DEF 14A of Aviat Networks, Inc.
Filed Feb 12, 2018 · FY20170001377789-18-000016
Directors’ Biographies
Directors’ Biographies The following is a brief description of the business experience and background of each nominee for director, including the capacities in which each has served during at least the past five years: Mr. John Mutch, age 61, currently serves as Chairman of the Board and has served on the Board since January 2015. He served on the Board of Directors of Steel Excel Inc. (“Steel Excel”), a provider of drilling and production services to the oil and gas industry and a provider of event-based sports services and other health-related services, from 2007 to 2016. From December 2008 to January 2014, he served as Chairman of the Board of Directors and Chief Executive Officer of Beyondtrust Software, a privately-held security software company. Mr. Mutch has been the founder and managing partner of MV Advisors LLC (“MV Advisors”), a strategic block investment firm that provides focused investment and strategic guidance to small and mid-cap technology companies, since December 2005. Prior to founding MV Advisors, in March 2003, Mr. Mutch was appointed by the U.S. Bankruptcy court to the Board of Directors of Peregrine Systems, Inc. (“Peregrine Systems”), a provider of enterprise asset and service management solutions. He assisted that company in a bankruptcy work-out proceeding and was named President and Chief Executive Officer in July 2003. Previous to running Peregrine Systems, Mr. Mutch served as President, Chief Executive Officer and a director of HNC Software, an enterprise analytics software provider. Before HNC Software, Mr. Mutch spent seven years at Microsoft Corporation in a variety of executive sales and marketing positions. Mr. Mutch previously served on the Boards of Directors of Phoenix Technologies Ltd., a leader in core systems software products, services and embedded technologies, Edgar Online, Inc., a provider of financial data, analytics and disclosure management solutions, Aspyra, Inc., a provider of clinical and diagnostic information systems for the healthcare industry, Overland Storage, Inc., a provider of unified data management and data protection solutions, and Brio Software, Inc., a provider of business intelligence software. He has served as a director at Agilysys, Inc., a provider of information technology solutions, since March 2009. Since April 2017, Mr. Mutch has served as a director at Maxwell Technologies, Inc., a manufacturer of energy storage and power delivery solutions for automotive, heavy transportation, renewable energy, backup power, wireless communications and industrial and consumer electronics applications, and since July 2017 he has served as a director at YuMe, Inc., a provider of digital video brand advertising solutions. Mr. Mutch brings to the Board extensive experience as an executive in the technology sector. He also has experience as a director at several public companies in the technology sector. He is or has been a member of the audit committee of various public and private companies, and brings valuable financial expertise to the Board. Mr. Wayne Barr, Jr., age 53, has served as a member of the Board since November 2016. Mr. Barr is currently the chairman of the board of directors of Concurrent Computer Corporation, a global software and solutions company (NASDAQ: CCUR), a position he has held since July 2017. He has served on the Concurrent board since August 2016 and serves on the compensation committee and nominating committee and is chairman of the audit committee of the Concurrent board. Mr. Barr also serves on the board of directors of HC2 Holdings, Inc. (“HC2”), a diversified holding company, a position he has held since January 2014. From January 2014 until July 2016, Mr. Barr served on the Audit Committee (chairman), Compensation Committee and Nominating and Governance Committee of the HC2 Board of Directors. Mr. Barr also serves as a director of four HC2 private portfolio companies. Mr. Barr has also served as the Managing Director of Alliance Group of NC, LLC, a full-service real estate brokerage firm in Raleigh, NC since January 2013, and as the Principal of Oakleaf Consulting Group LLC, a management consulting firm focusing on technology and telecommunications companies, since he founded the company in 2001. He previously served as a founder and President of Capital & Technology Advisors, Inc. from October 2003 until 2006 and served as Senior Managing Director of Communication Technology Advisors LLC from May 2001 to June 2005. From 1999 until 2001, Mr. Barr was a member of TechOne Capital Group, a private investment firm. From 1995 until 1999, Mr. Barr served as an Associate General Counsel of CAI Wireless Systems Inc., which was acquired by WorldCom Inc. in August 1999. He began his career as an attorney in private practice. Mr. Barr is a director of IoSat Holdings Ltd., a private satellite services provider. Mr. Barr was a director of Evident Technologies Inc. from 2005 until 2016, and has served on the Boards of Directors of Globix Corporation from 2004 to 2005, Anacomp from 2002 to 2003, Leap Wireless International Inc. from 2003 to 2004 and NEON Communications Group, Inc. in 2005. Mr. Barr brings to the Board his extensive experience as a senior executive and a member of various boards of directors. Mr. Kenneth Kong, age 43, has served as a member of the Board since November 2016. He is a Senior Vice President at Steel Services, Ltd. (“Steel Services”), a management and advisory company that provides management services to Steel Partners Holdings, L.P. and its affiliates. As an investment professional at Steel Services, Mr. Kong sources and analyzes investment opportunities in publicly traded securities in a diverse number of industries. He is also a member of the Mergers and Acquisitions team at Steel Services focused on deal sourcing, due diligence and analysis. Since joining the firm in 1997 as an investment analyst, Mr. Kong also performed in various key positions in managing investor relations, marketing and administration for Steel Partners II, L.P., Steel Partners Japan Strategic Fund, L.P. and Steel Partners China Access I, L.P. From 2006 to 2016, he managed Steel Partners China Access I, L.P., a private investment fund focused on investing in publicly listed state owned enterprises in the People’s Republic of China. Mr. Kong currently serves as a Trustee BNS Holding Liquidating Trust, Inc. since 2012 and as a Director of Ore Holdings, Inc. since October 2010. Additionally, he has served as a Director on several private companies. Mr. Kong’s brings to the Board an extensive knowledge of capital allocation and related matters. Mr. Michael A Pangia, age 56, has been our President and CEO and a member of the Board since July 2011. From March 2009 to July 2011, he served as our Chief Sales Officer where he was responsible for company-wide operations of the Global Sales and Services organization. Prior to joining Aviat, Mr. Pangia served as senior vice president, Global Sales Operations and Strategy, at Nortel, where he was responsible for all operational aspects of the Global Sales function. Prior to that, he was president of Nortel’s Asia region, where his key responsibilities included sales and overall business management for all countries in the region where Nortel did business. Mr. Pangia’s current and prior service as a senior executive officer with large technology driven companies with international operations provide him with an extensive knowledge base of complex management, financial, operational and governance issues faced by public companies with global operations. He also brings a high level of financial literacy to the Board through both formal education and over 15 years’ experience in multiple finance functional areas, including cost accounting, financial planning and analysis, and mergers and acquisitions.
Directors’ Biographies
Mr. John J. Quicke, age 68, has served as a member of the Board since January 2015. Mr. Quicke has served as a director of Rowan Companies, plc, an offshore contract drilling company, since January 2009. Since January 2016, he has served as a consultant, and as Chairman of Steel Energy Services LTD, a subsidiary of Steel Partners Holdings, L.P. He served on the Board of Directors of Steel Excel from 2007 to July 2016, and served as its Interim President and Chief Executive Officer from January 2010 to March 2013. In March 2013, he was named President and Chief Executive Officer of Steel Excel’s Steel Energy segment and served in that capacity until December 2015. Mr. Quicke served as Managing Director and operating partner of Steel Partners LLC, a subsidiary of Steel Partners Holdings L.P. from September 2005 until December 2015. Mr. Quicke has been associated with Steel Partners and its affiliates since September 2005. Previously, Mr. Quicke served in various capacities at Sequa Corporation, a diversified manufacturer, including Vice Chairman and Executive Officer, President, and as a director of the company. Mr. Quicke previously served as a Vice President and director of Handy & Harman Ltd. (“H&H”), director, President and Chief Executive Officer of DGT Holdings Corp. and as a director of Angelica Corporation, a provider of health care linen management services, Layne Christensen Company, a global solutions provider for essential natural resources, NOVT Corporation, a vascular brachytherapy business, JPS Industries, Inc., a manufacturer of mechanically formed glass and aramid substrate materials for specialty applications and H&H. Mr. Quicke’s extensive experience, including board service on ten public companies over 20 years, over 25 years of significant operating experience, which includes participation in acquisition and disposition transactions, as well as his financial and accounting expertise, enable him to assist in the effective management of the Company. Dr. James C. Stoffel, age 71, has served as a member of the Board since January 2007 and a lead independent director from July 2010 to February 2015. Presently, Dr. Stoffel is on the Board of Directors of Harris Corporation, of which he has been a member since August 2003, and is also a member of its Corporate Governance Committee. Additionally, since 2006 he has served as General Partner of Trillium International, LLC, a private equity company, and is a senior advisor to other private equity companies. He also serves on the boards of the following privately held companies: Display Data, Omni-ID Ltd., Quintel Ltd., and Intrinsiq Ltd. Prior to his retirement, Dr. Stoffel was Senior Vice President, Chief Technical Officer and Director of Research and Development of Eastman Kodak Company (“Kodak”). He held this position from 2000 to April 2005. He joined Kodak in 1997 as Vice President and Director, Electronic Imaging Products Research and Development, and became Director of Research and Engineering in 1998. Prior to joining Kodak, he was with Xerox Corporation (“Xerox”), where he began his career in 1972. His most recent position with Xerox was Vice President, Corporate Research and Technology. Dr. Stoffel serves on the Advisory Board for Research and Graduate Studies at the University of Notre Dame. Dr. Stoffel’s prior service as a senior executive of large, publicly traded, technology driven companies, and his more than 30 years’ experience focused on technology development, provide him with an extensive knowledge of the complex technical research and development, management, financial and governance issues faced by a public company with international operations. This experience brings our Board important knowledge and expertise related to research and development, new product introductions, strategic planning, manufacturing, operations and corporate finance. His experience as an advisor to private equity firms also provides him with additional knowledge related to strategic planning, capital raising, mergers and acquisitions and economic analysis. Dr. Stoffel also has gained an understanding of public company governance and executive compensation through his service on public company boards, including as a lead independent director.
DIRECTOR COMPENSATION AND BENEFITS
DIRECTOR COMPENSATION AND BENEFITS The form and amount of director compensation is reviewed and assessed from time to time by the Compensation Committee with changes, if any, recommended to the Board for action. Director compensation may take the form of cash, equity, and other benefits ordinarily available to directors. Directors who are not employees of ours received the following fees, as applicable, for their services on our Board during fiscal year 2017:
DIRECTOR COMPENSATION AND BENEFITS
| • | $60,000 basic annual cash retainer, payable on a quarterly basis, which a director may elect to receive in the form of shares of common stock; |
DIRECTOR COMPENSATION AND BENEFITS
| • | $25,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Board; |
DIRECTOR COMPENSATION AND BENEFITS
| • | $10,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Audit Committee; |
DIRECTOR COMPENSATION AND BENEFITS
| • | $5,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Governance and Nominating Committee; |
DIRECTOR COMPENSATION AND BENEFITS
| • | $8,000 annual cash retainer, payable on a quarterly basis, for service as Chairman of the Compensation Committee; and |
DIRECTOR COMPENSATION AND BENEFITS
| • | Annual grant of restricted shares of common stock valued (based on market prices on the date of grant) at $60,000, with 100% vesting at the earlier of (1) the day before the annual stockholders’ meeting, or (2) one year from grant date, subject to continuing service as a director. |
DIRECTOR COMPENSATION AND BENEFITS
Directors are eligible to defer payment of all or a portion of the retainer fees and restricted stock awards that are payable to them. Directors may choose either a lump sum or installment distribution of such fees and awards. Installment distributions are payable in annual installments over a period no longer than 10 years. We reimburse each non-employee director for reasonable travel expenses incurred and in connection with attendance at Board and committee meetings on our behalf, and for expenses such as supplies and continuing director education costs, including travel for one course per year. Employee directors are not compensated for service as a director.
Fiscal Year 2017 Compensation of Non-Employee Directors
Fiscal Year 2017 Compensation of Non-Employee Directors Our non-employee directors received the following aggregate amounts of compensation in respect of fiscal year 2017:
Fiscal Year 2017 Compensation of Non-Employee Directors
| Name | Fees Earned and Paid in Cash | Stock Awards (2) | Total | | | ($) | ($) | ($) | | Wayne Barr, Jr. (1) | 30,000 | 61,741 | 91,741 | | Kenneth Kong (1) | 30,000 | 61,741 | 91,741 | | John Mutch | 95,000 | 61,741 | 156,741 | | John J. Quicke | 65,000 | 61,741 | 126,741 | | Dr. James C. Stoffel | 68,000 | 61,741 | 129,741 |
Fiscal Year 2017 Compensation of Non-Employee Directors
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Fiscal Year 2017 Compensation of Non-Employee Directors
| 1. | Mr. Barr and Mr. Kong became directors in November 2016. |
Fiscal Year 2017 Compensation of Non-Employee Directors
| 2. | The amounts shown in this column reflect the aggregate grant date fair value of the stock awards and option awards granted to our non-employee directors computed in accordance with FASB ASC Topic 718. The assumptions made in determining the fair values of our stock awards and option awards are set forth in Notes 1 and 8 to our fiscal year 2017 Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2017, as filed with the SEC on September 6, 2017. |
Fiscal Year 2017 Compensation of Non-Employee Directors
As of June 30, 2017, our non-employee directors held the following numbers of unvested restricted shares of common stock and stock options, all of which were granted under the 2007 Plan:
Fiscal Year 2017 Compensation of Non-Employee Directors
| Name | Unvested Stock Awards | | Wayne Barr, Jr. | 4,474 | | Kenneth Kong | 4,474 | | John Mutch | 4,474 | | John J. Quicke | 4,474 | | Dr. James C. Stoffel | 4,474 |
Overview and Summary
| • | In reviewing the elements of our executive compensation program — base salary, annual incentives, long-term incentives and post-termination compensation — our Compensation Committee reviews market data from similar companies. |
Overview and Summary
| • | Our competitive positioning philosophy is to set compensation at approximately the 50th percentile of compensation at peer group companies with allowances for internal factors such as tenure, individual performance and the nature of the relative scope and complexity of the role. |
Overview and Summary
| • | Our annual incentive program is based on specific Company financial performance goals for the fiscal year, and includes provisions to “claw back” any excess amounts paid in the event of a later correction or restatement of our financial statements. |
Compensation Governance Best Practices
| • | Pay for performance: A substantial portion of our executives’ compensation opportunity is tied to achieving specified corporate objectives. In fiscal year 2017, 100% of the Annual Incentive Plan (“AIP”) was performance based and at-risk, subject to achievement of certain financial objectives. Under our Long-Term Incentive Plan (“LTIP”), half the equity awards were in the form of performance shares subject to achievement of a targeted financial measure. |
Compensation Governance Best Practices
| • | Mix of short-term and long-term compensation: Short term compensation for our executive officers is comprised of base salaries and the AIP, which pays out only to the extent that the Company meets its financial targets. Our LTIP, representing long-term compensation, is comprised of performance shares and service based restricted stock. Performance shares are earned, if the performance criteria are met, at the end of a three-year plan cycle, while service-based restricted stock vests over a three-year period. |
Compensation Governance Best Practices
| • | Independent compensation consultant: The Compensation Committee directly retains the services of Pearl Meyer, an independent compensation consultant, to advise it in determining reasonable and market-based compensation policies. |
Compensation Governance Best Practices
| • | No single trigger change of control acceleration: Except for a market-based stock unit award of 50,000 shares made to Michael Pangia, our President and Chief Executive Officer, which is subject to accelerated vesting upon a change of control, as described below under “Potential Payments Upon Termination or Change of Control”, change of control arrangements in employment agreements with our executive officers provide for acceleration of vesting for outstanding equity awards only in the event that we are both subject to a change in control and the executive officer’s employment terminates thereafter for reasons specified in the employment agreements. |
Independent Compensation Consultant for Compensation Committee
Independent Compensation Consultant for Compensation Committee The Compensation Committee has the authority under its charter to engage the services of outside advisors, experts and others for assistance. Accordingly, the Compensation Committee has hired Pearl Meyer as an independent consultant to advise the Compensation Committee on matters related to the compensation of the Company’s executive officers. All services that Pearl Meyer provided Aviat in fiscal year 2017 were approved by the Compensation Committee and were related to executive or Board compensation. Pearl Meyer provides an annual review of the Company’s compensation practices, reviews and makes recommendations regarding Aviat’s compensation peer groups, and provides independent input to the Compensation Committee on programs and practices.
Competitive Benchmarking
Competitive Benchmarking Our compensation program for all of our officers is addressed in the context of competitive compensation practices. Our management and Compensation Committee consider external data to assist in benchmarking total target compensation. For fiscal year 2017, targets for total cash and cash based compensation (base salary and short-term incentive compensation), long-term incentives and total direct compensation (base salary and short-term and long-term incentive compensation) for Messrs. Pangia, Marimon and Stumpe were set based on data collected from our peer group companies and from a published survey source, the Radford Global Technology Survey for our other named executive officers. In considering data from the Radford Global Technology Survey, we focused on results for technology companies with annual revenues of less than $500 million. The peer group companies selected and used for compensation comparisons are reflective of our market for executive talent and business line competitors. Also, the overall composition of the peer group reflects companies of similar complexity and size to us. For fiscal year 2017, these peer group companies included:
Competitive Benchmarking
| ADTRAN Inc. | Bel Fuse, Inc. | | CalAmp Corp. | Calix, Inc. | | Cohu, Inc. | Comtech Telecommunications Corp. | | DragonWave, Inc. | Extreme Networks, Inc. | | Harmonic Inc. | Infinera Corporation | | Ixia | KVH Industries | | MRV Communications | NeoPhotonics Corporation | | Novatel Wireless, Inc. | ShoreTel, Inc. | | Sonus Networks, Inc. | |
Competitive Benchmarking
Each year, the Compensation Committee reviews the appropriateness of the comparison group used for assessing the compensation of our CEO and other named executive officers. We made significant modifications to the peer group since fiscal year 2016 so that our peer group roster better reflects our company size and business model, and also reflects merger and acquisition activity in our sector. We removed Aruba Networks and Emulex Corporation since they are no longer publicly traded, and added KVH Industries and Novatel Wireless to bolster our overall sample size and position peer median revenue and market capitalization more closely to that of our company. Data for our peer group companies was collected directly from these companies’ proxy statements.
Total Compensation Elements
| • | annual incentive program |
Total Compensation Elements
| • | long-term compensation — equity incentives |
Total Compensation Elements
Each named executive officer’s performance is measured against factors such as long and short-term strategic goals and financial measures of our performance, including factors such as revenue, operating income, cash flow from operations, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings per share. Our compensation policy and practice is to target total compensation levels for all officers, including our named executive officers, nominally at the 50th percentile for similar positions as derived from the market composite data, assuming experience in the position and competent performance. The Compensation Committee may decide to target total compensation above or below the 50th percentile for similar positions in unique circumstances based on an individual’s background, experience, and relative complexity and scope of the applicable role. Though compensation levels may differ among our named executive officers based upon competitive factors and the role, responsibilities and performance of each named executive officer, there are no material differences in our compensation policies or in the manner in which total direct compensation opportunity is determined for any of our named executive officers. Because our CEO has significantly greater duties, responsibilities and accountabilities than our other named executive officers, the total compensation opportunity for the CEO is higher than for our other named executive officers. In determining CEO and other named executive officer compensation, the Board also considers the ratio between our CEO’s compensation and the average compensation of our other named executive officers as compared with similar ratios for peer group companies. For fiscal year 2017, that ratio was 2.58, compared to a median ratio of 2.41 in the peer group companies.
Annual Incentive Plan
Annual Incentive Plan The short-term incentive element of our executive compensation program is currently comprised of our AIP. Our AIP is designed to motivate our executives to focus on achievement of our short-term financial goals. The CEO reviews his recommendations for each named executive officer with the Compensation Committee, taking into account market data obtained from Pearl Meyer, the Compensation Committee’s independent consultant. Based on recommendations by the CEO, and as specified in any applicable employment agreement, the Compensation Committee recommends to the Board an annual incentive compensation target, expressed as a percentage of base salary, for each executive officer in August. Each named executive officer’s target annual incentive percentage is benchmarked against the 50th percentile within the market composite for his or her specific role. The Compensation Committee also recommends to the Board specific Company financial performance measures and targets including the relative weighting and payout thresholds. The financial targets are aligned with our Board-approved annual operating plan, and during the year periodic reports are made to the Board about our performance compared with the targets. Under the AIP, a significant portion of the executive’s annual compensation is tied directly to our financial performance. The target amount of annual incentive compensation under our AIP, expressed as a percentage of base salary, generally increases with an executive’s level of management responsibility. AIP target incentive can represent up to 100% of the base salary compensation for our named executive officers and may be paid in the form of cash, stock or a combination of the two. For fiscal year 2017, AIP target incentives were set at 100% of base salary for Mr. Pangia, 70% of base salary for Mr. Stumpe and 65% of base salary for our other named executive officers. If performance results meet target levels, our executives can earn up to a maximum of 100% of their target incentive. No incentive can be earned for performance below the minimum threshold. For fiscal year 2017, the AIP provided for an all cash payout. The performance metric was based on the achievement of an adjusted EBITDA target with a potential payout triggered at threshold adjusted EBITDA targets. The total available cash pool was restricted to specific percentages of adjusted EBITDA. Adjusted EBITDA was calculated by excluding charges for share-based compensation, restructuring, and other one-time/non-recurring income or expenses from GAAP-based EBITDA. The threshold amounts were established and approved in August 2016. The plan provided for no payout if the minimum adjusted EBITDA threshold was not met, and a total available cash pool equal to 20% of adjusted EBITDA for achievement, between the minimum threshold and a target threshold.
Fiscal Year 2017 Annual Incentive Plan - Minimum, Target and Maximum Thresholds
Fiscal Year 2017 Annual Incentive Plan - Minimum, Target and Maximum Thresholds
Fiscal Year 2017 Annual Incentive Plan - Minimum, Target and Maximum Thresholds
| | | Results-Driven Entitlement | | | Fiscal Year 2017 Annual Incentive Plan | | Performance | Payout | | Metric | Tiers | ($) | (As % of Award Target) | | Adjusted EBITDA | Minimum Threshold | $910,000 | 6% | | | Target Threshold | $15,250,000 | 100% | | | Maximum Threshold | $15,250,000 | 100% |
Fiscal Year 2017 Annual Incentive Plan - Minimum, Target and Maximum Thresholds
In fiscal year 2017, the AIP did not guarantee payout of the specified threshold and target amounts, and the Compensation Committee considered the adjusted EBITDA thresholds to be challenging. During the 2017 fiscal year, we achieved the minimum threshold target for AIP awards; therefore, all named executive officers received a payout as shown in the summary compensation table below.
Long-Term Compensation — Equity Incentives
Long-Term Compensation — Equity Incentives The Compensation Committee uses the LTIP as a means for determining awards of stock appreciation rights, restricted shares, restricted stock units, performance shares, and other stock-based awards to our officers and other executives based on multi-year performance. All of the LTIP awards are granted under our 2007 Stock Equity Plan (“2007 Plan”). Our LTIP is designed to motivate our executives to focus on achievement of our long-term financial goals. Equity awards motivate our executives to achieve our long-term goals and to the extent our results affect our stock price, link such results with the performance of our stock over a three to four -year period. Using equity awards helps us to retain executives, encourage share ownership and maintain a direct link between our executive compensation program and the value and appreciation in the value of our stock. Performance Shares. In past fiscal years, the Compensation Committee recommended performance share awards that are earned, if the specified performance criteria are met, at the end of a three year plan cycle. The maximum possible entitlement to performance shares will occur if 100% of the specified target is achieved. In addition, irrespective of Company performance versus target, there is no entitlement to performance shares unless the award recipient continues to be employed throughout the multi-year period. Performance shares are subject to repurchase by the Company at $0.01 per share if eligible employment ends during the performance measurement period and to the extent the maximum performance is not achieved during the performance measurement period. Service-Based Restricted Stock. Service-based restricted stock awards are awards of stock at the start of a vesting period which is subject to repurchase for nominal consideration if the specified vesting conditions are not satisfied. In addition to their use as a component of the LTIP, awards of service-based restricted stock may be made on a selective basis to individual executives primarily to facilitate retention and succession planning or to replace the value of equity awards that may have been forfeited as a result of the executive’s leaving a former employer. For compensation planning purposes, awards of service-based restricted stock are valued at the fair market value of the shares on the date of award, which is the closing price on the NASDAQ Global Select Market on that date, without reduction to reflect vesting or other conditions. In fiscal year 2017, LTIP awards were composed of 50% performance based and 50% service-based restricted stock. The performance shares required both achievement of an adjusted EBITDA target specific to fiscal year 2017 performance and certain service requirements. The adjusted EBITDA target for fiscal year 2017 was set at $1.00. This measure was determined by taking into consideration that management’s primary focus was to achieve profitability by increasing operating efficiency and also considering adjusted EBITDA for the past three fiscal years, which were negative: In fiscal Year 2014 adjusted EBITDA was -$26.2million, in fiscal year 2015 adjusted EBITDA was -$11.0 million and in fiscal year 2016 adjusted EBITDA was -$11.7 million. During the 2017 fiscal year, we achieved the adjusted EBITDA target, therefore, the performance-based stock was earned. Awards that are earned do not vest until the end of the three-year period which is after fiscal year 2020. Vesting of service-based restricted stock required continued employment through the third anniversary of date of grant.
Tax and Accounting Considerations
Tax and Accounting Considerations Tax Considerations. The Compensation Committee generally considers the federal income tax and financial accounting consequences of the various components of the executive compensation program in making decisions about executive compensation. The Compensation Committee believes that achieving the compensation objectives discussed above is more important than the benefit of tax deductibility and the executive compensation programs may, from time to time, limit the tax deductibility of compensation. Nevertheless, when not inconsistent with these objectives, the Compensation Committee endeavors to award compensation that will be deductible for income tax purposes. Internal Revenue Code Section 162(m) may limit the tax deductions that a public company can claim for compensation to some of its named executive officers. The Company does not guarantee that any compensation intended to qualify as deductible performance-based compensation under Section 162(m) so qualifies. Accounting Considerations. The Compensation Committee also considers the accounting implications of various forms of executive compensation. In its financial statements, the Company records salaries and performance-based compensation such as bonuses as expenses in the amount paid or to be paid to the named executive officers. Accounting rules also require the Company to record an expense in its financial statements for equity awards, even though equity awards are not paid as cash to employees. The accounting expense of equity awards to employees is calculated in accordance with GAAP. The Compensation Committee believes that the many advantages of equity compensation, as discussed above, more than compensate for the non-cash accounting expense associated with them.
Risk Considerations in Our Compensation Program
| • | The incentive elements of our compensation program (annual incentives and multi-year equity LTIP awards) are designed to reward both annual performance (under the AIP) and longer-term performance (under the LTIP). We believe this design mitigates any incentive for short-term risk-taking that could be detrimental to our company’s long-term best interests. |
Risk Considerations in Our Compensation Program
| • | Maximum payouts under our AIP are currently capped at 100% of the target payout amounts set by the Compensation Committee. We believe these limits mitigate excessive risk-taking, since the maximum amount that can be earned is limited. |
Risk Considerations in Our Compensation Program
| • | Finally, our AIP and our LTIP both contain provisions under which awards may be recouped or forfeited if the recipient has not complied with our policies. In addition, our performance-based plans (cash incentive and performance shares) both contain provisions under which awards may be recouped or forfeited if the financial results for a period affecting the calculation of an award are later restated. |
Summary Compensation Table
Summary Compensation Table The following table summarizes the total compensation for each of our fiscal years ended June 30, 2017, July 1, 2016 and July 3, 2015 of our named executive officers, who consisted of our CEO, CFO and three other most highly compensated executive officers.
Summary Compensation Table
| Name/Principal Position | Fiscal Year (1) | Salary (3) | Stock Awards (4) | Option Awards (5) | Non-Equity Incentive Plan Compensation (6) | All Other Compensation (7) | Total | | | | ($) | ($) | ($) | ($) | ($) | ($) | | Michael Pangia Chief Executive Officer | 2017 | 550,000 | 741,032 | — | 324,522 | 4,005 | 1,619,559 | | | 2016 | 550,000 | 333,086 | — | — | 3,073 | 886,159 | | | 2015 | 571,154 | — | 149,286 | — | 2,224 | 722,664 | | Ralph Marimon Senior Vice President and Chief Financial Officer (2) | 2017 | 294,231 | 141,638 | — | 115,058 | 2,616 | 553,543 | | | 2016 | 300,000 | 118,094 | — | — | 2,064 | 420,158 | | | 2015 | 33,462 | 114,000 | — | — | 238 | 147,700 | | Heinz H. Stumpe Senior Vice President and Chief Sales Officer | 2017 | 345,000 | 175,402 | — | 142,495 | 3,707 | 666,604 | | | 2016 | 345,000 | 146,255 | — | — | 3,707 | 494,962 | | | 2015 | 358,269 | — | 65,550 | — | 3,204 | 427,023 | | Shaun McFall Senior Vice President, Chief Marketing and Strategy Officer | 2017 | 320,000 | 151,057 | — | 122,728 | 10,666 | 604,451 | | | 2016 | 320,000 | 125,968 | — | — | 9,270 | 455,238 | | | 2015 | 332,308 | — | 56,457 | — | 1,792 | 390,557 | | Meena Elliott Senior Vice President, Chief Legal and Administrative Officer, Corporate Secretary | 2017 | 320,000 | 151,057 | — | 122,728 | 7,785 | 601,570 | | | 2016 | 320,000 | 125,968 | — | — | 6,421 | 452,389 | | | 2015 | 319,616 | — | 48,857 | — | 1,227 | 369,700 |
Summary Compensation Table
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Summary Compensation Table
| (1) Our fiscal year 2017 ended June 30, 2017, fiscal year 2016 ended July 1, 2016 and fiscal year 2015 ended July 3, 2015. The amounts in the Summary Compensation Table represent total compensation paid or earned for our fiscal years as included in our annual financial statements. |
Summary Compensation Table
| (2) Effective May 26, 2015, Mr. Marimon was appointed as our Senior Vice President and Chief Financial Officer. |
Summary Compensation Table
| (3) The annual base salary for Mr. Pangia is $550,000. The amounts shown take into account the extra pay period in our fiscal year 2015. |
Summary Compensation Table
The annual base salary for Mr. Marimon is $300,000. The amounts for fiscal year 2017 represents one week of unpaid leave. The amounts for fiscal year 2015 reflects Mr. Marimon’s salary and other income for the period from May 26, 2015 to July 3, 2015. The annual base salary for Mr. Stumpe is $345,000. The amounts shown take into account the extra pay period in our fiscal year 2015. The annual base salary for Mr. McFall is $320,000. The amounts shown take into account the extra pay period in our fiscal year 2015. The annual base salary for Ms. Elliott is $320,000 effective February 9, 2015. The amounts shown take into account the additional pay period for fiscal year 2015.
Summary Compensation Table
| (4) The “Stock Awards” column shows the full grant date fair value of the market-based shares, performance shares, and restricted stock granted in fiscal 2017 and fiscal 2016. |
Summary Compensation Table
For fiscal 2015, the grant date fair value of the performance shares was reduced to zero or no value since subsequent to the grant date we estimated that the minimum threshold performance would not be achieved. If we had estimated that the fiscal 2015 performance shares would be earned by exceeding the target metrics, the following amounts would have been included in the amount under this column and as part of the named executive officers’ total compensation:
Summary Compensation Table
| Mr. Pangia | $278,572 | | Mr. Stumpe | $87,595 | | Mr. McFall | $66,858 | | Ms. Elliott | $49,524 |
Summary Compensation Table
The grant date fair value of the market-based shares, performance shares and restricted stock was determined under FASB ASC Topic 718 and represents the amount we would expense in our financial statements over the entire vesting schedule for the awards. The grant date fair value of market-based shares was estimated using a Monte-Carlo simulation model. The grant date fair value for performance awards and restricted stock was based on the closing market price of our common stock on the respective award dates, except for the performance shares granted during fiscal year 2015 as discussed above. The assumptions used for determining values are set forth in Notes 1 and 8 to our audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for fiscal year 2017. These amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized by the named executive officers.
Summary Compensation Table
| (5) The “Option Awards” column shows the full grant date fair value of the stock options granted in fiscal year 2015. No options were granted in fiscal 2017 or fiscal year 2016. The grant date fair value of the stock option awards was determined under FASB ASC Topic 718 and represents the amount we would expense in our financial statements over the entire vesting schedule for the awards. The assumptions used for determining values are set forth in Notes 1 and 8 to our audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for fiscal year 2017. These amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized by the named executive officers. |
Summary Compensation Table
| (6) The “Non-Equity Incentive Plan Compensation” column shows the cash bonus earned under the fiscal year 2017 annual incentive plan. The following amounts were paid on February 9, 2017 with the remainder amounts paid on October 6, 2017: |
Summary Compensation Table
| Mr. Stumpe | $36,225 | | Mr. McFall | $31,200 | | Ms. Elliott | $31,200 |
Summary Compensation Table
| (7) The following table describes the components of the “All Other Compensation” column. |
Summary Compensation Table
| | | Life Insurance (a) | Company Matching Contributions Under 401(k) Plan (b) | Total All Other Compensation | | Name | Year | ($) | ($) | ($) | | Michael Pangia | 2017 | 4,005 | — | 4,005 | | | 2016 | 3,073 | — | 3,073 | | | 2015 | 2,224 | — | 2,224 | | Ralph Marimon | 2017 | 2,616 | — | 2,616 | | | 2016 | 2,064 | — | 2,064 | | | 2015 | 238 | — | 238 | | Heinz H. Stumpe | 2017 | 3,707 | — | 3,707 | | | 2016 | 3,707 | — | 3,707 | | | 2015 | 3,204 | — | 3,204 | | Shaun McFall | 2017 | 2,224 | 8,442 | 10,666 | | | 2016 | 2,224 | 7,046 | 9,270 | | | 2015 | 1,792 | — | 1,792 | | Meena Elliott | 2017 | 1,190 | 6,595 | 7,785 | | | 2016 | 1,190 | 5,231 | 6,421 | | | 2015 | 1,227 | — | 1,227 |
Summary Compensation Table
_____________________
Summary Compensation Table
| (a) Represents premiums paid for life insurance that represent taxable income for the named executive officer. |
Summary Compensation Table
| (b) Represents matching contributions made by us to the 401(k) account of the respective named executive. |
Grants of Plan-Based Awards in Fiscal Year 2017
Grants of Plan-Based Awards in Fiscal Year 2017 The following table lists our grants and incentives during our fiscal year ended June 30, 2017 of plan-based awards, both equity and non-equity based and including our Annual Incentive Plan and Long-Term Incentive Plan, to the named executive officers listed in the Summary Compensation Table. There is no assurance that the grant date fair value of stock and option awards will ever be realized.
Grants of Plan-Based Awards in Fiscal Year 2017
| | | | Estimated Possible Payouts Under Short-Term Non-Equity Incentive Plan Awards in Fiscal Year 2017 (1) | | | Estimated Future Payments Under Equity Incentive Plan Awards in Fiscal Year 2017 | | | All Other Stock Awards: Number of Shares of Stock or Units (4) | Fair Value of Stock and Option Awards (5) | | | Type of Award | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | Name | | | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | | Michael Pangia | Cash Bonus | 8/23/2016 | 33,000 | 550,000 | 550,000 | — | — | — | — | — | | | RSU | 9/22/2016 | — | — | — | — | — | — | 20,833 | 191,247 | | | PSU | 9/22/2016 | | | | 22,689 | 22,689 | 22,689(2) | | 208,285 | | | PSU | 12/30/2016 | — | — | — | 50,000 | 50,000 | 50,000(3) | — | 341,500 | | Ralph Marimon | Cash Bonus | 8/23/2016 | 11,700 | 195,000 | 195,000 | — | — | — | — | — | | | RSU | 9/22/2016 | — | — | — | — | — | — | 7,386 | 67,803 | | | PSU | 9/22/2016 | — | — | — | 8,043 | 8,043 | 8,043(2) | — | 73,835 | | Heinz H. Stumpe | Cash Bonus | 8/23/2016 | 14,490 | 241,500 | 241,500 | — | — | — | — | — | | | RSU | 9/22/2016 | — | — | — | — | — | — | 9,147 | 83,969 | | | PSU | 9/22/2016 | — | — | — | 9,960 | 9,960 | 9,960(2) | — | 91,433 | | Shaun McFall | Cash Bonus | 8/23/2016 | 12,480 | 208,000 | 208,000 | — | — | — | — | — | | | RSU | 9/22/2016 | — | — | — | — | — | — | 7,878 | 72,320 | | | PSU | 9/22/2016 | — | — | — | 8,577 | 8,577 | 8,577(2) | — | 78,737 | | Meena Elliott | Cash Bonus | 8/23/2016 | 12,480 | 208,000 | 208,000 | — | — | — | — | — | | | RSU | 9/22/2016 | — | — | — | — | — | — | 7,878 | 72,320 | | | PSU | 9/22/2016 | — | — | — | 8,577 | 8,577 | 8,577(2) | — | 78,737 |
Grants of Plan-Based Awards in Fiscal Year 2017
______________________
Grants of Plan-Based Awards in Fiscal Year 2017
| (1) The amounts shown under Estimated Possible Payouts Under Short-Term Non-Equity Incentive Plan Awards reflect possible payouts under our fiscal 2017 AIP. During fiscal 2017, we achieved 59% of the FY17 cash incentive target. |
Grants of Plan-Based Awards in Fiscal Year 2017
| (2) Performance-based share units (“PSU”) eligible to vest were based on the Company’s adjusted EBITDA for fiscal year 2017. Once the shares are earned, they will vest 100% on the third anniversary of the grant date. Vesting of these shares is dependent on continuous employment with us through the vesting date. |
Grants of Plan-Based Awards in Fiscal Year 2017
| (3) Market-based share units eligible to vest were based on the target closing prices of the Company’s common stock for calendar year 2018. The shares will vest on the date that the Compensation Committee certifies achievement of the performance measure. Vesting of these shares is dependent on continuous employment with us through the vesting date. |
Grants of Plan-Based Awards in Fiscal Year 2017
| (4) Restricted stock units (“RSU”) vest 100% on the third anniversary of the grant date. |
Grants of Plan-Based Awards in Fiscal Year 2017
| (5) The “Grant Date Fair Value of Stock and Option Awards” column shows the full grant date fair value of the stock options granted in fiscal year 2017. The grant date fair value of the stock options was determined under FASB ASC Topic 718 and represents the amount we would expense in our financial statements over the entire vesting schedule for the awards in the event the vesting provisions are achieved. |
Grants of Plan-Based Awards in Fiscal Year 2017
The assumptions used for determining values are set forth in Notes 1 and 8 to our audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal 2017. These amounts reflect our accounting for these grants and do not correspond to the actual values that may be recognized by the named executive officers.
Outstanding Equity Awards at Fiscal Year-End 2017
Outstanding Equity Awards at Fiscal Year-End 2017 The following table provides information regarding outstanding unexercised stock options and unvested stock awards held by each of our named executive officers as of June 30, 2017. Each grant of options or unvested stock awards is shown separately for each named executive officer. The vesting schedule for each award of options is shown in the footnotes following this table based on the option grant date. The material terms of the option awards, other than exercise price and vesting are generally described in the 2007 Plan.
Outstanding Equity Awards at Fiscal Year-End 2017
| | Option Awards | | | | | Stock Awards | | | | | | Award 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 or Units of Stock that have not Vested | Market Value of Shares or Units of Stock that have not Vested (9) | Equity Incentive Plan Awards: Number of Unearned Shares Units or Other Rights that have not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested (9) | | Name | | (#) | (#) | ($) | | (#) | ($) | (#) | ($) | | Michael Pangia | 12/30/2016 | — | — | — | — | | | 50,000(6) | 870,000 | | | 09/22/2016 | | | | | | | 22,689(7) | 394,789 | | | 09/22/2016 | | | | | 20,833(4) | 362,494 | | | | | 11/20/2015 | — | — | — | — | | | 15,126(8) | 263,192 | | | 10/23/2015 | — | — | — | — | 20,833(4) | 362,494 | | | | | 02/02/2015 | 15,460 | 6,365(1) | 15.60 | 2/2/2022 | — | — | — | — | | | 09/09/2013 | 34,722 | —(2) | 31.20 | 9/9/2020 | — | — | — | — | | | 10/03/2012 | 11,458 | —(3) | 27.36 | 10/3/2019 | — | — | — | — | | | 09/08/2011 | 25,107 | —(3) | 28.44 | 9/8/2018 | — | — | — | — | | | 11/11/2010 | 4,166 | —(3) | 52.32 | 11/11/2017 | — | — | — | — | | Ralph Marimon | 09/22/2016 | — | — | — | — | | | 8,043(7) | 139,948 | | | 09/22/2016 | | | | | 7,386(4) | 128,516 | | | | | 11/20/2015 | — | — | — | — | | | 5,362(8) | 93,299 | | | 10/23/2015 | — | — | — | — | 7,386(4) | 128,516 | | | | | 05/26/2015 | — | — | — | — | 4,166(5) | 72,488 | — | — | | Heinz H. Stumpe | 09/22/2016 | — | — | — | — | | | 9,960(7) | 173,304 | | | 09/22/2016 | | | | | 9,147(4) | 159,158 | | | | | 11/20/2015 | — | — | — | — | | | 6,640(8) | 115,536 | | | 10/23/2015 | — | — | — | — | 9,147(4) | 159,158 | | | | | 02/02/2015 | 6,788 | 2,795(1) | 15.60 | 2/2/2022 | — | — | — | — | | | 09/09/2013 | 15,246 | —(2) | 31.20 | 9/9/20 | — | — | — | — | | | 10/03/2012 | 5,031 | —(3) | 27.36 | 10/3/2019 | — | — | — | — | | | 09/08/2011 | 6,676 | —(3) | 28.44 | 9/8/2018 | — | — | — | — | | | 11/11/2010 | 4,583 | —(3) | 52.32 | 11/11/2017 | — | — | — | — | | Shaun McFall | 09/22/2016 | — | — | — | — | | | 8,577(7) | 149,240 | | | 09/22/2016 | | | | | 7,878(4) | 137,077 | | | | | 11/20/2015 | — | — | — | — | | | 5,718(8) | 99,493 | | | 10/23/2015 | — | — | — | — | 7,878(4) | 137,077 | | | | | 02/02/2015 | 5,847 | 2,407(1) | 15.60 | 2/2/2022 | — | — | — | — | | | 09/09/2013 | 13,131 | —(2) | 31.20 | 9/9/2020 | — | — | — | — | | | 10/03/2012 | 4,333 | —(3) | 27.36 | 10/3/2019 | — | — | — | — | | | 09/08/2011 | 6,162 | —(3) | 28.44 | 9/8/2018 | — | — | — | — | | | 11/11/2010 | 4,583 | —(3) | 52.32 | 11/11/2017 | — | — | — | — | | Meena Elliott | 09/22/2016 | — | — | — | — | | | 8,577(7) | 149,240 | | | 09/22/2016 | | | | | 7,878(4) | 137,077 | | | | | 11/20/2015 | — | — | — | — | | | 5,718(8) | 99,493 | | | 10/23/2015 | — | — | — | — | 7,878(4) | 137,077 | | | | | 02/02/2015 | 5,059 | 2,083(1) | 15.60 | 2/2/2022 | — | — | — | — | | | 09/09/2013 | 11,363 | —(2) | 31.20 | 9/9/2020 | — | — | — | — | | | 10/03/2012 | 3,750 | —(3) | 27.36 | 10/3/2019 | — | — | — | — | | | 09/08/2011 | 6,162 | —(3) | 28.44 | 9/8/2018 | — | — | — | — | | | 11/11/2010 | 3,333 | —(3) | 52.32 | 11/11/2017 | — | — | — | — |
Outstanding Equity Awards at Fiscal Year-End 2017
| (1) Stock options vest in installments of 25% on August 1, 2015, and 1/48 each month thereafter over the remaining three-year period based on continuous employment through those dates. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (2) Stock options vest in installments of 33 1/3% one year from the grant date, 33 1/3% two years from the grant date and 33 1/3% three years from the grant date based on continuous employment through those dates. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (3) Stock options vest in installments of 50% one year from the grant date, 25% two years from the grant date and 25% three years from the grant date based on continuous employment through those dates. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (4) Restricted stock units vest 100% on the third anniversary of the grant date. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (5) Restricted stock units vest in installments of 25% one year from the grant date, and 25% annually on each anniversary thereafter over the remaining three-year period based on continuous employment through those dates. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (6) Market-based share units eligible to vest were based on the target closing prices of the Company’s common stock for calendar year 2018, subject to acceleration under a change in control prior to January 1, 2019. The shares will vest on the date that the Compensation Committee certifies achievement of the performance measure. Vesting of these shares is dependent on continuous employment with us through the vesting date. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (7) Performance-based share units eligible to vest were based on the Company’s adjusted EBITDA for fiscal year 2017. Once the shares are earned, they will vest 100% on the third anniversary of the grant date. Vesting of these shares is dependent on continuous employment with us through the vesting date. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (8) Market-based share units eligible to vest were based on multiple target closing prices of the Company’s common stock for fiscal year 2016, fiscal year 2017, and fiscal year 2018, respectively. For fiscal year 2016, the common stock awards were canceled due to the performance condition not being met. If the shares are earned for fiscal year 2017, they will vest on the last day of fiscal 2018. If the shares are earned for the fiscal year ending 2018, they will vest on the date that the Compensation Committee certifies achievement of the performance metrics. Vesting of these shares is dependent on continuous employment with us through the vesting dates. |
Outstanding Equity Awards at Fiscal Year-End 2017
| (9) Market value is based on the $17.40 closing price of a share of our common stock on June 30, 2017, as reported on the NASDAQ Global Select Market. |
Options Exercised and Stock Vested in Fiscal Year 2017
Options Exercised and Stock Vested in Fiscal Year 2017 The following table provides information for each of our named executive officers regarding the number of shares of our common stock acquired upon the vesting of stock awards during fiscal year 2017. No options to purchase common stock were exercised during fiscal year 2017. Stock awards vesting during fiscal year 2017 consisted of restricted stock with service-based vesting provisions.
Options Exercised and Stock Vested in Fiscal Year 2017
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) (1) | Value Received on Vesting ($) (2) | | Ralph Marimon | 2,083 | 37,536 |
Options Exercised and Stock Vested in Fiscal Year 2017
_________________________
Options Exercised and Stock Vested in Fiscal Year 2017
| (1) Vested number of shares of service-based restricted stock units. |
Options Exercised and Stock Vested in Fiscal Year 2017
| (2) Amount shown is the aggregate market value of the vested shares of restricted stock units based on the closing price of our stock on the vesting date. |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control We have employment agreements with each of the continuing named executive officers, which provide for such executives to receive certain payments and benefits if their employment with us is terminated. These arrangements are set forth in detail below and assume a termination event on June 30, 2017 and refer to our stock price on that date. The Board has determined that such payments and benefits are an integral part of a competitive compensation package for our executive officers. The table below reflects the compensation and benefits due to each of the named executive officers in the event of termination of employment by us without cause or termination by the executive for good reason (other than within 18 months after a Change of Control, as defined below) and in the event of disability and in the event of termination of employment by us without cause or termination by the executive for good reason within 18 months after a Change of Control. The amounts shown in the table are estimates of the amounts that would be paid upon termination of employment. There are no compensation and benefits due to any named executive officer in the event of death, or of termination of employment by us for cause or voluntary termination. The actual amounts would be determined only at the time of the termination of employment.
Potential Payments Upon Termination or Change of Control
| Name | Conditions for Payouts | Base Salary Component (1) | Cash Incentive Component (2) | Accelerated Equity Vesting (3) | Insurance Benefit (4) | Out-Placement Services (5) | Total | | Michael Pangia | Termination without cause or for good reason, or due to disability | $550,000 | $324,522 | $719,565 | $21,140 | $30,000 | $1,645,227 | | | Within 18 months after Change of Control | $1,100,000 | $550,000 | $2,292,254 | $42,280 | $30,000 | $4,014,534 | | Ralph Marimon | Termination without cause or for good reason, or due to disability | $300,000 | $115,058 | $245,218 | $14,588 | $30,000 | $704,864 | | | Within 18 months after Change of Control | $300,000 | $195,000 | $562,768 | $14,588 | $30,000 | $1,102,356 | | Heinz H. Stumpe | Termination without cause or for good reason, or due to disability | $345,000 | $106,270 | $315,901 | $22,025 | $30,000 | $819,196 | | | Within 18 months after Change of Control | $690,000 | $205,275 | $624,405 | $44,050 | $30,000 | $1,593,730 | | Shaun McFall | Termination without cause or for good reason, or due to disability | $320,000 | $91,528 | $272,064 | $26,093 | $30,000 | $739,685 | | | Within 18 months after Change of Control | $640,000 | $176,800 | $537,745 | $52,186 | $30,000 | $1,436,731 | | Meena Elliott | Termination without cause or for good reason, or due to disability | $320,000 | $91,528 | $270,646 | $18,775 | $30,000 | $730,949 | | | Within 18 months after Change of Control | $640,000 | $176,800 | $535,743 | $37,550 | $30,000 | $1,420,093 |
Potential Payments Upon Termination or Change of Control
| (1) The base salary component represents the total gross monthly payments to each named executive officer at the current salary. |
Potential Payments Upon Termination or Change of Control
| (2) The cash incentive component represents the cash bonus due under the fiscal year 2017 AIP. |
Potential Payments Upon Termination or Change of Control
| (3) Reflects acceleration of outstanding equity awards, including pro-rata vesting under the fiscal year 2017 Long-Term Incentive Plan as of June 30, 2017, with final determination to be made by the Compensation Committee. |
Potential Payments Upon Termination or Change of Control
| (4) The insurance benefit provided is paid directly to the insurer benefit provider and includes amounts for COBRA. |
Potential Payments Upon Termination or Change of Control
| (5) The estimated dollar amounts for outplacement services would be paid directly to an outplacement provider selected by us. |
Potential Payments Upon Termination or Change of Control
The employment agreements with our named executive officers define a “Change of Control” as follows:
Potential Payments Upon Termination or Change of Control
| • | any merger, consolidation, share exchange or acquisition, unless immediately following such merger, consolidation, share exchange or acquisition, at least 50% of the total voting power (in respect of the election of directors, or similar officials in the case of an entity other than a corporation) of (i) the entity resulting from such merger, consolidation or share exchange, or the entity which has acquired all or substantially all of our assets (in the case of an asset sale that satisfies the criteria of an acquisition) (in either case, the “Surviving Entity”) or (ii) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the total voting power (in respect of the election of directors, or similar officials in the case of an entity other than a corporation) of the Surviving Entity is represented by our securities that were outstanding immediately prior to such merger, consolidation, share exchange or acquisition (or, if applicable, is represented by shares into which such Company securities were converted pursuant to such merger, consolidation, share exchange or acquisition); or |
Potential Payments Upon Termination or Change of Control
| • | any person or group of persons (within the meaning of Section 13(d)(3) of the Exchange Act) directly or indirectly acquires beneficial ownership (determined pursuant to SEC Rule 13d-3 promulgated under the |
Potential Payments Upon Termination or Change of Control
Exchange Act) of securities possessing more than 30% (50% in the case of Mr. Marimon) of the total combined voting power of our outstanding securities other than: (i) an employee benefit plan of ours or any of our affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of our or any of our affiliates; or (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or
Potential Payments Upon Termination or Change of Control
| • | over a period of 36 consecutive months or less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be composed of individuals each of whom meet one of the following criteria: (i) have been a Board member continuously since the adoption of this plan or the beginning of such 36-month period; or (ii) have been elected or nominated during such 36-month period by at least a majority of the Board members and satisfied the criteria of this bullet when they were elected or nominated; or |
Potential Payments Upon Termination or Change of Control
| • | a majority of the Board determines that a Change of Control has occurred; or |
Potential Payments Upon Termination or Change of Control
| • | the complete liquidation or dissolution of the Company. |
Potential Payments Upon Termination or Change of Control
Employment agreements are in effect for the named executive officers and provide that if they are terminated without cause or should they resign for good reason or become disabled and they sign a general release they will be entitled to receive the following severance benefits:
Potential Payments Upon Termination or Change of Control
| • | severance payments at their final base salary for a period of 12 months following termination; |
Potential Payments Upon Termination or Change of Control
| • | payment of premiums necessary to continue their group health insurance under COBRA (or to purchase other comparable health coverage on an individual basis if the employee is no longer eligible for COBRA coverage) until the earlier of (i) 12 months; or (ii) the date on which they first became eligible to participate in another employer’s group health insurance plan; |
Potential Payments Upon Termination or Change of Control
| • | the prorated portion of any incentive bonus they would have earned during the incentive bonus period in which their employment was terminated; |
Potential Payments Upon Termination or Change of Control
| • | any equity compensation subject to service-based vesting granted to the executive officer will stop vesting as of their termination date; however, they will be entitled to purchase any vested share(s) of stock that are subject to the outstanding options until the earlier of: (i) 12 months; or (ii) the date on which the applicable option(s) expire; and |
Potential Payments Upon Termination or Change of Control
| • | outplacement assistance selected and paid for by us. |
Potential Payments Upon Termination or Change of Control
In addition, these agreements provide that if there is a Change of Control, and employment with us is terminated by us without cause or by the employee for good reason within 18 months after the Change of Control and they sign a general release of known and unknown claims in a form satisfactory to us, (i) the severance benefits described shall be increased by an additional 12 months for Ms. Elliott and Messrs. Pangia, Stumpe and McFall; (ii) they will receive a payment equal to the greater of (a) the average of the annual incentive bonus payments received by them, if any, for the previous three years; or (b) their target incentive bonus for the year in which their employment terminates; and (iii) the vesting of all unvested stock option(s) and unvested equity-compensation awards subject to service-based vesting will accelerate, such that all of such stock option(s) and equity-compensation awards will be fully vested as of the date of their termination/resignation.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS At the Annual Meeting, directors are being nominated for election to serve until the 2018 Annual Meeting or until their successors are elected and qualified. In the unanticipated event that a nominee is unable or declines to serve as a director at the time of the Annual Meeting, all proxies received by the proxy holders will be voted for any subsequent nominee named by the Board to fill the vacancy created by the earlier nominee’s withdrawal from the election. As of the date of this Proxy Statement, the Board is not aware of any director nominee who is unable or will decline to serve as a director. Each of the nominees has consented to being named in this Proxy Statement and to serve as a director if elected. Ages are as of the date of this Proxy Statement.
Director Nominees
Director Nominees
Director Nominees
| Name | Title | Age | | John Mutch | Chairman of the Board | 61 | | Wayne Barr, Jr. | Director Nominee | 53 | | Kenneth Kong | Director Nominee | 43 | | Michael A. Pangia | Director, President and CEO | 56 | | John J. Quicke | Director | 68 | | Dr. James C. Stoffel | Director | 71 |