Item 11. Executive Compensation.
COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis explains our strategy, design and decision-making around our compensation programs and practices as they relate to our Named Executive Officers as defined by the rules promulgated under the Exchange Act. The Compensation Committee has the responsibility for evaluating, approving and recommending to the Board of Directors MRV compensation programs. The Compensation Committee is also responsible for reviewing and evaluating the performance of our Chief Executive Officer and his direct reports, including all of the Named Executive Officers, relative to meeting corporate goals and objectives, and determining compensation levels for these officers based on this evaluation.
Philosophy
In 2016, the Company’s objectives included improving the market position of its Network Equipment business by completing major new product releases and improving its financial reporting and product line management (“PLM”) processes. As a result, the Company identified a mix of financial and non-financial objectives for the business, and tied certain executive compensation incentives to the achievement of those objectives. Additionally the Compensation Committee continues to believe that the compensation mix should include longer-term equity incentive compensation, in addition to base salary and short-term performance-based bonuses. The Compensation Committee determined that such long-term equity awards could attract and motivate its executive team and create a strong connection between executive compensation and long-term stockholder value. Accordingly, the compensation mix for the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer were designed to provide a balanced mix of annual and longer-term incentives.
Risk Oversight and Controls.
As a general matter, the Board of Directors has oversight responsibility with respect to risk management and is not responsible for day-to-day management of risk issues, which is the responsibility of management. The Board of Directors has approved a Transactional Authority Matrix, as amended from time to time, to address approval controls required for various types of actions. Areas of risk that are focused on at quarterly Board of Directors meetings are the review of contingent liabilities and significant litigation matters. With respect to compensation plans rewarding risk-taking, the Compensation Committee has reviewed our compensation policies and practices for all employees, including executive and non-executive officers, and determined that our compensation programs do not give rise to risks reasonably likely to have a material adverse effect on MRV. The Compensation Committee noted several design features of MRV’s incentive programs for all executive officers in particular that reduce the likelihood of excessive risk-taking and instead encourage behaviors that support enhancing stockholder value. For example:
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The program design for 2017 is intended to provide a balanced mix of annual and longer-term incentives.
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The performance-based incentives granted to Mr. Bonney, Mr. Krulik and Mr. Scheer include not only the achievement of various financial metrics, but also the achievement of specific objectives related to the Company’s strategic goals, incentivizing the Named Executive Officers to execute plans designed to enhance stockholder value.
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In November 2011, the Board of Directors approved stock ownership guidelines for directors and executive officers that require the directors and officers to obtain a meaningful equity ownership level before they can sell their equity grants, thereby increasing their alignment with stockholder value.
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Annual Compensation Methodology
The Compensation Committee annually reviews the salary, bonus and equity-based compensation given to the Named Executive Officers and other highly compensated employees, and otherwise meets from time to time related to executive new hires, promotions and terminations. The Compensation Committee also reviews and adopts the annual incentive opportunities for each of our subsidiaries and business segments. In addition, the Management Incentive Compensation Plan (the “Plan”) has provided for bonuses based on corporate and business unit performance, as applicable, and each year the Compensation Committee will adjust targets pursuant to the Plan. For Named Executive Officers, the Compensation Committee determines whether the officers’ performance justifies adjustments to base salaries, bonuses and granting of share-based compensation. The Compensation Committee then recommends its overall compensation plan to the full Board of Directors for its approval. The full Board of Directors also approves the annual operating plan of the Company for the year on which the financial targets of the Plan are based. In addition, the Compensation Committee may consider discretionary bonuses for performance exceeding expectations and uses its discretion in review of Plan targets and performance.
In 2014, the Board of Director’s approved long-term equity incentives as part of its compensation mix, a compensation strategy that continued into 2016 under the 2015 Long-Term Incentive Plan (“LTIP”). The Compensation Committee believes that Common Stock-based awards are viewed as an important component of total executive pay, aligning compensation with increasing stockholder value and, thus, providing an important benefit to stockholders. Stock options provide a financial reward only in the event that stockholder value is increased. Restricted stock and restricted stock unit awards allow for employees to have an ownership stake in the Company regardless of the current stock price. Generally, within compensation programs, equity grants are viewed as a cost-effective method for providing long-term incentive compensation.
The Role of Executive Officers in Determining Executive Compensation
Consistent with our Compensation Committee charter, the Compensation Committee makes recommendations to the Board as to the Company’s general compensation philosophy and all compensation decisions related to the Chief Executive Officer and his direct reports, which includes all of the Named Executive Officers other than the Chief Executive Officer. To aid in making those recommendations and decisions for 2016 for all Named Executive Officers other than the Chief Executive Officer, the Chief Executive Officer provided information and recommendations to the Compensation Committee in setting compensation in 2016, including information relating to the performance of the executive officers, appropriate levels and components of compensation, and the targets for business unit performance or other goals for our annual cash incentives.
In particular, our typical practice, continued through 2016, calls for our Chief Executive Officer to meet with the Compensation Committee near the beginning of the fiscal year to present for review and approval, as applicable;
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An analysis of the compensation of the Chief Executive Officer and each of the individuals reporting to the CEO at MRV, which included, among other things, their salary, short-term cash incentive bonus, long-term bonus incentive, and benefits;
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Recommendations on aggregate base salary merit increases by entity and entity bonus pools based on market global compensation data and our financial performance during the prior fiscal year for all employees on the payroll to be included as part of the annual budget process; and
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A recommended performance rating structure for determination of the annual cash incentive awards for our business units, which structure was based upon key metrics that, if achieved, would create positive market performance and was a basis for creation of stockholder value.
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At the end of each year, our Chief Executive Officer also assists our Compensation Committee in evaluating our corporate performance and providing performance ratings for each of his direct reports for the recently completed fiscal year. Our internal procedures regarding compensation for all executive officers and individuals with a direct reporting relationship to the Chief Executive Officer require that Board of Directors approval be sought and received. Our Human Resources department also supports the Compensation Committee in various other compensation-related tasks and in some cases acts pursuant to delegated authority to fulfill various functions in administering our compensation programs.
Determination of the Chief Executive Officer’s Compensation
The Compensation Committee is responsible for evaluating the performance of the Chief Executive Officer in light of Board-approved goals and objectives and recommending to the Board the Chief Executive Officer’s compensation level based on this evaluation. In making the recommendation regarding the long-term incentive component of Chief Executive Officer compensation, the Committee considers, among other factors, the Company’s performance and relative stockholder return, the value of similar incentive awards to chief executive officers at the Company’s competitors and other comparable companies, and the awards given to the Chief Executive Officer in past years.
On December 12, 2014, MRV appointed Mark J. Bonney, who had been serving as its Chief Financial Officer, as its President and Chief Executive Officer, effective December 15, 2014. In connection with Mr. Bonney’s appointment as President and Chief Executive Officer, MRV entered into an Amended and Restated Employment Agreement with Mr. Bonney on December 12, 2014. In March 2016, MRV entered into a new Amended and Restated Employment Agreement (the “Bonney Employment Agreement”) with Mr. Bonney. The Bonney Employment Agreement sets forth Mr. Bonney’s duties and responsibilities as Chief Executive Officer, the terms of his compensation, the effect of a potential future termination event, and other customary provisions regarding release of claims and covenants related to confidentiality, non-solicitation, non-competition, non-disparagement and claw back requirements. Under the Bonney Employment Agreement, Mr. Bonney receives a base salary at the annual rate of $400,155. Mr. Bonney received an initial annual target bonus opportunity equal to 80% of his annual base salary, which was increased to 100% of his annual base salary for 2017.
If Mr. Bonney is terminated by the Company without “cause” or by him for “good reason” (as those terms are defined in the Bonney Employment Agreement), he will receive up to 12 months’ payment of COBRA premiums and severance consisting of salary continuation of twelve months’ base salary, unless the termination occurs after a change in control, in which case the severance will be a lump sum payment equal to 24 months’ base salary, payment of COBRA premiums will be for 24 months and vesting of unvested Company equity awards assumed as part of the change in control will be accelerated.
The Role of Peer Groups and Benchmarking
As part of the competitive analysis of market pay practices for our Named Executive Officers, the Compensation Committee ratified a competition peer group that the Compensation Committee believed to be similar to us based on product and customer profile. The companies selected as “primary peers” are listed below:
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Allot Communications Ltd.
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Communications Systems Inc.
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Digi International Inc.
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Zhone Technologies Inc.
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Incentive Compensation Plan and Bonus Targets
In May 2016, the Board of Directors, upon recommendation by the Compensation Committee, approved amended performance targets to the Plan, our annual cash incentive plan, and bonus percentage targets for management and other participants under the Plan. In approving the targets for performance-based cash bonus compensation, the Compensation Committee and Board of Directors took the peer group selected into consideration and the committee’s philosophy of weighting performance-based compensation. The Board of Directors, upon recommendation by the Compensation Committee, approved the following 2016 target bonus amounts for the Named Executive Officers. The targets were calculated as percentages of annual base pay, and are set forth below for the listed Named Executive Officers.
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Name
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Bonus Target
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Mark J. Bonney
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80%
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Stephen G. Krulik
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40%
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Adam L. A. Scheer (1)
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50%
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(1)
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Mr. Scheer’s bonus percentage target for 2016 was set while he serving as MRV’s Senior Vice President of Product Line Management & Corporate Development. Mr. Scheer was appointed MRV’s Chief Operating Officer effective December 20, 2016, and his bonus percentage target for 2016 was not changed.
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The Plan, which set forth the terms for which an annual bonus was earned, provided that a participant’s bonus was based on the revenues and EBITDA of the business operating unit to which the participant of the Plan belonged. The targets were set above the prior year’s achievements, and were intended to incentivize the participants to push their teams to reach their goals. The Plan provided for over-achievement of the revenue goals of up to 110% and EBITDA goals of up to 120% of the target Bonus at 105% of revenue goal or 115% of the EBITDA goal, and a minimum of 75% of target bonus at 90% achievement of the revenue or EBITDA goals. The bonuses were not earned unless the participant was employed as of the end of the Plan year, regardless of the reason for termination (unless otherwise set forth in a severance agreement).
In January 2017, the Compensation Committee reviewed the financial performance of the Company as well as that of Mr. Bonney relative to his individual performance objectives for 2016. The Committee determined that the Company had not achieved the revenue or EBITDA components of the 2016 objectives and that no bonus would be paid with respect to the 2016 financial objectives. In addition to the financial objectives, Mr. Bonney was assigned certain individual performance objectives. The Committee determined that Mr. Bonney achieved 16.5% of the 50% of his target bonus for his individual performance objectives. Accordingly, Mr. Bonney was awarded a bonus in the amount of $26,410, or 8.25% of his total target bonus.
The Compensation Committee reviewed the financial performance of the Company as well as that of Mr. Krulik relative to his individual performance objectives for 2016. The Committee determined that the Company had not achieved the revenue or EBITDA components of the 2016 objectives and that no bonus would be paid with respect to the 2016 financial objectives. In addition to the financial objectives, Mr. Krulik was assigned certain individual performance objectives. In total, the Committee determined that Mr. Krulik had achieved 35% of the 50% of his target bonus for his individual performance objectives. Accordingly, Mr. Krulik was awarded a bonus in the amount of $16,706, or 17.5% of his total target bonus.
Mr. Scheer’s bonus percentage target and financial and individual performance objectives for fiscal 2016 were set when Mr. Scheer was serving in the Company’s OCS operating unit as the Senior Vice President of Product Line Management & Corporate Development. The Compensation Committee reviewed the financial performance of the Company’s OCS operating unit as well as that of Mr. Scheer relative to his individual performance objectives for 2016. The Committee determined that the Company’s OCS operating unit had not achieved the revenue or EBITDA components of the 2016 objectives and that no bonus would be paid with respect to the 2016 financial objectives. In addition to the financial objectives, Mr. Scheer was assigned certain individual performance objectives. The Committee determined that Mr. Scheer had achieved 50% of the 50% of his target bonus for his individual performance objectives. Accordingly, Mr. Scheer was awarded a bonus in the amount of $32,500, or 25% of his total target bonus.
Fiscal 2017 Bonus Targets.
In January 2017, in connection with Mr. Bonney’s position as Chief Executive Officer, Mr. Krulik’s position as Chief Financial Officer, and Mr. Scheer’s position as Chief Operating Officer, the Board of Directors, upon recommendation by the Compensation Committee, approved the following 2017 target bonus amounts for the Named Executive Officers, expressed as percentages of annual base pay:
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Name
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Bonus Target
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Mark J. Bonney
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100%
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Stephen G. Krulik
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50%
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Adam L. A. Scheer
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65%
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Fiscal Year 2016 and First Quarter of 2017 Compensation Decisions
Chief Executive Officer
Effective March 16, 2016, MRV and Mr. Bonney entered into the Bonney Employment Agreement, under which Mr. Bonney receives a base salary at the annual rate of $400,155. Mr. Bonney received an initial annual target bonus opportunity equal to 80% of his annual base salary, which was increased to 100% of his annual base salary for 2017. The terms of this agreement are discussed below under the subheading “Bonney Amended and Restated Employment Agreement.”
Chief Financial Officer
On December 12, 2014, following Mr. Bonney’s appointment as Chief Executive Officer, MRV promoted Stephen G. Krulik to Chief Financial Officer and Chief Accounting Officer. In connection with Mr. Krulik’s promotion to Chief Financial Officer, the Company entered into a letter agreement (the “Krulik Letter Agreement”) with Mr. Krulik dated December 12, 2014. The terms of these agreements are discussed below under the subheading “Krulik Letter Agreement and Change in Control Agreement.” Under the Krulik Letter Agreement, Mr. Krulik received a base salary at an initial annual rate of $215,000, which was increased to $238,500 annually on February 16, 2016. He also receives an annual target bonus opportunity, which was increased to 50% of his annual base salary for 2017.
Resignation of Chief Legal Officer
On March 15, 2016, in connection with her resignation from her position as the Company’s Chief Legal Officer and Secretary, Ms. Barnett entered into a Separation Agreement (the “Barnett Separation Agreement”) with the Company. Pursuant to the Barnett Separation Agreement, the Company agreed to pay Ms. Barnett’s bonus under the 2015 Management Incentive Compensation Plan in the amount of $35,000 on March 31, 2016, and Ms. Barnett signed a general release of claims. No other severance or bonus payments were owed to Ms. Barnett in connection with her resignation.
Chief Operating Officer
Mr. Scheer was named MRV’s Chief Operating Officer effective December 20, 2016. Mr. Scheer is party to a letter agreement with the Company dated October 1, 2015 (the “Scheer Letter Agreement”), which was amended on September 27, 2016 (the “Scheer Amendment,” and the Letter Agreement as so amended, the “Scheer Amended Letter Agreement”). The terms of these agreements are discussed below under the subheading “Scheer Letter Agreement and Scheer Amended Letter Agreement.” Mr. Scheer received a base salary at an initial annual rate of $260,000, which was increased to $284,000 annually effective January 1, 2017. He also receives an annual target bonus opportunity, which was increased to 65% of his annual base salary for 2017.
Stock Option Grants/Shares of Restricted Stock
Effective June 1, 2016, the Board of Directors of the Company approved annual equity grants to certain key employees.
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Name
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Title
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Number of Options
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Number of Shares of Restricted Stock
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Mark J. Bonney
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Chief Executive Officer
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60,000
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30,000
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Stephen G. Krulik
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Chief Financial Officer
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15,000
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7,500
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Adam L. A. Scheer
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Senior Vice President (1)
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15,000
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6,000
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(1)
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On June 1, 2016, Mr. Scheer was the Company’s Senior Vice President of Product Line Management & Corporate Development. Mr. Scheer was appointed the Chief Operating Officer, effective December 20, 2016.
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The equity grants occurred on June 1, 2016, and the shares of restricted stock for Messrs. Bonney, Krulik and Scheer will vest in three equal annual installments commencing on the first anniversary of the grant date, subject in each case to the executive’s continuing employment. The stock options have an exercise price equal to the fair market value per share on the option grant date, which was $10.95 per share. The options will vest in three equal annual installments commencing on the first anniversary of the grant date.
The foregoing description of the terms of the restricted stock and stock option grants is not complete and is qualified in its entirety by reference to the Form of MRV Communications, Inc. 2015 Long-Term Incentive Plan Restricted Stock Agreement and the Form of MRV Communications, Inc. 2015 Long-Term Incentive Plan Stock Option Agreement, which are included in the Company’s Form 8-K filed on June 4, 2015.
Policy Governing Grant of Stock Options
We adopted a written stock option policy, updated in January 2013, to supplement the provisions of our equity compensation plans and to govern the timing of stock option grants to employees generally and to officers and directors in particular. The goal in adopting the policy was to seek to ensure that equity-based awards were made in a manner consistent with the terms of the governing plans and at prices and times that are determinable, and only upon approval by the Compensation Committee, and the Board of Directors for certain executives including the Named Executive Officers.
Compensation Recoupment Policy
In the event of a material restatement of our annual financial statement included in a report on Form 10-K, the Chief Executive Officer and Chief Financial Officer must each deposit or cause to be deposited into an escrow account the difference between (i) the amount of any incentive compensation received for each of the applicable years covered by such restated financial statements, and (ii) the amount of such cash bonus or incentive compensation that would have been earned based on the information contained in the restated financial statements.
The amount deposited into escrow by an executive officer will be returned to the executive officer if a majority of the independent members of the Board determines that the financial restatement was not due to the recklessness of such executive officer. Otherwise, the escrowed amount will be paid to us.
Employee Benefits
Executives are generally entitled only to qualified plan benefits consistent with those offered to our other employees. We offer group life, disability, medical, dental and vision insurance and a 401(k) plan.
Effect of Section 162(m) of the Code
In general, under Section 162(m) of the Code, a publicly held corporation may not deduct as an expense for federal income tax purposes total compensation in excess of $1 million paid in any taxable year to each of its chief executive officer and other Named Executive Officers (other than the Chief Financial Officer). The deduction limitation does not apply, however, to qualifying “performance-based” compensation. Our LTIP, which was approved by our shareholders at the 2015 shareholders meeting, contains provisions allowing us to make performance-based equity and cash incentive awards that are intended to qualify for the “performance-based” compensation exemption.
The Compensation Committee is mindful of the limit on deductibility of certain non-performance-based compensation under Section 162(m) of the Code; however, the Committee is not constrained from authorizing the payment of compensation that is subject to the deduction limit and may do so, as and when it deems appropriate, and in our best interest, under the circumstances. Although the Compensation Committee considers the net cost to us in making its compensation decisions (including the potential limitation on deductibility of executive compensation), there is no assurance that we will be allowed to deduct all of the compensation paid to our executives.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Ms. Diefenderfer (Chair), Mr. Traub and Mr. Bellinger. Mr. Stecker was a member of the Compensation Committee until April 20, 2016. No member of the Compensation Committee was, from January 1, 2016 to present, an officer or employee of MRV or any of its subsidiaries; was formerly an officer of MRV or any of its subsidiaries; or had a relationship in 2016 requiring disclosure under applicable SEC regulations except as set forth in “Relationships of Officers and Directors” set forth above. No executive officer of MRV serves or served as an executive officer, director or member of the compensation committee (or other board committee performing equivalent functions, or in the absence of such committee, the entire board of directors) of another entity, any of whose executive officers served as a member of the Compensation Committee or as a director of MRV.
Stockholder Advisory Vote on Executive Compensation
The results of the stockholder advisory vote on executive compensation proposal at our annual meeting of stockholders held in June 2016 were very favorable, with approximately 99% of the shares that were voted approving, and 1% of the shares that voted voting against or abstaining from voting. In January 2012, we held an annual meeting of stockholders at which we submitted to stockholders an advisory vote on the frequency of holding an advisory vote on executive compensation. We appreciate the confidence our stockholders have in our Board of Directors oversight of executive compensation. Our Board of Directors continues to review and revise the Company’s compensation programs to keep the programs in line with the Board of Director’s strategic plan for the Company, and we will continue to take our stockholders’ advice to request an advisory vote of stockholders on executive compensation on a one-year frequency.
Compensation Committee Report
The Compensation Committee of MRV has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated under the Exchange Act and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.
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Compensation Committee of the
Board of Directors
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Jeannie H. Diefenderfer, Chair
Kenneth H. Traub
Brian Bellinger
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SUMMARY COMPENSATION TABLE
The following table summarizes information regarding compensation paid and the fair value of equity grants during each of the past three fiscal years to the Named Executive Officers serving during the year ended December 31, 2016.
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Year
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Salary
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Bonus
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Option
Awards(1)
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Stock
Awards
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Non-Equity
Incentive Plan
Compensation
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All Other
Compensation (2)
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Total
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Mark J. Bonney(3)
Chief Executive Officer
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2016
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$400,155
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-
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$294,000
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$328,500
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$26,410
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$13,550
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$1,062,615
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2015
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$360,500
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-
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$260,839
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$240,750
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$241,535
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$11,682
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$1,115,306
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2014
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$149,506
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$25,000
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$104,586
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$94,486
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-
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$9,114
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$382,692
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Stephen G. Krulik(4)
Chief Financial Officer
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2016
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$238,500
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-
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$73,500
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$82,125
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$16,706
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$8,457
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$419,288
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2015
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$215,500
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-
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$60,194
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$72,225
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$63,022
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$9,639
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$420,080
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2014
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$115,960
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$8,200
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$8,751
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$9,720
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-
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$10,941
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$153,572
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Adam L. A. Scheer(5)
Chief Operating Officer
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2016
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$260,000
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-
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$73,500
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$65,700
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$32,500
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$11,197
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$442,897
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2015
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$55,000
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$50,000(6)
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-
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-
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-
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$950
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$105,950
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2014
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-
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-
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-
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-
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-
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-
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-
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Paula W. Barnett(7)
Chief Legal Officer and Corporate Secretary
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2016
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$66,416
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-
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-
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-
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-
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$2,699
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$104,115
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2015
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$124,038
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-
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$24,077
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$19,260
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$35,000
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$3,045
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$205,421
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2014
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-
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-
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-
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-
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-
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-
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-
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(1)
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Amounts reflect the aggregate grant date fair value determined by MRV calculated in accordance with Financial Accounting Standards Board ASC 718 Compensation—Stock Compensation (“ASC 718”). The stated amounts do not reflect whether the recipient will actually realize a financial benefit from the awards. For additional information regarding valuation assumptions, refer to Note 12 (Share-Based Compensation) in the Notes to our financial statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.
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(2)
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None of the Named Executive Officers received perquisites in excess of $10,000, and therefore such amounts are not included in the “All other compensation” or “Total” columns. For each Named Executive Officer, “All other compensation” includes life insurance premiums paid by MRV and contributions made by MRV to the Company’s 401(k) savings plan on the officer’s behalf.
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(3)
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Prior to his appointment as the Chief Financial Officer of MRV on August 25, 2014, Mr. Bonney served as a non-employee director of MRV. In 2014, Mr. Bonney earned $43,333 in director’s fees paid in cash, including $14,000 for fees earned in the first fiscal quarter of 2014 but paid on December 16, 2013. In connection with his service as non-employee director, Mr. Bonney also received $25,000 in stock awards, and $25,000 in option awards for a total of $93,333 of total director’s compensation. On August 25, 2014, MRV appointed Mr. Bonney as its Chief Financial Officer, and Mr. Bonney remained as MRV’s Chief Financial Officer until December 12, 2014, during which time he earned $92,308 in salary and $25,000 as a bonus. Effective December 15, 2014, Mr. Bonney was appointed MRV’s Chief Executive Officer, and in this role he earned $13,865 in salary until the end of the 2014 fiscal year.
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(4)
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Mr. Krulik was appointed the Chief Financial Officer of MRV on December 12, 2014, and from this time until the end of the 2014 fiscal year he earned $8,269 in salary. Prior to December 12, Mr. Krulik had served as MRV’s Vice President, Finance, and in this role he earned $107,691 in salary and $8,200 as a bonus in fiscal 2014.
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(5)
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Mr. Scheer was appointed MRV’s Chief Operating Officer effective December 20, 2016 and from this time until the end of the 2016 fiscal year he earned $10,000 in salary. From October 12, 2015 until December 20, 2016, he was MRV’s Senior Vice President of Product Line Management & Corporate Development, and in this role he earned $250,000 in salary and $32,500 as a bonus in fiscal 2016.
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(6)
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Mr. Scheer received a $50,000 signing bonus pursuant to the Scheer Letter Agreement executed on October 1, 2015 in connection with Mr. Scheer being hired as MRV’s Senior Vice President of Product Line Management & Corporate Development.
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(7)
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Effective March 31, 2016, Ms. Barnett resigned as Chief Legal Officer and Corporate Secretary.
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GRANTS OF PLAN-BASED AWARDS IN 2016
The following table summarizes awards to Named Executive Officers during 2016:
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All Other Stock Awards: Number of Shares of Restricted Stock
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All Other Option Awards: Number of Securities Underlying Options
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Exercise Price of Option Awards (2)
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Grant Date Fair Value of Stock and Option Awards (3)
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Estimated future payout under non-equity incentive plan awards (1)
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Estimated future payout under equity incentive plan awards
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Name
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Grant Date
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Approval Date
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$
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$
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$
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$
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$
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$
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Mark J. Bonney
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6/1/2016
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6/1/2016
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$120,047
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$320,124
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$344,133
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-
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-
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-
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30,000
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60,000
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$10.95
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$622,500(3)
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Stephen G. Krulik
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6/1/2016
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6/1/2016
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$35,798
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$95,460
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$102,620
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-
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-
|
-
|
7,500
|
15,000
|
$10.95
|
$155,625(3)
|
|
Adam L. A. Scheer (4)
|
6/1/2016
|
6/1/2016
|
$48,750
|
$130,000
|
$139,750
|
-
|
-
|
-
|
6,000
|
15,000
|
$10.95
|
$139,200(3)
|
|
Paula W. Barnett (5)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
(1)
|
The amounts shown reflect the threshold, target, and maximum payouts under the 2016 annual performance-based cash bonus opportunity described in our “Compensation Discussion and Analysis.” The amounts paid under this program are set forth in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above.
|
|
|
|
|
(2)
|
Stock options awarded to executive officers have an exercise price equal to the closing price of our Common Stock on the grant date.
|
|
|
|
|
(3)
|
The grant date fair value of the restricted stock granted on June 1, 2016, determined in accordance with ASC 718, was $10.95 per share. The grant date fair value of the stock options granted on June 1, 2016 is computed in accordance with the provisions of ASC 718 using the Black-Scholes model of option valuation. The actual value, if any, the executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised.
|
|
|
|
|
(4)
|
Mr. Scheer’s bonus percentage target for 2016 was set while he serving as MRV’s Senior Vice President of Product Line Management & Corporate Development. Mr. Scheer was appointed MRV’s Chief Operating Officer effective December 20, 2016, and his bonus percentage target for 2016 was not changed.
|
|
|
|
|
(5)
|
Effective March 31, 2016, Ms. Barnett resigned as Chief Legal Officer and Corporate Secretary.
|
OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Grant
date
|
Number of
securities
underlying
unexercised
options
exercisable
|
Number of securities underlying unexercised options unexercisable
|
Option exercise price
|
Option expiration date
|
|
Number of shares of stock that have not vested
|
Market value of shares of stock that have not vested(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark J. Bonney
|
|
6/3/2013
|
6,203
|
-
|
$9.10
|
6/23/2023
|
|
-
|
-
|
|
|
|
6/2/2014
|
4,472
|
-
|
$13.32
|
4/1/2024
|
|
-
|
-
|
|
|
|
8/25/2014
|
11,613
|
1,874
|
$13.46
|
8/25/2024
|
|
-
|
-
|
|
|
|
6/1/2015
|
21,667
|
43,333
|
$9.63
|
6/1/2025
|
|
16,666
|
$135,828
|
|
|
|
6/1/2016
|
-
|
60,000
|
$10.95
|
6/1/2026
|
|
30,000
|
$244,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen G. Krulik
|
|
12/1/2014
|
1,334
|
666
|
$9.72
|
4/1/2023
|
|
333
|
$2,714
|
|
|
|
6/1/2015
|
5,000
|
10,000
|
$9.63
|
6/1/2025
|
|
5,000
|
$40,750
|
|
|
|
6/1/2016
|
-
|
15,000
|
$10.95
|
6/1/2026
|
|
7,500
|
$61,125
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam L. A. Scheer
|
|
10/15/2015
|
13,333
|
6,667
|
$13.40
|
10/15/2025
|
|
5,000
|
$40,750
|
|
|
|
6/1/2016
|
-
|
15,000
|
$10.95
|
6/1/2026
|
|
6,000
|
$48,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Paula W. Barnett (2)
|
|
-
|
-
|
-
|
-
|
-
|
|
-
|
-
|
|
|
|
|
(1)
|
Reflects a price of $8.15 per share, which was the closing sale price of our Common Stock on the NASDAQ Capital Market on December 30, 2016.
|
|
|
|
|
(2)
|
Effective March 31, 2016, Ms. Barnett resigned as Chief Legal Officer and Corporate Secretary.
|
OPTION EXERCISES AND STOCK VESTED IN 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Stock Awards
|
|
|
Shares
Acquired
on Exercise
|
|
Value Realized
on Exercise
($)(1)
|
|
Shares
Acquired
on Vesting
|
|
Value Realized
on Vesting
($)(2)
|
|
Mark J. Bonney
|
—
|
|
$—
|
|
8,334
|
|
$91,257
|
|
Stephen G. Krulik
|
—
|
|
$—
|
|
2,500
|
|
$27,375
|
|
Adam L. A. Scheer
|
—
|
|
$—
|
|
2,500
|
|
$30,000
|
|
Paula W. Barnett (3)
|
—
|
|
$—
|
|
-
|
|
$—
|
|
|
|
|
(1)
|
Calculated by multiplying the number of exercised stock options by the difference between the exercise price of those options and the closing market price of our Common Stock on the date of exercise.
|
|
|
|
|
(2)
|
The aggregate value realized upon the vesting and settlement of restricted stock represents the aggregate market price of the shares of our Common Stock on the date of settlement.
|
|
|
|
|
(3)
|
Effective March 31, 2016, Ms. Barnett resigned as Chief Legal Officer and Corporate Secretary.
|
Other Compensation Information
We did not grant to any Named Executive Officer, nor did any Named Executive Officer vest in, any stock appreciation rights, or similar instruments, during 2016. We generally do not have pension or other retirement plans, except for a 401(k) savings plan under which we make employer contributions on behalf of U.S. employees and pension plans where required for our foreign subsidiaries, and we make contributions to a 401(k)-type insurance fund for our Israeli employees. We do not have any nonqualified defined contribution or other nonqualified deferred compensation plans that provide for the deferral of compensation on a basis that is not tax-qualified.
Employment Agreements and Change of Control Arrangements
Bonney Amended and Restated Employment Agreement.
On December 12, 2014, MRV appointed Mark J. Bonney, who had been serving as its Chief Financial Officer, as its President and Chief Executive Officer, effective December 15, 2014. In connection with Mr. Bonney’s appointment as President and Chief Executive Officer, MRV entered into an Amended and Restated Employment Agreement with Mr. Bonney on December 12, 2014. In March 2016, MRV entered into a new Amended and Restated Employment Agreement (the “Bonney Employment Agreement”) with Mr. Bonney. The Bonney Employment Agreement sets forth Mr. Bonney’s duties and responsibilities as Chief Executive Officer, the terms of his compensation, the effect of a potential future termination event, and other customary provisions regarding release of claims and covenants related to confidentiality, non-solicitation, non-competition, non-disparagement and claw back requirements. Under the Bonney Employment Agreement, Mr. Bonney receives a base salary at the annual rate of $400,155. Mr. Bonney received an initial annual target bonus opportunity equal to 80% of his annual base salary, which was increased to 100% of his annual base salary for 2017.
If Mr. Bonney is terminated by the Company without “cause” or by him for “good reason”, he will receive up to 12 months’ payment of COBRA premiums and severance consisting of salary continuation of twelve months’ base salary, unless the termination occurs after a change in control, in which case the severance will be a lump sum payment equal to 24 months’ base salary, payment of COBRA premiums will be for 24 months and vesting of unvested Company equity awards assumed as part of the change in control will accelerate.
For purposes of the Bonney Employment Agreement, “cause” is defined as Mr. Bonney’s (a) willful failure to perform the material duties of the position of Chief Executive Officer after receiving written notice of such failure and being given twenty days to cure such failure; (b) willful misconduct injurious to the Company; (c) conviction of, or plea of nolo contendere to, a felony or any other crime involving moral turpitude, or (d) material breach of the Bonney Employment Agreement, which breach is not cured within 20 days after written notice to Mr. Bonney from the Company. No act or failure to act on the part of Mr. Bonney shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Company.
”Good reason” means, with certain exceptions, any of the following: (a) a material diminution in Mr. Bonney’s duties or responsibilities; (b) the Company requires Mr. Bonney, without his consent, to be based at a location which is more than 50 miles from Mr. Bonney’s principal work location as of the date of the request; or (c) Mr. Bonney’s base salary is reduced. Notwithstanding the above, (x) any reduction in base salary, annual short-term incentive compensation, bonus or other such payments that affects substantially all U.S. employees, does not constitute Good Reason and (y) provided that following a Change in Control transaction Mr. Bonney remains employed by the Company, a change in Mr. Bonney’s duties or responsibilities following such transaction does not constitute Good Reason under clause (a) above. For termination by Mr. Bonney for good reason to be effective, Mr. Bonney must provide the Company with written notice of the triggering event, and the Company has 45 days to cure the situation.
A “Change in Control” is deemed to have occurred if and when on the date of the earlier to occur of any of the following events:
(a) the acquisition by any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) a subsidiary of the Company, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) of beneficial ownership (within the meaning of Rule l3d-3 under the Exchange Act), of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, other than an acquisition directly from the Company;
(b) the consummation of a merger, consolidation or other form of reorganization involving the Company unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such merger, consolidation or reorganization beneficially own more than 50% of the combined voting power of the securities of the Company (or the surviving entity or any parent thereof, as the case may be) that are outstanding immediately after such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities of the Company immediately prior to such merger, consolidation or reorganization; or
(c) the consummation of a complete liquidation or dissolution of the Company, or of a sale or disposition of all or substantially all of the Company’s assets (whether in one transaction or a series of related transactions), unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such sale or disposition beneficially own more than 50% of the combined voting power of the securities of the person or entity that acquires such assets that are outstanding immediately after such sale or disposition.
Notwithstanding the foregoing, a Change in Control is not deemed to occur solely because fifty percent (50%) or more of the then outstanding voting securities is acquired by (1) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, (2) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition, or (3) any Person who, as of the date of the Bonney Employment Agreement, owns more than 25% of the outstanding voting securities.
The Company may terminate Mr. Bonney’s employment due to disability if Mr. Bonney is unable to substantially perform the essential duties and responsibilities of his employment for at least 90 consecutive calendar days or 120 or more calendar days during any calendar year period by reason of physical or mental incapacity. If Mr. Bonney dies during the term of his employment, his employment terminates on the date of his death. If Mr. Bonney’s employment is terminated due to death or disability, then he or his spouse or heirs shall receive up to 12 months’ payment of COBRA premiums and severance consisting of salary continuation of twelve months’ base salary. The agreement has other customary provisions regarding release of claims and covenants related to confidentiality, non-solicitation, non-competition, non-disparagement and claw back requirements if the Company’s financial statements are restated.
Krulik Letter Agreement and Change in Control Agreement.
In connection with Mr. Krulik’s promotion to the position of Chief Financial Officer and Chief Accounting Officer on December 12, 2014, the Company entered into a letter agreement (the “Krulik Letter Agreement”) with Mr. Krulik dated December 12, 2014. Under the Krulik Letter Agreement, Mr. Krulik received a base salary at an initial annual rate of $215,000, which was increased to $238,500 annually on February 16, 2016. He received an initial annual target bonus opportunity equal to 35% of his annual base salary, which was increased to 40% by the Board of Directors for 2016 and to 50% for 2017. The Krulik Letter Agreement does not provide for employment for a specified term and Mr. Krulik’s employment is on an at-will basis. However, effective May 5, 2016, the Company entered into a Change In Control Agreement with Stephen G. Krulik (the “Krulik Change in Control Agreement”) under which Mr. Krulik will be entitled certain compensation if his employment is terminated pursuant to a Severance Event (as defined below).
The Krulik Change in Control Agreement defines a Severance Event as a termination of Mr. Krulik’s employment with the Company and its subsidiaries by the Company without Cause (as defined in the Agreement), or by Mr. Krulik for Good Reason (as defined in the Agreement), in either case occurring within twelve months following the date of a Change in Control (as defined in the Agreement).
For purposes of the Krulik Change in Control Agreement, “cause” is defined as (1) Mr. Krulik’s repeated failure (other than temporarily while physically or mentally incapacitated) or refusal to perform the duties of his employment or other service if such failure or refusal shall not have ceased or been remedied within fifteen days following written warning from the Company or a subsidiary; (2) Mr. Krulik’s conviction of or plea of no contest to a felony; (3) Mr. Krulik’s breach of a fiduciary trust; (4) material unauthorized disclosure by Mr. Krulik to any person of any confidential information or trade secrets of the Company or any of its subsidiaries; (5) Mr. Krulik’s engaging in conduct or activities materially damaging to the property, business or reputation of the Company or a subsidiary or to the ability of Mr. Krulik to perform the duties of his employment or other services; (6) any act or omission by Mr. Krulik involving gross malfeasance or gross negligence in the performance of Mr. Krulik’s duties to the material detriment of the Company or a subsidiary; or (7) Mr. Krulik’s failure to comply in all material respects with the policies of the Company or a subsidiary or with any noncompetition, nonsolicitation or other restrictive covenants made by Mr. Krulik to the Company or a subsidiary; in each of such cases as determined by the Board or the Compensation Committee acting in its good faith discretion.
“Good Reason” means, without Mr. Krulik’s written consent, (i) a material diminution in Mr. Krulik’s duties or responsibilities; (ii) any reduction in Mr. Krulik’s annual base salary in effect immediately prior to the Change in Control; or (iii) the Company’s requiring Mr. Krulik to be based at any office or location more than fifty (50) miles from the office where Mr. Krulik was employed immediately prior to the Change in Control. Notwithstanding the foregoing, Mr. Krulik would not have “Good Reason” to terminate his employment merely because Mr. Krulik is no longer an employee of a public company and/or has a change in title, duties, authority, responsibilities or reporting structure as a result of a Change in Control transaction (including having a reporting relationship within a larger company).
A “Change in Control” is deemed to have occurred if and when on the date of the earlier to occur of any of the following events:
(a) the acquisition by any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) a subsidiary of the Company, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) of beneficial ownership (within the meaning of Rule l3d-3 under the Exchange Act), of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, other than an acquisition directly from the Company;
(b) the consummation of a merger, consolidation or other form of reorganization involving the Company unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such merger, consolidation or reorganization beneficially own more than 50% of the combined voting power of the securities of the Company (or the surviving entity or any parent thereof, as the case may be) that are outstanding immediately after such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities of the Company immediately prior to such merger, consolidation or reorganization; or
(c) the consummation of a complete liquidation or dissolution of the Company, or of a sale or disposition of all or substantially all of the Company’s assets (whether in one transaction or a series of related transactions), unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such sale or disposition beneficially own more than 50% of the combined voting power of the securities of the person or entity that acquires such assets that are outstanding immediately after such sale or disposition.
Notwithstanding the foregoing, a Change in Control is not be deemed to occur solely because fifty percent (50%) or more of the then outstanding voting securities is acquired by (1) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, (2) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition, or (3) any Person who, as of the date of the Krulik Change in Control Agreement, owns more than 25% of the outstanding voting securities.
The Agreement provides that if a Severance Event occurs, than Mr. Krulik will be entitled to certain compensation. Such compensation consists of any accrued and unpaid compensation of Mr. Krulik’s previously earned base salary, any unpaid amount of a bonus earned by Mr. Krulik during the previous year, any vested payments and benefits accrued by Mr. Krulik under any employee benefits plan, severance equal to nine months of Mr. Krulik’s base salary as of the Severance Event, and, if Mr. Krulik timely elects, up to nine months of COBRA group health plan continuation coverage. In addition, if a Change in Control occurs, all of Mr. Krulik’s outstanding stock option, restricted stock and other equity compensation awards will be subject to the vesting and other terms and provisions of the applicable award agreement and Company plan.
Scheer Letter Agreement and Scheer Amended Letter Agreement.
Mr. Scheer is party to a letter agreement with the Company dated October 1, 2015 (the “Scheer Letter Agreement”), which was amended on September 27, 2016 (the “Scheer Amendment,” and the Letter Agreement as so amended, the “Scheer Amended Letter Agreement”).
The Scheer Amended Letter Agreement sets forth the terms of Mr. Scheer’s compensation, the effect of a potential future termination event, and other customary provisions regarding release of claims and covenants related to confidentiality and non-disparagement. Mr. Scheer received an initial base salary at an annual rate of $260,000, which was increased to $284,000 annually effective January 1, 2017. He received an initial annual target bonus opportunity equal to 50% of his annual base salary, which was increased to 65% for 2017. The Scheer Amended Letter Agreement does not provide for employment for a specified term. If Mr. Scheer’s employment is terminated without “cause” or for “good reason” (as those terms are defined in the Scheer Amended Letter Agreement), he will be entitled to reimbursement of up to 12 months’ COBRA premiums and salary continuation of 12 months’ base salary, unless the termination occurs after a change in control, in which case the severance will be a lump sum payment equal to 12 months’ base salary.
For purposes of the Scheer Amended Letter Agreement, “cause” is defined as Mr. Scheer’s (a) willful failure to perform the material duties of Mr. Scheer’s position after receiving written notice of such failure and being given twenty days to cure such failure; (b) willful misconduct injurious to the Company; (c) conviction of, or plea of nolo contendere to, a felony or any other crime involving moral turpitude, or (d) material breach of the Scheer Amended Letter Agreement, which breach is not cured within 20 days after written notice. No act or failure to act on the part of Mr. Scheer shall be considered “willful” unless it is done or omitted to be done in bad faith or without reasonable belief that the action or omission was in the best interest of the Company.
“Good Reason” is defined as, without Mr. Scheer’s written consent: (a) a material diminution in Mr. Scheer’s duties or responsibilities; (b) the Company requiring Mr. Scheer to be based at a location which is more than 50 miles from Princeton, New Jersey; or (c) Mr. Scheer’s base salary being reduced. Notwithstanding the above, any reduction in base salary, annual short-term incentive compensation, bonus or other such payments that affects substantially all U.S. employees, does not constitute Good Reason.
“Change of Control” means the occurrence of any of the following events:
(a) the acquisition by any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) a subsidiary of the Company, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) of beneficial ownership (within the meaning of Rule l3d-3 under the Exchange Act), of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, other than an acquisition directly from the Company;
(b) the consummation of a merger, consolidation or other form of reorganization involving the Company unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such merger, consolidation or reorganization beneficially own more than 50% of the combined voting power of the securities of the Company (or the surviving entity or any parent thereof, as the case may be) that are outstanding immediately after such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities of the Company immediately prior to such merger, consolidation or reorganization; or
(c) the consummation of a complete liquidation or dissolution of the Company, or of a sale or disposition of all or substantially all of the Company’s assets (whether in one transaction or a series of related transactions), unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such sale or disposition beneficially own more than 50% of the combined voting power of the securities of the person or entity that acquires such assets that are outstanding immediately after such sale or disposition.
Potential Payments Upon Termination or Change in Control
Mark J. Bonney
Pursuant to the Bonney Employment Agreement, Mr. Bonney is entitled to payments upon a termination of his employment by the Company without Cause or by him for Good Reason, and upon his death or disability. The terms of these payments are discussed above under the subheading “Bonney Employment Agreement.”
Separation from Service without Cause or for Good Reason (assuming occurrence on December 31, 2016 under the Bonney Employment Agreement):
|
|
|
|
|
|
|
|
|
12 months’ base salary
|
|
$
|
400,155
|
|
|
12 months’ COBRA or equivalent (l)
|
|
$
|
13,913
|
|
|
Total estimated payments:
|
|
$
|
414,068
|
|
Separation from Service following a Change of Control (assuming occurrence on December 31, 2016 under the Bonney Employment Agreement):
|
|
|
|
|
|
|
|
|
24 months’ base salary
|
|
$
|
800,310
|
|
|
Acceleration in full of unvested equity awards
|
|
$
|
380,328
|
|
|
Acceleration in full of unvested options awards
|
|
$
|
—
|
|
|
24 months COBRA or equivalent (l)
|
|
$
|
27,826
|
|
|
Total estimated payments:
|
|
$
|
1,208,464
|
|
|
|
|
|
(1)
|
The estimated benefits amounts are calculated by reference to the amounts paid by MRV in 2016.
|
The LTIP and the Company’s 2007 Omnibus Incentive Plan, as amended (the “Omnibus Plan” and, together with the LTIP, the “Company Stock Plans”), provide for the vesting in full of all restricted stock and stock option awards granted under the plan to be accelerated upon a change of control of the Company, unless the Board of Directors or Compensation Committee otherwise provides. All equity grants under the Company Stock Plans provide for such accelerated vesting.
Stephen G. Krulik
Pursuant to the Krulik Change in Control Agreement, Mr. Krulik is entitled to payments upon a termination of his employment by the Company without Cause or by him for Good Reason following a Change in Control. The terms of these payments are discussed above under the subheading “Krulik Letter Agreement and Change in Control Agreement.”
Severance Event following a Change of Control (assuming occurrence on December 31, 2016 under the Krulik Change in Control Agreement):
|
|
|
|
|
|
|
|
|
9 months’ base salary
|
|
$
|
178,875
|
|
|
Acceleration in full of unvested equity awards
|
|
$
|
104,589
|
|
|
Acceleration in full of unvested options awards
|
|
$
|
—
|
|
|
9 months COBRA or equivalent (l)
|
|
$
|
14,731
|
|
|
Total estimated payments:
|
|
$
|
298,195
|
|
|
|
|
|
(1)
|
The estimated benefits amounts are calculated by reference to the amounts paid by MRV in 2016.
|
The Company Stock Plans provide for the vesting in full of all restricted stock and stock option awards granted under the plan to be accelerated upon a change of control of the Company, unless the Board of Directors or Compensation Committee otherwise provides. All equity grants under the Company Stock Plans provide for such accelerated vesting.
Adam L. A. Scheer
Pursuant to the Scheer Amended Letter Agreement, Mr. Scheer is entitled to payments upon a termination of his employment by the Company without Cause or by him for Good Reason, and upon his death or disability. The terms of these payments are discussed above under the subheading “Scheer Amended Letter Agreement.”
Separation from Service without Cause or for Good Reason (assuming occurrence on December 31, 2016 under the Scheer Amended Letter Agreement):
|
|
|
|
|
|
|
|
|
12 months’ base salary
|
|
$
|
260,000
|
|
|
12 months’ COBRA or equivalent (l)
|
|
$
|
19,642
|
|
|
Total estimated payments:
|
|
$
|
279,642
|
|
Separation from Service following a Change of Control (assuming occurrence on December 31, 2016 under the Scheer Amended Letter Agreement):
|
|
|
|
|
|
|
|
|
12 months’ base salary
|
|
$
|
260,000
|
|
|
Acceleration in full of unvested equity awards
|
|
$
|
89,650
|
|
|
Acceleration in full of unvested options awards
|
|
$
|
—
|
|
|
12 months’ COBRA or equivalent(l)
|
|
$
|
19,642
|
|
|
Total estimated payments:
|
|
$
|
369,292
|
|
|
|
|
|
(1)
|
The estimated benefits amounts are calculated by reference to the amounts paid by MRV in 2016.
|
The Company Stock Plans provide for the vesting in full of all restricted stock and stock option awards granted under the plan to be accelerated upon a change of control of the Company, unless the Board of Directors or Compensation Committee otherwise provides. All equity grants under the Company Stock Plans provide for such accelerated vesting.
Compensation of Non-Employee Directors
Our compensation program for directors is designed to achieve the following goals: compensation should fairly pay directors for work required for the Company; compensation should align directors’ interests with the interest of our stockholders; and the structure of the compensation should be simple, transparent and easy to understand.
Cash Compensation.
The annual cash retainer fee for all non-employee directors is $42,000, with no per meeting fees. The Chairman and Vice-Chairman are paid an additional annual cash retainer of $50,000. All non-Chair committee members receive an annual $4,000 cash retainer fee per committee, while the Chairs of the committees receive the following annual cash retainer fees: Audit Committee Chair, $10,000; Compensation Committee Chair, $7,000; and Nomination and Governance Committee Chair, $6,000. The cash retainer fees are paid in quarterly installments in advance, and are prorated as appropriate based upon the dates and capacities in which each individual non-employee director serves. Cash compensation paid in respect of the services of Messrs. Traub and Bellinger as non-employee directors is paid to Raging Capital Management, LLC (“RCM”).
Equity Compensation.
Each of the directors receives an equivalent of $50,000 of equity each year, which amount they can elect to receive in stock options or restricted stock, with a maximum 50% election in restricted stock. The annual grant date for the equity issuances is June 1 of each year. The number of shares to be received in stock options is determined by using the Black-Scholes valuation method to determine the value per option on the valuation date (three business days prior to the grant date), and the number of shares of restricted stock is determined by using the fair market value of our Common Stock on the valuation date, which is the average of the closing bid and ask quotations per share of our Common Stock as reported on the NASDAQ Stock Market LLC. The stock options and restricted stock each vest in full upon the earlier of one year from date of grant or a change of control, as defined in our LTIP or our Omnibus Plan, as applicable. The stock options have an exercise price equal to the closing price of the Company’s Common Stock on the date of grant.
Director Compensation Table
The following table summarizes the compensation of our non-employee directors in fiscal year 2016.
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Name
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Fees Earned
or Paid
in Cash
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Stock
Awards($)(1)
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Option
Awards($)(2)
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All Other
Compensation ($)
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Total($)
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Kenneth H. Traub (3)
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$100,000
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$25,229
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$25,238
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$—
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$150,467
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Robert M. Pons
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$102,000
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$25,229
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$25,238
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$—
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$152,467
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Matthew Stecker (4)
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$28,000
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-
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-
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$—
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$28,000
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Jeannie H. Diefenderfer
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$57,000
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$25,229
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$25,238
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$—
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$107,467
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Brian Bellinger (3) (5)
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$37,538
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-
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$63,896
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$—
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$101,434
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Jeffrey Tuder (6)
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$35,923
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$29,094
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$29,099
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$—
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$94,116
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(1)
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These restricted stock grants have a one year vesting period, subject to continued service to the Company. The fair value of the restricted stock on the date of the grants to Mr. Traub, Mr. Pons, Ms. Diefenderfer, and Mr. Tuder, determined in accordance with ASC 718, was $10.95 per share.
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(2)
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Amounts reflect the aggregate grant date fair value determined by MRV calculated in accordance with ASC 718. All of the director stock options granted in 2016 vest in full one year from the date of grant, have an exercise price equal to the average of the closing bid and ask quotations per share of the Company’s Common Stock as reported on the NASDAQ Capital Market on the date of grant, and have a 10-year term. The aggregate number of shares of restricted stock and stock option awards outstanding as of December 31, 2016 for our directors serving as of that date were: 67,000 and 88,988, respectively.
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(3)
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Cash compensation paid in respect of the services of Messrs. Traub and Bellinger as non-employee directors is paid to RCM. Mr. Traub is a Managing Partner of RCM and Mr. Bellinger is a Senior Analyst of RCM. RCM is the general partner of Raging Capital Master Fund, Ltd. (“RCM Fund”). RCM Fund beneficially owns 2,136,864 shares of the Company’s Common Stock.
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(4)
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Mr. Stecker served on the Board of Directors until MRV’s annual meeting held on June 15, 2016.
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(5)
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Mr. Bellinger joined the Board on February 26, 2016. On June 1, 2016 he received a pro rata award of stock options for the portion of the 12-month measurement period for which he was a member of the Board following February 26, 2016, as well as for the coming year.
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(6)
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Mr. Tuder joined the Board on April 6, 2016. On June 1, 2016 he received a pro rata award of restricted stock and stock options for the portion of the 12-month measurement period for which he was a member of the Board following April 6, 2016, as well as for the coming year.
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