ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
We are asking our stockholders to approve, in a non-binding vote, the compensation awarded to our named executive officers for 2020. The Compensation
Committee of our Board of Directors oversees our executive compensation program, which is designed to motivate our executives to increase profitability and stockholder returns, to tie pay to
performance effectively, and to compete effectively for and retain managerial talent.
We
are asking our stockholders to indicate their support for our named executive officer compensation. We believe that our executive compensation program was designed appropriately and is working to
ensure that management's interests are aligned with our stockholders' interests to support long-term value creation.
This
"say on pay" vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the compensation methodology described in
this proxy statement. While this vote is advisory and not binding, the Board and the Compensation Committee will consider the outcome of the vote, along with other relevant factors, when considering
future executive compensation decisions.
Additional information regarding the non-binding "say on pay" vote may be found on page 20.
4 KVH Industries, Inc. 2021 Proxy Statement
Table of Contents
PROXY SUMMARY
2020 EXECUTIVE COMPENSATION HIGHLIGHTS
The 2020 compensation program for our named executive officers was comprised of three primary elements base salary, cash-based incentive
compensation, and annual equity grants. We believe the compensation program for our named executive officers included key features that aligned the interests of our executives with KVH's business
strategies and goals and stockholders' interests.
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|
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The mix of target compensation for our named executive officers for 2020 reflects these objectives, as shown in the chart. The percentages shown represent percentages of average total target compensation, not average total actual compensation, and
as a result do not match the percentages calculable from actual compensation reflected in the Summary Compensation Table on page 32. For 2020, fixed pay represents the sum of salary, holiday bonus and perquisites; variable ("at-risk") pay represents
equity awards and non-equity incentive plan compensation. For more information on the compensation of our named executive officers for 2020, see "Proposal 2 Advisory Vote on Named Executive Officer Compensation".
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Average NEO Compensation Mix
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What We Do
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What We Don't Do
|
ü
Offer competitive compensation that attracts and retains executive talent
ü
Align the interests of our named executive officers with those of our stockholders and reward the creation of long-term value for KVH stockholders through equity grants
ü
Emphasize variable performance-based compensation over fixed compensation
ü
Align payout of annual incentives to drivers of stockholder value, such as revenue and
adjusted EBITDA
ü
Balance the importance of achieving long-term strategic priorities and
critical short-term goals linked to long-term objectives
ü
Align individual performance goals
with our business strategy
ü
Cap incentive payments
ü
Benchmark compensation against that of a broad group of companies
ü
Cash and equity awards under our 2016 Equity and Incentive Plan have clawback provisions
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✗
No long-term employment agreements or change of control agreements
✗
No guaranteed severance programs
✗
No tax gross-ups
✗
No guaranteed salary increases
✗
No repricing of stock options or stock appreciation rights
✗
No discounted stock options or stock appreciation rights
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KVH Industries, Inc. 2021 Proxy Statement 5
Table of Contents
PROXY SUMMARY
For
2020, we had a non-equity incentive compensation plan intended to reward our named executive officers for achievement of corporate, business unit and individual performance goals for that year. In
May 2020, as a result of the potential adverse impact that the COVID-19 pandemic was anticipated to have on our business, senior management implemented, with the approval of the Compensation
Committee, a cash conservation and cost reduction plan (the "Cost-Savings Plan") that included, among other cost-saving measures, temporary reductions in executive base salaries and bonus
opportunities for the named executive officers. The reductions took effect on May 11, 2020 and continued until September 25, 2020 (the "Cost-Savings Period"), the point at which we
determined that the Cost-Savings Plan was no longer warranted. During the Cost-Savings Period, executive base salaries were reduced by 15% for the CEO and 10% for our other named executive officers.
In addition to the temporary reductions in base salary, the portion of each named executive officer's target incentive compensation attributable to individual performance during 2020 (representing 25%
of the executive's total target incentive compensation) under our 2020 incentive compensation plan was reduced by 30% during the Cost-Savings Period. In March 2021, after reviewing our overall
financial performance for 2020, the Compensation Committee determined not to make any awards with respect to the portion of each named executive officer's incentive compensation target attributable to
corporate performance or business unit performance but did award incentive compensation for achievement of individual performance goals. Taking into account the awards for individual performance, the
aggregate incentive compensation actually received by our CEO for 2020 represented 20% of his base salary, rather than the targeted 90% of his base salary, and the aggregate incentive compensation
actually received by our other named executive officers ranged from approximately 9% to 13% of their respective base salaries, rather than the targeted range of 40% to 60% of their respective base
salaries.
Actual Annual Incentive Payment Versus Target
(Average Percentage of Base Salary)
6 KVH Industries, Inc. 2021 Proxy Statement
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING
|
Why am I receiving these proxy materials?
|
Our Board is soliciting your vote at the annual meeting, which is to be held on June 17, 2021 at 9:00 a.m., Eastern Time. The annual meeting will be held at the offices
of KVH, located at 50 Enterprise Center, Middletown, Rhode Island. As part of our COVID-19 precautions, the annual meeting may be held solely by means of remote communication rather than in person. We
are monitoring the public health, travel, business, and social gathering concerns of our stockholders and employees in light of the ongoing COVID-19 pandemic, as well as any related restrictions and
protocols by federal, state, and local governments. If we determine to hold the annual meeting by means of remote communication, we will announce the decision to do so in advance and provide details
on how to participate in a press release issued by KVH and posting on our website at www.kvh.com. We will also file definitive additional solicitation materials with the Securities and Exchange
Commission.
These
materials also include a BLUE voting instruction form or BLUE proxy card for the annual meeting. BLUE voting instruction forms and BLUE proxy cards are being solicited on behalf of the Board. The proxy materials include detailed
information about
the matters that will be discussed and voted on at the annual meeting and provide updated information about the Company that you should consider in order to make an informed decision when voting your
shares.
What is the purpose of the annual meeting and what are the Board's voting recommendations?
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At
the annual meeting, we will submit the following proposals to our stockholders:
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Proposal 1
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To elect two nominees as Class I directors for a three-year term expiring in 2024.
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Our Board's Voting Recommendation
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FOR ALL NOMINEES RECOMMENDED BY OUR BOARD
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Proposal 2
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To approve, on an advisory (non-binding) basis, the compensation of our named executive officers.
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Our Board's Voting Recommendation
|
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FOR
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Proposal 3
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To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2021.
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Our Board's Voting Recommendation
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FOR
|
Our
Board does not intend to present to the annual meeting any business other than the proposals described in this proxy statement. Our Board is not aware of any other business to be presented for
action at the annual meeting. However, if any other matters properly come before the annual meeting, the individuals named as proxies, or their duly constituted substitutes acting at the annual
meeting, will be authorized to vote or otherwise act thereon in accordance with their judgment on such matters to the extent authorized by Rule 14a-4(c).
How many votes do I have?
|
You
will have one vote for every share of common stock you owned as of the close of business on the record date.
Our Board of Directors has fixed the close of business on April 21, 2021, as the record date for the annual meeting. Only stockholders of record as of the close of business on
that date are entitled to receive notice of, and to vote at, the annual meeting. At the close of business on the record date, there were 18,754,341 shares of our common stock outstanding. Each share
of common stock outstanding on the record date will be entitled to cast one vote.
How many votes can be cast by all stockholders?
|
18,754,341 votes, consisting of one vote for each share of common stock outstanding on the record date. There is no cumulative voting, and the holders of the common stock vote
together as a single class.
Why have I received different color proxy cards?
|
VIEX
has notified the Company that VIEX intends to propose two director nominees for election at the annual meeting in opposition to the director nominees recommended by our Board.
The Company has provided you with the enclosed BLUE voting instruction form or BLUE proxy card. VIEX may send you a white
voting instruction form or white proxy card.
KVH Industries, Inc. 2021 Proxy Statement 7
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING
The
Board recommends using the enclosed BLUE voting instruction form or BLUE proxy card to vote FOR
ALL of the Board's nominees for
director. Our Board also recommends that you DISREGARD the white voting instruction form and white proxy card.
What are the methods of voting?
|
The
shares represented by your properly signed BLUE proxy card will be voted in accordance with
your directions. If you do not specify a choice with respect to a proposal for which our Board of Directors has made a recommendation, the shares covered by your signed BLUE proxy card
will be voted as recommended by our Board in this proxy statement. We encourage you to vote on all
matters to be considered. Our Board urges you NOT to sign or return any white proxy card that may be sent to you by VIEX. If, on the record date, your shares were not held in your name, but rather
were held in an account at a broker (commonly referred to as being held in "street name"), you are the beneficial but not record owner of those shares. A beneficial owner should follow the
instructions of his, her or its broker in order to vote any shares.
By
signing and returning the BLUE proxy card in the enclosed postage pre-paid envelope, you are enabling each
individual named on the BLUE proxy card to vote your shares at the annual meeting in the manner you indicate. We
encourage you to sign and return BLUE proxy card, even if you plan to attend the annual meeting. In this way, your
shares will be voted even if you are unable to attend the meeting. If you received more than one BLUE proxy card, it
is an indication that your shares are held in multiple accounts. Please sign and return all BLUE proxy cards to
ensure that all of your shares are voted. Our Board urges you NOT to sign or return any white proxy card that may be sent to you by VIEX.
To
vote by telephone, please follow the instructions included on your BLUE proxy card. If you vote by telephone, you
do not need to complete and mail your BLUE proxy card.
To
vote on the Internet, please follow the instructions included on your BLUE proxy card. If you vote on the
Internet, you do not need to complete and mail your BLUE proxy card.
Will my shares be voted if I do nothing?
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If
your shares of our common stock are registered in your name, you must complete, sign, date, and return a proxy card or submit a proxy by telephone or by Internet in order for your
shares to be voted.
If
your shares of common stock are held in "street name," that is, held for your account by a broker, and you do not instruct your broker how to vote your shares, then your broker would not have
discretionary authority to vote your shares on Proposal 1 or Proposal 2. To the extent your broker has forwarded VIEX'S proxy materials to you, your broker would also not have
discretionary authority to vote your Shares on Proposal 3. If your shares of our common stock are held in "street name," your broker has enclosed a BLUE voting instruction form with this
proxy statement. We encourage you to authorize your broker to vote your
shares by following the instructions provided on the BLUE voting instruction form.
We strongly urge you to vote FOR ALL of our Board's nominees listed in Proposal 1, and FOR Proposals 2 and 3 by using the enclosed BLUE proxy card to vote TODAY
by Internet, by telephone or by signing, dating and returning the enclosed BLUE proxy card in the envelope
provided. If your shares are held in "street name," you should follow the instructions on the BLUE voting instruction form provided by your broker and provide
specific instructions to your broker to vote as
described above.
What constitutes a quorum?
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A
quorum must be present in order for business to be conducted at the annual meeting. Our By-laws provide that a quorum consists of a majority of the shares of common stock issued
and outstanding and entitled to vote at the annual meeting present in person or represented by proxy. Shares of common stock represented by a properly completed and returned proxy card (including
shares properly voted by telephone or on the Internet) will be treated as present at the annual meeting for purposes of determining the existence of a quorum at the annual meeting. Abstentions,
withhold votes, and broker non-votes (if any) are counted as present or represented for purposes of determining the existence of a quorum at the annual meeting.
What is a broker non-vote?
|
A
broker non-vote occurs when a broker holding shares for a beneficial owner has discretionary authority to vote on "routine" matters brought before a stockholder meeting, but the
beneficial owner of the shares fails to provide the broker with specific instructions on how to vote on any "non-routine" matters brought to a vote at the stockholder meeting. Under the rules of the
New York Stock Exchange governing brokers' discretionary authority, if you receive proxy materials from or on behalf of both the Company and VIEX, then brokers holding shares in your account will not
be permitted to exercise discretionary authority regarding
8 KVH Industries, Inc. 2021 Proxy Statement
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING
any of the proposals to be voted on at the annual meeting, whether "routine" or not. As a result, there would be no broker non-votes by such brokers. In such case, if you do not submit any voting
instructions to your broker, then your shares will not be counted in determining the outcome of any of the proposals at the annual meeting, nor will your shares be counted for purposes of determining
whether a quorum exists. However, if you receive proxy materials only from the Company, then brokers will be entitled to vote your shares on "routine" matters without instructions from you. The only
proposal that would be considered "routine" in such event is Proposal 3 (ratification of Grant Thornton LLP as our independent registered public accounting firm for 2021). A broker will not be
entitled to vote your shares on any "non-routine" matters, absent instructions from you. Consequently, if you receive proxy materials only from the Company and you do not submit any voting
instructions to your broker then your broker may exercise its discretion to vote your shares on the proposal to ratify the selection of Grant Thornton LLP as the Company's independent registered
public accounting firm for 2021 (Proposal 3). If your shares are voted on Proposal 3 as directed by your broker, your shares will constitute broker non-votes on Proposal 1 (election of directors) and
Proposal 2 (advisory approval of the compensation of our named executive officers). In such case, broker non-votes will count for purposes of determining whether a quorum exists, but will not be
counted as votes cast with respect to Proposal 1 (election of directors) or Proposal 2 (advisory approval of the compensation of our named executive officers). We urge you to instruct your broker
about how you wish your shares to be voted.
Who can attend the annual meeting?
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Attendance at the annual meeting will be limited to stockholders as of April 21, 2021, their authorized representatives and guests of the Company. Access to the annual meeting
may be granted to others at the discretion of the Company. In accordance with the Company's security procedures, all persons attending the annual meeting must present picture identification along with
proof of ownership. If you are a stockholder of record, please be prepared to provide the top portion of your BLUE
proxy card. If you hold your shares in "street name," you will need to provide proof of ownership, such as a recent account statement or letter from your broker. Cameras and recording devices will not
be permitted at the annual meeting.
Even
if you plan to attend the annual meeting, we strongly urge you to vote in advance by completing, signing, and dating the enclosed BLUE voting instruction form or BLUE proxy card and returning it in the postage-paid envelope provided or by voting via the Internet or by
telephone.
Is a list of registered stockholders available?
|
The
Company's list of stockholders as of the close of business on the record date will be available for inspection by the Company's stockholders for at least ten days prior to the
annual meeting. If you want to inspect the stockholder list, please call the office of the Secretary at (401) 845-8102 to schedule an appointment during ordinary business hours. The stockholder
list will also be open to the examination of any stockholder during the annual meeting at the place of the meeting.
What vote is required for approval? What is the effect of abstentions, withhold votes, and broker non-votes on each of the proposals?
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Proposal
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Vote Required for Approval
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Effect of Abstentions, Withhold Votes, and Broker Non-Votes
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Proposal 1 To elect two nominees as Class I directors for a three-year term expiring in 2024
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Directors will be elected by a plurality of the votes cast, meaning the two nominees receiving the most votes for their election will be elected to our Board.
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Abstentions, withhold votes and broker non-votes (if any) will have no effect on the outcome of the election of directors.
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Proposal 2 To approve, on an advisory (non-binding) basis, the compensation of our named executive officers
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The affirmative vote of a majority of the votes cast.
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Abstentions and broker non-votes (if any) will have no effect on the outcome of the proposal.
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Proposal 3 To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2021
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The affirmative vote of a majority of the votes cast.
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Abstentions and broker non-votes (if any) will have no effect on the outcome of the proposal.
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KVH Industries, Inc. 2021 Proxy Statement 9
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING
Because
we have received notice from VIEX that it intends to nominate persons for election to the Board, the provisions of our By-laws relating to majority voting for directors will not be applicable
at the annual meeting and, pursuant to our By-laws, plurality voting will instead apply. In the event that VIEX were to withdraw its nominees at least ten days before the date on which we file with
the SEC a definitive version of this proxy statement, the majority voting provisions of our By-laws would apply.
Under
the plurality voting provisions of our By-laws, the two nominees for director who receive the most votes of all votes cast for directors will be elected.
It will NOT help elect our Board's nominees if you sign and return a white proxy card sent by VIEX, even if you withhold on VIEX's director nominees using VIEX's proxy card.
Doing so will revoke any previous vote you may have cast on KVH's BLUE proxy card. We encourage you to vote FOR ALL of the Board's nominees on our BLUE voting instruction form or BLUE proxy card and to DISREGARD, and not return, any white voting instruction form or white
proxy card that you receive from VIEX.
Pursuant
to our By-laws, written notice by stockholders of qualifying nominations for election to the Board at the annual meeting must have been received by February 4, 2021. We did not receive
any such nominations, other than the nominations from VIEX, and no other nominations for election to the Board may be made by stockholders at the annual meeting.
The
Board has no reason to believe that Cielo Hernandez and Cathy-Ann Martine-Dolecki will not serve if elected. However, if, for some reason, any of the Board's director nominees are unable to serve,
or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board and, unless you indicate otherwise on the BLUE proxy
card, your shares will be voted in favor of the Board's remaining nominees. If any substitute nominee is
designated prior to the annual meeting, we will file an amended proxy statement that, as applicable, identifies the substitute nominee, discloses that such nominee has consented to being named in the
revised proxy statement and to serve if elected, and includes certain biographical and other information about such nominee required by the rules of the SEC.
Who will count the votes?
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We
have retained Corporate Election Services to assist as the tabulator of the BLUE proxy cards
and have retained First Coast Results, Inc. to serve as independent inspector to count and certify votes at the annual meeting.
Who is soliciting my vote?
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We
are soliciting proxies on behalf of our Board of Directors. In addition, we will reimburse brokers, dealers, banks and other nominees for the out-of-pocket expenses and other
reasonable clerical expenses they incur in obtaining instructions from beneficial owners of our common stock. In addition to our solicitation by mail, our directors, officers and employees may make
special solicitations of proxies personally or by telephone, facsimile, courier or email. We will pay all expenses incurred in connection with this solicitation. We have also retained D.F.
King & Co., Inc. to solicit proxies.
Can I change my vote? How can a proxy be revoked?
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Yes.
If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the meeting. Only your latest dated proxy will count. In order to revoke your
proxy, you must either:
-
ü
-
sign, date, and return another proxy card with a later date;
-
ü
-
provide timely written notice of the revocation of your proxy to our secretary;
-
ü
-
voting at a later time via the Internet or by telephone as instructed above; or
-
ü
-
attend the meeting and vote at the meeting.
If
you hold your shares in street name, you should follow the instructions of your broker to change your vote or revoke your voting instructions. Your attendance at the annual meeting will not revoke
your proxy unless you specifically request it or you vote at the annual meeting. If you hold shares in street name, your attendance at the annual meeting will not revoke your voting instructions. In
the absence of a revocation, shares represented by proxies will be voted at the annual meeting.
If
you have previously submitted a white proxy card sent to you by VIEX, you may change your vote by completing, signing, dating, and returning the enclosed BLUE proxy card in the
postage-paid envelope provided, or by voting via the Internet or by telephone by following
the instructions on the BLUE proxy card. Please note that submitting a white proxy card sent to you by VIEX will
revoke votes you have previously made via the Company's BLUE proxy card. Voting to withhold with respect to any of
VIEX's nominees on a white voting instruction form or white proxy card sent to you by VIEX is not the same as voting for our Board's nominees because a vote to withhold with respect to any of VIEX's
nominees on its white voting instruction form or white proxy card will revoke any BLUE voting instruction form or BLUE
proxy card you may have previously submitted.
10 KVH Industries, Inc. 2021 Proxy Statement
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS AND VOTING
Whether
or not you plan to attend the annual meeting, we urge you to complete, sign, date, and return the enclosed BLUE voting instruction form or BLUE proxy card in the postage-paid envelope provided, or vote via the Internet or by telephone as instructed on the BLUE voting instruction form or
BLUE proxy card.
Who pays for KVH's proxy solicitation?
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We will bear the cost of the solicitation of proxies on behalf of the Board of Directors. For additional information regarding the cost of this solicitation, please see the section
titled "Additional InformationCosts of Solicitation" on page 48 of this proxy statement.
How can I find the voting results of the Annual Meeting?
|
Voting
results will be tallied by the inspector of election. We will report the preliminary results in a Current Report on Form 8-K, which we must file with the SEC within
four business days following the annual meeting. We will similarly report the final results as soon as practicable following certification by the inspector of election.
Do I have any dissenters' or appraisal rights with respect to any of the matters to be voted on at the annual meeting?
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No.
Delaware law does not provide stockholders any dissenters' or appraisal rights with respect to the matters to be voted on at the annual meeting.
Who should I call if I have questions about the annual meeting?
|
If
you have any questions or require assistance voting on the BLUE voting instruction form or BLUE proxy card, or if you need
additional copies of the proxy materials, please contact our proxy solicitation
firm, D.F. King & Co., Inc. at:
48
Wall St FL 23, New York, NY, 10005-2922
Banks and brokers may call collect at (212) 269-5550
All others may call toll-free at (800) 488-8095
Email: KVH@dfking.com
KVH Industries, Inc. 2021 Proxy Statement 11
Table of Contents
BACKGROUND OF THE SOLICITATION
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On
February 5, 2020, Vintage Capital Management, LLC ("Vintage Capital") filed a Schedule 13D with the SEC disclosing beneficial ownership of approximately 9.39% of the
outstanding shares of the Company's common stock.
The
next day, on February 6, 2020, Vintage Capital submitted to the Company a notice of Vintage Capital's intent to nominate Robert Tavares and another individual to the Board at the Company's
2020 annual meeting of stockholders (the "2020 Annual Meeting").
On
April 8, 2020, Vintage Capital and the Company entered into a cooperation agreement (the "Vintage Capital Cooperation Agreement"). Pursuant to the Vintage Capital Cooperation Agreement, the
Company, among other things, agreed to appoint Mr. Tavares to serve as a director of the Company.
At
the 2020 Annual Meeting, which was held on June 10, 2020, director Bruce J. Ryan did not stand for re-election and concluded his service as a member of the Board. In addition, Danelle M.
Barrett was elected to serve as a director of the Company.
On
November 5, 2020, Eric Singer, the managing member of VIEX Capital Advisors, LLC, contacted Brent Bruun, the Company's Chief Operating Officer and then-interim Chief Financial
Officer, requesting a call with Mr. Bruun and Martin Kits van Heyningen, the Company's Chief Executive Officer and Chairman of the Board.
On
November 6, 2020, Mr. Bruun held a telephone conversation with Mr. Singer. During the conversation, Mr. Bruun discussed with Mr. Singer the Company's business,
strategy, operations, and financial performance, and Mr. Bruun addressed certain questions and views conveyed by Mr. Singer. In addition, Mr. Singer represented to
Mr. Bruun that VIEX owned more shares of the Company's common stock than Mr. Kits van Heyningen, who held approximately 4.9% of the Company's issued and outstanding shares at the time,
as was publicly disclosed. However, according to the preliminary proxy statement filed by VIEX on April 9, 2021 (the "VIEX Preliminary Proxy Statement"), VIEX owned only approximately 2.2% of
the Company's issued and outstanding shares as of November 6, 2020, the date Mr. Singer made the representation about his ownership level to Mr. Kits van Heyningen.
On
November 16, 2020, Mr. Bruun held a telephone call with Peter T. Shaper to discuss the Company's business and operations.
On
November 24, 2020, Messrs. Bruun and Kits van Heyningen held a telephone call with Mr. Shaper to discuss the Company's business and operations.
On
January 14, 2021, VIEX Opportunities Fund, LP Series One ("VIEX Series One"), delivered a notice to the Company indicating its intent to nominate
Mr. Singer and Mr. Mutch for election to the Board (the "Nomination Notice"). The Nomination Notice indicated that, as of January 14, 2021, VIEX Series One, together with other
entities affiliated with VIEX and Mr. Singer, owned approximately 3.9% of the Company's outstanding shares of common stock.
On
January 18, 2021, Mr. Kits van Heyningen held a telephone conversation with Mr. Singer to discuss the Nomination Notice and the Company's business, operations, and strategy.
During the discussion, Mr. Singer shared his views on the Company and its performance. Mr. Singer indicated, among other things, that he did not have a specific plan regarding how the
Company could improve its performance.
On
January 25, 2021, the Board met to discuss the annual meeting, the composition of the Board, the Nomination Notice, and other matters related to VIEX. At the conclusion of the meeting, the
Board formed an ad hoc committee comprised of Ms. Barrett and Messrs. Dodez and Kits van Heyningen to manage the response to and discussions with VIEX on behalf of the Board (the "Ad Hoc
Committee").
On
February 1, 2021, the Ad Hoc Committee met to discuss matters related to VIEX, the composition of the Board, the Nomination Notice, and the Ad Hoc Committee's interest in meeting with the
VIEX Nominees to evaluate their candidacies to serve as members of the Board. During the meeting, the Ad Hoc Committee discussed the qualifications and backgrounds of the VIEX Nominees, including the
Delaware Court of Chancery's finding in In re PLX Technology Inc. Stockholders Litigation that Mr. Singer breached his fiduciary duties to
PLX Technology Inc. ("PLX"), and induced other PLX directors to breach their duties by withholding material information from his fellow directors (the "PLX Case"). At the conclusion of the
meeting, the Ad Hoc Committee authorized Mr. Dodez, in his capacity as a member of the Nominating and Corporate Governance Committee of the Board (the "Nominating and Corporate
Governance Committee"), to schedule interviews with both of the VIEX Nominees, including, in the case of Mr. Singer, to learn more about the PLX Case.
12 KVH Industries, Inc. 2021 Proxy Statement
Table of Contents
BACKGROUND OF THE SOLICITATION
On
February 4, 2021, the time period for stockholders to submit director nominations to be considered at the annual meeting pursuant to the By-laws expired.
On
February 5, 2021, Mr. Dodez e-mailed both of the VIEX Nominees to schedule interviews regarding their candidacies to serve as members of the Board.
Between
February 5, 2021 and February 8, 2021, Mr. Dodez exchanged e-mails with Mr. Singer regarding the VIEX Nominees' willingness to meet with Mr. Dodez and
Charles Trimble in their capacities as members of the Nominating
and Corporate Governance Committee and the nationally recognized independent executive search firm assisting the Company with its review of potential director candidates (the "Independent Search
Firm"). In his communications to Mr. Dodez during this time period, Mr. Singer indicated that he was willing to meet only with all of the independent directors of the Company and only if
such meeting was in the context of a potential settlement involving the Company's appointment of the VIEX Nominees as members of the Board.
On
February 8, 2021, the Ad Hoc Committee met to discuss the qualifications and backgrounds of the VIEX Nominees, the composition of the Board, and the status of the Board's ongoing refreshment
process. During the meeting, the Ad Hoc Committee reviewed background research that had been conducted on the VIEX Nominees and determined that additional information about the backgrounds and
experiences of the VIEX Nominees would be necessary to determine their eligibility to serve as directors of the Company.
Later
on February 8, 2021, the Company engaged the Independent Search Firm to assist the Company with its review of potential director candidates.
On
February 9, 2021, the Board met to discuss, among other things, updates regarding the Company's recent interactions with VIEX.
On
February 10, 2021, Mr. Dodez again invited Mr. Singer to interview with members of the Nominating and Corporate Governance Committee in order to permit the Nominating and
Corporate Governance Committee to further evaluate Mr. Singer's candidacy for a position as a director of the Company. Mr. Dodez noted that the Nominating and Corporate Governance
Committee, on which he and Mr. Trimble served, was responsible for reviewing director candidates and that such committee's charter required the Nominating and Corporate Governance Committee to
evaluate candidates nominated by stockholders of the Company.
On
February 12, 2021, the Nominating and Corporate Governance Committee met to discuss the composition of the Board, the Company's potential nominees for election to the Board at the annual
meeting, and the status of the Board's ongoing refreshment process, including the search being conducted by the Independent Search Firm.
On
February 22, 2021, Mr. Singer responded to Mr. Dodez's e-mail of February 10, 2021. Mr. Singer stated that he was willing to meet only with all of the Company's
independent directors, subject to the execution of a nondisclosure agreement.
On
February 24, 2021, Mr. Dodez e-mailed the VIEX Nominees separately to invite them to meet with members of the Nominating and Corporate Governance Committee. In his e-mail to
Mr. Singer, Mr. Dodez noted that the Company did not believe that a nondisclosure agreement would be necessary to Mr. Singer's potential interview, indicating that the Company
would neither share non-public information with Mr. Singer nor ask Mr. Singer for non-public information and that Mr. Singer would be under no obligation to answer any question
with which he was uncomfortable. Mr. Singer did not respond to Mr. Dodez's e-mail. Mr. Mutch agreed to meet with Messrs. Dodez and Trimble on March 1, 2021.
On
February 26, 2021, Mr. Bruun held a telephone call with Mr. Shaper to discuss the Company's business and operations.
On
March 1, 2021, Messrs. Dodez and Trimble, in their capacities as members of the Nominating and Corporate Governance Committee, met with Mr. Mutch by videoconference to discuss
his candidacy for a position as a member of the Board.
On
March 2, 2021, the Ad Hoc Committee met to discuss the meeting that Messrs. Dodez and Trimble held with Mr. Mutch. Mr. Trimble participated in the meeting at the
invitation of the Ad Hoc Committee. The Ad Hoc Committee further considered the qualifications, skills, and experience of Mr. Mutch in light of his meeting with Messrs. Dodez and
Trimble, and determined that the Independent Search Firm should conduct a further review of Mr. Mutch's candidacy. The Ad Hoc Committee also considered potential options to obtain certain
information necessary to assess the candidacies of the VIEX Nominees, including options available to the Company pursuant to the By-laws to request information from the VIEX
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Nominees
to address concerns identified by the Ad Hoc Committee in connection with its background research on the VIEX Nominees.
On
March 3, 2021, the Nominating and Corporate Governance Committee met with the Independent Search Firm to discuss the status of the Company's ongoing Board refreshment process, including
whether candidates with qualifications, backgrounds, and experiences that fit the profile developed by the Nominating and Corporate Governance Committee in light of the current composition of the
Board had been identified. The Nominating and Corporate Governance Committee also discussed the meeting that Messrs. Dodez and Trimble held with Mr. Mutch, including the qualifications,
skills, and experience of Mr. Mutch. At the conclusion of the meeting, the Nominating and Corporate Governance Committee directed the Independent Search Firm to conduct a further review of
Mr. Mutch's candidacy to serve as a member of the Board.
On
March 4, 2021, VIEX issued a press release announcing the Nomination Notice. The press release indicated, among other things, that VIEX owned 3.4% of the Company's outstanding shares of
common stock, a decrease in VIEX's ownership position relative to what was disclosed to the Company in the Nomination Notice.
On
March 5, 2021, the Company, pursuant to the By-laws, sent VIEX a letter (the "Supplemental Request Letter") requesting that the VIEX Nominees provide additional information regarding the
eligibility of the VIEX Nominees to serve as members of the Board (the "Eligibility Information"). The Supplemental Request Letter sought additional context that the Board should consider when
evaluating the Delaware Court of Chancery's opinion and findings in the PLX Case with respect to Mr. Singer's actions as a director at PLX, and certain other information intended to address
questions and concerns identified by the Ad Hoc Committee through its background research on the VIEX Nominees, including information with respect to (i) any denials of D&O insurance coverage,
or increased premiums in connection with such coverage, following any legal proceeding, including the PLX Case, (ii) any instances where another board of directors asked any of the VIEX
Nominees to resign from the board or refused to re-nominate such individual, (iii) communications or understandings between the VIEX Nominees and Vintage Capital related to the Company or the
Board, (iv) whether the VIEX Nominees had received consents from the other public company boards on which they served to serve as a director of the Company, and (v) how each VIEX Nominee
intended to manage the responsibilities of serving on multiple public company boards, in addition to the responsibilities of their principal occupations, including in light of the fact that, at the
time of the Supplemental Request Letter, Mr. Singer was seeking election at Velodyne Lidar, Inc., both VIEX Nominees were seeking election at Leaf Group Ltd., and both of the VIEX
Nominees were already serving on two public company boards. The Supplemental Request Letter requested that the VIEX Nominees provide the Eligibility Information to the Company within five business
days.
On
March 8, 2021, the Ad Hoc Committee held a meeting to discuss the status of the Company's ongoing Board refreshment process, Mr. Mutch's background and research that had been
conducted with respect to his service on public company boards, and the Supplemental Request Letter.
On
March 12, 2021, a representative of Olshan Frome Wolosky LLP ("Olshan"), counsel to VIEX, sent representatives of Kirkland & Ellis LLP ("Kirkland"), counsel to the
Company, a letter indicating that the VIEX Nominees would respond to any reasonable requests required to be disclosed under the By-laws no later than March 26, 2021 (the "March 12 VIEX
Letter"). The March 12 VIEX Letter did not include any of the Eligibility Information.
On
March 15, 2021, the Ad Hoc Committee held a meeting to discuss the March 12 VIEX Letter and the status of the Company's ongoing Board refreshment process. With respect to the
March 12 VIEX Letter, the Ad Hoc Committee directed Kirkland to send Olshan a letter underscoring that failure to respond to the Supplemental Request Letter on
a timely, complete, and accurate basis may constitute failure to comply with the advance notice requirements for director nominations as set forth in the By-laws (the "March 16 Company
Letter").
Also
on March 15, 2021, Mr. Bruun held a telephone call with Mr. Shaper to discuss the Company's business and operations.
On
March 16, 2021, Kirkland sent Olshan the March 16 Company Letter.
On
March 22, 2021, the Ad Hoc Committee held a meeting to discuss the status of the Company's ongoing Board refreshment process, the Company's potential slate of director nominees for election
to the Board at the annual meeting, the proposed timing for announcing the Company's new director nominees and filing the Company's preliminary proxy statement with the SEC, and the fact that the
Company had not yet received a response to the March 16 Company Letter.
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On
March 25, 2021, the Nominating and Corporate Governance Committee held a meeting to discuss the composition of the Board, the Company's potential nominees for election to the Board at the
annual meeting, and the status of the Board's ongoing refreshment process, including the search being conducted by the Independent Search Firm.
On
March 26, 2021, Mr. Singer sent a letter to the independent members of the Board (the "March 26 VIEX Letter"). Mr. Singer stated that VIEX believed that the Company's
requests for the Eligibility Information in the Supplemental Request Letter were unreasonable. In addition, Mr. Singer stated that VIEX did not believe that the By-laws required the VIEX
Nominees to respond to the questions set forth in the Supplemental Request Letter.
On
April 5, 2021, the Ad Hoc Committee met to discuss the Company's potential slate of director nominees for election to the Board at the annual meeting and the March 26 VIEX Letter. The
Ad Hoc Committee also discussed the possibility of reaching a settlement with VIEX.
On
April 9, 2021, Mr. Shaper called Mr. Bruun to discuss the Company's business and operations, including Mr. Shaper's interest in facilitating the Company's entry into the
energy sector. Neither during this conversation, nor in any prior conversation with representatives of the Company, did Mr. Shaper indicate that he intended to work with VIEX or be a
participant in VIEX's solicitation of proxies for use at the annual meeting.
Also
on April 9, 2021, VIEX filed the VIEX Preliminary Proxy Statement.
On
April 12, 2021, VIEX filed a Schedule 13D with the SEC, reporting beneficial ownership of approximately 5.3% of the common stock (the "VIEX Schedule 13D").
Later
on April 12, 2021, the Ad Hoc Committee held a meeting to discuss the VIEX Preliminary Proxy Statement, the VIEX Schedule 13D, and the status of the Company's ongoing Board
refreshment process, including the background and experiences of certain potential nominees for election to the Board at the annual meeting. In addition, the Ad Hoc Committee discussed the terms on
which the Company might be willing to settle with VIEX.
On
April 19, 2021, VIEX filed an amendment to the VIEX Schedule 13D, disclosing that Bradley L. Radoff and Mr. Shaper had joined VIEX's "group," within the meaning of
Section 13(d)(3) of the Exchange Act, for the purpose of seeking the election of the VIEX Nominees to the Board at the annual meeting.
Also
on April 19, 2021, the Ad Hoc Committee met to discuss the amendment to the VIEX Schedule 13D filed earlier the same day. The Ad Hoc Committee also discussed the backgrounds and
experiences of certain potential nominees for election to the Board at the annual meeting.
On
April 29, 2021, the Nominating and Corporate Governance Committee concluded its nearly three-month search process during which it worked with the Independent Search Firm to identify,
evaluate and interview director candidates that met criteria developed by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee determined that it would
recommend Ms. Dolecki and Ms. Hernandez for nomination to the Board. Ms. Dolecki and Ms. Hernandez were both identified by the Independent Search Firm.
On
the same day, the Board held a meeting to discuss the candidacies of Ms. Dolecki and Ms. Hernandez, the annual meeting, and matters related to VIEX. At the meeting, the Board
determined that it was in the best interests of the Company and its stockholders for Ms. Dolecki and Ms. Hernandez to serve as the Company's nominees for election to the Board at the
annual meeting. In addition, the Board directed representatives of Kirkland to reengage with Olshan regarding the Supplemental Request Letter and to discuss a possible settlement between the Company
and VIEX. The Board also concluded that, because the VIEX Nominees failed to provide the Eligiblity Information as required by the By-laws, the VIEX Nominees would not be eligible to stand for
election at the annual meeting and, pursuant to the By-laws, the person presiding at the annual meeting should disregard any attempted nomination of the VIEX Nominees.
On
April 30, 2021, Mr. Shaper contacted Mr. Kits van Heyningen requesting a meeting. Later that day Mr. Kits van Heyningen held a telephone call with Mr. Shaper to
discuss his involvement with the VIEX "group" and his interest in working with the Company. Among other things, Mr. Shaper indicated that he had only spoken with Mr. Singer once and that
he had never spoken with Mr. Mutch.
Later
on April 30, 2021, a representative of Kirkland called a representative of Olshan to discuss the VIEX Nominees' failure to provide the Eligibility Information, the Board's determination
that the VIEX Nominees were not eligible to stand for election to the Board at the annual meeting, and a potential settlement between the Company and VIEX. As part of its settlement proposal, the
Company offered, among other things, to engage Mr. Shaper as a consultant, and invited VIEX to cooperate in the announcement of the Company's nominations of Ms. Dolecki and
Ms. Hernandez. As part of its offer, the Company
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also
proposed that Mr. Honey stand for re-election at the annual meeting. The Company did not propose that VIEX be subject to any standstill, voting or other restrictions.
Later
on April 30, 2021, in response, VIEX proposed, among other things, that Mr. Shaper join the Board and be part of a newly formed committee of the Board focused on improving
financial performance, subject to a one-year standstill agreement. In its proposal, VIEX also insisted that Mr. Honey not stand for re-election.
On
May 1, 2021, the Company responded to VIEX's counterproposal. The Company became aware of news reports citing statements from a federal bankruptcy judge in connection with bankruptcy
proceedings concerning Speedcast International indicating, among other things, that evidence had been presented that Mr. Shaper had breached his fiduciary duties by refusing to give equal
treatment to offers for the debtors that were not for Mr. Shaper's personal benefit. In light of this information, the Company indicated to VIEX that it would not be comfortable adding
Mr. Shaper to the Board in a fiduciary capacity. However, the Company indicated in its counterproposal that it would remain willing to engage Mr. Shaper as a consultant, that
Mr. Honey would stand for re-election to the Board at the annual meeting but would agree not to serve another term, and that this framework would not require any standstill obligations from
VIEX. The Company further indicated that, in light of the fiduciary duty issues that came to light with respect to both Mr. Singer and Mr. Shaper, the Company was not open to adding
Mr. Mutch or other individuals suggested by VIEX. VIEX represented to the Company that it was not aware of the foregoing issues with respect to Mr. Shaper.
Later
on May 1, 2021, VIEX responded by reverting to its original proposal, except that instead of Mr. Shaper joining the Board, VIEX proposed that Mr. Radoff join the Board. VIEX
acknowledged that Mr. Radoff did not have industry experience but indicated that his qualifications included his ownership of shares of the Company's common stock, membership in the VIEX group,
and public company board experience.
On
May 2, 2021, the Board met to discuss the settlement discussions that occurred on April 30, 2021 and May 1, 2021 and potential approaches to reach a negotiated resolution that
would benefit the Company's stockholders. At the Board's direction, the Company made a further proposal to VIEX, pursuant to which, among other things, Mr. Honey would not be re-nominated at
the annual meeting, Mr. Shaper would be retained as a consultant to the Company's CEO and to the Board and would be invited to present to the Board on strategic and financial issues, and VIEX
would be invited to join in the Company's press release announcing the nominations of Ms. Dolecki and Ms. Hernandez. As part of this proposal, the Company rejected the proposal to add
Mr. Radoff to the Board.
Later
on May 2, 2021, VIEX rejected the Company's proposal and again reiterated its proposal that Mr. Radoff join the Board. The Company again rejected VIEX's proposal to add Mr. Radoff to the
Board. In a final attempt to reach resolution with VIEX, the Company proposed that, in addition to its prior proposal, the Board would agree to form a committee focused on improving financial
performance that would itself retain Mr. Shaper as a consultant. Later in the evening of May 2, 2021, VIEX rejected the Company's final offer.
Throughout
the settlement discussions between April 30, 2021 and May 2, 2021, the representative of Kirkland indicated to the representative of Olshan that VIEX's continued failure to
provide the Eligibility Information did not comply with the By-laws and that the Board had accordingly resolved, pursuant to the By-laws, to disregard any attempted nomination of the VIEX Nominees at
the annual meeting.
On
May 3, 2021, the Company filed a preliminary proxy statement.
On
May 4, 2021, Olshan sent Kirkland a letter disputing the Board's invalidation of the Nomination Notice for VIEX's failure to comply with the By-laws (the "May 4 VIEX Letter"). The May 4 VIEX Letter
also indicated, among other things, that VIEX intended to continue its solicitation in favor of the election of the VIEX Nominees.
On
May 6, 2021, VIEX filed an amendment to the VIEX Schedule 13D that, among other things, disclosed that on May 4, 2021, Potomac Capital, Potomac Capital GP, Potomac Capital Management and Paul Solit
(collectively, "Potomac") joined the VIEX group. On the same date, VIEX filed a revised preliminary proxy statement disclosing, among other things, that Potomac purchased and sold shares of the
Company's common stock between September 2019 and June 2020, and then began accumulating shares of the Company's common stock between September 2020 and April 2021. As VIEX disclosed in the Nomination
Notice, Mr. Singer served as co-managing member of Potomac from March 2012 until September 2014 and served as an advisor to Potomac from May 2009 until September 2014. In the PLX Case, the Delaware
Court of Chancery found that an affiliate of Potomac aided and abetted breaches of fiduciary duties by the directors of PLX.
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On
May 6, 2021, Kirkland sent Olshan a letter highlighting the correspondence between the Company, VIEX, and their respective advisors over the course of the preceding two months regarding the
Eligibility Information and the consequences of VIEX's failure to comply with the By-laws (the "May 6 Letter"). The May 6 Letter also outlined the legal basis for the Board's invalidation of the
Nomination Notice for VIEX's failure to comply with the By-laws. Kirkland further explained that the Company continued to believe that the Board and the Company's stockholders were entitled to the
Eligibility Information, that the Board takes its fiduciary duties seriously, and that the Board was determined to protect the stockholder franchise and, as a result, the Company had decided to reduce
the number of information requests in the Supplemental Request Letter to three questions (collectively, the "Revised Eligibility Information"). The Company requested that the VIEX Nominees provide the
Revised Eligibility Information by May 10, 2021, noting that, if the VIEX Nominees complied with such information requests, the Board would declare the VIEX Nominees eligible to stand for election at
the annual meeting.
On
May 10, 2021, Kirkland received a letter from Olshan containing responses to the Revised Eligibility Requests (the "May 10 Letter").
On May 11, 2021, the Board held a meeting to discuss matters related to the annual meeting and VIEX. Among other things, the Board discussed the May 10 Letter. The Board determined that, having
received the responses to the Revised Eligibility Requests, it would declare the VIEX nominees eligible to stand for election at the annual meeting and instruct the person presiding at the annual
meeting to permit the VIEX Nominees to stand for election.
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