
2009.
The
Nominating and Governance Committee is responsible for identifying potential
Board members. Nominees will be evaluated on the basis of their
experience, areas of expertise, judgment, integrity, ability to make independent
inquiries and willingness to devote adequate time to Board
duties. The Nominating and Governance Committee’s process for
identifying and evaluating nominees for director is the same whether the nominee
has been identified by the committee or a third party.
The
Nominating and Governance Committee will consider candidates for director who
are recommended by shareholders. A shareholder who wishes to
recommend a director candidate for consideration by the committee should send
such recommendation to our Secretary at One Technology Way, Indianapolis,
Indiana 46268, who will forward it to the committee. Any such
recommendation should include a description of the candidate’s qualifications
for Board service and contact information for the shareholder and the
candidate.
A
shareholder who wishes to nominate an individual as a candidate for director
without the recommendation of the Nominating and Governance Committee must
comply with the advance notice and informational requirements set forth in our
By-Laws, which are more fully explained later in this proxy statement under
“Shareholder Proposals for our 2011 Annual Meeting.”
The
Nominating and Governance Committee operates under a written charter, a copy of
which is available on our website at www.hurco.com.
Compensation Committee
Interlocks and Insider Participation
No member
of our Compensation Committee was, at any time during fiscal 2009 or at any
other time before fiscal 2009, an officer or employee of Hurco. In
addition, none of the members of the Compensation Committee were involved in a
relationship requiring disclosure as an interlocking executive officer or
director under Item 407(e)(4) of Regulation S-K of the Exchange
Act. None of our executive officers served as a member of the
Compensation Committee at any time during or before fiscal
2009.
5
Shareholder
Communications
The Board
of Directors has implemented a process whereby shareholders may send
communications to its attention. The process for communicating with
the Board is set forth in our Corporate Governance Principles, which are
available on our website at www.hurco.com.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than 10% of our common stock, to file reports of ownership
with the SEC and Nasdaq. Such persons are also required to furnish us
with copies of all Section 16(a) forms they file.
Based
solely on our review of the copies of such forms received by us, and written
representations from certain reporting persons that they were not required to
file a Form 5 to report previously unreported ownership or changes in ownership,
we believe that, during our fiscal year ended October 31, 2009, all of our
officers, directors and greater than 10% beneficial owners complied with all
filing requirements under Section 16(a) except as indicated in the following
sentences. James D. Fabris, who resigned as an officer as of October
31, 2009, sold a total of 12,500 shares on September 16 and 17, 2009 and did not
file a Form 4 reporting those transactions until October 5,
2009. Michael P. Mazza, one of our directors, purchased 625 shares on
May 28, 2008, 700 shares on June 10, 2008, 500 shares on October 16, 2008 and
500 shares on December 17, 2009 and did not file a Form 4 reporting those
transactions until January 7, 2010.
Code
of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics, which applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. If we
grant any waiver to the Code of Business Conduct and Ethics, we will disclose
the nature of such waiver in a Current Report on Form 8-K that we will file with
the SEC. A copy of the Code of Business Conduct and Ethics is
available on our website at www.hurco.com. We
will disclose any amendments or updates to our Code of Business Conduct and
Ethics by posting such amendments or updates on our website.
6
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The goals
of our executive compensation program are to establish an appropriate
relationship between executive pay and the creation of shareholder value, while
at the same time motivating and retaining qualified employees. This
section and the tables that follow it provide information regarding the
compensation program and practices as they relate to the total pay for our Chief
Executive Officer, Chief Financial Officer, another executive officer and a
former executive officer, all of whom are identified in the Summary Compensation
Table on page 10, and are referred to as the “named executive officers” in this
analysis. We do not currently have any executive officers who are not
also named executive officers.
The
responsibilities of the Compensation Committee of the Board of Directors
(referred to as the “Committee” in this Executive Compensation section) include
administering our compensation programs and approving or ratifying all
compensation related decisions for the named executive officers.
Impact of Global
Recession
Our
compensation program was significantly affected by the global recession, which
led to a steep decline in worldwide demand for machine
tools. Beginning in the second quarter of fiscal 2009, we reduced the
base compensation of our executive officers and directors by 10% and suspended
the company-match contribution to our 401(k) plan. In addition, there
were no bonuses awarded in fiscal 2009.
Elements of
Compensation
Our
executive compensation program is very simple. We pay our named
executed officers a base salary and consider whether to award them discretionary
cash bonuses.
Base
Salaries.
Our industry is highly cyclical and, we believe that offering competitive base
salaries is a key factor in attracting and retaining talent. Base
salaries generally carry over from the prior year and are reviewed annually for
possible adjustments. Our Chief Executive Officer makes a
recommendation on salary adjustments for each of the other named executive
officers. Our Chief Executive Officer bases his recommendations on
his subjective assessment of our overall performance, his assessment of
individual’s contributions to that performance, and to a lesser extent, his
views on competitive practices in our industry and of other similar sized public
companies. The members of the Committee then use their own business
experience and judgment to determine the amount of the increase, if
any. The base salary of our Chief Executive Officer is determined by
the Committee based on the Committee’s subjective assessment of our overall
performance and the Chief Executive Officer’s individual contribution to that
performance.
Annual Cash
Bonuses. Historically, the Committee has determined on an
annual basis whether to pay discretionary cash bonuses to the named executive
officers as a reward for past efforts and motivation for future
efforts. When making its bonus determinations, the Committee has
available to it our annual financial statements for the fiscal year end and
related business plan which detail revenue, profit margins, net income and cash
flows. The Committee also considers the role of, and the
contributions made by, each named executive officer in achieving our business
plan. The Committee does not employ a specific formula for taking any
of these factors into account. Rather, the Committee makes a
subjective assessment of these factors in the aggregate and applies their
collective business experience and judgment to determine both how we performed
in the year and the amount of the annual bonus to be paid to each named
executive officer.
7
Equity-Based
Awards. Although the Committee has the authority to make
equity-based awards under the shareholder-approved incentive plan, the Committee
did not grant any equity awards to any named executive officers during fiscal
2009.
Medical,
Disability and Life Insurance. The named executive officers
participate in benefits coverage to help manage the financial impact of ill
health, disability and death. All named executive officers are
provided supplemental disability benefits and our Chief Executive Officer is
also provided a split-dollar life insurance benefit.
Retirement
Benefits. We sponsor a 401(k) plan in which all full-time
employees are eligible to participate. The purpose of the plan is to
provide an incentive for employees to save for their retirement income needs and
to assist in our attraction and retention of employees. Our named
executive officers participate in the 401(k) plan on the same basis as other
eligible employees. Prior to fiscal 2009, we made matching
contributions in an amount equal to 100% of the first 6% of a participant’s
annual earnings that he or she contributed, up to the maximum permitted by
law. This benefit was suspended beginning in the second quarter of
fiscal 2009 in order to control expenses as a result of the severe economic
downturn. We also maintain a deferred compensation program in which
our named executive officers and other senior management employees may
voluntarily participate. For additional information regarding the
deferred compensation program see “Nonqualified Deferred
Compensation.”
Perquisites. The
Committee believes that, even though the level of perquisites provided to the
named executive officers is relatively minimal, perquisites are an integral
component in establishing the competitiveness of our overall compensation
program. Perquisites offered to the named executive officers include
reimbursement of a health club membership, personal travel and use of company
leased vehicles. For additional information regarding perquisites see
“Summary Compensation Information.”
Pay
Equity. The
total compensation of our Chief Executive Officer is greater than that of the
other named executive officers. The principal reason for this
disparity is that the Committee believes that the Chief Executive Officer is the
person most instrumental in the development and implementation of our business
strategies.
Employment
Contracts
We have
employment contracts with Messrs. Doar and Oblazney. These contracts
generally provide for continued salary payments and other benefits for 12 months
if the officer’s employment terminates. Additional information
regarding employment contracts is found in this section under the heading
“Employment Contracts.” We also estimate under the heading “Potential
Payments Upon Termination” the benefits that we would have paid to any of our
current named executive officers if their employment had terminated on
October 31, 2009.
The
Committee believes that these contracts are an important part of the overall
compensation arrangements for the affected officers. The contracts
help to secure the continued employment and dedication of those officers, and
provide a reasonable amount of assurance of continued employment. The
contracts do not include any specific guarantees regarding continuation of
employment following, or compensation payable in connection with, a change in
control of the Company.
8
Compensation Decisions for
Fiscal 2009
Details
of the compensation payable to the named executive officers for fiscal 2009 are
disclosed in the tables and related discussion that follows this “Compensation
Discussion and Analysis.” As noted above and in the tables, we did
not pay any bonuses or make any incentive compensation awards during fiscal
2009.
Compensation Decisions for
Fiscal 2010
On
November 19, 2009, employing the methodology described above under
“Elements of Compensation,” the Committee approved annual salaries for each of
the named executive officers for fiscal 2010 as follows: Mr. Doar -
$337,500, Mr. Oblazney - $185,000, and Ms. McClelland - $130,000. The
Committee will consider discretionary bonuses with respect to fiscal 2010 when
it meets in November 2010.
Taxes and Accounting
Considerations
Section 162(m)
of the Internal Revenue Code limits the deductibility of non-performance-based
executive compensation in excess of $1,000,000. In fiscal 2009, none
of the Company’s officers covered under the law had non-performance-based annual
compensation substantially in excess of $1,000,000. Thus,
substantially all such compensation will be deductible for tax
purposes. The Committee expects to continue to monitor future
compensation decisions in relation to the possible impact of
Section 162(m).
Section
409A of the Internal Revenue Code affects the payments of certain types of
deferred compensation to key employees and includes requirements relating to
when payments under such arrangements can be made, acceleration of benefits, and
timing of elections under such arrangements. Failure to satisfy these
requirements will generally lead to an acceleration of the timing for including
deferred compensation in an employee’s income, as well as certain penalties and
interest. We believe that our nonqualified deferred compensation
arrangements meet the effective requirements of Section 409A as required by law
or regulation.
Report
of the Compensation Committee
The
Committee has reviewed and discussed the foregoing “Compensation Discussion and
Analysis” with management, and based on that review and those discussions, the
Committee has recommended to the Board of Directors that this “Compensation
Discussion and Analysis” be included in the Company’s Annual Report on Form 10-K
and Proxy Statement on Schedule 14A.
|
Philip
James, Chairman
|
|
|
Robert
W. Cruickshank
|
|
|
Michael
P. Mazza
|
9
Summary
Compensation Information
The
following table summarizes the compensation information for each of our named
executive officers for the fiscal years ended October 31, 2009, 2008 and
2007:
Summary
Compensation Table
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||
|
Michael
Doar Chairman, Chief
|
2009
|
349,039 | - | - | 65,795 | 414,834 | ||||||||||||||||
|
Executive
Officer and President
|
2008
|
372,192 | 670,000 | - | 86,088 | 1,128,280 | ||||||||||||||||
|
2007
|
328,269 | 670,000 | - | 69,548 | 1,067,817 | |||||||||||||||||
|
John
G. Oblazney Vice President,
|
2009
|
172,192 | - | 114,205 | 25,358 | 311,755 | ||||||||||||||||
|
Secretary,
Treasurer and Chief
|
2008
|
183,577 | 100,000 | 114,205 | 32,460 | 430,242 | ||||||||||||||||
|
Financial
Officer
|
2007
|
165,000 | 100,000 | 114,205 | 28,875 | 408,080 | ||||||||||||||||
|
Sonja
K. McClelland Corporate
|
2009
|
121,000 | - | - | 1,420 | 122,420 | ||||||||||||||||
|
Controller,
Assistant Secretary
|
2008
|
129,577 | 90,000 | - | 7,998 | 227,575 | ||||||||||||||||
|
2007
|
115,346 | 90,000 | - | 5,693 | 211,039 | |||||||||||||||||
|
James
D. Fabris Former President and
|
2009
|
311,808 | - | - | 572,625 |
1
|
884,433 | |||||||||||||||
| Chief Operating Officer |
2008
|
332,596 | 600,000 | - | 97,052 | 1,029,648 | ||||||||||||||||
|
2007
|
294,231 | 600,000 | - | 60,536 | 954,767 | |||||||||||||||||
___________
|
1
|
Mr.
Fabris resigned as President and Chief Operating Officer effective October
31, 2009 and compensation
related to his severance agreement is included in the All Other
Compensation column.
|
The table
shows the base salaries, annual cash bonuses, if any, equity-based awards and
perquisites and other benefits.
Historically,
we have paid cash bonuses awarded by the Committee for performance with respect
to a fiscal year in the following fiscal year. There were no cash
bonuses awarded in fiscal 2009.
10
The
following table summarizes the information included in the All Other
Compensation column in the Summary Compensation Table:
|
Name
|
Leased
Auto
|
Personal
Travel
|
Supplemental
Disability
Insurance
|
Matching
401(k) Plan
Contributions
|
Split-Dollar
Life
Insurance
|
Other
|
Total
|
||||||||||||||||||||||
|
Michael
Doar
|
2009
|
24,292 | - | 4,189 | 4,768 | 32,546 | - | 65,795 | |||||||||||||||||||||
|
2008
|
30,786 | 1,667 | 4,553 | 13,800 | 34,952 | 330 | 86,088 | ||||||||||||||||||||||
|
2007
|
27,042 | 10,807 | 4,001 | 10,125 | 16,916 | 657 | 69,548 | ||||||||||||||||||||||
|
John
G. Oblazney
|
2009
|
15,812 | - | 1,070 | 8,476 | - | - | 25,358 | |||||||||||||||||||||
|
2008
|
15,585 | 2,103 | 704 | 13,818 | - | 250 | 32,460 | ||||||||||||||||||||||
|
2007
|
16,737 | - | 456 | 11,025 | - | 657 | 28,875 | ||||||||||||||||||||||
|
Sonja
K. McClelland
|
2009
|
- | - | 820 | 600 | - | - | 1,420 | |||||||||||||||||||||
|
2008
|
- | - | 525 | 7,223 | - | 250 | 7,998 | ||||||||||||||||||||||
|
2007
|
- | - | 206 | 4,851 | - | 636 | 5,693 | ||||||||||||||||||||||
|
James
D. Fabris
|
2009
|
23,745 | - | 6,227 | 5,915 | 30,343 | 506,395 | 572,625 | |||||||||||||||||||||
|
2008
|
34,420 | 4,993 | 6,376 | 13,148 | 35,513 | 2,602 | 97,052 | ||||||||||||||||||||||
|
2007
|
26,765 | 455 | 6,394 | 9,346 | 14,714 | 2,862 | 60,536 | ||||||||||||||||||||||
The
amounts shown in the Leased Auto column represent the portion of the lease cost
for automobiles leased by us allocable to an executive’s personal use of the
automobile. Since the automobile is used for both business and
personal purposes, the percentage of personal use is calculated and applied to
the lease and operating expenses.
Personal
travel expenses are the amount we paid or reimbursed the executive for
non-business travel costs. There was no personal travel paid or
reimbursed during fiscal 2009.
The
Split-Dollar Life Insurance amounts represent a portion of the premium paid on
insurance policies we own on the lives of the identified
employees. All cash contributions are returned to us upon employee
separation or death of the insured. We pay the full amount of the
premiums and are the beneficiary for a portion of the policies’ death
benefit. By policy endorsement, the employee has the right to
designate the beneficiary for the remainder of the death benefit and related
incidental rights.
The
amounts in the Other column are for dues paid for a health club membership and
other miscellaneous taxable fringe benefits representing less than 10% of the
total personal benefits provided to each named executive officer. In
addition, in connection with Mr. Fabris’ resignation effective October 31, 2009,
we agreed to pay severance to him equal to at least eighteen months of his
monthly base salary ($25,125) and a one-time payment of
$52,260. These amounts are included under the Other column for Mr.
Fabris. In addition, if Mr. Fabris is not able to obtain other
employment at any time during the eighteen months after October 31, 2009, Hurco
will pay additional severance compensation to Mr. Fabris in the form of
bi-weekly severance payments in the amount of $12,335 each, less all applicable
payroll withholdings, for a period commencing on May 1, 2011 and ending on the
earlier of the date Mr. Fabris begins any other employment or October 31,
2011. This additional severance is not included in the above
total.
11
Plan-Based
Awards Information
The only
incentive plan in which the named executive officers are eligible to participate
is the 2008 Equity Incentive Plan, which was approved by shareholders in March
2008. The plan provides for equity-based incentive awards in the form
of stock options, stock appreciation rights settled in stock, restricted shares,
performance shares and performance units. Under the plan, the
Committee has authority to determine the officers, directors and key employees
who will be granted awards; determine the form and size of the award; determine
the terms and conditions upon which the awards will be granted; and prescribe
the form and terms of award agreements. The current number of shares
of our common stock that may be issued as awards under the plan is
719,000.
No awards
were made under the plan to any named executive officers during fiscal
2009.
The
following table summarizes the outstanding equity awards held by any named
executive officer as of October 31, 2009:
Outstanding
Equity Awards at Fiscal Year End
|
Option Awards
|
|||||||||||||
|
Name
|
Number of Securities
Underlying
Unexercised Options
(#) Exercisable1
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
|||||||||
|
John
G. Oblazney
|
10,000 | 5,000 |
2
|
$ | 26.69 |
11/16/2016
|
|||||||
|
Sonja
K. McClelland
|
500 | - | $ | 2.15 |
12/17/2011
|
||||||||
1 These
stock options were fully vested as of October 31, 2009.
2 These
stock options fully vest on November 16, 2009.
12
The
following table provides information regarding the exercise of option awards by
the named executive officers during fiscal 2009. There were no other
types of stock awards outstanding during the year.
Option
Exercises and Stock Vested
|
Option Awards
|
||||||||
|
Name
|
Number of
Shares
Acquired on
Exercise (#)
|
Value Realized
on Exercise ($)
|
||||||
|
James
D. Fabris
|
20,000 | 241,600 | 1 | |||||
|
1
|
Represents
the exercise of an option to purchase 20,000 shares at an exercise price
of $2.15 per share on June 9, 2009 at the market price of
$14.23.
|
Nonqualified
Deferred Compensation
For the
named executive officers participating in the nonqualified deferred compensation
plan, the following table provides information regarding fiscal 2009 executive
contributions, fiscal 2009 earnings and aggregate balances as of October 31,
2009. There were no Company contributions or aggregate withdrawals or
distributions in fiscal 2009.
NONQUALIFIED
DEFERRED COMPENSATION
|
Name
|
Executive
Contributions
in Last Fiscal
Year ($)
|
Aggregate
Earnings in
Last Fiscal
Year ($)
|
Aggregate
Balance at
Last Fiscal
Year End ($)
|
|||||||||
|
Michael
Doar
|
56,000 | 28,536 | 238,750 | |||||||||
|
James
D. Fabris
|
- | 9,565 | 78,755 | |||||||||
The
amounts shown in this table are also included in the amounts shown in the Salary
or Bonus columns of the Summary Compensation Table. All of the
contributions by the named executive officers in fiscal 2009 and prior fiscal
years were reported in the Summary Compensation Table in fiscal 2009 or prior
fiscal years, as applicable. The aggregate balance shown includes
earnings on such contributions.
13
The
Deferred Compensation Plan II (the “DCPII”) is a nonqualified deferred
compensation plan to which senior managers and other highly compensated
employees are eligible to participate. A committee consisting of our
Chief Executive Officer, Chief Financial Officer and Director of Human Resources
administers the plan. This committee is authorized to interpret the
plan, establish, amend and rescind any rules and regulations relating to the
plan, determine the terms and provisions of any agreements made pursuant to the
plan, and make all other determinations that may be necessary or advisable for
the administration of the plan.
Eligible
participants are able to defer between 2% and 50% percent of their base salary
and up to 100% of their annual bonus less required and voluntary payroll
deductions in a given plan year. Deferral elections are made by
eligible executives in January of each year for amounts to be earned in the
following year. The Board of Directors may declare a discretionary
amount of matching credits for participants deferring compensation, up to a
maximum of 6% of compensation. The Board of Directors has not awarded
any such matching credits to the named executive officers participating in the
DCPII.
Participants
are 100% vested in all deferral and matching accounts at all
times. Amounts deferred under the plan are credited with earnings at
the rate of return generated by the Vanguard mutual fund investment options
elected by the participants that are offered in our 401(k) plan. The
earnings do not reflect any above-market or preferential rates of
return. Participants may change their investment options at any time
by contacting Vanguard. Account balances in the DCPII are payable at
the election of the participant either in a single lump sum or in monthly,
quarterly or annual installments with a term of between two and ten
years. Distributions under the DCPII will not commence prior to the
expiration of a six-month period from the date of separation of service or the
participant’s death, if earlier.
Employment
Contracts
Michael
Doar entered into an employment contract effective November 13,
2001. The contract term is unspecified. Mr. Doar’s salary
and bonus arrangements are set annually by the Compensation Committee of the
Board of Directors. Other compensation, such as stock option grants,
is awarded periodically at the discretion of the Compensation
Committee. If Mr. Doar was removed as Chairman and Chief Executive
Officer, his employment would continue for thirty days at which time he would be
paid severance equal to 12 months of his then current base salary and his
health, life and disability insurance benefits would be maintained for twelve
months.
John G.
Oblazney entered into an employment contract on January 12, 2007. The
contract term is unspecified. Mr. Oblazney’s salary and bonus
arrangements are set annually by the Compensation Committee of the Board of
Directors. Other compensation, such as stock option grants, is
awarded periodically at the discretion of the Compensation
Committee. Mr. Oblazney is entitled to 12 months of salary if the
Company terminates his employment for any reason other than gross misconduct
(which is not defined in the contract). Mr. Oblazney is also entitled
to a lump sum payment in an amount sufficient to maintain his medical and life
insurance coverage for 12 months.
14
Potential
Payments upon Termination
|
Resignation ($)
|
Death ($)
|
Disability ($)
|
Retirement ($)
|
Termination
Without
Cause ($)
|
Termination
For
Cause ($)
|
|||||||||||||||||||
|
Michael
Doar
|
||||||||||||||||||||||||
|
Severance
Pay1
|
- | - | - | - | 337,500 | 337,500 | ||||||||||||||||||
|
Deferred
Compensation2
|
238,750 | 238,750 | 238,750 | 238,750 | 238,750 | 238,750 | ||||||||||||||||||
|
Stock
Options3
|
- | - | - | - | - | - | ||||||||||||||||||
|
Health
Care Coverage4
|
- | - | 309,847 | - | 27,097 | - | ||||||||||||||||||
|
Life
Insurance
|
- | 1,395,000 | 5 | - | - | 32,654 | 8 | - | ||||||||||||||||
|
John
G. Oblazney
|
||||||||||||||||||||||||
|
Severance
Pay1
|
- | - | - | - | 166,500 | - | ||||||||||||||||||
|
Deferred
Compensation
|
- | - | - | - | - | - | ||||||||||||||||||
|
Stock
Options3
|
- | - | - | - | - | - | ||||||||||||||||||
|
Health
Care Coverage4
|
- | - | 174,097 | - | 27,097 | - | ||||||||||||||||||
|
Life
Insurance
|
- | 333,000 | 6 | - | - | 361 | 8 | - | ||||||||||||||||
|
Sonja
K. McClelland
|
||||||||||||||||||||||||
|
Severance
Pay7
|
- | - | - | - | 20,250 | - | ||||||||||||||||||
|
Deferred
Compensation
|
- | - | - | - | - | - | ||||||||||||||||||
|
Stock
Options3
|
- | 6,875 | 6,875 | 6,875 | 6,875 | - | ||||||||||||||||||
|
Health
Care Coverage4
|
- | - | 123,339 | - | - | - | ||||||||||||||||||
|
Life
Insurance
|
- | 234,000 | 6 | - | - | - | - | |||||||||||||||||
|
1
|
Mr. Doar’s contract provides for severance if
he is removed as Chairman and Chief Executive Officer. Mr.
Oblazney would receive severance if his employment is terminated for any
reason other than for gross misconduct. The severance pay is
paid in a lump sum distribution on the next regular pay date following the
termination date. The amounts shown reflect 12 months of
salary.
|
|
2
|
Amounts can be paid in a lump sum distribution
or installments depending on the participant’s
election.
|
|
3
|
Reflects the excess of the closing price of
$15.90 for our common stock on October 31, 2009, over the exercise price
of outstanding options currently vested and any unvested stock options,
the vesting of which would accelerate as a result of the named executive
officer's termination of employment on October 31, 2009, as a result of
the specified termination event, multiplied by the number of shares of
common stock underlying the stock options. Under the terms of
the applicable award, all options shall terminate upon the first
occurrence of (i) the date of termination of employment by us for cause or
voluntarily by the participant for any reason other than death, disability
or retirement, (ii) the expiration of three months after the date on which
the participant retires or employment is terminated by us without cause,
(iii) the expiration of one year after the date on which employment is
terminated due to the participant’s death or disability, or (iv) upon
expiration of ten years from date of
grant.
|
|
4
|
Amounts represent 12 months of coverage under
the short-term and long-term disability plan, any supplemental disability
plan payment, and COBRA payments grossed up for tax
purposes.
|
|
5
|
Amount includes split-dollar life insurance
payment of two times annual salary plus one times bonus and $50,000
maximum benefit for accidental death insurance
policy.
|
|
6
|
Amounts include life insurance payment of two
times annual salary under accidental death insurance
policy.
|
|
7
|
Amount reflects severance pay in accordance
with Company policy based upon years of
service.
|
|
8
|
Amounts represent 12 months of group term life
insurance premiums payable by the
Company.
|
Mr.
Fabris is not included in the above table because his employment ended on
October 31, 2009.
15
In
addition to the above, if a tender offer or exchange offer for shares of our
common stock is commenced, or if our shareholders approve an agreement providing
either for a transaction in which we will cease to be an independent publicly
owned entity or for a sale or other disposition of all or substantially all of
our assets, the outstanding unvested stock options held by Mr. Oblazney will
become immediately exercisable in full. None of the other named
executive officers has any unvested stock options outstanding.
Compensation
of Directors
DIRECTOR
COMPENSATION
|
Name
|
Fees Earned
or Paid in
Cash ($)
|
|||
|
Stephen
H. Cooper
|
34,200 | |||
|
Robert
W. Cruickshank
|
43,700 | |||
|
Philip
James
|
34,200 | |||
|
Michael
P. Mazza
|
23,350 | |||
|
Richard
T. Niner
|
32,700 | |||
|
Charlie
Rentschler
|
24,700 | |||
|
Janaki
Sivanesan
|
34,200 | |||
Through
March 19, 2009, we paid meeting fees of $1,500 for each Board meeting attended
and quarterly board fees of $5,000 for each director. Effective March 19, 2009,
due to the adverse effects of the current economic downturn, we reduced Board
meeting fees to $1,350 and the quarterly retainer to $4,500. We paid
Mr. Cruickshank an additional $19,000 retainer in fiscal 2009 for his services
as the Audit Committee Chairman. We paid to each of Mr. Niner, Mr.
James, Mr. Cooper and Ms. Sivanesan an additional $9,500 in fiscal 2009 for
serving as a Committee chair or Audit Committee member.
As of
October 31, 2009, non-employee directors held outstanding options to purchase
the following number of shares of common stock:
|
Mr.
Cooper
|
5,000
shares
|
|
Mr.
James
|
5,000
shares
|
|
Mr.
Mazza
|
2,500
shares
|
|
Ms.
Sivanesan
|
5,000
shares
|
Mr.
Doar's compensation for fiscal 2009 is set forth in the Summary Compensation
Table and the following tables and narrative. Mr. Kohlbacher's total
compensation for fiscal 2009 was $505,511. Mr. Doar is not included
in this table because he did not receive any additional compensation for his
service as a director.
16
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth information as of January 13, 2010, regarding
beneficial ownership of our common stock held by each director, director nominee
and named executive officer, by all directors and executive officers as a group,
and by all persons who are known to be beneficial owners of more than 5% of our
common stock. Each such person has sole voting and investment power
with respect to such securities, except as otherwise noted.
|
Shares Beneficially Owned
|
||||||||
|
Name
|
Number
|
Percent
|
||||||
|
Directors, Director Nominees and Executive
Officers
|
||||||||
|
Stephen
H. Cooper
|
5,000 |
1
|
* | |||||
|
Robert
W. Cruickshank
|
5,000 | * | ||||||
|
Michael
Doar
|
58,650 | * | ||||||
|
Philip
James
|
5,500 |
2
|
* | |||||
|
Gerhard
Kohlbacher
|
- | * | ||||||
|
Michael
P. Mazza
|
5,195 |
3
|
* | |||||
|
Richard
T. Niner
|
231,812 | 3.6 | % | |||||
|
Charlie
Rentschler
|
3,000 | * | ||||||
|
Janaki
Sivanesan
|
5,000 |
1
|
* | |||||
|
John
G. Oblazney
|
15,000 |
4
|
* | |||||
|
Sonja
K. McClelland
|
500 |
5
|
* | |||||
|
Executive
officers and directors as a group (11 persons)
|
334,657 |
6
|
5.2 | % | ||||
|
Other Beneficial Owners
|
||||||||
|
Name and Address
|
||||||||
|
Royce
& Associates, LLC
1414
Avenue of the Americas
New
York, NY 10019
|
775,195 |
7
|
12.0 | % | ||||
|
FMR
LLC
82
Devonshire St
Boston,
MA 02109
|
641,998 |
8
|
10.0 | % | ||||
|
Dimensional
Fund Advisors LP
6300
Bee Cave Road
Austin,
TX 78746
|
350,084 |
9
|
5.4 | % | ||||
|
*
|
Less
than one (1) percent.
|
|
1
|
Consists
solely of 5,000 shares subject to options that are currently
exercisable.
|
|
2
|
Includes
5,000 shares subject to options that are currently
exercisable.
|
|
3
|
Includes
2,500 shares subject to options that are currently
exercisable.
|
|
4
|
Consists
solely of 15,000 shares subject to options that are currently
exercisable.
|
|
5
|
Consists
solely of 500 shares subject to options that are currently
exercisable.
|
|
6
|
Includes
33,000 shares subject to options that are currently
exercisable.
|
|
7
|
Based
solely on information supplied by Royce & Associates, LLC on a
Schedule 13F-HR filed with the SEC on November 10, 2009, indicating
beneficial ownership as of September 30,
2009.
|
|
8
|
Based
solely on information supplied by FMR LLC on a Schedule 13F-HR filed with
the SEC on November 16, 2009, indicating beneficial ownership as of
September 30, 2009.
|
|
9
|
Based
solely on information supplied by Dimensional Fund Advisors LP on a
Schedule 13F-HR filed with the SEC on October 29, 2009, indicating
beneficial ownership as of September 30,
2009.
|
17
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee is comprised of the three directors named below. The Board
of Directors and the Audit Committee have determined that the Committee’s
current composition satisfies the Nasdaq listing requirements, including the
requirement that all Audit Committee members be “independent directors” as
defined by Nasdaq rules. The Board of Directors annually reviews the
independence of the Audit Committee members under both Nasdaq rules and the
SEC’s definition of independence for Audit Committee members and the
independence requirements in our Corporate Governance Principles. The Board has
determined that Mr. Cruickshank meets the SEC’s definition of an “Audit
Committee financial expert.”
The
primary function of the Audit Committee is to assist the Board in fulfilling its
oversight responsibilities by reviewing the financial information that will be
provided to shareholders and others, the system of internal controls that
management has established, and the audit process. In doing so, it is
the responsibility of the Audit Committee to provide an open avenue of
communication between the Board of Directors, management and the independent
auditors.
The Audit
Committee has reviewed and discussed the audited financial statements of the
Company for the fiscal year ended October 31, 2009, with the Company’s
management. The Audit Committee has discussed with Ernst & Young
LLP, the Company’s independent registered public accounting firm, the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended,
as adopted by the Public Accounting Oversight Board in Rule
3200T. The Audit Committee has also received the written disclosures
and the letter from Ernst & Young required by applicable requirements of the
Public Accounting Oversight Board regarding the independent accountant’s
communications with the audit committee concerning independence and the Audit
Committee has discussed with Ernst & Young the independence of that
firm.
The
members of the Audit Committee have also confirmed that there have been no new
circumstances or developments since their appointment to the Committee that
would impair any member’s ability to act independently.
Based on
the reviews and discussions referred above, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year ended
October 31, 2009, for filing with the SEC.
|
Robert
W. Cruickshank, Chairman
|
|
Stephen
H. Cooper
|
|
Janaki
Sivanesan
|
18
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit
Committee has appointed Ernst & Young LLP (“Ernst & Young”) as our
independent registered public accounting firm for fiscal 2010. The
Board of Directors is submitting the appointment of Ernst & Young for
ratification in order to permit shareholders to express their approval or
disapproval. In the event of a negative vote, the Audit Committee may
reconsider this appointment. Representatives of Ernst & Young
will be present at the meeting and will be given an opportunity to respond to
questions and make a statement, if they desire.
The
Board of Directors recommends a vote “FOR” the ratification of
Auditors.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Ernst
& Young served as our independent registered public accounting firm for
fiscal 2009. Crowe Horwath LLP (“Crowe”) served as our independent
registered public accounting firm for fiscal 2008. Crowe was informed
it was not being reappointed as auditor on January 26, 2009. This
decision was made by the Audit Committee. The report of Crowe on our
financial statements for the fiscal year ended October 31, 2008 did not contain
an adverse opinion or disclaimer of opinion, nor were they qualified or modified
as to uncertainty, audit scope or accounting principle. During the
fiscal year ended October 31, 2008 and through January 26, 2009, there were no
disagreements between us and Crowe on any matter of accounting principle or
practices, financial statement disclosure or auditing scope of procedure which,
if not resolved to Crowe’s satisfaction, would have caused Crowe to
make reference thereto in its report on our consolidated financial statements
for such periods; nor were there any reportable events as defined in Item
304(a)(1)(v) of Regulation S-K of the Exchange Act.
Audit
and Non-Audit Fees
The
following table sets forth fees paid to Ernst & Young and Crowe for services
provided during fiscal years 2009 and 2008, respectively:
|
2009
|
2008
|
|||||||
|
Audit
Fees1
|
$ | 550,000 | $ | 470,000 | ||||
|
Audit
Related Fees2
|
120,000 | 361,700 | ||||||
|
Tax
Fees3
|
81,200 | - | ||||||
|
All
Other Fees4
|
26,450 | 32,600 | ||||||
|
TOTAL
|
$ | 777,650 | $ | 864,300 | ||||
|
1
|
Represents
fees for professional services provided in connection with the audit of
annual financial statements and review of quarterly financial
statements.
|
|
2
|
Represents
fees for professional services provided in connection with the audit of
internal control over financial
reporting.
|
|
3
|
Represents
fees for services provided in connection with tax compliance and tax
planning. Our tax compliance and tax planning services were
performed by Ernst & Young in 2008, however, Crowe was our appointed
independent public accounting firm in 2008, therefore those fees are not
shown in the table above for fiscal
2008.
|
|
4
|
Represents
fees for the audit of our employee benefit plan, and fees related to the
inclusion of audited financial statements in our registration statements
on Form S-3 and Form
S-8.
|
19
Pre-approval
Policy
The Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by the independent registered public accounting
firm. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is generally
provided for up to one year and any pre-approval is detailed as to the
particular service or category of services and is generally subject to a
specific budget. The independent registered public accounting firm
and management are required to periodically report to the Audit Committee
regarding the extent of services provided by the independent auditor in
accordance with this pre-approval, and the fees for the services performed to
date. The Audit Committee may also pre-approve particular services on
a case-by-case basis. For fiscal 2009 all of the fees reported above
as Audit Related Fees, Tax Fees, and All Other Fees were pre-approved by the
Audit Committee. During fiscal 2009 Ernst & Young did not provide
any non-audit services. The Audit Committee has concluded that the
provision of the services listed above is compatible with maintaining that
firm’s independence.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Under our
Code of Business Conduct and Ethics, which is available on our website at www.hurco.com, our
directors, officers and employees are not permitted to conduct business on our
behalf with a member of his or her family, or a business organization with which
he or she or a family member has an interest or employment relationship that
could be considered significant in terms of potential conflict of interest
unless such business dealings have been disclosed to, and approved by, our Audit
Committee.
Further,
under our Audit Committee’s charter, which is available on our website at www.hurco.com, our
Audit Committee must review and approve all related person
transactions. No related person transaction in an amount exceeding
$120,000 occurred during fiscal 2009.
SHAREHOLDER
PROPOSALS FOR OUR 2011 ANNUAL MEETING
The date
by which shareholder proposals must be received by us for inclusion in proxy
materials relating to the 2011 annual meeting of shareholders is September 22,
2010.
Our
By-Laws provide that shareholders are required to give us advance notice of any
business to be brought by a shareholder before an annual shareholders’
meeting. For business to be properly brought before an annual meeting
by a shareholder, the shareholder must give timely written notice thereof to the
Secretary of the Company. In order to be timely, a shareholder’s
notice must be delivered to or mailed and received at our principal executive
offices not less than 60 days prior to the meeting. In the event that
less than 70 days’ notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder must be received not
later than the close of business on the tenth day following the day on which
notice of the date of the meeting was mailed or public disclosure was
made. The notice must contain specified information about the
proposed business and the shareholder making the proposal. These
procedures apply to any matter other than nomination of directors that a
shareholder wishes to raise at the 2011 annual meeting, including those matters
raised pursuant to 17 C.F.R. §240.14a-8 of the rules and regulations of the
SEC.
Shareholders
who wish to nominate a candidate for election as a director without the
recommendation of the Nominating and Governance Committee must provide timely
written notice thereof to the Secretary of the Company. In order to
be timely, a shareholder’s notice must be delivered to or mailed and received by
dates explained in the preceding paragraph with respect to shareholder
proposals. In addition, the notice must contain additional
information concerning the shareholder, the nominee and any “Shareholder
Associated Person,” the nominee’s consent to the nomination, an executed
questionnaire in a form signed by the Company’s directors and nominees and
representatives, and an agreement establishing that there is no undisclosed
understanding with respect to the nominee’s conduct as a
director.
20
Any
shareholder proposals or nominations that do not meet the above requirements
will be considered untimely, and any proxy solicited by us may confer
discretionary authority to vote on such proposal or nominee. A copy
of our By-Laws is available upon request. Such requests and any
shareholder proposals or nominations should be sent to John G. Oblazney,
Secretary, Hurco Companies, Inc., One Technology Way, P.O. Box 68180,
Indianapolis, Indiana 46268, our principal executive offices.
INCORPORATION
BY REFERENCE
Notwithstanding
anything to the contrary set forth in any of our previous filings under the
Securities Act of 1933, as amended, or the Exchange Act, as amended, that may
incorporate future filings (including this proxy statement, in whole or in
part), the preceding Report of the Audit Committee and the Report of the
Compensation Committee shall not be incorporated by reference in any such
filings.
ANNUAL
REPORT ON FORM 10-K
We have
filed our Annual Report on Form 10-K for the fiscal year ended October 31, 2009,
with the SEC. Shareholders may obtain a copy of the Form 10-K by
writing to John G. Oblazney, Vice President and Chief Financial Officer, Hurco
Companies, Inc., One Technology Way, P.O. Box 68180, Indianapolis, Indiana
46268. A copy of the Annual Report on Form 10-K can also be obtained
at www.hurco.com/proxymaterials
or www.sec.gov.
OTHER
BUSINESS
The Board
of Directors knows of no other matters that may be presented at the annual
meeting. If any other matters should properly come before the annual
meeting, the persons named in the enclosed form of proxy will vote in accordance
with their business judgment on such matter.
21
TABLE OF CONTENTS