ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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Information required under this
Item with respect to Executive Officers of the Company is included as a supplemental item at the end of Part I of the Original 10-K Filing. The following table shows information as of March 23, 2016 with respect to each of the Companys
directors. Each of Mr. Kahn, Mr. Avril, Mr. Keating and Mr. Krieg has been serving as a director since 2011. Mr. Tavares was appointed to our Board of Directors (the Board) in connection with his appointment as
President and Chief Executive Officer of the Company effective March 2, 2015.
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Name
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Age
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Position
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Brian R. Kahn
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42
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Chairman
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Matthew E. Avril (1),(2),(3)
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55
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Director
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Melvin L. Keating (1),(2),(3)
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69
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Director
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Kenneth J. Krieg (1),(2),(3)
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55
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Director
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Robert E. Tavares
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54
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Director
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(1)
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Member of the Audit Committee.
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(2)
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Member of the Compensation Committee.
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(3)
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Member of the Nominating and Governance Committee.
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Brian R. Kahn
Brian R. Kahn became our Chairman of the Board and Chief Executive Officer on January 21, 2011. Mr. Kahn continued to serve as Chief
Executive Officer until August 1, 2012 and he continues to serve as Chairman of the Board. Mr. Kahn founded and has served as the investment manager of Vintage Capital Management, LLC (Vintage), and its predecessor, Kahn
Capital Management, LLC (KCM) since 1998. Vintage focuses on public and private market investments in the consumer, manufacturing, and defense industries. Mr. Kahn also was the former Chairman of the Board of White Electronic
Designs Corporation, where he served on the Governance, Compensation, and Strategic Alternatives committees. Additionally, he served as a director of Integral Systems, Inc., where he served on the Nominating and Governance, Strategic Growth, and
Special Litigation committees. Until recently, Mr. Kahn served as a director of Aarons, Inc. (NYSE: AAN) where he was a member of the Nominating & Governance Committee and the Operational & Financial Advisory Committee.
Mr. Kahn graduated cum laude and holds a Bachelor of Arts degree in Economics from Harvard University.
As founder of Vintage and
KCM, Mr. Kahn brings to the Board business leadership experience and significant investment banking and management skills, including in the defense and electronics industries. He also has corporate governance experience, as former Chairman of
the Board of White Electronic Designs Corporation and board member of Integral Systems, Inc. and Aarons Inc. In addition, as our former Chief Executive Officer, he is able to provide the Board with valuable insight on the day-to-day operations of
the Company and any current issues it may face.
Matthew E. Avril
Matthew E. Avril has served as a director since February 8, 2011 when he was elected by the Board. He has also been Chair of the
Companys Compensation Committee since February 8, 2011, a member of the Companys Audit Committee since February 8, 2011, and a member of the Nominating and Governance Committee since its formation in June 2011. Mr. Avril
retired from Starwood Hotels & Resorts Worldwide, Inc. on December 31, 2012, where he had served as President, Hotel Group since September 2008. Mr. Avril was responsible for hotel operations worldwide for Starwoods nine
hotel brands, consisting of approximately 1,100 properties in more than 97 countries. Mr. Avril also oversaw Starwoods global sales organization. Mr. Avril has over 20 years experience in the hospitality and vacation ownership
industry, serving as President and Managing Director of Operations for Starwood Vacation Ownership (SVO), a division of Starwood Hotels & Resorts Worldwide from 2002 to 2008.
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There, he oversaw Sales & Marketing, Resort Operations, Finance, Legal Affairs, Homeowner Association Management, and Human Resources functions. In connection with a spin-off of SVO
announced in February 2015, Mr. Avril returned to SVO to serve as Chief Executive Officer following completion of the spin-off. In July of 2014, Mr. Avril joined the board of directors of Aarons, Inc. (NYSE: AAN) where he serves on
the Audit Committee and the Compensation Committee. Mr. Avril graduated in 1982 with honors from the University of Miami and is a Certified Public Accountant.
Mr. Avril brings valuable and extensive operational and finance experience to the Board.
Melvin L. Keating
Melvin L. Keating has served as a director since January 21, 2011 when he was elected by the Board. He has also been Chair of the
Companys Audit Committee and a member of the Companys Compensation Committee since January 21, 2011, and a member of the Nominating and Governance Committee since its formation. Mr. Keating served as the President and Chief
Executive Officer of Alliance Semiconductor Corp., a worldwide manufacturer and seller of semiconductors, from December 2005 to September 2008 and a Special Consultant to Alliance from October 2005 to December 2005. He is currently a director of Red
Lion Hotels Corp., currently serving as a director and member of both the audit and nominating and governance committees, formerly serving as its Chairman of the Board. He is also a director of and was formerly Chairman of the Board of Modern
Systems (previously known as BluePhoenix Solutions Ltd.). He is a director, chairman of the compensation committee and a member of the nominating and governance committee of Agilysys Inc. He recently served as a director of the following public
companies: Crown Crafts, Inc., (member of the compensation committee, strategic committees and Chair of the capital committee); Pageflex, Inc. (formerly known as Bitstream Inc.), Integral Systems, Inc. (Chair of audit committee and member of
compensation committee and strategic growth committee); Aspect Medical Systems, Inc. (member of compensation committee and special committee for acquisitions/divestitures); White Electronic Designs Corporation (member of audit committee, strategic
committee and operations committee); Price Legacy Corp. (Chair of audit committee); LCC International Inc. (member of audit committee); Infologix Corp. (Chair of audit committee and member of special committee); Integrated Silicon Solutions Inc.
(Chair of audit committee); Tower Semiconductor (member of audit committee); Plymouth Rubber Company (Chair of audit committee and member of compensation committee); and Kitty Hawk, Inc. Mr. Keating holds a B.A. degree in History of Art from
Rutgers University, and both an M.S. in Accounting and an M.B.A. in Finance from the Wharton School at the University of Pennsylvania.
Mr. Keating brings extensive business leadership skills and experience to the Board, having served as President and Chief Executive
Officer of a worldwide manufacturer and seller of semiconductors and in various other business leadership positions. Mr. Keating also has considerable corporate governance experience from serving on the board of directors, audit committee and
compensation committee of numerous companies. This experience provides Mr. Keating with insight into board operations, including emerging trends and best practices. Mr. Keating also has audit and finance experience as a result of his
degrees in accounting and finance, experience working as a chief financial officer and service on other public company audit committees.
Kenneth J. Krieg
The Honorable Kenneth J. Krieg has served as a director since February 8, 2011 when he was elected by the Board. He has also been a member
of the Companys Audit and Compensation Committees since February 8, 2011 and has been Chair of the Nominating and Governance Committee since its formation. Mr. Krieg joined the Board of Directors of Chart Acquisition Corp. in January
2014 and serves on the Compensation Committee. Mr. Krieg heads McLean, VA-based Samford Global Strategies, a consulting practice focused on helping clients lead and manage through periods of strategic change. He also serves on the board of
directors of several private companies, is an Executive in Residence at Renaissance Strategic Advisors, and is a Fellow at the Center for Naval Analyses. Previously, he served as the Undersecretary of Defense for Acquisition, Technology and
Logistics (USD (AT&L)) from 2005 to 2007, with overall responsibility for the Department of Defenses (the DoD) procurement, research and development, and other major functions. Prior to his appointment as USD
(AT&L), he served as Special Assistant to the Secretary of Defense and Director of Program Analysis & Evaluation, leading an organization that advises the Secretary of Defense on defense systems, programs, and investment alternatives.
Before joining the DoD, he was Vice President and General Manager of the Office and Consumer Papers Division of International Paper Company. Mr. Krieg also served as a director of White Electronic Designs Corporation. Mr. Krieg holds a
Bachelor of Arts degree in history from Davidson College and a Masters degree in Public Policy from the Kennedy School of Government at Harvard University.
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Mr. Kriegs extensive experience with defense systems and the DoD along with his
strategic planning experience is valuable to the Board.
Robert E. Tavares
Mr. Tavares joined our Board March 2, 2015, at the time he was appointed our President and Chief Executive Officer. Mr. Tavares
has 30 years of experience in microelectronics and semiconductors for both commercial and defense applications. From March 2012 until joining the Company, Mr. Tavares served as the President of Crane Electronics Inc. which serves the defense,
commercial aerospace and medical markets with microelectronic based solutions for power and microwave applications. Prior experience includes serving as the President of e2v US Operations, a supplier of technology solutions in RF power,
semiconductors, including lifecycle management as well as high performance imaging semiconductors for space instrumentation from July 2010 to March 2012. Mr. Tavares also served as a Director of Hunter Technologies, a privately held PCB and EMS
provider in Santa Clara CA from June 2010 to April of 2012. Mr. Tavares spent most of his career, from May 1985 to February 2010, at Tyco Electronics, M/A Com Division where he started his career as a design and development engineer and
progressively advanced to become the Vice President, General Manager, where he was responsible for setting the strategic direction, growth and profitability of a $320 million RF and microwave multi-site business making a diverse set of highly custom
and application specific technology solutions. Mr. Tavares holds a B.S. in Engineering from the University of Massachusetts, Dartmouth.
Mr. Tavares brings extensive knowledge and experience in the industry to the Board. As President and Chief Executive Officer, he will
also be able to provide valuable insight on the day-to-day operations of the Company.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons beneficially owning more than 10 percent of a
class of our equity securities to file certain reports of beneficial ownership and changes in beneficial ownership with the SEC. Based solely on our review of Section 16(a) reports and any written representations made to us, the Company
believes that all such required filings for the fiscal year ended November 30, 2015 were made in a timely manner, except a grant by the Board to Mr. Seeton on September 8, 2015, of 31,381 restricted stock units (RSUs) and
100,000 stock options was reported on a Form 4 as required, but such filing was not made timely.
Code of Ethics
The Company has a Code of Ethics for its principal executive officer, principal financial officer, principal accounting officer, and persons
performing similar functions. This Code of Ethics is applicable to all of our directors, officers, employees, and agents. The Code of Ethics covers the areas of conflicts of interest, corporate opportunities, gifts, confidential information, insider
trading, and other areas of ethical concern to the Company. The Code of Ethics is posted on our website at www.apitech.com on the Investors, Corporate Governance section. We will post on our website any amendments to or waivers of the Code of Ethics
for executive officers or directors in accordance with applicable laws and regulations.
Director Nomination Process
In lieu of a nominating committee charter, the Board adopted a Director Nomination Policy on November 17, 2010. A copy of the Director
Nomination Policy can be found on our website www.apitech.com on the Investor Relations, Corporate Governance section.
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We also have adopted a policy with respect to director candidates recommended by stockholders.
Stockholders wishing to recommend a candidate for inclusion in the proxy materials should submit the recommendation to our Secretary at our principal executive offices not less than 90 days prior to the first anniversary of the date of the previous
years annual meeting of stockholders; provided, however, that if no annual meeting of stockholders was held in the previous year or if the date the annual meeting is advanced by more than 30 days prior to, or delayed by more than 30 days
after, such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the close of business on the 10
th
day following the day on which
the date of such meeting has been first publicly disclosed, meaning disclosure in a press release or in a document publicly filed by us with the SEC.
At the time the stockholder submits the recommendation for a director candidate, the stockholder must provide the following:
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Certification from the candidate that he or she meets the requirements to be independent under applicable NASDAQ and Exchange Act rules.
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Consent of the candidate to serve on the Board, if nominated and elected.
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Agreement of the candidate to complete, upon request, questionnaire(s) customary for directors of the Company.
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All information relating to such candidate that is required to be disclosed in solicitations of proxies for the election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange
Act.
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As to the stockholder giving notice, (i) the name and address, as they appear on the Companys stock ledger, of such stockholder, (ii) the class and number of shares of the Company which are beneficially
owned by such stockholder, and (iii) if the stockholder intends, directly or indirectly, to solicit proxies in support of such stockholders nominee for election or reelection as a director, the stockholders notice shall set forth,
as to the stockholder and any other participants in the solicitation of proxies, all information relating thereto that is required pursuant to Regulation 14A under the Exchange Act.
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The Nominating and Governance Committee will evaluate candidates recommended by stockholders on the same basis as candidates recommended by
other sources, including evaluating the candidate against the standards and qualifications set out in our Director Nomination Policy as well as any other criteria approved by the Board from time to time. The Nominating and Governance Committee will
determine whether to interview any candidate.
When evaluating a person for nomination for election to the Board, the qualifications and
skills considered by the Board and Nominating and Governance Committee include:
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whether or not the person will qualify as a director who is independent under applicable laws and regulations, including applicable NASDAQ rules, and whether the person is qualified under applicable laws and
regulations to serve as a director of the Company;
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whether or not the person is willing to serve as a director, and willing to commit the time necessary for the performance of the duties of a director;
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the contribution that the person can make to the Board, with consideration being given to the persons business experience, education, and such other factors as the Board may consider relevant;
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whether a candidate contributes to the Boards overall diversity, with diversity being broadly construed to mean a variety of personal and professional experiences and education;
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opinions, perspectives, and backgrounds; and
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the character and integrity of the person.
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In addition, the Company is of the view that the
continuing service of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Boards ability to work as a collective body, while giving the Company the benefit of the familiarity and insight into the
Companys affairs that its directors have accumulated during their tenure. Accordingly, the process for
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identifying nominees will reflect the Companys practice of re-nominating incumbent directors who continue to satisfy the criteria for membership on the Board, who the Board believes
continue to make important contributions to the Board, and who consent to continue their service on the Board.
Audit Committee
The Company has a separately designated Audit Committee, as defined in Section 3(a)(58)(A) of the Exchange Act. The Audit Committee
operates pursuant to a written charter, which the Board adopted in its current form on November 17, 2010, and can be found on our website www.apitech.com on the Investor Relations, Corporate Governance section. The primary purpose of the Audit
Committee is to assist the Board in fulfilling its responsibility to oversee the integrity of the financial statements of the Company and the Companys compliance with legal and regulatory requirements by overseeing and reviewing: the financial
reports and other financial information, such as earnings press releases; the Companys system of internal accounting and financial controls; the engagement and services of the Companys independent registered public accounting firm; and
the annual independent audit of the Companys financial statements. The Audit Committee also evaluates transactions where the potential for a conflict of interest exists.
The members of the Audit Committee during the fiscal year ended November 30, 2015 were Messrs. Avril, Keating, and Krieg.
Mr. Keating became a member of the Audit Committee and its Chairman on January 21, 2011 and Messrs. Avril and Krieg became members of the Audit Committee on February 8, 2011. The Board has determined that each of the members of the
Audit Committee is independent under NASDAQ listing standards. The Board also has determined that each of Mr. Keating and Mr. Avril is an audit committee financial expert as defined in Section (d)(5) of Item 407 of Regulation S-K.
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ITEM 11.
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EXECUTIVE COMPENSATION
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2015 Summary Compensation Table
The following table summarizes the total compensation paid to or earned by each named executive officer for the fiscal year ended
November 30, 2015, and the fiscal year ended November 30, 2014.
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Name and Principal Position
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Fiscal
Year
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Salary
($)
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Bonus
($)
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All Other
Compensation
($)
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Total
($)
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Brian R. Kahn
Chairman
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2015
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23,600
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26,086
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(1)
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49,686
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2014
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26,000
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29,324
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52,924
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Robert E. Tavares (2)
President and Chief Executive Officer
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2015
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390,000
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2,232,375
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(3)
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76,552
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(4)
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2,698,927
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2014
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Eric F. Seeton (5)
Chief Financial Officer
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2015
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51,058
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407,891
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(6)
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6,038
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(7)
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464,987
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Bel Lazar (8)
Former President and Chief Executive Officer
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2015
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161,539
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282,707
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(9)
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444,246
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2014
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500,000
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37,204
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537,204
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Claudio Mannarino (10)
Former Senior Vice President and Chief Financial Officer
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2015
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175,782
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(11)
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299,086
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(11),(12)
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474,869
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2014
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205,230
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(11)
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278,594
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(13)
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19,758
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(11)
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503,582
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(1)
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Represents $274 of insurance premiums and $25,812 for health plans.
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(2)
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Mr. Tavares was appointed as our President and Chief Executive Officer effective March 2, 2015.
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(3)
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Represents (i) $360,000 paid as a signing bonus in connection with Mr. Tavares hiring, (ii) 227,000 RSUs granted on March 2, 2015 as a signing bonus in connection with Mr. Tavares
hiring, (iii) 567,500 options granted on March 2, 2015 as a signing bonus in connection with Mr. Tavares hiring, (iv) $100,000 paid as a cash incentive award under Mr. Tavares employment letter agreement with the
Company, (v) 162,500 RSUs granted on January 26, 2016 as a bonus for Mr. Tavares service during the year ended November 30, 2015, and (vi) 406,250 options granted on January 26, 2016 as a bonus for
Mr. Tavares service during the year ended November 30, 2015.
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(4)
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Represents $2,015 of insurance premiums, $6,722 for health plans, $64,565 for relocation expenses, and $3,250 for 401(k) contributions.
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(5)
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Mr. Seeton was appointed as our Chief Financial Officer effective September 8, 2015.
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(6)
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Represents (i) 31,381 RSUs granted on September 8, 2015 as a signing bonus in connection with Mr. Seetons hiring, (ii) 100,000 options granted on September 8, 2015 as a signing bonus in
connection with Mr. Seetons hiring, (iii) $30,000 paid as a cash incentive award under Mr. Seetons employment letter agreement with the Company, (iv) 35,000 RSUs granted on January 26, 2016 as a bonus for
Mr. Seetons service during the year ended November 30, 2015, and (v) 100,000 options granted on January 26, 2016 as a bonus for Mr. Seetons service during the year ended November 30, 2015.
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(7)
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Represents $594 of insurance premiums and $5,444 for health plans.
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(8)
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Mr. Lazar resigned as our President and Chief Executive Officer effective March 1, 2015.
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(9)
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Represents $250,000 of severance paid to Mr. Lazar in connection with Mr. Lazars resignation, $3,000 for car allowance, $672 of insurance premiums and $29,035 for health plans.
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(10)
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Mr. Mannarino resigned as our Senior Vice President and Chief Financial Officer effective September 8, 2015.
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(11)
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Amounts shown in the Salary and All Other Compensation columns for Mr. Mannarino have been converted from Canadian Dollars to U.S. Dollars using the average currency conversion for fiscal
2015 of 0.79 and for fiscal 2014 of 0.91.
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(12)
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Represents $284,654 of severance paid to Mr. Mannarino in connection with Mr. Mannarinos resignation, including $81,180 of accrued vacation pay payable to Mr. Mannarino at the time of
Mr. Mannarinos resignation, $8,728 for car allowance, $939 of insurance premiums, and $4,765 for health plans.
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(13)
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Represents options for 200,000 shares of common stock granted on July 28, 2014 as a bonus in connection with Mr. Mannarinos promotion to Chief Financial Officer that began vesting in three equal annual
installments on July 28, 2015.
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Compensation Policies and Procedures
The following is a narrative overview of the Companys executive compensation policies and procedures.
Overview of Compensation Program
The Compensation Committee oversees our compensation programs, with particular attention to the compensation for our President and Chief
Executive Officer, Chief Financial Officer, and the other executive officers. It is the responsibility of the Compensation Committee to review and approve or, as the case may be, recommend to the Board for approval, changes to our compensation
policies and benefits programs, to recommend and approve stock-based awards to named executive officers, and to otherwise ensure that the Companys compensation philosophy is consistent with the best interests of the Company and its
stockholders and is properly implemented and monitored. We have not used compensation consultants in determining or recommending the amount or form of executive or director compensation. Because the Compensation Committee did not retain a
compensation consultant to assist in determining or recommending director or executive officer compensation for fiscal 2015, it did not need to evaluate the independence, including any potential conflicts of interest or how to address any such
conflicts pursuant to SEC and NASDAQ rules.
The day-to-day administration of savings plans, health, welfare, and paid time-off plans and
policies applicable to salaried employees in general are handled by our human resources and finance department employees. The responsibility for certain fundamental changes outside the day-to-day requirements necessary to maintain these plans and
policies belongs to the Compensation Committee.
Compensation Policies and Procedures
The principal objective of our compensation program is to attract, motivate, and retain and reward highly qualified persons who are committed
to the achievement of solid financial performance and excellence in the management of the Companys assets. The Compensation Committee believes that the most effective executive compensation program is one that is designed to reward the
achievement of annual, long-term, and strategic goals by the Company and to align named executive officers interests with those of the Companys stockholders. The Compensation Committee accomplishes this by providing competitive
compensation designed to link executive compensation to the Companys financial and operational performance, as well as rewarding overall high performance of its named executive officers, with the ultimate objective of increasing stockholder
value. The Compensation Committee evaluates compensation against individual performance and external market factors to ensure that we maintain our ability to attract and retain key executive talent. To that end, total compensation is comprised of a
base salary plus short-term and long-term incentive compensation, including performance-based bonuses and stock or RSU grants, based on the Companys objective financial performance as well as subjective factors including achievement of
individual goals to promote long-term alignment of executive interests with stockholder interests. The subjective component of the performance bonus provides executives the opportunity to receive additional compensation based on the executives
ability to function as an effective member of the management team in achieving Company profitability. The subjective component also provides the Compensation Committee flexibility in awarding compensation and permits the Company to integrate
non-financial business priorities into the compensation scheme. Individual non-performance bonuses are also part of overall compensation from time to time based on an individuals special efforts.
We recognize that value-creating performance by an executive or group of executives does not always translate immediately into appreciation in
our stock price. Management and the Compensation Committee are aware of the impact current economic conditions have had on our stock price. The Compensation Committee intends to continue to reward management performance, based on its belief that
over time strong operating performance will be reflected through stock price appreciation.
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Compensation Philosophy
The goal of our executive compensation policy is to ensure that an appropriate relationship exists between executive pay and the creation of
stockholder value, while at the same time attracting, motivating, and retaining key employees. To achieve this goal, the Companys named executive officers are offered compensation opportunities that are linked to the Companys financial
performance and to individual performance and contributions to the Companys success.
To achieve this goal, the Compensation
Committee focuses on the following considerations:
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An emphasis on rewarding our named executive officers with total compensation (including cash, stock options, and RSUs) at competitive market levels, based on each executives experience, skills, and individual
performance; and
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An appropriate mix of short-term (salary and cash bonuses) and long-term compensation (stock options and RSUs), which facilitates retention of talented executives and balances short-term and long-term financial goals
and behaviors within the Company.
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The primary components of the Companys executive compensation program for its named
executive officers have been: base salaries, incentive bonuses, and discretionary bonuses. Bonuses may be paid in cash or with long-term incentive opportunities in the form of options or RSUs. Commensurate with our long-term incentive objectives,
the Company paid a signing bonus of options and RSUs to our Chief Executive Officer and a signing bonus of options and RSUs to our Chief Financial Officer in fiscal 2015. The Companys primary form of short-term compensation has been an
executives base salary. The Company may also utilize cash bonuses from time to time as part of the short-term component of an executives compensation. The Compensation Committee has generally determined that bonuses are to be paid in
long-term compensation, such as options and RSUs.
Setting Executive Compensation
The Compensation Committee evaluates the performance of the Chief Executive Officer and the other named executive officers and, based on such
evaluation, reviews and approves the annual salary, long-term stock-based compensation, and other material benefits, direct and indirect, of the Chief Executive Officer and other named executive officers. In determining appropriate base salary
levels, consideration is given to the named executive officers impact level, scope of responsibility, past accomplishments, and other similar factors.
Our former Chief Executive Officer was subject to an employment letter agreement, which set out base salary and target and minimum guaranteed
bonus amounts. Our current Chief Executive Officer is also subject to an employment letter agreement, which sets out base salary and target bonus amounts in addition to other benefits generally granted to other executives with commensurate
experience and qualifications. See Agreements with Named Executive Officers below. In determining the Chief Executive Officers base amount of compensation and targets for bonuses, the Compensation Committee considers the status of
the Chief Executive Officer as the Companys most senior officer and the important role he has in establishing our corporate strategy and achieving overall corporate goals. The Chief Executive Officers overall compensation therefore
reflects this greater degree of policy and decision-making authority, and the higher level of responsibility with respect to our strategic direction and financial and operational results.
Our current Chief Financial Officer is also subject to an employment letter agreement, which sets out base salary and target bonus amounts in
addition to other benefits generally granted to other executives with commensurate experience and qualifications. See Agreements with Named Executive Officers below. In determining the Chief Financial Officers base amount of
compensation and targets for bonuses, the Compensation Committee considers the important role the Chief Financial Officer has in achieving overall corporate goals. The Chief Financial Officers overall compensation therefore reflects this
greater degree of policy and decision-making authority, and the higher level of responsibility with respect to our strategic direction and financial and operational results.
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Under his employment letter agreement with the Company, Mr. Tavares is entitled to receive
an annual target equity incentive award of 75% of his base salary, based on the achievement of performance goals established by the Compensation Committee. In January 2016 the Compensation Committee awarded to Mr. Tavares a bonus of 162,500
RSUs, which provide for annual equal vesting over three years beginning January 26, 2017, and 406,250 options, which provide for annual equal vesting over three years beginning January 26, 2017. This bonus was paid in consideration of
Mr. Tavares critical performance in the integration of Aeroflex / Inmet, Inc. (Inmet) and Aeroflex / Weinschel, Inc. (Weinschel) into the Company following their acquisition in June 2015, and general leadership in
considering and implementing our strategic plan alternatives. As a result of these acquisitions and strategic planning activities, Mr. Tavares responsibilities have increased accordingly, and the Compensation Committee decided
Mr. Tavares should be awarded such bonus.
In January 2016 the Compensation Committee also awarded to Mr. Seeton, as a bonus,
35,000 RSUs, which provide for annual equal vesting over three years beginning January 26, 2017, and 100,000 options, which provide for annual equal vesting over three years beginning January 26, 2017. This bonus was paid in consideration
of Mr. Seetons critical performance in considering and implementing our strategic plan alternatives and the resulting assumption of increased responsibilities by Mr. Seeton.
Role of Executive Officers in Compensation Decisions
Based on the foregoing objectives, the Compensation Committee structures the Companys annual and long-term incentive-based cash and
non-cash executive compensation to motivate the named executive officers to achieve the business goals set by the Company and to reward the named executive officers for achieving such goals. The Compensation Committee from time to time will rely
upon recommendations made by the Companys management, and in particular, the Chief Executive Officer, regarding compensation for named executive officers other than the Chief Executive Officer. Our former President and Chief Executive Officer,
Bel Lazar, did not participate in the determination of his compensation. Our current President and Chief Executive Officer, Bob Tavares, likewise does not and will not participate in the determination of his compensation. Mr. Tavares, however,
brings a wealth of industry knowledge and experience, which will aid the Compensation Committee in evaluating the compensation of our other named executive officers. The Compensation Committee will review and approve, or, if the situation warrants,
will recommend to the full Board for approval, all new executive compensation programs, including those for the named executive officers. The Chief Executive Officer and such other executives as the Chief Executive Officer deems appropriate will
review the performance of each of the named executive officers of the Company (other than the Chief Executive Officer whose performance is reviewed by the Compensation Committee). The conclusions reached and recommendations based on these reviews,
including with respect to salary adjustments and annual performance awards, are presented to the Compensation Committee. The Compensation Committee exercises its discretion in modifying any recommended adjustments or awards to named executive
officers.
Agreements with Named Executive Officers
Mr. Tavares became our President and Chief Executive Officer effective March 2, 2015. Under his employment letter agreement with the
Company, he is entitled to a base salary of $520,000 and an annual cash incentive payable for the achievement of performance goals to be established by the Compensation Committee. For the fiscal year ended November 30, 2015, Mr. Tavares
was entitled to a minimum $100,000 cash incentive bonus. His target for the incentive payment is 70% of his base salary, with a maximum target opportunity of 100%. Mr. Tavares is also eligible to receive an annual target equity incentive award
of 75% of his base salary, based on the achievement of performance goals established by the Compensation Committee. Any such equity incentive award will be determined at the discretion of the Compensation Committee. Mr. Tavares also was granted
a cash signing bonus of $360,000 and equity incentive signing bonus of 277,000 RSUs and options to purchase 567,500 shares of the Companys common stock. Mr. Tavares employment is at-will, and either party may terminate the
employment at any time and the Company is entitled to modify his job title, salary, and benefits. Although his employment is at-will, Mr. Tavares is entitled to certain severance benefits in the event of termination.
10
Mr. Lazar, our former President and Chief Executive Officer, had an employment letter
agreement with the Company, which entitled him to a base salary of $500,000 and an annual cash incentive payable for the achievement of performance goals to be established by the Compensation Committee. His target for the incentive payment was 70%
of his base salary, with a maximum target opportunity of 100%. Mr. Lazar resigned from the Company effective March 1, 2015, at which time he entered into a separation agreement and release with the Company.
On September 8, 2015, Eric Seeton was appointed as our Chief Financial Officer. Mr. Seeton replaced Claudio Mannarino. Under his
employment letter agreement with the Company, Mr. Seeton is entitled to a base salary of $225,000 and an annual cash incentive payable for the achievement of performance goals to be established by the Compensation Committee. His target for the
incentive payment is 40% of his base salary, and is to be based on achievement of performance goals as established by the Compensation Committee. For the fiscal year ended November 30, 2015, Mr. Seeton was entitled to a minimum $30,000
cash incentive bonus. Mr. Seeton also was granted an equity incentive signing bonus of 31,381 RSUs and options to purchase 100,000 shares of the Companys common stock. Mr. Seetons employment is at-will, and either party may
terminate the employment at any time and the Company is entitled to modify his job title, salary, and benefits. Although his employment is at-will, Mr. Seeton is entitled to certain severance benefits in the event of termination.
Mr. Kahn became our Chairman and Chief Executive officer on January 21, 2011 in connection with the SenDEC acquisition and resigned
as Chief Executive Officer effective August 1, 2012. Commencing in Fiscal 2012, he began receiving reduced compensation in comparison to our other non-employee directors, which he continues to receive. He does not receive bonuses or other
incentive compensation, although he does receive certain perquisites. The Company has no written employment agreement with Mr. Kahn.
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Outstanding Equity Awards at 2015 Fiscal Year-End
The following table sets forth information regarding unexercised stock options and unvested stock awards for each named executive officer as of
the end of fiscal 2015.
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Option Awards
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Stock Awards
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Name
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Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
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Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
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Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
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Option
Exercise
Price
($)
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Option
Expiration
Date
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Number
of Shares or
Units
of Stock That
Have Not
Vested
(#)
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Market Value
of Shares or
Units of
Stock That
Have
Not Vested
($)
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Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
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Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)(1)
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Brian Kahn
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Robert E. Tavares
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567,500
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(2)
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1.89
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3/2/2025
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227,000
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(3)
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447,190
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Eric F. Seeton
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100,000
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(4)
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2.39
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9/8/2025
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31,381
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(5)
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61,821
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Bel Lazar
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Claudio Mannarino
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200,000
6,250
50,000
120,000
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2.19
6.03
5.72
3.54
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2/3/2016
2/3/2016
2/3/2016
2/3/2016
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(1)
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Computed by multiplying the closing market price of the Companys stock on November 30, 2015 by the number of shares held.
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(2)
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Represents shares underlying unvested options from an option for 567,500 shares granted on March 2, 2015, which vested on March 2, 2016.
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(3)
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Represents unvested RSUs from a grant of 227,000 RSUs on March 2, 2015, that vested on March 2, 2016.
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(4)
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Represents shares underlying unvested options from an option for 100,000 shares granted on September 8, 2015, which provide for annual equal vesting over three years, or the earlier of (i) the date the Company
terminates Mr. Seeton other than for cause, or (ii) the date on which Mr. Seeton resigns for good reason.
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(5)
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Represents unvested RSUs from a grant of 31,381 RSUs on September 8, 2015, which provide for annual equal vesting over three years, or the earlier of (i) the date the Company terminates Mr. Seeton other
than for cause, or (ii) the date on which Mr. Seeton resigns for good reason.
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Potential Payments Upon Termination, Retirement,
or Change of Control
Regardless of the manner in which a named executive officers employment terminates, he is entitled to
receive amounts earned during his term of employment. Upon death or disability of a named executive officer, the named executive officer will receive benefits under the disability or life insurance policies maintained for such officer, as
appropriate.
Chief Executive Officer
We are a party to an employment letter agreement with Mr. Tavares dated January 28, 2015. Pursuant to this agreement, if
Mr. Tavares employment is terminated by the Company without cause or by Mr. Tavares for good reason and the termination occurs in anticipation of or within twenty-four (24) months after a change of control of the Company, he
will receive, subject to the terms
12
and conditions of such employment agreement, (1) continued payments of his base salary for a period of 12 months following termination; (2) a lump-sum payment equal to his annual cash
incentive award, pro-rated for the period of service during the performance period and payable based on actual performance at the time the bonus would otherwise be paid; and (3) all Mr. Tavaress outstanding equity awards will
immediately vest and be settled in full and such grants shall be exercisable for a period of one year following termination. The receipt of severance benefits described above is subject to Mr. Tavares signing and not revoking a general release
of claims in favor of the Company in a form reasonably acceptable to the Company.
In addition, if Mr. Tavares employment is
terminated by the Company without cause, or terminated as a result of his resignation for good reason, other than in anticipation of or within 24 months after a change in control, then he will receive, subject to the terms and conditions of such
employment agreement continued payments of his base salary for a period of 12 months. The receipt of such severance benefits is subject to Mr. Tavares signing and not revoking a general release of claims in favor of the Company in a form
reasonably acceptable to the Company.
In connection with Mr. Lazars resignation, the Company and Mr. Lazar entered into a
separation agreement and release, dated March 2, 2015, effective March 1, 2015 (the Lazar Separation Date), which provided for immediate vesting of Mr. Lazars unvested RSUs and a severance payment of $250,000 paid
bi-weekly for a period that ends on the earlier of: (i) 13 bi-weekly pay periods, commencing with the Separation Date; or (ii) Mr. Lazar accepting a position of full- or part-time employment and beginning work. The Company further
agreed to pay Mr. Lazar and his dependents Comprehensive Omnibus Budget Reconciliation Act (COBRA) monthly premium payments for group medical, dental, and executive supplemental health plans for a period of 12 months following
the Lazar Separation Date.
Chief Financial Officer
We are a party to an employment letter agreement with Mr. Seeton dated August 12, 2015. Pursuant to the agreement, if
Mr. Seetons employment is terminated by the Company without cause or by Mr. Tavares for good reason and the termination occurs in anticipation of or within 24 months after a change of control of the Company, he will receive, subject
to the terms and conditions of such employment agreement, (1) continued payments of his base salary for a period of six months following termination; and (2) a lump-sum payment equal to his annual cash incentive award, pro-rated for the
period of service during the performance period and payable based on actual performance at the time the bonus would otherwise be paid. The receipt of severance benefits is subject to Mr. Seeton signing and not revoking a general release of
claims in favor of the Company in a form reasonably acceptable to the Company.
In addition, if Mr. Seetons employment is
terminated by the Company without cause, or terminated as a result of his resignation for good reason, other than in anticipation of or within 24 months after a change in control, then he will receive, subject to the terms and conditions of such
employment agreement continued payments of his base salary for a period of six months. The receipt of such severance benefits is subject to Mr. Seeton signing and not revoking a general release of claims in favor of the Company in a form
reasonably acceptable to the Company.
The term cause in Mr. Tavares and Mr. Seetons employment
agreements generally means (1) a material act of dishonesty committed in connection with the executives responsibilities as an employee of the Company; (2) conviction of, or plea of nolo contendere to, a misdemeanor involving an act
of moral turpitude or a felony; (3) any gross or willful misconduct (including action or failures to act) that causes material harm to the business or reputation of the Company; (4) loss of any security or other clearance required to be
maintained due to the Companys contracting with government agencies; or (5) a material failure to discharge employment duties or material breach of the employment, after demand for performance by the board of directors and failure to cure
such breach.
The term good reason in Mr. Tavares and Mr. Seetons employment agreements generally means
resignation following expiration of a cure period following any of the following conditions, occurring without executives consent: (1) a material diminution of authority, duties, or responsibilities; (2) material change in work
location (i.e., relocation of more than fifty (50) miles from current work location); (3) the failure of the Company to obtain assumption of the employment agreement by a successor; (4) any material
13
breach by the Company of any provision of the employment agreement, this letter; (5) a material reduction in current base salary or other compensation, other than a reduction that is also
applicable in a substantially similar manner to the other senior executives. For Mr. Tavares agreement only good reason also includes failure of the Company to appoint him to the board of directors.
In connection with Mr. Mannarinos termination with the Company in November 2015, the Company and Mr. Mannarino entered into a
Release, dated November 30, 2015, effective November 3, 2015 (the Mannarino Separation Date), which provides for immediate vesting of Mr. Mannarinos unvested options and a severance payment of certain legal fees and
severance of 17 months base salary, less the pay in lieu of notice and severance pay which will have been provided under statutory requirements. The Company further agreed to pay Mr. Mannarinos COBRA monthly premium payments for
group medical, dental, and executive supplemental health plans for a period of three months following the Mannarino Separation Date.
There are currently no other required payments upon termination, retirement, or change of control for any of our named executive officers.
Risk Considerations in our Compensation Program
As discussed above, we structure the compensation of management, other than our current Chairman, who receives minimal compensation for his
services, to consist of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income so executives do not feel pressured to focus exclusively on short term gains, or annual stock price
performance which may be to the detriment of long term appreciation and other business metrics. The variable (any cash bonus or equity awards) portion of compensation is designed to reward both individual performance and overall corporate
performance. We believe that the variable components of compensation are sufficient to motivate executives to produce superior short and long terms corporate results, while the fixed element is also sufficient that executives are not encouraged to
take unnecessary or excessive risks in doing so.
Director Compensation for Fiscal 2015
The following table provides information with respect to the compensation earned during the fiscal year ended November 30, 2015 for
directors who are not named executive officers and who served as a director at any time during the fiscal year ended November 30, 2015.
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Name
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Fees Earned or
Paid in Cash
($)
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Stock
Awards(1),(2)
($)
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Total
($)
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Matthew E. Avril
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47,500
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10,050
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57,550
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Melvin L. Keating
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50,000
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10,050
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60,050
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Kenneth J. Krieg
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47,500
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10,050
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57,550
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(1)
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Represents the aggregate grant date fair value of stock awards calculated in accordance with FASB ASC Topic 718. The grant date fair value of each RSU is measured based on the closing price of our common stock on the
date of grant.
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(2)
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The listed directors had the following options and RSUs outstanding at the end of the fiscal year ended November 30, 2015: Mr. Avril: 5,000 unvested RSUs; Mr. Keating: 5,000 unvested RSUs; and
Mr. Krieg: 5,000 unvested RSUs.
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The Board determined in June 2011 that in order to attract and retain qualified
non-employee members of the Board, that independent directors would receive director compensation in both cash and RSUs. Independent directors, therefore, currently receive an annual cash retainer of $40,000, the chair of the Audit Committee
receives an additional annual cash retainer of $10,000, and the chairs of the Compensation Committee and the Nominating and Governance Committee each receive an additional cash retainer of $7,500, with all such amounts payable quarterly.
14
Any person who newly becomes a non-employee independent director will be entitled to 10,000 RSUs,
with one-third immediately exercisable and the remaining two-thirds vesting in two equal installments on the first and second anniversary date of the grant subject to the continued service of the recipient as a member of the Board through such date.
Also, an award of 5,000 RSUs is to be granted automatically to each non-employee independent director on the day of each annual meeting, with such award vesting on the day prior to the annual meeting following the annual meeting at which such award
is granted, subject to the continued service of the recipient as a Board member through such date. Messrs. Avril, Keating, and Krieg, therefore, received 5,000 RSUs on April 21, 2015, the date of our 2015 annual stockholder meeting. As our
Chairman and Chief Executive Officer, Mr. Kahn and Mr. Tavares, respectively, are not non-employee independent directors and are not eligible for this award of RSUs.