We will announce preliminary voting results at the Special Meeting. We expect to publish final voting results in a Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) and the Nasdaq Stock Market, including Nasdaq Rule 5605(a)(2): James H. England, Jason B. Few, Matthew F. Hilzinger, Christina Lampe-Onnerud, and Natica von Althann. The Board has also determined that John A. Rolls, who served on the Board through fiscal 2018 but has elected to retire from the Board and is not standing for re-election at the Annual Meeting, is an independent Director in accordance with the director independence standards of the SEC and the Nasdaq Stock Market, including Nasdaq Rule 5605(a)(2). Christopher S. Sotos, who served as a member of the Board during fiscal 2018 and has elected not to stand for re-election at the Annual Meeting, is not an independent Director under the director independence standards of the SEC and the Nasdaq Stock Market. Finally, the Board previously determined that Secretary Togo Dennis West, Jr., who served on the Board during early fiscal 2018, was an independent Director in accordance with the director independence standards of the SEC and the Nasdaq Stock Market, including Nasdaq Rule 5605(a)(2).

The Board and its committees meet regularly to review and discuss the Company’s progress, strategy and business. The Board meets regularly with management and outside advisors. The independent Directors also hold regular executive sessions without Mr. Bottone or other members of management. Board members are also kept apprised of Company progress and issues that arise between Board meetings.

All Directors serving at the time of the Company’s 2018 Annual Meeting were in attendance at the meeting, with the exception of Mr. England, who attended the Board meeting on the same day, but not the 2018 Annual Meeting. Regular attendance at Board meetings and annual stockholder meetings by each Board member is expected. The Board held 10 meetings in fiscal 2018. Each Director serving during fiscal 2018 attended more than 75% of the total number of Board and, if a Director served on a committee, committee meetings held during fiscal 2018.

BOARD COMMITTEES

The Board has four standing committees: the Audit and Finance Committee, the Compensation Committee, the Executive Committee and the Nominating and Corporate Governance Committee. These committees assist the Board in performing its responsibilities and making informed decisions.

The table below identifies the current members of these four standing committees:

Director	Audit and Finance	Compensation	Executive	Nominating and Corporate Governance
Arthur A. Bottone
James H. England (Chairman of the Board)
Jason B. Few
Matthew F. Hilzinger
Christina Lampe-Onnerud
John A. Rolls(1)
Christopher S. Sotos(2)
Natica von Althann

⁽¹⁾Mr. Rolls has elected to retire from the Board and is therefore not standing for re-election to the Board at the Annual Meeting.

⁽²⁾ Mr. Sotos is a non-independent Director and therefore does not serve on any standing committees. Mr. Sotos has elected not to stand for re-election to the Board at the Annual Meeting.

The Board believes it is more effective for the Board, as a whole, to monitor and oversee the Company’s government affairs strategy and initiatives, including federal and state legislative and regulatory proceedings, in addition to monitoring the Company’s ongoing relations with government agencies.

Audit and Finance Committee ■Current Members: Matthew F. Hilzinger, James H. England, Jason B. Few and Natica von Althann Current Chair: Matthew F. Hilzinger Our Committee structure changed on November 8, 2018 with the election of Mr. Few and Dr. Lampe-Onnerud as Directors. The members of the Audit and Finance Committee in fiscal 2018 were James H. England, Matthew F. Hilzinger, John A. Rolls, and Natica von Althann. Mr. Hilzinger was Chair of the Audit and Finance Committee throughout fiscal 2018. Each of the current and fiscal 2018 Audit and Finance Committee members satisfies the definition of independent director and is financially literate under the applicable Nasdaq and SEC rules. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board has designated Mr. Hilzinger and Mr. England as the Audit and Finance Committee’s “Audit Committee Financial Experts.” The Audit and Finance Committee represents and provides assistance to the Board with respect to matters involving the accounting, auditing, financial reporting, internal controls, and legal compliance functions of the Company and its subsidiaries, including assisting the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent auditors, the performance of the Company’s service firm used to assist management in its assessment of internal controls, and effectiveness of the Company’s financial risk management. The Audit and Finance Committee routinely holds executive sessions with the Company’s independent registered public accounting firm without the presence of management. Responsibilities of the Audit and Finance Committee include: ■  Overseeing management’s conduct of the Company’s financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing the Company’s systems of internal accounting and financial controls; ■  Overseeing the Company’s independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company; ■  Overseeing the performance of the Company’s independent auditors as well as parties engaged to assist the Company with its assessment of internal controls; ■  Reviewing potential financing proposals and referring them to the Board as necessary; and ■  Overseeing the Company’s analysis and mitigation strategies for enterprise risk (reporting any findings to the Board as necessary). The Audit and Finance Committee held 10 meetings during fiscal 2018. The complete Audit and Finance Committee charter can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website atwww.fuelcellenergy.com. The Audit and Finance Committee’s report appears on page 44 of this Proxy Statement.

Compensation Committee ■Current Members: Jason B. Few, Matthew F. Hilzinger, Christina Lampe-Onnerud and John A. Rolls Current Chair: Matthew F. Hilzinger Our Committee structure changed on November 8, 2018 with the election of Mr. Few and Dr. Lampe-Onnerud as Directors. The members of the Compensation Committee in fiscal 2018 were James H. England, Matthew F. Hilzinger, Togo D. West, Jr., and Natica von Althann. Mr. England was Chair of the Compensation Committee throughout fiscal 2018, prior to his election as Chairman of the Board. Each of the current and fiscal 2018 Compensation Committee members is an independent Director under applicable Nasdaq and SEC rules, and the Compensation Committee is governed by a Board-approved charter stating its responsibilities. Members of the Compensation Committee are appointed by the Board. The Compensation Committee is responsible for reviewing and approving the compensation plans, policies and programs of the Company to compensate the officers and Directors in a reasonable and cost-effective manner. The Compensation Committee’s overall objectives are to ensure the attraction and retention of superior talent, to motivate the performance of the executive officers in the achievement of the Company’s business objectives and to align the interests of the officers and Directors with the long-term interests of the Company’s stockholders. To that end, it is the responsibility of the Compensation Committee to develop, approve and periodically review a general compensation policy and salary structure for executive officers of the Company, which considers business and financial objectives, industry and market pay practices and/or such other information as may be deemed appropriate.

Responsibilities of the Compensation Committee include: ■  Reviewing and recommending for approval by the independent Directors of the Board the compensation (salary, bonus and other incentive compensation) of the Chief Executive Officer of the Company; ■  Reviewing and approving the compensation (salary, bonus and other incentive compensation) of the other executive officers of the Company; ■  Reviewing and approving milestones and strategic initiatives relevant to the compensation of executive officers of the Company and evaluating performance in light of those goals and objectives; ■  Reviewing and approving all employment, retention and severance agreements for executive officers of the Company; and ■  Reviewing the management succession program for the Chief Executive Officer, the NEOs and selected executives of the Company. The Compensation Committee acts on behalf of the Board in administering compensation plans approved by the Board in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year). The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation (annual retainer, committee fees and other compensation) of the Directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of the Company. Compensation Committee agendas are established in consultation with the committee chair. The Compensation Committee meets in executive session at each Committee meeting. The Compensation Committee held 7 meetings during fiscal 2018. The complete Compensation Committee charter can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website atwww.fuelcellenergy.com. The Compensation Committee’s report appears on page 21 of this Proxy Statement.

Executive Committee ■Current Members: Arthur A. Bottone, James H. England and John A. Rolls Current Chair: Arthur A. Bottone During the intervals between Board meetings, the Executive Committee has and may exercise all the powers of the Board in the management of the business and affairs of the Company, in such manner as the Committee deems in the best interests of the Company, in all cases in which specific instructions have not been given by the Board. Mr. England and Mr. Rolls are independent directors under applicable Nasdaq rules. The current members of the Executive Committee were also members of the Executive Committee in fiscal 2018. Togo D. West was also a member of the Executive Committee in fiscal 2018.

Nominating and Corporate Governance Committee ■Current Members: Natica von Althann, Matthew F. Hilzinger, John A. Rolls and Christina Lampe-Onnnerud Current Chair: Natica von Althann Our Committee structure changed on November 8, 2018 with the election of Mr. Few and Dr. Lampe-Onnerud as Directors. The members of the Nominating and Corporate Governance Committee in fiscal 2018 were Matthew F. Hilzinger, John A. Rolls and Natica von Althann. Ms. von Althann was Chair of the Compensation Committee throughout fiscal 2018. The current and fiscal 2018 members of the Nominating and Corporate Governance Committee are all independent directors under applicable Nasdaq rules. Members of the Nominating and Corporate Governance Committee are appointed by the Board. Responsibilities of the Nominating and Corporate Governance Committee include: ■  Identifying individuals qualified to become members of the Board and recommending the persons to be nominated by the Board for election as Directors at the annual meeting of stockholders or elected as Directors to fill vacancies; ■  Reviewing the Company’s corporate governance principles, assessing and recommending to the Board any changes deemed appropriate; ■  Periodically reviewing, discussing and assessing the performance of the Board and the committees of the Board;

■  Reviewing the Board’s committee structure and making recommendations to the full Board concerning the number and responsibilities of Board committees and committee assignments; and ■  Periodically reviewing and reporting to the Board any questions of possible conflicts of interest or related party transactions involving Board members or members of senior management of the Company. The Nominating and Corporate Governance Committee will consider nominees for the Board recommended by stockholders. Nominations by stockholders must be in writing, and must include the full name of the proposed nominee, a brief description of the proposed nominee’s business experience for at least the previous five years, and a representation that the nominating stockholder is a beneficial or record owner of the Company’s common stock. Any such submission must also be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as Director if elected. All recommendations for nomination received by the Corporate Secretary that satisfy our amended and restated by-law requirements relating to such Director nominations will be presented to the Nominating and Corporate Governance Committee for its consideration. Stockholders must also satisfy the notification, timeliness, consent and information requirements set forth in our amended and restated by-laws. Nominations must be delivered to the Nominating and Corporate Governance Committee at the following address: Nominating and Corporate Governance Committee FuelCell Energy, Inc. Office of the Corporate Secretary 3 Great Pasture Road Danbury, CT 06810 The Nominating and Corporate Governance Committee weighs the characteristics, experience, independence and skills of potential candidates for election to the Board and recommends nominees for Director to the Board for election (without regard to whether a nominee has been recommended by stockholders). In considering candidates for the Board, the Nominating and Corporate Governance Committee also assesses the size, composition and combined expertise of the Board. As the application of these factors involves the exercise of judgment, the Nominating and Corporate Governance Committee does not have a standard set of fixed qualifications that is applicable to all Director candidates, although the Nominating and Corporate Governance Committee does at a minimum assess each candidate’s strength of character, mature judgment, industry knowledge or experience, ability to work collegially with the other members of the Board and ability to satisfy any applicable legal requirements or listing standards. The Nominating and Corporate Governance Committee is committed to actively seeking highly qualified individuals, and requires a diverse candidate pool, including individuals of diverse gender and ethnicity, from which Board nominees are selected. In identifying prospective Director candidates, the Nominating and Corporate Governance Committee may seek referrals from other members of the Board, management, stockholders and other sources. The Nominating and Corporate Governance Committee also may, but need not, retain a search firm in order to assist it in identifying candidates to serve as Directors of the Company. The Nominating and Corporate Governance Committee utilizes the same criteria for evaluating candidates regardless of the source of the referral. When considering Director candidates, the Nominating and Corporate Governance Committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent Directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In fiscal 2018, the Nominating and Corporate Governance Committee retained the services of Egon Zhender to assist it in identifying qualified candidates to serve on the Board and vetting those candidates in accordance with the qualifications and attributes sought by the Committee. Egon Zhender identified and proposed Jason B. Few and Christina Lampe-Onnerud, both of whom were elected to the Board in November 2018. In connection with its annual recommendation of a slate of Director nominees, the Nominating and Corporate Governance Committee may also assess the contributions of those Directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board. The Nominating and Corporate Governance Committee held 6 meetings during fiscal 2018. The complete Nominating and Corporate Governance Committee charter, which includes the general criteria for nomination as a Director, can be found in the Corporate Governance subsection of the section entitled “Investors” on our website atwww.fuelcellenergy.com.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee was an officer or employee of the Company during the fiscal year ended October 31, 2018. During the fiscal year ended October 31, 2018, none of our executive officers served as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who served as members of our Board of Directors or our Compensation Committee. During the fiscal year ended October 31, 2018, no member of the Compensation Committee other than Mr. James H. England had a relationship with the Company that required disclosure under Item 404 of Regulation S-K.

NASDAQ LISTING RULES – COMPENSATION COMMITTEE MEMBERS

Upon assessing the independence of the Compensation Committee members in accordance with the Nasdaq Listing Rules, the Board has determined that each Compensation Committee member satisfies the following independence criteria, in addition to qualifying as an independent director under Nasdaq Rule 5605(a)(2):

■

No Compensation Committee member has received compensation from the Company for any consulting or advisory services nor has any Compensation Committee member received any other compensatory fees paid by the Company (other than Directors’ fees); and

■

No Compensation Committee member has an affiliate relationship with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.

NASDAQ LISTING RULES – COMPENSATION COMMITTEE ADVISOR

Upon assessing the independence of, and any potential conflicts of interest of, the Company’s Compensation Advisor, Compensia, Inc. (the “Advisor”), in accordance with the Nasdaq Listing Rules, the Compensation Committee has determined that the Advisor satisfies the following independence criteria:

■

The Advisor has not provided, in the last completed fiscal year ended October 31, 2018 or any subsequent interim period, any services to the Company or its affiliated companies, other than the Advisor’s work as a compensation advisor to the Company’s Compensation Committee;

■

Less than 1% of the Advisor’s total revenue was derived from fees paid by the Company in the last completed fiscal year ended October 31, 2018 and any subsequent interim period for work on behalf of the Company’s Compensation Committee;

■

The Advisor has implemented policies and procedures designed to prevent conflicts of interest;

■

Neither the Advisor nor any of its employees or their spouses has any business or personal relationships with any members of the Company’s Compensation Committee or any of the Company’s executive officers;

■

Neither the Advisor nor any of its employees or their immediate family members currently own any Company securities (other than through a mutual fund or similar externally-managed investment vehicle); and

■

The Advisor is unaware of any relationship not identified in the statements above that could create an actual or potential conflict of interest with the Company or its affiliated entities, any members of the Company’s Compensation Committee or any of the Company’s executive officers.

BIOGRAPHIES OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

MICHAEL S. BISHOP

Age 51

Mr. Bishop was appointed Senior Vice President, Chief Financial Officer, and Treasurer in June 2011. He has more than 20 years of experience in financial operations and management with public high growth technology companies with a focus on capital raising, project finance, debt/treasury management, investor relations, strategic planning, internal controls, and organizational development. Since joining the Company in 2003, Mr. Bishop has held a succession of financial leadership roles including Assistant Controller, Corporate Controller and Vice President and Controller. Prior to joining FuelCell Energy, Mr. Bishop held finance and accounting positions at TranSwitch Corporation, Cyberian Outpost, Inc. and United Technologies, Inc. He is a certified public accountant and began his professional career at McGladrey and Pullen, LLP. Mr. Bishop also served four years in the United States Marine Corps. Mr. Bishop received a Bachelor of Science in Accounting from Boston University in 1993 and a MBA from the University of Connecticut in 1999. PRINCIPAL OCCUPATION: ■ Senior Vice President, Chief Financial Officer and Treasurer

JENNIFER D. ARASIMOWICZ

Age 47

Ms. Arasimowicz was appointed Senior Vice President, General Counsel and Corporate Secretary in April 2017. In this position, Ms. Arasimowicz, a licensed attorney in Connecticut, New York and Massachusetts, is the chief legal officer and chief compliance officer of the Company, having responsibility for oversight of all of the Company’s legal and government affairs, and providing leadership in all aspects of the Company’s business, including compliance, corporate governance and board activities. Ms. Arasimowicz joined the Company in 2012 as Associate Counsel and was promoted to Vice President in 2014. Prior to joining the Company, Ms. Arasimowicz served as General Counsel of Total Energy Corporation, a New York based diversified energy products and services company providing a broad range of specialized services to utilities and industrial companies. Previously, Ms. Arasimowicz was a partner at Shipman & Goodwin, LLP in Hartford, Connecticut chairing the Utility Law Practice Group and began her legal career as an associate at Murtha Cullina, LLP. Ms. Arasimowicz earned her Juris Doctor at Boston University School of Law and holds a bachelor’s degree in English from Boston University. PRINCIPAL OCCUPATION: ■ Senior Vice President, General Counsel and Corporate Secretary

ANTHONY F. RAUSEO

Age 59

Mr. Rauseo was appointed Senior Vice President and Chief Operating Officer in July 2010. In this position, Mr. Rauseo has responsibility for closely integrating the manufacturing operations with the supply chain, product development and quality initiatives. Mr. Rauseo is an organizational leader with a strong record of achievement in product development, business development, manufacturing, operations, and customer support. Mr. Rauseo joined the Company in 2005 as Vice President of Engineering and Chief Engineer. Prior to joining the Company, Mr. Rauseo held a variety of key management positions in manufacturing, quality and engineering including five years with CiDRA Corporation. Prior to joining CiDRA, Mr. Rauseo was with Pratt and Whitney for 17 years where he held various leadership positions in product development, production and customer support of aircraft turbines. Mr. Rauseo received a Bachelor of Science in Mechanical Engineering from Rutgers University in 1983 and a Masters of Science in Mechanical Engineering from Rensselaer Polytechnic Institute in 1987. PRINCIPAL OCCUPATION: ■ Senior Vice President and Chief Operating Officer

EXECUTIVECOMPENSATION

TABLE OF CONTENTS
COMPENSATION COMMITTEE REPORT	21
COMPENSATION DISCUSSION AND ANALYSIS	21
FISCAL 2018 SUMMARY COMPENSATION TABLE	31
FISCAL 2018 GRANTS OF PLAN-BASED AWARDS TABLE	32
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END TABLE	33
FISCAL 2018 OPTION EXERCISES AND STOCK VESTED TABLE	33

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis as set forth in this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2018 and included in the Company’s 2019 Proxy Statement filed in connection with the Company’s 2019 Annual Meeting of Stockholders.

Respectfully submitted by the Compensation Committee of the Board of Directors.

Matthew F. Hilzinger (Chair)

Jason B. Few

Christina Lampe-Onnnerud

John A. Rolls

COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION AND SUMMARY

This Compensation Discussion and Analysis describes the philosophy and objectives of the executive compensation program underlying the compensation which is reported in the executive compensation tables included in this Proxy Statement for the following executive officers (the “NEOs” or “named executive officers”):

ARTHUR A. BOTTONE	President and Chief Executive Officer (the “CEO”);
MICHAEL S. BISHOP	Senior Vice President, Chief Financial Officer and Treasurer (the “CFO”);
JENNIFER D. ARASIMOWICZ	Senior Vice President, General Counsel and Corporate Secretary (the “GC”); and
ANTHONY F. RAUSEO	Senior Vice President and Chief Operating Officer (the “COO”).

The total compensation of each NEO is reported in the Fiscal 2018 Summary Compensation Table presented on page 31 of this Proxy Statement. The individuals identified above as our NEOs are all of our executive officers, which is why we only provide compensation-related disclosure with respect to our CEO, CFO and next two most highly compensated executive officers.

Our compensation program is intended to motivate and incentivize our NEOs to achieve our corporate objectives and increase stockholder value. The Compensation Committee continues to evaluate how best to structure our compensation programs to ensure that our executives are being appropriately and competitively compensated while also maintaining compensation levels commensurate with our business performance.

During fiscal 2018, we continued to progress toward sustainable profitability with the development of our generation portfolio. We recognize that there is still more work to be done in order to reach our full potential. Fiscal 2018 was focused on the continued advancement of our business plan. Despite challenging industry and market conditions, our executives capitalized on opportunities and achieved favorable results on a number of important business initiatives, including but not limited to:

■    Lobbying for the restoration of the federal investment tax credit for stationary fuel cells and expansion of the carbon sequestration credit;

■    Delivery, commissioning and operation of the 20 MW KOSPO project in Incheon, South Korea; and

■    Award of 22.2 MW of projects in the Connecticut Department of Energy and Environmental Protection competitive solicitation.

What We Do:

■

Maintain an Independent Compensation Committee– Our Compensation Committee consists solely of independent directors who establish our compensation practices.

■

Retain an Independent Compensation Advisor– Our Compensation Committee has engaged its own compensation consultant to provide information, analysis, and other advice on executive compensation independent of management.

■

Annual Executive Compensation Review– At least once a year, our Board conducts a review of our compensation strategy.

■

Compensation At-Risk– Our executive compensation program is designed so that a significant portion of our NEO’s compensation is “at risk” based on corporate performance, to align the interests of our NEOs and stockholders.

■

Stock Ownership Guidelines– We maintain minimum stock ownership guidelines and stock holding requirements applicable to the NEOs and the non-employee independent members of our Board. In December 2018, our Board approved a six-fold increase in the ownership guidelines; and, as of October 31, 2018, each of the NEOs satisfied the requirements of the minimum stock ownership policy.

■

Compensation Recovery (“Clawback”) Policy– We maintain an Executive Compensation Recovery Policy that enables our Board to seek recovery of any erroneously paid incentive compensation received by any current or former executive officer of the Company (who was actively employed as an executive officer of the Company on or after December 18, 2014, the date this policy was first adopted) in the event of an accounting restatement.

■

Conduct an Annual Stockholder Advisory Vote on NEO Compensation– We conduct an annual stockholder advisory vote on the compensation of our NEOs. Our Board considers the results of this advisory vote during the course of its deliberations on NEO compensation.

■

Compensation-Related Risk Assessment– We conduct regular risk assessments of our compensation programs and practices.

■

“Double-Trigger” Change in Control Arrangements– We have established “double-trigger” change-in-control severance agreements with each of the NEOs, with a payment equal to two times base salary plus the average of the bonuses paid since the effective date of his employment agreement (for Mr. Bottone) and payments of one times base salary plus the average of the bonuses paid since their appointment as executive officers of the Company (for Messrs. Bishop and Rauseo and Ms. Arasimowicz).

What We Do Not Do:

■

No Guaranteed Bonuses – We do not provide guaranteed bonuses to our NEOs.

■

No Defined Benefit Retirement Plans– We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our NEOs other than arrangements that are available generally to all employees. Our NEOs are eligible to participate in our 401(k) retirement plan on the same basis as our other employees.

■

Prohibition on Hedging and Pledging– We maintain a policy that prohibits our employees, including our NEOs and members of the Board, from hedging or pledging any Company securities.

■

No Perquisites or Tax Gross-Ups– We do not offer our NEOs any perquisites, executive class benefits, or tax “gross-ups.”

Following the “say-on-pay” voting results at the 2018 Annual Meeting, we wanted to provide a clearer understanding of how our equity-based compensation as reported in our proxy statements compares to the value actually paid to our NEOs in subsequent years and how this compensation structure is designed to be performance-based. This is commonly referred to as “reported” versus “realizable” pay. Reported pay refers to the compensation value reported in the compensation tables required under Item 402 of Regulation S-K, which we calculate based on applicable SEC rules and guidance. Realizable pay refers to the value of compensation received by our NEOs as of the applicable vesting dates.

We believe that it is important for our stockholders to understand, in reviewing the compensation information provided in this Proxy Statement, that all annual cash bonus and equity compensation are performance-based. Annual cash bonuses are dependent on achievement of the Company’s pre-established milestones and strategic initiatives. For fiscal 2018, the Company did not achieve the specific milestones and strategic initiatives that were established under the 2018 Management Incentive Plan. As a result of the Company’s performance, the stock price and the financial condition of the Company at fiscal year-end, our Compensation Committee determined that cash bonuses for fiscal 2018 were not earned. Annual equity awards are reported in the compensation tables at grant date fair value, which is not necessarily the actual compensation received by the NEOs at vesting. If our stock price declines over time, the NEO will receive less than the grant date fair value reported for those awards.

The table below compares the grant date fair values as reported in the proxy statements for the 2016, 2017, and 2018 Annual Meetings of the Stockholders to the fair market value of the shares on the applicable vesting dates. To calculate these fair market values, we multiplied the number of shares vesting by the closing price of our common stock on the applicable vesting dates. For shares not yet vested, we multiplied the number of unvested shares by the closing price of our common stock on December 31, 2018.

Name	Grant Date	Quantity Granted	Reported Grant Date Value		Aggregate Value Realized on Vesting(1)		% change from reported value
ARTHUR A. BOTTONE	4/2/2015	43,373	$	661,005	$	110,613	-83%
	4/7/2016	102,640	$	661,002	$	117,035	-82%
	4/6/2017	330,500	$	495,750	$	319,593	-36%
	4/5/2018	308,989	$	550,000	$	170,098	-69%
	4/5/2018	100,000	$	178,000	$	55,050	-69%
	Total	885,502	$	2,545,757	$	772,389	-70%

Name	Grant Date	Quantity Granted	Reported Grant Date Value		Aggregate Value Realized on Vesting(1)		% change from reported value
MICHAEL S. BISHOP	4/2/2015	16,405	$	250,012	$	41,834	-83%
	4/7/2016	54,348	$	350,001	$	61,970	-82%
	4/6/2017	175,000	$	262,500	$	169,225	-36%
	4/5/2018	168,539	$	299,999	$	92,781	-69%
	4/5/2018	100,000	$	178,000	$	55,050	-69%
	Total	514,292	$	1,340,513	$	420,860	-69%
JENNIFER D. ARASIMOWICZ	4/7/2016	9,473	$	61,006	$	12,746	-79%
	4/6/2017	200,000	$	300,000	$	176,364	-41%
	4/5/2018	168,539	$	299,999	$	92,781	-69%
	4/5/2018	100,000	$	178,000	$	55,050	-69%
	Total	478,012	$	839,006	$	336,940	-60%
ANTHONY F. RAUSEO	4/2/2015	16,405	$	250,012	$	41,834	-83%
	4/7/2016	54,348	$	350,001	$	61,970	-82%
	4/6/2017	175,000	$	262,500	$	169,225	-36%
	4/5/2018	168,539	$	299,999	$	92,781	-69%
	4/5/2018	100,000	$	178,000	$	55,050	-69%
	Total	514,292	$	1,340,513	$	420,860	-69%

(1)

Aggregate value realized on vesting assumes all unvested shares vested in full on December 31, 2018. Does not take into account shares tendered back to the Company to cover applicable tax withholdings.

COMPENSATION PHILOSOPHY AND OBJECTIVES

The Compensation Committee is responsible for developing and reviewing executive compensation plans, policies and practices consistent with our compensation philosophy. Our compensation philosophy is designed around certain key objectives:

■

Attract and Retain Top Executive Talent– We have designed our compensation program to be competitive and cost-effective, while allowing us to attract and retain executives critical to our long-term success.

■

Pay for Performance– Our compensation program aligns compensation with Company and individual performance on both a short-term and long-term basis.

■

Significant Portion of Pay is in the Form of Variable Compensation– We have aligned NEO compensation with stockholder interests by tying a significant portion of total direct compensation to the achievement of performance goals or stock price appreciation. With variable compensation, the NEO will not realize value unless performance goals are met or our stock price appreciates.

To achieve these objectives, our executive compensation program:

■

must be competitive with compensation paid by companies in the same or similar markets for executive talent;

■

rewards performance by linking compensation to Company performance and achievment of individual performance goals;

■

drives long-term stockholder returns by delivering a significant portion of NEO compensation in the form of equity compensation, the value of which is directly linked to our stock price;

■

aligns NEO and stockholder interests by requiring NEOs to own and hold our stock for a specified period of time;

■

provides no NEO perquisites;

■

is comprised of a “fixed” component, which consists of base salary, health and welfare benefits and contributions to the Company’s Section 401(k) Retirement Savings plan (the “401(k) Plan”), which benefits and contributions are the same as those offered to all other employees; and

■

has a “variable” component, which consists of an annual performance-based incentive award (the target amount of which is expressed as a percentage of base salary) and a long-term incentive award linked to individual and Company performance.

COMPENSATION-SETTING PROCESS

The Compensation Committee reviews the base salary, target annual incentive award, long-term incentive award and target total direct compensation opportunity (which represents the sum of these three elements) for each of the NEOs annually. The CEO makes recommendations to the Compensation Committee for annual increases in base salary, the annual incentive award payments and long-term incentive awards for each of the NEOs (other than with respect to his own compensation). The Compensation Committee has the final authority to approve annual increases in base salary, annual incentive award payments and long-term equity incentive awards for the NEOs other than the CEO, whose compensation is approved by the independent members of our Board.

The Compensation Committee makes any necessary adjustments to base salaries effective in July of each year. More information regarding the fiscal 2018 base salary adjustments for the NEOs can be found on page 26 of this Proxy Statement.

Prior to the start of each fiscal year, the CEO develops operational milestones and strategic initiatives for the year for our salaried employees, including the NEOs. These operational milestones and strategic initiatives represent key performance objectives which are incorporated into the MIP, which is then submitted to the Compensation Committee for consideration and approval. After our fiscal year-end financial results are available, the annual incentive award pool for employees and individual annual incentive award payments for the NEOs for the just-completed fiscal year are approved by the Compensation Committee, except with respect to the CEO, whose annual incentive award payment is approved by the independent members of our Board.

The Compensation Committee formulates its compensation decisions for the NEOs with input from the CEO (other than with respect to his own compensation), considering such factors as each NEO’s professional experience, job scope, past performance, tenure and retention risk. The Compensation Committee also considers prior fiscal year adjustments to compensation, historical annual incentive award payments and long-term incentive awards. Finally, the Compensation Committee considers current market practices, based on its review of executive compensation data for comparable companies, as well as current compensation trends, to ensure that the compensation of the NEOs is both competitive and reasonable, while also maintaining compensation levels commensurate with our financial and stock performance.

Since 2010, the Compensation Committee has engaged Compensia, Inc., a national compensation consulting firm (the “Advisor”), to support its compensation planning activities. In fiscal 2018, the Advisor did not provide any other services to the Company and worked with management only on matters for which the Compensation Committee is responsible.

Based on its consideration of the various factors as set forth in the rules promulgated by the SEC and the Nasdaq Marketplace Rules, the Compensation Committee has determined that the work of the Advisor has not raised any conflict of interest.

COMPETITIVE POSITIONING

We periodically perform a competitive market analysis of our executive and Director compensation programs to ensure that the total compensation packages of our executive officers and the non-employee members of our Board are within a reasonably competitive range. In connection with its fiscal 2018 compensation actions and decisions, the Compensation Committee considered the competitive market analysis that was prepared by the Advisor in 2018, as described below.

COMPETITIVE MARKET ANALYSIS

In March 2018, the Advisor conducted a competitive market analysis that was used by the Compensation Committee in connection with its executive and non-employee Director compensation decisions for fiscal 2018. To develop an understanding of the competitive marketplace, the Compensation Committee reviewed the executive compensation practices of a group of publicly-traded companies (the “Peer Group”) based on compensation data gathered from publicly-available filings and as supplemented with additional data drawn from the Radford Global Technology Survey, based on data cuts for technology companies with revenues between $50 million and $200 million, and also between $200 million and $500 million.

The Advisor worked with the Compensation Committee to develop the Peer Group by screening an initial list of publicly-traded companies on the basis of industry focus, revenue, market capitalization, geographical location and revenue to market capitalization ratio. These companies were then narrowed by identifying companies whose revenue at the time ranged from approximately $35 million to $375 million compared to our trailing four fiscal quarters’ revenue of $96 million, and whose market capitalization ranged from approximately 0.2 to 5.8 times ($40 million to $650 million) our then-market capitalization of $123 million. The list was further refined by focusing on companies in the electrical equipment and components sectors and eliminating companies with headquarters outside of North America, as pay practices and disclosure requirements may vary significantly from those found in the United States.

The Compensation Committee and the Advisor also reviewed and considered other factors such as revenue growth, profitability, valuation (for example, market capitalization as a multiple of sales) and business model. The Peer Group was selected based on the subjective evaluation of all of these factors, and consisted of the following 20 companies (almost half of which are different than the peer companies we benchmarked in fiscal 2017):

American Superconductor	Hydrogenics
Amyris	Maxwell Technologies
Ballard Power Systems	Park Electrochemical
Broadwind Energy	Plug Power
Capstone Turbine	Revolution Lighting Technologies
CECO Environmental	Thermon Group Holdings
Clean Energy Fuels	Vicor
Digi International	Vishay Precision Group
EMCORE	Vivint Solar
Enphase Energy	Westport Fuel Systems

To complete the competitive market analysis of the executive compensation program, the Advisor then blended the Peer Group data with the Radford Global Technology Survey data (weighted equally) to compare the various market compensation levels for each of the NEO positions. Based on the foregoing approach, the analysis indicated the fiscal 2017 target total direct compensation opportunities of the NEOs approximated the 45^th percentile of the competitive market, with significant variation for cash compensation among executives. In addition, the analysis showed that the fiscal 2017 equity awards granted to the NEOs approximated the 25^th percentile of the competitive market, with only one executive near the median, and with little retention hold as most outstanding equity awards were substantially vested.

The Compensation Committee uses the market analysis as a reference point to ensure that our executive compensation program is competitive with market practice. In the case of each NEO, the Compensation Committee compares the overall compensation of each individual against the compensation data developed through the market analysis, if his or her position is sufficiently similar to the positions identified in the data to make the comparison meaningful. However, the Compensation Committee does not target a particular percentile of the competitive market with respect to any portion of the NEOs’ pay. Ultimately, the Compensation Committee’s decisions with respect to each NEO’s total compensation, and each individual compensation element, are based in large part on its assessment of Company and individual performance as well as other factors, such as internal equity.

FIXED COMPENSATION

BASE SALARY

The purpose of base salary, from the perspective of the Compensation Committee, is to fairly and competitively compensate our NEOs with a fixed amount of cash for the jobs they perform. In addition, base salaries are used to recognize the experience, skills, knowledge and responsibilities required of our NEOs. Accordingly, we seek to ensure that base salary levels are competitive and consistent with industry practices.

FISCAL 2018 BASE SALARIES

In June 2018, the Compensation Committee reviewed the base salaries of the NEOs, taking into consideration their past performance and expected future contributions, their ongoing roles and responsibilities and the performance of the Company. The Compensation Committee also reviewed the competitive market analysis discussed in the preceding section of this Compensation Discussion and Analysis and the recommendations of the CEO (other than with respect to his own base salary). After considering the foregoing factors, including the competitive market analysis, and certain additional information, the Compensation Committee approved the base salaries for the NEOs (other than the CEO) set forth in the table below. The Compensation Committee determined that base salary increases were warranted to recognize the contributions that each individual had made during the preceding 12 months and to address its retention objectives. With respect to the CEO, after considering his performance during the preceding 12 months, including the significant progress that he had made on several of the Company’s longer-term initiatives and to recognize his strong leadership skills, the Compensation Committee recommended to the independent members of our Board the following base salary adjustment for the CEO (which recommendation was approved by the independent members of the Board). All base salary increases were effective July 2, 2018:

		Base Salary Changes Effective July 2, 2018
Name		2017 Base ($)		2018 Base ($)		Increase ($)		Increase %
Mr. Bottone		428,816		475,000		46,184		10.7%
Mr. Bishop		326,025		350,000		23,975		7.3%
Ms. Arasimowicz		300,000		330,000		30,000		10.0%
Mr. Rauseo		341,550		360,000		18,450		5.4%

BENEFITS

We offer medical and dental insurance to our NEOs, and pay a portion of the premiums for these benefits consistent with the arrangements for non-executive employees. We also provide the NEOs and other eligible employees, at our expense, with group life and accidental death and dismemberment insurance benefits; short-term and long-term disability insurance benefits; paid time off benefits; and other ancillary benefits (for example, flexible spending accounts and an employee assistance program). Further, we offer participation in the 401(k) Plan to our employees, including the NEOs, subject to the terms of the 401(k) Plan.

Contributions to the 401(k) Plan are limited to an annual maximum amount as determined by the Internal Revenue Service. For Plan Year 2018, the Compensation Committee approved a matching contribution equal to 25% of the first 8% of elective salary deferrals, not to exceed 2% of eligible earnings. These contributions to the retirement savings accounts of our employees are subject to a five year graded vesting schedule. Participants are not permitted to receive or purchase shares of our common stock through the 401(k) Plan.

The compensation program for the NEOs does not include any of the following pay practices:

■

Supplemental executive retirement benefits;

■

Supplemental health or insurance benefits; or

■

Perquisites or other personal benefits.

VARIABLE COMPENSATION

Annual Incentive Compensation

All salaried exempt employees, including the NEOs, are eligible to participate in our annual cash bonus plan, which we refer to as the Management Incentive Plan or the “MIP.” The MIP is intended to motivate employee performance in, and align compensation levels with, the achievement of our annual business objectives.

The Compensation Committee periodically reviews and determines the target annual incentive award opportunities (expressed as a percentage of base salary) that each of the named executive officers may earn under the MIP. The target annual incentive award opportunities for each NEO (expressed as a percentage of base salary) were established in 2011 at 90% for Mr. Bottone and 50% for each of the other NEOs (except Ms. Arasimowicz), based on an assessment of the competitive market performed by the Advisor at that time. The target annual incentive award opportunity of Ms. Arasimowicz was set at 50% of her base salary at the time of her appointment as our Senior Vice President, General Counsel and Corporate Secretary in 2017. These target award opportunities remained unchanged in fiscal 2018.

The actual amount of annual cash compensation earned under the MIP each year for our NEOs may be more or less than the target amount depending on our performance against a set of pre-established Company operational milestones (which represent 75% of their target annual incentive award opportunity) and a set of pre-established Company strategic initiatives (which represent the remaining 25% of their target annual incentive award opportunity). In addition, the Compensation Committee retains the right to exercise its discretion to adjust the size of potential award payments as it deems appropriate to take into account factors that enhance or detract from results achieved relative to the Company operational milestones and strategic initiatives. In this way, the Compensation Committee does not confine itself to a purely quantitative approach and retains discretion in determining award payments based on its review and assessment of other results for the fiscal year. The Compensation Committee believes that linking the annual incentive awards for the NEOs to Company operational milestones and strategic initiatives creates a performance-based compensation opportunity that furthers stockholder interests, but by retaining some discretion, reduces the risk that executives will overemphasize performance on the pre-established objectives to the detriment of the Company’s overall performance.

The operational milestones and strategic initiatives on which the 2018 MIP awards were based, as well as our performance with respect to such milestones and initiatives, are discussed below.

FISCAL 2018 OPERATIONAL MILESTONES AND STRATEGIC INITIATIVES

The pre-established Company operational milestones for fiscal 2018 (and their respective weighting) involved:

(1)

achieving a specified level of total revenue for the fiscal year (20%);

(2)

securing new orders (40%);

(3)

achieving a specified gross margin for the fiscal year (20%);

(4)

controlling operating expenses (10%); and

(5)

enhancing fleet performance (10%).

The Compensation Committee developed target performance levels for each of these milestones that were consistent with our annual operating plan for fiscal 2018.

FISCAL 2018 STRATEGIC INITIATIVES

The pre-established Company strategic initiatives for fiscal 2018 (which were equally weighted) involved:

(a)

developing a new strategic business alliance and restructuring the business in Europe;

(b)

executing on specified regulatory initiatives;

(c)

growing the Advanced Technology business; and

(d)

executing specified project finance and legal initiatives.

Under the 2018 MIP, performance against each of the Company operational milestones was evaluated based on a range of pre-established performance levels to obtain scores ranging from 0% to a maximum of 125%.

PERFORMANCE RESULTS AND ANNUAL INCENTIVE AWARD PAYMENTS FOR FISCAL 2018

After the end of fiscal 2018, the Compensation Committee reviewed the Company’s actual performance as measured against the Company operational milestones and strategic initiatives, which resulted in an annual incentive award achievement percentage of 38% of the target award levels, determined as follows. Comparing the Company’s actual performance against the range of pre-established target levels for these operational milestones, the Compensation Committee calculated a weighted score for each milestone, the sum of which yielded a total weighted score. The Company’s overall performance with respect to the operational milestones for fiscal 2018 resulted in a calculated aggregate weighted score of 18%.

With respect to the fiscal 2018 Company strategic initiatives, the Compensation Committee compared the Company’s actual performance against the pre-established target objectives for these initiatives, and calculated a weighted score for each strategic initiative, the sum of which yielded a total weighted score. Our overall performance with respect to the strategic initiatives for fiscal 2018 resulted in a calculated weighted score of 20%.

Applying the relative weighting of each performance category (75% for the operational milestones and 25% for the strategic initiatives), the Compensation Committee determined that the blended annual incentive award achievement percentage was equal to 38% of the target award levels.

After reviewing the blended annual incentive award achievement percentage and evaluating the Company’s performance, financial position and stock performance, and after considering the recommendations of the CEO, the Compensation Committee did not approve annual incentive award payments for the NEOs (other than our CEO) for fiscal 2018 and also recommended, and the independent members of the Board agreed, that no annual incentive award payment be made to the CEO.

FISCAL 2019 MANAGEMENT INCENTIVE PLAN

For fiscal 2019, Company operational milestones and strategic initiatives have been updated to further advance our business. The pre-established Company operational milestones for fiscal 2019 (and their respective weighting) are as follows: (1) achieve specified total revenue for the fiscal year (20%); (2) secure new orders (40%); (3) achieve a specified gross margin (20%); (4) control operating expenses (10%); and (5) enhance fleet performance (10%). The Compensation Committee has developed target performance levels for each of these milestones that are consistent with our fiscal 2019 annual operating plan.

The Compensation Committee has also established strategic initiatives for fiscal 2019 applicable to all participants including the NEOs. The pre-established Company strategic initiatives for fiscal 2019 (which are equally weighted) are as follows: (a) develop a new strategic partner; (b) execute on specified regulatory initiatives; (c) grow the Advanced Technology business; (d) develop project finance partners to support growth; and (e) reorganize the commercial development team.

LONG-TERM INCENTIVE COMPENSATION

ANNUAL RESTRICTED STOCK UNIT (RSU) GRANTS

Each of the NEOs is eligible to receive long-term incentive compensation in the form of RSUs under the 2018 Omnibus Incentive Plan (the “OIP”). These awards are intended to align a significant portion of the NEOs’ compensation with stockholders’ interests and the long-term success of the Company by providing a direct link to an NEO’s future earnings potential and the market value of our common stock. Our annual RSU grants typically vest over three years at a rate of 33.3% per year.

The Compensation Committee, in determining the value of equity awards to be granted to our employees, including the NEOs, considers relevant competitive market data as well as the recommendations of the CEO and other factors, including the individual’s job scope, past performance, expected future contributions, tenure and retention risk. The Compensation Committee approves all equity awards for the NEOs, except in the case of the CEO, whose award is approved by the independent members of our Board.

In April 2018, the Compensation Committee considered the relevant market data, the recommendations of the CEO for the equity awards to be granted to our executives (including the other NEOs), and the other factors described above. The Compensation Committee then approved the awards for the NEOs (other than the CEO) as recommended and set forth in the table below. In addition, the Compensation Committee considered and recommended to the independent members of our Board the grant of an equity award for the CEO. Its decisions (and, in the case of the CEO, its recommendation) were based on the factors described above, as well as the Company’s overall performance for fiscal 2017 and its retention objectives. Accordingly, the following equity awards were granted to the NEOs on April 5, 2018:

		2018 Long-Term Equity Incentive Awards
Name		# Shares/ Units		Grant Date Fair Value ($)		Vesting Period		Vesting Rate Per Year
Mr. Bottone		308,989		$550,000		3 years		33.3%
Mr. Bishop		168,539		$299,999		3 years		33.3%
Ms. Arasimowicz		168,539		$299,999		3 years		33.3%
Mr. Rauseo		168,539		$299,999		3 years		33.3%

The number of shares of our common stock subject to each RSU granted to each of the NEOs was based on the dollar value of the award approved for each individual by the Compensation Committee (or, in the case of the CEO, the independent members of our Board) divided by the closing market price of our common stock on the date of grant. As discussed on page 23 of this Proxy Statement, these equity awards are the “reported” equity award amounts and do not necessarily reflect the realizable award amounts.

Special One-Time Equity Awards

In conjunction with its consideration of the annual equity awards described above, the Compensation Committee also discussed with the CEO the grant of a special, one-time equity award to each of the other NEOs. In determining whether to grant such awards, the Compensation Committee considered its 2017 decision to reduce the size of future equity awards to the NEOs by 25% of the value of previous year’s awards and the resulting impact that such decision has had on the target total compensation opportunities of the NEOs, in the context of the highly competitive market for senior executive talent in the New England region and the Company’s desire to retain the continued services of the NEOs. After weighing these factors, the Compensation Committee determined that it was in the best interests of the Company and its stockholders to approve a special equity award of RSUs for each of the NEOs to retain their services in the competitive market environment, and recommend for approval by the independent Directors, a special equity award of RSUs for the CEO, valued in each case at $178,000, and subject to the following terms and conditions: (i) the RSUs vest 100% on the third anniversary of the grant date, provided that the executive remains in the continuous employment of the Company through such vesting date; and (ii) the awards are subject to the terms of the Company’s 2018 Omnibus Incentive Plan. As discussed on page 32 of this Proxy Statement, these special equity awards are “reported” in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718 for all stock-based awards and do not necessarily reflect the realizable compensation amounts.

The annual restricted stock unit grant and the special one-time equity award granted to the NEOs in fiscal 2018 are both set forth in the Fiscal 2018 Summary Compensation Table and the Fiscal 2018 Grants of Plan-Based Awards Table on pages 31 and 32, respectively, of this Proxy Statement.

COMPENSATION POLICIES

PROHIBITION ON OPTION RE-PRICING AND BACKDATING

The Compensation Committee does not re-price and has not re-priced options to purchase shares of our common stock, consistent with the OIP, which prohibits re-pricing of equity awards without stockholder approval. The grant date for each equity award is based on the date the award is approved by the Compensation Committee or the independent members of our Board, as applicable. Options to purchase shares of our common stock are granted with an exercise price equal to the closing market price of our common stock on the date of grant.

EQUITY AWARD GRANT POLICY

We maintain an Equity Award Grant Policy, which was most recently amended in December 2018. This policy includes the following key provisions: (a) all equity awards of more than 40,000 shares must be submitted to the Compensation Committee for approval; (b) all equity awards granted to executives at the level of vice president (or above) must be submitted to the Compensation Committee for approval; and (c) the Compensation Committee has authorized a pool of up to 100,000 shares from which the CEO may approve equity awards for special recognition or retention purposes, provided that such grants are limited to a grant date fair value of $40,000 or less, and further provided that no grants may be made from this pool to employees at the level of vice president or above.

COMPENSATION RECOVERY POLICY

We maintain an Executive Compensation Recovery Policy. A description of this policy can be found on page 13 of this Proxy Statement under “Corporate Governance.”

ANTI-HEDGING POLICY

A description of our anti-hedging policy can be found on page 13 of this Proxy Statement under “Corporate Governance.”

STOCK OWNERSHIP GUIDELINES

We maintain minimum stock ownership guidelines which were increased in December 2018. A description of these guidelines can be found on page 13 of this Proxy Statement under “Corporate Governance.”

TAX AND ACCOUNTING CONSIDERATIONS

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally prohibits public companies from taking a tax deduction for a taxable year for compensation in excess of $1 million paid to its covered executives. For compensation paid for the 2018 fiscal year, our covered executives were the chief executive officer and each of the other three most highly compensated executive officers (not including the chief financial officer) who were employed by a company as of the end of the year. For our 2018 fiscal year, qualifying “performance-based compensation” was not subject to the $1 million deduction limitation if specified requirements were met. The Compensation Committee has historically reviewed the potential consequences of Section 162(m) on the components of our executive compensation program, but has always reserved the discretion to grant or pay compensation that is not tax deductible as a result of the application of Section 162(m) if it believes that doing so is in the best interests of the Company and its stockholders.

As a result of changes made by the Tax Cuts and Jobs Act, starting with compensation paid in our 2019 fiscal year (the year beginning on November 1, 2018 and ending on October 31, 2019), Section 162(m) will limit us from deducting compensation, including performance-based compensation, in excess of $1 million paid to anyone who, starting with our 2018 fiscal year, serves as the chief executive officer or chief financial officer, or who is among the three most highly compensated executive officers for any fiscal year beginning with the 2018 fiscal year. Once an officer becomes a covered executive, the provisions of Section 162(m) will continue to apply, notwithstanding if such covered executive ceases to be an officer. The only exception to this rule is for compensation (including performance-based compensation) that is paid pursuant to a binding contract in effect on November 2, 2017, that would have otherwise been deductible under the prior Section 162(m) rules. Going forward, the Compensation Committee will retain full discretion to award compensation packages that best attract, retain, and reward successful executive officers. Therefore, the Compensation Committee may award compensation that is not fully deductible under Section 162(m) if the Compensation Committee believes it will contribute to the achievement of our business objectives.

We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 for all stock-based awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and full value stock awards, based on the aggregate grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables on pages 31, 32, and 40 of this Proxy Statement. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.

COMPENSATION RISK ASSESSMENT

In connection with its annual review of the executive compensation program, the Compensation Committee considers and assesses whether any aspects of the program encourage unnecessary or excessive risk-taking. This assessment examines the various compensation programs for all of our employees, including, but not limited to, the NEOs.

Based on its most recent review, the Compensation Committee has determined that the executive compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, the Compensation Committee considered the following:

■

Base salaries, which represent fixed compensation, do not encourage excessive risk-taking.

■

Annual incentive awards are capped at 125% of the target award opportunities and if actual performance falls below the threshold level of 50%, payment of an award is at the discretion of the Compensation Committee and the amount of the award could be zero, as it was for fiscal 2018. Moreover, the annual incentive award opportunity represents approximately 15% to 20% of each NEO’s target total direct compensation opportunity and, thus, is not likely to lead to excessive risk-taking. The Compensation Committee believes that the annual incentive award program is based on balanced, quantitative performance measures that promote disciplined progress towards longer-term goals and, as such, are well-aligned with the business strategy and stockholder interests.

■

The long-term incentive compensation in the form of equity awards granted to our executives helps to align their interests with those of our stockholders. The Compensation Committee has identified a number of factors that discourage excessive risk-taking including: (i) the relative size of the awards as compared to each executive’s target total direct compensation opportunity; (ii) the minimum vesting requirements for awards; and (iii) our policy which prohibits hedging transactions involving shares of our common stock and prevents our executives from insulating themselves from the effects of poor stock price performance. The Compensation Committee also noted that these awards do not encourage excessive-risk taking since their ultimate value is tied to our stock price, and they are granted on a staggered basis, subject to long-term vesting schedules, which help ensure that our executives have significant value tied to long-term stock price performance.

We have also historically granted equity awards to a significant number of employees. Like the equity awards granted to our executives, the relative size of these awards is modest compared to each employee’s target total compensation opportunity. All awards are subject to minimum vesting requirements and our policy which prohibits hedging transactions involving shares of our common stock is applicable to all grantees.

Further, the OIP, which governs the terms of such awards, includes several provisions designed to mitigate risk and protect stockholder interests, including, but not limited to, the following:

■

Options to purchase shares of our common stock and stock appreciation rights for shares of our common stock may not have an exercise or strike price that is less than the fair market value of our common stock on the date of grant;

■

With limited exceptions, no portion of any award granted uner the OIP may vest prior to the first anniversary of the award’s grant date;

■

The OIP was approved by stockholders at the 2018 Annual Meeting, and material amendments of the OIP, including an increase in the number of shares available thereunder, require stockholder approval; and

■

The OIP is administered by an independent committee of our Board.

The Compensation Committee has reviewed the compensation programs for our employees generally and has determined that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

FISCAL 2018 SUMMARY COMPENSATION TABLE

The following table presents summary information regarding the total compensation awarded to, earned by or paid to the NEOs for the fiscal years ended October 31, 2018, 2017, and 2016 (except for Ms. Arasimowicz for whom information is provided only with respect to the fiscal years ended October 31, 2018 and 2017).

Name and Principal Position		Year		Salary ($)		Bonus ($)		Stock Awards ($)(1)		Non-Equity Incentive Plan Compensation ($)(2)		All Other Compensation ($)		Total ($)
Arthur A. Bottone		2018		443,026		—		728,000		—		3,141		1,174,167
President and Chief Executive Officer		2017		428,816		—		495,750		282,000		3,016		1,209,582
		2016		426,414		—		661,000		192,967		4,026		1,284,406
Michael S. Bishop		2018		333,402		—		478,000		—		10,076		821,478
Senior Vice President, Chief Financial Officer and Treasurer		2017		318,392		—		262,500		125,520		4,572		710,894
		2016		307,904		—		350,000		78,750		4,255		740,909
Jennifer D. Arasimowicz(3)		2018		309,231		—		478,000		—		7,433		794,664
Senior Vice President, General Counsel and Corporate Secretary		2017		254,615		—		300,000		115,500		2,615		672,730
Anthony F. Rauseo		2018		347,227		—		478,000		—		4,625		829,852
Senior Vice President and Chief Operating Officer		2017		333,554		—		262,500		131,497		4,933		732,484
		2016		325,546		—		350,000		82,500		5,873		763,919

(1)

The amounts reported in the “Stock Awards” column reflect the aggregate grant date fair value of stock awards granted during each of the fiscal years 2018, 2017, and 2016, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC Topic 718”). These values have been determined under the principles used to calculate the grant date fair value of equity awards for purposes of our financial statements. For a discussion of the assumptions and methodologies used to value the awards reported in this column, please see the discussion of stock awards contained in Note 16 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018. These amounts represent the “reported” value of the awards, and do not necessarily represent the “realizable” value of the awards. See page 23 of this Proxy Statement for a discussion of reported versus realizable value of the awards.

(2)

The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent the value of the annual incentive award payment earned by each NEO for fiscal years 2018, 2017, and 2016 under our Management Incentive Plan. The amounts reported for fiscal years 2018, 2017, and 2016 were paid in cash.

(3)

Ms. Arasimowicz was appointed our Senior Vice President, General Counsel and Corporate Secretary on April 6, 2017.

FISCAL 2018 GRANTS OF PLAN-BASED AWARDS TABLE

The following table presents, for each of the NEOs, information with respect to the awards under the fiscal 2018 Management Incentive Plan and grants of long-term incentive compensation in the form of restricted stock unit awards made to the NEOs in fiscal 2018. For further information regarding the restricted stock unit awards included in the Fiscal 2018 Grants of Plan-Based Award Table, refer to the discussion of Long-Term Incentive Compensation on page 28 of this Proxy Statement. For further information concerning the reported value of these awards versus the realizable value of these awards, refer to the discussion on page 23 of this Proxy Statement.

		Estimated Future Payouts Under Incentive Compensation Awards(1)
Name		Grant Date		Threshold Non-Equity Incentive Comp ($)		Target Non-Equity Incentive Comp ($)		Maximum Non-Equity Incentive Comp ($)		All Other Stock Awards: Number of Units (#)(2)		Grant Date Fair Value of Stock and Option Awards ($)(3)
Arthur A. Bottone
Annual Incentive Award for Fiscal 2018		—		213,750		427,500		534,375		—		—
Restricted Stock Unit Award (Special)		4/5/2018		—		—		—		100,000	(4)	178,000
Restricted Stock Unit Award (Annual)		4/5/2018		—		—		—		308,989	(5)	550,000
Michael S. Bishop
Annual Incentive Award for Fiscal 2018		—		87,500		175,000		218,750		—		—
Restricted Stock Unit Award (Special)		4/5/2018		—		—		—		100,000	(4)	178,000
Restricted Stock Unit Award (Annual)		4/5/2018		—		—		—		168,539	(5)	299,999
Jennifer D. Arasimowicz
Annual Incentive Award for Fiscal 2018		—		82,500		165,000		206,250		—		—
Restricted Stock Unit Award (Special)		4/5/2018		—		—		—		100,000	(4)	178,000
Restricted Stock Unit Award (Annual)		4/5/2018		—		—		—		168,539	(5)	299,999
Anthony F. Rauseo
Annual Incentive Award for Fiscal 2018		—		90,000		180,000		225,000		—		—
Restricted Stock Unit Award (Special)		4/5/2018		—		—		—		100,000	(4)	178,000
Restricted Stock Unit Award (Annual)		4/5/2018		—		—		—		168,539	(5)	299,999

(1)

The amounts reported in the threshold, target and maximum columns reflect the range of potential payments of non-equity incentive compensation for fiscal 2018 that could have been made under the Management Incentive Plan in accordance with the performance measures established by the Compensation Committee. Threshold amounts represent the minimum amount payable of 50% of the target annual non-equity incentive award for each NEO. If actual performance falls below the minimum level required, then payment of an award is at the discretion of the Compensation Committee and could be zero. “Target” amounts assume achievement of 100% of our performance objectives for the fiscal year. The “maximum” amounts shown represent theoretical maximum payments that could be made, however, payout at the maximum has never been attained. The actual amount earned with respect to the fiscal 2018 annual non-equity incentive awards was zero, as reported in the Fiscal 2018 Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. For more information, see the explanation in the Compensation Discussion and Analysis under the sub-heading “Variable Compensation.”

(2)

Amounts reported in the “All Other Stock Awards” column represent the number of restricted stock units granted to each NEO under the 2018 Omnibus Incentive Plan. The number of restricted stock units was determined based upon the dollar value, as determined by the Compensation Committee (or, in the case of the CEO, the independent members of our Board), to be awarded to each NEO divided by the closing market price of our common stock on the date of grant. See discussion on page 23 of this Proxy Statement for a discussion of reported value versus realizable value for these awards.

(3)

Reflects the grant date fair value of the restricted stock units, calculated in accordance with ASC Topic 718 and utilizing the assumptions discussed in Note 16 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended October 31, 2018. See discussion on page 23 of this Proxy Statement for a discussion of reported value versus realizable value for these awards.

(4)

Reflects the one-time special RSU award, which vests 100% on the third anniversary of the grant date, provided that the executive remains in the continuous employment of the Company through such vesting date. Our Board may determine the effect on an award of the disability, death, retirement or other termination of employment of an NEO.

(5)

Reflects the annual RSU grant, which vests over three years at a rate of 33.3% per year beginning on the first anniversary of the date of grant. These awards were made on the same terms as the awards granted to all other eligible employees. Our Board may determine the effect on an award of the disability, death, retirement or other termination of employment of an NEO.

OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END TABLE

The following table presents, for each of the NEOs, information with respect to the outstanding equity awards held at October 31, 2018.

		Option Awards										Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Un-exercisable		Option Exercise Price ($)		Option Grant Date		Option Expiration Date		Stock Award Grant Date(1)		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)(2)
Arthur A. Bottone												4/02/2015		10,841		9,215
												4/07/2016		51,320		43,622
												4/06/2017		220,334		187,284
												4/05/2018		308,989		262,641
												4/05/2018		100,000		85,000
Michael S. Bishop												4/02/2015		4,101		3,486
												4/07/2016		27,174		23,098
												4/06/2017		116,667		99,167
												4/05/2018		168,539		143,258
												4/05/2018		100,000		85,000
Jennifer D. Arasimowicz												4/07/2016		4,737		4,026
												4/06/2017		150,000		127,500
												4/05/2018		168,539		143,258
												4/05/2018		100,000		85,000
Anthony F. Rauseo												4/02/2015		4,101		3,486
												4/07/2016		27,174		23,098
												4/06/2017		116,667		99,167
												4/05/2018		168,539		143,258
												4/05/2018		100,000		85,000

(1)

In 2015 and 2016, we granted restricted stock awards which vest at a rate of 25% per year beginning on the first anniversary of the date of grant; in 2017 and 2018, the restricted stock unit awards granted to Messrs. Bottone, Bishop and Rauseo and Ms. Arasimowicz, vest at the rate of 33.3% per year beginning on the first anniversary of the date of grant except for the special awards consisting of 100,000 restricted stock units, which vest 100% on the third anniversary of the grant date.

(2)

The fair market value of unvested restricted stock and restricted stock unit awards is based on the per share closing market price of our common stock on October 31, 2018, which was $0.85. See discussion on page 23 of this Proxy Statement for a discussion of reported value versus realizable value for these awards.

FISCAL 2018 OPTION EXERCISES AND STOCK VESTED TABLE

The following table presents, for each of the NEOs, the number of shares of our common stock acquired upon the vesting of restricted stock awards and restricted stock units during fiscal 2018, and the aggregate value realized upon the vesting of such awards. Our NEOs did not exercise any options to purchase shares of our common stock during fiscal 2018. For purposes of this table, the value realized is based upon the fair market value of our common stock on each vesting date.

	Option Awards					Stock Awards(1)
Name		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)			Value Realized on Vesting ($)(2)
Arthur A. Bottone		N/A		N/A		149,897	(3)		270,434
Michael S. Bishop		N/A		N/A		77,958	(4)		140,756
Jennifer D. Arasimowicz		N/A		N/A		52,368	(5)		94,404
Anthony F. Rauseo		N/A		N/A		78,387	(6)		141,506

(1)

Represents the gross number of shares acquired and value received on the vesting of restricted stock and restricted stock unit awards, without reduction for the number of shares withheld to pay applicable withholding taxes. Shares and value net of withholding are discussed in the following footnotes.

(2)

The amount reported in the “Value Realized on Vesting” column is computed by multiplying the number of shares of our common stock that vested by the closing market price of our common stock on the applicable vesting date.

(3)

Represents the vesting of the first tranche (33%) of Mr. Bottone’s April 6, 2017 award of 330,500 restricted stock units; the vesting of the second tranche (25%) of his April 7, 2016 award of 102,640 shares of restricted stock; the vesting of the third tranche (25%) of his April 2, 2015 award of 43,373 shares of restricted stock; and the vesting of the fourth tranche (25%) of his March 27, 2014 award of 12,913 shares of restricted stock, in each case in accordance with the terms of the applicable award.

(4)

Represents the vesting of the first tranche (33%) of Mr. Bishop’s April 6, 2017 award of 175,000 restricted stock units; the vesting of the second tranche (25%) of his April 7, 2016 award of 54,348 shares of restricted stock; the vesting of the third tranche (25%) of his April 2, 2015 award of 16,405 shares of restricted stock; and the vesting of the fourth tranche (25%) of his March 27, 2014 award of 7,748 shares of restricted stock, in each case in accordance with the terms of the applicable award.

(5)

Represents the vesting of the first tranche (25%) of Ms. Arasimowicz’s April 6, 2017 award of 200,000 restricted stock units; and the vesting of the second tranche (25%) of her April 7, 2016 award of 9,473 shares of restricted stock, in each case in accordance with the terms of the applicable award.

(6)

Represents the vesting of the first tranche (33%) of Mr. Rauseo’s April 6, 2017 award of 175,000 restricted stock units; the vesting of the second tranche (25%) of Mr. Rauseo’s April 7, 2016 award of 54,348 shares of restricted stock; the vesting of the third tranche (25%) of his April 2, 2015 award of 16,405 shares of restricted stock; and the vesting of the fourth tranche (25%) of his March 27, 2014 award of 9,470 shares of restricted stock, in each case in accordance with the terms of the applicable award.

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AND SEVERANCE

Each of the NEOs has an employment agreement with the Company, under which such NEO is eligible to receive certain severance payments and benefits in connection with a termination of employment under various circumstances, including following a change of control of the Company.

In reporting the estimated potential payments and benefits payable to each NEO in the event of termination of employment as of October 31, 2018, we assumed the terms of these agreements were applicable. The actual amounts that would be paid or distributed to the NEOs as a result of one of the termination events occurring in the future may be different than those presented below as many factors will affect the amount of any payments and benefits upon a termination of employment. For example, some of the factors that could affect the amounts payable include the NEO’s base salary and the market price of our common stock at the time of termination. In addition, although we have entered into written arrangements to provide severance payments and benefits to the NEOs in connection with a termination of employment under particular circumstances, we may mutually agree with the NEOs on severance terms that vary from those provided in these pre-existing agreements. Finally, in addition to the amounts presented below, each NEO would also be able to exercise any previously-vested options to purchase shares of our common stock that s/he held (if applicable). For more information about the NEOs’ outstanding equity awards as of October 31, 2018, see the Outstanding Equity Awards at 2018 Fiscal Year-End Table above.

In addition to the severance payments and benefits described in each NEO’s individual employment agreement, the NEOs are eligible to receive any benefits accrued under our broad-based benefit plans, such as accrued vacation pay, in accordance with those plans.

MR. BOTTONE

On February 8, 2011, we entered into an employment agreement with Mr. Bottone upon his promotion to President and Chief Executive Officer, which was subsequently amended effective as of January 1, 2012 (as amended, the “CEO Agreement”). The CEO Agreement specifies the reasons pursuant to which his employment may be terminated by our Board and provides him with certain compensation and benefits upon termination of employment (including in connection with a change in control of the Company). We believe that these provisions help ensure the Company’s long-term success. The CEO Agreement also sets forth the terms and conditions of employment for Mr. Bottone including his initial base salary, which is to be reviewed at least annually by our Board, and target annual incentive award opportunity. Mr. Bottone is also eligible to participate in the insurance plans and employee benefits generally available to our other employees. The CEO Agreement contains non-disclosure provisions that apply indefinitely and prohibit Mr. Bottone from competing with the Company and from soliciting our employees, in each case, during the term of his employment and for a period of two years thereafter.

In the event Mr. Bottone’s employment is terminated by the Company without cause or he resigns for good reason (as defined in the CEO Agreement), subject to his execution of a general release of claims against the Company, he is eligible to receive a severance payment in an amount equal to two times (i) his then-current annual base salary as of the date of termination plus (ii) the average of the bonuses paid to him since the effective date of his employment agreement, as well as payment for continued health insurance for 12 months (or 18 months if the termination (without cause or for good reason) occurs in connection with a change in control of the Company). In the event of termination of Mr. Bottone’s employment by the Company for any other reason (including death or disability), we will only pay Mr. Bottone any base salary and vacation accrued but as yet unpaid on the effective date of such termination and any vested and accrued benefits under our employee benefit plans. Mr. Bottone’s outstanding and unvested options to purchase shares of our common stock and restricted stock or restricted stock unit awards accelerate and immediately vest upon a change of control of the Company. Mr. Bottone’s CEO Agreement provides that, if he receives any payments in connection with a change of control of the Company that would constitute excess parachute payments that are subject to excise taxes under Section 4999 of the Code, (i) if such payments do not exceed four times his base amount (as defined in Section 280G of the Code), then such payments will be reduced to an amount that would not trigger any excise taxes and (ii) if such payments exceed four times his base amount and he is subject to excise taxes, the Company will provide a tax gross up payment for all income and excise taxes such that Mr. Bottone receives a net amount equal to such payments.

The following table sets forth the potential (estimated) payments and benefits that Mr. Bottone would be eligible to receive upon termination of employment (including in connection with a change in control of the Company), as specified under the CEO Agreement, assuming that the triggering event described below occurred on October 31, 2018.

POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. BOTTONE

Executive Payments and Benefits(1)		Termination without Cause or Resignation for Good Reason ($)(2)		Death or Disability ($)(2)		Following Change in Control of the Company ($)(2)
Accelerated vesting:
Stock options(3)		—		—		—
Restricted Shares/Stock Units(3)(4)		—		—		587,761
Payment for annual incentive award		—		—		—
Continued Health Insurance Premiums(5)		29,687		—		44,531
Severance payment(6)		1,379,089		—		1,379,089
TOTAL		1,408,776		—		2,011,381

(1)

For purposes of this analysis, we have assumed that Mr. Bottone’s compensation is as follows: a base salary equal to $475,000, annual incentive award payments paid for fiscal 2011 in the amount of $161,500, for fiscal 2012 in the amount of $230,706, for fiscal 2013 in the amount of $247,212, for fiscal 2014 in the amount of $200,079, for fiscal 2015 in the amount of $187,347, for fiscal 2016 in the amount of $192,967, and for fiscal 2017 in the amount of $282,000, and outstanding restricted stock and stock unit awards as reflected in the Outstanding Equity Awards at 2018 Fiscal Year-End Table, on page 33 of this Proxy Statement. These amounts reflect the terms of his compensation arrangements as approved by the independent members of our Board, effective January 1, 2012.

(2)

Assumes Mr. Bottone’s date of termination of employment was October 31, 2018. The market price of our common stock on October 31, 2018 was $0.85 per share. In addition, we have assumed that the total payments and benefits to Mr. Bottone in connection with a change in control of the Company would not trigger any excise taxes under Section 4999 of the Code, and therefore, no tax gross up payment is due to Mr. Bottone and no reduction is required.

(3)

The CEO Agreement provides for accelerated vesting of Mr. Bottone’s outstanding and unvested options to purchase shares of our common stock, and restricted stock and restricted stock unit awards upon a change in control of the Company. Assuming a change in control occurred on October 31, 2018, Mr. Bottone would receive accelerated vesting of 691,484 shares of restricted stock and restricted stock units. As of October 31, 2018, Mr. Bottone had no options to purchase shares of our common stock outstanding.

(4)

The value of the restricted stock and restricted stock unit awards on October 31, 2018 is based on 691,484 shares and units outstanding at $0.85 per share that had not vested.

(5)

Mr. Bottone is eligible to receive payment of continued health insurance for a period of 12 months upon termination of employment without cause or resignation for good reason and 18 months if termination of employment without cause or resignation for good reason occurs in connection with a change in control of the Company. The value of continued health insurance is based on the medical and dental insurance rates in effect for all employees of the Company as of October 31, 2018.

(6)

Mr. Bottone is eligible to receive a severance payment equal to two times (i) his base salary plus (ii) a bonus payment for the severance period equal to the average of the bonuses awarded to him since his appointment as our President and Chief Executive Officer.

MR. BISHOP, MS. ARASIMOWICZ AND MR. RAUSEO

We entered into employment agreements (the “Other NEO Agreements”) with Messrs. Bishop and Rauseo (effective January 1, 2012) and with Ms. Arasimowicz (effective April 6, 2017), which specify the reasons pursuant to which their employment may be terminated and provide them with certain compensation and benefits upon termination of employment (including in connection with a change in control of the Company). We believe that these provisions help ensure the Company’s long-term success. The Other NEO Agreements set forth the terms and conditions of their employment including the initial annual base salary and target annual incentive award opportunity, which is equal to 50% of base salary and payable in accordance with the terms of the Management Incentive Plan described on page 27 of this Proxy Statement. Our NEOs are also eligible to participate in insurance plans and other employee benefits generally available to our other employees.

In the event Ms. Arasimowicz’s or Messrs. Bishop or Rauseo’s employment is terminated by the Company without cause, or any of them resigns for “good reason” (as defined in his/her applicable agreement), he/she is eligible to receive a severance payment in an amount equal to six months of his/her then-current annual base salary as of the date of termination, as well as payment for continued health insurance for six months. In the event that Mr. Bishop, Mr. Rauseo or Ms. Arasimowicz is terminated by the Company without cause or resigns for good reason in connection with a change in control of the Company, his/her outstanding and unvested options to purchase shares of our common stock and restricted stock and restricted stock unit awards accelerate and immediately vest. In addition, each of them is eligible to receive a severance payment in an amount equal to one year of his/her base salary as of the date of termination plus the average of the bonuses paid to him/her since his/her appointment as an executive officer of the Company as well as payment for continued health insurance for 12 months. In the event of termination of employment by the Company for any other reason (including death or disability), we will only be required to pay him/her any base salary and vacation accrued but unpaid as of the effective date of such termination.

The following tables set forth the potential (estimated) payments and benefits which Ms. Arasimowicz and Messrs. Bishop and Rauseo would be eligible to receive upon termination of employment (including in connection with a change in control of the Company), as specified under the applicable Other NEO Agreements, assuming that the triggering event described below occurred on October 31, 2018.

POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. BISHOP

Executive Payments and Benefits(1)		Termination without Cause or Resignation for Good Reason ($)(2)		Death or Disability ($)(2)		Following Change in Control of the Company ($)(2)
Accelerated vesting:
Stock options(3)		—		—		—
Restricted Shares/Stock Units(3)(4)		—		—		354,009
Payment for annual incentive award		—		—		—
Continued Health Insurance Premiums(5)		12,952		—		25,904
Severance payment(6)		175,000		—		437,365
TOTAL		187,952		—		817,278

(1)

For purposes of this analysis, we have assumed that Mr. Bishop’s compensation is as follows: a base salary equal to $350,000, annual incentive award payments paid for fiscal 2011 in the amount of $59,850, for fiscal 2012 in the amount of $79,835, for fiscal 2013 in the amount of $89,670, for fiscal 2014 in the amount of $94,500, for fiscal 2015 in the amount of $83,430, for fiscal 2016 in the amount of $78,750, and for fiscal 2017 in the amount of $125,520, and outstanding restricted stock and restricted stock unit awards as reflected in the Outstanding Equity Awards at 2018 Fiscal Year-End Table, on page 33 of this Proxy Statement. These amounts reflect the terms of his compensation arrangements as approved by the Compensation Committee, effective January 1, 2012.

(2)

Assumes Mr. Bishop’s date of termination of employment was October 31, 2018. The market price of our common stock on October 31, 2018 was $0.85 per share.

(3)

Assuming termination of employment without cause or resignation for good reason in connection with a change in control of the Company, Mr. Bishop is to receive accelerated vesting of his outstanding and unvested options to purchase shares of our common stock and restricted stock and restricted stock unit awards. As of October 31, 2018, Mr. Bishop held 416,481 unvested shares of restricted stock and restricted stock units. As of October 31, 2018, Mr. Bishop held no options to purchase shares of our common stock outstanding.

(4)

The value of the restricted stock and restricted stock unit awards on October 31, 2018 is based on 416,481 shares and units at $0.85 per share that had not vested.

(5)

Mr. Bishop is eligible to receive payment of continued health insurance for a period of six months in the event his employment is terminated without cause or he resigns for good reason and 12 months if his employment is terminated without cause or he resigns for good reason in connection with a change in control of the Company. The value of continued health insurance is based on the medical and dental insurance rates in effect for all employees of the Company as of October 31, 2018.

(6)

In the event Mr. Bishop’s employment is terminated without cause or he resigns for good reason, he is eligible to receive a severance payment equal to six months of his base salary. In the event his employment is terminated without cause or he resigns for good reason in connection with a change in control of the Company, he is eligible for 12 months of his base salary plus a bonus payment for the severance period equal to the average of the bonuses awarded to him since his appointment as our Chief Financial Officer.

POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MS. ARASIMOWICZ

Executive Payments and Benefits(1)		Termination without Cause or Resignation for Good Reason ($)(2)		Death or Disability ($)(2)		Following Change in Control of the Company ($)(2)
Accelerated vesting:
Stock options(3)		—		—		—
Restricted Shares/Stock Units(3)(4)		—		—		359,785
Payment for annual incentive award
Continued Health Insurance Premiums(5)		14,844		—		29,687
Severance payment(6)		165,000		—		445,500
TOTAL		179,844		—		834,972

(1)

For purposes of this analysis, we have assumed that Ms. Arasimowicz’s compensation is as follows: a base salary equal to $330,000, annual incentive award payments paid for fiscal 2017 in the amount of $115,500, and outstanding restricted stock and restricted stock unit awards as reflected in the Outstanding Equity Awards at 2018 Fiscal Year-End Table, on page 33 of this Proxy Statement. These amounts reflect the terms of her compensation arrangements as approved by the Compensation Committee, effective April 6, 2017.

(2)

Assumes Ms. Arasimowicz’s date of termination of employment was October 31, 2018. The market price of our common stock on October 31, 2018 was $0.85 per share.

(3)

Assuming termination of employment without cause or resignation for good reason in connection with a change in control of the Company, Ms. Arasimowicz is to receive accelerated vesting of her outstanding and unvested options to purchase shares of our common stock and restricted stock and restricted stock unit awards. As of October 31, 2018, Ms. Arasimowicz held 423,276 unvested shares of restricted stock and restricted stock units. As of October 31, 2018, Ms. Arasimowicz did not hold any options to purchase shares of our common stock.

(4)

The value of the restricted stock and restricted stock unit awards on October 31, 2018 is based on 423,276 shares and units at $0.85 per share that had not vested.

(5)

Ms. Arasimowicz is eligible to receive payment of continued health insurance for a period of six months in the event her employment is terminated without cause or she resigns for good reason and 12 months if her employment is terminated without cause or she resigns for good reason in connection with a change in control of the Company. The value of continued health insurance is based on the medical and dental insurance rates in effect for all employees of the Company as of October 31, 2018.

(6)

In the event Ms. Arasimowicz’s employment is terminated without cause or she resigns for good reason, she is eligible to receive a severance payment equal to six months of her base salary. In the event her employment is terminated without cause or she resigns for good reason in connection with a change in control of the Company, she is eligible for 12 months of her base salary plus a bonus payment for the severance period equal to the average of the bonuses awarded to her since her promotion to Senior Vice President, General Counsel and Corporate Secretary.

POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. RAUSEO

Executive Payments and Benefits(1)		Termination without Cause or Resignation for Good Reason ($)(2)		Death or Disability ($)(2)		Following Change in Control of the Company ($)(2)
Accelerated vesting:
Stock options(3)		—		—		—
Restricted Shares/Stock Units(3)(4)		—		—		354,009
Payment for annual incentive award		—		—		—
Continued Health Insurance Premiums(5)		6,857		—		13,713
Severance payment(6)		180,000		—		457,112
TOTAL		186,857		—		824,834

(1)

For purposes of this analysis, we have assumed that Mr. Rauseo’s compensation is as follows: a base salary equal to $360,000, annual incentive award payments paid for fiscal 2011 in the amount of $74,100, for fiscal 2012 in the amount of $94,220, for fiscal 2013 in the amount of $101,213, for fiscal 2014 in the amount of $104,200, for fiscal 2015 in the amount of $92,051, for fiscal 2016 in the amount of $82,500, and for fiscal 2017 in the amount of $131,497 and outstanding restricted stock and restricted stock unit awards as reflected in the Outstanding Equity Awards at 2018 Fiscal Year-End Table, on page 33 of this Proxy Statement. These amounts reflect the terms of his compensation package approved by the Compensation Committee, effective January 1, 2012.

(2)

Assumes Mr. Rauseo’s date of termination of employment was October 31, 2018. The market price of our common stock on October 31, 2018 was $0.85 per share.

(3)

Assuming termination without cause or resignation for good reason in connection with a change in control of the Company, Mr. Rauseo is to receive accelerated vesting of his outstanding and unvested options to purchase shares of our common stock and restricted stock and restricted stock unit awards. As of October 31, 2018, Mr. Rauseo held 416,481 unvested shares of restricted stock and restricted stock units and all of Mr. Rauseo’s options to purchase shares of our common stock were fully vested and “out-of-the-money.”

(4)

The value of the restricted stock and restricted stock unit awards on October 31, 2018 is based on 416,481 shares and units at $0.85 per share that had not vested.

(5)

Mr. Rauseo is eligible to receive payment of continued health insurance for a period of six months in the event his employment is terminated without cause or he resigns for good reason and 12 months if his employment is terminated without cause or he resigns for good reason in connection with a change in control of the Company. The value of continued health insurance is based on the medical and dental insurance rates in effect for all employees of the Company as of October 31, 2018.

(6)

In the event Mr. Rauseo’s employment is terminated without cause or he resigns for good reason, he is eligible to receive a severance payment equal to six months of his base salary. In the event his employment is terminated without cause or he resigns for good reason in connection with a change in control of the Company, he is eligible for 12 months of his base salary plus a bonus payment for the severance period equal to the average of the bonuses awarded to him since his appointment as our Chief Operating Officer.

CEO PAY RATIO

CEO Pay Ratio – 13.8:1

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd – Frank Act”), the Securities and Exchange Commission adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (‟PEO”). Our Company’s PEO is Mr. Bottone. The purpose of this disclosure is to provide a measure of the equitability of pay within the organization.

The Compensation Committee believes its compensation philosophy and program must be fair, competitive and internally equitable to motivate our executives to perform in ways that enhance stockholder value. As a result of the recently adopted rules under the Dodd-Frank Act, and beginning with this Proxy Statement, the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees.

Following the close of fiscal year 2018, the Compensation Committee reviewed a comparison of Mr. Bottone’s annual total compensation to that of all other employees for the same period. The calculation of annual total compensation of all employees was determined in the same manner as the “Total Compensation” shown for our CEO in the “Fiscal 2018 Summary Compensation Table” on page 31 of this Proxy Statement. Pay elements that we included in the calculation of total compensation for each employee were:

■

salary received in fiscal year 2018;

■

annual incentive award payment received for performance in fiscal year 2018 (paid in fiscal year 2019);

■

grant date fair value of restricted stock unit awards granted in fiscal year 2018;

■

payments made for overtime work, shift differentials, and other supplemental forms of pay received in fiscal year 2018; and

■

Company contributions to the 401(k) Plan (or the RRSP, for Canadian employees) made during fiscal year 2018.

Our calculation included all active employees as of October 31, 2018. We annualized the wages and salaries for any employees who worked less than twelve months during the fiscal year, and we excluded those who took an unpaid leave of absence during the measurement period. We applied a Canadian to U.S. dollar exchange rate (0.7611) as of October 31, 2018 to the compensation elements paid in Canadian currency, and we excluded our employees in Germany (12 employees) and South Korea (4 employees), the total number of which is less than 5% of our total workforce (462 employees).

We determined the compensation of our median employee by: (i) calculating the annual total compensation described above for each of our employees, (ii) ranking the annual total compensation of all employees excluding the CEO from lowest to highest (a list of 445 employees), and (iii) identifying the employee who ranked number 223 on the list (the “Median Employee”).

As of October 31, 2018, the Company employed 445 employees in the U.S. and Canada, excluding the CEO. The annual total compensation for fiscal year 2018 for our CEO was $1,174,167 and for the Median Employee was $85,212. The resulting ratio of our CEO’s pay to the pay of our Median Employee for fiscal year 2018 is 13.8 to one.

DIRECTORCOMPENSATION

DIRECTOR COMPENSATION

The Compensation Committee periodically reviews Director compensation. In evaluating our Director compensation program, the Compensation Committee is guided by the following principles: compensation should fairly pay the non-employee Directors, compensation should align the interests of our non-employee Directors with the long-term interests of our stockholders and the structure of the compensation should be simple, transparent and easy for stockholders to understand.

The compensation of the non-employee Directors includes both a cash and an equity component. Our non-employee Directors receive an annual retainer and committee member and chair fees. They may elect to receive these fees in cash or shares of the Company’s common stock. In addition, the non-employee Directors also receive compensation in the form of an equity award.

In March 2018, the Compensation Committee directed Compensia, its external compensation consultant (also referred to herein as the “Advisor”), to conduct an analysis of our Director compensation program. For this purpose, Compensia analyzed the director compensation arrangements of the companies in the compensation Peer Group developed for purposes of the competitive market analysis used by the Compensation Committee to establish executive compensation levels (see page 25 above) and prepared a report for review and consideration by the Compensation Committee. In comparing the competitive market data against our then-current non-employee Director compensation, the Compensation Committee noted that, with the exception of the fees paid to members of the Nominating and Governance Committee and the Chair of the Compensation Committee, the fees for general Board service, as well as committee service and service as the non-Executive Chair of the Board, were typically at or below the 25^th percentile of the competitive market. After consideration of this market data and the current roles and responsibilities of the various members of the Board, and after noting the compensation of our non-employee Directors had last been adjusted in 2009, the Compensation Committee determined to increase the cash and equity compensation levels for general board services to levels that approximated the 45^th percentile of the competitive market as follows (effective April 5, 2018):

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The annual cash retainer for general Board service was increased from $30,000 to $35,000; and

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The annual equity award for general Board service was increased from $28,000 to $50,000.

All other annual non-employee Director compensation amounts remained the same.

The following is a description of the components of the Director compensation program during fiscal 2018.

NEW BOARD MEMBERS

Upon election to the Board, a non-employee Director will be granted an equity award in the form of Restricted Stock Units (“RSUs”) valued at $50,000, pro-rated from the date of his or her initial appointment to the end of the service year (which ends at the annual stockholder meeting). The per share fair market value of each award is based upon the closing market price of the Company’s common stock on the date of grant.

ANNUAL DIRECTOR COMPENSATION

The standard fee arrangements for the non-employee Directors include: 

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a retainer of $35,000 per year for service as a Director (increased from $30,000 effective April 5, 2018); and

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committee fees based upon the expected number of meetings and level of activity during the year.

Non-Chair committee fees are $5,000 for the first committee of which a non-employee Director is a member and $2,500 for each additional committee of which he or she is a member.

Chair committee fees are $12,500 for the Compensation, Audit and Finance, and Nominating and Corporate Governance Committees.

The non-employee Chairman of the Board receives a fee of $20,000 annually. A Director will receive pro-rated fees if he or she does not finish his or her then-current term as a Director.

In addition to the fees described above, the non-employee Directors have historically received an equity award valued at $28,000 (increased to $50,000 effective April 5, 2018) on the date of the Company’s annual stockholder meeting, which will be awarded in the form of RSUs. These awards vest over the course of the twelve-month service period commencing with the date of each annual stockholder meeting.

DIRECTORS DEFERRED COMPENSATION PLAN

Pursuant to our Directors Deferred Compensation Plan, non-employee Directors may elect to defer, until a predetermined date or until they leave the Board, receipt of all or a portion of their fees, whether paid in cash or common stock. The election to defer receipt of all or a portion of his or her fees must be made by a non-employee Director prior to December 31^stof each calendar year or, with respect to a newly-eligible Director, within 30 days after he or she becomes eligible to participate in the Directors Deferred Compensation Plan.

REIMBURSEMENT OF EXPENSES

We reimburse the non-employee Directors for reasonable expenses incurred in connection with the performance of their duties as members of the Board.

FISCAL 2018 NON-EMPLOYEE DIRECTOR COMPENSATION

The following table sets forth the Special Meeting.