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MRV Communications DEF 14A 2007 Documents found in this filing:Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ) Filed by the Registrant þ
Filed by a Party other than the Registrant o Check the appropriate box:
MRV COMMUNICATIONS, INC.
Payment of Filing Fee (Check the appropriate box):
Table of Contents
20415 NORDHOFF STREET
CHATSWORTH, CALIFORNIA
91311
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To Be Held May 29, 2007
To our stockholders:
The 2007 Annual Meeting of stockholders of MRV Communications,
Inc. will be held at the Warner Center Marriott Woodland Hills,
21850 Oxnard Street, Woodland Hills, California 91367 on
Tuesday, May 29, 2007, at 9:00 a.m., Pacific Standard
Time, for the following purposes:
1. To elect seven (7) directors to serve for the
ensuing year and until their successors are elected;
2. To ratify the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the
year ending December 31, 2007;
3. To approve the adoption of our 2007 Omnibus Incentive
Plan;
4. To approve an amendment to our Certificate of
Incorporation to increase the authorized number of shares of our
common stock to 320,000,000 and the aggregate number of shares
of capital stock to 321,000,000; and
5. To act upon such other matters as may properly come
before the meeting or any adjournments or postponements thereof.
All holders of record of shares of our common stock (Nasdaq:
MRVC) at the close of business on April 16, 2007 are
entitled to vote at the meeting and any postponements or
adjournments of the meeting.
The enclosed proxy statement describes the proposals set forth
above in more detail. We urge you to read the proxy statement
carefully before you decide how to vote.
You are cordially invited to attend the meeting. Please note
that space limitations make it necessary to limit attendance to
stockholders and one guest. Admission to the meeting will be on
a first-come, first-served basis. Registration will begin at
8:00 a.m., and seating will begin at
8:30 a.m. Each stockholder may be asked to present
valid picture identification, such as a driver’s license or
passport. stockholders holding stock in brokerage accounts,
(i.e. in “street name”) will need to bring a copy of a
brokerage statement reflecting stock ownership as of the record
date. Cameras (including cellular phones with photographic
capabilities), recording devices and other electronic devices
will not be permitted at the meeting.
By order of the Board of Directors,
Shlomo Margalit, Chairman
Chatsworth, California
April 27, 2007
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting in person, you may
vote on the proposals by proxy. To do so, please complete, date,
sign and return the enclosed proxy card. Doing so promptly could
save us the expenses and extra work of additional solicitation.
We have enclosed an envelope for which no postage is required if
mailed in the United States to return your proxy card. You may
also vote by telephone or over the Internet as noted in the
proxy card instructions. If you have voted by telephone,
Internet or mail and later decide to attend and vote at the
meeting, you may do so.
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MRV Communications, Inc. Annual Report 2007
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MRV Communications, Inc. Annual Report 2007
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20415 NORDHOFF
STREET
CHATSWORTH, CALIFORNIA 91311
PROXY STATEMENT FOR ANNUAL
MEETING OF STOCKHOLDERS
We are furnishing this Proxy Statement, which was first mailed
to our stockholders on or about April 30, 2007, with the
solicitation of proxies by our Board of Directors to be voted on
at our 2007 Annual Meeting of the stockholders. The Annual
Meeting will be held at the Warner Center Marriott Woodland
Hills, 21850 Oxnard Street, Woodland Hills, California 91367 on
Tuesday, May 29, 2007, at 9:00 a.m., Pacific Daylight
Time, and at any adjournments or postponements of the meeting.
Our Annual Report to stockholders for the year ended
December 31, 2006, containing audited financial statements
and other information, is being furnished with this Proxy
Statement to all stockholders entitled to vote. The Annual
Report does not form any part of our proxy solicitation material.
QUESTIONS AND
ANSWERS RELATING TO THE 2007 ANNUAL MEETING
Our stockholders as of the close of business on April 16,
2007, which we refer to as the “Record Date”
throughout this proxy statement, are entitled to vote at our
2007 Annual Meeting of stockholders. As a stockholder, you are
invited to attend the Annual Meeting and are requested to vote
on the items of business described in this proxy statement. We
are required by law to distribute these proxy materials to all
stockholders as of the Record Date. This proxy statement
provides notice of the Annual Meeting of stockholders, describes
the proposals presented for stockholder action and includes
information that we are required to disclose to stockholders.
The accompanying proxy card enables stockholders to vote on the
matters without having to attend the Annual Meeting in person.
Only stockholders of record at the close of business on the
Record Date are entitled to receive notice of and to participate
in the Annual Meeting. If you were a stockholder of record on
the Record Date, you will be entitled to vote all of the shares
that you held on that date at the meeting, or any postponements
or adjournments of the meeting.
You will be entitled to one vote for each outstanding share of
our common stock you own as of the Record Date. As of the Record
Date, there were 125,974,909 shares of our common stock
outstanding and eligible to vote.
Subject to space availability, all stockholders as of the Record
Date, or their duly appointed proxies, may attend the meeting,
and each may be accompanied by one guest. Since seating is
limited, admission to the meeting will be on a first-come,
first-served basis. Registration will begin at
8:00 a.m., and seating will begin at 8:30 a.m. If
you attend, please note that you may be asked to present
valid picture identification, such as a driver’s
license or passport. Cameras (including cell phones with
photographic capabilities), recording devices and other
electronic devices are not permitted at the meeting.
Please also note that if you hold your shares in “street
name” (that is, through a broker, bank or other nominee),
you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the Record Date and check
in at the registration desk at the meeting.
Please let us know if you plan to attend the meeting by marking
the appropriate box on the enclosed proxy card or, if you vote
by telephone or Internet, indicating your plans when prompted.
The presence at the meeting, in person or by proxy, of the
holders of a majority of the aggregate voting power of the
common stock outstanding on the Record Date will constitute a
quorum, permitting the conduct of business at the meeting. Based
on the number of shares of our common stock outstanding on the
Record Date, the presence of the holders of our common stock
representing at least 62,987,455 votes will be required to
establish a quorum.
Proxies received but marked as abstentions, votes withheld and
broker non-votes will be included in the calculation of the
number of votes considered present at the meeting.
Shares held in your name as the stockholder of record may be
voted by you in person at the Annual Meeting. Shares held by you
beneficially in “street name” through a broker, bank
or other nominee may be voted by you in person at the Annual
Meeting only if you obtain a legal proxy from the broker, bank
or other nominee that holds your shares giving you the right to
vote the shares.
MRV Communications, Inc. Annual Report 2007
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Whether you hold shares directly as the stockholder of record or
beneficially in “street name,” you may direct how your
shares are voted without attending the Annual Meeting. If you
are a stockholder of record (that is, if your shares are
registered directly in your name with our transfer agent), you
must complete and properly sign and date the accompanying proxy
card and return it to us and it will be voted as you direct. A
pre-addressed envelope is included for your use and is postage
paid if mailed in the United States. If you are a stockholder of
record and attend the meeting, you may deliver your completed
proxy card in person. If you hold shares beneficially in
“street name,” you may vote by submitting voting
instructions to your broker, bank or other nominee.
If you are a stockholder of record, you may vote by telephone,
or electronically through the Internet, by following the
instructions included with your proxy card. If your shares are
held in “street name,” please check your proxy card or
contact your broker, bank or other nominee to determine whether
you will be able to vote by telephone or electronically. The
deadline for voting by telephone or electronically is
11:59 p.m., Eastern Daylight Time, on May 28, 2007.
Yes. If you are a stockholder of record, you may revoke or
change your vote at any time before the proxy is exercised by
delivering to our Secretary at the address shown at the
beginning of this proxy statement a notice of revocation, or by
signing a proxy card bearing a later date or by attending the
Annual Meeting and voting in person.
For shares you hold beneficially in “street name,” you
may change your vote by submitting new voting instructions to
your broker, bank or other nominee or, if you have obtained a
legal proxy from your broker, bank or other nominee giving you
the right to vote your shares, by attending the meeting and
voting in person. In either case, the powers of the proxy
holders will be suspended if you attend the meeting in person
and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
Votes will be counted and certified by the Inspectors of
Election, who are employees of American Stock
Transfer & Trust Company (“American Stock”),
our transfer agent. If you are a stockholder of record, your
signed proxy card is returned directly to American Stock for
tabulation. If you hold your shares in “street name”
through a broker, bank or other nominee, your broker, bank or
other nominee will return one proxy card to American Stock on
behalf of its clients.
Unless you give other instructions on your proxy card, the
persons named as proxy holders on the proxy card will vote in
accordance with the recommendations of the Board of Directors.
The Board of Directors’ recommendation is set forth
together with the description of each item in this proxy
statement. In summary, the Board of Directors recommends a vote
“FOR” each of the proposals.
To the knowledge of MRV and its management, stockholders will
vote only on the matters described in this proxy statement.
However, if any other matters properly come before the meeting,
the persons named as proxies for stockholders will vote on those
matters in the manner they consider appropriate.
Election of Directors. The affirmative vote of
a plurality of the votes cast at the meeting is required for the
election of directors (Proposal 1). A properly executed
proxy marked “withhold authority” with respect to the
election of one or more directors will not be voted with respect
to the director or directors indicated, although it will be
counted for purposes of determining whether there is a quorum.
Amendment to Certificate of Incorporation. The
affirmative vote of the holders of outstanding shares
representing at least a majority of the voting power of all of
the shares of our common stock issued and outstanding on the
Record Date is required to amend our Certificate of
Incorporation to increase the number of authorized shares of
common stock (Proposal 4).
Other Items. For each other item, including
the proposals to ratify the appointment of our independent
registered public accounting firm for our year ending
December 31, 2007 (Proposal 2) and to approve the
adoption of our 2007 Omnibus Incentive Plan (Proposal 3),
the affirmative vote of the holders of a majority of the votes
cast in person or represented by proxy and entitled to vote on
the item will be required for approval.
A properly executed proxy marked “abstain” with
respect to any matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum.
Accordingly, an abstention will have the effect of a negative
vote.
In the election of directors, you may vote “FOR” all
or some of the nominees or your vote may be “WITHHELD”
with respect to one or more of the nominees. You may not
cumulate your votes for the election of directors.
For the other items of business, you may vote “FOR,”
“AGAINST” or “ABSTAIN.” If you elect to
“ABSTAIN,” the abstention has the same effect as a
vote “AGAINST.” If you provide specific instructions
with regard to certain items, your shares will be voted as you
instruct on such items.
If you hold your shares in “street name” through a
broker, bank or other nominee rather than directly in your own
name, then your broker, bank or other nominee is considered the
stockholder of
MRV Communications, Inc. Annual Report 2007
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record, and you are considered the beneficial owner of your
shares. We have supplied copies of our proxy statement to the
broker, bank or other nominee holding your shares of record, and
they have the responsibility to send it to you. As the
beneficial owner, you have the right to direct your broker, bank
or other nominee on how to vote your shares at the Annual
Meeting. The broker, bank or other nominee that is the
stockholder of record for your shares is obligated to provide
you with a voting instruction card for you to use for this
purpose. If you hold your shares in a brokerage account but you
fail to return your voting instruction card to your broker, your
shares may constitute “broker non-votes.” Generally,
broker non-votes occur on a matter when a broker is not
permitted to vote on that matter without instructions from the
beneficial owner and instructions are not given. In tabulating
the voting result for any particular proposal, shares that
constitute broker non-votes are not considered present and
entitled to vote on that proposal. If a quorum is present at the
Annual Meeting, the persons receiving the greatest number of
votes will be elected to serve as directors. As a result, broker
non-votes will not affect the outcome of the voting on the
election of directors (Proposal 1). The approval of the
adoption of our 2007 Omnibus Incentive Plan
(Proposal 3) and the ratification of the appointment
of our independent auditors (Proposal 2) require the
affirmative vote of a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting
and entitled to vote on the proposal. A broker non-vote is
treated as not being entitled to vote on the matter and,
therefore, is not counted for purposes of determining whether
the proposal has been approved. However, broker non-votes will
have the same effect as a negative vote on the proposals to
amend our Certificate of Incorporation to increase the number of
authorized shares of common stock (Proposal 4) because
this proposal is approved by a majority of the voting power of
all of the shares of our common stock issued and outstanding on
the Record Date, regardless of whether all of such shares are
present and entitled to vote at the meeting. Shares represented
by such “broker non-votes” will, however, be counted
in determining whether there is a quorum.
If you are a beneficial owner and your broker, bank or other
nominee holds your shares in its name, it is permitted for the
broker, bank or other nominees to vote your shares on the
election of directors (Proposal 1), the ratification of the
appointment of our independent auditors
(Proposal 2) and the amendment to our Certificate of
Incorporation (Proposal 4), even if the broker, bank or
other nominee does not receive voting instructions from you.
Your broker, bank or other nominee may not vote your shares,
absent instructions from you, on the approval of the adoption of
our 2007 Omnibus Incentive Plan (Proposal 3). Without your
voting instructions on these items a broker non-vote will occur.
You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you may receive a
separate voting instruction card for each brokerage account in
which you hold shares. If you are a stockholder of record and
your shares are registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date
and return each proxy card and voting instruction card that you
receive.
If you are a stockholder of record, you may request and consent
to electronic delivery of our future proxy materials and annual
reports by following the instructions on your proxy card. If
your shares are held in street name, please contact your broker,
bank or other nominee and ask about the availability of
electronic delivery. If you select electronic delivery, we will
discontinue mailing the proxy materials and annual reports to
you beginning next year, and you will be sent an
e-mail
message notifying you of the Internet address or addresses where
you may access the proxy materials and annual report. Your
consent to electronic delivery will remain in effect until you
revoke it.
We intend to disclose the final results in our quarterly report
on
Form 10-Q
for the quarter ending June 30, 2007.
The following table sets forth information with respect to
beneficial ownership of MRV common stock as of March 15,
2007 by each holder known to MRV to be the beneficial owner of
5% or more of the outstanding shares of MRV’s common stock.
For information regarding ownership of MRV’s common stock
by executive officers and directors, please see the table under
“Beneficial Ownership of Company Common Stock by Named
Executive Officers and Directors” on page 26 of this
proxy statement.
Beneficial ownership is determined under the rules of the
Securities and Exchange Commission and generally includes voting
or investment power with respect to securities. Except as
indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the
table below have sole voting and investment power with
respect to all shares of common stock beneficially owned. The
number of shares beneficially owned by each person or group as
of the Record Date includes shares of common stock that such
person or group had the right to acquire on or within 60 days
after the Record Date, including, but not limited to, upon the
exercise of the conversion feature of our outstanding
5% convertible notes.
MRV Communications, Inc. Annual Report 2007
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(1) For each individual included in the table above, percentage
ownership is calculated by dividing the number of shares
beneficially owned by such person by the sum of the
125,974,909 shares of common stock outstanding as of the
Record Date plus the number of shares of common stock that such
person had the right to acquire on or within 60 days after
the Record Date.
(2) Consists of shares issuable upon conversion of MRV’s
$23.0 million principal amount of five-year
5% convertible notes due June 2008 that MRV sold in June
2003. The notes are convertible at any time prior to maturity
into MRV’s common stock at a conversion price of
$2.32 per share. The notes include a provision limiting any
holder’s right to convert in excess of that portion of the
principal amount that, upon giving effect to such conversion,
would cause the aggregate number of shares beneficially owned by
the holder and its affiliates to exceed 4.99% of our total
outstanding shares following such conversion. The shares and
percentage ownership of our outstanding shares indicated in the
table above do not give effect to this limitation, but assume
that all or any portion of the notes may be converted into our
shares at any time prior to maturity.
(3) As reported in a Form 13F filed with the SEC on
February 14, 2007 by Sun Life Inc. (“Sun Life”),
Sun Life reported that these securities are owned by various
individual and institutional investors for which Sun Life serves
as investment advisor with power to direct investments
and/or sole
power to vote the securities. In preparing the information in
the table, we have assumed that at the Record Date there was no
change in the beneficial ownership of our securities by Sun Life
since its Form 13F was filed.
(4) As reported in Schedule 13G filed with the SEC on
January 31, 2007 by Wells Fargo & Company
(“Wells Fargo”), Wells Fargo reported that these
securities are owned by various individual and institutional
investors for which Wells Fargo serves as investment advisor
with power to direct investments
and/or sole
power to vote the securities. In preparing the information in
the table, we have assumed that at the Record Date there has
been no change in the beneficial ownership of our securities by
Wells Fargo since its Schedule 13G was filed.
PROPOSALS SUBMITTED
FOR STOCKHOLDER VOTE
ELECTION OF
DIRECTORS (Proposal No. 1)
Each of the directors below is a nominee for election to serve a
one-year term set to expire at our 2008 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified. Our Board of Directors expects that all of the
nominees will be able and willing to serve as directors. If any
nominee is not available to serve as a director at the time of
the Annual Meeting, the persons named on the proxy will vote for
another candidate nominated by our Board of Directors, or our
Board of Directors may reduce the number of directors. Our Board
of Directors has determined that each of the director nominees
below, except Mr. Noam Lotan, our Chief Executive Officer
and President, and Dr. Shlomo Margalit, our Board Chairman,
Chief Technology Officer and Secretary, is an “independent
director” as defined in the listing standards of the Nasdaq
Global Market, as currently in effect. See Board and Committee
Independence in the section of this proxy statement entitled
“INFORMATION ABOUT THE BOARD AND ITS COMMITTEES.”
Biographical information about each director nominee, each of
whom currently serves on our Board of Directors, appears below.
MRV Communications, Inc. Annual Report 2007
4
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The election of our directors requires a plurality of the votes
cast in person or by proxy at the meeting. This means that the
seven nominees receiving the highest number of votes will be
elected as directors.
Except where authority has been expressly withheld by a
stockholder, the enclosed proxy will be voted for each of
the above-named directors.
The Board of Directors recommends that the stockholders
vote “FOR” the election of each of the director
nominees named above.
MRV Communications, Inc. Annual Report 2007
5
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RATIFICATION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2)
The Audit Committee selects our independent auditors and has
selected Ernst & Young LLP as our independent
registered public accounting firm for the year ending
December 31, 2007. Ratification of our independent
registered public accounting firm is not required by our Bylaws
or applicable law. This proposal is before our stockholders
because, though not binding on the Audit Committee, the Board of
Directors has historically submitted the proposal to
stockholders at our annual meetings of stockholders as the Board
of Directors believes that it is good corporate practice to seek
stockholder ratification of the Audit Committee’s
appointment of independent auditors.
If the appointment of Ernst & Young LLP is not
ratified, the Audit Committee will evaluate the basis for the
stockholders’ vote when determining whether to continue the
firm’s engagement, but may ultimately determine to continue
the engagement or engage another audit firm without
re-submitting the matter to stockholders. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may act to engage a different independent auditing firm at any
time during the year if the Audit Committee determines that such
a change would be in MRV’s and its stockholders’ best
interests.
Representatives of Ernst & Young LLP are expected to be
present at the meeting and will have the opportunity to make a
statement if they desire to do so. It is also expected that they
will be available to respond to appropriate questions.
Ernst & Young LLP has audited MRV’s consolidated
financial statements annually since 2002. The following is a
summary of the fees billed to MRV by Ernst & Young LLP
for professional services rendered for the years ended
December 31, 2006 and 2005:
Audit Fees. Consists of fees billed for
professional services rendered for the audits of MRV’s
consolidated financial statements and internal control over
financial reporting and review of the interim consolidated
financial statements included in quarterly reports and services
that are normally provided by Ernst & Young LLP in
connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Consists of fees billed
for assurance and related services that are reasonably related
to the performance of the audit or review of MRV’s
consolidated financial statements and are not reported under
“Audit Fees.” These services include consultations in
connection with acquisitions, attest services that are not
required by statute or regulation and consultation concerning
financial accounting and reporting standards.
Tax Fees. Consists of fees billed for
professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal,
state and international tax compliance, tax audit defense and
international tax planning.
All Other Fees. Consists of fees for products
and services other than the services reported above.
Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered Public
Accounting Firm
The Audit Committee’s policy and procedure is to
pre-approve all audit and permissible non-audit related services
provided by the independent auditor. These services may include
audit services, audit-related services, tax services and other
services. Pre-approval is generally provided for up to one year
and any pre-approval is detailed as to the particular service or
category of services and generally subject to a specific budget.
The policy authorizes the Audit Committee to delegate to one or
more of its members pre-approval authority with respect to
permitted services. The independent registered public accounting
firm and management are required to periodically report to the
Audit Committee regarding the extent of services provided by the
independent registered public accounting firm in accordance with
this pre-approval, and the fees for the services performed
through the date of the auditor’s periodic report. The
Audit Committee may also pre-approve particular services on a
case-by-case
basis.
Ratification requires the affirmative vote of at least a
majority of the shares of the stockholders present in
person or by proxy and voting at the Annual Meeting of
Stockholders, assuming the presence of a quorum.
Except where authority has been expressly withheld by abstention
or negated by a stockholder who indicates in the proxy
“against,” the enclosed proxy will be voted for the
ratification of the appointment of Ernst & Young LLP to
serve as MRV’s independent registered public accounting
firm for the year ended December 31, 2007.
The Board recommends that the stockholders vote
“FOR” the ratification of the appointment of
Ernst & Young LLP to serve as MRV’s independent
registered public accounting firm for the year ended
December 31, 2007.
MRV Communications, Inc. Annual Report 2007
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Prior to 2003, we maintained several separate equity incentive
plans that provided for stock options or warrants for the
benefit of employees, directors and consultants. In 2003, we
consolidated all but one of these various plans into one plan,
our
Non-Director
and Non-Executive Officer Consolidated Long-Term Stock Incentive
Plan (the “Consolidated Plan”), which authorizes
equity awards to employees and consultants of MRV and its
subsidiaries. Executive officers and directors of MRV are
excluded from participating in the Consolidated Plan. As of the
Record Date, there were 1,590,912 options available for grant
under the Consolidated Plan and options to purchase
6,439,622 shares of our common stock were outstanding under
the Consolidated Plan. After the consolidation of the various
plans into the Consolidated Plan, there were no further options
available for grant separately under those various plans,
however, as of the Record Date, there were options to purchase
1,957,091 shares of our common stock that were outstanding
under the various plans that were consolidated into the
Consolidated Plan.
The equity incentive plan that we did not consolidate with our
other plans in 2003 is our 1997 Incentive and Nonstatutory Stock
Option Plan. This plan too includes authority to grant options
to our employees and consultants and also to our executive
officers and directors. By its terms, our 1997 Incentive and
Nonstatutory Stock Option Plan expires this year on
November 10, 2007, the tenth anniversary of its adoption,
at which time, no options may be granted under it. As of the
Record Date, there were 647,983 options available for grant
under this plan and options to purchase 2,544,542 shares of
our common stock were outstanding under it.
The Board believes that these plans have been effective in
attracting qualified executives, key employees, directors and
consultants to MRV and its affiliates and in providing long-term
incentives and rewards to those individuals responsible for
MRV’s growth. The Board further believes that the awards
granted under these plans have provided an incentive that aligns
the economic interests of executives, key employees, directors
and consultants with those of our stockholders. The Board
continues to believe that it is in MRV’s best interest to
utilize these types of awards as an integral part of its
compensation programs, and considers these programs to be key
contributors to MRV’s future success.
The Board believes that administering all future stock and
equity-based awards under a single plan would increase the
efficiency and effectiveness of MRV’s equity programs,
reduce administrative and regulatory costs and create greater
transparency with respect to MRV’s equity compensation
practices. For those reasons and also to replace our expiring
1997 Incentive and Nonstatutory Plan, the Board has adopted
and approved the MRV Communications Inc. 2007 Omnibus Incentive
Plan (the “2007 Plan”), which is a new long-term stock
incentive plan intended to facilitate the continued use of
long-term equity-based incentives and rewards for the
foreseeable future. The Board’s approval of the 2007 Plan
is subject to the approval of MRV’s stockholders.
Stockholder approval of the 2007 Plan is desired, among
other reasons, to ensure the tax deductibility by MRV of awards
under the 2007 Plan for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the
“Code”), to qualify any “incentive stock
options” granted under the 2007 Plan within the meaning of
Section 422 of the Code and to meet the listing
requirements of the Nasdaq Stock Market.
Upon approval of the 2007 Plan by MRV’s stockholders, our
2003 Consolidated Plan, the various plans that were consolidated
into the Consolidated Plan and 1997 Incentive and Nonstatutory
Stock Option Plan (collectively, the “Prior Plans”)
will be frozen and no further grants or awards will be made
under such plans. However, the Prior Plans will continue in
effect after approval of the 2007 Plan for so long as, and
solely to the extent necessary, to administer previously-granted
awards or options that remain outstanding under such plans. If
the 2007 Plan is not approved by MRV’s stockholders, the
Prior Plans will remain in effect according to their terms and
MRV may continue to make stock and equity-based awards under
such plans (except, in the case of the 1997 Plan, after
November 9, 2007).
The material features of the 2007 Plan are summarized below. The
summary is qualified in its entirety by reference to the
specific provisions of the 2007 Plan, the full text of which is
set forth as Appendix A to this proxy statement.
The 2007 Plan is administered by the Compensation Committee of
MRV’s Board of Directors. The Committee has the authority
to determine, within the limits of the express provisions of the
2007 Plan, the employees (other than Section 16 Officers)
and consultants to whom awards will be granted, the nature,
amount and terms of such awards and the objectives and
conditions for earning such awards. In the case of
Section 16 Officers and Directors, the full Board of
Directors has the authority to determine, within the limits of
the express provisions of the 2007 Plan, the individuals to whom
awards will be granted, the nature, amount and terms of such
awards and the objectives and conditions for earning such
awards. The Committee generally has discretion to delegate its
authority under the 2007 Plan to another committee of the Board
or a subcommittee, or to such other party or parties, including
officers of MRV, as the Committee deems appropriate.
Types of
Awards
Awards under the 2007 Plan may include incentive stock options,
nonqualified stock options, stock appreciation rights
(“SARs”), restricted shares of common stock,
restricted units, performance share or unit awards, other
stock-based awards and cash-based incentive awards.
Stock Options. The Committee may grant to a
participant options to purchase Company common stock that
qualify as incentive stock options for purposes of
Section 422 of the Code (“incentive stock
options”), options that do not qualify as incentive stock
options (“non-qualified stock options”) or a
combination thereof. The terms and conditions of stock option
grants, including the quantity,
MRV Communications, Inc. Annual Report 2007
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price, vesting periods, and other conditions on exercise will be
determined by the Committee in the case of awards to employees
and consultants and by the Board in the case of awards to
Section 16 Officers and Directors.
The exercise price per share for stock options will be
determined by the Committee or Board in its discretion, but may
not be less than 100% of the fair market value per share of
MRV’s common stock on the date when the stock option is
granted. Additionally, in the case of incentive stock options
granted to a holder of more than 10% of the total combined
voting power of all classes of stock of MRV on the date of
grant, the exercise price per share may not be less than 110% of
the fair market value of one share of common stock on the date
the stock option is granted. On April 23, 2007, the market
price per share of MRV’s common stock was $3.87 based on
the closing price of the common stock on the Nasdaq Stock Market
on such date.
Stock options must be exercised within a period fixed by the
Committee that may not exceed ten years from the date of grant,
except that in the case of incentive stock options granted to a
holder of more than 10% of the total combined voting power of
all classes of stock of MRV on the date of grant, the exercise
period may not exceed five years. The 2007 Plan provides for
earlier termination of stock options upon the participant’s
termination of service, unless extended by the Committee, but in
no event may the options be exercised after the scheduled
expiration date of the options.
At the Committee’s discretion, payment for shares of common
stock on the exercise of stock options may be made in cash,
shares of MRV’s common stock held by the participant or in
any other form of consideration acceptable to the Committee
(including one or more forms of “cashless” exercise).
Stock Appreciation Rights. The Committee (or
the Board) may grant to a participant an award of SARs, which
entitles the participant to receive, upon its exercise, a
payment equal to (i) the excess of the fair market value of
a share of common stock on the exercise date over the SAR
exercise price, times (ii) the number of shares of common
stock with respect to which the SAR is exercised.
The exercise price per SAR will be determined by the Committee
(or the Board) in its discretion, but may not be less than 100%
of the fair market value per share of MRV’s common stock on
the date when the SAR is granted. Upon exercise of a SAR,
payment may be made in cash, shares of MRV’s common stock
held by the participant or in any other form of consideration
acceptable to the Committee (including one or more forms of
“cashless” exercise). SARs must be exercised within a
period fixed by the Committee that may not exceed ten years from
the date of grant.
Restricted Shares and Restricted Units. The
Committee may award to a participant shares of common stock
subject to specified restrictions (“restricted
shares”). Restricted shares are subject to forfeiture if
the participant does not meet certain conditions such as
continued employment over a specified forfeiture period
and/or the
attainment of specified performance targets over the forfeiture
period.
The Committee also may award to a participant units representing
the right to receive shares of common stock in the future
subject to the achievement of one or more goals relating to the
completion of service by the participant
and/or the
achievement of performance or other objectives (“restricted
units”). The terms and conditions of restricted share and
restricted unit awards are determined by the Committee or the
Board, as applicable.
For participants who are subject to Section 162(m) of the
Code, the performance targets described in the preceding two
paragraphs may be established by the Committee or the Board, as
applicable, in its discretion, based on one or more of the
following measures (the “Performance Goals”):
The Performance Goals may be measured with respect to MRV or any
one or more of its subsidiaries, divisions or affiliates, either
in absolute terms or as compared to another company or
companies, or an index established or designated by the
Committee. The above terms will have the same meaning as in
MRV’s financial statements, or if the terms are not used in
MRV’s financial statements, as applied pursuant to
generally accepted accounting principles, or as used in the
industry, as applicable.
MRV Communications, Inc. Annual Report 2007
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Performance Awards. The Committee may grant
performance awards to participants under such terms and
conditions as the Committee deems appropriate. A performance
award entitles a participant to receive a payment from MRV, the
amount of which is based upon the attainment of predetermined
performance targets over a specified award period. Performance
awards may be paid in cash, shares of common stock or a
combination thereof, as determined by the Committee.
Award periods will be established at the discretion of the
Committee. The performance targets will also be determined by
the Committee. With respect to participants subject to
Section 162(m) of the Code, the applicable performance
targets will be established, in the Committee’s discretion,
based on one or more of the Performance Goals described under
the section below titled “Restricted Shares and
Restricted Units.” To the extent that a participant is
not subject to Section 162(m) of the Code, when
circumstances occur that cause predetermined performance targets
to be an inappropriate measure of achievement, the Committee, at
its discretion, may adjust the performance targets or the amount
or value of the performance award.
Other Stock-Based Awards. The Committee may
grant equity-based or equity-related awards, referred to as
“other stock-based awards,” other than options, SARs,
restricted shares, restricted units, or performance awards. The
terms and conditions of each other stock-based award will be
determined by the Committee. Payment under any other stock-based
awards will be made in common stock or cash, as determined by
the Committee.
Cash-Based Awards. The Committee may grant
cash-based incentive compensation awards, which would include
performance-based annual cash incentive compensation to be paid
to covered employees subject to Section 162(m) of the Code.
The terms and conditions of each cash-based award will be
determined by the Committee. The following material terms will
be applicable to performance-based cash awards granted to
covered executives subject to Section 162(m):
The class of persons covered consists of those senior executives
of MRV who are from time to time determined by the Committee to
be subject to Section 162(m) of the Code.
The targets for annual incentive payments to “covered
employees” (as defined in Section 162(m) of the Code)
will consist only of one or more of the Performance Goals
discussed under the section titled “Restricted
Shares and Restricted Units” above. Use of any other
target will require ratification by the stockholders if failure
to obtain such approval would jeopardize tax deductibility
of future incentive payments. Such performance targets will be
established by the Committee on a timely basis to ensure
that the targets are considered “preestablished”
for purposes of Section 162(m) of the Code.
In administering the incentive program and determining incentive
awards, the Committee will not have the flexibility to pay a
covered executive more than the incentive amount indicated by
his or her attainment of the performance target under the
applicable payment schedule. The Committee will have the
flexibility, based on its business judgment, to reduce this
amount.
The cash incentive compensation feature of the 2007 Plan does
not preclude the Board or the Committee from approving other
incentive compensation arrangements for covered employees.
Dividend Equivalents. The Committee may
provide for the payment of dividends or dividend equivalents
with respect to any shares of common stock subject to an award
under the 2007 Plan.
The Committee may grant awards to any employee (other than
Section 16 Officers), consultant or other person providing
services to MRV or its affiliates. The Board may grant awards to
any Section 16 Officer) or director. It is presently
contemplated that approximately 850 persons may receive awards
under the 2007 Plan.
The maximum awards that can be granted under the 2007 Plan to a
single participant in any calendar year will be
500,000 shares of common stock in the form of options or
SARs, 250,000 shares of common stock in the form of
restricted shares, restricted units, performance unit or share
awards and other stock-based awards, and $250,000 in the form of
cash-based incentive awards.
As previously reported in our
Form 8-K
filed with the SEC on March 5, 2007, on February 28,
2007, the Board authorized the grant of options to the following
Section 16 Officers (who are also “named executive
officers” or “NEOs” for purposes of the Summary
Compensation Table on page 33 of this proxy statement) in
the following amounts:
If stockholders approve the 2007 Plan, these Options will be
granted on the “First Available Grant Date”
following such approval at an exercise price per share equal to
the closing price per share of the date of grant. For
information on the meaning of “First Available Grant
Date,” see “Stock Option Policy” on page 30
of this proxy statement.
Other than these grants to our NEOs listed in the above table,
no specific awards have been approved by the Board or the
Compensation Committee to be granted under the 2007 Plan. The
exact types and amounts of any future awards to be made to any
eligible participants pursuant to the 2007 Plan are not
presently determinable. As a result of the discretionary nature
of the 2007 Plan, it is not possible to state who the
participants in the 2007 Plan will be
MRV Communications, Inc. Annual Report 2007
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in the future or the number of options or other awards to be
received by a person or group.
An aggregate of 12,000,000 shares of common stock is
reserved for issuance and available for awards under the 2007
Plan, including incentive stock options. No more than 2,000,000
of the total shares of common stock reserved under the 2007 Plan
may be awarded as restricted shares, restricted units,
performance awards or other-stock-based awards.
With respect to awards other than SARs made under the 2007 Plan,
shares of common stock not actually issued (as a result, for
example, of the lapse of an option or a forfeiture of restricted
stock), other than shares surrendered to or withheld by MRV in
payment or satisfaction of the exercise price of a stock option
or tax withholding obligations with respect to an award, will be
available for additional grants under the 2007 Plan. With
respect to SARs, the full number of SARs granted that are
settled by the issuance of shares of common stock will be
counted against the number of shares reserved for issuance under
the 2007 Plan, regardless of the number of shares actually
issued upon settlement of the SAR award.
Shares to be issued or purchased under the 2007 Plan will be
authorized but unissued shares of common stock. Shares issued
with respect to awards assumed by MRV in connection with
acquisitions, including our recently announced and pending
acquisition of Fiberxon, do not count against the total number
of shares available under the 2007 Plan.
In the event of any corporate event or transaction (including,
but not limited to, a change in the shares of our common stock
or our capitalization) such as from a merger, consolidation,
reorganization, recapitalization, separation, partial or
complete liquidation, stock dividend, stock split, reverse stock
split, split up, spin-off, or other distribution of our stock or
property, combination of shares, exchange of shares, dividend in
kind, or other like change in capital structure, number of
outstanding shares or distribution (other than normal cash
dividends) to our stockholders, or any similar corporate event
or transaction, the Committee (or the Board in the case of
awards to Section 16 Officers and directors), in order to
prevent dilution or enlargement of participants’ rights
under the 2007 Plan, is required to make equitable and
appropriate adjustments and substitutions, as applicable, to or
of the number and kind of shares that may be issued under the
2007 Plan or under particular forms of awards, the number and
kind of shares subject to outstanding awards, the exercise price
or grant price applicable to outstanding awards, the annual
award limits, and other determinations applicable to outstanding
awards. Under the 2007 Plan, the Committee (or the Board, as the
case may be) has the power and sole discretion to determine the
amount of the adjustment to be made in each case.
The Board of Directors may at any time amend or terminate the
2007 Plan, provided that no such action may be taken that
adversely affects any rights or obligations with respect to any
awards previously made under the 2007 Plan without the consent
of the recipient. No awards may be made under the 2007 Plan
after the tenth anniversary of its effective date. Certain
provisions of the 2007 Plan relating to performance-based awards
under Section 162(m) of the Code will expire on the fifth
anniversary of the effective date.
The federal income tax consequences of the issuance
and/or
exercise of awards under the 2007 Plan are as described below.
The following information is only a summary of the tax
consequences of the awards, and participants should consult with
their own tax advisors with respect to the tax consequences
inherent in the ownership
and/or
exercise of the awards, and the ownership and disposition of any
underlying securities.
Incentive Stock Options. A participant who is
granted an incentive stock option will not recognize any taxable
income for federal income tax purposes either on the grant or
exercise of the incentive stock option. If the participant
disposes of the shares purchased pursuant to the incentive stock
option more than two years after the date of grant and more than
one year after the transfer of the shares to the participant
(the required statutory “holding period”),
(a) the participant will recognize a long-term capital gain
or loss, as the case may be, equal to the difference between the
selling price and the option price; and (b) MRV will not be
entitled to a deduction with respect to the shares of stock so
issued. If the holding period requirements are not met, any gain
realized upon disposition will be taxed as ordinary income to
the extent of the excess of the lesser of (i) the excess of
the fair market value of the shares at the time of exercise over
the option price, and (ii) the gain on the sale. Also in
that case, MRV will be entitled to a deduction in the year of
disposition in an amount equal to the ordinary income recognized
by the participant. Any additional gain will be taxed as a
short-term or long-term capital gain depending upon the holding
period for the stock. A sale for less than the option price
results in a capital loss.
The excess of the fair market value of the shares on the date of
exercise over the option price is, however, includable in the
option holder’s income for alternative minimum tax purposes.
Nonqualified Stock Options. A participant who
is granted a nonqualified stock option under the 2007 Plan will
not recognize any income for federal income tax purposes on the
grant of the option. Generally, on the exercise of the option,
the participant will recognize taxable ordinary income equal to
the excess of the fair market value of the shares on the
exercise date over the option price for the shares. MRV
generally will be entitled to a deduction on the date of
exercise in an amount equal to the ordinary income recognized by
the participant. Upon disposition of the shares purchased
pursuant to the stock option, the participant will recognize a
long-term or short-term capital gain or loss, as the
MRV Communications, Inc. Annual Report 2007
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case may be, equal to the difference between the amount realized
on such disposition and the basis for such shares, which basis
includes the amount previously recognized by the participant as
ordinary income.
Stock Appreciation Rights. A participant who
is granted stock appreciation rights will normally not recognize
any taxable income on the receipt of the SARs. Upon the exercise
of a SAR, (a) the participant will recognize ordinary
income equal to the amount received (the increase in the fair
market value of one share of MRV’s common stock from the
date of grant of the SAR to the date of exercise); and
(b) MRV will be entitled to a deduction on the date of
exercise in an amount equal to the ordinary income recognized by
the participant.
Restricted Shares. A participant will not be
taxed at the date of an award of restricted shares, but will be
taxed at ordinary income rates on the fair market value of any
restricted shares as of the date that the restrictions lapse,
unless the participant, within 30 days after transfer of
such restricted shares to the participant, elects under
Section 83(b) of the Code to include in income the fair
market value of the restricted shares as of the date of such
transfer. MRV will be entitled to a corresponding deduction. Any
disposition of shares after restrictions lapse will be subject
to the regular rules governing long-term and short-term capital
gains and losses, with the basis for this purpose equal to the
fair market value of the shares at the end of the restricted
period (or on the date of the transfer of the restricted shares,
if the employee elects to be taxed on the fair market value upon
such transfer). To the extent dividends are payable during the
restricted period under the applicable award agreement, any such
dividends will be taxable to the participant at ordinary income
tax rates and will be deductible by MRV unless the participant
has elected to be taxed on the fair market value of the
restricted shares upon transfer, in which case they will
thereafter be taxable to the employee as dividends and will not
be deductible by MRV.
Restricted Units. A participant will normally
not recognize taxable income upon an award of restricted units,
and MRV will not be entitled to a deduction until the lapse of
the applicable restrictions. Upon the lapse of the restrictions
and the issuance of the earned shares, the participant will
recognize ordinary taxable income in an amount equal to the fair
market value of the common stock received and MRV will be
entitled to a deduction in the same amount.
Performance Awards, Other Stock-Based Awards and Cash-Based
Awards. Normally, a participant will not
recognize taxable income upon the grant of performance awards,
other stock-based awards and cash-based awards. Subsequently,
when the conditions and requirements for the grants have been
satisfied and the payment determined, any cash received and the
fair market value of any common stock received will constitute
ordinary income to the participant. MRV also will then be
entitled to a deduction in the same amount.
The 2007 Plan will be effective on April 12, 2007 if
approved by our stockholders. If not approved by the
stockholders, no awards will be made under the 2007 Plan. If and
when the 2007 Plan becomes effective, the Prior Plans will be
frozen and no further grants of equity or equity-based awards or
cash-based awards will be made under such plans. However, shares
of common stock subject to outstanding awards granted under
those plans prior to the effective date of the 2007 Plan will
remain available for issuance under such plans and such plans
will remain in effect after the effective date of the 2007 Plan
to the extent necessary to administer such previously-granted
awards.
Approval of the 2007 Plan will require the affirmative vote of
at least a majority of the shares of the stockholders present in
person or by proxy and voting at the Annual Meeting of
Stockholders, assuming the presence of a quorum. If the
stockholders do not approve the 2007 Plan, it will not be
implemented, but we reserve the right to adopt such other
compensation plans and programs as our Board deems appropriate
and in the best interests of MRV and its stockholders.
Except where authority has been withheld by abstention or
negated by a stockholder indicating “against,” the
enclosed proxy will be voted for the approval of the 2007 Plan.
The Board of Directors unanimously recommends a vote
“FOR” the proposal to approve the 2007 Plan.
APPROVAL TO AMEND
OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED
SHARES OF COMMON STOCK TO 320,000,000 AND THE AGGREGATE
NUMBER OF SHARES OF CAPITAL STOCK TO 321,000,000.
(Proposal 4)
The Board of Directors has approved, subject to stockholder
approval (a) an amendment to our Certificate of
Incorporation that would increase the number of shares of common
stock which we would have authority to issue from
160,000,000 shares to 320,000,000 shares and, taking
into account that we currently have authorized in our
certificate of incorporation, as previously amended,
1,000,000 shares of preferred stock, to make a
corresponding change in the aggregate number of shares of all
classes of stock which we have authority to issue and to
321,000,000. If approved by our stockholders, the increase in
authorized common stock (and the corresponding increase in the
aggregate number of shares of all classes of stock) would become
effective as soon as reasonably practicable after the 2007
annual meeting of Stockholders by filing a Restated Certificate
of Incorporation with the Delaware Secretary of State,
reflecting such amendments and restating without change, in a
single instrument the other operative provisions of our
Certificate of Incorporation as previously amended.
Pursuant to Delaware law, a corporation, whenever its Board of
Directors so desires, may integrate into a single instrument all
of the
MRV Communications, Inc. Annual Report 2007
Table of Contents
provisions of its certificate of incorporation which are then in
effect and operative as a result of previous filings of the
original and amendments to the certificate of incorporation made
with the Secretary of State and, at the same time, it may also,
with the requisite stockholder approval, further amend in any
respect its certificate of incorporation. Based upon this
statutory authority, the Board of Directors has determined that
if stockholders approve the amendment to our Certificate of
Incorporation in the manner indicated in the preceding
paragraph, to restate in a single instrument entitled
“Amended and Restated Certificate of Incorporation”
our Certificate of Incorporation as so amended at this Annual
Meeting. A copy of the proposed Amended and Restated Certificate
of Incorporation is attached to this proxy statement as
Appendix B. Appendix B gives effect to the proposed
amendments, and is marked to show the manner in which our
Certificate of Incorporation will be amended, if stockholders
approve Proposal 4.
Our current authorized common stock is 160,000,000 shares.
As of the Record Date, there were 125,974,909 shares of our
common stock issued and outstanding, 10,941,255 shares of
our common stock issuable upon exercise of options granted
pursuant to our Prior Plans, 12,000,000 shares of our
common stock reserved for issuance under the 2007 Stock
Incentive Plan if Proposal 3, which is being submitted to
stockholders by this proxy statement, is approved, and
9,913,794 shares of our common stock issuable upon
conversion of outstanding convertible notes that we issued in
2003. Based on the number of outstanding and reserved shares of
common stock described above, if Proposal 3 is approved by
stockholders, we would have 1,170,042 shares of common
stock remaining available for issuance.
Our acquisition of Fiberxon, if completed, will require us to
issue up to 21,188,630 additional shares of our common stock
(including shares of common stock issuable upon exercise of
Fiberxon options that we will be assuming). Accordingly, without
an increase in the authorized common stock, we will not have
sufficient shares of common stock available for the issuance in
connection with the Fiberxon acquisition.
The additional shares of common stock authorized would also be
available for other issuances for any proper corporate purpose
from time to time as determined by our Board of Directors. For
example, in addition to the Share Transaction, we may issue
shares of common stock in public or private offerings for cash,
or for use in our operations and for use as consideration in
acquiring other companies or assets with stock.
The proposed increase in authorized shares of common stock is
necessary to enable us to complete the Fiberxon transaction,
grant options and awards under our proposed 2007 Omnibus
Incentive Plan and issue shares upon exercise of outstanding
stock options and conversion of our outstanding notes. Our Board
of Directors also believes the amendment to our Certificate of
Incorporation will enhance our flexibility in managing our
capitalization, raising capital and structuring appropriate
equity compensation. Our Board of Directors determines whether,
when and on what terms to issue shares of common stock and
preferred stock, including the additional shares proposed to be
authorized.
While we do not have any current plans to issue additional
equity securities (other than in connection with the Fiberxon
acquisition, in connection with grants under our present and
future equity compensation plans
and/or the
potential issuance of shares of common stock upon conversion of
the convertible notes), and have not entered into any agreement
to sell our equity securities at this time or to make an
acquisition utilizing common stock (other than as contemplated
for the Fiberxon acquisition), our Board of Directors is seeking
approval for additional authorized common stock at this time
because opportunities requiring prompt action may arise in the
future and our Board of Directors believes the delay and expense
in seeking stockholder approval for additional authorized common
stock could deprive us and our stockholders of the ability to
benefit effectively from opportunities
and/or cause
the loss of attractive acquisitions or financing arrangements.
The additional shares of common stock to be authorized will have
rights identical to the currently outstanding common stock. The
proposed amendment will not affect the par value of the common
stock, which will remain at $0.0017 per share. Under our
Certificate of Incorporation, our stockholders do not have
preemptive rights to subscribe to additional securities that may
be issued by us. This means that current stockholders do not
have a prior right to purchase any new issue of our capital
stock in order to maintain their proportionate ownership of
common stock.
If we issue additional shares of common stock or other
securities convertible into common stock in the future, it could
dilute the voting rights of existing holders of our common
stock, dilute our book value per share and, if and when we
report net income, dilute earnings per share.
Consequences if
the Amendment to the Certificate of Incorporation to Increase
the Authorized Shares of Common Stock is Not Approved by the
Stockholders
If Proposal 4 is not approved by the requisite vote of the
stockholders, we may not be able to proceed with the acquisition
of Fiberxon as it is currently structured without potentially
breaching obligations under our outstanding convertible notes or
outstanding options to purchase our shares (unless
stockholders subsequently approved an increase of our common
stock in an amount sufficient to permit full conversion of our
notes and exercise of outstanding options). Depending on which
of the alternatives we chose as described below, we face the
following consequences if the proposed amendment to our
Certificate of Incorporate to increase our authorized of common
stock is not approved:
MRV Communications, Inc. Annual Report 2007
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The affirmative vote of the holders of outstanding shares
representing at least a majority of the voting power of all of
the shares of our common stock issued and outstanding on the
Record Date will be required to approve Proposal 4.
MRV Communications, Inc. Annual Report 2007
Table of Contents
Except where authority has been expressly withheld or negated by
a stockholder, the enclosed proxy will be voted for the approval
of the amendment to our Certificate of Incorporation.
The Board of Directors recommends a vote “FOR”
the proposal to amend our Certificate of Incorporation.
As of the date of this proxy statement, we know of no business
that will be presented for consideration at the 2007 Annual
Meeting of Stockholders other than the items referred to above.
If any other matter is properly brought before the meeting for
action by stockholders, proxies in the enclosed form returned to
us will be voted in accordance with the recommendation of the
Board of Directors or, in the absence of such a recommendation,
in accordance with the best judgment of the proxy holders.
INFORMATION ABOUT
THE BOARD AND ITS COMMITTEES
The system of governance practices followed by the Company is
memorialized in the MRV Communications, Inc. Corporate
Governance Guidelines and the charters of the four committees of
the Board of Directors. The Governance Guidelines and charters
are intended to assure that the Board will have the necessary
authority and practices in place to review and evaluate the
Company’s business operations and to make decisions that
are independent of the Company’s management. The Governance
Guidelines also are intended to align the interests of directors
and management with those of MRV’s stockholders. The
Governance Guidelines establish the practices the Board will
follow with respect to Board composition and selection, Board
meetings and involvement of senior management, Chief Executive
Officer’s performance evaluation, Board committees, and
director compensation. The Board annually conducts a
self-evaluation to assess compliance with the Governance
Guidelines and identify opportunities to improve Board
performance.
The Governance Guidelines and committee charters are reviewed
periodically and updated as necessary to reflect changes in
regulatory requirements and evolving oversight practices. The
Governance Guidelines were most recently modified by the Board,
effective September 24, 2004, to, among other things,
assure compliance with corporate governance requirements
contained in The Nasdaq Stock Market (“Nasdaq”) and
make other enhancements to the Company’s corporate
governance policies, including creating the role of lead
independent director. The chair of the Nomination and Governance
Committee, Dr. Igal Shidlovsky, has served as the lead
independent director since the last annual meeting of
stockholders. The lead independent director is responsible for
coordinating the activities of the non-management directors,
coordinating with the Chairman to set the agenda for Board
meetings, chairing meetings of the non-management directors, and
leading the Board’s review of the Chief Executive Officer.
The Board has four committees: an Audit Committee, a
Compensation Committee, a Nomination and Governance Committee
and an Executive Committee. The Governance Guidelines, as well
as current copies of the Charter for the Audit Committee, the
Compensation Committee and the Nomination and Governance
Committee are available on MRV’s website http://www.mrv.com.
The Board of Directors, the Audit Committee, the Compensation
Committee and the Nomination and Governance Committee each hold
regularly scheduled quarterly meetings. In addition to the
quarterly meetings, there may be special meetings from time to
time as the Board or its committees deem necessary. At each
quarterly board meeting, time is set aside for the independent
directors to meet in an executive session without management or
management directors present. The Board of Directors met seven
times during 2006. All directors attended 75% or more of the
Board meetings and meetings of the committees on which they
served during 2006, with the exception of Igal Shidlovsky, who
attended five of the seven Board of Director meetings.
The members of the Board of Directors on the date of this proxy
statement, and the committees of the Board of Directors on which
they currently serve, are identified below.
(1) Committee Chairperson
(2) Lead Independent Director
Below is a description of each committee of the Board of
Directors. Each of the committees has authority to engage legal
counsel or other experts or consultants as it deems appropriate
to carry out its responsibilities. The Board of Directors has
determined that each member of the Board and of each
committee (other than Dr. Margalit and Mr. Lotan who
are officers and employees of MRV and serve on the Executive
Committee) meets the standards of independence under the
Governance Guidelines and applicable Nasdaq listing standards.
MRV Communications, Inc. Annual Report 2007
Table of Contents
The Audit Committee assists the Board of Directors in its
oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the Company. The Audit
Committee met six times during 2006. The Audit Committee’s
role includes overseeing the work of the Company’s internal
accounting and auditing processes and discussing with management
the Company’s processes to manage business and financial
risk, and for compliance with significant applicable legal,
ethical, and regulatory requirements. The Audit Committee is
responsible for the appointment, compensation, retention, and
oversight of the independent auditor engaged to prepare or issue
audit reports on the financial statements of the Company. The
Audit Committee relies on the expertise and knowledge of
management and the independent auditor in carrying out its
oversight responsibilities. The Committee’s specific
responsibilities are delineated in the Audit Committee Charter,
a copy of which is available on MRV’s website
http://www.mrv.com. The Board of Directors has determined that
each Audit Committee member has sufficient knowledge in
financial and auditing matters to serve on the Committee. The
members of the Audit Committee during 2006 are as stated in the
Committee table above. The Board has determined that
Dr. Guenter Jaensch and Dr. Harold W. Furchtgott-Roth
are each an “audit committee financial expert” as
defined by Item 401(h) of
Regulation S-K
of Securities and Exchange Commission (“SEC”)
regulations and that they are independent as that term is used
in Item 7(d)(3)(iv) of Schedule 14A under the
Securities Exchange Act of 1934. For additional information
concerning the Audit Committee, see
REPORT OF THE AUDIT COMMITTEE on page 38 of this proxy
statement.
During 2006, the Compensation Committee consisted of
Dr. Shidlovsky, Dr. Jaensch, Professor Tsui and
Professor Fischer. The Compensation Committee met two times
during 2006. The primary responsibilities of the Compensation
Committee are: (a) In consultation with senior management,
to make recommendations to the Board as to the Company’s
general compensation philosophy and to oversee the development
and implementation of compensation programs; (b) To
evaluate the performance of the Chief Executive Officer in light
of Board-approved goals and objectives, and to recommend to the
Board the Chief Executive Officer’s compensation level
based on this evaluation; (c) To make recommendations to
the Board regarding the compensation (including any new
compensation programs) of the other executive officers,
following its review of performance evaluations of the other
executive officers; (d) to review and make recommendations
to the Board with respect to the Company’s incentive
compensation plans and equity-based plans; and (e) to grant
awards under the Company’s equity incentive plans to
employees (other than Section 16 Officers) and consultants
and to recommend to the Board the grant awards under the
Company’s equity incentive plans to the Company’s
Section 16 Officers. The Compensation Committee’s role
includes producing the report on executive compensation required
by SEC rules and regulations. The specific responsibilities and
functions of the Compensation Committee are delineated in the
Compensation Committee Charter, which is available on MRV’s
website http://www.mrv.com.
No member of the Compensation Committee was, during 2006, an
officer or employee of MRV or any of its subsidiaries; or was
formerly an officer of MRV or any of its subsidiaries. During
2006, no executive officer of MRV served as an executive
officer, director or member of the compensation committee (or
other board committee performing equivalent functions, or in the
absence of such committee, the entire board of directors) of
another entity, any of whose executive officers served as a
member of the Compensation Committee or as a director of MRV.
The principal responsibilities of the Nomination and Governance
Committee are to: (a) To lead the search for qualified
individuals for election as directors to ensure the Board has
the right mix of skills and expertise; (b) To retain and
terminate any search firm to be used to identify director
candidates, as it may deem appropriate in its discretion;
(c) To solicit the views of the Chief Executive Officer,
other members of the Company’s senior management, and other
members of the Board regarding the qualifications and
suitability of candidates; (d) To establish policies and
procedures for the evaluation of candidates put forth by the
Company’s stockholders; (e) To review and recommend to
the full Board a set of corporate governance principles and a
code of business conduct and ethics applicable to the Board and
the Company, and, if deemed necessary by the Board, propose from
time to time any amendments to such principles and such code;
and (f) To oversee and evaluate compliance by the Board and
management of the Company with the Company’s corporate
governance principles and ethics standards and its code of
conduct. The Nomination and Governance Committee’s role
also includes periodically reviewing the compensation paid to
non-employee directors, and making recommendations to the Board
for any adjustments. In addition, the Chair of the Nomination
and Governance Committee acts as the lead independent director
and is responsible for leading the Board of Directors’
annual review of the chief executive officer’s performance.
The specific responsibilities and functions of the Nomination
and Governance Committee are delineated in the Nomination and
Governance Committee Charter, which is available on MRV’s
website http://www.mrv.com. The Nomination and Governance
Committee was established in September 2004 and met once in
2006. The members of the Nomination and Governance Committee
during 2006 are as stated in the Committee table above.
Nominees for the Board of Directors should be committed to
enhancing long-term stockholder value and must possess a high
level of personal and professional ethics, sound business
judgment
MRV Communications, Inc. Annual Report 2007
Table of Contents
and integrity. The Nomination and Governance Committee annually
reviews with the Board the applicable skills and characteristics
required of Board nominees in the context of current Board
composition and Company circumstances. In making its
recommendations to the Board, the Nomination and Governance
Committee considers, among other things, the qualifications of
individual director candidates. The Nomination and Governance
Committee works with the Board to determine the appropriate
characteristics, skills, and experiences for the Board as a
whole and its individual members with the objective of having a
Board with business experience, diversity, and personal skills
in technology, finance, marketing, international business,
financial reporting and other areas that are expected to
contribute to an effective Board. In evaluating the suitability
of individual Board members, the Board takes into account many
factors, including general understanding of marketing, finance,
and other disciplines relevant to the success of a publicly
traded company in today’s business environment;
understanding of the Company’s business and technology;
educational and professional background; and personal
accomplishment. The Board evaluates each individual in the
context of the Board as a whole, with the objective of
recommending a group that can best perpetuate the success of the
Company’s business and represent stockholder interests
through the exercise of sound judgment, using its diversity of
experience. In determining whether to recommend a director for
re-election, the Nomination and Governance Committee also
considers the director’s past attendance at meetings and
participation in and contributions to the activities of the
Board.
The Committee will consider stockholder recommendations for
candidates for the Board. All stockholder nominating
recommendations must be in writing, addressed to MRV
Communications, Inc., 20415 Nordhoff Street, Chatsworth,
California 91311, Attention: Secretary (or if MRV’s
corporate headquarters have changed, to MRV’s new corporate
headquarters as publicly announced). Submissions must be made by
certified mail or commercial courier service (Federal Express,
for example). Hand delivered or emailed submissions will
not be considered.
Any stockholder wishing to nominate an individual for election
to the Board must ensure that MRV receives it, not later than
120 calendar days prior to the first anniversary of the date of
the proxy statement for the prior annual meeting of stockholders
(e.g., for the 2008 annual meeting, by January 1,
2008). In the event that the date of the annual meeting of
stockholders for any year is more than 30 days from the
first anniversary date of the annual meeting of stockholders for
the prior year, the submission of a recommendation will be
considered timely if it is submitted a reasonable time in
advance of the mailing of MRV’s proxy statement for the
annual meeting of stockholders for the current year. The
nomination must contain the following information about the
nominee: name; age; business and residence addresses; principal
occupation or employment; the number of shares of MRV common
stock held by the nominee; the time period for which such shares
have been held and a statement from the stockholder as to
whether the stockholder has a good faith intention to continue
to hold the reported shares through the date of MRV’s next
annual meeting of stockholders; the information that would be
required under SEC rules in a proxy statement soliciting proxies
for the election of such nominee as a director; a description of
any relationships between the proposed nominee and the
recommending stockholder, and to any of MRV’s competitors,
customers, suppliers, or other persons with special interests
regarding MRV; a statement supporting the recommending
stockholder’s view that the proposed nominee possesses the
minimum qualifications set forth below to serve as a director,
and briefly describing the contributions that the nominee would
be expected to make to the Board and to the governance of MRV; a
statement whether, in the view of the recommending stockholder,
the nominee, if elected, would represent all stockholders and
not serve for the purpose of advancing or favoring any
particular stockholder or other constituency of MRV; and a
signed consent of the nominee to be interviewed and to serve as
a director of MRV, if elected.
Minimum qualifications for serving on the Board include
integrity; absence of conflicts of interest; ability to provide
fair and equal representation of all stockholders; demonstrated
achievement in one or more fields of business, professional,
governmental, community, scientific or educational endeavor;
management or policy-making experience (which may be as an
advisor or consultant); demonstrated ability to function
effectively in an oversight role through management or
policy-making experience that evidences an ability to function
effectively in an oversight role; a general appreciation
regarding major issues facing public companies of a size and
operational scope similar to MRV, including regulatory
obligations and governance concerns of a public issuer;
strategic business planning; competition in a global economy;
basic concepts of corporate finance; and the ability to devote
the time and effort necessary to fulfill his or her
responsibilities, in the context of the perceived needs of the
Board at that time.
The Executive Committee consists of Mr. Lotan and
Dr. Margalit. The Executive Committee did not meet as a
committee during 2006. The primary responsibility of the
Executive Committee is to take any action that the Board is
authorized to act upon, with the exception of the issuance of
stock, the sale of all or substantially all of MRV’s assets
and other significant corporate transactions.
MRV’s current compensation program for non-management
directors has been in effect since October 20, 2004, and is
designed to achieve the following goals: compensation should
fairly pay directors for work required for a company of
MRV’s size and scope; compensation should align
directors’ interests with the long-term interest of
stockholders; and the structure of the compensation should be
simple, transparent and easy for stockholders to understand. The
table below on non-management
MRV Communications, Inc. Annual Report 2007
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directors’ compensation during 2006 includes the following
compensation elements:
Annual Compensation. Annual compensation of
$18,000 was paid in cash to each non-management director in
monthly installments for each month of service.
Board and Committee Meeting
Participation. Meeting compensation of $1,000 was
paid in cash for each Board and Committee of the Board meeting
for which a non-management director participated in person or
telephonically.
Option Awards. Options were granted to
non-management directors as follows:
(1) This column reports the amount of cash compensation earned
or paid in cash in 2006 to non-management directors for Board
and committee service.
(2) This column reports the grant date fair value of options
granted to non-management directors, calculated using the
Black-Scholes model, which is the method MRV uses to report the
fair value for option awards in its financial statements in
accordance with SFAS No. 123(R). For additional
information of valuation assumptions, please see note 13 of
the notes to MRV’s financial statements included in its
Annual Report on
Form 10-K
for the year ended December 31, 2006, as filed with the SEC
on March 6, 2007. The dollar amounts reflect the dollar
amount recognized in 2006 for financial statement reporting
purposes and do not necessarily correspond to the actual value
that will be realized by the non-management directors from the
options awarded.
The Company uses reasonable efforts to schedule its annual
meeting of stockholders at a time and date to maximize
attendance by directors, taking into account the directors’
schedules. In cases where the Company, in its reasonable
business judgment, believes that stockholder attendance at its
annual meetings is significant, the Company encourages
director attendance at such annual meetings. Directors make
every effort to attend the Company’s annual meeting of
stockholders when meaningful stockholder attendance at such
meeting is anticipated. Noam Lotan attended the 2006 Annual
Meeting.
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers and persons who
own more than 10% of a registered class of our equity
securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other
equity securities of the Company. Directors, executive officers
and 10% or greater stockholders are required by the SEC
regulations to furnish us with copies of all Section 16(a)
forms they file.
We believe, based solely on a review of the copies of such
reports furnished to the Company, that each report required of
the Company’s executive officers, directors and 10% or
greater stockholders was duly and timely filed during the year
ended December 31, 2006.
Except for Dr. Near Margalit, the Chief Executive Officer
of MRV’s subsidiary, Luminent, Inc., who is the son of
Dr. Shlomo Margalit, and Dr. Harold Furchtgott-Roth,
who is the cousin of Noam Lotan’s wife, none of the
Executive Officers, Directors or Director nominees of MRV are
related by blood, marriage or adoption to any of MRV’s
executive officers, Directors or Director nominees. The Board of
Directors elects officers annually and those elected serve at
the discretion of the Board, subject, in the cases of
Dr. Shlomo Margalit and Mr. Lotan, to the terms of
their respective employment agreements described in
“Employment Agreements and Change of Control
Arrangements” on page 37 of this proxy statement.
The Board has established a process by which stockholders and
other interested parties may communicate with members of the
Board of Directors. Any stockholder or other interested party
who desires to communicate with the Board of Directors,
individually or as a group, may do so by writing to the intended
member or members of the Board of Directors, c/o Compliance
Officer, 20415 Nordhoff Street, Chatsworth, California 91311.
All communications received in accordance with this procedure
will be reviewed initially by the office of our Compliance
Officer to determine that the communication is a message to our
directors and will be relayed to the appropriate director or
directors unless the officer determines that the communication
is an advertisement or other promotional material. The director
or directors who receive any such communication will have
discretion to determine whether
MRV Communications, Inc. Annual Report 2007
Table of Contents
the subject matter of the communication should be brought to the
attention of the full Board of Directors or one or more of its
committees and whether any response to the person sending the
communication is appropriate.
Biographies of the current executive officers of the Company are
set forth below, excluding Mr. Noam Lotan’s and
Dr. Shlomo Margalit’s biographies, which are included
under “Director Nominees” above.
Kevin Rubin, 32, became Chief Financial Officer in
December 2005. Since April 2002, Mr. Rubin has served as
Vice President of Finance and Corporate Compliance Officer of
MRV. From 1995 through March 2002, Mr. Rubin was employed
by Arthur Andersen LLP providing services to a broad array of
high-tech companies ranging from small private companies to
public companies with market capitalizations in excess of
$1 billion. Mr. Rubin holds a bachelor of science
degree in business economics from the University of California,
Santa Barbara, and is a certified public accountant.
Near Margalit, 34, Ph.D. re-joined MRV in May 2002
as Vice President of Marketing and Business Development. In
February 2003, Dr. Margalit was appointed Chief Executive
Officer of Luminent, Inc. From 1998 until re-joining MRV,
Dr. Margalit was founder, Chairman and Chief Technology
Officer for Zaffire, Inc., a DWDM Metro Platform company, which
was acquired by Centerpoint in October 2001. At Zaffire,
Dr. Margalit was responsible for product vision and
architecture of integrating DWDM and SONET technology. Prior to
founding Zaffire, Dr. Margalit was employed by MRV, both in
the optical component and networking divisions.
Dr. Margalit holds a bachelor of science degree in applied
physics from Caltech and a Ph.D. in optoelectronics from the
University of California, Santa Barbara.
Michael Blust, 31, became Vice President of Finance
in December 2005. From August 2002 to December 2005,
Mr. Blust had served as the Corporate Controller of MRV.
From 1999 through June 2002, Mr. Blust was employed by
Arthur Andersen LLP providing services to a wide range of
high-tech and manufacturing companies in both the public and
private sector. Mr. Blust graduated summa cum laude from
the University of California, Los Angeles, with a bachelor of
science degree in business economics and is a certified public
accountant.
We encourage our directors, officers and employees to own our
common stock, as owning our common stock aligns their interest
with those interests of our stockholders. The following table
sets forth the beneficial ownership of MRV common stock, as of
the Record Date, by each of our current directors and director
nominees and the Named Executive Officers, and by all of our
current directors, director nominees and executive officers
named in the Summary Compensation Table on page 33 of this
proxy statement (the “Named Executive Officers” or
“NEO”).
COMMON STOCK
BENEFICIALLY OWNED
AS OF APRIL 16, 2007
* Less than 1%
(1) Each current non-management director and Named Executive
Officer has sole voting and investment power with respect to
these shares.
(2) This column relates to shares that may be acquired by the
non-management director or Named Executive Officer pursuant to
stock options that are or will become exercisable within
60 days.
(3) For each individual and group included in the table above,
percentage ownership is calculated by dividing the number of
shares beneficially owned by such person or group by the sum of
the 125,974,909 shares of common stock outstanding as of
the Record Date plus the number of shares of common stock that
such person or group had the right to acquire on or within
60 days after the Record Date.
MRV Communications, Inc. Annual Report 2007
Table of Contents
EXECUTIVE
COMPENSATION
The Compensation Committee of the Board has responsibility for
evaluating, approving and recommending the Company’s
compensation programs including reviewing and approving
corporate goals and objectives relative to compensation,
evaluating performance in light of those goals and determining
compensation levels based on this evaluation.
MRV’s compensation policies are structured to link the
compensation of the chief executive officer and other executive
officers to corporate performance, to set base salaries by
referring to those of comparable or comparably-sized businesses
and then to provide performance based variable compensation,
such as bonuses, as determined by the Compensation Committee
according to factors such as MRV’s financial performance
and the performance of its share price. This philosophy allows
total compensation to fluctuate from year to year. As a result,
the Named Executive Officers’ actual compensation levels in
any particular year may be above or below those of MRV’s
competitors, depending upon the evaluation of the compensation
factors described above by the Committee. Through the
establishment of compensation programs and employment
agreements, MRV has attempted to align the financial interests
of its executives with the results of MRV’s performance, to
set base salaries by referring to broad-based published market
data to determine whether we are generally competitive in the
market and then to provide performance based variable
compensation, such as salary increases, bonuses and equity
awards, based on such as MRV’s financial performance and
the performance of its share price. It should be noted that this
market data does not necessarily come from a specified peer
group, is not industry specific and is not necessarily related
to companies included in the indexes used for comparison in the
Comparison of 5 Year Cumulative Total Return chart included
in our 2006 Annual Report that accompanies this proxy statement.
The Compensation Committee does not attempt to maintain a
certain target percentile within a peer group.
In general, the compensation package provided to MRV’s
senior executives consists of:
To the extent readily determinable and as one of the factors in
its consideration of compensation matters, the Compensation
Committee considers the anticipated tax treatment to MRV and to
the executives of various types of compensation. Some types of
compensation and their deductibility depend upon the timing of
an executive’s vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws
also affect the deductibility of compensation. To the extent
reasonably practicable and to the extent it is within the
Compensation Committee’s control, the Committee
intends to limit executive compensation in ordinary
circumstances to that deductible under Section 162(m) of
the Internal Revenue Code of 1986, as amended. In doing so,
the Committee may utilize alternatives (such as deferring
compensation) for qualifying executive compensation for
deductibility and may rely on grandfathering provisions with
respect to existing contractual commitments.
In March 1992, Mr. Lotan entered into a three-year
employment agreement effective upon completion of MRV’s
initial public offering in December 1992, which, upon
expiration, automatically renews for one-year terms unless
either MRV or Mr. Lotan terminates it by giving the other
three months’ notice of non-renewal prior to the expiration
of the current term. Under the employment agreement when
effective in 1992, Mr. Lotan’s base salary during the
first year was $100,000, and was subject to increase or
decrease thereafter in the discretion of the Board of Directors.
Mr. Lotan’s base compensation was first revised by the
Board in 2002 when it raised it to $150,000 for that year.
Mr. Lotan’s base compensation was further revised in
2005 and 2006 to $200,000 and $250,000, per year, respectively.
Mr. Lotan’s base compensation was not adjusted in 2003
or 2004 and remained at the 2002 level because neither the
Committee nor Mr. Lotan believed, based on MRV’s
financial and share performance during those years, that an
adjustment was appropriate. In determining the amount of the
increase in Mr. Lotan’s base compensation, incentive
bonus and stock option awards for 2006, the Compensation
Committee reviewed market data of businesses it considered
comparable and comparably-sized to MRV and such factors as the
total compensation paid to other chief executives in such
businesses, Mr. Lotan’s years of service with MRV, the
compensation paid to Mr. Lotan and MRV’s other
executives during years prior to 2006 and MRV’s financial
and share-price performance since 2001 generally and in 2006
particularly. The Committee did not make any specific
determination as to whether any particular factor was favorable
or unfavorable to their ultimate conclusion or assign any
particular weight to any factor, but conducted an overall
analysis of the factors described above.
Management and, in particular, the Chief Executive Officer and
the Chief Financial Officer, are instrumental in developing
recommendations for compensation levels of senior management,
including the Chief Executive Officer and Chief Financial
Officer, for submission to the Compensation Committee. These
officers review the performance of each senior executive each
year shortly after the financial results for a fiscal year are
known (the “Annual Performance Review”). The
conclusions reached and recommendations based on this review,
including proposed salary, incentive bonuses and stock option
grants, are presented to the Compensation Committee.
MRV Communications, Inc. Annual Report 2007
Table of Contents
In the first quarter of each year, following submission of the
compensation recommendations from senior management, the
Compensation Committee meets to consider the compensation
recommendations of annual salary, bonus and stock based
compensation and whether the company’s financial
performance for the preceding year justifies increases in base
salary, the award of a discretionary bonus
and/or the
grant of equity-based compensation.
In connection with its deliberations, the Compensation Committee
also has tally sheets available for review covering each of the
senior executives, which were prepared by our finance and human
resources departments that show for each of these individuals
the “comprehensive income” received by such executive
officer during each of the preceding two fiscal years.
Comprehensive income is the term often used in computing total
annual compensation and consists, in MRV’s case, for each
of the two preceding years the total of (1) the cash
compensation (i.e., salary and bonus), paid or payable to the
executive for each of the two preceding years, (2) adding
the increase or subtracting the decrease of the value of
stock-based compensation as of the end of each of the two
preceding fiscal years, and (3) adding the amount of any
other executive perquisites, which in MRV’s case, consist
of the total cash contributed by MRV during the year to its
401(k) savings plan for the executive and insurance premiums on
health, dental, vision and life insurance covering the executive
that MRV pays. These same perquisites are also provided by MRV
to all of its employees in the United States. The value of
stock-based compensation is computed for each of the two fiscal
years by (a) adding the value at the time of stock options
grants to the executive during that year (which is determined
using the same financial model used to compute the value of all
compensatory options granted during the year for purposes of
preparing MRV’s financial statements under generally
accepted accounting principles applicable to the company during
the year), (b) adding the unrealized gain or subtracting
the unrealized loss in the intrinsic value of
in-the-money
stock options previously granted and held by the executive at
the end of the year (regardless of whether the options have
vested) from the intrinsic value of in-the money options held by
the executive at the end of the preceding year and
(c) adding the unrealized gain or subtracting the
unrealized loss at the end of the year on the market value of
shares of MRV’s stock obtained by the executive upon
exercise of previously granted company-options from the value of
such shares at the end of the preceding year. Thus, if
MRV’s stock price declines to an amount at the end of the
second year that is lower than the stock price at the end of the
preceding year, the decrease in equity value of shares held by
the executive at the end of the latest year could very easily
offset any increase in cash compensation and even result in less
comprehensive income attributable to the executive in the later
year notwithstanding that his cash compensation was
substantially increased during the year as compared to the
previous year. Such tally sheets are provided to the
Compensation Committee for information purposes only in order to
allow the members to consider prior compensation paid to an
executive as a factor in determining the amount of current-year
salary, bonus and option grants and previous-year bonus
compensation and may be given such weight as the members believe
appropriate in their deliberations.
With such information, marketplace data, the Annual Performance
Review and the recommendations of the Chief Executive Officer,
Chairman of the Board, Chief Financial Officer and
Luminent’s Chief Executive Officer, MRV’s financial
and share price performance, comprehensive income of the
executives during each of the two previous years available from
the tally sheets, the Compensation Committee considers and
discusses (a) the compensation for the Company’s Chief
Executive Officer for his services to the Company for the
current year and the amount of any bonus for services rendered
to the Company during 2006; (b) cash compensation to be
paid to each of the Company’s other senior executives for
their services to the company during the ensuing year;
(c) cash bonuses to be paid to each of the Company’s
senior executives for services rendered and performance goal
attainment during the preceding year, and (d) the amount of
equity-based number of equity-based compensation to be granted
to each of such officers.
The recommendations of the Compensation Committee are then
reported by the Chairman of the Compensation Committee to the
full Board of Directors and the full Board determines, after
discussion with the Compensation Committee, the amounts of
compensation to be paid or received by senior management. Senior
management for this purpose and for purposes of the preceding
discussion include the Chief Executive Officer, the Chief
Financial Officer, the Chairman of the Board and Chief Technical
Officer, and the Chief Executive Officer of Luminent, Inc., the
Company’s wholly-owned subsidiary.
Using the forgoing methodology, during the first quarter of
2007, the Compensation Committee recommended to the Board
salaries for 2007 (retroactive to January 1, 2007), bonus
payments for 2006 and stock option grants to the following
senior executives in the following amounts.
As he has done in past years, Dr. Shlomo Margalit, informed
the Compensation Committee that he declined the increase in his
salary, any bonus and the grant of options. At its meeting on
February 28, 2007, the Board (with Mr. Lotan and
Dr. Margalit abstaining)
MRV Communications, Inc. Annual Report 2007
Table of Contents
accepted the recommendations of the Compensation Committee
(except with respect to Dr. Margalit because of his
declination) and approved the compensation to the senior
executives named in the above table other than Dr. Shlomo
Margalit. Accordingly, Dr. Shlomo Margalit’s 2007
compensation remains at the same annual level (salary of
$110,000, plus 401(k) contributions and health, dental, vision
and life insurance premiums paid on his behalf) at which it
has been since 1992.
The Board did not grant the options to purchase the shares
indicated in the table; rather the Board authorized such options
to be granted from a new equity-based employee benefits plan
that we planned to adopt prior to the registrant’s 2007
Annual Meeting of Stockholders and submit to stockholders for
approval at that meeting. The new plan is being presented to
stockholders for approval at this Annual Meeting and is
described under Proposal Number 3 beginning at
page 9 of this proxy statement. If approved by
stockholders, the new plan will replace the Company’s 1997
Incentive and Nonstatutory Stock Option Plan, which expires in
November 2007. In such case, the exercise price of the options
granted to the senior executives listed in the above table will
be equal to the closing price per share as reported on the
Nasdaq Stock Market on the date of grant, the options will be
exercisable for ten years from the date of grant (unless sooner
terminated pursuant to provisions of the plan when adopted),
will vest in cumulative installments of 25% per year for
the four years from the date of grant and will otherwise be
subject to the provisions of the plan when adopted. If
stockholders approve the new plan, the options reflected in the
above table will be granted on the “First Available Grant
Date” following such approval at an exercise price per
share equal to the closing price per share of the date of grant.
For information on the meaning of “First Available Grant
Date” and MRV’s policy with respect to awards of
equity-based compensation, see Stock Option Policy below.
In 2006, in view of the scandals involving, and media and
investor focus on, stock option grants and the timing and
pricing mechanisms employed by certain companies, including the
practices of some companies to grant options using schemes that
have been referred to as “backdating,”
“spring-loading” and “bullet-dodging,” MRV
adopted a written stock option policy to supplement the
provisions of its equity compensation plans and to govern the
timing of its stock option grants to employees generally and to
its officers and directors in particular. The goal in creating
and adopting the policy was and is to try to ensure that
equity-based awards were made in a manner consistent with the
terms of the governing plans and only at times, and at prices,
when all material information had been disseminated to MRV
stockholders, thereby placing all participants in MRV
equity-award plans in no better position with respect to their
receipt of stock options and other equity incentives than
investors making investment decisions with respect to
MRV’s common stock. The following summarizes the
material provisions of the policy:
Timing of Grants. Under the policy, grants to
any participant can be made only on the following seven
“Available Grant Dates” during the year: March 1,
May 1, June 1, August 1, September 1,
November 1 and December 1, or if a weekend or holiday,
on the first trading day thereafter. These dates all coincide
with MRV’s normal window periods for trading by officers
and directors and maintained MRV’s practice of granting
options on the first day of a month based on the Nasdaq closing
price that day. Provision is made in the policy to postpone the
grant date in case MRV is required to close a trading window on
an Available Grant Date because of some material extraordinary
event that has not then been disclosed publicly. The intent of
the policy in linking grants to window dates is to guard against
practices that have been principal focuses of the option
controversy, namely spring-loading or bulleting-dodging of
option grants, i.e., the announcement of material good
news immediately after the grant or material bad news
immediately before the grant.
Date of Grants. The “Date of Grant”
under the policy is the nearest Available Grant Date following
the date on which the grants are approved in accordance with the
policy (the “Approval Date”).
Grants to Section 16 Officers and
Directors. In the case of grants to directors and
executive officers of MRV required to file reports under
Section 16 of the Securities and Exchange Act of 1934
(“Section 16 Officers”) grants are to be made
once per year on the Available Grant Date nearest following the
month of the Approval Date.
Grant Allocations to Employees. The annual
aggregate number of grants to be allocated to employees (other
than Section 16 Officers) is to be established each year by
the Compensation Committee at its last meeting held
the preceding year or the first meeting
held during the year or as otherwise determined by the
Compensation Committee.
Employees. The Chief Executive Officer shall
submit a list of option recommendations to the Compensation
Committee, together with a form of unanimous consent, by, or as
soon as practical after, the end of each quarter. The
Compensation Committee shall consider the submitted list and to
the extent approved, such approval is to be evidenced by the
Compensation Committee signing (or otherwise indicating assent
thereto through electronic means as permitted by Delaware law)
and delivering the signed consents (or electronic assents
thereto) with the approved list of grants attached to the Chief
Executive Officer. The “Date of Grant” for such
approved list of grants is to be on the first Available Grant
Date following the date on which the signed consents (or the
electronic assents thereto) from all members of the Compensation
Committee are received by the office of the Chief Executive
Officer.
Section 16 Officers. Annual grants to
Section 16 Officers (e.g., Chief Executive Officer,
Chief Financial Officer, Chief Technical Officer, etc.) are to
be approved during the first quarter of MRV’s fiscal year
by the full Board of Directors in amounts determined by the
Board of
MRV Communications, Inc. Annual Report 2007
Table of Contents
Directors based upon recommendations of the Compensation
Committee. The first quarter was selected to permit the Board to
consider MRV’s previous year’s financial performance
and outlook for the current year. The Date of Grant for grants
to Section 16 Officers is to be on the next Available Grant
Date following the date that all of the signed directors’
consents for the Section 16 officers’ grants (or the
electronic assents thereto) are received by the Chief Executive
Officer, which presumably will occur in the first quarter.
Directors. Annual grants to members of the
Board of Directors in their capacity as directors or as members
of Board committees is to be made during the last quarter of
MRV’s fiscal year by the full Board of Directors in amounts
determined by the Board of Directors using such guidance as the
members, in the exercise of business judgment, so determine. The
Date of Grant for grants to directors is to be on the next
Available Grant Date following the date that all of the signed
directors consents for the directors’ grants (or the
electronic assents thereto) are received by the Chief Executive
Officer. This was intended to carry on as nearly as practicable
to MRV’s practice of granting options to directors during
the last quarter of each year.
Exercise Prices: Consistent with the governing
plans, the policy requires the exercise price per share of all
options granted is to be equal to the closing price per share of
MRV’s common stock on the Nasdaq Stock Market on the Date
of Grant (the “Closing Price”). However, provision is
made in the policy for the exercise price per share for options
to be more than the Closing Price if necessary to satisfy
requirements under income tax laws applicable to employees
outside of the United States regarding the determination of fair
market value of common stock underlying options.
Section 16 Compliance. The policy
expressly provides for the filing with the SEC of a Form 4
by or on behalf of a Section 16 Officer or director
receiving a grant within the time required following the
applicable Date of Grant and that such filing shall, to the
extent the grant has not otherwise been accepted, conclusively
establish the recipient’s acceptance of the grant.
Flexibility. Although the policy contemplates
that grants will be evidenced by written consents (or electronic
assents) with grantee lists attached, the policy permits the
Board or the Compensation Committee to approve grants or
otherwise act with respect to equity-based awards at Board or
Compensation Committee meetings, as applicable.
Notwithstanding anything to the contrary set forth in any of
our previous filings under the Securities Act or the Securities
Exchange Act of 1934 that might incorporate future filings, in
whole or in part, including our Annual Report on
Form 10-K
for the year ended December 31, 2006 and the Company’s
currently effective Registration Statements on
Forms S-3
and S-8, the
following Report, and the Report of the Audit Committee set
forth on page 38 shall not be incorporated by reference
into any such filings.
The Compensation Committee of MRV Communications, Inc. has
reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement.
MRV Communications, Inc. Annual Report 2007
Table of Contents
The following table shows information regarding compensation
paid during each of the past three fiscal years to MRV’s
principal executive officer, principal financial officer and
each of the two other executive officers serving at
December 31, 2006 or during 2006, who received receiving
total compensation of $100,000 or more during 2006
(collectively, the “Named Executive Officers”):
(1) The grant date fair value of options is calculated using the
Black-Scholes model. The fair value shown for option awards are
accounted for in accordance with Statements of Financial
Accounting Standards (“SFAS”) No. 123 (Revised
2004), “Share-Based Payment”
(“SFAS No. 123(R)”). For additional
information of valuation assumptions, refer to note 13 of
the MRV financial statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the
SEC. These amounts reflect the Company’s accounting
expense, and do not correspond to the actual value that will be
recognized by the Named Executive Officers.
(2) “All Other Compensation” includes Company
contributions to its 401(K) savings plan on behalf of the Named
Executive Officer, as well as health, dental, vision and life
insurance premiums paid on behalf of the Named Executive Officer.
(3) Mr. Rubin became Chief Financial Officer in December
2005. From 2002 to December 2005, Mr. Rubin served as
MRV’s Vice President of Finance.
(4) Mr. Blust became Vice President of Finance of MRV in
December 2005. The table also includes Mr. Blust’s
compensation during 2005 before he became an executive officer
of MRV.
The following table sets forth information with respect to
plan-based awards to the Named Executive Officers during 2006:
GRANTS OF
PLAN — BASED AWARDS
DURING FISCAL 2006
(1) The number of stock options granted during 2006 to the Named
Executive Officers.
MRV Communications, Inc. Annual Report 2007
Table of Contents
(2) The exercise price for the stock options granted, which was
equal to the closing price of MRV stock as reported by Nasdaq on
the date of grant.
(3) The grant date fair value of options is calculated using the
Black-Scholes model. The fair value shown for option awards are
accounted for in accordance with SFAS No. 123(R). For
additional information of valuation assumptions, refer to
note 13 of the MRV financial statements in the
Form 10-K
for the year ended December 31, 2006, as filed with the
SEC. These amounts reflect the Company’s accounting
expense, and do not correspond to the actual value that will be
recognized by the Named Executive Officers.
MRV only has incentive plans that are equity-based (other than
bonuses that are awarded and paid annually in the discretion of
the Board). The following table provides information on the
holdings of equity awards by the Named Executive Officers as
December 31, 2006. This table includes unexercised and
unvested option awards. Each equity grant is shown separately
for each named executive.
OUTSTANDING
EQUITY AWARDS
AT 2006 FISCAL YEAR — END
MRV Communications, Inc. Annual Report 2007
Table of Contents
There were no option exercises during fiscal 2006 by any of the
Named Executive Officers.
MRV did not grant any stock appreciation rights, or SARs, or
similar instruments, or restricted stock, restricted stock units
and similar instruments during 2006.
MRV does not have a pension or other retirement plan (except for
a 401(k) savings plan under which it makes employer
contributions on behalf of employees in the US generally).
MRV does not have any nonqualified defined contribution or other
nonqualified deferred compensation plans that provide or
provides for the deferral of compensation on a basis that is not
tax-qualified.
The table below sets forth information with respect to shares of
common stock that may be issued under our stock option and
warrant plans as of December 31, 2006.
As a result of the adoption, in January 2003, of the
Consolidated Plan, the plans set forth in the bulleted
paragraphs immediately above in this footnote were terminated
and shares available for future grants of options or warrants
under these plans, including shares that became and become
available as a consequence of the lapse, expiration or
forfeiture of outstanding options or warrants granted under such
terminated plans, were rolled into, and became available for,
future grants of options and other awards under the Consolidated
Plan. No net increase in the total number of shares available
for the grant of options or awards under the Consolidated Plan
from the total number of shares covered by outstanding options,
warrants or awards granted, available or reserved in the
Consolidated Plan at the time the Consolidated Plan was adopted
in January 2003 resulted from this action.
Of MRV’s two outstanding equity compensation plans, its
1997 Incentive and Nonstatutory stock option plan, under which
all employees, officers, directors and consultants are eligible
to participate was submitted to and approved by stockholders,
and its Consolidated Plan under which officers and directors may
not participate was not submitted to or approved by stockholders
as neither the Nasdaq qualification standards nor federal law
required such approval at the time the Consolidated Plan was
adopted.
We have generally attempted to avoid entering into employment
agreements with our executives. However, we do have written
employment agreements with Mr. Lotan and Dr. Shlomo
Margalit. In March 1992, we entered into three-year employment
agreements, effective upon completion of our initial public
offering in December 2002, with Mr. Lotan and
Dr. Margalit. Upon expiration, these agreements
automatically renew for one-year terms unless either party
terminates them by giving the other three months’ notice of
non-renewal prior to the expiration of the current term.
Accordingly, Mr. Lotan and Dr. Margalit are currently
employed under the eleventh
MRV Communications, Inc. Annual Report 2007
Table of Contents
renewal of their employment agreements with a term expiring on
March 22, 2008, but automatically renewable for another
year unless notice of non-renewal is provided prior to at least
three months’ before the expiration of the current term.
Pursuant to the agreements, Mr. Lotan serves as President,
Chief Executive Officer and a Director of MRV and
Dr. Margalit serves as Chairman of the Board of Directors,
Chief Technical Officer and Secretary. For 2006, Mr. Lotan
and Dr. Margalit received base annual salaries of $225,000
and $110,000, respectively, and each is entitled to receive a
bonus determined and payable at the discretion of the Board of
Directors upon the recommendation of the Compensation Committee
of the Board. MRV has obtained, maintained during 2006, and is
the beneficiary of, a key man life insurance policy in the
amount of $1,000,000 on the life of Mr. Lotan. All benefits
under this policy are payable to MRV upon his death during the
policy term.
Both Mr. Lotan’s and Dr. Margalit’s
employment agreements provide that upon a termination of their
employment without cause or upon a change of control of MRV (as
defined in the agreements), then upon notice termination, they
shall be entitled to receive as severance pay a lump sum amount
equal to one (1) year base salary, or an amount equal to
the salary due to him under the terms of this contract at
the time of termination, whichever is less. Thus, the
actual amount, up to one-year base salary, that
Mr. Lotan or Dr. Margalit will be entitled to upon a
change of control would depend on when during the one-year
terms of their employment agreements they received notice of
termination.
The Audit Committee (the “Committee”) oversees
MRV’s financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for
MRV’s financial statements and the overall reporting
process, including MRV’s system of financial controls. In
fulfilling its oversight responsibilities during 2006, the
Committee periodically:
The Committee also reviewed with Ernst & Young LLP,
which was responsible in 2006 for expressing an opinion on the
conformity of the audited financial statements with accounting
principles generally accepted in the United States, their
judgment as to the quality and not just the acceptability, of
MRV’s accounting principles and such other matters as are
required to be discussed with the Committee under accounting
principles generally accepted in the United States. The
Committee periodically met with Ernst & Young to
discuss the results of their examinations, their evaluations of
MRV’s internal controls and the overall quality of
MRV’s financial reporting.
In addition, the Committee discussed with Ernst & Young
LLP their independence from management and MRV including the
matters in the written disclosures required by the Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees) and discussed with Ernst & Young
any matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees).
The Committee also considered the compatibility of
Ernst & Young’s non-audit services (principally
tax advisory services) with the standards for auditors’
independence. The Committee discussed with Ernst &
Young the overall scope and plans for their audit.
The Directors who serve on the Committee are all
“independent” for purposes of the rules of the Nasdaq
Stock Market. During 2006, the committee met six times, with all
members of the committee during 2006 in attendance at each
meeting.
In reliance on the reviews and discussions referred to above and
representations by management that the financial statements were
prepared in accordance with generally accepted accounting
principles, the Committee recommended to the Board of Directors
that the audited financial statements be included in the Annual
Report on
Form 10-K
for the year ended December 31, 2006.
MRV Communications, Inc. Annual Report 2007
Table of Contents
Stockholders may submit proposals for consideration at future
stockholder meetings.
If a stockholder wishes to have us include a proposal(s) in our
proxy statement and form of proxy for our 2008 annual meeting of
stockholders, such stockholder must deliver a written copy of
the proposal(s) no later than January 1, 2008. Proposals
must comply with the proxy rules relating to stockholder
proposals, in particular
Rule 14a-8
under the Securities Exchange Act of 1934 (the “Exchange
Act”), in order to be included in MRV’s proxy
materials.
Stockholders who wish to submit a proposal for consideration at
MRV’s 2008 Annual Meeting, but who do not wish to submit
the proposal for inclusion in MRV’s proxy statement
pursuant to
Rule 14a-8
under the Exchange Act, must deliver a written copy of their
proposal no later than March 31, 2008.
In the event that the date of our annual meeting of stockholders
for a particular year is more than 30 days from the first
anniversary date of the annual meeting of stockholders for the
prior year, the submission of proposals to be included in
MRV’s Proxy Statement and form of proxy relating to an
annual meeting of stockholders held in that year or proposals
for consideration at that annual meeting of stockholders but not
submitted for inclusion in MRV’s proxy statement, will be
considered timely received if submitted a reasonable time in
advance of the printing and mailing of MRV’s proxy
statement for the annual meeting of stockholders for that year.
In any case, proposals should be delivered to MRV
Communications, Inc., 20415 Nordhoff Street, Chatsworth,
California 91311, Attention: Secretary. To avoid controversy and
establish timely receipt by MRV, it is suggested that
stockholders send their proposals by certified mail return
receipt requested.
AVAILABILITY OF
ANNUAL REPORTS ON
FORM 10-K
AND OTHER SEC FILINGS
You may obtain, without charge, hard copy of our Annual Report
on
Form 10-K
for the year ended December 31, 2006, including our audited
financial statements. You may also obtain copies of exhibits
to the
Form 10-K,
but we will charge a reasonable fee to
stockholders requesting such exhibits. You should direct
your request to us at MRV Communications, Inc., 20415 Nordhoff
Street, Chatsworth, California 91311, Attention: Secretary, or
by calling Investor Relations at
(818) 886-6782
or by emailing Investor Relations at ir@mrv.com.
We maintain a website at www.mrv.com. We make available free of
charge, either by direct access or a link to the Securities and
Exchange Commission (“SEC”) website, our proxy
statement, our Annual Report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and other reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after such
reports are filed with the SEC. Our reports filed with, or
furnished to, the SEC are also available directly at the
SEC’s website at www.sec.gov.
ADDITIONAL
INFORMATION
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements
for proxy statements with respect to two or more stockholders
sharing the same address by delivering a single proxy statement
addressed to those stockholders. This process, which is commonly
referred to as “householding,” potentially provides
extra convenience for stockholders and cost savings for
companies. Our company and some brokers household proxy
materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. Once you have
received notice from your broker or our company that they or our
company will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer
wish to participate in householding and would prefer to receive
a separate proxy statement, or if you are receiving multiple
copies of the proxy statement and wish to receive only one,
please notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify us
by sending a written request to MRV Communications, Inc., 20415
Nordhoff Street, Chatsworth, California 91311, Attention:
Secretary or by calling Investor Relations at
(818) 773-0900.
Our company is making this solicitation and will pay the entire
cost of preparing, assembling, printing, mailing and
distributing these proxy materials and soliciting votes. If you
choose to access the proxy materials
and/or vote
over the Internet, you are responsible for Internet access
charges you may incur. If you choose to vote by telephone, you
are responsible for telephone charges you may incur. Our
officers and regular employees of MRV may, but without
compensation other than their regular compensation, solicit
proxies by further mailing or personal conversations, or by
telephone, telex, facsimile or electronic means. We will, upon
request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the
beneficial owners of stock.
By order of the Board of Directors
Shlomo Margalit,Secretary
Chatsworth, California
April 27, 2007
MRV Communications, Inc. Annual Report 2007
Table of Contents
APPENDIX A
MRV
COMMUNICATIONS, INC.
2007 OMINIBUS INCENTIVE PLAN
1.01. Purpose. The purpose of the
MRV Communications, Inc. 2007 Incentive Plan (as amended from
time to time, the “Plan”) is to assist in attracting
and retaining highly competent employees, directors and
consultants to act as an incentive in motivating selected
employees, directors and consultants of MRV Communications, Inc.
and its Subsidiaries to achieve long-term corporate objectives
and to enable stock-based and cash-based incentive awards to
qualify as performance-based compensation for purposes of the
tax deduction limitations under Section 162(m) of the Code.
1.02. Adoption and Term. The Plan
has been approved by the Board of Directors of the Company to be
effective as of the date of such approval, but is subject to the
approval of the shareholders of the Company. The Plan shall
remain in effect until terminated by action of the Board;
provided, however, that no Awards may be granted hereunder
after the tenth anniversary of its initial effective date.
For the purpose of this Plan, capitalized terms shall have the
following meanings:
2.01. Award means any one or a combination of
Non-Qualified Stock Options or Incentive Stock Options described
in Article VI, Stock Appreciation Rights described in
Article VI, Restricted Shares described in
Article VII, Performance Awards described in
Article VIII, Stock Units and other stock-based Awards
described in Article IX, short-term cash incentive Awards
described in Article X or any other Award made under the
terms of the Plan.
2.02. Award Agreement means a written
agreement between the Company and a Participant or a written
acknowledgment from the Company to a Participant specifically
setting forth the terms and conditions of an Award granted under
the Plan.
2.03. Award Period means, with respect to an
Award, the period of time, if any, set forth in the Award
Agreement during which specified target performance goals must
be achieved or other conditions set forth in the Award Agreement
must be satisfied.
2.04. Beneficiary means an individual, trust
or estate who or which, by a written designation of the
Participant filed with the Company, or if no such written
designation is filed, by operation of law, succeeds to the
rights and obligations of the Participant under the Plan and the
Award Agreement upon the Participant’s death.
2.05. Board means the Board of Directors of
the Company.
2.06. Change in Control means, and shall be
deemed to have occurred upon the occurrence of, any one of the
following events:
(a) The acquisition in one or more transactions, other than
from the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act), other than the Company, a Subsidiary or any employee
benefit plan (or related trust) sponsored or maintained by the
Company or a Subsidiary, of beneficial ownership (within the
meaning of
Rule 13d-3
promulgated under the Exchange Act) of a number of Company
Voting Securities in excess of 25% of the Company Voting
Securities unless such acquisition has been approved by the
Board;
(b) Any election has occurred of persons to the Board that
causes two-thirds of the Board to consist of persons other than
(i) persons who were members of the Board on the effective
date of the Plan and (ii) persons who were nominated for
elections as members of the Board at a time when two-thirds of
the Board consisted of persons who were members of the Board on
the effective date of the Plan, provided, however, that any
person nominated for election by a Board at least
two-thirds of whom constituted persons described in
clauses (i) and/or (ii) or by persons who were
themselves nominated by such Board shall, for this purpose, be
deemed to have been nominated by a Board composed of persons
described in clause (i);
(c) The consummation (i.e. closing) of a
reorganization, merger or consolidation involving the Company,
unless, following such reorganization, merger or consolidation,
all or substantially all of the individuals and entities who
were the respective beneficial owners of the Outstanding Common
Stock and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, following such
reorganization, merger or consolidation beneficially own,
directly or indirectly, more than seventy five percent (75%) of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors or trustees, as the case may be, of the entity
resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or
consolidation, as the case may be;
(d) The consummation (i.e. closing) of a
sale or other disposition of all or substantially all the assets
of the Company, unless, following such sale or disposition, all
or substantially all of the individuals and entities who were
the respective beneficial owners of the Outstanding Common Stock
and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, following such
MRV Communications, Inc. Annual Report 2007
Table of Contents
reorganization, merger or consolidation beneficially own,
directly or indirectly, more than seventy five percent (75%) of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors or trustees, as the case may be, of the entity
purchasing such assets in substantially the same proportion as
their ownership of the Outstanding Common Stock and Company
Voting Securities immediately prior to such sale or disposition,
as the case may be; or
(e) a complete liquidation or dissolution of the Company.
2.07. Code means the Internal Revenue Code of
1986, as amended. References to a section of the Code shall
include that section and any comparable section or sections of
any future legislation that amends, supplements or supersedes
said section.
2.08. Committee means the Committee defined in
Section 3.01.
2.09. Company means MRV Communications, Inc.,
a Delaware corporation, and its successors.
2.10. Common Stock means Common Stock of the
Company, par value $0.0017 par value per share.
2.11. Company Voting Securities means the
combined voting power of all outstanding voting securities of
the Company entitled to vote generally in the election of
directors to the Board.
2.12. Date of Grant means the Date of Grant
following the first Available Grant Date as specified in the
Policy and subject to postponement as specified in the Policy.
2.13. Dividend Equivalent Account means a
bookkeeping account related to an Award that is credited with
the amount of any cash dividends or stock distributions that
would be payable with respect to the shares of Common Stock
subject to such Awards had such shares been outstanding shares
of Common Stock.
2.14 Exchange Act means the Securities
Exchange Act of 1934, as amended.
2.15. Exercise Price means, with respect to a
Stock Appreciation Right, the amount established by the
Committee in the Award Agreement which is to be subtracted from
the Fair Market Value on the date of exercise in order to
determine the amount of the payment to be made to the
Participant, as further described in Section 6.02(b).
2.16. Fair Market Value means, on any date,
(i) the closing sale price of a share of Common Stock, as
reported on the Composite Tape for New York Stock Exchange
Listed Companies (or other established stock exchange on which
the Common Stock is regularly traded) on such date or, if there
were no sales on such date, on the last date preceding such date
on which a sale was reported; (ii) if the Common Stock is
not listed for trading on an established stock exchange, but a
regular, active public market for the Common Stock exists (as
determined in the sole discretion of the Committee or Board,
whose discretion shall be conclusive and binding), the average
of the closing bid and ask quotations per share of Common Stock
in the
over-the-counter
(“OTC”) market for such shares on such date or, if no
quotations are available on such date, on the last date
preceding such date on which a quotation was reported; or
(iii) if shares of Common Stock are not listed for trading
on an established stock exchange or quoted on the OTC, Fair
Market Value shall be determined by the Committee in good faith.
Such definition of Fair Market Value shall be specified in the
Award Agreement and may differ depending on whether Fair Market
Value is in reference to the grant, exercise, vesting, or
settlement or payout of an Award.
2.17 Form S-8
means registration statements on
Form S-8
under the Securities Act, or any successor Form under which the
shares of Common Stock of the Company reserved for issuance
under the Plan upon the issuance or exercise of Awards are
registered,
2.18. Incentive Stock Option means a stock
option within the meaning of Section 422 of the Code.
2.19. Merger means any merger, reorganization,
consolidation, exchange, transfer of assets or other transaction
having similar effect involving the Company.
2.20. Non-Qualified Stock Option means a stock
option which is not an Incentive Stock Option.
2.21. Options means all Non-Qualified Stock
Options and Incentive Stock Options granted at any time under
the Plan.
2.22. Outstanding Common Stock means, at any
time, the issued and outstanding shares of Common Stock.
2.23. Participant means a person designated to
receive an Award under the Plan in accordance with
Section 5.01.
2.24. Performance Awards means Awards granted
in accordance with Article VIII.
2.25. Performance Goals means net earnings or
net income (before or after taxes); earnings per share or
earnings per share growth, total units, or unit growth; net
sales, sales growth, total revenue, or revenue growth; net
operating profit; return measures (including, but not limited
to, return on assets, capital, invested capital, equity, sales,
or revenue); cash flow (including, but not limited to, operating
cash flow, free cash flow, cash flow return on equity, and cash
flow return on investment); earnings before or after taxes,
interest, depreciation,
and/or
amortization; gross or operating margins; productivity ratios;
share price or relative share price (including, but not limited
to, growth measures and total stockholder return); expense
targets; margins; operating efficiency; market share or change
in market share; customer retention or satisfaction; working
capital targets; economic value added or
EVA®
(net operating profit after tax minus the sum of capital
multiplied by the cost of capital).
2.26. Plan shall have the meaning given to such term
in Section 1.01.
2.27 Policy shall mean the Policy of MRV
Communications, Inc. Relating to Grants of Equity-based Awards
adopted by the Board on October 10, 2006 as amended by the
Board from time to time.
2.28. Purchase Price, with respect to Options,
shall have the meaning set forth in Section 6.01(b).
MRV Communications, Inc. Annual Report 2007
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2.29. Restoration Option means a Non-Qualified Stock
Option granted pursuant to Section 6.01(f).
2.30. Restricted Shares means Common Stock
subject to restrictions imposed in connection with Awards
granted under Article VII.
2.31. Retirement means early or normal
retirement under a pension plan or arrangement of the Company or
one of its Subsidiaries in which the Participant participates
or, in the case of a Participant who is a non-employee member of
the Board, retirement under the Board’s retirement policy,
if any.
2.32. Rule 16b-3
means
Rule 16b-3
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, as the same may be amended
from time to time, and any successor rule.
2.33 Securities Act means the Securities Act
of 1933, as amended.
2.34. Stock Appreciation Rights means awards
granted in accordance with Article VI.
2.35 Subsidiary means a subsidiary of the
Company within the meaning of Section 424(f) of the Code.
2.36. Termination of Service means the
voluntary or involuntary termination of a Participant’s
service as an employee, director or consultant with the Company
or a Subsidiary for any reason, including death, disability,
retirement or as the result of the divestiture
of the Participant’s employer or any similar
transaction in which the Participant’s employer ceases to
be the Company or one of its Subsidiaries. Whether entering
military or other government service shall constitute
Termination of Service, or whether and when a Termination of
Service shall occur as a result of disability, shall be
determined in each case by the Committee in its sole discretion.
3.01. Committee.
(a) Duties and Authority. The Plan shall
be administered by the Compensation Committee of the Board
except in the case Participants who are members of Board or
Section 16 Officers, in which case the Plan shall be
administered by the Board and as used herein the term
“Committee” shall refer to either the Compensation
Committee or the Board as the context shall so require in
reference to the Participant and if not in reference to a
Participant, the term “Committee” shall refer to the
Compensation Committee or the Board. The Committee shall have
exclusive and final authority in each determination,
interpretation or other action affecting the Plan and its
Participants. The Committee shall have the sole discretionary
authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and
restrictions on Awards as it determines appropriate, and to take
such steps in connection with the Plan and Awards granted
hereunder as it may deem necessary or advisable. The Committee
shall not, however, have or exercise any discretion that would
disqualify amounts payable under Article X as
performance-based compensation for purposes of
Section 162(m) of the Code. The Committee may delegate such
of its powers and authority under the Plan as it deems
appropriate to a subcommittee of the Committee
and/or
designated officers or employees of the Company. In addition,
the full Board may exercise any of the powers and authority of
the Committee under the Plan. In the event of such delegation of
authority or exercise of authority by the Board, references in
the Plan to the Committee shall be deemed to refer, as
appropriate, to the delegate of the Committee or the Board.
Actions taken by the Committee or any subcommittee thereof, and
any delegation by the Committee to designated officers or
employees, under this Section 3.01 shall comply with
Section 16(b) of the Exchange Act, the performance-based
provisions of Section 162(m) of the Code, and the
regulations promulgated under each of such statutory provisions,
or the respective successors to such statutory provisions or
regulations, as in effect from time to time, to the extent
applicable.
(b) Indemnification. Each person who is
or shall have been a member of the Board or the Committee, or an
officer of the Company to whom authority was delegated in
accordance with the Plan shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him
or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or
failure to act under the Plan and against and from any and all
amounts paid by him or her in settlement thereof, with the
Company’s approval, or paid by him or her in satisfaction
of any judgment in any such action, suit, or proceeding against
him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or
her own behalf; provided, however, that the foregoing
indemnification shall not apply to any loss, cost, liability, or
expense that is a result of his or her own willful misconduct.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be
entitled under the Company’s Certificate of Incorporation
or Bylaws, conferred in a separate agreement with the Company,
as a matter of law, or otherwise, or any power that the Company
may have to indemnify them or hold them harmless.
4.01. Number of
Shares Issuable. The total number of shares
initially authorized to be issued under the Plan shall be
12,000,000 shares of common Stock. No more than
12,000,000 shares of Common Stock may be issued under the
Plan as Incentive Stock Options. No more than
1,000,000 shares of Common Stock may be issued under the
Plan as Awards under Articles VII, VIII and IX. The
foregoing share limits shall be subject to adjustment in
accordance with Section 11.07. The shares to be offered
under the Plan shall be authorized and unissued Common Stock, or
issued Common Stock that shall have been reacquired
by the Company.
MRV Communications, Inc. Annual Report 2007
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4.02. Shares Subject to Terminated
Awards. Common Stock covered by any unexercised
portions of terminated or forfeited Options (including canceled
Options) granted under Article VI, Common Stock forfeited
as provided in Section 7.02(a), Stock Units and other
stock-based Awards terminated or forfeited as provided in
Article IX, and Common Stock subject to any Awards that are
otherwise surrendered by the Participant may again be subject to
new Awards under the Plan. Shares of Common Stock surrendered to
or withheld by the Company in payment or satisfaction of the
Purchase Price of an Option or tax withholding obligation with
respect to an Award shall be available for the grant of new
Awards under the Plan. In the event of the exercise of Stock
Appreciation Rights, whether or not granted in tandem with
Options, only the number of shares of Common Stock actually
issued in payment of such Stock Appreciation Rights shall be
charged against the number of shares of Common Stock available
for the grant of Awards hereunder, and any Common Stock subject
to tandem Options, or portions thereof, which have been
surrendered in connection with any such exercise of Stock
Appreciation Rights shall not be charged against the number of
shares of Common Stock available for the grant of Awards
hereunder.
5.01. Eligible
Participants. Participants in the Plan shall be
such employees, directors and consultants of the Company and its
Subsidiaries as the Committee, in its sole discretion, may
designate from time to time. The Committee’s designation of
a Participant in any year shall not require the Committee to
designate such person to receive Awards or grants in any other
year. The designation of a Participant to receive Awards or
grants under one portion of the Plan does not require the
Committee to include such Participant under other portions of
the Plan. The Committee shall consider such factors as it deems
pertinent in selecting Participants and in determining the type
and amount of their respective Awards. Subject to adjustment in
accordance with Section 11.07, in any calendar year, no
Participant shall be granted Awards in respect of more than
500,000 shares of Common Stock (whether through grants of
Options or Stock Appreciation Rights or other Awards of Common
Stock or rights with respect thereto) or cash-based Awards for
more than $250,000.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01. Option Awards.
(a) Grant of Options. The Committee may
grant, to such Participants as the Committee may select, Options
entitling the Participant to purchase shares of Common Stock
from the Company in such number, at such price, and on such
terms and subject to such conditions, not inconsistent with the
terms of this Plan, as may be established by the Committee. The
terms of any Option granted under this Plan shall be set forth
in an Award Agreement.
(b) Purchase Price of Options. The
Purchase Price of each share of Common Stock which may be
purchased upon exercise of any Option granted under the Plan
shall be determined by the Committee; provided, however, that
the Purchase Price of the Common Stock purchased pursuant to
Options shall be equal to or greater than the Fair Market Value
on the Date of Grant.
(c) Designation of Options. The Committee
shall designate, at the time of the grant of each Option, the
Option as an Incentive Stock Option or a Non-Qualified Stock
Option.
(d) Incentive Stock Option Share Limitation.
No Participant may be granted Incentive Stock
Options under the Plan (or any other plans of the Company
and its Subsidiaries) that would result in shares with an
aggregate Fair Market Value (measured on the Date of Grant) of
more than $100,000 first becoming exercisable in any one
calendar year.
(e) Rights As a Shareholder. A
Participant or a transferee of an Option pursuant to
Section 11.04 shall have no rights as a shareholder with
respect to Common Stock covered by an Option until the
Participant or transferee shall have become the holder of record
of any such shares, and no adjustment shall be made for
dividends in cash or other property or distributions or other
rights with respect to any such Common Stock for which the
record date is prior to the date on which the Participant or a
transferee of the Option shall have become the holder of record
of any such shares covered by the Option; provided, however,
that Participants are entitled to share adjustments to reflect
capital changes under Section 11.07.
(f) Restoration Options Upon the Exercise of a
Non-Qualified Stock Option. In the event that any
Participant delivers to the Company, or has withheld from the
shares otherwise issuable upon the exercise of a Non-Qualified
Stock Option, shares of Common Stock in payment of the Purchase
Price of any Non-Qualified Stock Option granted hereunder in
accordance with Section 6.04, the Committee shall have the
authority to grant or provide for the automatic grant of a
Restoration Option to such Participant. The grant of a
Restoration Option shall be subject to the satisfaction of such
conditions or criteria as the Committee in its sole discretion
shall establish from time to time. A Restoration Option shall
entitle the holder thereof to purchase a number of shares of
Common Stock equal to the number of such shares so delivered or
withheld upon exercise of the original Option and, in the
discretion of the Committee, the number of shares, if any,
delivered or withheld to the Corporation to satisfy any
withholding tax liability arising in connection with the
exercise of the original Option. A Restoration Option shall have
a per share Purchase Price of not less than 100% of the per
share Fair Market Value of the Common Stock on the date of grant
of such Restoration Option, a term not longer than the remaining
term of the original Option at the time of exercise thereof, and
such other terms and conditions as the Committee in its sole
discretion shall determine.
(g) Dividend Equivalents. For any Option
(with or without alternative Stock Appreciation Rights) granted
under the Plan, the Committee shall have the discretion, upon
the grant of the Option or thereafter, to establish a Dividend
Equivalent Account with respect to the Option, and the
applicable Award Agreement or an amendment
MRV Communications, Inc. Annual Report 2007
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thereto shall confirm such establishment. If a Dividend
Equivalent Account is established, the following terms apply.
(i) Subject to such conditions, limitations and
restrictions as shall be established by the Committee, from the
Date of Grant of the Option or, if later, the date of
establishment of the Dividend Equivalent Account, to the earlier
of (i) the date of payment of such Dividend Equivalent
Account or (ii) the date of cancellation, termination or
expiration of the Option, the Dividend Equivalent Account shall
be credited as of the record date of each cash dividend on the
Common Stock with an amount equal to the cash dividends which
would be paid with respect to the Common Stock then covered by
the Option if the Option had been exercised and such Common
Stock had been held of record on such record date. The
Participant or other holder of such Option shall be entitled to
receive from the Company in cash the balance credited to the
Dividend Equivalent Account at such time, or from time to time,
as shall be determined by the Committee and set forth in the
applicable Award Agreement or an amendment thereto; provided,
however, that if the applicable Award Agreement shall so
provide, the Committee may determine that the balance credited
to a Participant’s Dividend Equivalent Account be paid in
the form of shares of Common Stock having a fair market value
equal to such balance, or a combination of cash and shares.
(ii) To the extent that an Option and any alternative Stock
Appreciation Rights granted in conjunction with the Option are
canceled, terminate or expire without the exercise of the Option
or the alternative Stock Appreciation Rights, if any, granted in
conjunction with the Option, the Dividend Equivalent Account
with respect to the Option shall be eliminated, and no payment
with respect to the Dividend Equivalent Account shall be made by
the Company. Dividend Equivalent Accounts shall be established
and maintained only on the books and records of the Company and
no assets or funds of the Company shall be set aside, placed in
trust, removed from the claims of the Company’s general
creditors, or otherwise made available until such amounts are
actually payable as provided hereunder.
6.02. Stock Appreciation Rights.
(a) Stock Appreciation Right Awards. The
Committee is authorized to grant to any Participant one or more
Stock Appreciation Rights. Such Stock Appreciation Rights may be
granted either independent of or in tandem with Options granted
to the same Participant. Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in
the case of Non-Qualified Stock Options, subsequent to, the
grant to such Participant of the related Option; provided
however, that: (i) any Option covering any share of Common
Stock shall expire and not be exercisable upon the exercise of
any Stock Appreciation Right with respect to the same share,
(ii) any Stock Appreciation Right covering any share of
Common Stock shall expire and not be exercisable upon the
exercise of any related Option with respect to the same share,
and (iii) an Option and Stock Appreciation Right covering
the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right with
respect to a share of Common Stock, the Participant shall be
entitled to receive an amount equal to the excess, if any,
of (A) the Fair Market Value of a share of Common Stock on
the date of exercise over (B) the Exercise Price of such
Stock Appreciation Right established in the Award Agreement,
which amount shall be payable as provided in
Section 6.02(c).
(b) Exercise Price. The Exercise Price
established under any Stock Appreciation Right granted under
this Plan shall be determined by the Committee, but in the case
of Stock Appreciation Rights granted in tandem with Options
shall not be less than the Purchase Price of the related Option.
Upon exercise of Stock Appreciation Rights granted in tandem
with options, the number of shares subject to exercise under any
related Option shall automatically be reduced by the number of
shares of Common Stock represented by the Option or portion
thereof which are surrendered as a result of the exercise of
such Stock Appreciation Rights.
(c) Payment of Incremental Value. Any
payment which may become due from the Company by reason of a
Participant’s exercise of a Stock Appreciation Right may be
paid to the Participant as determined by the Committee
(i) all in cash, (ii) all in Common Stock, or
(iii) in any combination of cash and Common Stock. In the
event that all or a portion of the payment is made in Common
Stock, the number of shares of Common Stock delivered in
satisfaction of such payment shall be determined by dividing the
amount of such payment or portion thereof by the Fair Market
Value on the Exercise Date. No fractional share of Common Stock
shall be issued to make any payment in respect of Stock
Appreciation Rights; if any fractional share would be issuable,
the combination of cash and Common Stock payable to the
Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.
6.03. Terms of Stock Options and Stock
Appreciation Rights.
(a) Conditions on Exercise. An Award
Agreement with respect to Options
and/or Stock
Appreciation Rights may contain such waiting periods, exercise
dates and restrictions on exercise (including, but not limited
to, periodic installments) as may be determined by the Committee
at the time of grant.
(b) Duration of Options and Stock Appreciation
Rights. Options and Stock Appreciation Rights
shall terminate upon the first to occur of the following events:
(i) Expiration of the Option or Stock Appreciation Right as
provided in the Award Agreement; or
(ii) Termination of the Award in the event of a
Participant’s disability, Retirement, death or other
Termination of Service as provided in the Award
Agreement; or
(iii) In the case of an Incentive Stock Option, ten years
from the Date of Grant; or
(iv) Solely in the case of a Stock Appreciation Right
granted in tandem with an Option, upon the expiration of the
related Option.
(c) Acceleration or Extension of Exercise
Time. The Committee, in its sole discretion,
shall have the right (but shall not be obligated),
MRV Communications, Inc. Annual Report 2007
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exercisable on or at any time after the Date of Grant, to permit
the exercise of an Option or Stock Appreciation Right
(i) prior to the time such Option or Stock Appreciation
Right would become exercisable under the terms of the Award
Agreement, (ii) after the termination of the Option or
Stock Appreciation Right under the terms of the Award Agreement,
or (iii) after the expiration of the Option or Stock
Appreciation Right.
6.04. Exercise Procedures. Each
Option and Stock Appreciation Right granted under the Plan shall
be exercised prior to the close of business on the expiration
date of the Option or Stock Appreciation Right by written notice
to the Company or by such other method as provided in the Award
Agreement or as the Committee may establish or approve from time
to time. The Purchase Price of shares purchased upon exercise of
an Option granted under the Plan shall be paid in full in cash
by the Participant pursuant to the Award Agreement; provided,
however, that the Committee may (but shall not be required to)
permit payment to be made by delivery to the Company of either
(a) Common Stock (which may include Restricted Shares or
shares otherwise issuable in connection with the exercise of the
Option, subject to such rules as the Committee deems
appropriate) or (b) any combination of cash and Common
Stock, or (c) such other consideration as the Committee
deems appropriate and in compliance with applicable law
(including payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, Common
Stock may be issued directly to the Participant’s broker or
dealer upon receipt of an irrevocable written notice of exercise
from the Participant). In the event that any Common Stock shall
be transferred to the Company to satisfy all or any part of the
Purchase Price, the part of the Purchase Price deemed to have
been satisfied by such transfer of Common Stock shall be equal
to the product derived by multiplying the Fair Market Value as
of the date of exercise times the number of shares of Common
Stock transferred to the Company. The Participant may not
transfer to the Company in satisfaction of the Purchase Price
any fractional share of Common Stock. Any part of the Purchase
Price paid in cash upon the exercise of any Option shall be
added to the general funds of the Company and may be used for
any proper corporate purpose. Unless the Committee shall
otherwise determine, any Common Stock transferred to the Company
as payment of all or part of the Purchase Price upon the
exercise of any Option shall be held as treasury shares.
6.05. Change in Control. Unless
otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all Options
outstanding on the date of such Change in Control, and all Stock
Appreciation Rights shall become immediately and fully
exercisable. The provisions of this Section 6.05 shall not
be applicable to any Options or Stock Appreciation Rights
granted to a Participant if any Change in Control results from
such Participant’s beneficial ownership (within the meaning
of
Rule 13d-3
under the Exchange Act) of Common Stock or Company Voting
Securities.
7.01. Restricted Share Awards. The
Committee may grant to any Participant an Award of Common Stock
in such number of shares, and on such terms, conditions and
restrictions, whether based on performance standards, periods of
service, retention by the Participant of ownership of purchased
or designated shares of Common Stock or other criteria, as the
Committee shall establish. With respect to performance-based
Awards of Restricted Shares to “covered employees” (as
defined in Section 162(m) of the Code), performance targets
will be limited to specified levels of one or more of the
Performance Goals. The terms of any Restricted Share Award
granted under this Plan shall be set forth in an Award Agreement
which shall contain provisions determined by the Committee and
not inconsistent with this Plan.
(a) Issuance of Restricted Shares. As
soon as practicable after the Date of Grant of a Restricted
Share Award by the Committee, the Company shall cause to be
transferred on the books of the Company, or its agent, Common
Stock, registered on behalf of the Participant, evidencing the
Restricted Shares covered by the Award, but subject to
forfeiture to the Company as of the Date of Grant if an Award
Agreement with respect to the Restricted Shares covered by the
Award is not duly executed by the Participant and timely
returned to the Company. All Common Stock covered by Awards
under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the
Award Agreement entered into by the Participant. Until the lapse
or release of all restrictions applicable to an Award of
Restricted Shares, the share certificates representing such
Restricted Shares may be held in custody by the Company, its
designee, or, if the certificates bear a restrictive legend, by
the Participant. Upon the lapse or release of all restrictions
with respect to an Award as described in Section 7.01(d),
one or more share certificates, registered in the name of the
Participant, for an appropriate number of shares as provided in
Section 7.01(d), free of any restrictions set forth in the
Plan and the Award Agreement shall be delivered to the
Participant.
(b) Shareholder Rights. Beginning on the
Date of Grant of the Restricted Share Award and subject to
execution of the Award Agreement as provided in
Section 7.01(a), the Participant shall become a shareholder
of the Company with respect to all shares subject to the Award
Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such shares and
the right to receive dividends; provided, however, that any
Common Stock distributed as a dividend or otherwise with respect
to any Restricted Shares as to which the restrictions have not
yet lapsed, shall be subject to the same restrictions as such
Restricted Shares and held or restricted as provided in
Section 7.01(a).
(c) Restriction on Transferability. None
of the Restricted Shares may be assigned or transferred (other
than by will or the laws of descent and distribution, or to an
inter vivos trust with respect to which the Participant is
treated as the owner under Sections 671 through 677 of the
Code, except to the extent that Section 16 of the Exchange
Act
MRV Communications, Inc. Annual Report 2007
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limits a Participant’s right to make such transfers),
pledged or sold prior to lapse of the restrictions applicable
thereto.
(d) Delivery of Shares Upon Vesting.
Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of
or release from any other conditions prescribed by the
Committee, or at such earlier time as provided under the
provisions of Section 7.03, the restrictions applicable to
the Restricted Shares shall lapse. As promptly as
administratively feasible thereafter, subject to the
requirements of Section 11.05, the Company shall deliver to
the Participant or, in case of the Participant’s death, to
the Participant’s Beneficiary, one or more share
certificates for the appropriate number of shares of Common
Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
7.02. Terms of Restricted Shares.
(a) Forfeiture of Restricted
Shares. Subject to Sections 7.02(b) and
7.03, all Restricted Shares shall be forfeited and returned to
the Company and all rights of the Participant with respect to
such Restricted Shares shall terminate unless the Participant
continues in the service of the Company or a Subsidiary as an
employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set
forth in the Award Agreement. The Committee shall determine the
forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with
respect to any Restricted Share Award.
(b) Waiver of Forfeiture
Period. Notwithstanding anything contained in
this Article VII to the contrary, the Committee may, in its
sole discretion, waive the forfeiture period and any other
conditions set forth in any Award Agreement under appropriate
circumstances (including the death, disability or Retirement of
the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and
conditions (including forfeiture of a proportionate number of
the Restricted Shares) as the Committee shall deem appropriate.
7.03. Change in Control. Unless
otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all restrictions
applicable to the Restricted Share Award shall terminate fully
and the Participant shall immediately have the right to the
delivery of share certificate or certificates for such shares in
accordance with Section 7.01(d).
8.01. Performance Awards.
(a) Award Periods and Calculations of Potential
Incentive Amounts. The Committee may grant
Performance Awards to Participants. A Performance Award shall
consist of the right to receive a payment (measured by the Fair
Market Value of a specified number of shares of Common Stock,
increases in such Fair Market Value during the Award Period
and/or a
fixed cash amount) contingent upon the extent to which certain
predetermined performance targets have been met during an Award
Period. The Award Period shall be two or more fiscal or calendar
years as determined by the Committee. The Committee, in its
discretion and under such terms as it deems appropriate, may
permit newly eligible Participants, such as those who are
promoted or newly hired, to receive Performance Awards after an
Award Period has commenced.
(b) Performance Targets. The performance
targets may include such goals related to the performance of the
Company or, where relevant, any one or more of its Subsidiaries
or divisions
and/or the
performance of a Participant as may be established by the
Committee in its discretion. In the case of Performance Awards
to “covered employees” (as defined in
Section 162(m) of the Code), the targets will be limited to
specified levels of one or more of the Performance Goals. The
performance targets established by the Committee may vary for
different Award Periods and need not be the same for each
Participant receiving a Performance Award in an Award Period.
Except to the extent inconsistent with the performance-based
compensation exception under Section 162(m) of the Code, in
the case of Performance Awards granted to employees to whom such
section is applicable, the Committee, in its discretion, but
only under extraordinary circumstances as determined by the
Committee, may change any prior determination of performance
targets for any Award Period at any time prior to the final
determination of the Award when events or transactions occur to
cause the performance targets to be an inappropriate measure of
achievement.
(c) Earning Performance Awards. The
Committee, at or as soon as practicable after the Date of
Grant, shall prescribe a formula to determine the percentage of
the Performance Award to be earned based upon the degree of
attainment of the applicable performance targets.
(d) Payment of Earned Performance
Awards. Subject to the requirements of
Section 11.05, payments of earned Performance Awards shall
be made in cash or Common Stock, or a combination of cash
and Common Stock, in the discretion of the Committee. The
Committee, in its sole discretion, may define, and set forth in
the applicable Award Agreement, such terms and conditions with
respect to the payment of earned Performance Awards as it
may deem desirable.
8.02. Termination of Service. In
the event of a Participant’s Termination of Service during
an Award Period, the Participant’s Performance Awards shall
be forfeited except as may otherwise be provided in the
applicable Award Agreement.
8.03. Change in Control. Unless
otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all Performance
Awards for all Award Periods shall immediately become fully
vested and payable to all Participants and shall be paid to
Participants in accordance with Section 8.02(d), within
30 days after such Change in Control.
MRV Communications, Inc. Annual Report 2007
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9.01. Grant of Other Stock-Based
Awards. Other stock-based awards, consisting of
stock purchase rights (with or without loans to Participants by
the Company containing such terms as the Committee shall
determine), Awards of Common Stock, or Awards valued in whole or
in part by reference to, or otherwise based on, Common Stock,
may be granted either alone or in addition to or in conjunction
with other Awards under the Plan. Subject to the provisions of
the Plan, the Committee shall have sole and complete authority
to determine the persons to whom and the time or times at which
such Awards shall be made, the number of shares of Common Stock
to be granted pursuant to such Awards, and all other conditions
of the Awards. Any such Award shall be confirmed by an Award
Agreement executed by the Committee and the Participant, which
Award Agreement shall contain such provisions as the Committee
determines to be necessary or appropriate to carry out the
intent of this Plan with respect to such Award.
9.02. Terms of Other Stock-Based
Awards. In addition to the terms and conditions
specified in the Award Agreement, Awards made pursuant to this
Article IX shall be subject to the following:
(a) Any Common Stock subject to Awards made under this
Article IX may not be sold, assigned, transferred, pledged
or otherwise encumbered prior to the date on which the shares
are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses; and
(b) If specified by the Committee in the Award Agreement,
the recipient of an Award under this Article IX shall be
entitled to receive, currently or on a deferred basis, interest
or dividends or dividend equivalents with respect to the Common
Stock or other securities covered by the Award; and
(c) The Award Agreement with respect to any Award shall
contain provisions dealing with the disposition of such Award in
the event of a Termination of Service prior to the exercise,
realization or payment of such Award, whether such termination
occurs because of Retirement, disability, death or other reason,
with such provisions to take account of the specific nature and
purpose of the Award.
10.01. Eligibility. Executive
officers of the Company who are from time to time determined by
the Committee to be “covered employees” for purposes
of Section 162(m) of the Code will be eligible to receive
short-term cash incentive awards under this Article X.
10.02. Awards.
(a) Performance Targets. For each fiscal
year of the Company after fiscal year 1999, the Committee shall
establish objective performance targets based on specified
levels of one or more of the Performance Goals. Such performance
targets shall be established by the Committee on a timely
basis to ensure that the targets are considered
“preestablished” for purposes of Section 162(m)
of the Code.
(b) Amounts of Awards. In conjunction
with the establishment of performance targets for a fiscal year,
the Committee shall adopt an objective formula (on the basis of
percentages of Participants’ salaries, shares in a bonus
pool or otherwise) for computing the respective amounts payable
under the Plan to Participants if and to the extent that the
performance targets are attained. Such formula shall comply with
the requirements applicable to performance-based compensation
plans under Section 162(m) of the Code and, to the extent
based on percentages of a bonus pool, such percentages shall not
exceed 100% in the aggregate.
(c) Payment of Awards. Awards will be
payable to Participants in cash each year upon prior written
certification by the Committee of attainment of the
specified performance targets for the preceding fiscal year.
(d) Negative Discretion. Notwithstanding
the attainment by the Company of the specified performance
targets, the Committee shall have the discretion, which need not
be exercised uniformly among the Participants, to reduce or
eliminate the award that would be otherwise paid.
(e) Guidelines. The Committee shall adopt
from time to time written policies for its implementation of
this Article X. Such guidelines shall reflect the intention
of the Company that all payments hereunder qualify as
performance-based compensation under Section 162(m) of the
Code.
(f) Non-Exclusive Arrangement. The
adoption and operation of this Article X shall not preclude
the Board or the Committee from approving other short-term
incentive compensation arrangements for the benefit of
individuals who are Participants hereunder as the Board or
Committee, as the case may be, deems appropriate and in the best
interest of the Company.
ARTICLE XI
TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN
11.01. Plan Provisions Control Award
Terms. Except as provided in Section 11.16,
the terms of the Plan shall govern all Awards granted under the
Plan, and in no event shall the Committee have the power to
grant any Award under the Plan which is contrary to any of the
provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan
as constituted on the Date of Grant of such Award, the term in
the Plan as constituted on the Date of Grant of such Award shall
control. Except as provided in Section 11.03 and
Section 11.07, the terms of any Award granted under the
Plan may not be changed after the Date of Grant of such Award so
as to materially decrease the value of the Award without the
express written approval of the holder.
11.02. Award Agreement. No person
shall have any rights under any Award granted under the Plan
unless and until the Company and
MRV Communications, Inc. Annual Report 2007
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the Participant to whom such Award shall have been granted shall
have executed and delivered an Award Agreement or received any
other Award acknowledgment authorized by the Committee expressly
granting the Award to such person and containing provisions
setting forth the terms of the Award.
11.03. Modification of Award After
Grant. No Award granted under the Plan to a
Participant may be modified (unless such modification does not
materially decrease the value of the Award) after the Date of
Grant except by express written agreement between the Company
and the Participant, provided that any such change
(a) shall not be inconsistent with the terms of the Plan,
and (b) shall be approved by the Committee.
11.04. Limitation on
Transfer. Except as provided in
Section 7.01(c) in the case of Restricted Shares, a
Participant’s rights and interest under the Plan may not be
assigned or transferred other than by will or the laws of
descent and distribution, and during the lifetime of a
Participant, only the Participant personally (or the
Participant’s personal representative) may exercise rights
under the Plan. The Participant’s Beneficiary may exercise
the Participant’s rights to the extent they are exercisable
under the Plan following the death of the Participant.
Notwithstanding the foregoing, (a) to the extent permitted
under Section 16(b) of the Exchange Act with respect to
Participants subject to such Section, the Committee may grant
Non-Qualified Stock Options that are transferable, without
payment of consideration, to immediate family members of the
Participant or to trusts or partnerships for such family
members, and the Committee may also amend outstanding
Non-Qualified Stock Options to provide for such transferability
and (b) in the case of Participants subject to the laws in
foreign jurisdictions that tax the Company upon the grant of
options to such Participants, the Committee may grant
Non-Qualified Stock Options in the form of freely transferable
warrants provided that, based on the advice of Company’s
legal counsel, (i) any transfer of the warrants to, and the
issuance of shares upon exercise of the transferred warrants by,
a transferee (other than a transferee involving a transfer
without consideration to a transferee who is an immediate family
member of the Participant or which is a trust or partnership for
such family members) would be exempt under the registration
provisions of the Securities Act, and (ii) such transfer or
issuance complies with the conditions necessary to establish
such exemption(s). In the event the Committee grants warrants in
accordance with clause (b) of this Section 11.04 and
such warrants are transferred (except to transferees for which
an effective
Form S-8
is available), the number of shares reserved for issuance and
registered by the Company on
Form S-8
shall be reduced by the number of shares underlying the
transferred warrants.
11.05. Taxes. The Company shall be
entitled, if the Committee deems it necessary or desirable, to
withhold (or secure payment from the Participant in lieu of
withholding) the amount of any withholding or other tax required
by law to be withheld or paid by the Company with respect to any
amount payable
and/or
shares issuable under such Participant’s Award, or with
respect to any income recognized upon a disqualifying
disposition of shares received pursuant to the exercise of an
Incentive Stock Option, and the Company may defer payment or
issuance of the cash or shares upon exercise or vesting of an
Award unless indemnified to its satisfaction against any
liability for any such tax. The amount of such withholding or
tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee
determines in accordance with the following rules:
(a) The Participant shall have the right to elect to meet
his or her withholding requirement (i) by having withheld
from such Award at the appropriate time that number of shares of
Common Stock, rounded up to the next whole share, whose Fair
Market Value is equal to the amount of withholding taxes due,
(ii) by direct payment to the Company in cash of the amount
of any taxes required to be withheld with respect to such Award
or (iii) by a combination of shares and cash.
(b) The Committee shall have the discretion as to any
Award, to cause the Company to pay to tax authorities for the
benefit of any Participant, or to reimburse such Participant for
the individual taxes which are due on the grant, exercise or
vesting of any share Award, or the lapse of any restriction on
any share Award (whether by reason of a Participant’s
filing of an election under Section 83(b) of the Code or
otherwise), including, but not limited to, Federal income tax,
state income tax, local income tax and excise tax under
Section 4999 of the Code, as well as for any such taxes as
may be imposed upon such tax payment or reimbursement.
(c) In the case of Participants who are subject to
Section 16 of the Exchange Act, the Committee may impose
such limitations and restrictions as it deems necessary or
appropriate with respect to the delivery or withholding of
shares of Common Stock to meet tax withholding obligations.
11.06. Surrender of Awards. Any
Award granted under the Plan may be surrendered to the Company
for cancellation on such terms as the Committee and the holder
approve. With the consent of the Participant, the Committee may
substitute a new Award under this Plan in connection with the
surrender by the Participant of an equity compensation award
previously granted under this Plan or any other plan sponsored
by the Company; provided, however, that no such substitution
shall be permitted without the approval of the Company’s
shareholders if such approval is required by the rules of any
applicable stock exchange.
11.07. Adjustments to Reflect Capital Changes.
(a) Recapitalization. The number and kind
of shares subject to outstanding Awards, the Purchase Price or
Exercise Price for such shares, the number and kind of shares
available for Awards subsequently granted under the Plan and the
maximum number of shares in respect of which Awards can be made
to any Participant in any calendar year shall be appropriately
adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan
or the Awards granted under the Plan. The maximum number of
shares in respect of which Awards can be made to any
Participant in any calendar year shall be proportionately
adjusted to reflect any other event that results
MRV Communications, Inc. Annual Report 2007
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in an increase in the number of issued and outstanding
shares of Common Stock. The Committee shall have the power and
sole discretion to determine the amount of the adjustment to be
made in each case.
(b) Merger. After any Merger in which the
Company is the surviving corporation, each Participant shall, at
no additional cost, be entitled upon any exercise of all Options
or receipt of other Award to receive (subject to any required
action by shareholders), in lieu of the number of shares of
Common Stock receivable or exercisable pursuant to such Award,
the number and class of shares or other securities to which such
Participant would have been entitled pursuant to the terms of
the Merger if, at the time of the Merger, such Participant had
been the holder of record of a number of shares equal to the
number of shares receivable or exercisable pursuant to such
Award. Comparable rights shall accrue to each Participant in the
event of successive Mergers of the character described above. In
the event of a Merger in which the Company is not the surviving
corporation, the surviving, continuing, successor, or purchasing
corporation, as the case may be (the “Acquiring
Corporation”), shall either assume the Company’s
rights and obligations under outstanding Award Agreements or
substitute awards in respect of the Acquiring Corporation’s
stock for such outstanding Awards. In the event the Acquiring
Corporation fails to assume or substitute for such outstanding
Awards, the Board shall provide that any unexercisable
and/or
unvested portion of the outstanding Awards shall be immediately
exercisable and vested as of a date prior to such Merger, as the
Board so determines. The exercise
and/or
vesting of any Award that was permissible solely by reason of
this Section 11.07(b) shall be conditioned upon the
consummation of the Merger. Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the
date of the Merger shall terminate effective as of the effective
date of the Merger.
(c) Options to Purchase Shares or Stock of Acquired
Companies. After any Merger in which the Company
or a Subsidiary shall be a surviving corporation, the Committee
may grant substituted options under the provisions of the Plan,
pursuant to Section 424 of the Code, replacing old options
granted under a plan of another party to the Merger whose shares
or stock subject to the old options may no longer be issued
following the Merger. The foregoing adjustments and manner of
application of the foregoing provisions shall be determined by
the Committee in its sole discretion. Any such adjustments may
provide for the elimination of any fractional shares which might
otherwise become subject to any Options.
11.08. No Right to Continued
Service. No person shall have any claim of right
to be granted an Award under this Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any
Participant any right to be retained in the service of the
Company or any of its Subsidiaries.
11.09. Awards Not Includable for Benefit
Purposes. Payments received by a Participant
pursuant to the provisions of the Plan shall not be included in
the determination of benefits under any pension, group insurance
or other benefit plan applicable to the Participant which is
maintained by the Company or any of its Subsidiaries, except as
may be provided under the terms of such plans or determined by
the Board.
11.10. Governing Law. All
determinations made and actions taken pursuant to the Plan shall
be governed by the laws of State of Delaware and construed in
accordance therewith.
11.11. No Strict Construction. No
rule of strict construction shall be implied against the
Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award
granted under the Plan or any rule or procedure established
by the Committee.
11.12. Compliance with
Rule 16b-3. It
is intended that, unless the Committee determines otherwise,
Awards under the Plan be eligible for exemption under
Rule 16b-3.
The Board is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with
Rule 16b-3,
as it may be amended from time to time, and to make any other
such amendments or modifications as it deems necessary or
appropriate to better accomplish the purposes of the Plan in
light of any amendments made to
Rule 16b-3.
11.13. Captions. The captions
(i.e., all Section headings) used in the Plan are for
convenience only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize or affect in any way
any provisions of the Plan, and all provisions of the Plan shall
be construed as if no captions have been used in the Plan.
11.14. Severability. Whenever
possible, each provision in the Plan and every Award at any time
granted under the Plan shall be interpreted in such manner as to
be effective and valid under applicable law, but if any
provision of the Plan or any Award at any time granted under the
Plan shall be held to be prohibited by or invalid under
applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as
originally written to the fullest extent permitted by law and
(b) all other provisions of the Plan and every other Award
at any time granted under the Plan shall remain in full force
and effect.
11.15. Amendment and Termination.
(a) Amendment. The Board shall have
complete power and authority to amend the Plan at any time;
provided, however, that the Board shall not, without the
requisite affirmative approval of shareholders of the Company,
make any amendment which requires shareholder approval under the
Code or under any other applicable law or rule of any stock
exchange which lists Common Stock or Company Voting Securities.
No termination or amendment of the Plan may, without the consent
of the Participant to whom any Award shall theretofore have been
granted under the Plan, adversely affect the right of such
individual under such Award.
(b) Termination. The Board shall have the
right and the power to terminate the Plan at any time. No Award
shall be granted under the Plan after the termination of the
Plan, but the termination of the Plan shall not have any other
effect and any Award outstanding at the time of the termination
of the Plan may be exercised after termination of the Plan at
any time prior to the expiration date of such Award to the
MRV Communications, Inc. Annual Report 2007
Table of Contents
same extent such Award would have been exercisable had the Plan
not terminated.
11.16. Foreign Qualified
Awards. Awards under the Plan may be granted to
such employees of the Company and its Subsidiaries who are
residing in foreign jurisdictions as the Committee in its sole
discretion may determine from time to time. The Committee may
adopt such supplements to the Plan as may be necessary or
appropriate to comply with the applicable laws of such foreign
jurisdictions and to afford Participants favorable treatment
under such laws; provided, however, that no Award shall be
granted under any such supplement with terms or conditions
inconsistent with the provision set forth in the Plan.
MRV Communications, Inc. Annual Report 2007
Table of Contents
APPENDIX B
AMENDED AND
RESTATED
CERTIFICATE OF INCORPORATION OF MRV COMMUNICATIONS, INC.
MRV Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware (the
“Corporation”), hereby certifies as follows:
FIRST: The name of the Corporation is MRV Communications,
Inc.
SECOND: The original Certificate of Incorporation of the
Corporation was filed with the Secretary of the State of
Delaware on March 9, 1992, under the name “MRV
Technologies, Inc.”
THIRD: All amendments to the Certificate of Incorporation
reflected herein have been duly authorized and adopted by the
Corporation’s Board of Directors and stockholders in
accordance with the provisions of Sections 242 and 245 of
the Delaware General Corporation Law. This Amended and Restated
Certificate of Incorporation restates, integrates, amends and
supersedes the provisions of the Certificate of Incorporation of
this Corporation as previously filed and as the same may have
been heretofore amended.
FOURTH: The text of the Certificate of Incorporation as
previously filed and as the same may have been heretofore
amended is hereby restated and further amended to read in its
entirety as follows:
1. The name of the Corporation is MRV Communications, Inc.
2. The address of its registered office in the State of
Delaware is 2711 Centerville Road Suite 400, Wilmington,
New Castle County, Delaware 19808. The name of its registered
agent at such address is The Prentice-Hall Corporation System,
Inc.
3. The nature of the business or purposes to be conducted
or promoted is:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
4. This Corporation is authorized to issue two classes of
stock, to be designated respectively, “Common Stock”
and “Preferred Stock.” The total number of shares of
stock which the Corporation shall have authority to issue is
Three Hundred Twenty One Million (321,000,000) shares, of which
Three Hundred Twenty Million (320,000,000) shares shall be
designated Common Stock, with a par value of $0.0017 per
share, and One Million (1,000,000) shares shall be
designated Preferred Stock, with a par value of $0.01 per
share.
Additional designations and powers, the rights and preferences
and the qualifications, limitations or restrictions with respect
to each class of stock of the Corporation shall be as determined
by the Board of Directors from time to time.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
conferred by statute, this board of directors is expressly
authorized:
To make, alter or repeal the bylaws of the Corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve in the manner in which
it was created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the
directors of the Corporation. The board may designate one or
more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. The bylaws may provide that in the absence or
disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to
act at the meeting in the place of any such agent or
disqualified member. Any such committee, to the extent provided
in the resolution of the board of directors, or in the bylaws of
the Corporation, shall have and may exercise all the powers and
authority of the board of directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or
authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease, or exchange of
all or substantially all of the Corporation’s property and
assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the
bylaws of the Corporation; and, unless the resolution or bylaws
expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of
stock.
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of
the property and assets of the Corporation, including its
goodwill and its corporate franchises, upon such terms and
conditions and for such consideration, which may consist in
whole or in part of money or property, including shares of stock
in, and/or
other securities of, any other corporation or corporations, as
its board of directors shall deem expedient and for the best
interests of the Corporation.
7. To the maximum extent permitted by
Section 102(b)(7) of the General Corporation Law of
Delaware, a director of this Corporation shall not be personally
liable to the Corporation or its stockholders
MRV Communications, Inc. Annual Report 2007
Table of Contents
for monetary damage for breach of fiduciary duty as a director,
except for liability (i) for any breach of the
director’s duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
8. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them
and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receiver, appointed for this
Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be
binding on all the creditors or class of creditors,
and/or on
all the stockholders or class of stockholders of this
Corporation, as the case may be, and also on this Corporation.
9. Meetings of the stockholders may be held within or
without the State of Delaware, as the bylaws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
Elections of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
10. The Corporation reserves the right to amend, alter,
change, or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein
are granted subject to this reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by Noam
Lotan, its President and Chief Executive Officer, and attested
by Shlomo Margalit, its Secretary,
this
of May, 2007.
MRV COMMUNICATIONS, INC.
Noam Lotan, President and CEO
ATTEST
Shlomo Margalit, Secretary
MRV Communications, Inc. Annual Report 2007
Table of Contents
MRV COMMUNICATIONS, INC.
20415 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MRV COMMUNICATIONS, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 29, 2007
The undersigned holder of common stock, par value $0.0017, of MRV Communications,
Inc. (“MRV”) hereby appoints Noam Lotan and Shlomo Margalit, or either of them, proxies for
the undersigned, each with full power of substitution, to represent and to vote as specified
in this Proxy all common stock of MRV that the undersigned stockholder would be entitled to
vote if personally present at the Annual Meeting of Stockholders (the “Annual Meeting”) to be
held at the Warner Center Marriott Woodland Hills, 21850 Oxnard Street, Woodland Hills,
California 91367 on Tuesday, May 29, 2007, at 9:00 a.m., Pacific Standard Time, and at any
adjournments or postponements of the Annual Meeting. The undersigned stockholder hereby
revokes any proxy or proxies heretofore executed for such matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE DIRECTORS, FOR THE RATIFICATION OF ERNST & YOUNG LLP AS MRV’S INDEPENDENT ACCOUNTANTS
FOR 2007, FOR APPROVAL OF THE ADOPTION OF MRV’S 2007 OMNIBUS INCENTIVE PLAN; FOR APPROVAL OF
THE AMENDMENT TO MRV’s CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF
SHARES OF MRV’s COMMON STOCK TO 320,000,000 AND THE AGGREGATE NUMBER OF SHARES OF CAPITAL
STOCK TO 321,000,000; AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED STOCKHOLDER MAY REVOKE THIS PROXY AT ANY
TIME BEFORE IT IS VOTED BY DELIVERING TO THE CORPORATE SECRETARY OF MRV EITHER A WRITTEN
REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY APPEARING AT THE
ANNUAL MEETING AND VOTING IN PERSON. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
ELECTION OF THE DIRECTORS; “FOR” THE RATIFICATION OF ERNST & YOUNG LLP AS MRV’S INDEPENDENT
ACCOUNTANTS FOR 2007; “FOR” APPROVAL OF THE ADOPTION OF MRV’S 2007 OMNIBUS INCENTIVE PLAN;
AND “FOR” APPROVAL OF THE AMENDMENT TO MRV’s CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF MRV’s COMMON STOCK TO 320,000,000 AND THE AGGREGATE NUMBER OF
SHARES OF CAPITAL STOCK TO 321,000,000.
IF YOU ARE VOTING BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
Table of Contents
ANNUAL MEETING OF
STOCKHOLDERS OF
MRV COMMUNICATIONS, INC.
May 29,
2007
PROXY VOTING INSTRUCTIONS
MAIL
-
Date, sign and mail your proxy card in the envelope provided as soon as
possible.
- or -
TELEPHONE
- Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. - OR -
INTERNET
- Access “www.voteproxy.com” and follow the on-screen instructions. Have
your proxy card available when you access the web page.
You may enter your
voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
â Please detach along perforated line and mail
in the envelope provided IF you are not voting via telephone or the
Internet. â
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