Compensation Committee Report
The Compensation Committee of our board of directors is primarily responsible for determining the annual salaries and other compensation of
our executive officers and administering our equity
compensation plans. The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis of the 2017 proxy statement. Based on such review and
discussions, the Compensation Committee recommended to the board that the Compensation Discussion and Analysis be included in our annual report filed on Form 10-K and this proxy statement.
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Compensation Committee
Arnold L. Fishman
Charles Thomas Burbage
Edward R. Muller
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Compensation Discussion and Analysis
This
Compensation Discussion and Analysis provides information about the material components of our executive compensation program for:
Wahid Nawabi, our President and Chief Executive Officer;
Timothy E. Conver, our Chairman of our board of directors and former President and Chief Executive Officer (Mr. Conver retired as an officer
of the
company in May 2016);
Teresa Covington, our Senior Vice President and Chief Financial Officer;
Raymond Cook, our former Senior Vice President and Chief Financial Officer (Mr. Cook's employment with the company ended on February 28,
2017);
Kirk Flittie, our Vice President and General Manager of Unmanned Aircraft Systems (UAS);
Kenneth Karklin, our Vice President and General Manager of Efficient Energy Systems (EES); and
Doug Scott, our former Senior Vice President and General Counsel (Mr. Scott's employment with the company ended effective October 3, 2016).
We
refer to these executive officers collectively in this Compensation Discussion and Analysis as the "Named Executive Officers."
Specifically,
this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each
compensation component that we provide. In addition, we explain how and why the Compensation Committee arrived at specific compensation policies and decisions involving our Named Executive Officers
during fiscal year 2017.
Due
to Mr. Conver's retirement on May 1, 2016, he was not compensated as an employee during fiscal year 2017 and instead only received compensation for his services as a non-employee
director during fiscal year 2017. Because he served as our President and Chief Executive Officer for a portion of fiscal year 2017, he is included as a Named Executive Officer for purposes of this
Compensation Discussion and Analysis and the compensation tables below pursuant to SEC requirements. However, since he did not receive any compensation as an employee during fiscal year 2017, he is
not included in the discussion regarding our fiscal year 2017 compensation decisions below.
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Executive Summary
Our executive compensation program is designed to support our business goals and objectives by providing a link between the total compensation
opportunities for our executive officers, including the Named Executive Officers, and the creation of long-term stockholder value. The Compensation Committee reviews our executive compensation program
on an annual basis to ensure that it is consistent with such objectives. In line with this philosophy, compensation awarded to our Named Executive Officers for fiscal year 2017 reflected our financial
and strategic results and overall compensation philosophy.
For
fiscal year 2017, revenue and pre-tax income were the primary financial metrics used by the Compensation Committee to evaluate our financial performance. Our performance for fiscal year 2017 for
these metrics, relative to fiscal year 2016 performance, is reflected in the table below, which highlights the strong growth in our year-over-year pre-tax income.
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Financial Measure
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Fiscal Year 2017 ($)
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Fiscal Year 2016 ($)
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Increase (decrease) (%)
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Revenue
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264.9 million
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264.1 million
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0.3%
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Pre-Tax Income
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14.2 million
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8.1 million
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75.3%
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We
also made significant progress in achieving the operational imperatives associated with our 2017 annual bonus plan, which focused on compliance and safety, customer satisfaction, strategic growth,
organizational development and competitive rates.
Based
primarily on our financial performance in fiscal 2017, our Named Executive Officers received payouts of their annual cash bonuses significantly below target amounts even with our strong pre-tax
income performance for the year. In addition, due to our failure to meet the revenue and operating profit objectives established by our Compensation Committee for our Long-Term Incentive Compensation
Awards for the three-year performance period comprising fiscal years 2015, 2016 and 2017, such awards were forfeited without any payout.
Our
executive compensation program is governed by policies and practices that are in line with industry practices and stockholder interests, examples of which include:
Majority of total potential compensation paid to executives based on our financial performance;
A compensation recovery (or "clawback") policy for the recovery of incentive compensation of executive officers;
Anti-hedging and anti-short sale policies for executives;
Stock ownership guidelines requiring ownership of company stock by our Chief Executive Officer of 4x his base salary and by other Named Executive Officers of
2x their base salaries;
Post-vesting stock retention guidelines requiring Named Executive Officers to hold 50% of net
after-tax shares issued upon the vesting of equity awards until their required stock ownership levels are
achieved; and
Double-trigger provisions for change in control situations in our Severance Protection Agreements, and no excise tax gross-up payments upon a
termination
after a change in control.
Objectives of our Executive Compensation Program
Our executive compensation program is designed to support our business goals and objectives by providing a link between the total compensation
opportunities for our executive officers, including the Named Executive Officers, and the creation of long-term stockholder value. Specifically, our executive compensation program is designed
to:
attract, motivate and retain superior talent;
ensure that compensation is commensurate with the company's performance and stockholder returns;
provide performance awards for the achievement of financial and strategic objectives that are critical to our long-term growth; and
ensure that our executive officers have financial incentives to achieve substantial growth in stockholder value.
Our
compensation program is designed to achieve these objectives through a combination of the following types of compensation: base salary, annual cash incentive bonus awards, performance restricted
stock units which will settle in fully-vested shares of common stock for multi-year performance periods, restricted stock awards subject to time-based vesting over a multi-year period and other
employee benefits.
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Each
of these compensation components serve our interests in different ways and together represent a balance among all elements of compensation and the various time periods for such elements. A
majority of the compensation provided to the Named Executive Officers is based on our performance. This design approach helps align the interests of our executive officers with those of stockholders
in achieving long-term
increases in the value of our common stock. We have selected these compensation components to create a flexible pay package that reflects the long-term nature of our business and can reward both the
short-term and long-term performance of the company and each individual Named Executive Officer. Each element of our executive compensation program is discussed in greater detail below.
Compensation-Setting Process
The Compensation Committee is responsible for overseeing our executive compensation program, as well as determining and approving the ongoing
compensation arrangements for our executive officers, including the Named Executive Officers.
Generally,
annual base salary adjustments for our executive officers are determined within the first quarter of each fiscal year. Annual cash bonus payouts are made within 75 days of our fiscal
year end to synchronize award determinations with the conclusion of our fiscal year and the review of fiscal year financial results. Historically, long-term incentive awards have been made at the
discretion of the Compensation Committee. Compensation adjustments in connection with changes in duties and/or other material changes in the primary assumptions forming the basis of a compensation
decision will continue to be made as required by circumstances throughout the fiscal year.
Typically, our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our executive officers (except with
respect to his own compensation), including base salary levels, target annual cash bonus opportunities, bonus payouts under the prior fiscal year's annual bonus plan, long-term incentive performance
compensation levels and equity awards, with the assistance of our chief human resources officer and Chief Financial Officer. Our Chief Executive Officer also provides recommendations for the corporate
financial and strategic objectives used in our annual cash bonus plan and long-term incentive
compensation
program. In addition, he established the individual performance goal objectives for the non-CEO Named Executive Officers for the fiscal 2017 annual cash bonus plan. He supports his
recommendations with competitive market data developed by our human resources department, information provided by the Compensation Committee's independent compensation consultant, and by reviewing the
historical performance of each executive officer with the Compensation Committee. Although the Compensation Committee carefully considers the recommendations of our Chief Executive Officer when
determining the compensation of our executive officers, it bases its decisions on the collective judgment of its members after considering the input of its independent compensation consultant and any
relevant supporting data.
While
our Chief Executive Officer generally attends meetings of the Compensation Committee, the committee meets outside the presence of our Chief Executive Officer when discussing his compensation.
Decisions with respect to our Chief Executive Officer's compensation are made by the Compensation Committee, subject to the approval of our board of directors (unless such decisions require approval
by our Compensation Committee to the extent such compensation is intended to be qualified performance-based compensation for purposes of Section 162(m) of the Code or exempt under
Section 16(b) of the Exchange Act).
The
Compensation Committee may delegate and grant authority to our Chief Executive Officer and/or a committee of executive officers to grant option awards under the company's equity incentive plan to
the employees holding positions below the level of Vice President.
The Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with the
oversight of our executive compensation program. In fiscal year 2017, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm, to provide executive
compensation advisory services, including an executive officer compensation assessment and a board of directors' compensation review. Compensia had provided executive compensation advisory services to
the Compensation Committee since 2006 and did not provide any non-compensation-related services to us during fiscal year 2016 or 2017. In July 2017, the Compensation
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Committee
retained a new independent compensation consultant, Pay Governance, LLC, to provide it with an assessment of the company's executive compensation, including its long-term incentive
compensation program.
The
Compensation Committee considered the independence of Compensia and Pay Governance LLC consistent with the requirements of Nasdaq. Further, as required under Item 407(e)(3) of
Regulation S-K, the Compensation Committee conducted a conflicts of interest assessment and determined that there is no conflict of interest resulting from retaining Compensia or Pay
Governance. The Compensation Committee intends to reassess the independence of its compensation advisors at least annually.
Each year, the Compensation Committee reviews the executive compensation practices of a group of companies in the technology sector determined to be
comparable to us based on their size and public company status. Our fiscal year 2017 peer group consisted of the companies listed below.
Aerojet
Rocketdyne Holdings, Inc.
American Science and Engineering, Inc.
Astronics Corporation
Cubic Corporation
DigitalGlobe, Inc.
Ducommun Incorporated
II-VI Incorporated
iRobot Corporation
The KEYW Holding Corporation
KVH Industries, Inc.
LMI Aerospace, Inc.
Maxwell Technologies, Inc.
Mercury Systems, Inc.
OSI Systems, Inc.
ViaSat, Inc.
Each
year, the Committee's independent compensation consultant surveys the compensation practices of the peer group to assess the competitiveness of our compensation programs. Although we maintain the
peer group for executive compensation and performance reference purposes, the peer group compensation data is limited to publicly available information and therefore does not necessarily provide
comparisons for all officers. By contrast, survey data has the advantage of including data on executive positions beyond what is available in public filings, but may not be specific to the selected
companies
in the peer group. In light of this, in setting fiscal year 2017 compensation, the Compensation Committee also reviewed data from the Radford Executive Compensation Survey, which consists of
information on U.S. companies primarily in the technology industry with revenue between $200 million and $500 million. With respect to the survey data presented to the Compensation
Committee, the identities of the individual companies included in the survey were not provided to the Compensation Committee, and the Compensation Committee did not refer to individual compensation
information for such companies.
We
believe that by utilizing both publicly available peer group data and the survey data, we are able to develop an appropriate set of competitive data for use in making compensation decisions. The
Compensation Committee uses the information derived from this review in two ways: to assist it in determining the appropriate level and reasonableness of total compensation, as well as each separate
component of compensation, for our executive officers and to ensure that the compensation we offer to them is competitive and fair.
The
Compensation Committee has adopted a general approach of compensating our executive officers with base salaries commensurate with the experience and expertise of the individual executive and
competitive with the median base salaries of executives holding comparable positions based on the competitive market data provided by its independent compensation consultant based on our peer group
and the survey data.
The Compensation Committee will take into account significant changes from year-to-year in the base salaries of comparable executives in our peer group and survey data in setting base salaries for our
executive officers and may approve increases in base salaries of the relevant executive officers to move them closer to the median of our peer group and survey data for their positions, although such
approved base salaries may remain below the median.
To
reward our executive officers for their contributions to the achievement of annual corporate financial and strategic performance objectives, the Compensation Committee sets annual cash bonus
opportunities at a level designed to ensure that, when actual bonus payouts are added to the executive officer's base salary, assuming achievement at targeted levels, total annual cash compensation
will be competitive with the market and when above target performance occurs, total cash compensation will be above median total
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cash
compensation level of executives holding comparable positions based on the competitive market data provided by the Compensation Committee's independent compensation consultant, based on our peer
group and the survey data. The Compensation Committee has adopted this approach in recognition of the aggressive nature of the company's annual operating plan.
However,
the Compensation Committee does not establish compensation levels based directly on benchmarking. The Compensation Committee instead relies on the judgment of its members in making
compensation decisions regarding base salaries, target bonus levels and long-term equity incentive awards. In addition to competitive market data, in making its compensation decisions, the
Compensation Committee also considers an executive officer's position, tenure with the company, individual and organizational performance, our retention needs, and internal pay equity. As a result,
the total compensation (or any particular component of compensation) received by an executive officer may differ materially from the amounts paid to individuals holding comparable executive positions
based on the competitive market data provided by the Compensation Committee's independent compensation consultant based on our peer group and the survey data. The Compensation Committee does not
guarantee that any executive will receive a specific market-derived compensation level.
Fiscal Year 2017 Compensation Determinations.
During fiscal year 2017, the Compensation Committee made the following compensation decisions:
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Base Salary Increases:
For fiscal year 2017, our Named Executive Officers
received base salary increases commensurate with our peer group and outside salary survey data.
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Continued Emphasis on Performance-Based Compensation:
In fiscal year 2017,
the Compensation Committee continued its practice of awarding the majority of total target compensation to the Named Executive Officers in the form of performance-based compensation tied to the
achievement of performance goals. This emphasis on performance-based compensation is intended to align executive compensation with stockholder interests.
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Below Target Annual Bonuses for Fiscal Year 2017 Tied to Performance Relative to Corporate Financial Goals and, for non-CEO Named
Executive Officers, Individual Performance
Goals:
We maintain an annual cash bonus plan tied to achievement of corporate financial and strategic objectives. In
fiscal 2017, the Compensation Committee added an individual performance component to the cash bonus plan for each non-CEO Named Executive Officer. Based on our performance for fiscal year 2017, the
Compensation Committee's assessment of our strategic achievements, the Compensation Committee's assessment of each non-CEO Named Executive Officer's achievement of his or her individual performance
goals, and a discretionary increase in the final bonus payouts, each of our Named Executive Officers received an annual performance bonus equal to 85.0% to 90.5% of his or her targeted bonus amount.
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Implementation of New Long-Term Incentive Compensation Program; No Equity Awards to NEOs During Fiscal Year
2017:
During fiscal year 2017, the Compensation Committee reviewed the company's long-term incentive compensation program with Pay
Governance, LLC, its new independent compensation consultant and, as a result of the review, redesigned the company's long-term incentive compensation program. The company's new long-term
incentive compensation program consists of a mix of performance restricted stock unit awards ("PRSUs"), which vest based on the company's achievement of specified financial metrics over a three-year
performance period, and restricted stock awards, which vest in equal annual installments over a three-year vesting period. If the financial metrics associated with payouts are earned, the PRSUs will
settle in fully-vested shares of our common stock. As a result of the process undertaken by our Compensation Committee to redesign our long-term incentive compensation program, no long-term incentive
awards were granted to our Named Executive Officers during fiscal year 2017 (with the exception of Mr. Conver, who received stock awards as part of his non-employee director compensation
pursuant to our director compensation program, as described above). Instead, in May 2017, the Compensation Committee granted the restricted stock awards and PRSUs to certain of the Named Executive
Officers with specified financial objectives for the cumulative three-year performance cycle comprising fiscal years 2017, 2018 and 2019. Due to the extended design and implementation
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period
for our new long-term incentive compensation program, as described in more detail below, the initial awards granted under the program were granted following the end of fiscal year 2017 but have
vesting terms and performance objectives, as applicable, that take fiscal year 2017 into account to compensate such officers for their service during fiscal 2017 while the new program was being
considered by the Compensation Committee. As a result, our Named Executive Officers will receive both these initial awards during fiscal year 2018, which are intended to represent the awards they
would have otherwise received during fiscal year 2017 had our new long-term incentive compensation program been in place at that time, and additional awards during fiscal year 2018 that represent the
ordinary course annual awards for our Named Executive Officers.
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No Payouts under Long-Term Incentive Compensation Awards for Fiscal Year 2015-Fiscal Year 2017 Performance
Period:
Of the long-term incentive awards issued by the company in prior years, only the award for the two-year performance period comprising
fiscal years 2011 and 2012 has resulted in a payout to our executive officers. The awards granted for the three-year performance period comprising fiscal years 2015, 2016 and 2017 were forfeited
without any payout due to our failure to meet the revenue and operating profits objectives set by our Compensation Committee for purposes of such awards.
Executive Compensation Program Components
The following describes each component of our executive compensation program, the rationale for each, and how compensation amounts are
determined.
We use base salaries to provide our executive officers, including the Named Executive Officers, with a fixed amount of compensation for their regular work.
The Compensation Committee generally reviews the base salaries of our executive officers at the beginning of each fiscal year, as well as in connection with a promotion or other change in
responsibilities. Base salary adjustments generally go into effect within the first quarter of each fiscal year. Base salary
adjustments
are based on an evaluation of an executive officer's position, tenure with our company, experience with other companies, individual and organizational performance, our retention needs, and
internal pay equity.
In
light of the considerations discussed above, for fiscal year 2017, the board of directors increased the base salaries of our Named Executive Officers as follows:
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Named Executive Officer
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2017 Salary
($)
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Increase Over
2016
(%)
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Wahid Nawabi
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500,000
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49.3
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Teresa Covington
1
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300,000
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20.0
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Raymond Cook
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340,000
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4.6
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Kirk Flittie
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281,000
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2.2
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Kenneth Karklin
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222,000
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0.9
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Doug Scott
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305,000
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5.2
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Ms. Covington's base salary for fiscal 2017 was increased to this amount effective March 1, 2017 in connection with her appointment as our Chief
Financial Officer. During her service as our Vice President of Finance during fiscal 2017 prior to her appointment as our Chief Financial Officer, she received a base salary of
$256,277.
Mr. Nawabi
received a 49.3% increase in his base salary due to his increased duties in connection with his appointment as our Chief Executive Officer in May 2016. Ms. Covington's base
salary was increased to $300,000 effective March 1, 2017 in connection with her appointment as our Chief Financial Officer. As noted above, Mr. Conver was not paid as an employee of the
company during fiscal 2017 due to his retirement as our President and Chief Executive Officer effective May 1, 2016.
We
believe that the base salaries paid to our Named Executive Officers during fiscal year 2017 helped to achieve our executive compensation objectives and are competitive with the salaries of the
executives
holding comparable positions based on the competitive market data provided by Compensia based on our peer group and the survey data.
We believe that a significant portion of overall target compensation of our executive officers, including the Named Executive Officers, should be "at risk"
(that is, contingent upon the successful implementation of our annual operating plan, and for non-CEO Named Executive Officers, upon the achievement of individual performance goals). Annual cash
bonuses represent a portion of this "at risk" compensation. We use these annual cash bonus opportunities to motivate our executive officers to achieve our short-term financial and operational
imperatives while making progress towards our longer-term growth and other goals.
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At
the end of the fiscal year the Compensation Committee determines whether to pay cash bonuses to our executive officers, including the Named Executive Officers, based on its assessment of our
financial and operational results and, for non-CEO Named Executive Officers, based on each such officer's achievement of his or her individual performance goals as recommended by our Chief Executive
Officer. While the decision to make bonus payouts and any amounts payable are made in the sole discretion of the Compensation Committee, in making its determinations the Compensation Committee
considers input from our Chief Executive Officer (for executive officers other than himself), as well as such other factors as the Compensation Committee deems appropriate.
Initially,
the Compensation Committee establishes a "target bonus level" for each executive officer, which is expressed as a percentage of his or her base salary. In setting these
target bonus levels, the Compensation Committee considers the cash compensation of executives holding comparable positions based on the competitive market data provided by its independent compensation
consultant based on our peer group and the survey data. Generally, the Compensation Committee sets the target bonus levels so that, assuming achievement of the corporate financial and operational
imperative objectives at targeted levels, and in addition for non-CEO Named Executive Officers, assuming achievement of their individual performance goals at target levels, total annual cash
compensation will be competitive with the market and when above-target performance occurs, total cash compensation will be above the median of total cash compensation level of executives holding
comparable positions based on the competitive market data provided by its independent compensation consultant based on our peer group and the survey data. The Compensation Committee believes that this
approach is consistent with the high level of growth generally reflected in the corporate performance objectives applicable to the annual bonus determinations.
At
the beginning of each fiscal year, the Compensation Committee identifies one or more corporate financial performance measures and establishes a specific performance target level
for each such measure for purposes of calculating the bonus for each executive officer. Threshold, target and maximum levels of
performance
are established for each corporate financial performance measure. In the event that the threshold performance level for any corporate financial performance measure is not met, then no
credit will be given with respect to the portion of the annual bonus attributable to that corporate financial performance measure. In addition to establishing corporate financial performance measures,
the Compensation Committee establishes one or more operational imperatives for purposes of calculating the bonus payable to each executive officer, as described in more detail below.
For
fiscal 2017, the Compensation Committee determined to add an individual performance component as a component of the annual cash bonus plan for all non-CEO Named Executive Officers to drive
individual performance against our strategic corporate initiatives. The Compensation Committee determined that our Chief Executive Officer should not have individual performance as a component of his
annual cash bonus plan because he is responsible for the financial performance of the entire company. The individual performance goals vary depending on the company's strategic plan and the roles and
responsibilities of the executive officer. Our Chief Executive Officer determines the specific individual performance goals for each non-CEO Named Executive Officer at the beginning of each fiscal
year.
At
the end of the fiscal year, the Compensation Committee reviews our actual performance against the target levels set for each of the corporate financial performance measures
established at the beginning of the year. Achievement for purposes of the operational imperative component
of each named executive's bonus award is not necessarily tied to formulaic or pre-established performance measures, but is instead determined based on the Compensation Committee's subjective
assessment of the company's achievement of key operational imperative initiatives and overall performance during the fiscal year, specifically for fiscal year 2017 in the areas of compliance and
safety, customer satisfaction, strategic growth, organizational development and competitive rates. The operational imperative component of the annual bonus program also takes into account the
Compensation Committee's assessment of performance in the event of any unforeseen extraordinary event or transaction that occurred during the fiscal year. In making its determination of achievement
for the operational imperative component of the annual bonuses, the
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Compensation
Committee does not follow any guidelines, nor are there such standing guidelines regarding the exercise of such discretion. After the completion of the fiscal year, our Chief Executive
Officer assesses each non-CEO Named Executive Officer's achievement of his or her individual performance goals and recommends an achievement percentage for such goals. This assessment and
recommendation are provided to the Compensation Committee.
In
no event may an executive officer's annual cash bonus payout exceed his or her maximum permissible bonus as established by the Compensation Committee.
Fiscal Year 2017 Bonuses.
The Compensation Committee designed our fiscal year 2017 annual cash bonus opportunities to focus our executive officers, including the
Named Executive Officers,
on
achieving key company financial objectives and to reward substantial achievement of these objectives and overall corporate performance and achievement of key operational imperatives. Additionally,
our Chief Executive Officer established individual performance goals for each of our non-CEO Named Executive Officers for fiscal 2017 to drive individual performance by such officers to achieve the
company's strategic corporate initiatives for the year. Mr. Conver was not eligible for a bonus for fiscal year 2017 due to his retirement as our President and Chief Executive Officer effective
May 1, 2016.
For
fiscal year 2017, the Compensation Committee established the target bonus levels for the Named Executive Officers at the levels indicated in the table below:
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Named Executive Officer
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Target Bonus Level
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Percentage of Base Salary
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Wahid Nawabi
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$
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410,000
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82.0%
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Teresa Covington
1
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$
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150,000
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50.0%
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Raymond Cook
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$
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197,200
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58.0%
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Kirk Flittie
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$
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150,000
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53.4%
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Kenneth Karklin
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$
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100,000
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45.1%
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Doug Scott
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$
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152,500
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5.2%
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1.
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Ms. Covington's bonus target was increased to $150,000, from $95,000, in connection with her appointment as our Chief Financial Officer in March 2017. Such
increase to Ms. Covington's target bonus level is consistent with our pay positioning philosophy described
above.
Under
the fiscal year 2017 bonus program, our Named Executive Officers were eligible to receive annual bonuses of up to 200% of their target bonus levels.
For
fiscal year 2017, the Compensation Committee selected revenue and pre-tax income as the corporate financial performance measures, as well as the achievement of certain operational imperatives, for
the corporate performance measures for the Named Executive Officer annual bonuses. The targeted corporate financial goals for our Chief Executive Officer and other Named Executive Officers were above
the range of public guidance provided by the company for revenue growth and profitability at the beginning of fiscal year 2017. In order for any bonus to be paid, the company was required to achieve
the pre-determined thresholds for both revenue and pre-tax income. These financial goals are described in detail below.
For
fiscal 2017, the individual performance goals for each non-CEO Named Executive Officer were generally tied to the roles and responsibilities of the individual executive officer and their
responsibility for our overall progress towards achievement of our strategic plan. These individual performance measures
were
generally intended to serve as a guide for our Chief Executive Officer's and Compensation Committee's evaluation of each executive's individual performance and overall contributions during fiscal
year 2017 and no formula or pre-established weightings were assigned to such measures. As a result, the final evaluation of each non-CEO Named Executive Officer's individual performance for annual
bonus plan purposes, and the resulting percentage achievement, was ultimately a subjective analysis by our Chief Executive Officer and the Compensation Committee. The individual objectives for the
non-CEO Named Executive Officers were as follows:
Teresa Covington: assist in improving profitability of EES business segment; implement practices to improve company's capital deployment and
measuring return
on invested capital; and assist in ensuring the company maintains competitive government rates.
Kirk Flittie: implement internal reorganization of UAS business segment; increase UAS backlog; and implement and launch strategic growth initiatives for UAS
business segment.
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Kenneth Karklin: meet or exceed annual operating plan targets for EES business segment in fiscal 2017; and successfully launch a new industrial charging
product.
The
Compensation Committee selected the goals based on the recommendation of our Chief Executive Officer and after reviewing the company's annual
operating
plan for fiscal year 2017, as well as its long-term strategic plan. Based on such recommendation and analysis, the Compensation Committee weighted the goals associated with the fiscal year
2017 annual bonus plan as follows for our Named Executive Officers:
Weighting for Fiscal 2017 Annual Bonus Plan Goals
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CEO
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Non-CEO
Executives
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Revenue
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33.3%
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25.0%
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Pre-Tax Income
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33.3%
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25.0%
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Operational Imperatives
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33.3%
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25.0%
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Also adjusted by payout percentage of revenue and pre-tax income objectives
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Individual Performance Goals
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n/a
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25.0%
|
|
Also adjusted by payout percentage of revenue and pre-tax income objectives
|
|
|
|
|
|
|
|
|
|
The
Compensation Committee implemented a sliding scale for the corporate financial performance goals that calculated a downward adjustment to 0% of the target bonus amount if we did not meet
established minimum levels for
both
revenue and pre-tax income and an upward adjustment of up to 200% based upon achievement relative to the corporate financial
performance goals as set forth in the table below. Therefore, in order to receive any bonus payout, we were required to achieve both the minimum revenue and pre-tax income levels established by the
Compensation Committee for the bonus plan.
Scaled Adjustment of Target Annual Cash Bonus Amounts Based on Total Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
Target (100% Payout)
|
|
Superior (150% Payout)
|
|
Maximum (200% Payout)
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
260.0
|
|
$
|
280.4
|
|
$
|
350.6
|
|
$
|
420.7
|
|
Pre-tax Income
|
|
$
|
4.8
|
|
$
|
11.8
|
|
$
|
26.0
|
|
$
|
44.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on our actual results for fiscal 2017, the achievement percentages for the revenue and pre-tax income metrics were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Goal
|
|
Performance
Goal
($ in millions)
|
|
Actual
Performance ($ in
millions)
|
|
Percentage of
Achievement
|
|
Payout
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
280.4
|
|
|
264.9
|
|
|
94.4%
|
|
|
23.8%
|
|
Pre-Tax Income
|
|
|
11.8
|
|
|
14.2
|
|
|
120.9%
|
|
|
111.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Compensation Committee awarded a 75.0% achievement level with respect to the operational imperatives component of the fiscal year 2017 annual bonus based on its subjective assessment of the
company's achievement of operational imperatives during the fiscal year. Specifically, the Compensation Committee noted the following:
Compliance and Safety
We continued to make enhancements to our compliance, certification
and safety programs, including our export compliance program, and identified no material non-compliance during fiscal 2017 in areas that were not already being enhanced.
Customer Satisfaction
During fiscal 2017, we implemented new methods, programs and
metrics to monitor customer satisfaction with our products and services to serve our customers better. Additionally, we improved on-time delivery of our products and improved overall warranty costs.
Strategic Growth
We made significant progress in a number of our strategic growth
initiatives during fiscal year 2017, including those within our Tactical Missile Systems and Tactical UAS business areas. In fiscal 2017, we were successful in growing our international customer base
to more than 40 allied countries, launching multiple products to the market, including our new Mantis® i45 gimbaled sensor suite for our Puma AE UAV, and securing additional orders
45
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
for our Switchblade products and its multiple variants.
Organizational Development
Company leadership's objective was to increase overall
employee engagement. The company initiated and made progress in multiple projects and initiatives in support of this imperative. We continued to increase employee engagement and implemented a number
of training, development and continuous improvement programs during fiscal 2017. In addition, we implemented a new employee performance management system in fiscal 2017 in order to increase overall
employee performance and engagement.
Competitive Rates
During fiscal 2017, we were able to achieve and maintain competitive
bidding rates in order to remain competitive for U.S. government business, which is critical to the success of our business. We successfully measure, track and maintain competitive bidding rates.
In
determining the payout percentage for the operational imperatives for the fiscal year 2017 bonus plan, the achievement percentage of the operational
imperatives
was adjusted further by the average of the payout percentages for the revenue and pre-tax income metrics, or 67.4%.
The
Compensation Committee awarded varying individual achievement levels for each non-CEO Named Executive Officer based on our Chief Executive Officer's assessment of such officer's individual
performance and contributions. Based upon our Chief Executive Officer's recommendation, the committee awarded an achievement level for the individual component of the bonus plan of 67% for
Ms. Covington, 44% for Mr. Flittie and 33% for Mr. Karklin. In determining the payout percentage for each non-CEO's individual performance goals, the achievement percentage for
each officer was adjusted further by the average of the payout percentages for the revenue and pre-tax income metrics, or 67.4%.
The
table below shows the payout percentages for the financial metrics and operational imperatives for the fiscal year 2017 bonus plan. In addition, it shows the weighted payout percentage for each
metric based on the applicable weightings of such metrics under the bonus plans for our Chief Executive Officer and our Non-CEO Named Executive Officers.
Percentage of Achievement of Corporate Performance Goals and Weighted Average Payout Percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Payout
Percentage
|
|
Performance Goal
|
|
Percentage of
Achievement
|
|
Payout
Percentage
|
|
CEO
|
|
Non-CEO
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
94.4%
|
|
|
23.8%
|
|
|
7.9%
|
|
|
6.0%
|
|
Pre-Tax Income
|
|
|
120.9%
|
|
|
108.6%
|
|
|
36.2%
|
|
|
27.2%
|
|
Operational Imperatives
|
|
|
75.0%
|
|
|
49.7%
|
|
|
16.8%
|
|
|
12.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on the company's achievement of the corporate performance goals and each non-CEO Named Executive Officer's achievement of his or her individual performance goals, the Named Executive Officers
received a total payout of their fiscal 2017 bonus as follows. The payout also included an award of a discretionary bonus approved by the Compensation Committee:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Payout Percentage (%)
|
|
|
|
|
|
Revenue
|
|
Pre-Tax
Income
|
|
Operational
Imperatives
|
|
Individual
Performance
Goals
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
|
7.9%
|
|
|
36.2%
|
|
|
16.8%
|
|
|
n/a
|
|
|
60.9%
|
|
Teresa Covington
|
|
|
6.0%
|
|
|
27.2%
|
|
|
12.6%
|
|
|
11.0%
|
|
|
56.8%
|
|
Kirk Flittie
|
|
|
6.0%
|
|
|
27.2%
|
|
|
12.6%
|
|
|
7.3%
|
|
|
53.1%
|
|
Kenneth Karklin
|
|
|
6.0%
|
|
|
27.2%
|
|
|
12.6%
|
|
|
5.5%
|
|
|
51.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upon
recommendation of our Chief Executive Officer, the Compensation Committee awarded a discretionary increase in the bonus payouts for all
employees
for fiscal 2017. Our Chief Executive Officer and Compensation Committee determined that the award of a discretionary bonus for all employees was
46
Table of Contents
EXECUTIVE COMPENSATION AND OTHER INFORMATION
appropriate
because all company employees working as a team contributed to the company's success in fiscal 2017, including our significant improvement in our Contractor Performance Assessment Reports
(CPARs) ratings. A CPAR assesses a government contractor's performance under U.S. government contracts and provides a record, either positive or negative, on such contractor during a specific period
of time. An assessment is based on program and contract management data, including cost performance reports, customer comments, quality reviews, technical interchange meetings, financial solvency
assessments, construction/production management reviews, contractor operations reviews, functional performance evaluations, and earned contract incentives. It is critical to our business, as a U.S.
government contractor generating a significant portion of our revenue from US government contracts, that we perform well against the expectations of our customers under our government contracts. In
fiscal year 2017, we achieved excellent scores in almost every evaluation area on all of our CPARs. This was a significant achievement and represented improvement from fiscal year 2016, which
positions us well for future U.S. government contracts because the U.S. government uses past CPAR scores and standings in evaluating the award of new contracts.
All
non-CEO employees received a discretionary award of 33.7%. The Compensation Committee approved a 27.1% discretionary increase for our Chief Executive Officer's fiscal 2017 bonus payout to assure
more pay equity with our other Named Executive Officers, which resulted in a total percentage payout for our Chief Executive Officer's fiscal 2017 bonus equal to the average payout of our other Named
Executive Officers.
Messrs. Cook
and Scott did not receive annual bonuses since they were not employed for the full fiscal year 2017.
Long-Term Incentive Compensation
We use equity awards to motivate our executive officers, including the Named Executive Officers, to
increase
the long-term value of our common stock and, thereby, to align the interests of our executive officers with those of our stockholders. These equity awards are intended to further our success
by ensuring that sustainable value creation is a key factor in our executive officers' management of our business.
The
size and form of these equity awards is determined by the Compensation Committee in its discretion. As described below, we grant equity awards in the form of restricted stock and PRSUs to our
Named Executive officers as part of our long-term incentive compensation program. We use the restricted stock and restricted stock units as long-term incentives because they reward our executive
officers for improved stock price performance, but also encourage executive retention as these awards maintain value even during periods when there is volatility in our stock price.
In
prior years, we have used stock options as a long-term incentives because, in addition to providing our executive officers with the opportunity to develop a stock ownership stake in our company,
they result in compensation only to the extent that the market price of our common stock increases over the option term.
In
making equity awards to our executive officers, the Compensation Committee considers various factors, including, but not limited to, the recommendations of our Chief Executive Officer, the role and
responsibilities of the executive officer, past performance, future planned contributions, and prior equity awards.
As
noted above, the Compensation Committee has the discretion to determine which executive officers will receive equity awards, as well as the amount of any such awards. Typically, the Compensation
Committee grants equity awards only on the dates of its regularly-scheduled committee meetings, without regard to the timing of the release of material information about us. All stock options are
granted with an exercise price equal to the closing market price of our common stock on the date of grant. Historically, we have issued stock options that vest in five equal installments on each of
the first five anniversaries of the date of grant.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
No Equity Awards to Named Executive Officers During Fiscal 2017 Due to Implementation of New Long-Term
Incentive Compensation Program
None of our Named Executive Officers received any long-term incentive compensation or other equity awards during fiscal year 2017 (with the
exception of Mr. Conver, who received stock awards as part of his non-employee director compensation pursuant to our director compensation program, as described above). Due to the extended
design and implementation period for our new long-term incentive compensation program, as described in more detail below, the initial awards granted under the program were granted following the end of
fiscal year 2017 but have vesting terms and performance objectives, as applicable, that take fiscal year 2017 into account to compensate such officers for their service during fiscal 2017 while the
new program was being considered by the Compensation Committee. As a result, our Named Executive Officers will receive both these initial awards during fiscal year 2018, which are intended to
represent the awards they would have otherwise received during fiscal year 2017 had our new long-term incentive compensation program been in place at that time, and additional awards during fiscal
year 2018 that represent the ordinary course annual awards for our Named Executive Officers.
Long-Term Incentive Compensation Program Prior to Fiscal Year 2017
In furtherance of our compensation philosophy that a significant portion of overall compensation for our executive officers, including the Named Executive
Officers, should be tied to performance, in July 2010, the Compensation Committee established a long-term incentive compensation program and made annual long-term compensation awards under the
company's Amended and Restated 2006 Equity Incentive Plan to the executive officers of the company as well as other
officers
and senior managers in each fiscal year until fiscal 2017. The long-term compensation awards would vest based on the company's achievement of financial metrics for a specified cumulative
three-year period. Following the completion of each three-year performance period associated with an award, the Compensation Committee would determine whether the company had achieved such financial
metrics and the associated achievement level for such metrics. If the financial metrics were met, the award would be paid out as follows: 50% in cash, paid as soon as practicable after the committee's
certification of the company's achievement of the financial metrics associated with the award (the "Certification Date"); and 50% in the form of a number of restricted stock units equal to
(1) the portion of the award to be paid in the form of restricted stock units divided by (2) the fair market value per share of the company's common stock on the Certification Date. The
restricted stock units would vest in two equal tranches on the last day of the first and second fiscal years following the completion of the relevant performance period. The awards would be settled in
cash or in shares of the company's common stock, in the discretion of the Compensation Committee. In the event an executive's employment terminates before the end of a performance period or prior to
the payment and/or vesting of the cash portion of the award or the restricted stock units, the award and the restricted stock units will be forfeited.
For
each performance period under the program, the Compensation Committee determined a goal bonus amount for each executive, as well as financial objectives. A minimum achievement level relative to
each financial objective must be met in order for any award to be paid. An executive's final award amount will be determined based on the highest performance relative to any of the financial goals and
will be determined based on a sliding scale between achievement levels as follows:
|
|
|
Highest Level of
Achievement Relative
to Any Financial Objective
|
|
Final Award Value
|
|
|
|
85.0% Achievement (Adjusted upward to 88.5% for FY2015-FY2017 Performance Period) (Threshold)
|
|
50% of the Goal LTIP Amount
|
100% Achievement (Target)
|
|
100% of the Goal LTIP Amount
|
150% Achievement (Maximum)
|
|
200% of the Goal LTIP Amount
|
|
|
|
Although
this historical long-term incentive compensation program has been discontinued, as further described below, below is a summary of the awards that remained outstanding under such program
during fiscal year 2017.
Awards Under the Program for the FY2015-FY2017 Performance Period.
In August 2014, the Compensation Committee granted awards under its prior long-term incentive
compensation program for the
48
Table of Contents
EXECUTIVE COMPENSATION AND OTHER INFORMATION
three-year
performance period that ran from the beginning of our 2015 fiscal year through the end of our 2017 fiscal year (such period of time is referred to as the FY2015-FY2017 Performance Period)
and established the revenue and gross profits objectives for such FY2015-FY2017 Performance Period. The financial goals for the FY2015-FY2017 Performance Period consisted solely of financial targets
for the fiscal year 2017 period. Mr. Cook was granted a pro-rated award under the long-term compensation program for the FY2015-FY2017 Performance Period in connection with his employment with
the company, which commenced on July 7, 2015. Set forth below is a list of the Named Executive Officers who were granted long-term incentive compensation awards under the program for the
FY2015-FY2017 Performance Period, the goal bonus amount for each Named Executive Officer and the maximum value of each such award. The terms of these awards were consistent with the terms of the
program described above.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Goal
LTIP
Amount
($)
|
|
Maximum
LTIP
Amount
($)
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
President and Chief Executive Officer
|
|
188,000
|
|
376,000
|
Timothy E. Conver
1
|
|
Former President and Chief Executive Officer
|
|
387,600
|
|
775,200
|
Teresa Covington
|
|
Senior Vice President and Chief Financial Officer
|
|
70,000
|
|
140,000
|
Raymond Cook
2
|
|
Former Senior Vice President and Chief Financial Officer
|
|
116,111
|
|
232,222
|
Kirk Flittie
|
|
Vice President and General Manager, UAS
|
|
75,000
|
|
150,000
|
Ken Karklin
|
|
Vice President and General Manager, EES
|
|
35,000
|
|
70,000
|
Doug Scott
3
|
|
Former Senior Vice President, General Counsel and Secretary
|
|
131,000
|
|
262,000
|
|
|
|
|
|
|
|
-
1
-
Mr. Conver's employment ended effective May 2, 2016, at which time he forfeited these awards.
-
2.
-
In June 2015, the Compensation Committee granted Mr. Cook an award under the long-term incentive compensation program for the FY2015-FY2017 Performance Period
effective as of his start of employment with the company. Mr. Cook's employment ended effective February 28, 2017 at which time he forfeited these awards.
-
3.
-
Mr. Scott's employment ended effective October 3, 2016 at which time he forfeited these awards.
For
the awards under the long-term incentive compensation program for the FY2015-FY2017 Performance Period, the Compensation Committee established the following long-term compensation plan corporate
financial objectives:
|
|
|
|
|
|
|
Financial Measure
|
|
Threshold
|
|
Objective
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Revenue
|
|
$384.9
|
|
$434.9
|
|
$652.4
|
Gross Profits
|
|
143.2
|
|
$161.8
|
|
$242.7
|
|
|
|
|
|
|
|
Following
the completion of fiscal year 2017, the Compensation Committee determined that the company's fiscal year 2017 revenue was $264.9 million for the FY2015-FY2017 Performance Period,
missing the objective by 64.2%, and that its fiscal year 2017 gross profits were $102.1 million, missing the objective by 14.4%. Accordingly, each Named Executive Officer's long-term
compensation plan award for the FY2015-FY2017 Performance Period was forfeited and no amounts were paid in respect of such awards.
Awards under the Program for the FY2016-FY2018 Performance Period.
In June 2015, the Compensation Committee granted awards under our prior long-term incentive
compensation program for the three-year performance period that will run from the beginning of our 2016 fiscal year through the end of our 2018 fiscal year (such period of time is referred to as the
FY2016-FY2018 Performance Period) and established the revenue and gross profits objectives for such FY2016-FY2018 Performance Period. The financial goals for the FY2016-FY2018 Performance Period
consisted of cumulative financial targets for the 2016, 2017 and 2018 fiscal years. Set forth below is a list of the Named Executive Officers who were granted long-term incentive compensation awards
under the program for the FY2016-FY2018 Performance Period, the goal bonus amount for each Named Executive
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Table of Contents
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Officer
and the maximum value of each such award. The terms of these awards are consistent with the terms of the program described above.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Goal
LTIP
Amount
($)
|
|
Maximum
LTIP
Amount
($)
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
President and Chief Executive Officer
|
|
265,000
|
|
530,000
|
Timothy E. Conver
1
|
|
Former President and Chief Executive Officer
|
|
450,000
|
|
900,000
|
Teresa Covington
|
|
Senior Vice President and Chief Financial Officer
|
|
95,000
|
|
190,000
|
Raymond Cook
2
|
|
Former Senior Vice President and Chief Financial Officer
|
|
190,000
|
|
380,000
|
Kirk Flittie
|
|
Vice President and General Manager, UAS
|
|
150,000
|
|
300,000
|
Ken Karklin
|
|
Vice President and General Manager, EES
|
|
100,000
|
|
200,000
|
Doug Scott
3
|
|
Former Senior Vice President, General Counsel and Secretary
|
|
145,000
|
|
290,000
|
|
|
|
|
|
|
|
-
1.
-
Mr. Conver's employment ended effective May 1, 2016, at which time he forfeited these awards.
-
2.
-
Mr. Cook's employment ended effective February 28, 2017 at which time he forfeited these awards.
-
3.
-
Mr. Scott's employment ended effective October 3, 2016 at which time he forfeited these awards.
Implementation of New Long-Term Incentive Compensation Program Awards
Under the long-term incentive compensation program in effect prior to fiscal 2017, only the award for the two-year performance period comprising fiscal years
2011 and 2012 resulted in a payout to our executive officers. As a result of this historical non-payout of such awards, in fiscal 2017 the Compensation Committee engaged a new independent compensation
consultant, Pay Governance LLC, in July 2016 to assess the company's long-term incentive compensation program and to assist the committee in developing an appropriate long-term incentive
compensation program to ensure that the company's long-term incentive compensation program and the overall compensation of our executives remained competitive with those of our peer companies and
appropriately incentivized our executives to focus on the company's long-term growth and strategic objectives.
Pay
Governance interviewed members of the company's management regarding the company's compensation practices and provided the committee with market data on long-term incentive compensation programs
utilized by our peer companies. Pay Governance used the same peer companies as the company's prior independent compensation consultant, Compensia. Based on Pay Governance's assessment and
recommendations regarding changes to the company's long-term incentive compensation program structure, the Compensation Committee implemented a new long-term incentive compensation program. The
initial awards were made under this new program in May 2017. Due to the extended design and implementation period for the new long-term incentive compensation program, the initial awards granted under
the program were granted following the end of
fiscal
year 2017 but have vesting terms and performance objectives, as applicable, that take fiscal year 2017 into account to compensate such officers for their service during fiscal 2017 while the
new program was being considered by the Compensation Committee, The new program consists of a mix of the following:
Performance Restricted Stock Unit Awards ("PRSUs") (Approximately 67% of Total Long-Term Incentive Compensation Award
Value)
: PRSUs will vest based on the company's achievement of financial performance metrics established by the Compensation Committee at the time of grant. These metrics will
be for a cumulative three-year period. At the time of grant, the Compensation Committee establishes a target achievement level for each of the financial performance metrics associated with the PRSU,
at which level the PRSU would vest at 100% for such metric. The Compensation Committee also established a threshold achievement level for which the PRSU would vest at 50% for such metric and a maximum
achievement level for which the PRSU would vest at 200% for such metric. Achievement below the threshold level of any financial metric would result in no payout for the portion of the PRSU tied to
that financial metric. At the end of the applicable three-year performance period and the Compensation Committee's certification of the company's achievement percentage for each financial measure
associated with the PRSU, the award will vest and fully-vested shares of the company's common stock will be issued based on the achievement of the financial metrics. Upon vesting, the PRSUs will
settle in fully-vested shares of common stock.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
Time-Based Restricted Stock Awards (Approximately 33% of Total Long-Term Incentive Compensation Award Value)
:
Restricted stock awards will vest in three annual equal installments beginning approximately one year after the date of grant.
The
new long-term incentive compensation program is intended to be an ongoing program under which the Compensation Committee will grant the above-described awards each year. However, the Compensation
Committee is not obligated to grant awards under the program each year, and it may grant awards in any given year with terms that vary from those set forth above in any respect, including, among other
things, the performance objectives, the aggregate award values and the performance period. All determinations, interpretations and assumptions relating to the vesting and the calculation of the awards
under the program will be made by the Compensation Committee.
Each
year, the Compensation Committee will set a total long-term incentive compensation amount for each officer. For Named Executive Officers, a higher percentage of the total amount will be issued in
PRSUs, with the percentage allocation to be determined by the Compensation Committee. In setting these total long-term incentive compensation amounts and the financial metric achievement levels for
the PRSUs, the Compensation Committee considered the overall compensation of executives holding comparable positions based on the competitive market data provided by its independent compensation
consultant based on our peer group and the survey data. Generally, the Compensation Committee will set the annual total award amount so that, assuming the full vesting of each restricted stock award
and PRSU for the applicable performance period, the total compensation for our Named
Executive
Officers would be comparable with similarly situated executives at the companies in our peer group.
Below
is a description of the initial awards issued in May 2017 pursuant to the Company's new long-term incentive program:
Performance Restricted Stock Unit Awards for the FY2017-FY2019 Performance Period.
In May 2017, the Compensation Committee granted PRSUs to the Named Executive
Officers. The PRSUs will vest based on the company's achievement of cumulative revenue and operating income targets for fiscal years 2017, 2018 and 2019 (such period of time is referred to as the
FY2017-FY2019 Performance Period). Set forth below is a list of the Named Executive Officers who were granted PRSUs for the FY2017-FY2019 Performance Period, the target number of RSUs and the maximum
number of RSUs subject to each such award. The terms of these awards are consistent with the terms of the PRSUs described above.
Time-Based Restricted Stock Awards.
Under the new long-term incentive compensation program, in May 2017, the Compensation Committee issued time-based restricted
stock awards to our Named Executive Officers. The restricted stock awards vest in three equal annual installments with the first vesting on July 11, 2017. The Compensation Committee determined
that the first vesting date for such awards should be in July 2017 due to the delay in implementing the new long-term incentive compensation program for fiscal 2017 and to compensate such officers for
their service during fiscal 2017 while the new program was being considered by the Compensation Committee. Set forth below is a list of the Named Executive Officers who were issued restricted stock
awards in May 2017 and the number of shares underlying such awards:
May 2017 Long-Term Incentive Compensation Awards to the Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Title
|
|
RSAs
(#)
|
|
Target
PRSUs
(#)
|
|
Maximum
PRSUs
(#)
|
|
% of Total
Long-Term
Award
Allocated to
Performance
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
President and Chief Executive Officer
|
|
7,890
|
|
15,136
|
|
30,272
|
|
65.7%
|
Teresa Covington
|
|
Senior Vice President and Chief Financial Officer
|
|
2,415
|
|
5,314
|
|
10,628
|
|
68.8%
|
Kirk Flittie
|
|
Vice President and General Manager, UAS
|
|
2,145
|
|
5,314
|
|
10,628
|
|
68.8%
|
Ken Karklin
|
|
Vice President and General Manager, EES
|
|
1,610
|
|
3,059
|
|
6,118
|
|
65.5%
|
|
|
|
|
|
|
|
|
|
|
|
For
these initial awards, the Compensation Committee allocated approximately two-thirds of the total long-term incentive compensations amounts for each Named Executive Officer to the PRSU
performance-based awards.
51
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
Other Compensation Practices
Employee Benefit Plans
We maintain various broad-based employee benefit plans for our employees. Except as described below, our executive officers, including the Named Executive
Officers, participate in these plans on the same terms as other eligible employees, subject to any applicable limits on the amounts that may be contributed on behalf of or paid to our executive
officers under these plans.
We
have established a tax-qualified 401(k) retirement savings plan for our salaried U.S. employees who satisfy certain eligibility requirements. We intend for this plan to qualify under
Section 401(a) of the Code so that contributions by participants to the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan. Pursuant to
the Section 401(k) plan, in the case of participants who contribute a portion of their annual base salary to the plan, we provide a matching contribution of up to 5.75% of such annual base
salary. The matching contributions made to the accounts of the Named Executive Officers during fiscal year 2017 are set forth in the Summary Compensation Table below.
We
also maintain other benefit plans for our employees, which include medical and dental benefits, medical and dependent care flexible spending accounts, long-term disability insurance, accidental
death and dismemberment insurance, and basic life insurance coverage. Except as noted in the following sentences, these benefits are provided to our executive officers on the same general terms as to
all of our salaried U.S. employees. Certain employees receive higher disability insurance benefits than other employees based on a threshold base compensation level. Our executive officers, including
the Named Executive Officers, receive higher life, accidental death, and dismemberment insurance benefits than our other employees.
We
design our employee benefit programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefit programs as
needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Personal Benefits
We do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, however, we have
provided perquisites to certain of our executive officers to ensure that their compensation packages are competitive. As described above, in fiscal year 2017, we provided our executive officers with
life, accidental death, and dismemberment insurance benefits in an amount exceeding that offered to our non-executive employees.
Pursuant
to an agreement with Mr. Conver, we provide supplemental medical coverage for Mr. Conver and his spouse following his retirement. As of April 30, 2017, the actuarial
value of Mr. Conver and his spouse's lifetime supplemental medical coverage is approximately $196,218, based on the estimated future cost of insurance premiums and the life expectancies of
Mr. Conver and his spouse. The value of the supplemental medical coverage provided to Mr. Conver and his spouse during fiscal year 2017 is reflected in the Summary Compensation Table
below.
The
amounts of the perquisites and other personal benefits provided to the Named Executive Officers in fiscal year 2017 are disclosed in the Summary Compensation Table below
Severance and Change in Control Agreements
In December 2015, we entered into severance protection agreements with our Named Executive Officers (Wahid Nawabi, Tim Conver, Raymond Cook, Teresa Covington,
Kirk Flittie, Kenneth Karklin and Doug Scott), which provide for the payment of certain benefits to the officer in connection with a change in control and/or the termination of the officer's
employment. Mr. Nawabi entered into an amended and restated agreement in May 2016 upon the effectiveness of his appointment as our Chief Executive Officer. Ms. Covington entered into an
amended and restated agreement in June 2017 in connection with her appointment as our Chief Financial Officer in March 2017. Mr. Conver's agreement expired upon his retirement in May 2016 and
is no longer in effect.
The
Compensation Committee approved the severance protection agreements to ensure our named executive officers continue their employment with us if there is a change of control, or a threatened change
in control transaction, and to maintain a
52
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
competitive
total compensation program after discussing with Compensia the terms of similar arrangements in place for executives at companies in our peer group. The severance protection agreements
have a double trigger mechanism pursuant to which benefits are paid if the officer is terminated by the company without
cause or the officer terminates his or her employment for good reason within 18 months following a change in control event, or in certain circumstances, 3 months prior to a change in
control event. The agreements also provide for the provision of certain severance benefits if an officer's employment is terminated by the company other than for cause during the term of the agreement
not in connection with a change of control transaction. The agreement with our Chief Executive Officer also provides for the payment of severance benefits if he terminates his employment with the
company for good reason during the term of the agreement not in connection with a change of control transaction. For additional information on our severance protection agreements, see below on
page 60 under "Severance Protection Agreements."
Stock Ownership Guidelines for Executive Officers
To further link the long-term economic interests of our executive officers directly to that of our stockholders,
our
board of directors adopted stock ownership guidelines for the executive officers in August 2013. The guidelines provide that the company's executive officers are expected to, within five years of
the later of August 6, 2013 or the date on which such person is appointed to his or her position, own shares of the company's common stock with a market value of no less than four times current
annual base salary with respect to our Chief Executive Officer and no less than two times current annual base salary with respect to the other executive officers. In addition, any shares of our common
stock held by an executive officer in margin accounts or pledged as collateral for a loan will not be counted for purposes of satisfying the ownership guidelines. The company determines progress
towards meeting the applicable ownership thresholds and ongoing compliance with the guidelines on the last day of each fiscal year. The table below shows each executive's equity ownership in the
company as a multiple of salary and the minimum ownership level required pursuant to these guidelines for each of our current executive officers as of April 30, 2017 (information regarding
Mr. Conver's compliance with our ownership guidelines for non-employee directors is disclosed above under "Director Compensation"):
|
|
|
|
|
|
|
|
Name
|
|
Dollar Value
of Equity
Ownership as
a Multiple
of Base Salary
($)
1
|
|
Minimum
Ownership
Level
Required as a
Multiple of
Base Salary
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
2
|
|
|
1.2x
|
|
|
4x
|
|
Teresa Covington
3
|
|
|
|
|
|
2x
|
|
Kirk Flittie
|
|
|
6.1x
|
|
|
2x
|
|
Kenneth Karklin
4
|
|
|
|
|
|
2x
|
|
|
|
|
|
|
|
|
|
-
1.
-
For each executive, calculated by dividing (a) the sum of (1) the aggregate number of shares of vested and unrestricted common stock held by such
executive, multiplied by the closing price of $28.57 per share of our common stock on April 28, 2017, the last trading day of fiscal 2017, plus (2) the amount by which the market value
of the shares of common stock underlying vested stock options held by such executive exceeds the exercise price of such stock options, if any, by (b) such executive's base salary.
-
2.
-
Mr. Nawabi was appointed as our Chief Executive Officer effective May 2, 2016. He has until May 2, 2021 to satisfy the minimum ownership level
required for our Chief Executive Officer position of 4x his base salary under our stock ownership guidelines.
-
3.
-
Ms. Covington was appointed as our Chief Financial Officer effective March 1, 2017. She has until March 1, 2022 to satisfy the minimum ownership
level required under our stock ownership guidelines.
-
4.
-
Mr. Karklin was appointed as a Section 16 officer on September 30, 2016. He has until September 30, 2021 to satisfy the minimum ownership
level required under our stock ownership guidelines.
Compensation Recovery Policy
In August 2013, we implemented an incentive compensation "clawback" policy under which our board of directors may require reimbursement or forfeiture of
incentive compensation from an executive officer in the event the officer's wrongdoing later is determined by our board of directors to have resulted
in
a material negative restatement of the company's financial results. We believe that by providing the company with the appropriate power to recover incentive compensation paid to an executive
officer in this situation, the company further demonstrates its commitment to strong corporate governance. This compensation recovery policy is in addition to any policies or recovery rights that are
provided under
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
applicable
laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.
Under
our compensation recovery policy, if the board of directors determines that a material negative financial restatement was caused by an executive officer's gross negligence or willful misconduct,
it may require reimbursement from the executive officer for vested incentive compensation and/or the forfeiture of unvested or unpaid incentive compensation. The amount of vested compensation that may
be recovered is the portion of any bonus paid to, and any performance-based equity awards earned by, the executive officer that the executive officer would not have received if the company's financial
results had been reported properly. The right to cause a forfeiture or recovery of incentive compensation applies to incentive compensation awarded, vested and/or paid during the two years prior to
the date on which the company is required to prepare an accounting restatement.
Post-Vesting Stock Retention Guidelines
The company has adopted post-vesting stock retention guidelines, which require executives to hold 50% of net after-tax shares issued upon the vesting of
equity awards until their required stock ownership levels are achieved.
Insider Trading and Anti-Hedging Policies
The company's insider trading policies contain stringent restrictions on transactions in company stock by executive officers. All trades by executive officers
must be pre-cleared. Furthermore, no executive officer may use any strategies or products (including derivative securities, such as put or call options, or short-selling techniques) to hedge against
potential changes in the value of our common stock.
No Tax Gross-Ups
We do not provide tax gross-ups with regard to any compensation, benefit or perquisite paid by us to our Named Executive Officers.
Independent Compensation Consultant
With regard to executive compensation matters, the Compensation Committee is advised by an independent compensation consultant.
Say-on-Pay Votes
In October 2014, we held a stockholder advisory vote on the compensation of our Named Executive Officers,
commonly
referred to as a say-on-pay vote. Our stockholders overwhelmingly approved the compensation of our Named Executive Officers, with over 95% of stockholder votes cast in favor of our 2014
say-on-pay resolution (excluding abstentions and broker non-votes). As we evaluated our compensation practices and talent needs since that time and during fiscal year 2017, we were mindful of the
strong support our stockholders expressed for our compensation program. As a result, following our annual review of our executive compensation program, the Compensation Committee decided to generally
retain our existing
approach to executive compensation for our continuing executives, with an emphasis on short- and long-term incentive compensation that rewards our senior executives when they deliver value for our
stockholders. At this 2017 annual meeting of stockholders, the stockholders will vote, on an advisory basis, on the compensation of our Named Executive Officers. The Compensation Committee and board
of directors value stockholder opinions and will take into account the outcome of this year's advisory vote in making future decisions on executive compensation.
In
addition, when determining how often to hold a stockholder advisory vote on the compensation of our Named Executive Officers, the board of directors took into account the strong preference for a
triennial vote expressed by our stockholders at our 2011 annual meeting. Accordingly, in 2011 the board of directors determined that we would hold an advisory stockholder vote on the compensation of
our Named Executive Officers every three years until the next say-on-pay frequency vote. At this 2017 annual meeting of stockholders, the stockholders will vote, on an advisory basis, on the frequency
with which we should hold say-on-pay votes, either every year, every two years or every three years. The Compensation Committee and board of directors will take into account the outcome of this year's
advisory vote in making its decision on how frequently we hold say-on-pay votes.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Generally, Section 162(m) of the Code disallows a tax deduction to any publicly-held corporation for any remuneration in excess of $1 million
paid in any taxable year to its chief executive officer and certain other executive officers. Remuneration in excess of $1 million may be deducted if, among other things, it qualifies as
"performance-based compensation" within the meaning of the Code.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
The
Compensation Committee believes that stockholder interests are best served by not restricting the Compensation Committee's discretion and flexibility in crafting compensation programs, even though
such programs may result in certain non-deductible compensation expenses. Accordingly, the Compensation Committee reserves the right to approve elements of compensation for certain officers that are
not fully deductible in the future in appropriate circumstances.
Taxation of "Parachute" Payments
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service
providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits, and that we, or our
successor, may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any Named Executive Officer, with a "gross-up" or other
reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during fiscal year 2017 and we have not agreed and are not otherwise
obligated to provide any Named Executive Officer with such a "gross-up" or other reimbursement.
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock-based compensation awards. ASC
Topic 718 requires companies to calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in
the compensation tables
below, even though recipients may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income
statements over the period that an employee is required to render service in exchange for the award.
Risk Oversight of Compensation Programs
We conducted a risk assessment of our compensation policies and practices for our employees for fiscal 2017 compensation, including those
relating to our executive compensation program. This risk assessment included a review of all our employee compensation programs, including our executive
officer
compensation program. Based on this assessment, we believe that these compensation programs have been appropriately designed to attract and retain talent and properly incent our employees
while ensuring that they do not encourage excessive risk taking. We further believe that we have an effective system of controls and procedures in place to ensure that our employees, including our
executive officers, are not encouraged to take unnecessary or excessive risks in managing our business. In addition, our recently adopted compensation recovery policy provides our board of directors
with an additional risk mitigation tool by allowing the board to hold employees accountable for improper actions that run counter to the company's objectives or inflate incentive compensation payable
to executives. Likewise, our recently adopted stock ownership guidelines for executives help to further align executive interests with those of stockholders and provide an additional risk mitigation
tool.
In
reaching this conclusion, we note the following policies and practices that are intended to enable us to effectively monitor and manage the risks associated with our compensation
programs:
Most of our incentive compensation plans, including our annual cash bonus program, permit the Compensation Committee to exercise its discretion to
select
performance measures and set target levels, monitor performance and determine final payouts;
Each of our compensation programs is subject to oversight by a broad-based group of functions within the company, including human resources, finance and
legal, and at multiple management levels within the company;
Employee compensation reflects a balanced mix of programs that focus our employees on achieving both short-term and long-term goals and that
provide a
balanced mix of fixed and variable compensation;
There are caps on the maximum payouts available under certain programs, including our annual cash bonus program and our long-term incentive
program; and
Equity awards granted to employees are subject to multi-year, service-based vesting conditions.
We
discussed the findings of our risk assessment with the Compensation Committee. Based upon this assessment, we believe that our compensation policies and practices do not encourage unnecessary or
excessive risk taking and are not reasonably likely to have a material adverse effect on the company.
55
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EXECUTIVE COMPENSATION TABLES
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
The following table sets forth the compensation during the last three fiscal years paid to or earned by (a) each person who served as
Chief Executive Officer or Chief Financial Officer during fiscal year 2017; (b) the two most highly compensated executive officers other than the Chief Executive Officer and Chief Financial
Officer who were serving as executive officers at the end of fiscal year 2017 whose compensation exceeded $100,000; and (c) one individual who served as an executive officers during fiscal year
2017 but
was not serving as an executive officer at the end of fiscal year 2017 (collectively, the "Named Executive Officers").
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Positions
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
1
|
|
Stock
Awards
($)
2
|
|
Option
Awards
($)
2
|
|
Non-Equity
Incentive Plan
Compensation
($)
3
|
|
All Other
Compensation
($)
4
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
5
|
|
2017
|
|
510,973
|
|
121,590
|
|
|
|
|
|
239,210
|
|
16,039
|
|
887,812
|
President and Chief Executive
|
|
2016
|
|
358,083
|
|
41,499
|
|
400,500
|
|
507,926
|
|
197,001
|
|
23,564
|
|
1,528,573
|
Officer, Former Senior Vice
|
|
2015
|
|
308,672
|
|
|
|
226,989
|
|
227,073
|
|
170,015
|
|
16,145
|
|
948,894
|
President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy E. Conver
6
|
|
2017
|
|
|
|
|
|
110,009
|
|
|
|
|
|
108,074
|
|
218,083
|
Former President and Chief
|
|
2016
|
|
569,322
|
|
70,470
|
|
400,500
|
|
304,755
|
|
334,530
|
|
24,151
|
|
1,703,728
|
Executive Officer
|
|
2015
|
|
522,935
|
|
|
|
299,973
|
|
300,095
|
|
350,520
|
|
24,344
|
|
1,497,867
|
Teresa Covington
7
|
|
2017
|
|
256,036
|
|
45,742
|
|
|
|
|
|
89,990
|
|
15,968
|
|
407,736
|
Senior Vice President and Chief
|
|
2016
|
|
259,085
|
|
14,877
|
|
267,587
|
|
|
|
70,623
|
|
16,193
|
|
628,366
|
Financial Officer, Former Vice
|
|
2015
|
|
242,581
|
|
70,000
|
|
|
|
|
|
63,303
|
|
15,203
|
|
391,087
|
President of Finance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Cook
8
|
|
2017
|
|
302,970
|
|
|
|
|
|
|
|
|
|
363,017
|
|
665,987
|
Former Senior Vice President and Chief Financial Officer
|
|
2016
|
|
262,500
|
|
79,754
|
9
|
408,750
|
|
308,125
|
|
141,246
|
|
7,111
|
|
1,207,486
|
Kirk Flittie
10
|
|
2017
|
|
280,298
|
|
43,855
|
|
|
|
|
|
86,279
|
|
17,153
|
|
427,585
|
Vice President and General Manager, UAS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
10
|
|
2017
|
|
232,399
|
|
28,635
|
|
|
|
|
|
56,336
|
|
13,993
|
|
331,363
|
Vice President and General Manager, EES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doug Scott
11
|
|
2017
|
|
149,861
|
|
|
|
|
|
|
|
|
|
379,857
|
|
529,718
|
Former Senior Vice President,
|
|
2016
|
|
298,957
|
|
22,707
|
|
133,500
|
|
101,585
|
|
107,793
|
|
18,002
|
|
682,544
|
General Counsel and Secretary
|
|
2015
|
|
274,056
|
|
|
|
113,979
|
|
114,028
|
|
118,468
|
|
12,088
|
|
632,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1.
-
This column reflects the discretionary portion of the cash bonuses paid to the Named Executive Officers under our annual executive cash bonus plan during the
applicable fiscal year.
-
2.
-
The value of the equity awards equals their grant date fair value as computed in accordance with ASC Topic 718. For additional information regarding the valuation
assumptions used in the calculation of these amounts, refer to Note 12 to the financial statements included in our annual report on Form 10-K for our 2017 fiscal year, as filed with the
SEC. The amounts shown in the table do not necessarily reflect the actual value that may be recognized by the Named Executive Officers. We did not grant any stock awards or option awards to our Named
Executive Officers during fiscal year 2017. We granted restricted stock awards and performance restricted stock units to our Named Executive Officers in May 2017; see page 51 for information on
such awards.
-
3.
-
This column reflects the portion of the cash bonuses paid to the Named Executive Officers under our annual executive cash bonus plan for performance during the
applicable fiscal year.
56
Table of Contents
EXECUTIVE COMPENSATION TABLES
-
4.
-
These amounts represent the aggregate incremental cost to the company with respect to the perquisites and other personal benefits provided to the Named Executive
Officer in fiscal years 2015 through 2017. For fiscal year 2017, the amounts include (a) our matching contributions to the 401(k) Plan, (b) life insurance premiums, and
(c) separation payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
401(k)
Matching
Contributions
|
|
Life
|
|
Supplemental
Medical
Insurance
(a)
|
|
Director
Retainer
(b)
|
|
Separation
Payments
(c)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
|
2017
|
|
|
15,238
|
|
|
801
|
|
|
|
|
|
|
|
|
|
|
|
16,039
|
|
|
Timothy Conver
|
|
|
2017
|
|
|
|
|
|
|
|
|
11,597
|
|
|
95,000
|
|
|
|
|
|
108,074
|
|
|
Teresa Covington
|
|
|
2017
|
|
|
15,362
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
15,968
|
|
|
Raymond Cook
|
|
|
2017
|
|
|
21,192
|
|
|
1,825
|
|
|
|
|
|
|
|
|
340,000
|
|
|
363,017
|
|
|
Kirk Flittie
|
|
|
2017
|
|
|
15,347
|
|
|
1,806
|
|
|
|
|
|
|
|
|
|
|
|
17,153
|
|
|
Kenneth Karklin
|
|
|
2017
|
|
|
13,452
|
|
|
541
|
|
|
|
|
|
|
|
|
|
|
|
13,993
|
|
|
Doug Scott
|
|
|
2017
|
|
|
8,716
|
|
|
961
|
|
|
|
|
|
|
|
|
370,178
|
|
|
379,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Represents the value of the supplemental medical coverage provided to Mr. Conver and his spouse during fiscal year 2017 following his retirement.
-
(b)
-
Represents the annual retainers paid to Mr. Conver during fiscal year 2017 for his service as Chairman of the Board pursuant to our director compensation
program, as described above.
-
(c)
-
For more information about Mr. Cook's and Mr. Scott's separation payments, please see "Fiscal 2017 Severance Payments"
below.
-
5.
-
Mr. Nawabi was appointed as our President and Chief Executive Officer effective May 2, 2016. He served as our President and Chief Operating Officer from
January 2016 to May 1, 2016.
-
6.
-
Mr. Conver ceased serving as our President in January 2016 and retired as our Chief Executive Officer effective May 2,
2016.
-
7.
-
Ms. Covington was appointed our Senior Vice President and Chief Financial Officer effective March 1, 2017. She served as
Vice President, Finance from
July 2016 to March 2017. She served as our Interim Chief Financial Officer from February 2015 to July 2015 and as Vice President of Finance of our Efficient Energy Systems business segment from May
2011 to February 2015.
-
8.
-
Mr. Cook retired as our Senior Vice President and Chief Financial Officer effective February 28,
2017.
-
9.
-
Includes a signing bonus of $50,000 received by Mr. Cook in connection with his appointment as our Senior Vice President and
Chief Financial Officer in July
2015.
-
10.
-
Messrs. Flittie and Karklin are new Named Executive Officer for fiscal year 2017.
-
11.
-
Mr. Scott's employment as the company's Sr. Vice President and General Counsel ended in October 2016.
Grants of Plan-Based Awards
The following table provides information with respect to plan-based awards granted to the Named Executive Officers during fiscal year 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
1
|
|
Grant Date
Fair
Value of
Stock and
Option
Awards
($)
2
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Conver
|
|
|
3/5/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,085
|
|
|
110,009
|
|
Annual Executive Cash Bonus Plan
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
|
5/17/16
|
|
|
*
|
|
|
410,000
|
|
|
820,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
|
3/1/17
|
|
|
*
|
|
|
150,000
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Cook
|
|
|
5/17/16
|
|
|
*
|
|
|
197,200
|
|
|
394,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
|
5/17/16
|
|
|
*
|
|
|
150,000
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
|
5/17/16
|
|
|
*
|
|
|
100,000
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doug Scott
|
|
|
5/17/16
|
|
|
*
|
|
|
152,500
|
|
|
304,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1.
-
Represents restricted stock awards granted to Mr. Conver for his service as a non-employee director during fiscal year 2017 pursuant to our director
compensation program described above, which awards vest in three equal annual installments, with the first installment vesting on July 11, 2017.
57
Table of Contents
EXECUTIVE COMPENSATION TABLES
-
2.
-
Represents the grant date fair value of the restricted stock awards as determined under ASC Topic 718. For additional information regarding the valuation assumptions
used in the calculation of these amounts, refer to Note 12 to the financial statements included in our annual report on Form 10-K for our 2017 fiscal year, as filed with the SEC.
-
3.
-
The Compensation Committee established maximum cash bonus and target bonus levels for the Named Executive Officers under our annual executive cash bonus plan in June
2016. Teresa Covington's maximum and target bonus levels were increased to the level reflected in the table in connection with her appointment as Senior Vice President and Chief Financial Officer
effective March 1, 2017. The Compensation Committee established threshold achievement metrics for the cash bonus plan which were required to be achieved before any payout under the plan would
be made. The amount of the payout after the achievement of the threshold was determined based on a linear scale up to the achievement of target levels for the bonus plan. The determination of the
bonuses payable to the Named Executive Officers for fiscal year 2017 is described in the Compensation Discussion and Analysis section above. These columns show the range of bonus amounts for each
Named Executive Officer from the threshold to the maximum based on the maximum permissible bonus amount set at the beginning of the fiscal year. Mr. Conver was not eligible for a bonus for
fiscal year 2017.
58
Table of Contents
EXECUTIVE COMPENSATION TABLES
Outstanding Equity Awards at Fiscal Year-End
The following table provides information with respect to equity awards held by each of the Named Executive Officers as of April 30,
2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
Plan Awards:
|
|
|
|
|
|
Number of Securities
Underlying Unexercised
Options
1
|
|
|
|
|
|
|
|
Market
Value of
Shares or
Units of
Stock that
Have not
Vested ($)
2
|
|
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)
|
|
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)
2
|
|
|
|
|
|
|
|
|
|
Number of
Shares or
Units of
Stock that
Have not
Vested (#)
|
|
|
|
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Name
|
|
Grant
Date
|
|
Exercisable
(#)
|
|
Unexercisable
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
|
6/24/15
|
|
|
10,000
|
|
|
40,000
|
|
|
26.70
|
|
|
6/24/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
3
|
|
342,840
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
66,250
|
4
|
|
|
|
8/1/14
|
|
|
6,464
|
|
|
9,700
|
|
|
31.27
|
|
|
8/1/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,355
|
5
|
|
124,422
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
47,000
|
4
|
|
|
|
4/22/13
|
|
|
24,000
|
|
|
6,000
|
|
|
18.07
|
|
|
4/22/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/22/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
6
|
|
228,560
|
|
|
|
|
|
|
|
|
|
|
3/1/12
|
|
|
50,000
|
|
|
|
|
|
28.72
|
|
|
3/1/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Conver
|
|
|
3/5/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,085
|
7
|
|
116,708
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
6,000
|
|
|
24,000
|
|
|
26.70
|
|
|
6/24/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
3
|
|
342,840
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
8,544
|
|
|
12,818
|
|
|
31.27
|
|
|
8/1/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,756
|
5
|
|
164,449
|
|
|
|
|
|
|
|
|
|
|
6/12/13
|
|
|
30,000
|
|
|
20,000
|
|
|
19.74
|
|
|
6/12/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
6
|
|
399,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,400
|
3
|
|
182,848
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,618
|
3
|
|
46,226
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
23,750
|
4
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
17,500
|
4
|
|
|
|
4/22/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
6
|
|
22,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
3
|
|
228,560
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
37,500
|
4
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050
|
5
|
|
29,999
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
17,500
|
4
|
|
|
|
4/22/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400
|
6
|
|
11,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
3
|
|
159,992
|
|
|
|
|
|
|
|
|
|
|
6/24/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
25,000
|
4
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
5
|
|
17,142
|
|
|
|
|
|
|
|
|
|
|
8/1/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
8,750
|
4
|
|
|
|
11/21/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
8
|
|
22,856
|
|
|
|
|
|
|
|
|
|
|
4/22/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
6
|
|
22,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1.
-
Except as otherwise noted, all stock option awards vest in five equal annual installments beginning on the first anniversary of the date of grant.
-
2.
-
Calculated using the closing price per share of our common stock of $28.57 on April 30, 2017.
-
3.
-
The award vests in five equal annual installments, with the first installment vesting on July 11, 2016.
-
4.
-
Represents the value of awards that may be paid to the Named Executive Officers in the form of restricted stock units under our long-term incentive program for the
FY2015-FY2017 Performance Period (granted August 1, 2014) and the FY2016-FY2018 Performance Period (granted June 24, 2015) at threshold performance. The Compensation Committee determined
that no payment of the FY2015-FY2017 awards would be made because the company did not achieve the threshold performance goals for such awards. Provided that the threshold performance goals for the
FY2016-FY2018 Performance Period are achieved, the Named Executive Officers' long-term incentive compensation awards will be paid as follows: 50% will be paid in cash as soon as practicable following
the Certification Date for the applicable performance period, and the remaining 50% will be paid in the form of a number of restricted stock units equal to (1) the portion of the award to be
paid in the form of restricted stock units divided by (2) the fair market value per share of the company's common stock on the Certification Date. The restricted stock units will vest in two
equal tranches on the last day of the first and second fiscal years following the completion of the relevant performance period. If such restricted stock units are earned, they would vest in two equal
installments on the last day of the first and second fiscal years following the
59
Table of Contents
EXECUTIVE COMPENSATION TABLES
completion of the relevant performance period. If target or maximum performance is achieved for either performance period, the respective value of the restricted stock units that would be paid for
each performance period would be as follows:
|
|
|
|
|
|
|
|
|
|
FY2016-2018
Performance Period
|
|
|
|
|
Target
Value
($)
|
|
Maximum
Value
($)
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
132,500
|
|
265,000
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
47,500
|
|
95,000
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
75,000
|
|
150,000
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
50,000
|
|
100,000
|
|
|
|
|
|
|
|
|
The actual number of restricted stock units issued to our Named Executive Officers following the conclusion of a performance period will be based on our performance relative to the financial goals for
that performance period and our stock price on the Certification Date. The value of the restricted stock units that may be received by an executive will depend on our stock price on the payment date.
In addition, the restricted stock units may be settled in cash or in shares of the company's common stock, in the discretion of the Compensation Committee.
-
5.
-
The restricted stock award vests in five equal annual installments, with the first installment vesting on October 5, 2015.
-
6.
-
The restricted stock award vests in five equal annual installments, with the first installment vesting on July 11, 2014.
-
7.
-
The restricted stock award vests in three equal annual installments, with the first installment vesting on July 11, 2017.
-
8.
-
The restricted stock award vests in five equal annual installments, with the first installment vesting on January 1, 2015.
Option Exercises and Stock Vested in Fiscal Year 2017
The following table provides information on option exercises and stock award vesting for each of the Named Executive Officers during fiscal
year 2017.
|
|
|
|
|
|
|
|
|
|
|
Option Exercises
|
|
Stock Awards
|
Name
|
|
Number of
Shares Acquired
on Exercise
(#)
|
|
Value
Realized on
Exercise
($)
|
|
Number of
Shares Acquired
on Vesting
(#)
|
|
Value
Realized on
Vesting
($)
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
|
|
|
|
8,452
|
|
226,397
|
|
|
|
|
|
|
|
|
|
Timothy Conver
|
|
98,310
|
|
507,254
|
|
11,918
|
|
319,587
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
|
|
|
|
4,404
|
|
120,009
|
|
|
|
|
|
|
|
|
|
Raymond Cook
|
|
6,000
|
|
9,824
|
|
3,000
|
|
81,750
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
30,000
|
|
228,201
|
|
3,350
|
|
90,343
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
|
|
|
|
2,400
|
|
64,892
|
|
|
|
|
|
|
|
|
|
Doug Scott
|
|
17,000
|
|
62,594
|
|
1,000
|
|
27,250
|
|
|
|
|
|
|
|
|
|
Payments Upon Termination or Change of Control
Severance Protection Agreements
In December 2015, we entered into severance protection agreements with each of our Named Executive Officers which provide for the payment of
certain benefits to the officer in connection with a change in control and/or the termination of such officer's employment as summarized below. The agreement with Mr. Conver terminated on
May 1, 2016, upon his retirement as an employee of the company. Mr. Nawabi entered into an amended and restated severance protection agreement on May 2, 2016 upon the
effectiveness of his appointment as the company's Chief Executive Officer. Ms. Covington entered into an amended and restated severance protection agreement on June 26, 2017 in
connection with her appointment as the company's Chief Financial Officer.
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EXECUTIVE COMPENSATION TABLES
Except
as noted below, the severance protection agreements with the Named Executive Officers are on identical terms and do not provide for a gross up of severance benefits in the event excise taxes
under Section 280G of the Internal Revenue Code apply.
-
(a)
-
The
term of each agreement commenced on the date of the agreement's execution and continues until December 31, 2018. If a change in control occurs during the
term of the agreement, the term will be extended to the date that is 18 months after the date of the occurrence of such change in control.
-
(b)
-
Upon
termination of the officer's employment by the company without cause or by the officer for good reason (as those terms are defined in the agreements) within
18 months following a change in control, the officer is entitled to receive (i) his or her prorated bonus target for the year in which the termination occurs, (ii) a lump sum cash
payment (the "Lump Sum Payment") equal to 1.0x (or 1.5x for our Chief Executive Officer) the sum of his or her base salary at the rate in effect on the termination date (or, if higher, the highest
base salary rate in effect at any time during the 180-day period prior to a change in control), his or her annual target bonus for the year in which the termination occurs and 100% of his or her
target payout under all outstanding long-term incentive plan awards, (iii) acceleration of vesting and exercisability of equity awards, (iv) the continuation of certain employee welfare
plan benefits for the executive and his or her dependents and beneficiaries for a period of 12 months and (v) outplacement services for a period of 12 months, or if earlier, until
the first acceptance by the executive of an offer of employment.
-
(c)
-
If
an executive's employment is terminated by the company without cause or by the executive for good reason, and a change in control occurs prior to the earlier of
the date which is three (3) months following the termination date or February 14
th
of the calendar year following the year in which the termination date occurs, the
executive shall be entitled to receive the benefits described in (b) above.
-
(d)
-
The
agreements also provide for the officer receiving the following severance benefits if the officer's employment is terminated by the company for any reason other
than cause in a context that does not involve a change in control, or upon any termination by reason of the officer's death or disability: (i) his or her prorated bonus target for the year in
which the termination occurs, (ii) a lump sum payment in an amount equal to his or her base salary at the rate in effect on the termination date, and (iii) the continuation of certain
employee welfare plan benefits for the executive and his or her dependents and beneficiaries for a period of 12 months. Under his agreement, Mr. Nawabi would also be entitled to receive
the severance benefits described in this section (d) in a non-change in control context if he terminates his employment for good reason.
-
(e)
-
To
receive the severance benefits described above, the officer must execute a full release of any and all claims against the company and comply with certain
obligations specified in the agreement for 12 months following the termination date, including non-solicitation and non-disparagement obligations and continued compliance with the obligations
under the executive's patent and confidentiality agreement with the company. Any waiver of any breach of such obligations must be approved by the company.
For
purposes of the severance protection agreements, "change in control" of the company generally means, subject to certain exceptions, (a) the consummation of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all of the company's assets unless all or substantially all of the beneficial owners prior to such transaction immediately own more
than 50% of the combined outstanding voting power of the entity resulting from the transaction; (b) individuals who at the beginning of any two year period constitute the company's board of
directors cease for any reason to constitute at least a majority of
the board of directors; (c) the acquisition by any person of beneficial ownership of 25% or more of the outstanding voting power of the company; or (d) the approval by the company's
stockholders of a complete liquidation or dissolution of the company.
Potential Payments Upon Termination or Change in Control
Summary of Potential Payments Upon Termination (As of April 30, 2017)
The table below sets forth the estimated payments to be made to each Named Executive Officer under his or her severance protection agreement in the event of
the officer's involuntary termination by the Company without cause, termination by reason of death or disability, or in the case of our Chief Executive Officer, his voluntary termination for good
reason, in each case not within the change in control protection period provided in the
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EXECUTIVE COMPENSATION TABLES
severance
protection agreements. The following table assumes that such termination occurred on April 30, 2017. Mr. Conver is not included in the following table as his severance
protection agreement was no longer in effect on April 30, 2017. Pursuant to an agreement with Mr. Conver, we provide supplemental medical coverage for Mr. Conver and his spouse
following his retirement as our President and Chief Executive Officer effective May 2, 2016. As of April 30, 2017, the actuarial value of Mr. Conver and his spouse's lifetime
supplemental medical coverage is approximately $196,218, based on the estimated future cost of insurance premiums and the life expectancies of Mr. Conver and his spouse. The value of the
supplemental medical coverage provided to Mr. Conver and his spouse during fiscal year 2017 is reflected in the Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance
1
($)
|
|
Benefits
Continuation
2
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
910,000
|
|
23,116
|
|
|
933,116
|
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
450,000
|
|
14,996
|
|
|
464,996
|
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
431,000
|
|
32,100
|
|
|
463,100
|
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
322,000
|
|
32,343
|
|
|
354,343
|
|
|
|
|
|
|
|
|
|
|
-
1.
-
Cash severance was calculated using the base salary in effect for each officer on April 30, 2017, plus the target annual bonus for each officer for fiscal year
2017.
-
2.
-
The benefit continuation payment is based on premium costs as of April 30, 2017.
Summary of Potential Payments Upon Change in Control (As of April 30, 2017)
The table below sets forth the estimated payments to be made to each Named Executive Officer under his or her severance protection agreement in the event of
the officer's involuntary termination by the Company without cause or the officer's voluntary termination for good reason within 18 months after a change in control or within the change in
control protection period provided in the severance protection agreements. The following table assumes that such termination, and a corresponding change in control, occurred on April 30, 2017.
Mr. Cook and Mr. Scott are not included in this table because their employment with the company ceased prior to April 30, 2017. The terms of Mr. Scott's and
Mr. Cook's separation arrangements with the company are described below under "Fiscal 2017 Severance Payments."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
|
|
|
Name
|
|
Cash
Severance
1
($)
|
|
Benefits
Continuation
2
($)
|
|
In-the-Money
Value of
Accelerated
Stock Options
3
($)
|
|
Value of
Accelerated
Restricted
Stock Awards
4
($)
|
|
Total Value
of Change-
in-Control
Related Benefits
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wahid Nawabi
|
|
2,454,500
|
|
23,116
|
|
137,800
|
|
695,822
|
|
3,311,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teresa Covington
|
|
765,000
|
|
14,996
|
|
|
|
251,930
|
|
1,031,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirk Flittie
|
|
801,000
|
|
32,100
|
|
|
|
269,987
|
|
1,103,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Karklin
|
|
557,000
|
|
32,343
|
|
|
|
222,846
|
|
812,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1.
-
Cash severance was calculated using the base salary in effect for each officer on April 30, 2017, the target bonus for each officer for fiscal year 2017 and
each officer's target goal bonus amounts under the FY2015-FY2017 Performance Period and the FY2016-FY2018 Performance Period long-term incentive compensation plan awards granted to such officer, if
applicable.
-
2.
-
The benefit continuation payment is based on premium costs as of April 30, 2017. The benefits continuation column excludes outplacement benefits which we are
not able to quantify at this time. We expect the amount of outplacement benefits to be immaterial.
-
3.
-
Amounts in respect of stock options were determined by multiplying the number of stock options that would have vested upon such employment termination by the
difference between $28.57, the closing price of our common stock on April 30, 2017, and the applicable exercise prices of such stock options.
-
4.
-
Amounts in respect of restricted stock awards were determined by multiplying the number of restricted stock awards that would have vested upon such employment
termination by $28.57, the closing price of our common stock on April 30, 2017.
Fiscal 2017 Severance Payments
On December 19, 2016, Raymond Cook, our Senior Vice President and Chief Financial Officer, notified the company of his intent to resign
from the company for personal health reasons effective February 28, 2017. In
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EXECUTIVE COMPENSATION TABLES
connection
with his resignation, we entered into a severance agreement and general release with Mr. Cook. Pursuant to the severance agreement, Mr. Cook released us and certain of our
related parties from all potential claims and agreed to be subject to certain non-disparagement obligations in consideration for a payment of $40,000, which amount was paid once the agreement became
irrevocable. Upon Mr. Cook's re-execution of the agreement after his separation date, he received (i) a lump-sum cash payment of approximately $406,758.14, which represented an amount
equal to the sum of Mr. Cook's fiscal year 2017
base salary and 65% of his pro-rata bonus for his service during fiscal year 2017, less $40,000, and (ii) a lump sum payment equal to the after tax cost of the sum of 12 months of COBRA
premiums, 12 months of life insurance premiums and $2,400 in lieu of long-term disability insurance premiums.
Effective
October 3, 2016, the company and Doug Scott, its Senior Vice President and General Counsel, agreed to a separation of Mr. Scott from the company. In connection with his
separation, Mr. Scott executed a release of potential claims in our favor and certain of our related parties. In consideration for Mr. Scott's execution of the release and upon its
effectiveness, Mr. Scott received, as severance (i) a lump-sum cash payment of approximately $370,178, paid in January 2017, which represented an amount equal to the sum of
Mr. Scott's fiscal year 2017 base salary and his pro-rata bonus for his service during fiscal year 2017 and (ii) for the one-year period following his separation date, life insurance,
disability, medical, dental and hospital benefits provided by the company for himself and his dependents.
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AUDIT MATTERS
AUDIT MATTERS
PROPOSAL 3. ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
We are providing our stockholders with the opportunity to cast an advisory vote on the compensation of our Named Executive Officers. This
advisory vote on executive compensation, commonly known as "Say-on-Pay," is advisory in nature, and it is not binding on us or our board of directors. This vote provides our stockholders with the
opportunity to express their view on our 2017 executive compensation programs and policies for such officers. This vote is not intended to address any specific item of compensation, but rather the
overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this proxy statement. Although the vote is non-binding, our Compensation Committee and
board of directors value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions.
As
described more fully in the Compensation Discussion and Analysis section of this proxy statement, our executive compensation program is designed to attract, retain and motivate individuals with
superior ability,
experience and leadership capability to deliver on our annual and long-term business objectives necessary to create long-term stockholder value. The Compensation Committee and the board of directors
believe that our executive compensation program fulfills these goals. We urge stockholders to read the Compensation Discussion and Analysis section of this proxy statement, which describes in detail
how our executive compensation policies and procedures operate and are intended to operate in the future.
Our
executive compensation program is governed by policies and practices that are in line with industry practices and stockholder interests. Examples of such policies and practices
include:
Clawback policy for the recovery of incentive compensation of executive officers;
Anti-hedging and anti-short sale policies for executives;
Stock ownership guidelines requiring ownership of company stock by our Chief Executive Officer of 4x his base salary and by other Named Executive Officers of
2x their base salaries;
Post-vesting stock retention guidelines requiring Named Executive Officers to hold 50% of net after-tax shares issued upon the vesting of equity
awards until
their required stock ownership levels are achieved; and
Double-trigger provisions for change in control situations in our Severance Protection Agreements, and no excise tax gross-up payments upon a
termination
after a change in control.
We
are asking our stockholders to indicate their support for the compensation of our Named Executive Officers as described in this proxy statement. Accordingly, we ask that our stockholders vote "FOR"
the following resolution:
"RESOLVED,
that AeroVironment, Inc.'s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in this proxy statement, including the
Compensation Discussion and Analysis, the compensation tables and the other related tables and disclosure."
Recommendation of the Board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"
FOR"
THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
PROPOSAL 4. ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Section 14A(a)(2) of the Exchange Act permits stockholders to vote on a non-binding advisory basis on how frequently we submit
"Say-on-Pay" proposals to stockholders in the future. Pursuant to Section 14A(a)(2), generally, each public company must submit such a proposal to its stockholders not less than every six
years, and this proposal was last submitted to our stockholders at our 2011 annual meeting. The stockholder vote on the frequency of the stockholder vote to approve the compensation of our Named
Executive Officers is an advisory vote only, and it is not binding on us or our board of directors. Although the vote is non-binding, our Compensation Committee and board of directors value the
opinions of the stockholders and will consider the outcome of the vote when determining the frequency of the advisory stockholder vote on executive compensation.
Stockholders
may choose to recommend that we submit future Say-on-Pay proposals to stockholders (i) every year ("1 YEAR" on the proxy card), (ii) every two years ("2 YEARS" on the proxy
card) or (iii) every three years ("3 YEARS" on the proxy card). Stockholders may also choose to abstain from voting on this proposal.
The
alternative that received the most votes at the 2011 annual meeting of stockholders was every three years. After the 2011 annual meeting, the board of directors, taking into account the
stockholder vote at the 2011 annual meeting, determined that a Say-on-Pay proposal should be submitted to stockholders every three years.
After
careful consideration, our board of directors believes that submitting an advisory Say-on-Pay vote to stockholder every year is now the most appropriate alternative for the company. Annual
Say-on-Pay votes will provide us with annual feedback on the compensation of our Named Executive Officers and provide the
Compensation Committee and board of directors with more information to consider in its yearly decision-making process in approving the compensation of our Named Executive Officers.
Recommendation of the Board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE, ON AN ADVISORY BASIS, FOR EVERY YEAR ("1 YEAR" ON THE PROXY CARD) AS THE FREQUENCY FOR FUTURE NON-BINDING, ADVISORY
VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these proxy materials?
You have received these proxy materials because you were an AeroVironment, Inc. stockholder as of the close of business on
August 11, 2017, and our board of directors is soliciting authority, or proxy, to vote your shares at the 2017 annual meeting of stockholders. The proxy materials include our notice of annual
meeting of stockholders, proxy statement and 2017 annual report. These materials also include the proxy card and postage-paid return envelope or voting instruction form for the annual meeting. The
proxy cards are being solicited on behalf of our board of directors. The proxy materials include detailed information about the matters that will be discussed and voted on at the meeting, and provide
updated information about our company that you should consider in order to make an informed decision when voting your shares. The proxy materials are first being furnished to stockholders on or about
August 24, 2017.
Four
proposals are scheduled to be voted on at the annual meeting:
Proposal 1:
Election of Catharine Merigold, Wahid Nawabi and Stephen F. Page, each to serve as a Class II director for a three-year term;
Proposal 2:
Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending
April 30, 2018;
Proposal 3:
Advisory vote on the compensation of our Named Executive Officers; and
Proposal 4:
Advisory vote on the frequency of future advisory votes on the compensation of our Named Executive Officers.
Why is it so important that I promptly vote my shares?
We value your input. Regardless of the number of shares you hold and whether you plan to attend the annual meeting, we encourage you to vote
your shares as soon as possible to ensure that your vote is recorded promptly and so that we can avoid additional solicitation costs.
Can I access the proxy materials on the internet?
Yes. The company's proxy statement and 2017 annual report are available at investor.avinc.com/annuals-proxies.cfm.
Can I receive a copy of the company's annual report on Form 10-K?
Our annual report on Form 10-K for the fiscal year ended April 30, 2017, which has been filed with the SEC, will be made
available to stockholders without charge upon written request to AeroVironment, Inc., Attn: Corporate Secretary, 800 Royal Oaks Drive, Suite 210, Monrovia, California 91016.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
How can I view or request copies of the company's corporate documents and SEC filings?
The company's website contains the company's Corporate Governance Guidelines, board committee charters and Code of Business Conduct and Ethics
and the company's SEC filings. To view these documents, go to www.avinc.com, click on "Investors" and click on "Corporate Governance." To view the Company's SEC filings and Forms 3, 4 and 5
filed by the company's directors and executive officers, go to www.avinc.com, click on "Investors," click on "Financial Information" and then click on "SEC Filings."
We
will promptly deliver free of charge, upon request, a copy of the Corporate Governance Guidelines, the board committee charters and the Code of Business Conduct and Ethics to any stockholder
requesting a copy. Requests should be directed to AeroVironment, Inc., Attn: Corporate Secretary, 800 Royal Oaks Drive, Suite 210, Monrovia, California 91016.
How do I attend the annual meeting?
The annual meeting will be held on Thursday, September 28, 2017 at 9:00 a.m., Pacific Time, at the company's offices at 994
Innovators Way, Simi Valley, CA 93065. When you arrive, signs will direct you to the appropriate room. Please note that the doors to the meeting room will not be open until 8:30 a.m. You must
be prepared to present valid government-issued photo identification, such as a driver's license or passport, for admittance. In addition, if you are a stockholder of record, your name will be verified
against the list of stockholders of record as of the close of business on the record date prior to admittance to the annual meeting. If you are a beneficial owner, you must provide proof of beneficial
ownership as of the close of business on the record date, such as your account statement showing that you owned our stock as of August 11, 2017, a copy of the voting instruction form provided
by your broker, trustee or nominee, or other similar evidence of ownership. If you do not provide valid government-issued photo identification or comply with the other procedures outlined above, you
will not be admitted to the annual meeting. You do not need to attend the annual meeting to vote. Even if you plan to attend the annual meeting, please submit your vote in advance as instructed
herein.
What is the quorum requirement for holding the annual meeting?
A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the annual
meeting. Abstentions will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business.
Who can vote?
Holders of record of common stock at the close of business on August 11, 2017 will be entitled to vote at the annual meeting. Each
share of common stock will be entitled to one vote on all matters properly brought before the meeting. On August 11, 2017, the record date for the annual meeting, there were 23,840,300 shares
of common stock outstanding. There are no other voting securities of the company outstanding.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is the difference between holding shares as a holder of record and as a beneficial owner?
If at the close of business on August 11, 2017, the record date for the annual meeting, your shares were held in an account at a
brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in "street name" and the proxy materials, as applicable, are being forwarded to you by that
organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that
organization on how to vote the shares in your account. If you do not provide voting instructions to your broker or bank, such organization will need to determine whether it has the discretionary
authority to vote your shares on any matter to be considered at the annual meeting.
Under
applicable rules, your bank or broker has discretionary authority to vote your shares on the ratification of Ernst & Young, LLP as our independent registered public accounting firm
for the fiscal year ending April 30, 2018 without receiving instructions from you. Therefore, your broker or bank will be able to vote on this matter if you do not provide voting instructions
to such organization. Your bank or broker does not have discretionary authority to vote your shares without receiving instructions from you on any of the other proposals. Accordingly, if you do not
give instructions to your custodian, your shares will not be voted with respect to these matters because the bank or brokerage firm will not have authority to vote them on your behalf.
Banks and brokers are not permitted to vote your shares with respect to the election of directors or the advisory votes on the compensation of our Named Executive Officers and
the frequency of future advisory votes on the compensation of our Named Executive officers without your instructions as to how to vote. Please instruct your broker how to vote your shares using the
voting instruction form provided by your broker.
How do I vote my shares?
You may vote your shares using one of the following methods:
Over the internet.
If you have access to the internet, by submitting the
proxy following the instructions included on your proxy card for voting over the internet.
By telephone.
You can vote by calling a toll-free telephone number listed
on the proxy card. Please refer to your proxy card for instructions on voting by phone.
By mail.
You may vote your shares by completing, signing and mailing the
proxy card included with your proxy materials. Please refer to your proxy card for instructions on voting by mail.
In person at the annual meeting.
Stockholders are invited to attend the
annual meeting and vote in person at the annual meeting. If you are a beneficial owner of shares you must obtain a legal proxy from the bank, broker or other holder of record of your shares to be
entitled to vote those shares in person at the meeting.
A
control number, located on the instruction sheet attached to the proxy card, is designated to verify your identity and allow you to vote your shares and confirm that your voting instructions have
been recorded properly. If you vote via the internet or by telephone, there is no need to return a signed proxy card. However, you may still vote by proxy by using the proxy card.
Can I change my vote?
Yes. You may revoke the proxy at any time prior to its use by:
delivering a written notice to the Corporate Secretary of the company, mailed to the company's principal executive office at 800 Royal Oaks Drive,
Suite 210, Monrovia, California 91016;
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
executing and submitting a later-dated proxy;
re-voting your shares by telephone or on the internet; or
attending the annual meeting and voting in person.
Only
the latest validly executed proxy that you submit will be counted.
What vote is required to approve each of the proposals?
Proposal 1 Election of directors:
Directors will be
elected on a plurality basis and the three nominees receiving the highest number of "FOR" votes will be elected as directors. Notwithstanding the foregoing, pursuant to the company's Corporate
Governance Guidelines, if a director nominee is not elected by a majority of votes cast, he has agreed to submit a letter of resignation to the board. The Nominating and Corporate Governance Committee
will make a recommendation to the board on whether to accept or reject any such resignation, or whether other action should be taken and the board will act on the resignation taking into account the
recommendation of the Nominating and Corporate Governance Committee. Withholdings will be counted as present for the purposes of determining a quorum but are not counted as votes cast. Broker
non-votes will not be counted as present and are not entitled to vote on the proposal.
Proposal 2 Ratification of selection of independent registered public accounting
firm:
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at
the annual meeting. Abstentions will be counted as present for purposes of this vote and will have the effect of a vote against the proposal. Brokers have discretionary authority to vote your shares
on this proposal without receiving instructions from you.
Proposal 3 Advisory vote on the compensation of our Named Executive
Officers:
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote
at the annual meeting. Abstentions will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.
Proposal 4 Advisory vote on frequency of future advisory votes on the compensation of our Named
Executive Officers:
The option that receives the most votes cast will be the option selected by the stockholders. Abstentions and broker non-votes will have
no effect on the outcome of this proposal.
What are the recommendations of the board of directors?
The board of directors recommends that you vote your shares on your proxy card:
FOR
the election of the directors nominated herein;
FOR
the proposal to ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2018;
FOR
the proposal to approve the compensation of our Named Executive
Officers; and
EVERY YEAR
("1 YEAR" on the proxy card) as the frequency for holding
future advisory votes on the compensation of our Named Executive Officers.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What if I do not specify how I want my shares to be voted?
If you are the record holder of your shares and do not specify on your proxy card (or when giving your proxy by telephone or the internet) how
you want to vote your shares, your shares will be voted:
FOR
the election of directors nominated herein;
FOR
the proposal to ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2018;
FOR
the approval of the advisory vote to approve the compensation of our
Named Executive Officers;
For EVERY YEAR
("1 Year" on the proxy card) on the advisory proposal on
the frequency of future advisory votes on the compensation of our Named Executive Officers; and
with respect to any other business which may properly come before the annual meeting or any adjournments or postponements thereof, in accordance
with the best
judgment of the designated proxy holders.
If
you are a beneficial owner of shares and do not specify to the organization that holds your shares how you want to vote, such organization may only vote your shares on "routine" matters. The only
routine matter to be voted upon at this annual meeting is the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year
ending April 30, 2018. Therefore, if you do not provide instructions to the record holder on how you want to vote, your shares may not be voted on the election of directors or the proposals to
approve, on an advisory basis, the compensation of our Named Executive Officers or on the frequency of future advisory votes on the compensation of our Named Executive Officers. If your shares are
held of record by a bank, broker or other nominee, we urge you to give instructions to your bank, broker or other nominee as to how you wish your shares to be voted so you may participate in the
stockholder voting on these important matters.
Is cumulative voting allowed for the election of directors?
No. You may not cumulate your votes for the election of directors.
What is the effect of an "ABSTAIN" vote?
Abstentions are considered to be present and entitled to vote with respect to each relevant proposal, but will not be considered a vote cast
with respect to that proposal. Therefore, an abstention will effectively be a vote against each of the proposals, except for the election of directors and the advisory proposal on the frequency of
future advisory votes on the compensation of our named executive officers.
What is a "broker non-vote"?
A "broker non-vote" occurs when a beneficial owner of shares held by a broker, bank or other nominee fails to provide the record holder with
voting instructions on any "non-routine" matters brought to a vote at a stockholder meeting.
Under
applicable rules, "non-routine" matters include the election of directors and the proposals for the advisory votes on the compensation of our Named Executive Officers and the frequency of future
advisory votes on the compensation of our Named Executive Officers. As such, a broker may not vote your shares with respect to the election of directors or other non-routine matters without your
instructions. If your shares are held of record by a bank, broker or other nominee, we urge you to give instructions to your bank, broker or other nominee as to how you wish your shares to be voted so
you may participate in the stockholder voting on these important matters.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
When will the company announce the voting results?
We will announce preliminary voting results at the annual meeting. Final official results will be provided in a current report on
Form 8-K filed with the SEC within four business days of the meeting (which will be available at www.sec.gov and www.avinc.com).
How are the proxies solicited and what is the cost?
We will bear the expense of soliciting proxies. Our directors, officers and other employees may solicit proxies in person, by telephone, by
mail or by other means of communication, but such persons will not be specially compensated for such services. We may also reimburse brokers, banks, custodians, nominees and other fiduciaries for
their reasonable charges and expenses in connection with the distribution of proxy materials.
What is householding?
Some brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This
means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in a stockholder's household. Additionally, you may have notified us that multiple
stockholders share an address and thus you requested to receive only one copy of our proxy statement and annual report. We will promptly deliver a separate copy of either document to any stockholder
who contacts our investor relations department at (626) 357-9983 ×4245 or by mail addressed to Investor Relations, AeroVironment, Inc., 800 Royal Oaks Drive, Monrovia,
California 91016, requesting such copies. If a stockholder is receiving multiple copies of our proxy statement and annual report at the stockholder's household and would like to receive a single copy
of the proxy statement and annual report for a stockholder's household in the future, stockholders should contact their broker, or other nominee record holder to request mailing of a single copy of
the proxy statement and annual report. Stockholders receiving multiple copies of these documents directly from us, and who would like to receive single copies in the future, should contact our
investor relations department at the address above to make such a request.
How do I submit a proposal for action at next year's annual meeting?
Stockholder Proposals for Inclusion in Next Year's Proxy Statement.
Stockholders may submit proposals on matters appropriate
for stockholder
action at meetings of our stockholders in accordance with Rule 14a-8 promulgated under the Exchange Act. To be eligible for inclusion in the proxy statement relating to our 2018 annual meeting
of stockholders, proposals of stockholders must be received at our principal executive offices no later than April 26, 2018 (120 calendar days prior to the anniversary of the date of the proxy
statement for our 2017 annual meeting was released to stockholders) and must otherwise satisfy the conditions established by the SEC for stockholder proposals to be included in the proxy statement for
that meeting. However, in the event that the date of our 2018 annual meeting is more than 30 days before or after the anniversary of our 2017 annual meeting, a stockholder proposal will be
timely if received at our principal executive offices a reasonable time before we begin to print and send our proxy materials for the 2018 meeting.
Stockholder Proposals for Presentation at Next Year's Annual Meeting.
If a stockholder wishes to present a proposal, including
a director nomination, at our 2017 annual meeting of stockholders and the proposal is not intended to be included in our proxy statement relating to that meeting, the stockholder must give advance
notice in writing to our Corporate Secretary prior to the deadline for such meeting determined in accordance with our bylaws. Our bylaws require notice with respect to the 2018 annual meeting between
May 31, 2018 (120 calendar
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
days
prior to the anniversary of our 2017 annual meeting) and June 30, 2018 (90 calendar days prior to the anniversary of our 2017 annual meeting). However, in the event that the date of the
2018 annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 2017 annual meeting, notice by the stockholder must be received no
earlier than the close of business on the 120th day prior to the 2018 annual meeting and no later than the close of business on the later of (1) the 90th day prior to the 2018
annual meeting or (2) the 10th day following the earlier of (a) the day on which notice of the 2018 annual meeting was mailed or (b) the date on which public announcement
of the date of the 2018 annual meeting is first made by the company. If a stockholder fails to give timely notice of a proposal, the stockholder will not be permitted to present the proposal to the
stockholders for a vote at our 2018 annual meeting. In addition, our bylaws include other requirements for nomination of candidates for director and proposals of other business.
Could any additional proposals be raised at the 2017 annual meeting of stockholders?
The board of directors knows of no other matters to come before the meeting. Should any unanticipated business properly come before the
meeting, the persons named in the enclosed proxy will vote in accordance with their best judgment. The accompanying proxy confers discretionary authority to such persons to vote on any unanticipated
matters.
It is important that proxies be returned promptly. Stockholders are urged to date and sign the proxy and return it promptly in the accompanying envelope, or to vote via the
internet or by calling the toll-free number as instructed on the proxy card.
If stockholders have any questions or require any assistance with voting your shares, please contact the company's corporate secretary.
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ON BEHALF OF THE BOARD OF DIRECTORS
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Wahid Nawabi
President and Chief Executive Officer
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Simi Valley, California
August 16, 2017
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75
ANNUAL MEETING OF STOCKHOLDERS OF
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AEROVIRONMENT, INC.
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September 28, 2017
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PROXY VOTING INSTRUCTIONS
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INTERNET
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Access
www.voteproxy.com
and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page.
TELEPHONE
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Call toll-free
1-800-PROXIES
(1-800-776-9437) in the United States or
1-718-921-8500
from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
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Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL
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Sign, date and mail your proxy card in the envelope provided as soon as possible.
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COMPANY NUMBER
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IN PERSON
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You may vote your shares in person by attending the Annual Meeting.
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ACCOUNT NUMBER
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GO GREEN
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e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, Proxy Statement, Proxy Card
are available at http://investor.avinc.com/annuals-proxies.cfm
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Please detach along perforated line and mail in the envelope provided
IF
you are not voting via telephone or the Internet.
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20330304000000001000 4
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092817
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A VOTE FOR EACH OF THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS.
A VOTE FOR 1 YEAR ON PROPOSAL 4 IS RECOMMENDED BY THE BOARD OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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Proposal 1. To elect the board of directors' three nominees as directors:
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Proposal 2.
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To ratify the selection of Ernst & Young LLP as the company's independent registered public accounting firm:
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FOR
o
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AGAINST
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ABSTAIN
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FOR ALL NOMINEES
withhold authority
for all nominees
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NOMINEES:
Catharine Merigold
Wahid Nawabi
Stephen F. Page
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Proposal 3.
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Advisory vote on the compensation of the Companys Named Executive Officers:
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FOR
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AGAINST
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ABSTAIN
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for all except
(See instructions below)
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Proposal 4.
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Advisory vote on the frequency of future advisory votes on the compensation of the Companys Named Executive Officers:
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1 YEAR
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2 YEARS
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3 YEARS
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ABSTAIN
o
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The undersigned hereby revokes any other proxy to vote at the annual meeting, and hereby ratifies and confirms all that said attorneys and proxies, and each of them, may lawfully do by virtue hereof. With respect to matters not known at the time of the solicitation hereof, said proxies are authorized to vote in accordance with their best judgment.
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INSTRUCTIONS
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To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
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THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR, TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR EACH OF THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AND A VOTE FOR 1 YEAR ON PROPOSAL 4. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PROXIES.
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The undersigned acknowledges receipt of a copy of the notice of annual meeting and accompanying proxy statement dated August 16, 2017 relating to the annual meeting.
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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AEROVIRONMENT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a stockholder of AeroVironment, Inc., a Delaware corporation (the Company), hereby nominates, constitutes and appoints Wahid Nawabi and Teresa Covington, or either one of them, as proxy of the undersigned, each with full power of substitution, to attend, vote and act for the undersigned at the annual meeting of stockholders of the Company, to be held on September 28, 2017, and any postponements or adjournments thereof, and in connection therewith, to vote and represent all of the shares of the Company which the undersigned would be entitled to vote with the same effect as if the undersigned were present, as follows:
(Continued and to be signed on the reverse side)
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