UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2013
MRV COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE |
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001-11174 |
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06-1340090 |
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(State or other jurisdiction of |
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(Commission file number) |
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(I.R.S. employer |
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incorporation or organization) |
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identification number) |
20415 Nordhoff Street, Chatsworth, CA 91311
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (818) 773-0900
Not Applicable
Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On January 31, 2013, MRV Communications, Inc. (the “Company”) announced that the Company’s Board of Directors had appointed David Stehlin, age 56, to serve as Chief Executive Officer (“CEO”) of the Company beginning February 1, 2013 upon the retirement of Barry Gorsun from the position. Prior to being named CEO, Mr. Stehlin served as President of the Company’s Optical Communications Systems (“OCS”) division since February 2012. There are no understandings or arrangements between Mr. Stehlin and any other person to which he was selected as an executive officer, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. Mr. Gorsun will serve as a consultant to the Company for the next six months to assist in the transition of his responsibilities and other needs as the Company requests.
In conjunction with Mr. Gorsun’s departure, the Company entered into a Separation and Consulting Agreement with him dated January 31, 2013 (the “Separation Agreement”) that sets forth, among other things, the terms of his compensation upon termination of employment, a release of claims against the Company, and the terms of his continuing consulting relationship with the Company. Mr. Gorsun will continue to be paid at the same rate as his base salary of $380,000 per annum that was in effect prior to his separation for the six month consultancy period beginning February 1, 2013, and he will further receive a bonus of (a) $9,741 on May 29, 2013 related to a May 2012 special dividend to stockholders and (b) $40,166 on or before July 31, 2013. No other severance or bonus payments are owed to Mr. Gorsun in connection with his employment agreement. The non-solicitation, non-competition, non-disparagement and transition assistance provisions of his existing employment continue to apply.
In connection with Mr. Stehlin’s promotion, the Company entered into an Employment Agreement with him effective February 1, 2013 (the “Employment Agreement”). The Employment Agreement sets forth his duties and responsibilities as CEO, the terms of his compensation, the effect of a potential future termination event, and other customary provisions regarding release of claims and covenants related to confidentiality, non-solicitation, non-competition, non-disparagement and claw back requirements. Under the Employment Agreement, Mr. Stehlin will receive a base salary at an initial annual rate of $350,000, an annual target bonus opportunity equal to 80% of his annual base salary, and an initial equity award of 18,000 stock options and 6,000 shares of restricted stock. The equity grants will occur on or about April 1, 2013, and the shares of restricted stock will vest in full on February 1, 2016, subject to Mr. Stehlin’s continuing employment. The stock options will have an exercise price equal to the fair market value per share on the option grant date, and 6,000 of the options will vest on February 1, 2014, with the remaining 12,000 options vesting pro rata monthly over the following 24 month period, subject to Mr. Stehlin’s continuing employment. The term of Mr. Stehlin’s employment goes through December 31, 2013, and automatically renews for successive one-year periods unless notice is provided at least 90 days before the end of the applicable term. If Mr. Stehlin is terminated by the Company without “cause” or by him for “good reason” (as those terms are defined in the Employment Agreement), he will receive up to 12 months’ payment of COBRA premiums and severance consisting of salary continuation of six months’ base salary, unless the termination occurs after a change in control, in which case the severance will be a lump sum payment equal to 12 months’ base salary plus a pro rata amount of his target bonus opportunity (if the termination date is after March 31 of the year of termination), and accelerated vesting of unvested Company equity awards assumed as part of the change in control.
The foregoing descriptions of the Separation Agreement and Employment Agreements are not complete and are qualified in their entirety by the full text of the agreements, which are attached as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.
A copy of the press release announcing the management changes is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
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Item 9.01 |
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Financial Statements and Exhibits |
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(d) |
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Exhibits |
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Exhibit 10.1 |
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Separation and Consulting Agreement, dated January 31, 2013, by and between the Company and Barry Gorsun |
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Exhibit 10.2 |
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Employment Agreement, dated February 1, 2013, by and between the Company and David Stehlin |
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Exhibit 99.1 |
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Press Release dated January 31, 2013 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Date: February 1, 2013
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MRV COMMUNICATIONS, INC. | |
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By: |
/s/ Jennifer Hankes Painter |
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Jennifer Hankes Painter |
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VP, General Counsel and Secretary |
Exhibit 10.1
Separation and Consulting Agreement
Agreement made this 31st day of January, 2013 (hereinafter referred to as the “Agreement”), between Barry Gorsun (“Gorsun”), and MRV Communications, Inc. (the “Company”).
W I T N E S S E T H :
WHEREAS, Gorsun has been employed with the Company as Chief Executive Officer; and
WHEREAS, the Company and Gorsun now desire to end the employment relationship amicably.
NOW, THEREFORE, in consideration of the premises and of the representations, promises and obligations herein contained, the parties hereto agree as follows:
1. The parties agree that Gorsun’s employment with the Company will cease on January 31, 2013 (the “Termination Date”) and that Gorsun will no longer be an employee or officer of the Company. The parties also agree that the employment agreement between MRV Communications—Boston Division, Inc. and Gorsun, dated as of March 10, 2011, as amended by the letter agreement between the Company and Gorsun, dated February 8, 2012 (the “Employment Agreement”), will no longer be of any force or effect; provided, however, that sections 7.2, 7.3, 7.4 and 7.5 shall survive the expiration of the Employment Agreement and remain in full force and effect. Further, the Executive will execute the resignations attached as Exhibit A contemporaneously with his execution of this Agreement.
2. Gorsun shall make himself reasonably available as a consultant for advice and consultation to the Company’s Board of Directors and Chief Executive Officer to assist in the transition of his responsibilities and other needs of the Company upon request for the six month period commencing on February 1, 2013 and terminating on July 31, 2013 (the “Consultancy Period”). During the Consultancy Period Gorsun shall be paid at the same rate as his current base salary of $ $380,000 on an annual basis. Gorsun shall provide only such consulting services and advice as requested by the Company’s Board of Directors or Chief Executive Officer. The Company will reimburse Gorsun for any reasonable travel expenses incurred on its behalf, provided that Gorsun submits documentation in a form acceptable to the Company to substantiate such expenses.
3. Gorsun in the performance of the consulting services shall be deemed an independent contractor and not an employee or agent of the Company. Gorsun shall have no right or authority to assume or create any obligations on behalf of the Company or to make any representations on its behalf, except with the prior written consent of the Company. Under no circumstances shall Gorsun be, or be deemed to be, an employee of the Company for any purposes.
4. The Company agrees, provided that Gorsun complies with all of the terms of this Agreement, that Gorsun (i) shall receive a bonus of $40,166 on or before July 31, 2013; (ii) shall be entitled to accelerated vesting of all options and restricted stock previously granted to him on July 31, 2013 and (iii) shall receive a bonus of $9,740.53 on May 29, 2013 related to the May 2012 special dividend.
5. The Company agrees to provide Gorsun with the benefits which he is presently receiving for a period of one year following the Termination Date. The parties agree that medical insurance will not be provided by the Company but that the Company will provide dental insurance. The benefits will be provided to Gorsun at the Company’s expense, except that Gorsun agrees to continue to pay the employee portion of any such benefits.
6. As a fundamental condition of this Agreement and the payments and benefits provided for herein, Gorsun shall comply fully with all of his obligations under Sections 7.2, 7.3, 7.4 and 7.5 of the Employment Agreement.
7. Gorsun represents that as of January 31, 2013, he will have returned all property of the Company, including but not limited to, any computers, VPN equipment, software, telephones, documents, books, records (whether in electronic format or hard copy), reports, files, correspondence, notebooks, manuals, notes, specifications, mailing lists, credit cards, access cards, identification cards, key fobs, keys and other data and/or materials in his possession or control, provided that the Company may allow Gorsun to retain and use certain property, such as a computer or cell phone, during the Consultancy Period.
8. Gorsun, for himself and for the executors and administrators of his estate, his heirs, successors and assigns, hereby releases and forever discharges the Company, its current and former subsidiaries and affiliates, and all of its or their respective officers, directors, managers, members, stockholders, employees, agents, attorneys, insurers and the respective executors, administrators, heirs, successors and assigns of the foregoing, from any and all claims, actions, causes of action, suits, sums of money, debts, dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, demands or damages of any nature whatsoever or by reason of any matter, cause or thing regardless of whether known or unknown at present, which against the Company, or any of their respective officers, directors, and employees Gorsun ever had, now has or hereafter can, shall or may have for, upon, or by reason of, any matter, cause or thing whatsoever from the beginning of the world to the date hereof including, but not limited to, any matter relating to or arising out of the employment of Gorsun or the termination thereof under any contract, tort, federal, state or local fair employment practices or civil rights law including, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Older Workers Benefits Protection Act, the federal Family and Medical Leave Act, the Massachusetts Fair Employment Law, the Florida Civil Rights Act, the Ohio Fair Employment Practices Act, the Ohio Revised Code, the Fair Labor Standards Act, or any claim for physical or emotional distress or injuries, invasion of privacy, defamation, claims relating to severance pay, wages, sick leave, vacation pay, life insurance, medical insurance, disability or any other benefit of employment, or any other duty or obligation of any kind or description, including any implied covenant of good faith and fair dealing, implied contract of permanent employment or the tortious or willful discharge of employment. The parties also agree that this Agreement does not either affect the rights and responsibilities of the Equal Employment Opportunity Commission to enforce the Age Discrimination in Employment Act, or justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission under the Age Discrimination in Employment Act. In the event the Equal Employment Opportunity Commission commences a proceeding against the Company in which Gorsun is a named party, Gorsun agrees to waive and forego any monetary claims which may be alleged by the Equal Employment Opportunity Commission to be owed to Gorsun. The parties also agree that nothing in the provisions of this paragraph 8 is intended to limit their rights under and concerning enforcement of this Agreement.
9. Gorsun agrees to keep confidential the terms of this Agreement and not to disclose any term of this Agreement to any other person or entity, except for Gorsun’s family, accountants and attorneys. In the event that Gorsun is required by law to disclose any term of this Agreement, Gorsun agrees to give the Company ten days’ written notice prior to any such disclosure, or such shorter time period as mandated by law or is otherwise practicable. The Company acknowledges that this Agreement may be part of a public filing.
10. Gorsun shall not make any statements, either directly or through other persons or entities, which are disparaging to the Company or any of its affiliates, management, officers, directors, employees, agents, services, products, operations, prospects or other matters relating to the Company’s businesses. In that regard, Gorsun shall not make or encourage others to make any statement or release any information that is intended to, or reasonably could be foreseen to, embarrass or criticize the Company or its affiliates, employees, managers, directors, officers, members or stockholders, individually or as a group.
11. Gorsun hereby agrees that, in the event his testimony, services or time are required in the future to assist the Company in handling any legal matter, prosecuting or defending against litigation or to pursue or defend against a disputed claim or charge of any type, he will make himself reasonably available to work with Company’s attorneys and representatives, to prepare for and provide deposition and/or trial testimony and to take whatever other steps are necessary to assist in the handling of such legal matters and prosecution/defense of such claims.
12. Gorsun agrees that in the event he violates any of the provisions of this Agreement, the Company shall have the right to (i) cease making all payments due in accordance with this Agreement and (ii) cease to provide benefits as set forth in paragraph 4 herein
13. The Company has advised Gorsun to consult with an attorney prior to executing this Agreement. By executing this Agreement, Gorsun acknowledges that (a) he has been provided an opportunity to consult with an attorney or other advisor of his choice regarding the terms of this Agreement, (b) this is a final offer and Gorsun has been given twenty-one (21) days in which to consider whether he wishes to enter into this Agreement, (c) Gorsun has elected to enter this Agreement knowingly and voluntarily and (d) if he does so within fewer than twenty-one (21) days from receipt of the final document he has knowingly and voluntarily waived the remaining time. The Company reserves the right to change or revoke this Agreement prior to Gorsun’s execution hereof. This Agreement shall be fully effective and binding upon all parties hereto immediately upon execution of this Agreement except as to rights or claims arising under the ADEA, in which case Gorsun has seven (7) days following execution of this Agreement to change his mind (the “Revocation Period”).
14. Any notice to be given hereunder shall be in writing and shall be deemed given when mailed by certified mail, return receipt requested, addressed as follows:
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To Gorsun at: |
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[redacted] |
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To the Company at: |
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MRV Communications, Inc. |
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20415 Nordhoff Street |
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Chatsworth, CA 91311 |
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Attn.: Chairman of the Board |
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With a copy to: |
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Steven I. Suzzan, Esq. |
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Fulbright & Jaworski L.L.P. |
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666 Fifth Avenue, 31st Floor |
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New York, New York 10103 |
or at such other address as may be indicated in writing by any party to the other parties in the manner provided herein for giving notice.
15. In the event that any one or more of the provisions of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. This Agreement will survive the termination of any arrangements contained herein and is binding on and will inure to the benefit of each of the parties and their respective affiliates, heirs, executors, administrators, successors and assigns.
16. This Agreement shall be governed by the substantive laws of the State of New York, without giving effect to any principles of conflicts of law. The parties agree that any claims shall be brought exclusively in a state or federal court located in New York, New York and that the nexus is appropriate.
17. Each of the parties agrees to do and perform or cause to be done and performed all further acts and shall execute and deliver all other documents necessary on its part to carry out the intent and accomplish the purposes of this Agreement and the transaction contemplated hereby.
18. This Agreement sets forth the entire agreement between the parties hereto concerning the subject matter hereof and may not be changed without the written consent of each of the parties.
IN WITNESS WHEREOF, the parties have each executed this Agreement as of the date first written above.
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MRV Communications, Inc. | |
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By: |
/s/ Kenneth Traub |
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Name: Kenneth Traub | |
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Title: Chairman of the Board | |
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/s/ Barry Gorsun | |
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Barry Gorsun | |
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of February, 2013, by and between MRV COMMUNICATIONS, INC., a Delaware corporation (the “Company”), and David Stehlin (“Executive”).
RECITALS:
A. The Executive is currently employed by MRV Communications—Boston Division, Inc., a subsidiary of the Company, pursuant to an agreement made as of June 1, 2012 (the “Prior Agreement”).
B. The Company now desires to employ the Executive as its Chief Executive Officer and the Executive desires to accept such employment, upon the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Termination of Prior Agreement. Effective as of the date hereof, the Prior Agreement is terminated and shall have no further force or effect. This Agreement supersedes the Prior Agreement in its entirety.
2. Employment. Executive shall be employed as the Chief Executive Officer of the Company pursuant to this Agreement.
2.1 Duties and Responsibilities. Executive will have the authority, duties and responsibilities customarily associated with the position of Chief Executive Officer, consistent with the Company’s by-laws and applicable law. Executive will have such additional duties and responsibilities commensurate with his position as the Company’s Board of Directors (the “Board”) may assign to him from time to time. Executive will report directly to and be subject to the control and direction of the Board. The Executive will observe and adhere to all applicable written Company policies and procedures in effect from time to time, including, without limitation, policies on business ethics and conduct, and policies on the use of inside information and insider trading.
2.2 Term. Unless sooner terminated pursuant to Section 4, the term of this Agreement (the “Term”) will begin as of the date set forth above and will end on December 31, 2013. Thereafter, the Term will automatically be renewed for successive one-year periods unless either party provides written notice of non-renewal to the other at least 90 days before the end of the then-current Term.
2.3 Full Time. Executive shall devote all of his business time and attention to the performance of his duties and responsibilities under this Agreement. Executive will not render services to others for compensation, provided, however, that Executive may engage in personal, charitable and passive investment activities, so long as such activities do not conflict or interfere with the performance of his duties and responsibilities to the Company or otherwise constitute a breach of his obligations and covenants under this Agreement.
3. Compensation.
3.1 Base Salary. The Company will pay base salary (“Base Salary”) to Executive, in accordance with its regular payroll practices at an initial annual rate of $350,000. The Board and/or the Compensation Committee of the Board (the “Compensation Committee”) may adjust the Executive’s Base Salary from time to time.
3.2 Annual Bonus Opportunity. For each fiscal year of the Company, Executive will have a target bonus opportunity equal to 80% of his Base Salary. The bonus opportunity for any fiscal year will be based upon the attainment of performance objectives determined by the Board or the Compensation Committee. The amount (if any) of the bonus for any fiscal year will be determined and payable no later than March 31 of the next fiscal year.
3.3 Initial Equity Award. On or about April 1, 2013, the Company will issue to Executive a one-time option to purchase 18,000 shares of Company Common Stock and a one-time restricted stock grant for 6,000 shares, pursuant to the Company’s 2007 Omnibus Incentive Plan, as amended (the “Equity Plan”). The exercise price per share under the option will be equal to the fair market value per share on the option grant date, which is defined in the Equity Plan as the average of the closing bid and ask quotations per share of Common Stock in the over-the-counter market for such shares on such date. The option will vest as to 6,000 shares on the first anniversary of the date Executive’s employment commences under this Agreement, and as to the remaining 12,000 in 24 equal monthly increments beginning one month after such first anniversary date, subject to Executive’s continuing employment through the applicable vesting date. The restricted stock award will “cliff” vest on the third anniversary of the Executive’s employment commencement date. Each of said awards will be subject to the terms of the Equity Plan and the applicable award agreement.
3.4 Annual Equity Awards. Executive will be eligible for annual equity awards under the Company’s equity incentive plan at the discretion of the Board or the Compensation Committee.
3.5 Employee Benefits. Executive will be eligible to participate in such retirement, welfare and other employee benefit and fringe benefit plans as may be maintained or provided by the Company from time to time.
3.6 Reimbursement of Business Expenses. It is anticipated that the Executive may incur reasonable expenses in carrying out his duties and responsibilities under this Agreement. The Company will promptly reimburse him for all such expenses that are so incurred upon presentation of appropriate vouchers or receipts, subject to the Company’s expense reimbursement policies as in effect from time to time.
4. Termination of Employment Before End of Term.
4.1 Termination by Company for Cause. The Company may terminate Executive’s employment before the end of the Term for Cause if Executive: (a) is convicted of or pleads nolo contendre to a felony, (b) commits fraud or a material act or omission involving dishonesty affecting the assets, business or reputation of the Company or any of its subsidiaries or affiliates, (c) willfully fails or refuses to carry out the material responsibilities of his employment, as reasonably determined by the Board, and the Executive does not cure the event constituting Cause (if curable) within 20 days of receiving written notice from the Company, (d) engages in gross negligence, willful misconduct or a pattern of behavior that has had or is reasonably likely to have a significant adverse effect on the Company or the ability of Executive to perform the duties and responsibilities of his employment, or (e) willfully engages in any act or omission that is in material violation of Company policy, including, without limitation, Company policy on business ethics and conduct, and Company policy on the use of inside information and insider trading.
4.2 Resignation by Executive. Executive may terminate his employment before the end of the Term, subject to at least 60 days’ prior written notice to the Company. Upon receipt of such notice, the Company may relieve Executive of some or all of his duties and/or set an earlier termination date.
4.3 Termination by Company without Cause. The Company may terminate Executive’s employment without Cause before the end of the Term, subject to 60 days prior written notice to Executive. Following such notice, the Company may relieve Executive of some or all of his duties, provided that Company continues to pay Executive through the end of the notice period.
4.4 Termination Due to Disability or Death. The Company may terminate Executive’s employment before the end of the Term due to “Disability” if Executive is unable to substantially perform the essential duties and responsibilities of his employment for at least 90 consecutive calendar days or 120 or more calendar days during any calendar day period by reason of physical or mental incapacity. Executive acknowledges that, if he incurs a Disability as described in the preceding sentence, he will have become unable to perform the essential functions of his position and there would be no reasonable accommodation which would not constitute an undue hardship to the Company that the Company could make due to the nature of his position. No minimum notice is required for a termination due to Executive’s Disability. If Executive dies before the end of the Term, his employment will terminate on the date of his death.
4.5 Termination by Executive for Good Reason. Executive may terminate his employment for Good Reason at any time. For this purpose, the term “Good Reason” means any of the following: (a) a failure by the Company to pay Executive’s salary, bonus and benefits in accordance with this Agreement; or (b) in connection with a Change in Control, (1) the failure by the successor or acquiring company (or parent thereof) to succeed to or assume the obligations of Company under this Agreement, or (2) a material diminution of the Executive’s duties and responsibilities, it being understood that, for this purpose, Executive’s not serving as the chief executive officer of the successor or acquiring company (or a parent or subsidiary thereof) shall not be deemed to be a material diminution of his duties and responsibilities. As a condition to terminating his employment for Good Reason, Executive must specify in writing to the Company (or the successor or acquiring company) the nature of the act or omission that Executive deems to constitute Good Reason and provide the Company (or the successor or acquiring company) 30 days after receipt of such notice to review and, if required, correct the situation (and thus prevent Executive’s termination for Good Reason). Notice of termination for Good Reason must be provided, if at all, within 30 days after the occurrence of the event or condition giving rise to such termination.
4.6 Definition of Change in Control. For the purposes hereof, a “Change in Control” will be deemed to have occurred if and when, after the date of this Agreement,
(a) any person, as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than (1) the Company, (2) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, (3) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (4) any person who becomes a beneficial owner (as defined below) in connection with a transaction described in clause (1) of subparagraph (c) below, is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 50 percent or more of the combined voting power of the Company’s then outstanding voting securities;
(b) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other entity, other than (1) a merger or consolidation which results in the directors of the Company immediately prior to such merger or consolidation continuing to constitute at least a majority of the board of directors of the Company, the surviving entity or any parent thereof or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 50% or more of the combined voting power of the Company’s then outstanding securities; or
(c) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or a majority of the Company’s assets, income or revenue to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
5. Payments and Benefits Upon Termination of Employment.
5.1 Termination of Employment by Company without Cause or by Executive for Good Reason. If Executive’s employment is terminated by Company without Cause pursuant to Section 4.3 or by Executive for Good Reason pursuant to Section 4.5, then, subject to the provisions hereof, including Section 6 (relating to the release condition) and Section 16 (relating to compliance with Section 409A of the Internal Revenue Code), Executive shall receive the following payments and benefits:
(a) a single cash payment equal to the sum of (1) the unpaid amount, if any, of Base Salary previously earned by Executive through the date of his termination, (2) the unpaid amount, if any, of the annual bonus earned by Executive for the preceding year, and (3) the unpaid amount of any quarterly performance-based bonuses earned prior to the date of termination;
(b) reimbursement of any previously unreimbursed business expenses that were previously incurred and are otherwise eligible for reimbursement under this Agreement;
(c) any payments or benefits payable to Executive or his covered spouse, or a dependent or beneficiary of Executive, under and in accordance with the provisions of any employee benefit plan, program or arrangement of the Company;
(d) salary continuation payments (determined and paid as if Executive’s employment had continued) for a period of six (6) months following such termination of employment at the rate of his annual Base Salary in effect at the time of such termination of employment; provided, however, that, if such termination of employment occurs after a Change in Control, the amount of severance payable to Executive will be an amount equal to the sum of (1) 12 months of Base Salary in effect at the time of such termination of employment, plus (2) if the Executive’s termination occurs later than March 31 of the year of termination, a pro rata portion of the Executive’s target bonus for such year based upon the number of days elapsed from the beginning of the year to the date of termination which amount will be payable in a lump sum on the 60th day following the termination of employment;
(e) If such termination occurs after a Change in Control, the Executive shall become fully vested in any unvested Company equity awards that were assumed or converted into equity awards with respect to securities of the acquirer or successor company (or a parent thereof) and that are outstanding at the time his employment terminates; and
(f) if the Executive and/or his covered spouse or dependents elect COBRA continuation coverage as a result of the termination of Executive’s employment, then the Company will pay or reimburse the Executive for the payment of the premiums for such coverage for a period of up to 12 months following the termination of Executive’s employment or until the Executive becomes employed by another employer, whichever occurs first.
5.2 Termination Due to Disability or Death. If Executive’s employment is terminated pursuant to Section 4.4 by reason of his death or Disability, then, subject to Section 6, Executive (or, as applicable, his spouse, covered dependents and/or beneficiaries) shall receive the payments and benefits the Executive (or, as applicable, his spouse, covered dependents and/or beneficiaries) would have been entitled to receive pursuant to Section 5.1(a) — (d) and 5.1(f) if, instead of terminating due to death or Disability, the Executive’s employment had been terminated by the Company without Cause on the date of actual termination.
5.3 Termination by Company for Cause or Resignation by Executive. If Company terminates Executive’s employment for Cause pursuant to Section 4.1 or if Executive resigns his employment pursuant to Section 4.2 (other than a resignation for Good Reason pursuant to Section 4.5), Executive shall be entitled to the payments and benefits described in Section 5.1(a)(1), (b) and (c), and he shall not be entitled to any further payments or benefits.
6. Release of Claims; Restoration of Payments; Section 409A Delayed Payments.
6.1 Release. Notwithstanding anything to the contrary contained herein, Executive’s right to receive and retain any and all separation payments or benefits under Sections 5.1(d) — 5.1(f) (and, by extension, Section 5.2) shall be conditioned upon receipt by the Company, within 60 days following the termination of his employment, of a release substantially in the form of Exhibit A annexed hereto, which is no longer subject to revocation. If the Executive fails to timely satisfy the foregoing release condition, then the Executive will not be entitled to receive or retain any of such separation payments and benefits.
6.2 Restoration of Payments. Executive’s right to receive any separation payments and benefits pursuant to this Agreement shall be subject to his compliance with the restrictive covenants referenced or set forth in Section 7 and repayment pursuant to this Section. If Executive violates or is in breach of any said restrictive covenants, then (a) Executive shall not be entitled to any further separation payments and benefits under this Agreement, (b) Executive shall be obligated to immediately return to the Company any separation payments and the value of any separation benefits previously received hereunder, and (c) Executive shall have no further rights or entitlements under this Agreement. This Section shall not in any manner supersede or limit any other right the Company may have to enforce or seek legal or equitable relief with respect to a violation or breach by Executive of any of said restrictive covenants.
6.3 Section 409A Delayed Payment Requirements. Notwithstanding any provision to the contrary in this Agreement or in any employee plan or other agreement, plan, policy or program of the Company, any payment otherwise required to be made to Executive on account of his separation from service (including, without limitation, payments and benefits payable under Section 5.1), to the extent such payment is properly treated as deferred compensation subject to Section 409A of the Code and the regulations and other applicable guidance issued by the Internal Revenue Service thereunder, shall be delayed until the first business day after the expiration of six months from the date of the termination of Executive’s employment or, if earlier, the date of his death. On the delayed payment date, there shall be paid to Executive (or his estate, as the case may be) in a single cash payment an amount equal to the aggregate amount of the payments delayed pursuant to the preceding sentence.
7. Restrictive Covenants.
7.1 Nondisclosure of Confidential Information; Intellectual Property. The Executive is a party to and bound by an Assignment of Rights, Confidentiality and Non-Disclosure Agreement that was made with the Company on April 11, 2011 (the “Confidentiality Agreement”). The Executive shall, during and after his employment by the Company, remain bound by and shall comply with the Confidentiality Agreement as if the provisions of the Confidentiality Agreement were incorporated in this Agreement. The Company’s rights to enforce the covenants contained in this Section 7 shall extend to the enforcement of the Executive’s covenants and obligations under the Confidentiality Agreement.
7.2 Duty to Return Company Documents and Property. Upon the termination of Executive’s employment with the Company for any reason, Executive shall immediately return and deliver to the Company any and all papers, books, records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, belonging to the Company or any of its subsidiaries or relating to the business of the Company or any of its subsidiaries, in Executive’s possession, whether prepared by Executive or others. If at any time after the termination of employment, Executive determines that he has any trade secrets or other confidential information belonging to the Company or any of its subsidiaries in his possession or control, Executive shall immediately return to the Company all such trade secrets and other confidential information, including all copies and portions thereof.
7.3 Non-Solicitation. During the period of Executive’s employment or other service with the Company and, thereafter, during the Restricted Period (as defined below), Executive shall not, without the prior written consent of the Company, directly or indirectly: (a) solicit, request, advise, entice, persuade, induce, offer to employ, or hire any employee, consultant, or independent contractor employed by or working on behalf of the Company or any of its subsidiaries at any time during the one-year period prior to the Executive’s termination of employment with the Company to leave the Company or any of its subsidiaries or to engage in any activity which, were it done by the Executive, would violate the terms of this Agreement; or (b) solicit, request, advise, entice, persuade or induce any individual or entity, including but not limited to any customer, supplier, vendor, investor, equity or financing source, or other contracting party of the Company or any of its subsidiaries, to terminate, reduce or refrain from continuing or renewing their present or prospective contractual or business relationship with the Company or any of its subsidiaries. Upon request, Executive will execute a standard form of Company non-solicitation agreement, as in effect from time to time for executives generally, which shall apply in addition to and not in lieu of the covenants contained in this Agreement (it being understood that, in the event of any inconsistency, the provisions of this Agreement shall govern). For the purposes of this Agreement (including Sections 7.3 and 7.4), the term “Restricted Period” means the 6-month period following the date on which the Executive’s employment terminates or, if the Executive’s employment terminates after a Change in Control, the 12-month period following the date of such termination of employment, it being understood and agreed that, for purposes of determining the Restricted Period, the Executive will not be deemed to have terminated employment until the expiration of any applicable notice period.
7.4 Non-Competition Restrictions. During the period of Executive’s employment or other service with the Company and, thereafter, during the Restrictive Period (as defined in 7.3 above), Executive shall not, directly or indirectly, without the prior written consent of the Company, engage in, become financially interested in, be employed by, render any consultation or business advice with respect to, or have any connection with, any business engaged in the research, development, testing, design, manufacture, sale, lease, marketing, utilization or exploitation of any products or services which are designed for the same purpose as, are similar to, or are otherwise competitive with, products or services of the Company or any of its subsidiaries, in any geographic area where, during the period of his employment with the Company or any subsidiary or at the time of the termination of his employment or other service with the Company and its subsidiaries, as the case may be, the business of the Company or any of its subsidiaries was being conducted or was proposed to be conducted in any manner whatsoever; provided, however, that Executive’s mere purchase or holding, for investment purposes, of securities representing less than 3% of the outstanding value or voting interest of a publicly traded company shall not be deemed to be a violation of the provisions of this paragraph.
7.5 Non-Disparagement. The Executive shall, after his employment with the Company has terminated, refrain from any action that could reasonably be expected to harm the reputation or goodwill of the Company, its subsidiaries, affiliates and any shareholder holding more than 5% of the Company’s voting securities, including, without limitation, making derogatory comments about the character or ability of the Company or its directors, officers, employees, shareholders, agents or representatives.
7.6 Remedies. It is intended that, in view of the nature of the Company’s business, the restrictions contained in Sections 7.1 through 7.5, are considered reasonable and necessary to protect the Company’s legitimate business interests and that any violation of these restrictions would result in irreparable injury to the Company. In the event of a breach or a threatened breach by Executive of any restrictive covenant contained herein, the Company shall be entitled to a temporary restraining order and injunctive relief restraining Executive from the commission of any breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or threatened breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for any breach or threatened breach, including, without limitation, the restoration and other remedies specified in this Agreement and/or the recovery of money damages, attorneys’ fees, and costs. These covenants and restrictions shall each be construed as independent of any other provisions in the Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants and restrictions.
7.7 Severability. Should a court determine that any paragraph or sentence, or any portion of a paragraph or sentence of this Section 7 is invalid, unenforceable, or void, this determination shall not have the effect of invalidating or validating the remainder of the paragraph, sentence or any other provision of this Section 7. Further, it is intended that the court should construe this Section 7 by limiting and reducing it only to the extent necessary to be enforceable under then applicable law.
8. Claw Back Requirements. The Executive acknowledges that the Company will adopt a claw back policy having the terms described in Exhibit B hereto, under which the Board or the Compensation Committee may require the Executive to reimburse the Company for the amount of any incentive compensation paid to him, cause the cancellation of outstanding incentive compensation awards, and seek reimbursement of any gains otherwise realized by him in respect of the exercise or settlement of any such awards. The Executive further acknowledges that the Company may adopt another claw back policy or policies applicable to its most senior executives generally if and to the extent required by the Dodd-Frank claw back requirements, stock exchange listing requirements or other applicable law in effect from time to time. The Executive specifically authorizes the Company to withhold from his future wages any amounts that may become due under this provision. This Section 8 shall survive the termination of this Agreement for a period of three years.
9. Assignment. The services and duties to be performed by Executive hereunder are personal and may not be assigned. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and Executive and his heirs and representatives. Company may assign this Agreement to a successor in interest, provided that any such assignee affirmatively adopts and agrees to fulfill all obligations to Executive hereunder.
10. No Impediment to Agreement. Executive covenants that, except as otherwise disclosed herein, he is not, as of the date hereof, and will not be, during the period of his employment hereunder, employed under contract, oral or written, by any other person, firm or entity, and is not and will not be bound by the provisions of any other restrictive covenant or confidentiality agreement, and is not aware of any other circumstance or condition (legal, health or otherwise), which, in any such case, would constitute an impediment to, or restriction upon, his ability to enter into this Agreement and to perform the duties and responsibilities of his employment hereunder.
11. Governing Law and Choice of Forum. This Agreement shall be governed by the laws of the State of New York, excluding its conflict of law rules. The parties agree that all claims shall be brought exclusively in a state or federal court located in New York, New York and that there is a sufficient nexus to do so.
12. Indemnification. To the extent permitted by its Certificate of Incorporation and By-laws and subject to applicable law, the Company will indemnify, defend and hold Executive harmless from and against any claim, liability or expense (including reasonable attorneys’ fees) made against or incurred by him as a result of his employment with the Company or any subsidiary or other affiliate of the Company, including service as an officer or director of the Company or any subsidiary or other affiliate of the Company.
13. Withholding. All payments made by Company to or for the benefit of Executive in connection with his employment shall be subject to applicable tax withholding.
14. Section 409A. Anything in this Agreement to the contrary notwithstanding:
(a) It is intended that any amounts payable under this Agreement will either be exempt from or comply with Section 409A of the Internal Revenue Code of 1986 (“Section 409A) and all regulations, guidance and other interpretive authority issued thereunder so as not to subject the Executive to payment of any additional tax penalty or interest imposed under Section 409A, and this Agreement will be interpreted on a basis consistent with such intent. References to Termination Date or termination of employment herein mean a termination of employment that constitutes a Separation from Service within the meaning of Section 409A.
(b) To the extent that the reimbursement of any expenses or the provision of any in-kind benefits under this Agreement is subject to Section 409A, (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided during any one calendar year shall not affect the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year (provided that this clause (i) will not be violated with regard to expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect); (ii) reimbursement of any such expense shall be made by no later than December 31 of the year following the calendar year in which such expense is incurred; and (iii) the Executive’s right to receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
(c) Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
(d) To the extent any amount payable to the Executive is subject to his entering into a release of claims with the Company and any such amount is a deferral of compensation under Section 409A and which amount could be payable to the Executive in either of two taxable years, and the timing of such payment is not subject to terms and conditions under another plan, program or agreement of the Company that otherwise satisfies Section 409A, such payments shall be made or commence, as applicable, on January 15 (or any later date that is not earlier than eight days after the date that the release becomes irrevocable) of such later taxable year and shall include all payments that otherwise would have been made before such date.
15. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
16. Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which taken together shall constitute one and the same agreement, and any party hereto may execute this Agreement by signing any such counterpart.
17. Amendment or Waiver. No provision of this Agreement may be modified, amended, waived or terminated except by an instrument in writing signed by the parties to this Agreement. No course of dealing between the parties will modify, amend, waive or terminate any provision of this Agreement or any rights or obligations of any party under or by reason of this Agreement. No delay on the part of the Company in exercising any right hereunder shall operate as a waiver of such right. No waiver, express or implied, by a party of any right or any breach by the other party shall constitute a waiver of any other right of such party or breach by such other party.
18. Notices. Any notice or other communication made or given in connection with this Agreement may be given by counsel, shall be in writing, and, if to a party, shall be deemed to have been duly given when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by electronic mail or facsimile with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to a party at his or its address set forth below or at such other address or such facsimile number as a party may specify by notice to the other party:
To the Executive:
David Stehlin
[redacted]
With a simultaneous copy to:
David Clouston
Sessions Fishman Nathan & Israel LLC
Founders Square
900 Jackson St, Suite 440
Dallas, TX 75202
To the Company:
MRV Communications, Inc.
20415 Nordhoff Street
Chatsworth, CA 91311
Attn: Chairman of the Board of Directors
With a simultaneous copy to:
Steven Suzzan, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
19. Entire Agreement. This Agreement and, as set forth herein, the Confidentiality Agreement, contain the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior and/or contemporaneous understandings, agreements or representations, written or oral, relating to the subject matter hereof.
[Signature Page Follows]
Exhibit 99.1
MRV Announces Executive Leadership Transition
CHATSWORTH, Calif., January, 31, 2013 — MRV Communications, Inc. (OTCQB: MRVC) (“MRV” or the “Company”), a leading provider of optical communications network infrastructure equipment and integration and managed services, today announced that Barry Gorsun is to retire from his role as CEO effective January 31, 2013, and the Board of Directors has appointed David Stehlin, who currently serves as MRV’s Optical Communication Systems (“OCS”) division President, to CEO of MRV effective February 1, 2013. To aid with the transition, Gorsun will serve as a consultant to MRV for the next six months.
“The Board of Directors would like to thank Barry for his exemplary leadership of MRV,” said Kenneth Traub, Chairman of MRV’s Board of Directors. “Under Barry’s leadership, we renewed the Company’s commitment to building MRV’s core OCS business, resolved long-standing contingent liabilities, sold three non-core subsidiaries in Europe and returned a substantial amount of capital to stockholders. We wish Barry well in his future endeavors and appreciate his continued service to MRV during this transition.”
Traub continued, “David Stehlin is a telecommunications industry veteran with over 20 years of experience and we are confident that he is the right leader to take MRV to the next level. Over the past nearly two years while at MRV, Dave has been instrumental in helping develop MRV’s strategic direction, leading MRV’s OCS division and securing major new customers. Dave has the Board’s full support as we move forward on our plan to strengthen and grow MRV, while building value for our stockholders.”
Stehlin joined MRV in April 2011 as the Senior Vice President of Sales and Marketing of its OCS division, and in February 2012, was appointed President of the OCS division. He has more than two decades of telecommunications industry experience, having held executive level positions at various equipment manufacturing companies since 1990. From 2003 to March 2011, Stehlin was the president of Overture Networks, Inc., a developer and manufacturer of high-speed Carrier Ethernet edge and aggregation solutions, and president and chief executive officer of Ceterus Networks, Inc., which merged into Overture Networks under Stehlin’s direction. From 2002 to 2003, he was the president and chief executive officer of Valo, Inc., an early stage venture-backed start up focused on developing a new copper-bonding access system for North American carriers. From 1999 to 2001, he was the president and chief executive officer of OnePath Networks, Inc., a venture-backed start up building multi-service fiber optic access systems for major communications service providers. From 1990 to 1999, he was the senior vice president of sales and marketing of Keptel, Inc., then, after helping lead the sale of the business to Antec (now known as Arris), a major provider of hybrid fiber-coaxial and interconnection products to the telecommunications industry, was appointed president of Keptel and Antec’s Network Transport, division. From 1984 to 1989 he held various sales management positions with both Laser Precision and Siecor, high-end fiber optic infrastructure equipment companies. After graduating from the U.S. Naval Academy with a bachelor of science degree in international security affairs, Stehlin served as an infantry officer in the U.S. Marine Corps. Additionally, he earned a master’s of business administration degree from National University.
Stehlin commented, “MRV is poised to leverage its long-standing legacy of innovative solutions for the optical transport, carrier Ethernet, mobile backhaul, data center and cloud computing markets. We are committed to capitalize on our strengths in serving these growing markets and to execute our strategy of developing next generation optical edge solutions. It is an exciting time for MRV and I am honored to lead the Company as we execute the next stage of our strategy to accelerate growth and deliver additional value to our stockholders.”
“I would like to thank MRV’s Board of Directors, employees and stockholders for their support and commitment during my tenure,” said Barry Gorsun, chief executive officer. “It has been a privilege to work with such a dedicated team and I appreciate the MRV employees that have and continue to work very hard to increase shareholder value and to build an exciting future for MRV. With three non-core subsidiaries divested and OCS positioned to leverage its technology to become a market leader in the optical communications market, I felt it was the right time for me to transition the leadership to Dave. I know I am leaving the Company in good hands.”
About MRV Communications, Inc.
MRV Communications, Inc. is a leading global provider of carrier Ethernet, wavelength division multiplexing optical transport, infrastructure management equipment and solutions, as well as network integration and managed services. MRV’s solutions enable the delivery and provisioning of next-generation optical transport and carrier Ethernet services over any fiber infrastructure. MRV provides equipment and services worldwide to telecommunications service providers, enterprises and governments, enabling network evolution and increasing efficiency, while reducing complexity and costs. Through its subsidiaries, MRV operates development centers in North America and Europe, along with support centers and sales offices around the world. For more information about MRV, visit http://www.mrv.com.
Forward Looking Statements
This press release may contain statements regarding future financial and operating results of MRV, management’s assessment of business trends, and other statements about management’s future expectations, beliefs, goals, plans or prospects and those of the market segments in which MRV is engaged that are based on management’s current expectations, estimates, forecasts and projections about MRV and its consolidated businesses and the respective market segments in which MRV’s businesses operate, in addition to management’s assumptions. Statements in this press release regarding MRV’s future financial and operating results, which are not statements of historical facts, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “envisions,” “estimates,” “targets,” “intends,” “plans,” “believes,” “seeks,” “should,” “could,” “forecasts,” “projects,” variations of such words and similar expressions, are intended to identify such forward-looking statements which are not statements of historical facts. These forward-looking statements are not guarantees of future performance nor guarantees that the events anticipated will occur or expected conditions will remain the same or improve. These statements involve certain risks, uncertainties and assumptions, the likelihood of which are difficult to assess and may not occur, including risks that each of its business segments may not make the expected progress in its respective market, or that management’s long-term strategy may not achieve the expected results. Therefore, actual outcomes, performance and results may differ from what is expressed or forecast in such forward-looking statements, and such differences may vary materially from current expectations.
For further information regarding risks and uncertainties associated with MRV’s businesses, please refer to the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Risk Factors” sections of MRV’s SEC filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2011, and its quarterly report on Form 10-Q for the quarter ended September 30, 2012, copies of which may be obtained by contacting MRV’s investor relations department or by visiting MRV’s website at http://www.mrv.com or the SEC’s EDGAR website at http://www.sec.gov.
All information in this release is as of January 31, 2013 unless otherwise stated. MRV undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in MRV’s expectations.
Contact:
Investor Relations:
MRV Communications, Inc.
(818) 886-MRVC (6782)
ir@mrv.com
or
Media Relations:
MRV Communications, Inc.
pr@mrv.com