SourceForge (LNUX) commentary as of Feb-22-2009* or Who is Scott L. Kauffman?, Pt II
Scott Kauffman was hired December 4th, 2008 and on January 5th was given an unconditional non-qualified stock option to purchase 2,250,000 shares of LNUX common at $0.63/share. These were not shares issued pursuant to SourceForge's formally adopted Employee Stock Option Plans e.g. their Equity Incentive Plan. And on February 10th, 2009, SourceForge Board Director, Carl Redfield resigned "Effective immediately".
Why is this a big deal?
It may not be, however, 1st, Carl Redfield was a member of SourceForge's [Compensation] Committee - the committee providing oversight for compensation to SourceForge officers, directors, and employees (see below, Charter For The Compensation Committee). Carl Redfield was a Class II Director. Pursuant to SourceForge's DEF 14A Form Of Proxy filed 10/21/2008 Carl Redfield was not up for reelection until 2010 [emphasis added]. This 'effective immediately' resignation is an anomaly. In addition, "...The Compensation Committee consists of Messrs. Wright, Redfield, and Howe, each of whom is “independent,” as such term is defined by the Marketplace Rules of NASDAQ. The Compensation Committee reviews and recommends to the Board of Directors the salaries, incentive compensation and benefits of our officers and employees and administers our stock plans and employee benefit plans...The Nominating Committee consists of Messrs. Anker, Gupta, and Redfield, each of whom is “independent,” as such term is defined by the Marketplace Rules of NASDAQ...The members of the Compensation Committee are directors David B. Wright (Chair), Carl Redfield and Scott E. Howe. Each of these individuals qualifies as (i) an “independent director” under the Marketplace Rules of NASDAQ, (ii) a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, and (iii) an “outside director” under Section 162(m) of the Code.The Company’s Board of Directors created the Compensation Committee to carry out the Board of Directors’ responsibilities to: (i) oversee SourceForge’s compensation policies, plans and benefits programs; (ii) oversee the compensation of SourceForge’s Chief Executive Officer and other executive officers (including officers reporting under Section 16 of the Securities Exchange Act of 1934); (iii) evaluate and approve the executive officer compensation plans, policies and programs of SourceForge; and (iv) oversee the design of SourceForge’s equity compensation and incentive plans. The Compensation Committee reviews and establishes the executive compensation packages offered to the Company’s Chief Executive Officer and other named executive officers. In doing so, its Compensation Committee is responsible for ensuring that such packages are consistent with its compensation program and philosophy..." Source: DEF 14/A filed 10/21/2008. Accordingly, it is incumbent upon the SourceForge Borad Of Directors, Sr. Management, and insiders, by definition, and purusant to State and Federal Securities Laws including but not limited to SEC Rule 10b-5 to fully disclose why Carl Redfield resigned effective immediately [emphasis added].
On June 29th, 2008 PopTok announced Scott L. Kauffman's hiring as their CEO stating that "...one of his first objectives is to mount a campaign for Series A funding...". Kauffman bailed PopTok within five (5) months of his hiring and engineered an unconditional non-qualified stock option to purchase 2,250,000 shares of LNUX common in addition to a SourceForge Director position.
Directors Gone Wild
So, what were the other Director's thinking? What was Suzanne Present thinking having been appointed to the Compensation Committee on October 15th, 2008? Neumeister, interim CEO, was still taking $50,000 in salary the same month Kauffman was hired (December 4th). Were the 2,250,000 shares alleged hush money? A desperate Board of Directors? An out of touch with reality and alleged criminally gross negligent Board of Directors? A Company and Board of Directors out of control? Directors Gone Wild? Or were they simply acting on behalf of non-insider shareholders pursuant to the normal course of business defense?
As of February 21st, 2009 SourceForge has failed to return calls regarding Carl Redfield's resignation on February 10th. The Company was contacted February 12th.
So...should SourceForge have hired a seasoned CEO with deep high-tech/publicly-held turnaround experience and maximize shareholder value of the respective LNUX assets e.g. Linux.com (Sun Microsystems, Linus Torvalds, Linux Foundation...), ThinkGeek (Best Buy...), or with someone effectively unemployed? and also inexplicably no longer a Director of Ubiquisys, again, within months of the announcement in April 2008? And what about ex Yahoo! General Counsel, and CBS Sr Exec Jonathan Sobel? One simply has to ask why did someone with these accomplishments move to SourceForge, and given he did, not as CEO?...[SourceForge is either at a tipping point of creating significant shareholder value or is effectively being strip-mined by incompetence, greed, and incompetence**.
* LNUX commentary as of 11/08/2008
** I will be the first to publicly congratulate Scott Kauffman if it is the former.
CHARTER FOR THE COMPENSATION COMMITTEE OF SOURCEFORGE, INC.
The purpose of the Compensation Committee of the Board of Directors (the “Board”) of SourceForge, Inc. (the “Company”) shall be to discharge the Board’s responsibilities relating to compensation of the Company’s executive officers and employees. The Compensation Committee has overall responsibility for approving and evaluating the executive officer and employee compensation plans, policies and programs of the Company.
The Compensation Committee also is responsible for producing an annual report on executive compensation for inclusion in the Company’s proxy statement.
COMMITTEE MEMBERSHIP AND ORGANIZATION:
The Compensation Committee will be appointed by and will serve at the discretion of the Board. The Compensation Committee shall consist of no fewer than two members. The members of the Compensation Committee shall meet (i) the independence requirements of NASDAQ Rule 4200, (ii) the non-employee director definition of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended, and (iii) the outside director definition of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The members of the Compensation Committee will be appointed by the Board on the recommendation of the Nominating and Governance Committee. Compensation Committee members will serve at the discretion of the Board.
COMMITTEE RESPONSIBILITIES AND AUTHORITY:
• The Compensation Committee shall annually review and approve: (a) the annual base salary, (b) the annual incentive bonus, including the specific goals and amount, (c) equity compensation, (d) employment agreements, severance arrangements, and change in control agreements/provisions, and (e) any other benefits, compensation or arrangements of the CEO and the executive officers of the Company.
• The Compensation Committee may make recommendations to the Board with respect to incentive compensation plans.
• The Compensation Committee may form and delegate authority to subcommittees when appropriate.
• The Compensation Committee shall make regular reports to the Board.
• The Compensation Committee shall annually review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.
• The Compensation Committee shall annually review its own performance.
• The Compensation Committee shall have the sole authority to both retain and terminate any compensation consultant used by the Company to assist in the evaluation of executive officer compensation and to approve the consultant’s fees and other retention terms.
• The Compensation Committee shall have the authority to adopt, amend and terminate plans, programs and policies that provide retirement and welfare benefits to employees. With respect to these matters, the Compensation Committee may delegate authority to the Company’s management when appropriate.
• In performing its responsibilities, the Compensation Committee shall have authority to obtain advice and assistance from internal or external legal, accounting or other advisors.
Source: SourceForge Corporate Website, Corporate Governance