<PAGE> 1
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:
<PAGE> 2
MRV COMMUNICATIONS, INC.
8943 FULLBRIGHT AVE.
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, October 30, 1998,
at 8:30 a.m. at the Woodland Hills Hilton & Towers, 6360 Canoga Avenue, Woodland
Hills, CA 91367.
At the Annual Meeting, you will be asked to: elect five directors of the
Company; approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
40,000,000 to 80,000,000; approve amendments to the Company's 1997 Incentive and
Nonstatutory Stock Option Plan to increase by 500,000 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 which 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.
<PAGE> 3
MRV COMMUNICATIONS, INC.
8943 FULLBRIGHT AVE.
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, October 30, 1998 at 8:30 a.m. at the Woodland Hills Hilton & Towers,
6360 Canoga Avenue, Woodland Hills, CA 91367 and thereafter as it may be
adjourned from time to time:
At the Meeting the Stockholders will be asked:
1. To elect five members of the Board of Directors to serve for the ensuing
years, all of whom currently serve as Directors;
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock
from 40,000,000 to 80,000,000 shares;
3. To approve amendments to the Company's 1997 Incentive and Nonstatutory
Stock Option Plan to increase by 500,000 shares the number of shares of
Common Stock that can be optioned and sold under such Stock Option Plan.
4. To ratify the selection of Arthur Andersen LLP as independent auditors
for the Company for the fiscal year ending December 31, 1998;
5. 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 September 11,
1998 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
October 1, 1998
<PAGE> 4
MRV COMMUNICATIONS, INC.
8943 FULLBRIGHT AVE.
CHATSWORTH, CALIFORNIA 91311
------------------------
PROXY STATEMENT
------------------------
OCTOBER 1, 1998
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 Woodland Hills Hilton & Towers,
6360 Canoga Avenue, Woodland Hills, California 91367, at 8:30 a.m. on Friday,
October 30, 1998, and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on September 11, 1998 (the
"Record Date") will be entitled to vote at the meeting or any adjournment
thereof. On the Record Date, 26,656,121 shares of Common Stock, $.0034 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 17.8% 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 or facsimile.
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.
An annual report covering the Company's fiscal year ended December 31, 1997
and containing audited consolidated financial statements is being mailed
herewith to all stockholders entitled to vote. This annual report does not form
any part of the proxy solicitation material. This Proxy Statement and the
accompanying Proxy were first mailed to Stockholders on or about October 1,
1998.
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 executive officers as a group, (iii) each person known by
the Company to own beneficially 5% or more of the Common Stock, (iv) the
Company's Chief Executive Officer and the Company's three other most highly
compensated executive
<PAGE> 5
officers receiving more than $100,000 in total compensation for the year ended
December 31, 1997, and (v) all Directors and Executive Officers as a group.
Except as otherwise indicated, the stockholders listed in the table below have
sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS
---------------------- --------------------- ----------
<S> <C> <C>
Shlomo Margalit................................ 1,843,930 6.9%
Zeev Rav-Noy................................... 1,713,915 6.4
Noam Lotan(3).................................. 883,437 3.3
Ken Ahmad(4)................................... 313,464 1.2
Dr. Igal Shidlovsky............................ -- --
Dr. Guenter Jaensch............................ -- --
The TCW Group, Inc.(5)......................... 1,413,900 5.3
865 South Figueroa Street
Los Angeles, CA 90017
Robert Day(5)(6)............................... 1,413,900 5.3
200 Park Avenue
New York, New York 10166
All Directors and Executive Officers as a Group
(8 persons)(7)............................... 4,934,646 18.3
</TABLE>
- ---------------
(1) Except as noted below, the address of each of the persons listed is c/o MRV
Communications, Inc., 8943 Fullbright Avenue, Chatsworth, CA 91311.
(2) Pursuant to the rules of the Commission, shares of 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 such 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) Includes 20,000 shares issuable pursuant to stock options exercisable within
60 days from the Record Date.
(4) Includes 150,000 shares issuable pursuant to stock options exercisable
within 60 days from the Record Date.
(5) Based on the latest Schedule 13G filed by the listed person with the
Securities and Exchange Commission.
(6) Consists of the same shares as those reflected for The TCW Group, Inc.
(7) Includes 349,900 shares issuable pursuant to stock options exercisable
within 60 days from the Record Date.
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. 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 fixing the number of Directors for the ensuing year at five (5) and
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.
2
<PAGE> 6
The following table sets forth the year each nominee was elected 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."
<TABLE>
<CAPTION>
YEAR
BECAME A
NAME DIRECTOR POSITION
---- -------- --------
<S> <C> <C>
Noam Lotan(1)(3)................ 1990 President, Chief Executive Officer, and
Director
Shlomo Margalit(1).............. 1988 Chairman of the Board of Directors, Chief
Technical Officer and Secretary
Zeev Rav-Noy(1)................. 1988 Chief Operating Officer, Treasurer and
Director
Dr. Igal Shidlovsky(2)(3)....... 1997 Director
Dr. Guenter Jaensch(2)(3)....... 1997 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
Each director is elected for a period of one year and serves until his
successor is duly elected by the stockholders. Officers are elected by and serve
at the discretion of the Board of Directors.
NOAM LOTAN, 46, has been the President, Chief Executive Officer, and a
Director of the Company since May 1990. From March 1987 to January 1990, Mr.
Lotan was Managing Director of Fibronics (UK) Ltd., the United Kingdom
subsidiary of Fibronics International Inc. ("Fibronics"), a manufacturer of
fiber optic communication networks. From January 1985 to March 1987, Mr. Lotan
was 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, Fontainebleu, France).
DR. SHLOMO MARGALIT, 56, a co-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 was a founder and Vice
President of Research and Development for LaserCom, Inc. ("LaserCom"), a
manufacturer of semiconductor lasers. From 1982 to 1985, Dr. Margalit was a
Senior Research Associate at the California Institute of Technology ("Caltech"),
and from 1976 to 1982, a Visiting Associate at Caltech. From 1972 to 1978, Dr.
Margalit was 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 Doctor of Science degree (Ph.D.) in
Electrical Engineering from the Technion.
DR. ZEEV RAV-NOY, 50, a co-founder of the Company, has been its Chief
Operating Officer and a Director of the Company since its inception and was its
President until May 1990. From May 1985 to July 1988, Dr. Rav-Noy was a founder
and Vice President of Operations of LaserCom and, from 1982 to 1985, was a
research fellow at Caltech. From 1979 to 1982, Dr. Rav-Noy served as a
consultant to a number of companies, including Tadiran Electronic Industries,
Inc., an Israeli telecommunication, military, and consumer electronics
conglomerate, and the Yeda Research and Development Co. Ltd., a technology
exploitation and application company affiliated with the Weizman Institute in
Israel. Dr. Rav-Noy holds a Bachelor of Science degree and a Masters degree in
physics from Tel Aviv University, and a Ph.D. in applied Physics from the
Weizman Institute in Israel.
DR. IGAL SHIDLOVSKY, 67, 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. Dr. Shidlovsky is a Director of the Omega Point Foundation. From 1982
to 1991, Dr. Shidlovsky was a Director of Sentex Sensing Technologies. Dr.
Shidlovsky held several executive positions
3
<PAGE> 7
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. GUENTER JAENSCH, 59, became a Director of the Company in December 1997,
agreeing to serve after Mr. Eddie Kawamura, who had been elected a Director at
the Company's annual meeting of stockholders, became too ill to serve. Dr.
Jaensch serves as Managing Director of The McKenzie Companies, Inc. and McKenzie
Ventures LTD. and as President of Jaensch Enterprises, firms engaged in
management consulting, mergers and acquisitions and investments. For over 20
years, Dr. Jaensch held several executive positions with Siemens or its
subsidiaries. Among his executive positions in the United States were service as
President of Siemens Communications Systems, Inc.; Chairman of Siemens Corporate
Research and Support, Inc.; Chairman and Chief Executive Officer of Pacesetter;
and head of the cardiac management division of Siemens AG Medical Group. Dr.
Jaensch also served as controller of Siemens Data Processing Group and Director
of Siemens Internal Accounting and Budgeting operations. Dr. Jaensch holds a
Masters degree in Business Administration and Ph.D. degree in Finance from the
University of Frankfurt. He also served as an Associate Professor at the
University of Frankfurt prior to joining Siemens.
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, while serving as Directors.
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. All of the Directors attended all meetings of the Board of
Directors and the committees on which they served during their tenure as
directors during the year ended December 31, 1997. The Board of Directors met 14
times during 1997, including telephonic meetings.
The Audit Committee, composed of Mr. Lotan and Drs. Shidlovsky and Jaensch,
held two meetings during 1997. The Audit Committee's functions include making
recommendations to the Board of Directors relative to the appointment of
independent public accountants, and conferring with the Company's independent
public accountants regarding the scope and the results of the audit of the
Company's books and accounts and reporting the same to the Board of Directors.
The Compensation Committee, composed of Drs. Shidlovsky and Jaensch, held
two meetings during 1997. 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, consisting of Mr. Lotan and Drs. Margalit and
Rav-Noy, held four meetings during 1997. 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.
4
<PAGE> 8
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth a summary of all compensation paid by the
Company 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, 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
------------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS(#)(1)
---------------------------- ---- -------- ------- -------------
<S> <C> <C> <C> <C>
Noam Lotan............................................. 1997 $100,000 $ 0 0
President and Chief Executive Officer 1996 $100,000 $ 0 30,000
1995 $100,000 $ 0 0
Shlomo Margalit........................................ 1997 $110,000 $ 0 0
Chairman of the Board of Directors, 1996 $110,000 $ 0 0
Chief Technical Officer and Secretary 1995 $110,000 $ 0 0
Zeev Rav-Noy........................................... 1997 $110,000 $60,000 0
Chief Operating Officer 1996 $110,000 $60,000 0
1995 $110,000 $60,000 0
Ken Ahmad.............................................. 1997 $ 90,000 $45,830 0
Vice President of Marketing and Sales 1996 $ 90,000 $57,170 0
1995 $ 90,000 $43,500 150,000
</TABLE>
- ---------------
(1) As adjusted for a three-for-two stock split effected March 20, 1996.
FY-END OPTION VALUES
None of the Named Executive Officers were granted or exercised any stock
options during the year ended December 31, 1997. Neither Drs. Margalit nor
Rav-Noy hold any stock options. The following table provides certain information
concerning stock options held by the other Named Executive Officers at December
31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Noam Lotan...................................... 10,000 20,000 $ 154,550 $ 309,100
Ken Ahmad....................................... 100,000 50,000 $2,024,500 $1,012,250
</TABLE>
- ---------------
(1) Based on the difference between $23.88 per share (the last sale price per
share of Common Stock on December 31, 1997 as reported on The Nasdaq
National Market) and the per share exercise price.
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 Securities
and Exchange Commission ("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, 1997.
5
<PAGE> 9
EMPLOYMENT AGREEMENTS
In March 1992, the Company entered into three-year employment agreements
with Mr. Lotan, Dr. Margalit and Dr. Rav-Noy. 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 the Company, Dr. Margalit serves as
Chairman of the Board of Directors, Chief Technical Officer and Secretary, and
Dr. Rav-Noy serves as a Chief Operating Officer, Treasurer and a Director. Mr.
Lotan, Dr. Margalit and Dr. Rav-Noy receive base annual salaries of $100,000,
$110,000 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.
Each officer also receives employee benefits, such as vacation, sick pay
and insurance, in accordance with the Company's policies which are applicable to
all employees. The Company 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 Rav-Noy and Mr. Lotan. All benefits under these policies will be
payable to the Company upon the death of an insured.
STOCK OPTION PLANS
1992 Plan. On March 27, 1992, the Board of Directors and stockholders of
the Company adopted the 1992 Stock Option Plan (the "1992 Plan"), which provides
for the grant to employees, officers, directors and consultants of options to
purchase up to 900,000 shares of Common Stock, consisting of both "incentive
stock options" within the meaning of Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code"), and non-qualified options.
Incentive stock options are issuable only to employees of the Company, while
non-qualified options may be issued to non-employee directors, consultants and
others, as well as to employees of the Company. The Board increased the shares
reserved under the 1992 Plan by 900,000 shares in February 1995, which was
approved by stockholders in June 1995, and in May 1996 further increased the
shares reserved under the 1992 Plan by 150,000 shares, which was approved by
stockholders in July 1996.
Under the 1992 Plan, the Compensation Committee has the authority to
determine the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be
incentive stock options, the duration and rate of exercise of each option, the
option price per share, the manner of exercise and the time, manner and form of
payment upon exercise of an option.
The exercise price per share of Common Stock subject to incentive stock
options may not be less than the fair market value of the Common Stock on the
date the option is granted. The exercise price per share of Common Stock subject
to non-qualified options is established by the Board of Directors. The aggregate
fair market value (determined as of the date the option is granted) of the
Common Stock that any employee may purchase in any calendar year pursuant to the
exercise of incentive stock options may not exceed $100,000. No person who owns,
directly or indirectly, at the time of the granting of an incentive stock option
to him, more than 10% of the total combined voting power of all classes of stock
of the Company shall be eligible to receive any incentive stock options under
the 1992 Plan unless the exercise price is at least 110% of the fair market
value on the date of grant. Non-qualified options are not subject to this
limitation.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution and, during the lifetime of an
optionee, the option will be exercisable only by the optionee. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination or until the expiration of such option,
whichever occurs first, to exercise the option. Upon termination of employment
of an optionee by reason of death or permanent total disability, options remain
exercisable for one year thereafter or until the expiration of such option,
whichever occurs first, to the
6
<PAGE> 10
extent they were exercisable on the date of such termination. No similar
limitation applies to non-qualified options.
Stock options under the 1992 Plan must be granted within 10 years from the
effective date of the 1992 Plan. Incentive stock options granted under the 1992
Plan cannot be exercised more than 10 years from the date of grant, except that
incentive stock options issued to 10% or greater stockholders are limited to
five year terms. All options granted under the 1992 Plan provide for the payment
of the exercise price in cash or by delivery to the Company of shares of Common
Stock already owned by the optionee having a fair market value equal to the
exercise price of the options being exercised, or by a combination of such
methods of payment. Therefore, an optionee may be able to tender shares of
Common Stock to purchase additional shares of Common Stock and may theoretically
exercise all of his stock options without making any additional cash investment.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed with the Company become available once again for
issuance. At the Record Date, options for 1,085,807 shares were outstanding
under the 1992 Plan and none were reserved thereunder for options available for
future grant.
1997 Plan. On November 11, 1997 and December 12, 1997, respectively, the
Board of Directors and stockholders of the Company adopted and approved the 1997
Incentive and Nonstatutory Stock Option Plan (the "1997 Plan"), which provides
for the grant of options to purchase up to 500,000 shares of Common Stock. 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 additional
information concerning this Stock Option Plan, see Proposal No. 3 "To Approve
Amendments to The Company's 1997 Incentive and Nonstatutory Stock Option Plan to
Increase by 500,000 Shares the Number of Shares of Common Stock That Can Be
Optioned and Sold Under The Stock Option Plan," below.
Other Option Plans. The Company also has two other outstanding option
programs: (1) its 1998 Nonstatutory Stock Option Plan, under which the Company
may grant nonstatutory stock options to purchase up to 1,100,000 shares of
Common Stock to employees 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, and (2) its
German Employees Warrant Program under which the Company may grant warrants to
purchase up to 100,000 shares of Common Stock to employees of its German
subsidiaries. Directors and officers of the Company are not eligible to
participate in either of these plans. At the Record Date, options for 1,031,000
shares were outstanding under the 1998 Nonstatutory Stock Option Plan and 69,000
were reserved thereunder for options available for future grant. At the Record
Date, warrants for 100,000 shares were outstanding under the German Employees
Warrant Program and none were reserved thereunder for warrants available for
future grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997 the Compensation Committee consisted of Leonard Mautner and
Milton Rosenberg, until they retired from the Board in December 1997, and then
by Drs. Igal Shidlovsky and Guenter Jaensch. No member of the Compensation
Committee was, during 1997 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 1997, 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.
7
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") was formed by the Board of
Directors 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
and 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 in
accordance with 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.
The Committee has applied the foregoing policies to the compensation of
Noam Lotan, the Company's Chief Executive Officer. For the year ended December
31, 1997, the Committee believes that Mr. Lotan's compensation was low in
comparison to the salaries of CEOs of comparable companies. Accordingly, based
on the Company's performance during Mr. Lotan's tenure as Chief Executive
Officer the Committee believes it was appropriate at the beginning of 1997 for
the Board to grant him options to purchase 30,000 shares of the Company's Common
Stock at an exercise price equal to the fair market value at the date of grant.
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 fiscal 1995, 1996 and 1997 for Mr. Lotan, Drs. Margalit and
Rav-Noy and Mr. Ahmad was determined in 1992, based upon employment agreements
entered into by and between the Company and such executives. See "Employment
Agreements."
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 various 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.
8
<PAGE> 12
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
Igal Shidlovsky
Guenter Jaensch
9
<PAGE> 13
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following chart shows the value of an investment of $100 on December
31, 1992 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 (Hambrecht & Quist Technology Index).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MRV COMMUNICATIONS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
NASDAQ HAMBRECHT
'MRV STOCK &
COMMUNICATIONS, MARKET QUIST
INC.' (U.S.) TECHNOLOGY
<S> <C> <C> <C>
DEC-92 100 100 100
DEC-93 80 115 117
DEC-94 211 112 141
DEC-95 441 159 211
DEC-96 1135 195 262
DEC-97 1246 239 307
</TABLE>
* $100 INVESTED ON 12/31/92 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
PROPOSAL NO. 2
TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S
COMMON STOCK FROM 40,000,000 TO 80,000,000 SHARES
The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of the Common Stock of
the Company from 40,000,000 to 80,000,000 shares. Accordingly the Board of
Directors has unanimously approved the proposed Certificate of Amendment to the
Company's Certificate of Incorporation, in substantially the form attached
hereto as Exhibit A (the "Certificate of Amendment"), and hereby solicits the
approval of the Certificate of Amendment by the Company's stockholders.
10
<PAGE> 14
At the Record Date, there were 26,656,121 shares of Common Stock and no
shares of preferred stock outstanding. The approval by stockholders of the
Certificate of Amendment will not increase or otherwise affect the number of
authorized shares of preferred stock which may be issued by the Company.
If stockholders approve the Certificate of Amendment, approximately
53,344,000 shares of Common Stock would be authorized and unissued. At the
Record Date there were approximately 5,684,285 shares of Common Stock reserved
for issuance pursuant to exercise of outstanding warrants and options and
warrants and options available for future grant under the Company's various
warrant and option programs. In addition, if Proposal No. 3 to approve
amendments to the Company's 1997 Incentive and Nonstatutory Stock Option Plan is
approved by stockholders, an additional 500,000 shares of Common Stock will be
reserved for issuance upon exercise of options that may be granted under that
plan. Moreover, at the Record Date there were approximately 3,637,200 shares of
Common Stock reserved for issuance upon the conversion of the Company's
outstanding $100,000,000 principal amount of 5% Convertible Subordinated Notes
due 2003. Thus, at the Record Date the Company had outstanding, committed and
reserved an aggregate of 36,037,606 shares of Common Stock (36,537,606 if
stockholders approve the proposed amendments to the Company's 1997 Incentive and
Nonstatutory Stock Option Plan). Accordingly, if stockholders approve the
Certificate of Amendment, approximately 43,962,394 shares of Common Stock would
be authorized and not issued, committed or reserved as of the Record Date
(43,462,394 if stockholders approve the proposed amendments to the Company's
1997 Incentive and Nonstatutory Stock Option Plan).
The Board of Director's purpose in proposing the increase in the number of
authorized shares of Common Stock is to have shares available for future
issuances from time to time as and when the Board determines that such issuances
may be desirable. If the stockholders approve the proposed Certificate of
Amendment, the Board of Directors may cause the issuance of additional shares of
Common Stock without further vote of the stockholders of the Company, except as
provided under Delaware corporate law or under the rules of any national
securities exchange or The Nasdaq Stock Market on which shares of Common Stock
of the Company are then listed. Current holders of Common Stock have no
preemptive or like rights, which means that current stockholders do not have a
prior right to purchase any new issue of capital stock of the Company in order
to maintain their appropriate ownership thereof. The issuance of additional
shares of Common Stock would decrease the proportionate equity interest of the
Company's current stockholders and, depending upon the price paid for such
additional shares, could result in dilution to the Company's current
stockholders.
In addition, the Board of Directors could use authorized but unissued
shares to create impediments to a takeover or a transfer of control of the
Company. Accordingly, the increase in the number of authorized shares of Common
Stock may deter a future takeover attempt which holders of Common Stock may deem
to be in their best interest or in which holders of Common Stock may be offered
a premium for their shares over the market price. The Board of Directors is not
currently aware of any attempt to take over or acquire the Company. While it may
be deemed to have potential anti-takeover effects, the proposed amendment to
increase the authorized Common Stock is not prompted by any specific effort or
takeover threat currently perceived by management.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON
STOCK ENTITLED TO VOTE WILL BE REQUIRED TO APPROVE THE CERTIFICATE OF AMENDMENT.
BOTH ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECTS AS VOTES
AGAINST THIS PROPOSAL.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
CERTIFICATE OF AMENDMENT.
11
<PAGE> 15
PROPOSAL NO. 3
PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S 1997
INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
TO INCREASE BY 500,000 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 Stock Option Plan was 500,000 shares of Common Stock. The Board of Directors
has proposed amendments to the Company's 1997 Plan to increase by 500,000 shares
the number of shares of Common Stock that may be optioned and sold under the
1997 Plan to a total of 1,000,000 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
1997 Incentive and Nonstatutory Stock Option (the "New Plan"). THE AFFIRMATIVE
VOTES OF A MAJORITY OF ALL SHARES OF THE COMPANY PRESENT AT THE MEETING IN
PERSON OR BY PROXY IS REQUIRED TO APPROVE THE NEW PLAN.
The summary of the provisions of the New 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 Exhibit B.
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 1,000,000 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 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
12
<PAGE> 16
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 383,000 shares
of Common Stock, at a weighted average exercise price of $20.25 per share, were
outstanding under the 1997 Plan. No options were granted in 1997 under the 1997
Plan. As of the Record Date, all employees (including three directors who are
employees) and two non-employee directors were eligible to participate in the
1997 Plan and approximately 50 employees were so participating. All options
granted under of 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, no options granted under the 1997 Plan
had been exercised and 32,000 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, (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 (v) all employees who are not executive officers as a group:
<TABLE>
<CAPTION>
NO. OF SHARES
COVERED BY
NAME OF PERSON OR GROUP POSITION WITH THE COMPANY OPTIONS
- ----------------------- ------------------------- -------------
<S> <C> <C>
Noam Lotan President and Chief Executive Officer, Director and Director
Nominee..................................................... 0
Shlomo Margalit Chairman of the Board, Chief Technical Officer and Director
Nominee..................................................... 0
Zeev Rav-Noy Chief Operating Officer, Director and Director Nominee...... 0
Igal Shidlovsky Director and Director Nominee............................... 15,000
Guenter Jaensch Director and Director Nominee............................... 20,000
Ken Ahmad Vice President of Marketing and Sales....................... 0
Edmund Glazer Chief Financial Officer..................................... 50,000
Ofer Iny Vice President of Engineering............................... 60,000
All current executive officers as a group............................................ 110,000
All current directors who are not executive officers as a group...................... 35,000
All employees who are not executive officers as a group.............................. 323,000
</TABLE>
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").
13
<PAGE> 17
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.
If the optionee disposes of ISO shares prior to the expiration or 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 AMENDMENTS TO
THE COMPANY'S STOCK OPTION PLAN.
PROPOSAL NO. 4
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, 1998 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.
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 1999
annual meeting of stockholders, they must deliver a written copy of their
proposal no later than July 3, 1999. 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 1999 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,
14
<PAGE> 18
must deliver a written copy of their proposal no later than August 15, 1999. In
either case, proposals should be delivered to MRV Communications, Inc., 8943
Fullbright Ave., 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.
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
October 1, 1998
THE 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.
15
<PAGE> 19
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
MRV COMMUNICATIONS, INC.
MRV Communications, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), pursuant to the provisions of the
General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY
CERTIFY as follows:
FIRST: The Certificate of Incorporation of the Company is hereby amended by
deleting paragraphs A and B of Section 4 of the Certificate of Incorporation in
their present form and substituting therefor new paragraphs A and B of Section 4
in the following form:
A. This corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares of this corporation is authorized to issue is
Eighty-one Million (81,000,000) shares of capital stock.
B. Of such authorized shares, Eighty Million (80,000,000) shares shall be
designated "Common Stock" and have a par value of $.0034 per share. One
Million (1,000,000) shares shall be designated "Preferred Stock" and
have a par value of $0.01 per share.
SECOND: The amendment to the Certificate of Incorporation of the Company
set forth in this Certificate of Amendment has been duly adopted in accordance
with the provisions of Section 242 of the DGCL by (a) the Board of Directors of
the Company having duly adopted a resolution setting forth such amendment and
declaring its advisability and submitting it to the stockholders of the Company
for their approval, and (b) the stockholders of the Company having duly adopted
such amendment by vote of the holders of a majority of the outstanding stock
entitled to vote thereon at a special meeting of stockholders called and held
upon notice in accordance with Section 222 of the DGCL.
IN WITNESS WHEREOF, the Company has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment to be signed by Noam Lotan,
its President and Chief Executive Officer, and attested by Shlomo Margalit, its
Secretary, this day of , 1998.
MRV COMMUNICATIONS, INC.
By:
------------------------------------
Noam Lotan
President and Chief Executive
Officer
ATTEST:
- --------------------------------------
Secretary
A-1
<PAGE> 20
MRV COMMUNICATIONS, INC.
1997
INCENTIVE STOCK OPTION PLAN
AND
NONSTATUTORY STOCK OPTION PLAN
(AS ADOPTED ON NOVEMBER 11, 1997 AND AMENDED AUGUST 3, 1998 (SUBJECT TO
STOCKHOLDER APPROVAL))
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.
(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.
B-1
<PAGE> 21
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 One Million (1,000,000) 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 One Million (1,000,000) minus 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 One Million (1,000,000) 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.
B-2
<PAGE> 22
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) No Option granted under Plan A may be exercised in whole or in
part until six (6) months after the date on which the Option is granted by
the Board, or by the Committee if so authorized (hereinafter the "Option
Grant Date").
(b) 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."
(c) 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).
(d) 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 later of
(x) date of execution of such agreement or (y) six (6) months after the Option
Grant Date, 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 be 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
B-3
<PAGE> 23
(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, 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-4
<PAGE> 24
(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.
(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
B-5
<PAGE> 25
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 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.
B-6
<PAGE> 26
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.
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.
B-7
<PAGE> 27
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 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
B-8
<PAGE> 28
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.
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, as amended on , 1998, the
Company has caused this Plan to be duly executed by its duly authorized officer.
MRV COMMUNICATIONS, INC.
BY
------------------------------------
Noam Lotan
President and Chief Executive
Officer
B-9
<PAGE> 29
MRV COMMUNICATIONS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD OCTOBER 30, 1998
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, Zeev Rav-Noy and Edmund Glazer, 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 at the Woodland Hills Hilton &
Towers, 6360 Canoga Avenue, Woodland Hills, California 91367 on Friday,
October 30, 1998 at 8:30 a.m. 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
Zeev Rav-Noy Igal Shidlovsky
Guenter Jaensch
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
40,000,000 to 80,000,000 shares;
FOR / / AGAINST / / ABSTAIN / /
3. To approve amendments to the Company's 1997 Incentive and Nonstatutory Stock
Option Plan to increase by 500,000 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)
<PAGE> 30
(continued from other side)
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
4. To ratify the appointment of Arthur Andersen LLP as independent accountants
for the year ending December 31, 1998.
FOR / / AGAINST / / ABSTAIN / /
5. 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, 3 and 4.
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
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) _______________________________
Date _________________________
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.
