SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MRV COMMUNICATIONS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
MRV COMMUNICATIONS, INC.
20415 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders of MRV
Communications, Inc. (the "Company") to be held on Friday, December 14, 2001, at
8:30 a.m. at The Holiday Inn -- Woodland Hills, Mulholland Room, 21101 Ventura
Blvd., Woodland Hills, CA 91364.
At the Annual Meeting, you will be asked to: elect six directors of the
Company; approve amendments to the Company's 1997 Incentive and Nonstatutory
Stock Option Plan to increase by 1,200,000 shares the number of shares of Common
Stock that can be optioned and sold under such Stock Option Plan; and ratify the
selection of the Company's independent accountants.
Details of the matters to be considered at the Annual Meeting are
contained in the accompanying Proxy Statement that we urge you to consider
carefully.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
Sincerely,
/s/ Noam Lotan
Noam Lotan
President and Chief Executive Officer
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL STOCKHOLDERS'
MEETING, YOU ARE REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN
THE ENVELOPE PROVIDED.
MRV COMMUNICATIONS, INC.
20415 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MRV
Communications, Inc. (the "Company"), a Delaware corporation, will be held on
Friday, December 14, 2001 at 8:30 a.m. at The Holiday Inn -- Woodland Hills,
Mulholland Room, 21101 Ventura Blvd., Woodland Hills, CA 91364 and thereafter as
it may be adjourned from time to time:
At the Meeting the Stockholders will be asked:
1. To elect six members of the Board of Directors, all of whom currently
serve as Directors, to serve for the ensuing year;
2. To approve amendments to the Company's 1997 Incentive and
Nonstatutory Stock Option Plan to increase by 1,200,000 shares the number of
shares of Common Stock that can be optioned and sold under such Stock Option
Plan.
3. To ratify the selection of Arthur Andersen LLP as independent
auditors for the Company for the fiscal year ending December 31, 2001;
4. To consider and act upon any matters incidental to the foregoing and
any other matters which may properly come before the meeting or any adjournment
or adjournments thereof.
The Board of Directors has fixed the close of business on November 1,
2001 as the record date for the determination of Stockholders entitled to notice
of and vote at the meeting and any adjournment or adjournments thereof.
WE HOPE THAT ALL STOCKHOLDERS WILL BE ABLE TO ATTEND THE MEETING IN
PERSON. IN ORDER TO ASSURE THAT A QUORUM IS PRESENT AT THE MEETING, PLEASE DATE,
SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING. A POSTAGE PAID ENVELOPE, ADDRESSED TO AMERICAN STOCK TRANSFER &
TRUST CO., THE COMPANY'S TRANSFER AGENT AND REGISTRAR, HAS BEEN ENCLOSED FOR
YOUR CONVENIENCE. IF YOU ATTEND THE MEETING, YOUR PROXY WILL, AT YOUR REQUEST,
BE RETURNED TO YOU AND YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
/s/ Shlomo Margalit
Shlomo Margalit
Secretary
Chatsworth, California
November 14, 2001
MRV COMMUNICATIONS, INC.
20415 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311
PROXY STATEMENT
NOVEMBER 14, 2001
The enclosed Proxy is solicited by the Board of Directors of MRV
Communications, Inc. (the "Company"), a Delaware corporation, for use at the
Annual Meeting of Stockholders to be held at the The Holiday Inn -- Woodland
Hills, Mulholland Room, 21101 Ventura Blvd., Woodland Hills, CA 91364, at 8:30
a.m. on Friday, December 14, 2001, and at any adjournment or adjournments
thereof.
Stockholders of record at the close of business on November 1, 2001 (the
"Record Date") will be entitled to vote at the meeting or any adjournment
thereof. On the Record Date, 77,514,780 shares of Common Stock, $.0017 par value
("Common Stock"), of the Company were issued and outstanding. There are no other
voting securities of the Company. Each share entitles the holder to one vote
with respect to all matters submitted to stockholders at the meeting. A quorum
for the meeting is a majority of the shares outstanding. The Company intends to
include abstentions and broker non-votes as present or represented for purposes
of establishing a quorum for the transaction of business.
The Directors and executive officers of the Company as a group owned
approximately 6.2% of the outstanding shares of Common Stock of the Company at
the Record Date. Each of the Directors and executive officers has indicated his
intent to vote all shares of Common Stock owned by him in favor of each item set
forth herein.
Execution of a Proxy will not in any way affect a Stockholders' right to
attend the meeting and vote in person. The Proxy may be revoked at any time
before it is exercised by written notice to the Secretary prior to the Annual
Meeting, or by giving to the Secretary a duly executed Proxy bearing a later
date than the Proxy being revoked at any time before such Proxy is voted, or by
appearing at the Annual Meeting and voting in person. The shares represented by
all properly executed Proxies received in time for the meeting will be voted as
specified therein. In the absence of a special choice, shares will be voted in
favor of the election of those persons named in this Proxy Statement as
Directors and in favor of all other items set forth herein.
The cost of soliciting proxies will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares of their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and employees, without compensation, personally or by
telephone, telegram, letter, facsimile or e-mail.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be taken, such shares represented
by all Proxies received by the Board of Directors will be voted with respect
thereto in accordance with the judgment of the persons named as attorney in the
Proxies.
The Company's Annual Report on Form 10-K for the year ended December 31,
2000 containing audited consolidated financial statements is being mailed with
this Proxy Statement to all stockholders entitled to vote. That Annual Report
does not form any part of the Company's proxy solicitation material. This Proxy
Statement and the accompanying Proxy were first mailed to Stockholders on or
about November 14, 2001.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the number of
shares of the Company's Common Stock owned by (i) each Director, (ii) all
Directors, Director nominees and current executive officers as a group, (iii)
each person known by the Company to own beneficially 5% or more of the Common
Stock and (iv) the Company's Chief Executive Officer and the Company's four
other most highly compensated executive officers receiving more than $100,000 in
total compensation for the year ended December 31, 2000 (collectively the "Named
Executive Officers"). Except as otherwise indicated, the stockholders listed in
the table below have sole voting and investment powers with respect to the
shares indicated.
COMMON STOCK
--------------------------
NAME AND ADDRESS(1) OF NUMBER OF PERCENTAGE
BENEFICIAL OWNER(2) OR IDENTITY OF GROUP SHARES OWNERSHIP
- ------------------------------------------------- --------- ---------
Pilgrim Baxter & Associates Ltd.(3) ............. 6,387,600 8.2%
Shlomo Margalit ................................. 3,342,060 4.3%
Noam Lotan ...................................... 1,497,874(4) 1.9%
Edmund Glazer ................................... 130,800(5) 0.2%
William R. Spivey ............................... 316,315(6) 0.4%
Guy Avidon ...................................... 36,000(6) *
Igal Shidlovsky ................................. 62,000(6) *
Guenter Jaensch ................................. 32,000(6) *
Professor Daniel Tsui ........................... 6,000(6) *
Professor Baruch Fischer ........................ 6,000(6) *
All current executive officers, director nominees
and directors as a group ............... 5,007,934(7) 6.4%
- ---------
(1) Except as noted below, the address of each of the person listed is c/o
MRV Communications, Inc., 20415 Nordhoff Street, Chatsworth, California,
Chatsworth, CA 91311.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares
of MRV common stock that an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed
to be outstanding for the purpose of computing the percentage ownership
of a particular individual or group, but are not deemed to be outstanding
for the purpose of computing the percentage ownership of any other person
shown in the table.
(3) Based on Amendment No. 1 to Schedule 13D filed with the SEC on February
14, 2001. According to this document, the address of the firm listed is
825 Duportail Road, Wayne, PA 19087. Percentage ownership is based on
number of shares beneficially owned, as reflected in the filing, divided
by the number of shares outstanding on September 30, 2001.
2
(4) Includes 12,000 shares issuable pursuant to stock options exercisable
within 60 days of September 30, 2001.
(5) Includes 36,400 shares issuable pursuant to stock options exercisable
within 60 days of September 30, 2001. Mr. Glazer was killed in the
terrorists attack on the World Trade Center on September 11, 2001 and the
table reflects options owned by his estate.
(6) Consists of shares issuable upon exercise of stock options within 60 days
of September 30, 2001. Dr. Spivey resigned in September 2001.
(7) Includes 192,000 shares issuable upon exercise of stock options within 60
days of September 30, 2001.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Directors of the Company are elected annually and hold office until
the next annual meeting of stockholders and until their successors shall have
been elected and shall have qualified. The number of directors currently fixed
as the authorized number of directors of the Company is six. In general,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority vote of the Directors
then in office. Shares represented by all Proxies received by the Board of
Directors and not so marked as to withhold authority to vote for an individual
Director, or for all Directors, will be voted (unless one or more nominees are
unable or unwilling to serve) for the election of the nominees named below. The
Board of Directors does not know of any reason why any such nominee should be
unwilling to serve, but if such should be the case, proxies will be voted for
the election of some other person or for fixing the number of Directors at a
lesser number.
The following table sets forth the year each nominee first became a
Director and the positions presently held by each nominee with the Company. For
information about ownership of the Company's Common Stock by each nominee, see
"Security Ownership of Certain Beneficial Owners and Management."
Year
Became a
Name Director Position
- ------------------------------- ---- -----------------------------------
Noam Lotan(1).................. 1990 President, Chief Executive Officer,
and Director
Shlomo Margalit(1)............. 1988 Chairman of the Board of Directors,
Chief Technical Officer and Secretary
Dr. Igal Shidlovsky(2)(3)...... 1997 Director
Dr. Guenter Jaensch(2)(3)...... 1997 Director
Professor Daniel Tsui(3)....... 1999 Director
Professor Baruch Fischer....... 1999 Director
- ----------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee. Professor Tsui became a member of the
Audit Committee in 2001.
Each director is elected for a period of one year and serves until the
stockholders duly elect his successor. Officers are elected by and serve at the
discretion of the Board of Directors.
3
Noam Lotan, 49, has been the President, Chief Executive Officer and a
Director of the Company since May 1990 and became Chief Financial Officer of the
Company in October 1993, in which position he served until June 1995. From March
1987 to January 1990, Mr. Lotan served as Managing Director of Fibronics (UK)
Ltd., the United Kingdom subsidiary of Fibronics International Inc.
("Fibronics"), a manufacturer of fiber optic communication networks. The Company
purchased the Fibronics business in September 1996. From January 1985 to March
1987, Mr. Lotan served as a Director of European Operations for Fibronics. Prior
to such time, Mr. Lotan held a variety of sales and marketing positions with
Fibronics and Hewlett-Packard. Mr. Lotan holds a Bachelor of Science degree in
Electrical Engineering from the Technion, the Israel Institute of Technology,
and a Masters degree in Business Administration from INSEAD (the European
Institute of Business Administration, Fontainebleau, France).
Dr. Shlomo Margalit, 60, a founder of the Company, has been Chairman of
the Board of Directors and Chief Technical Officer since the Company's inception
in July 1988. From May 1985 to July 1988, Dr. Margalit served as a founder and
Vice President of Research and Development for LaserCom, Inc. ("LaserCom"), a
manufacturer of semiconductor lasers. From 1982 to 1985, Dr. Margalit served as
a Senior Research Associate at the California Institute of Technology
("Caltech"), and from 1976 to 1982, a Visiting Associate at Caltech. From 1972
to 1982, Dr. Margalit served as a faculty member and Associate Professor at the
Technion. During his tenure at the Technion, Dr. Margalit was awarded the
"Israel Defense" prize for his work in developing infrared detectors for heat
guided missiles and the David Ben Aharon Award for Novel Applied Research. Dr.
Margalit holds a Bachelor of Science degree, a Masters degree and a Ph.D. in
Electrical Engineering from the Technion.
Dr. Igal Shidlovsky, 65, became a Director of the Company in May 1997.
Dr. Shidlovsky serves as Managing Director of Global Technologies, an investment
and consulting organization, which he founded in 1994. He has extensive
management and consulting experience with international companies and start up
technology companies. From 1982 to 1991, Dr. Shidlovsky was a Director of Sentex
Sensing Technologies. Dr. Shidlovsky held several executive positions including
Vice President Corporate Development at Siemens Pacesetter, a division of
Siemens AG Medical Group, Director of Strategic Planning and Technology
Utilization, and Director of the Microelectronics Department at Siemens
Corporate Research. From 1969 to 1982 he was with RCA Laboratories, a leading
electronic R&D organization. Dr. Shidlovsky holds a Bachelor of Science degree
in Chemistry from the Technion and Master and Ph.D. degrees from the Hebrew
University in Israel. Dr. Shidlovsky became a director of Luminent, Inc., MRV's
92.3% publicly traded subsidiary in September 2001.
Dr. Guenter Jaensch, 63, became a Director of the Company in December
1997. Dr. Jaensch serves as President of Jaensch Enterprises, a firm engaged in
management and project consulting. For over 20 years, he held executive
positions with Siemens or its subsidiaries in Europe and the United States.
Among his assignments were service as President of Siemens Communications
Systems, Inc.; President and Chairman of Siemens Corporate Research and Support,
Inc.; Chairman and Chief Executive Officer at Siemens Pacesetter, Inc.; and head
of the Cardiac Arrhythmia Division of Siemens AG Medical Group. Dr. Jaensch also
served as Director of Siemens Accounting and Budgeting operations and as
controller of Siemens Data Processing Group. Dr. Jaensch holds a Masters degree
in Business Administration and Ph.D. degree in Business and Finance from the
University of Frankfurt, where he also taught business for three years.
4
Professor Daniel Tsui, 62, is the Arthur Le Grand Doty Professor of
Electrical Engineering at Princeton University and was awarded the 1998 Nobel
prize in Physics for the discovery and explanation of the fractional quantum
hall effect. Professor Tsui was a recipient of the American Physical Society
1984 Buckley Prize, the 1998 Benjamin Franklin Medal and was elected to the
National Academy of Sciences. He is a fellow of the American Physical Society
and the American Association for the Advancement of Science. He is currently
engaged in research activity relating to properties of thin films and
microstructures of semiconductors and solid state physics. He received his Ph.D.
in physics from the University of Chicago in 1967 and for 13 years was with Bell
Laboratories before joining Princeton University, where he spent the last 16
years.
Professor Baruch Fischer, 50, currently serves as Dean of the Electrical
Engineering Faculty at the Technion. Professor Fischer's current Research
Activities include solid state devices, lasers and optical amplifiers; WDM
technology; fiber gratings; "all optical" networks; non-linear effect in fiber,
wave mixing; and optical computing, optical data storage and optical image
processing. He has authored or co-authored approximately 180 papers and holds
several patents in the field of optics and opto-electronics. He received his
Ph.D. from Bar-Ilan University, Israel in 1980. He subsequently became a
Post-Doctorate Fellow at CalTech and joined the faculty of the Technion in 1983.
The members of the Board of Directors who are not employees of the
Company receive cash compensation of $800 per month and $500 for each Board of
Directors meeting attended.
None of the persons nominated to serve as Directors of the Company are
related by blood, marriage or adoption to any of the Company's Directors or
executive officers. The Board of Directors met four times during 2000, including
telephonic meetings Each of the Directors attended all meetings of the Board of
Directors and the committees on which he served during the year ended December
31, 2000.
The Compensation Committee, composed of Drs. Shidlovsky and Jaensch,
held four meetings during 2000. The Compensation Committee's functions include
making recommendations to the Board of Directors concerning the compensation of
officers and employees. The Company does not have a standing nominating
committee of the Board of Directors or a committee performing similar functions.
The Executive Committee, which, during 2000, consisted of Mr. Lotan and
Dr. Margalit held four meetings during 2000. The Executive Committee is
empowered to take any action that the Board of Directors is authorized to act
upon, with the exception of the issuance of stock, the sale of all or
substantially all of the Company's assets and other significant corporate
transactions.
5
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth a summary of all compensation paid by MRV
to its Chief Executive Officer and for each of its other executive officers
whose total annual salary and bonus exceeded $100,000 (the "Named Executive
Officers") during the fiscal year ended December 31, 2000:
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS(#) COMPENSATION
- ----------------------------- ---- -------- ------- ------- ---------
Noam Lotan ............................... 2000 $100,000 $ -- -- --
President and Chief Executive Officer 1999 $100,000 $ -- -- --
1998 $100,000 $ -- 60,000(1) --
Shlomo Margalit .......................... 2000 $110,000 $ -- -- --
Chairman of the Board of Directors, 1999 $110,000 $ -- -- --
Chief Technical Officer and Secretary 1998 $110,000 $ -- -- --
Edmund Glazer(2) ......................... 2000 $140,000 $ -- 40,000 --
Vice President of Finance and 1999 $140,000 $ -- 60,000 --
Administration and Chief Financial Officer 1998 $107,000 $ -- 178,000(3) --
William R. Spivey(4) ..................... 2000 $138,000 $90,000 316,315 $48,682(5)
President and Chief Executive Officer of 1999 N/A N/A N/A N/A
Luminent, Inc. 1998 N/A N/A N/A N/A
Guy Avidan ............................... 2000 $125,000 $39,000 -- --
President and Chief Executive Officer of 1999 $102,000 $39,000 -- --
Optical Access, Inc. 1998 $102,000 $39,000 60,000 --
- ----------
(1) Consists of repriced options granted under MRV's stock option plans that
were issued in replacement of earlier options granted to the Named Executive
Officer under MRV's stock option plans. The Options vest at their original
vesting schedules.
(2) Mr. Glazer was killed in the air crash of American Airlines Flight 11 into
North Tower of the World Trade Center on September 11, 2001.
(3) Includes 78,000 repriced options granted under MRV's stock option plans that
were issued in replacement of earlier options granted to the Named Executive
Officer under the Stock Option Plans. The Options vest at their original vesting
schedules.
(4) Dr. Spivey joined Luminent in July 2000 and resigned in September 2001.
(5) Consists of a reimbursement of legal fees Dr. Spivey incurred in 2000 in
connection with negotiation of his employment contract.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding stock option
grants made to the Named Executive Officers in the year ended December 31, 2000.
6
PERCENT POTENTIAL REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL RATE OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM
UNDERLYING EMPLOYEES EXERCISE EXPIRATION ---------------------------------------------
NAME OPTIONS GRANTED IN 2000 PRICE($/SH) DATE 0%(1) 5%(2) 10%(2)
---- --------------- ------- ----------- ---- -------- ----------- --------
Noam Lotan ......... -- -- $ -- N/A N/A N/A N/A
Shlomo Margalit .... -- -- $ -- N/A N/A N/A N/A
Edmund Glazer ...... 40,000 0.7 $20.50 4/16/2006 -- $ 278,878 $ 632,680
William R. Spivey(3) 316,315 5.3 $32.56 7/10/2005 $10,300,000 $16,006,758 $22,898,476
Guy Avidan ......... -- -- $ -- N/A N/A N/A N/A
- -----------
(1) Based upon the difference between the closing price of a share of MRV Common
Stock on the date of grant and the exercise price per share of the options.
(2) The dollar amounts under these columns are the result of calculations
assuming the price of MRV's common stock on the date of the grant of the option
increases at the hypothetical 5% and 10% rates set by the SEC for the term of
the option. Neither the amounts reflected nor the rates applied are intended to
forecast possible future appreciation, if any, of MRV's stock price.
(3) Excludes separate options granted on July 11, 2000 by Luminent, MRV's
subsidiary, to Dr. Spivey exercisable at $6.25 per share. These options are
described under the Employment Agreements section below. If the market value of
the underlying shares of Luminent common stock on the grant date is assumed to
equal Luminent's IPO price of $12 per share (determined on November 9, 2000),
the intrinsic value of Dr. Spivey's options (the market price of the underlying
common stock less the exercise price) on the grant date was $27,600,000. The
potential realizable value of these options at assumed annual rate of stock
price appreciation of 5% and 10% for the option term calculated like the amounts
in the table accompanying footnote (2) are $63,824,331 and $119,399,566,
respectively.
FISCAL YEAR END OPTION VALUES
The following table provides certain information concerning MRV stock
options exercised by the Named Executive Officers during the year ended, and
held by them at, December 31, 2000.
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2000 DECEMBER 31, 2000(2)
ACQUIRED UPON VALUE ----------------------------- ------------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
---- -------- ----------- ----------- -------------- ----------- --------------
Noam Lotan ............. 48,000 $2,634,000 -- 12,000 $ -- $129,000
Shlomo Margalit ........ -- $ -- -- -- $ -- $ --
Edmund Glazer .......... 96,400 $4,295,160 36,400 101,600 $391,300 $662,200
William R. Spivey(3) ... -- $ -- 316,315 -- $ -- $ --
Guy Avidan ............. -- $ -- 24,000 36,000 $258,000 $387,000
- ----------
(1) Based on difference between the closing price of MRV common stock on the
date of exercise and the exercise price.
(2) Based on difference between the closing price of MRV common stock on
December 29, 2000 and the exercise price.
(3) Excludes separate options granted on July 11, 2000 by Luminent, MRV's
subsidiary, to Dr. Spivey exercisable at $6.25 per share. These options are
described under the Employment Agreements section below. Of these options,
1,200,000 were exercisable on December 31, 2000 and 3,600,000 were not
exercisable. None of Dr. Spivey's options was in the money at December 29, 2000.
7
EMPLOYMENT AGREEMENTS
In March 1992, MRV entered into three-year employment agreements with
Mr. Lotan and Dr. Margalit. Upon expiration, these agreements automatically
renew for one-year terms unless either party terminates them by giving the other
three months' notice of non-renewal prior to the expiration of the current term.
Pursuant to the agreements, Mr. Lotan serves as President, Chief Executive
Officer and a Director of MRV and Dr. Margalit serves as Chairman of the Board
of Directors, Chief Technical Officer and Secretary. Mr. Lotan and Dr. Margalit
receive base annual salaries of $100,000 and $110,000, respectively, and each is
entitled to receive a bonus determined and payable at the discretion of the
board of directors upon the recommendation of the Compensation Committee of the
Board. Recommendations with respect to bonus levels are based on achievement of
specified goals, such as new product introductions, profitability levels,
revenue goals, market expansion and other criteria as established by the
Compensation Committee.
In July 2000, MRV and its subsidiary, Luminent, entered into a four-year
employment agreement with Dr. William R. Spivey, Luminent's former President and
Chief Executive Officer. Under the agreement, Luminent agreed to pay to Dr.
Spivey an annual salary of $300,000 with a bonus targeted at $75,000 for 2000
and at $150,000 for the following years as determined at the discretion of our
board of directors. MRV granted Dr. Spivey an option to purchase 316,315 shares
of MRV common stock exercisable at $32.56 per share for five years. Luminent
granted to Dr. Spivey an option to purchase 4,800,000 shares of Luminent common
stock at an exercise price of $6.25 per share. Dr. Spivey's option to purchase
MRV common stock was fully exercisable as of the date of grant, and his option
to purchase Luminent common stock vested in annual installments of 25%,
beginning on July 11, 2000, provided, however, that in the event his employment
was terminated other than for cause he was entitled to receive from the date of
termination over a one year period an amount equal to two times the sum of his
annual salary plus bonus and all of his unvested Luminent options will
automatically vest and become exercisable. Dr. Spivey's resignation on September
12, 2001 was considered by the parties to be a termination other than for cause
under his employment agreement entitling him to the severance benefits of his
employment agreement therefor. As a consequence of Dr. Spivey's resignation, his
MRV and Luminent options are now exercisable through September 11, 2003.
Each officer also receives employee benefits, such as vacation, sick pay
and insurance, in accordance with MRV's policies, which are applicable to all
employees. MRV has obtained, and is the beneficiary of, key man life insurance
policies in the amount of $1,000,000 on the lives of each of Drs. Margalit and
Mr. Lotan. All benefits under these policies will be payable to MRV upon the
death of an insured.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the SEC
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock and other equity securities of the Company. Directors,
executive officers and 10% or greater stockholders are required by the SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
The Company believes, based solely on a review of the copies of such
reports furnished to the Company, that each report required of the Company's
executive officers, directors and 10% or greater stockholders was duly and
timely filed during the year ended December 31, 2000, except for Form 3s of
William R Spivey and Guy Avidan and a Form 5 by William R. Spivey. The Form 3
filed late by Dr. Spivey
8
did not report any beneficial ownership of our shares and his Form 5 filed late
reported the grant of stock options exempt from Section 16(b) of the Exchange
Act pursuant to Rule 16b-3 under the Exchange Act. The Form 3 filed late by Mr.
Avidan reported as his beneficial ownership of our shares prior grants to him of
stock options exempt from Section 16(b) of the Exchange Act pursuant to Rule
16b-3 under the Exchange Act.
COMPENSATION OF OUTSIDE DIRECTORS
Outside directors, i.e., directors who are not employees of the
Company, receive cash compensation of $800 per month and $500 for each Board of
Directors' meeting attended, while serving as Directors. No stock options were
granted to the Company's outside directors during 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000 the Compensation Committee consisted of Drs. Igal Shidlovsky
and Guenter Jaensch. No member of the Compensation Committee was, during 2000 or
prior thereto, an officer of the Company or any of its subsidiaries. No
executive officer of the Company serves or served on the compensation committee
of another entity during 2000, which has or had an executive officer serve on
the Compensation Committee of the Company, and no executive officer of the
Company serves or served as a director of another entity who has or had an
executive officer serve on the Compensation Committee of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1998, the Company and Zaffire, Inc. (formerly New Access
Communications, Inc.) ("Zaffire") entered into a Securities Purchase Agreement,
under which the Company purchased for $950,000 shares of the capital stock of
Zaffire equal to approximately 19% of the capital stock of Zaffire then
outstanding and warrants to purchase additional capital stock of Zaffire, which,
if fully exercised for an aggregate of $2,050,000, the Company would own an
aggregate of approximately 60% of Zaffire's capital stock (when the shares
purchased upon exercise of the warrants were added to the Company's existing
stake in Zaffire). The warrants were exercisable in two installments (provided
the first installment was exercised) by July 1, 1999 and January 4, 2000,
respectively.
In May 2000, the Company, along with 36 other accredited investors, and
Zaffire entered into a Series C Preferred Stock Purchase Agreement under which
the Company purchased for $5,000,000 shares of Series C Preferred Stock of
Zaffire. At December 31, 2000, the Company had an approximate 22% ownership
interest in Zaffire. In July 2001, Zaffire reached an agreement with Centerpoint
Broadband Technologies, Inc., under which Centerpoint would acquire Zaffire in
an all-stock transaction and this acquisition was completed in October 2001. In
the acquisition, the Company, like Zaffire's other stockholders, exchanged its
equity interests in Zaffire for equity interests in Centerpoint, and now owns
less than 10% of Centerpoint's outstanding capital stock. Centerpoint develops
high capacity transport systems that maximize network performance for both
optical and wireless networks. These highly scalable, dynamically flexible
systems allow service providers advanced levels of bandwidth efficiency,
capacity and high service velocity.
From inception through its acquisition by Centerpoint, Dr. Near
Margalit, served as an executive officer and member of the board of Zaffire and
was a principal stockholder of it. Dr. Near Margalit is the son of Dr. Shlomo
Margalit, the Company's Chairman of the Board of Directors and Chief Technical
Officer.
9
REPORT OF THE COMPENSATION COMMITTEE
The Board of Directors formed the Compensation Committee (the
"Committee") in 1992 to set and administer the policies governing the Company's
compensation programs, including stock option plans. The Committee receives and
evaluates information regarding compensation practices for comparable businesses
in similar industries, and considers this information in determining base
salaries, bonuses and stock-based compensation. The Committee is authorized to
engage or employ such outside professional consultants or other services as in
its discretion may be required to fulfill its responsibilities. The Committee
also discusses and considers executive compensation matters and makes decisions
thereon.
The Company's compensation policies are structured to link the
compensation of the Chief Executive Officer, the Named Executive Officers and
other executives of the Company with corporate performance. In March 1992, Mr.
Lotan, Drs. Margalit and Rav-Noy entered into three-year employment agreements,
which, upon expiration automatically renew for one year terms unless either
party terminates them by giving the other three months' notice of non-renewal
prior to the expiration of the current term. Through the establishment of
compensation programs and employment agreements, the Company has attempted to
align the financial interests of its executives with the results of the
Company's performance, which is designed to put the Company in a competitive
position regarding executive compensation and to ensure corporate performance,
which will then enhance stockholder value.
The Company's executive compensation philosophy is to set base salaries
by referring to those of comparable businesses, and then to provide
performance-based variable compensation, such as bonuses, as determined by the
Compensation Committee according to factors such as the Company's earnings as
well as value received by stockholders. This philosophy allows total
compensation to fluctuate from year to year. As a result, the Named Executive
Officers' actual compensation levels in any particular year may be above or
below those of the Company's competitors, depending upon the evaluation of the
compensation factors described above by the Compensation Committee.
In line with the Company's overall compensation program and the annual
objectives set by the Committee, the Company's executive officers have a high
percentage of their total compensation at risk dependent upon the Company's
financial performance and other factors as considered by the Committee. The base
compensation for 1998, 1999 and 2000 for Mr. Lotan and Dr. Margalit was
determined in 1992, based upon employment agreements entered into by and between
the Company and such executives. See "Employment Agreements." The base
compensation with Mr. Glazer was determined through negotiations between the
Company and him at the time Mr. Glazer agreed to relocate to the Company's
facilities in Massachusetts and was based on Mr. Glazer's prior compensation
adjusted for the increase in the cost of living resulting from the relocation.
The base compensation with Dr. Spivey was determined through negotiations
between the Company and him in July 2000 at the time the Company was recruiting
Dr. Spivey to join Luminent as its President and Chief Executive Officer. The
base compensation with Mr. Avidan was determined through negotiations between
the Company and him at the time Mr. Avidan was promoted to and assumed the
responsibilities as Chief Executive Officer and President of Optical Access, the
Company's wholly owned subsidiary, and was based on his prior compensation
adjusted for the increase in his responsibilities.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of
10
various types of compensation. Some types of compensation and their
deductibility depend upon the timing of an executive's vesting or exercise of
previously granted rights. Further, interpretations of and changes in the tax
laws also affect the deductibility of compensation. To the extent reasonably
practicable and to the extent it is within the Committee's control, the
Committee intends to limit executive compensation in ordinary circumstances to
that deductible under Section 162(m) of the Internal revenue Code of 1986, as
amended. In doing so, the Committee may utilize alternatives (such deferring
compensation) for qualifying executive compensation for deductibility and may
rely on grand fathering provisions with respect to existing contractual
commitments.
The Committee believes that its overall executive compensation program
has been successful in providing competitive compensation appropriate to attract
and retain highly qualified executives and also to encourage increased
performance from the executive group, which should increase stockholder value.
Compensation Committee
of the Board of Directors
/s/ Igal Shidlovsky
Igal Shidlovsky
/s/ Guenter Jaensch
Guenter Jaensch
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the Company's financial statements and the overall reporting process,
including the Company's system of financial controls. In fulfilling its
oversight responsibilities during 2000, the Committee periodically:
- reviewed the unaudited and audited financial statements with
management and the Company's independent auditors, Arthur
Andersen LLP,
- discussed the accounting principles, significant assumptions,
estimates and matters of judgment used in preparing the financial
statements with management and Arthur Andersen,
- reviewed the Company's financial controls and financial reporting
process, and
- reviewed significant financial reporting issues and practices,
including changes in accounting principles and disclosure
practices.
The Committee also reviewed with Arthur Andersen, who are responsible
for expressing an opinion on the conformity of the audited financial statements
with accounting principles generally accepted in the United States, their
judgment as to the quality, and not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under accounting principles generally accepted in the United
States. The Committee periodically met with Arthur Andersen to discuss the
results of their examinations, their evaluations of the Company's internal
controls and the overall quality of the Company's financial reporting.
11
In addition, the Committee has discussed with Arthur Andersen their
independence from management and the Company including the matters in the
written disclosures required by the Independence Standards Board and discussed
with Arthur Andersen any matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees). The Committee
also considered the compatibility of Arthur Andersen's non-audit services
(principally tax advisory services) with the standards for auditors'
independence. The Committee discussed with Arthur Andersen the overall scope and
plans for their audit.
The Directors who serve on the Committee are all "independent" for
purposes of the rules of the Nasdaq Stock Market. The Board of Directors has
adopted the written charter attached to this proxy statement as Appendix B.
During 2000, the committee met four times, with all members of the committee
during 2000 in attendance at each meeting.
In reliance on the reviews and discussions referred to above and
representations by management that the financial statements were prepared in
accordance with generally accepted accounting principles, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the year ended December 31, 2000.
The Committee also recommended to the Board of Directors, subject to stockholder
approval, the selection of Arthur Andersen LLP as the Company's independent
auditors for the year ending December 31, 2001.
Audit Committee of the Board of Directors
/s/ Igal Shidlovsky
Igal Shidlovsky
/s/ Guenter Jaensch
Guenter Jaensch
12
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following chart shows the value of an investment of $100 on December
31, 1995 in cash of (i) the Company's Common Stock, (ii) The Nasdaq Stock Market
Index-US, (iii) an index based on companies in a group of companies in the
Company's industry (JP Morgan H& Q Technology Index).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MRV COMMUNICATIONS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE JP MORGAN H & Q TECHNOLOGY INDEX
[PERFORMANCE GRAPH]
Cumulative Total Return
------------------------------------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
------ ------ ------ ------ ------ ------
MRV COMMUNICATIONS, INC. 100.00 257.14 282.27 73.15 743.35 316.26
NASDAQ STOCK MARKET (U.S.) 100.00 123.03 150.68 212.47 394.84 237.36
JP MORGAN H & Q TECHNOLOGY 100.00 124.29 145.71 226.64 506.17 327.22
* $100 INVESTED ON 12/31/95 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDED DECEMBER 31.
13
PROPOSAL NO. 2
PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S 1997 INCENTIVE
AND NON-STATUTORY STOCK OPTION PLAN TO INCREASE BY 1,200,000
SHARES THE NUMBER OF SHARES OF COMMON STOCK THAT CAN BE
OPTIONED AND SOLD UNDER THAT PLAN
The 1997 Incentive and Nonstatutory Stock Option Plan (the "1997 Plan")
was originally approved by the Company's stockholders on December 12, 1997. As
originally adopted, the number of shares that could be optioned and sold under
the 1997 Plan was 1,000,000 shares of Common Stock. As amended in 1998, 1999 and
2000, the number of shares of Common Stock that could be optioned and sold under
the 1997 Plan was increased by 1,000,000, 1,200,000 and 500,000 shares,
respectively, to a total of 3,700,000 shares. The Board of Directors has
approved amendments to the Company's 1997 Plan to increase by 1,200,000 shares
the number of shares of Common Stock that may be optioned and sold under the
1997 Plan to a total of 4,900,000 shares. This increase in the 1997 Plan is
subject to the approval of stockholders.
The Board of Directors believes that the selective use of stock options
is an effective means of attracting, motivating and retaining employees and that
the availability of the number of shares covered by the Stock Option Plan, as
proposed for adoption, is essential to the success of the Company. The Board of
Directors recommends that the stockholders approve the adoption of the proposed
amendments to the 1997 Incentive and Nonstatutory Stock Option. THE AFFIRMATIVE
VOTES OF A MAJORITY OF THE SHARES OF THE COMPANY PRESENT AT THE MEETING IN
PERSON OR BY PROXY IS REQUIRED TO APPROVE THE AMENDMENTS TO THE 1997 PLAN.
The summary of the provisions of the 1997 Plan, which follows, is not
intended to be complete. A copy of the 1997 Plan, as proposed to be amended by
the Board, is annexed to this Proxy Statement as Appendix A.
SUMMARY OF THE PROVISIONS OF THE 1997 PLAN AS PROPOSED TO BE AMENDED
The Company's 1997 Plan provides for the granting of (i) incentive stock
options to key employees and (ii) nonstatutory stock options to key employees
and non-employee directors of the Company and any person who performs consulting
or advisory services for the Company and who is, by the Board of Directors or
the Stock Option Committee, determined to be eligible to participate. For
information concerning the federal income tax distinctions of incentive and
nonstatutory stock options, see "Federal Income Tax Consequences of Incentive
Stock Options and Nonstatutory Stock Options," below.
The maximum number of shares of the Company's Common Stock that may be
issued pursuant to the exercise of options granted under the Stock Option Plan,
as proposed to be amended, is 4,900,000 shares (subject to adjustment in the
event of stock dividends, splits, reverse splits, recapitalizations, mergers or
other similar changes in the Company's capital structure). All options must be
granted, if at all, not later than November 10, 2007. The aggregate fair market
value (determined as of the date the option is granted) of the shares of Common
Stock to which incentive stock options granted under the Stock Option Plan are
exercisable for the first time by any employee of the Company during any
calendar year may not exceed $100,000. This limitation shall not apply
14
with respect to nonstatutory stock options.
The Stock Option Plan is administered by the full Board of Directors,
which determines the terms of options granted, including the exercise price, the
number of shares subject to the option and the terms and conditions of exercise.
No option granted under the Stock Option Plan is transferable by the optionee
other than by will or the laws of descent and distribution and each option is
exercisable during the lifetime of the optionee only by such optionee. Incentive
stock options and nonstatutory stock options may be and typically are granted
for exercise for up to ten years from the date granted and typically vest in
equal installments over three years from the date of grant.
Options granted under the Stock Option Plan are evidenced by written
agreements specifying the number of shares covered thereby and the option price,
the exercise period and all other terms, restrictions and conditions of the
option. The exercise price of all stock options granted under the Stock Option
Plan must be at least equal to the fair market value of such shares on the date
of grant. With respect to any optionee who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any stock option must be not less than 110% of the fair market value on
the date of grant.
Options must be exercised only by written notice from the optionee (or
his estate or other legal representative) to the Company accompanied by payment
of the option price in full. The option price may be paid in cash, cash
equivalents (certified or cashier's check), or with shares of Common Stock of
the Company.
As of the Record Date, options to purchase an aggregate of 2,855,458
shares of Common Stock, at a weighted average exercise price of $6.49 per share,
were outstanding under the 1997 Plan. During 2000, options to purchase 397,500
were granted under the 1997 Plan. As of the Record Date, all employees
(including two directors who are employees) and four non-employee directors were
eligible to participate in the 1997 Plan and approximately 205 employees were so
participating. All options granted under the 1997 Plan since its inception
have been granted at exercise prices equal to the fair market value at the date
of grant determined by reference to the closing price of the Company's Common
Stock on The Nasdaq National Market. As of the Record Date, 844,542 options
granted under the 1997 Plan had been exercised and 0 were available for future
grant.
The following table sets forth information from the inception of the
1997 Plan through the Record Date concerning the net number of options under the
1997 Plan that has been received by (i) each of the Company's current executive
officers receiving options under the 1997 Plan, (ii) each nominee for election
as director, (iii) all current executive officers as a group, (iv) all current
directors who are not executive officers as a group, (v) the persons receiving 5
percent or more of the options granted, and (vi) all employees who are not
executive officers as a group:
15
NO. OF SHARES
NAME OF PERSON COVERED BY
OR GROUP POSITION WITH THE COMPANY OPTIONS
- --------------- -------------------------------------------------------------------- ---------
Noam Lotan President and Chief Executive Officer, Director and Director Nominee 98,000
Shlomo Margalit Chairman of the Board, Chief Technical Officer and Director Nominee --
Igal Shidlovsky Director and Director Nominee ...................................... 220,000
Guenter Jaensch Director and Director Nominee ...................................... 220,000
Daniel Tsui Director and Director Nominee ...................................... 90,000
Baruch Fischer Director and Director Nominee ...................................... 90,000
All current executive officers as a group ................................................... 98,000
All current directors who are not executive officers as a group ............................. 620,000
All employees who are not executive officers as a group ..................................... 2,982,000
FEDERAL INCOME TAX CONSEQUENCES OF INCENTIVE STOCK OPTIONS AND NONSTATUTORY
STOCK OPTIONS
THE FOLLOWING DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES IS BASED
UPON EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS AS OF THE DATE OF THIS
PROXY STATEMENT. BECAUSE THE CURRENTLY APPLICABLE RULES ARE COMPLEX AND THE TAX
LAWS MAY CHANGE AND BECAUSE INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH PARTICIPANT, EACH PARTICIPANT SHOULD CONSULT
HIS OR HER OWN TAX ADVISOR CONCERNING FEDERAL (AND ANY STATE AND LOCAL) INCOME
TAX CONSEQUENCES. THE FOLLOWING DISCUSSION DOES NOT PURPORT TO DESCRIBE STATE OR
LOCAL INCOME TAX CONSEQUENCES.
Options so designated under the Option Plan are intended to qualify as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code"). All options that are not designated
as ISOs are intended to be "nonstatutory stock options" ("NSOs").
Incentive Stock Options. The optionee will recognize no income upon the
grant of an ISO and incur no tax on its exercise (unless the optionee is subject
to the alternative minimum tax). If the optionee holds the stock acquired upon
exercise of an ISO (the "ISO Shares") for more than one year after the date the
option was exercised and for more than two years after the date the option was
granted, the optionee generally will realize long-term capital gain or loss
(rather than ordinary income or loss) upon disposition of the ISO Shares. This
gain or loss will be equal to the difference between the amount realized upon
such disposition and the amount paid for the shares.
16
If the optionee disposes of ISO shares prior to the expiration of either
required holding period (a "disqualifying disposition"), then gain realized upon
such disposition, up to the difference between the fair market value of the
shares on the date of exercise (or, if less, the amount realized on a sale of
such shares) and the option exercise price, will be treated as ordinary income.
Any additional gain will be long-term or short-term capital gain, depending upon
the amount of time the ISO Shares were held by the optionee.
Nonstatutory Stock Options. An optionee will not recognize any taxable
income at the time an NSO is granted. However, upon exercise of an NSO, the
optionee will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
(or, in the case of exercise for stock subject to a substantial risk of
forfeiture, at the time such forfeiture restriction lapses) and the amount paid
for that stock upon exercise of the NSO. In the case of stock subject to a
substantial risk of forfeiture, if the optionee makes an 83(b) election, the
included amount will be based on the difference between the fair market value on
the date of exercise and the option exercise price. The included amount will be
treated as ordinary income by the optionee and will be subject to income tax
withholding by the Company (either by payment in cash by the optionee or
withholding out of the optionee's salary). Upon sale of the shares by the
optionee, any appreciation or depreciation in the value of the shares will be
treated as capital gain or loss (either long or short term -- depending upon the
time the optionee holds the shares after exercising the NSO.)
Tax Treatment of the Company. The Company will be entitled to a
deduction in connection with the exercise of an NSO by a domestic employee or
director to the extent that the optionee recognizes ordinary income and the
Company withholds tax. The Company will be entitled to a deduction in connection
with the disposition of ISO Shares only to the extent that the optionee
recognizes ordinary income on a disqualifying disposition of the ISO Shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENTS TO THE COMPANY'S STOCK OPTION PLAN.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The persons named in the enclosed Proxy will vote to ratify the
selection of Arthur Andersen LLP as independent public accountants for the
fiscal year ending December 31, 2001 unless otherwise directed by stockholders.
A representative of Arthur Andersen LLP is expected to be present at the meeting
of stockholders, and will have the opportunity to make a statement and answer
questions from stockholders if he or she so desires.
AUDIT FEES
The aggregate fees billed by the Company to Arthur Andersen LLP during
fiscal year ended December 31, 2000 for the audit of the Company's annual
financial statements and for the review of the financial statements included in
the Company's quarterly reports on Form 10-Q totaled $1.0 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
17
In 2000, no fees were billed to the Company by Arthur Andersen LLP for
services for financial information systems design and implementation.
ALL OTHER FEES
The aggregate fees billed to the Company by Arthur Andersen LLP for
services rendered to the Company during 2001, other than the services described
above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees" totaled $2.2 million. These services included various
advisory services related principally to tax preparation, tax consultation and
business consultation.
The Audit Committee considered and determined that the provision of the
services other than the services described under "Audit Fees" is compatible with
maintaining the independence of the independent auditors.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast is required for
approval of this proposal. In the event ratification by the stockholders of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants is not obtained, the Board of Directors will reconsider such
appointment. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001.
STOCKHOLDERS PROPOSALS
Stockholders are hereby notified that if they wish a proposal to be
included in the Company's Proxy Statement and form of proxy relating to the 2001
annual meeting of stockholders, they must deliver a written copy of their
proposal no later than July 17, 2002. Proposals must comply with the proxy rules
relating to stockholder proposals, in particular Rule 14a-8 under the Securities
Exchange Act of 1934 (the "Exchange Act"), in order to be included in the
Company's proxy materials. Stockholders who wish to submit a proposal for
consideration at the Company's 2001 annual meeting of stockholders, but who do
not wish to submit the proposal for inclusion in the Company's proxy statement
pursuant to Rule 14a-8 under the Exchange Act, must deliver a written copy of
their proposal no later than September 15, 2002. In either case, proposals
should be delivered to MRV Communications, Inc., 20415 Nordhoff Street,
Chatsworth, California 91311, Attention: Secretary. To avoid controversy and
establish timely receipt by the Company, it is suggested that stockholders send
their proposals by certified mail return receipt requested.
18
MISCELLANEOUS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented for the meeting,
it is the intention of the persons named in the accompanying Proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
By Order of the Board of Directors
/s/ Shlomo Margalit
Shlomo Margalit
Secretary
November 14, 2001
MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND YOU ARE URGED TO COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGHT THEY HAVE SENT IN THEIR PROXIES
19
APPENDIX A
MRV COMMUNICATIONS, INC.
1997
INCENTIVE STOCK OPTION PLAN
AND
NONSTATUTORY STOCK OPTION PLAN
(AS ADOPTED ON NOVEMBER 11, 1997 AND
AMENDED AUGUST 3, 1998, OCTOBER 25, 1999, OCTOBER 31, 2000
AND NOVEMBER 1, 2001 (SUBJECT TO STOCKHOLDER APPROVAL)
(GIVES EFFECT TO TWO-FOR-ONE STOCK SPLIT EFFECTED MAY 11, 2000)
1. NAME, EFFECTIVE DATE AND PURPOSE.
(a) This Plan document is intended to implement and govern two
separate stock option plans of MRV COMMUNICATIONS, INC., a Delaware corporation
(the "Company"): the Incentive Stock Option Plan ("Plan A") and the Nonstatutory
Stock Option Plan ("Plan B"). Plan A provides for the granting of options that
are intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422A(b) of the Internal Revenue Code, as amended.
Plan B provides for the granting of options that are not intended to so qualify.
Unless specified otherwise, all the provisions of this Plan relate equally to
both Plan A and Plan B and are condensed for convenience into one Plan document.
(b) Plan A and Plan B are each established effective as of
November 11, 1997. The purpose of Plan A and Plan B (sometimes together referred
to as the "Plan" or this "Plan") is to promote the growth and general prosperity
of the Company and its Affiliated Companies. This Plan will permit the Company
to grant options ("Options") to purchase shares of its common stock ("Common
Stock"). The granting of Options will help the Company attract and retain the
best available persons for positions of substantial responsibility and will
provide certain key employees with an additional incentive to contribute to the
success of the Company and its Affiliated Companies. For purposes of this Plan,
the term "Affiliated Companies" shall mean any component member of a controlled
group of corporations, as defined under Internal Revenue Code Section 1563, in
which the Company is also a component member.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of
the Company (the "Board").
(b) The Board shall have sole authority, in its absolute
discretion, to determine which of the eligible persons of the Company and its
Affiliated Companies shall receive Options ("Optionees"), and, subject to the
express provisions and restrictions of this Plan, shall have sole authority, in
its absolute discretion, to determine the time when Options shall be granted,
the terms and conditions of an Option other than those terms and conditions
fixed under this Plan, the number of shares which may be issued upon exercise of
an Option and shall have authority to do everything necessary or appropriate to
administer the Plan. All decisions, determinations and interpretations of the
Board shall be final and binding on all Optionees.
(c) Definitions:
(i) Restricted Stockholder: An individual who, at the
time an Option is granted under either Plan A or Plan B, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
employer corporation or of its Parent Corporation or Subsidiary Corporation,
with stock ownership to be determined in light of the attribution rules set
forth in Section 425(d) of the Internal Revenue Code.
(ii) Parent Corporation: A corporation as defined in
Section 425(e) of the Internal Revenue Code.
(iii) Subsidiary Corporation: A corporation as defined
in Section 425(f) of the Internal Revenue Code.
A-1
(iv) Officer: The chief executive officer, president,
chief financial officer, chief accounting officer, any vice president in charge
of a principal business function (such as sales, administration, or finance) and
any other person who performs similar policy-making functions for the Company.
3. ELIGIBILITY.
(a) Plan A: The Board (or the Committee, if so authorized by the
Board) may, in its discretion, grant one or more Options under Plan A to any key
management employee of the Company or its Affiliated Companies, including any
employee who is a director of the Company or of any of its Affiliated Companies
presently existing or hereinafter organized or acquired. Such Options may be
granted to one or more such employees without being granted to other eligible
employees, as the Board may deem fit.
(b) Plan B: The Board (or the Committee, if so authorized by the
Board), may, in its discretion, grant one or more Options under Plan B to any
key management employee, any employee or non-employee director of the Company or
its Affiliated Companies, including any employee who is a Director of the
Company or of any of its Affiliated Companies presently existing or hereinafter
organized or acquired or any person who performs consulting or other services
for the Company or its Affiliated Companies and who is designated by the Board
as eligible to participate in Plan B. Such Options may be granted to one or more
such persons without being granted to other eligible persons, as the Board may
deem fit.
4. STOCK TO BE OPTIONED.
(a) The maximum aggregate number of shares which may be optioned
and sold under Plan A and Plan B is four million nine hundred thousand
(4,900,000) shares of authorized Common Stock of the Company. The foregoing
constitutes an absolute cumulative limitation on the total number of shares that
may be optioned under both Plan A and B. Therefore, at any particular date the
maximum aggregate number of shares which may be optioned under Plan A is equal
to four million nine hundred thousand (4,900,000) the number of shares
previously optioned under both Plan A and Plan B and the maximum aggregate
number of shares which may be optioned under Plan B is equal to four million
nine hundred thousand (4,900,000) minus the number of shares which have been
previously optioned under both Plan A and Plan B. All shares to be optioned and
sold under either Plan A or Plan B may be either authorized but unissued shares
or shares held in the treasury.
(b) Shares of Common Stock that: (i) are repurchased by the
Company after issuance hereunder pursuant to the exercise of an Option, or (ii)
are not purchased by the Optionee prior to the expiration or termination of the
applicable Option, shall again become available to be covered by Options to be
issued hereunder and shall not, as of the effective date of such repurchase or
expiration, be counted as covered by an outstanding Option for purposes of the
above-described maximum number of shares which may be optioned hereunder.
5. OPTION PRICE.
The Option Price for shares of Common Stock to be issued under
either Plan A or Plan B shall be 100% of the fair market value of such shares on
the date on which the Option covering such shares is granted by the Board (or
the Committee, if authorized by the Board), except that if on the date on which
such Option is granted the Optionee is a Restricted Stockholder, than such
Option Price for Options granted under Plan A shall be 110% of the fair market
value of the shares of Common Stock subject to the Option on the date such
Option is granted by the Board (or the Committee, if so authorized). The fair
market value of shares of Common Stock for all purposes of this Plan is to be
determined by the Board (or the Committee, if so authorized by the Board) in its
sole discretion, exercised in good faith.
6. TERM OF PLAN.
Plan A and Plan B shall become effective on November 11 1997;
both Plan A and Plan B shall continue in effect until November 10, 2007 unless
terminated earlier by action of the Board. No Option may be granted hereunder
after November 10, 2007.
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7. EXERCISE OF OPTION.
Subject to the actions, conditions and/or limitations set forth
in this Plan document and/or any applicable Stock Option Agreement entered into
hereunder, Options granted under this Plan shall be exercisable in accordance
with the following rules:
(a) Subject to the specific provisions of this Section 7,
Options shall become exercisable at such times and in such installments (which
may be cumulative) as the Board shall provide in the terms of each individual
Option; provided, however, each Option granted under the Plan shall become
exercisable in installments of not less than 20% of the number of shares covered
by such Option each year from the Option Grant Date; and provided, further, that
by a resolution adopted after an Option is granted the Board may, on such terms
and conditions as it may determine to be appropriate and subject to the specific
provisions of this Section 7, accelerate the time at which such Option or
installment thereof may be exercised. For purposes of this Plan, any accrued
installment of an Option granted hereunder shall be referred to as an "Accrued
Installment."
(b) Subject to the specific restrictions contained in this
Section 7, an Option may be exercised when Accrued Installments accrue, as
provided in the terms under which such Option was granted, for a period of up to
ten (10) years from the Option Grant Date with respect to Options granted under
Plan A and for a period of up to ten (10) years from the Option Grant Date with
respect to Options granted under Plan B. In no event shall any Option be
exercised on or after the expiration of said maximum applicable period,
regardless of the circumstances then existing (including but not limited to the
death or termination of employment of the Optionee).
(c) The Board (or the Committee if so authorized by the Board)
shall fix the expiration date of the Option (the "Option Expiration Date") at
the time the Option grant is authorized.
8. RULES APPLICABLE TO CERTAIN DISPOSITIONS.
(a) Notwithstanding the foregoing provisions of Section 7, in
the event the Company or the Stockholders of the Company enter into an agreement
to dispose of all or substantially all of the assets or capital stock of the
Company by means of a sale, merger, consolidation, reorganization, liquidation,
or otherwise, an Option shall become immediately exercisable with respect to the
full number of shares subject to that Option during the period commencing as of
the date of execution of such agreement and ending as of the earlier of:
(i) the Option Expiration Date; or
(ii) the date on which the disposition of assets or
capital stock contemplated by the agreement is consummated. The exercise of any
Option that was made exercisable solely by reason of this Subsection 8(a) shall
be conditioned upon the consummation of the disposition of assets or stock under
the above referenced agreement. Upon the consummation of any such disposition of
assets or stock, this Plan and any unexercised Options issued hereunder (or any
unexercised portion thereof) shall terminate and cease to be effective.
(b) Notwithstanding the foregoing, in the event that any such
agreement shall be terminated without consummating the disposition of said stock
or assets:
(i) any unexercised non-vested installments that had
become exercisable solely by reason of the provisions of Subsection 8(a) shall
again become non-vested and unexercisable as of said termination of such
agreement, and
(ii) the exercise of any option that had become
exercisable solely by reason of this Subsection 8(a) shall be deemed ineffective
and such installments shall again become non-vested and unexercisable as of said
termination of such agreement.
(c) Notwithstanding the provisions set forth in Subsection 8(a),
the Board (or the Committee, if so authorized by the Board) may, at its election
and subject to the approval of the corporation purchasing or acquiring the stock
or assets of the Company (the "surviving corporation"), arrange for the Optionee
to receive upon surrender of Optionee's Option a new option covering shares of
the surviving corporation in the same proportion, at an equivalent option price
and subject to the same terms and conditions as the old Option. For purposes of
the preceding sentence,
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the excess of the aggregate fair market value of the shares subject to such new
option immediately after consummation of such disposition of stock or assets
over the aggregate option price of such shares of the surviving corporation
shall not be no more than the excess of the aggregate fair market value of all
shares subject to the old Option immediately before consummation of such
disposition of stock or assets over the aggregate Option Price of such shares of
the Company, and the new option shall not give the Optionee additional benefits
which such Optionee did not have under the old Option or deprive the Optionee of
benefits which the Optionee had under the old Option. If such substitution of
options is effectuated, the Optionee's rights under the old Option shall
thereupon terminate.
9. MERGERS AND ACQUISITIONS.
(a) If the Company at any time should succeed to the business of
another corporation through a merger or consolidation, or through the
acquisition of stock or assets of such corporation, Options may be granted under
the Plan to option holders of such corporation or its subsidiaries, in
substitution for options or rights to purchase stock of such corporation held by
them at the time of succession. The Board (or the Committee, if so authorized by
the Board) shall have sole and absolute discretion to determine the extent to
which such substitute Options shall be granted (if at all), the person or
persons within the eligible group to receive such substitute Options (who need
not be all option holders of such corporation), the number of Options to be
received by each such person, the Option Price of such Option, and the terms and
conditions of such substitute Options; provided, however, that the terms and
conditions of the substitute Options shall comply with the provisions of Section
425 of the Code, such that the excess of the aggregate fair market value of the
shares subject to such substitute Option immediately after the substitution or
assumption over the aggregate option price of such shares is not more that the
excess of the aggregate fair market value of all shares subject to the
substitute Option immediately before such substitution or assumption over the
aggregate option price of such shares, and the substitute Option or the
assumption of the old option does not give the holder thereof additional
benefits which he or she did not have under such old option.
(b) Notwithstanding anything to the contrary herein, no Option
shall be granted, nor any action taken, permitted or omitted, which could cause
the Plan, or any Options granted hereunder as to which Rule 16b-3 under the
Securities Exchange Act of 1934 may apply, not to comply with such Rule.
10. TERMINATION OF EMPLOYMENT.
(a) In the event that the Optionee's employment, directorship or
consulting or other arrangement with the Company (or Affiliated Company) is
terminated for any reason other than death or disability, any unexercised
Accrued installments of the Option granted hereunder to such terminated Optionee
shall expire and become unexercisable as of the earlier of:
(i) the applicable Option Expiration Date; or
(ii) a date 30 days after such termination occurs,
provided however, that the Board (or the Committee if empowered to so act) may,
in the exercise of its discretion, extend said date up to and including a date
three months following such termination, with respect to Options granted under
Plan A, or up to and including a date two years following such termination with
respect to Options granted under Plan B.
(b) In the event that the Optionee's employment, directorship or
consulting or other arrangement with the Company is terminated due to the death
or disability of the Optionee, any unexercised Accrued Installments of the
Option granted hereunder to such Optionee shall expire and become unexercisable
as of the earlier of:
(i) the applicable Option Expiration Date; or
(ii) the first anniversary of the date of death of such
Optionee (if applicable); or
(iii) the first anniversary of the date of the
termination of employment, directorship or consulting or other arrangement by
reason of disability (if applicable). Any such Accrued Installments of a
deceased Optionee may be exercised prior to their expiration by (and only by)
the person or persons to whom the Optionee's Option right shall pass by will or
by the laws of descent and distribution, if applicable, subject, however, to all
of the terms and conditions of this Plan and the applicable Stock Option
Agreement governing the exercise of Options granted hereunder.
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(c) For purposes of this Section 10, an Optionee shall be deemed
employed by the Company (or affiliated Company) during any period of leave of
absence from active employment as authorized by the Company (or Affiliated
Company).
11. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when written notice of
such exercise has been given to the Company at its principal business office by
the person entitled to exercise the Option and full payment in cash or cash
equivalents (or with shares of Common Stock pursuant to Section 14) for the
shares with respect to which the Option is exercised has been received by the
Company.
(b) An Option may be exercised in accordance with this Section
11 as to all or any portion of the shares covered by any Accrued Installment of
the Option from time to time during the applicable Option period, but shall not
be exercisable with respect to fractions of a share.
(c) As soon as practicable after any proper exercise of an
Option in accordance with the provisions of this Plan, the Company shall,
without charging transfer or issue tax to the Optionee, deliver to the Optionee
at the main office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates representing the shares of Common
Stock as to which the Option has been exercised. The time of issuance and
delivery of the Common Stock may be postponed by the Company for such period as
may, be required for it with reasonable diligence to comply with any applicable
listing requirements of any national or regional securities exchange and any law
or regulation applicable to the issuance and delivery of such shares.
12. AUTHORIZATION TO ISSUE OPTIONS AND STOCKHOLDER APPROVAL.
Unless in the judgment of counsel to the Company such permit is
not necessary with respect to particular grants, Options granted under the Plan
shall be conditioned upon the Company obtaining any required permit from the
California Department of Corporations and/or other appropriate governmental
agencies, free of any conditions not acceptable to the Board, authorizing the
Company to grant such Options, provided, however, such condition shall lapse as
of the effective date of issuance of such permit(s) in a form to which the
Company does not object within sixty (60) days. The grant of Options under the
Plan also is conditioned on approval of the Plan by the vote or consent of the
holders of a majority of the outstanding shares of the Company's Common Stock
and no Option granted hereunder shall be effective or exercisable unless and
until the Plan has been so approved.
13. LIMIT ON VALUE OF OPTIONED SHARES.
The aggregate fair market value (determined as of the Option
Grant Date) of the shares of Common Stock to which Options granted under Plan A
are exercisable for the first time by any employee of the Company during any
calendar year under all incentive stock option plans of the Company and its
Affiliated Companies shall not exceed $100,000. The limitation imposed by this
Section 13 shall not apply with respect to Options granted under Plan B.
14. PAYMENT OF EXERCISE PRICE WITH COMPANY STOCK.
The Board (or the Committee, if so authorized) may provide that,
upon exercise of the Option, the Optionee may elect to pay for all or some of
the shares of Common Stock underlying the Option with shares of Common Stock of
the Company previously acquired and owned at the time of exercise by the
Optionee, subject to all restrictions and limitations of applicable laws, rules
and regulations, including Section 425(c)(3) of the Internal Revenue Code, and
provided that the Optionee will make representations and warranties satisfactory
to the Company regarding his or her title to the shares used to effect the
purchase, including without limitation representations and warranties that the
Optionee has good and marketable title to such shares free and clear of any and
all liens, encumbrances, charges, equities, claims, security interests, options
or restrictions and has full power to deliver such shares without obtaining the
consent or approval of any person or governmental authority other than those
which have already given consent or approval in a form satisfactory to the
Company. The equivalent dollar value of the shares used to effect the purchase
shall be the fair market value of the shares on the date of the purchase as
determined by the Board (or the Committee, if so authorized) in its sole
discretion, exercised in good faith.
The terms and conditions of Options granted under the Plan shall
be evidenced by a Stock Option
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Agreement (hereinafter referred to as the `Agreement') executed by the Company
and the person to whom the Option is granted. Each agreement shall contain the
following provisions:
(a) A provision fixing the number of shares which may be issued
upon exercise of the Option;
(b) A provision establishing the Option exercise price per
share;
(c) A provision establishing the times and the installments in
which Options may be exercised, provided, however, such times and installments
shall not be less than 20% of the number of shares covered by such Option each
year from the Option Grant Date;
(d) A provision incorporating therein this Plan by reference;
(e) A provision clarifying which Options are intended to be
Incentive Stock Options under Plan A and which are intended to be nonstatutory
stock options under Plan B;
(f) A provision fixing the maximum duration of the Option as not
more than ten (10) years from the Option Grant Date for Options granted under
either Plan A or Plan B;
(g) Such representations and warranties by the Optionee as may
be required by Section 25 of this Plan or as may be required by the Board (or
the Committee) in its discretion;
(h) Any other restriction (in addition to those established
under this Plan) as may be established by the Board (or the Committee) with
respect to the exercise of the Option, the transfer of the Option, and/or the
transfer of the shares purchased by exercise of the Option, provided that such
restrictions are not in conflict with this Plan; and
(i) Such other terms and conditions not inconsistent with this
Plan as may be established by the Board (or the Committee).
15. TAXES, FEES AND EXPENSES.
The Company shall pay all original issue and transfer taxes (but
not income taxes, if any) with respect to the grant of Options and/or the issue
and transfer of shares pursuant to the exercise of such Options, and all other
fees and expenses necessarily incurred by the Company in connection therewith,
and will from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of counsel for the Company, shall be
applicable thereto.
16. WITHHOLDING OF TAXES.
The grant of Options hereunder and the issuance of Common Stock
pursuant to the exercise of such Options is conditioned upon the Company's
reservation of the right to withhold, in accordance with any applicable law,
from any compensation payable to the Optionee any taxes required to be withheld
by federal, state or local law as a result of the grant or exercise of any such
Option.
17. AMENDMENT OR TERMINATION OF THE PLAN.
(a) The Board may amend this Plan from time to time in such
respects as the Board may deem advisable, provided, however, that no such
amendment shall operate to (i) affect adversely an Optionee's rights under this
Plan with respect to any Option granted hereunder prior to the adoption of such
amendment, except as may be necessary, in the judgment of counsel to the
Company, to comply with any applicable law, (ii) increase the maximum aggregate
number of shares which may be optioned and sold under the Plan (unless
Stockholders approve such increase), (iii) change the manner of determining the
Option exercise price, (iv) change the classes of persons eligible to receive
Options under the Plan, or (v) extend the maximum duration of the Option or the
Plan.
(b) The Board may at any time terminate this Plan. Any such
termination of the Plan shall not, without the written consent of the Optionee,
alter the terms of Options already granted and such Options shall remain in full
force and effect as if this Plan had not been terminated.
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18. OPTIONS NOT TRANSFERABLE.
Options granted under this Plan may not be sold, pledged,
hypothecated, assigned, encumbered, gifted or otherwise transferred or alienated
in any manner, either voluntarily or involuntarily by operation of law,
otherwise than by will or the laws of descent of distribution, and may be
exercised during the lifetime of an Optionee only by such Optionee.
19. NO RESTRICTIONS ON TRANSFER OF STOCK.
Common Stock issued pursuant to the exercise of an Option
granted under this Plan (hereinafter "Optioned Stock"), or any interest in such
Optioned Stock, may be sold, assigned, gifted, pledged, hypothecated, encumbered
or otherwise transferred or alienated in any manner by the holder(s) thereof,
subject, however, to any representations or warranties requested under Section
25 of this Plan and also subject to compliance with any applicable federal,
state or other local law, regulation or rule governing the sale or transfer of
stock or securities.
20. RESERVATION OF SHARES OF COMMON STOCK.
The Company, during the term of this Plan, will at all times
reserve and keep available such number of shares of its Common Stock as shall be
sufficient to satisfy the requirements of the Plan.
21. RESTRICTIONS ON ISSUANCE OF SHARES.
The Company, during the term of this Plan, will use its best
efforts to seek to obtain from the appropriate regulatory agencies any requisite
authorization in order to grant Options or issue and sell such number of shares
of its Common Stock as shall be sufficient to satisfy the requirements of the
Plan. The inability of the Company to obtain from any such regulatory agency
having jurisdiction thereof the authorization deemed by the Company's counsel to
be necessary to the lawful grant of Options or the issuance and sale of any
shares of its stock hereunder or the inability of the Company to confirm to its
satisfaction that any grant of Options or issuance and sale of any shares of
such stock will meet applicable legal requirements shall relieve the Company of
any liability in respect of the non-issuance or sale of such stock as to which
such authorization or confirmation have not been obtained.
22. NOTICES.
Any notice to be given to the Company pursuant to the provisions
of this Plan shall be addressed to the Company in care of its Secretary at its
principal office, and any notice to be given to a person to whom an Option is
granted hereunder shall be addressed to him or her at the address given beneath
his or her signature on his or her Stock Option Agreement, or at such other
address as such person or his or her transferee (upon the transfer of Optioned
Stock) may hereafter designate in writing to the Company. Any such notice shall
be deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each transferee holding Optioned Stock to
provide the Secretary of the Company, by letter mailed as provided hereinabove,
with written notice of his or her correct mailing address.
23. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, then an
appropriate and proportionate adjustment shall be made in the number or kind of
shares which may be issued upon exercise of Options granted under the Plan;
provided, however that no such adjustment need be made if, upon the advice of
counsel, the Board determines that such adjustment may result in the receipt of
federally taxable income to holders of Options granted hereunder or the holders
of Common Stock or other classes of the Company's securities.
24. REPRESENTATIONS AND WARRANTIES.
As a condition to the grant of any Option hereunder or the
exercise of any portion of an Option, the
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Company may require the person to be granted or exercising such Option to make
any representation and/or warranty to the Company as may, in the judgment of
counsel to the Company, be required under any applicable law or regulation,
including, but not limited to, a representation and warranty that the Option
and/or shares issuable or issued upon exercise of such Option are being acquired
only for investment, for such person's own account and without any present
intention to sell or distribute such Option or shares, as the case may be, if,
in the opinion of counsel for the Company, such representation is required under
the Securities Act of 1933, the California Corporate Securities Law of 1968 or
any other applicable law, regulation or rule of any governmental agency.
25. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
This Plan is purely voluntary on the part of the Company, and
while the Company hopes to continue it indefinitely, the continuance of the Plan
shall not be deemed to constitute a contract between the Company and any
employee, or to be consideration for or a condition of the employment of any
employee. Nothing contained in the Plan shall be deemed to give any employee the
right to be retained in the employ of the Company or its Affiliated Companies,
or to interfere with the right of the Company or an Affiliated Company to
discharge or retire any employee thereof at any time. No employee shall have any
right to or interest in Options authorized hereunder prior to the grant of such
an Option to such employee, and upon such grant he or she shall have only such
rights and interests as are expressly provided herein, subject, however, to all
applicable provisions of the Company's Certificate of Incorporation, as the same
may be amended from time to time.
26. INFORMATION TO OPTION HOLDERS.
During the period any options granted to employees of the
Company remain outstanding, such employee-option holders shall be entitled to
receive, on an annual or other periodic basis, financial and other information
regarding the Company. The Board (or the Committee, if so authorized) shall
exercise its discretion with regard to the nature and extent of the financial
information so provided, giving due regard to the size and circumstances of the
Company and, if the Company provides annual reports to its Stockholders, the
Company's practice in connection with such annual reports. Notwithstanding the
above, if the issuance of options under either Plan A or Plan B is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information, this Section 27 shall not apply to such employees and
plan.
27. LEGENDS ON STOCK CERTIFICATES.
Each certificate representing Common Stock issued under this
Plan shall bear whatever legends are required by federal or state law or by any
governmental agency. In particular, unless an appropriate registration statement
is filed pursuant to the federal Securities Act of 1933, as amended, with
respect to the shares of Common Stock issuable under this Plan, each certificate
representing such Common Stock shall be endorsed on its face with the following
legend or its equivalent:
"Neither the Option pursuant to which the shares represented by
this certificate are issued nor said shares have been registered
under the Securities Act of 1933, as amended (the "Act").
Transfer or sale of such securities or any interest therein is
unlawful except after registration, or pursuant to an exemption
from the registration requirements, as provided in the Act and
the regulations thereunder."
A copy of this Plan shall be delivered to the Secretary of the
Company and shall be shown by him or her to each eligible person making
reasonable inquiry concerning it. A copy of this Plan also shall be delivered to
each Optionee at the time his or her Options are granted.
28. INVALID PROVISION.
In the event that any provision of this Plan is found to be
invalid or otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions shall
be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
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29. APPLICABLE LAW.
This Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
30. SUCCESSORS AND ASSIGNS.
This Plan shall be binding on and inure to the benefit of the
Company and the employees to whom an Option is granted hereunder, and such
employees' heirs, executors, administrators, legatees, personal representatives,
assignees and transferees.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of
this plan by the Board on November 11, 1997 and amended on August 3, 1998,
October 25, 1999, October 31, 2000 and November 1, 2001, the Company has caused
this Plan to be duly executed by its duly authorized officer.
MRV COMMUNICATIONS, INC.
BY /s/ Noam Lotan
-------------------------------------
Noam Lotan
President and Chief Executive Officer
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APPENDIX B
MRV COMMUNICATIONS, INC.
AUDIT COMMITTEE CHARTER
A. The Audit Committee shall be composed of at least three directors who are
independent of the corporation and its management. Each member of the Audit
Committee shall be financially literate and at least one member will have
accounting or related financial management expertise. The Audit Committee shall
have all the authority of the board to:
1. Review the Company's internal audit plan, the results of each
internal audit, and review the appointment and replacement of the senior
internal auditing executive.
2. Review the independent auditor's compensation, the proposed terms of
its engagement and its independence. The Audit Committee shall obtain a formal
written statement from the independent auditor setting forth all relationships
between the auditor and the corporation that, in the auditor's judgment, may
reasonably be thought to bear on independence, discuss with the auditor any
impact on the auditor's objectivity and independence, and recommend to the board
of directors any action necessary to satisfy the auditor's independence. The
Audit Committee will direct the independent auditor to review before filing with
the SEC the corporation's interim financial statements included in Quarterly
Reports on Form 10-Q, using professional standards and procedures for conducting
such reviews.
3. Review the results of each external audit, including any
qualifications of the auditor's opinion, any related management letter,
management's responses to recommendations made by the independent auditor in
connection with the audit, reports submitted to the Audit Committee by the
internal auditing department that are material to the corporation as a whole,
and management's responses to those reports.
4. Consider, in consultation with the independent auditor and the senior
internal auditing executive, the adequacy of the corporation's internal
financial controls. Among other things, these controls must be designed to
provide reasonable assurance that the corporation's publicly reported financial
statements are presented fairly in conformity with generally accepted accounting
principles.
5. Consider major changes and other major questions of choice regarding
the appropriate auditing and accounting principles and practices to be followed
when preparing the corporation's financial statements.
6. Review the procedures employed by the corporation in preparing
published financial statements and related management commentaries, including:
review of financial results with management and the independent auditor prior to
the corporation's issuance of its quarterly press release; and review of
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K prior to the
corporation's filing of such reports with the SEC.
7. Meet periodically with management to review the corporation's major
financial risk exposures.
8. Meet periodically with management to provide guidance concerning
major capital expenditures, infrastructure investments, financial strategies and
special projects.
B. The Audit Committee shall also:
1. Recommend to the board of directors, which firm to engage as the
corporation's independent auditor and whether to terminate that relationship.
2. Serve as a channel of communication between the independent auditor
and the board of directors and between the senior internal auditing executive
and the board of directors.
3. Report to the board of directors on the Audit Committee's review of
the corporation's financial statements and any significant disputes between
management and the independent auditor that arose in connection with the
preparation of those financial statements.
4. Make recommendations to the board of directors concerning oversight
of the corporation's policies and procedures regarding compliance with the law
and with significant corporate policies including the corporation's code of
conduct.
5. Provide a report in the corporation's proxy statement in accordance
with applicable SEC regulations.
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MRV COMMUNICATIONS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 2001
THIS PROXY IS SOLICITED ON BEHALF OF BOARD OF DIRECTORS.
The undersigned, having received notice of the Annual Meeting of Stockholders
and the Proxy Statement of the Board of Directors furnished therewith, hereby
appoints Noam Lotan and Shlomo Margalit, and each of them, attorneys of the
undersigned (with full power of substituting him) for and in the name(s) of the
undersigned to attend the Annual Meeting of Stockholders of MRV Communications,
Inc. (the "Company") to be held Friday, December 14, 2001, at 8:30 a.m. at
Holiday Inn -- Woodland Hills, Mulholland Room, 21101 Ventura Blvd., Woodland
Hills, CA 91364 and any adjournment or adjournments thereof, and there to vote
and act in regard to all matters which may properly come before said meeting
(except those matters as to which authority is hereinafter withheld) upon and in
respect to all shares of the Common Stock of the Company upon or in respect of
which the undersigned would be entitled to vote or act, and with all power the
undersigned would possess, if personally present, and especially (but without
limiting the general authorization and power hereby given) to vote and act as
follows.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all
below) nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below.)
Noam Lotan Shlomo Margalit
Igal Shidlovsky Guenter Jaensch
Daniel Tsui Baruch Fischer
2. To approve amendments to the Company's 1997 Incentive and Nonstatutory Stock
Option Plan to increase by 1,200,000 shares the number of shares of Common Stock
that can be optioned and sold under such Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(continued and to be signed on the reverse side)
(continued from other side)
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
3. To ratify the appointment of Arthur Andersen LLP as independent accountants
for the year ending December 31, 2001.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the Proxies are each authorized to vote upon such other
business as may properly come before the meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy, when properly executed, will
be voted in the manner directed herein
by the undersigned shareholder. If no
direction is made, this Proxy will be
voted FOR Proposals 1, 2 and 3.
The undersigned hereby confer(s) upon
said attorney Proxy discretionary
authority to vote upon any other matters
of proposals not known at the time of
solicitation of this Proxy, which may
properly come before the meeting.
Attendance of the undersigned at said
meeting or at any adjournment or
adjournments thereof will not be deemed
to revoke this Proxy unless the
undersigned shall affirmatively indicate
thereat that it is his intention to vote
said shares in person. If a fiduciary
capacity is attributed to the
undersigned in imprint below, this Proxy
is signed by the undersigned in that
capacity.
Signature(s)
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Date
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IMPORTANT: In signing this Proxy, please
write names exactly as appearing on
imprint. For stock held jointly, each
joint owner should personally sign. For
stock held by Company, please affix
corporate seal.