UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment No. )
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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KVH INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
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KVH Industries, Inc.
Notice of Annual Meeting of Stockholders
to be held on June 11, 2014
and
Proxy Statement
IMPORTANT
Please mark, sign and date your proxy
and promptly return it in the enclosed envelope or
vote your proxy over the
Internet or by telephone.
This proxy statement and form of proxy are first being mailed to stockholders on or about
April 30, 2014.
KVH Industries, Inc.
50 Enterprise Center
Middletown, RI 02842
April 30, 2014
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of KVH Industries, Inc. Our meeting will be held at the offices of KVH Industries, Inc., 50 Enterprise Center, Middletown, Rhode
Island, on Wednesday, June 11, 2014, beginning at 11:00 a.m. local time.
At this years annual meeting,
stockholders will be asked to take the following actions:
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elect two Class III directors to a three-year term;
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consider a non-binding say on pay vote regarding the compensation of our named executive officers; and
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vote upon any other matters appropriate to the meeting.
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We have provided additional information about these items and the annual meeting in the attached notice of annual meeting and proxy statement.
Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote over the Internet, by
telephone, or by mailing a completed proxy card. Voting your proxy will ensure your representation at the annual meeting. If you hold your shares indirectly, such as through a brokerage firm or similar institution, you should follow the voting
instructions provided by that firm.
I urge you to review the proxy materials carefully and to vote for the proposals
described in the proxy statement.
Thank you for your cooperation, continued support, and interest in KVH Industries, Inc. I
hope to see you at the annual meeting.
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Sincerely,
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Martin A. Kits van Heyningen
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President, Chief Executive Officer and
Chairman of the Board of Directors
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KVH INDUSTRIES, INC.
Notice of Annual Meeting of Stockholders
to be held on June 11,
2014
KVH Industries, Inc., hereby gives notice that it will hold its annual meeting of stockholders at the offices of KVH
Industries, Inc., 50 Enterprise Center, Middletown, Rhode Island, on Wednesday, June 11, 2014, beginning at 11:00 a.m., local time, for the following purposes:
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To consider and vote upon the election of two Class III directors to a three-year term;
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To consider a non-binding say on pay vote regarding the compensation of our named executive officers; and
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To transact such further business as may properly come before the annual meeting or any adjournment of the meeting.
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Our Board of Directors has fixed the close of business on Tuesday, April 22, 2014, as the record date for the determination of the
stockholders entitled to receive notice of, and to vote at, the annual meeting and any adjournment of the meeting. Only stockholders of record on April 22, 2014 are entitled to receive notice of, and to vote at, the annual meeting or any
adjournment of the meeting.
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By Order of the Board of Directors,
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Felise Feingold
Secretary
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Middletown, Rhode Island
April 30, 2014
YOUR VOTE IS IMPORTANT
Please sign and return the enclosed proxy,
whether or not you
plan to attend the annual meeting.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on June 11, 2014
This proxy statement and our 2013 annual report to stockholders are available on the Internet at www.kvh.com/annual. You can read, print,
download and search these materials at that website. The website does not use cookies or other tracking devices to identify visitors.
You can obtain directions to be able to attend the meeting and vote in person at www.kvh.com/annual.
None of the information on our website or elsewhere on the Internet forms a part of this proxy statement or is incorporated by reference into this proxy statement.
PROXY STATEMENT
TABLE OF CONTENTS
ANNUAL MEETING OF STOCKHOLDERS
Purpose of the
annual meeting
At the annual meeting, we will submit the following proposals to our stockholders:
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Proposal One:
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To elect two Class III directors to a three-year term.
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Proposal Two:
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To consider a non-binding say on pay vote regarding the compensation of our named executive officers.
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Our Board of Directors does not intend to present to the annual meeting any business other than the
proposals described in this proxy statement. Our Board of Directors was not aware, a reasonable time before mailing this proxy statement to stockholders, of any other business that may be properly presented for action at the annual meeting. If any
other business should come before the annual meeting, the persons present will have discretionary authority to vote the shares they own or represent by proxy in accordance with their judgment, to the extent authorized by applicable regulations.
Record date
Our Board of Directors has fixed the close of business on Tuesday, April 22, 2014, as the record date for the annual meeting. Only stockholders of record as of the close of business on that date are
entitled to receive notice of the annual meeting, and to vote at, the annual meeting. At the close of business on the record date, there were 15,859,352 shares of our common stock outstanding. Each share of common stock outstanding on the record
date will be entitled to cast one vote.
Methods of voting
The shares represented by your properly signed proxy card will be voted in accordance with your directions. If you do not specify a choice
with respect to a proposal for which our Board of Directors has made a recommendation, the shares covered by your signed proxy card will be voted as recommended in this proxy statement. We encourage you to vote on all matters to be considered.
Voting by mail:
By signing and returning the proxy card in the enclosed envelope, you are enabling the individual named on the proxy card (known as a proxy) to vote your shares at the meeting in the manner
you indicate. We encourage you to sign and return the proxy card even if you plan to attend the meeting. In this way, your shares will be voted even if you are unable to attend the meeting. If you received more than one proxy card, it is an
indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.
Voting by telephone:
To
vote by telephone, please follow the instructions included on your proxy card. If you vote by telephone, you do not need to complete and mail your proxy card.
Voting on the Internet:
To vote on the Internet, please follow the
instructions included on your proxy card. If you vote on the Internet, you do not need to complete and mail your proxy card.
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Voting in person at the meeting:
If you plan to attend the meeting and vote in person, we will provide you with a ballot at the meeting. If your shares are registered
directly in your name, you are considered the stockholder of record and you have the right to vote in person at the meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of the shares
held in street name. If you wish to vote shares held in street name at the meeting, you will need to bring with you to the meeting a legal proxy from your broker or other nominee authorizing you to vote your shares.
Quorum requirement
Our by-laws provide that a quorum consists of a majority of the shares of common stock outstanding and entitled to vote at the annual meeting. Shares of common stock represented by a properly signed and
returned proxy will be treated as present at the annual meeting for purposes of determining the existence of a quorum at the annual meeting. Abstentions and broker non-votes are counted as present or represented for purposes of
determining the existence of a quorum at the annual meeting. A non-vote occurs when a broker or nominee holding shares for a beneficial owner returns a proxy but does not vote on a proposal because the broker or nominee does not have
discretionary voting power and has not received instructions from the beneficial owner.
Votes required;
tabulation of votes
A majority of the votes properly cast at the annual meeting will be necessary to elect each Class III
director to a three-year term (proposal one), to approve the advisory vote on the approval of our executive compensation (proposal two) and to approve any other matter to be acted upon at the annual meeting. For more information on majority voting,
please see Board of Directors and Committees of the Board Corporate Governance Majority Voting. Proposal Two is a non-binding proposal.
Abstentions and broker non-votes will not be included in calculating the number of votes cast on any proposal. As a result, abstentions and broker non-votes will not have any
effect on the outcome of the vote on any proposal.
Our transfer agent, Computershare Trust Company, N.A., will separately
tabulate the votes on each matter presented to the stockholders at the annual meeting.
Solicitation of proxies
We are soliciting proxies on behalf of our Board of Directors. No compensation will be paid by any person in connection
with our solicitation of proxies. We will reimburse brokers, banks and other nominees for the out-of-pocket expenses and other reasonable clerical expenses they incur in obtaining instructions from beneficial owners of our common stock. In addition
to our solicitation by mail, our directors, officers and employees may make special solicitations of proxies personally or by telephone, facsimile, courier or e-mail. We expect that the expense of any special solicitation will be nominal. We will
pay all expenses incurred in connection with this solicitation.
Revocability of proxy
You may revoke your proxy at any time before it is voted at the meeting. In order to revoke your proxy, you must either:
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sign and return another proxy card with a later date;
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provide written notice of the revocation of your proxy to our secretary;
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if you voted by Internet or telephone, by following the instructions for revocation provided by Internet or telephone; or
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attend the meeting and vote in person.
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PROPOSAL ONE: ELECTION OF DIRECTORS
Proposal One concerns the election of two
Class III directors for three-year terms.
Our Board of Directors currently consists of six directors and is divided into
three classes. We refer to these classes as Class I, Class II and Class III. The term of one class of directors expires each year at the annual meeting of stockholders. Each director also continues to serve as a director until his or her successor
is duly elected and qualified. This year, the term of the Class III directors is expiring.
Our Nominating and Corporate
Governance Committee has nominated Robert W.B. Kits van Heyningen and Bruce J. Ryan to serve as Class III directors for a three-year term. Our stockholders last elected Messrs. Robert W.B. Kits van Heyningen and Bruce J. Ryan at our annual meeting
of stockholders in May 2011, and their current terms will expire at the 2014 annual meeting.
Proxies will not be voted at the
2014 annual meeting for more than two candidates.
Messrs. Robert W.B. Kits van Heyningen and Bruce J. Ryan have agreed to
serve if elected, and we have no reason to believe that they will be unable to serve. If either of them is unable or declines to serve as a director at the time of the annual meeting, proxies will be voted for another nominee that our Board of
Directors will designate at that time.
Our Board recently amended our by-laws to provide for majority voting in uncontested
elections for members of the Board of Directors. Accordingly, a majority of the votes properly cast at the annual meeting will be necessary to elect each Class III director to a three-year term. In accordance with our recently adopted director
resignation policy, each of Messrs. Robert W.B. Kits van Heyningen and Bruce J. Ryan has submitted his resignation in advance of the annual meeting, and each resignation will only become effective if (a) the candidate fails to receive a
majority of the votes properly cast on his re-election and (b) our Board accepts his resignation. For more information about majority voting and our director resignation policy, please see Board of Directors and Committees of the Board
Corporate Governance Majority Voting.
Our Board of Directors recommends that you vote FOR the election
of Messrs. Robert W.B. Kits van Heyningen and Bruce J. Ryan as our Class III directors.
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PROPOSAL TWO: ADVISORY VOTE ON EXECUTIVE COMPENSATION
Proposal Two is an advisory
vote on our executive compensation for 2013.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted
in July 2010, or the Dodd-Frank Act, and Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act, our stockholders are entitled to vote at the annual meeting to approve the compensation of our named executive
officers. This proposal is commonly referred to as a say on pay proposal.
At our 2011 annual meeting of
stockholders, our stockholders voted in favor of holding future say on pay votes once every three years, and in accordance with the will of our stockholders our board subsequently determined to submit say on pay proposals to
our stockholders once every three years. Approximately 100% of the votes cast at the 2011 annual meeting on the non-binding proposal to approve our executive compensation for 2010 were voted in favor of approval. Partially as a result of this
overwhelmingly positive stockholder feedback, our Compensation Committee has adopted compensation packages having similar basic structures in subsequent years.
As described in our Compensation Discussion and Analysis, the executive compensation tables and the accompanying narrative disclosure set forth in this proxy statement, we design our executive
compensation program to provide an appropriate mix of fixed and variable pay, to balance short-term operational performance with long-term stockholder value, and to encourage executive recruitment and retention. Our 2013 executive compensation
program provided for (a) fixed compensation in the form of salaries designed to provide a competitive baseline of compensation, (b) short-term variable compensation in the form of a cash-based incentive compensation program designed to
reward achievement of our financial and business goals for 2013 and (c) long-term variable compensation in the form of equity awards designed to reward our executives primarily through increases in the price of our common stock. We believe that
our executive compensation program appropriately implemented our pay-for-performance philosophy and gave appropriate incentives to our named executive officers to increase stockholder value.
Highlights of our executive compensation program include the following:
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Base Salary
. Base salaries of our named executive officers provide fixed compensation to reward individual value that the executive
brings to us through experience and past and expected future contributions to our success while factoring in our specific needs and the base salaries of executives with comparable responsibilities at similar organizations. With the assistance of
Radford Surveys and Consulting, an Aon Consulting Company, or Radford, the Compensation Committee reviewed the base salaries of our named executive officers against those of a peer group of companies and other survey data. We refer to the peer group
data and the survey data collectively as the survey data. For 2013, the base salaries of our named executive officers were at or below the 50
th
percentile of the survey data, the base salaries of two named executive officers were at the 50
th
percentile of the survey data, and the base salaries of our three
other named executive officers ranged from 3% to 10% below the 50
th
percentile of the survey data. We believe that aligning the base salaries of our named executive officers with appropriate benchmarks is especially critical to a competitive compensation program, as
other elements of our compensation are determined as a percentage of base salary.
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Annual Cash-based Incentive Compensation
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In 2013, we utilized a cash-based incentive compensation plan that tied executive pay to
the achievement of our annual business and financial goals and certain individual performance goals set at the beginning of the year. This incentive program awarded compensation based on the degree to which our actual financial results met the
financial goals of our internal business plan and the degree to which the executives met their individual performance goals. In 2013, the Compensation Committee approved two formulas for calculating our cash-based incentive compensation. For named
executive officers responsible for sales, 25% of each executives target incentive compensation was based on the degree of achievement of our corporate performance goals
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and 75% was based on the degree of achievement of budgeted revenue targets. For all other named executive officers, 75% of each executives target incentive compensation was based on the
degree of achievement of our corporate performance goals and 25% was based on the degree of achievement of individual performance goals. The Compensation Committee gave greater weight in the formula to corporate performance (including revenue
targets for sales executives) because it wished to align our executives interest with strong corporate performance, accountability for budgeted revenue targets and to promote cooperation among them. The target incentive compensation (as a
percentage of base salary) selected for the named executive officers was positioned five percentage points below the percentage of base salary at the 50
th
percentile of the survey data, with the exception of the two sales executives, which were positioned 25 percentage
points below the percentage of base salary at the 50
th
percentile of the survey data. The corporate performance goal was based on the degree of achievement of our goals for revenue and earnings before interest, taxes, depreciation, amortization and equity-based compensation expenses, or Adjusted EBITDA.
The Compensation Committee selected revenue and Adjusted EBITDA as performance measures because it believed that revenue and Adjusted EBITDA are strong operating measurements of how well or poorly we performed from a financial standpoint. In 2013,
we did not meet all of our target goals for corporate performance, and the Compensation Committee awarded only 50% of the portion of the named executive officers incentive compensation based on achievement of our corporate performance goals.
Accordingly, cash-based incentive compensation actually awarded to the named executive officers for 2013 performance ranged from approximately 61% to 63% of the respective target compensation for the non-sales executives and were 79% and 94% of the
respective target compensation for the two sales executives. The sales executives received a higher percentage of their target cash-based incentive compensation because the formulas for their incentive compensation gave greater weight to revenue
targets, where our performance was closer to or over our targets.
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Long-Term Equity Incentives
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Equity incentives are designed to reward the achievement of long-term growth in the price of our common
stock. The equity grants to our named executive officers in 2013 consisted of restricted stock awards, with four year vesting periods designed to encourage the executives to focus on the long-term performance of our stock price. The Compensation
Committee believed that granting equity incentives was the best method of motivating the named executive officers to manage our operations in a manner that is consistent with the long-term interests of our stockholders. The fair values of the equity
awards granted to the named executive officers in 2013 ranged from approximately 42% below to 16% above the
50
th
percentile of the survey data.
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Total Direct Compensation
. The total direct compensation for our CEO and CFO was approximately 21% and 32% below the 50
th
percentile of the Radford survey data, respectively, and the average
total direct compensation for our other named executive officers was approximately 5% below the 50
th
percentile of the Radford survey data.
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Pay Practices
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We do not use certain executive pay practices that stockholder advocates consider to be problematic. For example, we
do not provide extensive perquisites to our named executive officers, we do not have long-term employment agreements, we do not have guaranteed severance programs, and we do not provide any tax gross-ups. We have no guaranteed salary increases, no
guaranteed bonuses and no cash-based incentive compensation programs that are not tied to our performance.
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Consultant Independence
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Our Compensation Committees independent consultant is retained directly by the Compensation
Committee, provides no other services to us, and has provided the Committee with a written attestation of its independence from management.
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The Compensation Discussion and Analysis beginning on page 11 of this proxy statement further describes our compensation program for our named executive officers and the decisions made by the Compensation
Committee with respect to 2013.
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Stockholders are being asked to vote on the following resolution:
RESOLVED: That the stockholders of KVH Industries, Inc. hereby approve, on an advisory
basis, the compensation of the corporations named executive officers, as described in the Compensation Discussion and Analysis section, the executive compensation tables and the accompanying narrative disclosure set forth in the
corporations proxy statement for the 2014 annual meeting of stockholders.
Approval of this proposal requires the
affirmative vote of the holders of a majority of the votes cast on the proposal at the annual meeting.
As an advisory vote,
this proposal is not binding. The outcome of this advisory vote will not determine or overrule any decision by our directors or officers, create or imply any change to the fiduciary duties of our directors or officers or create or imply any
additional fiduciary duties for our directors or officers. However, our Compensation Committee and Board of Directors value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when
making future compensation decisions for named executive officers.
Our Board of Directors unanimously recommends that you
vote FOR the approval of the compensation of our named executive officers, as described in the Compensation Discussion and Analysis section, the executive compensation tables and the accompanying narrative disclosure set forth in this proxy
statement.
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DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and
directors are as follows:
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Name
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Age
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Position
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Martin A. Kits van Heyningen
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President, Chief Executive Officer and Chairman of the Board of Directors
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Peter A. Rendall
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Chief Financial Officer
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Brent C. Bruun
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Executive Vice President, Mobile Broadband
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Daniel R. Conway
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Executive Vice President, Guidance and Stabilization
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Robert J. Balog
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Senior Vice President, Engineering
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James S. Dodez
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Senior Vice President, Marketing and Strategic Planning
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Felise B. Feingold
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Vice President, General Counsel and Secretary
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Robert W.B. Kits van Heyningen
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Vice President, Research and Development and Director
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Mark S.Ain
(1)(2)(3)
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71
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Director
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Stanley K. Honey
(1)(3)
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Director
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Bruce J. Ryan
(1)(2)(3)
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Director
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Charles R. Trimble
(1)(2)(3)
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Director
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Member of the Audit Committee.
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Member of the Compensation Committee.
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Member of the Nominating and Corporate Governance Committee.
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Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. Robert W.B. Kits van Heyningen is the
brother of Martin A. Kits van Heyningen. Kathleen Keating, our senior director of creative and customer experience, is the wife of Martin A. Kits van Heyningen. Paula Conway, who served as our program manager until November 2013 and now serves as an
engineering program management consultant, is the wife of Daniel R. Conway.
Directors serving a term expiring at the 2014 annual
meeting (Class III directors):
Robert W.B. Kits van Heyningen
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one of our founders, has served as one of
our directors since 1982 and as our vice president of research and development since April 1998. From September 2008 to June 2009, he also served as an Adjunct Professor at the University of Rhode Island School of Engineering. From 1982 to April
1998, he served as our vice president of engineering. From 1979 to 1982, Mr. Kits van Heyningen was an associate engineer at the Submarine Signal Division of Raytheon Company and from 1977 to 1984, he served as a consultant to various companies
and universities. Mr. Kits van Heyningen received a B.S. in physics from McGill University with a minor in computer science. Our Nominating and Corporate Governance Committee determined that Mr. Kits van Heyningen should serve as a
director because of his more than 30 years of industry experience, combined with his extensive background in engineering, as well as his 32 years of experience as a member of our Board of Directors.
Bruce J. Ryan
has served as one of our directors, the Chairman of our Audit Committee, and a member of our Compensation Committee
since July 2003. He has also been a member of our Nominating and Corporate Governance Committee since February 2004. Mr. Ryan is currently involved in private consulting. From February 1998 to November 2002, he served as executive vice
president and chief financial officer of Global Knowledge Network, a provider of information technology and computer software training programs and certifications. From 1994 to 1998, he served as the executive vice president and chief financial
officer of Amdahl Corporation, a provider of information technology solutions. Mr. Ryan previously had a 25-year career at Digital Equipment Corporation, where he served in various executive positions, including senior vice president of the
financial services, government and professional services business group. He currently serves on the Board of Directors of two private companies and served as a director of UTStarcom, Inc. from April 2008 to December
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2010. He received a B.S. in business administration from Boston College and an M.B.A. from Suffolk University. Our Nominating and Corporate Governance Committee determined that Mr. Ryan
should serve as a director because of his more than 10 years of experience as a member of our Board of Directors combined with his experience as a member of the Board of Directors for numerous private and public companies, his familiarity with
accounting matters, as well as his executive and management experience serving as executive vice president and chief financial officer of Global Knowledge Network and Amdahl Corporation, both providers of information technology, and his 25 years of
experience at Digital Equipment Corporation.
Directors serving a term expiring at the 2015 annual meeting (Class I directors):
Mark S. Ain
has served as one of our directors since 1997, the Chairman of our Compensation Committee since
1997, a member of our Audit Committee since 2000 and a member of our Nominating and Corporate Governance Committee since February 2004. He is the Chairman of the Board of Directors of Kronos Incorporated, which he founded in 1977 and served as
CEO until 2005. Mr. Ain also serves on the Board of Directors of LTX-Credence Corporation, VeruTEK Technologies, Inc., and various other private companies and charitable organizations. He received a B.S. from the Massachusetts Institute of
Technology and an M.B.A. from the University of Rochester. Our Nominating and Corporate Governance Committee determined that Mr. Ain should serve as a director because of his 17 years of experience as a member of our Board of Directors combined
with his executive and management experience serving as founder, chief executive officer and Chairman of the Board of Directors of Kronos Incorporated as well as his experience as a member of the Board of Directors of LTX-Credence Corporation and
various private companies.
Stanley K. Honey
has served as one of our directors since 1997 and a member of our
Nominating and Corporate Governance Committee since February 2004. Mr. Honey was a member of the Audit Committee from 1997 to 2003 and was reappointed in February 2011. Mr. Honey has been serving as the Director of Technology for the
Americas Cup Event Authority since April 2011. From January 2004 through January 2005, Mr. Honey served as the chief scientist of Sportvision Systems, LLC, which he co-founded in November 1997. He served as president and chief technology
officer of Sportvision Systems, LLC, from 2000 to January 2004 and as its executive vice president and chief technology officer from 1998 to 2000. From 1993 to 1997, Mr. Honey served as executive vice president of technology for the New
Technology Group of News Corporation. From 1989 to 1993, Mr. Honey served as president and chief executive officer of ETAK, Inc., a wholly owned subsidiary of News Corporation. Mr. Honey founded ETAK in 1983 and served as its executive
vice president of engineering until News Corporation acquired it in 1989. Mr. Honey received a B.S. from Yale University and an M.S. from Stanford University. Our Nominating and Corporate Governance Committee determined that Mr. Honey
should serve as a director because of his 17 years of experience as a member of our Board of Directors as well as his executive and management experience serving in numerous senior level executive positions, his experience as co-founder of
Sportvision Systems, LLC and founder of ETAK and his extensive knowledge of our marine customer base and the industry.
Directors
serving a term expiring at the 2016 annual meeting (Class II directors):
Martin A. Kits van Heyningen
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one of our founders, has served as our president and a director since 1982, chief executive officer since 1990, and as our Chairman of the Board of Directors since 2007. From 1980 to 1982, Mr. Kits van Heyningen was employed by the New England
Consulting Group, a marketing consulting firm, as a marketing consultant. Mr. Kits van Heyningen received a B.A., cum laude, from Yale University and has been issued six patents. Our Nominating and Corporate Governance Committee determined that
Mr. Kits van Heyningen should serve as a director because of his more than 30 years of industry experience as well as his executive leadership and management experience as our founder, president, chief executive officer and Chairman of the
Board of Directors.
Charles R. Trimble
has served as one of our directors since 1999, a member of our Audit Committee
since 2001, a member of our Compensation Committee since 2000 and a member of our Nominating and Corporate
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Governance Committee since February 2004. From 1981 to 1998, he served as the president and chief executive officer of Trimble Navigation Limited, a GPS company that he founded in 1978.
Previously, he served as the manager of integrated circuit research and development at Hewlett-Packards Santa Clara Division. Mr. Trimble is an elected member of the National Academy of Engineering, and he has been Chairman of the United
States GPS Industry Council since 1996. In addition, Mr. Trimble is a member of the California Institute of Technology (Caltech) Board of Trustees. He received a B.S. in engineering physics, with honors, and an M.S. in electrical engineering
from the California Institute of Technology. Our Nominating and Corporate Governance Committee determined that Mr. Trimble should serve as a director because of his 15 years of experience as a member of our Board of Directors combined with his
executive leadership and management experience as co-founder, president and chief executive officer of Trimble Navigation Limited as well as his experience as an elected member of the National Academy of Engineering, Chairman of the United States
GPS Industry Council and a member of the California Institute of Technology Board of Trustees.
Our executive officers who are not also
directors are listed below:
Peter A. Rendall
has served as our chief financial officer since October 2012.
Before joining us, from July 2011 to June 2012, Mr. Rendall served as consulting chief financial officer for JobSmart Partners, a company that provided IT consulting and contract services for software development teams. Prior to that, from June
2003 to April 2011, he served as chief executive officer of Top Layer Networks, Inc., an information technology security company, where he served as chief financial officer from March 2003 to June 2003. From October 1999 to March 2003, he served as
chief financial officer of Elcom International, Inc., a NASDAQ-listed international information technology products and services business. From April 1999 to September 1999, Mr. Rendall was Vice President of Finance of Elcom Services Group,
Inc. From July 1996 to March 1999, Mr. Rendall served as Vice President of Finance and Operations of Logica North America, Inc., a subsidiary of Logica, plc, a U.K. publicly held international software integration services company.
Mr. Rendall began his career at PricewaterhouseCoopers LLP in London in August 1987, before transferring to its Boston office in June 1995 as a senior manager, a position he held until July 1996. Mr. Rendall holds a B.S. in biochemistry
from the University of London and has been a member of the Institute of Chartered Accountants in England and Wales since 1991.
Robert J. Balog
has served as our senior vice president of engineering since October 2008. Previously, he served as our vice
president of engineering, satellite products from February 2005 to October 2008. From June 2003 to January 2005, Mr. Balog served as president of his own engineering contract services company, Automation Services, Inc., a contract product
development and services group specializing in a wide range of automation solutions. From June 2001 to May 2003, Mr. Balog served as vice president of engineering at ADE Corporation. From 1989 to April 2001, Mr. Balog held a number of
positions at Speedline Technologies, Inc., a supplier of capital equipment to the electronics assembly industry, including general manager and vice president of research and development. He has served on the Board of Directors of the Surface Mount
Equipment Manufacturers Association, serving as Chairman and numerous other positions. Mr. Balog is the recipient of 11 U.S. patents. Mr. Balog holds a B.S. in Computer Science from Purdue University.
Brent C. Bruun
has served as our executive vice president of mobile broadband since November 2012. From January 2011 to November
2012, he served as our senior vice president of global sales and business development. He served as our vice president of global sales and business development from July 2008 to December 2010. From January 2008 until joining KVH, Mr. Bruun
worked as a private consultant. From January 2007 until January 2008, Mr. Bruun served as senior vice president of strategic initiatives for SES AMERICOM, a satellite operator providing services via its fleet of 16 geosynchronous satellites
covering North America. In this position, he concentrated on global mobile broadband opportunities with particular emphasis on the maritime and aeronautical markets. Other positions held at SES AMERICOM included president of Americoms Managed
Solutions Division from July 2004 until December 2006 and senior vice president of business development from July 2002 until June 2004. Previously, Mr. Bruun held positions at KPMG LLP and General Electric. Mr. Bruun holds a B.S. in
accounting from Alfred University and is a certified public accountant.
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Daniel R. Conway
has served as our executive vice president of guidance and
stabilization since November 2012. From January 2003 to November 2012, he served as our vice president of business development for military and industrial products. From March 2000 to December 2002, Mr. Conway was the vice president of sales
and marketing at BENTHOS Inc., an oceanographic technology company with customers in the marine, oil and gas, government and scientific markets. From 1980 to January 2000, he served in a variety of positions at Anteon (formerly Analysis &
Technology), including vice president for new business development and acquisition integration from 1997 to January 2000 and vice president of operations for the Newport, Rhode Island operation from 1991 to 1997. Mr. Conway served for five
years as a member of the U.S. Navy nuclear submarine force and was a Commander in the U.S. Naval Reserve (Naval Intelligence) for more than 10 years. He is a graduate of the U.S. Naval Academy with post-graduate studies in nuclear engineering, and
he received an M.B.A. from the University of Rhode Island.
James S. Dodez
has served as our senior vice president of
marketing and strategic planning since March 2013. From March 2007 to February 2013, he served as our vice president of marketing and strategic planning. From October 1998 to March 2007, he served as our vice president of marketing. He served as our
vice president of marketing and reseller sales from 1995 to October 1998, and from 1986 to 1995, he served as our marketing director. Before joining us, Mr. Dodez was the marketing director at MagrattenWooley, Inc., an advertising agency, where
he managed KVHs account from 1983 to 1986. Mr. Dodez received a B.S. in business with an emphasis in marketing from Miami University.
Felise B. Feingold
has served as our vice president and general counsel since August 2007. Before joining us, from January 2004 until July 2007, she held the position of vice president and general
counsel for The Jean Coutu Group (PJC) USA, Inc., which operated the Brooks/Eckerd pharmacy chain, comprising more than 1,800 stores. Her other experience includes six years, from September 1998 to December 2004, as an attorney with the
international law firm of McDermott, Will & Emery. Ms. Feingold holds a B.A. in government from Cornell University, a J.D. from Hostra University School of Law, and an M.B.A. from Boston University Graduate School of Management.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation Discussion and Analysis
Overview of Executive Compensation Program
Our executive
compensation program is overseen and administered by the Compensation Committee of our Board of Directors, which is comprised entirely of independent directors as determined in accordance with various NASDAQ Stock Market, United States Securities
and Exchange Commission, or SEC, and Internal Revenue Code rules. None of its members is a current or former employee of ours. It is the goal of the Compensation Committee to create policies and practices that provide total compensation for
executive officers that is fair, reasonable and competitive. The Compensation Committee operates under a written charter adopted by our Board.
All principal elements of compensation paid to our executive officers are subject to approval by the Compensation Committee. Specifically, our Board has delegated authority to the Compensation Committee
to determine and approve (1) our compensation philosophy, including evaluating risk management and incentives that create risk, (2) annual base salaries, cash-based incentive compensation and equity-based compensation applicable to our
executive officers, and (3) equity-based compensation applicable to non-executive employees.
There are no material
differences in the compensation policies, objectives or program elements and administration with respect to our named executive officers, except that the compensation for our President, Chief Executive Officer, and Chairman of the Board of Directors
(CEO) is determined exclusively by the Compensation Committee, while the compensation of our other named executive officers is determined by the Compensation Committee based on similar criteria, but also takes into account the recommendations of our
CEO.
Executive Compensation Philosophy and Objectives
Our executive compensation program is designed to attract, retain and motivate highly qualified executives and align their interests with the interests of our stockholders. The ultimate goal of our
executive compensation program is to increase stockholder value by providing executives with appropriate incentives to achieve our business goals. In recent years, our executive compensation program has had three principal elements: annual base
salary, annual cash-based incentive compensation, and longer-term equity-based compensation.
Our executive compensation
objectives are to:
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offer fair and competitive compensation that attracts and retains superior executive talent;
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directly and substantially link rewards to measurable corporate performance;
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align the interests of executive officers with those of stockholders by providing executive officers with an equity stake in our company;
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optimize the cost to us and value to executives; and
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promote long-term career commitments that support a long-standing internal culture of loyalty and dedication to our interests.
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The three principal elements of our executive compensation program seek to provide the following rewards:
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Base salaries provide fixed compensation to reward individual value that an executive officer brings to us through experience and past and expected
future contributions to our success, while factoring in our specific needs and comparable responsibilities at similar organizations.
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Annual cash-based incentive compensation is designed to reward the achievement of our annual business and financial goals and certain individual
performance goals set at the beginning of each year.
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This incentive program generally awards compensation based on the degree to which our actual financial results meet the financial goals of our internal business plan and the degree to which the
executives meet their individual performance goals.
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Equity grants are designed to reward the achievement of long-term growth in our stock price. In 2013, the Board elected to grant shares of restricted
stock as the preferable form of equity compensation for our named executive officers to align with the trends among our peer group. Restricted stock awards were granted with no payment of cash consideration. The restricted stock awards vest in
four equal annual installments, the first of which vested on March 11, 2014, the first anniversary of the grant date.
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For a company of our size, we believe that the use of these executive compensation elements strengthens our ability to attract and retain highly qualified executives. We believe this combination of
programs provides an appropriate mix of fixed and variable pay, balances short-term operational performance with long-term stockholder value, and encourages executive recruitment and retention.
Our equity incentive program is a key retention tool and our vehicle for offering long-term incentives. Equity incentives with four-year
vesting periods are granted annually to executive officers to attract, motivate and retain these executives. We grant equity incentives to executive officers to encourage executive officers to work with a long-term view in the interest of
stockholders and to reward the achievement of long-term growth in our stock price. We believe that granting equity incentives is the best method of motivating the executive officers to perform in a manner that is consistent with the long-term
interests of our stockholders.
The Compensation Committee also noted that, at our 2011 annual meeting of stockholders, the
stockholders approved the compensation of our named executive officers for 2010 by a favorable vote of approximately 100% of the votes cast. Partially as a result of this overwhelmingly positive stockholder feedback, our Compensation Committee has
in subsequent years continued to employ compensation packages having a similar basic structure to the compensation package used in 2010.
Compensation Decision-making Process
Our executives are compensated principally through a combination of base salary, cash-based incentive compensation paid in the first quarter of the following year and an annual equity grant. In addition,
we may also grant an initial equity award to new executive officers when they commence employment. From time to time, we may offer a signing or retention bonus to attract a new executive officer.
The base salary and equity award for each executive, together with the overall cash-based incentive compensation plan for all executives,
are generally established within the first quarter of each fiscal year at meetings of the Compensation Committee held for this purpose. These meetings generally follow one or more informal presentations or discussions of our financial performance,
including achievement of performance targets, for the prior fiscal year. In deciding the compensation to be awarded to the executive officers other than the CEO for the current year and cash-based incentive compensation earned during the prior
fiscal year, the Compensation Committee typically receives recommendations from the CEO. The CEO and the members of the Compensation Committee discuss the CEOs recommendations. In deciding the compensation to be awarded to the CEO for the
current year and the cash-based incentive compensation earned by the CEO during the prior year, the Compensation Committee typically receives a written self-assessment from the CEO and recommendations from the Chairman of the Compensation Committee.
The members of the Compensation Committee then discuss the Chairmans recommendations. The CEO is not present at the time of these deliberations. The Compensation Committee may accept or adjust any recommendations and makes all final
compensation decisions.
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Our cash-based incentive compensation program comprises both corporate performance goals and
individual performance goals. Under this program, our Compensation Committee approved two formulas for 2013: one formula for named executive officers responsible for sales and one formula for all other named executive officers. For named executive
officers responsible for sales, one-fourth of each executives target incentive compensation was based on the degree of achievement of our corporate performance goals for 2013 and three-fourths was based on the degree of achievement of budgeted
revenue targets for 2013. For all other named executive officers, three-fourths of each executives target incentive compensation was based on the degree of achievement of our corporate performance goals for 2013 and one-fourth was based on the
degree of achievement of individual performance goals for 2013. The corporate performance portion of the cash-based incentive compensation program is generally based on a formula approved by the Compensation Committee at the start of each year, but
the Compensation Committee has the discretion to award incentive compensation that differs from the formula-based amounts. The individual performance goals for the named executive officers other than the CEO are determined by the CEO, with input
from the CFO and each executive at the beginning of the year. The individual performance goals for the CEO are determined by the Compensation Committee, with input from the CEO.
Compensation Consultant
Since 2005, the Compensation Committee has
engaged Radford as its independent compensation consultant. The Compensation Committee has engaged Radford to advise on matters related to our executive compensation program and to assist in creating an effective and competitive executive
compensation program. A comprehensive Radford study was provided in January 2013 to determine the 2013 recommendations. Neither Radford nor any of its affiliates provided any services to us in 2013 other than Radfords services to the
Compensation Committee.
Radford assisted the Compensation Committee by providing comparative market data on compensation
practices and programs based on an analysis of executive compensation survey data. Radford also provided guidance on industry best practices. Radford advised the Compensation Committee in (1) determining base salaries for executives,
(2) determining the targets for total cash-based incentive compensation as a percentage of base salary, and (3) designing and determining individual equity grants for the 2013 long-term incentive plan for executives.
Radfords recommendations with respect to base salary, cash-based incentive compensation and equity-based compensation were taken
into consideration by the Compensation Committee when setting base salaries and making changes to the cash-based incentive compensation and equity-based compensation components of the executive compensation program in 2013.
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Peer Group, Survey Data and Compensation Targets
With the assistance of Radford, the Compensation Committee compared our executive officers compensation to that of a peer group of
companies. For 2013, the peer group consisted of 21 public high technology companies which were selected by Radford in 2012 and approved by the Compensation Committee based on their respective businesses, revenues, market capitalization and the
number of employees. In addition to the peer group, Radford reviewed data from the Radford Global Technology Survey, which includes approximately 127 high technology companies with revenues of less than $200 million with the median revenue for the
group being approximately $107 million as well as the Radford Global Sales Survey, which included approximately 104 companies. The peer group, the Radford Global Technology Survey and the Radford Global Sales Survey data had effective dates of
December 2012, November 2012, and November 2012, respectively, and were blended equally, where possible, and then the cash compensation data was increased by a 3.0% annual factor based on the results of Radfords Q4 2012 Trends Report
specifically targeting high technology companies to update the previous cash compensation data results to a common effective date of February 1, 2013. The 21 companies included in our peer group were as follows:
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Mercury Computer Systems
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Compensation Benchmarking Relative to Market
Radford also provided the Compensation Committee with a comparison of the compensation of our executives to the compensation of executives with similar titles and level of experience at the companies
included in the aforementioned peer group. The assessment did not consider executive tenure, skill or performance. The Radford data reviewed by the Compensation Committee included market data taken from the aforementioned peer group and the survey
data, which was combined and weighted equally and then gathered at the 25
th
, 50
th
, and
75
th
percentiles for (1) base salaries,
(2) bonus, (3) total cash compensation (base salary plus bonus), (4) long-term incentives (number of shares of stock options granted and long-term incentive value of equity-based compensation), (5) stock option equivalents as a
percentage of total outstanding shares of the company, and (6) total direct compensation (total cash compensation and long-term incentives).
Historically, the Compensation Committee has generally targeted approximately the median base salary level (50
th
percentile) of the base salaries of executives in the survey data used by the Compensation Committee as the basis for
comparison for that year. Adjustments to median base salary levels were made based on comparisons to the survey data and evaluation of other factors, such as executive tenure, skill and performance relative to expectations for average performance
for comparable executives, which are not reflected in the survey data. These factors reflect the value each individual brings to us through experience, education and training, our specific needs, and the individuals past and expected future
contributions to our success. Radford advised the Compensation Committee that base salary levels are considered to be competitive if they fall within 10% of the desired market position. For 2013, base salaries for our named executive officers ranged
from approximately 3% to 10% below the 50
th
percentile of
the survey data, with the exception of two individuals whose base salaries were at the 50
th
percentile of the survey data for their positions.
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We believe that benchmarking and aligning base salaries is especially critical to a
competitive compensation program. Other elements of our compensation are affected by changes in base salary. For example, our annual cash-based incentive compensation is targeted and paid out as a percentage of base salary.
Our compensation program allows executives to participate in an annual cash-based incentive compensation program.
Historically, the payouts for our executives for achieving the expected level of corporate performance for the year (as a percentage of base salary) have been targeted to pay out at approximately the median (50
th
percentile) of payouts for executives in the survey data used by the
Compensation Committee as the basis for comparison for that year. As a percentage of base salary, targets for cash-based incentive compensation to the named executive officers for 2013 were five percentage points below the percentage of base salary
at the 50
th
percentile of the Radford survey data, with
the exception of two sales executives whose targets were positioned 25 percentage points below the percentage of base salary at the 50
th
percentile of the survey data.
Our compensation program allows executives to receive equity incentive awards under our equity incentive plans. Our
primary goal is to create long-term value for stockholders, and accordingly the Compensation Committee believes that equity incentive awards provide an additional incentive to executive officers to work to maximize stockholder value. Typically, as
was the case in 2013, all named executive officers other than the CEO and CFO receive the same quantity of equity awards, as their roles and responsibilities have been valued at an equivalent level. The Compensation Committee believed that
granting equity incentives in this manner was the best method of motivating our executive team to perform in a manner consistent with the long-term interests of our stockholders. The CEO and CFO typically receive larger equity awards because
they have greater responsibility for achieving our long-term goals. The fair values of the equity awards granted to the named executive officers in 2013 ranged from approximately 42% below to 16% above the 50
th
percentile of the survey data.
Radford advised the Compensation Committee that Radford considers target total direct compensation levels to be
competitive if they fall within 30% of the desired market position. When taking into consideration the base salary, annual cash-based incentive compensation and the equity grants made during 2013, the total direct compensation for Martin A. Kits van
Heyningen, our CEO and Chairman of the Board, was approximately 21% below the 50
th
percentile of the Radford survey data, and the total direct compensation for Peter Rendall, our CFO, was approximately 32% below the 50
th
percentile of the Radford survey data. The average total direct compensation for our other named executive officers
was approximately 5% below the 50
th
percentile of the
Radford survey data. The compensation for our CEO and CFO fell below this benchmark primarily because 75% of their cash-based incentive compensation was tied to achievement of our corporate performance goals, which was below the budgeted targets for
2013. Our CFOs compensation for 2013 also fell short of the benchmark because his 2013 equity grant was reduced in light of the substantial equity grant that he received in October 2012 in connection with the commencement of his employment.
Base Salary
The Compensation Committee defines base salary as the annualized regular cash compensation of an employee, excluding cash bonus awards,
corporate contributions to employee benefit plans, and other compensation not designated as salary. As described above, base salaries are set for our named executive officers at a meeting of our Compensation Committee which is held for that purpose
in the first quarter of the year.
In establishing base salaries for our named executive officers for 2013, the Compensation
Committee took into account the value each individual brings to us through experience, education and training, our specific needs, and the individuals past and expected future contributions to our success, as well as our overall corporate
performance. For 2013, the average adjustment to salaries for our named executive officers was an increase equal to 5% of base salary for 2012, with the largest increase equal to 10% of base salary for 2012. These adjustments were effective
January 1, 2013.
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The following summarizes some of the individual achievements of the CEO considered by the
Compensation Committee for his 2013 base salary increase:
Martin Kits van Heyningen, President, Chief Executive Officer
and Chairman of the Board
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Delivered record revenues and earnings per share in 2012, leading to a stronger financial position and a significant increase in the price of our
common stock in 2012.
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Developed and implemented a clear growth strategy for the company.
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Secured the largest contract in our history and key customer contracts in each target market.
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Achieved significant growth in our mobile broadband airtime revenue.
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Led the development and introduction of new products important to our future competitive position.
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Streamlined and improved our internal operations for better performance.
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In light of these factors, Mr. Kits van Heyningen received a 5.1% increase in his base salary for 2013, which
brought his base salary to approximately 3% below the 50
th
percentile of the Radford survey data.
The following summarizes some of the individual achievements of our other named
executive officers considered by the CEO in providing recommendations to the Compensation Committee for 2013 base salary increases:
Peter A. Rendall, Chief Financial Officer
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Accomplished a smooth transition in the position from our former, long-term CFO, including attention to our key stockholders.
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Devised a plan to improve our internal financial reporting process.
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Oversaw the successful centralization of billing for our airtime services.
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Ensured our adherence to our budget to exceed our financial goals for the fourth quarter of 2012.
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Mr. Rendalls base salary was initially set in October 2012 when he was appointed our CFO and was reviewed
again in the first quarter of 2013 contemporaneously with the annual review of salaries for our other named executive officers. In light of these factors, Mr. Rendall received a 1.0% increase in base salary for 2013, which brought his base
salary to approximately 9% below the 50
th
percentile in
the Radford survey data.
Brent C. Bruun, Executive Vice President, Mobile Broadband
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Oversaw the successful completion of the C-Band portion of our mini-VSAT network.
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Achieved significant increases in our Mobile Broadband revenue, unit sales and subscriber base.
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Refined and began implementation of sales expansion strategy for regional markets, including new Japanese office.
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Developed and began implementation of additional value-added services for the mini-VSAT broadband network.
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Developed marketing plan to transition competitors customers to our Mobile Broadband products and services.
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In light of these factors, Mr. Bruun received a 5.0% increase in base salary for 2013, which brought his base
salary to the 50
th
percentile in the Radford survey data.
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Robert J. Balog, Senior Vice President, Engineering
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Managed a variety of new product development efforts, leading to product introductions for the TracPhoneV11, 1750 IMU, IP/ACU Integrated ACU Modem as
well as managed spending and scheduling commitments for the mini-VSAT support services and TACNAV product roadmap.
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Developed comprehensive product roadmap for TracVision products.
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Continued to maintain engineering department spending within budgeted levels.
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Continued to improve new product development process, including program estimation efficiency.
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Provided overall support for Antenna products research methods for increasing performance.
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In light of these factors, Mr. Balog received a 3.5% increase in base salary for 2013, which brought his base
salary to the 50
th
percentile in the Radford survey data.
Daniel R. Conway, Executive Vice President, Guidance and Stabilization
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Achieved significant expansion of TACNAV product revenue capturing over $37 million in new contracts and achieving record revenue of $18 million.
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Contributed to the successful expansion of KVHs mini-VSAT Broadband service through performance on our 10-year, $42 million U.S. Coast Guard
contract, and by expanding satellite hardware sales and airtime service into other U.S. and allied government and military organizations.
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Executed on a base of multi-year, multi-million dollar contracts, with record booked backlog of $35 million across several fiscal years.
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Positioned KVH for success on four major TACNAV and fiber optic gyro contracts that were awarded in 2012.
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In light of these factors, Mr. Conway received a 10% increase in base salary for 2013, which brought his base
salary to 10% below the 50
th
percentile in the Radford
survey data.
Annual Cash-based Incentive Compensation
Our management incentive plan is designed to reward our executives for the achievement of annual goals, principally, achievement of corporate financial goals, and, secondarily, achievement of individual
goals. It is our philosophy that the executives be rewarded for their performance as a team. We believe this is important to align our executive officers interests with strong corporate performance and to promote cooperation among them. The
executives also are rewarded for achieving individual goals set at the beginning of each year.
Formula for Cash-based Incentive
Compensation
In March 2013, the Compensation Committee adopted the management incentive plan for 2013. The management
incentive plan for 2013 was adopted based on our historical financial performance, planned strategic initiatives and the existing economic environment. Annual cash-based incentive compensation opportunities as a percentage of base salary were
targeted at 90% of base salary for the CEO and 50% of base salary for the other named executive officers, with the exception of one individual that was targeted at 40% of base salary. The Compensation Committee approved two formulas for calculating
the cash-based incentive compensation with respect to the executives, one formula for the executive responsible for sales and one formula for all other executives. Under the incentive compensation formula for each sales executive for 2013, 75% of
the sales executives target incentive compensation was tied to achievement of revenue targets. The threshold for payment was achievement of 85% of the individuals revenue target, in which case 60% of this portion of the bonus would have
been earned. The maximum bonus payment for the individuals achievement of revenue
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targets would have been awarded if he had exceeded his individual revenue target by 25%, in which case the payment would have been equal to 200% of this portion of the target bonus. The remaining
25% of the target incentive compensation for each sales executive was tied to corporate performance. Corporate performance was measured by the achievement of our goals for (i) revenue and (ii) earnings before interest, taxes, depreciation,
amortization, and equity-based compensation expenses, or Adjusted EBITDA. The threshold for payment of the portion of the bonus for corporate performance for the sales executives was our achievement of 100% of the corporate revenue target and 85% of
the Adjusted EBITDA target, and at this level of achievement, 50% of the target bonus for corporate performance would have been earned. If we did not meet either of these thresholds, the payment for the corporate performance portion of the bonus
would have been zero. The bonus payment for corporate performance would have been 100% for the sales executives if we had achieved 100% of our targets for both revenue and Adjusted EBITDA. The maximum bonus payment for corporate performance would
have been awarded if we had exceeded the targets for revenue and Adjusted EBITDA by 15% and 25%, respectively, in which case the payment would have been 233% of the target bonus for corporate performance.
The Compensation Committee approved a formula for determining the bonus of all other named executive officers based 75% on corporate
performance goals and 25% on individual performance goals. The portion of the bonus plan based on achieving corporate performance goals used the same formula described above for the sales executives. The portion of the bonus based on individual
performance for such executives was based solely on the discretion of the Compensation Committee.
Incentive Compensation Awarded
The Compensation Committee awarded incentive compensation for fiscal 2013 based on its assessment of the degree of
achievement of corporate and individual performance goals for 2013. Although we slightly exceeded the threshold performance targets for payment of the incentive compensation for corporate performance, the Compensation Committee, taking into account
the fact that the acquisition of Headland Media Limited (now known as KVH Media Group) contributed to the achievement of corporate performance goals that pre-dated the acquisition, used its discretion and awarded only 50% of the corporate
performance portion of the incentive compensation award, which was equal to the amount payable for achieving only the threshold performance targets. For Brent C. Bruun and Daniel R. Conway, our sales executives, the portion of the incentive
compensation award based on the degree of achievement of their respective revenue targets was paid on 89% and 109% achievement, respectively. Achievement of individual performance goals for the remaining named executive officers ranged from 95% to
100%. Accordingly, cash-based incentive compensation actually awarded to the named executive officers for 2013 performance ranged from approximately 61% to 63% of the respective target compensation for the non-sales executives and were 79% and 94%
of the respective target compensation for the two sales executives. The sales executives received a higher percentage of their target cash-based incentive compensation because the formulas for their incentive compensation gave greater weight to
revenue targets, where our performance was closer to or over their targets.
Equity Incentive Program
The equity grant to our CEO in 2013 was based upon the Radford survey data for grants to other chief executive officers, the CEOs
prior performance, the value of equity awards previously granted and unvested and the importance of retaining the CEOs services. These factors, as well as the CEOs achievements as listed above in determining his 2013 base salary, were
taken into consideration when determining the number of shares covered by the equity grant. The equity grant to our CEO in 2013 constituted the largest portion of his total compensation for that year. The equity grant to our CFO in 2013 was based on
guidance provided by Radford and was somewhat reduced in light of the substantial initial grant that he received in October 2012 upon his appointment as our CFO. When granting equity incentives to our other named executive officers, a team approach
was utilized. In 2013, consistent with the approach used in recent years, all named executive officers other than the CEO and CFO received the same number of equity awards, as their roles and responsibilities were valued at an equivalent
level. The Compensation Committee believed that granting equity incentives in this
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manner was the best method of motivating our executive team to perform in a manner consistent with the long-term interests of our stockholders. The CEO received a larger award because he has
greater responsibility for achieving our long-term goals.
Timing of Equity Grants
We typically grant equity incentives to executives in the first quarter of each fiscal year, usually in conjunction with the annual review
of the individual and collective performance of our executive officers.
We grant restricted stock awards or stock options to
new hires on a case-by-case basis. In addition, we typically grant restricted stock awards or stock options to certain non-executive employees each year.
Exercise Price and Vesting of Equity Awards
Restricted stock awards are
granted with no payment of cash consideration. In 2013, restricted stock awards were granted to our named executive officers to vest in four equal annual installments, the first of which vested on March 11, 2014, the first anniversary of the
grant date.
Other Compensation and Perquisites
Our named executive officers are eligible to receive the same health and welfare benefits that are available to other U.S. employees and a contribution to their benefit premium that is the same percentage
as provided to other U.S. employees. These benefit programs include health and dental insurance, life insurance, supplemental life insurance, and long-term disability insurance, and certain other benefits. In general, our employees pay between 30%
and 34% of the health insurance premium due.
We maintain an Employee Stock Purchase Plan and a tax-qualified 401(k) plan,
which provides for broad-based employee participation. Under the 401(k) plan, all of our U.S. employees, including executive officers, are eligible to receive matching contributions from us. We presently match 50% of all employee 401(k) plan
contributions up to 4% of salary, with a maximum annual corporate match per employee of $3,000. We do not provide defined benefit pension plans or defined contribution retirement plans to our executives or other U.S. employees other than the 401(k)
plan.
We provided automobile and/or housing allowances to four named executive officers in 2013. Martin A. Kits van
Heyningens automobile allowance was $10,580 and Robert J. Balogs was $6,000. Brent C. Bruun received $15,000 in 2013 for automobile and housing allowances. Peter A. Rendall received $12,500 in 2013 for a housing allowance, which ended in
October 2013. No other named executive officers received any other perquisites or other personal benefits or property from us during 2013.
Equity Ownership by Executives
We do not currently have a formal stock ownership requirement for executives or any related hedging policies. However, stock ownership by executives is encouraged on a voluntary basis. Each of our
executive officers holds both vested and unvested stock options and restricted stock awards to the extent shown in the table entitled Outstanding Equity Awards as of December 31, 2013. The Compensation Committee reviews the vested
and unvested stock options and restricted stock awards held by the executives each year.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code limits our ability to deduct annual compensation in excess of
$1,000,000 that is paid to each of our CEO and our three most highly paid executive officers (other than the CEO and the CFO), unless that compensation is performance-based within the meaning of Section 162(m) and the
19
regulations promulgated there under. The restricted stock awards that we grant under the 2006 Plan do not qualify as performance-based compensation. We believe that all of our stock options do so
qualify and therefore are not subject to the deduction limitation of Section 162(m). The salary and bonuses paid to our executive officers are not exempt from this deduction limit. Accordingly, we may be unable to deduct some of the amounts
that may be recognized as ordinary income by our executive officers.
We consider tax deductibility in the design and
administration of our executive officer compensation plans and programs. However, we believe that it is in the best interests of our stockholders that we retain flexibility and discretion to make compensation awards, whether or not deductible, when
such awards are consistent with our strategic goals.
Rules under generally accepted accounting principles determine the
manner in which we account for grants of equity-based compensation to our employees in our consolidated financial statements. Our accounting policies for equity-based compensation are further discussed in note 7 of our audited consolidated financial
statements in our Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 17, 2014.
20
COMPENSATION COMMITTEE REPORT
(1)
The Compensation Committee
established by our Board of Directors is currently composed of Messrs. Ain, Ryan and Trimble. Our Board of Directors adopted a charter for the Compensation Committee in April 2004, which was most recently revised in August 2013. Under the charter,
the Compensation Committee is responsible for recommending to the Board the compensation philosophy and policies that we should follow, particularly with respect to the compensation of the members of our senior management. The Committee is
responsible for reviewing and approving the compensation of our executive officers, including our Chief Executive Officer. In addition, the Board has delegated to the Committee the authority to administer, review and make recommendations with
respect to our incentive compensation plans and our equity-based plans.
The Compensation Committee has submitted the
following report for inclusion in this proxy statement:
Our Committee has reviewed and discussed with management the
Compensation Discussion and Analysis contained in this proxy statement. Based on our Committees review of, and the discussions with management with respect to the Compensation Discussion and Analysis, our Committee recommended to the Board
that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our companys annual report on Form 10-K for the fiscal year ended December 31, 2013.
Compensation Committee
Mark S. Ain (Chairman)
Bruce J. Ryan
Charles R. Trimble
(1)
|
The material in this report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of our filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this proxy statement and irrespective of any incorporation language in such filing.
|
21
SUMMARY COMPENSATION TABLE
For 2013
The following table provides information concerning the compensation earned by our CEO, our CFO and each of our three most highly
compensated executive officers other than the CEO and CFO (collectively, named executive officers) during 2013. In addition, we are providing information regarding the compensation earned by Robert W.B. Kits van Heyningen, who is a
director and an immediate family member of Martin A. Kits van Heyningen, our President, Chief Executive Officer and Chairman of the Board of Directors. We are treating Robert W.B. Kits van Heyningen as a named executive officer for
purposes of our executive compensation disclosures (other than the Compensation Discussion and Analysis and Proposal Two) in lieu of the information that we would otherwise provide in response to the disclosure requirements for director compensation
and related-party transactions.
In 2013, the salary and bonus (including the non-equity incentive plan compensation) of our
named executive officers as a percentage of total compensation ranged from 52% to 69%.
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|
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|
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Name and Principal Position
|
|
Year
|
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|
Salary
($)
|
|
|
Bonus
($)(1)
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|
|
Stock
Awards
($)(2)
|
|
|
Option
Awards
($)(3)
|
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|
Non-Equity
Incentive Plan
Compensation
($)(4)
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All Other
Compensation
($)(5)
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Total
($)
|
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Martin A. Kits van Heyningen
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2013
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|
440,001
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1,000
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|
|
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616,950
|
|
|
|
|
|
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247,501
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13,580
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1,319,032
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|
President, Chief Executive Officer and Chairman of the Board of Directors
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2012
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|
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|
418,637
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|
1,000
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|
|
|
|
|
|
|
408,196
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|
|
|
316,332
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|
|
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13,733
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|
|
|
1,157,898
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2011
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|
|
|
408,825
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|
|
|
1,000
|
|
|
|
360,000
|
|
|
|
347,350
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|
|
|
72,055
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|
|
15,882
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1,205,112
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter A. Rendall
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|
|
2013
|
|
|
|
252,500
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|
|
|
1,000
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|
|
|
137,100
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|
|
|
|
|
|
|
77,328
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|
|
|
14,844
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|
|
|
482,772
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|
Chief Financial Officer
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|
2012
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|
|
|
62,500
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(6)
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|
|
231
|
(6)
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|
|
|
|
|
|
346,235
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|
|
|
31,094
|
(6)
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|
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4,961
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|
|
|
445,021
|
|
|
|
|
|
|
|
|
|
|
Brent C. Bruun
|
|
|
2013
|
|
|
|
250,044
|
|
|
|
1,000
|
|
|
|
179,944
|
|
|
|
|
|
|
|
99,174
|
|
|
|
18,000
|
|
|
|
548,162
|
|
Executive Vice President, Mobile Broadband
|
|
|
2012
|
|
|
|
238,137
|
|
|
|
1,000
|
|
|
|
|
|
|
|
122,459
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|
|
|
95,493
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|
|
|
18,000
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|
|
|
475,089
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2011
|
|
|
|
231,426
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|
|
|
1,000
|
|
|
|
108,000
|
|
|
|
104,205
|
|
|
|
22,911
|
|
|
|
18,000
|
|
|
|
485,542
|
|
|
|
|
|
|
|
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|
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Robert J. Balog
|
|
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2013
|
|
|
|
251,897
|
|
|
|
1,000
|
|
|
|
179,944
|
|
|
|
|
|
|
|
61,715
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|
|
|
9,000
|
|
|
|
503,556
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|
Senior Vice President, Engineering
|
|
|
2012
|
|
|
|
243,379
|
|
|
|
1,000
|
|
|
|
|
|
|
|
122,459
|
|
|
|
97,595
|
|
|
|
9,000
|
|
|
|
473,433
|
|
|
|
2011
|
|
|
|
236,520
|
|
|
|
1,000
|
|
|
|
108,000
|
|
|
|
104,205
|
|
|
|
21,760
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|
|
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9,000
|
|
|
|
480,485
|
|
|
|
|
|
|
|
|
|
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Daniel R. Conway
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2013
|
|
|
|
224,106
|
|
|
|
1,000
|
|
|
|
179,944
|
|
|
|
|
|
|
|
105,482
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|
|
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3,000
|
|
|
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513,532
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|
Executive Vice President, Guidance and Stabilization
|
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2012
|
|
|
|
203,733
|
|
|
|
1,000
|
|
|
|
|
|
|
|
122,459
|
|
|
|
142,817
|
|
|
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3,000
|
|
|
|
473,008
|
|
|
|
|
|
|
|
|
|
|
Robert W.B. Kits van Heyningen
|
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2013
|
|
|
|
237,131
|
|
|
|
1,000
|
|
|
|
179,944
|
|
|
|
|
|
|
|
50,835
|
|
|
|
3,000
|
|
|
|
471,910
|
|
Vice President, Research and Development and Director
|
|
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2012
|
|
|
|
229,112
|
|
|
|
1,000
|
|
|
|
|
|
|
|
122,459
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|
|
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79,588
|
|
|
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3,000
|
|
|
|
435,159
|
|
|
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2011
|
|
|
|
222,655
|
|
|
|
1,000
|
|
|
|
108,000
|
|
|
|
104,205
|
|
|
|
18,119
|
|
|
|
3,000
|
|
|
|
456,979
|
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(1)
|
Reflects annual holiday bonus earned and paid in 2013, 2012 and 2011.
|
(2)
|
Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown represent the aggregate grant
date fair value, computed using the closing price of our common stock on the date of grant in accordance with Accounting Standards Codification 718,
Compensation Stock Compensation
(ASC 718), of restricted stock awards granted during
each year, excluding the impact of estimated forfeitures related to service-based vesting conditions. Also included in this amount is the aggregate grant date fair value of performance-based restricted stock awards, which is based on the probable
outcome of the performance conditions related to these awards as of the grant date, excluding the impact of estimated forfeitures related to service-based vesting conditions. There were no performance-based restricted stock awards granted during
2013 or 2012. The probable outcome of the 2011 performance-based awards was estimated at 100%, and the awards paid out at 100% of the target, as the performance criterion was determined to have been met by the Compensation Committee. Therefore,
stock-based compensation associated with the aggregate grant date fair value of the performance-based awards was recorded in 2011.
|
22
(3)
|
Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown represent the aggregate grant
date fair value, computed using the Black-Scholes option pricing model in accordance with ASC 718, of options granted during each year excluding the impact of estimated forfeitures related to service-based vesting conditions. The assumptions made to
determine the value of these awards are set forth in Note 7 of our Consolidated Financial Statements included in our 2013 annual report on Form 10-K, as filed with the SEC on March 17, 2014.
|
(4)
|
For 2013, the table reflects amounts that were earned under our management incentive plan for 2013 performance and that were determined and paid in
March 2014. For 2012, the table reflects amounts that were earned under our management incentive plan for 2012 performance and that were determined and paid in March 2013. For 2011, the table reflects amounts that were earned under our management
incentive plan for 2011 performance and that were determined in February 2012 and paid in March 2012.
|
(5)
|
Reflects the value of 401(k) matching contributions ($3,000 maximum) and auto and housing allowances. See Compensation Discussion and
AnalysisOther Compensation and Perquisites for more information on these allowances. Named executive officers did not receive any other perquisites, personal benefits or property.
|
(6)
|
Peter A. Rendall was appointed our CFO on October 1, 2012. His salary, bonus and non-equity incentive plan compensation for 2012 were paid in
proportion to his period of service in that year.
|
23
GRANTS OF PLAN-BASED AWARDS
For 2013
The following table provides information regarding grants of plan-based awards made to our named executive officers during 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date(1)
|
|
|
Estimated
Future Payouts
Under Non-Equity
Incentive Plan
Awards(2)
|
|
|
All
Other
Stock
Awards:
Number of
Shares of
Stock
(#)(3)
|
|
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)(4)
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
Martin A. Kits van Heyningen
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
396,001
|
|
|
|
791,012
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
616,950
|
|
|
|
|
|
|
|
|
Peter A. Rendall
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
126,250
|
|
|
|
252,184
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
137,100
|
|
|
|
|
|
|
|
|
Brent C. Bruun
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
125,022
|
|
|
|
166,592
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125
|
|
|
|
179,944
|
|
|
|
|
|
|
|
|
Robert J. Balog
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
125,949
|
|
|
|
167,826
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125
|
|
|
|
179,944
|
|
|
|
|
|
|
|
|
Daniel R. Conway
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
112,053
|
|
|
|
149,311
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125
|
|
|
|
179,944
|
|
|
|
|
|
|
|
|
Robert W.B. Kits van Heyningen
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
82,996
|
|
|
|
165,784
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125
|
|
|
|
179,944
|
|
(1)
|
Reflects the date on which the grants and management incentive plan were approved by the Compensation Committee.
|
(2)
|
The amounts shown in these columns represent the executives annual incentive opportunity under the management incentive plan, which has both
corporate performance goals and individual performance goals. There is no threshold for achievement of individual performance goals; the thresholds for achievement of corporate performance goals and sales performance goals vary by goal. All target
and maximum amounts reflect executive achievement of 100% of individual performance goals. See Compensation Discussion and AnalysisAnnual Cash-based Incentive Compensation for more information regarding this plan.
|
(3)
|
Represents the grant of restricted stock awards under the 2006 Stock Incentive Plan in 2013, excluding the impact of estimated forfeitures related to
service-based vesting conditions. The restricted stock awards were received without payment of cash consideration. The restricted stock awards vest in four equal annual installments. The equity grant to our CFO in 2013 was somewhat reduced in light
of the substantial initial grant that he received in October 2012 upon his appointment as our CFO. See Compensation Discussion and AnalysisEquity Incentive Program for more information regarding these grants.
|
(4)
|
Reflects the grant date fair value of restricted stock awards granted to our named executive officers computed using the market price on the date of
grant, in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. No options were granted to our named executive officers in 2013.
|
24
OUTSTANDING EQUITY AWARDS
As of December 31, 2013
The following table provides information concerning outstanding equity awards held by the named executive officers on December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date(2)
|
|
|
Grant Date
of Shares
of
Stock That
Have Not
Vested
|
|
|
Number of
Shares of
Stock
That Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares of
Stock That
Have Not
Vested
($)(3)
|
|
Martin A. Kits van Heyningen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2010
|
(4)
|
|
|
8,750
|
|
|
|
114,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/5/2010
|
(5)
|
|
|
3,750
|
|
|
|
48,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2011
|
(4)
|
|
|
12,500
|
|
|
|
162,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
45,000
|
|
|
|
586,350
|
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
14.40
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,875
|
|
|
|
65,625
|
|
|
|
9.32
|
|
|
|
2/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter A. Rendall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
10,000
|
|
|
|
130,300
|
|
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
13.78
|
|
|
|
10/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent C. Bruun
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2010
|
(4)
|
|
|
2,625
|
|
|
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/5/2010
|
(5)
|
|
|
1,124
|
|
|
|
14,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2011
|
(4)
|
|
|
3,750
|
|
|
|
48,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
13,125
|
|
|
|
171,019
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
14.40
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,562
|
|
|
|
19,688
|
|
|
|
9.32
|
|
|
|
2/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Balog
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2010
|
(4)
|
|
|
2,625
|
|
|
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/5/2010
|
(5)
|
|
|
1,124
|
|
|
|
14,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2011
|
(4)
|
|
|
3,750
|
|
|
|
48,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
13,125
|
|
|
|
171,019
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
14.40
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,562
|
|
|
|
19,688
|
|
|
|
9.32
|
|
|
|
2/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Conway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2010
|
(4)
|
|
|
2,625
|
|
|
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/5/2010
|
(5)
|
|
|
1,124
|
|
|
|
14,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2011
|
(4)
|
|
|
3,750
|
|
|
|
48,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
13,125
|
|
|
|
171,019
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
14.40
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,562
|
|
|
|
19,688
|
|
|
|
9.32
|
|
|
|
2/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert W.B. Kits van Heyningen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2010
|
(4)
|
|
|
2,625
|
|
|
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/5/2010
|
(5)
|
|
|
1,124
|
|
|
|
14,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2011
|
(4)
|
|
|
3,750
|
|
|
|
48,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2013
|
(4)
|
|
|
13,125
|
|
|
|
171,019
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
14.40
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,562
|
|
|
|
19,688
|
|
|
|
9.32
|
|
|
|
2/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The options vest and become exercisable in equal installments on the first four anniversaries of the grant date.
|
(2)
|
Each option was granted five years prior to the option expiration date.
|
(3)
|
Market value is calculated by multiplying the number of restricted stock awards that have not vested by $13.03, which was the closing price of our
common stock on the NASDAQ Global Select Market on December 31, 2013.
|
(4)
|
The restricted stock awards vest in equal installments on the first four anniversaries of the grant date.
|
(5)
|
The restricted stock awards vest in four equal annual installments, the first of which vested on March 12, 2011.
|
25
OPTION EXERCISES AND STOCK VESTED DURING 2013
The following table provides information regarding the exercise of stock options and the vesting of restricted stock awards for each of
our named executive officers during 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
|
Value Realized
on Exercise
($)(1)
|
|
|
Number of
Shares
Acquired on
Vesting (#)
|
|
|
Value Realized
on Vesting
($)(2)
|
|
Martin A. Kits van Heyningen
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
511,438
|
|
Peter A. Rendall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent C. Bruun
|
|
|
75,000
|
|
|
|
450,000
|
|
|
|
11,249
|
|
|
|
153,418
|
|
Robert J. Balog
|
|
|
|
|
|
|
|
|
|
|
11,249
|
|
|
|
153,418
|
|
Daniel R. Conway
|
|
|
|
|
|
|
|
|
|
|
11,249
|
|
|
|
153,418
|
|
Robert W.B. Kits van Heyningen
|
|
|
|
|
|
|
|
|
|
|
11,249
|
|
|
|
153,418
|
|
(1)
|
The value realized equals the difference between the option exercise price and the closing price of our common stock on the NASDAQ Global Select Market
on the date of exercise, multiplied by the number of shares for which the option was exercised.
|
(2)
|
Value realized is calculated by multiplying the number of restricted stock awards vested by the closing price of our common stock on the NASDAQ Global
Select Market on the vesting date.
|
We have no pension plan or nonqualified deferred compensation plan, and
accordingly the tables of pension benefits and nonqualified deferred compensation are omitted.
Director
Compensation
At the first meeting of the Board of Directors following the annual meeting of stockholders, non-employee
directors will automatically receive a restricted stock award of 5,000 shares of our common stock. Each restricted stock award vests in four equal quarterly installments after the date of grant.
In addition, each non-employee director who is appointed to serve on the Audit Committee of our Board of Directors will receive, on the
date of his or her initial appointment, a restricted stock award of 5,000 shares of our common stock and an additional restricted stock award of 5,000 shares on each anniversary, so long as he or she continues to serve on our Audit Committee. In
accordance with this policy, each of Messrs. Ain, Honey, Ryan and Trimble received a restricted stock award of 5,000 shares of common stock in August 2013, the fair value of which was $66,100 on the date of grant. Each restricted stock award will
vest in four equal quarterly installments after the date of grant.
Each newly elected non-employee director will
automatically receive on the date of his or her election a restricted stock award of 10,000 shares of our common stock. Each initial grant will vest in four equal quarterly installments after the date of grant. Currently, our non-employee directors
are Messrs. Ain, Honey, Ryan and Trimble.
In accordance with the policy regarding automatic grants to non-employee directors,
at the first meeting of the Board of Directors after the 2013 annual meeting of stockholders, each of Messrs. Ain, Honey, Ryan and Trimble received a restricted stock award of 5,000 shares of common stock, the fair value of which was $64,050 on the
date of grant. Each restricted stock award vests in four equal quarterly installments after the date of grant.
We also paid
our non-employee directors a $26,250 annual retainer and $2,625 for each regularly scheduled quarterly Board meeting attended during 2013.
26
Non-employee directors who also served as members of the Audit and Compensation Committees
received an additional annual compensation of $3,150 and $2,100, respectively, except that the Chairman of each of the Audit and Compensation Committees received an additional annual compensation of $6,825 and $3,150, respectively during 2013. No
additional cash compensation was paid for attending any other Board or Committee meetings. Directors who are employees did not receive separate fees for their services as directors.
We paid compensation to Martin A. Kits van Heyningen and Robert W.B. Kits van Heyningen as set forth in the tables entitled
Summary Compensation Table For 2013, Grants of Plan-Based Awards For 2013, and Option Exercises and Stock Vested During 2013.
27
DIRECTOR COMPENSATION TABLE
For 2013
The following table provides information regarding the compensation of our directors who are not named executive officers for 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in
Cash ($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Total
($)(2)
|
|
Bruce J. Ryan
|
|
|
45,675
|
|
|
|
130,150
|
|
|
|
175,825
|
|
Mark S. Ain
|
|
|
43,050
|
|
|
|
130,150
|
|
|
|
173,200
|
|
Charles R. Trimble
|
|
|
42,000
|
|
|
|
130,150
|
|
|
|
172,150
|
|
Stanley K. Honey
|
|
|
39,900
|
|
|
|
130,150
|
|
|
|
170,050
|
|
(1)
|
Amounts shown do not reflect compensation actually received by the director. Instead, the amounts shown represent the aggregate grant date fair value,
computed using the market price on the date of grant in accordance with ASC 718, of restricted stock awards granted during 2013, excluding the effect of estimated forfeitures.
|
(2)
|
Amounts shown reflect actual cash received during 2013 as well as the aggregate grant-date fair value of stock awards granted during 2013. Refer to the
Outstanding Director Equity Awards table for information concerning outstanding equity awards held by our non-employee directors.
|
28
OUTSTANDING DIRECTOR EQUITY AWARDS
As of December 31, 2013
The following table provides information concerning outstanding equity awards held by our directors who are not named executive officers on December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
of Shares
of
Stock That
Have Not
Vested
|
|
|
Number of
Shares
of Stock
That Have
Not
Vested
(#)
|
|
|
Market
Value
of Shares
of Stock
That Have
Not
Vested
($)(1)
|
|
Bruce J. Ryan
|
|
|
6/10/2013
|
|
|
|
2,500
|
(2)
|
|
|
32,575
|
|
|
|
|
8/23/2013
|
|
|
|
3,750
|
(3)
|
|
|
48,863
|
|
Mark S. Ain
|
|
|
6/10/2013
|
|
|
|
2,500
|
(2)
|
|
|
32,575
|
|
|
|
|
8/23/2013
|
|
|
|
3,750
|
(3)
|
|
|
48,863
|
|
Charles R. Trimble
|
|
|
6/10/2013
|
|
|
|
2,500
|
(2)
|
|
|
32,575
|
|
|
|
|
8/23/2013
|
|
|
|
3,750
|
(3)
|
|
|
48,863
|
|
Stanley K. Honey
|
|
|
6/10/2013
|
|
|
|
2,500
|
(2)
|
|
|
32,575
|
|
|
|
|
8/23/2013
|
|
|
|
3,750
|
(3)
|
|
|
48,863
|
|
(1)
|
Value is calculated by multiplying the number of restricted stock awards that have not vested by $13.03, the closing price of our common stock on the
NASDAQ Global Select Market on December 31, 2013.
|
(2)
|
Amounts include restricted stock awards granted on June 10, 2013 which vest in four equal quarterly installments, with the first vest date being
September 10, 2013.
|
(3)
|
Amounts include restricted stock awards granted on August 23, 2013 which vest in four equal quarterly installments, with the first vest date being
November 23, 2013.
|
29
EQUITY COMPENSATION PLANS
The following table provides
information as of December 31, 2013 regarding shares authorized for issuance under our equity compensation plans, including individual compensation arrangements.
The equity compensation plans approved by our stockholders are our Amended and Restated 2006 Stock Incentive Plan, Amended and Restated 2003 Incentive and Nonqualified Stock Option Plan, and Amended and
Restated 1996 Employee Stock Purchase Plan. Under the 2006 Plan, each share issued under awards other than options will reduce the number of shares reserved for issuance by two shares (but will reduce the maximum annual number of shares that may be
granted to a participant only by one share), and shares issued under options will reduce the shares reserved for issuance on a share-for-share basis. The following table does not reflect grants from January 1, 2014 through April 22, 2014
of 225,380 restricted stock awards with a weighted-average grant-date fair value of $13.78 per share. No nonqualified stock options were issued from January 1, 2014 through April 22, 2014. The restricted stock awards and stock options
reflected in the table were granted on the following terms as determined by the Compensation Committee: (a) in the case of restricted stock awards, the grantee received the restricted stock award without payment of cash consideration and
(b) in the case of stock options, the exercise price per share of the stock option was equal to the closing price of our common stock on the NASDAQ Global Select Market on the date of the grant, (c) the total number of shares subject to
the award will vest annually in four equal installments, the first of which vests on the first anniversary of the grant date. As of December 31, 2013, we did not have any equity compensation plans not approved by our stockholders.
Equity Compensation Plan Information
as of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of shares to be
issued upon exercise of
outstanding
options,
warrants and rights (#)
|
|
|
Weighted-average
exercise price of
outstanding
options,
warrants and rights ($)
|
|
|
Number of shares remaining
available for future issuance
under equity
compensation
plans (excluding shares
reflected in column (a)(#))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by stockholders
|
|
|
1,021,791
|
(1)
|
|
|
11.55
|
|
|
|
2,828,892
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,021,791
|
(1)
|
|
|
11.55
|
|
|
|
2,828,892
|
(2)
|
(1)
|
Does not include 379,007 shares of restricted stock granted under the Amended and Restated 2006 Stock Incentive Plan which were not vested as of
December 31, 2013 and therefore subject to forfeiture. The weighted-average grant-date fair value of these shares of restricted stock was $13.61. Any restricted stock award forfeited would be available for issuance under the Amended and
Restated 2006 Stock Incentive Plan at a ratio of two available shares for each restricted stock award forfeited.
|
(2)
|
Each share issued under awards other than options will reduce the number of shares reserved for issuance by two shares (but will reduce the maximum
annual number of shares that may be granted to a participant only by one share), and shares issued under options will reduce the shares reserved for issuance on a share-for-share basis. Includes 58,973 shares of common stock reserved for future
issuance under our Amended and Restated 1996 Employee Stock Purchase Plan.
|
30
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on
April 22, 2014, there were 15,859,352 shares of our common stock outstanding. On April 22, 2014, the closing price of our common stock as reported on the NASDAQ Global Select Market was $13.63 per share.
Principal stockholders
The following table provides, to the knowledge of management, information regarding the beneficial ownership of our common stock as of
April 22, 2014, or as otherwise noted, by:
|
|
|
each person known by us to be the beneficial owner of more than five percent of our common stock;
|
|
|
|
each executive officer named in the summary compensation table; and
|
|
|
|
all of our current directors and executive officers as a group.
|
The persons named in this table have sole voting and investment power with respect to the shares listed, except as otherwise indicated.
The inclusion of shares listed as beneficially owned does not constitute an admission of beneficial ownership. Shares included in the Right to acquire column consist of shares that may be purchased through the exercise of options that
are vested or will vest within 60 days of April 22, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares beneficially owned
|
|
|
|
Outstanding
|
|
|
Right to
acquire
|
|
|
Total
|
|
|
Percent
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invicta Capital Management, LLC
(1)
60 East 42
nd
Street
New York, NY 10165
|
|
|
1,457,197
|
|
|
|
|
|
|
|
1,457,197
|
|
|
|
9. 2
|
|
Royce & Associates, LLC
(2)
745 Fifth Avenue
New York, NY 10151
|
|
|
1,172,015
|
|
|
|
|
|
|
|
1,172,015
|
|
|
|
7. 4
|
|
BlackRock, Inc.
(3)
40 East 52
nd
Street
New York, NY 10022
|
|
|
1,021,636
|
|
|
|
|
|
|
|
1,021,636
|
|
|
|
6.4
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin A. Kits van Heyningen
(5)
|
|
|
594,016
|
|
|
|
81,866
|
|
|
|
675,882
|
|
|
|
4.3
|
|
Robert W.B. Kits van Heyningen
|
|
|
194,267
|
|
|
|
24,374
|
|
|
|
218,641
|
|
|
|
1.4
|
|
Stanley K. Honey
(6)
|
|
|
96,875
|
|
|
|
|
|
|
|
96,875
|
|
|
|
*
|
|
Mark S. Ain
|
|
|
93,246
|
|
|
|
|
|
|
|
93,246
|
|
|
|
*
|
|
Charles R. Trimble
|
|
|
62,000
|
|
|
|
|
|
|
|
62,000
|
|
|
|
*
|
|
Bruce J. Ryan
|
|
|
50,000
|
|
|
|
|
|
|
|
50,000
|
|
|
|
*
|
|
Other Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent C. Bruun
|
|
|
88,094
|
|
|
|
24,374
|
|
|
|
112,468
|
|
|
|
*
|
|
Daniel R. Conway
(7)
|
|
|
60,692
|
|
|
|
24,374
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|
|
|
85,066
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|
|
|
*
|
|
Robert J. Balog
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53,255
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|
|
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24,374
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|
|
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77,629
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*
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Peter A. Rendall
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23,200
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|
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12,500
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35,700
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*
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All current directors and executive officers as a group
(12 persons)
(8)
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1,420,437
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|
|
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240,610
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|
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1,661,047
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|
|
|
10.5
|
|
31
(1)
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Information is based on a Schedule 13G/A filed jointly by Invicta Capital Management, LLC and Gregory Weaver on February 14, 2014. The Schedule
13G/A indicates that Mr. Weaver is the control person of Invicta Capital Management LLC and that they may be deemed to share voting and dispositive power for all 1,457,197 shares.
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(2)
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Information is based on a Schedule 13G/A filed by Royce & Associates, LLC with the SEC on January 10, 2014. The Schedule 13G/A states
that Royce & Associates, LLC has sole voting and sole dispositive power for 1,172,015 shares.
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(3)
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Information is based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 29, 2014. The Schedule 13G/A states that BlackRock, Inc.
has sole voting power for 991,496 shares and sole dispositive power for 1,021,636 shares.
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(5)
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Includes 7,605 shares of common stock and 616 stock options held by Martin A. Kits van Heyningens spouse, who is our creative director.
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(6)
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Includes 89,250 shares of common stock held in trust of Stanley K. Honey and spouse.
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(7)
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Includes 2,571 shares of common stock held by Daniel R. Conways spouse, who retired as our program manager in November 2013 and since then serves
as an engineering program management consultant for us.
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(8)
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Includes 2,529 shares of common stock held by James S. Dodezs spouse and children.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the
Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. SEC regulations require
executive officers, directors and greater-than-ten-percent stockholders to furnish us with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3, 4, 5, and amendments thereto furnished to us with respect to 2013, we believe that all Section 16(a) filing requirements applicable to our executive officers,
directors and greater-than-ten-percent stockholders were fulfilled in a timely manner, with two exceptions. Robert W.B. Kits van Heyningen filed one Form 4 two days late with respect to ten sale transactions on September 16, 2013 in fulfillment
of a single sales order. Daniel R. Conway filed one Form 4 two days late with respect to one transaction.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Director independence
A majority of our
directors are independent directors under the rules of the NASDAQ Stock Market. Our Board of Directors has determined that our independent directors are Messrs. Ain, Honey, Ryan and Trimble.
Board meetings
During 2013, our Board of
Directors met seven times. Each incumbent director attended at least 75% of the total number of meetings held by the Board and the committees of the Board on which he served during 2013. To the extent reasonably practicable, directors are expected
to attend Board meetings, meetings of committees on which they serve, and our annual meeting of stockholders. Last year, two of the six individuals then serving as directors attended the annual meeting.
Board leadership structure
Martin A. Kits van Heyningen currently serves as our President, Chief Executive Officer and Chairman of the Board. The Board has determined that, at present, combining the positions of Chairman of the
Board and
32
Chief Executive Officer serves the best interests of KVH and our stockholders. The Board believes that the CEOs extensive knowledge of our businesses, expertise and leadership skills make
him a more effective Chairman than an independent director.
The functions of the Board are carried out by the full Board, and
when delegated, by the Board committees. The Board has delegated significant authority to the Audit, Compensation and Nominating and Corporate Governance Committees, each of which is comprised entirely of independent directors. The independent
directors typically meet in an executive session at regularly scheduled Board meetings and additional executive sessions may be convened at any time at the request of a director.
The independent directors have designated Mr. Ain to serve as our Lead Independent Director. The Lead Independent Director will,
among other functions, preside at all meetings of the Board at which the Chairman is not present and will serve as a liaison between the CEO and the independent directors. The Lead Independent Director also presides at executive sessions of the
independent directors.
Risk management
Our Board of Directors administers its risk oversight role both directly and through its Committee structure. The Board consists of only
six directors, four of whom are independent directors and two of whom are members of senior management. Of the four independent directors, three serve on each of the three principal Board committees, which makes them knowledgeable about the aspects
of our business under the jurisdiction of those committees. The Boards Audit Committee meets frequently during the year and discusses with management, our CFO and our independent auditor: (a) current business trends affecting us;
(b) the major risk exposures that we face; (c) the steps management has taken to monitor and control these risks; and (d) the adequacy of internal controls that could significantly affect our financial statements. The Board also
receives regular reports from senior management about business plans and opportunities, as well as the challenges and risks associated with implementing those plans and taking advantage of new opportunities.
Board committees
Our Board of Directors has three standing committees: the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. Each member of the Audit Committee, the
Nominating and Corporate Governance Committee and the Compensation Committee meets the independence requirements of the NASDAQ Stock Market for membership on the committees on which he serves. The Audit Committee, the Nominating and Corporate
Governance Committee and the Compensation Committee each have the authority to retain independent advisors and consultants. We pay the fees and expenses of these advisors. Our Board of Directors has adopted a written charter for each of the Audit
Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. We have made each of these charters available through the Investors Relations page of our website at http://kvh.com/ircoe.
Audit Committee
As of
December 31, 2013, our Audit Committee was comprised of Messrs. Ain, Honey, Ryan, and Trimble. Our Audit Committee provides the opportunity for direct contact between our independent registered public accounting firm and members of the Board of
Directors; the auditors report directly to the Committee. The Committee assists the Board in overseeing the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent registered public accounting
firms qualifications and independence, and the performance of our independent registered public accounting firm. The Committee is directly responsible for appointing, compensating, evaluating and, when necessary, terminating our independent
registered public accounting firm. Our Audit Committee has established procedures for the treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential and anonymous
submission by our employees of concerns regarding questionable accounting,
33
internal accounting controls or auditing matters. Our Board has determined that Mr. Ryan is an Audit Committee financial expert under the rules of the SEC. Our Audit Committee met ten times
during 2013. For additional information regarding the Audit Committee, please see Report of the Audit Committee.
Nominating
and Corporate Governance Committee
As of December 31, 2013, our Nominating and Corporate Governance Committee was
comprised of Messrs. Ain, Honey, Ryan and Trimble. Our Nominating and Corporate Governance Committees responsibilities include providing recommendations to our Board of Directors regarding nominees for director and membership on the committees
of our Board. An additional function of the committee is to develop corporate governance practices to recommend to our Board and to assist our Board in complying with those practices. Our Nominating and Corporate Governance Committee met once during
2013.
Compensation Committee
As of December 31, 2013, our Compensation Committee was comprised of Messrs. Ain, Ryan and Trimble. The Compensation Committees responsibilities include providing recommendations to our Board
regarding the compensation levels of directors, reviewing and approving the compensation levels of executive officers, providing recommendations to our Board regarding compensation programs, administering our incentive-compensation plans and
equity-based plans, authorizing grants under our stock option and incentive plans, and authorizing other equity compensation arrangements. Our Compensation Committee met three times during 2013. For more information regarding the authority of the
Compensation Committee, the extent of delegation to the Compensation Committee, our processes and procedures for determining executive compensation and the role of executive officers and compensation consultants in determining or recommending the
amount or form of compensation for directors and executive officers, please see Compensation Discussion and Analysis.
Compensation Committee interlocks and insider participation
During 2013, the members of our Compensation Committee
were Messrs. Ain, Ryan and Trimble. No member of our Compensation Committee has ever been an officer or employee of ours or any of our subsidiaries. None of our executive officers serves as a director or member of the compensation committee of
another entity in a case where an executive officer of such other entity serves as a director of ours or a member of our Compensation Committee.
Director candidates and selection processes
The
process followed by our Nominating and Corporate Governance Committee to identify and evaluate director candidates includes, as necessary, requests to our Board members and others for recommendations, meetings from time to time to evaluate
biographical information and background materials relating to potential candidates, and interviews of selected candidates by members of the Committee and other members of our Board. The Committee may also solicit the opinions of third parties with
whom the potential candidate has had a business relationship. Once the committee is satisfied that it has collected sufficient information on which to base a judgment, the committee votes on the candidate or candidates under consideration.
In evaluating the qualifications of any candidate for director, the Committee considers, among other factors, the
candidates depth of business experience, reputation for personal integrity, understanding of financial matters, familiarity with the periodic financial reporting process, reputation, degree of independence from management, possible conflicts
of interest and willingness and ability to serve. The Committee also considers whether the candidate will add diversity to the Board, including the degree to which the candidates skills, experience and background complement or duplicate those
of our existing directors and the long-term interests of our stockholders. In the case of incumbent directors whose terms are set to expire, the Committee also gives consideration to each directors prior contributions to the Board. The minimum
qualifications that each director
34
must possess consist of general familiarity with fundamental financial statements, ten years of relevant business experience, no identified conflicts of interest, no convictions in a criminal
proceeding during the five years prior to the date of selection and the willingness to execute and comply with our code of ethics. Although the Committee considers diversity as a factor in assessing any nomination, the Board does not have a formal
policy with regard to diversity in identifying director nominees. In selecting candidates to recommend for nomination as a director, the Committee abides by our company-wide non-discrimination policy.
The Committee will consider director candidates recommended by stockholders and use the same process to evaluate candidates regardless of
whether the candidates were recommended by stockholders, directors, management or others. The Committee has not adopted any particular method that stockholders must follow to make a recommendation. We suggest that stockholders make recommendations
by writing to the Chairman of the Board who will in turn forward the nomination to the Nominating and Corporate Governance Committee, in care of our offices, with sufficient information about the candidate, his or her work experience, his or her
qualifications for director, and his or her references as will enable the Committee to evaluate the candidacy properly. We also suggest that stockholders make their recommendations well in advance of the anticipated mailing date of our next proxy
statement so as to provide our Nominating and Corporate Governance Committee an adequate opportunity to complete a thorough evaluation of the candidacy, including personal interviews. We remind stockholders of the separate requirements set forth in
our by-laws for nominating individuals to serve as directors, which we discuss elsewhere in this proxy statement.
Corporate Governance
Our board believes that our corporate governance practices have been fundamental to our success. We seek to ensure that good governance and responsible business principles and practices are part of our
culture and values and the way we do business. To maintain and enhance our corporate governance, the board of directors and the Nominating and Corporate Governance Committee periodically refine our corporate governance policies, procedures and
practices. The following are examples of how we worked to achieve these objectives in 2013.
Majority Voting in Uncontested
Director Elections
. In March 2013, the Board of Directors undertook a review of its corporate governance with a specific focus on changes in the prevailing practices of larger companies toward majority voting in uncontested director elections.
After reviewing developments in this area, the Board began the process of adopting a majority voting standard with respect to uncontested director elections and determined that we should replace our plurality voting standard with such a majority
voting standard prior to our 2014 annual meeting of stockholders. The Board determined that we should retain plurality voting in contested director elections, where the number of director candidates exceeds the number of available director
positions. Our Board implemented the new voting standard through a revision to our by-laws. Our by-laws now require that, in order for a nominee for election to the Board of Directors in an uncontested election to be elected, he or she must receive
a majority of the votes properly cast at the meeting. Ballots for uncontested elections, including the elections at the 2014 annual meeting, will allow stockholders to vote FOR or AGAINST each nominee and will also allow
stockholders to abstain from voting on any nominee. Abstentions and broker non-votes will have no effect on the outcome of any election for director. Under our by-laws and in accordance with Delaware law, an incumbent directors term extends
until his or her successor is duly elected and qualified, or until he or she resigns or is removed from office. Thus, an incumbent director who fails to receive the required vote for re-election at our annual meeting would continue serving as a
director (sometimes referred to as a holdover director) until his or her term ends for one of the foregoing reasons. In order to address the situation where an incumbent director receives more votes AGAINST his or her
re-election than votes FOR his or her re-election, the Board has adopted a policy to the effect that, in order for an incumbent director in an uncontested election to be nominated for re-election, that director should tender a
resignation that would become effective only upon both (i) the failure to obtain the requisite majority vote and (ii) the acceptance of the resignation by the Board of Directors. If an incumbent director were to fail to obtain the
requisite majority vote for re-election, the Nominating and Corporate Governance Committee (or another appropriate committee) and the Board would consider the resignation in light of the surrounding circumstances. The policy adopted by the Board
states that
35
the Board will publicly announce its decision regarding the resignation within 90 days after certification of the results of the applicable annual meeting.
Committee Charters.
In August 2013, the Board revised the charters of the Audit, Compensation and Nominating and Corporate
Governance Committees to reflect regulatory developments and to implement other practices designed to enhance the functioning of the committees.
Communications with our Board of Directors
Our
Board, including all of the independent directors, has established a process for facilitating stockholder communications with our Board. Stockholders wishing to communicate with our Board should send written correspondence to the attention of our
corporate secretary, Felise B. Feingold, KVH Industries, Inc., 50 Enterprise Center, Middletown, RI 02842, USA, and should include with the correspondence evidence that the sender of the communication is one of our stockholders. Satisfactory
evidence would include, for example, contemporaneous correspondence from a brokerage firm indicating the identity of the stockholder and the number of shares held. Our secretary will forward all mail to each member of our Board of Directors.
Code of ethics
We have adopted a code of ethics that applies to all of our directors, executive officers and employees, including our principal executive officer and principal financial and accounting officer. The code
of ethics includes provisions covering compliance with laws and regulations, insider trading practices, conflicts of interest, confidentiality, protection and proper use of our assets, accounting and record keeping, fair competition and fair
dealing, business gifts and entertainment, payments to government personnel and the reporting of illegal or unethical behavior. You can obtain a copy of our code of ethics through the Investor Relations page of our website at
http://kvh.com/ircharters.
Certain relationships and related-party transactions
Pursuant to our Code of Ethics, our executive officers, directors and employees are to avoid conflicts of interest, except with the
approval of the Board of Directors. A related-party transaction would be a conflict of interest. Pursuant to its charter, the Audit Committee must review and approve in advance all related-party transactions. In May 2012, our Board adopted a written
policy and procedures for the Audit Committee to review and approve transactions involving us and related parties (which includes our directors, director nominees and executive officers and their immediate family members, as well as
stockholders known by us to own five percent or more of our common stock and their immediate family members). The policy applies to any transaction in which we are a participant and any related party has a direct or indirect material interest, where
the amount involved in the transaction exceeds $120,000 in a single calendar year, excluding transactions in which standing pre-approval has been given. Pre-approved transactions include:
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compensation of directors and executive officers provided that such compensation is approved by the Board of Directors or Compensation Committee or
such compensation plan or other arrangement is generally available to full-time employees; and
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transactions where the related partys interest arises solely from ownership of our common stock and such interest is proportionate to the
interests of stockholders.
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The Audit Committee is responsible for reviewing the material facts of all
related-party transactions, subject to the exceptions described above. The Audit Committee will either approve or disapprove the entry into the related-party transaction. If advance approval is not feasible, the transaction will be considered and,
if the Audit Committee determines it to be appropriate, ratified at the Audit Committees next regularly scheduled meeting. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into
account, among other factors that it determines to be appropriate:
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whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar
circumstances;
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36
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the business reasons for the transaction;
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whether the transaction would impair the independence of an outside director; and
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the extent of the related partys interest in the transaction.
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Except as stated below, as of the date of this proxy statement there have been no reportable related-party transactions since
January 1, 2013, nor are there any pending related-party transactions.
Kathleen Keating, the spouse of Mr. Martin
A. Kits van Heyningen, serves as our senior director of creative and customer experience. For fiscal 2013, total individual compensation for Kathleen Keating, based on total salary, bonus, aggregate grant date fair value of stock option awards
granted during the year and all other compensation, as calculated in a manner consistent with our Summary Compensation Table For 2013, was approximately $167,000.
Hendrik Kits van Heyningen, the son of Mr. Martin A. Kits van Heyningen, worked for us as an engineering intern during the summer of 2013. During this time, total compensation for Hendrik Kits van
Heyningen was approximately $6,000.
Paula Conway, the wife of Mr. Daniel R. Conway, retired as our program manager in
November 2013 and since then has served as an engineering program management consultant for us. For fiscal 2013, total individual compensation for Mrs. Conway as our program manager, based on total salary, bonus, aggregate grant date fair value
of stock option awards granted during the year and all other compensation, as calculated in a manner consistent with our Summary Compensation Table For 2013, was approximately $118,000. In 2013, we also paid Mrs. Conway $4,970 for consulting
services.
Mark S. Ain, a director, is a minority owner and advisor to ETS International, a ground transportation service
company. In 2013, we paid ETS International $18,703 for services rendered in 2013. The Audit Committee has determined such services are reasonable, in our best interest and on terms no less favorable than could be obtained from an unrelated third
party. In assessing Mr. Ains independence, our Board of Directors was aware of this information and concluded that it had no impact on his independence as a director.
37
AUDIT COMMITTEE REPORT
(1)
The Board of Directors appointed
an Audit Committee to monitor the integrity of our companys consolidated financial statements, its system of internal control over financial reporting and the independence and performance of our independent registered public accounting firm.
The Audit Committee also selects our companys independent registered public accounting firm. Our Board of Directors adopted a charter for the Audit Committee in February 2004. The Audit Committee currently consists of four independent
directors. Each member of the Audit Committee meets the independence requirements of the NASDAQ Stock Market for membership on the Audit Committee.
Our companys management is responsible for the financial reporting process, including the system of internal control over financial reporting, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. Our companys independent registered public accounting firm is responsible for auditing those consolidated financial statements and auditing the effectiveness of internal
control over financial reporting. Our responsibility is to monitor and review these processes. We have relied, without independent verification, on the information provided to us and on the representations made by our companys management and
independent registered public accounting firm.
In fulfilling our oversight responsibilities, we discussed with
representatives of KPMG LLP, our companys independent registered public accounting firm for 2013, the overall scope and plans for their audit of our companys consolidated financial statements for the year ended December 31, 2013. We
met with them, with and without our companys management present, to discuss the results of their audits of our consolidated financial statements and of our companys internal control over financial reporting and to discuss with them the
overall quality of our companys financial reporting.
We reviewed and discussed the audited consolidated financial
statements for the year ended December 31, 2013 with management and the independent registered public accounting firm.
We discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting
Oversight Board (PCAOB) standards,
Communications with Audit Committees
, as amended
.
In addition, we have discussed with the independent registered public accounting firm its independence from our company and our companys
management, including the matters in the written disclosures and letter which we received from the independent registered public accounting firm under applicable requirements of the PCAOB. We also considered whether the independent registered public
accounting firms performance of non-audit services for our company is compatible with the auditors independence, and concluded that the performance of such non-audit services did not impair the auditors independence.
Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred
to above and in the Audit Committee charter, we recommended to the Board of Directors that our companys audited consolidated financial statements for the year ended December 31, 2013 be included in our companys annual report on Form
10-K.
The Audit Committee
Bruce J. Ryan (Chairman)
Mark S. Ain
Stanley K. Honey
Charles R. Trimble
(1)
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The material in this report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of our filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this proxy statement and irrespective of any incorporation language in such filing.
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38
PRINCIPAL ACCOUNTANT FEES AND SERVICES
We expect that representatives
of KPMG LLP, our independent registered public accounting firm for 2013, will be present at the annual meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from
stockholders.
As of the date of this proxy statement, the Audit Committee of our Board of Directors has not yet selected an
independent registered public accounting firm for 2014 because it is in the process of soliciting bids to perform such services.
Fees for professional services
The following is a summary of the fees for professional services rendered by KPMG LLP
for 2013 and 2012:
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Fee category
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Fees
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2013
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2012
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Audit fees
(1)
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$
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789,300
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$
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446,075
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Audit-related fees
(2)
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7,400
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7,068
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Tax fees
(3)
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27,400
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16,000
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Total fees
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$
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824,100
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$
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469,143
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(1)
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Audit fees consist of amounts billed for professional services rendered for the integrated audit of our consolidated financial statements, including
compliance with Section 404 of the Sarbanes-Oxley Act of 2002, review of the interim condensed consolidated financial statements included in quarterly reports, the statutory audits of our foreign locations and audits of financial statements for
a significant acquisition.
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(2)
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Audit-related fees consist of amounts billed arising from translation of statutory statements for our Denmark location.
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(3)
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Tax fees consist of amounts billed arising from services rendered for tax compliance for our Singapore, Cyprus, and United Kingdom locations. Our
Cyprus and United Kingdom locations were acquired as part of Headland Media Limited (now known as KVH Media Group) in 2013.
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We did not engage KPMG LLP to provide any other services during or with respect to 2013 or 2012.
Pre-approval policies and procedures
Our Audit Committee approves each engagement for audit or non-audit services before we engage KPMG LLP to provide those services.
Our Audit Committee has not established any pre-approval policies or procedures that would allow our management to engage KPMG LLP to
provide any specified services with only an obligation to notify the Audit Committee of the engagement for those services.
39
STOCKHOLDER PROPOSALS
Stockholder proposals for
inclusion in our proxy materials relating to our 2015 annual meeting of stockholders must be received by us at our executive offices no later than December 31, 2014 or, if the date of that meeting is more than 30 calendar days before or after
June 11, 2014, a reasonable time before we begin to print and mail our proxy materials with respect to that meeting.
In
addition, our by-laws provide that a stockholder desiring to bring business before any meeting of stockholders or to nominate any person for election to the Board of Directors must give timely written notice to our secretary in accordance with the
procedural requirements set forth in our by-laws. In the case of a regularly scheduled annual meeting, written notice must be delivered to or mailed and received at our principal executive offices not less than 60 days before the scheduled annual
meeting, must describe the business to be brought before the meeting and must provide specific information about the stockholder, other supporters of the proposal, their stock ownership and their interest in the proposed business. For example, if we
were to hold our 2015 annual meeting on May 6, 2015, in order to bring an item of business before the 2015 annual meeting in accordance with our by-laws, a stockholder would be required to have delivered the requisite notice of that item of
business to us not later than March 7, 2015. If we hold our 2015 annual meeting before May 6, 2015, and if we give less than 70 days notice or prior public disclosure of the date of that meeting, then the stockholders notice
must be delivered to or mailed and received at our principal executive offices not later than the close of business on the tenth day after the earlier of (1) the day on which we mailed notice of the date of the meeting and (2) the day on
which we publicly disclosed the date of the meeting.
AVAILABLE INFORMATION
Stockholders of record on
April 22, 2014 will receive a proxy statement and our annual report to stockholders, which contains detailed financial information about us. The annual report is not incorporated herein and is not deemed a part of this proxy statement.
40
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined
below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE
TITLE BAR.
Proxies submitted by the Internet or telephone must be
received by 1:00 a.m., Central Time, on June 11, 2014.
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Vote by Internet
Go to
www.investorvote.com/KVHI
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
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Vote by telephone
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Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the designated areas.
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x
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Call toll free
1-800-652-VOTE
(8683) within the USA, US territories & Canada on a touch tone telephone
Follow the
instructions provided by the recorded message
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Annual Meeting Proxy Card
IF YOU
HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE
.
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A
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Proposals The Board of Directors recommends a vote
FOR
all the nominees listed and
FOR
Proposal 2.
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1.
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Election of Class III Directors to a three-year term:
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For
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Withhold
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Abstain
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For
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01 - Robert W.B. Kits van Heyningen
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02 - Bruce J. Ryan
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For
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Against
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Abstain
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2.
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Approval of a non-binding say on pay vote regarding the compensation of our named executive officers.
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Change of Address
Please print new address below.
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Comments
Please print your comments below.
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C
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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Please sign exactly as your name(s) appear(s) on the books of KVH Industries, Inc. Joint owners should each sign
personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or
her title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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Dear Stockholder,
Please take note of the important information enclosed with this proxy card.
Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how you would like your shares to be voted. Then sign the card, detach it and return
it in the enclosed postage-paid envelope. Alternatively, you can vote by Internet or telephone using the instructions on the back of this card.
Your vote must be received prior to the Annual Meeting of Stockholders to be held on June 11, 2014.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
KVH Industries, Inc.
Important Notice Regarding the Availability of Proxy Materials
for the
Annual Meeting of Stockholders to be Held on June 11, 2014
The proxy statement for the 2014 annual meeting of
stockholders of KVH Industries, Inc. and the related 2013 annual report to stockholders are available on the Internet at www.kvh.com/annual. You can read, print, download and search these materials at that website. The website does not use
cookies or other tracking devices to identify visitors. You can obtain directions to be able to attend the meeting and vote in person at www.kvh.com/annual.
IF
YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE
.
Proxy KVH Industries, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF KVH INDUSTRIES, INC.
A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD
OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Proxy for Annual Meeting of
Stockholders
to be held on June 11, 2014
The undersigned, revoking all prior proxies, hereby appoints Felise Feingold proxy and attorney-in-fact, with full power of substitution, to vote all shares of Common Stock of KVH Industries, Inc., which
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at the offices of KVH Industries, Inc., 50 Enterprise Center, Middletown, RI 02842, on June 11, 2014, at 11:00 a.m., Eastern time, and at any adjournments or
postponements thereof, upon matters set forth in the Notice of Annual Meeting and Proxy Statement dated April 30, 2014, a copy of which has been received by the undersigned, and in their discretion upon any business that may properly come before the
meeting or any adjournments or postponements thereof. Attendance of the undersigned at the meeting or any adjourned or postponed session thereof will not be deemed to revoke this proxy unless the undersigned shall affirmatively indicate the
intention of the undersigned to vote the shares represented hereby in person prior to the exercise of this proxy.
The
shares represented by this proxy will be voted as directed. If no voting direction is given on a proposal, the shares represented by this proxy will be voted as recommended by the Board of Directors.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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