UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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 §240.14a-12
ClearOne
Communications, Inc.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than 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)(4) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4)
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Proposed
maximum aggregate value of
transaction:
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5)
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Total
fee paid:
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[
]
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Fee
paid previously with preliminary
materials.
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[
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule-11(a)(2) and identify the filing for which the offsetting
fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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3)
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Filing
Party:
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4)
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE
HELD NOVEMBER 20, 2006
TO
THE
SHAREHOLDERS:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Shareholders of ClearOne Communications,
Inc. (the "Company"), a Utah Corporation, will be held on November 20, 2006,
at
10:00 A.M. MST, at the Salt Lake City Airport Hilton, 5151 Wiley Post Way,
Salt
Lake City, Utah 84116.
Please
note that attendance at the Annual Meeting will be limited to shareholders
of
record (or their authorized representatives) at the close of business on
October
12, 2006. Proof of ownership can be a copy of the enclosed proxy
card.
The
following describes the purpose of the Annual Meeting:
|
1.
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To
elect six members of the Company's Board of
Directors;
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2.
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To
transact such other business as may properly come before the meeting
or
any adjournment thereof.
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The
foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. The Board of Directors recommends that an affirmative
vote be cast in favor of all nominees and for each of the proposals listed
in
the proxy card.
All
shareholders are cordially invited to attend the meeting in person. However,
to
ensure your representation at the meeting, you are urged to mark, sign, date,
and return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder attending the meeting
may
vote in person even if such shareholder has previously returned a
proxy.
BY
ORDER
OF THE BOARD OF DIRECTORS
/s/
Zeynep Hakimoglu
Zeynep
Hakimoglu
President,
Chief Executive Officer,
and
Member of the Board of Directors
PROXY
STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The
enclosed Proxy is solicited on behalf of the Board of Directors of ClearOne
Communications, Inc. (the "Company") for use at the Company's 2006 Annual
Meeting of Shareholders ("Annual Meeting") to be held November 20, 2006 at
10:00
A.M. MST, or at any postponement or adjournment thereof, for the purposes
set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting will be held at the above date and time at the
Salt
Lake City Airport Hilton, 5151 Wiley Post Way, Salt Lake City, Utah
84116.
These
proxy solicitation materials are being first furnished to shareholders of
the
Company on or about October 24, 2006.
INFORMATION
CONCERNING SOLICITATION AND VOTING
Record
Date and Shares Outstanding
Shareholders
of record at the close of business on October 12, 2006 (the "Record Date")
are
entitled to notice of, and to vote at, the Annual Meeting. On the Record
Date,
12,185,427 shares of Common Stock were issued and outstanding. Each shareholder
will be entitled to one vote for each share of Common Stock held on the record
date.
Voting
of Proxies
By
completing and returning the accompanying proxy, the shareholder authorizes
Zeynep Hakimoglu, President and Chief Executive Officer, and Greg A. LeClaire,
Vice-President Finance, as designated on the face of the proxy, to vote all
shares for the shareholder. All proxies that are properly signed and dated
will
be voted as the shareholder directs. If no direction is given, executed proxies
will be voted FOR each of the nominees and listed proposals.
Vote
Required for Approval
A
quorum
of the shares of the Company must be present at the Annual Meeting in order
for
the shareholders to take official action. Under Utah law and the Articles
of
Incorporation and Bylaws of the Company, a quorum will exist if a majority
of
the shares issued by the Company and entitled to vote on a matter at the
Annual
Meeting are present, in person or by proxy. Abstentions and broker non-votes
will be considered present at the Annual Meeting and will be counted for
purposes of determining whether a quorum exists, but abstentions and broker
non-votes will not be counted for purposes of determining the vote on any
matter
currently proposed for action at the Annual Meeting. The election of directors
will be determined by plurality vote. The Board of Directors recommends that
an
affirmative vote be cast in favor of all nominees and for the proposal listed
in
the proxy card.
Revocability
of Proxies
Any
proxy
given pursuant to this solicitation may be revoked by the person giving it
at
any time before its use by delivering to the Secretary of the Company, a
written
notice of revocation, a duly executed proxy bearing a later date or by attending
the Annual Meeting and voting in person.
Solicitation
The
cost
of this solicitation will be borne by the Company. In addition, the Company
may
reimburse brokerage firms and other persons representing beneficial owners
of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited by certain of the Company's directors,
officers, and regular employees, without additional compensation, personally
or
by telephone, facsimile, or telegram.
1
PROPOSAL
ONE -- ELECTION OF DIRECTORS
The
Company had six directors as of October 12, 2006. The term of each of our
directors expires at the 2006 Annual Meeting. Six are nominated for reelection
at the Annual Meeting to serve until the next Annual Meeting of Shareholders
or
until their respective successors are duly elected and qualified. Unless
otherwise instructed, the proxies will be voted for the election of the six
nominees named below. In the event any nominee is unable to serve, the proxies
will be voted for a substitute nominee, if any, to be designated by the Board
of
Directors. The Board of Directors has no reason to believe any nominee will
be
unavailable.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES
NAMED BELOW TO THE BOARD OF DIRECTORS.
Nominees
for Director
The
following individuals were directors of the Company as of October 12, 2006
and
are nominated for reelection as directors of the Company:
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Name
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Age
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Position
with
ClearOne
Communications, Inc.
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Director
Since
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Edward
Dallin Bagley
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68
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Chairman
of the Board of Directors
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1994
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Brad
R. Baldwin
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50
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Director
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1988
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Zeynep
“Zee” Hakimoglu
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53
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President,
Chief Executive Officer, and Director
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2006
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Larry
R. Hendricks
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63
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Director
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2003
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Scott
M. Huntsman
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41
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Director
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2003
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Harry
Spielberg
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50
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Director
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2001
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Edward
Dallin “Dal” Bagley
joined
our Board of Directors in April 1994 and was named Chairman of the Board
in
February 2004. Mr. Bagley also served as a Director from April 1987 to July
1991. Mr. Bagley has served as a Director of Tunex International. Mr. Bagley
has
been licensed to practice law in Utah since 1965 and holds a Juris Doctorate
Degree from the University of Utah College of Law. For in excess of the past
five years, Mr. Bagley has managed his own investments and served as a
consultant from time to time.
Brad
R. Baldwin
joined
our Board of Directors in October 1988. Mr. Baldwin is an attorney licensed
to
practice in Utah. Since April 2001, he has been engaged in the commercial
real
estate business with Commerce CRG in Salt Lake City, Utah. From February
2000 to
March 2001, Mr. Baldwin was an executive with Idea Exchange Inc. From October
1994 to January 2000, he served as President and Chief Executive Officer
of Bank
One, Utah, a commercial bank headquartered in Salt Lake City, Utah. Mr. Baldwin
holds a Degree in Finance from the University of Utah and a Juris Doctorate
Degree from the University of Washington.
2
Zee
Hakimoglu joined
our Board of Directors in April 2006. Ms. Hakimoglu joined us in December
2003
with more than 15 years of executive and senior-level, high-tech management
experience and was appointed as President and Chief Executive Officer in
July
2004. She served in a variety of executive business development, product
marketing, and engineering roles including Vice-President of Product Line
Management for ClearOne from December 2003 to July 2004; Vice-President of
Product Line Management for Oplink Communications, a publicly traded developer
of fiber optic subsystems and components from December 2001 to December 2002;
President of OZ Optics USA, a manufacturer of fiber optic test equipment
and
components from August 2000 to November 2001; and various management positions
including Vice-President of Wireless Engineering and wireless business unit
Vice-President for Aydin Corp., a telecommunications equipment company, formerly
traded on the New York Stock Exchange from May 1982 until it was acquired
in
September 1996. She also was Vice-President of Business Development for Kaifa
Technology from October 1998 to August 2000 and was instrumental in its
acquisition by E-Tek Dynamics, then again acquired by JDS Uniphase. Through
these acquisitions, she held the role of Deputy General Manager of the Kaifa
business unit. Ms. Hakimoglu earned a Bachelor of Science Degree in Physics
from
California State College, Sonoma, and a Master’s Degree in Physics from Drexel
University.
Larry
R. Hendricks
joined
our Board of Directors in June 2003. Mr. Hendricks is a Certified Public
Accountant who retired in December 2002 after serving as Vice-President of
Finance and General Manager of Daily Foods, Inc., a national meat processing
company. During his 30-year career in accounting, he was also a self-employed
CPA and worked for the international accounting firm Peat Marwick &
Mitchell. Mr. Hendricks has served on the boards of eight other organizations,
including Tunex International, Habitat for Humanity, Daily Foods, and Skin
Care
International. He earned a Bachelor's Degree in Accounting from Utah State
University and a Master of Business Administration Degree from the University
of
Utah. Mr. Hendricks is currently a member of the American Institute of Certified
Public Accountants and the Utah Association of Certified Public
Accountants.
Scott
M. Huntsman joined
our Board of Directors in June 2003. Mr. Huntsman has served as President
and
Chief Executive Officer of GlobalSim, a private technology and simulation
company, since February 2003 and Chief Financial Officer from April 2002
to
February 2003. Prior to GlobalSim, he spent 11 years on Wall Street as an
investment banker, where he focused on mergers, acquisitions, and corporate
finance transactions. From August 1996 to 2000, Mr. Huntsman served at
Donaldson, Lufkin and Jenrette Securities Corporation until their merger
with
Credit Suisse First Boston where he served until October 2001. Mr. Huntsman
earned a Bachelor's Degree from Columbia University and a Master of Business
Administration Degree from The Wharton School at the University of Pennsylvania.
He also studied at the London School of Economics as a Kohn Fellowship
recipient.
Harry
Spielberg
joined
our Board of Directors in January 2001. Since January 1996, Mr. Spielberg
has
been the Director of Cosentini Information Technologies’ Audiovisual Group, a
division of the consulting engineering firm Cosentini Associates. Prior to
1996,
Mr. Spielberg served as Vice-President, Engineering for Media Facilities
Corp.
and Barsky & Associates. Mr. Spielberg received a Bachelor’s Degree in
Psychology from the State University of New York.
Security
holders who would like to send communications to the Board may do so by
submitting such communications to ClearOne Communications, Inc., 1825 Research
Way, Salt Lake City, Utah 84119, Attention: Corporate Secretary (through
October
31, 2006); or ClearOne Communications, Inc., 5225 Wiley Post Way, 5th
Floor,
Salt Lake City, Utah 84116, Attention: Corporate Secretary (after November
1,
2006). The communications with then be forwarded to the Board. The Board
suggests, but does not require, that such submissions include the name and
contact information of the security holder making the submission and a
description of the matter that is the subject of the communication.
3
Director
Compensation and Committees
All
of
our directors serve until their successors are elected and have qualified
to
serve as directors. We pay the Chairman of the Board $4,000 per month and
all
other nonemployee directors $2,000 per month for their services to us as
directors. Directors who are also employed by us do not receive compensation
for
their services as directors.
Dal
Bagley, at the time a director, served as a consultant to the Company from
November 2002 through January 2004 and was paid $5,000 per month for his
services. He consulted with the Company’s management on mergers and financial
matters on an as needed basis. Mr. Bagley’s services were performed pursuant to
an oral agreement, the terms of which were approved by the Board of Directors.
Our
Board
of Directors currently has two standing committees; namely, an audit committee
established in accordance with section 3(a)(58)(A) of the Exchange Act and
a
compensation committee. The Company currently does not have a formal nominating
committee but is in the process of developing one including drafting a written
charter under which the committee will operate. A nominating committee and
charter will be in place well in advance of the Company’s next annual meeting.
The Board of Directors does accept and review candidate nominations as described
in the Nomination
of Director Candidates section
below.
The
Audit Committee.
The
audit
committee assists the board in its general oversight of our financial reporting,
internal controls, and audit functions and is directly responsible for the
appointment, retention, compensation, and oversight of our principal
accountants. The audit committee is currently composed of Brad R. Baldwin,
Larry
R. Hendricks, and Scott M. Huntsman (Chair). The board has determined that
Mr.
Hendricks is a financial expert and is independent within the meaning of
National Association of Securities Dealers (“NASD”) Rule 4200(a)(15). None of
the members of the audit committee is a current or former employee of the
company or any of its subsidiaries.
REPORT
OF THE AUDIT COMMITTEE
The
Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial
statements and the reporting process including the system of internal control.
In fulfilling its oversight responsibilities, the Committee reviewed and
discussed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The
Committee reviewed with the principal accountants, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of the Company’s accounting principles and
such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the principal accountants the auditors’ independence from management and
the Company including the matters in the written disclosure and the letter
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committee) and considered the compatibility of nonaudit
services with the accountants’ independence. The Committee also discussed with
the principal accountants any matters required to be discussed by Statement
on
Auditing Standards No. 61 (Communications with Audit Committees).
The
Committee discussed with the Company’s principal accountants the overall scope
and plans for their audits. The Committee meets with the principal accountants,
with and without management present, to discuss the results of their
examinations, their evaluations of the Company’s internal control, and the
overall quality of the Company’s financial reporting.
4
Each
member of the Audit Committee is an independent director as defined in Rule
4200(a)(14) of the National Association of Securities Dealers listing standards.
That is, the Board of Directors has determined that none of the audit committee
members has a relationship to the Company that would interfere with that
person’s exercise of independent judgment in carrying out the responsibilities
of a director.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K
for
the year ended June 30, 2006 for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
shareholder approval, the selection of the Company’s principal
accountants.
Respectfully
submitted by the members of the Audit Committee.
Brad
R.
Baldwin
Larry
R.
Hendricks
Scott
M.
Huntsman (Chair)
The
Board
of Directors has adopted a written charter for the audit committee setting
out
the functions the Committee is to perform. A copy of the charter is attached
to
the proxy statement as Appendix A.
The
Compensation Committee.
The
compensation committee makes recommendations to the Board of Directors regarding
remuneration of our executive officers and directors and administers the
incentive plans for our directors, officers, and key employees. The compensation
committee is currently composed of Edward Dallin Bagley (Chair), Brad R.
Baldwin, and Scott M. Huntsman.
With
the
exception of Mr. Bagley, the directors who serve on the compensation committee
are all “independent” for purposes of the rules of the National Association of
Securities Dealers. That is, the Board of Directors has determined that none
of
the compensation committee members, apart from Mr. Bagley, has a relationship
to
the Company that would interfere with that person’s exercise of independent
judgment in carrying out the responsibilities of a director. The Board has
determined that Mr. Bagley, as beneficial owner of 14.3% of the Company’s common
stock, is not independent. However, because of Mr. Bagley’s financial experience
and knowledge of the Company and its operations, the Board of Directors has
determined that his inclusion on the compensation committee is in the best
interests of the Company and its shareholders.
Compensation
Committee Interlocks and Insider Participation.
The
Compensation Committee during fiscal 2006 was composed of Edward Dallin Bagley,
Brad R. Baldwin and Scott M. Huntsman. This same composition exists today.
Mr.
Bagley also served as a consultant to the Company from November 2002 through
January 2004 and was paid $5,000 monthly for his services. No interlocking
relationships exist between any member of the Company’s Board of Directors or
Compensation Committee and any member of the Board of Directors or compensation
committee of any other company nor has any such interlocking relationship
existed in the past. No member of the Compensation Committee is or was formerly
an executive officer or an employee of the Company or its
subsidiaries.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has provided the following report:
Committee’s
Responsibilities
- The
Committee sets the overall compensation principles for the Company, subject
to
annual review. In consultation with the Chief Executive Officer, it establishes
the individual compensation levels for Company executives.
5
Executive
Compensation Policy
-
ClearOne Communications, Inc.’s compensation goals for executive officers are as
follows:
| · |
To
attract and retain quality talent
|
| · |
To
use incentive compensation to reinforce strategic performance
objectives
|
| · |
To
align the interest of the executives with the interests of the
shareholders such that risks and rewards of strategic decisions are
shared
|
All
compensation is tax deductible for the Company, except for the compensation
that
qualifies for incentive stock option tax treatment.
Base
Compensation
- The
Committee believes that executive officer base compensation needs to be
competitive with market rates and makes salary decisions in coordination
with
the Chief Executive Officer. Certain executive officers received salary
increases for fiscal 2006 from fiscal 2005 base pay rates.
Quarterly/Annual
Bonus Plan
- The
fiscal year 2006 annual bonus plan was developed to reward executives based
on
meeting or exceeding certain internal financial objectives that were created
by
the executive team and the Company’s Board of Directors. The financial
objectives were established in the beginning of the fiscal year and were
based
on the Company’s revenues, gross margin, and a certain discretionary amount.
Objectives were established for each fiscal quarter, together with an annual
objective. If a quarterly objective was met, a bonus was paid for that quarter.
If a quarterly objective was not met, then no related bonus was paid. Executives
were not allowed to make up a missed quarterly bonus based on subsequent
performance.
Long-Term
Incentive Compensation
- The
Compensation Committee uses employee stock options for long-term executive
compensation as a means of achieving the compensation goals previously
described. Options are granted under the Company’s 1998 Stock Option Plan (the
“Plan”). The Compensation Committee, in consultation with the Chief Executive
Officer, determines the number of options granted to each executive. Factors
bearing on the number of options granted to an executive include his or her
position, individual performance, and contribution to the Company’s overall
performance.
Option
grants under the Plan permit a recipient to purchase shares of Company stock
at
a fixed price (the market price on the date the option is granted). Options
granted to executive officers typically vest over three years. Vesting schedules
are based on three-year vesting schedules, with one-third vesting on the
first
anniversary and the remaining options vesting ratably over the remainder
of the
vesting term. Vested options must be exercised at least 90 days after leaving
the Company. No options were granted to executive officers during fiscal
2006.
Employment
and Severance Agreements
- The
Company has not entered into Employment Agreements with any of its named
executive’s officers. All officers of the Company are employed at will and can
be terminated without cause. All employees of the Company have signed
Confidentiality Agreements to keep certain information
confidential.
The
preceding Compensation Committee Report and the Company Stock Performance
Graph
(set forth below) will not be incorporated by reference into any of the
Company’s filings, past or future, that may be made pursuant to the U.S.
Securities laws.
Respectfully
submitted by the members of the Compensation Committee.
Edward
Dallin Bagley (Chair)
Brad
R.
Baldwin
Scott
M.
Huntsman
6
Meetings
of the Board of Directors and Committees
The
Board
of Directors held ten meetings during fiscal 2006. The audit committee held
22
meetings during fiscal 2006. The compensation committee held six meetings
during
fiscal 2006. In 2006, each director attended at least 75 percent of the meetings
of the Board of Directors and the committees on which they served.
Nomination
of Director Candidates
Security
holders may recommend candidates for nomination as directors. Any such
recommendations should include the nominee’s name, home and business addresses,
and other contact information, detailed biographical data, and qualifications
for board membership, along with information regarding any relationships
between
the candidate and ClearOne within the last three fiscal years. Any such
recommendations should be sent to:
|
ClearOne
Communications, Inc.
|
ClearOne
Communications, Inc.
|
|
|
1825
Research Way
|
5225
Wiley Post Way, 5th
Floor
|
|
|
Salt
Lake City, Utah 84119
|
OR
|
Salt
Lake City, Utah 84116
|
|
Attention:
Corporate Secretary
|
Attention:
Corporate Secretary
|
|
|
(through
October 31, 2006)
|
(after
November 1, 2006)
|
7
Code
of Ethics
On
August
23, 2006, the Board of Directors adopted a code of ethics that applies to
our
Board of Directors, executive officers, and employees, a copy of which was
included as an exhibit to our Form 10-K for the period ended June 30, 2006.
Executive
Officers
Our
executive officers as of October 12, 2006 are as follows:
|
Name
|
Age
|
Position
with
ClearOne
Communications, Inc.
|
|
Zee
Hakimoglu
|
53
|
President,
Chief Executive Officer, and Member of the Board of Directors
|
|
Tracy
A. Bathurst
|
42
|
Vice-President
of Product Line Management
|
|
Greg
A. LeClaire
|
37
|
Vice-President
of Finance
|
|
Marthes
Solamuthus
|
33
|
Vice-President
of Operations
|
For
the
biography of Ms. Hakimoglu, see "Nominees for Director."
Tracy
A. Bathurst joined
us
in September 1988 and held several positions with us until he was named
Vice-President of Product Line Management in January 2005. He was most recently
ClearOne’s Director of Research and Development and has nearly 20 years
experience in defining and developing communications-related products and
technology. Mr. Bathurst has lead the design and development of ClearOne’s high
performance audio and telecommunications equipment. He earned a Bachelor
of
Science degree in Industrial Technology from Southern Utah
University.
Greg
A. LeClaire joined
us
in September 2006 as our Vice President of Finance. Mr. LeClaire served
as
Vice President of Finance and Administration with Livedeal.com, an early
stage
online classifieds website, from April 2006 to August 2006. He held a 12-year
career in a variety of senior finance and accounting positions with Utah
Medical
Products (UTMD), a publicly traded specialty medical device company, including
serving as Vice President and Chief Financial Officer from January 2001 to
April
2006. He earned a Bachelor of Science degree in Accounting from the University
of Utah and a Master of Science degree in Management from Stanford
University.
Marthes
Solamuthu
joined
us in August 2006. From January 2001 to August 2006, Mr. Solamuthu was Senior
Operations Manager for Venture Corporation, one of the world’s largest contract
manufacturing companies, where he oversaw two manufacturing plants and had
full
responsibility for large-scale production, materials purchasing, planning,
engineering, quality, program management and sales. He earlier held a variety
of
senior manufacturing positions with Ericsson Mobile, Motorola and Western
Digital. He earned a bachelor’s degree in mechanical engineering from Technology
University, in Malaysia. In addition to English, Solamuthu speaks Bahasa
(spoken
in Malaysia and Indonesia), Chinese (Cantonese) and Tamil (spoken in
India).
8
Executive
Compensation
Summary
Compensation
The
following table sets forth for the periods indicated the compensation paid
to or
accrued for the benefit of each person who served as the Company’s Chief
Executive Officer during fiscal 2006 and the next four most highly compensated
executive officers who were serving as executive officers on June 30, 2006
(collectively referred to herein as the “named executive officers”). The
position identified in the table for each person is the position they held
with
the Company as of June 30, 2006.
SUMMARY
COMPENSATION TABLE
|
Annual
Compensation
|
Long-Term
Compensation
|
||||||||||||||||||
|
Awards
|
Payouts
|
||||||||||||||||||
|
Securities
|
|||||||||||||||||||
|
Other
|
Under-
|
All
|
|||||||||||||||||
|
Annual
|
lying
|
Other
|
|||||||||||||||||
|
Fiscal
|
Paid
|
Compen-
|
Options
|
Compen-
|
|||||||||||||||
|
Name
and Position
|
Year
|
Salary
|
Bonus
|
sation1
|
/SARS
|
sation2
|
|||||||||||||
|
Chief
Executive Officer
|
|||||||||||||||||||
|
Zee
Hakimoglu
|
2006
|
$
|
200,000
|
$
|
67,455
|
-
|
-
|
$
|
2,810
|
||||||||||
|
President
and
|
|||||||||||||||||||
|
Chief
Executive Officer3
|
2005
|
$
|
193,077
|
$
|
64,529
|
-
|
100,000
|
$
|
17,330
|
||||||||||
|
2004
|
$
|
75,293
|
$
|
2,359
|
-
|
50,000
|
$
|
388
|
|||||||||||
|
Executive
Officers as of June 30, 2006
|
|||||||||||||||||||
|
Tracy
A. Bathurst4
|
2006
|
$
|
120,000
|
$
|
115,263
|
-
|
-
|
$
|
2,116
|
||||||||||
|
Vice-President5
|
|||||||||||||||||||
|
2005
|
$
|
113,065
|
$
|
30,676
|
-
|
20,000
|
$
|
898
|
|||||||||||
|
2004
|
$
|
104,584
|
-
|
-
|
5,000
|
$
|
637
|
||||||||||||
|
Craig
E. Peeples
|
2006
|
$
|
124,308
|
$
|
20,000
|
-
|
-
|
$
|
1,278
|
||||||||||
|
Interim
Chief Financial Officer and Corporate Controller6
|
|||||||||||||||||||
|
Werner
H. Pekarek
|
2006
|
$
|
164,616
|
$
|
49,466
|
-
|
-
|
$
|
2,596
|
||||||||||
|
Vice-President7
|
|||||||||||||||||||
|
2005
|
$
|
70,031
|
$
|
34,408
|
-
|
45,000
|
$
|
17,573
|
|||||||||||
|
Joseph
P. Sorrentino
|
2006
|
$
|
175,000
|
$
|
63,946
|
-
|
-
|
$
|
1,682
|
||||||||||
|
Vice-President8
|
|||||||||||||||||||
|
2005
|
$
|
104,327
|
$
|
99,729
|
-
|
55,000
|
$
|
13,363
|
|||||||||||
____________
|
1
|
The
Company did not pay or provide perquisites or other benefits during
the
periods indicated by any named executive officer in an aggregate
amount
exceeding $50,000.
|
|
2
|
These
amounts reflect our contributions to our deferred compensation
plan,
401(k) plan, or severance compensation on behalf of the named executive
officers.
|
9
|
3
|
Ms.
Hakimoglu served as our Vice-President of Product Line Management
from
December 1, 2003 to July 8, 2004 when she was named as our President
and
Chief Executive Officer.
|
4 Mr.
Bathurst received a $68,850 bonus related to expired options and an associated
release of claims.
5
Mr.
Bathurst was named Vice-President of Product Line Management in January
2005.
6
Mr.
Peeples was employed by the Company on August 22, 2005 as our Corporate
Controller. From September 20, 2005 to September 17, 2006, he also served
as our
Interim Chief Financial Officer.
7
Mr.
Pekarek was employed by the Company on January 4, 2005. Mr. Pekarek was
succeeded by Marthes Solamuthu as Vice-President of Operations on August
21,
2006.
8
Mr.
Sorrentino was employed by the Company from November 15, 2004 to September
26,
2006.
Options/SAR
Grants in Last Fiscal Year
We
did
not grant any stock options or stock appreciation rights (“SARs”), to the named
executive officers during fiscal 2006.
Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR
Values
The
following table sets forth the aggregated stock options exercised by the
named
executive officers in fiscal 2006 and the year-end value of in-the-money,
unexercised options:
AGGREGATED
OPTION EXERCISES IN FISCAL YEAR ENDED JUNE 30, 2006
AND
FISCAL YEAR-END OPTION VALUES
|
Number
of
|
|||||||||||||
|
Securities
|
Value
of
|
||||||||||||
|
Underlying
|
Unexercised
|
||||||||||||
|
Unexercised
|
In-the-Money
|
||||||||||||
|
Options
|
Options
|
||||||||||||
|
Shares
|
at
FY-End (#)
|
at
FY-End ($)
|
|||||||||||
|
Acquired
|
Value
|
Exercisable/
|
Exercisable/
|
||||||||||
|
Name
and Position
|
on
Exercise (#)
|
Realized
($)1
|
Unexercisable
|
Unexercisable2
|
|||||||||
|
Chief
Executive Officer
|
|||||||||||||
|
Zee
Hakimoglu
|
-
|
$
|
-
|
101,388/48,612
|
$
|
-/$-
|
|||||||
|
Executive
Officers as of
June
30, 2006
|
|||||||||||||
|
Tracy
A. Bathurst
|
-
|
$
|
-
|
68,902/16,098
|
$
|
-/$-
|
|||||||
|
Craig
E. Peeples
|
-
|
$
|
-
|
-/-
|
$
|
-/$-
|
|||||||
|
Werner
H. Pekarek
|
-
|
$
|
-
|
21,250/23,750
|
$
|
-/$-
|
|||||||
|
Joseph
P. Sorrentino
|
-
|
$
|
-
|
29,027/25,973
|
$
|
-/$-
|
|||||||
____________
1
Based
upon the market price of the purchased shares on the exercise date less the
option exercise price paid for such shares.
2
Based
on
the market price of $3.50 per share, which was the closing selling price
of our
common stock on the Pink Sheets on the last business day of fiscal 2006,
less
the option exercise price payable per share.
10
Employment
Contracts and Change in Control Arrangements with Named Executive
Officers
Employment
Agreements
As
of the
end of our 2006 fiscal year, none of the named executive officers was party
to
an employment or severance agreement with us, and each named executive officer’s
employment was on an “at-will” basis, permitting either the Company or each
officer to terminate his or her employment for any reason or for no
reason.
Settlement
Agreements and Releases
On
February 20, 2006, we entered into a settlement agreement and release with
DeLonie Call, the Company’s former Vice-President - Human Resources, in
connection with the cessation of her employment, which generally provided
for
her resignation from her positions and employment with the Company, the payment
of severance in the amount of $93,300, her surrender of 145,000 stock options
(86,853 of which were vested) and a general release of claims against the
Company. In accordance with the terms of our stock option plans, any unvested
stock options terminated on the date of termination of such persons’ employment
with the Company.
Stock
Option Plan
Under
the
1998 Plan, our Board of Directors has the authority to automatically accelerate
the vesting of each outstanding option granted to a named executive officer
in
the event of specified corporate transactions, including a change in control
events designated in the 1998 Plan, whether or not the outstanding option
is
assumed or substituted in connection with the corporate transaction or change
in
control event.
11
STOCK
PERFORMANCE GRAPH
The
following graph compares what an investor’s five-year cumulative total return
(assuming reinvestment of dividends) would have been assuming $100 initial
investments on June 30, 2001, for the Company’s Common Stock and the two
indicated indices.
Cumulated
shareholder return data respecting the Nasdaq Composite Index are included
as
the comparable broad market index. The peer group compared is the Morgan
Stanley
Technology Index.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Indemnification
of Officers and Directors. The
Company’s bylaws and the Utah Revised Business Corporation Act provide for
indemnification of directors and officers against reasonable expenses incurred
by such persons in connection with civil or criminal actions or proceedings
to
which they have been made parties because they are or were directors or
officers
of the Company or its subsidiaries. Indemnification is permitted if the
person
satisfies the required standards of conduct. Certain of the litigation
matters
described in “Item 3. Legal Proceedings” of the Company’s Form 10-K for the year
ended June 30, 2006 involved certain of the Company’s current and former
directors and officers, all of whom are covered by the aforementioned indemnity
and if applicable, certain prior period insurance policies. The Company
has
indemnified such persons for legal expenses incurred by them in such actions
and
has sought reimbursement from its insurance carriers. The Company cannot
predict
with certainty the extent to which the Company will recover the indemnification
payments from its insurers. The Company has made payments to the law firms
representing such current and former directors and officers in the aggregate
amount of approximately $1.7 million during the period from January 2003
through
August 31, 2006.
Joint
Prosecution and Defense Agreement.
In
connection with the Insurance Coverage Action described under the caption
“Item
3. Legal Proceedings” of the Company’s Form 10-K for the year ended June 30,
2006, the Company and its counsel entered into a Joint Prosecution and
Defense
Agreement dated as of April 1, 2004 with Edward Dallin Bagley, Chairman
of the
Board of Directors, and his counsel, which generally provides that ClearOne
and
Mr. Bagley will jointly prosecute their claims against the carriers of
certain
prior period directors and officers liability insurance policies and jointly
defend the claims made by the insurance carriers in order to reduce litigation
expenses.
12
In
the
litigation, ClearOne is generally pursuing claims to recover the policy limits
of certain officer and director liability insurance policies and Mr. Bagley
is
pursuing related claims to recover losses he incurred as a result of such
carriers’ refusal to pay the policy limits which refusals caused ClearOne to
enter into a settlement agreement in the class action litigation that diluted
Mr. Bagley’s shareholdings in ClearOne. The agreement, as amended, provides that
the two law firms shall jointly represent ClearOne and Mr. Bagley, the parties
shall cooperate in connection with the conduct of the litigation and that
ClearOne shall pay all litigation expenses, including attorneys’ fees of its
counsel and Mr. Bagley’s counsel, except litigation expenses which are solely
related to Mr. Bagley’s claims in the litigation. In February 2005, we entered
into a confidential settlement agreement with Lumbermens Mutual pursuant
to
which ClearOne and Mr. Bagley received a lump-sum cash amount and the plaintiffs
agreed to dismiss their claims against Lumbermens Mutual with prejudice.
The
cash settlement will be held in a segregated account until the claims involving
National Union have been resolved, at which time the amounts received in
the
action will be allocated among the Company and Mr. Bagley and any proceeds
to
the Company will be recognized in the consolidated financial statements.
The
Joint Prosecution and Defense Agreement does not explain any allocation method
and no allocation discussions have occurred. On October 21, 2005, the court
granted summary judgment in favor of National Union on its rescission defense
and accordingly entered a judgment dismissing all of the claims asserted
by
ClearOne and Mr. Bagley. On February 2, 2006, the Company and Mr. Bagley
filed
an appeal to the summary judgment granted on October 21, 2005 and intend
to
vigorously pursue the appeal and any follow-up proceedings regarding their
claims against National Union, although no assurances can be given that they
will be successful.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT (BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE)
Section
16(a) of the Exchange Act, as amended, requires our directors and executive
officers, and persons who own more than 10 percent of a registered class
of our
equity securities to file with the SEC initial reports of ownership on Form
3
and reports of changes of ownership of our equity securities on Forms 4 and
5.
Officers, directors, and greater than 10 percent shareholders are required
to
furnish us with copies of all Section 16(a) reports they file.
Based
solely on a review of the reports and amendments to reports furnished to
us, we
believe that all reports required by Section 16(a) were filed on a timely
basis,
except that the Form 4 dated March 16, 2006 for DeLonie Call was filed late.
STOCK
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding ownership of our
common
stock as of August 31, 2006 by (i) each person known to us to be the beneficial
owner of more than 5 percent of our outstanding common stock, (ii) each
director, (iii) the named executive officers, and (iv) all of our executive
officers and directors as a group. Each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws
where applicable, except as otherwise indicated below. The address for each
director and officer is in care of ClearOne Communications, Inc., 1825 Research
Way, Salt Lake City, Utah 84119 until November 1, 2006, after which the address
will be 5225 Wiley Post Way, 5th
Floor,
Salt Lake City, Utah 84116.
13
|
Names
of
Beneficial Owners
|
Amount
of
Beneficial
Ownership
|
Percentage
of
Class1
|
|
Beneficial
Owners
|
||
|
FMR
Corp.
|
824,487
|
6.4%
|
|
Royce
& Associates Inc.
|
651,644
|
5.1%
|
|
Graham
Partners LP
|
642,650
|
5.0%
|
|
Total
|
2,118,781
|
16.5%
|
|
Directors
and
Executive
Officers
|
||
|
Edward
Dallin Bagley2
|
1,837,351
|
14.3%
|
|
Brad
R. Baldwin3
|
214,416
|
1.7%
|
|
Zee
Hakimoglu4
|
118,055
|
0.9%
|
|
Harry
Spielberg5
|
75,250
|
0.6%
|
|
Tracy
A. Bathurst6
|
72,038
|
0.6%
|
|
Larry
R. Hendricks7
|
41,750
|
0.3%
|
|
Scott
M. Huntsman8
|
41,750
|
0.3%
|
|
Joseph
P. Sorrentino9
|
35,138
|
0.3%
|
|
Werner
Pekarek10
|
26,250
|
0.2%
|
|
Craig
E. Peeples11
|
0
|
0.0%
|
|
Directors
and Executive
Officers
as a Group
|
||
|
(10
people)12
|
2,461,998
|
19.2%
|
1
For
each
individual included in the table, the calculation of percentage of beneficial
ownership is based on 12,184,727 shares of common stock outstanding as of
August
31, 2006 and shares of common stock that could be acquired by the individual
within 60 days of August 31, 2006, upon the exercise of options or
otherwise.
2
Includes
126,166 shares held by Mr. Bagley’s spouse with respect to which he disclaims
beneficial ownership and options to purchase 166,750 shares that are exercisable
within 60 days after August 31, 2006.
3
Includes
88,666 shares held in the Baldwin Family Trust; 9,000 shares owned directly,
which are held in an IRA under the name of Mr. Baldwin; and options to purchase
116,750 shares that are exercisable within 60 days after August 31,
2006.
4
Includes
options to purchase 118,055 shares that are exercisable within 60 days after
August 31, 2006.
5
Includes
options to purchase 75,250 shares that are exercisable within 60 days after
August 31, 2006.
6
Includes
options to purchase 71,540 shares that are exercisable within 60 days after
August 31, 2006.
7
Includes
options to purchase 41,750 shares that are exercisable within 60 days after
August 31, 2006.
8
Includes
options to purchase 41,750 shares that are exercisable within 60 days after
August 31, 2006.
9
Includes
options to purchase 35,138 shares that are exercisable within 60 days after
August 31, 2006.
10
Includes
options to purchase 26,250 shares that are exercisable within 60 days after
August 31, 2006.
11
Includes
options to purchase 0 shares that are exercisable within 60 days after August
31, 2006.
12
Includes
options to purchase a total of 693,233 shares that are exercisable within
60
days after August 31, 2006 by executive officers and directors.
Changes
in Control
The
Company is not aware of any arrangements which may result in a change in
control
of the Company.
14
INDEPENDENT
PUBLIC ACCOUNTANTS
The
Board
of Directors has appointed Hansen, Barnett & Maxwell,, a professional
corporation, as principal accountants for the Company for the two fiscal
years
ended June 30, 2005 and 2006. The selection of the Company’s auditors for the
current fiscal year is not being submitted to the shareholders for their
consideration in the absence of a requirement to do so. The selection of
the
independent auditors for fiscal 2007 will be made by ClearOne’s Audit Committee
of the Board of Directors, at such time as they may deem it appropriate.
It
is
anticipated that a representative of Hansen, Barnett & Maxwell will attend
the Annual Meeting and will be available to respond to questions. It is not
anticipated that the representative will make any statement or presentation,
although the representative will have an opportunity to do so if he
desires.
Audit
Fees
During
fiscal 2006 and 2005, Hansen, Barnett & Maxwell billed ClearOne
Communications $205,165 and $237,121, respectively for professional services
rendered by our principal accountant for the audit of our financial statements,
review of financial statements included in our quarterly reports and other
fees
that are normally provided by the accountant in connection with statutory
and
regulatory filings or engagements. KPMG LLP billed the Company $26,947 and
$27,097, during fiscal 2006 and 2005, respectively, for reissuing its opinion
in
ClearOne’s latest 10-K filings.
Neither
Hansen, Barnett & Maxwell nor any of its members have ever had any direct or
indirect financial interest in the Company or been connected with the Company
as
promoter, underwriter, voting trustee, director, officer, or employee.
Audit
Related Fees
The
Company did not pay its principal accountant any audit-related fees during
fiscal 2006 or 2005.
Tax
Fees
The
Company did not pay its principal accountant any tax fees during fiscal 2006
or
2005.
All
Other Fees
The
Company did not pay its principal accountant any other fees during fiscal
2006
or 2005.
Audit
Committee
It
is the
Company’s policy that the Audit Committee pre-approves all audit, tax and
related services. All of the services described under the prior five headings
were approved in advance by our Audit Committee. No items were approved by
the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X. The Audit Committee has considered whether the provision of the services
performed by our principal accountant is compatible with maintaining the
principal accountant’s independence.
15
OTHER
MATTERS
The
Board
of Directors knows of no other matter to be presented for action at the
Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares
they
represent as the Board of Directors may recommend.
It
is
important that your stock be represented at the meeting, regardless of
the
number of shares which you hold. You are, therefore, urged to execute and
return
the accompanying proxy in the postage-prepaid envelope enclosed for that
purpose
at your earliest convenience.
Annual
Report
This
Proxy Statement has been preceded or accompanied by an Annual Report.
Shareholders are referred to such reports for financial and other information
about the activities of the Company, but such report is not to be deemed
a part
of the proxy soliciting material.
Deadline
for Receipt of Shareholder Proposals
The
Company currently anticipates the Annual Meeting in 2007 will be held on
or
about November 19, 2007. Any shareholder desiring to submit a proposal
for
inclusion in the Company's proxy statement and form of proxy for the Company's
2007 Annual Meeting of Shareholders should transmit such proposal to the
Secretary of the Company on or before June 15, 2007. For any other proposal
that
a shareholder wishes to have considered at the Company’s 2007 Annual Meeting,
the shareholder must notify the Company of the proposal on or before August
31,
2007. Proposals for which the Company receives notice after that time will
be
considered untimely and the persons serving as proxies will have discretionary
authority to vote on such matter at the meeting.
FOR
THE
BOARD OF DIRECTORS
/s/
Zeynep Hakimoglu
Zeynep
Hakimoglu, President, Chief Executive Officer,
and
Member of the Board of Directors
Salt
Lake
City, Utah
October
12, 2006
16
APPENDIX
A
CLEARONE
COMMUNICATIONS, INC.
AUDIT
COMMITTEE CHARTER
(effective
September 27, 2006)
PURPOSE
AND AUTHORITY
The
Audit
Committee (the "Committee") of the Board of Directors (the "Board") of ClearOne
Communications, Inc. ("ClearOne"):
(a) assists
the Board in fulfilling its responsibilities for general oversight of: (1)
ClearOne's financial reporting processes and the audit of ClearOne's financial
statements, including the integrity of ClearOne's financial statements, (2)
ClearOne's compliance with legal and regulatory requirements, (3) the
independent auditors' qualifications and independence, (4) the performance
of
ClearOne's independent auditors, and (5) risk assessment and risk
management;
(b) prepares
the report required by the proxy rules of the Securities and Exchange Commission
(the "SEC") to be included in ClearOne's annual proxy statement;
and
(c) has
the
additional duties and responsibilities set forth in Section IV
below.
The
Committee has the authority to obtain advice and assistance from outside
legal,
accounting or other advisors as the Committee deems necessary to carry out
its
duties, and the Committee shall receive appropriate funding, as determined
by
the Committee, from ClearOne for payment of compensation to the outside legal,
accounting or other advisors employed by the Committee.
| I. |
Membership
|
The
Committee shall consist of at least three directors, each of whom shall meet
the
independence and experience requirements of the applicable stock exchange
listing standards, as determined by the Board. In particular, the Chairman
of
the Audit Committee shall have accounting or related financial management
experience. In addition, no Committee member may have participated in the
preparation of the financial statements of ClearOne or any of ClearOne's
current
subsidiaries at any time during the past three years. The members of the
Audit
Committee shall be appointed by the Board.
| II. |
Meeting
and Procedures
|
The
Committee shall convene at least six times each year, with additional meetings
called as the Committee deems appropriate. The Committee Chair is responsible
for the agenda, including input from management, staff and other Committee
and
Board members as appropriate. A majority of the Committee members shall be
present to constitute a quorum for the transaction of the Committee's business.
The Committee shall meet regularly in separate executive sessions and also
in
private sessions with management and the independent auditors to facilitate
full
communication. The Committee shall be given open access to the Chairman of
the
Board, ClearOne executives and independent auditors, as well as ClearOne’s
books, records, facilities and other personnel.
A-1
| III. |
Duties
and Responsibilities
|
The
Committee shall:
| 1. |
Review
and reassess annually the adequacy of this charter and submit the
charter
for approval of the full Board. The Committee also shall conduct
an annual
self valuation of the Committee's performance and
processes.
|
| 2. |
Appoint,
evaluate and compensate the independent auditors, which shall report
directly to the Committee, and oversee the rotation of the independent
auditors' lead audit and concurring partners at least once every
five
years and the rotation of other audit partners at least once every
seven
years, with applicable time-out periods, in accordance with SEC
regulations. The Committee shall determine whether to retain or,
if
appropriate, terminate the independent
auditors.
|
| 3. |
Review
and approve in advance the scope of the fiscal year's independent
audit
and the audit fee, establish policies for the independent auditors'
activities and any fees beyond the core audit, approve in advance
all
non-audit services to be performed by the independent auditors that
are
not otherwise prohibited by law and associated fees, and monitor
the usage
and fees paid to the independent auditors. The Committee may delegate
to
the Chair of the Committee the authority, with agreed limits, to
pre-approve non-audit services not prohibited by law to be performed
by
the independent auditors. The Chair shall report any decisions to
pre-approve such services to the full Committee at its next
meeting.
|
| 4. |
Review
and discuss with the independent auditors their annual written statement
delineating all relationships or services between the independent
auditors
and ClearOne, or any other relationships or services that may impact
their
objectivity and independence.
|
| 5. |
Set
clear hiring policies for employees or former employees of the independent
auditors, and monitor compliance with such
policies.
|
| 6. |
Review
with management and the independent
auditors:
|
| (a) |
ClearOne's
annual audited and quarterly financial statements, including ClearOne's
disclosures in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," prior to being
published;
|
| (b) |
the
results of the independent auditors' audit and the independent auditors'
opinion on the annual financial
statements;
|
| (c) |
the
independent auditors' judgments on the quality, not just the
acceptability, and consistent application of ClearOne's accounting
principles, the reasonableness of significant judgments, clarity
of
disclosures and underlying estimates in the financial
statements;
|
A-2
| (d) |
changes
in accounting principles or application thereof, significant judgment
areas, significant and complex transactions and off-balance sheet
structures, if any; and
|
| (e) |
any
disagreements between management and the independent auditors, about
matters that individually or in the aggregate could be significant
to
ClearOne's financial statements or the independent auditors' report,
and
any serious difficulties the independent auditors encountered in
dealing
with management related to the performance of the
audit.
|
| 7. |
Recommend
to the Board whether the audited financial statements should be included
in ClearOne's Annual Report on Form 10-K, before the report is
released.
|
| 8. |
Prepare
the report required by the rules of the SEC to be included in the
Company’s annual proxy statement.
|
| 9. |
Discuss
earnings press releases, as well as corporate disclosure policies
with
respect to financial information and earnings guidance provided to
analysts and ratings agencies.
|
| 10. |
At
least annually, obtain from and review a report by the independent
auditors describing (a) the independent auditors' internal quality
control
procedures, and (b) any material issues raised by the most recent
internal
quality-control review, or peer review, or by any governmental or
professional inquiry or investigation within the preceding five years
regarding any audit performed by the independent auditors, and any
steps
taken to deal with any such issues.
|
| 11. |
Review
the adequacy and effectiveness of ClearOne's disclosure controls
and
procedures.
|
| 12. |
Review
the adequacy and effectiveness of ClearOne's internal controls, including
any significant deficiencies in such controls and significant changes
or
material weaknesses in such controls reported by the independent
auditors
or management, and any fraud, whether or not material, that involves
management or other ClearOne employees who have a significant role
in such
controls.
|
| 13. |
Review
the adequacy and effectiveness of ClearOne's information security
policies
and the internal controls regarding information
security.
|
| 14. |
Review
with management the results of its review of compliance with applicable
laws and regulations and ClearOne's Standards of Business Conduct,
and
review with management the results of its review of compliance with
applicable listing standards.
|
| 15. |
Assure
that procedures are established for the receipt, retention and treatment
of complaints on accounting, internal accounting controls or auditing
matters, as well as for confidential, anonymous submissions by ClearOne's
employees of concerns regarding questionable accounting or auditing
matters and compliance with the Standards of Business
Conduct.
|
A-3
| 16. |
Receive
and, if appropriate, respond to attorneys' reports of evidence of
material
violations of securities laws and breaches of fiduciary duty and
similar
violations of U.S. or state law.
|
| 17. |
Review
significant risks or exposures relating to litigation and other
proceedings and regulatory matters that may have a significant impact
on
ClearOne's financial statements.
|
| 18. |
Review
the results of significant investigations, examinations or reviews
performed by regulatory authorities and management's
response.
|
| 19. |
Review
and approve all "related party transactions," as defined in applicable
SEC
rules.
|
| 20. |
Obtain
reports from management and the independent auditor that ClearOne’s
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and ClearOne’s Code of Conduct, including disclosures
of insider and affiliated party
transactions.
|
| 21. |
Conduct
or authorize investigations into any matters within the Committee's
scope
of responsibilities.
|
| 22. |
Meet
at least quarterly with the chief financial officer and the independent
auditor in separate executive sessions.
|
| 23. |
Consider
such other matters regarding ClearOne's financial affairs, its controls,
and the independent audit of ClearOne as the Committee, in its discretion,
may determine to be advisable.
|
| 24. |
Report
regularly to the Board with respect to the Committee's
activities.
|
While
the
Audit Committee has the responsibilities and powers set forth in this Charter,
it is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company’s financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is
the
responsibility of management and the independent auditor. Nor is it the duty
of
the Audit Committee to conduct investigations, to resolve disagreements,
if any,
between management and the independent auditor or to assure compliance with
laws
and regulations and ClearOne’s Code of Conduct.
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