Attached files
| file | filename |
|---|---|
| EX-31.2 - EXHIBIT 31.2 - DETERMINE, INC. | ex31-2.htm |
| EX-32.2 - EXHIBIT 32.2 - DETERMINE, INC. | ex32-2.htm |
| EX-31.1 - EXHIBIT 31.1 - DETERMINE, INC. | ex31-1.htm |
| EX-32.1 - EXHIBIT 32.1 - DETERMINE, INC. | ex32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended March 31, 2010
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number: 0-29637
SELECTICA, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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77-0432030
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1740 Technology Drive Suite 460, San Jose, California 94110-2111
(Address of Principal Executive Offices)
(408) 570-9700
(Registrant’s Telephone Number)
Securities registered under Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange On Which Registered
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Common Stock, $0.002 par value per share
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The Nasdaq Global Market
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Securities registered under Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨ (Do not check if a smaller reporting company)
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of September 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of $6.60 per share as reported by The Nasdaq Global Market on that date, was $18,368,137.
As of June 21, 2010, the registrant had outstanding 2,812,604 shares of common stock.
Explanatory Statement
This Form 10-K/A is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2010 originally filed on June 29, 2010 (“Original Annual Report”), for the purpose of adding information under Items 10, 11, 12, 13 and 14 of Part III previously intended to be incorporated by reference from the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A for our 2010 annual meeting of stockholders (the “Proxy Statement”). The Proxy Statement has not been filed as of the date of filing of this amended report on Form 10-K/A. No attempt has been made in this Form 10-K/A to modify or update any other disclosures presented in the Original Annual Report.
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance.
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Directors
The following table sets forth, as of July 29, 2010, the names and certain information concerning our directors:
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Name
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Age
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Position
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Director
Since
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End of
Term
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||||||
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Brenda Zawatski
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49 |
Director
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2005 | 2010 | ||||||
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Jim Thanos
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61 |
Director
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2007 | 2010 | ||||||
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James Arnold, Jr. (1)(2)(3)
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53 |
Co-Chair of the Board
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2003 | 2010 | ||||||
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Lloyd Sems (1)(2)(3)
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39 |
Director
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2008 | 2010 | ||||||
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Alan Howe (1)(2)(3)
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48 |
Co-Chair of the Board
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2009 | 2010 |
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(1)
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Member of the Audit Committee
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(2)
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Member of the Compensation Committee
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(3)
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Member of the Nominating/Corporate Governance Committee
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Brenda Zawatski has served as a director since November 2005. On May 6, 2010, Ms. Zawatski was appointed a Senior Vice President of CA, Inc., and is working primarily in a marketing capacity. Ms. Zawatski was the vice president of sales and marketing for Pillar Data Systems from January 2006 to July 2007. Prior to joining Pillar, Ms. Zawatski was the vice president of sales and general manager of Information Lifecycle Management Solutions at StorageTek. Previously, Ms. Zawatski served as vice president of Product and Solutions Marketing for VERITAS Software. Prior to her move to VERITAS, Ms. Zawatski held significant roles at IBM as vice president, Tivoli Storage Software; vice president, Removable Media Storage Solutions; and director of S/390 Enterprise Systems. Ms. Zawatski holds a bachelor’s of science degree in Accounting and Computer Science from Penn State University. Ms. Zawatski’s current and prior experience in the sales and marketing of information systems solutions brings a great deal of operational expertise to our company, in addition to her understanding of the Company’s history and operations from her 5 year tenure on the Board.
Jim Thanos was has served as a director since October 2007. Since June 2002, Mr. Thanos has served on advisory boards and provided consulting services to a variety of companies. From June 2000 to June 2002, Mr. Thanos served as Executive Vice President and General Manager of Worldwide Field Operations at Broadvision. Previously, Mr. Thanos held senior sales management roles for Aurum Software, Harvest Software, and Metaphor Inc. Mr. Thanos has previously served on the Boards of Directors of Support.com, Inc., a provider of software and services for technology problem resolution, and ClickSoftware Technologies Ltd., a company that provides software that enables businesses to schedule, monitor and manage their service operations. Mr. Thanos holds a B.A. in behavioral sciences from The Johns Hopkins University in Baltimore, Maryland. Mr. Thanos brings extensive operational and leadership experience and domain knowledge applicable to companies in our industry; in addition his prior service on public company boards provides invaluable governance expertise.
James Arnold, Jr. has served as chairman and financial expert of the Audit Committee of our Board since 2003, Chairman of our Board since November of 2009 and Co-Chair since January 12, 2010. Mr. Arnold is the Chief Financial Officer and member of the Board of Directors of Kofax, Plc. Mr. Arnold has served as Senior Vice President since 2004 and was Chief Financial Officer of Nuance Communications from 2004 to 2008. Prior to joining Nuance Communications, Mr. Arnold served as Corporate Vice President and Corporate Controller of Cadence Design Systems. Prior to joining Cadence, Mr. Arnold held a number of senior finance positions, including Chief Financial Officer, at Informix Corp.—now known as Ascential Software Corporation. From 1995 to 1997, Mr. Arnold served as Corporate Controller for Centura Software Corporation. Mr. Arnold worked in public accounting at Price Waterhouse LLP from 1983 to 1995, where he provided consulting and auditing services. Mr. Arnold received a bachelor’s degree in finance from Delta State University in Cleveland, Mississippi and an M.B.A. from Loyola University in New Orleans, Louisiana. We believe that Mr. Arnold’s qualifications for Board membership include his extensive public company financial and accounting background, as well as his historical knowledge of the Company and its operations given his 7 year tenure on the Board.
Lloyd Sems was elected to our Board of Directors on June 2, 2008, and serves as chairman of the Board’s Nominating/Corporate Governance Committee. Since October 2003, he served as President of Sems Capital, LLC and of Capital Edge, LLC, both of which he founded. Previously, Mr. Sems served as Director of Research and Portfolio Manager for Watchpoint Asset Management. Mr. Sems holds a Bachelor of Science degree in Business Administration and Finance from Albright College. We believe that Mr. Sems’s knowledge of the securities and capital markets, as well as his experience as one of the Company’s larger long term shareholders, is invaluable to our Board’s discussions of the Company’s strategic, capital and liquidity needs.
3
Alan Howe was elected to the Board on January 12, 2009, serves as chairman of the Compensation Committee of our Board and since January 12, 2010, as Co-Chair of our whole Board. He is co-founder and managing partner of Broadband Initiatives, LLC, a boutique corporate advisory and consulting firm. He also serves as a Managing Director with B Riley & Co. LLC in their corporate advisor group under a consulting agreement. He served as vice president of strategic and wireless business development for Covad Communications, Inc., a national broadband telecommunications company. Prior to that, Mr. Howe was chief financial officer and vice president of corporate development of Teletrac, Inc., and director of corporate development for Sprint PCS. Mr. Howe is currently a member of the public Boards of Directors of Ditech Networks, Inc. and Altigen Communications, Inc. He previously served on teh public boards of Proxim, Inc., Crossroads, Inc., Alliance Semiconductor Inc., Kitty Hawk, Inc., and Dyntek, Inc. Mr. Howe holds a B.A. in business administration from the University of Illinois and an M.B.A. from the Indiana University Kelley Graduate School of Business. We believe that Mr. Howe’s prior positions and current advisory roles provide the Board with leadership experience and operational knowhow; in addition his outside board experience helps the Board in its compliance and governance discussions and strategies.
Executive Officers
The following table sets forth, as of June 30, 2010, the names and certain information concerning our executive officers who do not also serve as directors:
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Name
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Age
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Position
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Jason Stern
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40 |
President and Chief Operating Officer
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Todd Spartz
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45 |
Chief Financial Officer and Secretary
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Todd Spartz was appointed our Chief Financial Officer on September 14, 2009. Mr. Spartz served as Chief Financial Officer at Nomis Solutions, a provider of pricing and profitability management solutions for financial services companies, from October 2007 to the present. He has also served as Vice President and Corporate Controller at Openwave Systems, from December 2005 until October 2007. Prior to that, Mr. Spartz served in various management positions of Metaward from April 2005 to December 2005, and Oblix from October 2003 to March 2005. Mr. Spartz has a BS Commerce from DePaul University and an MBA from Santa Clara University. Mr. Spartz is a licensed CPA in the state of California.
Jason Stern was appointed Senior Vice President of Operations of our Contract Management Business on June 10, 2009, and did not serve as an executive officer of us in fiscal year 2009. From March 2008 to June 2009, Mr. Stern served as our Vice President of Products and Business Development for Contract Management Solutions and from January 2007 to March 2008, was Vice President of Solutions. Prior to joining us in November of 2006, Mr. Stern was the Vice President of Product Management for I-many, a contract management software and services company. With more than 10 years of experience in enterprise software product management, Mr. Stern also spent four years at Oracle, an enterprise software company, managing products for CRM, Call Center, and Finance. Mr. Stern has a B.A. from UCLA and an M.B.A. from the University of Southern California.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than 10% percent of the Company’s Common Stock (collectively, “Reporting Persons”) to file reports of ownership and changes in ownership of the Company’s Common Stock. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of the Reporting Persons’ Section 16(a) reports or written representations from certain Reporting Persons, the Company believes that during the fiscal year ended March 31, 2009, all Reporting Persons complied with all applicable filing requirements, with the exception of reports that were filed late for the following persons: Form 4 for Mr. Sems for 1,157,573 restricted stock units granted on January 2, 2009, filed on August 10, 2009; Form 4 for Mr. Howe for 100,000 options granted on February 27, 2009, filed on August 11, 2009; Form 4 for Ms. Zawatski for 29,586 restricted stock units granted on December 15, 2006, filed on August 11, 2009; Form 4 for Ms. Zawatski for 100,000 options granted on December 15, 2006, filed on August 11, 2009; Form 4 for Mr. Arnold for 29,586 restricted stock units granted on December 15, 2006, filed on August 14, 2009; Form 3 for Mr. Stern for 200,000 options granted on June 10, 2009, filed on September 11, 2009; Form 4 for Mr. Sems for 100,000 restricted stock units granted on November 12, 2009, filed on November 16, 2009; Form 4 for Ms. Zawatski for 100,000 restricted stock units granted on November 12, 2009, filed on November 16, 2009; Form 4 for Mr. Howe for 100,000 restricted stock units granted on November 12, 2009, filed on November 16, 2009; Form 4 for Mr. Arnold for 100,000 restricted stock units granted on November 12, 2009, filed on November 16, 2009; and Form 4 for Mr. Thanos for 100,000 restricted stock units granted on November 12, 2009, filed on November 16, 2009.
Recommendation of Nominees by Stockholder
On June 28, 2009, our Board of Directors adopted Corporate Governance Guidelines that, among other things, specify procedures by which stockholders may submit recommendations of director candidates as follows:
(a) To recommend a candidate for election tour Board, a stockholder must notify our Nominating/Corporate Governance Committee by writing to our General Counsel.
4
(b) The stockholder’s notice shall set forth the following information:
(i) To the extent reasonably available, information relating to such director candidate that would be required to be disclosed in a proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, in which such individual is a nominee for election to the Board;
(ii) The director candidate’s written consent to (A) if selected, be named in the Company’s proxy statement and proxy and (B) if elected, to serve on the Board; and
(iii) Any other information that such stockholder believes is relevant in considering the director candidate.
Code of Ethics
The Board of Directors has adopted a Code of Ethics for Chief Executive Officer and Senior Financial Officers and a Code of Business Conduct applicable to all directors, officers and employees of the Company as required by applicable securities laws, rules of the Securities and Exchange Commission, and the listing standards of The Nasdaq Stock Market. The Code of Ethics for Chief Executive Officer and Senior Financial Officers and Code of Business Conduct can be found on our website, http://www.selectica.com/Company/CorporateGovernance/tabid/733/Default.aspx.
Audit Committee
Our Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the adequacy of the Company’s financial reporting and disclosure controls and processes, the adequacy of our internal control policies, the selection of our independent auditors, the scope of the annual audits, fees to be paid to our independent auditors, the performance of our independent auditors and our accounting practices.
During the fiscal year ended March 31, 2010, the members of our Audit Committee were Messrs. Arnold (Chair), Sems and Howe. The Board has determined that the Company’s audit committee financial expert is Mr. Arnold.
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Item 11.
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Executive Compensation.
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Summary
Our compensation committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns management’s interests with those of our stockholders. Our compensation committee also believes that the compensation of our executive officers is both appropriate and responsive to the goal of improving stockholder value.
Fiscal 2010 Summary Compensation Table
The following table sets forth, for the last two fiscal years, the dollar value of all cash and non-cash compensation earned by each person who, for fiscal year 2010, may be considered a “named executive officer” under the rules of the Securities and Exchange Commission (the “Named Executive Officers”).
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Name and Principal Position
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Year
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Salary ($)
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Stock
Awards ($)(1)(7)
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Option
Awards ($)(1)(7)
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Non-Equity Incentive Plan Compensation ($)(2)
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All Other
Compensation ($)
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Total ($)
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Jason Stern (3)
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2010
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201,421
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67,500
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21,252
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1,150
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42,469
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333,792
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President and Chief
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2009
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175,000
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90,950
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37,713
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||||||||||||||
| Operating Officer | ||||||||||||||||||
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Todd Spartz (4)
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2010
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120,833
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124,000
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1,643
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246,476
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Chief Financial Officer
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James Thanos (5)
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2010
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25,000
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162,208
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253,707
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Former Co-Chairman
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2009
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24,999
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228,708
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253,707
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Brenda Zawatski (5)
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2010
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25,000
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396,881
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421,881
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Former Co-Chairman
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2009
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24,999
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20,063
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351,273
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396,335
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|||||||||||||
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Richard Heaps (6)
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2010
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136,213
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0
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157,421
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293,634
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Former Chief Financial
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2009
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142,046
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160,500
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15,972
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318,518
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| Officer and General | ||||||||||||||||||
| Counsel | ||||||||||||||||||
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(1)
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The amounts in the Stock Awards and Option Awards columns reflect the grant date fair value of stock awards and option awards granted in the fiscal years shown, calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of option award amounts are included in Note 9 to the financial statements set forth in our annual report on Form 10-K filed on June 29, 2010 (Commission File No. 000-29637).
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5
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(2)
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The amounts in this column represent bonus payments based on the achievement of certain Company milestones.
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(3)
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Mr. Stern was elected President and Chief Operating Officer on January 12, 2010, and became an executive officer at that time. All other compensation for Mr. Stern are for medical, dental, vision and life insurance.
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(4)
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Mr. Spartz’s employment with us started on September 14, 2009. All other compensation for Mr. Spartz are for life insurance.
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(5)
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On August 19, 2009, Mr. Thanos stepped down as Co-Chair of our Board and terminated his consulting relationship with the Company. Ms. Zawatski stepped down as Chair of our Board on November 12, 2009.
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(6)
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Mr. Heaps’ employment with us started on September 8, 2008 and ended on October 1, 2009.
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(7)
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The material terms of the referenced grants are included in the footnotes to the Outstanding Euqity Awards table below and incorporated herein by reference.
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Outstanding Equity Awards at Fiscal Year-End 2010
The following table sets forth information regarding outstanding equity awards as of March 31, 2010, for each of our named executive officers.
| Option Awards |
Stock Awards
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||||||||||||||||||||||
| Equity | |||||||||||||||||||||||
| Incentive | |||||||||||||||||||||||
| Plan Awards: | |||||||||||||||||||||||
| Equity | Market or | ||||||||||||||||||||||
| Incentive | Payout Value | ||||||||||||||||||||||
| Plan Awards: |
or Unearned
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||||||||||||||||||||||
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Number of
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Number of
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Number of
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Number of
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Market Value
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Shares,
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|||||||||||||||||
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Securities
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Securities
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Securities
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Shares or
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of Shares or
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Units or
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|||||||||||||||||
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Underlying
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Underlying
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Underlying
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Units of
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Units of
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Other Rights
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||||||||||||||||||
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Unexercised
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Unexercised
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Unexercised
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Option
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Option
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Stock That
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Stock That
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of Stock
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||||||||||||||||
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Options―
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Options―
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Unearned
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Exercise
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Expiration
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Have Not
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Have Not
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That Have
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||||||||||||||||
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Name
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Exercisable (#)
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Unexercisable (#)
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Options (#)
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Price ($)
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Date
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Vested (#)
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Vested ($)(1)
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Not Vested (#)
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|||||||||||||||
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Jason Stern (2)
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4,166
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834
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$17.00
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11/12/2016
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| 1,875 |
5,625
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$5.20
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1/12/2020
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||||||||||||||||||||
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8,998
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$44,720
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||||||||||||||||||||||
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2,812
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$13,976 | |||||||||||||||||||||
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Todd Spartz (3)
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10,000 | $49,700 | |||||||||||||||||||||
| 7,500 | $37,275 | ||||||||||||||||||||||
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James Thanos (4)
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3,334
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1,666
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$18.10
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11/15/2017
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|||||||||||||||||||
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5,000
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$24,850
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||||||||||||||||||||||
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Brenda Zawatski (5)
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5,000
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0
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$27.90
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11/8/2015
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|||||||||||||||||||
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1,700
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3,300
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$10.80
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9/9/2018
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||||||||||||||||||||
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5,000
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$24,850
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||||||||||||||||||||||
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Richard Heaps
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|||||||||||||||||||||||
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(1)
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Computed in accordance with SEC rules as the number of unvested shares or units multiplied by the closing market price of our Common Stock at the end of the 2010 fiscal year, which was $4.97 on March 31, 2010. The actual value (if any) to be realized by the officer depends on whether the shares vest and on the future performance of our Common Stock.
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(2)
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Mr. Stern was granted 5,000 shares of non-qualified incentive stock options on November 13, 2006, one quarter of which will vest upon completion of one year of continuous service from November 13, 2006, the vesting commencement date, and 1/48 shall vest when after each month of continuous service thereafter; provided that 100% of such shares shall be vested upon a change of control of the Company. In addition, Mr. Stern was granted 7,500 shares of performance-based non-qualified incentive stock options on January 12, 2010, 1,875 of these shares vested based achievement of certain performance targets for fiscal 2010, and the remaining 5,625 shares shall vest upon achievement of certain performance targets for fiscal 2011. Mr. Stern was granted 8,500 restricted stock units on September 9, 2008, half of which vested on September 9, 2009 after one year of continuous service from the September 9, 2008 vesting commencement date, and 1/8 has or will vest after each quarter of continuous service thereafter. Mr. Stern was also granted 5,000 restricted stock units on September 1, 2009, 1/16 of which has or will vest after each quarter of continuous service from the September 1, 2009 vesting commencement date and will vest in full upon a change of control of the Company. Mr. Stern was granted 2,500 restricted stock units on January 12, 2010, one quarter of which will vest after one year of continuous service from January 12, 2010, the vesting commencement date, and 1/16 will vest after each quarter of continuous service thereafter. Lastly, Mr. Stern was granted 3,750 performance-based restricted stock units on January 12, 2010, 938 units vested based on achievement of certain performance targets for fiscal 2010, and the remaining 2,812 units shall vest upon achievement of certain performance targets for fiscal 2011.
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6
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(3)
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Mr. Spartz was granted 10,000 restricted stock units on September 14, 2009, one quarter of which will vest upon completion of one year of continuous service from September 14, 2009, the vesting commencement date, and 1/16 shall vest after each quarter of continuous service thereafter; provided that 100% of such shares shall be vested upon a change of control of the Company. Additionally, Mr. Spartz was granted 10,000 performance-based restricted stock units on January 12, 2010, 2,500 vested based on achievement of certain performance targets for fiscal 2010, and the remaining 7,500 units shall vest upon achievement of certain performance targets for fiscal 2011.
|
|
(4)
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Mr. Thanos was granted 5,000 shares of non-qualified incentive stock options on November 15, 2007, one third of which has or will vest after each year of continuous service from the November 15, 2007 vesting commencement date. In addition, Mr. Thanos was granted 5,000 restricted stock units on November 12, 2009, all of which will vest upon the earlier of a) one year of continuous service from November 12, 2009, the vesting commencement date or b) a change of control of the Company.
|
|
(5)
|
Ms. Zawatski was granted 5,000 shares of non-qualified incentive stock options on November 9, 2005, one quarter of which will vest upon completion of one year of continuous service from November 9, 2005, the vesting commencement date, and 1/48 shall vest when after each month of continuous service thereafter. Additionally, Ms. Zawatski was granted 5,000 shares of non-qualified incentive stock options on November 18, 2008, 1,700 shares of which vested upon completion of one year of service from September 9, 2008, the vesting commencement date, and 1,650 shares will vest after each year of continuous service thereafter; provided that 100% of such shares shall be vested upon a change of control of the Company. Lastly, Ms. Zawatski was granted 5,000 restricted stock units on November 12, 2009, all of which will vest upon the earlier of a) one year of continuous service from November 12, 2009, the vesting commencement date or b) a change of control of the Company.
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Employment Agreement with President and Chief Operating Officer
Mr. Stern entered into an employment arrangement with the Company under which he receives an annual base salary of $225,000. Mr. Stern was also granted a cash incentive bonus of $15,000 for the fourth quarter of the Company’s 2010 fiscal year, based on the achievement of certain revenue and cash flow goals for such quarter, and an incentive bonus of $60,000 for the Company’s 2011 fiscal year, based on the achievement of certain revenue and cash flow targets for such year. In addition, Mr. Stern has been granted (i) 2,500 restricted stock units vesting over four years, with a one-year minimum service requirement, (ii) 3,750 restricted stock units vesting based upon performance criteria established by the Board and (iii) an option to purchase 7,500 shares of the Company’s common stock vesting based upon performance criteria established by the Board.
In addition, the Company and Mr. Stern have entered into a severance agreement, which provides for the continuation of Mr. Stern’s base salary and health insurance coverage for four months if he is discharged for a reason other than cause or permanent disability at any time. However, Mr. Stern is entitled to six months of base salary and health insurance coverage if he is discharged for a reason other than cause or permanent disability or if he resigns for good reason, in either case within 12 months after the Company is subject to a change in control. Mr. Stern will be required to execute a release in the form attached to the severance agreement as a condition of receiving these benefits. The severance agreement also provides that all equity awards held by Mr. Stern at the time of a change in control will immediately vest in full.
Employment Agreement with Chief Financial Officer
Mr. Spartz entered into an employment arrangement with the Company under which he receives an annual base salary of $220,000. Mr. Spartz was granted a cash incentive bonus of $15,000 for the fourth quarter of the Company’s 2010 fiscal year and a cash incentive bonus of $60,000 for the Company’s 2011 fiscal year. Mr. Spartz received 10,000 restricted stock units vesting over four years, with a one year minimum service requirement and full acceleration of unvested units upon a change in control of the Company. Additionally, based upon criteria subject to the approval of the Board, Mr. Spartz will receive 10,000 restricted stock units, with a one year minimum service requirement and full acceleration of unvested units upon a change in control of the Company.
In addition, the Company and Mr. Spartz entered into a severance agreement, which provides, among other things, for the continuation of Mr. Spartz’s base salary and health insurance benefits for three months if he is discharged for a reason other than cause or permanent disability at any time. Mr. Spartz will be entitled to nine months of base salary and health insurance benefits if he is discharged without cause or resigns for good cause within twelve months after the Company is subject to a change in control. Mr. Spartz will be required to execute a release in the form attached to the severance agreement as a condition of receiving these benefits.
Employment Agreement with Former Chief Financial Officer
In September 2008, we entered into an employment agreement with Mr. Heaps when he became our Chief Financial Officer. Under the agreement, he received an annual base salary of $250,000. Pursuant to the agreement, Mr. Heaps also received 7,500 restricted stock units vesting over four years, with full acceleration of unvested units upon a change in control of the Company. In addition, the Company and Mr. Heaps entered into a severance agreement, which provided for the continuation of his base salary and health insurance benefits for six months if he is discharged without cause at any time or if his employment terminates for any reason within 12 months after the Company is subject to a change in control.
Mr. Heaps’s employment with the Company ceased on October 1, 2009. Pursuant to the terms of his employment agreement, Mr. Heaps received a severance benefit of $124,053 plus benefits described above. His unvested stock units and options are not subject to accelerated vesting.
7
Employment Agreement with Former Co-Chairs
On June 30, 2008, James Thanos and Brenda Zawatski were appointed Co-Chairs of our Board of Directors, following the departure of our former chief executive officer on the same day. As originally contemplated, Mr. Thanos and Ms. Zawatski would, in their capacity as non-employee directors, devote additional time on an interim basis to overseeing operational matters until we appointed a successor chief executive officer. On August 1, 2008, our Board determined to compensate Mr. Thanos and Ms. Zawatski at the rate of $250 per hour in cash, subject to a maximum of eight hours per day, for time spent providing operational assistance beyond the time spent on normal Board matters. Effective June 28, 2009, Mr. Thanos and Ms. Zawatski were formally designated as executive officers. Pursuant to this arrangement, Mr. Thanos and Ms. Zawatski received $102,458 and $334,631, respectively, in cash in the fiscal year ended March 31, 2010, but no equity compensation. In addition, pursuant to our regular compensation program for non-employee directors, they received $59,750 and $62,250, respectively, in cash in the fiscal year ended March 31, 2010, as well as the equity compensation shown in the table above. On August 19, 2009, Mr. Thanos stepped down as Co-Chair of our Board and terminated his consulting relationship with the Company. Ms. Zawatski stepped down as Chair of our Board on November 12, 2009.
Fiscal 2010 Director Compensation
The following table sets forth the compensation of the members of our Board of Directors for fiscal year 2010. For the reasons described in above in “Employment Agreement with Former Co-Chairs,” the compensation of Mr. Thanos and Ms. Zawatski is shown in the tables above and is not included in the following table.
|
Fees Earned
|
||||||||||||
|
or Paid in
|
Stock
|
Option
|
||||||||||
|
Name
|
Cash ($)
|
Awards ($)(1)
|
Awards ($)(1)
|
Total ($)
|
||||||||
|
Jamie Arnold
|
72,750 |
25,000
|
- |
97,750
|
||||||||
|
Alan Howe
|
62,046 |
25,000
|
- |
87,046
|
||||||||
|
Lloyd Sems
|
73,028 |
25,000
|
- |
98,028
|
||||||||
|
(1)
|
The amounts in the Stock Awards and Option Awards columns reflect the grant date fair value of stock awards and option awards granted in the fiscal year 2010, calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of option award amounts are included in Note 9 to the financial statements set forth in our annual report on From 10-K filed on June 29, 2010 (Commission File No. 000-29637). Our directors held the following stock awards at March 31, 2010: Jamie Arnold, 5,000 shares; Alan Howe, 5,000 shares; and Lloyd Sems, 5,000 shares. Our directors held the following options at March 31, 2010: Jamie Arnold, 12,500 shares; Alan Howe, 5,000 shares; and Lloyd Sems, 5,000 shares.
|
Under the director compensation policy in effect during fiscal year 2010, each non-employee director was paid a $20,000 annual retainer fee, a $10,000 annual fee per committee on which the non-employee director served as the chairperson ($20,000 for the audit committee chair) and a $5,000 annual fee for the first committee on which the non-employee director served. Our non-employee directors were also entitled to a fee of $1,000 for each board or special committee meeting attended in person, or $500 for each board or special committee meeting attended by telephone. Effective May 20, 2009, the policy was amended to provide for a $45,000 annual retainer fee and a $10,000 annual fee for the audit committee chair. All other fees for service on committees or attendance at meetings were eliminated. Travel expenses incidental to meeting attendance are reimbursed.
In addition, each non-employee director receives restricted stock units with a market value of $25,000 per year. All of the restricted stock units vest on the first anniversary of the grant, with immediate full vesting in the event of a change in control. Upon taking office and every three years thereafter, each non-employee director also receives an option. The number of option shares was 50,000 until January 2, 2009, when it was increased to 100,000 shares. The options vest over three years, with immediate full vesting in the event of a change in control.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of July 29, 2010, certain information with respect to shares beneficially owned by (i) each person who is known by the Company to be the beneficial owner of more than five percent 5% of the Company’s outstanding shares of Common Stock, (ii) each of the Company’s directors and the executive officers named in the Summary Compensation Table and (iii) all current directors and executive officers as a group. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within sixty (60) days of the date as of which the information is provided; in computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date. The Company has relied upon the contents of statements filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act. The Company has updated, as appropriate, reported share ownership figures of beneficial owners to reflect a 1-for-20 reverse stock split of the Company’s Common Stock effected on February 24, 2010.
To the Company’s knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock as beneficially owned by them.
8
Security Ownership of Certain Beneficial Owners
|
Title of Class
|
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|
Common
|
Steel Partner Holdings, L.P. (1)
590 Madison Avenue, 32nd Floor New York, NY 10022
|
420,768
|
14.96%
|
|
Common
|
Dimensional Fund Advisors, Inc. (2)
1299 Ocean Avenue Santa Monica, CA 90401
|
144,708
|
5.14%
|
|
Common
|
Lloyd I. Miller III (3)
4550 Gordon Drive Naples, FL, 34102
|
547,619
|
19.47%
|
|
Common
|
Bank of America Corporation (4)
100 North Tryon Street Charlotte, NC 28255
|
165,942
|
5.90%
|
Note: Percentage of ownership is based on 2,812,604 shares of Common Stock outstanding on June 21, 2010.
|
(1)
|
Steel Partners LLC is the manager of Steel Partner Holdings L.P. Steel Partners II GP LLC is the general partner of Steel Partner Holdings L.P. Warren G. Lichtenstein is the manager of Steel Partners LLC and the managing member of Steel Partners II GP LLC. By virtue of these relationships, each of Steel Partners LLC, Steel Partners II GP LLC and Mr. Lichtenstein may be deemed to beneficially own the shares owned by Steel Partner Holdings L.P.
|
|
(2)
|
Dimensional Fund Advisors LP (“Dimensional”), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the “Funds.” In its role as investment advisor or manager, Dimensional possesses investment and/or voting power over the securities of the Company described above that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported above are owned by the Funds. Dimensional has disclaimed beneficial ownership of such securities. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities held in their respective accounts. To the knowledge of Dimensional, the interest of any one such Fund does not exceed 5% of the class of securities.
|
|
(3)
|
Mr. Miller has sole voting and dispositive power with respect to 341,180 of the reported securities as a manager of a limited liability company that is the general partner of a certain limited partnership. Mr. Miller has shared voting and dispositive power with respect to 206,439 of the reported securities as an investment advisor to the trustee of certain family trusts.
|
|
(4)
|
Bank of America Corporation, NB Holdings Corporation, BAC North America Holding Company, BANA Holding Corporation, Bank of America, N.A. and Columbia Management Group, LLC have shared voting power to vote 2,570,742 shares of the Company and shared dispositive power over 3,653,342 shares of the Company. Columbia Management Advisors, LLC has sole voting power over 2,570,742 shares of the Company, sole dispositive power over 3,641,542 shares of the Company and shared dispositive power over 11,800 shares of the Company.
|
9
Security Ownership of Management
|
Title of Class
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|
Common
|
James Arnold, Jr. (1)
|
19,266
|
*
|
|
Common
|
Alan Howe (2)
|
1,667
|
*
|
|
Common
|
Jim Thanos (3)
|
8,508
|
*
|
|
Common
|
Lloyd Sems (4)
|
121,443
|
4.31%
|
|
Common
|
Brenda Zawatski (5)
|
13,432
|
*
|
|
Common
|
Jason Stern (6)
|
20,001
|
*
|
|
Common
|
Todd Spartz (7)
|
12,500
|
*
|
|
Common
|
Richard Heaps (8)
|
0
|
*
|
|
Common
|
All executive officers and directors as a group (8 persons)
|
196,817
|
7.00%
|
|
*
|
Less than 1% of the outstanding shares of Common Stock.
|
Note: The number of shares of Common Stock deemed outstanding includes shares issuable pursuant to stock options that may be exercised within 60 days after July 29, 2010. Percentage of ownership is based on 2,812,604 shares of Common Stock outstanding on June 21, 2010, plus shares of Common Stock subject to options or exercisable within 60 days of July 29, 2010, and held by each listed person. Shares of Common Stock subject to options exercisable within 60 days of July 29, 2010, are deemed outstanding for purposes of computing the percentage ownership of the person holding such options but are not deemed outstanding for computing the percentage ownership of any other person. The Company has updated, as appropriate, reported share ownership figures of management to reflect a 1-for-20 reverse stock split of the Company’s Common Stock effected on February 24, 2010.
|
(1)
|
Includes 6,766 shares of Common Stock held by Mr. Arnold and 12,500 shares of Common Stock issuable upon the exercise of stock options exercisable within 60 days of July 29, 2010.
|
|
(2)
|
Includes 1,667 shares of Common Stock issuable upon exercise of stock options exercisable within 60 days of July 29, 2010.
|
|
(3)
|
Includes 5,175 shares Common Stock held by Mr. Thanos and 3,333 shares of Common Stock issuable upon the exercise of stock options exercisable within 60 days of July 29, 2010.
|
|
(4)
|
Includes 2,336 shares of Common Stock held by Mr. Sems, 3,350 shares of Common Stock issuable upon the exercise of stock options exercisable within 60 days of July 29, 2009 and 115,757 shares of Common Stock held beneficially by Sems Capital, LLC, of which Mr. Sems is the managing member.
|
|
(5)
|
Includes 6,766 shares of Common Stock held by Ms. Zawatski and 6,667 shares of Common Stock issuable upon the exercise of stock options exercisable within 60 days of July 29, 2010.
|
|
(6)
|
Includes 18,438 shares of Common Stock held by Mr. Stern and 1,563 shares of Common Stock issuable upon exercise of stock options exercisable within 60 days of July 29, 2010.
|
|
(6)
|
Includes 12,500 shares of Common Stock held by Mr. Spartz.
|
|
(8)
|
Mr. Heaps does not hold shares of Common Stock and does not have any options exercisable for shares of Common Stock within 60 days of July 29, 2010. Mr. Heaps’s employment with us ended on October 1, 2009.
|
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of March 31, 2009 with respect to shares of common stock that may be issued under our existing equity compensation plans.
|
Plan Category
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
(b)
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and Rights(1)
|
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
|
|||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
|
Equity compensation plans approved by security holders
|
178 | (2) | $ | 21.07 | 1,370 | (3) | ||||||||
|
Equity compensation plans not approved by security holders
|
3 | 38.91 | 181 | |||||||||||
|
Total
|
181 | $ | 21.86 | 1,551 | ||||||||||
|
(1)
|
The weighted average exercise price is calculated basely solely on outstanding options.
|
|
(2)
|
Includes options and rights to acquire shares outstanding under our 1996 Stock Plan and 1999 Equity Incentive Plan.
|
|
(3)
|
Represents 142,000 shares available for issuance under our 1996 Stock Plan and 1,228,000 shares available for issuance under our 1999 Equity Incentive Plan.
|
10
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Transactions with Related Persons
Other than the compensation arrangements with directors and executive officers and except as set forth below, there have been no transactions since April 1, 2009 (and there are no currently proposed transactions) in which:
|
|
·
|
We have been or are to be a participant;
|
|
|
·
|
The amount involved exceeds $120,000; and
|
|
|
·
|
Any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediately family member of or person sharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest.
|
The spouse of Ms. Zawatski, one of our directors, serves as Executive Vice President and Chief Financial Officer of Cisco, Inc. (“Cisco”). During fiscal 2010, Cisco purchased approximately $1.53 million in software licenses, annual maintenance and related technical services from the Company. Ms. Zawatski had no direct involvement in these transactions.
On May 6, 2010, Ms. Zawatski entered into an employment relationship with CA, Inc. (“CA”) as a Senior Vice President working primarily on marketing. During fiscal 2010, CA purchased approximately $1.11 million in software licenses, annual maintenance and related technical services from the Company. Ms. Zawatski had no direct involvement in these transactions as she was not employed by CA at the time. Since May 6, 2010, Ms. Zawatski has not participated in any discussions at the board about any ongoing or potential transactions with CA.
Indemnification Agreements
The Company’s certificate of incorporation limits the liability of the Company’s directors for monetary damages arising from a breach of their fiduciary duty as directors, except to the extent otherwise required by the Delaware General Corporation Law. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission.
The Company’s bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. The Company has entered into indemnification agreements with its executive officers and directors containing provisions that may require the Company, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Pursuant to these agreements, the Company has advanced or indemnified certain directors and officers for fees and expenses incurred by them in connection with the ongoing litigation with Trilogy, as previously reported in our Original Annual Report.
Review, Approval or Ratification of Transaction with Related Persons
Our board of directors adopted certain written policies and procedures with respect to related person transactions on June 28, 2009. These policies and procedures require that certain transactions, subject to specified exceptions and other than one that involves compensation, between us and any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, be consummated only if (i) approved or ratified by our Audit Committee and only if the terms of the transaction are comparable to those that could be obtained in arm’s-length dealings with an unrelated third party or (ii) approved by the disinterested members of our board of directors. Our policies and procedures with respect to related person transactions also apply to certain charitable contributions by us or our executive officers and to the hiring of any members of the immediate family of any of our directors or executive officers as our permanent full-time employees. Our Compensation Committee is also required to approve any transaction that involves compensation to our directors and executive officers.
11
Independence of the Board of Directors
The Board of Directors is currently composed of five members. Messrs. Arnold, Sems and Howe qualify as independent directors in accordance with the published listing requirements of The Nasdaq Stock Market. The directors hold office until their successors have been elected and qualified or their earlier death, resignation or removal.
|
Item 14.
|
Principal Accounting Fees and Services
|
The Audit Committee of our Board of Directors selected Armanino McKenna LLP as our independent registered public accounting firm for the fiscal year ended March 31, 2010.
The following table sets forth the aggregate fees we paid to Armanino McKenna LLP, our independent registered public accounting firm, for professional services provided during our fiscal years ended March 31, 2009 and March 31, 2010.
|
Fiscal 2010
|
Fiscal 2009
|
|||||||||
|
(In thousands $)
|
||||||||||
|
Audit fees(1)
|
376 | 400 | ||||||||
|
Audit-related fees(2)
|
0 | 0 | ||||||||
|
Tax fees(3)
|
15 | 23 | ||||||||
|
All other fees
|
13 | 19 | ||||||||
|
Total fees
|
404 | 442 | ||||||||
|
(1)
|
Audit fees consist of fees incurred for professional services rendered for the audit of our annual consolidated financial statements and review of the quarterly consolidated financial statements that are normally provided by Armanino McKenna LLP in connection with regulatory filings or engagements.
|
|
(2)
|
Audit-related fees relate to assurance and related services that are reasonably related to the audit or review of our financial statements.
|
|
(3)
|
Tax fees consist of fees for tax planning and tax compliance services.
|
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services rendered by Armanino McKenna LLP, our independent registered public accounting firm. The Audit Committee can pre-approve specified services in defined categories of audit services, audit-related services and tax services up to specified amounts, as part of the Audit Committee’s approval of the scope of the engagement of Armanino McKenna LLP or on an individual case-by-case basis before Armanino McKenna LLP is engaged to provide a service. All audit, audit-related and tax services were pre-approved by the Audit Committee. The Audit Committee has determined that, subject to reasonable limits, the rendering of the services other than audit services by Armanino McKenna LLP is compatible with maintaining the principal accountant’s independence.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the day of July 29, 2010.
|
SELECTICA, INC.
|
|||
|
Registrant
|
|||
| /s/ Jason Stern | |||
| Jason Stern | |||
| Chief Operating Officer and President | |||
| /s/ Todd Spartz | |||
|
Todd Spartz
|
|||
| Chief Financial Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
/S/ Jason Stern
|
President and Chief Operating Officer (Principal Executive Officer)
|
July 29, 2010
|
||
| Jason Stern | ||||
|
/S/ Todd Spartz
|
Chief Financial Officer (Principal Financial Officer and
|
July 29, 2010
|
||
| Todd Spartz | Principal Accounting Officer) and Secretary | |||
|
Directors:
|
||||
|
*
|
Director
|
July 29, 2010
|
||
| Jamie Arnold | ||||
|
*
|
Director
|
July 29, 2010
|
||
| Brenda Zawatski | ||||
|
*
|
Director
|
July 29, 2010
|
||
|
Lloyd Sems
|
||||
|
*
|
Director
|
July 29, 2010
|
||
|
Jim Thanos
|
||||
|
*
|
Director
|
July 29, 2010
|
||
| Alan Howe |
*By the signatures set forth below, the undersigned, pursuant to the duly authorized power of attorney filed with the Securities and Exchange Commission have signed this Amendment No. 1 on Form 10-K/A on behalf of the person indicated.
|
/S/ Jason Stern
|
||||
| Jason Stern | ||||
|
(Attorney-in-fact)
|
||||
|
/S/ Todd Spartz
|
||||
| Todd Spartz | ||||
|
(Attorney-in-fact)
|
13
EXHIBIT INDEX
|
Exhibit No.
|
Description
|
|
|
31.1**
|
Certification of President and Chief Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2**
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1**
|
Certification of President and Chief Operating Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2**
|
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
**
|
This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Selectica, Inc. specifically incorporates it by reference.
|
14